Civil Litigation - Striking Pleadings - R21 v R20 Summary Judgment. Taylor v. Hanley Hospitality Inc.
In Taylor v. Hanley Hospitality Inc. (Ont CA, 2022) the Court of Appeal held that a lower court had effectively converted a R21 striking pleadings motion to a R20 summary judgment motion:
(a) The motion judge erred in dismissing the action under rule 21. The Catalyst Capital Group Inc. v. Dundee Kilmer Developments Limited Partnership
 The motion judge made several errors of law in her approach to the respondent’s motion and, effectively, treated the respondent’s rule 21.01(1)(a) motion as if it were a motion for summary judgment.
 Rule 21.01(1)(a) of the Rules of Civil Procedure provides as follows:
21.01(1) A party may move before a judge, As stipulated in rule 21.01(2), no evidence is admissible on a motion under (1)(a), except with leave of a judge or on consent of the parties. As already noted, the parties did not consent to admit evidence, nor did they seek leave of the motion judge to do so. Indeed, the appellant took the position that the respondent’s motion was not an appropriate means to resolve the action because of the material issues of fact in dispute.
(a) for the determination, before trial, of a question of law raised by a pleading in an action where the determination of the question may dispose of all or part of the action, substantially shorten the trial or result in a substantial saving of costs.
 The well-established approach to be followed on a motion brought under rule 21.01(1)(a) was recently reviewed by this court in Beaudoin Estate v. Campbellford Memorial Hospital, 2021 ONCA 57, at para. 14:
(1) The test is whether the determination of the issue of law is “plain and obvious”; The motion judge erred in failing to apply the correct principles on a motion under rule 21.01(1)(a). Importantly, she failed to assume that the allegations in the statement of claim were true. This led her to misapply the provisions of rule 25.08 that stipulate where a reply is necessary and the deemed effect of the absence of a reply.
(2) The facts pleaded in the statement of claim are assumed to be true, unless they are patently ridiculous or manifestly incapable of proof;
(3) The statement of claim should be read as generously as possible to accommodate any drafting inadequacies in the pleading.
 Among other pleaded facts in the statement of claim, the motion judge was required to assume as true that the respondent had temporarily laid off the appellant because of unfavourable economic reasons and that the respondent had treated her differently than other employees that continued to work at its Tim Hortons’ storefronts. As the appellant had already pleaded in her statement of claim a different version of the facts from that pleaded in the respondent’s statement of defence, which denied the appellant’s allegations, it was not necessary for the appellant to repeat the same allegations in a reply.
 Rules 25.08(1) and (2) require a reply only where a party “intends to prove a version of the facts different from that pleaded in the opposite party’s defence” and where a party intends to reply to a matter in the defence “that might, if not specifically pleaded, take the opposite party by surprise or raise an issue that has not been raised by a previous pleading”. As neither of these circumstances applied here because of the allegations already contained in the statement of claim, no reply was required nor even allowed under rule 25.08(3). As a result, in accordance with the provisions of rule 25.08(4), by not delivering a reply, the appellant was “deemed to deny the allegations of fact made in the defence” of the respondent (emphasis added).
 The motion judge therefore erred in treating the allegations in the respondent’s statement of defence as admitted facts.
In The Catalyst Capital Group Inc. v. Dundee Kilmer Developments Limited Partnership (Ont CA, 2020) the Court of Appeal discussed a R21.01(1)(b) [disclosing "no reasonable cause of action or defence"] motion in this way:
 A r. 21.01(1)(b) motion focuses on the legal sufficiency of a plaintiff’s pleading, in the sense of determining whether the plaintiff has pleaded the material facts necessary to support a cause of action recognized by the law: Brozmanova v. Tarshis, 2018 ONCA 523, 81 C.C.L.I. (5th)1, at paras. 25-26.. Baradaran v. Alexanian
 By contrast, contractual interpretation contains a strong factual component. It is an exercise in which the principles of contractual interpretation are applied to the words of the written contract, considered in light of the factual matrix. Contractual interpretation usually involves a question of mixed fact and law, except where a question of law can be extracted: Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53,  2 S.C.R. 633, at para. 50. A court’s consideration of the language of a contract always must have regard to the factual matrix that gave birth to the contract, even where the contractual provision is not ambiguous: Dumbrell v. The Regional Group of Companies Inc., 2007 ONCA 59, 85 O.R. (3d) 616 (C.A.), at para. 54. At the same time, the factual matrix cannot overwhelm or displace the language of the contract: Sattva, at para. 57.
