Canadian Lawyer

March 2013

The most widely read magazine for Canadian lawyers

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OPINION BaCk pagE by jiM MiddleMiSS Ontario summary judgment test faces SCC microscope T he important question of how much latitude judges have in Ontario to avoid trials by granting summary judgment under Rule 20 is scheduled to come before the Supreme Court of Canada in March in two appeals involving an alleged investor scam. The top court is being asked to assess the Ontario Court of Appeal���s ���full appreciation test��� for implementing summary judgments. However, the rulings in Bruno Appliance and Furniture Inc. v. Hryniak and Hryniak v. Mauldin will also send an important message on how Canadian courts perceive investor scams and whether they will require lengthy and costly fraud trials or allow judges, in flagrant cases, to cut straight to a monetary award, avoiding the ���forensic machinery of a trial.��� Investor fraud in Canada is a serious problem; investors have lost more than $320 million in recent Ponzi schemes, according to the Criminal Intelligence Service Canada. The 2012 Canadian Securities Administrators Investor Index found 27 per cent of Canadians have been approached with a possible fraudulent investment and 56 per cent believe ���they are just as likely to be a victim of investment fraud as anyone else.��� Almost 60 per cent of victims say they recovered nothing, while 23 per cent say they recovered less than 50 per cent of their funds. In the two cases before the Supreme Court, Robert Hryniak is accused of bilking Bruno Appliance and the Mauldin plaintiffs of more than $2 million. They sued and sought summary judgment against Hryniak and the law firm Cassels Brock & Blackwell LLP and its former lawyer Greg Peebles. In a 58-page ruling in 2010, Ontario motions Justice Duncan Grace granted summary judgment against Hryniak in both cases and ordered him to pay $2.1 million, but dismissed the motions against 46 March 2013 www.CANADIAN Peebles and Cassels Brock, ruling those facts required a trial. The four-day motion contained 28 volumes of evidence, including affidavits from 18 witnesses, requiring three weeks of cross-examinations. Grace found Hryniak was a ���master of illusion��� and ���the threads of dishonesty are everywhere.��� Based on the record, he ruled ���the forensic machinery of a trial is not required��� concerning Hryniak. Hryniak appealed. Meanwhile, other Ontario judges were ruling on the application of the new summary judgment rule with diverging views over when and how it applies. The Court of Appeal combined five cases about the new rule, agreeing to hear Hryniak���s appeals as part of it. In 2011, the appeal court set out in Combined Air Mechanical Services Inc. v. Flesch a new ���full appreciation test��� for applying the rule. It held ���the motion judge must ask the following question: can the full appreciation of the evidence and issues that is required to make dispositive findings be achieved by way of summary judgment, or can this full appreciation only be achieved by way of a trial? ���We think this ���full appreciation test��� provides a useful benchmark for deciding whether or not a trial is required in the interest of justice.��� The appeal court added, ���In cases that call for multiple findings of fact on the basis of conflicting evidence emanating from a number of witnesses and found in a voluminous record, a summary judgment motion cannot serve as an adequate substitute for the trial process. Generally speaking, in those cases, the motion judge simply cannot achieve the full appreciation of the evidence and issues that is required to make dispositive findings. Accordingly, the full appreciation test is not met and the ���interest of justice��� requires a trial.��� However, the appeal court felt simply setting aside the summary judgments was undesirable, because the motion judge L a w ye r m a g . c o m arrived at his decision after ���a careful scrutiny of an extensive record, written at a time when the law was unsettled.��� Rather, the court supported a finding of civil fraud in Mauldin because Hryniak���s defence had ���no credibility.��� However, in Bruno, the appeal court found the evidence ���was not nearly as overwhelming��� and required a trial, because it was not clear whether Hryniak made any statements inducing Bruno to invest in the trading scheme. Bruno is asking the top court to revisit the full appreciation test and its negative implication in fraud cases and consider replacing it with a ���contextual justice test.��� That test would give a motions judge more latitude to conclude it would be unjust to force a trial. Hryniak wants the court to find the appeal court���s prospective overruling in Mauldin was inappropriate. Either way, there should be some clarity as to how Rule 20 applies in the future. Will investors be put to the pains of arduous and costly trials to recover their lost funds in what a judge thinks is blatant investment fraud based on a paper record? Or will the top court be progressive and fall on the side of those who get scammed? Canada has a spotty record of dealing with investment frauds. The Supreme Court has a chance to send fraudsters a strong message that Canada isn���t a playground for investment scams. Let���s hope the court seizes the opportunity. Jim Middlemiss blogs about the legal profession at WebNewsManagement.com. You can follow him on Twitter��@JimMiddlemiss.

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