Baywood Homes Partnership et al. v. Haditaghi et al.
[Indexed as: Baywood Homes Partnership v. Haditaghi]
Ontario Reports
Court of Appeal for Ontario,
Rouleau, Lauwers and van Rensburg JJ.A.
June 9, 2014
120 O.R. (3d) 438 | 2014 ONCA 450
Case Summary
Civil procedure — Summary judgment — Plaintiffs bringing action for damages for fraud and defendants counterclaiming on two promissory notes — Motion judge granting summary judgment dismissing plaintiffs' action on basis that it was precluded by valid release — Motion judge conducting mini-trial under rule 20.04(2.2) of Rules before refusing [page439] to grant summary judgment on counterclaim on ground that he was unable to conclude that promissory notes were valid — Plaintiffs' appeal allowed and both claim and counterclaim required to proceed to trial — Release and promissory notes being part of same series of transactions — Motion judge erring in failing to assess advisability of staged summary judgment process in context of litigation as whole in circumstances where credibility was important — Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 20.04(2.2.).
The plaintiffs brought an action alleging fraud and other improprieties, and the defendants counterclaimed on two promissory notes. The motion judge granted the defendants' motion for summary judgment dismissing the plaintiffs' action on the basis that it was precluded by the terms of a release that he accepted as valid. The motion judge did not grant summary judgment on the counterclaim. Before refusing to grant summary judgment on the counterclaim, he conducted a "mini-trial" in the exercise of his authority under rule 20.04(2.2) of the Rules of Civil Procedure. After hearing the witnesses, he found that he was unable to conclude that the promissory notes were valid, and he referred the issue of their validity to trial. The plaintiffs appealed.
Held, the appeal should be allowed.
The summary judgment rules permit the fact-finding process to be staged, but only where that will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole. The motion judge was obliged to assess the advisability of a staged summary judgment process in the context of the litigation as a whole. He failed to do so. The release and the promissory notes were signed at roughly the same time and in the context of the same series of transactions. If, as the motion judge concluded, the promissory notes were questionable because the parties fabricated and executed documents that did not reflect the true state of affairs, and were therefore not amenable to enforcement on a motion for summary judgment, then the same could well be true of the release. It was inappropriate for the motion judge to distinguish between the promissory notes and the release on the basis of decontextualized transcript evidence. Great care must be taken by a 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.
Hryniak v. Mauldin, [2014] S.C.J. No. 7, 2014 SCC 7, 314 O.A.C. 1, 453 N.R. 51, 2014EXP-319, J.E. 2014-162, EYB 2014-231951, 95 E.T.R. (3d) 1, 12 C.C.E.L. (4th) 1, 27 C.L.R. (4th) 1, 46 C.P.C. (7th) 217, 37 R.P.R. (5th) 1, 366 D.L.R. (4th) 641, apld
Other cases referred to
Combined Air Mechanical Services Inc. v. Flesch (2011), 108 O.R. (3d) 1, [2011] O.J. No. 5431, 2011 ONCA 764, 286 O.A.C. 3, 97 C.C.E.L. (3d) 25, 14 C.P.C. (7th) 242, 13 R.P.R. (5th) 167, 93 B.L.R. (4th) 1, 10 C.L.R. (4th) 17, 211 A.C.W. S. (3d) 845
Rules and regulations referred to
Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 20.04(2.2)
APPEAL from the order Belobaba J., [2013] O.J. No. 1772, 2013 ONSC 2145 (S.C.J.) on summary judgment motions. [page440]
David W. Foulds and Jennifer A. Whincup, for appellants.
George J. Karayannides, for respondents.
The judgment of the court was delivered by
[1] LAUWERS J.A.: — The motion judge granted summary judgment dismissing the appellants' action, which alleged fraud and other impropriety, on the basis that it was precluded by the terms of a release that he accepted as valid. The motion judge did not, however, grant summary judgment on the respondents' counterclaim on two promissory notes. Before refusing to grant summary judgment on the counterclaim, he conducted what he described as a "half-day mini-trial" in the exercise of his authority under rule 20.04(2.2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. After hearing the witnesses, he found that he was unable to conclude that the two promissory notes signed by the appellant in favour of the respondent were valid, and he referred the issue of their validity to trial.
[2] For the reasons set out below, I would allow the appeal, set aside the judgment and require both the claim and counterclaim to proceed to trial.
