Court File and Parties

Date: 2021-03-09 Superior Court of Justice - Ontario

Re: Melvyn D. Eisen, in Trust, Plaintiff, Responding Party, Defendant by Counterclaim and Moving Party in the Cross Motion And: Altus Group Limited and Jason White, Defendants, Plaintiffs by Counterclaim, Moving Parties, and Responding Parties in the Cross Motion And: 2172742 Ontario Inc. and Paul Politi, Third Parties, no one appearing

Before: Vella J.

Counsel: Alfred Esterbauer, Counsel for the Plaintiff Christopher Afonso and Christian Breukelman, Counsel for the Defendants

Heard: August 17, 2020 and Rule 48.04 Leave Motion heard in writing August 27, 2020

Reasons for Decision – Summary Judgment Motion

[1] This is a motion brought by the Defendants, Altus Group Limited and Jason White (collectively, the “Altus Group”), dismissing the action pursuant to r. 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The basis for the Defendants’ r. 20 motion is that the Plaintiff, Melvyn D. Eisen (the “Trustee”), lacks standing as a trustee to bring the action on behalf of 13 investors regarding a syndicated mortgage transaction (the “Investor Beneficiaries”).

[2] In addition, there is a cross motion by the Trustee for a declaration that the Trustee has standing to pursue the claims on behalf of the Investor Beneficiaries as a trustee, or, alternatively, for an order under rr. 5.04 and 26.01 to either add the Investor Beneficiaries as plaintiffs or substitute the Investor Beneficiaries in place of the Trustee.

[3] During oral argument of the motion on August 17, 2020, the Trustee asked this Court to grant him leave to bring the cross motion pursuant to r. 48.04(1).

[4] In support of the motion for summary judgment, the Defendants filed a three-volume motion record consisting of a Notice of Motion and affidavits by Kasia Kogut and Michael Connolly (a law clerk and articling student, respectively, with the Defendants’ law firm), and a two-volume Reply Motion Record consisting of affidavits by Kasia Kogut and Jason White. The Defendants also filed a Supplementary Reply Record filing a further brief affidavit of Kasia Kogut.

[5] In his two-volume responding motion record, the Plaintiff filed an affidavit by Sydney Hodge (a lawyer with the Plaintiff’s law firm) and included the notice of cross motion.

[6] In addition, each party filed a Compendium of key documents and excerpts from the voluminous cases cited.

[7] For the reasons that follow, I am dismissing the motion for summary judgment, and denying leave under r. 48.04(1) to bring the cross motion.

Overview

[8] The action was brought by the Trustee on behalf of the Investor Beneficiaries who invested in a private syndicated mortgage relating to a farm property located in Greenwood, Ontario (the “Property”).

[9] Allegedly, either the Trustee or at least 12 of the 13 Investor Beneficiaries or both relied on an appraisal report dated February 15, 2011, of the Property, prepared by the Altus Group (the “Appraisal”). The Appraisal was commissioned by the owner, 2172742 Ontario Inc. (the “Mortgagor”) through its principal, Paul Politi.

[10] Allegedly, based on the Appraisal, the Investor Beneficiaries decided to participate in the syndicated mortgage and collectively advanced $2.75 million (plus interest and charges) to the Mortgagor through Mr. Eisen, as Trustee. The mortgage is held in the name of Mr. Eisen, as Trustee and is registered on title as such (the “Mortgage”). Mr. Eisen, as Trustee, in turn holds the Mortgage for the benefit of the individual Investor Beneficiaries.

[11] The Mortgage fell into default, and the Property was sold for a sum that was well less than the value reflected in the Appraisal. This left a shortfall in the sum due under the Mortgage.

[12] The action was commenced in 2013 by the Trustee, under r. 9.01, against the Altus Group alleging negligence and breach of contract on his own behalf, and as Trustee on behalf of the Investor Beneficiaries. The negligence claim, as pleaded, is based on the Appraisal and falls largely under the law of negligent misrepresentation.

Chronology of Key Events

[13] The sequence of the key events, based on the documentary record, is as follows:

(a) The Mortgagor, whose sole director is Mr. Politi, approached Altus Group to obtain an appraisal of the Property. Altus Group prepared the Appraisal, valuing the Property at $6.1 million (subject to certain limitations).

(b) In or around early January 2012, Mr. Politi approached Mr. Eisen, a lawyer, to see if Mr. Eisen could attract investors to loan funds to be secured by way of a private syndicated mortgage against the Property.

(c) Mr. Eisen has established a practice of facilitating private syndicated mortgages.

(d) On January 6, 2012, Mr. Eisen wrote to Altus Group to advise that he had been contacted by Mr. Politi to arrange a private first mortgage loan on the Property, and that “we shall be relying upon your appraisal for mortgage purposes”. In this letter, Mr. Eisen also wrote that if the Altus Group had any “doubts, reservations, [or] qualifications to the appraisal” to advise him “forthwith”. He also wrote that “if there is any major discrepancy in the property and any loss suffered by the mortgagees we intend to rely upon the appraisal”.

