In Hryniak v. Mauldin, released January 23, 2014, the Supreme Court of Canada upheld the finding of fraud against Toronto businessman Robert Hyrniak on a summary judgment motion. The unanimous SCC found that a shift in culture is needed to embrace summary judgment motions as an alternative model of adjudicating disputes. The SCC ruled that findings of fraud can be made when the judge is able to reach a fair and just determination on the merits on a summary judgment motion. This will be the case when the motion:

  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.

In a call to action to improve access to justice, the SCC also called upon lower court judges to take a more active role in case-managing disputes by seizing themselves of cases where they have dismissed a motion for summary judgment. This is a significant departure from current practice. 

Revolutionary changes in Ontario’s Rules of Civil Procedure were made in 2010 which emphasized proportionality and empowered judges to weigh evidence, evaluate credibility and draw inferences from the evidence in deciding whether a case could be decided on a summary basis. However, soon after, divergent jurisprudence emerged regarding how the new rules should be interpreted. In 2011, Ontario’s Court of Appeal decision in this case established a “full appreciation test”, which required a summary judgment motion judge to answer the following question: can the full appreciation of 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 trial? The focus on the importance of the trial narrative limited the usefulness of summary judgment motions for complex fraud cases.

The SCC rejected that approach in favour of a broader test. Writing for the unanimous Court, Justice Karakatsanis held:

[4]  In interpreting these provisions, the Ontario Court of Appeal placed too high a premium on the “full appreciation” of evidence that can be gained at a conventional trial, given that such a trial is not a realistic alternative for most litigants. In my view, a trial is not required if a summary judgment motion can achieve a fair and just adjudication, if it provides a process that allows the judge to make the necessary findings of fact, apply the law to those facts, and is a proportionate, more expeditious and less expensive means to achieve a just result than going to trial.

[5]  To that end, I conclude that summary judgment rules must be interpreted broadly, favouring proportionality and fair access to the affordable, timely and just adjudication of claims.

[66]  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.

There were two appeals before the SCC arising out of similar facts. In the first appeal, Hryniak v. Mauldin, a group of American investors had met with Hryniak and others to discuss an investment opportunity. The group wired US$1.2 million, which was pooled with other funds and transferred to Hryniak’s company. A few months later, the money was sent to an offshore bank and disappeared. The investors brought an action for civil fraud against Hryniak and others and subsequently brought a motion for summary judgment. The motion judge concluded that a trial was not required against Hryniak. Ontario’s Court of Appeal was satisfied that the record supported the finding that Hryniak had committed the tort of civil fraud against the investors, but found that, in future, this type of case would not meet the “full appreciation” test needed for a successful summary judgment motion. As noted above, the SCC affirmed the finding of fraud against Hryniak while differing on the approach to be taken with summary judgment motions.

In the second appeal, Bruno Appliance and Furniture, Inc. v. Hryniak, the principal of an American company, Bruno Appliance and Furniture Inc., had met with Hryniak’s lawyer and another individual. Following the meeting, US$1 million was wired to the lawyer’s law firm which transferred the funds to Hryniak’s company. Ultimately, all of the monies were lost and Bruno Appliance sued Hryniak and others. The motion judge found that Bruno Appliance had established its claim as against Hryniak only. The Court of Appeal disagreed and ordered that the action against Hryniak and the other defendants should proceed to trial.

In both appeals, the SCC summarized the elements of civil fraud as follows:

  1. a false representation made by the defendant;
  2. some level of knowledge of the falsehood of the representation on the part of the defendant (whether through knowledge or recklessness);
  3. the false representation caused the plaintiff to act; and
  4. the plaintiff’s actions resulted in a loss.

In the Bruno decision, the SCC agreed with the Ontario Court of Appeal that the motion judge had failed to find a necessary element of civil fraud, namely a false representation made by Hryniak. Since the action was proceeding to trial against the other defendants in any event, the SCC found a trial was the most proportionate, timely and cost effective approach.

The principles of proportionality now reflected in many Canadian provinces’ procedural rules were endorsed by the SCC in this precedent-setting decision. The culture shift called for by the SCC should result in more cases proceeding by way of summary judgment, rather than by way of trial, correspondingly less cost for victims of fraud, and speedier results. Nevertheless, going forward, parties should continue to appreciate that not every fraud case will be suitable for a summary judgment motion and that the particular facts of any given case will need to be carefully considered.

by Michael Nowina & Chanel Sterie (student at law)