A. Background
[3] For convenience, I will adopt the monikers used by the motion judge: "Alex", for the defendant Alex Haditaghi; "Ralph" for the plaintiff Ralph Canonaco; and "Frank" for Ralph's brother, Frank Canonaco.
[4] The litigation stems from a series of transactions related to a property in Barrie (the "Mapleview property"). The contextual facts were summarized by the motion judge, at para. 5:
Ralph and his family are experienced home-builders; Alex is an expert mortgage broker. The two of them, with their colleagues and through their respective companies, engaged in a series of transactions involving a property in Barrie over the course of the turbulent financial year that was 2009. Disputes arose, giving rise to this litigation. Initially, Alex sued Ralph on two promissory notes that Ralph had signed personally and Alex believed were due and owing, one for $750,000 and another for $500,000. Ralph countered with a multi-million dollar lawsuit accusing Alex and certain of his companies and colleagues of fraud and other improprieties, and numerous breaches of agreement. The competing lawsuits were eventually consolidated into a single proceeding that now consists of Ralph's action and Alex's counterclaim on the two promissory notes ("the Two PNs").
[5] The resolution of this appeal requires a detailed exploration of the transaction history. The execution of a release, dated November 12, 2009, which the motion judge found to bar the appellants' claims, as well as the execution of the two promissory notes around the same time, were bound up in the series of [page441] transactions that gave rise to what the motion judge characterized as "admittedly false" and "fake" documentation. The release at issue and the promissory notes were the product of the same business culture, which the motion judge described, at para. 17, as one in which the parties "often ignored or worked around carefully drafted documentation or worse, fabricated such documentation when it was deemed necessary to do so".
[6] The evidence shows that, over the course of 2009, Ralph and Alex engaged in a complex series of transactions, the results of which were beneficial to Alex but quite detrimental to Ralph. By December 2009, Alex had managed to leverage the Mapleview property and the financial distress of the Mapleview Company, which was the registered owner of the Mapleview property to great advantage, and, in particular, to satisfy an outstanding personal judgment against him; to acquire and dispose of valuable rights in the Mapleview property; and to obtain promissory notes from Ralph, two of which remain outstanding in the total amount of $1,250,000. By contrast, Ralph's interest in the Mapleview property was diminished in the series of transactions between the parties.
(1) Alex acquires the Mapleview property
[7] Around December 2008, Ralph was introduced to Alex and retained his services to secure mortgage financing for various projects of Baywood Homes Partnership ("Baywood"), a company beneficially owned by Ralph and his family members. On January 15, 2009, the parties signed a letter of interest. Alex was to secure $13 million in mortgage financing for Baywood and was to receive a $50,000 fee if he successfully obtained a mortgage commitment. The parties disagree on whether Alex actually discharged his obligations under their agreement: Ralph says Alex obtained a letter of understanding, not a firm mortgage commitment. Alex claims to have secured the mortgage commitment, but says the deal fell through because Ralph misrepresented the value and liabilities of Baywood's projects.
[8] By the spring of 2009, Baywood faced financial pressure and refinancing was necessary. According to Ralph, Alex proposed to transfer the Mapleview property to a public company controlled by Alex. Alex would then refinance the mortgages on the Mapleview property. On May 11, 2009, the parties executed the first of two share purchase agreements (the "first share purchase agreement"). Under this agreement, the public company controlled by Alex -- Moneylogix U.S. -- acquired the Mapleview Company shares and, through it, the Mapleview property. In exchange, Ralph received about 10 per cent of the [page442] issued and outstanding shares in Moneylogix U.S. On May 20, 2009, in connection with the first share purchase agreement, Ralph executed a release in favour of the Mapleview Company and an entity referred to as Moneylogix Group Inc.
[9] After the closing of the first share purchase agreement, Moneylogix U.S. assigned the Mapleview Company shares to its wholly owned Canadian subsidiary, Moneylogix Ontario.
[10] The effect of the first share purchase agreement was to transfer control of the Mapleview Company to Alex. Ralph retained an indirect interest in the Mapleview property through the shares he received in Moneylogix U.S. Ralph claims that, after the first share purchase agreement, he learned for the first time that Moneylogix U.S. did not have any substantial assets apart from the Mapleview Company shares it had just acquired.