(e) On the same date, Mr. Eisen wrote to a group of potential investors (including the Investor Beneficiaries) to advise of this investment opportunity and inviting them to participate in a syndicated mortgage with certain terms and with Mr. Eisen as trustee. Mr. Eisen specified that “[w]e have obtained an appraisal upon the said property setting out the value, $6,100,000.00” and enclosing excerpts of the Appraisal. He also wrote that “[b]ased upon the appraisal giving a value of the property at $6,100,000.00 we are proposing to arrange and place a first mortgage on this property securing the sum of $2,750,000.00”. He then set out the proposed terms of the proposed syndicated mortgage.

(f) On January 13, 2012, Altus Group provided a letter acknowledging that Mr. Eisen and the Investor Beneficiaries “have been given a copy of the noted appraisal report dated February 21, 2011, originally completed for 2172742 Ontario Inc., and are seeking permission from Altus to rely on such appraisal report” (“Reliance Confirmation Letter”). In the Reliance Confirmation Letter, Altus Group also confirmed its appraisal of the market value of the Property in the sum of $6.1 million (subject to certain conditions and assumptions specified in the Appraisal) as of February 15, 2011. Altus specifically confirmed that its Appraisal “is for the sole and exclusive use of Melvyn D. Eisen and it’s investors, its successors, related subsidiaries and affiliates and any assigns that have been consented to by Altus Group” and could be relied upon by Mr. Eisen and the Investor Beneficiaries but only for “first mortgage financing purposes” subject to two stipulated conditions. These two conditions are not material for the purposes of this motion.

(g) After receipt of the Reliance Confirmation Letter, the Investor Beneficiaries executed various documents relating to the investment to be facilitated by way of a trust (collectively referred to, for purposes of this motion only, as the “Trust”) with Mr. Eisen appointed as Trustee.

(h) First, each of the individual Investor Beneficiaries executed separate Form 18s entitled “Investment Authority” between January 20, 2012, and February 9, 2012, apart from the last one that was signed on April 10, 2012. Of note, by these documents, the Investor Beneficiaries authorized Mr. Eisen to act on their respective behalves regarding their particular contribution to the mortgage investment, and setting out the specific amount of the contribution. These instructions detailed the proposed mortgage transaction and acknowledged that the Mortgage is to be registered in the name of Mr. Eisen in trust. Each of these documents also confirmed reliance by the signing investor on the Appraisal, and contained a disclaimer acknowledging that the investor was responsible for assessing the financial merits of the mortgage investment. At the bottom of this Form 18 was a disclaimer: the “lawyer’s responsibility is limited to ensuring the mortgage is legally registered on title in accordance with the investor’s or investors’ instructions.”

(i) By letter dated February 14, 2012, the Mortgagor’s lawyer provided the executed mortgage documentation to Mr. Eisen in anticipation of the closing date of February 15, 2012.

(j) The Trust advanced the principal sum of $2.75 million on February 15, 2012, with interest at 8% per annum, for a term of two years maturing on February 15, 2014, secured by a first mortgage held by the Trust.

(k) The Mortgage was registered against title in the name of Mr. Eisen as Trustee on February 15, 2012.

(l) By individual agreements, each dated February 15, 2012, between “Melvyn David Eisen, in Trust” and each of the individual Investor Beneficiaries, Mr. Eisen acknowledged and confirmed his position as a Trustee and “merely a nominee holding the mortgage” (collectively, the “Agreements”). The Agreements confirmed that Mr. Eisen was holding the Mortgage in trust on behalf of each of the individual Investor Beneficiaries, and that “all rights, benefits and money” belong to the Investor Beneficiaries (in proportion to their respective contributions to the principal sum loaned and secured by the Mortgage). The preamble to the Agreements stipulated that the Mortgage had already been registered on that same day, in the name of Mr. Eisen as Trustee. There is nothing on the face of the Agreements that indicates that Mr. Eisen is vested with the power and authority to commence or defend any litigation involving the Trust.

(m) On March 13, 2013, the Mortgagor went into default under the Mortgage and the default was not cured by Mr. Politi as guarantor or otherwise. The Trustee then issued a Notice of Sale and the Property ultimately sold for $2.04 million, leaving a shortfall under the Mortgage.

(n) By letter dated January 31, 2014, the Trustee wrote to the Investor Beneficiaries to report on the status of the investment generally (including the shortfall), in light of the sale of the Property, and confirming that he had issued an action against Altus Group on behalf of the Trust.

[14] On March 12, 2019, the parties appeared before O’Brien J. seeking directions with respect to Altus Group’s pending motion for summary judgment. At that appearance, O’Brien J. ruled that the Altus Group could only proceed on the issue of the Trustee’s standing. She denied the request to proceed regarding the legal tenability of the claims advanced, citing concerns that if the latter ground was permitted to proceed, there could be inconsistent and overlapping findings of fact made by the motion judge with the trier of fact, should the matter proceed to trial. Her Honour also left the matter of whether this matter ought to be determined by summary judgment to the motion judge. By Order dated September 27, 2019, the Divisional Court denied leave to appeal O’Brien J.’s decision.

