Court File No. 34645 in the SUPREME COURT of CANADA (ON APPEAL from the COURT of APPEAL for ONTARIO) B E T W E E N: BRUNO APPLIA

Court File No. 34645

IN THE SUPREME COURT OF CANADA (ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO)

B E T W E E N:

BRUNO APPLIANCE AND FURNITURE, INC. Appellant (Respondent)

- and -

ROBERT HRYNIAK Respondent (Appellant)

FACTUM OF THE APPELLANT BRUNO APPLIANCE AND FURNITURE, INC. Pursuant to Rule 42 of the Rules of the Supreme Court of Canada.

HEYDARY HAMILTON PC GOWLING LAFLEUR HENDERSON LLP Barristers and Solicitors Barristers and Solicitors Toronto-Dominion Centre 160 Elgin Street, 66 Wellington Street West Suite 2600 Suite 4500, P.O. Box 150 Ottawa, Ontario Toronto, Ontario, M5K 1H1 K1P 1C3 Per: Javad Heydary Per: Henry S. Brown QC

Tel: 416-972-9001 Tel: 613-233-1781 Fax: 416-972-9940 Fax: 613-563-9869 Email: [email protected] Email: [email protected]

Counsel for the Appellant Agent for the Appellant

McCARTHY TÈTRAULT LLP CAVANAGH WILLIAMS CONWAY BAXTER Barristers and Solicitors LLP Toronto-Dominion Bank Tower 1111 Prince of Wales Drive Suite 5300 Suite 401 Toronto, Ontario M5K 1E6 Ottawa, Ontario Per: Sarit E. Batner K2C 3T2 Per: Moya J. Graham Per: Colin S. Baxter

Tel: 416-601-7756 Tel: 613-780-2016 Fax: 416-868-0673 Fax: 613-569-8668 Email: [email protected] Email: cbaxter@cweb-law.com

Counsel for the Respondent Agent for the Respondent

TABLE OF CONTENTS

APPELLANT’S FACTUM PAGE

PART I OVERVIEW AND STATEMENT OF FACTS 1 A. Purpose and Policy 3

i. Motion for Summary Judgment – Rule 20 3 ii. Tort Law 4 B. Statement of Facts 5 i. Procedural History 5 ii. Factual Background 9

PART II STATEMENT OF QUESTIONS IN ISSUE 14

PART III STATEMENT OF ARGUMENT 15 A. Error in Formulation of Test for Rule 20 15 i. Legislative and Jurisprudential Context 15 ii. The Test Enunciated by the Court of Appeal 16 iii. General Negative Implications of Newly Stated Test 20 for Rule 20 iv. Negative Implications of Newly Stated Rule 20 Test 21 in Fraud Cases v. New Proposed Standard – Contextual Justice Test 23 B. Error in Standard of Review 24 C. Error in Statement of Elements of Civil Fraud 25

i. The Elements of Civil Fraud 26 ii. Court of Appeal's Determination of the Elements 27 iii. Hryniak’s Responsibility for Fraud Despite 29 Involvement of Others D. Incorrect Standard of Proof for Civil Fraud 32 i. Standard of Proof 32 ii. Clear and Cogent Evidence of Bruno Fraud 34 E. Conclusion 37

PART IV SUBMISSIONS CONCERNING COSTS 38

PART V NATURE OF ORDER SOUGHT 39

PART V1 TABLE OF AUTHORITIES 40

PART VII STATUTORY PROVISIONS 42

APPELLANT’S FACTUM

PART I – OVERVIEW AND STATEMENT OF FACTS

1. As so eloquently put by the Honourable Justice Grace, “[d]reams of profitable investments were dashed long ago. What remains is the investors’ attempt to hold someone accountable.”1 The investor, on this appeal, is the Appellant Bruno Appliance & Furniture, Inc. (“Bruno Appliance”). The “someone accountable” is the Respondent, Robert Hryniak (“Hryniak”).

2. Mr. Albert Bruno is an elderly US investor and the principal of Bruno Appliance. Gregory Jack Peebles (“Peebles”) is a lawyer at Cassels Brock & Blackwell LLP (“Cassels Brock”). Relying on the misrepresentations of Peebles, Mr. Bruno directed Bruno Appliance to invest U.S. $1 million dollars with an Ontario company named Tropos Financial Corporation (“Tropos”) in what he would later discover was a fraudulent investment scheme. After eight years, the Appellant finally secured a summary judgment for fraud against Hryniak, the director and operating mind behind Tropos.

3. Now, in what the Appellant respectfully submits was an erroneous and unjust decision, the Ontario Court of Appeal has stripped the Appellant and Mr. Bruno of their hard-won and long-awaited victory. Bruno Appliance & Furniture, Inc. v. Robert Hryniak et al. (the “Bruno Action”) and Fred Mauldin et al. v. Robert Hryniak et al. (the “Mauldin Action”) were the subjects of an extraordinary consolidated hearing by a panel of five Justices of the Court of Appeal who, in a far-reaching and novel decision, changed the law, unfortunately, resulting in the Appellant losing its hard-won victory. Whether this change to the law was correct is to be determined in this appeal. However, the Appellant takes the position that the Ontario Court of Appeal either misapplied or incorrectly formulated the legal tests for summary judgments and civil fraud, thereby rendering an unjust decision and setting a bad precedent for lower courts. The Appellant asks this Honourable Court to state the correct law, set aside the appeal court’s decision, restore the lower court decision and bring necessary clarity to the law.

1 Bruno Appliance v. Cassels Brock & Blackwell LLP, 2010 ONSC 5490 (CanLII) at para. 1 [Bruno Appliance], Appellant’s Book of Authorities (“ABA”) Vol. I at Tab 2.

4. Despite having engaged in a 39-page discussion of the recently revised Rule 20 of the Ontario Rules of Civil Procedure (the “Rule 20”)2 in Combined Air Mechanical Services Inc. v. Flesch,3 the Ontario Court of Appeal failed to appropriately apply the test for Rule 20 in the Bruno Action, as evidenced by its conflicting decisions.

5. It is the Appellant’s respectful submission that allowing the Respondent Hryniak’s appeal, with respect to the summary judgment finding of fraud against him in the Bruno Action, was not ordered solely on the grounds that a genuine issue existed requiring a trial. Instead, Hryniak’s appeal was allowed because the Court of Appeal misidentified and misapplied the elements and standard of proof for the tort of civil fraud.

6. Hence, this appeal is about restoring justice, deciding both the proper interpretation and application of Rule 20, and the identification of the elements and appropriate standard of proof applicable to the common law tort of civil fraud.

7. While on their face, summary judgment and civil fraud appear to be two very distinct legal concepts, a consideration of the policy and purpose behind the rule and tort law serves to elucidate their interconnectedness within both the confines of this case and more generally.

8. The Appellant respectfully submits that an analysis of the purpose and policy considerations on which Rule 20 and tort law are founded relative to the Court of Appeal’s decision in Combined Air and, in particular, with respect to the Bruno Action, will reveal that:

(a) the Court of Appeal’s formulation of the test for summary judgment motions is

far too narrow and effectively constricts the class of cases that are eligible for

summary judgment with the result that access to justice in Ontario is significantly

limited;

(b) the appropriate standard of review on appeals of questions of mixed law and facts

ought to be one of palpable and overriding error, where the facts dominate;

2 Rules of Civil Procedure, O. Reg. 55/12 at Rule 20. 3 Combined Air Mechanical Services Inc. v. Flesch 2011 ONCA 764 (CanLII) [Combined Air]. ABA, Vol. I at Tab 4.

by the alleged fraudster nor the requirement that the alleged fraudster benefited

from the entire loss experienced by the victim; and

(d) the requisite standard of proof for the tort of civil fraud ought not to be higher

than the required standard in other cases. Regardless of the seriousness of the

case, evidence should always be scrutinized with care and be sufficiently clear,

convincing, and cogent to satisfy the balance of probabilities test.

A. Purpose and Policy

i. Motions for Summary Judgment – Rule 20

9. Although it has been amended several times since its first iteration was enacted in 1881, the main objective of Ontario’s summary judgment procedure has been increased efficiency, expeditious resolution of court cases, and decreased legal expense to litigants.4

10. Read in light of Rule 1.04 of the Ontario Rules of Civil Procedure (“Rules”),5 which provides that the Rules “shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits”; Rule 20 requires that the court “balance expedition, expense and efficiency against the need for a fair process.”6

11. Hence, the intention behind the enactment of Rule 20, and its subsequent amendments, is to provide litigants with justice at a procedural level by ensuring increased access to justice to those who may not necessarily need, or be able to afford the expense of, a full trial to finally determine the issues in dispute in their action. This is especially important in light of the increased cost of litigation.

4 Timothy Pinos & S. John Page, Summary Judgment (Aurora, Ontario: Canada Law Book, 1998) at p. 5 [Summary Judgment], ABA, Vol. II at Tab 28. 5 Rules of Civil Procedure, O. Reg. 55/12 at Rule 1.04 (1). 6 Summary Judgment, supra note 4 at p. 5, ABA, Vol. II at Tab 28.

12. Thus, the Appellant submits that Rule 20 is an important procedural safeguard of litigants’ access to justice in Canada. Notwithstanding the purpose behind Rule 20, the Appellant submits that, in the case at bar, the decision of the Ontario Court of Appeal in Combined Air unreasonably and unnecessarily restricts the usefulness of Rule 20 to litigants, thus impairing access to justice. This is particularly true where individuals engaged in fraudulent activities make a simple fraud appear to be complex, such as the alleged investment fraud that is the subject matter of this case. From a policy perspective, it would be an unjust result for perpetrators of fraud, such as Hryniak, to escape summary judgment against them simply by virtue of their efforts to conceal the fraud by masking the simple fraud through the production of complex- looking documents or utilizing a reputable third party, such as a leading law firm. ii. Tort Law

13. Complementing the purpose behind the enactment of statutory law governing summary judgment are the purposes of tort law, which include, but are not limited to, providing compensation and justice to victims. The theoretical underpinnings of our legal system rest on the belief that when a wrongdoer injures another individual, he or she should be required to repair the damage and restore the victim.7

14. Accordingly, tort law is intended to provide litigants with a means to secure substantive justice. Rule 20 complements and supports tort law in that the purpose of Rule 20 is to ensure that justice is obtained as expeditiously as possible where a trial is not required.

15. Particularly in the case of fraud, where the evidence clearly demonstrates that a fraud has been perpetrated, and the victim has lost over U.S.$1 million to the fraudster (as was the case in the Bruno action), decreased time spent in litigation, lowered legal expenses, and compensation are all key to achieving justice for the victim.

16. A great deterrent to civil wrongs, including fraud, is found in its speedy discovery, prosecution, and recovery of losses. Delay and needless procedural complexity, on the other hand, encourage fraudsters in the belief they may escape justice and commit civil wrongs with

7 Leanne Berry, Klar Lewis, and Linda D. Rainaldi. Remedies in Tort, looseleaf (Toronto: Carswell, 1987). at p.25-32 at para. 18, ABA, Vol. II at Tab 26.

impunity. The challenge for the court system is to secure justice for the innocent without throwing up needless obstacles that may allow fraudsters to escape legal accountability.

17. In the Bruno Action, Hryniak has escaped both civil and criminal liability for his fraudulent actions, as there has also been no criminal prosecution against him, despite the efforts of the Appellant.

