September 2011 Newsletter

Babin Bessner Spry Newsletter

Top Legal Fiction

Ed's Pick: And Justice for All

Al Pacino is a scrappy defence lawyer hired to represent a nasty, kind-of-crazy and suicidal judge in connection with a murder charge. There are many great moments in this movie, but the best is the classic scene when Pacino nails his own client in open court. The Judge yells "YOU’RE OUT OF ORDER" and Pacino screams back, as only he can, "YOU’RE OUT OF ORDER…." It makes the movie! Warning – please do not try this tactic – it is unethical, even when your client has done something bad, and will get you disbarred.

Cynthia's Pick: A Few Good Men 

Two Marines stand accused of murdering a member of their unit at the Guantanamo Bay Naval Base in Cuba, which is under the command of Colonel Nathan R. Jessep (Jack Nicholson). From the beginning, Lieutenant Commander Joanne Galloway (Demi Moore) is convinced that the Marines are not guilty, as they were following Jessep’s orders to effect a "Code Red" (an extrajudicial punishment for substandard Marines). Lieutenant Junior Grade Daniel Kaffee (Tom Cruise) is assigned as lead counsel to defend the two Marines, despite being less than a year out of Harvard Law School.

Nicholson stole the show for me with his portrayal of the fanatical Colonel Jessep. I particularly enjoyed his cross-examination by Kaffee, even though my love affair with Tom Cruise is long since over (it began with Top Gun, waned in the early 90s with Interview with the Vampire, and ended abruptly in 2005 when he appeared on Oprah). **spoiler alert** Is there anything more delicious than the thought of an opposing party who so completely buckles under cross-examination?

Cliff's Pick: Michael Clayton 

George Clooney stars as a lawyer who has been with one of the largest and most respected law firms in the world for seventeen years. But he isn’t a partner. Instead, in his own words, he’s a janitor. He’s a jack-of-all-trades without his own book of business who deals with all of the messiest problems of the firm’s clients. And so he’s the man on the spot when the firm’s senior litigation partner (Tom Wilkinson in an excellent performance) starts losing his mind while representing a large, and murkily dangerous, corporate client. The acting is amazing (Clooney and Wilkinson were nominated for Academy Awards) and the film feels much more authentic than most legal movies; the dialogue in particular is excellent. Perhaps it ends a little too neatly, but then, endings are hard. A great rental if you haven’t already seen it.

Fraud and a Bank’s Duty of Care: Javitz v. BMO Nesbitt Burns Inc.

The case of Javitz v. BMO Nesbitt Burns Inc., 2011 ONSC 1332, deals with the question of whether a bank owes a duty of care in a fraud case to a victim who is not a customer. Given the explosion of Ponzi schemes and other fraud in the last few years, this is an important development for both financial institutions and their clients.

The defendants, BMO Nesbitt Burns Inc. and the Bank of Montreal, brought motions to strike claims by three related plaintiffs for damages arising from fraud committed by Gregory Rao, an investment advisor employed by Nesbitt but operating out of a BMO branch in Woodbridge, Ontario.

Based on statements by Rao, the first plaintiff, Eli Javitz, believed he was investing with Nesbitt. In fact, Rao fabricated the investment product and converted Javitz’s money to his own use.

Javitz pled that Rao was an employee of BMO because he enjoyed unfettered, unsupervised access to BMO’s banking systems, which access facilitated Javitz’s fraud. Javitz claimed that BMO and Nesbitt operated as one business entity from the Woodbridge office.

Javitz claimed that BMO knew or ought to have known Rao was using his own BMO account to perpetrate a fraud, and was negligent in failing to recognize Rao’s fraud. Javitz also pled BMO negligently failed to monitor Rao’s use of its banking systems, and failed to take appropriate steps in the face of suspicious activity. Finally, Javitz claimed BMO breached its statutory duty to detect unusual and potentially fraudulent transactions in Rao’s BMO account pursuant to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the "Act").

BMO, relying on Dynasty Furniture v. Toronto-Dominion Bank, 2010 ONSC 436, argued that it was plain and obvious that BMO did not owe a duty of care to Javitz unless it had actual knowledge of the fraud (in other words, constructive knowledge was not sufficient).

Justice Pepall summarized the legal principles applicable on a motion to strike pursuant to Rule 21: 

  • The defendant must show that it is plain and obvious that the plaintiff’s statement of claim discloses no reasonable cause of action;   
  • The fact that the issues are complex, the cause of action is novel, or that the defendant may present a strong defence provides insufficient grounds to strike;   
  • The facts as pleaded are presumed to be true unless patently ridiculous or incapable of proof;   
  • No evidence is permitted on a Rule 21 motion without leave of the court or the consent of the parties;   
  • The court should not dispose of matters of law that are not fully settled in the jurisprudence; and  
  • The statement of claim should be read generously with allowance for inadequacies due to drafting deficiencies.  

Justice Pepall found that Dynasty does not stand for the principle that a bank cannot be liable in negligence to a non-customer in the absence of actual knowledge; however, it was plain and obvious that BMO did not owe Javitz a duty of care in these circumstances, as the parties were not in a relationship of sufficient proximity (Javitz relied on BMO’s position as the collecting bank for the cheques invested by Javitz through Rao, rather than on the bank’s position as banker to Javitz).

Justice Pepall also struck the claim for breach of a statutory duty, as: (1) there is no such cause of action; (2) the Act cannot ground a private duty of care; (3) it is unclear that the Act requires a financial institution to detect "potentially fraudulent transactions".

Justice Pepall also struck the allegations regarding Rao’s status as a de factoemployee pursuant to Rule 25.11, as they were irrelevant to the remaining claims (with the exception of the allegation that Rao had unfettered access to BMO’s banking systems, as this was relevant to whether BMO knew, was wilfully blind, or was reckless with respect to Rao’s fraud within his own BMO account).

