21 May 2019By Uri Snir
In a recent decision, the Ontario Court of Appeal set aside a partial summary judgment for fraud.
The Court held that partial summary judgment should only be granted where the motion judge is satisfied that the issues being resolved on partial summary judgment can be readily bifurcated from the issues proceeding to trial.
Background: The plaintiff corporations, Service Mold + Aerospace Inc., and SMI Ventilation Products, commenced an action against their former bookkeeper and the Toronto Dominion Bank (“TD”) for fraud.
The plaintiffs alleged that their bookkeeper defrauded them in two ways: (1) she used forged cheques (the “Cheque Fraud”), and (2) she made additional unauthorized payroll payments into her bank account (the “Payroll Fraud”).
With respect to the Cheque Fraud, the plaintiffs claimed that TD was strictly liable under the Bills of Exchange Act, and liable for negligently failing to review the cheques. The Payroll Fraud claim was based exclusively in negligence.
TD defended both claims based on (1) a Business Banking Agreement containing a verification clause and a limited liability clause that it claimed the plaintiffs signed (the “BBA Defence”), and (2) the Limitation Act (the “Limitations Defence”). In addition to these defences, TD also denied negligence on the Payroll Fraud claim.
The plaintiffs brought a motion for partial summary judgment based on the strict liability claim relating to the Cheque Fraud.
The Motion Judge Awards Partial Summary Judgment: The motion judge ruled that there was no genuine issue to be tried relating to TD’s BBA Defence to the Cheque Fraud claim, as there was no evidence that the plaintiff corporations had signed a BBA.
The motion judge also ordered a mini-trial on the issue of discoverability, relating to the Limitations Defence. Following the mini-trial, the motion judge held that the limitation period had not expired when the statement of claim was issued.
The motion judge found the Cheque Fraud claim and Payroll Fraud claim to be distinct, representing different causes of action. She concluded that partial summary judgment could eliminate a single claim enabling the subsequent trial to be shorter and more focused, and that this could encourage settlement. As a result, she granted partial summary judgment on the Cheque Fraud claim.
TD appealed the ruling.
The Court of Appeal Sets Aside Partial Summary Judgment: In finding that the motion judge erred in awarding partial summary judgment, the Court of Appeal relied on the principles articulated in Hryniak v. Mauldin, where the Supreme Court recognized that partial summary judgment may “run the risk of duplicative proceedings or inconsistent findings of fact” at trial.1
The Court of Appeal previously held in Butera v. Chown, Cairns LLP, that while partial summary judgment has its place, it “should be considered to be a rare procedure that is reserved for an issue or issues that may be readily bifurcated from those in the main action and that may be dealt with expeditiously and in a cost-effective manner.”2
The Court found that in her decision, the motion judge only referenced the standards for summary judgment, without overtly addressing partial summary judgment consideration.
The Court found that the motion judge erred in principle when evaluating the risk of overlap in the evidence. The motion judge “should not have proceeded to partial summary judgment unless she was satisfied affirmatively that the issues before her could readily be bifurcated without causing overlap that could lead to inefficient duplication or a material risk of inconsistent finding or outcomes.”
In this case, the defendants pleaded the BBA Defence and the Limitations Defence in response to both claims, not just the Cheque Fraud. The motion judge did not properly consider the risk of a different result at the trial for the Payroll Fraud.
In addition to the palpable and overriding errors made by the motion judge in considering the principles of awarding partial summary judgment, the Court of Appeal also found that the motion judge misapplied the “modified objective” test for discoverability when considering the Limitations Defence.
The Takeaway: Partial summary judgments are very rarely awarded in Ontario. The main concern is that partial summary judgments may increase the risk of duplicative proceedings or inconsistent findings, and can frustrate the Hryniak objective of using summary judgment to achieve proportionate, timely and affordable justice.
1Hryniak v. Mauldin, 2014 SCC 7 at para 60.
2Buteral v. Chown, Cairns LLP, 2017 ONCA 783 at para 34.