COURT OF APPEAL
    FOR ONTARIO

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

DATE: 20210219

DOCKET: C67540

Doherty, Roberts
    and Harvison Young JJ.A.

BETWEEN

Royal Bank of Canada

Plaintiff (Respondent)

and

1643937 Ontario Inc.
,
Lorraine
    MacDonald
,

Shawn McHale,
Patrick McHale
,

and
Beverly McHale

Defendants (
Appellants
)

Jonathan C. Lisus and
    Zain Naqi, for the appellants

J. Ross Macfarlane,
    for the respondent

Heard: November
    25, 2020 by video conference

On appeal from the judgment of Justice Heather J. Williams of
    the Superior Court of Justice, dated September 16, 2019, with reasons reported
    at 2019 ONSC 5145, and from the costs order, dated January 2, 2020, with
    reasons reported at 2020 ONSC 44.

Roberts J.A.:

A.

OVERVIEW

[1]

The appellants, Lorraine MacDonald, Patrick McHale,
    and Beverly McHale, appeal from the judgment for the payment of monies owing
    under the personal guarantees they provided to the respondent, the Royal Bank
    of Canada, following their competing motions for summary judgment.

[2]

At the commencement of oral submissions, the
    appellants abandoned their appeal from the motion judges dismissal of their counterclaims
    and further narrowed the issues on appeal.

[3]

The issue put forward by the appellants on this
    appeal was: did the motion judge err in granting the respondents motion for summary
    judgment because there was no genuine issue requiring a trial about the scope
    of the appellants liability to the respondent under their personal guarantees?
    The appellants submit that there was a genuine issue requiring a trial, as the
    respondent misrepresented to them that their liability under their personal guarantees
    was joint and several with a collective exposure limited to $600,000.

[4]

For the reasons that follow, I agree that the
    motion judge erred and would remit for trial the narrow issue of determining the
    amount that each appellant owes to the respondent under their respective personal
    guarantees.

B.

Background

(1)

Facts

[5]

The appellants provided personal guarantees as
    security for several million dollars in loan advances made by the respondent to
    Ottawa Valley Glass Enterprises Ltd., later named OVG Inc. (OVG), a family
    business in which the appellants had been directors and shareholders. Ms.
    MacDonald (whose husband, Jack MacDonald, founded and then sold his shares in and
    retired from the business), Shawn and Patrick McHale are siblings. Patrick and
    Beverly McHale are spouses. Ms. MacDonald resigned as a director of OVG in 2006
    and sold her shares to her siblings, Patrick and Shawn, in 2006 and 2011, respectively.
    Although they held 51 percent of the shares in OVG, Patrick and Beverly McHale had
    relatively little involvement with OVG. Shawn McHale actually operated the business.

[6]

The appellants personal guarantees came about after
    Shawn McHale approached the respondent with a request for new financing. On September
    28, 2007, the respondent offered a credit facility in the amount of $1,000,000.
    As security for the loan, the respondent required a general security agreement
    over OVGs assets, together with a personal guarantee and postponement of claim
    in the amount of $300,000, signed by Ms. MacDonald on October 10, 2007, as well
    as a postponement and assignment of claims in favour of the respondent from each
    of Shawn, Patrick, and Beverly McHale, which they executed around the same
    time.

[7]

In the fall of 2008, Shawn McHale requested and
    obtained a further increase to OVGs operating line of credit from $1,000,000
    to $1,500,000. The respondent and OVG entered into a new credit facilities
    letter, dated December 9, 2008. At the request of the respondent, Shawn McHale
    executed a personal guarantee in the amount of $600,000 on December 11, 2008,
    and Patrick and Beverly McHale executed personal guarantees in the amount of
    $600,000 on December 15, 2008. Ms. MacDonald did not sign a new personal
    guarantee.

[8]

OVG struggled financially and began to default
    on its loan obligations to the respondent in the fall of 2012. In January 2013,
    the respondent proposed a forbearance agreement with stringent conditions that was
    rejected by OVG and the appellants. On February 12, 2013, the respondent demanded
    payment from OVG under its various loan agreements and from the appellants under
    their personal guarantees.

[9]

As a result of the respondents demand, on
    February 22, 2013, OVG filed a notice of intention to make a proposal under the
Bankruptcy and Insolvency Act
, R.S.C. 1985, c. B-3. In an attempt to
    restructure OVG, between February and December 2013, Patrick McHale indicated
    that he and his wife, Beverly, invested $1,958,498 of their own money into OVG.
    The restructuring did not succeed. On December 12, 2013, OVG made an assignment
    into bankruptcy.

(2)

Court Proceedings

[10]

The respondent brought an action to recover over
    $3 million owing under the guarantees of OVGs indebtedness. Patrick and Beverly
    McHale counterclaimed, alleging the respondent improvidently realized on OVGs
    assets, thereby triggering the bankruptcy of OVG. Shawn McHale made an assignment
    into bankruptcy, and the respondents action was stayed against him.
    Examinations for discovery were held. The parties brought competing motions for
    summary judgment. In support of its motion, the respondent filed the affidavit
    of its manager in the department of Special Loans and Advisory Services, Peter
    Gordon. Ms. MacDonald, Patrick, and Shawn McHale filed affidavits. No cross-examinations
    on the affidavits were held, but the parties relied on the transcripts from the
    various discovery examinations.

[11]

On her examination for discovery, dated December
    15, 2015, Ms. MacDonald deposed that she believed she signed her personal guarantee
    in the presence of Kevin Bossy, an account manager with the respondent. Although
    she could not remember during her examination the conversations she had with Mr.
    Bossy, she said it had always been her understanding that the personal guarantee
    she signed in 2007 was joint and several and thereby limited to $300,000 with
    Shawn, Patrick, and Beverly McHale, and that she did not sign an increased
    guarantee to $600,000 in 2008 because, by then, she had left OVG and disposed
    of the majority of her shares.

[12]

Shawn McHales examination for discovery
    occurred on December 14, 2015. His understanding was that the personal guarantees
    were for a total of $600,000, although he could not recall the bank representative
    telling him whether they were joint and several or individual guarantees. He deposed
    that he was told that the guarantees could be signed in counterpart and would
    still be binding, which informed his assumption that the guarantees were joint
    and several. He also relied on the language in the guarantee that the undersigned
    and each of them (if more than one) hereby jointly and severally agree(s) with
    the bank as follows. He believed the guarantees were joint and several among him,
    Patrick, and Beverly McHale because of the language of the guarantee that said
    the guarantees were joint and several and could be signed in counterparts. In
    his affidavit, sworn on November 5, 2017, Shawn McHale stated the following, at
    para. 13:

Again, based on discussions I had with Mr. Bossy
    of the [respondents] Renfrew branch, I understood that the total liability under
    the Replacement Guarantees [was] limited to $600,000 joint and severally
    between Pat, Bev, and I. Lorraine [MacDonald] never signed the document. This
    understanding is reflected in OVGs financial statements for year-end March 31,
    2009 and all subsequent year-ends.

[13]

On his examination for discovery, dated December
    14, 2015, Patrick McHale testified that he signed his guarantee in a Tim Hortons
    restaurant where he met the respondents representative. He said he understood the
    guarantee was for a total indebtedness of $600,000 as between him and his wife,
    Beverly, and that the respondents representative told them it was for $600,000.
    They were never told anything different than that, and if they had been told otherwise,
    they would not have signed the guarantees. In his affidavit, sworn on November 3,
    2016, Patrick McHale stated the following, at para. 11:

Based on information provided and representations
    made by Mr. Kevin Bossy of the [respondent], it was my understanding and belief
    that my personal liability under the Replacement Guarantee was joint and
    several with my wife Bev, Shawn and Lorraine. I understood and believed that the
    collective maximum personal exposure against all of us was $600,000 and not
    $600,000 each, as the [respondent] is claiming.

[14]

Beverly McHale deposed during her examination
    for discovery, held on December 14, 2015, that she and Patrick met with Mr.
    Bossy or his successor, Milton, at a Tim Hortons restaurant to sign the guarantee.
    She understood that the $600,000 guarantee was a total amount shared by Patrick,
    Shawn, and her, and that it was never explained to them that it would be
    $600,000 for each of them. Unlike Patrick and Shawn McHale, and Ms. MacDonald, Beverly
    McHale did not file an affidavit on the motions for summary judgment.

[15]

The respondent filed no affidavit from Mr. Bossy
    in response to the appellants evidence concerning their understanding of the scope
    of liability under their personal guarantees and their discussions with the respondents
    representatives. The respondent did not cross-examine Ms. MacDonald, Patrick,
    or Shawn McHale on their affidavits.

(3)

The Motion Judges Reasons

[16]

The motion judge held that there was no genuine
    issue requiring a trial in respect of the validity and enforceability of the personal
    guarantees and that they were valid and enforceable. She rejected the
    appellants allegations that the respondent, through its employee, Mr. Bossy, who
    was the account manager for their bank accounts, had misrepresented the scope of
    the liability under their personal guarantees, which they maintained was joint
    and several with a collective exposure limited to $600,000.

