Moritex Europe Ltd. v. Oz Optics Ltd.

Moritex Europe Ltd. v. Oz Optics Ltd.

81 O.R. (3d) 783

Ontario Superior Court of Justice, Divisional Court,

Epstein J.

June 7, 2006

Civil procedure -- Appeal -- Standard of review -- Standard of review of decision of master granting plaintiff's motion for summary judgment being that of correctness.

Sale of goods -- Acceptance -- Defendant purchasing fiber optic measurement machine from plaintiff -- Plaintiff bringing action for payment -- Defendant defending action on basis that machine was defective -- Master correctly allowing plaintiff's motion for summary judgment -- Master correctly applying ss. 12(3) and 34 of Sale of Goods Act to her factual findings that defendant had not informed plaintiff that machine was defective or that it had been rejected and that defendant had retained and used machine for several years -- Defendant not having right to treat purchase agreement as repudiated -- No genuine issue for trial existing -- Sale of Goods Act, R.S.O. 1990, c. S.1, ss. 12(3), 34.

The plaintiff sold the defendant a fiber optic measurement machine. The machine was delivered in January 2002. For several months, the plaintiff pressed for payment. In August 2003, the plaintiff commenced an action for payment. The defendant defended the claim primarily on the basis that the machine was defective. The plaintiff's motion for summary judgment was granted. Section 34 of the Sale of Goods Act provides that a buyer shall be deemed to have accepted the goods when the buyer retains the goods after the lapse of a reasonable period of time without intimating to the seller that they have been rejected. The Master did not accept the defendant's evidence that it had communicated to the plaintiff problems with the machine, and held that there was no evidence to support the defence that the machine was defective. Given that finding and the finding that the defendant never asked the plaintiff to take the machine back, and in fact continued to use the machine through July 2004, the Master found that the defendant's position that it did not accept the machine had no chance of success. The defendant appealed.

Held, the appeal should be dismissed. [page784]

After reviewing the inconsistent case law, it was held that, on an appeal from a discretionary order of a master which is final, or which determines a matter vital to the final issue in the case, the standard of review is correctness.

The Master was entirely correct in identifying and applying the relevant legal principles. She was alive to the fact that while the plaintiff had the burden of satisfying the court that there was no genuine issue for trial, the defendant had the evidential burden of responding with evidence that there was a genuine issue for trial. The Master rightly found that there was no genuine factual dispute, as the defendant's evidence about alleged deficiencies in the machine was uncorroborated and contradicted by overwhelming evidence to the contrary. The Master was entitled to consider the absence of an expert report when assessing whether there were genuine issues for trial about alleged deficiencies in the machine. The Master found as a fact that the evidence in the record supported the conclusion that the defendant accepted the machine and that the payment delay was caused by the defendant deliberately stalling or having difficulty coming up with the funds. The Master did not err in applying the provisions of the Sale of Goods Act. The application of ss. 34 and 12(3) of the Act to the unassailable findings of fact that the defendant retained the machine for well over a year without intimating to the defendant that it had been rejected, deprived the defendant of the right to reject the machine and treat the purchase agreement as repudiated. The Master was correct in concluding that there was no genuine issue for trial.

APPEAL from the order of Master Albert, [2005] O.J. No. 5525, 144 A.C.W.S. (3d) 546 (S.C.J.), granting a summary judgment.