(2) Alex registers the Trisan mortgage and quitclaim
[11] After the closing of the first share purchase agreement, Alex caused a $950,000 mortgage to be registered on the Mapleview property, and provided an escrow quitclaim as security for the mortgage. The mortgage and escrow quitclaim were provided in favour of the Trisan Equitable Mortgage Corporation ("Trisan"), in satisfaction of an outstanding October 2007 judgment against Alex and several of his companies. In consideration for the registration of the mortgage and the escrow quitclaim, Moneylogix U.S. was released from the issuance of 15 million shares held back by the company and due to Alex.
[12] Ralph claims that he was unaware of the mortgage and escrow quitclaim when they were provided. Ralph also claims that Alex defaulted on the existing Mapleview property mortgages, allowed permits for the property to lapse and failed to obtain new financing for the property as promised.
(3) Ralph re-acquires the Mapleview property
[13] In August 2009, Ralph re-acquired the Mapleview Company shares. The parties disagree on what motivated this transaction. Ralph says that he was concerned with Alex's management of the Mapleview property, and particularly the registration of the mortgage and quitclaim in favour of Trisan. He wanted to re-acquire the Mapleview property before his investment was lost. Alex says he introduced Ralph to a social housing entity called Options for Homes, and Ralph wanted to re-acquire Mapleview with a view to developing it with that entity. In any event, on August 21, 2009, the parties executed the second of the share purchase agreements (the "second share purchase agreement"), by which Ralph re-acquired the Mapleview Company shares. [page443]
[14] Under the terms of the second share purchase agreement, Alex retained (1) a $2.53 million mortgage secured against the Mapleview property and Baywood's Lisgar property; (2) the right to fee simple ownership of 100 residential units on the Mapleview property; and (3) the right to acquire a further 150 residential units (the "ancillary rights"). Alex testified at the mini-trial that the value of the ancillary rights exceeded $4 million. Ralph also executed a second release on behalf of the Mapleview Company in favour of Moneylogix Group Inc.
[15] Thus, after the close of the second share purchase agreement, Ralph once again owned the Mapleview Company shares, but the Mapleview property was encumbered by an additional mortgage, and Alex retained the ancillary rights in the Mapleview property.
(4) The parties execute the option to purchase
[16] Following the second share purchase agreement, Ralph obtained new financing from 2219657 Ontario Inc. ("221"). The principal of 221, Albert Soberano, required that Alex grant an option, in favour of 221, to purchase his ancillary rights in the Mapleview property. On October 6, 2009, Alex granted 221 a 30-day option to purchase the ancillary rights for $2 million (the "option to purchase").
[17] Also on October 6, 2009, Alex and Ralph signed an exclusive mortgage arrangement (the "settlement agreement"), which provided that Ralph owed $500,000 to Mortgagebrokers.com, another of Alex's companies. Ralph executed a $500,000 promissory note in favour of Mortgagebrokers.com dated October 6, 2009. Ralph also executed a second promissory note also dated October 6, 2009, in the amount of $750,000, in favour of Moneylogix Group Inc. He executed a third promissory note dated October 6, 2009, in the amount of $245,240, in favour of Moneylogix Group Inc., which has been paid. There was some evidence to suggest that, notwithstanding the dates on the notes, they were actually executed in November, around the time that the option to purchase was exercised.
(5) Ralph executes the third release
[18] 221 exercised the option to purchase on November 3, 2009. An assignment agreement was executed on November 16, 2009, which transferred the ancillary rights to a company related to 221. On November 12, 2009, Ralph personally and on behalf of the Mapleview Company executed a third release (the "third release"). According to Alex, the third release was signed in connection with the assignment of the ancillary rights. Ralph agrees [page444] that the third release was signed as part of the same series of transactions that gave rise to the promissory notes.
[19] According to Alex, Ralph executed the promissory notes in connection with the option to purchase, in order to compensate Alex to some degree for the discrepancy between the value of the ancillary rights -- over $4 million according to Alex -- and the option price of $2 million.
[20] Ralph took a different view of events, though he did not dispute that the promissory notes were related to the option to purchase. According to Ralph, he executed both notes as a favour to Alex, and Alex assured him that they would not be enforced. Ralph testified that the notes were a sham that enabled Alex to account to investors for the discrepancy between the value of the ancillary rights and the option price.
