Collie Woolen Mills Ltd. v. R., [1996] 2 CTC 152, 96 DTC 6146

Richard J.: — This is a motion by the defendant for an order dismissing the plaintiffs’ claim by way of summary judgment, pursuant to Rules 432.1 to 432.3 of the Federal Court Rules, C.R.C. 1978, c. 663 (the “Rules”).

The defendant had also sought an order striking out the plaintiffs’ amended statement of claim pursuant to Rule 419(l)(a), (c) or (f) of the Rules. On the return of the motion, however, counsel for the defendant elected to proceed only with the motion for summary judgment and withdrew the motion to strike out the amended statement of claim.

The Test for Summary Judgment

Rule 432.3 provides in part as follows:

432.3(1) Where a judge is satisfied that there is no genuine issue for trial with respect to a claim or defence, the judge shall grant summary judgment accordingly...

(3) Where a judge is satisfied that the only genuine issue is a question of law, the judge may determine the question and grant summary judgment accordingly.

(4) Where a judge decides that there is a genuine issue with respect to a claim or defence, the judge may nevertheless grant summary judgment in favour of any party, either upon an issue or generally, unless

(a) the judge is unable on the whole of the evidence to find the facts necessary to decide the questions of fact or law; or

(b) the judge considers that it would be unjust to decide the issues on the motion for summary judgment.

The Associate Chief Justice described the purpose of these provisions as follows:

The purpose of these provisions is to allow the court to summarily dispense with those cases which it considers ought not to proceed to trial because there is no genuine issue with respect to the claim or defence. It is a decision to be made on the particular circumstances of each case and on the law and the facts submitted in support of the claim or defence. Old Fish Market Restaurants Ltd. v. 1000357 Ontario Inc. (1995), 58 C.P.R. (3d) 221 (F.C.T.D.), at page 222.

I would add that these provisions ought to be liberally construed to secure the just, most expeditious and least expensive determination of every proceeding.

Rules 432.1 to 432.7, which establish a procedure for obtaining summary judgment, came into force January 13, 1994. A similar provision for summary judgment was introduced in the Ontario Rules of Civil Procedure some 10 years earlier [1] . Although the Ontario Courts’ application of the summary judgment provisions are not determinative of the interpretation to be adopted by this Court, Marine Atlantic Inc. v. Blyth (1994), 77 F.T.R. 97, the language of the Ontario Rules is in all material respects identical with that of Rule 432.3(1). Thus, the decisions of the Ontario courts provide some useful guidance, Feoso Oil Limited v. “Sarla”, The (1995), 184 N.R. 307, [1995] 3 F.C. 68 (C.A.). Mr. Justice Henry of the Ontario Court (General Division), in dealing with the corresponding Ontario Rule 20 had this to say:

In my view, the general thrust of the seminal decisions of the court on Rule 20, where the moving party is the defendant, may be summarized thus for present purposes:

Rule 20 contemplates a radically new attitude to motions for judgment; the objective is to screen out claims that in the opinion of the court, based on evidence furnished as directed by the rule, ought not to proceed to trial because they cannot survive the “good hard look”.

— There is no arbitrary or fixed criterion that the motions judge must apply. It is a case by case decision to be made on the law and on the facts that he is able to find on the evidence submitted to him in support of the claim or defence, whether the plaintiff has laid a proper foundation in its affidavit and other evidence to sustain the claims made.

— It is not sufficient for the responding party to say that more and better evidence will (or may) be available at trial. The occasion is now. The respondent must set out specific facts and coherent evidence organized to show that there is a genuine issue for trial.

— Apparent factual conflict in evidence does not end the inquiry.

— The court may, on a common sense basis, draw inferences from the evidence.

— The court may look at the overall credibility of the plaintiffs action, i.e., does the plaintiff’s case have the ring of truth about it such that it would justify consideration by the trier of fact?

— Matters of credibility requiring resolution in a case of conflicting evidence ought to go to trial; however, that depends upon the circumstances of the case; the court in taking the “hard look” at the merits must decide if any conflict is more apparent than real, 1.e., whether there is really an issue of credibility that must be resolved in order to adjudicate on the merits.

— Motions under Rule 20 must be made sparingly and judiciously; the court will control abuse of this process if necessary by its order for costs. Pizza Pizza Ltd. v. Gillespie (1991), 75 O.R. (2d) 225, 45 C.P.C. (2d) 168, at pages 238-39 (C.P.C. 183-84).