Analysis

[15] Altus Group challenges the standing of the Trustee to bring this action on the basis that the gravamen of this action is the negligent misrepresentation claim.

[16] Altus Group also asserts that there can be no breach of contract claim because there is no privity of contract between Altus Group and either the Trustee or the Investor Beneficiaries.

[17] However, in light of the ruling of O’Brien J., I am not considering the tenability of the claims advanced.

[18] Altus Group submits that the Appraisal is alleged to be the negligent misrepresentation and Mr. Eisen received the Appraisal and provided it to the Investor Beneficiaries before the creation of the Trust. Therefore, the cause of action can only be asserted by the individual Investor Beneficiaries because the tort predates the Trust. Furthermore, because the Trust documentation does not vest power in the Trustee to start any litigation on behalf of the Trust, the Trustee lacks standing on this ground as well.

[19] The Trustee counters that in fact Altus Group specifically acknowledged, through the Reliance Confirmation Letter, that the Appraisal was relied upon by him, as Trustee, and the Investor Beneficiaries for purposes of entering into the Mortgage. Moreover, the various documents signed by the Investor Beneficiaries authorized him to act on their respective behalves to assert actions for the Trust in connection with the Mortgage. The Mortgage is the property of the Trust. Furthermore, the detrimental reliance on the Appraisal was ongoing as at the date that the Trust was created and throughout the ensuing mortgage transaction.

[20] In addition, the Trustee says that the claims based on negligence and breach of contract are independent causes of action. These claims are based on the duty of care allegedly owed by Altus Group to the Investor Beneficiaries as beneficiaries of the Trust, separate and apart from any claim based on misrepresentation and detrimental reliance.

[21] In Hryniak v. Mauldin, 2014 SCC 7, at para. 66, the Supreme Court of Canada set out a two-part roadmap for judges in their approach to assessing whether a matter is appropriate for determination by way of a summary judgment motion:

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.

[22] In Hryniak, at paras. 50 and 60, the Court provided further guidance as to when a summary judgment procedure will, and will not, be the appropriate procedure:

[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.

[60] The “interest of justice” inquiry goes further, and also considers the consequences of the motion in the context of the litigation as a whole. For example, if some of the claims against some of the parties will proceed to trial in any event, it may not be in the interest of justice to use the new fact-finding powers to grant summary judgment against a single defendant. Such partial summary judgment may run the risk of duplicative proceedings or inconsistent findings of fact and therefore the use of the powers may not be in the interest of justice. On the other hand, the resolution of an important claim against a key party could significantly advance access to justice, and be the most proportionate, timely and cost-effective approach.

[23] In my view, in the context of this litigation, there is a genuine issue for trial raised with respect to the Trustee’s standing to pursue any or none of the claims advanced. I have considered exercising the new fact-finding powers under rr. 20.04(2.1) and (2.2). However, I find that there are various live issues that will benefit from a full evidentiary record established at trial, in part, because the issues raised in this matter are novel. Neither party were able to provide me with any case law that deals with a challenge to a trustee’s standing under r. 9.01 (or the counterpart provisions in other provincial jurisdictions) within a similar factual context. Moreover, there is a real risk that there could be an overlapping of finding of facts that properly remain in the domain of the trier of fact, as I will further discuss within the context of the cross motion.

[24] In summary, I find that there is a genuine issue requiring a trial in the interest of a fair and just adjudication of this matter, keeping in mind the benefits of having a proportionate, timely, and cost-effective approach. The new fact-finding process set out by r. 20 does not permit me to find the necessary facts and apply the relevant legal principles so as to fairly resolve this dispute. The affidavits filed in support of, and against, this motion were largely sworn by lawyers, law clerks or articling students at the law firms representing the parties. The affidavits attached many documents relevant to the proceeding and entire examination for discovery transcripts. Mr. White is the only party who swore affidavits, and he did so in reply. The first one, sworn on March 13, 2020, largely addresses the scope and limitations of the Appraisal and includes his opinion that anyone relying on the Appraisal had to at least have read the entire Appraisal. Notably, Mr. White stated that his affidavit “does not contain all of the evidence on all of the issues in this matter that I would provide at trial”. His second brief affidavit, sworn on June 5, 2020, clarifies that neither he nor Altus Group were retained by Mr. Eisen or the Investor Beneficiaries in respect of the Appraisal and that no contract was entered into with any of those parties. His affidavits largely address the legal tenability and merits of the claims.

[25] As emphasized by the court in Sweda Farms v. Egg Farmers of Ontario, 2014 ONSC 1200, at para. 26, aff’d 2014 ONCA 878, “[t]he party must ‘put its best foot forward’ or ‘lead trumps or risk losing’.” In this matter, I find that none of the parties put their proverbial “best foot forward”.