[17]

At paras. 55-56 of her reasons, the motion judge
    explained why she rejected the appellants allegations of misrepresentation:

There is no evidence to suggest that any of these
    circumstances [of
non est factum
, unconscionability, fraud, misrepresentation,
    or undue influence] existed in this case. Although [Patrick] said in his
    affidavit that Mr. Bossy of [the respondent] had made representations that left
    [Patrick] with the understanding and belief that his $600,000.00 liability
    under the guarantee was shared with his wife and his brother, I cannot accept that
    Mr. Bossy made any misrepresentations to this effect to [Patrick]. [Patrick] provided
    no particulars of what Mr. Bossy said to him. [Patrick] did not give evidence
    at his examination for discovery that he had relied on any representations made
    by Mr. Bossy and there was no evidence that [Patrick] had ever corrected his examination
    for discovery evidence.

[Patricks] evidence about
    Mr. Bossy was not corroborated by [Beverly], who signed her guarantee at the
    same time and who had an opportunity to file an affidavit in response to [the
    respondents] motion and in support of her own but did not do so.

[18]

The motion judge went on to determine that even
    if she had accepted the appellants allegations of misrepresentation, the entire
    agreement clause contained in para. 13 of the guarantees precluded the
    appellants from relying on any representations that were not set out in the
    guarantees themselves.

[19]

Further, having rejected the allegations of
    misrepresentation, the motion judge did not accept the appellants argument
    that their liability was shared, given that each of the appellants signed a separate
    guarantee that made no reference to a guarantee or guarantees signed by anyone
    else, and that para. 9 of the guarantees provided that each guarantee was in addition
    to and not in substitution for any other guarantee, by whomsoever given.

[20]

The motion judge allowed the respondents motion
    for summary judgment and granted judgment to the respondent against Ms.
    MacDonald in the amount of $300,000, Patrick McHale in the amount of $600,000, and
    Beverly McHale in the amount of $600,000, plus prejudgment and postjudgment interest.
[1]
The
    motion judge found that Patrick and Beverly McHales counterclaims of improvident
    realization of OVGs assets was an alleged wrong to OVG that they had no capacity
    to assert. She therefore dismissed the counterclaims. She ordered that the
    appellants jointly and severally pay costs to the respondent on a substantial indemnity
    basis in the all-inclusive amount of $84,490.38.

C.

The parties positions

[21]

The appellants submit that the motion judge erred
    in granting summary judgment against the appellants in the total amount of
    $1,500,000, plus interest. They do not challenge that the loan advances were
    made, and they concede some indebtedness to the respondent under their personal
    guarantees. However, they say that the motion judge erred in failing to find that
    there was a genuine issue requiring a trial as to whether the respondent misrepresented
    the scope of the appellants liability under their personal guarantees. The appellants
    maintain that their total joint and several liability under the guarantees is limited
    to $600,000. They argue that the motion judges reasons are insufficient, as
    she did not direct herself to key pieces of evidence. Further, they argue that she
    failed to recognize that summary judgment was not appropriate for this issue,
    as the record before her contained real credibility issues that required careful
    study. As such, some form of oral hearing was required to determine this issue
    and make the required credibility findings.

[22]

The respondent argues that the motion judge made
    no error, as she based her decision on the clear wording of the personal
    guarantees signed by the appellants. According to the respondent, the appellants
    failed to put their best evidentiary foot forward. As such, their evidence about
    misrepresentations made by the respondent to the appellants was simply insufficient
    and not accepted by the motion judge. The appeal should therefore be dismissed.

D.

Analysis

(1)

The Framework
    for Summary Judgment

[23]

At the heart of this appeal is the motion judges
    approach to summary judgment and, specifically, her treatment of the evidence
    and record before her. Absent an error of law, a misdirection, or the creation
    of an injustice through a decision that is clearly wrong, a motion judges
    determination of these questions is generally entitled to considerable
    deference on appeal:
Hryniak v. Mauldin
, 2014 SCC 7, [2014] 1 S.C.R. 87,
    at paras. 81-84. However, here, appellate intervention is required, as the
    motion judge fell into error and misdirected herself because she failed to determine
    whether summary judgment was appropriate, having regard to the entire evidentiary
    record and the
Hryniak
analytical framework.

[24]

This determination required the motion judge to
    follow the analytical approach set out in
Hryniak
, at para. 66, which
    is summarized as follows:

1.

First, the motion judge should have determined
    if there was a genuine issue requiring a trial based only on the evidence before
    her, without using the enhanced fact-finding powers under r. 20.04(2.1) of the
Rules
    of Civil Procedure
, R.R.O. 1990, Reg. 194.

2.

Second, if there appeared to be a genuine issue
    requiring a trial, the motion judge should have determined if the need for a
    trial could be avoided by using the enhanced powers under r. 20.04(2.1)  which
    allowed her to weigh evidence, evaluate the credibility of a deponent, and draw
    any reasonable inference from the evidence  and under r. 20.04(2.2) to order
    that oral evidence be presented by one or more parties.

[25]

While summary judgment is an important tool for enhancing
    access to justice and achieving proportionate, timely, and cost-effective adjudication,
    there is no imperative on the court to use it in every case:
Trotter Estate
,
    2014 ONCA 841, 122 O.R. (3d) 625, at para. 49;
Lesenko v. Guerette
,
    2017 ONCA 522, 416 D.L.R. (4th) 349, at para. 30. As affirmed by the Supreme
    Court in
Hryniak
, at para. 28, the overarching goal remains to have a
    fair process that results in a just adjudication of disputes.

[26]

Indeed, notwithstanding the parties agreement
    that the action and counterclaims could be determined by summary judgment, it is
    still incumbent on the motion judge to decide whether it is appropriate to
    grant summary judgment:
Rules of Civil Procedure
,

r. 20.04(2)(b).

[27]

In determining whether summary judgment is appropriate,
    motion judges are required to engage with the
Hryniak
analytical framework
    process, as described above, look at the evidentiary record, determine whether
    there is a genuine issue requiring a trial, and assess, in their discretion,
    whether resort should be taken to the enhanced powers under rr. 20.04(2.1) and
    (2.2) of the
Rules of Civil Procedure
. To do otherwise runs the risk
    that, in an effort to dispose of a case in a summary fashion, motion judges
    will not properly analyze the evidence:
Trotter
, at para. 49. Unfortunately,
    that is what occurred here.

(2)

The Motion Judges Approach

[28]

The motion judges sole brief self-direction
    about the applicable analytical framework appears at para. 5 of her reasons:

Rule 20.04(2) of the
Rules of Civil Procedure
provides that the court shall grant summary judgment if it is satisfied that
    there is no genuine issue requiring a trial with respect to a claim or defence.
    A trial is not required if a summary judgment motion can achieve a fair and
    just adjudication, if the process allows the judge to make the necessary findings
    of fact and apply the law to those facts and if the motion is a proportionate,
    more expeditious and less expensive means to achieve a just result.

[29]

It was, of course, unnecessary for the motion
    judge to recite
verbatim
the applicable principles from
Hryniak
,
    so long as she applied them throughout her decision. However, her reasons do not
    demonstrate that she did. The motion judge did not set out an adequate analysis
    leading to her conclusion at para. 100(1) that there is no genuine issue
    requiring a trial in respect to the validity and enforceability of the
    guarantees.

[30]

In order to come to this conclusion, the motion
    judge was required to analyze the entirety of the evidentiary record before her
    and determine whether there was a genuine issue requiring a trial with respect
    to the appellants allegations of misrepresentation and, if so, whether the
    need for a trial could be avoided by using the enhanced powers under rr.
    20.04(2.1) and (2.2) of the
Rules of Civil Procedure
. Unfortunately,
    she failed to do so.

[31]

Specifically, the motion judges reasons do not
    adequately explain why she rejected the appellants unchallenged evidence that,
    if accepted, would support their allegation of misrepresentation, particularly in
    the absence of any evidence to the contrary by the respondent. The appellants
    and Shawn McHales unequivocal and unchallenged evidence was that they gave
    their guarantees on the understanding that their total obligation was $600,000,
    joint and several, and that this understanding came from the guarantees
    themselves and discussions with the respondents representatives. Further,
    according to Shawn McHales affidavit, at para. 13, the understanding of the
    appellants was recorded in the year-end financial statements of OVG. While Mr.
    Gordon gave evidence regarding his interpretation of the guarantees in an
    examination for discovery, dated September 21, 2015, he was unable to indicate
    whether the liability was properly explained to the appellants, as he said the
    account manager would possess that information.

[32]

The motion judge failed to reference Shawn
    McHales evidence, and her apparent rejection of the evidence given by Patrick
    and Beverly McHale was conclusory and in part appears to be based on a misapprehension
    of their evidence. Other than the guarantee documents and the evidence of Mr.
    Gordon, the respondent filed no other evidence challenging the appellants and
    Shawn McHales understanding of the scope of the guarantees, nor were Patrick and
    Shawn McHale, or Ms. MacDonald cross-examined on their affidavits. The motion judge
    failed to address this absence of evidence.