18. The Appellant submits that the Court of Appeal’s decision overturning the summary judgment against Hryniak erected an unnecessary procedural hurdle for the Appellant. Moreover, in denying the Appellant a remedy for Hryniak’s fraudulent conduct, the Court of Appeal’s decision has amounted to a deprivation of both Bruno Appliance’s right to substantive justice under tort law and its right to procedural justice under Rule 20. As stated by this Honourable Court in Hill, “To deny a remedy in tort is, quite literally, to deny justice.”8

B. Statement of Facts

i. Procedural History

19. The Appellant, Bruno Appliance, is the plaintiff in an action against the Defendants Hryniak, Cassels Brock and Peebles; however, Hryniak is the only respondent to this Appeal. Bruno Appliance’s action and motion for summary judgment against Hryniak relate to fraudulent misrepresentation and deceit.

Motions for Summary Judgment

20. Bruno Appliance brought a summary judgment motion (the “Motion”), for all of the claims in the action under Rule 209, against all three Defendants.

21. The hearing of the Motion took place in 2010 before The Honourable Justice Grace (“Motions Judge”) of the Ontario Superior Court of Justice over the course of four days.10 The Motion was heard concurrently with another motion brought by the 13 plaintiffs in the Mauldin

8 Hill v. Hamilton-Wentworth Regional Police Services Board, [2007] 3 S.C.R. 129, 2007 SCC 41 at para. 35, ABA, Vol. II at Tab 11. 9 R.R.O. 1990, Reg 194. 10 Combined Air, supra note 3 at para. 117, ABA, Vol. I at Tab 4.

Action (the “Mauldin Plaintiffs”) against the same defendants for a fraudulent investment scheme. The joint evidentiary record of the Mauldin Plaintiffs and Bruno Appliance before the Motions Judge on the Motion consisted of affidavits filed by five main witnesses, with cross examinations, plus an additional examination of a witness under Rule 39.03 of the Rules.

22. The Motions Judge delivered a 58-page decision, in which he assessed this evidence and granted summary judgment as against Hryniak in both the Bruno Action and Mauldin Action,11 but dismissed the motions as against Cassels Brock and Mr. Peebles.12 After reviewing the recent jurisprudence on summary judgment motions under Rule 20, which had recently been amended in Ontario, the Motions Judge found that the following principles applied:

(a) the motions judge is entitled to assume that the record contains all the evidence which the parties will present at trial;

(b) nevertheless, the motions judge should not assume the role of a trial judge. However, by permitting the motions judge to weigh evidence, evaluate credibility and draw reasonable inferences, Rule 20.04 (2.1) permits motions judges to do much more than they could before;

(c) Rule 20 should be broadly interpreted to achieve the objectives of the reduction of delay and costs, access to justice, and flexibility, while acknowledging that elimination of trials is not an objective; and

(d) Judges should not take refuge in previous restrictive case law that limited the scope of the rule.13

23. Applying these principles, the Motions Judge specifically found that, insofar as Hryniak was concerned, the forensic machinery of a trial was unnecessary because there was no genuine issue requiring a trial. The Motions Judge indicated that he considered the evidence with the assistance of counsel and found that the significant record allowed him to evaluate the credibility of Hryniak. This finding was made by the Motions Judge without the need for an expert report.

11 Bruno Appliance, supra note 1 at para. 265, ABA, Vol. I at Tab 2. 12 Bruno Appliance, ibid. at para. 266, ABA, Vol. I at Tab 2. 13 Bruno Appliance, ibid at para. 59-61, ABA, Vol. I at Tab 2.

The Motions Judge also noted that the significant record allowed him to draw inferences from the evidence finding that, insofar as Hryniak was concerned, a “very clear picture” had emerged,14 and that Hryniak was liable in fraud in both the Bruno Action and the Mauldin Action.

Appeals to Court of Appeal for Ontario

24. Hryniak appealed both the Mauldin and Bruno decisions. The appeals were heard in June 2011 by a five-justice panel of the Ontario Court of Appeal as part of a hearing of five cases involving the new Rule 20 test (the “Appeal”).

25. The Court of Appeal delivered its decision in the Mauldin and Bruno appeals as part of the reasons delivered on December 5, 2011 in Combined Air.15

26. The Court of Appeal determined that, going forward, cases such as Mauldin and Bruno require a trial. However, the Court was willing to look beyond the characteristics of the Mauldin and Bruno actions that it believed would otherwise preclude summary judgment under the newly stated full appreciation test to determine if the Motions Judge was nonetheless correct in granting summary judgment against Hryniak.16 In a decision that was conflicting on its face, the Court of Appeal stated that to simply set aside the summary judgments in the Mauldin and Bruno actions was an undesirable approach because to do so would fail to give effect to the reality that the Motions Judge’s decision had been “reached after a careful scrutiny of an extensive record, written at a time when the law was unsettled.”17

27. The Court of Appeal found that the Motions Judge was correct in granting summary judgment against Hryniak in the Mauldin matter. In so doing, the Court of Appeal found that Hryniak’s defence to the action simply had no credibility18 and that the incredulity of Mr. Hryniak’s evidence strongly supported Justice Grace’s finding that Mr. Hryniak never had, or intended to have, a legitimate trading program in place and yet, falsely told Fred Mauldin that he

14 Bruno Appliance, ibid. at para. 138, ABA, Vol. I at Tab 2. 15 Combined Air, supra note 3, ABA, Vol. I at Tab 4. 16 Combined Air, ibid. at para. 154, ABA, Vol. I at Tab 4. 17 Combined Air, ibid at para. 156, ABA, Vol. I at Tab 4. 18 Combined Air, ibid at para. 156, ABA, Vol. I at Tab 4.

did, to persuade the Mauldin Plaintiffs to part with their money.19 In light of the lack of credibility of Hryniak’s evidence, the Court of Appeal was not persuaded that it should interfere with the summary judgment granted in favour of the Mauldin Plaintiffs.20

28. Although the facts in the Bruno matter were substantially similar to the Mauldin matter, featuring a purported investment scheme nearly identical to the one that was found to have been fraudulent in Mauldin, the Court of Appeal erroneously allowed Hryniak’s appeal in Bruno on the basis that the evidence against Hryniak raised two genuine issues requiring a trial, namely:

(a) whether Hryniak made a false statement on which Bruno relied upon in deciding to direct the Appellant to invest with him;21 and

(b) whether part of Bruno Appliance’s investment was misappropriated by Hryniak or by Robert Cranston (“Cranston”), a person who met with Mr. Bruno and Peebles at the offices of Cassels Brock and who was later sentenced to imprisonment for his involvement in a fraudulent investment scheme.22

29. On the issue of whether there was a false statement, the Court of Appeal noted that Mr. Hryniak did not meet or speak with Mr. Bruno prior to Bruno Appliance investing in the alleged fraudulent scheme. The Court of Appeal considered whether there was a possibility that Mr. Hryniak made a false statement through an agent, and found that there was no compelling evidence that Mr. Hryniak’s lawyer, Mr. Peebles, acted as Mr. Hryniak’s agent for the purpose of inducing Mr. Bruno to invest. The Court of Appeal made this finding despite accepting that Mr. Hryniak knew that Bruno Appliance invested $1 million with Tropos, Mr. Hryniak’s supposed investment company; that he knew of a meeting between Mr. Bruno, Mr. Peebles, and Mr. Cranston; and that Mr. Hryniak did not invest the $1 million, but instead used at least a portion of it for his own “corporate requirements”.

19 Combined Air, ibid. at para. 164, ABA, Vol. I at Tab 4. 20 Combined Air, ibid. at para. 165, ABA, Vol. I at Tab 4. 21 Combined Air, ibid. at para. 172, ABA, Vol. I at Tab 4. 22 Combined Air, ibid. at para. 173, ABA, Vol. I at Tab 4.

ii. Factual Background

The Investment Scheme

30. In December 2001, Mr. Bruno was introduced to Cranston, who purportedly acted on behalf of Frontline Investment Inc. (“Frontline”). Mr. Cranston was introduced to Mr. Bruno by a Mr. Jim Hamilton (“Hamilton”), who Mr. Bruno understood was a representative of Mr. Cranston in the United States and was responsible for securing U.S. investors.23

31. Mr. Bruno was advised by Cranston and Hamilton that Frontline had a high-yield investment opportunity that involved investing in secured prime bank notes that would be traded between banks for short periods of time.24

32. Mr. Bruno was further advised by Hamilton and Cranston that the purported investment was completely secure; there would be a significant monthly return on the purported investment; and the purported investment would be held in the trust account of a lawyer, Peebles, in Toronto, Canada, who was a senior partner at one of Canada’s oldest and largest law firms, Cassels Brock.25

33. Although Mr. Bruno was provided with information about Mr. Peebles and Cassels Brock from the Cassels Brock website, Mr. Bruno advised that he would not authorize Bruno Appliance to make the purported investment without first meeting the lawyer and the law firm to determine if they were trustworthy.26

34. On Friday, February 22, 2002, Mr. Bruno personally attended a meeting with Mr. Peebles and Mr. Cranston at the offices of Cassels Brock in Toronto, Ontario, to discuss the purported investment.27

23 Affidavit of Albert J. Bruno, sworn October 29, 2008 para. 4., Appellant’s Record (“AR”) at Vol. III, p. 148 [Bruno Affidavit]. 24 Bruno Affidavit, ibid. at para. 4, AR, Vol. III, p 148. 25 Bruno Affidavit, ibid. at para. 5, AR, Vol. III, p 148; Transcript of Cross-Examination of Albert J. Bruno, at p. 67, q. 299 [Bruno Transcript] AR, Vol. VI, p 155. 26 Bruno Transcript, ibid. at pp. 91-92, 94-95, 145-146, qq. 399, 413-414, 639-641, AR, Vol. VI , p 156-161. 27 Bruno Affidavit, supra note 24 at para. 9, AR, Vol. III, p. 149; Combined Air, supra note 3 at para. 133 and 135, ABA, Vol. I at Tab 4.

35. At the time, Mr. Peebles was a senior partner and the former managing partner at Cassels Brock. He was the lawyer who principally undertook work for Tropos.28

36. An examination of the Cassels Brock – Peebles dockets shows that Mr. Peebles met with or spoke to potential “investors”/victims in the absence of Mr. Hryniak on at least 12 different occasions during the period of May 2001 to March 2002.29

37. During said meeting, the purported investment scheme was explained by Mr. Peebles, who advised that the investment was secure; that Bruno Appliance’s money would be deposited into a non-depletion interest bearing trust account with Cassels Brock; and that Mr. Hryniak was a long-standing client of the firm.30

38. It became clear to Mr. Bruno during the meeting that Cassels Brock and Mr. Peebles were supportive of the investment scheme and that they had worked with the purported investment scheme for a number of years.31

39. Accordingly, Mr. Bruno then signed the documentation, on Frontline letterhead, which was necessary to enter into the purported investment.32

40. As a result of the February 22, 2002, meeting with Mr. Peebles and the representation that an investment opportunity was available, on March 4, 2002, Bruno Appliance wired U.S. $1,000,000.00 (“Bruno Funds”) to Cassels Brock.33 The Bruno Funds were deposited in a Cassels Brock U.S. dollar trust account with a Tropos client number.34

Disappearance of Bruno Funds

41. Cassels Brock’s trust records and instructions to Mr. Peebles’ assistant overwhelmingly show that Mr. Hryniak, and not others, such as Cranston or Cassels Brock, knowingly took

28 Combined Air, supra note 3 at ¶ 113 ABA, Vol. I at Tab 4. Bruno Appliance, supra note 1 at para. 11 ABA, Vol. I at Tab 2. 29 Tropos Financial Corporation Dockets, AR, Vol. VI, p. 54-67. 30 Bruno Affidavit, para. 11, AR, Vol. III, p 149-150; Bruno Transcript, pp. 120-121, 124, 142, 149, 194, qq. 534, 547, 629, 659, 838, AR, Vol. VI , p. 162-164, 167-168, 171. 31 Bruno Affidavit, para. 14, AR, Vol. III, p 150. 32 Bruno Affidavit, para. 15, AR, Vol. III p 150. 33 Combined Air, supra note 3 at para. 135, ABA, Vol. I at Tab 4; Bruno Affidavit, para. 16 and 17, AR, Vol. III, p 150-151; Outgoing Wire Transfer Request Form on March 4, 2002, AR, Vol. IV, p. 2. 34 Combined Air, ibid. at para. 137, ABA, Vol. I at Tab 4.