The applicable principles were recently further elaborated by Kitely J. of the Ontario Court (General Division) in Steer v. Merklinger (1996), 25 O.R. (3d) 812 at page 821 (Gen. Div.), in the following terms:

The principles to be applied on motions for summary judgment can be summarized as follows:

— The objective of the rule is to screen out claims that, based on the evidence provided, ought not, in the court’s view, proceed to trial because they cannot withstand a “good hard look”.

— The moving party has the burden of establishing that there is no genuine issue for trial. The responding party also bears an evidentiary burden to put evidence before the court showing the existence of issues requiring a trial (rule 20.04(1)).

— The court must look at the overall credibility of the respondent’s pleading and determine whether it has a “ring of truth” about it that justifies consideration by a trier of fact.

— Where there are significant facts in dispute, the case should likely be sent to trial. However, this does not follow as a matter of course. If the evidence satisfies the court that there is no issue of fact that requires a trial for its resolution, the Rule 20 test has been satisfied. It must, however, be clear that a trial is unnecessary: Irving Ungerman Ltd. v. Galanis (1991)» 4 O.R.

(3d) 545, 83 D.L.R. (4th) 734 (C.A.).

— The same principle applies to issues of credibility. In taking a hard look at the merits of the case, the court must decide if “any conflict [in credibility] is more apparent than real, i.e. whether there is really an issue of credibility that must be resolved in order to adjudicate on the merits”: Pizza Pizza, supra, at page 238 O.R.

In Vaughan v. Warner Communications Inc. (1986), 56 O.R. (2d) 242, 10 C.P.C. (2d) 205 at 246 (C.T.C. 209-10) (H.C.), Madam Justice Boland stated that courts must “freely canvass the facts and the law in order to determine whether there is a genuine issue for trial”. She remarked further:

The specific changes to the summary judgment rule and the spirit in which other rules are changed indicates in my respectful view that Rule 20 should not be eviscerated by the practice of deferring actions for trial at the mere suggestion that further evidence may be made available or that the law is in a state of confusion. The responding party has a positive responsibility to go beyond mere supposition and the court now has the duty to take a hard look at the merits of an action at this preliminary stage. [2]

In this Court, Mr. Justice Strayer (Patrick v. Canada (sub nom. Patrick v. R.) (August 19, 1994), Doc. T-2400-93 (F.C.T.D.)) dealt with a motion by the defendant for summary judgment pursuant to Rule 432.3 of the Federal Court Rules. In his decision, he noted that the new Federal Court Rule 432.3(4)(a) clearly authorizes a judge to decide both questions of fact and law on a motion for summary judgment if able to do so on the material before the Court. He concluded that in this respect, the power of the Court on such a motion is broader than that provided under Ontario Rule 20 which was the Rule in question in the decision of the Ontario Court of Justice in Ottawa Mortgage Investment Corp. v. Edwards (1991), 5 O.R.

(3d) 465, 7 C.P.C. (3d) 71 (Gen. Div.), where the Court declined to grant summary judgment because there were certain questions of fact to be determined.

Clearly, Rule 432.3(4) of the Rules authorizes this Court to decide questions of fact and law on a motion if it is able to do so on the material before it. On my reading of this Rule, a motion for summary judgment should only be denied where:

1. on the whole of the evidence, the judge is unable to find the necessary facts; or

2. it would be unjust to do so.

Furthermore, this Court has held that it is desirable to dispose of cases where there is no real dispute over the law or the facts or where such disputes can be resolved by the Court Marine Atlantic v. Blyth, supra, note 4, Where the genuine issue is the amount of money involved, the court may order a reference to determine the amount.

Evidence

The materials before me on the return of the motion for summary judgment are as follows:

1. the plaintiffs’ statement of claim filed on September 29, 1992, and served on the defendant on October 8, 1992;

2. the plaintiffs’ amended statement of claim filed February 12, 1993, and served on the defendant on February 15, 1993;

3. the plaintiffs’ reply to the defendant’s demand for particulars filed February 12, 1993, and served on the defendant on February 15, 1993;

4. the plaintiffs’ reply to the defendant’s further demand for particulars filed on August 29, 1994;

5. the defendant’s statement of defence filed on November 24, 1994;

6. the plaintiffs’ reply filed on January 10, 1995;

7. the affidavit of Gwen S. Lévesque, an employee of Revenue Canada, dated December 21, 1995, and filed on January 5, 1996; and

8. the affidavit of James Edward Collie, the president of the plaintiffs’ company, dated January 22,1996, and filed on January 22, 1996.

Counsel for each of the parties also filed a memorandum of fact and law with the Court prior to the return of the motion. Although this is not presently required by the Rules, it is a practice which is very helpful to the Court and one that should be followed.

