In Bannerman Lumber Ltd et al v Goodman, 2021 MBCA 13, Madam Justice Holly C. Beard explored statements by the Supreme Court which asserted “balance of probabilities” as the only standard of proof in civil matters and limited the recurring phrase “clear, convincing and cogent” to merely a statement of the quality of evidence. Beard J.A. also addressed the nature of inferences and the appellate courts’ limited intervention to the extent that the inferences are questions of fact and mixed fact and law. Beard J.A. determined that the applications judge made no palpable or overriding error by drawing inferences on findings made in an arbitration award and using those inferences to determine the viability of other claims.
Applicant sought leave to appeal a decision in Bannerman Lumber Ltd. et al. v. Goodman, 2020 MBQB 76 which held that a debt owing by him to Respondent survived Applicant’s discharge from bankruptcy. For the earlier Arbitration Matters note on that decision, see “Court relies on arbitral award to qualify award amount as debt surviving bankrupt’s discharge – #322”. Relying on findings made in an arbitral award, Madam Justice Colleen Suche declared that a bankrupt’s debt disputed in arbitration survived his discharge because the debt resulted from “obtaining property or services by false pretences or fraudulent misrepresentation”. Though the arbitration proceeded without pleadings and the issue of fraud was not advanced in the arbitration, the arbitrator’s findings permitted Suche J. to determine that the bankrupt “lacked an honest belief in the truth of his statements” which were reckless and qualified as false pretences under section 178(1)(e) of the Bankruptcy and Insolvency Act, RSC 1985, c B-3.
On appeal, Beard J.A. had to determine whether she should grant an extension of time to appeal, applying the criteria set out in Samborski Environmental Ltd v. The Government of Manitoba et al, 2020 MBCA 63 paras 36-38.
For his appeal, as part of his grounds, Applicant argued that the issues of fraud and false pretences were not before the arbitrator because Respondent had chosen not to raise them and that the arbitrator did not make any findings in that regard. As such, Respondent ought not to be allowed to “reconstitute” that claim and that the application judge erred by drawing an inference based on the arbitration award. Applicant urged for a higher standard of proof.
“He states that, because the arbitrator did not draw any inferences or conclusions about fraud or whether he had an honest belief that he had the requisite authority to enter into the contract, the application judge was left with an incomplete record and was only able to “infer” fraud. This, he says, falls short of clear and conclusive evidence and, therefore, does not meet “the required standard of clear and conclusive evidence” that he lacked an honest belief”.
Standard of proof in civil matters – Due to Applicant’s argument regarding the standard of proof, Beard J.A. examined what the standard of proof ought to be in civil matters. She turned to F.H. v. McDougall, 2008 SCC 53, [2008] 3 SCR 41 which spoke to a controversy over potential standards of proof in civil matters, dismissing all in favour of a single one: balance of probabilities.
“[39] I summarize the various approaches in civil cases where criminal or morally blameworthy conduct is alleged as I understand them:
(1) The criminal standard of proof applies in civil cases depending upon the seriousness of the allegation;
(2) An intermediate standard of proof between the civil standard and the criminal standard commensurate with the occasion applies to civil cases;
(3) No heightened standard of proof applies in civil cases, but the evidence must be scrutinized with greater care where the allegation is serious;
(4) No heightened standard of proof applies in civil cases, but evidence must be clear, convincing and cogent; and
(5) No heightened standard of proof applies in civil cases, but the more improbable the event, the stronger the evidence is needed to meet the balance of probabilities test.
The Approach Canadian Courts Should Now Adopt
[40] Like the House of Lords, I think it is time to say, once and for all in Canada, that there is only one civil standard of proof at common law and that is proof on a balance of probabilities. Of course, context is all important and a judge should not be unmindful, where appropriate, of inherent probabilities or improbabilities or the seriousness of the allegations or consequences. However, these considerations do not change the standard of proof. I am of the respectful opinion that the alternatives I have listed above should be rejected for the reasons that follow”.
After addressing specific situations raised by certain of the five (5) approaches listed in para. 39, the Supreme Court at paras 45-46 addressed the standard of proof when an allegation is “serious”.