$450,000.00 of Bruno Appliance’s money and used it for his own purposes,35 including making a payment to the Aro Motor Corporation, a company involved in an alleged “test trade” in the context of the trading program, in which the Mauldin Plaintiffs lost money, and which Mr. Hryniak never intended to have in place.36

42. Mr. Hryniak testified that he sent the remaining $550,000.00 back to Cassels Brock at Mr. Peebles’ request because Mr. Peebles required it to “cover off” his trust obligations. Mr. Hryniak testified that he did not know what those obligations were, nor did he inquire about them.37

43. Mr. Hryniak denies that he directed Mr. Peebles to attend the meeting with Mr. Cranston to meet Mr. Bruno, a potential investor. He claims that he was not taking any more investment subscriptions in 2002 and that he chastised Mr. Peebles for meeting with an investor and Mr. Cranston. However, there are numerous facts supported by documents obtained from Cassels Brock that indicate that Hryniak’s evidence defies credulity, including:

(a) There had been numerous meetings with prospective investors in February 2002, and Hryniak was often present.38

(b) Hryniak directed Tropos to pay an invoice issued by Cassels Brock,39 which included payment for Mr. Peebles’ participation in a discussion with Mr. Bruno and Mr. Cranston regarding “Tropos corporate structure.”40

(c) Mr. Hryniak was aware of the arrival of the U.S. $1 million that Bruno Appliance wired to Cassels Brock shortly after it arrived at Cassels Brock, and provided instructions with respect to them.41

35 Combined Air, ibid. at para. 135 and ¶ 173, ABA, Vol. I at Tab 4; Transcript of Cross-Examination of Robert Hryniak, pp. 94, 96, qq. 500, 501, 512, AR, Vol. VI, p. 192, 194. 36 Combined Air, ibid. at para 86 and para. 164, ABA, Vol. I at Tab 4. 37 Bruno Appliance, supra note 1 at para. 168, ABA, Vol. I at Tab 2. 38 Bruno Appliance, ibid at para. 155, ABA, Vol. I at Tab 2. 39 Combined Air, supra note 3 at para. 134, ABA, Vol. I at Tab 4. 40 Bruno Appliance, supra note 1 at para. 156, ABA, Vol. I at Tab 2. 41 Bruno Appliance, ibid at para. 157, 160 and 161, ABA, Vol. I at Tab 2.

(d) His testimony that he was not taking investment subscriptions in 2002 is contradicted by the fact that the Cassels Brock documents indicate that monies were solicited, received and accepted from various sources within this period.42

(e) Bruno Appliance’s investment was confirmed by Mr. Cranston to Mr. Hryniak in an email on June 24, 2002.43

44. With respect, the documents in this case strip all credibility from Mr. Hryniak’s testimony. The documents provide clear, convincing, and cogent evidence that Mr. Hryniak actively promoted an investment scheme at the time of Mr. Bruno’s meeting at Cassels Brock, that Mr. Peebles and Mr. Cranston attended that meeting for, and on behalf of, Mr. Hryniak, and that Mr. Peebles discussed with Bruno Appliance the Tropos structure and the closing process for the purported investment. Furthermore, Mr. Hryniak’s handling of Bruno Appliance’s investment funds, which were lost, all indicate that there was never any legitimate investment scheme.

45. The Court of Appeal maintains that there is controversy over what happened to the remaining approximately $550,000.00. It states that there is a genuine issue for trial as to whether Mr. Peebles inadvertently sent the $550,000.00 to Mr. Cranston as part of a U.S. $1 million payment. The Court of Appeal based this finding on a statement signed by Mr. Peebles in March 2005, in which he acknowledged that he ‘inadvertently’ sent U.S. $1 million out of the Cassels Brock trust account to Mr. Cranston’s company, Rhino Holdings. Mr. Peebles has since distanced himself from this unbelievable statement.44

46. Moreover, Cassels Brock’s trust records clearly show that Bruno Appliance’s $550,000.00 could not have made up part of the payment to Rhino Holdings. Rather, the trust records show that most of the $550,000.00 was part of a payment made to a corporation unrelated to Bruno Appliance or Rhino Holdings.45

42 Bruno Appliance, ibid at para. 159, ABA, Vol. I at Tab 2. 43 Bruno Appliance, ibid at para. 164, ABA, Vol. I at Tab 2. 44 Combined Air, supra note 3 at para. 174, ABA, Vol. I at Tab 4. 45 Cassels Brock & Blackwell LLP Trust Investment Ledger, AR, Vol. V, p 146-151.; Tropos Financial Corporation Trust Ledger, AR, Vol. V, p 152- 153.

47. The Bruno Funds deposited into the trust account of Cassels Brock were never invested. Rather, an examination of the trust records and bank statements make it clear that the Bruno Funds were used to pay third parties and co-venturers of Mr. Hryniak. Despite accepting that Hryniak “knowingly took Bruno’s money and used at least U.S. $450,000.00 of it for his own purposes”46, the Court of Appeal failed to acknowledge that this was sufficient to establish Hryniak’s fraud in the Bruno Action, even if the Court could not account for the remaining $500,000.00 of the Bruno Funds.

46 Combined Air, ibid. at para. 173, ABA, Vol. I at Tab 4.

PART II – STATEMENT OF QUESTIONS IN ISSUE

48. The questions before this Court are:

(a) What is the appropriate test for summary judgment under Rule 20 of Ontario’s Rules of Civil Procedure?

(b) What is the appropriate standard of review on an appeal from summary judgment where there is a question of mixed fact and law?

(c) What are the elements applicable to the common law tort of civil fraud (also known as the tort of deceit or fraudulent misrepresentation)? and

(d) What is the appropriate standard of proof applicable to the common law tort of civil fraud?

PART III - STATEMENT OF ARGUMENT

49. In Combined Air, with respect to the Bruno Action, the Court of Appeal:

(a) narrowly formulated the test for summary judgment motions so as to severely constrict the class of cases that are eligible for summary disposition by way of Rule 20, and thus, substantially limiting access to justice in Ontario;

(b) applied the standard of review of correctness to its review of the Motions Judge’s decision in the Bruno Action;

(c) required the plaintiff to prove, as one of the elements for the tort of civil fraud, that the alleged fraudster benefitted from the entire monetary loss experienced by the plaintiff; and

(d) held the plaintiff to a higher standard of proof than has been required by other Canadian courts, including the Supreme Court of Canada, in dealing with the tort of civil fraud.

50. With respect, the Appellant does not agree that these determinations are in line with both the policies and purposes behind Rule 20 and the tort of civil fraud.

A. Error in Formulation of Test for Rule 20

51. The issue of the appropriate test under Rule 20 affects access to justice in that the average litigant is denied efficient, and thereby meaningful, access to justice, when the dispute resolution system offered by the courts becomes an intricate, expensive, time-consuming curiosity, of use only to the powerful and the wealthy. It is the Appellant’s submission that decisions such as that in Combined Air threaten to reduce the justice system to one that denies rather than enables justice, thereby bringing the justice system into disrepute.

i. Legislative and Jurisprudential Context

52. Prior to January 2010, the former Rule 20.04(2) provided that summary judgment shall be granted where the court is satisfied that “there is no genuine issue for trial.” Prior to the

amendment, Rule 20 presented a bright line test for motions for summary judgment. However, the amended rule now provides for summary judgment if the court is satisfied that “there is no genuine issue requiring a trial.” This amendment was made as a result of the recommendations of the Civil Justice Reform Project, which was chaired by the Honourable Coulter A. Osborne.47

53. Prior to the decision that is the subject of this appeal, lower courts found that the purpose of the change from “no genuine issue for trial” to “no genuine issue requiring a trial” in the new test for summary judgment was to:

(a) make summary judgment more readily available; and

(b) recognize that although there may be issues appropriate for trial, these issues may not require a trial because the court has the power to weigh evidence on a motion for summary judgment.48

54. The Court determined that if conflicts of material fact are present, then under the new Rule 20, the motion judge’s inquiry does not stop as it did under the former Rule. Instead, the judge has the power to go further and determine whether the nature of the factual dispute is such that it affords sufficient basis to engage the court’s fact-finding powers without the need for viva voce evidence.49 Where a judge determines that the record enables findings of fact with the same degree of certainty as could be done at a trial, then Rule 20.04(2.1) authorizes the judge to do so.50

ii. The Test Enunciated by the Court of Appeal

55. The central concept around which the Court of Appeal organizes its Rule 20 test is “full appreciation.” This “full appreciation test” is a judicial gloss on Rule 20, using words not found in the Rule. The appeal court’s novel test is set out in paragraph 50 of its decision:

47 Civil Justice Reform Project: A Summary of Findings and Recommendations, by the Honourable Coulter A. Osborne, Q.C., ABA, Vol. II at Tab 24. 48 Healey v. Lakeridge Health Corporation, 2010 ONSC 725 (CanLII) at para. 23 [Healey v. Lakeridge Health Corp.], ABA, Vol. I at Tab 10; Canadian Premier Life Insurance Company v. Sears Canada Inc., 2010 ONSC 3834 (CanLII) at para. 68 [Canadian Premier Life Insurance Co. v. Sears Canada Inc.], ABA, Vol. I at Tab 3; Lawless v. Anderson, 2010 ONSC 2723 (CanLII) at para. 19 [Lawless v. Anderson], ABA, Vol. II at Tab 15. 49 Optech Inc. v. Sharma, 2011 ONSC 680 (CanLII) at para. 43[Optech Inc. v. Sharma], ABA, Vol. II at Tab 18; Cuthbert v. TD Canada Trust, 2010 CarswellOnt 867, 2010 ONSC 830, 88 C.P.C. (6th) 359 at para. 42, ABA, Vol. I at Tab 7. 50Optech Inc. v. Sharma, at para. 43, ABA, Vol. II at Tab 18; Canadian Premier Life Insurance Co. v. Sears Canada Inc., at para. 68, ABA, Vol. I at Tab 3; Lawless v. Anderson, at para. 19, ABA, Vol. II at Tab 15.