[26] In addition, leave is denied to the Trustee under r. 48.04 with respect to his cross motion for a declaration that he has standing to prosecute this claim and the alternative relief that the Investor Beneficiaries be either added as plaintiffs or substituted in the Trustee’s place pursuant to rr. 5.04 and 26.01. The reasons for this decision on the cross motion will follow my discussion regarding the reasons for dismissing the summary judgment motion.

The Summary Judgment Motion

Rule 9.01 – Scope and Application

[27] The Trustee relies on r. 9.01 as the basis of his standing to assert the subject claims on behalf of the Investor Beneficiaries, whose investments were made under the auspices of the Trust.

[28] Rule 9.01 states:

(1) A proceeding may be brought by or against an executor, administrator or trustee as representing an estate or trust and its beneficiaries without joining the beneficiaries as parties.

(2) Subrule (1) does not apply to a proceeding,

(a) to establish or contest the validity of a will;

(b) for the interpretation of a will;

(c) to remove or replace an executor, administrator or trustee;

(d) against an executor, administrator or trustee for fraud or misconduct; or

(e) for the administration of an estate or the execution of a trust by the court.

[29] The purpose of r. 9.01 is to provide for an efficient procedure which permits a trustee (or an administrator or executor, as the case may be) to commence and pursue (or defend) litigation on behalf of the beneficiaries without the need to name the beneficiaries as plaintiffs, subject to the exceptions listed in r. 9.01(2).

[30] In argument, it was suggested that r. 9.01 is analogous to r. 7. Rule 7 governs, inter alia, the appointment of a litigation guardian to represent a person under a legal disability. However, I do think this analogy is helpful. Unlike a trustee under r. 9.01, the role of the litigation guardian is subject to oversight by the court, and many conditions are imposed on the litigation guardian’s ability to resolve litigation on behalf of the person under a legal disability.

[31] Altus Group says that the Trustee is misinterpreting the purpose of r. 9.01. Rule 9.01 cannot be used to vest jurisdiction in the Trustee if that jurisdiction does not already exist. Altus Group submits that because:

(i) it was the Investor Beneficiaries, alone, who relied upon the Appraisal in making their respective decisions to invest in the syndicated mortgage as opposed to the Trustee,

(ii) their respective decisions to invest were made before the creation of the Trust, and

(iii) the Trust documentation did not vest explicit power in the Trustee to commence any action or take any steps to enforce the Trust.

Therefore, the only persons who have the standing to prosecute the claims in the action are the Investor Beneficiaries (or at least 12 of them).

[32] While I agree that the Rules of Civil Procedure do not create a jurisdiction, Altus Group’s further submission raises a genuine issue for trial based on the existing evidentiary record before this Court.

[33] If the cause of action belongs to the Trust, then r. 9.01 generally allows the Trustee to stand in the shoes of the Investor Beneficiaries and assert the action without the need to add them as named plaintiffs: see, for example, Suzanne Street Properties Ltd. v. Manhold Development Corp. (1998), 37 O.R. (3d) 797 (C.A.), at para. 7; Bramalea Inc. (Trustee of) v. KPMG (1999), 50 B.L.R. (2d) 274 (Ont. S.C. [Commercial List]), at paras. 50-52; and C & K Mortgage Services Inc. v. Fasken Campbell Godfrey, at para. 2. Rule 9.01 implicitly recognizes that a trustee is a fiduciary, and that he, she, or they must act in the best interests of the trust. The beneficiaries of the trust will ultimately receive any benefits of the litigation through the terms of the trust. In the case at bar, the Mortgage is held in trust by the Trustee for the benefit of the Investor Beneficiaries.

[34] Altus Group relies on the “four corners” of the Trust documentation and its lack of express conferral of the power on the Trustee to commence litigation or otherwise take steps to protect the interests of the Trust. Altus Group submits that this supports their challenge to the Trustee’s standing to bring this action. However, it is open on the evidentiary record for a trier of fact to find that the Investor Beneficiaries have authorized the Trustee to commence this litigation. For example, the Trustee sent a reporting letter on January 31, 2014, to the Investor Beneficiaries following the default under the Mortgage advising he had commenced litigation against Altus Group on behalf of the Trust. Further, it is apparent that the Investor Beneficiaries are aware of this litigation by virtue of their respective participation in the examination for discovery process.

[35] None of the prohibited grounds listed under r. 9.01(2) are engaged by the litigation. Accordingly, if the causes of action pled are properly asserted on behalf of the Trust, and if the Trustee has been authorized to bring this proceeding by the Investor Beneficiaries, then the Trustee has standing to pursue the action as Plaintiff on their behalf without naming them. This determination will depend in large part on the resolution of the next issue.

Did the Tort of Negligent Misrepresentation Predate the Trust?