[21] Regardless of which account is accurate, the parties agree that it was the option to purchase that motivated the promissory notes. The same option to purchase also gave rise to the third release: the option was exercised on November 3, 2009, the third release was executed on November 12, 2009, and the ancillary rights were assigned and transferred by way of an assignment agreement dated November 16, 2009. In other words, the promissory notes and third release were part and parcel of the same series of transactions: the promissory notes were executed in connection with the grant of the option to purchase, and the third release was executed in connection with the exercise of that option.
B. The Decision under Appeal
[22] After hearing the summary judgment motion, the motion judge ordered a mini-trial under rule 20.04(2.2) of the Rules of Civil Procedure. He explained his reason for doing so, at para. 14:
I wanted to hear more about the Two PNs from Ralph and Alex in person. I decided that a "mini-trial" would assist me in assessing their conflicting evidence and deciding whether the issue of enforceability could be adjudicated summarily.
At no time prior to the close of the mini-trial did the motion judge express a conclusion on any aspect of the summary judgment motion, though he directed the mini-trial relating only to the two promissory notes.
[23] At the mini-trial, the motion judge heard from three witnesses who gave evidence about the promissory notes: Alex, Ralph, and Ralph's brother, Frank. The motion judge rejected Frank's evidence. He then said, at para. 14: "[f]or me, the contest came down to the PN documentation and to Alex and Ralph's explanations as to why the two PNs were signed". [page445]
[24] The motion judge outlined the competing versions of the evidence, and then concluded, at paras. 17-18:
As I have already noted, all of the documentary evidence before me supports Alex's version of events. However, it became apparent as the mini-trial progressed, that in the business culture that had developed between them, Ralph and Alex often ignored or worked around carefully drafted documentation or worse, fabricated such documentation when it was deemed necessary to do so.
The best example, as already noted, is the $500,000 PN. The documentation shows that Ralph made the note payable to Alex's other public company, Mortgagebrokers.com. The documentation also explains that the money was being paid to Mortgagebrokers.com as a settlement for fees due and owing to this company. However, none of this was true. No fees were owing to Mortgagebrokers.com. The applicable "settlement agreement" that was signed by both Ralph and Alex was itself a fake document that had no connection with what was really happening.
[25] As a result of the questions that he was left with after the mini-trial, the motion judge decided that a full trial on the enforceability of the promissory notes was necessary. He explained, at paras. 21-23:
The problem for me is obviously the $500,000 PN and its related documentation. I think it's fair to say that but for the questions surrounding this particular promissory note, and given Ralph's uneven testimony at the mini-trial, I would likely have found in favour of the defendants and would have granted summary judgment on the Two PNs. Should I now at least grant judgment on the $750,000 PN? In my view, this would neither be fair nor reasonable. The Two PNs are interconnected, whosoever version is believed. I cannot enforce one and send the other on to trial.
In sum, the mini-trial conducted under Rule 20.04(2.2) persuaded me that I am unable to achieve a full appreciation of the evidence that will be needed to make dispositive findings about the enforceability of the two PNs. This is a question that does not turn solely on the documentation, given that some of the documentation is admittedly false. A full and complete examination of why the parties did what they did is required in the interests of justice. A trial judge will be in a better position to hear all of the evidence from all of the witnesses, including Ralph's lawyer and Alex's accountant, and make the appropriate findings.
I find that the enforceability of the Two PNs are genuine issues that require a trial.
[26] The motion judge came to the conclusion, by contrast, that the third release was entirely authentic and valid. He explained, at paras. 7-9:
During the course of the hearing of the motion for summary judgment, I was persuaded on the evidence before me that Ralph's action was completely precluded by the November 12, 2009 release agreement, referred to as the Third Release. The language is clear and comprehensive and can be objectively assessed. None of the arguments advanced by Ralph about the document's scope and content or its signatories are tenable. And, there is no [page446] credible evidence in the material before me that can seriously support the allegations of duress, unconscionability, non est factum or lack of consideration. On its face, the Third Release seems to be a complete bar to this action.
But the most telling and most persuasive indicator of its validity was Ralph's own testimony. During the cross-examination on his affidavit, Ralph admitted that "as of December 2009, there was a clean slate." He agreed that neither he nor any of his companies "had any claims against [Alex]."
Ralph's counsel points out that Ralph also added that "likewise [Alex] didn't have any claims against [me]." This additional qualifier deserves the following comment. If Ralph meant that the Third Release explicitly released any claims that Alex may have had as against him, that interpretation is demonstrably incorrect. If he meant, as is more likely, that he had a separate (perhaps earlier) understanding or agreement with Alex that Alex would not pursue him on the Two PNs, then this can be considered as a separate issue and will be, below.