 Given that most contractual interpretation claims involve questions of mixed fact and law, r. 21.01(1)(b) usually is ill-suited to dispose of such claims prior to trial. That is due to the restrictions built into the rule that limit its utility for assessing the factual adequacy of a claim. Of greatest significance is the restriction that no evidence is admissible on such a motion: r. 21.01(2)(b). This restriction rubs the wrong way against the jurisprudence’s recognition that a party is entitled to lead relevant evidence regarding the circumstances surrounding a contract’s formation or its context to aid in its interpretation: McDowell v. Fortress Real Capital Inc., 2019 ONCA 71, 91 B.L.R. (5th) 181, at para. 83.
 Yet, some moving party defendants, like DKD, contend that r. 21.01(1)(b) is an apt procedural device to strike out a claim involving contractual interpretation, pointing to the jurisprudence that holds a claim may be struck where it is plain and obvious that “the claim has no reasonable prospect of success”: Knight v. Imperial Tobacco Canada Ltd., 2011 SCC 42,  3 S.C.R. 45, at para. 17.
 As well, DKD relies on the decision of the Superior Court of Justice in ArcelorMittal Dofasco Inc. v. U.S. Steel Canada Inc., 2008 CanLII 56932, for the proposition that a court can rule on a breach of contract claim on a r. 21 motion where the operative provisions of a contract are clear. However, great care must be taken in applying the ArcelorMittal Dofasco decision. First, that decision pre-dated Sattva. Second, in ArcelorMittal Dofasco the parties agreed that the issue of the exercise of the contractual termination right was a question of law, not a question of mixed fact and law: at para. 17. Finally, the court held that “arguably” there was no need to consider the factual matrix as there was no ambiguity with respect to the interpretation of the termination right: at para. 33. However, Dumbrell and McDowell teach to the contrary: Dumbrell, at para. 54; McDowell, at para. 83.
 When the Rules of Civil Procedure are examined through the lens of Sattva’s teaching, a r. 20 summary judgment motion is better suited than a r. 21.01(1)(b) motion to deal with claims involving contractual interpretation because such claims typically involve mixed questions of fact and law and always require a consideration of the factual matrix. Still, it remains the case that the language of r. 21.01(1)(b) does not exclude its use to strike out causes of action that turn on an issue of contractual interpretation. However, r. 21.01(1)(b) contains certain features that reduce the risk of its misuse to dispose of contractual interpretation claims.
 First, a motion to strike for failure to disclose a reasonable cause of action proceeds on the basis that the facts pleaded are true, unless they are manifestly incapable of being proven or are patently ridiculous: Imperial Tobacco, at para. 22; Transamerica Life Canada Inc. v. ING Canada Inc. (2003), 2003 CanLII 9923 (ON CA), 234 D.L.R. (4th) 367 (Ont. C.A.), at p. 375. Accordingly, a defendant who resorts to r. 21.01(1)(b) must take the plaintiff’s pleaded claim at its provable highest.
 Second, a court must read the plaintiff’s pleading generously, making allowances for drafting deficiencies and erring on the side of permitting an arguable claim to proceed to trial: Transamerica, at p. 375; Raush v. Pickering (City), 2013 ONCA 740, 369 D.LR. (4th) 691, at para. 34.
 Finally, r. 21.01(1)(b) imposes a very high burden of proof on the moving defendant. It is not sufficient for a moving defendant to demonstrate that it is more probable than not that the plaintiff’s pleading does not disclose a reasonable cause of action. The defendant must meet the much higher standard of establishing that the claim as pleaded has no reasonable prospect of success.
 At the same time, the notional availability of a r. 21.01(1)(b) motion to dispose of a cause of action involving contractual interpretation reminds a plaintiff that it must plead clearly the facts upon which it relies when making a breach of contract claim. A plaintiff is not entitled to rely on the possibility that new facts may turn up as the case progresses: Imperial Tobacco, at para. 22. As well, since r. 25.06(1) requires a plaintiff to plead “the material facts on which the party relies for the claim”, where a plaintiff’s cause of action puts into play an issue of contractual interpretation, its statement of claim must plead the material facts of the factual matrix upon which the plaintiff relies.
