May 5th, 2021
In Royal Bank of Canada v 1643937, the Court of Appeal for Ontario provided guidance on how credibility issues are to be addressed on a summary judgment motion.
Lorraine MacDonald, Patrick McHale, and Beverly McHale provided personal guarantees as security for loan advances made by the Royal Bank of Canada (“RBC”) to their family business, Ottawa Valley Glass Enterprises Ltd. In 2012, the business struggled financially and began to default on its loan obligations. RBC demanded payment under the personal guarantees. After an unsuccessful attempt to re-structure the business, an assignment in bankruptcy was made by the corporation.
RBC brought an action to recover monies owing under the guarantees. The parties brought competing motions for summary judgment. The position of Lorraine MacDonald, Patrick McHale, and Beverly McHale was that RBC had represented to them that their liability under the guarantees was joint and several, with a collective exposure capped at $600,000, as opposed to individual exposure of $600,000 each.
The Motion Judge’s Decision
The motion judge granted summary judgment to RBC, and she found there was no genuine issue requiring a trial with respect to the validity and enforceability of the personal guarantees. In her reasons, the motion judge rejected the allegations of misrepresentation, stating that no evidence of misrepresentation was provided on the motion. The motion judge held that the entire agreement clause governed. Given that each individual signed a separate guarantee, the motion judge did not accept that liability under the guarantees was joint and several, and capped.
The defendants appealed, arguing there was a genuine issue for trial with respect to the representations made by RBC as to their individual liability under the guarantees.
Ontario Court of Appeal
The Court of Appeal allowed the appeal and determined that a trial was required.
The court found that the motion judge’s approach to summary judgment was “at the heart of [the] appeal”. As per Hryniak v Mauldin, the motion judge was required to determine whether there was a genuine issue for trial based on the evidence before her. If there was a genuine issue for trial, she was to determine whether trial could be avoided by using the enhanced fact-finding powers under Rule 20.04(2.1) and (2.2) of the Rules of Civil Procedure, which allow judges to weigh evidence, evaluate credibility, draw reasonable inferences, and order oral evidence.
The court found that the motion judge did not follow the analytical framework in Hyrniak v. Mauldin or provide adequate reasons. The motion judge misdirected herself as to whether summary judgment was appropriate. Specifically, she did not explain why she rejected unchallenged evidence that supported the allegation of misrepresentation, and did not address the absence of evidence of any responding evidence from RBC. It was thus incumbent on the motion judge to order oral evidence (i.e., a mini-trial) or a full trial if she determined that she could not evaluate the credibility of the defence pleaded based on the written record alone.
The decision reminds us that the overarching goal of summary judgment is to achieve “a fair process that results in a just adjudication of disputes.” Simply citing Hryniak v. Mauldin is not sufficient. While a motion judge’s decision is entitled to considerable deference on appeal, appellate intervention was required in this case. By failing to engage the principles and framework articulated in Hryniak, including the fact-finding powers in Rule 20.04(2.1) and (2.2), appellate intervention was appropriate. There is a risk that, in an effort to dispose of a case in a summary fashion, the motion judge will not properly analyze the evidence. According to the Court of Appeal, that is precisely what happened in this case. The motion judge should have followed the Hyrniak framework and ordered a summary procedure or a trial.
- On a motion for summary judgment, the court must follow the Hryniak framework, step by step. It is not sufficient to simply cite Hryniak and then engage in a cursory review of the evidence.
- Where there are credibility issues, the court cannot ignore them. The court must consider using the enhanced fact-finding powers in Rule 20.04(2.1) and (2.2). If credibility issues cannot be resolved on a written record, motion judges must consider ordering oral evidence (i.e., a mini-trial) or deferring the issue to trial.
- To avoid appellate intervention, motion judges must ensure their findings on issues of credibility are clear, understandable, and supported by the evidentiary record.
 Ibid, at paras 7-8.
 Ibid, at para 10.
 Ibid, at para 3, 16.
 Ibid, at para 17, 19.
 Ibid, at para 1, 16.
 Ibid, at para 45.
 Ibid, at para 23.
 Ibid, at para 29, 38.
 Ibid, at para 23.