Mauldin v. Cassels Brock & Blackwell LLP, 2011 ONCA 67

CITATION: Mauldin v. Cassels Brock & Blackwell LLP, 2011 ONCA 67

DATE: 2011-01-24

DOCKET: M39492 & M39517 (C52912)

COURT OF APPEAL FOR ONTARIO

Weiler J.A. (in chambers)

BETWEEN

Fred Mauldin, Dan Myers, Robert Blomberg, Theodore Landkammer, Lloyd Chelli, Stephen Yee, Marvin Cleair, Carolyn Cleair, Richard Hanna, Douglas Laird, Charles Ivans, Lyn White, and Athena Smith

Plaintiffs (Respondents) (Responding Parties in M39492/Moving Parties in M39517)

and

Cassels Brock & Blackwell LLP, Gregory Jack Peebles, and Robert Hryniak

Defendants (Appellant) (Moving Party in M39492/Responding Party in M39517)

DOCKET: M39493 & M39519 (C52913)

BETWEEN

Bruno Appliance and Furniture, Inc.

Plaintiffs (Respondents) (Responding Party in M39493/Moving Party in M39519)

and

Cassels Brock & Blackwell LLP, Gregory Jack Peebles, and Robert Hryniak

Defendants (Appellant) (Moving Party in M39493/Responding Party in M39519)

COUNSEL:

Kenneth Cancellara, Q.C., Gleb Bazov and Andrea Sanche, for the appellant

Javad Heydary, David Alderson and Ruzbeh Hosseini, for the respondents

HEARD: January 6, 2011

On motions for extensions of time to perfect the appeals and on motions for stays pending the appeals and on appeal from the order of Justice A. Duncan Grace of the Superior Court of Justice dated October 22, 2010, with reasons reported at 2010 ONSC 5490.

Reasons for Decision

Weiler J.A. (in chambers):

[1] The appellant, Robert Hryniak, has brought a motion to extend the time to perfect his appeal until March 31, 2011. Rule 3.02(1) of the Rules of Civil Procedure provides that the court may extend the time prescribed by the rules on such terms as are just.

[2] The respondents, referred to as the Mauldin group and Bruno Appliance and Furniture, Inc. (“Bruno”), oppose Hryniak’s motion and have each brought cross-motions for the following relief: (a) an order lifting the automatic stay pending appeal, pursuant to rule 63.01; (b) an order that Hryniak post security for costs, pursuant to rule 61.06; and (c) an interlocutory or mandatory order requiring Hryniak to pay the amount awarded by summary judgment into court, pursuant to rule 40.01 and s. 101 of the Courts of Justice Act, R.S.O. 1990, c. C.43.

[3] The motions arise out of the order of Grace J., granting partial summary judgment pursuant to Rule 20. Hryniak was ordered to pay the Mauldin group $1,190,401.29 USD and to pay Bruno $1 million USD. The motion judge found that the evidence established that Hryniak had created an investment structure designed to defraud them. He further found that Hryniak procured the Mauldin group’s money fully intending to take it. Finally, the motion judge found that Hryniak received the Bruno funds and did not invest them, instead using them to make payments to others. These findings were made on the basis of a voluminous documentary record consisting of 28 volumes of evidentiary material, along with transcripts of cross-examinations and rule 39.03 examinations involving 18 witnesses.

[4] The Mauldin group and Bruno also brought a motion for summary judgment against Hryniak’s lawyer, Greg Peebles, and Peebles’ former law firm, Cassels Brock & Blackwell LLP. The motion judge concluded that summary judgment was not warranted against Peebles or Cassels Brock and dismissed the motion for summary judgment in relation to them. He ordered that the action against these defendants proceed to trial “with dispatch.” The full reasons for judgment are reported at 2010 ONSC 5490.

The Test

[5] Although this motion involves a request for leave to extend time to perfect an appeal, it is useful to consider the factors that apply when determining whether to exercise discretion to extend the time for filing a notice of appeal. Those factors are:

• Has the appellant maintained a firm intention to appeal within the relevant time period?
• Has the appellant provided a reasonable explanation for the delay in perfecting the appeal?
• Is there prejudice to the respondent in granting the extension?
• Is there is so little merit in the proposed appeal that the court could reasonably deny the appellant this important right?
• Does the “justice of the case” require the granting of an extension?