[36] The lynchpin of the Altus Group’s submission is premised on who detrimentally relied on the Appraisal and when that reliance occurred. For the purpose of this motion, I am prepared to proceed on the basis that, as suggested by Altus Group, the negligence claim is subsumed by the tort of negligent misrepresentation: see, for example, LBP Holdings Ltd. v. Hycroft Mining Corporation, 2017 ONSC 6342.

[37] Like the situation in Singer v. Schering-Plough Canada Inc., 2010 ONSC 42, the fresh as amended statement of claim is replete with references to facts alleging detrimental reliance based on the Appraisal and that the Appraisal was negligently prepared.

[38] In Queen v. Cognos Inc., [1993] 1 S.C.R. 87, at p. 110, the Supreme Court of Canada laid out the elements of the tort of negligent misrepresentation. The plaintiff must show:

(1) there is a duty of care based on a “special relationship” between the representor and the representee;

(2) the representation in question is untrue, inaccurate, or misleading;

(3) the representor acted negligently in making the misrepresentation;

(4) the representee relied, in a reasonable manner, on the negligent misrepresentation; and

(5) the reliance was detrimental to the representee in the sense that damages resulted.

[39] A constituent element of the tort of negligent misrepresentation is that the representee must have relied upon the alleged misrepresentation, and that reliance must have been reasonable, to be actionable. Altus Group submits that the Trustee as Plaintiff must have actually relied upon the Appraisal for this element to be satisfied, meaning that the alleged reliance by the Investor Beneficiaries cannot be transmitted to the Trustee through the operation of r. 9.01 or otherwise.

[40] Altus Group relies on the following passage from Hercules Managements Ltd. v. Ernst & Young, [1997] 2 S.C.R. 165, at para. 18, per La Forest J.,

Needless to say, actual reliance is a necessary element of an action in negligent misrepresentation and its absence will mean that the plaintiff cannot succeed in holding the defendant liable for his or her losses; see: Queen v. Cognos Inc., [1993] 1 S.C.R. 87, at p. 110. In light of my disposition on the duty of care issue, however, it is unnecessary to inquire into this matter here – the absence of a duty of care renders inconsequential the question of actual reliance.

[41] Altus Group submits that an analogous situation to the one at bar occurred in Layland v. State Farm Mutual Automobile Insurance Co., 2018 ONSC 6477. However, in that case the plaintiffs were suing State Farm and others for injuries sustained by them in a motor vehicle accident (the proposed analogous situation). They asserted a negligent misrepresentation claim against the insurer as reflected by a “misstatement” made by State Farm at mediation. The misstatement was communicated to them by their lawyer. However, the plaintiffs’ affidavit evidence failed to indicate that the misrepresentation had caused them to act to their detriment. The evidence only showed that the plaintiffs knew the misstatement to be incorrect but did not show that knowing the correct amount would have caused them to act differently. Nishikawa J. concluded that “at its highest” the evidence demonstrated that the plaintiffs relied on their lawyer’s advice, and it was their lawyer who relied on the misstatement. This is not the situation here. There is evidence that could lead to the conclusion that both the Trustee and the Investor Beneficiaries relied on the Appraisal and that, but for the alleged over valuation of the Property, the Mortgage would never have been proposed or entered into.

[42] Altus Group submits that only those who “actually” relied upon the alleged misrepresentation can meet the test for negligent misrepresentation. There is evidence in the record to suggest that the Trustee did not personally rely on the Appraisal but merely passed it along to the prospective investors for their own independent assessment of the financial merits of the proposed investment. Altus Group relies, in part, on the Form 18 disclaimer, and cites the following passage from the Trustee’s examination for discovery in support of this contention:

Q. 91: In terms of how it all works, do they rely on you to do the due diligence about whether this is a reasonable investment or do you expect them to go and do their own research?

A. I provide them the letter, I set out everything I know about the transaction and it’s up to them whether they wish to participate or not. […]

Q. 100: And is that your position in the lawsuit that it was up to the individual participants to assess the financial merits of the mortgage investment?

A. Yes.

[43] On the other hand, there is evidence in the form of the January 6, 2012 letter written by Mr. Eisen to Altus Group, and the responding Reliance Confirmation Letter, that Mr. Eisen would be relying on the Appraisal. There is also evidence in the form of the letter Mr. Eisen wrote to the Investor Beneficiaries dated January 6, 2012, to the effect that he was proposing specific terms for a mortgage of a specific value based on the Appraisal.

[44] There is also some evidence in the form of the examinations for discovery and written interrogatories of the Investor Beneficiaries that suggests that they were relying on Mr. Eisen’s recommendation, which was based on the Appraisal. For example, at Questions 70 to 71 of Mr. Eisen’s examination for discovery transcript, filed in its entirety as an exhibit by Altus Group, Mr. Eisen testified that he only puts forward these types of investment opportunities to potential investors if, after reviewing the facts, he feels that the investment is safe. Further, at Questions 181 to 182, Mr. Eisen reiterates that he was relying on the Appraisal as stipulated in his letter of January 6, 2012. [^1] This evidence, if repeated at trial and believed, could reasonably lead to a finding that Mr. Eisen did rely on the Appraisal in his decision to approach investors with this opportunity.