The following facts are accepted by both the plaintiffs and the defendant.

The plaintiff Collie Woollen Mills Ltd (the “corporation”) is a corporation which formerly carried on business in the province of Ontario as a manufacturer of woollen and synthetic fabrics [3] .

The plaintiff, James Edward Collie, is the president and primary shareholder of the corporation. The plaintiff, Gene L. Collie, is the wife of the president and is a shareholder of the corporation. The plaintiffs, James

S. Collie and Jean L. Collie, are respectively, the son and the sister of the president and both are shareholders of the corporation [4] .

By promissory note dated August 22, 1984, the plaintiffs, James Edward Collie and Gene L. Collie, agreed to pay the Royal Bank of Canada the sum of $100,000.00 according to the terms and conditions set out in a personal loan agreement [5] . All of the plaintiffs gave personal guarantees to the Royal Bank of Canada with respect to the indebtedness of the corporate plaintiff^. [6]

By letter dated April 22, 1987, the Royal Bank of Canada advised the plaintiffs, James Edward Collie and Gene L. Collie, that they were in default of their loan payments. Consequently, the bank demanded payment in full of the outstanding balance of their loans, amounting to $85,929.33/ [7]

By letter dated April 22, 1987, the Royal Bank demanded that the plaintiff, James S. Collie, pay the sum of $980,000.00 by virtue of their personal guarantee to pay the debts and liabilities of the corporate plaintiff [8] .

On April 22, 1987, the Royal Bank of Canada, with representatives of the Federal Business Development Bank and Eastern Ontario Development Corporation, sent in a receiver pursuant to subsection 59(5) of the Ontario Personal Property Security Act’, [9] and a debenture dated June 22, 1979, and took over the property of the corporate plaintiff . [10]

By a report dated May 11, 1987 an investigator with the Special Investigations Section of the Ottawa District Office of the Department of National Revenue, Ms. Gwen S. Lévesque, alleged that the plaintiff, James Edward Collie and the corporate plaintiff, Collie Woollen Mills, violated paragraphs 239(1 )(a) and (d) of the Income Tax AcZ [11] , by making false or deceptive statements, failing to declare income, and by wilfully evading the payment of federal taxes [12] . It is agreed that this report was made by Ms. Gwen S. Lévesque in the course of her employment with the defendant.

On May 19, 1987, on the advice and recommendation of the Crown Prosecutor, the corporate plaintiff and the plaintiff James Edward Collie, were charged with the above offenses [13] .

By letters dated February 2, 1988 and February 3, 1988, the Royal Bank called upon the personal guarantee signed by the plaintiff James Edward Collie and demanded payment of $1,047,388.10 and $94,641.21 which represented, respectively, the outstanding debts of the corporate plaintiff [14] .

On April 26, 1988, the corporate plaintiff and the plaintiff James Edward Collie pled not guilty to the criminal charges [15] .

By statement of claim filed April 28, 1988, the Royal Bank of Canada commenced an action in the Ontario Supreme Court against the plaintiffs Jean L. Collie and James S. Collie to collect the amounts outstanding under the terms and conditions of the guarantee [16] .

By statements of claim filed April 25, 1988, the Royal Bank of Canada commenced two actions in the Ontario Supreme Court against the plaintiffs James Edward Collie and Gene L. Collie to recover the amounts outstanding under the terms and conditions of the promissory note and the guarantee [17] .

On May 27, 1988, two default judgments were entered against the plaintiffs James Edward Collie and Gene L. Collie and they were ordered to jointly pay to the Royal Bank $1,077,690.66 and separately pay to the Royal Bank the amounts of $98,686.42 and $96,022.26, respectively [18] . On July 6, 1988, a default judgment was entered against the plaintiffs Jean

L. Collie and James S. Collie and they were ordered to pay to the Royal Bank $l,090,701.75 [19] .

By Judgment of the Honourable Judge David W. Dempsey, dated January 19, 1989, Collie Woollen Mills Ltd. and James Edward Collie were found not guilty of the criminal charges [20] .

As a result of the Supreme Court of Ontario actions by the Royal Bank in 1988, the plaintiffs James Edward Collie and Gene L. Collie made assignments in bankruptcy on September 22, 1989. Moreover, by application dated June 30, 1989, James S. Collie made an assignment in bankruptcy. All three plaintiffs were absolutely discharged from bankruptcy on August 30, 1990 [21] .