We find that the passages set out above from Housen, at paras. 14 and 18, such as “total familiarity with the evidence”, “extensive exposure to the evidence”, and “familiarity with the case as a whole”, provide guidance as to when it is appropriate for the motions judge to exercise the powers in rule 20.04(2.1). In deciding if these powers should be used to weed out a claim as having no chance of success or be used to resolve all or part of an action, 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 [emphasis added]?51

56. The Court of Appeal stated that simply being knowledgeable about the entire content of the motion record is not the same as fully appreciating the evidence and issues in a way that permits a fair and just adjudication of the dispute. It found that the full appreciation test requires motion judges to do more than simply assess if they are capable of reading and interpreting all of the evidence that has been put before them.52

57. The Court of Appeal found that the amended rule permits the motions judge to decide the action where he or she is satisfied that by exercising the powers that are now available on a motion for summary judgment, there is no factual or legal issue raised by the parties that requires a trial for its fair and just resolution.53

58. The Court of Appeal provided guidance on whether or not the case is suitable for summary judgment, or alternatively, trial by describing three classes of cases where summary judgment may be granted, namely:54

(a) Where the parties agree to submit their dispute to resolution by way of summary judgment;55

(b) Where the motion judge uses the enhanced powers to determine if the claim or defence has no chance of success. However, before the motion judge decides to

51 Combined Air, supra note 3 at para. 50, ABA, Vol. I at Tab 4. 52 Combined Air, ibid. at para. 53, ABA, Vol. I at Tab 4. 53 Combined Air, ibid. at para. 37, ABA, Vol. I at Tab 4. 54 Combined Air, ibid. at para. 72, ABA, Vol. I at Tab 4. 55 Combined Air, ibid. at para. 41, ABA, Vol. I at Tab 4.

weigh evidence, evaluate credibility, or draw reasonable inferences from the evidence, the motion judge must apply the full appreciation test;56 and

(c) Where the motion judge is satisfied that the issues can be fairly and justly resolved by exercising the powers in rule 20.04(2.1) by assessing whether:

(i) he or she can achieve the full appreciation of the evidence and issues that are required to make dispositive findings on the basis of the motion record – as may be supplemented by oral evidence under rule 20.04(2.2); or

(ii) the attributes and advantages of the trial process require that these powers only be exercised at a trial.57

59. Conversely, the Court of Appeal described cases, or the relevant factors or circumstances of cases, which would require a trial (any one of these would require a trial):

(a) Where the case calls for multiple findings of fact on the basis of conflicting evidence emanating from a number of witnesses and found in a voluminous record;58

(b) Where the case is not document driven (and testimonial evidence is not limited), the judge would not be able to achieve full appreciation of the evidence and the issues required to make a dispositive finding;59

(d) Where a trial would be necessary to enable the judge to fully appreciate the evidence and the issues posed by the case;61

56 Combined Air, ibid. at para. 73, ABA, Vol. I at Tab 4. 57 Combined Air, ibid. at para. 74, ABA, Vol. I at Tab 4. 58 Combined Air, ibid. at para. 51 and para. 146, ABA, Vol. I at Tab 4. 59 Combined Air, ibid. at para. 52, ABA, Vol. I at Tab 4. 60 Combined Air, ibid., ABA, Vol. I at Tab 4. 61 Combined Air, ibid. at para. 54, ABA, Vol. I at Tab 4.

(e) Where the judge cannot accurately weigh and draw inferences from the evidence without the benefit of the trial narrative, without the ability to hear the witnesses speak in their own words, and without the assistance of counsel;62

(f) Where the nature and complexity of the issues demand that the normal process of production of documents and oral discovery be completed before a party is required to respond to a summary judgment motion (forcing a responding party to build a record through affidavits and cross-examinations will only anticipate and replicate what should happen through the usual discovery process);63

(g) Where the record was built through affidavits and cross-examinations at an early stage, offering a less complete picture of the case than the responding party could present at trial (where the moving party has adopted an inappropriate litigation strategy in bringing the motion for summary judgement before discovery);64

(h) Where the moving party is not in a position to present its case in a manner that is capable of being decided on a paper record before the court;65

(i) Where the documentary evidence is not limited and is contentious, where there are not a limited number of relevant witnesses, and where the legal principles are in dispute; 66

(j) Where the motion record is insufficient or inadequate to ensure that a just result can be achieved without the need for a trial and cannot be made so, regardless of the specific tools that are now available to the motion judge;67

(k) Where numerous witnesses file affidavits, cross-examination is lengthy, there are numerous volumes of evidence, and argument is lengthy, such as:68

62 Combined Air, ibid., ABA, Vol. I at Tab 4. 63 Combined Air, ibid. at para. 57, ABA, Vol. I at Tab 4. 64 Combined Air, ibid. at para. 58, ABA, Vol. I at Tab 4. 65 Combined Air, ibid. at para. 63, ABA, Vol. I at Tab 4. 66 Combined Air, ibid. at para. 219, ABA, Vol. I at Tab 4. 67 Combined Air, ibid. at para. 9, ABA, Vol. I at Tab 4. 68 Combined Air, ibid. at para. 117, ABA, Vol. I at Tab 4.

(i) Where the full appreciation of the evidence and issues that is required to make dispositive findings can only be achieved by way of a trial;69

(ii) Where there is an absence of cross-examination of key witnesses;70 or

(iii) Where the motion record is voluminous, many witnesses give evidence by affidavit, cross-examination on affidavits is lengthy, different theories of liability are advanced against each of the defendants, numerous finding of facts are required to decide the motions, credibility determinations lay at the heart of the disputes, the evidence of the major witnesses conflict on key issues, and credibility is made more difficult by the near absence of reliable documentary yardsticks.71 iii. General Negative Implications of Newly Stated Test for Rule 20

60. The Appellant submits that the Court of Appeal’s formulation of the test under Rule 20 severely constricts the class of cases that are eligible for summary disposition, thus substantially limiting access to justice in the province. Under this novel formulation, disposition prior to trial is only available in the rare case that is document driven, has limited cross-examinations, requires few findings of fact, where the legal principles are not in dispute, and where credibility does not lie at the heart of the disposition of the issues. Effectively, if the Court of Appeal’s test is allowed to stand, the powers granted to motions judges under Rule 20.04(2.1) will be of no use, except in cases where use of those powers is not required in any event.

61. It is submitted that through the guidelines set down in Combined Air, the Court of Appeal has rendered Rule 20 as restrictive, if not more so, than it was under its previous iteration, thus defeating the purpose of the amendment entirely. The Court of Appeal has blocked the very increased access to justice that the government of Ontario intended to create with Rule 20. Under the old formulation of Rule 20, a blanket list did not exist for the types of cases that are not suitable for summary judgment. However, with the introduction of the blanket list, the Court of Appeal’s full appreciation test opens the door to the very real possibility that some motions for

69 Combined Air, ibid.at para. 146, ABA, Vol. I at Tab 4. 70 Combined Air, ibid. at para. 256, ABA, Vol. I at Tab 4. 71 Combined Air, ibid. at para. 148, ABA, Vol. I at Tab 4.

summary judgment will be denied, based solely on the type of case it is, rather than on whether there is a genuine issue requiring a trial.

62. The harm to the public interest created by Combined Air is highlighted by the circumstances of this case. This is a case where the facts have been made to seem factually complex by a now-known fraudster, with many persons, both parties and non-parties in this appeal, alleged to have taken part in the fraud. But this way, this case exemplifies a typical investment fraud case. There is no reason why a fraudster should evade efficient and timely civil justice by relying on his own obfuscations to cover up his fraud.

iv. Negative Implications of Newly Stated Rule 20 Test in Fraud Cases

63. Fraud cases, particularly those involving securities or investment frauds, are by their nature made to seem factually complex, due to the techniques that fraudsters use to make the investment in question appear legitimate and to insulate themselves from liability. A report on securities and investment fraud by Criminal Intelligence Service Canada (the “CISC Report”) succinctly describes common features of these frauds as follows:

. . . . organized crime relies upon corrupting or coercing financial professionals to orchestrate successful securities frauds, including lawyers, brokers, transfer agents, fund managers, accountants and promoters. In some instances, providers of this assistance may be unaware of their exploitation by organized crime. Others, lured by the profitability of their relationship, either may suspect but remain silent or knowingly and openly participate. While these individuals may be recruited from a wide range of professions, they represent only a small percentage of their peers. Nominees are used and multiple trusts are set up in layers to provide insulation for the originators and to give the appearance of legitimacy to public companies. In some cases, reputable public and business officials (who are often unwitting) are used to add clout to the board of directors, thereby enhancing the credibility of the company. 72

64. These frauds will necessarily result in cases that will run afoul of the guidelines laid out in Combined Air. The recruitment of financial and legal professionals to orchestrate the fraud and the use of numerous nominees and facilitators will cause there to be many defendants associated with any one fraud, and the differing roles these individuals would have with respect to the fraud will result in different theories of liability being advanced against the various

72Criminal Intelligence Service Canada, 2010 Report on Organized Crime (Ottawa: Criminal Intelligence Service Canada, 2010) at page 35 [2010 Report], ABA, Vol. II at Tab 25.

defendants. The involvement of these many facilitators, along with the existence of many layers of trusts, will necessarily cause these cases to appear to be factually complex, with an extensive record and numerous cross-examinations being undertaken, in order to present a picture of the fraud.

65. However, the fact that these cases are factually made to appear complex by the fraudsters does not mean that a judge cannot gain a full appreciation of the evidence. As the Motions Judge’s decision in Mauldin demonstrates, a motions judge who has reviewed the record with the assistance of counsel, and using the powers provided by Rule 20.4 (2.1), will not be fooled by the obfuscations put in place by the fraudster. Rather, he or she can identify the gaps in logic where the fraudster’s story falls apart, without the need to necessarily hear this story in the context of a trial narrative.

66. Effectively, the Combined Air decision prevents such a determination from being made in civil fraud cases, thus denying victims of civil fraud the opportunity to obtain disposition without trial. Since victims of civil fraud will often have sustained a severe financial loss due to the fraud, they are unlikely to be able to afford the time-consuming and expensive mechanisms of discovery and trial, and for the vast majority of civil fraud victims, after Combined Air, they will be unable to pursue a civil remedy in Ontario. Such an outcome would be contextually unjust, as described below, stemming from a failure to take into account all of the details and context of the case.

67. This is a matter of real importance because of the increasing prevalence of fraud in Canada (26% of Canadians were more likely to report having been approached with fraudulent attempts in 2009, compared to 17% in 2007 and 14% in 2006).73 Add to that the fact that a scheme of this type often operates across numerous jurisdictions,74 and it becomes clear that the Combined Air decision will have very negative implications for access to justice for victims of fraud across Canada.

73 2010 Report, ibid. at page 35, ABA, Vol. II at Tab 25. 74 2010 Report, ibid. at page 37, ABA, Vol. II at Tab 25.

v. New Proposed Standard – Contextual Justice Test

68. As noted above, it is a general principle of the Rules that they must be read liberally to secure a just determination of civil proceedings on their merits.75 Just determinations necessitate that judges completely immerse themselves in the details of the cases before them to make contextually responsive judgments. Bearing this in mind, the Appellant submits that the correct formulation of the test under Rule 20 is one of Contextual Justice requiring that a motions judge examine the context of the case and perceives that he or she understands the genuine issues and evidence required to make dispositive findings. Practically, the two-prong approach to Rule 20, formulated by the Court of Appeal, ought to be revised so that the motion judge must thoroughly review the evidence and issues before him or her to determine whether he or she does in fact understand the genuine issues and evidence of the case. Simply put, under the Contextual Justice approach the motions judge must determine whether or not it would be unjust to the parties involved not to make summary judgment at this stage of the proceeding.

