In Summary

Fair and just adjudication requires proportionality. In a ground-breaking decision, the Supreme Court of Canada wholly embraces the touchstone of proportionality in the country’s civil justice system and sets forth a new test for summary judgment.

In the two related decisions of Hryniak v. Mauldin, and Bruno Appliance and Furniture v. Hryniak, released on January 23, 2014 (collectively described as Hryniak), the high court heralds a shift in legal culture across Canada towards a fair and just process that allows judges to find the facts necessary to resolve disputes.

In Hryniak, the Supreme Court of Canada liberally interpreted Ontario’s Summary Judgment Rule 20 to provide judges with broad discretion to exercise expanded powers of fact finding in the interest of justice. Legal process must be proportionate, timely and affordable – and the most painstaking procedure, such as a full trial, may not be the most suitable forum to justly adjudicate claims.

As a result, the threshold has been lowered and summary judgment motions will be increasingly used in litigation so as to avoid unnecessary expense and delay.

HRYNIAK DECISION

Mauldin and Bruno are two related cases involving the questionable dealings of the same investment trader, Robert Hryniak. (The latter two cases before the Court of Appeal for Ontario are discussed in Canadian Underwriter, April 2012).

In 2010, the motion judge in Mauldin held that Hryniak had made false representations that funds had been properly invested in a legitimate trading program when he knew the program was a sham from the outset. Investors were defrauded US$1.2 million (related to Mauldin, not including Bruno) as a result.

In December 2011, the Court of Appeal affirmed the motion judge’s findings that Hryniak was liable for the tort of civil fraud. In Bruno, the Court of Appeal overturned the summary judgment and, instead, found there was a genuine issue requiring trial as to whether Hryniak had induced Bruno to invest.

Mauldin and Bruno were subsequently appealed to the Supreme Court of Canada, resulting in the Hryniak decision. In the end, Canada’s highest court found that summary judgment was suitable on the facts in Mauldin, since the elements for civil fraud had been proven, but not in Bruno.

Previously, the Court of Appeal for Ontario had ruled that the expanded powers under Rule 20 should be exercised at trial unless a motions judge can achieve the “full appreciation” of the evidence and issues required to make dispositive findings. However, the Supreme Court of Canada held that the Court of Appeal’s “full appreciation” test went too far and prevented judges from exercising their discretion to adjudicate more cases through summary judgment. The requirement of “full appreciation” overemphasizes the benefits of the trial process.

In Hryniak, the high court emphasizes that the principle of proportionality underlies the rules of court, whether or not expressly stated. Ontario’s Rule 1.04(1.1) provides that the “court shall make orders and give directions that are proportionate to the importance of the complexity of issue, and to the amount involved, in the proceeding.”

The Supreme Court of Canada states the discretion of motion judges to use their enhanced powers of fact finding – i.e., the hearing of oral evidence, making findings on credibility, and drawing reasonable inferences – should be exercised, keeping in mind that “access to justice is one of the greatest challenges to the Rule of Law today.” Summary judgment provides a proportionate, more expeditious and less expensive means to achieve a just result than proceeding to trial.

NEW SUMMARY JUDGMENT TEST

In Hryniak, the Supreme Court of Canada describes the new summary judgment test as first requiring judges to determine if there is a genuine issue requiring trial based on the evidence before them, without using the new fact-finding powers. If there appears to be a genuine issue requiring a trial, then the judge should determine if the need for a trial can be avoided by exercising their new powers. Justice Andromache Karakatsanis states the following:

“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.”

The test is whether or not the motions judge can appreciate the evidence necessary to make dispositive findings confidently in order to fairly resolve the dispute and serve the interest of justice.

As Justice Karakatsanis states, “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.”

The “interest of justice” is not defined in the Rules and must be considered on the facts of each case. In this regard, judges should first determine the consequences of using the new powers in a preliminary step.

In some cases, judges may find that summary judgment motions clearly lack merit, and there will be no need to proceed further. Some concerns about credibility or clarification of evidence may be addressed by oral evidence. The motion judge should also consider the evidence that would be available at trial and the opportunity to fairly evaluate this evidence.

Clearly, the interest of justice would not be served where claims will proceed to trial regardless of the outcome of the motion, or where there is a risk of duplicative proceedings or inconsistent findings of fact.

ENHANCED TRIAL MANAGEMENT

As a preliminary to the summary judgment motion, parties should seek an order for directions, and may apply to dismiss the summary judgment motion itself as premature or improper. Dismissal of the motion may occur where the matter is lengthy and complex, and where it would not advance the litigation or support timeliness, affordability and proportionality.

In some cases, summary judgment motions may be appropriate even before discoveries have been completed. In many cases, however, full document production and discoveries will be first required to ensure that the parties have a meaningful opportunity to lead their case and that the motion judge has an appreciation of the evidence and issues necessary to confidently make findings of fact and to apply the law to the facts.

Even if a summary judgment motion fails, the motion judge may provide directions to manage litigation and ensure efficiencies going forward. Motion judges should also remain seized of the matter so as not to waste judicial resources given their knowledge about the case.

STANDARD OF REVIEW

The Supreme Court of Canada recognizes that deference should be accorded to motion judges who make findings on the “interest of justice” and whether or not a trial is required – both being mixed issues of fact and law – and the standard for review is a “palpable and overriding error.” For findings of law, the standard is that of correctness.

POST HRYNIAK

Within the first month of its release, Hryniak has been cited in more than 20 decisions across Canada. In the Ontario decision, The Bank of Nova Scotia v. David Allin, Justice David Brown applies Hryniak and clarifies the role of the motion judge. For hearings under case management in Toronto, at least, parties are encouraged to complete the written record and cross-examinations well before the summary judgment hearing to allow the judge to assess the adequacy of the record in advance, and to provide direction as to the hearing of oral evidence. Any expert opinion relied upon would also have to be filed with the record.

The judge would then take a preliminary view of whether oral evidence is required to make findings on contested facts.

IMPAC
T ON THE INSURANCE INDUSTRY

As a result of the Supreme Court of Canada’s decision in Hryniak, one may expect an increase in summary judgment motions brought. Judges will play a more expansive role and, ideally, more cases can be heard quicker and with less cost.

Insurers will wish to assess the pros and cons of the summary judgment option at an earlier stage in litigation and avoid legal costs and uncertainty in a conventional trial. There are tactical advantages to bringing these motions in appropriate cases and settlement may occur due to the prospect of summary judgment at an earlier stage.

In some cases, however, attempts at summary judgment motions may lead to further appeals and delays. Fact investigation and expert opinion may be required earlier.

Summary judgment motions will become more prominent as a litigation tool for resolving disputes. As a result, insurers may wish to assess claims and related risks earlier, and review litigation budgets, keeping in mind the new test for summary judgment.