Justice Pepall refused to strike Javitz’s claim against Nesbitt for negligent failure to supervise Rao. This claim fell within a duty of care recognized in Blackburn v. Midland Walwyn Capital Inc., [2005] O.J. No.678 (C.A.), where the court held that it was reasonably foreseeable that a failure to supervise would result in losses to the brokerage firms.

Pursuant to Rule 25.11, Justice Pepall struck Javitz’s allegations that Nesbitt failed to supervise Rao in regard to a number of other customer accounts, that Rao perpetrated a massive fraud over several years at Nesbitt, and that Nesbitt misrepresented Rao’s employment status to Javitz and the public at large. Relying on the new proportionality considerations in Rule 1.04(1.1), Justice Pepall held that these allegations would greatly expand the complexity and expense of the litigation while providing little or no probative value.

Pursuant to Rule 1.04(1.1), Justice Pepall ordered that the defendants answer questions on discovery as to when and how the defendants learnt of Rao’s conduct and how many customers were involved, but not engage in an examination of the details of each fraudulent act that did not involve Javitz.

Justice Pepall found that the other two claims were substantially similar to Javitz’s, and ordered that the same portions of those be struck. Her Honour granted leave to amend all three pleadings.

Finally, Justice Pepall suggested that all three actions be case-managed by the same judge and tried together or consecutively, and ordered that the parties attend before Justice Morawetz to speak to the issue.

Supreme Court Clarifies Definition of "Materiality": Sharbern Holding Inc. v. Vancouver Airport Centre Ltd.

This case was a securities class action dealing with the ever-important concept of materiality and its application.

The proceeding was commenced by Sharbern Holding Inc. against Vancouver Airport Centre Ltd. ("VAC") and others on behalf of investors who purchased strata lots in a Hilton hotel. Sharbern claimed VAC was liable for failing to disclose certain differences between its financial arrangements with the class and its arrangements with the purchasers of strata lots in the adjacent Marriott hotel. Sharbern alleged that VAC was liable under section 75 of the Real Estate Act, R.S.B.C. 1996, c. 297, and that VAC was also liable for negligent misrepresentation and breach of fiduciary duty.

Justice Rothstein, on behalf of the Supreme Court, dismissed Sharbern’s appeal.

The main issue on appeal was whether certain omitted information was "material".

VAC was incorporated to build two hotels in Vancouver: a Hilton and a Marriott. VAC financed the construction of the hotels by selling strata lots to the public. The Marriott hotel marketed strata lots through a disclosure statement issued to the public in September 1996, while the Hilton hotel marketed its lots through a disclosure statement issued in February 1998. Both sets of purchasers entered into separate hotel asset management agreements with VAC whereby VAC obtained exclusive management of each hotel for 20 years.

The terms of purchase and sale offered to the two classes of purchasers were different. For the Marriott, VAC guaranteed a particular gross return. VAC marketed the Hilton on the basis of projections. VAC disclosed that it was developing the Marriott in the Hilton statement, but it did not disclose the differences between the compensation offered to the two sets of owners.

Ultimately, neither hotel achieved its expected financial result. VAC and its owner sustained significant liability to the Marriott owners, whose revenues were guaranteed. The Hilton owners incurred losses and commenced an action.

At trial, Justice Wedge found VAC liable to the Hilton owners under both the common law and the Real Estate Act. She found that VAC had a duty to disclose a potential conflict of interest, which it failed to discharge. She also found that in its capacity as manager, VAC owed the Hilton owners a fiduciary duty, and that it breached that duty by failing to disclose a conflict of interest arising from, among other things, a non-competition arrangement that prevented the Hilton and the Marriott from competing for certain hotel customers.

Justice Chaisson, for the British Columbia Court of Appeal, overturned the trial decision, finding that the existence of a duty to disclose depends on whether the information in question is material. In this case there was no such duty, as VAC’s economic arrangements with the Marriott owners were not material to the Hilton owners.

Justice Rothstein, for the Supreme Court, thoroughly reviewed the law on materiality (including Kerr v. Danier Leather Inc., 2007 SCC 44) and came to the following conclusions: 

  • A materiality standard should strike a balance between too much and too little disclosure. Burying shareholders in an avalanche of trivial information impairs decision-making.   
  • Materiality is a question of mixed law and fact. It is to be determined on a case-by-case basis in light of all the relevant information (the "total mix") available to investors.   
  • Materiality is determined objectively from the perspective of a reasonable investor.   
  • An omitted fact is material if there is a substantial likelihood that it would (not "might") have been "considered important" by a reasonable investor. "Considered important" means that it would have been viewed by the reasonable investor as having significantly altered the "total mix" of information made available.   
  • It is not necessary to prove that the material fact would have changed the plaintiff’s decision, but only that there is a substantial likelihood that it would have assumed actual significance in a reasonable investor’s deliberations.   
  • The court will not defer to the party making a representation on questions of materiality (materiality is not a question of business judgment).   
  • Materiality must be proven through evidence by the party alleging it, except in those cases where common sense inferences are sufficient.  
  • In determining materiality, the court should consider the disclosed information, the omitted information, relevant contextual information, and concurrent and subsequent conduct of the parties.  

Justice Rothstein found that the trial judge erred because she assumed that a potential conflict of interest was inherently material. In fact, there was a great deal of evidence that the differences between the Marriott owners and the Hilton owners would not have affected the Hilton owners’ decision to purchase Hilton strata lots. For example, one of the largest investors had purchased units in both the Hilton and the Marriott.

