COURT OF APPEAL FOR ONTARIO
CITATION: Toronto-Dominion Bank v. 1633092 Ontario Ltd., 2020 ONCA 452
DATE: 20200710
DOCKET: C67799
Pepall, Hourigan and Roberts JJ.A.
BETWEEN
The Toronto-Dominion Bank
Plaintiff
(Appellant/Respondent by way of cross-appeal)
and
1633092 Ontario Ltd., 2362378 Ontario Inc., Matthew Rooney and Haley Rooney
Defendants
(Respondents/Appellants by way of cross-appeal)
Oren Chaimovitch and Shawna Sosnovich, for the appellant
Andrew D. Ferguson, for the respondents
Heard: in writing
On appeal from the judgment of Justice Michelle O’Bonsawin of the Superior Court of Justice, dated March 7, 2019, with reasons reported at 2019 ONSC 1473.
REASONS FOR DECISION
INTRODUCTION
[1] The appellant, Toronto Dominion Bank (the “Bank”), appeals from a summary judgment that held, among other things, that the Bank had negligently breached its contract with the respondents. The respondents, 1633092 Ontario Ltd. (“163”), 2362378 Ontario Inc. (“236”), Matthew Rooney and Haley Rooney, cross-appeal.[^1] The judgment resulted from the hearing of summary judgment motions brought by both the appellant and the respondents. The parties’ dispute centered on various loan facilities provided by the Bank.
[2] The parties were unable to agree on the terms of the judgment. They submitted competing versions of the draft judgment along with brief outlines of their positions. The motions judge reviewed their submissions, together with her amended reasons from March 7, 2019 (the “Amended Reasons”), and her endorsement on costs from May 25, 2019. In an endorsement dated October 17, 2019 on the settlement of the judgment, she wrote that there had been an attempt to relitigate certain issues, that she had signed the appropriate judgment, and “[s]hould the Plaintiff wish to argue the ‘Rule in Foss & Harbottle’ which was not before me at these Motions, it can do so before the trial judge.”
[3] The judgment approved by the motions judge recited that summary judgment motions made by the appellant and respondents had been heard. The body of the judgment consisted of the following five numbered paragraphs:
THIS COURT FINDS there is no genuine issue requiring a trial regarding liability and the only genuine issue is the amount(s) to which the parties are entitled. A trial of that issue will proceed.
THIS COURT FINDS the Plaintiff, Toronto Dominion Bank, negligently breached its contract with the Defendants.
THIS COURT FINDS that Ms. Rooney cannot rely on the improper valuation of the family home with regards to the HELOC.[^2]
THIS COURT FINDS the Plaintiff must pay the Defendants’ costs related to the Motions for Summary Judgment in the amount of $20,000, payable within 30 days from the date of the Endorsement Regarding Costs.
THIS COURT FINDS since it only dealt with the issue of liability, the issue of damages is bifurcated and will be the only issue reviewed at trial. The issue of the amount owing from the Defendants to the Plaintiff regarding the HELOC must be determined at trial since there will be a potential offset from the determination of damages for the Plaintiff’s breach of contract.
THE BANK’S APPEAL
[4] We will start with the Bank’s appeal, which advances two grounds. First, the Bank argues that the judgment for negligent breach of contract should not be in favour of all respondents because the relevant contract (the agreement for the Canada Small Business Financing Loan) was only with 163 and not with 236 or the Rooneys. Second, the Bank argues that the judgment for the outstanding amount under the HELOC should be granted to the Bank immediately, together with possession of the home, as the motions judge concluded that Ms. Rooney had no defence to the Bank’s claim for payment of the HELOC. Furthermore, the Bank asserts that she would have no right of set-off.
[5] For the reasons that follow, we would allow the appeal on the first ground but not on the second ground.
ANALYSIS
[6] The judgment states there is no genuine issue requiring a trial regarding liability. Both parties brought motions for summary judgment, the Bank seeking judgment on various loans extended to 163 and Ms. Rooney and the respondents seeking damages of $10 million for breach of contract, negligence, and negligent misrepresentation.
(1) The HELOC
[7] The first issue we will be address on the Bank’s appeal involves the HELOC agreement entered into by the Bank and Ms. Rooney for the principal amount of $750,000. Ms. Rooney provided a collateral mortgage on her property as security.
[8] In their statement of defence and counterclaim, the respondents pleaded that the HELOC was to be limited to 75% of the value of their home. They stated that the Bank relied on an incorrect property description for the appraisal, which resulted in an estimated home value of $1,002,000 and available credit of $750,000. The respondents agreed to the HELOC and pleaded that they relied on the equity in the home to obtain credit to open a new location for their restaurant business.
