SUPREME
COURT OF CANADA
Citation:
Bruno Appliance and Furniture, Inc.
v. Hryniak, 2014 SCC 8, [2014]
1 S.C.R. 126
|
Date:
20140123
Docket:
34645
|
Between:
Bruno
Appliance and Furniture, Inc.
Applicant
and
Robert
Hryniak
Respondent
-
and -
Attorney
General of Ontario, Ontario Trial Lawyers Association,
Advocates’
Society and Canadian Bar Association
Interveners
Coram: McLachlin C.J. and LeBel, Abella, Rothstein, Cromwell,
Karakatsanis and Wagner JJ.
Reasons for
Judgment:
(paras. 1 to 32)
|
Karakatsanis J. (McLachlin C.J. and LeBel, Abella,
Rothstein, Cromwell and Wagner JJ. concurring)
|
Bruno Appliance and Furniture, Inc. v. Hryniak, 2014 SCC 8, [2014] 1 S.C.R. 126
Bruno Appliance and Furniture,
Inc. Appellant
v.
Robert Hryniak Respondent
and
Attorney General of Ontario, Ontario
Trial Lawyers Association, Advocates’
Society and Canadian
Bar Association Interveners
Indexed as: Bruno Appliance and Furniture, Inc. v. Hryniak
2014 SCC 8
File No.: 34645.
2013: March 26; 2014: January 23.
Present: McLachlin C.J. and LeBel, Abella, Rothstein,
Cromwell, Karakatsanis and Wagner JJ.
on appeal from the court of appeal for ontario
Civil procedure — Summary judgment — Investor
bringing action in civil fraud and subsequently bringing a motion for summary
judgment — Motion judge granting summary judgment but being overruled by Court
of Appeal — Elements of civil fraud — Whether motion judge erred in granting
summary judgment — Rules of Civil Procedure, R.R.O. 1990, Reg. 194,
Rule 20.
Bruno
Appliance and Furniture, Inc. is an American corporation. Its principal met
with the principal of Frontline Investments, Inc. and as a result of these
meetings, executed a number of investment documents in favour of Frontline. Bruno
Appliance subsequently wired US$1 million to Cassels Brock, who assigned
the funds to an account associated with Tropos Capital Inc., a company of which
H was the principal. Bruno Appliance’s funds were then bundled with other
funds and paid to Tropos in a bank draft. Bruno Appliance’s money was not
invested and disappeared.
Bruno
Appliance launched a civil fraud action against H and others, and brought a motion
for summary judgment. The motion judge found that Bruno Appliance had
established its claim and that there was no issue requiring a trial. The Court
of Appeal disagreed and ordered that the Bruno Appliance action proceed to
trial.
Held: The appeal should be dismissed.
The
scope and interpretation of the amended Rule 20 summary judgment motion
are addressed in the companion appeal, Hryniak v. Mauldin, 2014 SCC 7,
[2014] 1 S.C.R. 87. Summary judgment may not be granted under Rule 20
where there is a genuine issue requiring a trial. The motion judge should ask
whether the matter can be resolved in a fair and just manner on a summary
judgment motion. 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. If there
appears to be a genuine issue requiring a trial, based only on the record
before her, the judge should then ask if the need for a trial can be avoided by
using the new powers provided 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.
The
Court of Appeal did not err in its determination that Bruno Appliance should
not receive summary judgment against H. The following four elements constitute
the tort of civil fraud: (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.
Civil
fraud requires a finding that H made a misrepresentation which induced Bruno
Appliance to invest. The motion judge neither identified the need for a
misrepresentation, nor found that H made one. H was not present at the meeting
that led to Bruno’s investment and the motion judge’s findings are insufficient
to establish that any false statements made at the meeting can be attributed to
him.
While
the evidence clearly demonstrates that H was aware of the fraud, and may in
fact have benefited from the fraud, whether H perpetrated the fraud by inducing
Bruno Appliance to contribute US$1 million to a non‑existent
investment scheme is a genuine issue requiring a trial.
Cases Cited
Applied:
Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87; referred to:
Derry v. Peek (1889), 14 App. Cas. 337; Parna v. G. & S.
Properties Ltd., [1971] S.C.R. 306; Snell v. Farrell, [1990] 2
S.C.R. 311; Angers v. Mutual Reserve Fund Life Assn. (1904), 35 S.C.R.
330.
Statutes and Regulations Cited
Rules of Civil Procedure, R.R.O. 1990,
Reg. 194, r. 20.