The trial judge also wrongfully reversed the onus of proof of materiality (shifting it from the plaintiffs to the defendants).

Justice Rothstein found that VAC was not liable in negligent misrepresentation because it had not breached the standard of care, and there was no evidence of reliance.

Justice Rothstein agreed that VAC owed the Hilton owners a fiduciary duty once it began acting as a hotel manager; however, those duties were circumscribed by the contract between the parties, which disclosed that VAC was also managing the Marriott. VAC was only obliged to disclose the differences in the arrangements between the two sets of owners if they were material, and for the reasons described above, they were not.

Finally, Justice Rothstein held that the existence of the non-competition agreement between the hotels was not a material fact, nor was the agreement a direct breach of fiduciary duties. The evidence was that the agreement helped keep rates high for both the hotels.

Summary Judgment: Five Appeals to the Ontario Court of Appeal

The Ontario Court of Appeal recently heard a number of cases dealing with Ontario’s new summary judgement rules. In deciding these cases, we hope the Court will provide a clear guide to the use of the new rules.

On June 21, 2011, the Ontario Court of Appeal began the joint hearing of a number of summary judgment appeals: Combined Air Mechanical Services Inc. et al. v. Flesch et al.; Mauldin et al. v. Cassels Brock & Blackwell LLP et al.;Bruno Appliance and Furniture, Inc. v. Cassels Brock & Blackwell LLP et al.;394 Lakeshore Oakville Holdings Inc. v. Misek and Purvis; and Parker et al. v. Casalese et al.

No decision has yet been rendered. This article summarizes the facta filed by the parties to these five proceedings, as well as various amicus curae, including The Advocates’ Society, the Attorney General of Ontario, the Ontario Bar Association, and the Ontario Trial Lawyers Association.

The Advocates Society

The Advocates Society was appointed amicus curiae and took no position on the merits of the decisions under appeal.

TAS argued that the amendments to Rule 20: expand the powers of the court to assess credibility, weigh evidence or draw inferences; make summary judgment more readily available; and, recognize that with the expanded powers of the court a full trial may not be required to determine the issues.

TAS specifically argued that Rule 20 should be interpreted recognizing that there are a significant number of cases that should be resolved without a full trial on all potential issues of fact.

TAS outlined a principled approach to the application of Rule 20: 

  1. Determine whether there is any impediment (for example, absence of discovery, prematurity of the development of damage) to the parties’ ability to put all relevant evidence before the motions court that would be put before the trial court;   
  2. Identify each genuine issue that must be resolved to determine whether to grant the relief sought;   
  3. Eliminate those issues about which there is no conflicting evidence;   
  4. Identify and analyze the nature and extent of the evidence where there are issues involving conflicting evidence;   
  5. Address the conflicting evidence and determine whether conflicts can be eliminated and a finding of fact fairly made without a trial (weigh evidence, evaluate credibility, draw inferences, taking into account limitations caused by a lack of oral evidence);   
  6. Determine relief where issues do not require a trial;   
  7. For any remaining issues, determine whether a mini-trial is appropriate (this decision should be based on whether there is a significant likelihood that it will resolve most or all of the genuine issues in dispute (i.e., where the factual disputes can be resolved by hearing specific oral evidence from a small number of witnesses));   
  8. Where a mini-trial is appropriate, identify the evidentiary process to be followed, including the scope of the evidence and the record upon which the mini-trial will proceed;   
  9. If genuine issues can be resolved on motion or by mini-trial, determine whether it is in the interests of justice to do so, having regard to factors including the extent to which doing so will resolve sufficient outstanding issues, give rise to material costs savings, or result in the more expeditious resolution of the action, and the importance of the issues to the parties;   
  10. If the court cannot resolve the issues by motion or mini-trial, refuse summary judgment;   
  11. Where summary judgment is refused or granted only in part, consider what further directions should be made with a view to streamlining the disposition of the remaining issues.  

In conclusion, TAS argued that the amendments to Rule 20 represent substantive changes to the dispute resolution process. In appropriate cases, a litigant’s entitlement to a full trial will be constrained by this alternate means of resolution. Summary judgment can be expected to expedite the process and significantly reduce unnecessary costs of litigation.

Attorney General of Ontario

The Attorney General of Ontario was appointed amicus curiae and took no position on the merits of the decisions under appeal.

The AG argued that in the decisions rendered to date, two streams of interpretation have arisen, diverging over the ability of a motions judge to make findings of fact and determine the issues in an action.

The AG argued in favour of the expansive approach for three reasons: 

  1. It best reflects the intent of the amendments and has been more widely adopted and applied by motions judges in Ontario;   
  2. It is consistent with the approach taken in British Columbia, which has similar rules for summary disposition; and   
  3. It offers a functional approach to summary judgment, promoting access to justice and proportionality in the resolution of issues in an action.  

The AG submitted that, contrary to the statement by the appellant Hryniak that the "preponderance of the case law adopts the view articulated in Cuthbert", the restrictive approach has been largely rejected by motions judges. The AG also noted that the decisions favouring the restrictive approach for the most part pre-date Justice Pepall’s decision in Canadian Premier Life Insurance v. Sears Canada Inc.

On the issue of legislative intent, the AG adopted the submissions of the Ontario Bar Association (described below).

The AG addressed the history of the analagous British Columbia Rule 18A (now 9-7), noting that the present appeals resemble the appeal to the British Columbia Supreme Court two decades ago, in Inspiration Management Ltd. v. McDermid St. Lawrence Ltd.

In Inspiration, the British Columbia Court of Appeal unanimously rejected the restrictive approach applied to the new Rule, and held that if the chambers judge can find the facts, then he must give judgment as he would upon a trial unless it would be unjust to do so.