[27] The motion judge added, at paras. 11-12:
I refer to the existence of "fake documents" while discussing the Third Release because Ralph's counsel tried to persuade me that the Third Release may also be tainted by these same concerns and thus full review of the factual background was necessary, providing yet another reason why the entire matter should go to trial. I acknowledge that, standing alone, the authenticity or intended purpose of the Third Release could well be doubted given the apparent use and prevalence of fake documentation. However, I am prepared to adjudicate the Release issue summarily, and in favour of Alex, mainly because of Ralph's "clean state" admissions on cross-examination as discussed above.
These admissions in my view, confirm both the authenticity and intended purpose of the Third Release. By December 2009, as Ralph himself admitted, neither he nor his companies had any claims against Alex and his companies. And, given that all of the claims in the plaintiffs' action relate to alleged breaches that predate the Release, and given that none of the legal defences advanced on the plaintiffs' behalf (duress, unconscionability, non est factum and lack of consideration) can succeed on the record before me, I have no difficulty concluding that the plaintiff's action (except for the claims relating to the Two PNs, which I will explain shortly) is precluded and should be summarily dismissed.
(Footnote omitted)
C. The Positions of the Parties
[28] The promissory notes and the third release were all signed at roughly the same time and in the context of the same series of transactions. The appellants argue that the motion judge's misgivings about the reliability of the evidence on the promissory notes, which led him to order a trial on their enforceability, ought to have influenced his thinking on the validity of the release. The two promissory notes are interconnected, and so is the third release, which must also, the appellants assert, be infected with the same reliability worries. [page447]
[29] The respondents submit that the process undertaken by the motion judge was consistent with the Supreme Court of Canada's decision in Hryniak v. Mauldin, [2014] S.C.J. No. 7, 2014 SCC 7, even though it was released after this decision. Hryniak encourages motion judges to use the mini-trial referred to in rule 20.04(2.2); the motion judge exercised his discretion to trigger the fact-finding mini-trial; and this court ought to defer to him. The respondents point out that the motion judge focused on the very issue of the validity of the third release, at paras. 11-12, excerpted above, and assert that he made no palpable and overriding error.
D. Analysis
(1) The standard of review
[30] In Hryniak, at para. 81, Karakatsanis J. ruled that the exercise of powers under the new summary judgment rule attracts appellate deference. The question as to whether there is a genuine issue for trial is a question of mixed fact and law; in the absence of an extricable error in principle, or palpable and overriding error, this determination should not be disturbed on appeal.
(2) Summary judgment under Hryniak
[31] In Hryniak, the Supreme Court of Canada rejected this court's "full appreciation" test for summary judgment in Combined Air Mechanical Services v. Flesch (2011), 108 O.R. (3d) 1, [2011] O.J. No. 5431, 2011 ONCA 764, ruling, at para. 4, that "[i]n 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". Karakatsanis J. stated, at para. 56, that "[w]hile 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".
[32] Rule 20.04(2.2) empowers motion judges to order "that oral evidence be presented by one or more parties", under the heading of "Oral Evidence (Mini-Trial)". The summary judgment rules, as interpreted in Hryniak, do permit the fact-finding process to be staged, but only where, as noted by Karakatsanis J., at para. 66, that "will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole". She stated, at para. 63, that the power to order a "[mini-trial] should be employed when it allows the judge to reach a fair and just adjudication on the merits and it is the proportionate course of action". [page448]
(3) The application of Hryniak to the decision
[33] In my view, the motion judge made a material error in principle in his approach to this motion in light of the Supreme Court of Canada's decision in Hryniak. He erred in failing to assess the advisability of the summary judgment process in the context of the litigation as a whole.
i. The litigation as a whole
[34] Karakatsanis J. noted, at para. 60:
The "interest of justice" inquiry goes further, and also considers the consequences of the motion in the context of the litigation as a whole. For example, if some of the claims against some of the parties will proceed to trial in any event, it may not be in the interest of justice to use the new fact-finding powers to grant summary judgment against a single defendant. Such partial summary judgment may run the risk of duplicative proceedings or inconsistent findings of fact and therefore the use of the powers may not be in the interest of justice. On the other hand, the resolution of an important claim against a key party could significantly advance access to justice, and be the most proportionate, timely and cost effective approach.