[33]

With respect to Patrick McHales evidence, while
    the motion judge was entitled to reject it, she erred by failing to provide
    adequate reasons for doing so. Notably, she failed to explain why she labelled
    Patrick McHales evidence as lacking particularity and why her observation that
    certain particulars from his affidavit were not mentioned on his examination for
    discovery apparently led her to reject his unchallenged evidence.
The
    motion judges concerns about Patrick McHales evidence that she did identify,
    as noted above at para. 17 of these reasons, were not sufficient to reject his
    evidence out of hand, especially given he had not been cross-examined on his
    affidavit and there was evidence that, if accepted, could corroborate his
    evidence. Moreover, his evidence was not speculative and provided some
    particulars of his dealings with the respondent that were corroborated by his
    brother and wife.

[34]

However, even if the motion judge did not err in
    rejecting Patrick McHales evidence, she was required to go beyond it and
    assess it together with the other evidence in the record that, if accepted,
    would support the appellants version of events and corroborate Patrick McHales
    evidence. She failed to do so.

[35]

Notably, Shawn McHales evidence was that the respondent
    had misrepresented the nature of the guarantees and indicated the guarantees could
    be signed in counterparts, and that the appellants understanding was reflected
    in OVGs year-end financial statements. Similarly, while Beverly McHale did not
    file an affidavit on the motions, the parties relied on her discovery
    transcript in which she provided some corroboration of her husbands evidence
    concerning the place of the meeting with the respondents representative and
    the appellants understanding of the scope of their liability under their
    guarantees as a result of discussions with the respondents representative. The
    motion judges reasons are silent with respect to Shawn McHales evidence and
    do not explain why she determined that Beverly McHales evidence did not corroborate
    her husbands evidence.

[36]

Simply put, if the motion judge rejected Shawn
    McHales evidence, she was required to give her reasons. Given that Beverly McHales
    examination for discovery did corroborate her husbands evidence in some
    particulars, the motion judge erred by stating that it did not, without explaining
    why it did not. It was not necessary for Beverly McHale to repeat her evidence
    in an affidavit, as the motion judge appears to suggest.

[37]

While each piece of evidence by itself may not
    have been sufficient to establish the appellants allegations of misrepresentation,
    the motion judge was required to consider the evidence as a whole to determine
    whether, in all of the circumstances of the case, based on the entire record before
    her, she was able to determine the material issues in dispute without requiring
    a trial. She failed to do so.

[38]

As
    part of this balancing exercise that she was required to undertake, the motion
    judge further erred in failing to address the absence of evidence by the
    respondent to challenge the appellants affidavits and transcripts. Rather, in
    evaluating Patrick McHales evidence, she simply stated that she could not
    accept that Mr. Bossy had made the misrepresentations to Patrick. This was an
    error. In this case, the respondents choice not to cross-examine Patrick or
    Shawn McHale or Ms. MacDonald on their respective affidavits, and not to tender
    evidence in response to the appellants evidence of misrepresentation, ought to
    have been taken into consideration by the motion judge before she rejected the
    appellants evidence and accepted the respondents position on the key disputed
    factual issues:
2212886 Ontario Inc. v. Obsidian Group
    Inc.
, 2018 ONCA 670, 83 B.L.R. (5th) 186, at para. 49, leave to
    appeal refused, [2018] S.C.C.A. No. 391.

[39]

Since the evidence adduced by the appellants was
    capable of supporting an allegation of misrepresentation and was unchallenged
    by the respondent in cross-examination, it was incumbent upon the motion judge
    to explain why she rejected the evidence:
Neuberger v. York
,
    2016 ONCA 191, 129 O.R. (3d) 721, at para. 124, leave to appeal refused, [2016]
    S.C.C.A. No. 207;
Trotter
, at para. 54;
Lesenko
, at para. 19.
Her conclusory
    statements were insufficient. While she recited the evidence, she did not weigh
    it, evaluate it, or make findings of credibility as she was required to do in
    this case. She could not simply prefer one position over another without providing
    an explanation that is sufficient for appellate review:
Gordashevskiy v.
    Aharon,
2019 ONCA 297, at para. 6.

[40]

Rather, s
he was required to undertake a credibility
    analysis pursuant to the expanded judicial powers under r. 20.04(2.1) of the
Rules
    of Civil Procedure
to weigh the evidence, evaluate the credibility of the
    appellants deponents, and draw reasonable inferences:
Trotter
, at
    para. 54. Further, if the motion judge determined she could not assess credibility
    solely on the written record, she should have considered whether oral evidence
    or a trial were required:
Trotter
, at para. 55.

[41]

While
    summary judgment may have been appropriate had the motion judge carried out the
    requisite analysis under r. 20.04(2.1) of the
Rules of
    Civil Procedure

and exercised her powers to
    hear oral evidence pursuant to r. 20.04(2.2), she did not seek to do so.

[42]

I agree that fairness requires a trial of the
    narrow issue framed by the appellants before another judge of the Superior Court
    of Justice.

[43]

While not pressed in argument by the parties, for
    the purposes of the trial of the narrow issue, it is important to address the motion
    judges related alternative conclusion. As earlier noted, the motion judge
    concluded that even if she had found that the respondent had made the alleged misrepresentations
    to the appellants, the effect of the entire agreement clause in the personal guarantees
    precluded the appellants from relying on any such representations that were not
    set out in the guarantees themselves. In my view, this conclusion was
    erroneous. It is well-established that the defence of misrepresentation is not
    precluded or diminished by reason only of the existence of an entire agreement
    clause:
Bank of Nova Scotia v. Zackheim
(1983), 3 D.L.R. (4th) 760
    (Ont. C.A.), at pp. 761-62;
Beer v. Townsgate I Ltd.
(1997), 152
    D.L.R. (4th) 671 (Ont. C.A.), at paras. 25-32, leave to appeal refused, [1997]
    S.C.C.A. No. 666. I would not uphold the motion judges finding on this issue.

E.

Disposition

[44]

I would allow the appeal and set aside paras. 1,
    3 and 4 of the motion judges judgment, dated September 16, 2019, and the costs
    order, dated January 2, 2020. However, for greater certainty, I would not disturb
    the motion judges conclusions at paras. 100 1. and 2. of her reasons that there
    is no genuine issue requiring a trial in respect of the validity and enforceability
    of the appellants personal guarantees and that the guarantees are valid and enforceable.

[45]

The narrow issue requiring a trial is the scope of
    the appellants liability under their personal guarantees, having regard to the
    appellants allegations of misrepresentations that they say were made by the
    respondent.

[46]

As agreed in oral submissions, I would allow the
    appellants their partial indemnity costs of the appeal in the amount of $15,000,
    which is inclusive of disbursements and applicable taxes.

[47]

I would also direct that if the parties cannot
    agree on the disposition of the costs before the motion judge, they should forward
    brief written submissions of no more than two pages, plus a costs outline, within
    seven days of the release of these reasons.

Released: February 19, 2021 (D.D.)

L.B.
    Roberts J.A.

I
    agree. Doherty J.A.

I
    agree. Harvison Young J.A.

[1]

Judgment
    was also granted against
1643937
Ontario Inc., however,
    it did not appeal the judgment or take any position on the appeal.


COURT OF APPEAL FOR ONTARIO

CITATION: Royal Bank of Canada v. 1643937
    Ontario Inc., 2021 ONCA 178

DATE: 20210322

DOCKET: C67540

Doherty, Roberts
    and Harvison Young JJ.A.

BETWEEN

Royal Bank of Canada

Plaintiff (Respondent)

and

1643937 Ontario Inc.
,
Lorraine
    MacDonald
,

Shawn McHale,
Patrick McHale
,

and
Beverly McHale

Defendants (
Appellants
)

Jonathan C. Lisus and
    Zain Naqi, for the appellants

J. Ross Macfarlane,
    for the respondent

Heard: in
    writing

On appeal from the judgment of Justice Heather J. Williams of
    the Superior Court of Justice, dated September 16, 2019, with reasons reported
    at 2019 ONSC 5145, and from the costs order, dated January 2, 2020, with
    reasons reported at 2020 ONSC 44.

COSTS ENDORSEMENT

[1]

On February 19, 2021, we allowed the appeal in
    part from the dismissal of the appellants action with costs to the appellants
    of $15,000 as agreed by the parties. With respect to the appellants, we set
    aside the $84,490.38 costs award that was granted by the motion judge to the respondent
    jointly and severally against the appellants and 1643937 Ontario Inc. We remitted
    for trial the narrow issue of the scope of the appellants liability under
    their personal guarantees, having regard to the appellants allegations of
    misrepresentations that they say were made by the respondent. We otherwise
    dismissed the appeal.

[2]

The parties have not reached an agreement on the
    disposition of the costs from their respective motions for summary judgment. We
    invited the parties to provide brief written submissions, plus costs outlines,
    which they have delivered, and we have reviewed.

[3]

The appellants seek partial indemnity costs on
    the motions in the amount of $30,000. The respondent submits that it is
    entitled to its costs on the motions in the amount of $37,500, less the $15,000
    appeal costs award granted to the appellants. The respondent says that the
    balance of the costs of the action to‑date should be reserved to the
    trial judge.

[4]

The disposition of the costs on the motions and
    the action to-date should be reserved to the trial judge. While the appellants
    prevailed on the narrow issue remitted for trial, the motions below also
    concerned several other issues, including the appellants counterclaims, that
    were not pursued on appeal. The trial judge will be best placed to assess these
    costs in the context of the final disposition of the action.

[5]

Accordingly, we order that the costs on the
    parties respective motions for summary judgment and the action to-date are
    reserved to the trial judge.

