The Supreme Court Gives a Green Light to Summary Judgment in Hryniak v Mauldin

Commentators often refer to a crisis in civil justice.  Civil procedure is slow, complicated, and prohibitively expensive, putting it out of the reach of the average Canadian.   In 2010, the Ontario government amended the Rules of Civil ProcedureRRO 1990, Regulation 194, with the aim of improving access to justice.  One aspect of this was to give judges more scope for conducting simplified summary trials where there was no genuine issue requiring a full fledged trial and lengthy examination of witnesses.  Where appropriate, a judge is given the power to just look at the documents in the case and say “this is obvious.”

Two of the early cases that were tried under the new rules have now been adjudicated by the Supreme Court of Canada (“SCC”).    Both of these cases involved claims of civil fraud against the same defendant, by two different groups of plaintiffs who had invested money.  In deciding the cases, the SCC provided strong encouragement for the process of summary judgment, and gave some helpful guidance on the nuances of how it should be applied.   The unanimous judgment of the Court was delivered by Justice Karakatsanis.  She decided that the standard applied by the Ontario Court of Appeal had been too stringent, and a high degree of deference should be given to the views of the trial judge.   

Background to the Cases

The intertwined cases on appeal were Bruno Appliance and Furniture Inc v Hryniak, [2014] 1 SCR 126 [Bruno] and Hryniak v Mauldin, [2014] 1 SCR 87 [Mauldin].  In both, the SCC dismissed the appeal, upholding the Ontario Court of Appeal’s ruling that summary judgment should be allowed for Mauldin but not for Bruno. 

The disputes involved a total of $2.2 million of investors’ money that vanished more than 10 years ago.  It is very small potatoes indeed by the standards of a Madoff, and it is likely that the legal fees exceed the amount of the money in dispute.  If this story had been told by a writer of fiction, critics would say that is sounds very contrived, and in any event the story reads more like a farce than a legal thriller.  Some of the investors were a church group from Michigan, who vied with seemingly religious fervour to be included in the investment schemes of somebody they referred to only as “the Trader.” One disgruntled plaintiff allegedly threatened to break the legs of a former managing partner of the highly respectable firm of Cassels Brock & Blackwell, whose trust account had been the vehicle for the alleged fraud. Ironically, the plaintiffs were represented by Javad Heydary, who argued their case at the SCC just a few months before he allegedly died in Iran, with over $3 million missing from his own trust account.

It says something about our civil justice system that this matter has spawned approximately 16 court sessions, including various appeals, motions for a Mareva injunction and security for costs, and disputes about cost awards.  Capping it off was a lawsuit by Cassells Brock & Blackwell over the refusal of the professional liability insurer, Lawpro, to defend the firm. The insurer did not consider these investment shenanigans to be a legal professional activity that was covered by their insurance. Lawpro’s position was upheld by the Court of Appeal, Cassels Brock & Blackwell v Lawpro, 2007 ONCA 122.

The facts, as succinctly as possible, are these:   Mauldin (the Michigan pastor) and his group were drawn in by slick salesman Robert Cranston, who told them about “the Trader” in Toronto, who was Mr. Hryniak. (Cranston was later charged with criminal fraud on related matters, R v Cranston, 2008 ONCA 751).  Two members of the group came to Toronto, where they met Hryniak and his lawyer Peebles at the latter’s office. Mr. Peebles was at the time managing partner of Cassels Brock & Blackwell. Convinced that they were on to a fabulous opportunity, and perhaps impressed by the prestigious law firm setting, the Mauldin group sent $1.2 million to Peebles, which he put in his trust account, and subsequently transferred to Hryniak’s company.  Subsequently Mr. Bruno, who never met Hryniak, but only met with Cranston and Peebles at the latter’s office, also sent $1 million to Peebles. 

Hryniak claimed that Mauldin’s $1.2 million had been deposited in a bank in Montenegro, and it was unfortunately stolen by a dishonest bank official. He argued that he had no dealings with Bruno, and never received Bruno’s money, which may have been sent to Cranston’s company.

The two claims were argued together at first instance, indexed as Bruno Appliance v Cassels Brock & Blackwell LLP, 2010 ONSC 5490.  The plaintiffs had moved for summary judgment, and Grace J felt obliged to give this serious consideration. This followed from the new Rule 20.04 (2) (a), allowing summary judgment to be granted if “the court is satisfied there is no genuine issue requiring a trial.” He ended up delivering a 60 page judgment, following from 28 volumes of evidence and four days of arguments.   He noted with some irony that it was called a summary proceeding but “I recognize some may not believe the use of that word is appropriate” under the circumstances (footnote 166).