Cases referred to Hudon v. Colliers Macaulay Nicolls Inc. (c.o.b. Colliers International), [2001] O.J. No. 1588, 147 O.A.C. 163, 11 C.P.C. (5th) 258, 104 A.C.W.S. (3d) 868 (Div. Ct.), apld 1286110 Ontario Ltd. v. College Manning Professional Centre Inc. (2005), 2005 79672 (ON SCDC), 78 O.R. (3d) 463, [2005] O.J. No. 4572, 208 O.A.C. 103 (Div. Ct.); 1485625 Ontario Inc. v. Peel Halton Kitchens Inc., 2004 11170 (ON SCDC), [2004] O.J. No. 1589, 185 A.C.W.S. (3d) 383 (Div. Ct.); Architectural Phases v. Torch Educational Fund, 2005 45407 (ON SCDC), [2005] O.J. No. 5233, 205 O.A.C. 137 (Div. Ct.); Bank of Nova Scotia v. Liberty Mutual Insurance Co. (2003), 2003 35171 (ON SCDC), 67 O.R. (3d) 699, [2003] O.J. No. 4474 (Div. Ct.); Carter v. Brooks (1990), 1990 2623 (ON CA), 2 O.R. (3d) 321, [1990] O.J. No. 2182, 41 O.A.C. 389, 77 D.L.R. (4th) 45, 30 R.F.L. (3d) 53 (C.A.); Marleen Investments Ltd. v. McBride (1979), 1979 1895 (ON SC), 23 O.R. (2d) 125, [1979] O.J. No. 4050, 13 C.P.C. 221, [1979] 1 A.C.W.S. 177 (H.C.J.); Noranda Metal Industries Ltd. v. Employer's Liability Assurance Corp., 2000 50967 (ON SC), [2000] O.J. No. 3846, [2000] O.T.C. 730, 23 C.C.L.I. (3d) 60, 49 C.P.C. (4th) 336, 100 A.C.W.S. (3d) 555 (S.C.J.); Reid v. Dow Corning Corp., [2002] O.J. No. 3414, 48 C.P.C. (5th) 93, 134 A.C.W.S. (3d) 751 (S.C.J.); Rosenthal v. Kingsway General Insurance Co., [2002] O.J. No. 4046, [2002] O.T.C. 787, 27 C.P.C. (5th) 183, 117 A.C.W.S. (3d) 703 (S.C.J.); S.P.Y. Underground Cable & Trenching Inc. v. Sims, 2004 9450 (ON SCDC), [2004] O.J. No. 142, 181 O.A.C. 334 (Div. Ct.); Stoicevski v. Casement (1983), 1983 1679 (ON CA), 43 O.R. (2d) 436, [1983] O.J. No. 3186, 43 C.P.C. 178 (C.A.), consd Correa v. CIBC General Insurance Co., 2001 62785 (ON SC), [2001] O.J. No. 3599, [2001] O.T.C. 654, 31 C.C.L.I. (3d) 278, 12 C.P.C. (5th) 249 (S.C.J.); Royal Bank of Canada v. Russo, [2002] O.J. No. 72 (Div. Ct.); Woodheath Developments Ltd. v. Goldman (2003), 2003 46735 (ON SCDC), 66 O.R. (3d) 731, [2003] O.J. No. 3440, 38 C.P.C. (5th) 80 (Div. Ct.), supp. reasons [2004] O.J. No. 3959, 5 C.P.C. (6th) 36 (Div. Ct.), revg (2001), 2001 28019 (ON SC), 56 O.R. (3d) 658, [2001] O.J. No. 4018 (Div. Ct.), not folld Other cases referred 1066087 Ontario Inc. v. Church of the First Born Apostolic Inc., [2004] O.J. No. 3068, 1 C.P.C. (6th) 199 (Div. Ct.); Aljoe v. Co-Operators General Insurance Co., 2005 94670 (ON SC), [2005] O.J. No. 4044, 31 C.C.L.I. (4th) 58 (S.C.J.); [page785] Canadian Blood Services v. Freeman, [2006] O.J. No. 1531, 147 A.C.W.S. (3d) 393 (S.C.J.); Champlain Thickson Inc. v. 365 Bay New Holdings Ltd., [2006] O.J. No. 541, 208 O.A.C. 223 (Div. Ct.); Degroote v. Canadian Imperial Bank of Commerce, [1996] O.J. No. 3993, 18 O.T.C. 93, 67 A.C.W.S. (3d) 121 (Gen. Div.); Equity Waste Management of Canada v. Halton Hills (Town) (1997), 1997 2742 (ON CA), 35 O.R. (3d) 321, [1997] O.J. No. 3921, 40 M.P.L.R. (2d) 107 (C.A.); Evans v. Bartlam, [1937] A.C. 473, [1937] 2 All E.R. 646 (H.L.); Eveready Industrial Services Corp. v. Jacques Daoust Coatings Management Inc. (2005), 2005 19797 (ON SC), 76 O.R. (3d) 390, [2005] O.J. No. 2285, 15 C.P.C. (6th) 330 (S.C.J.); Fedorchuk v. Merrill Lynch, [2005] O.J. No. 4332, 142 A.C.W.S. (3d) 938 (S.C.J.); Fotwe v. Citadel General Assurance Co., 2005 5470 (ON SCDC), [2005] O.J. No. 827, 21 C.C.L.I. (4th) 80, 25 C.P.C. (6th) 220 (Div. Ct.), supp. reasons 2005 5469 (ON SCDC), [2005] O.J. No. 828, 195 O.A.C. 390, 21 C.C.L.I. (4th) 86, 11 C.P.C. (6th) 1 (Div. Ct.); Hi-Tech Group Inc. v. Sears Canada Inc. (2001), 2001 24049 (ON CA), 52 O.R. (3d) 97, [2001] O.J. No. 33, 11 B.L.R. (3d) 197, 4 C.P.C. (5th) 35 (C.A.); Housen v. Nikolaisen, [2002] 2 S.C.R. 235, [2002] S.C.J. No. 31, 219 Sask. R. 1, 211 D.L.R. (4th) 577, 286 N.R. 1, 272 W.A.C. 1, [2002] 7 W.W.R. 1, 30 M.P.L.R. (3d) 1, 2002 SCC 33, 10 C.C.L.T. (3d) 157; Lai v. Williams, [2005] O.J. No. 4840 (Div. Ct.), supp. reasons 2005 44397 (ON SCDC), [2005] O.J. No. 5170, 205 O.A.C. 182 (Div. Ct.); Law v. Zurich Insurance Co., 2002 79673 (ON SC), [2002] O.J. No. 1635, 39 C.C.L.I. (3d) 145, 21 C.P.C. (5th) 280, 114 A.C.W.S. (3d) 409 (S.C.J.); Madonia v. Mulder, [2002] O.J. No. 487, 17 C.P.C. (5th) 349, 111 A.C.W.S. (3d) 911 (S.C.J.); McBride v. Pilon, 2002 53260 (ON SCDC), [2002] O.J. No. 2803, 163 O.A.C. 101, 23 C.P.C. (5th) 288, 115 A.C.W.S. (3d) 725 (S.C.J.); McNally International Inc. v. Toronto Transit Commission, [2005] O.J. No. 4747, 47 C.L.R. (3d) 1 (S.C.J.); Middleton v. Sun Media Corp., [2005] O.J. No. 4413, 19 C.P.C. (6th) 386 (S.C.J.); Pearce v. UPI Inc., 2006 15143 (ON SCDC), [2006] O.J. No. 1836, 211 O.A.C. 91 (Div. Ct.), supp. reasons [2006] O.J. No. 3530 (Div. Ct.); Queen West Building Corp. v. Bruce A. Brown Associates Ltd., [2004] O.J. No. 1746, 130 A.C.W.S. (3d) 895 (S.C.J.); Rogers Cable TV Ltd. v. 373041 Ontario Ltd. (1994), 1994 7367 (ON SC), 22 O.R. (3d) 25, [1994] O.J. No. 2196 (Gen. Div.); Royal Bank of Canada v. Canada, [2002] O.J. No. 72 (Div. Ct.); Salva v. Emery, [2005] O.J. No. 2860 (S.C.J.); Unwin v. Crothers (2005), 2005 23337 (ON SC), 76 O.R. (3d) 453, [2005] O.J. No. 2797, 17 C.P.C. (6th) 128 (S.C.J.) Statutes referred to Sale of Goods Act, R.S.O. 1990, c. S.1, ss. 12(3), 34