Authors Cited
Osborne, Philip H. The Law of Torts, 4th ed. Toronto:
Irwin Law, 2011.
APPEAL
from a judgment of the Ontario Court of Appeal (Winkler C.J.O. and Laskin,
Sharpe, Armstrong and Rouleau JJ.A.), 2011 ONCA 764, 108 O.R. (3d)
1, 286 O.A.C. 3, 97 C.C.E.L. (3d) 25, 14 C.P.C. (7th) 242, 13 R.P.R. (5th) 167,
93 B.L.R. (4th) 1, 344 D.L.R. (4th) 193, 10 C.L.R. (4th) 17, [2011] O.J. No. 5431
(QL), 2011 CarswellOnt 13515, setting aside a decision of Grace J., 2010
ONSC 5490, [2010] O.J. No. 4661 (QL), 2010 CarswellOnt 8325. Appeal
dismissed.
Javad
Heydary, Jeffrey D. Landmann, David K.
Alderson, Michelle Jackson and Jonathan A. Odumeru, for
the appellant.
Sarit E.
Batner, Brandon Kain and Moya J.
Graham, for the respondent.
Malliha
Wilson and Christopher P. Thompson,
for the intervener the Attorney General of Ontario.
Allan
Rouben and Ronald P. Bohm, for the
intervener the Ontario Trial Lawyers Association.
David W.
Scott, Q.C., Patricia D. S.
Jackson and Crawford Smith, for the intervener the Advocates’
Society.
Paul R.
Sweeny and David Sterns, for the intervener the
Canadian Bar Association.
The judgment of the Court was
delivered by
[1]
Karakatsanis J. — Like its companion, Hryniak v. Mauldin,
2014 SCC 7, [2014] 1 S.C.R. 87 (Mauldin), this appeal concerns the
interpretation and application of Ontario’s new summary judgment rules. In
this action, the Ontario Court of Appeal overturned the motion judge’s decision
to grant summary judgment in favour of the plaintiff and made various trial
management orders under Rule 20.05 of the Rules of Civil Procedure,
R.R.O. 1990, Reg. 194.
[2]
In light of the principles articulated in the Mauldin
appeal and for the reasons that follow, I would dismiss the appeal.
I.
Facts
[3]
Bruno Appliance and Furniture, Inc. is an
American corporation, whose principal is Albert Bruno. In late 2001, Bruno met
with Robert Cranston, the principal of a Panamanian company, Frontline
Investments, Inc. As a result of these meetings, Bruno executed a number of
investment documents in favour of Frontline.
[4]
In February 2002, Bruno met with Cranston and
Gregory Peebles, a corporate-commercial lawyer at the Toronto offices of
Cassels Brock and Blackwell. No notes were kept of this meeting, and the
recollection of the participants varies. While Robert Hryniak did not attend
this meeting, Tropos Capital Inc. (Tropos), a company of which Hryniak was the
principal, received and paid a bill for Peebles’ attendance.
[5]
In early March 2002, Bruno Appliance wired US$1
million to Cassels Brock, who assigned the funds to an account associated with
Tropos. Bruno Appliance’s funds were then bundled with other funds (totalling
US$3.5 million) and paid to Tropos in a bank draft. At the end of April 2002,
Tropos paid US$2.5 million to a company called Southern Equity Investors Inc.,
and in late June 2002 transferred approximately US$550,000 to an individual
named Reinhard. By the end of September 2003, Tropos’ balance with Cassels
Brock had declined to US$19,000.
[6]
In short, Bruno Appliance’s money was not
invested and it never received a return on its investment.
II.
Judicial History
A.
Ontario Superior Court of Justice, 2010 ONSC
5490 (CanLII)
[7]
Bruno Appliance joined with the plaintiffs from
the companion Mauldin appeal in a civil fraud action against Hryniak,
Peebles and Cassels Brock. Both sets of plaintiffs brought motions for summary
judgment, which were heard together.
[8]
The motion judge found that Bruno Appliance had
established its claim against Hryniak and that there was no issue requiring a
trial. He was satisfied that, in spite of Hryniak’s absence from an early
meeting between Peebles, Cranston and Bruno, Hryniak knew that the meeting was
occurring and his company, Tropos, paid for Peebles’ attendance. The motion
judge further found that Hryniak was aware that US$1 million was placed in
Tropos’ account on Bruno Appliance’s behalf, and that Hryniak gave instructions
regarding those funds.