“[45] To suggest that depending upon the seriousness, the evidence in the civil case must be scrutinized with greater care implies that in less serious cases the evidence need not be scrutinized with such care. I think it is inappropriate to say that there are legally recognized different levels of scrutiny of the evidence depending upon the seriousness of the case. There is only one legal rule and that is that in all cases, evidence must be scrutinized with care by the trial judge.
[46] Similarly, evidence must always be sufficiently clear, convincing and cogent to satisfy the balance of probabilities test. But again, there is no objective standard to measure sufficiency. In serious cases, like the present, judges may be faced with evidence of events that are alleged to have occurred many years before, where there is little other evidence than that of the plaintiff and defendant. As difficult as the task may be, the judge must make a decision. If a responsible judge finds for the plaintiff, it must be accepted that the evidence was sufficiently clear, convincing and cogent to that judge that the plaintiff satisfied the balance of probabilities test”.
The Supreme Court pursued its comments and concluded at para. 49 on the standard of proof in civil cases.
“[49] In the result, I would reaffirm that in civil cases there is only one standard of proof and that is proof on a balance of probabilities. In all civil cases, the trial judge must scrutinize the relevant evidence with care to determine whether it is more likely than not that an alleged event occurred”.
Beard J.A. next noted that use of the phrase “clear, convincing and cogent” persisted despite F.H. v. McDougall, 2008 SCC 53 (CanLII), [2008] 3 SCR 41 and the Supreme Court returned to the topic twice, in Canada (Attorney General) v. Fairmont Hotels Inc., 2016 SCC 56, [2016] 2 SCR 720 and Nelson (City) v. Mowatt, 2017 SCC 8, [2017] 1 SCR 138.
(i) Canada (Attorney General) v. Fairmont Hotels Inc., 2016 SCC 56, [2016] 2 SCR 720 at para. 36 addressed the evidence required to support a grant of rectification. The Supreme Court reaffirmed its earlier statement in Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19, [2002] 1 SCR 678 that rectification requires “convincing proof” which it required, at para. 37 to “promote the utility of written agreements by closing the ‘floodgate’ against marginal cases that dilute what are rightly seen to be demanding preconditions to rectification”.
“In my view, the applicable standard of proof to be applied to evidence adduced in support of a grant of rectification is that which McDougall identifies as the standard generally applicable to all civil cases: the balance of probabilities. But this merely addresses the standard, and not the quality of evidence by which that standard is to be discharged”.
(ii) Nelson (City) v. Mowatt, 2017 SCC 8, [2017] 1 SCR 138 at paras 39-40, the Supreme Court discussed whether the appellate court imported a new standard of proof with its comments on historical adverse possession claims. The Supreme Court held that those comments did not have that effect.
“[39] My conclusion is unaffected by the historical nature of the claim, which the Court of Appeal thought merited an assessment of the evidence that is “broad” and “curious-minded”. The City criticizes this aspect of the Court of Appeal’s reasons. It says that, in light of the Court of Appeal’s statement (at para. 74) that “[h]ow [the standard of proof on a balance of probabilities] may be met depends on the proof that is capable of presentation”, the Court of Appeal should be taken as having effectively imported a new standard of proof. This is, the City adds, contrary to this Court’s direction in F.H. v. McDougall, 2008 SCC 53, [2008] 3 S.C.R. 41, at para. 40, that there is “only one civil standard of proof at common law and that is proof on a balance of probabilities”.
