The Summary Judgment Analysis And Collateral Oral Agreements To Written Contracts

• Published date: 15 December 2021
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Contracts and Commercial Law, Trials & Appeals & Compensation, Civil Law
• Law Firm: Pallett Valo LLP
• Author: Mr Eric Blay

The Courts have recently provided significant guidance on summary judgment analysis in the form of three decisions which impact all summary judgment motions, with a particular emphasis on cases involving alleged misrepresentations or collateral oral agreements. Royal Bank of Canada v. 1643937 Ontario Inc, 2021 ONCA 98 ('RBC'), Pomata Investment v Yang, 2021 ONSC 6786 ('Pomata Investment,') and Oxygen Working Capital Corp. v Mouzakitis 2021 ONSC 1907 ('OWCC') together are instructive on the evidentiary and credibility analysis that judges ought to follow when faced with representations that, if accepted, would constitute a genuine issue requiring a trial. The courts have also provided a roadmap outlining how collateral oral agreements to written contracts will be analyzed by the Courts at each stage of the Hryniak test for summary judgment.

This article provides an overview of this recent guidance on the courts' summary judgment analysis, examines the increasingly nuanced evidentiary and credibility assessments the courts will engage in on summary judgment, and highlights the specific guidance on alleged misrepresentations and/or collateral oral agreements to written contracts set out in these cases.

But first, here are key takeaways for those in a hurry:

1. While a motion judge is given significant deference by the Court of Appeal on summary judgment, appellate intervention is appropriate where a judge improperly provides judgment at the first stage of the Hryniak test by failing to have regard for the entire evidentiary record.
2. Unchallenged material evidence, which if credible would constitute a genuine issue requiring a trial must be assessed by the Court either by using its enhanced fact-finding powers set out in Rules 20.04(2.1) and (2.2) of the Rules of Civil Procedure, or by ordering a mini-trial or trial.
3. There is no imperative to use summary judgment in every case but consideration should be given to summary judgment whenever appropriate. Partial summary judgment is not recommended unless the moving party can show that it will be cheaper and quicker than a trial and can be argued without the risk of inconsistent findings of fact.
4. When weighing credibility issues on a summary judgment motion the Court will assess the context of the evidence including the timing and the circumstances under which the evidence was acquired and the availability and possible omission of material evidence in the Court record in coming to their decision.
5. A mini trial is not intended to allow a party to buttress its deficient evidentiary record, is not intended as a 'second kick at the can' and is a tool only available to the Court and not a party. Further, while mini trials may be useful, they are not necessary if credibility can be properly assessed based on the evidentiary record already before the court.
6. Allegations of collateral oral agreements and misrepresentations relied on by a party to alter or defeat an executed contract must be assessed by the court using its enhanced fact-finding powers and cannot be dismissed at the first stage of the Hryniak Conversely, the subjective intention or understanding of a party to a written contract does not interfere with the plain reading of the written contract.

Of particular interest is Royal Bank of Canada v. 1643937 Ontario Inc, 2021 ONCA 98, where the Ontario Court of Appeal found that there was a genuine issue requiring a trial, reversing the finding of summary judgment at the first stage of the Hryniak test. The Court of Appeal found that the motion judge erred in dismissing unchallenged material evidence at the first stage of the Hryniak test, granting summary judgment to the Plaintiff, without using the enhanced fact-finding powers set out in Rule 20.04(2.1) and (2.2) of the Rules of Civil Procedure. This case is helpful in assessing when a judge is required to exercise these enhanced fact-finding powers.

Pomata Investment v Yang, 2021 ONSC 6786 ('Pomata Investment') dealt with a dispute involving an executed agreement of purchase and sale and an alleged side oral agreement. Here, the Court granted summary judgment finding that there was no genuine issue requiring a trial despite the alleged side oral agreement. The court also rejected the Defendants' argument that this was a partial summary judgment motion given that the Defendants had advanced a third-party claim against their realtor. The Court engaged its enhanced fact-finding powers illustrating how a failure to produce available evidence can result in an adverse inference regarding credibility and that the existence of a third-party claim is not fatal to a summary judgment motion in the main action.

In Oxygen Working Capital Corp. v Mouzakitis 2021 ONSC 1907 ('OWCC') Justice Myers methodically sets out the test for summary judgment, providing a non-exhaustive list of considerations taken into account by the Court when ascertaining whether to engage in the second stage of the Hryniak test. He followed the guidance given by the Court of Appeal in RBC by using his enhanced fact-finding powers to weigh evidence, assess credibility, and grant summary judgment in spite of the allegation of a side oral agreement purporting to amend a written loan agreement.

In each of these cases the courts were faced with a summary judgment motion regarding a collateral oral agreement or alleged misrepresentation impacting a written contract. While the outcomes differ , the analytical process which the court engages in does not. These cases, analyzed together, provide clear insight into the courts' analysis of evidentiary and credibility issues raised during the motions and are highly instructive to parties considering or facing summary judgment.

Royal Bank of Canada v. 1643937 Ontario Inc, 2021 ONCA 98

In RBC v 1643937 Ontario Inc, ('RBC') Royal Bank of Canada ('RBC') made a loan to Ottawa Valley Glass Enterprises Ltd. ('OVG') which was personally guaranteed by the owners Lorraine, Patrick, Shawn and Beverly McHale. OVG was unable to meet its repayment obligations and ultimately went bankrupt. RBC then sought to recover the amount owing by OVG from the McHales on the personal...