The AG reviewed the functional approach to the new Rule posited by Justice Brown in Optech Inc. v. Sharma, and recommended the following process: 

  1. After reviewing the evidence and the applicable law, can the motions judge safely decide the issues before him or her? If so, summary judgment should be granted.   
  2. If (s)he cannot, the motions judge may employ fact-finding powers (weigh evidence, assess credibility, and draw reasonable inferences). Having done that, can the motions judge make findings of fact with a degree of certainty that would permit him or her to decide the issues in the motion? If so, summary judgment should be granted.   
  3. If (s)he cannot, the motions judge may consider holding a mini-trial to hearviva voce evidence. In determining whether the court should do so, the motions judge must consider:   
    1. Proportionality;   
    2. The likelihood of success of the motion;   
    3. Potential delay; and   
    4. Complexity of the issue and nature of the action.  

If the motions judge is not satisfied that the procedures available would permit him or her to determine the issues in a just and proportional manner, at any of the stages of this test, there is a genuine issue requiring a trial. The judge may then use the powers under Rule 20.05 to narrow factual issues or set timetables for pre-trial procedures.

The AG submitted that this functional approach reflects the statutory intent behind the amendments, promoting flexibility, efficiency and access to justice.

Ontario Trial Lawyers Association

The Ontario Trial Lawyers Association was appointed amicus curiae and took no position on the merits of the decisions under appeal.

The OTLA traced the history of Rule 20 through the jurisprudence. It noted that while the tools for determining whether there is a genuine issue for trial have been expanded, the purpose of the exercise is the same. For this reason, the legal traditions from some of the prior caselaw remain relevant, although the previous restrictions on the resolution of issues by a judge on a motion for judgment have been removed.

The OTLA noted that the 2010 amendments have sparked diverging lines of authority. The more narrow approach is exemplified in several decisions of Karakatsanis J. (as she then was). The OTLA highlighted, however, that while Karakatsanis J. had held on several occasions that the role of the court is not to make findings of fact on a motion for summary judgment, her Honour had then proceeded with an extensive review of the evidence and had granted summary judgment in two of three cases.

The OTLA argued that the approach of Perell J. in Healey v. Lakeridge best captures the proper interpretation of the new Rule: the moving party must provide a satisfactory level of proof to demonstrate that a trial is unnecessary to truly, fairly and justly resolve the issues. The quality of the evidentiary record must be such that the judge is able to conclude with a very high degree of confidence that the interests of justice do not require a trial.

The OTLA set out certain circumstances where summary judgment will not be appropriate: 

    1. Complex negligence claims with competing expert evidence on engineering or other technical aspects of liability and damages;   
    2. Claims for professional negligence where there is competing expert evidence on standard of care, causation and damages;   
    3. Claims for professional negligence involving issues of discoverability for limitation purposes; or   
    4. Cases involving multiple, complex issues requiring evidence from a large number of witnesses.  

The OTLA added that, applying the principle of proportionality, the use of summary judgment for discrete issues in complex cases should be discouraged.

The OTLA suggested that there are a large number of claims in which summary judgment may be appropriate, such as: 

  1. Employment law claims involving issues of reasonable notice or discrete issues of termination for cause;   
  2. Commercial claims on invoices or instruments such as a guarantee; and   
  3. Family or estate claims where the range of issues is limited and the evidentiary record permits the judge to find that a trial is unnecessary.  

With respect to the appropriateness of a mini-trial, the OTLA argued that a judge should order oral evidence where narrow contested issues emerge and there is a strong prospect that hearing oral evidence will enable the judge to resolve the issues. The mini-trial is not a "look-see" before a "regular" trial, as this would have the perverse effect of saddling litigants with an extra layer of costs in an already expensive process.

In conclusion, the OTLA noted that summary judgment provides a useful mechanism for screening out cases that are unworthy of the full resources of trial. However, if used inappropriately, the summary judgment procedure can increase the cost of litigation and create delay. It is therefore important that, before the procedure is employed, a moving party has sufficient proof to satisfy a judge to a very high degree of confidence that a trial is unnecessary in the interests of justice.

Reply Factum of the Plaintiffs to OTLA Factum

In their reply factum to the OTLA factum, the plaintiff-respondents in the actions commenced by Bruno Appliance and Furniture, Inc., Fred Mauldin, and 12 other individuals argued that classifying claims into categories based on their nature will limit the effectiveness of Rule 20 and preclude otherwise meritorious motions for summary judgment from being heard and determined in accordance with the Rule.

The plaintiffs argued that the only relevant categorization that can be made is whether or not a claim is meritorious, based on the quality of the record before the court, rather than the nature of the claim.

The plaintiffs adopted the submissions of the Attorney General of Ontario in its factum, arguing that factors such as the complexity of the issues, the number of witnesses, the amount of evidence, and the determination of discrete issues where such determination will not bring the entire action to a conclusion may make certain claims unsuitable for summary judgment. The plaintiffs added, however, that these factors are irrelevant where there is sufficient evidence on the record to order summary judgment.

In conclusion, the plaintiffs argued that where a court determines that, based on the record, it can dispose of the proceeding with the same degree of certainty as it could at trial, the judge should grant summary judgment regardless of the claim. It is only in the event that the motion judge is unable to decide the issues on the paper record that other case-specific factors would become relevant in determining whether it is in the interests of justice to hold a mini-trial.

County & District Law Presidents’ Association

The County & District Law Presidents’ Association was appointed amicus curiaeand took no position on the merits of the decisions under appeal.

The C&DLPA argued that the within appeals are an opportunity for the court to enhance access to justice through a liberal interpretation of Rule 20, and thereby address the public perception that systemic issues in the civil justice system threaten access to justice.

