COURT FILE NO.: CV-17-2649-00 DATE: 2018 10 15
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: 1305268 Ontario Inc. Plaintiff
-and-
823042 Ontario Inc. and the Canada Trust Company Trustee for the self-directed RRSP N0. 2947795 Defendants
BEFORE: Bloom, J.
COUNSEL: Martin Greenglass, counsel for the Moving Party, the Plaintiff Brian M. Jenkins, counsel for the Responding Party, the Defendant 823042 Ontario Inc.
HEARD: August 1 and October 9, 2018
ENDORSEMENT
I. INTRODUCTION
[1] The Plaintiff, hereinafter “130” moves for summary judgement for foreclosure on a mortgage as against the Defendant, hereinafter “823.” The Defendant, Canada Trust, did not participate in this matter.
II. AGREED FACTS
[2] The mortgaged premises is a three storey building in Brampton, Ontario.
[3] At the time the mortgage was granted by it, 823 had three groups of shareholders. Each group arranged for a mortgage made by 823. The mortgage in question was arranged by a group composed of Donald Stoddart and Kenneth James (in trust). James was a solicitor.
[4] The shareholders agreement provided that the mortgage was to be paid by Pedigree Holdings Inc. However, the registered mortgagor was 823. The mortgage was registered on August 31, 1993. It was not the subject of dispute in oral argument that the mortgage was signed for the mortgagor by Donald Stoddart and Stephen Robinson. It matured on August 31, 1996.
III. ARGUMENTS OF THE PARTIES
[5] The Moving Party argues that the mortgage was renewed with a term which expired on August 31, 2001; then renewed again with a maturity date of August 31, 2011; then assigned in 2006 to the Plaintiff. That assignment, based upon which the Plaintiff claims ownership of the mortgage, was registered on May 18, 2017. The Plaintiff further argues that monies are owing under the mortgage; that its enforcement is not statute-barred because the 10 year limitation period under the Real Property Limitations Act runs from the maturity date of August 31, 2011; and that, therefore, it is entitled to summary judgment.
[6] The Plaintiff also argues that there is in the record no forensic evidence of the fraudulent nature of three letters, the alleged fraudulent character of which is a central element of the argument of the Responding Party.
[7] The Responding Party argues that on the record before me there is a genuine issue requiring a trial with respect to a limitations defense; and that, therefore, the motion before me must be dismissed. The Defendant argues that the limitations defense arises in relation to the 10 year limitation period to which I made reference above. Specifically, the Defendant contends that on the record before me there is a genuine issue requiring the calling of viva voce evidence at a trial in relation to the authenticity of three letters which are required by the Plaintiff to prove the two renewals.
[8] The Responding Party argues that only by the calling of this evidence at a trial and its assessment by the trier of fact, can it be justly determined whether, as it alleges, those letters are fraudulent, the renewals never took place, and, therefore, the enforcement of the mortgage was statute barred. The Responding Party submits that enforcement would be statute barred, since the mortgage matured on August 31, 1996, more than 10 years before the commencement of the action at bar on June 16, 2017.
IV. GOVERNING PRINCIPLES
A. The Applicable Rules
[9] The applicable rules provide:
RULE 20 SUMMARY JUDGMENT
EVIDENCE ON MOTION
20.02 (1) An affidavit for use on a motion for summary judgment may be made on information and belief as provided in subrule 39.01 (4), but, on the hearing of the motion, the court may, if appropriate, draw an adverse inference from the failure of a party to provide the evidence of any person having personal knowledge of contested facts. O. Reg. 438/08, s. 12.
(2) In response to affidavit material or other evidence supporting a motion for summary judgment, a responding party may not rest solely on the allegations or denials in the party’s pleadings, but must set out, in affidavit material or other evidence, specific facts showing that there is a genuine issue requiring a trial. O. Reg. 438/08, s. 12.
DISPOSITION OF MOTION
General
20.04 (1) Revoked : O. Reg. 438/08, s. 13 (1).
