ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 855/12
DATE: 2014-06-09

BETWEEN:

ALLA BOGATYREVA
Plaintiff

– and –

RICKY3 HOLDINGS LTD. and COLDWELL BANKER PETER BENNINGER REALTY, BROKERAGE INC.
Defendants

Robert A. Watson, Counsel for the Plaintiff

Christopher Clemmer, Counsel for the Defendant, Ricky3 Holdings Ltd.

HEARD: May 29, 2014

REASONS FOR JUDGMENT

Gray J.

[1] In this motion for summary judgment, I must apply the principles discussed by the Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7, in the context of a “simplified rules” action, namely, an action governed by Rule 76 of the Rules of Civil Procedure.

Background

[2] The Statement of Claim in this action was issued on February 13, 2012. A Statement of Defence and Counterclaim was delivered by the defendant Ricky3 Holdings Ltd. (“Ricky3”) on April 4, 2012. A Reply and Defence to Counterclaim was delivered on April 9, 2012.

[3] After the close of pleadings, nothing happened for almost two years, until a status notice was issued by the registrar on March 17, 2014. The plaintiff then moved for summary judgment.

[4] The action is in relation to a failed real estate transaction. It is alleged that the plaintiff entered into an Agreement of Purchase and Sale with Ricky3 to purchase a property in Waterloo. The property was subject to a mortgage that had a maturity date of January 1, 2018. In the Agreement of Purchase and Sale, the maturity date was said to be January 1, 2017.

[5] The Agreement provided for the transfer of the property to a corporation to be incorporated by the plaintiff without personal liability. The Agreement contemplated the assumption of the existing mortgage by the purchaser.

[6] Ultimately, the plaintiff refused to close the transaction, and took the position that she was entitled to do so on two grounds:

a.) the mortgagee insisted on obtaining a personal guarantee from the plaintiff, notwithstanding that the purchaser was to be a corporation without personal liability on the part of the plaintiff;

b.) the agreement contained a misrepresentation as to the maturity date of the mortgage.

[7] Both grounds are set out in the Statement of Claim. The plaintiff claims that as a result, she is entitled to a return of the deposit of $50,000.

[8] In the Statement of Defence and Counterclaim, it is pleaded that it is a normal part of any assumption of a mortgage that a personal guarantee will be required as part of the assumption process. It is also pleaded that the misstatement as to the maturity date of the mortgage was inconsequential and irrelevant, and in any event the plaintiff knew, as a result of the mortgage assumption process, that the maturity date had been misstated in the agreement.

[9] It is pleaded that the plaintiff had applied to the mortgagee for approval to assume the mortgage, and in fact the assumption of the mortgage was approved. It was stipulated in the assumption agreement that the plaintiff would personally guarantee the mortgage.

[10] The defendant pleads that the plaintiff improperly refused to close the transaction, and as a result, the defendant was entitled to retain the deposit.

[11] While the defendant maintained its right to assert a claim for damages depending on the result of a resale of the property, it now appears that the defendant resold the property for approximately $100,000 more than the sale price of the agreement with the plaintiff. If that is the case, it is unlikely that there are any damages. There has been no attempt to amend the Statement of Defence and Counterclaim, and I thus assume that this action is now simply to determine which party is entitled to the deposit of $50,000.

[12] In the result the plaintiff asserts, and it does not appear to be disputed, that this action is one that is now governed by Rule 76.

[13] As noted, upon receiving the status notice from the registrar, the plaintiff brought this motion for summary judgment. In the alternative, the plaintiff asks for an extension of time in which to set this action down for trial.

[14] For its part, the defendant Ricky3 brought a cross-motion, seeking to adjourn the motion for summary judgment until affidavits of documents are exchanged and examinations for discovery are completed. Ricky3 also seeks an order striking some or all of the affidavit filed in support of the motion for summary judgment.

Submissions

[15] Mr. Watson, counsel for the plaintiff, submits that this action can be disposed of on one simple ground, namely, that the agreement of purchase and sale contemplated a mortgage maturity date of January 1, 2017, and that date was incorrect. Rather, the mortgage does not mature until January 1, 2018.

[16] Mr. Watson submits that the earlier maturity date was material. He submits that it would have been important for the plaintiff to have been able to refinance the property at the earliest opportunity. This was particularly important, he submits, because interest rates were falling and it was important that the higher interest rate spelled out in the existing mortgage be replaced as quickly as possible with a lower rate. Because the mortgage did not mature until a year later, the plaintiff would have been stuck with the higher rate for another year at additional cost.

