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Focus: Cases highlight difficulties in partial summary judgment

Focus on: Corporate and Commercial Law
Two recent Ontario court decisions involving complex commercial litigation have outlined the difficulties a party may have in successfully obtaining a partial summary judgment in these types of cases.

The Ontario Court of Appeal ruled in December in CIBC v. Deloitte & Touche that Superior Court Justice Paul Perell erred in granting partial summary judgment to the accounting firm on certain issues and risked duplication and inconsistent findings at trial.

Meanwhile, in litigation stemming from a Florida-based Ponzi scheme, Ontario Superior Court Justice Sean Dunphy granted partial summary judgment to TD Bank on certain issues because its motion was sufficiently narrow. In the ruling in TD Bank v. Lloyd’s Underwriters, issued just days after the Court of Appeal decision in CIBC, the Superior Court judge also noted that it will normally be difficult for partial summary judgments to succeed in commercial litigation.

Three years ago, in its decision in Hryniak v. Mauldin, the Supreme Court of Canada spoke of the importance of finding new models of adjudication to improve access to justice.

“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,” wrote Justice Andromache Karakatsanis on behalf of the court in the 2014 decision.

The Supreme Court urged judges to be more willing to determine an action on summary judgment if there is no genuine issue requiring a trial. When it comes to more complex litigation, though, seeking to dispose of even a portion of the outstanding issues by summary judgment may be an uphill battle, say lawyers who practise in this area.

Jeffrey Feiner, a partner at Corman Feiner LLP in Toronto, says there is always a risk in seeking determination of part of an action.

“For your client, if the potential reward justifies the risk, it is a good procedural tool.

You are going to have to be able to tell the court that you will be contributing to judicial economy” in hearing a partial summary judgment motion, says Feiner.

“If there is a discrete and severable issue, it is worth considering,” he adds.

Despite the urging of the Supreme Court to trial level judges to be more willing to use these tools, it may be difficult to overcome a natural hesitation to determine an action without a trial, suggests Gord McGuire, a partner at Adair Barristers LLP in Toronto.

“I don’t think Hryniak changes a judge’s instincts,” says McGuire.

Those instincts are more naturally in favour of having a matter determined by trial than a summary judgment motion, he believes.

Hryniak does not factor into our analysis. It is where the claim or defence is sufficiently strong or whether or not it is unduly complex,” McGuire says, in deciding whether or not to seek summary judgment or partial summary judgment.

The case before Perell related to the insolvency of Philips Services Corp.

The Superior Court judge, in his December 2015 decision, granted partial summary judgment to Deloitte and dismissed a negligent misrepresentation claim brought by CIBC.

The five-day summary judgment motion he heard would not be much different than a trial on this issue, over events that occurred nearly 20 years ago, noted Perell.

As well, by the time of a summary judgment motion, courts are entitled to assume that “the parties have respectively advanced their best case and that the record contains all the evidence that the parties will respectively present at trial,” he wrote.

CIBC successfully appealed that finding and the Ontario Court of Appeal agreed that Perell erred in granting partial summary judgment on that issue.

The decision, written by Justice Alexandra Hoy, conceded that overturning the lower court ruling would use up scarce judicial resources and require the issue to be adjudicated again before a trial judge.

However, the Court of Appeal said it disagreed with the analysis of Perell on the negligent misrepresentation claim.

“There is a real risk of duplicative or inconsistent findings at trial.

“This error taints the motion judge’s conclusion that partial summary judgment was advisable in the context of the litigation as a whole,” wrote Hoy.

“This appeal illustrates a potential danger when a party brings a motion for partial summary judgment,” she stated, with Justices Mary Lou Benotto and Grant Huscroft concurring.

While it may often be difficult or not the best strategy for a client to seek partial summary judgment, with the appropriate facts, it can be successful, says Feiner, pointing to the decision by Dunphy in TD Bank.

In that case, the bank was seeking partial summary judgment on three “test cases” as part of the interpretation of an insurance policy.

TD was sued following a Ponzi scheme orchestrated by a Florida customer of the bank.

It was a defendant in 19 separate lawsuits stemming from the Ponzi scheme.

After one proceeded to trial, the bank lost and then settled the other actions.

The motion before Dunphy was whether the bank’s losses were “direct financial losses” under the insurance policy.

As well, the bank was not asking the court to determine other issues related to the insurance coverage.

“I have decided that this case is an appropriate one for partial summary judgment because of and not despite its narrow scope,” wrote Dunphy in his ruling.  

“The question raised has significant potential to narrow the issues for trial materially,” he added.

The judge concluded that there was no material risk of duplication or conflicting judgments in the litigation.

At the same time, in reference to the Court of Appeal ruling in CIBC issued earlier that month, the Superior Court judge suggested that caution is required whenever considering a partial summary judgment motion.

“In my view, CIBC should certainly be viewed as an amber light if not a flashing red light to be considered before proceeding with any partial summary judgment motion,” wrote Dunphy.

Judges must first carefully consider the adequacy of the record before the court and whether such a motion will promote the objects of efficiency and proportionality, he added, echoing the words of the Supreme Court in Hryniak.

Another consideration in bringing a partial summary judgment motion, says Feiner, is that it is hard to predict if there might be duplication at a later stage.

As well, “if you bring a motion to try to narrow the issues, you risk assessment, but with the added complication of not disposing of the entirety of the claim,” says Feiner.

Despite the potential hurdles, the recognition by the Supreme Court that this is a legitimate tool for a litigator depending on the facts of the case is a welcome development, says McGuire.

“You used to be met with resistance when you wanted to schedule such a motion,” he notes.

While there are still barriers, he says there is at least less resistance to getting these types of motions before a court.

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