[6]

In response to the respondents inquiry, we clarify
    that the motion judges $84,490.38 costs order was set aside in relation to the
    appellants only but still stands as against
1643937 Ontario Inc.

[7]

The respondent has invited us to revisit
    paragraph 44 of our reasons. We see no basis to do so.

Doherty
    J.A.

L.B.
    Roberts J.A.

A.
    Harvison Young J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Royal Bank of Canada v. Azkia, 2021 ONCA 89

DATE: 20210212

DOCKET: C67753

Rouleau, Benotto and Thorburn JJ.A.

BETWEEN

Royal Bank of Canada

Plaintiff/Defendant to Counterclaim

(Respondent)

and

Baharak Azkia, Diana Nekonam and Nader

Zanddizari also known as Nader Zand

Defendants/Plaintiffs by Counterclaim

(Appellants)

Hossein Niroomand,
for the
    appellants

Jeffrey Kukla, for the respondent

Heard: February 3, 2021 by videoconference

On appeal from the order of Justice Markus Koehnen of the
    Superior Court of Justice, dated November 11, 2019, with reasons reported at
    2019 ONSC 5894.

REASONS FOR DECISION

The order sought

[1]

This is an appeal of the order:

a)

granting summary
    judgment in favour of the respondent, Royal Bank of Canada (RBC) in three
    separate actions, and ordering payment of the sums owing by the plaintiffs to
    RBC;

b)

dismissing the appellants counterclaim in one action;

c)

granting RBC possession of the premises; and,

d)

vacating the certificates of pending litigation (CPLs) on the two
    properties at 56 Hawksbury Drive and 326 St. Clements Avenue (the two
    properties).

[2]

The appellants seek to overturn the dismissal of their counterclaim and
    stay the judgments pending the trial of the appellants counterclaim. They also
    seek leave to adduce new evidence on this appeal.

The basis for the claims

[3]

RBC lent money to the appellants by way of mortgages, demand loans, lines
    of credit, overdrafts and credit cards. The total principal and interest owing
    as of October 5, 2018 was approximately $4,852,286.02.

[4]

RBC commenced three separate actions on the various debts. The actions
    relate primarily to mortgages made in favour of RBC secured by the two
    properties, and a demand loan which the bank claimed was secured by a second
    mortgage on one of those properties.

[5]

The appellants filed a counterclaim in the third action seeking damages
    in the amount of $3,650,000 in connection with RBCs registration of cautions
    and two certificates of pending litigation on the two properties (the CPLs).

The motions for summary judgment

[6]

RBC brought a motion for summary judgment in each of the three actions.

[7]

The appellants did not dispute the debt, but opposed the request for summary
    judgment on the basis that there was a sufficiently close connection among the
    three actions that it would be inequitable to allow RBC to obtain summary
    judgment in respect of the three claims without first deciding the counterclaim
    and permitting the appellants to set off any award in the counterclaim against
    amounts owing in the other actions.

[8]

The appellants also took the position that the CPLs were improperly
    granted resulting in damage to the appellants which damage should be assessed
    prior to the granting of any order for summary judgment.

[9]

The motion judge summarized the appellants position at para. 46 of his
    decision as follows:

The gist of the defence is that the defendants were renovating
    326 St. Clements in order to sell it. They had a buyer, but the sale did not
    close because the certificate of pending litigation prevented the [appellants]
    from obtaining a small amount of additional financing from a third party which
    would have enabled them to complete the renovations.

[10]

On
    November 11, 2019, the motion judge granted summary judgment in favour of RBC
    in all three actions. Although he vacated the CPLs because of RBCs failure to
    make proper disclosure in the course of obtaining the CPLs on an
ex parte
motion, he dismissed the appellants counterclaim.

[11]

He
    held that the appellants had not demonstrated that there is any issue that
    requires a trial, as the counterclaim for damages was implausible and the
    defendants have not provided any evidence at all about their damages, let alone
    sufficient evidence to demonstrate that a trial is required on damages.

[12]

His
    reasons for so finding, at paras. 49-56, are set out below:

If it is true that [the appellant] Mr. Zanddizari needed only
    $100,000 to complete the renovation of 326 St. Clements, one might have expected
    Mr. Zanddizari to explain that to RBC and try to arrange additional financing.
    RBC had a material interest in completing the sale of 326 St. Clements because
    that would free up money to repay the demand loan. There is no evidence of any
    efforts by Mr. Zanddizari to enter into arrangements like this with RBC and no
    explanation for his failure to do so.

If Mr. Zanddizari had two other lenders whose loans would fund
    the renovation and bring the demand loan into good standing, one might expect
    him to advise RBC of that fact and try to enter into an arrangement whereby the
    additional loan to complete construction of 326 St. Clements would have
    priority over the certificate of pending litigation. Once again there is no
    evidence to suggest that Mr. Zanddizari tried to make such an arrangement and
    no explanation for his failure to do so.

Mr. Zanddizari provides no information about these other
    lenders. He does not disclose the lenders' names, the loan documentation or the
    terms of the loans.

Mr. Zanddizari does not describe what work was left to be
    completed on 326 St. Clements Avenue beyond describing it a small amount of
    work and appliances. He has not produced any photographs that would allow me
    to compare the renovations that had already been completed with the work that
    remained.

While he was discussing bringing the demand loan back into good
    standing between September 2017 and January 2018, Mr. Zanddizari sent the bank
    a screenshot of an account he had at CIBC showing a balance of $137,016.05. Mr.
    Zanddizari told RBC that when this deposit cleared within a few days, he would
    transfer the money into his RBC account to cover his overdue loan balance of
    $70,000. He never did so.

If Mr. Zanddizari was being honest in his statements to RBC, he
    in fact had funds that exceeded the approximately $100,000 he needed to finish
    off the renovations on 326 St. Clements Avenue. Mr. Zanddizari provided no
    explanation for why the funds in his CIBC account could not be used to complete
    the renovations on St. Clements.

Mr. Zanddizari also made no efforts to set aside the
    certificate of pending litigation. If this were truly a case of losing a sale
    of St. Clements Avenue, Mr. Zanddizari had ample time to set aside the
    certificate of pending litigation. According to Mr. Zanddizari, the purchaser
    extended the closing to February 28, 2019. This gave Mr. Zanddizari just short
    of 12 months to set the certificate of pending litigation aside, obtain
    additional funds and sell the property. He took no steps to set aside the certificate
    of pending litigation until the end of January 2019. Even then he did so only
    in response to RBC's motion for summary judgment.

Similarly, Mr. Zanddizari has provided no explanation for his
    damage claim of $3,500,000. On the record before me, it is simply a number that
    has been inserted into a counterclaim.

[13]

However,
    the motion judge dismissed RBCs request for an order for a legal or equitable mortgage
    in respect of the demand loan over the two properties. RBC had not established
    on a balance of probabilities that there was a mutual intention by the parties
    to grant a mortgage on those properties as security for the demand loan.

The issues on this appeal

[14]

The
    issues on this appeal are (1) whether the motion judge erred in finding that
    there was no genuine issue requiring a trial in respect of the appellants
    counterclaim and refusing to order a stay of execution on the judgments, and
    (2) whether the appellants should be permitted to adduce new evidence on appeal.

Analysis and conclusion

[15]

As
    explained in
Hryniak v. Mauldin
, 2014 SCC 7, [2014] 1 S.C.R. 87, at
    para. 49:

There will be no genuine issue requiring a trial when the judge
    is able to reach a fair and just determination on the merits on a summary
    judgment motion. This will be the case when the process (1) allows the judge to
    make necessary findings of fact, (2) allows the judge to apply the law to the
    facts, and (3) is a proportionate, more expeditious and less expensive means to
    achieve a just result.

[16]

The
    appellants take issue with the motion judges finding that there is no genuine
    issue for trial.

[17]

Although
    parties are required to present the best version of their case on a motion for
    summary judgment, the appellants adduced no evidence from lenders that they
    would have advanced funds even if the CPLs had not been placed on title. It was
    therefore open to the motion judge to reject the appellants evidence regarding
    damages. His findings are owed deference.

[18]

The
    motion judge accepted the appellants submission that the CPLs should not have
    been placed on the properties and ordered that the CPLs be vacated. However, he
    held that the appellants had not suffered damages as a result of the CPLs, as
    pleaded in the appellants counterclaim.

[19]

On
    this appeal, the appellants seek leave to introduce an exhibit of documents most
    of which were not before the motion judge. The exhibits are not appended to an
    affidavit and consist of letters and other documentation regarding refinancing.
    In oral submissions, counsel for the appellants claimed that two letters, one
    to a possible lender and the other to RBC, were provided in support of the
    appellants cost submissions and should therefore be allowed to be introduced
    on appeal.

[20]

This
    evidence does not meet the test for the introduction of new evidence on appeal:
    see
Palmer v. R.
, [1980] 1 S.C.R. 759, at p. 775;
Sengmueller v.
    Sengmueller
, 111 D.L.R. (4th) 19 (Ont. C.A.), at p. 23.