(2) The court shall grant summary judgment if,
(a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence; or
(b) the parties agree to have all or part of the claim determined by a summary judgment and the court is satisfied that it is appropriate to grant summary judgment. O. Reg. 284/01, s. 6; O. Reg. 438/08, s. 13 (2).
Powers
(2.1) In determining under clause (2) (a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:
Weighing the evidence.
Evaluating the credibility of a deponent.
Drawing any reasonable inference from the evidence. O. Reg. 438/08, s. 13 (3).
Oral Evidence (Mini-Trial)
(2.2) A judge may, for the purposes of exercising any of the powers set out in subrule (2.1), order that oral evidence be presented by one or more parties, with or without time limits on its presentation. O. Reg. 438/08, s. 13 (3).
B. The General Principles relating to the Granting of Summary Judgment
[10] In Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 SCR 87 Justice Karakatsanis for the Court set out principles to be applied on a summary judgement motion at paras. 49, 50, 57 to 59, and 66:
[49] 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.
[50] These principles are interconnected and all speak to whether summary judgment will provide a fair and just adjudication. When a summary judgment motion allows the judge to find the necessary facts and resolve the dispute, proceeding to trial would generally not be proportionate, timely or cost effective. Similarly, a process that does not give a judge confidence in her conclusions can never be the proportionate way to resolve a dispute. It bears reiterating that the standard for fairness is not whether the procedure is as exhaustive as a trial, but whether it gives the judge confidence that she can find the necessary facts and apply the relevant legal principles so as to resolve the dispute.
[57] On a summary judgment motion, the evidence need not be equivalent to that at trial, but must be such that the judge is confident that she can fairly resolve the dispute. A documentary record, particularly when supplemented by the new fact-finding tools, including ordering oral testimony, is often sufficient to resolve material issues fairly and justly. The powers provided in Rules 20.04(2.1) and (2.2) can provide an equally valid, if less extensive, manner of fact finding.
[58] This inquiry into the interest of justice is, by its nature, comparative. Proportionality is assessed in relation to the full trial. It may require the motion judge to assess the relative efficiencies of proceeding by way of summary judgment, as opposed to trial. This would involve a comparison of, among other things, the cost and speed of both procedures. (Although summary judgment may be expensive and time consuming, as in this case, a trial may be even more expensive and slower.) It may also involve a comparison of the evidence that will be available at trial and on the motion as well as the opportunity to fairly evaluate it. (Even if the evidence available on the motion is limited, there may be no reason to think better evidence would be available at trial.)
[59] In practice, whether it is against the “interest of justice” to use the new fact-finding powers will often coincide with whether there is a “genuine issue requiring a trial”. It is logical that, when the use of the new powers would enable a judge to fairly and justly adjudicate a claim, it will generally not be against the interest of justice to do so. What is fair and just turns on the nature of the issues, the nature and strength of the evidence and what is the proportional procedure.
[66] On a motion for summary judgment under Rule 20.04, the judge should first determine if there is a genuine issue requiring trial based only on the evidence before her, without using the new fact-finding powers. There will be no genuine issue requiring a trial if the summary judgment process provides her with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure, under Rule 20.04(2)(a). If there appears to be a genuine issue requiring a trial, she should then determine if the need for a trial can be avoided by using the new powers under Rules 20.04(2.1) and (2.2). She may, at her discretion, use those powers, provided that their use is not against the interest of justice. Their use will not be against the interest of justice if they 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.
[11] In a leading textbook on civil procedure, Paul M. Perell & John W. Morden, The Law of Civil Procedure in Ontario, 2d ed (Markham, Ontario: LexisNexis Canada Inc., 2014) at para. 6.209 the learned authors set out the following additional principles governing a summary judgement motion:
The court is entitled to assume that the parties have respectively advanced their best case and that the record contains all the evidence that the parties respectively will present at trial. The onus is on the moving party to show that there is no genuine issue requiring a trial, but the responding party must present its best case or risk losing.