[40] I do not take the Court of Appeal to have espoused or applied a standard of proof other than the balance of probabilities. The impugned statements go not to the standard of proof, but to the quality of evidence by which that standard is to be met. This Court said in McDougall (at para. 46) that “evidence must always be sufficiently clear, convincing and cogent”. Those are relative, not absolute qualities. It follows that the quality of evidence necessary to meet that threshold so as to satisfy a trier of fact of a proposition on a balance of probabilities will depend upon the nature of the claim and of the evidence capable of being adduced (Delgamuukw v. British Columbia, 1997 CanLII 302 (SCC), [1997] 3 S.C.R. 1010, at para. 82; Canada (Attorney General) v. Fairmont Hotels Inc., 2016 SCC 56, [2016] 2 S.C.R. 720, at para. 36). In the context of historical adverse possession claims, the quality of the supporting evidence must merely be “as satisfactory as could reasonably be expected, having regard to all the circumstances” (Anglin J., as he then was, in Tweedie v. The King (1915), 1915 CanLII 44 (SCC), 52 S.C.R. 197, at p. 220; see also Sir Arthur Wilson in Attorney-General for British Columbia v. Canadian Pacific Railway, [1906] A.C. 204 (P.C.), at pp. 209-10)”.
In its 2017 decision by the Supreme Court, it held that the chambers judge’s finding was “untainted by palpable and overriding error”.
Beard J.A. concluded her analysis and summarized the state of the case law on standard of proof.
“[41] It is clear that, at least since McDougall, the “standard” of “clear, convincing and cogent” evidence is not a standard of proof; rather, it relates to the weight to be given to the evidence. This is a determination that is to be made by the trial judge, not by the appellate court. To repeat Rothstein J in McDougall, “[i]f a responsible judge finds for the plaintiff, it must be accepted that the evidence was sufficiently clear, convincing and cogent to that judge that the plaintiff satisfied the balance of probabilities test” (at para 46)”.
See Beard J.A.’s comments at para. 43 on inferences.
Beard J.A. declined to interfere with the application judge’s inferences, stating that her role as an appellate judge was limited to intervening when for palpable and overriding errors. Applicant sought to change an inference made by the applications judge and Beard J.A. characterized such decisions as raising questions of fact and mixed fact and law.
At paras 47-55, Beard J.A. then considered whether the issues of fraud and false pretence were before the arbitrator and whether the findings before the arbitrator could support the inferences drawn by the applications judge.
Beard J.A. concluded that the evidence and findings referred to the applications judge were capable of supporting the inference and conclusions made. As there was no palpable and overriding error, Beard J.A. held that there was no basis upon which to overturn them and the ground of appeal had “no potential to succeed”.
urbitral notes – First, for recent decisions involving arbitration and a discussion of the standard proof, see:
(i) 1406444 Alberta Ltd v. Taylor, 2020 ABQB 356.
“[47] The plaintiff must prove its case on a balance of probabilities. The Supreme Court of Canada addressed the degree of proof within the balance of probabilities burden by noting that, “… evidence must always be sufficiently clear, convincing and cogent to satisfy the balance of probabilities test” (F.H. v McDougall, et al, 2008 SCC 53 (CanLII), 2008 S.C.C. 53, at para.46).
[48] The balance of probabilities standard also applies to the assessment of the credibility of witnesses. While the Court can accept some, all or none of the testimony of any witnesses, it is important to remember that the starting point is always that witnesses are presumed to be telling the truth and honouring their oath. (R v S(RD), 1997 1997 CanLII 324 SCC, para 131)”.
“[118] In the present case, the plaintiff has called no direct evidence of the existence of goodwill by IAGTM, nor has there been an evidentiary foundation from which inferences could be made, or facts determined on this issue. Contrary to the assertion of the plaintiff, the absence of evidence on a material point does not leave the Court in the position of having to “calculate the value of Goodwill”. Applying the burden of proof and harkening back to comments of the Supreme Court of Canada in F.H., that “evidence must always be sufficiently clear, convincing and cogent to satisfy the balance of probabilities test” (para 46), the plaintiffs have not met their burden of proving the loss of any goodwill”.
(ii) Prairie Roadbuilders Limited v. Flatiron-Dragados-Aecon-Lafarge, A Joint Venture, 2019 ABQB 934.
“[48] The Arbitrator acknowledged that a party seeking rectification must prove its case on the balance of probabilities, on evidence which is sufficiently clear, convincing and cogent, and that rectification can occur if by mistake the written agreement does not accord with the true agreement it was intended to record (Canada (AG) v Fairmont Hotels Inc, 2016 SCC 56 (CanLII), [2016] 2 SCR 720 at paras 12, 36)”.