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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

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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: [email protected] Counsel for the Respondent Agent for the Respondent i 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 ii PART IV SUBMISSIONS CONCERNING COSTS 38 PART V NATURE OF ORDER SOUGHT 39 PART V1 TABLE OF AUTHORITIES 40 PART VII STATUTORY PROVISIONS 42 1 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. 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. 3 (c) the elements of the tort of civil fraud ought not include inducement of the victim 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. 4 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.
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