See Todd Archibald, Gordon Killeen & James C. Morton, Ontario Superior Court Practice 2011 (Toronto: Lexis Nexis Canada, 2010), at p.580; Rizzi v. Mavros (2007), 2007 ONCA 350, 85 O.R. (3d) 401 (C.A.); and Kefeli v. Centennial College of Applied Arts and Technology, 23 C.P.C. (5th) 35 (Ont. C.A.), at para. 14.

i. Intention to Appeal

[6] The judgment at issue was released on October 22, 2010. The notices of appeal in the actions brought by the Mauldin group and Bruno against Hryniak were served on November 8, 2010, and filed on November 9, 2010, well within the 30-day time limit prescribed by the rules for appealing the order. I am satisfied that Hryniak had an intention to appeal within the relevant time period.

ii. Explanation for the Delay

[7] Hryniak’s explanation for the delay in perfecting his appeals within the 30-day period after filing the notices of appeal, as required by rule 61.09(1), is that he wished to obtain a second opinion about his litigation strategy and ultimately retained new solicitors on December 15, 2010. The explanation for the delay is reasonable.

iii. Prejudice

[8] In this case the motion to extend the time within which to perfect the appeal was promptly brought and the extension of time that Hryniak seeks to perfect the appeal is less than two months. It does not appear that the respondents would be prejudiced in defending against the appeal by the granting of an extension of time within which to perfect it.

[9] The respondents do, however, allege prejudicial conduct on the part of the appellant. I prefer to discuss this conduct when considering the justice of the case.

iv. The Merits of the Appeal

[10] The fourth factor requires me to consider the merits of the appeal, not with a view to determining whether the appeal will succeed, but to determine whether it has so little merit that the court could reasonably deny the important right of an appeal: see Duca Community Credit Union Ltd. v. Giovannoli (2001), 2001 CanLII 24017 (ON CA), 142 O.A.C. 146 (C.A.), per MacPherson J.A. at para. 11.

[11] Hryniak’s principal ground of appeal is that the motion judge exceeded the scope of what a judge is permitted to do on a motion for summary judgment by using the powers under rule 20.04(2.1) of weighing evidence, evaluating credibility and drawing inferences as though he were exercising the powers and jurisdiction of a trial court judge, rather than using the powers as tools to determine whether there was a genuine issue requiring a trial.

[12] To deal with the merits of Hryniak’s primary ground of appeal, it is necessary for me to briefly consider the history and general scope of the amendments to Rule 20.

[13] Prior to the new amendments to the Rules of Civil Procedure which came into effect on January 1, 2010, Rule 20 provided that a party bringing a motion for summary judgment had the onus of showing that there was “no genuine issue for trial.” In support of the motion, the party could file supporting affidavit evidence. The responding party could not rest on a mere denial of the allegations but had to set out specific facts showing that there was “a genuine issue for trial.” The former rule was, however, interpreted by the Court of Appeal as not allowing a judge to assess credibility, weigh evidence, or draw factual inferences in determining whether there was a genuine issue for trial. See Aguonie v. Galion Solid Waste Material Inc. (1998), 1998 CanLII 954 (ON CA), 38 O.R. (3d) 161 (C.A.). As a result, a trial was required whenever there was any genuine issue with respect to material facts, no matter how weak the issue. See Dawson v. Rexcraft Storage &Warehouse Inc. (1998), 1998 CanLII 4831 (ON CA), 164 D.L.R. (4th) 257 (Ont. C.A.).

[14] On June 28, 2006, the Attorney General of Ontario asked the Honourable Coulter Osborne, former Associate Chief Justice of Ontario, to lead the Civil Justice Reform Project for the purpose of proposing ways to make the civil justice system more accessible and affordable in the province. Mr. Osborne’s report was released on November 20, 2007: see the Honourable Coulter A. Osborne, Civil Justice Reform Project: Summary of Findings & Recommendations (Ministry of the Attorney General, 2007) (“the Osborne Report”). Commenting on the Court of Appeal’s decisions under Rule 20, he wrote at p. 35: “[F]rom my reading of the Court of Appeal’s decisions on summary judgment, it is how the court has confined the scope of the powers of a motion judge or master under Rule 20, not the no ‘genuine issue for trial’ test itself that has limited the effectiveness of the rule”. The Osborne Report recommended that Rule 20 be amended to allow a motion judge to “weigh evidence, evaluate credibility and draw any reasonable inference from the evidence and documents filed” in order to determine whether an issue should proceed to trial.

