In the recent case of 2275518 Ontario Inc. v. The Toronto-Dominion Bank, 2024 ONCA 343, the Ontario Court of Appeal cautioned courts from delaying a creditor's access to summary judgement motions.
TD Bank, the Respondents, appealed a motion summary judgement granted against the Appellants, 2275518 Ontario Inc, the corporate borrowers, and the Guarantors who defaulted on a loan. The Guarantors allege their lawyer, and the lawyer for TD Bank, failed to register the bank's security in a first priority position thus making the guarantee void and TD Bank was estopped from enforcing the guarantees
Background
This action began with TD Bank who brought a summary judgement motion seeking judgment from the Borrower and Guarantors. Before TD Bank's summary judgement motion, the Appellants sought to amend their statement of defense to include the lawyer's negligence in failing to register TD Bank's security interest in a first priority decision and his misrepresentation regarding the security registration.
When TD Bank's summary judgement motion came before the motion judge, the judge ordered a mini-trial based on Rule 20.04(2.2). During the mini-trial, the motion judge heard three witnesses, including the lawyer in question, over a three-day period.
The motion judge concluded the lawyer did not mispresent the bank's security interest and did not find there was a barrier to summary judgement because of the third-party claim.
Issues and Decision
The Appellants raised three issues at appeal in which they essentially assert errors in the motion judge's use of the enhanced powers in r.20.04(2.2) which are as follows: the motion judge erred by ordering oral evidence from a non-party, the lawyer, in violation of Rule 20.04(2.2), and in the alternative in making findings of fact an credibility relating to the appellants' third party claim against the lawyer thereby creating a risk of inconsistent findings of fact and effectively granting partial summary judgment and in the further by granting summary judgment in the main action prior to the determination of the third party claim, thereby prejudicing the appellant's interests. All of which the Court of Appeal rejected.
Discussion: Court of Appeal overturns Lower Court
The judge reaffirmed Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, in which the Supreme Court concluded that the exercise of powers under r.20.04(2.1) attracts deference and a determination that there is no genuine issue for trial should not be disturbed on appeal. A decision to exercise the enhanced powers under the rule is discretionary and, as such, should not be disturbed unless the motion judge misdirected themself or came to a decision that is so clearly wrong that it resulted in an injustice.1
Rule 20.04(2.2) states, "oral evidence can be presented by one or more parties." Further, Rule 1.04(1) and (1.1) state the rules should be interpreted liberally and grants the court the power to make orders proportionate to the complexity of the issues involved.
The Appellants claim the motion judge should not have made findings relevant to the third-party negligence claim when the motion judge did not have all the evidence in front of him. They claim this could lead to a risk of inconsistent findings of fact. However, the Court of Appeal wrote,
"... the summary judgement process is tailor-made to enforce liquidated claims by creditors against debtors and guarantors. Unless there is a genuine issue for trial, the court should be reluctant to delay a creditor's access to this summary procedure..."2
Here, the Court of Appeal is distinguishing the negligence claim from the liquidated claim. This differentiation is important when considering the consequences a prolonged claim would have on creditors. The Court of Appeal highlights the summary judgement's role in swiftly dealing with creditor claims.
The mini-trial was an appropriate method to hear all necessary witness testimonies and examinations. The Appellants were given the opportunity to merge the third-party action into the main action but chose not to.
Conclusion
In sum, the Court of Appeal's decision gives creditors a clear picture on how they can effectively use the summary judgement process. It also cautions courts from delaying summary judgement motions and notes the implications that can arise.
This blog was co-authored by Summer Law Student, Barbara Attia.
Sources:
2275518 Ontario Inc. v. The Toronto-Dominion Bank, 2024 ONCA 343
Footnotes
1 2275518 Ontario Inc. v. The Toronto-Dominion Bank, 2024 ONCA 343 (CanLII), at para 38, https://canlii.ca/t/k4ghx#par38
2 2275518 Ontario Inc v The Toronto-Dominion Bank, 2024 ONCA 343 at para 44.
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