Case: Healthy Lifestyle Medical Group Inc. v. Chand Morningside Plaza Inc., 2019 ONCA 6

Keywords: Summary judgment, pleadings, defence

Synopsis:

Rochak Badhwar needed a loan for business ventures involving multidisciplinary health care centres and asked his parents to sign a guarantee. He defaulted on the loan and the Respondents, Chand Morningside Plaza Inc. and Joshi Group of Companies Ltd., sued to recover the debt. A motion judge granted summary judgment in favour of the Respondents for close to $1 million.

The Badhwars appealed and argued there was no consideration for the guarantee because it was signed after the loan monies had already been advanced. Past consideration is not valid consideration. They also stated that they did not personally benefit from the guarantee. The Court of Appeal allowed the appeal, set aside the summary judgment and directed that the matter proceed to trial on all issues.

The Court found that the motion judge erred by refusing to consider a defence which she had observed “could have potentially established a genuine issue requiring a trial on this motion” because it was not properly pleaded. When the amended statement of defence was “read generously”, it pleads the defence of no consideration and therefore it should have been considered.

Importance:

For the Badhwars and the Court of Appeal, the importance of the appeal was clear: “If the judgment stands, the appellants will lose their house” (para. 2). From a legal perspective, the decision serves as a reminder that although summary judgment decisions attract appellate deference, a motion judge risks being overturned where their analysis is “sparse and perfunctory” and does “not address the full scope of the defences raised”.

The Court of Appeal at para. 7 reiterated the importance of principles applicable to considering pleadings:

The motion judge did not consider the principles by which a court assesses the adequacy of pleadings. In considering whether a pleading discloses a reasonable defence, a court is obliged to read the pleading generously to allow for drafting deficiencies, and if the defence has some chance of success, it must be permitted to proceed. A statement of defence is required to contain the material facts on which a party will rely. Here the facts on which the legal argument about consideration would be based were alleged.

In allowing the appeal, the Court of Appeal also made reference to its line of cases that caution against partial summary judgment where it is possible that the trial judge “will develop a fuller appreciation of the relationships and the transactional context than the motions judge” which could risk “inconsistent findings and substantive injustice”: Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450 at para 37; Butera v. Chown, Cairns LLP, 2017 ONCA 783, and Mason v. Perras Mongenais, 2018 ONCA 978. The message is clear in Butera at para. 29:

The caution expressed pre-Hryniak in Corchis is equally applicable in the post-Hryniak world. In addition to the danger of duplicative or inconsistent findings considered in Baywood and CIBC, partial summary judgment raises further problems that are anathema to the stated objectives underlying Hryniak.

lthough the Supreme Court of Canada called for a culture shift in Hryniak v. Mauldin, 2014 SCC 7 and encouraged the use of summary judgment, it still remains the case that it should not be granted where there is a genuine issue requiring a trial.

Counsel for the Applicants: Paul Robson and Karanpaul Randhawa

Counsel for the Respondent: Jonathan Rosenstein (Rosenstein Law, Toronto)

Counsel for the Intervenors: Scott Hutchison and Lauren Mills Taylor (Henein Hutchison LLP, Toronto)

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