[15] Mr. Osborne also recommended that Ontario adopt a new “mini-trial” or summary trial mechanism, similar to Rule 18A (now Rule 9-7)[^1] of British Columbia’s Supreme Court Civil Rules, B.C. Reg. 168/2009. Rule 18A(11) provided:

On the hearing of a summary trial application, the court may

(a) grant judgment in favour of any party, either on an issue or generally, unless

(i) the court is unable, on the whole of the evidence before the court on the application, to find the facts necessary to decide the issues of fact or law, or

(ii) the court is of the opinion that it would be unjust to decide the issues on the application,

(b) impose terms respecting enforcement of the judgment, including a stay of execution, and

(c) award costs.

[16] Mr. Osborne commented on this concept of a “summary trial” at p. 36 of his report:

As rule 20 matters now stand, the result of a rule 20 motion is binary; the motion is granted and the action ends, or it is dismissed and the parties are on the way to a full trial. In my view, there should be more flexibility in the system. Where the court is unable to determine the motion [for summary judgment] without hearing viva voce evidence on discrete issues, the rules should provide for a mini-trial where witnesses can testify on these issues in a summary fashion, without having to wait for a full trial. This can be done in British Columbia through rule 18A. It could be done in Ontario through a similar rule, i.e., by amending rule 20. [Emphasis added][^2]

[17] The recommendations in the Osborne Report were considered and, subject to small modifications, approved by the Civil Rules Committee. They form the basis of the present rule. The new summary judgment rule in Ontario now provides:

Disposition of Motion

20.04 (2) The court shall grant summary judgment if,

(a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence; or

(b) the parties agree to have all or part of the claim determined by a summary judgment and the court is satisfied that it is appropriate to grant summary judgment.

[18] Rule 20.04 now enables a court to grant summary judgment where “there is no genuine issue requiring a trial with respect to a claim or a defence” (emphasis added). This replaces the former wording of “no genuine issue for trial.” The use of the words “requiring a trial” is indicative that the court may still grant summary judgment where there is an issue on the merits that, with the exercise of its powers, the court can resolve. This is similar to British Columbia’s Rule 18A, which allows the court to grant judgment on an issue of fact or law on the merits where there is sufficient evidence before the court to find the facts necessary to decide the issue.

[19] The new amendments also bestow new powers to a summary judgment motion judge to assist him or her in determining whether the action should proceed to trial.[^3] Rule 20.04(2.1) provides:

In determining under clause (2) (a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:

1. Weighing the evidence,

2. Evaluating the credibility of a deponent,

3. Drawing any reasonable inference from the evidence.

[20] I note that a summary judgment motion judge may exercise these powers “unless it is in the interest of justice for such powers to be exercised only at a trial”. This exception echoes rule 18A(11)(ii) of British Columbia’s summary trial rule, which provides that the court may not grant summary judgment if it “is of the opinion that it would be unjust to decide the issues on the application”.

[21] Finally, the vehicle of the mini-trial recommended in the Osborne Report was adopted in rule 20.04(2.2):

Oral Evidence (Mini-Trial)

(2.2) A judge may, for the purposes of exercising any of the powers set out in subrule (2.1), order that oral evidence be presented by one or more parties, with or without time limits on its presentation.

[22] The effect of the 2010 amendments to Rule 20 was discussed by Karakatsanis J. in Cuthbert v. TD Canada Trust, 2010 ONSC 830, and in Hino Motors Canada Ltd. v. Kell, 2010 ONSC 1329. In Cuthbert, Karakatsanis J. suggests that the principles from Dawson v. Rexcraft Storage still have force. She stated at para. 11:

The decision itself or the test for summary judgment -whether there is a genuine issue of material fact that requires a trial for its resolution as first articulated in Irving Ungerman Ltd. v. Galanis (citation omitted) - has not changed. However, the cases that have since restricted a motions judge in assessing credibility, weighing evidence or drawing factual inferences have been superseded by the powers set out in the new Rule. Both the analytical review and the availability of oral evidence have considerably broadened the motions judge's tools in a summary judgment motion. Nonetheless, although a motions judge may weigh the evidence, evaluate the credibility and draw reasonable inferences from the evidence, it is not the role of the motions 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. This change in the Rule does [not?] substitute a summary trial for a summary judgment motion. Although a summary judgment motion may, if the motions judge so directs, resemble a summary trial, the test and the decision are different (See Dawson v. Rexcraft Storage and Warehouse Inc. (citation omitted). The motions judge must take "a hard look" at the evidence to determine whether it raises a genuine issue requiring a trial. (See Rozin v. Ilitchev (2003), 2003 CanLII 21313 (ON CA), 66 O.R. (3d) 410 at para. 8 (C.A.)) New Rule 20.04 provides the judge with more tools to do so.” [Emphasis added.]

[23] An arguably more expansive reading of the new Rule 20 was adopted by Perell J. in Healey v. Lakeridge Health Corp., 2010 ONSC 725, a decision referred to by the motion judge. Perell J. states at paras. 22-23 and 29:

Rule 20.04 (2.1) is a statutory reversal of the case law that had held that a judge cannot assess credibility, weigh evidence, or find facts on a motion for summary judgment. Further under rule 20.04(2.2), a judge for the purpose of weighing the evidence, evaluating credibility, and drawing inferences may order that oral evidence be presented by one or more parties, with or without time limits on its presentation.

Placed in the context of the other amendments to Rule 20, the purposes of the change from “no genuine issue for trial” to “no genuine issue requiring a trial” in the test for summary judgment are: (1) to make summary judgment more readily available; and (2) to recognize that with the court’s expanded forensic powers, although there may be issues appropriate for trial, these issues may not require a trial because the court has the power to weigh evidence on a motion for summary judgment.

It is informative to note that rule 20.04(2.1) envisions that the motions judge may use the powers of a trial judge unless it is in the interest of justice for such powers to be exercised only at a trial. The reference to the interests of justice suggests that the motions judge will have to assess whether the search for truth and justice requires the forensic machinery of a trial.

[24] In a more recent decision, Canadian Premier Life Insurance Co. v. Sears Canada Inc., 2010 ONSC 3834, Pepall J. refers to Cuthbert and Hino Motors and indicates her disagreement with the view expressed by Karakatsanis J. that the judge hearing a motion for summary judgment should not make findings of fact for purposes of deciding the action. After reviewing the recommendations in the Osborne Report, Pepall J. held as follows at para. 68 (footnotes omitted):

[C]onsistent with the language of Rule 20, a motions judge is not precluded from making findings of fact for the purpose of deciding the action on the basis of the evidence presented on a motion for summary judgment. A judge is now able to weigh the evidence, evaluate credibility and draw reasonable inferences from the evidence and order oral evidence. Implicit in these powers is the ability to make a finding of fact. If a motions judge using these powers can safely make a determination without the need for a trial, he or she is authorized to do so. This view is consistent with that expressed by D.M. Brown J. in Lawless v. Anderson: “... in a very real sense Rule 20.40(2.1) vests in a motion judge the powers typically exercised by a trial judge” and “... the fact-finding restrictions placed on judges under old Rule 20 have been removed, or at least significantly loosened.” [Emphasis added.]

[25] Having set out the history and wording of the amendments to Rule 20, as well as the two streams of jurisprudence, I turn to the appellant’s primary ground of appeal, namely, that the motion judge exceeded the scope of Rule 20 in granting summary judgment, rather than ordering a trial. Of course, the issue for present purposes is not whether I would give effect to that ground of appeal, but only whether this ground is utterly devoid of merit.

[26] In the present case, it is at least arguable the motion judge approached his task as being more along the lines of conducting a summary trial in which he made a host of factual findings for the purpose of deciding the action on the basis of the evidence before him. As acknowledged by the motions judge at para. 63, Hryniak “vigorously denie[d] the suggestion he was involved in a sham” and he pointed to others as being responsible for the respondents’ losses. The motions judge observed at para. 74: “Stopping here, the task facing the Mauldin group and Bruno on a motion for summary judgment seems overwhelming.” However, the motion judge went on to closely scrutinize the voluminous evidence and reached a determination that Hryniak was responsible for defrauding the Mauldin group and Bruno.