[45] Further, none of the cases relied upon by Altus Group deals with the situation alleged by the Trustee; namely that if he did not rely on the Appraisal to his detriment, the Investor Beneficiaries did rely on the Appraisal to their detriment and, as Trustee, he is able to assert that claim on their collective behalf since he holds the Mortgage as Trustee.

[46] This issue will likely require the trier of fact to make a credibility assessment regarding whether or not the Trustee relied on the Appraisal, in his capacity as a Trustee, when he made the proposal regarding the terms of the Mortgage to the Investor Beneficiaries.

[47] Moreover, as the Mortgage appears to be the property of the Trust, another issue that must be determined is whether the Investor Beneficiaries authorized the Trustee to bring this action as arising out of the Trust property on their collective behalf. This too will require a finding of fact that will likely be dependent on an assessment of credibility in terms of the intentions of the Investor Beneficiaries.

[48] The last issue focuses on the timing of the act of the alleged detrimental reliance. If the detrimental reliance occurred before the creation of the Trust, then Altus Group submits, the cause of action based in negligent misrepresentation cannot be prosecuted by the Trustee on behalf of the Investor Beneficiaries because the tort predated the Trust.

[49] An analysis of this issue will likely require a determination of when either the Investor Beneficiaries or the Trustee or both changed their position to their detriment based on the Appraisal. For example, in Hamilton (City) v. Metcalfe & Mansfield Capital Corporation, 2012 ONCA 156, 347 D.L.R. (4th) 657, at paras. 36-38, the Court of Appeal stated,

In the context of this case, the City’s damage must fall within the measure of damage applicable to negligent misrepresentation. The general principle underlying damages for negligent misrepresentation is that the plaintiff is “entitled to be put in the position he or she would have been in if the misrepresentation had not been made”: Rainbow Industrial Caterers Ltd. v. Canadian National Railway Co., [1991] 3 S.C.R. 3, at p. 14.

“In a case in which a material negligent misrepresentation has induced the plaintiff to enter into a transaction, the plaintiff’s position is usually that, absent the misrepresentation, the plaintiff would not have entered into the transaction”: Rainbow, at pp. 14-15. In other words, the plaintiff ordinarily claims that it suffered damage by entering into a transaction that was materially less favourable than the defendant led the plaintiff to believe. The plaintiff claims it is therefore entitled – by way of damages – to be put into the position that it would have been in had it not entered into the transaction.

The leading English and Canadian authorities on when damage first occurs are consistent with Rainbow and illustrate that, in cases where the plaintiff is induced to enter into a transaction in reliance on a misrepresentation and fails to get what he was entitled, damage is the condition of being worse off than before being induced to enter into the transaction.

[50] On Altus Group’s interpretation of the evidence, the time at which detrimental reliance occurred was the date at which the Investor Beneficiaries decided to enter into the transaction. This date was at some point before the creation of the Trust and likely on or about the time the Investor Beneficiaries received the Appraisal Report. In any event, this date was in advance of the closing of the Mortgage on February 15, 2012. Therefore, Altus Group submits that the Trust was not formulated until after the tort was allegedly committed.

[51] However, the Trustee submits that the act that triggered the detrimental reliance was when the Mortgage closed with the consequent transfer of funds, on February 15, 2012, by which time the Trust was already created. The advancement of funds pursuant to the Mortgage is the change in position that underlies the tort.

[52] A determination of the point in time at which the transaction was entered into as measured against when the Trust was created, therefore also raises genuine issues for trial that cannot be fairly or efficiently resolved on the existing evidentiary record.

[53] There is evidence in the record that could reasonably lead a trier of fact to opposite findings which will likely be based, in part, on an assessment of credibility.

[54] Finally, as stated at the outset, this case raises a novel issue regarding the power of a Trustee to assert a claim on behalf of a Trust, in the factual circumstances presented, that would benefit from a full hearing at trial.

[55] The motion for summary judgment by the Defendants is therefore dismissed.

Should a declaration be granted in favour of the Plaintiff based on r. 20?

[56] In Landrie v. Congregation of the Most Holy Redeemer, 2014 ONSC 4008, Perell J. found that under a motion for summary judgment pursuant to r. 20.04, the court can issue summary judgment in favour of the responding party without the need for a cross motion where the court is satisfied that there is no genuine issue for trial on the matter raised in the motion. See also Wolseley Canada v. Caesar’s Plumbing and Heating Ltd., 2018 ONSC 7159. This has been colloquially referred to as a “boomerang judgment”.

[57] When the court is faced with such circumstances, it has the jurisdiction to issue summary judgment in favour of the responding party, without the need for a cross motion.