[17] Mr. Watson submits that the defendant admits that the maturity date was misstated in the Agreement of Purchase and Sale. Thus, he submits, there is no need to expend time and legal resources canvassing facts that are not relevant. The only thing that is relevant is that the maturity date was misstated, and there is no dispute about that. This becomes a simple contractual issue that can be disposed of without the expenditure of additional time and cost. He relies particularly on GMAC Leaseco Corporation v. Jaroszynski, 2013 ONCA 765.

[18] Mr. Watson submits that this is exactly the kind of case that should be disposed of on summary judgment. The Supreme Court of Canada has made it clear in Hryniak, supra, that a motion for summary judgment should be utilized where it is a proportionate, more expeditious and less expensive means to achieve a just result. That is precisely the case here.

[19] Mr. Clemmer, counsel for Ricky3, submits that this motion for summary judgment is at best premature and should be dismissed or adjourned.

[20] Mr. Clemmer points out that in every case that has considered the appropriate summary judgment principles, it has been assumed that each party has put its best foot forward, and indeed it has been asserted that each party is obliged to put its best foot forward.

[21] Mr. Clemmer asserts that in this case the defendant, at this stage of the action, is not able to put its best foot forward. He points out that pursuant to Rule 76.04 (1), the defendant is precluded from cross-examining the deponent of the affidavit filed by the plaintiff, and is precluded from examining a witness under Rule 39.03.

[22] Mr. Clemmer asserts that the plaintiff affirmed the contract, notwithstanding the misstatement as to the maturity date in the mortgage, by proceeding with the contract once she ascertained the error. Mr. Clemmer points out that his client has been advised that the plaintiff actually executed an assumption agreement for the mortgage, but that a representative of the mortgagee has refused to provide an affidavit in that regard. He asserts that the plaintiff will likely have a copy of the executed assumption agreement and other documents that are relevant to plaintiff’s knowledge of the terms of the mortgage being assumed, but the defendant has no way to access them prior to documentary and oral discovery.

[23] Mr. Clemmer submits that it would be unfair to force the defendant to submit to a summary judgment motion at this stage of the action when it has not had an opportunity to secure evidence that is relevant to its case.

[24] Mr. Clemmer particularly relies on Stever v. Rainbow International Carpet Dyeing & Cleaning Co., 2013 ONSC 4054 (S.C.J); Hino Motors Canada Ltd. v. Kell, 2010 ONSC 1329 (S.C.J.); Cole v. Hamilton (City) (1999), 1999 14820 (ON SC), 45 O.R. (3d) 235 (Gen. Div.); and McLelland v. Farquhar Plymouth Chrysler Ltd., 2013 ONSC 1216 (S.C.J.).

Analysis

[25] As a result of the Supreme Court of Canada’s decision in Hryniak, supra, it is clear that the court must adopt a fair process that allows the judge to make the necessary findings of fact, apply the law to those facts, and is a proportionate, expeditious and the least expensive means to achieve a just result. In many cases, a motion for summary judgment will better achieve these objectives than a trial. In paragraph 49 of Hryniak, Karakatsanis J. stated:

There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

[26] It is important to note that whatever means of resolving the dispute are adopted, the judge must be able to make the necessary findings of fact. As noted earlier, the judge hearing the motion must assume that each party has put its best foot forward.

[27] However, in the case of a proceeding governed by Rule 76, there are some limitations on the ability of a party to provide relevant evidence to the judge, depending on when the motion for summary judgement is brought.

[28] Where a case is governed by Rule 76, a party may not cross-examine on an affidavit and may not examine a witness under Rule 39.03. Thus, in a case where a motion for summary judgment is brought before an affidavit of documents is furnished and before there have been examinations for discovery, a party in the position of the defendant has no ability to secure evidence from the plaintiff or from another person or party. In this case, the defendant acknowledges that there was a misrepresentation as to the maturity date of the mortgage, but asserts that the plaintiff elected to affirm the contract, and that the plaintiff likely has documents that will show that she did so. At this stage, the defendant has no means to obtain these documents or otherwise obtain evidence from the plaintiff, and as a result is unable to put its best foot forward. The defendant argues that it would be unfair to proceed with a motion for summary judgment before it has had a fair opportunity to secure evidence that may be relevant to its case.

[29] I agree with the defendant.

