The Ontario Court of Appeal's recent decision in 1000425140 Ontario Inc. v. 1000176653 Ontario Inc., 2024 ONCA 610 provides guidance on foundational principles in litigation: the importance of tendering evidence and sufficiently pleading one's claim.
In this action involving the purchase of a luxury home (the "Property"), 1000425140 Ontario Inc., (the "Purchaser") sought recission of the purchase on the basis that the home was not private and secure, as the seller had marketed it to be. The principals of the Purchaser learned some days after moving into the Property that it was previously inhabited by the self-described "Crypto King" and that people were regularly approaching the Property looking for him. After contacting the police, the principals of the Purchaser learned that the police had received reports of people trying to break into the Property, that the "Crypto King" had allegedly defrauded some "very bad people" and that someone had threatened to burn down the Property. Once the safety issues were discovered at the Property, the principals of the Purchaser moved out and commenced an action to rescind the transaction due to the seller's fraudulent misrepresentation.
Partial summary judgment was granted in favour of the Purchaser. The Court accepted that the seller corporation was liable for fraudulent misrepresentation because corporations are generally imputed with the knowledge of their principals and the principal of the seller corporation, Ray Gupta, knew about the safety issues at the Property through his son's involvement with the "Crypto King." The Purchaser's claim for conspiracy was not resolved on the summary judgment motion and instead will require a trial.
The Value of Evidence Cannot be Overlooked
Neither Mr. Gupta nor his son tendered evidence to counter the Purchaser's evidence that privacy and security were important to the decision to purchase the Property, that the Property was marketed as "private and secure," and that the seller corporation knew it was marketed this way. Mr. Gupta's failure to tender an affidavit resulted in the motion judge making an adverse inference and allowed the Court to find that the appellants had simply failed to put their best foot forward, as is required on a summary judgment motion.
Deficient Pleadings Can Hamper Success
The Court agreed that partial summary judgment was appropriate in this case because the Purchaser's claim for conspiracy could not be decided through summary judgment. Although some elements of the tort were pleaded, the Purchaser failed to plead that Mr. Gupta or his son were personally liable for fraudulent misrepresentation, which was necessary to make out a claim of conspiracy. The Purchaser's failure to argue conspiracy in their factum further precluded the Court from deciding the issue. Had the Purchaser addressed these details, one wonders if they could have been fully successful on this summary judgment motion and avoided the need for a full trial.
Key Takeaways
Because a corporation is generally imputed to have the knowledge of its directing minds, the failure of a corporation's directing minds to tender evidence can be fatal to successfully defending a summary judgment motion, where parties are required to put forth all evidence that would be tendered at a trial.
Conversely, failure to adequately plead all causes of action in the originating process can have serious implications for the outcome of a summary judgment motion, as it did for the Purchaser in this case. It is crucial for plaintiffs to thoroughly address each cause of action at all stages of a summary judgment motion to achieve a full resolution of every issue raised.
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