[58] I gave serious thought to issuing a boomerang partial summary judgment in favour of the Trustee, bearing in mind that the determination of this issue, if appropriate, may have led to a shortening of the trial. However, in order to do so, I would have had to make findings of fact that would likely have interfered with the trier of fact’s determination of the action on the merits due to overlapping issues; for example, pertaining to the timing of the detrimental reliance and the timing of the creation of the Trust. In any event, I have found that the issue of the Trustee’s standing raises a genuine issue requiring a trial. Accordingly, I have determined that a boomerang partial summary judgment would not be appropriate in this case. This matter will still be proceeding to trial and the trier of fact must not be encumbered by findings of fact that overlap with the merits of the causes of action that must still be adjudicated.

The Cross Motion

[59] This then gives rise to a consideration of the Responding Party Trustee’s cross motion. The Trustee seeks a declaration that he has standing to pursue the action. In the alternative, the Trustee seeks leave to amend his Statement of Claim to add or substitute in his place the Investor Beneficiaries under rr. 5.04 and 26.01.

[60] As I have already determined that the issue of standing of the Trustee to bring this action raises a genuine issue for trial, the request for a declaration of standing in the cross motion has already been dealt with within the context of the summary judgment determination.

[61] The remaining ground for relief in the cross motion is a request for an order adding the Investor Beneficiaries as plaintiffs in addition to, or in place of, the Trustee.

[62] However, the Trustee failed to bring a motion pursuant to r. 48.04 seeking leave of the court to bring his cross motion. This is required because the Trustee has set this action down for trial.

[63] The requirement for a party to seek leave of the court to bring motions, and other proceedings, is prescribed by r. 48.04(1):

Subject to subrule (3), any party who has set an action down for trial and any party who has consented to the action being placed on a trial list shall not initiate or continue any motion or form of discovery without leave of the court.

[64] The requested relief does not fall under the exceptions provided in rr. 48.04(2) or (3).

[65] The setting down of an action for trial is not a mere technicality. Once a party has set down an action for trial, that party is declaring that it is ready for trial. The nonconsenting parties are then entitled to prepare to meet the case for trial as then framed by the party setting it down. The court also relies upon the party’s declaration to set timetables relating to the scheduling of a trial and a pre-trial conference. The fairness and efficiency of the civil justice system relies in no small part on the representation reflected by a party’s decision to set down its action for trial.

[66] Whether or not leave ought to be granted depends on the nature of the relief and the circumstances of the request.

[67] There are two arguably competing lines of case law regarding the test for granting leave. The longstanding test requires that the party seeking leave establish that there has been a substantial or unexpected change in circumstances that justifies granting leave, as to deny leave would render an injustice: see Hill v. Ortho Pharmaceutical (Canada) Ltd., at para. 10; Moynihan v. Rowe, 2018 ONSC 502, at para. 61; and Secure Solutions Inc. v. Smiths Detection Toronto Ltd., 2017 ONSC 2401, at paras. 42-46.

[68] A more recently developed line of cases emphasizes whether or not granting leave would be just in all of the circumstances as dictated by the interests of justice, consistent with the approach to the rules stipulated by r. 1.04: see BNL Entertainment Inc. v. Ricketts, 2015 ONSC 1737 (Master). This line of cases does not require the party seeking leave to establish a substantial or unexpected change in circumstances: see, for example, Owala Estate v. Southlake Regional Health Care Centre, 2019 ONSC 5930; J.A.L. Developments v. Residences of Springhill Inc., 2020 ONSC 2222 (Master).

[69] In the circumstances of this case, it would be unfair to the Defendants to permit the Trustee to hedge his bets by now adding or substituting the Investor Beneficiaries as plaintiffs, given the positions and steps taken in this already lengthy litigation to date. The litigation has been premised on the Trustee’s assumption that he has standing to assert the claims as Trustee under r. 9.01. In furtherance of this position, the Trustee produced redacted documents and refused to answer certain questions at discovery on the basis that the personal identities of the Investor Beneficiaries were not relevant given this was being advanced as a Trust action. The Defendants have had to take steps in the litigation because of this decision. For example, the Defendants brought a motion before Master Graham to, inter alia, compel the Investor Beneficiaries to attend at examinations under r. 31.03(8). Master Graham granted this relief but capped the amount of time the Defendants were entitled to conduct examinations to one hour per Investor Beneficiary and restricted the scope of discovery to their respective reliance on the Appraisal.

[70] The Trustee submits that adding the Investor Beneficiaries would not alter the litigation landscape at all. However, I disagree. To reframe the action as the personal claims of each individual Investor Beneficiary, independent of the Trust, could well give rise to the need for further pre-trial steps to be taken including additional oral and documentary discovery. This action is already seven years old and further delays are not warranted in the circumstances presented.

[71] Furthermore, the Trustee has not put forward any evidence demonstrating that there has been a substantial or unexpected change in circumstances. To the contrary, the decision not to name the individual Investor Beneficiaries has been a deliberate tactical choice.