[30] This case is not a simple case of interpretation or a simple acknowledged breach of a contract, as asserted by the plaintiff. There is a serious issue as to whether the contract was affirmed by the plaintiff. As stated in John D. McCamus, The Law of Contracts (Irwin Law Inc., 2005), at p.342:

Just as a party may elect to rescind an agreement on the basis of misrepresentation, so too a party may elect to affirm the transaction. Such an affirmation will be irrevocable. The affirmation can arise, however, only after the misrepresentee becomes aware of the nature of the misrepresentation.

The affirmation may be communicated by words or inferred by conduct. Thus, affirmation may be inferred from the fact that after learning of the misrepresentation, the misrepresentee continued with, or demanded performance of the contract.

[31] Counsel for the plaintiff asserts that the defendant has not pleaded that the plaintiff elected to affirm the Agreement, and thus I should ignore the defendant’s affidavit material that asserts such a defence. I disagree. While the words “elect” and “affirm” are not used in the Statement of Defence and Counterclaim, the defendant has pleaded that the plaintiff knew that the maturity date of the mortgage was misstated, that she nevertheless applied for approval of her assumption of the mortgage, and that assumption was approved. If leave to formally amend the pleading were required, it would be readily granted.

[32] There may be documents in the plaintiff’s possession that are relevant to the defendant’s case, and it would be unfair to require the defendant to submit to a motion for summary judgment until it has had an opportunity to secure relevant evidence and put its best foot forward.

[33] This issue was addressed by Cumming J. in Cole, supra. At para. 3 he stated:

Rule 30.03 is straightforward in requiring a party to serve on every other party an affidavit of documents within ten days of the close of pleadings. This normative approach is purposeful because a party will often require production of documents by the opposition to prove the party’s case. There is no suspension of this obligation because of an intended or pending motion for summary judgment. A party against whom there is a motion for summary judgment must be able to put forward all relevant evidence in defending the motion. A party in such a position may ascertain relevant evidence through the affidavit of documents.

[34] At para. 6, he stated:

To preclude the plaintiffs from a production of the defendants’ documents prior to the hearing of the summary judgment motion would, in the absence of the above-mentioned concession by the defendants, mean that the plaintiffs could not put their best foot forward in defending the motion for they would be uncertain as to what evidence might have been gained through production.

[35] And, at para. 8, he stated:

The plaintiffs, as with any other person, have the right to be able to put their best foot forward in defending a motion for summary judgment by ascertaining all relevant evidence in support of their position. To be able to do this, they properly require an affidavit of documents from the defendants prior to the return of the summary judgment motion.

[36] The reasoning of Cumming J. in Cole was applied by Morgan J. in Stever, supra, at paras. 5, 10 and 11. Indeed, he extended the reasoning of Cumming J. so as to require that examinations for discovery should take place before the summary judgment motion.

[37] In my view, this reasoning applies here, and is particularly compelling in the case of a matter governed by Rule 76. In other cases, governed by the regular procedure, the difficulty might be overcome by cross-examination on affidavits and the use of Rule 39.03. However that is not possible in cases such as this. For this reason, it is even more important that the defendant have access to evidence that is obtainable from the plaintiff through an affidavit of documents and an examination for discovery. A degree of proportionality is built into the process because, pursuant to Rule 76.04 (2) the examination for discovery of the plaintiff cannot exceed two hours.

[38] I am far from saying that a summary judgment motion cannot be brought in a simplified rules case. I am simply saying the process must be fair, and each party must have a meaningful opportunity to put its best foot forward. In the context of a simplified rules case, that would normally be at least after an exchange of affidavits of documents, and probably after examinations for discovery.

[39] As noted earlier, the plaintiff seeks in the alternative an order extending the time to set this action down for trial. I do not think I should deal with that issue. It is more appropriately dealt with by a judge at a status hearing.

Disposition

[40] For the foregoing reasons, the motion for summary judgment is dismissed, without prejudice to a further motion to be brought after the exchange of affidavits of documents and examinations for discovery.

[41] The motion to extend time to set this action down for trial is dismissed, without prejudice to the issue being dealt with at a status hearing.

[42] I will entertain brief written submissions with respect to costs, not to exceed three pages, together with a bill of costs. Counsel for the defendant shall have five days to file submissions and counsel for the plaintiff shall have five days to respond. Counsel for the defendant shall have three days to reply.

Gray J.

Released: June 9, 2014