Daniel F. Chitiz and Tamara Ramsey, for plaintiff/defendant by counterclaim, respondent, Moritex Europe Ltd. Stephen Victor and David Cutler, for defendant/plaintiff by counterclaim, appellant, Oz Optics Limited.

[1] EPSTEIN J.: -- The defendant, Oz Optics Limited, appeals the order of Master Albert dated October 3, 2005, [2005] O.J. No. 5525, 144 A.C.W.S. (3d) 546 (S.C.J.), granting summary judgment in favour of the plaintiff, Moritex Europe Ltd., in the amount of US $120,000 plus interest and costs. The action arises out of Moritex's claim for payment for its sale to Oz of a high-technology fiber optic measurement machine known as an FZ-1000. Oz has defended the claim primarily on the basis that the [page786] machine was defective. By way of counterclaim Oz has claimed damages for breach of warranty.

[2] Moritex brought a motion for judgment for the full amount of the purchase price plus interest and costs. Moritex's position was that there was incontrovertible evidence that Oz had accepted the machine and the delay in payment was due to difficulties Oz was having in making arrangements to pay for the machine rather than any concerns about its [being] able to fulfill the purpose for which it was purchased.

[3] The counterclaim was not in issue in the motion.

[4] The Master rejected Oz's defence and found that it had accepted the machine. She therefore found there to be no genuine issue for trial and granted judgment to Moritex.

The Motion

[5] Most of the facts were not in dispute.

[6] On December 17, 2001, Oz ordered an FZ-1000 from Moritex. Mr. Nguyen, Oz's technician, received delivery on January 16, 2002 and upon inspection noticed that one of the three delivery crates had been damaged.

[7] On January 21, 2002, Mr. Hall, the Moritex field engineer, arrived to install and certify the machine and provide training to Mr. Nguyen. He advised Nguyen that the damage occasioned during delivery was inconsequential.

[8] On January 24, 2002, Nguyen and Hall executed an Acceptance Agreement after tests were run and overseen by Hall. Through this agreement Oz acknowledged that the machine "fulfill[ed] the agreed functions". At Nguyen's request an Acceptance Plan was attached to the Acceptance Agreement. This plan identified unresolved problems including data pertaining to "V-Groove substrates' measurement".

[9] Throughout the months of February through June, further adjustments were made to the machine and on June 10, 2002, Nguyen sent an email to another Oz employee in which he advised that the outstanding items were satisfied and payment could be released. This information was communicated to others at Oz including the president, Mr. Sezerman.

[10] The parties' communication then turned to the issue of payment. As Moritex pressed for payment, Oz asked Moritex about leasing possibilities and when that proved impossible the Oz purchasing manager wrote to Mr. Parker, the Moritex engineering manager, on October 28, 2002 saying that Mr. Sezerman was working on a financing/payment plan and that Moritex "will get paid for the full amount of your machine in a short term". [page787] This financing plan did not come to fruition and in January of 2003, the then director of business development at Oz wrote to the managing director of Moritex advising that Oz was pursuing a different financing option and that that option would be finalized within a week and that Oz would then "forward the funds for the equipment in question".

[11] In August of 2003, Moritex discontinued its technical support to Oz pending resolution of the payment issue and issued the statement of claim in this action.

[12] From June 10, 2002, the date that Oz acknowledged that the funds would be released to August of 2003, there is no documentary evidence in which Oz sets out any complaints about the performance of the FZ-1000.

[13] There is evidence, in the form of an affidavit sworn by Mr. Sezerman, that he met with Mr. Parker in September of 2002, at a trade show, and told him that the machine was malfunctioning and that he further complained to Moritex representatives in March of 2003.