[9] At paras. 51 and 52 of their statement of defence and counterclaim, the Rooneys asserted that the Bank was negligent in assessing the value of the property in excess of its worth and in advancing a HELOC in excess of 100% of the property value, and also negligently misrepresented that they would not receive a HELOC in excess of 75% of its value.
[10] On the summary judgment motion, the respondents argued that the Bank had advanced too much money under the HELOC and therefore there was no equity on which they could rely as a safety net.
[11] The motions judge found that the respondents were unable to rely on the improper valuation of the home. On learning of the flawed appraisal, Ms. Rooney alerted the Bank and she and the Bank entered into a new credit agreement bearing a reduced interest rate that was relied upon by the parties and implemented. As such, the motions judge held that Ms. Rooney could not take the position that the Bank was negligent as a result of the appraisal.
[12] The Bank argues on appeal that the motions judge erred in ruling that the amount owing to the Bank on the HELOC had to await trial as “there will be a potential offset from the determination of damages for the [Bank’s] breach of contract.”
[13] The Bank provided the motions judge with evidence that $803,776.97 plus interest was due to the Bank under the HELOC. However, the parties had agreed that only liability would be determined on the motions for summary judgment and the issue of damages would go to trial: see para. 87 of the Amended Reasons. The Bank appears to be suggesting that set-off is not available to Ms. Rooney because the judgment of liability for negligent breach of contract against the Bank is only in favour of 163. As explained below, we agree that the judgment should be varied to reflect that the Bank’s contract in respect of the Canada Small Business Financing Loan was only with 163. However, as we will explain when we address the cross-appeal, the counterclaim is being referred to trial, and the issue of any available set-off should be determined at that time.
[14] We would therefore dismiss this ground of appeal.
(2) The Canada Small Business Financing Act[^3] (“CSBFA”) Loan
[15] The next issue to be addressed is the CSBFA Loan made by the Bank.
[16] As a result of a fire at the restaurant, Ms. Rooney met with Bank representatives about a $350,000 business loan to reopen the restaurant. In their statement of defence and counterclaim, the respondents pleaded that the Bank advised them that they were pre-qualified and should make a formal application for the Canada Small Business Financing Loan Program, which would allow the respondents to borrow at a competitive interest rate, meet all their requirements, and allow them to complete their project as planned. The respondents pleaded that the Federal Government would guarantee a substantial portion of the loan granted by the Bank.
[17] The Bank provided conditional approval for a CSBFA Loan on April 2, 2015. Many conditions had to be fulfilled prior to final approval, including the discharge of notices of security interest under the Personal Property Security Act, R.S.O. 1990, c. P.10 (the “PPSA”). On November 21, 2015, the CSBFA Loan was approved and the Rooneys attended at the Bank to sign all the banking documentation, including a Credit Agreement for $350,000 and unlimited guarantees from the Rooneys and 236.
[18] Prior to funding, further documents were required by the Bank. In the meantime, the Rooneys paid trades for work done on the project.
[19] Starting in February 2016, the Bank proceeded to fund some invoices, but limited its funding to roughly 55% of the amounts submitted. The respondents argued that the Bank advised them that it was working on a solution and that funding of the balance of the CSBFA Loan would be made under a special loan agreement. Instead, on May 17, 2016, the Bank delivered notices of intention to enforce its security under the PPSA and Bankruptcy and Insolvency Act, R.S.C., 1985, c. B-3.
[20] At paras. 45-48 of the statement of defence and counterclaim, 163 (also called “Tosh”) pleaded that the Bank breached its contract with it by failing to advance the full amount of the eligible invoices permitted by the CSBFA Loan Agreement and failed to perform the contract honestly and in good faith. The respondents pleaded that the Bank was negligent in documenting and implementing the CSBFA Loan and in limiting the financing to 55% of invoices.
[21] 163 also pleaded, at para. 53, that the Bank negligently misrepresented that the CSBFA Loan was the correct product for the project and that sufficient funding for the estimated budget would be available. At para. 61 of their pleading, the respondents pleaded that the Bank knew that a failure to fund the eligible expenses would lead to a failure of the restaurant to open and the failure of the respondents to earn a profit or a living.
[22] The motions judge found that the Bank had agreed to fund the full amount of $350,000 and stated, at paras. 73-74 of the Amended Reasons, that the Rooneys signed the CSBFA Loan Credit Agreement for $350,000 and Mr. Rooney signed the CSBFA Loan Registration Form. The Credit Agreement was signed on November 21, 2015. At para. 74, the motions judge found that the Credit Agreement is “the agreement that regiments the loan between the parties.”
[23] At para. 78 she concluded: “I find that the Bank breached its contract with the [respondents]. The evidence supports that the Bank breached the provisions of the Credit Agreement when it failed to provide the [respondents] with the funding of $350,000.00.”