69. While the Court of Appeal listed, as summarized above at paragraph 59, somewhat useful examples of cases where, generally speaking, the full appreciation of the evidence and issues can only be achieved at trial, the Appellant submits that this list should only be used as a guideline by motions judges where it is clear, on the face of the record, that a particular case is not appropriate for summary judgment. Such a blanket list of cases should not be utilized as a hard and fast rule in every civil proceeding.

70. Litigants should not be denied access to the summary judgment rule based solely on the type of case it is, rather than on whether the motions judge sufficiently understands the genuine issues and evidence requisite to determine if there is a genuine issue requiring a trial.

71. A Contextual Justice approach to Rule 20 will mean that there will be cases that bear all the hallmarks of the types of cases identified by the Court of Appeal, as not appropriate for summary judgment that are actually perfectly suited for summary judgment, in light of the circumstances of the case.

75 Rules of Civil Procedure, O. Reg. 55/12 at Rule 1.04 (1).

72. Accordingly, cases, for example, that appear to be complex on their face and contain voluminous records of evidence, as was the case in the Bruno Action, may be ripe for summary judgment, but upon a close review of the evidentiary record and the genuine issues of the case, the motions judge is able to recognize that the complexity of the case was more apparent than real. In addition, cases such as the Bruno Action mandate that they be decided summarily based on the concepts of practicality and the old adage that “justice delayed is justice denied”.

B. Error in Standard of Review

73. The Appellant submits that the issue of the appropriate standard of review for Rule 20 decisions is crucial to this appeal. This is because the appeal court, having found this case does not meet the test for summary judgment under Rule 20, reviewed the Motion Judge’s determination of the substance of the Appellant’s case on a standard of correctness.

74. In determining the appropriate standard of review that applies to a decision to grant or deny a motion for summary judgement, the Court of Appeal in Combined Air laid out three scenarios and the appropriate standard of review for each as follows:

(a) On a question of law the appropriate standard of review is one of correctness;76

(b) On a question of mixed fact and law that “can be attributed to the application of an incorrect standard, a failure to consider a required element of a legal test, or a similar error in principle” the standard of review is also correctness;77 and

75. However, the Court failed to elucidate the correct standard of review on questions of mixed fact and law where the question does not arise from “the application of an incorrect standard, a failure to consider a required element of a legal test, or a similar error in principle”.79

76 Combined Air, supra note 3, at para. 70, ABA, Vol. I at Tab 4. 77 Combined Air, ibid., ABA, Vol. I at Tab 4. 78 Combined Air, ibid. at para. 71, ABA, Vol. I at Tab 4. 79 Combined Air, ibid. at para. 70, ABA, Vol. I at Tab 4.

76. The Appellant respectfully submits that the appropriate standard of review for a summary judgment motion may not always be one of correctness where there is question of mixed fact and law. As Justice Blair said in Bell Canada v. The Plan Group:

Where the matter is one in which the legal principle and the facts are inextricably intertwined – where the facts dominate, as it were – it falls more towards the factual end of the spectrum, and significant deference must be accorded.80

77. In the case at bar, the Appellant submits that the appropriate standard of review is one of palpable and overriding error. It is the Court of Appeal’s failure to apply this standard that led the Court to ignore the inferences of fact, credibility findings and decisions as to the weight to put on various pieces of evidence made by the Motions Judge, thus leading to the Court’s decision to allow Mr. Hryniak’s appeal. As stated by the majority of the Supreme Court of Canada in Housen v. Nikolaisen, the general rule is that “where the issue on appeal involves the trial judge’s interpretation of the evidence as a whole, it should not be overturned absent palpable and overriding error.”81 As such, the Appellant submits that this Court ought to review the decision of the Motions Judge to determine whether he made a palpable and overriding error in granting summary judgment in favour of Bruno Appliance.

78. Moreover, this is in line with the Contextual Justice approach requiring that the circumstances of the case must be taken into account when determining the appropriate standard of review on appeal.

79. Beyond the Bruno Action, this is also a matter requiring guidance from the Supreme Court of Canada, given that the Court of Appeal has left a void in discussion concerning standards of review, which only the Supreme Court of Canada is best positioned to address.

C. Error in Statement of Elements of Civil Fraud

80. The third issue on this appeal is whether the Court of Appeal erred in law in applying the wrong definition of civil fraud and its constituent elements.

80 Bell Canada v. The Plan Group, 2009 ONCA 548 (CanLII) at para. 27, ABA, Vol. I at Tab 1. 81 Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235 (CanLII), at para. 36, ABA, Vol. II at Tab 12.

81. The Appellant submits that the elements of civil fraud, also referred to as deceit and fraudulent misrepresentation,82 applied by the Court of Appeal in the Bruno Action are at variance with the elements applied in other Canadian provinces, as well as the very elements applied by the Court of Appeal in the Mauldin Action.83 To avoid this inconsistent application of this tort nationally, this Court ought to elucidate the requisite elements and standard of proof for the tort of civil fraud, as identified below.

i. The Elements of Civil Fraud

82. The tort of civil fraud is encompassed within the tort of deceit.84 The elements of the tort of deceit are summarized by G.H.L. Fridman in The Law of Torts in Canada, as follows:

The tort of deceit is based on the making of a fraudulent misrepresentation. It entails a deliberate, wilful, conscious distortion of the truth, the making of a false statement with the knowledge that it is untrue, or with reckless disregard for its truth or falsity, and with the intent that the plaintiff should act upon it. For liability to ensue the plaintiffs must act upon it in a manner contemplated or manifestly probable and, in consequence of such act, the plaintiff must incur damage. The deliberate or reckless deception of the plaintiff by the defendant must have been intended by the latter and must produce the consequence that was itself intended or, at the very least, foreseen as being likely. The tort of deceit involves more than fraud or falsehood. There must be a direct causal link between the untruth and the behavior of the plaintiff that leads to the detrimental occurrence. Hence, for there to be liability for deceit the following elements must be established: (a) a false statement; (b) knowledge of its falsity; (c) an intent to deceive; (d) reliance by the plaintiff; (e) damage caused by such reliance [emphasis added].85

83. Similarly in Trentfab Inc. v. Brian Kinmond, relying on the summarization of the elements above, Justice Wilton-Siegel addressed his analysis of the evidence in that case in light of the following four elements of the tort of deceit:

1. Have the plaintiffs established a false statement of a material fact?

2. Have the plaintiffs established an intent to deceive?

3. Have the plaintiffs established damage?

82 G.H.L. Fridman, The Law of Torts in Canada, 3nd ed., Toronto: Carswell, 2010 at para. 747, ABA, Vol. II at Tab 30; The Court of Appeal in Combined Air analyzed Mr. Hryniak’s liability on the basis of the elements of civil fraud and did not in its judgment clarify the relationship between the torts of deceit and fraudulent misrepresentation. 83 Combined Air, supra note 3, at para. 157, ABA, Vol. I at Tab 4. 84 Trentfab Inc. v. Brian Kinmond, 2011 ONSC 773 (CanLII) at para. 196, ABA, Vol. II at Tab 21. 85 G.H.L. Fridman, The Law of Torts in Canada, 2nd ed., Toronto: Carswell, 2002 at page 709, ABA, Vol. II at Tab 30.

4. Have the plaintiffs established that the damage was caused by reliance on [the defendant’s] non-disclosure …?86

84. Neither of these definitions of civil fraud includes inducement of the victim by the alleged fraudster nor the requirement that the alleged fraudster benefited from the entire loss experienced by the victim. ii. Court of Appeal's Determination of the Elements

85. The Appellant submits that the Ontario Court of Appeal departed from this formulation by adding an additional requirement, namely, that the plaintiff prove that the alleged fraudster benefitted from the entire monetary loss experienced by the plaintiff and that there was an inducement. This is an error of law. In placing the onus of proving these elements on the plaintiff, the Court of Appeal reversed the finding of fraud against Hryniak in the Bruno Action despite accepting that:

(a) Hryniak knew that Bruno Appliance “had invested U.S. $1 million with Tropos”, a corporation of which Hryniak was the director and operating mind;87

(b) “he did not invest this money, and that instead he used at least a portion of it for his own corporate requirements”.88 In particular, “he knowingly took Bruno’s money and used at least U.S.$450,000 of it for his own purposes”89;

(d) “Bruno lost his entire investment”91; and

(e) in the Mauldin Action, Hryniak had committed the tort of civil fraud and his “defence to [the Mauldin] action had no credulity.”.92

86 Trentfab Inc. v. Brian Kinmond, 2011 ONSC 773 (CanLII) at para. 202, ABA, Vol. II at Tab 21. 87 Combined Air, supra note 3 at para. 168, ABA, Vol. I at Tab 4. 88 Combined Air, ibid. at para. 168, ABA, Vol. I at Tab 4. 89 Combined Air, ibid. at para. 173, ABA, Vol. I at Tab 4. 90 Combined Air, ibid. at para. 168-169, ABA, Vol. I at Tab 4. 91 Combined Air, ibid at para. 169, ABA, Vol. I at Tab 4.

86. While the traditional test for civil fraud includes a requirement that damage be caused by the plaintiff’s reliance on the false statement of the defendant, there is nothing in the test requiring the plaintiff to prove that the loss experienced by the plaintiff benefitted the defendant at all, much less that the loss benefitted only the fraudster without benefit to others. Such a requirement does not make sense in the context of fraud, given that, as described above, it is common for fraudsters to involve confederates in the commission of their frauds. Such confederates, one assumes, do not provide their services on a voluntary basis and, instead, seek some form of compensation for their involvement in the fraud.

87. Furthermore, the Court of Appeal was inconsistent in its own application of the elements of the tort of civil fraud within the Combined Air decision itself in that it did not require the plaintiffs in the Mauldin Action and the Bruno Action to prove the same elements for civil fraud. In particular, the plaintiffs in the Mauldin Action were not required to prove that their loss benefited Hryniak to establish civil fraud, whereas the plaintiff in the Bruno Action was required to do so. Specifically, in the Mauldin Action the Court of Appeal stated,

To prove civil fraud against Hryniak, the Mauldin Group has to show on a balance of probabilities that:

 Hryniak knowingly made a false statement to Fred Mauldin with the intent to deceive him;

 The false statement induced the Mauldin group to invest with Hryniak; and

 As a result of investing with Hryniak, the Mauldin Group suffered a loss.93

88. While the Court of Appeal stated that Bruno Appliance would have to prove the same elements to establish that Hryniak defrauded it,94 it found that “whether Hryniak eventually got the benefit of that money or whether Cranston misappropriated it are questions that require a trial of their resolutions”,95 thereby incorrectly adding another element to the tort of civil fraud.