The Decision

[14] In her detailed decision, the learned Master identified the disputed and the undisputed facts. Many of the undisputed facts were contained in the documentation, the most significant being the email in which Oz confirmed that outstanding issues pertaining to the FZ-1000 had been satisfied and indicating that payment could be released and subsequent email in which Oz indicated to Moritex that it had financing problems and made no reference to any concerns about the machine's usefulness or performance. The disputed facts primarily pertained to whether the machine had been accepted and correspondingly whether it had deficiencies that Oz communicated to Moritex. In contrast to the undisputed facts that emerge from the documentation put into evidence, the disputed facts were not documented.

[15] Master Albert then properly set out the legal principles applicable to the issues before her -- issues pertaining to the test to be applied on a motion for summary judgment, particularly when the court is required to assess the record to determine whether there is a genuine issue of disputed facts. Citing the decision of Borins J.A. in Rogers Cable TV Ltd. v. 373041 Ontario Ltd. (1994), 1994 7367 (ON SC), 22 O.R. (3d) 25, [1994] O.J. No. 2196 (Gen. Div.), the Master identified that the requirement that the parties "put their 'best foot forward' goes together with the requirement that the court 'take a hard look at the merits of the action at this preliminary stage' to determine whether the moving party had succeeded in establishing that there is no genuine issue for trial" [at p. 28 O.R.]. [page788]

[16] The Master did not accept Oz's evidence that it had communicated to Moritex problems about the machine. After rejecting Mr. Sezerman's affidavit to this effect as being self-serving, the Master held that there was no evidence to support Oz's defence that the machine was defective. Given Oz's obligation to present its best case on the motion, the learned Master found that at trial Oz would present no better evidence to support its position that it had communicated to Moritex any dissatisfaction with respect to the machine.

[17] Significantly, the Master held, based on the evidence before her, that Oz had conducted itself in a manner consistent with a desire to keep the machine.

[18] At that point the Master turned to the key issue of acceptance and the implications of the Sale of Goods Act, R.S.O. 1990, c. S.1. Section 34 provides that a buyer shall be deemed to have accepted the goods when the buyer retains the goods after the lapse of a reasonable period of time, without intimating to the seller that they have been rejected. Given the findings that there was no credible evidence that Oz ever communicated to Moritex any issues pertaining to the machine's performance and that Oz never asked Moritex to take the machine back -- in fact Oz continued to use the machine through July of 2004 -- the Master found there was no chance of success of Oz's position that it did not accept the FZ-1000.

Standard of Review

[19] The parties differ in their submissions concerning the appropriate standard of review.

[20] Since the decision of Southey J. in Marleen Investments Ltd. v. McBride (1979), 1979 1895 (ON SC), 23 O.R. (2d) 125, [1979] O.J. No. 4050 (H.C.J.), the case law has been inconsistent on this issue. Two streams of jurisprudence seem to have emerged from Marleen.

[21] Marleen dealt with an appeal of an interlocutory discretionary order of a master. This case stated [at p. 128 O.R.] that on appeal from any interlocutory order of a master, the case should be heard as an appeal, not by way of a rehearing: "In such an appeal . . . there should be no interference with the order below unless it is clearly wrong."

[22] In reaching this conclusion, Southey J. rejected the line of English authority that reviewed discretionary decisions of masters as if the matters were being heard for the first time: "Any such rule of practice, in my view, would substantially reduce the advantages in our system of having Masters to deal with many matters of procedure." Southey J. did, however, make a [page789] distinction between interlocutory orders and final orders, based on Lord Wright's speech in Evans v. Bartlam, [1937] A.C. 473, [1937] 2 All E.R. 646 (H.L.). Southey J. commented as follows [at p. 484 A.C.]:

The Masters admirably exercise their discretion in routine matters of pleading, discovery, interrogatories, venue, mode of trial, and other interlocutory directions, without any appeal being necessary. But such matters may on occasion raise questions most vital to the final issue of the case. The decision of such questions is properly for the judge who will no doubt consider carefully the order of the Master.

(Emphasis added)

[23] Southey J.'s view was that whereas final orders of Masters "fall into the class of decisions which [are] properly for a judge", "[o]n routine matters, not vital to the final issue of a case, [Lord Wright] contemplated that no appeals from the Masters would be necessary."

[24] This pronouncement in Marleen was interpreted in Stoicevski v. Casement (1983), 1983 1679 (ON CA), 43 O.R. (2d) 436, [1983] O.J. No. 3186 (C.A.) to mean that the "clearly wrong" test was appropriate only where an appeal was taken from an interlocutory order involving matters such as a change of venue, a jury notice or a routine amendment to a pleading. When the ruling raises questions vital to the final issue of the case, an appellate court should conduct a rehearing, in which the appellate judge's discretion can properly be substituted for that of the master.

[25] The reasoning in Stoicevski, based on whether or not a master's decision is "vital to the final issue", was arguably altered by the decision of Morden A.C.J.O. in Carter v. Brooks (1990), 1990 2623 (ON CA), 2 O.R. (3d) 321, [1990] O.J. No. 2182 (C.A.). Carter did not deal with a master's order, nor did it refer to either Marleen or Stoicevski specifically. However, Morden A.C.J.O.'s discussion of the applicable standard of appellate review of a judge's decision is relevant.