C. The Use of the Summary Judgment Powers in a Fraud Case
[12] In Cannon v. Funds for Canada Foundation, 2012 ONSC 399, [2012] O.J. No. 168; leave to appeal refused by the Divisional Court at [2012] O.J. No. 5117 Justice Strathy, as he then was, at paras. 476 to 479, and 485 considered the appropriateness of use of a summary judgement motion as opposed to a trial to determine issues of civil fraud:
476 I am also satisfied that in the particular circumstances of this case, it is in the interests of justice that the weighing of the evidence, the evaluation of the credibility of witnesses and the drawing of inferences from the evidence should only be exercised by a trial judge.
477 I come to this conclusion for several reasons. First, a finding of fraud is a serious matter and proof of civil fraud, although on a balance of probabilities standard, requires rigorous examination of the totality and quality of the evidence as a whole. This frequently requires an assessment of the credibility of witnesses and, in a case such as this, may require the evaluation, assessment and comparison of the credibility of a number of witnesses. Even using the motion judge's expanded powers under Rule 20.04(2.1) a summary judgment motion is not a suitable forum for this kind of assessment.
478 Second, as the authorities indicate, the defendant's knowledge and state of mind are vital considerations in cases of fraud and fraudulent misrepresentation. Did the defendant have an honest belief in the truth of the statement? Were the representations made recklessly, not caring whether they were true or false? These issues are best explored through examination and cross-examination in the context of all the other evidence in the crucible of trial.
479 Third, the very nature of the inquiries in cases of fraud, unconscionability and public policy requires that the factual foundation be carefully examined and reconstructed.
485 Having regard to the evidence adduced by both sides, and for the reasons I have expressed, I am satisfied that the plaintiff has discharged the burden of showing that his claims have a real chance of success and that there is a genuine issue requiring a trial. I am also satisfied that fairness to both parties - not just the plaintiff - requires that there be a trial. It would not be possible to acquire a full appreciation of the evidence on the written record and that it would not be in the interests of justice to decide these issues on a motion.
[13] These principles apply by analogy in the case at bar.
D. The Drawing of an Adverse Inference
[14] In S. N. Lederman, Alan W. Bryant, and Michelle K. Fuerst, The Law of Evidence in Canada, 5th ed, (Toronto, Ontario: LexisNexis Canada Inc., 2018) at para. 6.471 the learned authors state:
In civil cases, an unfavourable inference can be drawn, when, in the absence of an explanation, a party litigant …fails to call a witness who would have knowledge of the facts and would be assumed to be willing to assist that party….The inference should only be drawn in circumstances where the evidence of the person who was not called would have been superior to other similar evidence. The failure to call a material witness amounts to an implied admission that the evidence of the absent witness would be contrary to the party’s case, or at least would not support it.
[15] Rule 20.02(1) also speaks to this same point.
V. APPLICATION OF THE GOVERNING PRINCIPLES TO THE CASE AT BAR
[16] I have concluded that on the application of the above principles there is a genuine issue requiring a trial with respect to the limitations issue, and, accordingly, I dismiss the motion at bar.
[17] Specifically I am satisfied that justice cannot be done in this matter without the calling of viva voce evidence and an adjudication of the credibility of witnesses regarding the validity of the three letters. Further, related to that point is the necessity to hear from Kenneth James, the only sender or recipient of the three letters still alive. In that connection I find that an adverse inference is to be drawn on this motion from the failure of the Plaintiff to adduce evidence from Mr. James as to the authenticity of the letters.
[18] I will now explain my conclusions. I intend to address (1) the evidentiary issues that arise in relation to the three letters, (2) other items of evidence which also point to the need for a trial, and (3) the adverse inference on this motion from the failure of the Moving Party to tender the evidence of James.
The Three Letters
[19] The first letter is dated August 29, 1996; is addressed to the attention of Ken Robinson with a copy to Ken James; purports to be signed by Ken McClenaghan; states that the mortgage is extended to August 31, 2001; and recites a discussion with Ken James.