The C&DLPA argued that under the previous Rule 20, a restrictive judicial interpretation prevented the Rule from being used effectively. The new Rule 20, which permits a mini-trial or summary trial, provides two new and different avenues to grant a litigant his or her "day in court".

The C&DLPA criticised motion judges who seek to restrict the use of the mini-trial, who argue that the test for summary judgment has not changed, and that it is not the role of a motion judge to make findings of fact. Under the new Rule, what "requires" a trial must be considered in the context of the motion judge’s additional powers.

The C&DLPA argued for a more liberal application of the mini-trial powers, as, among other things, it recognizes the enhanced role of the motion judge under the new Rule, acknowledges the spirit of proportionality inherent in the amendments to the new Rules, and enhances access to justice.

The C&DLPA argued that prior case law ought not to be relied upon to interpret the scope of the new Rule.

The C&DLPA listed certain factors that ought to be considered when determining whether to hold a mini-trial: 

    1. Will it advance the principle of proportionality;   
    2. Will it result in less delay, and cost savings for the litigants;   
    3. Will it lead to early final disposition;   
    4. Are the issues too complex and interrelated for a mini-trial;   
    5. Is there potential prejudice to a non-moving party, and if so, can that prejudice be adequately addressed; and   
    6. Do the interests of justice require a full trial?  

Ontario Bar Association

The Ontario Bar Association was appointed amicus curiae and took no position on the merits of the decisions under appeal.

The OBA argued that the test for summary judgment has changed from a determination of whether there is a triable issue, to whether those triable issues (if any) can be justly resolved without the forensic machinery of a trial. Summary judgment will be granted unless a trial is strictly necessary to resolve the dispute. If the motion judge can justly make the findings of fact, (s)he is entitled to do so.

The OBA argued that the following considerations are relevant when determining whether to grant summary judgment: 

  • whether the case is entirely based on a close "he said / she said" credibility issue and both parties have not consented to a determination under rule 20 (by cross-motion or otherwise), in which case a full trial may be more appropriate;   
  • if the party waiting for a full trial would effectively be denied justice by that delay, summary judgment may be more appropriate; and   
  • consent to a determination under rule 20 (by cross-motion or otherwise), in which case summary judgment may be more appropriate.  

The OBA also argued that where summary judgment will not be faster or more efficient, the judge should likely not engage in fact-finding. Factors to be considered in making this determination include: 

  • where issues of credibility are determinative and viva voce evidence is required from many witnesses, there is likely no efficiency to be gained;   
  • where there are cross-motions such that the motion judge could completely dispose of the matter;   
  • where the proceedings are likely to polarize the parties or add a lengthy and protracted proceeding without the prospect of finality; and   
  • where a summary judgment motion will remove an obstacle to settlement.  

The OBA also argued that the court should address issues relating to proportionality. The court should consider: 

  • complexity (this is not an automatic bar, but matters requiring a short (one-day) trial may be less appropriate for summary judgment);   
  • costs of proceeding to a conventional trial versus the amount involved in the lawsuit; and   
  • the importance of the case (both the social impact of the overall case and its importance to the parties).  

The OBA also argued that the ability to hold a "mini-trial" must be exercised with regard to proportionality, and it will be particularly appropriate where the mini-trial will be considerably shorter than a full trial, or where there is a "head-on" conflict in the evidence that goes to the heart of the matter.

In conclusion, the OBA argued that the new summary judgment test signals the view of Government that a traditional trial is not the only way to provide procedural fairness and substantive justice. Access to justice does not always mean a full trial. In fact, an effective summary procedure enhances access to justice by making the case more affordable for the parties and freeing up scarce court resources for those cases requiring a full trial.

Reply Factum of the Appellant, Robert Hryniak

Robert Hryniak, the appellant in the Hryniak appeal (described below), raised two issues in response to the facta filed by the amicus curae: (i) the consideration of the "interest of justice" under Rule 20; and (ii) the distinction between the role of the trial judge and the role of the summary judgment motion judge.

The appellant argued that, in advance of considering the question of whether there is a genuine issue requiring trial, Rule 20 requires a motion judge to consider whether it is in the interest of justice for the expanded powers to be exercised only at trial.

The appellant argued that a consideration of the interest of justice includes: (a) the reputation of the administration of justice (a just substantive result and the appearance of justice); (b) whether proceeding with the motion is the most expeditious and least expensive way of justly determining the matter on its merits; and (c) whether the time and expense related to exercising the expanded powers is proportionate to the importance and complexity of the issues and the amount involved.

The appellant argued that the distinction between taking an "expansive" or a "restrictive" approach to summary judgment has been overemphasized: the question is not whether, but when a motion judge may use the expanded powers to make findings of fact and determine the issues.

The appellant further argued that although the motion judge is entitled to assume that all evidence that would be presented at trial is before him, it is well-recognized that more information, of a different nature and quality, will be available at trial.

The appellant argued that Rule 20 does not permit the motion judge to simply use the expanded powers to determine all issues on a balance of probabilities and then conclude, once complete, that there are no genuine issues requiring a trial. To do so would render the concept of a genuine issue requiring trial meaningless, because every issue can be determined on the preponderance of the available evidence.

Misek Appeal

Factum of Appellant, Carol Anne Misek

Ms. Misek, the appellant (defendant) appealed from the judgment of Perell J. dated November 2, 2010, declaring that Ms. Misek’s property does not enjoy a prescriptive easement over the property of the respondent, 394 Lakeshore Oakville Holdings Inc.

At first instance, Perell J. held that the evidence showed only a personal benefit to the owner of the Misek property and not a prescriptive easement: the prior owners of the Misek property had a personal licence. Perell J. also held that the dimensions of the easement claim were never precisely fixed, and the easement was not necessary for the enjoyment of the dominant tenement and meant to burden the servient tenement.