[26] In Carter, Morden A.C.J.O. drew a distinction based on whether or not the judge presiding on first instance had heard oral evidence [at pp. 329-30 O.R.]:

Since this is not a case where the judge of first instance heard oral evidence, with the advantage that this would have given him over this court in his assessment of the evidence and his findings of fact, the appellant to succeed in the realm of fact does not have the burden of establishing palpable and overriding error. An appeal, however, is not a rehearing which takes place as though there were not already a decision on the merits of the case. The judge's decision is entitled to due respect and, I think, should not be set aside unless the appellant can show the court that the judge erred in his appreciation of the evidence, in the inferences he drew from the evidence, or in his application of the relevant legal considerations.

(Emphasis added) [page790]

[27] Thus, even where no oral evidence is before the judge of first instance, deference is owed to a judge's decision. Arguably, the same rationale should apply in the case of a master's decision and Carter overrules Stoicevski. This was the view of Then J. in Architectural Phases v. Torch Educational Fund, 2005 45407 (ON SCDC), [2005] O.J. No. 5233, 205 O.A.C. 137, (Div. Ct.), at para. 5.

[28] Nordheimer J., in Noranda Metal Industries Ltd. v. Employer's Liability Assurance Corp., 2000 50967 (ON SC), [2000] O.J. No. 3846, 49 C.P.C. (4th) 336 (S.C.J.), appears to have followed Carter. He stated that the appropriate standard of review is one of deference regardless of whether or not the master's decision disposed of the final issue; appeals should "be heard as appeals and not de novo" (para. 7). He went on to offer policy reasons for this conclusion, including the fact that masters are on the "front line" in determining many matters, the fact that case management masters must have reasonable and fair control over their process, and that: "if these matters are heard de novo, it simply encourages parties to launch such reviews and thereby adds to the costs and length of proceedings which is inconsistent with the fundamental purpose of the Rules of Civil Procedure. . ."

[29] In Hudon v. Colliers Macaulay Nicolls Inc. (c.o.b. Colliers International), [2001] O.J. No. 1588, 147 O.A.C. 163 (Div. Ct.), the appeal was from a final order of a master exercising discretion. A panel of the Divisional Court stated that "on an appeal from a discretionary order of a master which is final, or which determines a matter vital to the final issue of the case, the judge hearing the appeal is entitled to conduct a rehearing and -- after according some deference to the Master's expertise in the field -- to substitute his or her discretion for that of the Master." The court did not consider the implications of Carter.

[30] However the approach in Hudon has been rejected in a number of cases.

[31] In Correa v. CIBC General Insurance Co., 2001 62785 (ON SC), [2001] O.J. No. 3599, [2001] O.T.C. 654 (S.C.J.), Sachs J. considered an appeal of a master's order requiring production of claims files. Sachs J. observed the following (at para. 4):

The case law is confusing . . . the concern identified by Nordheimer J. in Noranda Metal . . . emerges at the forefront of the debate. That is, if appeals from Masters' orders are heard de novo, parties are encouraged to launch such reviews. This adds to the cost and length of proceedings, something that is antithetical to one of the fundamental purposes of the Rules of Civil Procedure in general, and to case management in particular.

(Citations omitted)

[32] Sachs J. noted that the lack of deference given to masters' orders, as opposed to the higher deference traditionally [page791] owed to trial judges, is partly based on the concept that masters rarely hear oral evidence. Sachs J. stated at para. 5: ". . . what this reasoning ignores is that Appellate Courts defer to the decisions of Judges of first instance even when no oral evidence has been heard". She cited Morden A.C.J.O. on this point in Carter, as well as the reasoning of Laskin J.A. in Equity Waste Management of Canada v. Halton Hills (Town) (1997), 1997 2742 (ON CA), 35 O.R. (3d) 321, [1997] O.J. No. 3921 (C.A.), where Laskin J.A. stated that for a variety of policy reasons, deference is owed to a judge of first instance.

[33] Similarly, in Correa, Sachs J. concluded as follows at para. 7: "In my view the standard of review that Judges apply to Masters' decisions should be the same as that applied by Appellate Courts to their decisions." The words of Laskin J.A. articulate that standard at p. 336 O.R. of Equity Waste:

What is important for this appeal is the kind of error that justifies intervention by an appellate court. An error of law obviously justifies intervention. An appellate court may interfere with a finding of fact if the trial judge or motion judge disregarded, misapprehended, or failed to appreciate relevant evidence, made a finding not reasonably supported by the evidence, or drew an unreasonable inference from the evidence.

[34] This reasoning of Sachs J. has not been applied widely, although it was adopted by Greer J. in Law v. Zurich Insurance Co., 2002 79673 (ON SC), [2002] O.J. No. 1635, 21 C.P.C. (5th) 280 (S.C.J.). Additionally, it is consistent with the comments of the Supreme Court of Canada in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, [2002] S.C.J. No. 31, where the majority stated that regardless of whether or not oral evidence has been heard by a trial judge, "there is one, and only one, standard of review applicable to all factual conclusions made by the trial judge -- that of palpable and overriding error" (para. 25).