[24] The difficulty with the motions judge’s analysis is that she conflates the respondents and treats them as one. Having concluded that the CSBFA Loan Credit Agreement governed, she fails to explain how the respondents, other than 163, are parties to that agreement. Nor does she particularize any other contract with the respondents that she finds was breached by the Bank. Based on the motions judge’s findings, the negligent breach of contract could only relate to 163. Moreover, the contract relied upon in the respondents’ statement of defence and counterclaim is that same Credit Agreement, and neither the Rooneys nor 236 pleaded a breach of contract other than the generalized prayer for relief. Similarly, the respondents’ notice of motion in support of their request for summary judgment also refers to the agreement between the Bank and 163. Absent particularized findings connecting the Bank’s alleged breach of contract to the other respondents, there is no basis to support the motions judge’s conclusion that the Bank negligently breached its contract with all of the respondents.
[25] The motions judge erred in treating the respondents as one and in not distinguishing amongst them and further erred in approving a judgment that found that the Bank negligently breached its contract with all of the respondents.
DISPOSITION OF THE MAIN APPEAL
[26] For these reasons, we would allow the Bank’s appeal in part. Paragraph 2 of the Judgment is to be varied to state that the “Plaintiff, Toronto Dominion Bank, negligently breached its contract with 1633092 Ontario Ltd.” The remainder of its appeal is dismissed.
THE CROSS-APPEAL
[27] This brings us to the cross-appeal of the respondents. They submit that the Judgment approved by the motions judge failed to include her findings on breach of contract, negligence and negligent misrepresentation and ask that the Judgment be varied to properly reflect her reasons. The Bank responds arguing that these other causes of action were never pleaded and the judgment ought not to be varied to reflect the disposition proposed by the respondents.
[28] The motions judge’s Amended Reasons suffer from the same defect as the Judgment. All of the respondents are treated as one. It would appear from her Amended Reasons that she found a negligent breach of contract, negligence and negligent misrepresentation. However, the Amended Reasons fail to analyze, with any particularity, the causes of action or how the pleadings supported her findings. The parties could not agree on and therefore contested the form of judgment.
[29] Following receipt of submissions and competing draft judgments, the motions judge approved a judgment that only specifically addressed the cause of action for negligent breach of contract. Moreover, in her costs endorsement, the motions judge summarized her Amended Reasons, stating that she concluded that the Bank had breached its contract with the respondents, but said nothing about the remainder of the respondents’ claims. She also authorized the Bank to argue the rule in Foss v. Harbottle(1843), 67 E.R. 189 (U.K.H.L.) at trial. Presumably this was to preserve the ability of the Bank to argue that only 163 has available causes of action. As mentioned, damages were also left to trial.
[30] This court has frequently raised the pitfalls associated with partial summary judgment motions and we do not propose to repeat them here. See Butera v. Chown, Cairns LLP, 2017 ONCA 783, 137 O.R. (3d) 561, and Mason v. Perras Mongenais, 2018 ONCA 978. Additionally, bifurcation of proceedings sometimes results in an absence of precision in the disposition of the claims. Here, given the absence of particularized findings connecting the causes of action to the parties wronged and to the causes of action advanced in the pleadings, we are of the view that the subject matter of the counterclaim should be referred to trial along with the issues relating to Foss v. Harbottle and damages including any rights of set-off for either of the parties. In addition, the motions judge did not dispose of the Bank’s claims on 163’s $25,000 line of credit, 163’s Visa account nor the unlimited guarantees of 163’s indebtedness provided by 236 and each of the Rooneys. These claims are also referred to trial.
DISPOSITION OF THE CROSS-APPEAL
[31] Accordingly, paragraph 5 of the Judgment is varied to refer the subject matter of the counterclaim to trial along with the issues described in paragraph 30. For greater clarity, neither Mrs. Rooney’s liability for the HELOC loan nor the Bank’s liability for negligent breach of its contract with 163 would be tried as those issues have already been determined.
[32] If they are unable to agree, the parties are to submit brief written submissions on costs, not to exceed three pages in length, within 15 days of the release of these reasons.
“S.E. Pepall J.A.”
“C.W. Hourigan J.A.”
“L.B. Roberts J.A.”
[^1]: The notice of cross-appeal was not filed separately but was contained in the respondents’ compendium and the appellant did not style any of its materials as being in both the appeal and the cross-appeal. Counsel for the parties were contacted and confirmed that they both intended that the cross-appeal be addressed by the panel. [^2]: Home Equity Line of Credit. [^3]: Canada Small Business Financing Act, S.C. 1998, c. 36.