[21]

The
    appellants were represented at trial and this evidence should and could have
    been obtained prior to the motion, through the exercise of reasonable
    diligence. Moreover, it was not attached to a sworn affidavit and there has
    been no opportunity for the respondent to examine or cross-examine on this
    evidence. In any event, this new evidence, like the evidence proffered to the
    motion judge,
does not demonstrate any
    quantifiable damages suffered by the appellants
and
    thus, could not reasonably have affected the result
.

[22]

As
    set out above, the motion judge gave ample reasons for his finding that the
    appellants:

a)

did not satisfy him that they were unable to sell the property;

b)

did not take appropriate steps to address the CPLs with RBC; and,

c)

did not
    adduce evidence to outline the steps taken to complete the renovations required
    to sell the property.

[23]

We
    see no error in these findings, nor do we accept that the motion judge erred by
    failing to consider the defence of equitable set-off.

[24]

As
    such, the appeal  seeking to set aside the order dismissing the counterclaim
    and, if such an order is granted, requesting that the execution of the judgment
    in favour of RBC be stayed, pending resolution of the counterclaim  is
    dismissed.

[25]

We
    order costs payable to the RBC in the amount of $15,000, all inclusive.

Paul
    Rouleau J.A.

M.L. Benotto J.A.

J.A. Thorburn J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Rusinek & Associates Inc. v.
    Arachchilage, 2021 ONCA 112

DATE: 20210223

DOCKET: C68306

Strathy
    C.J.O., Rouleau and Coroza JJ.A.

In
    the Matter of the Bankruptcy of Roshan Singho Dasanayaka Arachchilage, of the
    City of Toronto, in the Province of Ontario

BETWEEN

Rusinek & Associates Inc.,
    Licensed Insolvency Trustee for the Estate of Roshan Singho Dasanayaka Arachchilage

Applicant (Appellant)

and

Roshan Singho Dasanayaka
    Arachchilage and
Jayalukxhmi Baliah

Respondents (
Respondent
)

Sharon Sam and Mark Ross, for the
    appellant

David A. Schatzker and Richard D.
    Howell, for the respondent Jayalukxhmi Baliah

Heard: November 26, 2020 by video conference

On appeal from the judgment of Justice Cory
    A. Gilmore of the Superior Court of Justice, dated February 19, 2020, with
    reasons reported at 2020 ONSC 1090.

Rouleau J.A.:

A.

OVERVIEW

[1]

The question raised in the present appeal is
    whether a trustee in bankruptcy can initiate an equalization claim under the
Family
    Law Act
, R.S.O. 1990, c. F.3
(
FLA

). The answer to
    this question lies in the proper interpretation of ss. 5 and 7 of the
FLA
.

[2]

Section 5 of the
FLA
provides for the equalization
    of net family properties. This entitlement is, however, described as personal
    as between the spouses by s. 7(2) of the
FLA
. What this latter
    expression means and what limits, if any, it places on the entitlement provided
    in s. 5 is central to this appeal.

[3]

As I will explain, I conclude that the
    entitlement provided in s. 5 of the
FLA
, once it has crystalized,
    falls within the broad definition of property as found in s. 2 of the
Bankruptcy
    and Insolvency Act
, R.S.C. 1985, c.
    B-3
(
BIA

),
    without regard to whether an application has been initiated. However, with the
    limited exception provided in s. 7(2)(b) that has no application to trustees in
    bankruptcy, the limitation placed on this entitlement in s. 7(2) to the effect
    that it is personal as between the spouses operates to prevent anyone other
    than a spouse from starting an application for the equalization of net family
    properties. As a result, while an unexercised equalization entitlement
    constitutes property under the
BIA
for vesting purposes, a trustee in
    bankruptcy cannot initiate a claim for recovery of that equalization
    entitlement.

[4]

Therefore, for the reasons that follow, I would
    dismiss the appeal.

B.

FACTS

[5]

On March 15, 2003, Roshan Singho Dasanayaka
    Arachchilage (Roshan) and Jayalukxhmi Baliah, the respondent, were married.
    During their marriage, the matrimonial home was purchased and placed in the
    respondents name. According to the respondent, she paid the down payment and
    legal fees, made the mortgage payments, and paid all taxes and expenses related
    to the matrimonial home. She maintains that it was never the intention of the
    parties that Roshan would acquire an interest in the matrimonial home, as he
    never contributed to its acquisition or maintenance. Title to the matrimonial
    home is solely in her name.

[6]

In February 2015, the parties separated, and in
    October 2015, Roshan left the matrimonial home and has never returned. Their
    separation is permanent but neither party has commenced an application for the
    equalization of net family properties. The respondent continues to reside in
    the matrimonial home with the couples two children.

[7]

On November 30, 2015, Roshan made an assignment
    in bankruptcy, and Rusinek & Associates, the appellant, were appointed as
    bankruptcy trustee. Roshan remains an undischarged bankrupt. His declared
    unsecured liabilities total $282,700.

[8]

The appellant applied to the Superior Court for
    a declaration that the right to commence an equalization claim under the
FLA
has vested in it as Roshans trustee in bankruptcy.

[9]

The application judge determined that unless and
    until the right to commence an equalization claim is exercised by a spouse, the
    equalization claim is inchoate and does not constitute property for the
    purposes of the
BIA
. Therefore, the right to commence such a claim is
    not assignable and does not vest in the trustee in bankruptcy, as the decision
    remains personal as between the spouses.

C.

ISSUES

[10]

The issues raised on this appeal are as follows:

1.

Was this appeal properly brought before this
    court pursuant to s. 6(1)(b) of the
Courts of Justice Act
, R.S.O. 1990, c. C.43 (
CJA
)
;

2.

Is the unexercised entitlement to equalization
    of net family properties considered property for the purposes of the
BIA
,
and if it is, can an application for
    equalization be initiated by a trustee in bankruptcy; and

3.

If s. 7(2) of the
FLA
prevents a trustee
    in bankruptcy from initiating an application for equalization, is s. 7(2)
    rendered inoperative pursuant to the doctrine of federal paramountcy?

D.

ANALYSIS

(1)

Was this appeal properly brought before this
    court pursuant to s. 6(1)(b) of the
CJA
?

[11]

The appellant brought the present appeal
    pursuant to s. 6(1)(b) of the
CJA
. The respondent argues that the
    appeal ought to have been brought under s. 193 of the
BIA
and only
    after leave to appeal had been obtained by a judge of the Court of Appeal.

[12]

Section 6(1)(b) of the
CJA
provides as
    follows:

6 (1) An appeal lies to the Court of Appeal from,

(b) a final order of
    a judge of the Superior Court of Justice, except an order referred to in clause
    19 (1) (a) or an order from which an appeal lies to the Divisional Court under
    another Act[.]

[13]

The relevant parts of s. 193 indicate the
    following:

193 Unless otherwise expressly provided, an
    appeal lies to the Court of Appeal from any order or decision of a judge of the
    court in the following cases:

(c) if the property involved in the appeal
    exceeds in value ten thousand dollars;

(e) in any other case by leave of a judge of the
    Court of Appeal.

[14]

The respondent relies on
Business
    Development Bank of Canada v. Astoria Organic Matters Ltd.
, 2019 ONCA 269, 69 C.B.R. (6th) 13, at paras. 66-67, in support of the
    proposition that where there is jurisdiction for an appeal under both the
BIA
and
CJA
, the appellant must comply with the more restrictive provisions of the
BIA
. According to the
    respondent, where, as here, a matter of procedure is at issue, s. 193(c) does
    not apply because the proceeding is not about a sum of money. Therefore, leave to
    appeal is required pursuant to s. 193(e) of the
BIA
.

[15]

I would not give effect to this submission. First, the application was brought
    by the appellant before the Superior Court pursuant to r. 14.05(3)(d) of the
Rules of Civil Procedure
, R.R.O. 1990,
    Reg. 194, wherein the appellant sought to determine whether it had the right to
    commence an equalization claim by interpreting the
FLA
and the
BIA
. Furthermore, the final order was not one made in a bankruptcy
    proceeding nor was the application judge exercising a power conferred on her by
    the
BIA
.

[16]

Second, these proceedings involve the respondent, who is a stranger to
    the bankruptcy. When determining the issue of jurisdiction in cases involving a
    stranger to the bankruptcy, the court should answer the following question: will
    the
[stranger to the bankruptcy]
be a
    creditor of the bankrupt estate as a result of losing the application?: see
    L.W. Houlden, G.B. Morawetz & Janis Sarra,
Bankruptcy
    and Insolvency Law of Canada
, loose-leaf (2009-Rel.
    5), 4th ed. (Toronto: Thomson Reuters, 2013), vol. 3, at Part VII, I
§
7, p. 7-19. If the answer is in the negative, the
    bankruptcy court does not have jurisdiction to hear the matter. Here, the respondent
    is not a creditor of the bankrupt estate. She has not commenced any claim for
    equalization. Therefore, this is a matter of property and civil rights that was
    properly brought before an ordinary civil court.

[17]

I conclude that this appeal was properly brought before this court
    pursuant to s. 6(1)(b) of the
CJA
.

(2)

Is an unexercised entitlement to equalization of net
    family properties considered property for the purposes of the
BIA
,
and if it is, can an application for equalization be initiated by a
    trustee in bankruptcy?