89. Furthermore, the Appellant submits that inducement is not a requisite element to establish the tort of civil fraud. While Mr. Bruno did in fact act upon the representation that a legitimate

92 Combined Air, ibid. at para. 156-165, ABA, Vol. I at Tab 4. 93 Combined Air, supra note 3, at para. 157, ABA, Vol. I at Tab 4. 94 Combined Air, ibid. at para. 167, ABA, Vol. I at Tab 4. 95 Combined Air, ibid. at para. 174 ABA, Vol. I at Tab 4.

trading program existed, the Appellant reiterates that this Honourable Court ought to clarify the necessary elements of the tort of civil fraud to avoid this inconsistent application of this tort nationally.

iii. Hryniak’s Responsibility for Fraud Despite Involvement of Others

90. The Appellant respectfully submits that Hryniak’s liability for fraud does not cease to exist simply because other participants were involved in defrauding Bruno Appliance and may have monetarily benefitted from such participation.

91. The evidence on the record clearly shows that the Bruno Funds were never invested by Hryniak or Tropos. While the Tropos bank statements show that the Bruno Funds were paid to others, including Aro Motors,96 Hryniak “used at least U.S. $450,000.00 of it for his own purposes.”97 Hryniak’s evidence was that the monies were spent for “[g]eneral purpose requirements”98 pursuant to authority provided by an alleged investor in New Savings Bank named Selkirk.99 However, there was no evidence that the monies in the Tropos account were in any way related to Selkirk or why Selkirk had provided such authority.

92. The Appellant respectfully disagrees with the Court of Appeal’s statement that “whether Hryniak, through Peebles, made a false statement that induced Bruno to invest is a genuine issue requiring a trial”.

93. Rule 20 clearly gives a judge hearing a motion for summary judgment the authority to “weigh the evidence”, make determinations as to the credibility of deponents, and “draw any reasonable inference from the evidence.”100 In the Motions Judge’s analysis of Hryniak’s false representation, it is arguable that he may not have set out his reasoning as precisely as the Court of Appeal would have preferred. However, what is clear, as described above at paragraph 33, is that the Motions Judge made a reasonable inference from the evidence on the record that Hryniak made a misrepresentation to the Appellant.

96 Tropos Capital Inc. Statements of Account dated April 2002 to December 2002, AR, Vol. V, p 184-200. 97 Combined Air, supra note 3 at para. 173, ABA, Vol. I at Tab 4. 98 Robert Hryniak in Cross-examination, pp. 94, 96, qq. 500-501, 512, AR, Vol. VI , p 192, 194. 99 Robert Hryniak in Cross-examination, pp. 97, qq. 519-521, AR, Vol. VI, p 195.; Tropos Capital Inc. Statements of Account dated April 2002 to December 2002, AR, Vol. V, p 184-200. 100 Rules of Civil Procedure, O. Reg. 55/12 at Rule 20,

94. The Appellant submits that the very fact that a meeting took place between Peebles, Cranston, and Mr. Bruno on February 22, 2002, to discuss the investment opportunity with Tropos, was in and of itself a misrepresentation to Mr. Bruno that a legitimate trading program existed, when in actuality it did not.

95. Surely, the assistance of others was needed in committing a fraud of this magnitude. Insofar as Cranston and Jay Russell Pribble were concerned, they are not parties to the action and the Motions Judge did not need to concern himself with their liability. Despite this finding, the Motions Judge observed that all of Cranston’s dealings with Peebles were billed to and paid by Tropos (Tropos being one and the same as Hryniak)101 without complaint.102

96. The law with respect to a principal’s liability for the tort of deceit, where the elements of the tort have been satisfied either partially or entirely by the actions of its agent, was clarified by the decision of the Court of Appeal of England and Wales in Armstrong v. Strain. As summarized in Bowstead and Reynolds on Agency (2001) 17th ed. Sweet & Maxwell, London England the following propositions can be taken from the decision in Armstrong v. Strain:

(a) The principal is liable if he authorised the agent to make the false representation which he (the principal) knew to be untrue (or did not believe to be true) whether the agent knew the truth or not.

(b) The principal is liable if, while not expressly authorising the agent to make the false representation, he knew it to be untrue and was guilty of some positive wrongful conduct, as by consciously permitting the agent to remain ignorant of the true facts, so as to prevent the disclosure of the truth to the third party, if the third party should ask the agent for information, or in the hope that the agent would make some false representation. The agent’s representation when made would of course require to be within the scope of his actual or apparent authority …103

97. With respect to Peebles, after review of the evidence before him, the Motions Judge found that there existed genuine issues regarding the liability of Peebles that could not be resolved by the paper record, but such issue did not prevent the Motions Judge from finding that the elements of civil fraud had been made out against Hryniak.

101 Robert Hryniak in Cross-examination, pp. 95, qq. 508-509, AR, Vol. VI, p 193. 102 Bruno Appliance, supra note 1 at para. 177, ABA, Vol. I at Tab 2. 103 Peter Watts, ed., Bowstead & Reynolds on Agency, 19th ed., (London: Sweet and Maxwell Ltd., 2010) at para. 8-185, ABA, Vol. II at Tab 27; Cormier v. Universal Property Management Ltd., 2011 NSSC 16 (CanLII) at para. 37, ABA, Vol. I at Tab 5.

98. Simply put, whether or not Peebles was complicit in Hryniak’s fraud, or simply a dupe, was not determinative of Hryniak’s liability.

99. Peebles testified at the Motion that Hryniak called him and asked that he attend the meeting with Mr. Bruno on February 22, 2002.104 Although Hryniak disputed that he had provided this instruction to Peebles, the Motions Judge found that,

the purpose of the meeting was not hidden from Mr. Hryniak. The participation of Mr. Peebles and Mr. Cranston in a discussion with Mr. Bruno to discuss the “Tropos corporate structure” was set forth in Mr. Peebles’ docket entry of February 22, 2002: a docket entry which appeared on the bill sent by Cassels Brock to and paid by Tropos. Had Mr. Peebles been “chastised” by Mr. Hryniak for attending the meeting, it is highly unlikely Mr. Peebles would have had the audacity to charge Tropos for it.105

100. It was because of the misrepresentations made by Peebles at the February 22nd meeting that Mr. Bruno wired the Bruno Funds to Cassels Brock, and it was only after that same meeting that the Bruno Funds were in fact sent to Cassels Brock by Bruno Appliance.

101. Moreover, Hryniak’s assertions that a trial of this issue will somehow result in inconsistent findings with respect to Hryniak’s liability, have no basis. To the extent that Hryniak will testify at the trial, the purpose of his testimony will be limited to assessing whether Peebles was a dupe or a willing participant in Hryniak’s fraud. However, this is not a question or issue of Hryniak’s liability, which has been settled.

102. Concerning Hryniak’s liability in the Bruno Action, the Motions Judge stated that:

I am of the view that Mr. Hryniak is responsible in law for the loss of the Bruno investment. He received the Bruno funds knowingly. He knew they were advanced for the purposes of investment. They were not invested. Indeed, as evidenced by the manner in which the funds were used, Tropos had no intention of investing them. They were monies which were received by Tropos so that it could make payments to others. Bruno was defrauded by Mr. Hryniak.106

103. The Motions Judge determined that “the forensic machinery of a trial is not required”107 to determine Hryniak’s liability, whether or not Hryniak’s fraud was committed with the

104 Bruno Appliance, supra note 1 at para. 186, ABA, Vol. I at Tab 2. 105 Bruno Appliance, supra note 1 at para. 156, ABA, Vol. I at Tab 2. 106 Bruno Appliance, ibid. at para. 178, ABA, Vol. I at Tab 2. 107 Bruno Appliance, ibid. at para. 138, ABA, Vol. I at Tab 2.

assistance of others. Hryniak’s fraud was apparent on the face of the documentary evidence, and Hryniak’s explanations were so implausible and so extraordinary that the Motions Judge determined that he could safely draw inferences from the evidence and make findings of fact without the need for trial. To allow Hryniak an opportunity to further obfuscate and delay, in the manifestation of a full trial, despite his blatant and obvious fraud, would amount to a “failure of procedural justice”108. The Court of Appeal’s decision has done just that and, moreover, represents a failure of Contextual Justice in not allowing the Motions Judge the latitude to make a contextually sensitive judgment.

D. Incorrect Standard of Proof for Civil Fraud

104. The fourth issue on this appeal is whether the Court of Appeal erred in law in applying the wrong standard of proof for the tort of civil fraud. The Appellant respectfully submits that Court of Appeal erred in answering this question as well.

105. The Appellant submits that the Court of Appeal applied an increased standard of proof in this case, contrary to the authority of this Court in F.H. v. McDougall109 regarding the civil standard of proof. Courts across Canada have frequently made a similar mistake in the context of deciding fraud claims. Therefore, it is necessary for the Supreme Court of Canada to make a statement of the law in this area, to correct this common error.

i. The Standard of Proof

106. In finding that the elements of a false statement were not made out in this case, the Court of Appeal considered the possibility that Mr. Hryniak might have made fraudulent statements through an agent. In rejecting this possibility, the Court of Appeal stated: “we have no compelling evidence that Peebles acted as Mr. Hryniak’s agent for the purpose of inducing Bruno to invest.”110

107. This Court in F.H. v. McDougall, rejected the notion that the degree of scrutiny of the evidence should increase with the seriousness of the case. The Court found that there is one legal

108 Irving Ungerman Ltd. v. Galanis [1991] O.J. No. 1478, 83 D.L.R. (4th) 734, ABA, Vol. II at Tab 14; Combined Air, supra note 3 at para. 14, ABA, Vol. I at Tab 4; Cunningham v. Moran, 2010 ONSC 4310 (CanLII) at para. 47, ABA, Vol. I at Tab 6. 109 F.H. v. McDougall, 2008 SCC 53, [2008] 3 S.C.R. 41 at para. 45-46, ABA, Vol. I at Tab 8. 110 Combined Air, supra note 3 at para. 171, ABA, Vol. I at Tab 4.

rule in all cases: that evidence must be scrutinized with care and that evidence must always, regardless of the seriousness of the case, be sufficiently clear, convincing and cogent to satisfy the balance of probabilities test.111

108. The Appellant submits that the Court of Appeal’s reference for the need for “compelling evidence” to establish an element of the test for fraud indicates that the Court of Appeal applied a higher standard of proof than is dictated by the civil standard of proof enunciated in McDougall.

109. The Appellant further submits that had the Court of Appeal applied the proper standard, it would have found that the evidence, outlined in subparagraphs 22 (a) to (e) above, was sufficient to meet the standard of proof to establish that Mr. Hryniak made a false statement through an agent.

110. The requirement of “compelling evidence” has been found to imply a higher standard of proof than the “clear, convincing and cogent” standard set out in McDougall.