With respect to the test to be applied on a Rule 20 motion, Ms. Misek relied on the decision of Karakatsanis J. in Cuthbert v. TD Canada Trust, and argued that it is not the role of the motion judge to make findings of fact for the purpose of deciding the action on the basis of evidence presented on a motion for summary judgment. Ms. Misek argued that a claim for a prescriptive easement requires a court to properly interpret the facts in order to appreciate the mental state of the parties and assess credibility. Accordingly, the existence of a prescriptive easement should only be determined at trial.

Factum of the Respondent, 394 Lakeshore Oakville Holdings Inc.

394 disputed the appellant’s characterisation of the issue on appeal: it was not whether Perell J. had correctly found that the appellant had no prescriptive easement, but whether his Honour had correctly found that there was no genuine issue requiring a trial as to whether the Misek property enjoyed the benefit of a prescriptive easement.

With respect to the test to be applied on a Rule 20 motion, 394 argued that the change in wording from "no genuine issue for trial" to "no genuine issuerequiring a trial" indicates that the court may grant summary judgment even if there is an issue on the merits, provided that with the exercise of its powers, the court can resolve it. These powers are the ability to weigh the evidence, evaluate credibility, and draw reasonable inferences from the evidence.

394 noted the two streams of jurisprudence that have developed under the new Rule 20: that exemplified by Karakatsanis J. in Cuthbert v. TD Canada Trust(which holds that it is not the role of the motion judge to make findings of fact for the purpose of deciding the action on the basis of the evidence presented on a motion for summary judgment), and that exemplified by Perell J. in Healey v. Lakeridge Health Corp. and Pepall J. in Canadian Premier Life Insurance Co. v. Sears Canada Inc. (which holds that the amendments to Rule 20 make summary judgment more readily available and recognize that issues that may beappropriate for trial may not require a trial because the court has expanded forensic powers to weigh evidence).

394 argued that whatever stream the Court of Appeal determines is appropriate, Justice Pepall did not err in granting summary dismissal of Ms. Misek’s claims.

Parker Appeal

Factum of the Appellants, Parker et al.

The appellants, Marie Parker, Katherine Stiles, and Siamak Khalajabadi appealed from an order of the Divisional Court dismissing the appellants’ appeal from the dismissal of their motion for summary judgment. The appellants alleged that their properties were damaged during the construction of two new homes between the appellants’ properties by the respondent contractor, Pino Scarfo.

The appellants argued that the motion judge erred when he dismissed the motion in a three-sentence judgment that found there were conflicts in the evidence that "could be justly resolved only after a trial".

The appellants argued that the amendments to Rule 20 were designed to make summary judgment more readily attainable, but the decisions of the courts below have the opposite effect, particularly in regard to actions commenced, as here, under the Simplified Rules.

The appellants argued that even if genuine issues requiring a trial exist in this case, it was appropriate to direct a mini-trial, grant partial judgment, or define the issues for trial.

The appellants argued that the motion judge did not address any of the evidence submitted by the parties and did not identify the conflicts in the evidence that he relied on in requiring a trial.

According to the appellants, on the application for leave to appeal Justice Greer found that the motion judge appeared to have ignored the uncontroverted engineering evidence as to the damages suffered by the appellants. On appeal, the Divisional Court found that the motion judge made no reference to the test set out in Rule 20, and there was nothing to indicate whether he appreciated the fact that the standard is different and more flexible under the new Rules; however, a review of the record indicated that this case was appropriate for a trial, although perhaps a summary trial.

The appellants argued that the former Rule 76.07 (repealed and replaced with Rule 20) established a lower threshold for granting summary judgment than under the former Rule 20, and permitted the motion judge to make determinations of fact and credibility.

Relying on Healey v. Lakeridge Health Corp., the appellants argued that the new Rule 20 was designed to make summary judgment more readily available, and to recognize that with the court’s expanded forensic powers, issues appropriate for trial may not require a trial. The appellants therefore argued that replacing Rule 76.07 with the new Rule 20 indicates that Rule 20 is intended to be at least as permissive as Rule 76.07.

The appellants suggested that motion judges adopt the following process for addressing summary judgment motions: 

  1. identify the material issues;   
  2. identify and analyze conflicting evidence pertaining to the material issues;   
  3. if the moving party demonstrates that the conflicting evidence does not require a trial for resolution, grant summary judgment;   
  4. if there are conflicts in the evidence on material issues on the paper record, consider whether oral evidence in a mini-trial will overcome these;   
  5. if a mini-trial will not overcome conflicts in the evidence, consider whether partial judgment is appropriate; and   
  6. if summary judgment is refused, or granted only in part, consider whether it is appropriate to:   
    1. specify the material facts that are not in dispute;   
    2. define the issues to be tried; or   
    3. give directions or impose terms.  

The appellants argued that if there was a conflict in the evidence regarding the respondent contractor’s liability, it cannot survive the court’s new powers under Rule 20 to weigh evidence, evaluate credibility, and draw inferences. The appellants argued that it should not be more difficult for them to obtain summary judgment under the new Rule 20 than under the old Rule 76.07.

Factum of the Respondent, Pino Scarfo

The respondent, Pino Scarfo, argued that this case was not appropriate for summary judgment, as there was conflicting evidence on liability and damages (Mr. Scarfo argued that the home construction was performed through a corporation rather than by him personally, and there was conflicting evidence on whether the damages were actually caused by the corporation’s construction).