[35] In Royal Bank of Canada v. Russo, [2002] O.J. No. 72 (Div. Ct.), Then J. heard an appeal from a master's final decision to strike out a statement of defence. At para. 8, Then J. stated that deference is owed to the decision of a master and that the decision "should not be interfered with unless the Master erred in his appreciation of the evidence, in the inferences he drew from the evidence, or in his application of the relevant law". Similar to Sachs J., Then J. cited Carter and Equity Waste.

[36] In Woodheath Developments Ltd. v. Goldman (2001), 2001 28019 (ON SC), 56 O.R. (3d) 658, [2001] O.J. No. 4018 (Div. Ct.), Then J. did not include reference to the above decisions, but nevertheless applied a deferential standard of review. This was an appeal from the order of Master Dash dismissing the action for want of prosecution. Then J. stated as follows: "the standard of review by this court in reviewing the final order of a master requires a measure [page792] of deference to the court of first instance and only to interfere in the event of palpable and overriding error in the decision rendering it clearly wrong. This standard applies both to findings of fact and to the application of legal principles" (at para. 2). He went on to state that discretionary decisions "ought not to be interfered with unless it is apparent that the judge applied erroneous principles that rendered the result 'clearly wrong'. The judge must have acted on a wrong principle or disregarded or misinterpreted material evidence."

[37] Thus, in Correa, Russo and Woodheath, the courts opted against the Hudon approach.

[38] However, Hudon has been specifically followed in others.

[39] In Reid v. Dow Corning Corp., [2002] O.J. No. 3414, 48 C.P.C. (5th) 93 (S.C.J.), Then J. seemed to attempt to put the matter to rest by reviewing the case law and applying Hudon. He noted that the standard enunciated in Hudon was adopted in Madonia v. Mulder, [2002] O.J. No. 487, 17 C.P.C. (5th) 349 (S.C.J.) where McCombs J. stated at para. 2 that on appeal from a final discretionary order, he was entitled "to conduct a rehearing, and, with some deference to the Master's expertise, substitute my discretion for hers". Then J. concluded that based on all of the case law, the standard in Hudon applied; the master "determined a matter that was vital to the final issue in the case and consequently, this Court is entitled to conduct a rehearing and substitute its own discretion for that of the Master" (para. 15). In McBride v. Pilon, 2002 53260 (ON SCDC), [2002] O.J. No. 2803, 163 O.A.C. 101 (S.C.J.), Then J. reached the same conclusion.

[40] In Rosenthal v. Kingsway General Insurance Co., [2002] O.J. No. 4046, [2002] O.T.C. No. 787 (S.C.J.), Somers J. found that Marleen did not apply in the circumstances of the case, and he implicitly applied Hudon at para. 10: ". . . I am of the view that I am not required to defer to her decision if the order she has issued imposes security for costs where the Plaintiff alleges impecuniosity and where such an order essentially disposes of the action."

[41] In S.P.Y. Underground Cable & Trenching Inc. v. Sims, 2004 9450 (ON SCDC), [2004] O.J. No. 142, 181 O.A.C. 334 (Div. Ct.), Caputo J. applied Hudon to conclude that on appeal from a master's final order, the judge hearing the appeal is entitled to conduct a re-hearing and, after according some deference to the master, to substitute his or her discretion for that of the master.

[42] In 1286110 Ontario Ltd. v. College Manning Professional Centre Inc. (2005), 2005 79672 (ON SCDC), 78 O.R. (3d) 463, [2005] O.J. No. 4572 (Div. Ct.), Lane J. stated at para. 18 that the standard of review is "that set out by the Divisional Court in Hudon . . . where a Master's order is a final order, the judge hearing the appeal is entitled [page793] to conduct a rehearing and, after according some deference to the Master's expertise in the field, to substitute his or her discretion for that of the Master". Lane J. commented that he had been referred to slightly different formulations in Woodheath and 1066087 Ontario Inc. v. Church of the First Born Apostolic Inc., [2004] O.J. No. 3068, 1 C.P.C. (6th) 199 (S.C.J.), but he chose to follow Hudon because it was a decision of a three-judge panel, whereas single judges made the other decisions. Furthermore, he commented that a rehearing was appropriate in this case due to the "sparse nature of the Master's reasons".

[43] Then J.'s decision in Woodheath, in which he rejected Hudon, was decided just prior to Bank of Nova Scotia v. Liberty Mutual Insurance Co. (2003), 2003 35171 (ON SCDC), 67 O.R. (3d) 699, [2003] O.J. No. 4474 (Div. Ct.). This was an appeal from a decision of Nordheimer J., who had upheld the decision of Master Kelly on the issue of documentary production on a motion. A panel of the Divisional Court affirmed that Nordheimer J.'s approach in Noranda Metal had been the correct approach to the "standard of review of deference for all matters not vital to the disposition of the lawsuit" (at para. 10). The court went on to say as follows at para. 11:

We are of the view that Noranda Metal does not dismiss the former standards of review in situations where the decision being reviewed is one determined to be vital to the ultimate disposition of the case, nor does it obviate the necessity of the reviewing court to determine the standard of review of a Master's decision on a case-by-case basis.