[72] The Trustee also says that the Defendants could have brought its challenge to his standing sooner and this challenge prompted his motion under r. 5.04. This is not a good reason to justify the granting of leave under r. 48.04(1). There is no barrier to the Defendants having decided to bring this motion for summary judgment after the completion of the additional examinations of the Investor Beneficiaries as ordered by Master Graham on May 17, 2016. After the Defendants signified an intention to examine the Investor Beneficiaries, the Plaintiff retained a new lawyer because one of the former lawyers was one of the Investor Beneficiaries.

[73] The examinations of the Investor Beneficiaries took the form of oral and written examinations. The last oral discovery was completed on November 19, 2018, and the last written interrogatory was sent on or about January 17, 2019.

[74] This motion was brought by Notice of Motion dated February 18, 2019.

[75] In the interim, there were delays due to the COVID-19 pandemic.

[76] Quite apart from having failed to provide evidence of any substantial or unexpected change in circumstances, in considering the fairness of this request under r. 1.04, one must also consider fairness to the Defendants. The Defendants acted reasonably in the timeliness of bringing this motion for summary judgment.

[77] Finally, the Trustee submitted that his request under r. 5.04 should be permitted to correct a misnomer and that the Altus Group always knew that the “litigating finger” being pointed at them was the Investor Beneficiaries.

[78] In Mazzuca v. Silvercreek Pharmacy Ltd. (2001), 56 O.R. (3d) 768, 207 D.L.R. (4th) 492 (C.A.), the Court of Appeal makes the point that r. 5.04 is really intended to allow for the addition or substitution of a new party where there has been either a misdescription of the party or a mistake made in the naming of a wrong party.

[79] Further, in Mazzuca, the Court emphasized that, unlike r. 26 in which the court must grant a motion to amend a statement of claim, barring prejudice, r. 5.04 vests discretion in the court to deny the relief requested even in the absence of prejudice.

[80] The Trustee submits that if he does not have standing to assert this action, this was based, according to his factum, on an “inadvertent belief that rule 9.01 permitted the action to be commenced in the name of the Trustee on behalf of the Beneficiaries”. However, the cases cited by the Trustee do not support the contention that a mistaken belief in the law as to who holds a cause of action, leading to the naming of the wrong party, constitutes a misnomer. A misnomer is a case of mistaken identity.

[81] There is no evidence to suggest that the Plaintiff always intended to put forward the Investor Beneficiaries as plaintiffs. To the contrary, the evidence reveals that the Trustee made a deliberate choice not to include the Investor Beneficiaries as plaintiffs. The Trustee had knowledge of all the facts and identities from the outset of the litigation to make this decision and made a tactical decision to commence and pursue the litigation as Trustee: see Tetreault v. Nussbaum, 2015 ONSC 6226, at para. 44; Streamline Foods Ltd. v. Jantz Canada Corporation, 2012 ONCA 174, at para. 6; and Coffee Culture Systems Inc. v. Krukowski, 2013 ONSC 1588, at para. 42, aff’d 2014 ONCA 61.

[82] This is not a case to which the doctrine of misnomer applies.

[83] The fact that the Trustee’s lawyer candidly advised me that he had not turned his mind to the issue of requiring leave under r. 48.04, until I raised it at the oral hearing, explains why no evidence was led specifically in support of this request for leave.

[84] There are two further reasons that militate against the granting of leave. First, without the benefit of a proposed amended statement of claim, it is not possible to fully assess the prejudice that may arise from the granting of leave and the granting of the motion to add or substitute the Investor Beneficiaries and amend the statement of claim. Second, the Trustee failed to file consents of the Investor Beneficiaries to be added as plaintiffs, as required under r. 5.04(3).

Order and Costs

[85] For all these reasons, the motion for summary judgment is dismissed and leave to the Trustee, under r. 48.04, to bring his cross motion under rr. 5.04 and 26.01, is denied.

[86] If the parties cannot agree on the matter of costs, the Defendants will deliver their costs outline and any supplementary written submissions, to be no longer than three pages double spaced, to me by March 19, 2021. The Plaintiff shall then deliver his costs outline and any responding written submissions, also to be no longer than three pages double spaced, to me by March 26, 2021.

Justice S. Vella Date: March 9, 2021

[^1]: Although no point was made of this by Altus Group, I note that r. 39.04 does not permit the plaintiff to rely on his own examination for discovery evidence on a motion. However, because Altus Group tendered this evidence, it is, in my view, open to the plaintiff to rely on the transcript, as he has done. By so doing, the policy underlying r. 39.04, which is to disallow a party from escaping cross examination on an affidavit by relying on its own examination for discovery evidence, is not offended when that evidence has been tendered by the adverse party as part of its own case. By filing the entire transcript of the Trustee’s examination for discovery, the evidence is properly before this Court on this motion.