Oct 20, 2020

COURT OF APPEAL SUMMARIES (October 13 – October 16, 2020)

Chaba v. Khan, 2020 ONCA 643 (CanLII)

[Doherty, Hoy and Jamal JJ. A.]

COUNSEL:

M.A. Khan, for the appellants

R.H. Parker, for the respondent

Keywords: Contracts, Debtor-Creditor, Guarantees, Torts, Fraudulent Misrepresentation, Inducing Breach of Contract, Civil Procedure, Reasonable Apprehension of Bias, Costs, Courts of Justice Act, R.S.O. 1990, c. c.43, s. 131, Mariani v. Lemstra (2004), 246 D.L.R. (4th) 489 (Ont. C.A.), Drouillard v. Cogeco Cable Inc., 2007 ONCA 322, R. v. Sahdev, 2017 ONCA 900, R. v. Aird, 2013 ONCA 447, R v. Gravesande, 2015 ONCA 774, R. v. Ibrahim, 2019 ONCA 613, Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, Boucher v. Public Accountants Council for Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.)

FACTS:

The individual appellant, a lawyer, provided a loan to a third party couple to finance the purchase of a home. When the borrowers did not make their monthly payments, the appellant issued a notice of sale and obtained an order for possession.

The respondent, a mortgage broker, became involved and tried to arrange alternative financing for the borrowers. The appellant and the borrowers later agreed to settle the debt. In a schedule to the settlement, the borrowers signed a promissory note in favour of the appellant, and the respondent signed as guarantor.

The respondent continued to seek financing for the borrowers, but in the meantime disputed his role as guarantor. He, in conjunction with the borrowers, sued the appellant for fraudulent misrepresentation. The appellant settled with the borrowers, but counterclaimed against the respondent, likewise claiming fraudulent misrepresentation, in addition to alleging that the respondent induced a breach of contract by undermining the original settlement for the debt.

The trial judge dismissed the appellant’s counterclaim, and held that the appellant’s settlement with the borrowers with respect to the debt released the respondent of any obligations as a guarantor. The appellant raised at least 14 issues on this appeal. The Court categorized these issues into six topics.

ISSUES:

(1) Did the trial judge err in dismissing the claim for fraudulent misrepresentation?

(2) Did the trial judge err in dismissing the claim for inducing breach of contract?

(3) Did the trial judge err in dismissing the claim to enforce the respondent’s guarantee?

(4) Did the trial judge approach the evidence unfairly by applying differential standards of scrutiny?

(5) Did the trial judge’s interventions give rise to a reasonable apprehension of bias?

(6) Did the trial judge err in his costs ruling?

HOLDING:

Appeal dismissed.

REASONING:

(1) No. The trial judge correctly summarized the elements of fraudulent misrepresentation as laid out in Mariani v. Lemstra (2004), 246 D.L.R. (4th) 489 (Ont. C.A.): (i) defendant made a false representation of fact; (ii) defendant knew the statement was false or was reckless as to its truth; (iii) defendant made the representation with the intention that it would be acted upon by the plaintiff; (iv) the plaintiff relied upon the statement; and (v) the plaintiff suffered damages as a result.

(2) No. Once again, the trial judge correctly cited the four elements of inducing breach of contract as established in Drouillard v. Cogeco Cable Inc., 2007 ONCA 322: (i) plaintiff must have a valid and enforceable contract with the defendant; (ii) defendant was aware of the existence of the contract; (iii) defendant intended to and did procure the breach of the contract; and (iv) because of the breach, the plaintiff suffered damages.

Again, the Court was very brief in its analysis, and limited its comments to finding that there was no basis to interfere with the trial judge’s conclusion on this issue.

(3) No. The trial judge accepted that a lender may have separate claims against a borrower and their guarantor. However, in this case, it was not a term of the appellant’s settlement with the borrowers that he could maintain his pursuit of the respondent. Instead, the settlement provided for the “payment of the debt in its entirety.” Again, there was no basis to interfere with these findings.

(4) No. The Court emphasized that credibility findings are part of the bedrock of a trial judge’s function, and as such, attract a very high degree of deference on appeal (R. v. Sahdev, 2017 ONCA 900; R. v. Aird, 2013 ONCA 447). To challenge these findings, the appellant “must identify something clear in the trial judge’s reasons or the record indicating that a different standard of scrutiny was applied” (R v. Gravesande, 2015 ONCA 774). The Court concluded that the appellants did not meet this threshold.

(5) No. The appellant submitted that the trial judge’s apparently excessive questioning during his final submissions compromised his ability to cover all the issues before the court. However, the Court found no merit to these submissions, and pointed out that the questions involved nothing more than standard discussion between the court and counsel. This fell well short of meeting the test of a reasonable apprehension of bias as assessed from the perspective of a reasonable observer present throughout the trial (R. v. Ibrahim, 2019 ONCA 613).

(6) No. The Court stated that a costs award should only be set aside on appeal if the trial judge made an error in principle, or if the award is plainly wrong (Hamilton v. Open Window Bakery Ltd., 2004 SCC 9). This is a stringent test, and once again one that the appellants had failed to meet. The trial judge was well within his rights to exercise discretion in his costs award pursuant to s. 131 of the Courts of Justice Act, provided that the amount is “fair and reasonable” (Boucher v. Public Accountants Council for Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.)). The Court found no error in this exercise of discretion, and therefore no basis to intervene.