In a recent decision, Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450, the Ontario Court of Appeal reiterates some of the risks of summary adjudication and reminds parties that, despite the enthusiasm for summary judgment endorsed by the Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7, summary judgment may not be appropriate in all cases – specifically, those in which a staged fact-finding process raises the spectre of inconsistent findings at summary judgment and at trial.

Background

In 2009, the parties were involved in a series of transactions relating to a property located in Barrie, Ontario. When the relationship between the parties broke down, litigation arose: the plaintiffs sued, alleging fraud and other misconduct by the defendants; the defendants counterclaimed for payment on two promissory notes executed by the plaintiff totalling $1.25 million. The defendants moved for summary judgment dismissing the plaintiff’s claim and granting the counterclaim requiring payment of the promissory notes.

Motion Judge’s Decision

The motion judge declined to grant summary judgment on the defendants’ counterclaim to enforce the promissory notes. Before deciding the issue, he ordered a half-day “mini trial” under Rule 20.04(2.2) of the Ontario Rules of Civil Procedure to hear evidence from the parties relating to the enforceability of the promissory notes. The motion judge found that the documentary evidence supported enforceability of the notes, but the parties’ live evidence confirmed a pattern of fabricating and executing documents that did not reflect the actual state of affairs between them. As a result, the motion judge was unable to obtain a sufficient appreciation of the evidence and ordered that a trial was needed to decide whether the notes were enforceable.

The motion judge did, however, grant summary judgment dismissing the plaintiff’s claim. Notwithstanding his concerns about the reliability of the promissory notes, the motion judge accepted that a release executed by the plaintiff in November 2009 was valid and therefore a complete bar to his claim against the defendant. In reaching this decision, the motion judge relied on the plaintiff’s admission in cross examination on his affidavit that he believed, as of December 2009, that there was a “clean slate” between the parties.

Court of Appeal Decision

The Ontario Court of Appeal, per Lauwers J.A., reversed the motion judge’s decision dismissing the plaintiff’s claim and ordered that both the claim and counterclaim proceed to trial.

Applying the Supreme Court of Canada’s decision in Hryniak, Lauwers J.A. held that the motion judge erred by failing to assess the advisability of summary judgment in the context of “the litigation as a whole”. Here, the promissory notes and the release were part and parcel of the same series of transactions. Although the summary judgment rules do permit staged fact-finding, it was not appropriate for the motion judge in this case to attempt to isolate adjudication on the enforceability of the release from adjudication on the enforceability of the promissory notes when the motion judge had concerns about the reliability of the latter:

[37] In the complex situation in this case, it is therefore entirely possible that the trial judge who hears the trial of the issue on the validity of the promissory notes will develop a fuller appreciation of the relationships and the transactional context than the motions judge. That could force a trial decision on the promissory notes that would be implicitly inconsistent with the motions judge’s finding that the [release] is fully valid and effective, even though the parties would be bound by that finding. The process, in this context, risks inconsistent findings and substantive injustice.

Lauwers J.A. also noted concerns with the motion judge’s reliance, when adjudicating the issue of the release, on the plaintiff’s “clean slate” admissions. Lauwers J.A. noted that these admissions were not made specifically in relation to the release, and they were also undermined by other portions of the plaintiff’s cross-examination transcript. Lauwers J.A. cautioned against undue reliance on decontextualized affidavit and transcript evidence in the context of summary adjudication, particularly on matters involving credibility:

[44] What happened here illustrates one of the problems that can arise with a staged summary judgment process in an action where credibility is important. Evidence by affidavit, prepared by a party’s legal counsel, which may include voluminous exhibits, can obscure the affiant’s authentic voice. This makes the motion judge’s task of assessing credibility and reliability especially difficult in a summary judgment and mini-trial context. Great care must be taken by the motion judge to ensure that decontextualized affidavit and transcript evidence does not become the means by which substantive unfairness enters, in a way that would not likely occur in a full trial where the trial judge sees and hears it all.

Significance

Baywood revisits some of the concerns about the limits of summary adjudication expressed by the Ontario Court of Appeal in Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764 (before that decision was considered by the Supreme Court of Canada in Hryniak), particularly in regard to adjudication of matters involving credibility.

The Baywood decision also serves as a reminder that, notwithstanding the culture shift around summary judgment that was affirmed in Hryniak and applied by the Court in Baywood, parties must still be aware that not every case will be appropriate for summary judgment:

[45]…I note that sometimes, as in this case, it will simply not be possible to salvage something dispositive from an expensive and time-consuming, but eventually abortive, summary judgment process. That is the risk, and is consequently the difficult nettle that motion judges must be prepared to grasp, if the summary judgment process is to operate fairly.

To this end, Baywood appears to outline a type of case in which, when considered in the context of the “litigation as a whole” summary judgment may generally be inappropriate. These will be partial summary judgment cases in which some issues are not amenable to summary adjudication, and those issues are factually intertwined with the issues that might otherwise amenable to summary judgment, thereby giving rise to a risk of inconsistent findings between summary adjudication and trial. A recent decision of the Ontario Superior Court, Lavergne v. Dominion Citrus Limited, 2014 ONSC 1836, followed similar reasoning. The motion judge declined partial summary judgment on the basis that “no findings of fact should be made where the balance of the claim is to be decided at trial and where the issues are linked by a factual matrix”.

Baywood in Context

However, in the context of the developing body of post-Hryniak appellate jurisprudence on summary judgment, the implications of the decision in Baywood should not be overstated. Other recent decisions from the Court endorse the use and importance of summary judgment to resolve part or all of a dispute in advance of trial.

In Miller Group Inc. v. James, 2014 ONCA 335, another recent case decided by the Court of Appeal, the Court remitted a matter for summary adjudication on the threshold issue of whether the plaintiffs were barred from suing the defendant as a result of an implied indemnity agreement between the co-defendants. Despite the fact that the action was, at that point, ready for trial, the Court held the moving defendant was entitled to have determined by way of summary judgment, “if necessary pursuant to the [mini trial] procedure contemplated by rule 20.04 (2.2).”

Similarly, in Winter v. Royal Trust Company, 2014 ONCA 473, a decision released one week after Baywood, the Ontario Court of Appeal upheld a motion judge’s decision to grant partial summary judgment and refer resolution some issues to trial. The Court of Appeal noted that determination of the issues sent to trial would not overlap with the findings of fact underlying the summary judgment, and there was no risk of inconsistent findings.

Thus, while Baywood provides important guidance on the type of case in which summary adjudication may be inappropriate, even under the new regime, summary judgment remains an important means of pre-trial adjudication in appropriate cases.

Case Information

Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450

Docket: C57087

Date of Decision: June 9, 2014