111. For instance, in Hausmann v. Klukas, the British Columbia Court of Appeal agreed with comments in Jeffery v. Motherwell, 2006 BCSC 140, stating that the use of the words “compelling evidence” might suggest a higher standard of proof than “clear evidence.”112

112. Similarly, in Tsawwassen Residents Against Higher Voltage Overhead Lines Society v. B.C. Utilities Commission, the British Columbia Court of Appeal agreed that the use of the phrase “compelling evidence” could imply a higher standard than the balance of probabilities.113

113. Moreover, the Supreme Court of Canada has established that a finding of fraud can be based on circumstantial and inferential evidence.114

114. While the Ontario Superior Court of Justice has in the past sanctioned the use of a higher standard of proof in the case of civil fraud, that practice is no longer in line with the more

111 F.H. v. McDougall, supra note 107 at para. 45-46, ABA, Vol. I at Tab 8. 112 Hausmann v. Klukas, 2009 BCCA 32 at para. 51, ABA, Vol. I at Tab 9. 113 Tsawwassen Residents Against Higher Voltage Overhead Lines Society v. B.C. Utilities Commission, 2006 BCCA 537 at para. 77, ABA, Vol. II at Tab 22; varied on an unrelated point at Tsawwassen Residents Against Higher Voltage Overhead Lines Society v. B.C. Utilities Commission, 2007 BCCA 95, ABA, Vol. II at Tab 23. 114 North Brothers & Mercantile Insurance Co. v. Tourville,1895 CarswellQue 12, 25 S.C.R. 177 at para .10, ABA, Vol. II at Tab 17.

recently enunciated rule in McDougall. In International Corona Resources Ltd. v. Lac Minerals Ltd., Justice Osborne, when discussing the test for setting aside an order for fraud, stated that “[t]he fraud alleged must be proved on a reasonable balance of probability. The more serious the fraud alleged, the more cogent the evidence going to establish it will have to be to meet the civil onus of proof. The reasonable balance of probability is not an inflexible standard of proof.”115 However, in McDougall, this Honourable Court expressly rejected this approach stating,

[t]o suggest that depending upon the seriousness, the evidence in the civil case must be scrutinized with greater care implies that in less serious cases the evidence need not be scrutinized with such care. I think it is inappropriate to say that there are legally recognized different levels of scrutiny of the evidence depending upon the seriousness of the case. There is only one legal rule and that is that in all cases, evidence must be scrutinized with care by the trial judge.116

115. Similarly, the Newfoundland Court of Appeal in Metro General Insurance Corporation Ltd. v. Dinn, based on this Honourable Court’s decision in McDougall, rejected a trial judge’s finding that “[a] wilful false statement must be made fraudulently, and a claim of fraud requires proof beyond the normal civil standard of proof for negligence.”117

116. The Appellant submits that the Supreme Court of Canada ought to reaffirm its decision in McDougall that the appropriate standard of proof for the tort of civil fraud is “clear, convincing and cogent” evidence on a balance of probabilities and further ought to clarify that it is not a requisite element of civil fraud that a plaintiff prove that the alleged fraudster benefitted solely from the monetary loss experienced by the plaintiff. McDougall is correct, and there is no basis on which to argue that the law should be revised or reformed, only that it be restated and applied in this case.

ii. Clear and Cogent Evidence of Bruno Fraud

117. In the case at bar, the Motions Judge’s finding of fraud against Hryniak was not based solely on inferences and testimony of other witnesses, but was supported by the documentary evidence referred to in the following paragraphs.

115 International Corona Resources Ltd. v. Lac Minerals Ltd., 1988 CarswellOnt 870, 66 O.R. (2d) 610, 54 D.L.R. (4th) 647 at para. 55, ABA, Vol. II at Tab 13. 116 F.H. v. McDougall, 2008 SCC 53, [2008] 3 S.C.R. 41 at para. 45, ABA, Vol. I at Tab 8. 117 Metro General Insurance Corporation Ltd. v. Dinn, 2008 NLCA 59 at para. 29, 30 and 44, ABA, Vol. II at Tab 16.

118. The evidence on the record led the Motions Judge to the finding that Mr. Bruno was induced by the representation that a legitimate trading program existed. The evidence also established that Hryniak knew the Bruno Funds had been advanced for the purpose of an investment, and Hryniak received those funds despite knowing that no trading program ever existed. Accordingly, the evidence on the record establishes Hryniak’s fraud as the Motions Judge concluded.

119. Peebles, Hryniak’s agent and co-conspiritor, agreed that during the February 22, 2002, meeting with Mr. Bruno, he spoke with Mr. Bruno about an investment opportunity with Tropos.118 The fact that an investment opportunity existed was relied upon by Mr. Bruno and led Mr. Bruno to direct Bruno Appliance to deposit the Bruno Funds with Cassels Brock.

120. In this case, the Court of Appeal stated that Bruno Appliance had not established the elements of civil fraud, as it had failed to show that Hryniak made a misrepresentation directly to Bruno Appliance. However, the Appellant submits that given that Hryniak was aware of Peebles’ involvement in inducing the Appellant to invest in Hryniak’s fraudulent investment scheme and did nothing to inform the Appellant of the fraudulent scheme, his silence or non- disclosure amounted to a representation. As stated by Justice DiTomaso in Perdue v. Myers,

Silence can be taken as fraudulent misrepresentation. The circumstances must establish dishonest conduct on the part of the defendant, who must have intended (i) to deceive the plaintiff by his/her failure to disclose irrelevant information, and (ii) to commit a fraudulent act by such non disclosure equivalent to that which would prevail had he/she made a false statement knowing it to be false. 119

121. Similarly, in Sidhu Estate v. Bains the silence of a corporate director on a misinformation that had been provided to a potential investor, where that director had an opportunity to correct the misinformation, amounts to an actionable misrepresentation for the purpose of establishing fraudulent misrepresentation.120 The conditions necessary for silence to be actionable misrepresentation are as follows:

118 Affidavit of Gregory Jack Peebles paras. 9 and 11, AR, Vol. IV, p 165. 119 Perdue v. Myers, 2005 CanLII 30860 (ON SC) at para. 31, ABA, Vol. II at Tab 19. 120 Sidhu Estate v. Bains, 1996 CanLII 3332 (BC CA) ABA, Vol. II at Tab 20; George Spencer Bower, The Law of Actionable Misrepresentation stated in the form of A Code and followed by A Commentary and Appendices (London: Butterworth & Co., 1911) at p. 91 at para.89, ABA, Vol. II at Tab 29.

A misrepresentation may be made by silence, when either the representee, or a third person in his presence, or to his knowledge, states something false, which indicates to the representor that the representee either is being, or will be, misled, unless the necessary correction be made. Silence, under such circumstances, is either a tacit adoption by the party of another's misrepresentation as his own, or a tacit confirmation of another's error as truth.121

122. The evidence on record clearly demonstrates that Hryniak knew about the February 22nd meeting, as he directed Tropos to pay an invoice with a docket entry by Peebles stating “[m]eeting with R. Cranston & Albert Bruno to discuss Tropos’ corporate structure, etc.”122 Hryniak was informed when the Bruno Funds were deposited with Cassels Brock, and he gave express instructions on how those funds were to be handled, including giving express instructions on the disbursement of the Bruno Funds to Tropos.123

123. Moreover, Hryniak’s evidence at the Motion that an investment opportunity did not exist for Bruno Appliance was contradicted by other evidence from Hryniak and Cassels Brock that Tropos was accepting funds from other sources, including Southern Equity Investors, during the relevant time period.124 As well, Hryniak’s evidence that the Bruno Funds went to Rhino Holdings is not supported by the Cassels Brock trust ledgers, which are reliable in so far as none of the parties questioned their authenticity.

124. Finally, the Court of Appeal stated, with respect to the Bruno Action, that it accepted that Hryniak “knew Bruno had invested U.S. $1 million with Tropos, that he did not invest this money, and that instead used at least a portion of it for his own “corporate requirements” and that it also accepted that “Bruno lost his entire investment.”125

125. In light of all of the above, the Appellant respectfully submits that there was clear and cogent evidence to support the Motion Judge’s finding of fraud against Hryniak in the Bruno Action, and there is, thus, no genuine issue requiring a trial.

121 Sidhu Estate v. Bains, 1996 CanLII 3332 (BC CA) at para. 31, ABA, Vol. II at Tab 20, referencing Spencer Bower & Turner, The Law of Actionable Misrepresentation, 3d ed. (London: Butterworths, 1974) at para. 101, ABA, Vol. II at Tab 29. 122 Bruno Appliance, ibid. at para. 156, ABA, Vol. I at Tab 2. 123 Bruno Appliance, ibid. at para. 157-162, ABA, Vol. I at Tab 2.. 124 Bruno Appliance, ibid. at para. 158, ABA, Vol. I at Tab 2 ; Robert Hryniak in Cross-examination, pp. 10-11, 18-19, qq. 42-47, 89-94, AR, Vol. VI, p. 186-189; Tropos Financial Corporation Trust Ledger, AR, Vol. V, p. 152-153. 125 Combined Air, supra note 3, at para. 168, ABA, Vol. I at Tab 4.

E. Conclusion

126. With respect, the Court of Appeal’s decision in Combined Air is unjust in its constricted formulation of the test under Rule 20 in the context of this case. It is contrary to the fundamental principle of law that Canadians must have access to justice. It incorrectly states the elements and standard of proof for the tort of civil fraud and ignores the clear and cogent evidence of Hryniak’s fraud. It is submitted that there is no genuine issue requiring a trial with respect to Hryniak’s liability, and to force the Appellant to proceed to trial when there is clear and cogent evidence establishing Hryniak’s fraud would run contrary to the purpose and policy behind the enactment of Rule 20 and the very existence of tort law. For these reasons, the Court of Appeal’s decision should be overturned and the decision of the Motions Judge reinstated insofar as the Bruno Action.

PART IV – SUBMISSIONS CONCERNING COSTS

127. The Appellant respectfully requests its costs in this Court and throughout.

PART V- NATURE OF ORDER SOUGHT

128. The Appellant respectfully requests that this Court allow this appeal, set aside the Court of Appeal’s decision with respect to the Bruno Action, with costs in this Court and throughout.

ALL OF WHICH IS RESPECTFULLY SUBMITTED this 19th day of November, 2012.

GOWLING LAFLEUR HENDERSON LLP Barristers and Solicitors 160 Elgin Street, Suite 2600 Ottawa, Ontario K1P 1C3 Per: Henry S. Brown QC

Tel: 613-233-1781 Fax: 613-563-9869 Email: [email protected]

Agent for the Appellant

PART VI

ALPHABETICAL TABLE OF AUTHORITIES

Case Name Paragraphs 1 Bell Canada v. The Plan Group, 2009 ONCA 548 (CanLII) 27 2 Bruno Appliance v. Cassels Brock & Blackwell LLP, 2010 ONSC 5490 11, 59, 60, (CanLII) 61, 138, 155, 156, 157, 158, 159, 160, 161, 162, 164, 168, 177, 178, 265, 266 3 Canadian Premier Life Insurance Company v. Sears Canada Inc., 2010 68 ONSC 3834 (CanLII) 4 Combined Air Mechanical Services Inc. v. Flesch 2011 ONCA 764 37, 39, 41, (CanLII) 50, 51, 52, 53, 54, 57, 58, 63, 70, 71, 72, 73, 74, 86, 113, 117, 133, 134, 135, 137, 146, 148, 154, 156, 157, 158, 159, 160, 161, 162, 163, 164, 165, 167, 168, 169, 171, 172, 173, 174, 219, 256 5 Cormier v. Universal Property Management Ltd., 2011 NSSC 16 (CanLII) 37 6 Cunningham v. Moran, 2010 ONSC 4310 (CanLII) 47 7 Cuthbert v. TD Canada Trust, 2010 CarswellOnt 867, 2010 ONSC 830, 88 42 C.P.C. (6th) 359 8 F.H. v. McDougall, 2008 SCC 53, [2008] 3 S.C.R. 41 45-46 9 Hausmann v. Klukas, 2009 BCCA 32 51 10 Healey v. Lakeridge Health Corporation, 2010 ONSC 725 (CanLII) 23 11 Hill v. Hamilton-Wentworth Regional Police Services Board, [2007] 3 35 S.C.R. 129, 2007 SCC 41 12 Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235 (CanLII) 36 13 International Corona Resources Ltd. v. Lac Minerals Ltd., 1988 55