(a)

The Relevant Legislation

[18]

Net family property is defined in s. 4(1) of the
FLA
as:

[T]he value of all the property, except
    property described in subsection (2), that a spouse owns on the valuation date,
    after deducting,

(a) the spouses debts and other liabilities,
    and

(b) the value of
    property, other than a matrimonial home, that the spouse owned on the date of
    the marriage, after deducting the spouses debts and other liabilities, other
    than debts or liabilities related directly to the acquisition or significant
    improvement of a matrimonial home, calculated as of the date of the marriage[.]

[19]

In s. 5 of the
FLA
, the Ontario legislature provided spouses with an entitlement to
    equalization of net family properties in certain circumstances. Sections 5(1), (2),
    and (3) are as follows:

5 (1) When a divorce is granted or a marriage is
    declared a nullity, or when the spouses are separated and there is no
    reasonable prospect that they will resume cohabitation, the spouse whose net
    family property is the lesser of the two net family properties is entitled to
    one-half the difference between them.

(2)
When a spouse dies, if the net family property of the deceased spouse
    exceeds the net family property of the surviving spouse, the surviving spouse
    is entitled to one-half the difference between them.

(3)
When spouses are cohabiting, if there is a
    serious danger that one spouse may improvidently deplete his or her net family
    property, the other spouse may on an application under section 7 have the
    difference between the net family properties divided as if the spouses were
    separated and there were no reasonable prospect that they would resume
    cohabitation.

[20]

Section 7(1) of the
FLA

provides for the commencement of an
    application for equalization. Section 7(2) of the
FLA
indicates that the entitlements created in ss. 5(1),
    (2), and (3) are personal as between the spouses. This section also provides
    the estate of the deceased spouse with certain rights to initiate or continue
    an application for the equalization of net family properties. Those sections
    read as follows:

7

(1)
    The court may, on the application of a spouse, former spouse or deceased
    spouses personal representative, determine any matter respecting the spouses
    entitlement under section 5.

(2) Entitlement under subsections 5 (1), (2)
    and (3) is personal as between the spouses but,

(a) an application based on subsection 5 (1)
    or (3) and commenced before a spouses death may be continued by or against the
    deceased spouses estate; and

(b) an application
    based on subsection 5 (2) may be made by or against a deceased spouses
    estate.

[21]

The
BIA
provides
    that, with limited exceptions, all of a bankrupts property passes to and vests
    in the trustee in bankruptcy. The relevant provisions of the
BIA
are as follows:

2
In this Act,

property
means
    any type of property, whether situated in Canada or elsewhere, and includes
    money, goods, things in action, land and every description of property, whether
    real or personal, legal or equitable, as well as obligations, easements and
    every description of estate, interest and profit, present or future, vested or
    contingent, in, arising out of or incident to property[.]

40

(1)
Any property of a bankrupt that is
    listed in the statement of affairs referred to in paragraph 158(d) or otherwise
    disclosed to the trustee before the bankrupts discharge and that is found
    incapable of realization must be returned to the bankrupt before the trustees
    application for discharge, but if inspectors have been appointed, the trustee
    may do so only with their permission.

67

(1)
The property of a bankrupt divisible
    among his creditors shall not comprise

(a)
property held by
    the bankrupt in trust for any other person;

(b)
any property
    that as against the bankrupt is exempt from execution or seizure under any laws
    applicable in the province within which the property is situated and within
    which the bankrupt resides;

but it shall comprise

(d) such powers in or over or in respect of the
    property as might have been exercised by the bankrupt for his own benefit.

71
On a bankruptcy
    order being made or an assignment being filed with an official receiver, a
    bankrupt ceases to have any capacity to dispose of or otherwise deal with their
    property, which shall, subject to this Act and to the rights of secured
    creditors, immediately pass to and vest in the trustee named in the bankruptcy
    order or assignment, and in any case of change of trustee the property shall
    pass from trustee to trustee without any assignment or transfer.

72

(1)
The
    provisions of this Act shall not be deemed to abrogate or supersede the
    substantive provisions of any other law or statute relating to property and
    civil rights that are not in conflict with this Act,
and the trustee is entitled to avail
    himself of all rights and remedies provided by that law or statute as
    supplementary to and in addition to the rights and remedies provided by this
    Act
.

(b)

The Positions of the Parties

[22]

The appellant argues that the right to payment of an equalization claim
    vests in both spouses as soon as the right under s. 5(1) of the
FLA
, in this case permanent separation,
    has crystalized. The unexercised equalization claim then constitutes property
    in the hands of a spouse. No further steps are required on the part of a spouse
    to vest the equalization claim.

[23]

Because the unexercised equalization claim is property in the hands of
    a spouse on separation, it should, in the appellants view, also be property in
    the hands of the trustee in bankruptcy.

[24]

Notably, the definition of property in s. 2 of the
BIA
is broad and includes present or
    future, vested or contingent interests, whether in, arising out of, or incident
    to property. It also includes things in action, otherwise known as choses in
    action:
Meisels v. Lawyers Professional Indemnity
    Company
, 2015 ONCA 406, 126 O.R. (3d) 448, at para. 12.
    The trustee in bankruptcy is therefore not limited to the choses in action that
    have been initiated by the bankrupt prior to bankruptcy.

[25]

In the appellants submission, it is well established that a trustee in
    bankruptcy has the right to commence any proceeding otherwise belonging to the
    bankrupt, except for claims that are personal in nature such as claims for
    mental distress, pain and suffering, or reputational damage:
Wallace v. United Grain Growers Ltd.
,
[1997] 3 S.C.R. 701, at para. 38;
Meisels
, at paras. 11-13.

[26]

In addition, the appellant maintains that there is no support in the
    jurisprudence for the application judges conclusion that an equalization claim
    is inchoate and does not constitute property for the purposes of the
BIA
until the claim is initiated, when it
    then takes on a new form as property. In the appellants submission, the
    procedural step of commencing an application pursuant to s. 7 of the
FLA
does not render the equalization claim
    inchoate beyond the realm of contingent actions or choses in action that constitute
    property under the
BIA
.
    An equalization claim is no different than any other cause of action requiring
    the issuance of a statement of claim.

[27]

Lastly, the appellant argues that the stipulation in s. 7(2) of the
FLA

that the equalization
    entitlement is personal as between the spouses does not have the significance
    developed by the application judge and the respondent. Rather, the appellant
    submits that the use of the word personal simply distinguishes these claims
    from proprietary entitlements. Therefore, the expression personal as between the
    spouses is in no way intended to prevent the trustee in bankruptcy from commencing
    a claim to recover the property of the bankrupt.

[28]

For her part, the respondent supports the application judges determination
    that an equalization claim does not constitute property for the purposes of the
BIA
until an application
    has been commenced by a spouse. This, the respondent argues, flows from the
    Ontario legislature having qualified the entitlement to equalization of net
    family properties as one that is personal as between the spouses.

[29]

The respondent maintains that describing the entitlement to an equalization
    claim as personal as between the spouses means more than explaining that it
    is a non-proprietary claim. This language provides that the entitlement to an equalization
    claim is personal, in the sense that it can only be exercised by the spouses
    themselves, subject to the specific exceptions for estates set out in ss.
    7(2)(a) and (b) of the
FLA
.

[30]

In this regard, the respondent references Robert A. Klotz, Who Gets
    the Matrimonial Property Claim  And Then What? in Professor Jill Corraini
    & The Honourable D. Blair Nixon, eds.,
Annual
    Review of Insolvency Law 2019
(Toronto: Thomson
    Reuters, 2020) 471, at pp. 476-77
,
wherein Klotz explained the following:

The term personal or personal right is in
    common use in debtor-creditor law, having two related but distinct meanings. In
    a priority dispute involving third parties, a personal right is one that gives
    to the holder of the right, the ability to seek a court order declaring and
    enforcing that right; but until the order is made, gives no enforceable
    property right or priority over any given asset. In that sense, a personal
    right requires a triggering event, in the second sense above, to become a
    property right, a real right, a right
in specie
, or a claim having priority over another.

The other meaning of
    personal, as in personal cause of action, describes a right that has no
    existence independent of its holder, such that it cannot be bought or sold,
    cannot be exercised by anyone else, is non-assignable and cannot be stripped
    from its holder under debtor-creditor or bankruptcy law. For example, a drivers
    licence affords its holder the right to drive on public roads. It is personal
    in the sense that it cannot be sold or assigned; it cannot be seized by a
    creditor; it is useless to anyone else.

[31]

The respondent argues that the interpretation advanced by the appellant
    would state the obvious, as spouses do not have a claim to a proprietary
    interest in any particular property as a result of s. 5(1) of the
FLA
. In addition, such an interpretation
    is illogical and incoherent, as it would give no meaning to the phrase personal
    as between the spouses. According to the respondent, the only reasonable
    interpretation, therefore, is the one adopted by the application judge.

(c)

The Entitlement to an Equalization Claim is
    Property that Vests in the Trustee in Bankruptcy

[32]

It is well established in the case law that once a spouse has brought an
    application for the equalization of net family properties, that claim will vest
    in the trustee in bankruptcy upon that spouses assignment in bankruptcy: see
Blowes v. Blowes
(1993)
, 16 O.R. (3d) 318 (C.A.);
Green v. Green
, 2015 ONCA 541, 338 O.A.C.
    279, at para. 40. Once initiated by a spouse, an equalization claim constitutes
    property under the
BIA
and the trustee in bankruptcy has control over the claim and the proceeds. There
    is no limiting provision in the
BIA
or at the common law, nor does s. 7(2) of the
FLA

prevent the trustee
    in bankruptcy from pursuing the claim once a spouse has commenced an
    application.

