Court of Appeal finds summary-judgment-motion judge failed to weigh evidence, evaluate credibility

Decision emphasises the need for Rule-20-motion judges to direct themselves transparently: lawyer

Court of Appeal finds summary-judgment-motion judge failed to weigh evidence, evaluate credibility
Jonathan Lisus, Lax O'Sullivan Lisus Gottlieb

Part of the “continuing dialogue” between the bar, Rule-20-motion judges and the Court of Appeal, a recent ruling shows that, while summary judgment is a potent tool for the administration of justice, “like any powerful tool it has to be handled with care,” says Jonathan Lisus.

Lisus acted for the appellants in Royal Bank of Canada v. 1643937 Ontario Inc., 2021 ONCA 98, a decision reached by Court of Appeal Justices David Doherty, Lois Roberts and Alison Harvison Young, and released Feb. 19. The appellants successfully argued that, in granting summary judgment, the Superior Court Judge had erred in her determination that there was no genuine issue requiring a trial.

The analytical framework on which judges can find that a summary judgment is appropriate comes from Hryniak v. Mauldin, 2014 SCC 7. First, the judge determines whether there is a genuine issue requiring trial, based only on the evidence before her. Second, if there is, the judge can avoid trial with the enhanced powers under r. 20.04(2.1) of the Rules of Civil Procedure. The judge must weigh the evidence, evaluate the credibility of the deponent and draw any reasonable inference from the evidence. Under r. 20.04(2.2), the judge may also order that one or more of the parties present oral evidence.

Summary judgment “may have been appropriate” had the motion judge done the “requisite analysis,” but she did not, and “fairness requires” another trial by another judge, said the Court of Appeal’s decision.

“The broader, practical takeaway is that council has got to be aware of the need to remind Rule 20 motion judges, that it’s not enough for both sides to think the case is appropriate for summary judgment,” says Lisus, a litigator at Lax O'Sullivan Lisus Gottlieb. “The judge, independently of counsel, has to look at the record and make that determination and identify having made that determination – and the reason for it – to satisfy the Court of Appeal.”

The appellants – Lorraine MacDonald and Shawn, Patrick and Beverly McHale – had given personal guarantees as security for loans RBC had given their family business, OVG Inc. The company later began to struggle financially and defaulted on its loan obligations. The bank proposed a forbearance agreement, which the appellants rejected. RBC demanded payment and after a failed restructuring, OVG made an assignment into bankruptcy.

RBC brought an action to recover the over $3 million it said was owed by the appellants’ guarantees and they counter-claimed that the bank had improvidently realized on OVG’s assets. The appellants said RBC’s representative had misrepresented the scope of their liability, making them believe that if OVG could not repay the loans, they would together owe $600,000 (MacDonald said she believed she agreed to $300,000). The bank’s position was that $600,000 was owed by each. 

Both parties moved for summary judgment. The motion judge found no genuine issue requiring a trial, dismissed the appellants’ counterclaims and ordered MacDonald to pay $300,000 and Beverly and Patrick to pay $600,000 each. Shawn McHale had gone bankrupt and RBC’s action against him had been stayed.

On appeal, the appellants stuck to their claim that their liability was limited to $600,000, in total, and argued that motion judge erred in failing to see the misrepresentation as an issue requiring a trial. The motion judge ignored “key pieces of evidence” and failed to see summary judgment was inappropriate because of credibility issues that would require an oral hearing, said the appellants.

The motion judge did not elaborate on her rejection of the appellant’s evidence that the RBC representative had misrepresented the nature of the guarantees, said the Court of Appeal’s decision. The motion judge also did not address RBC’s absence of evidence challenging the appellants’ and the bank’s decision not to cross-examine the McHales or MacDonald on their corroborating evidence of misrepresentation. The motion judge did not weigh or evaluate the evidence or make findings of credibility, as was required, said the decision.

“The decision doesn’t discourage the use of enhanced fact-finding powers, but it emphasizes the need to do so in a reviewable way,” says Lisus. “This means that even where both parties ask for a Rule-20 determination, the Court must still direct itself on whether the record is appropriate for Rule-20 disposition and, where enhanced powers are used to make credibility findings, especially on the basis of inferential findings, it does so in a way that is transparent and understandable.”

The motion judge had also ruled that even if she had accepted the appellants’ allegations of misrepresentation, a clause in their agreement with the bank precluded them from relying on any representations not contained in the guarantees. The Court of Appeal also found that it is “well-established” that a misrepresentation defence is not “precluded or diminished by reason only of the existence of an entire agreement clause.”

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