By amended statement of claim filed in this Court on February 15, 1993, the plaintiffs made a claim for “negligence, reckless and improper investigation” and “wilful negligent and reckless prosecution and reckless and improper investigation” against the federal Crown [22] .

Issues

On the return of the motion for summary judgment before me in Ottawa on January 25, 1996, counsel for the defendant relied on two grounds. They are as follows:

1. the plaintiffs’ claim is statute barred;

2. the amended statement of claim does not disclose a genuine issue for trial.

1. Limitation Period

The plaintiffs’ action for negligence is based upon the Crown’s vicarious liability for the alleged acts or omissions of her servants imposed by the Crown Liability and Proceedings Act [23] , Section 32 of that Act provides that the laws relating to the prescription and limitation of actions in force within a province apply to any proceedings arising in that province against the Federal Crown. Subsection 7(1) of the Public Authorities Protection Act [24] provides:

7(1) No action, prosecution or other proceeding lies or shall be instituted against any person for an act done in pursuance or execution or intended execution of any public duty or authority, or in respect of any alleged neglect or default in the execution of any such duty or authority, unless it is commenced within six months next after the cause of action arose, or, in the case of continuance of injury or damage, within six months after the ceasing thereof.

Following the reasoning of Gibson J. of this Court, Olympia Interiors Ltd. v. R. (sub nom. Olympia Interiors Ltd. v. Canada) [1994] 2 C.T.C. 126, (sub nom. Olympia Interiors Ltd. v. Minister of National Revenue) 66 F.T.R. 81, affirmed at (sub nom. Olympia Interiors Ltd. v. Canada) [1994] 2 C.T.C. 142, (sub nom. Olympia Interiors Ltd. v. Minister of National Revenue) 81 F.T.R. 285 (C.A.), in the absence of mala fides, the six month limitation begins to run on January 18, 1989; the date of acquittal of the plaintiffs. Since the action was commenced on September 29, 1992, it is clearly outside of the limitation period. There is no allegation of mala fides in the amended statement of claim, nor is there any evidentiary foundation for such an allegation. Thus, the plaintiffs’ claim is statute barred.

2. Genuine Issue for Trial

Even if I were to find that the action is not statute barred, I have reached the conclusion that there is no genuine issue for trial. The defendant has raised two grounds in support of this argument. The defendant argues that the amended statement of claim does not disclose a cause of action known to the law, and that, if it does, there is no genuine issue for trial.

The tort of “negligent investigation” in the context of a criminal investigation is not one which is known to the law. As explained by Ryan J. of the New Brunswick Court of Appeal,

The enforcement of the criminal law is one of the most important aspects of the maintenance of law and order in a free society. So long as the carrying out of duties in relation to the investigation and prosecution of persons in pursuit of the aims of the justice system is done within jurisdiction and with an absence of mala Tides, there can be no recovery. A breach, in order to be actionable must be carried out in disregard of fundamental justice resulting in, for example, a loss of liberty. In order for the criminal justice system to function effectively, there has to be something more than an allegation of an error in reaching a conclusion or in the making of a decision by law enforcement officers, or the experts upon which they rely for professional advice. [25]

The plaintiffs have not pleaded malicious prosecution, only negligence. The Honourable Judge Dempsey gave limited weight to the testimony of one expert witness at trial. The plaintiffs argue that this witness’ testimony was based on an incorrect valuation of a particular piece of equipment by the investigator. This is not evidence on which an action for negligence can proceed since, even if the allegation is accepted, it demonstrates no disregard for fundamental justice, but at most an error by an investigative officer in reaching a conclusion.

In any event, His Honour Judge Dempsey found as follows:

The defence of course has raised arguments in regards to that portion of the prosecution and suggests that the Court should put little weight if any, on the evidence of Mrs. Lévesque in regards to her interpretation of these items which have been filed. I find on the evidence that the interpretations made by Mrs. Lévesque were overall correct.

On the whole of the evidence before me, the plaintiffs have not made out a case that the defendant, through its servants, acted in a negligent manner or exercised its discretion in an improper manner.

Thus, the plaintiffs have not laid a proper foundation in their affidavit and other evidence to sustain a viable legal action. The pleadings frame the issues in the action. It is up to the plaintiffs to put their “best foot forward” in the pleadings and affidavits. In the present case, they raise no allegation of mala fides. In the absence of an allegation of mala fides, the claim is both statute barred and without legal foundation.

Conclusion

The defendant’s motion for summary judgment is therefore granted and the plaintiffs’ action for “negligence, reckless and improper investigation” and “wilful negligent and reckless prosecution and reckless and improper investigation” against the defendant is dismissed with costs.

Motion granted.