CarswellOnt 870, 66 O.R. (2d) 610, 54 D.L.R. (4th) 647 14 Irving Ungerman Ltd. v. Galanis [1991] O.J. No. 1478, 83 D.L.R. (4th) 734 20 15 Lawless v. Anderson,2010 ONSC 2723 (CanLII) 19 16 Metro General Insurance Corporation Ltd. v. Dinn, 2008 NLCA 59 29, 30, 44 17 North Brothers & Mercantile Insurance Co. v. Tourville,1895 CarswellQue 10 12, 25 S.C.R. 177 18 Optech Inc. v. Sharma, 2011 ONSC 680 (CanLII) 43 19 Perdue v. Myers, 2005 CanLII 30860 (ON SC) 31 20 Sidhu Estate v. Bains, 1996 CanLII 3332 (BC CA) 31 21 Trentfab Inc. v. Brian Kinmond, 2011 ONSC 773 (CanLII) 196, 202 22 Tsawwassen Residents Against Higher Voltage Overhead Lines Society v. 77 B.C. Utilities Commission, 2006 BCCA 537 23 Tsawwassen Residents Against Higher Voltage Overhead Lines Society v. B.C. Utilities Commission, 2007 BCCA 95

Reports Paragraphs

24 Civil Justice Reform Project: A Summary of Findings and Recommendations, by the Honourable Coulter A. Osborne, Q.C. 25 Criminal Intelligence Service Canada, 2010 Report on Organized Crime Pages 35, 37 (Ottawa: Criminal Intelligence Service Canada, 2010) 26 Leanne Berry, Klar Lewis, and Linda D. Rainaldi. Remedies in Tort, 18 looseleaf (Toronto: Carswell, 1987) 27 Peter Watts, ed., Bowstead & Reynolds on Agency, 19th ed., (London: 8-185 Sweet and Maxwell Ltd., 2010) at para. 8-185 28 Timothy Pinos & S. John Page, Summary Judgment (Aurora, Ontario: Page 5 Canada Law Book, 1998)

Commentary Paragraphs

29 George Spencer Bower, The Law of Actionable Misrepresentation stated in 89 the form of A Code and followed by A Commentary and Appendices (London: Butterworth & Co., 1911) 30 G.H.L. Fridman, The Law of Torts in Canada, 2nd ed., Toronto: Carswell, Page 709 2002

PART VII

STATUTES, REGULATIONS, RULES, ETC.

Rules of Civil Procedure, O. Reg. 55/12 at Rule 1.04

INTERPRETATION

General Principle

1.04 (1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits. R.R.O. 1990, Reg. 194, r. 1.04 (1).

Rules of Civil Procedure, O. Reg. 55/12 at Rule 20.

RULE 20 SUMMARY JUDGMENT

WHERE AVAILABLE

To Plaintiff

20.01 (1) A plaintiff may, after the defendant has delivered a statement of defence or served a notice of motion, move with supporting affidavit material or other evidence for summary judgment on all or part of the claim in the statement of claim. R.R.O. 1990, Reg. 194, r. 20.01 (1).

(2) The plaintiff may move, without notice, for leave to serve a notice of motion for summary judgment together with the statement of claim, and leave may be given where special urgency is shown, subject to such directions as are just. R.R.O. 1990, Reg. 194, r. 20.01 (2).

To Defendant

(3) A defendant may, after delivering a statement of defence, move with supporting affidavit material or other evidence for summary judgment dismissing all or part of the claim in the statement of claim. R.R.O. 1990, Reg. 194, r. 20.01 (3).

EVIDENCE ON MOTION

20.02 (1) An affidavit for use on a motion for summary judgment may be made on information and belief as provided in subrule 39.01 (4), but, on the hearing of the motion, the court may, if appropriate, draw an adverse inference from the failure of a party to provide the evidence of any person having personal knowledge of contested facts. O. Reg. 438/08, s. 12.

(2) In response to affidavit material or other evidence supporting a motion for summary judgment, a responding party may not rest solely on the allegations or denials in the party’s

pleadings, but must set out, in affidavit material or other evidence, specific facts showing that there is a genuine issue requiring a trial. O. Reg. 438/08, s. 12.

FACTUMS REQUIRED

20.03 (1) On a motion for summary judgment, each party shall serve on every other party to the motion a factum consisting of a concise argument stating the facts and law relied on by the party. O. Reg. 14/04, s. 14.

(2) The moving party’s factum shall be served and filed with proof of service in the court office where the motion is to be heard at least seven days before the hearing. O. Reg. 394/09, s. 4.

(3) The responding party’s factum shall be served and filed with proof of service in the court office where the motion is to be heard at least four days before the hearing. O. Reg. 394/09, s. 4.

(4) Revoked: O. Reg. 394/09, s. 4.

DISPOSITION OF MOTION

General

20.04 (1) Revoked: O. Reg. 438/08, s. 13 (1).

(2) The court shall grant summary judgment if,

(a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence; or

(b) the parties agree to have all or part of the claim determined by a summary judgment and the court is satisfied that it is appropriate to grant summary judgment. O. Reg. 284/01, s. 6; O. Reg. 438/08, s. 13 (2).

Powers

(2.1) In determining under clause (2) (a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:

1. Weighing the evidence.

2. Evaluating the credibility of a deponent.

3. Drawing any reasonable inference from the evidence. O. Reg. 438/08, s. 13 (3).

Oral Evidence (Mini-Trial)

(2.2) A judge may, for the purposes of exercising any of the powers set out in subrule (2.1), order that oral evidence be presented by one or more parties, with or without time limits on its presentation. O. Reg. 438/08, s. 13 (3).

Only Genuine Issue Is Amount

(3) Where the court is satisfied that the only genuine issue is the amount to which the moving party is entitled, the court may order a trial of that issue or grant judgment with a reference to determine the amount. R.R.O. 1990, Reg. 194, r. 20.04 (3); O. Reg. 438/08, s. 13 (4).

Only Genuine Issue Is Question Of Law

(4) Where the court is satisfied that the only genuine issue is a question of law, the court may determine the question and grant judgment accordingly, but where the motion is made to a master, it shall be adjourned to be heard by a judge. R.R.O. 1990, Reg. 194, r. 20.04 (4); O. Reg. 438/08, s. 13 (4).

Only Claim Is For An Accounting

(5) Where the plaintiff is the moving party and claims an accounting and the defendant fails to satisfy the court that there is a preliminary issue to be tried, the court may grant judgment on the claim with a reference to take the accounts. R.R.O. 1990, Reg. 194, r. 20.04 (5).

WHERE TRIAL IS NECESSARY

Powers of Court

20.05 (1) Where summary judgment is refused or is granted only in part, the court may make an order specifying what material facts are not in dispute and defining the issues to be tried, and order that the action proceed to trial expeditiously. O. Reg. 438/08, s. 14.

Directions and Terms

(2) If an action is ordered to proceed to trial under subrule (1), the court may give such directions or impose such terms as are just, including an order,

(a) that each party deliver, within a specified time, an affidavit of documents in accordance with the court’s directions;

(b) that any motions be brought within a specified time;

(d) that examinations for discovery be conducted in accordance with a discovery plan established by the court, which may set a schedule for examinations and impose such limits on the right of discovery as are just, including a limit on the scope of discovery to matters not covered by the affidavits or any other evidence filed on the motion and any cross-examinations on them;

(e) that a discovery plan agreed to by the parties under Rule 29.1 (discovery plan) be amended;

(f) that the affidavits or any other evidence filed on the motion and any cross-examinations on them may be used at trial in the same manner as an examination for discovery;

(g) that any examination of a person under Rule 36 (taking evidence before trial) be subject to a time limit;

(h) that a party deliver, within a specified time, a written summary of the anticipated evidence of a witness;

(i) that any oral examination of a witness at trial be subject to a time limit;

(j) that the evidence of a witness be given in whole or in part by affidavit;

(k) that any experts engaged by or on behalf of the parties in relation to the action meet on a without prejudice basis in order to identify the issues on which the experts agree and the issues on which they do not agree, to attempt to clarify and resolve any issues that are the subject of disagreement and to prepare a joint statement setting out the areas of agreement and any areas of disagreement and the reasons for it if, in the opinion of the court, the cost or time savings or other benefits that may be achieved from the meeting are proportionate to the amounts at stake or the importance of the issues involved in the case and,

(i) there is a reasonable prospect for agreement on some or all of the issues, or

(ii) the rationale for opposing expert opinions is unknown and clarification on areas of disagreement would assist the parties or the court;

(l) that each of the parties deliver a concise summary of his or her opening statement;

(m) that the parties appear before the court by a specified date, at which appearance the court may make any order that may be made under this subrule;

(n) that the action be set down for trial on a particular date or on a particular trial list, subject to the direction of the regional senior judge;

(o) for payment into court of all or part of the claim; and

(p) for security for costs. O. Reg. 438/08, s. 14.

Specified Facts

(3) At the trial, any facts specified under subrule (1) or clause (2) (c) shall be deemed to be established unless the trial judge orders otherwise to prevent injustice. O. Reg. 438/08, s. 14.

Order re Affidavit Evidence

(4) In deciding whether to make an order under clause (2) (j), the fact that an adverse party may reasonably require the attendance of the deponent at trial for cross-examination is a relevant consideration. O. Reg. 438/08, s. 14.

Order re Experts, Costs

(5) If an order is made under clause (2) (k), each party shall bear his or her own costs. O. Reg. 438/08, s. 14.

Failure to Comply with Order

(6) Where a party fails to comply with an order under clause (2) (o) for payment into court or under clause (2) (p) for security for costs, the court on motion of the opposite party may dismiss the action, strike out the statement of defence or make such other order as is just. O. Reg. 438/08, s. 14.

(7) Where on a motion under subrule (6) the statement of defence is struck out, the defendant shall be deemed to be noted in default. O. Reg. 438/08, s. 14.

COSTS SANCTIONS FOR IMPROPER USE OF RULE

20.06 The court may fix and order payment of the costs of a motion for summary judgment by a party on a substantial indemnity basis if,

(a) the party acted unreasonably by making or responding to the motion; or

(b) the party acted in bad faith for the purpose of delay. O. Reg. 438/08, s. 14.

EFFECT OF SUMMARY JUDGMENT

20.07 A plaintiff who obtains summary judgment may proceed against the same defendant for any other relief. R.R.O. 1990, Reg. 194, r. 20.07.

STAY OF EXECUTION

20.08 Where it appears that the enforcement of a summary judgment ought to be stayed pending the determination of any other issue in the action or a counterclaim, crossclaim or third party claim, the court may so order on such terms as are just. R.R.O. 1990, Reg. 194, r. 20.08.

APPLICATION TO COUNTERCLAIMS, CROSSCLAIMS AND THIRD PARTY CLAIMS

20.09 Rules 20.01 to 20.08 apply, with necessary modifications, to counterclaims, crossclaims and third party claims. R.R.O. 1990, Reg. 194, r. 20.09.