



COURT OF APPEAL FOR ONTARIO

CITATION: Toronto-Dominion Bank v. 1633092
    Ontario Ltd., 2020 ONCA 452

DATE: 20200710

DOCKET: C67799

Pepall, Hourigan and Roberts
    JJ.A.

BETWEEN

The Toronto-Dominion Bank

Plaintiff

(Appellant/Respondent by way of cross-appeal)

and

1633092 Ontario Ltd., 2362378
    Ontario Inc., Matthew Rooney and Haley Rooney

Defendants

(Respondents/Appellants by way of cross-appeal)

Oren Chaimovitch and Shawna Sosnovich,
    for the appellant

Andrew D. Ferguson, for the
    respondents

Heard: in writing

On appeal from the judgment of Justice
    Michelle OBonsawin of the Superior Court of Justice, dated March 7, 2019, with
    reasons reported at 2019 ONSC 1473.

REASONS FOR DECISION

INTRODUCTION

[1]

The appellant, Toronto Dominion Bank (the Bank), appeals from a
    summary judgment that held, among other things, that the Bank had negligently
    breached its contract with the respondents. The respondents, 1633092 Ontario
    Ltd. (163), 2362378 Ontario Inc. (236), Matthew Rooney and Haley Rooney,
    cross-appeal.
[1]
The judgment resulted from the hearing of summary judgment motions brought by
    both the appellant and the respondents. The parties dispute centered on various
    loan facilities provided by the Bank.

[2]

The parties were unable to agree on the terms of the judgment. They
    submitted competing versions of the draft judgment along with brief outlines of
    their positions. The motions judge reviewed their submissions, together with her
    amended reasons from March 7, 2019 (the Amended Reasons), and her endorsement
    on costs from May 25, 2019. In an endorsement dated October 17, 2019 on the
    settlement of the judgment, she wrote that there had been an attempt to
    relitigate certain issues, that she had signed the appropriate judgment, and [s]hould
    the Plaintiff wish to argue the Rule in Foss & Harbottle which was not
    before me at these Motions, it can do so before the trial judge.

[3]

The judgment approved by the motions judge recited that summary judgment
    motions made by the appellant and respondents had been heard. The body of the
    judgment consisted of the following five numbered paragraphs:

1.

THIS COURT
    FINDS
there is no genuine issue requiring a trial regarding liability and
    the only genuine issue is the amount(s) to which the parties are entitled. A
    trial of that issue will proceed.

2.

THIS COURT
    FINDS
the Plaintiff, Toronto Dominion Bank, negligently breached its
    contract with the Defendants.

3.

THIS COURT
    FINDS
that Ms. Rooney cannot rely on the improper valuation of the family
    home with regards to the HELOC.
[2]

4.

THIS COURT
    FINDS
the Plaintiff must pay the Defendants costs related to the Motions
    for Summary Judgment in the amount of $20,000, payable within 30 days from the
    date of the Endorsement Regarding Costs.

5.

THIS COURT
    FINDS
since it only dealt with the issue of liability, the issue of damages
    is bifurcated and will be the only issue reviewed at trial. The issue of the
    amount owing from the Defendants to the Plaintiff regarding the HELOC must be
    determined at trial since there will be a potential offset from the
    determination of damages for the Plaintiffs breach of contract.

THE BANKS APPEAL

[4]

We will start with the Banks appeal, which advances two grounds. First,
    the Bank argues that the judgment for negligent breach of contract should not
    be in favour of all respondents because the relevant contract (the agreement
    for the Canada Small Business Financing Loan) was only with 163
and not with 236 or the Rooneys.
Second, the Bank argues that
    the judgment for the outstanding amount under the HELOC should be granted to
    the Bank immediately, together with possession of the home, as the motions
    judge concluded that Ms. Rooney had no defence to the Banks claim for payment
    of the HELOC. Furthermore, the Bank asserts that she would have no right of
    set-off.

[5]

For the reasons that follow, we would allow the appeal on the first
    ground but not on the second ground.

ANALYSIS

[6]

The judgment states there is no genuine issue requiring a trial
    regarding liability. Both parties brought motions for summary judgment, the
    Bank seeking judgment on various loans extended to 163 and Ms. Rooney and the
    respondents seeking damages of $10 million for breach of contract, negligence,
    and negligent misrepresentation.

(1)

The HELOC

[7]

The first issue we will be address on the Banks appeal involves the
    HELOC agreement entered into by the Bank and Ms. Rooney for the principal
    amount of $750,000. Ms. Rooney provided a collateral mortgage on her property
    as security.

[8]

In their statement of defence and counterclaim, the respondents pleaded
    that the HELOC was to be limited to 75% of the value of their home. They stated
    that the Bank relied on an incorrect property description for the appraisal,
    which resulted in an estimated home value of $1,002,000 and available credit of
    $750,000. The respondents agreed to the HELOC and pleaded that they relied on
    the equity in the home to obtain credit to open a new location for their
    restaurant business.