On Rule 20, the respondent argued that the rule is permissive, not mandatory: the court has discretion to determine whether it wishes to weigh the evidence and evaluate credibility or draw inferences, and if it chooses to do so, decide whether a trial is warranted in the circumstances. The respondent argued that summary judgment should not be granted where it is in the interests of justice for the court’s expanded powers to be exercised only at trial.

The respondent further argued that the test to determine whether summary judgment should be granted is largely the same: what has changed is that the new Rule 20 provides the motion judge with additional tools to determine whether the test is met.

The respondent contractor argued that there would be no costs savings realized by granting partial summary judgment, and no value in ordering a mini-trial given the factual disputes as to liability and damages. The respondent argued that mini-trials should not be routinely ordered to resolve factual disputes, because this would result in trials being replaced by mini-trials. The respondent also argued that it is not the purpose of Rule 20 to "allow a Motions Court Judge to avoid a Trial simply by ordering a mini Trial and hearing viva voce evidence". 

Factum of the Respondents, Eric Casalese et al.

The respondents argued that fair adjudication of the issues of liability, as well as causation and quantum of damages, require a full trial with all witnesses testifying and being subject to cross-examination, and that therefore the Divisional Court’s approach (dismissing the motion for summary judgment) was correct.

On the new Rule 20, the respondents noted the two diverging lines of caselaw (the Cuthbert line versus the Healey line). The respondents emphasized that the motions judge may exercise the expanded powers in Rule 20 unless it is in the interest of justice for such powers to be exercised only at a trial. They argued that historically a fair hearing required full disclosure through documentary and oral discovery, and cross-examination of witnesses at trial.

The respondents cautioned that the court must ensure that an expeditious, less costly disposition of a dispute does not replace a fair hearing. The moving party must provide a level of proof that demonstrates that a trial is unnecessary to truly, fairly and justly resolve the issues.

In addressing whether a mini-trial should have been ordered in this case, the respondents relied on the decision of Justice Brown in Optech Inc. v. Sharma that the following considerations may determine the appropriateness of a mini-trial: 

  • where the resolution of the material factual disputes will require viva voce evidence from a significant number of witnesses, the court should hold a "regular" trial, taking advantage of the work product from the summary judgment motion, coupled with other directions under Rule 20.05(2);   
  • a mini-trial only makes practical sense if it is likely that the adjudication of the factual dispute on the mini-trial will result in granting the motion;   
  • to minimize costs and conserve judicial resources, courts should strive to schedule mini-trials for the initial hearing of the motion, rather than as "Phase Two"; and   
  • the complexity and volume of the evidence to be adduced on a summary judgment motion must factor into the determination about whether to hold a mini-trial or, indeed, whether a summary judgment motion is appropriate.  

The respondents further argued that the appellants raised the issue of a mini-trial for the first time in their submissions to the Court of Appeal, and that prior to the motion for summary judgment they had taken the contrary position that there should be no oral evidence or cross-examinations.

Finally, the respondents argued that this is a case where a trial is necessary to truly, fairly and justly resolve the issues.

Hryniak Appeal

Factum of the Appellant, Robert Hryniak

The plaintiffs, Bruno Appliance and Furniture, Inc., Fred Mauldin and 12 other individuals, brought actions against Robert Hryniak, Gregory Peebles, and Cassels, Brock and Blackwell LLP for fraud. Both plaintiffs moved for summary judgment, which motions were heard together. Justice Grace granted summary judgment only against Mr. Hryniak, who appealed from the judgment.

The appellant argued that Justice Grace misapplied the expanded powers under Rule 20 and asked the wrong question. He asked whether the plaintiffs had proved fraud on a balance of probabilities, rather than whether there were genuine issues regarding any of the elements of the tort of fraud that required a trial for their resolution.

Specifically, the appellant argued that Justice Grace erred in granting summary judgment for five reasons.

First, it was inappropriate to grant summary judgment against one defendant and not the others when, as in this case, the plaintiffs in both actions made similar allegations of fraud and other misconduct against the other defendants, arising out of the same factual record. The appellant argued that doing so serves no efficiency and saves no resources, and there is a real likelihood of inconsistent factual findings and a fettering of the trial judge’s ability to determine the case before her.

Second, fraud requires clear and cogent evidence, not inference and speculation. There were genuine issues requiring a trial in respect of the elements of inducement and reliance.

Third, credibility findings were at the heart of the case, and certain inferences drawn by Justice Grace were not put to the appellant on cross-examination, violating the rule in Browne v. Dunn.

Fourth, the documentary record was unreliable and incomplete and there were many disputes about material facts, including what representations were made and by whom.

Fifth, the factual record was complex and voluminous.

The appellant argued that the following principles have emerged from the jurisprudence on the new Rule 20: (i) the test of whether there is a genuine issue requiring trial has not changed; (ii) the motion judge can review the evidentiary record; (iii) the new Rules overrule the jurisprudence preventing the motion judge from weighing evidence, assessing credibility and drawing inferences; (iv) the motion judge is entitled to assume the evidentiary record is complete; (v) the evidentiary burden on the parties has not changed; and (vi) the new Rules do not substitute a summary trial for a summary judgment motion.

The appellant argued that the preponderance of the case law adopts the view articulated in Cuthbert v. TD Canada Trust.

The appellant further argued that Justice Grace misapplied Rule 20 by changing the task of the motion judge into that of a trial judge, and failing to recognize that certain issues, identifiable by their very characteristics, require a trial. The appellant argued that issues of credibility, unreliable documentary evidence, material disputes of fact, a voluminous evidentiary record and complex factual issues militate toward the need for trial.

The appellant emphasized that the evidence, witnesses and issues in question would be the subject of trial in any event, on an expedited basis. The appellant argued that where little efficiency is gained and there is a risk of conflicting judgments or a fettering of the trial judge’s ability to determine the facts, justice requires the action to go to trial. In this case, the appellant argued that there was no economy, but there was injustice.