[44] The court attempted to summarize the new test, which appears to be a combination of Marleen and Hudon, as follows (at para. 12):

(a) if the matter is one of discretion, the court should not interfere unless the Master was clearly wrong;

(b) if the matter is one of law that is not vital to the disposition of the lawsuit, the court should not interfere unless the Master was clearly wrong; and

(c) if the matter is one of law that is deemed vital to the disposition of the lawsuit, the test should be one of correctness.

[45] In addition, the court stated that on an interlocutory matter not vital to the disposition of the case, the motion should be heard as an appeal and not de novo (at para. 13). The panel concluded that deference was owed to Master Kelly's decision since his exercise of discretion regarding the relevance of documents was not vital to the disposition of the lawsuit.

[46] Courts have applied the test in Bank of Nova Scotia, supra, fairly regularly. See, for example: [page794] McNally International Inc. v. Toronto Transit Commission, [2005] O.J. No. 4747, 47 C.L.R. (3d) 1 (S.C.J.) per Harvison Young J.; Queen West Building Corp. v. Bruce A. Brown Associates Ltd., [2004] O.J. No. 1746, 130 A.C.W.S. (3d) 895 (S.C.J.) per Sutherland J.; Unwin v. Crothers (2005), 2005 23337 (ON SC), 76 O.R. (3d) 453, [2005] O.J. No. 2797 (S.C.J.) per Spies J.; Salva v. Emery, [2005] O.J. No. 2860 (S.C.J.) per Belobaba J.; Fedorchuk v. Merrill Lynch, [2005] O.J. No. 4332, 142 A.C.W.S. (3d) 938 (S.C.J.) per Ratushny J.

[47] In 1485625 Ontario Inc. v. Peel Halton Kitchens Inc., 2004 11170 (ON SCDC), [2004] O.J. No. 1589, 185 O.A.C. 383 (Div. Ct.), echoing the comments of Sachs J. in Correa, supra, Then J. identified serious concerns with the jurisprudence distinguishing orders of a master that are "final or vital to the disposition of a case", such as a decision granting summary judgment [at paras. 6-7]:

The traditional approach has been that Masters' orders vital to the disposition of the case should be reviewed by way of a hearing de novo [Stoicevski cited]. This assumption was challenged by Justice Morden of the Court of Appeal of Ontario [Carter cited].

The distinction between the standard of review for the decision of a Master compared to a decision of a judge has been based upon the assumption that Masters rarely hear oral evidence. This distinction becomes hard to justify when one considers that the decisions of judges are entitled to a high level of deference even when a judge has heard no oral evidence. If the discretionary or interlocutory orders of Masters are generally reviewed according to the same standard as the discretionary orders of judges there seems to be little reason to treat final orders of Masters differently on the basis of their not having heard oral evidence. There is even less reason to impose a different standard of review in cases where the Master did hear oral evidence.

(Emphasis added)

[48] Then J. concluded that the "clearly wrong" test should apply to the final order of the master: "Given that the Master heard oral submissions from counsel for both the plaintiff and the defendants there is no reason to grant his decision any less deference than that given to the order of a judge" (at para. 8). No reference was made to Bank of Nova Scotia in this decision.

[49] The confusion in the case law was recently brought to light in the decision of Then J. in Architectural Phases v. Torch Educational Fund, 2005 45407 (ON SCDC), [2005] O.J. No. 5233, 205 O.A.C. 137 (Div. Ct.), in which he cited his decision in Peel Halton Kitchens. While Peel Halton Kitchens does not apply the Bank of Nova Scotia test, Bank of Nova Scotia failed to take into account the policy reasons for deference that many judges, including Then J., have raised in the case law since Morden A.C.J.O. decided Carter. Then J. suggested that Hudon was decided incorrectly since it relied on Stoicevski, and Stoicevski is arguably no longer good law in light of [page795] Carter (para. 5). However, Then J. did not determine the appropriate standard of review in Torch, since he found that the result would be the same under either standard.

[50] I share the concerns expressed by Then J. in Peel Halton and in Torch. A survey of recent judgments suggests that the approach which gives little deference where the issue decided by the master was final or dispositive, has found the most favour:

-- June 7, 2005: In Eveready Industrial Services Corp. v. Jacques Daoust Coatings Management Inc. (2005), 76 O.R. (3d) 390, 2005 19797 (ON SC), [2005] O.J. No. 2285 (S.C.J.), Stinson J. applied Bank of Nova Scotia, stating that the continuing authority of Marleen was recently affirmed by the Divisional Court in Fotwe v. Citadel General Assurance Co., 2005 5470 (ON SCDC), [2005] O.J. No. 827, 25 C.P.C. (6th) 220 (Div. Ct.). In Fotwe, a panel of the Divisional Court cited the "clearly wrong" test from Marleen as applicable to a master's decision to order the removal of the solicitors of record for the plaintiff, at para. 3: "A judge hearing an appeal from a decision of a Master should not intervene unless the decision is clearly wrong." The panel did not enter into an analysis of whether the decision was final or interlocutory, or whether it was "vital" to the final issue.

-- September 23, 2005: In Aljoe v. Co-Operators General Insurance Co., 2005 94670 (ON SC), [2005] O.J. No. 4044 (S.C.J.), Wilton-Siegel J. applied Bank of Nova Scotia.