[35] The motion judge was obliged to assess the advisability of a staged summary judgment process in the context of the "litigation as a whole". This he failed to do.
[36] As noted, the promissory notes and third release were part and parcel of the same series of transactions: the promissory notes were executed in connection with the grant of the option to purchase, and the third release was executed in connection with the exercise of that option. Given that, the motion judge's attempt to detach the third release from the web of paper that was, quite rightly, cause for the motion judge's concern, was not the appropriate approach. If, as he concluded, the promissory notes were questionable because the parties "fabricated and executed documents that did not reflect the true state of affairs", and were therefore not amenable to enforcement on a motion for summary judgment, then the same could well be true of the third release.
[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 motion judge. That could force a trial decision on the promissory notes that would be implicitly inconsistent with the motion judge's finding that the third 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. [page449]
[38] In light of the factual connection between the promissory notes and third release, and Ralph's testimony, it was an error in principle for the motion judge to refer the enforceability of the promissory notes to trial while summarily determining the enforceability of the third release.
ii. Ralph's admission
[39] In this case, the motion judge relied heavily on certain admissions that were made by Ralph during cross-examination on his affidavit, but which only came before him by way of a transcript. The statements, which the motion judge characterized as fatal admissions, were never put to Ralph during the mini-trial; he had no opportunity to explain how his evidence on the promissory notes might square with, if it could, the statements that he made in the transcripted cross-examination.
[40] In my view, it was inappropriate for the motion judge to distinguish between the promissory notes and the third release on the basis of decontextualized transcript evidence.
[41] I reproduce the exchange relied on by the motion judge:
Q. Okay, good. So by December of 2009 you believed that you had resolved all your disputes with Alex, right?
A. Yeah.
Q. And you weren't -- whatever you had signed and all the agreements that you had done with him, as far as you understood by December of 2009 it was a clean slate, everything had been released, right? Right?
R. Everything was done. His mother didn't lose his house, I didn't lose the land. It cost a few bucks back and forth. Business was finished.
Q. And so your claims against him were done, right?
A. And him with me.
Q. Perfect. That's what your understanding was as of December 2009, that there was a clean slate, you no longer had any claims against him, and when I say you, I'm talking about the Baywood entities, right? Right?
A. Yeah.
Q. And likewise he didn't have any claims against you, right?
A. Right.
The motion judge was prepared to summarily adjudicate the issue of the third release, unlike the promissory notes, on the basis of these "clean slate" admissions.
[42] The "clean slate" admissions were not, however, made in relation to the third release, or any release, for that matter. There is no mention of the third release anywhere in this portion of the evidence. Rather, Ralph was asked about an e-mail he [page450] sent to Alex before Christmas in December 2009, in which he thanked Alex for his support during a difficult period. Alex responded to Ralph and thanked him for his friendship. In connection with this e-mail exchange, Ralph's evidence was that he believed the parties' dealings to be at an end. Read in context, this evidence does not amount to an admission that the third release was intended to be a genuine agreement despite the parties' culture of document fabrication.
[43] The motion judge's treatment of the "clean slate" admissions is also undermined by other portions of the cross-examination on Ralph's affidavit. Elsewhere in that cross-examination, Ralph responded to specific questions about the third release. That line of questioning included the following exchanges:
Q. You understood this to be a full and final release? Do you see that?
R. I don't know what I understood here. This was never explained to me.
Q. My question is, sir, did you understand that when you signed this document you were releasing Alex and Moneylogix for all of the problems you had with them prior --
A. No way.
Q. Prior to November --
A. No.
Q. -- 19, 2009?
A. No.
[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.
[45] Judges are aware that the process of preparing summary judgment motion materials and cross-examinations, with or without a mini-trial, will not necessarily provide savings over an ordinary discovery and trial process, and might not "serve the goals of timeliness, affordability and proportionality" (Hryniak, at para. 66). [page451] Lawyer time is expensive, whether it is spent in court or in lengthy and nuanced drafting sessions. 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.
E. Disposition
[46] For these reasons, I would allow the appeal, set aside the summary judgment, and refer both the claim and the counterclaim to trial. In view of the appellants' success, I would fix costs of the appeal in the amount of $27,000, all-inclusive, payable to the appellants. The motion judge awarded no costs, in view of divided success. I would refer the costs of the motion to the trial judge.
Appeal allowed.
End of Document