In Baradaran v. Alexanian (Ont CA, 2016) the Court of Appeal clarified practice in motions to strike and in converting motions made of one nature to another nature (here a motion to strike into a summary judgment motion). The court below had granted a defendant's motion to strike brought under rules 21.01(3)(d) [stay or dismissal as frivolous and vexatious] and 25.11 [to strike pleadings as frivolous and vexatious, or as an abuse of process]. The motions court relied in part on an extensive affidavit of the defendant, which addressed the merits of the case, to strike key paragraphs of the pleadings. The Court of Appeal however allowed an appeal on the basis that the motions court had effectively converted what was originally a motion to strike into a motion for summary judgment, with the following comments:
 First, the motion judge erred in approaching the motion, which was a motion to strike pleadings under rules 21.01(3)(d) and 25.11, as though he were determining a motion for summary judgment under rule 20. While the motion judge could consider evidence on such a motion, the evidence on which he based his decision went to the merits of the claims. The motion judge accepted the solicitor’s evidence, that the appellant had been advised that two of the actions the respondent had been retained to litigate were ill-conceived and he accepted the solicitor’s account of what transpired in his handling of all of the actions. In doing so, the motion judge did not address obvious inconsistencies in the evidence, including the appellant’s assertion in his own affidavit that Mr. Alexanian said he had “a great chance to win [the] claims”. From comments in the transcript it is apparent that the motion judge considered the solicitor’s evidence to be uncontradicted.
 The propriety of the use of rules 21 and 25 was not addressed by the motion judge in the court below.
 In this court, the respondents sought to justify the decision of the motion judge as being properly made under rule 25.11. First, the respondents asserted that, since rule 25.11 permitted evidence to be filed on such a motion, the judge did not err in considering such evidence in making his decision, even if the evidence he considered went to the merits. Second, the respondents argued that the motion judge could have converted the pleadings motion into a motion for summary judgment and that no prejudice resulted to the appellant because he knew the issues he had to meet.
 We reject these arguments.
 The purpose of a motion to strike paragraphs in a statement of claim is to weed out claims that have no possibility of success. Pleadings motions are brought early in the litigation and before the opposing party has pleaded in response. When a pleading is struck, the court must consider whether to grant leave to amend. A summary judgment motion, by contrast, can only be brought after pleadings are exchanged: rule 20.01(3). This is for good reason. Summary judgment disposes of the merits of a claim or defence.
 The court will only strike out a claim on the basis that it is frivolous or vexatious or an abuse of the process of the court, in the clearest of cases and where it is plain and obvious that the case cannot succeed. One must guard against converting such motions into summary judgment motions: Miguna v. Toronto Police Services Board, 2008 ONCA 799 (CanLII), 243 O.A.C. 62, at paras. 16 and 21. In that case, Blair J.A. addressed the very point made by the respondents – that the motion judge was entitled to evaluate the merits of the appellants’ claims because affidavit evidence was admissible on the motion. He stated, at para. 34:
Evidence is admissible in relation to a rule 25.11 motion or in relation to the "frivolous and vexatious" aspect of a motion under rule 21.01(3)(d). It does not follow, however, that such a motion may be turned into an evidentiary disposition. The test remains: is it plain and obvious that the claim cannot succeed? The test is not whether it is unlikely the claim will succeed. Nor is the process one of weighing and assessing the evidence against the allegations as if the motion were a trial or a request for summary judgment. This means that, while evidence is admissible in a motion under rules 25.11 and 21.01(3)(d), the evidence must be relevant to, and considered for the purposes of, the motion that is before the court. In other words, the ability to file evidence in a pleadings motion does not change the character of the motion, which is not to determine the merits, but to decide whether the pleading should be struck, as having no chance of success because it is frivolous and vexatious or an abuse of process. For these reasons, we reject the respondents’ contention that the motion judge was acting within the proper scope of rules 21.01(3)(d) and 25.11 in striking the relevant paragraphs of the statement of claim based on Mr. Alexanian’s affidavit evidence.
 We also reject the respondents’ alternative argument that the motion judge was entitled to convert the motion to a summary judgment motion, where the appellant had the opportunity to tender evidence and to respond to the motion judge’s questions about the merits of his claim. Rule 20 permits a summary judgment motion to be brought only after pleadings have been exchanged: in this case no statement of defence had been delivered. Further, the appellant was entitled to rely on the notice of motion, and the relief sought by the respondents, which was to strike certain paragraphs in his pleading, and not for summary judgment. Finally, certain interchanges in the transcript show that the appellant was taken by surprise at the motion judge’s approach, when he was challenged on the merits of the claim. And, to the extent that the motion judge considered the merits, he was wrong to state that there was no evidence to contradict that of Mr. Alexanian.
 It is clear from both the endorsement and the transcript of the hearing before the motion judge, that he approached this case as a summary judgment motion. While he used the term “vexatious” liberally in both his endorsement and his comments in court, and labeled the paragraphs in the pleading as well as the entire action as vexatious and an abuse of process, the motion judge conducted a merits-based analysis of the evidence. Indeed, he commented at the end of his endorsement that the appellant’s claim was “entirely without merit”. Further, the fact that the motion judge struck the paragraphs without leave to amend, without giving proper or any consideration to whether the claims were capable of being amended, reinforces the conclusion that he approached the motion as a summary judgment motion and not as a motion respecting pleadings.