[20] The second letter is dated August 31, 2001; has the same sender and addressee as the first, also with a copy to James; recites that the mortgage is now extended to August 31, 2011 conditioned inter alia on a payment of $50,000; and recites a discussion with Ken James.
[21] The last letter is dated August 31, 2006; again has the same sender and addressee as the first two, also with a copy to James; recites that a principal prepayment of $50,000 on the mortgage had just been made; and recites another discussion with James.
[22] The sender and addressee on all three letters, Ken McClenaghan and Ken Robinson, were both dead before the action at bar was commenced; accordingly, their evidence was not available on the motion before me. Ken Robinson did not sign the mortgage for the mortgagor, nor did he have any apparent connection to the mortgagor. There is no evidence before me of the payment of either $50,000 sum.
[23] There is before me no reply to any of the letters, or, indeed, any document acknowledging sending or receipt of any of the letters.
Other Items of Evidence Pointing to the Need for a Trial
[24] The Plaintiff, 130, tendered in support of its motion the affidavit of Marco Lorenti, an officer and director of the Plaintiff. In that affidavit he stated that James had informed of a number of matters, including that Ken McClenaghan was a client of James’s, that McClenaghan had died in 2007, and that James was one of his executors. Lorenti further deposed that the assignment of the mortgage to the Plaintiff occurred in 2006, but was not formally registered until 2017.
[25] Donald Stoddart, who had signed the mortgage for the mortgagor, gave evidence in an affidavit sworn March 22, 2018 and filed by the Responding Party. He deposed that McClenaghan was a good friend of his and that “at no time over the last 20 years did…[he] ever mention or discuss with me the mortgage or that there were any monies owing, up to the time of his death…on July 26, 2007.”
[26] It is undisputed that the Plaintiff was not added to the insurance policy on the mortgaged premises as the mortgagee, replacing the original mortgagee, until 2017.
[27] No document has been tendered effecting the assignment of the mortgage in 2006, nor has any bookkeeping or banking record been tendered evidencing the payment by the Plaintiff for the assignment in 2006.
[28] It is suspicious that there is no document effecting the assignment in 2006, no evidence of payment for the assignment in 2006, no registration of the assignment for over a decade, and no immediate protection of the assignee on the insurance policy. The peculiarities of the letters also raise suspicion, particularly when taken together with these additional items of evidence set out above.
[29] All of this evidence requires examination at a trial where the credibility of witnesses can be assessed in the context of the evidence as a whole. I do not find the absence of forensic evidence of the fraudulent character of the letters, a point emphasized in the submissions of the Moving Party, to be an answer to the suspicion raised by the evidence I have examined.
The Adverse Inference from the Failure to Tender the Evidence of James
[30] As I have noted already in my examination of evidence, James has a number of connections with the letters and with their purported sender, Mr. McClenaghan. In addition, Lorenti in cross-examination stated that in relation to the mortgage, “[A]ll my dealings with Ken [James], I have never had any reason to doubt what he was telling me and I didn’t feel like I had the need to contact any of the other owners or directors of the [mortgagor].”
[31] Based on that evidence I draw an adverse inference against the Moving Party as a result of its failure to tender the evidence of James; that inference is that his evidence would be contrary to the Plaintiff’s case or would not support it. In drawing that inference I rely on both Rule 20.02(1) and the common law.
Conclusion
[32] I, therefore, dismiss the motion at bar. There is a genuine issue requiring a trial as to the whether the enforcement of the mortgage is statute barred by reason of the passage of more than 10 years from its maturity date prior to the commencement of the action. A trial where the credibility of all witnesses can be assessed in the context of all documentary and testimonial evidence is necessary to resolve the factual issues going to the existence of the purported renewals of the mortgage; those renewals are dependent on the authenticity of the three letters.
VI. COSTS
[33] I will receive written costs submissions. The Responding Party shall serve and file its submissions on or before October 31, 2018. The Moving Party shall serve and file its submissions on or before November 16, 2018. There shall be no reply.
Bloom, J.
DATE: October 15, 2018