Justice Grace doubted the bank where Hryniak claimed to have deposited the money even existed, and did not believe his claims about the circumstances in which the money was lost. (The SCC later noted that, even if everything stated in Hryniak’s defence was true, it amounted to sufficient recklessness to make out the tort of civil fraud, thus justifying the summary judgment.)  He gave summary judgment in favour of Mauldin and Bruno against Hryniak. However, with respect to Peebles (and the vicarious liability of his former firm), he ruled that a trial would be required to determine if he was negligent, or merely an innocent dupe.  There is an interesting question here about whether a lawyer has a duty of care to people who are defrauded by his client, when the lawyer welcomes the victims to his office and plays a role in adding an aura of respectability to the client.

At the Ontario Court of Appeal

Both decisions were appealed, and formed part of the omnibus Court of Appeal decision on five cases involving the new summary trial rules, indexed as Combined Air Mechanical Services Inc. v Flesch 2011 ONCA 764 [Flesch].  Here, the Court of Appeal put forward the full appreciation test for summary motions:  “In deciding whether to exercise those powers, the judge is to assess whether he or she can achieve a full appreciation of the evidence and issues required to make dispositive findings on the basis of the motion record” (para 55).

In the Flesch case, the Court of Appeal ruled that it was appropriate to make a summary judgment because there were narrow and discrete issues.   When it came to Mauldin and Bruno, the Court held that these issues had in fact been too complex to be properly tried summarily.   Due to the volume of evidence and the strong case for Mauldin, the Court of Appeal nevertheless upheld the partial summary judgment in that case. However, “going forward, cases such as these should not be decided by summary judgment.” With regard to Bruno’s $1 million, the Court of Appeal held that there were genuine issues of credibility requiring a trial to decide what happened to the money. This hinged particularly on the fact that Mr. Hryniak never actually met Mr. Bruno, and it was not clearly established that he received his money.

The Supreme Court Dismisses the Appeals

The SCC had little to add regarding the Bruno case, and in fact it is surprising that leave to appeal had ever been granted in that proceeding.  With respect to Mauldin, the Court of Appeal’s position was rather interesting, and Hryniak’s appeal noted that it represented a “prospective overruling” of the trial judge’s approach to summary judgment.  The Court of Appeal had said that they would allow it this time, but in future such complicated cases should not proceed summarily.  The SCC rejected that position, effectively broadening the scope for summary trials.   It held that the Court of Appeal’s “full appreciation” test is too stringent.  Justice Karakatsanis has substituted the test of “fair and just adjudication:”

In interpreting these provisions, the Ontario Court of Appeal placed too high a premium on the “full appreciation” of evidence that can be gained at a conventional trial, given that such a trial is not a realistic alternative for most litigants.  In my view, a trial is not required if a summary judgment motion can achieve a fair and just adjudication, if it provides a process that allows the judge to make the necessary findings of fact, apply the law to those facts, and is a proportionate, more expeditious and less expensive means to achieve a just result than going to trial (para 4).

Justice Karakatsanis articulated a clear philosophical position on the tradeoffs.  In effect, she said that striving for perfection in all cases is too costly.  The net benefit to society is greater with increased access to the justice system for a larger number of participants:

While I agree that a motion judge must have an appreciation of the evidence necessary to make dispositive findings, such an appreciation is not only available at trial.  Focussing on how much and what kind of evidence could be adduced at a trial, as opposed to whether a trial is “requir[ed]” as the Rule directs, is likely to lead to the bar being set too high.  The interest of justice cannot be limited to the advantageous features of a conventional trial, and must account for proportionality, timeliness and affordability.  Otherwise, the adjudication permitted with the new powers – and the purpose of the amendments – would be frustrated (para 56).

Justice Karakatsanis also held that the Court of Appeal had set too stringent a standard for reviewing the decision of the trial judge.   She prescribed a high degree of deference:

The Court of Appeal concluded that determining the appropriate test for summary judgment – whether there is a genuine issue requiring a trial – is a legal question, reviewable on a correctness standard, while any factual determinations made by the motions judge will attract deference…In my view, absent an error of law, the exercise of powers under the new summary judgment rule attracts deference.  When the motion judge exercises her new fact-finding powers under Rule 20.04(2.1) and determines whether there is a genuine issue requiring a trial, this is a question of mixed fact and law.  Where there is no extricable error in principle, findings of mixed fact and law, should not be overturned, absent palpable and overriding error (paras 80-81).

This decision by the SCC provides enthusiastic support for expanded use of the summary judgment procedure.  Of course, how this will play out in practice is another matter.  The so-called summary procedure in this case became brutally complicated and spawned multiple appeals.  Nevertheless, the guidance provided by the SCC on how to manage summary trials will be useful, and should give trial judges a greater sense of comfort when they attempt to simplify proceedings.

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