[33]

It is apparent, therefore, that an entitlement to equalization is not,
    as suggested by the respondent, a personal cause of action, in the sense of
    a right that has no existence independent of its holder, as described by
    Klotz, at p. 477 of his chapter. Personal causes of action do not vest in the
    trustee in bankruptcy and the bankrupt remains free to pursue such an action in
    his or her own right: see
Wallace
, at para. 38;

Meisels
,
at para. 13. If the entitlement to equalization were such a personal
    cause of action, it could not be stripped from the bankrupt spouse upon
    assignment in bankruptcy and passed to the trustee in bankruptcy. Unlike true
    personal causes of action, a trustee in bankruptcy is entitled to the proceeds
    of an exercised equalization claim: see
Blowes
.

[34]

I do not, however, accept the appellants interpretation of what personal
    as between the spouses means. Interpreting these words as the Ontario legislature
    simply noting that a claim for equalization is non-proprietary would give
    little or no meaning to s. 7(2) of the
FLA
. A provision in legislation should not be given an interpretation that
    defeats the purpose of the statute or renders a provision pointless or futile:
Rizzo & Rizzo Shoes Ltd. (Re)
,
[1998] 1 S.C.R. 27, at para. 27;
Jackson v.
    Stephen Durbin and Associates
, 2018 ONCA 424, 142
    O.R. (3d) 379, at para. 26.
Nor should an interpretation
    render the provision illogical, incoherent, or incompatible with other
    provisions or the object of the enactment: see
R.
    v. Stipo
, 2019 ONCA 3, 370 C.C.C. (3d) 311, at para.
    177. I say that the appellants interpretation gives little or no meaning to s.
    7(2) of the
FLA
for three
    reasons.

[35]

First, the legislature would simply be stating the obvious. The fact
    that the claim is non-proprietary is clear from the wording of s. 5(1) of the
FLA
, where the entitlement itself is
    granted, and the definition of net family property in s. 4(1) of the
FLA
that speaks only of value and not of
    interests in any particular property. Indeed, s. 10(1) of the
FLA
establishes that a person may apply to
    the court to determine a question as to the ownership interest in any
    particular property other than a question arising out of an equalization of
    net family properties under section 5. In addition, case law establishes that
    such interests in property must be established before undertaking the equalization
    of net family properties. As the Supreme Court of Canada articulated in
Rawluk v. Rawluk
, [1990] 1 S.C.R. 70, at
    p. 90,

Sections 4 and 5 of
    the
Family Law Act, 1986
create a two-step property division process that emphasizes the distinction
    between the determination of legal and equitable ownership and the equalization
    of net family property. These sections require a court
first

to determine individual ownership piles and
then
to equalize
    the spouses assets by ordering the spouse with the larger ownership pile to
pay money
to the
    spouse with the smaller pile. [Emphasis added.]

[36]

Second, such an interpretation would be incompatible with the balance
    of the section. If it were a non-proprietary claim like any other, there would
    be no need for ss. 7(2)(a) and (b) to specify the persons who can exercise the
    right. Those clauses have nothing to do with the entitlement to equalization being
    proprietary or not.

[37]

Third, the words personal as between the spouses did not originate
    with the introduction of the
FLA
.
Subsection 7(2) is a modified version of s.
    4(3) of the
Family Law Reform Act
, R.S.O. 1980, c. 152, which was
    subsequently repealed in 1986 to make way for the
FLA
. Because those
    words existed in a property division legislative scheme, they must do more than
simply inform that the claims spouses have against one
    another are personal claims instead of proprietary claims.

[38]

How, then, are the words personal as between the spouses in s. 7(2)
    of the
FLA
to be
    interpreted where, as here, a spouses equalization claim has crystalized but
    an application to court has not been made by either spouse?

[39]

As noted earlier, the respondent argues that the application judge
    correctly found that the words personal as between the spouses in s. 7(2) of
    the
FLA
operate to make
    an unexercised but crystalized equalization claim an inchoate right that does
    not constitute property for the purposes of the
BIA
until it is
    exercised by one of the spouses
.

[40]

I disagree with the respondents submission.

[41]

In my view, such an interpretation is inconsistent with the intention
    and purpose of the
BIA
and with the established jurisprudence. Property, as it is defined in s. 2 of
    the
BIA
,
has been given a broad
    interpretation. As explained by Binnie J. in
Saulnier
    v. Royal Bank of Canada
, 2008 SCC 58,
[2008] 3 S.C.R. 166,
at para. 44:

The terms of the definition
    [of property] are very wide. Parliament unambiguously signalled an intention to
    sweep up a variety of assets of the bankrupt not normally considered property
    at common law. This intention should be respected if the purposes of the
BIA
are to be achieved.

[42]

Nothing in the
BIA
suggests that property is restricted to choses in action that have
    been commenced. As noted earlier, the definition of property includes choses
    in action, even where the claim has not yet been initiated by the bankrupt
    prior to bankruptcy. There is simply no precedent for the respondents
    suggestion that until the spouses equalization claim is commenced by a spouse,
    it is an inchoate right that does not come within the broad definition of
    property for the purposes of the
BIA
. No other claim is dealt with this way. Either the claim is property
    for the purposes of the
BIA
and vests in the trustee in bankruptcy, or
    it is personal in nature and the trustee in bankruptcy can neither advance the
    claim nor receive the proceeds from such a claim.

[43]

As explained earlier, if the claim were personal in nature, this would
    mean that a bankrupt spouse not only retained the capacity to initiate the
    claim during the currency of the bankruptcy but also to retain the proceeds of
    such a claim:
Wallace
, at
    para. 38;

Meisels
,
at para. 13. However,
    this court has already determined that a bankrupt spouse is not entitled to
    receive any proceeds from an application for equalization once it has been
    commenced, as it constitutes property and is vested in the trustee in
    bankruptcy: see
Blowes
.

[44]

I therefore reject the suggestion that the entitlement to an
    equalization claim is an inchoate right that does not constitute property until
    it is exercised by a spouse. Once a right to equalization has crystalized due to
    permanent separation, it has value to that spouse. The fact that a spouse has
    not taken the procedural step of commencing an application for the equalization
    claim does not take it outside the broad definition of property in the
BIA
. The equalization claim is like any
    other chose in action. Therefore, it vests in the trustee in bankruptcy.

[45]

Lastly, in oral submissions, the respondent advanced a somewhat nuanced
    position. She acknowledged that the bankrupt could not make an equalization
    claim following discharge from bankruptcy, as the claim itself does go to the
    trustee to the extent that it can be exercised. This suggests that the unexercised
    equalization claim is something different than a personal cause of action, as
    described in
Klotzs

chapter, at p. 477. This, in effect, was a
    concession that the right to commence the equalization claim had vested in the
    trustee in bankruptcy. It follows, therefore, that if the right to make the
    claim vested in the trustee in bankruptcy, an unexercised right to claim equalization
    falls within the broad definition of property under the
BIA
. I agree with this interpretation.

(d)

The Entitlement to Equalization Cannot be Initiated
    by the Trustee in Bankruptcy

[46]

Finding that the entitlement to an equalization claim is property and properly
    vests in the trustee in bankruptcy does not, as the appellant suggests, end the
    matter. The question remains as to whether, as argued by the respondent, s.
    7(2) of the
FLA
operates
    to prevent the trustee in bankruptcy from initiating the claim to recover that
    property. Put another way, what is the effect of s. 7(2) of the
FLA
on an unexercised equalization claim during
    the estate-administration stage of the bankruptcy?

[47]

As explained by Gonthier J. in
Royal Bank
    of Canada v. North American Life Assurance Co.
,
[
1996
]
1
    S.C.R. 325, at paras. 44-49, the Supreme Court of Canada recognized two
    distinct stages in a bankruptcy: the property-vesting stage, or the property-passing
    stage; and the estate-administration stage. At the time of the assignment in
    bankruptcy, by operation of s. 71 of the
BIA
, the trustee in bankruptcy is
    obligated to take possession of the bankrupts assets, and the bankrupts
    property passes to and vests in the trustee in bankruptcy. Once the bankrupts
    property has passed into the possession of the trustee in bankruptcy, the
BIA
provides the trustee in bankruptcy
    with the power to administer the estate. In
Royal Bank of Canada
, at
    para. 47, the Supreme Court gave the example of assets that are made exempt
    from execution or seizure under provincial laws, specifically citing life
    insurance annuities under ss. 2(kk)(vii) and 158(2) of
The Saskatchewan Insurance Act
, R.S.S.
    1978, c. S-26, as repealed by
The Insurance Act
, S.S. 2015, c. I-9.11, s. 11-1. Such assets vest in the trustee at the
    time of bankruptcy at the property-vesting stage. However, the exemption under s. 67(1)(b)
    of the
BIA
then operates
    at the estate-administration stage to bar the trustee from distributing exempt
    items to the creditors. Section 40(1) of the
BIA
then requires the trustee in bankruptcy to return unrealizable property
    to the bankrupt prior to the trustee in bankruptcys application for discharge.