[27] This approach to a motion for summary judgment may potentially be consistent with the more expansive scope of the rule as interpreted by Perell J. in Healy and Pepall J. in Canadian Premier Life. On the other hand, the above passage from Cuthbert could be taken to possibly support the appellant’s argument that the motion judge’s fact-finding mission was more extensive, and was conducted for a different purpose, than how the fact-finding function in the amended Rule 20 should be performed.

[28] Our court has not yet commented on the scope and meaning of the amended rule, or the extent to which it is open to a judge on a summary judgment motion to make findings of fact for the purpose of deciding the action based on the evidence presented on a motion for summary judgment. Thus, I do not think it can safely be said that there is so little merit to this ground of appeal that the appellant’s right to appeal should be denied.

[29] Hryniak also raises three further grounds of appeal: (1) that summary judgment ought not to be granted where fraud is alleged; (2) that the motion judge misinterpreted the rule in Browne v. Dunn (1893), 1893 CanLII 65 (FOREP), 6 R. 67 (H.L.); and (3) that his findings of fact reveal overriding and palpable errors. In light of my conclusion that there is sufficient merit in the first ground, it is unnecessary to address the other grounds, the merits of which may be considered by the panel hearing the appeal.

v. Considerations relating to the “justice of the case”

[30] The respondents raise serious concerns relating to Hryniak’s conduct in encumbering his interest in his family home following the release of the motion judge’s reasons for judgment. They submit that Hryniaks motion to extend time to perfect his appeal is designed to delay the proceeding and to frustrate their efforts to enforce the court order against him to recover their losses. This is a reasonable submission, given Hryniaks actions leading up to this motion as well as the undertaking given in his affidavit in support of this motion.

[31] Hryniak’s affidavit states:

My spouse and I have no interest in or intention to sell our home. Our family resides in Toronto and our life and assets are here, in Ontario. Given the nature of the Plaintiffs’ motions, the fact that my spouse and I have no interest in alienating title to our property at this time, and so to allay any concerns that the Plaintiffs may have (although these concerns are wholly unsubstantiated), I will undertake not to transfer, divest or dissipate my title to the matrimonial home pending the hearing of the plaintiffs’ motions.

[32] When Hryniak swore this affidavit he had already dealt with the matrimonial home located at 66 Cotswold Crescent, Toronto. On December 3, 2010, he transferred ownership of the matrimonial home from joint tenancy to tenancy in common and charged his interest in the matrimonial home in the principal amount of $1,000,000 in favour of his wife, Suzanna Mandryk. Hryniak says the charge was granted as security for his wife pursuant to an agreement dated December 1, 2010, in recognition of his indebtedness to her for subsidizing his legal fees.

[33] Hryniak deposes that he did the transfer “[p]rior to any knowledge of the Plaintiffs’ motions, on my or my former counsel’s behalf”. While that may be so, before the transfer was effected and the indebtedness registered on title, Hryniak’s former solicitors forwarded to him a letter dated November 5, 2010, from counsel for the respondents requesting that he agree in writing and that his counsel undertake that he would not deal with his interest in the property.

[34] Presumably this request was made because, pursuant to rule 60.07, in order to enforce the judgment by requisitioning a writ of seizure and sale without leave of the court, the respondents had to file a copy of the order as entered. As the order had not yet been settled, it could not be entered.

[35] Following receipt of this letter, Hryniak’s former solicitors advised that he did not own the property, his wife did; they then filed his notices of appeal, dated November 8, 2010, which had the effect under rule 63.01 of automatically staying the orders for payment by him to the respondents until the disposition of the appeals. On November 10, however, they advised that Hryniak actually held the property in joint tenancy with his wife.[^4]

[36] As I have indicated, after Hryniak filed his notices of appeal staying enforcement of the judgments against him, he gave a charge on the matrimonial home to his wife for $1 million on December 3, 2010. After this, on December 6, 2010, the order was finally settled. A Basic Residential Market Value Report from the Municipal Property Assessment Corporation obtained by counsel for the respondents values the property at $1,905,000, which suggests that Hryniak’s undivided joint interest in the property was worth $952,500.