[9]

At paras. 51 and 52 of their statement of defence and counterclaim, the Rooneys
    asserted that the Bank was negligent in assessing the value of the property in
    excess of its worth and in advancing a HELOC in excess of 100% of the property
    value, and also negligently misrepresented that they would not receive a HELOC
    in excess of 75% of its value.

[10]

On
    the summary judgment motion, the respondents argued that the Bank had advanced
    too much money under the HELOC and therefore there was no equity on which they
    could rely as a safety net.

[11]

The
    motions judge found that the respondents were unable to rely on the improper
    valuation of the home.  On learning of the flawed appraisal, Ms. Rooney alerted
    the Bank and she and the Bank entered into a new credit agreement bearing a
    reduced interest rate that was relied upon by the parties and implemented. As
    such, the motions judge held that Ms. Rooney could not take the position that
    the Bank was negligent as a result of the appraisal.

[12]

The
    Bank argues on appeal that the motions judge erred in ruling that the amount
    owing to the Bank on the HELOC had to await trial as there will be a potential
    offset from the determination of damages for the [Banks] breach of contract.

[13]

The
    Bank provided the motions judge with evidence that $803,776.97 plus interest
    was due to the Bank under the HELOC.  However, the parties had agreed that only
    liability would be determined on the motions for summary judgment and the issue
    of damages would go to trial: see para. 87 of the Amended Reasons. The Bank
    appears to be suggesting that set-off is not available to Ms. Rooney because
    the judgment of liability for negligent breach of contract against the Bank is
    only in favour of 163. As explained below, we agree that the judgment should be
    varied to reflect that the Banks contract in respect of the Canada Small Business
    Financing Loan was only with 163. However, as we will explain when we address
    the cross-appeal, the counterclaim is being referred to trial, and the issue of
    any available set-off should be determined at that time.

[14]

We
    would therefore dismiss this ground of appeal.

(2)

The
Canada Small Business Financing
    Act
[3]
(CSBFA) Loan

[15]

The
    next issue to be addressed is the CSBFA Loan made by the Bank.

[16]

As
    a result of a fire at the restaurant, Ms. Rooney met with Bank representatives
    about a $350,000 business loan to reopen the restaurant. In their statement of
    defence and counterclaim, the respondents pleaded that the Bank advised them
    that they were pre-qualified and should make a formal application for the Canada
    Small Business Financing Loan Program, which would allow the respondents to
    borrow at a competitive interest rate, meet all their requirements, and allow
    them to complete their project as planned. The respondents pleaded that the Federal
    Government would guarantee a substantial portion of the loan granted by the
    Bank.

[17]

The
    Bank provided conditional approval for a CSBFA Loan on April 2, 2015. Many
    conditions had to be fulfilled prior to final approval, including the discharge
    of notices of security interest under the
Personal
    Property Security Act
, R.S.O. 1990, c. P.10 (the 
PPSA
). On November 21, 2015, the CSBFA Loan was
    approved and the Rooneys attended at the Bank to sign all the banking
    documentation, including a Credit Agreement for $350,000 and unlimited
    guarantees from the Rooneys and 236.

[18]

Prior
    to funding, further documents were required by the Bank. In the meantime, the
    Rooneys paid trades for work done on the project.

[19]

Starting
    in February 2016, the Bank proceeded to fund some invoices, but limited its
    funding to roughly 55% of the amounts submitted. The respondents argued that
    the Bank advised them that it was working on a solution and that funding of the
    balance of the CSBFA Loan would be made under a special loan agreement. Instead,
    on May 17, 2016, the Bank delivered notices of intention to enforce its
    security under the
PPSA
and
Bankruptcy and Insolvency Act
, R.S.C., 1985, c. B-3.

[20]

At
    paras. 45-48 of the statement of defence and counterclaim, 163 (also called Tosh)
    pleaded that the Bank breached its contract with it by failing to advance the
    full amount of the eligible invoices permitted by the CSBFA Loan Agreement and
    failed to perform the contract honestly and in good faith. The respondents
    pleaded that the Bank was negligent in documenting and implementing the CSBFA
    Loan and in limiting the financing to 55% of invoices.

[21]

163
    also pleaded, at para. 53, that the Bank negligently misrepresented that the
    CSBFA Loan was the correct product for the project and that sufficient funding
    for the estimated budget would be available. At para. 61 of their pleading, the
    respondents pleaded that the Bank knew that a failure to fund the eligible
    expenses would lead to a failure of the restaurant to open and the failure of
    the respondents to earn a profit or a living.

[22]

The
    motions judge found that the Bank had agreed to fund the full amount of
    $350,000 and stated, at paras. 73-74 of the Amended Reasons, that the Rooneys
    signed the CSBFA Loan Credit Agreement for $350,000 and Mr. Rooney signed the
    CSBFA Loan Registration Form. The Credit Agreement was signed on November 21,
    2015. At para. 74, the motions judge found that the Credit Agreement is the
    agreement that regiments the loan between the parties.