[48]

The issue for this court to determine is, therefore, whether the
    qualification the Ontario legislature has imposed on the right granted in s. 7 of
    the
FLA

limits the trustee in bankruptcys ability to initiate the equalization
    claim during the estate-administration stage of bankruptcy. In my view, this is
    precisely the effect of the words personal as between the spouses in s. 7(2) of
    the
FLA
. A spouse makes the
    decision to initiate a claim for equalization, as it is something that is
    personal to the spouses, and that decision cannot be made by a trustee in
    bankruptcy or any other assignee.

[49]

In
Rondberg Estate v. Rondberg Estate
(1989)
, 62 D.L.R. (4th) 379 (Ont. C.A.),
    Grange J.A. considered the wording in s. 7(2) of the
FLA
, albeit in
    that case, it involved an executor of an estate making an election pursuant to
    s. 6 of the
FLA
rather than advancing a claim by a trustee in
    bankruptcy. The executor in that case sought to elect to make an equalization
    claim on behalf of a deceased spouse. In reaching the conclusion that the executor
    could not make such an election, Grange J.A., at p. 383, explained that:

I have come to the
    conclusion that Reid J. was right and that the Legislature of Ontario must be
    presumed to have intended to restrict the election (as opposed to the
    application) to a surviving and living spouse. The failure to specify any right
    of election in the personal representative under s. 6 coupled with the rights
    given them under s. 7 and the statement in the latter section that entitlement
    under s. 5 is personal between the spouses lead inevitably to that
    conclusion. Reid J. thought the omission was deliberate. As he put it, he
    could think of few things more personal than the consideration by a surviving
    spouse whether to respect or to override the wishes of the deceased. While the
    procedure to enforce the decision could be entrusted to a stranger to the
    marriage, the decision itself could not. [Citations omitted.]

[50]

That statement is apposite. There can be no
    doubt that the decision to advance an equalization claim is deeply personal. The
    respondent argues that, in the present case, if an equalization claim is made
    by the trustee in bankruptcy, it may result in the respondent and her children
    having to leave the matrimonial home, as it would likely have to be sold to
    fund the equalization claim.

[51]

Such a decision may create further conflict
    between the spouses by involving them in litigation and causing them to incur
    legal fees they may well not be able to afford. Conflict between spouses often
    has an impact on the children of the marriage. There is, of course, no
    obligation under the
FLA
for a spouse to make an equalization claim,
    and parties are encouraged to settle their affairs without resorting to the
    courts. As stated in the Preamble of the
FLA
, it is desirable to
    encourage and strengthen the role of the family and it is necessary to
    provide in law for the orderly and equitable settlement of the affairs of the
    spouses. This interpretation of personal as between the spouses is
    consistent with these overall purposes of the
FLA
.

[52]

If a spouse has already taken the step of
    commencing an application for the equalization of net family properties, the
    concerns outlined in the paragraph above are substantially reduced, as the
    parties are already in a situation of conflict. In such a case, the trustee in
    bankruptcy steps into the shoes of the bankrupt spouse and continues the claim
    that has already commenced.

[53]

Lastly, such an interpretation of personal as
    between the spouses is consistent with the rights the Ontario legislature has provided
    to estate trustees to administer claims for equalization after a spouses
    death. The interplay between ss. 5 and 7 of the
FLA
makes it clear
    that an estate trustee can continue an equalization claim that has commenced
    before the spouses death. However, a claim for equalization by a spouse having
    the lesser of the two net family properties cannot be initiated by the estate
    trustee after the spouses death.

[54]

In other words, an estate trustee cannot make
    the personal decision to exercise a right to recovery from a surviving spouse
    of the deceased spouses entitlement to equalization. There is, in my view, no
    principled reason why personal as between the spouses should be applied any
    differently to trustees in bankruptcy as to estate trustees. While the
    unexercised claim vests in the trustee in bankruptcy, absent the personal
    decision by a spouse to initiate an application for equalization of net family
    properties as provided in s. 7(2) of the
FLA
(the triggering event),
    the trustee in bankruptcy is unable to commence that claim for the purpose of
    distributing the proceeds of the litigation to creditors.

[55]

However, unlike exempt property, an unexercised
    equalization claim does not automatically become unrealizable property that
    must be returned to the bankrupt prior to the trustee in bankruptcys
    application for discharge, pursuant to s. 40(1) of the
BIA
. As Klotz
    points out, at pp. 531-39, a trustee may have other options for realizing value
    from that cause of action during the estate-administration stage, for example,
    a sale of the claim under s. 30 of the
BIA
. However, because
third parties would similarly be unable to initiate an unexercised
    equalization claim,
the practical effect of s. 7(2) of
    the
FLA
is to limit the potential buyers market. What steps a trustee
    in bankruptcy may or should take in realizing value from an unexercised
    equalization claim that has vested in the trustee in bankruptcy is not a
    question that is before the court. I leave that issue for another day.

(e)

Conclusions

[56]

In conclusion, I am of the view that the
    unexercised but crystalized claim for equalization is a chose in action that,
    on bankruptcy, constitutes property at the property-vesting stage of a
    bankruptcy. However, s. 7(2) of the
FLA
prevents a trustee in
    bankruptcy from initiating the claim for the recovery of the equalization
    entitlement during the estate-administration stage of a bankruptcy. This is because
    the required triggering event pursuant to s. 7(2) of the
FLA
, the initiation
    of the application by a spouse, has not occurred.

(3)

Does the doctrine of federal paramountcy render
    s. 7(2) of the
FLA
inoperative
?

[57]

The appellant argues that if s. 7(2) of the
FLA
prevents a trustee in bankruptcy from commencing a claim for equalization, then
    the doctrine of federal paramountcy renders it constitutionally inoperative. In
    the appellants submission, where, as here, a federal and a provincial statute
    are independently valid, but a conflict prevents compliance with both laws,
    then the provincial law, the
FLA
, will be read down to not conflict
    with the federal statute, the
BIA
: see
Alberta (Attorney General)
    v. Moloney
, 2015 SCC 51,
[2015] 3 S.C.R. 327, at
    paras. 17-18, 29
.

[58]

The appellant explains that, by interpreting s.
    7(2) of the
FLA
as preventing the trustee in bankruptcy from
    initiating a claim for equalization, the trustee in bankruptcy is prevented
    from realizing on an asset of the estate, the crystalized but unexercised right
    to equalization, for the benefit of the bankrupts creditors. This frustrates
    the equitable distribution of the bankrupts assets among the bankrupts
    creditors, which is one of the purposes of the
BIA
:
Moloney
,
    at para. 32.

[59]

Where the
BIA
tells the trustee in
    bankruptcy to do something and the
FLA
prevents it, the provision of
    the
FLA
is incompatible with the purpose of the
BIA
,
and the provisions are in conflict. The
    laws cannot operate concurrently, and, as a result, the appellant submits that s.
    7(2) of the
FLA
should be declared constitutionally inoperative by
    reason of the doctrine of federal paramountcy.

[60]

I disagree. The right to equalization is a creation
    of the provincial legislature. The province that created the right is free to
    limit the circumstances in which an application for equalization can be
    commenced. As I have explained, by providing that the right to commence an
    equalization application is personal as between the spouses, the province has
    made this equalization right subject to a triggering event. Only a spouse can
    choose to commence that application. In a sense, this is no different than the conditions
    imposed in s. 5(1) of the
FLA
, whereby the equalization of net family
    properties can only occur if there is a divorce, a declaration of nullity of
    marriage, or a separation with no reasonable prospect of resumed cohabitation.

[61]

The trustee in bankruptcy takes the property during
    the property-vesting stage of bankruptcy in the form it was given by the
    province, which is a property right that is subject to the triggering event. A
    statutorily created asset subject to a condition over which the trustee in
    bankruptcy has no control does not, in my view, make the section creating the
    limitation incompatible with the purpose of the
BIA
,
as suggested by the appellant. Upon
    bankruptcy, the trustee in bankruptcy gets no more than what any other
    assignee, such as an estate trustee, would receive: that is, a right to pursue
    an equalization claim once the decision is made by a spouse, and only a spouse,
    to initiate the claim. Such an interpretation does not conflict with the
BIA
.

[62]

As stated earlier, while s. 7(2) of the
FLA
prevents a trustee in bankruptcy from initiating an unexercised equalization
    claim, it does not necessarily prevent a trustee in bankruptcy from realizing value
    from that cause of action during the estate-administration stage, although its
    practical effect is to limit the trustee in bankruptcys options. In this
    sense, there is no operational conflict between s. 7(2) of the
FLA
and
    the scheme and purpose of the
BIA
.

[63]

I conclude that s. 7(2) of the
FLA
is
    not in operational conflict with the
BIA
, nor does it frustrate the
    purpose of the
BIA
. Therefore, the doctrine of federal paramountcy is
    not applicable in the present appeal.

E.

DISPOSITION

[64]

For these reasons, I would dismiss the appeal. I
    would award costs to the respondent in the agreed amount of $10,000, inclusive
    of disbursements and applicable taxes.

Released: February 23, 2021 GRS

Paul Rouleau J.A.

I agree G.R. Strathy C.J.O.

I agree S. Coroza J.A.