[37] The undertaking offered by Hryniak only deals with his interest in the matrimonial home pending disposition of the respondents’ motions. It is not an undertaking that he will refrain from dealing or disposing of all assets he may have pending the outcome of his appeals.

[38] On December 17, 2010, Rosenberg J.A. adjourned the appellant’s motion and the respondents’ cross-motions that are now before me. At that time, he lifted the automatic stay on enforcing judgment pending appeal for two purposes: (1) to permit the respondents to lodge the judgment against the matrimonial home; and (2) to allow them to examine Hryniak in aid of execution.

[39] The examination ordered by Rosenberg J.A. was held, albeit not to the satisfaction of either the Mauldin group or Bruno. Hryniak refused to answer a number of questions and the propriety of those refusals has yet to be determined. At this point, Hryniak’s only known asset is the matrimonial home in which he continues to enjoy living.

[40] Bruno and the Mauldin group assert that they have been prejudiced by Hryniak’s actions. In the event that Hryniak has other assets, it is apparent that the limited undertaking offered does not cover them. Bearing in mind the summary judgment against Hryniak, his dealing with the matrimonial home in the face of his creditors’ request that he not do so pending settlement of the order, the self-interested preference he gave to his wife as a creditor, the lack of transparency concerning his financial position, and the careful wording of his undertaking, the risk of prejudice to the respondents in allowing the appeal to proceed is very real. Subject to any conditions the court may impose as a reasonable term for granting the extension, extending the time within which to perfect the appeal would give more time to Hryniak to encumber or dispose of his assets.

[41] However, such risk to the respondents may be minimized if certain conditions are imposed on Hryniak. Rule 3.02(1) provides that the court may extend the time prescribed by the rules on such terms as are just (emphasis added). Having regard to the respondents’ cross-motions, I believe that any prejudice arising from allowing Hryniak to proceed with his appeal may be remedied by requiring him to pay an amount reflecting his undivided joint interest in his matrimonial home. This would be a just balance between Hryniak’s right to an appeal and the respondents’ interest in ensuring that they may enforce the motion judge’s court order if Hryniak loses his appeal.

Conclusion

[42] Having regard to all of the factors governing the test for extending the time to perfect an appeal, I would grant the appellant’s motion to extend time for perfection while also imposing terms. Those terms are: (1) that Hryniak post an irrevocable letter of credit with the court in the amount of $950,000; and (2) that he provide the court with his written undertaking not to encumber or dispose of any assets he may have pending the outcome of his appeals. The letter of credit should be made payable to the Accountant of the Superior Court of Justice, and the undertaking should be addressed to the Registrar of the Court of Appeal for Ontario.

[43] Provided that the terms above are complied with on or before February 3, 2011, I order that the time to perfect the appeals be extended until February 28, 2011. If the terms are not complied with, the motions to extend the time to perfect the appeals will be dismissed on February 3, 2011, without further notice to Hryniak.

[44] Given that these terms in substance reflect the relief sought by the respondents in the cross-motions, I would dismiss those motions.

Costs

[45] In the circumstances, I make no order as to costs.

RELEASED: January 24, 2011

[^1]: British Columbia’s Supreme Court Civil Rules, B.C. Reg. 221/90, were recently amended. The new rules, B.C. Reg. 168/2009, came into force on July 1, 2010.

[^2]: British Columbia’s Rule 18A did not itself provide that the court may order viva voce evidence at a summary trial. Rather, rules 52(8)(a) and (b) (now rules 22-1(4)(a) and (b)) of the Supreme Court Civil Rules permitted the court to order the examination of a witness or party, or the cross-examination of a deponent, before the court in chambers proceedings. Pursuant to rule 52(2)(c), chambers proceedings included summary trials under Rule 18A.

[^3]: It should be noted that only a judge, and not a master, may exercise these new powers.

[^4]: Hryniak did not attend an examination in aid of execution in the Mauldin Action scheduled on November 17, 2010, although duly served through his lawyer with the notice of the examination. However, because the execution of the judgment was stayed when Hryniak filed the notice of appeal on November 8, 2010, and an examination in aid of execution is considered to be enforcement of the judgment, it appears he did not have to attend the examination.