[23]

At
    para. 78 she concluded: I find that the Bank breached its contract with the [respondents].
    The evidence supports that the Bank breached the provisions of the Credit
    Agreement when it failed to provide the [respondents] with the funding of
    $350,000.00.

[24]

The
    difficulty with the motions judges analysis is that she conflates the
    respondents and treats them as one. Having concluded that the CSBFA Loan Credit
    Agreement governed, she fails to explain how the respondents, other than 163,
    are parties to that agreement. Nor does she particularize any other contract
    with the respondents that she finds was breached by the Bank.  Based on the
    motions judges findings, the negligent breach of contract could only relate to
    163. Moreover, the contract relied upon in the respondents statement of
    defence and counterclaim is that same Credit Agreement, and neither the Rooneys
    nor 236 pleaded a breach of contract other than the generalized prayer for relief.
    Similarly, the respondents notice of motion in support of their request for
    summary judgment also refers to the agreement between the Bank and 163. Absent
    particularized findings connecting the Banks alleged breach of contract to the
    other respondents, there is no basis to support the motions judges conclusion
    that the Bank negligently breached its contract with all of the respondents.

[25]

The
    motions judge erred in treating the respondents as one and in not
    distinguishing amongst them and further erred in approving a judgment that found
    that the Bank negligently breached its contract with all of the respondents.

DISPOSITION OF THE MAIN APPEAL

[26]

For
    these reasons, we would allow the Banks appeal in part. Paragraph 2 of the
    Judgment is to be varied to state that the Plaintiff, Toronto Dominion Bank,
    negligently breached its contract with 1633092 Ontario Ltd.  The remainder of
    its appeal is dismissed.

THE CROSS-APPEAL

[27]

This
    brings us to the cross-appeal of the respondents. They submit that the Judgment
    approved by the motions judge failed to include her findings on breach of
    contract, negligence and negligent misrepresentation and ask that the Judgment
    be varied to properly reflect her reasons. The Bank responds arguing that these
    other causes of action were never pleaded and the judgment ought not to be
    varied to reflect the disposition proposed by the respondents.

[28]

The
    motions judges Amended Reasons suffer from the same defect as the Judgment. All
    of the respondents are treated as one. It would appear from her Amended Reasons
    that she found a negligent breach of contract, negligence and negligent
    misrepresentation. However, the Amended Reasons fail to analyze, with any
    particularity, the causes of action or how the pleadings supported her
    findings. The parties could not agree on and therefore contested the form of
    judgment.

[29]

Following
    receipt of submissions and competing draft judgments, the motions judge approved
    a judgment that only specifically addressed the cause of action for negligent
    breach of contract. Moreover, in her costs endorsement, the motions judge summarized
    her Amended Reasons, stating that she concluded that the Bank had breached its
    contract with the respondents, but said nothing about the remainder of the respondents
    claims. She also authorized the Bank to argue the rule in
Foss
    v. Harbottle
(1843),
    67 E.R. 189 (U.K.H.L.)

at trial. Presumably
    this was to preserve the ability of the Bank to argue that only 163 has
    available causes of action.  As mentioned, damages were also left to trial.

[30]

This
    court has frequently raised the pitfalls associated with partial summary
    judgment motions and we do not propose to repeat them here. See
Butera v. Chown, Cairns LLP
,

2017 ONCA 783, 137
    O.R. (3d) 561, and
Mason v. Perras Mongenais
,
    2018 ONCA 978. Additionally, bifurcation of proceedings sometimes results in an
    absence of precision in the disposition of the claims. Here, given the absence
    of particularized findings connecting the causes of action to the parties
    wronged and to the causes of action advanced in the pleadings, we are of the
    view that the subject matter of the counterclaim should be referred to trial
    along with the issues relating to
Foss v. Harbottle

and damages including any rights of set-off for either of
    the parties.
In addition, the motions judge did not dispose of
    the Banks claims on 163s $25,000 line of credit, 163s Visa account nor the
    unlimited guarantees of 163s indebtedness provided by 236 and each of the
    Rooneys.  These claims are also referred to trial.

DISPOSITION OF THE CROSS-APPEAL

[31]

Accordingly,
    paragraph 5 of the Judgment is varied to refer the subject matter of the counterclaim
    to trial along with the issues described in paragraph 30. For greater clarity,
    neither Mrs. Rooneys liability for the HELOC loan nor the Banks liability for
    negligent breach of its contract with 163 would be tried as those issues have
    already been determined.

[32]

If
    they are unable to agree, the parties are to submit brief written submissions
    on costs, not to exceed three pages in length, within 15 days of the release of
    these reasons.

S.E. Pepall
    J.A.

C.W. Hourigan
    J.A.

L.B. Roberts J.A.





[1]
The
    notice of cross-appeal was not filed separately but was contained in the
    respondents compendium and the appellant did not style any of its materials as
    being in both the appeal and the cross-appeal. Counsel for the parties were
    contacted and confirmed that they both intended that the cross-appeal be
    addressed by the panel.



[2]

Home Equity Line of Credit.



[3]

Canada Small Business
    Financing Act
, S.C. 1998, c. 36.