Factum of the Respondent, Bruno Appliance and Furniture, Inc.

In its factum, the respondent, Bruno Appliance and Furniture, Inc., argued that Justice Grace did not misapply the law and correctly determined that there were no genuine issues requiring a trial.

The respondent argued that: (1) there was clear and cogent evidence of fraud as against Mr. Hryniak; (2) the principle in Browne v. Dunn was followed because Mr. Hryniak had notice that his credibility was at issue, and in any event, the principle did not need to be observed in this case because his evidence was, in Justice Grace’s words, "utter nonsense"; (3) the record was complete and not complex, and the evidence Mr. Hryniak pointed to as being unreliable was not material to the determination of fraudulent misrepresentation; (4) Mr. Hryniak had his day in court.

The respondent argued that the purpose of the change in wording of the new Rule 20 is to: (a) make summary judgment more readily available; and (b) recognize that although there may be issues appropriate for trial, these issues may not require a trial, given the court’s expanded powers to weigh evidence.

The respondent argued that Mr. Hryniak’s submissions that a judge on a motion for summary judgment should not first engage in fact finding but determine whether there are genuine issues requiring a trial is, as noted by Justice Perell, "intellectually dishonest" because "weighing evidence is unavoidable and occurs in the very act of determining whether it requires to be weighed".

The respondent argued that if conflicts of material fact are present, under the new Rule the judge has the power to go further and determine whether the nature of the factual dispute is such that the court can engage in fact-finding without viva voce evidence. To accept the appellant’s argument would be to limit a judge’s powers to such an extent that they would not be materially different from those under the old Rule 20.

The respondent further argued that to prohibit findings of fact would only result in unnecessary expense and delays for litigants, as well as a waste of judicial resources and time.

The respondent agreed that some cases are not suitable for summary judgment: a motion judge is free to exercise the new powers unless (s)he is of the opinion that it is in the interests of justice for such powers to be exercised only at trial. While many factors guide this judicial discretion, it is ultimately the quality of the record that will speak to the motion judge’s ability to dispose of the proceedings without trial.

The respondent argued that a court will expect that on a motion for summary judgment all relevant evidence that could be placed before a trial judge is placed before it. Mr. Hryniak’s claims that he was deprived of a fair hearing because of the procedural shortcomings of the summary judgment process should therefore not be believed, because Justice Grace’s reasons for finding Mr. Hryniak liable were the result of the glaring shortcomings of Mr. Hryniak’s own evidence.

Combined Air Appeal

Factum of the Appellants, Combined Air Mechanical Services Inc. et al.

The appellant plaintiffs, Combined Air Mechanical Services Inc. et al., appealed the decision of Justice Belobaba granting summary judgment dismissing the action. The main issue was whether the defendants were engaged in a "similar" or competing business to Combined Air, as defined in the acquisition agreement between the parties.

The appellants argued that the motion judge: (a) misconstrued the applicable sections of the acquisition agreement; (b) failed to draw an adverse inference from the failure of the respondents to lead certain evidence; (c) exceeded his jurisdiction and brought about procedural unfairness by directing a mini-trial but restricting the scope of cross-examination on that evidence; and (d) ignored important evidence.

The appellants argued that under the new Rule 20, the court is entitled to draw an adverse inference from the failure of a party to provide the evidence of any person having personal knowledge of contested facts. The moving party must provide a level of proof that demonstrates that a trial is "unnecessary to truly, fairly, and justly resolve the issues".

The appellants argued that the defendants failed to meet this evidentiary burden, as their main witness lacked credibility, and they had failed to adduce corroborating evidence from a representative of the client company at issue.

The appellants argued that the motion judge, in ordering a mini-trial to hear evidence from the client company representative, and restricting the type of questions the plaintiffs were entitled to ask on cross-examination, committed an error of law. Rule 20 permits a judge to impose temporal restrictions, but not restrictions on the type of questions that can be asked.

The appellants argued that if a judge exceeds his powers under Rule 20, this action amounts to a breach of procedural fairness. The appellant further argued that significant undue intervention in a witness’ cross-examination destroys the image of judicial impartiality and thereby deprives the court of jurisdiction.

Factum of the Respondents, Flesch et al.

The respondent defendants argued that: (a) the motions judge appropriately ordered a mini-trial on a discrete issue relating to a particular document; (b) the motions judge did not err in finding that the defendants were not in a similar or competitive business to Combined Air; (c) the motions judge did not ignore any important evidence; (d) the motions judge explicitly considered the deeming provision concerning the definition of "compete"; and (e) there was no basis upon which the motions judge was required to draw an adverse inference.

The respondents submitted that the motions judge directed a mini-trial to help him understand a particular document and assess the weight to be given to this evidence. The respondents argued that in exercising his or her power to direct a mini-trial, the judge hearing a summary judgment motion is to limit the mini-trial to one or more discrete issues, and that the judge also has the ability to limit cross-examination to the discrete issues that are the subject of the mini-trial.

The respondents argued that none of the evidence referenced by the appellants raised a genuine issue that would require a trial. In order for a fact to raise a genuine issue for trial it must be material in the sense that the result of the proceeding would turn on its existence or non-existence.

The respondents further argued that the appellants simply did not meet the burden upon them to adduce evidence setting out specific facts showing that there is a genuine issue for trial, which burden has not been altered by the changes to the new rules. To overcome this defect, the appellants asked the court to draw an adverse inference that was contrary to the evidence in the record. The motions judge appropriately refused to do so.


Stay tuned for future newsletters from Babin Barristers LLP: we hope to report on the decision of the Ontario Court of Appeal on this issue soon.