[9]
The motion judge found that none of Bruno
Appliance’s funds were invested. In part, they were used to fund disbursements
to another individual, Reinhard, and the remainder was slowly drained.
[10]
The motion judge held that the tort of civil
fraud was made out and there was no genuine issue requiring a trial.
[11]
As in the companion Mauldin appeal, the
motion judge dismissed the motion for summary judgment against Peebles, as he
found that the claim involved factual issues that could not be resolved on the
record. Consequently, the motion for summary judgment against Cassels Brock
was dismissed, as it was premised on the theory that the firm was vicariously
liable for Peebles’ acts and omissions.
B.
Court of Appeal for Ontario, 2011 ONCA 764, 108
O.R. (3d) 1
[12]
Hryniak’s appeal of this motion was heard
together with the companion Mauldin appeal, as well as three other
matters, which are not before this Court. The Court of Appeal found that Bruno
Appliance’s action should not be addressed through summary judgment due to its
voluminous record, conflicting testimony, credibility issues, conflicting
theories of liability advanced against multiple defendants, and the absence of
reliable documentary evidence.
[13]
Despite this conclusion, as in Mauldin,
the Court of Appeal was prepared to review whether the motion judge was
nonetheless entitled to grant judgment but, in this case, it concluded that the
evidence against Hryniak was not nearly as overwhelming. Two genuine issues
required a trial: first, whether Hryniak induced Bruno Appliance to invest,
and second, whether some of the funds were misappropriated by Cranston, instead
of Hryniak.
[14]
The Court of Appeal found that the motion judge
failed to address the issue of whether Hryniak knowingly made any
misrepresentation that induced Bruno Appliance to invest, a necessary element
of fraud. The Court of Appeal concluded that there was no compelling evidence
that Peebles acted as Hryniak’s agent when the relevant representations were
made. With respect to the second issue, the Court of Appeal found that it
could not decide, based on the record, whether Bruno Appliance’s investment was
misappropriated entirely by Hryniak or by both Hryniak and Cranston in some
proportion.
[15]
As a result, the Court of Appeal ordered that
the Bruno Appliance action proceed to trial, subject to certain trial
management orders under Rule 20.05(2).
III.
Analysis
[16]
The scope and interpretation of the amended Rule
20 are addressed in the companion Mauldin appeal. Therefore, the issue
that remains to be determined in this appeal is whether the Court of Appeal
erred in its determination that Bruno Appliance should not receive summary
judgment against Hryniak.
A.
The Tort of Civil Fraud
[17]
The parties disagree as to the elements of the
tort of civil fraud, in particular whether proof is required that Hryniak
induced Bruno Appliance to part with its funds.
[18]
The classic statement of the elements of civil
fraud stems from an 1889 decision of the House of Lords, Derry v. Peek
(1889), 14 App. Cas. 337, where Lord Herschell conducted a thorough review of
the history of the tort of deceit and put forward the following three
propositions, at p. 374:
First, in order to sustain an action of
deceit, there must be proof of fraud, and nothing short of that will suffice.
Secondly, fraud is proved when it is shewn that a false representation has been
made (1) knowingly, or (2) without belief in its truth, or (3) recklessly,
careless whether it be true or false. . . . Thirdly, if fraud be proved, the
motive of the person guilty of it is immaterial. It matters not that there was
no intention to cheat or injure the person to whom the statement was made.
[19]
This Court adopted Lord Herschell’s formulation
in Parna v. G. & S. Properties Ltd., [1971] S.C.R. 306, adding that
the false statement must “actually [induce the plaintiff] to act upon it” (p.
316, quoting Anson on Contract). Requiring the plaintiff to prove
inducement is consistent with this Court’s later recognition in Snell v.
Farrell, [1990] 2 S.C.R. 311, at pp. 319-20, that tort law requires proof
that “but for the tortious conduct of the defendant, the plaintiff would not
have sustained the injury complained of”.
[20]
Finally, this Court has recognized that proof of
loss is also required. As Taschereau C.J. held in Angers v. Mutual Reserve
Fund Life Assn. (1904), 35 S.C.R. 330, “fraud without damage gives . . . no
cause of action” (p. 340).
[21]
From this jurisprudential history, I summarize
the following four elements of the tort of civil fraud: (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.
B.
Did the Motion Judge Err in Granting Summary
Judgment?
