The Defendant was the victim of a mortgage fraud scheme. As a result of the scheme, the Defendant was the sole party against whom the Plaintiff bank sought to recover a $583,733 deficiency.

In her Trial Decision, Justice Dario noted that while the Defendant did not issue a Counterclaim for set-off, the Statement of Defence did partially set out the particulars of fraud, negligence, contribution, and illegality or invalidity of the mortgage contract.

In considering some alleged deficiencies in the Defendant’s Statement of Defence, Justice Dario discussed Rules 13.6 and 13.7, which set out the requirements for pleadings. Justice Dario held that a “wide interpretation” should be given to the contents of pleadings filed by self-represented litigants, noting that such an interpretation must be within reason.

Justice Dario held, applying the required “wide interpretation”, that the Statement of Defence set out negligence on behalf of the Plaintiff, potential knowledge of and participation in the fraud, and a suggestion of the contract’s invalidity. Her Ladyship held that some of these claims were sufficient in the context to constitute a pleading of set-off as a defence, pursuant to Rule 3.59.

Justice Dario found that special consideration must be given to the allegations of fraud and invalidity of contract, given the particular Rules which apply to allegations of this nature under Rules 13.6 and 13.7. However, Her Ladyship noted that these Rules are in place to ensure fairness to the parties and to prevent Trial by surprise. In the circumstances, Dario J. held that there was no unfairness to the Plaintiff.

In the result, Dario J. held that the Plaintiff bank was precluded from recovering as against the Defendant due to its wilful blindness towards the scheme and the doctrine of ex turpi causa.