-- October 14, 2005: In Middleton v. Sun Media Corp., [2005] O.J. No. 4413, 19 C.P.C. (6th) 386 (S.C.J.), Spies J. relied upon Bank of Nova Scotia.

-- October 25, 2005: In 1286110 Ontario Ltd. v. College Manning Professional Centre Inc., supra, Lane J. explicitly followed Hudon.

-- November 15, 2005: In Lai v. Williams, [2005] O.J. No. 4840 (Div. Ct.), Then J. stated that it is "common ground" that based on Hudon, the standard of review of a final discretionary order of a master is that "this court may substitute its own discretion for that of a master with due deference to the Master's view" (at para. 5) (Note that Then J.'s decision in Torch was released on December 6, 2005).

-- February 3, 2006: In Champlain Thickson Inc. v. 365 Bay New Holdings Ltd., [2006] O.J. No. 541, 208 O.A.C. 223 (Div. Ct.), Wilson J. applied the standard of correctness to a final order of the master on a question of law. [page796]

-- April 18, 2006: In Canadian Blood Services v. Freeman, [2006] O.J. No. 1531, 147 A.C.W.S. (3d) 393 (S.C.J.), Morin J. appeared to rely on the test in Bank of Nova Scotia.

-- May 8, 2006: In Pearce v. UPI Inc., 2006 15143 (ON SCDC), [2006] O.J. No. 1836, 211 O.A.C. 91 (Div. Ct.), Hackland J. applied Hudon in an appeal from the master's final order for summary judgment, citing Lane J.'s reliance on Hudon in College Manning.

[51] While it would be useful if a higher court were to resolve this issue and reconcile the Hudon line of cases with the policy concerns raised in the Carter line of cases, for now, it appears that the weight of authority indicates that Hudon is the one I should follow.

[52] Since the matter in issue is vital to the parties' interests, the standard of review is correctness.

The Appeal

[53] Against this background Oz's primary submission is that the learned Master erred in granting summary judgment in the face of disputed facts particularly concerning whether Oz had communicated to Moritex problems associated with the machine. Furthermore, says counsel for Oz, the Master erred in drawing an adverse inference based on Oz's failure to adduce expert evidence concerning the machine's functioning. Finally, Oz argues that the Master improperly applied the Sale of Goods Act.

[54] I do not accept Oz's arguments.

[55] First, the Master was entirely correct in identifying and applying the relevant legal principles. Specifically, she was alive to the two burdens. Moritex had the burden of satisfying the court that there was no genuine issue for trial. But this does not mean that Oz had no burden. Oz had the evidential burden of responding with evidence showing that there is a genuine issue for trial. See: Hi-Tech Group Inc. v. Sears Canada Inc. (2001), 2001 24049 (ON CA), 52 O.R. (3d) 97, [2001] O.J. No. 33 (C.A.). Put another way, it is not just the moving party that is required to put the "best foot forward". For the summary judgment procedure to be effective in screening cases that do not require a trial to resolve, all parties involved must "lead, trump or risk losing".

[56] Secondly, the learned Master examined the record, as she is obliged to do, and concluded, rightly in my view, that there was no genuine factual dispute. A conflict in evidence does not by itself, create a genuine issue for trial. Any conflicts must be viewed in the context of all of the evidence presented. See: Degroote v. Canadian Imperial Bank of Commerce, [1996] O.J. No. 3993, 18 O.T.C. 93 (Gen. Div.). [page797] Here, the Master found Oz's evidence about alleged deficiencies in the machine to be uncorroborated and contradicted by overwhelming evidence to the contrary.

[57] Thirdly, the Master was entitled to consider the absence of an expert report when assessing whether there were genuine issues for trial about alleged deficiencies in the FZ-1000.

[58] The learned Master found as a fact that the evidence in the record before her supported the conclusion that Oz accepted the machine and that the payment delay was caused by Oz's deliberately stalling or having difficulty coming up with the funds (paras. 5(e) and (f)). At para. 19 she said, "there was no chance of success of the defence advanced by Oz that it never accepted the FZ-1000". The Master therefore was correct in concluding there was no genuine issue for trial and that this was the type of case where the court ought to isolate and then terminate a factually unsupported defence.

[59] Furthermore, I reject Oz's submissions that the Master incorrectly applied the provisions of the Sale of Goods Act. All of Oz's arguments presuppose a finding that the machine was defective and that Oz communicated the defects to Moritex in a timely fashion. Such findings were not made nor in my view could they properly have been made on the evidence.

[60] Section 34 of the Sale of Goods Act provides that the buyer shall be deemed to have accepted the goods after the lapse of a reasonable period of time, when the buyer retains the goods without intimating to the seller that they have been rejected. Section 12(3) provides that where the buyer has accepted the goods, the breach of any condition cannot be used as a ground for rejecting the goods and treating the contract as repudiated. The application of these sections to the unassailable findings of fact that Oz retained the machine for well over a year without intimating to Moritex that it had been rejected, deprives Oz of the right to reject the machine and treat the purchase agreement as repudiated.

Conclusion

[61] For these reasons, the appeal is dismissed. If the parties are unable to resolve the issue of costs, they may make brief written submissions directly to my office, within 20 days.

Appeal dismissed. [page798]