[22]
Summary judgment may not be granted under Rule
20 where there is a genuine issue requiring a trial. As outlined in the
companion Mauldin appeal, the motion judge should ask whether the matter
can be resolved in a fair and just manner on a summary judgment motion. 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. If there
appears to be a genuine issue requiring a trial, based only on the record
before her, the judge should then ask if the need for a trial can be avoided by
using the new powers provided 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.
[23]
For the reasons that follow, I am of the view
that there is a genuine issue requiring a trial.
[24]
As noted by the Court of Appeal, and following
the analysis above, civil fraud requires a finding that Hryniak made a
misrepresentation which induced Bruno Appliance to invest. The motion judge
neither identified the need for a misrepresentation, nor found that Hryniak
made one.
[25]
The motion judge found that Tropos did not
invest Bruno Appliance’s funds and that a misrepresentation had therefore been
made to the investors. The point at which a misrepresentation occurred was a
meeting between Peebles, Cranston and Bruno Appliance’s principal in February
2002. He found: that Hryniak was supposed to be in attendance at this
meeting, that Hryniak knew of the purpose of the meeting and that Hryniak’s
company paid for Peebles’ attendance.
[26]
However, Hryniak was not present, and he can
only be liable for any misrepresentation made by Peebles or Cranston if their
statements can be attributed to him. For example, the Court of Appeal
considered, and ultimately rejected, the possibility that Peebles or Cranston
was acting as Hryniak’s agent.
[27]
In my view, the motion judge’s findings are
insufficient to establish that any false statements made at the meeting can be
attributed to Hryniak. There was no evidence that Peebles or Cranston were
acting on instructions from Hryniak when they met with Bruno. While a
principal will generally be vicariously liable “for the torts of her agent
committed within the scope of her actual or apparent authority” (P. H.
Osborne, The Law of Torts (4th ed. 2011), at p. 369), the motion
judge did not find Peebles or Cranston to be Hryniak’s agent, and there is no
indication that the evidence established that Peebles or Cranston was
authorized to make representations on behalf of Hryniak and did not do so on
their own account. Similarly, there was insufficient evidence to establish
that either Peebles or Cranston was acting as Hryniak’s unwitting dupe and, as
the motion judge concluded, that issue required a trial.
[28]
While the motion judge found that Hryniak was
aware of the falseness of the representations
and exercised “full dominion and control” over Bruno Appliance’s funds (para.
169), as noted by the Court of Appeal, this finding would support liability in
conversion, but is not sufficient to establish fraud.
[29]
While I agree with the motion judge that the
evidence clearly demonstrates that Hryniak was aware of the fraud, and
may in fact have benefited from the fraud, whether Hryniak perpetrated
the fraud by inducing Bruno Appliance to contribute US$1 million to a
non-existent investment scheme is a genuine issue requiring a trial.
[30]
The Court of Appeal also found the extent of
Hryniak’s misappropriation of Bruno Appliance’s funds to be a second issue
requiring a trial. The Court of Appeal found that Hryniak had appropriated
US$450,000, but that the fate of the remaining US$550,000 required a trial.
Given the principles of joint and several liability, I am satisfied that this issue
would not normally preclude a finding that there is no genuine issue requiring
a trial against Hryniak.
[31]
The motion judge failed to find a necessary
element of civil fraud, an error of law, and did not draw sufficient factual
conclusions for either him, or an appellate court, to make such a finding.
Since the action was proceeding to trial against the other defendants in any
event, the order of the Court of Appeal that all the remaining actions be heard
together is the most proportionate, timely and cost effective approach. In
light of this conclusion, it is unnecessary for me to determine whether it was
against the interest of justice for the motion judge to make use of his
expanded fact-finding powers.
IV.
Conclusion
[32]
Accordingly, I would dismiss the appeal, with
costs to the respondent. I would not interfere with the case management orders
made by the Court of Appeal.
Appeal
dismissed with costs.
Solicitors for the
appellant: Heydary Hamilton, Toronto.
Solicitors for the
respondent: McCarthy Tétrault, Toronto.
Solicitor for the
intervener the Attorney General of Ontario: Attorney General of
Ontario, Toronto.
Solicitors for the
intervener the Ontario Trial Lawyers Association: Allan Rouben,
Toronto; SBMB Law, Richmond Hill, Ontario.
Solicitors for the
intervener the Advocates’ Society: Borden Ladner Gervais, Ottawa;
Torys, Toronto.
Solicitors for the
intervener the Canadian Bar Association: Evans Sweeny Bordin,
Hamilton; Sotos, Toronto.