Executive Summary: Key Legal and Evidentiary Issues

• Rebel sought summary judgment for $385,470.25, plus interest, based on an alleged July 2023 settlement, along with dismissal of Flex’s counterclaim.
   
• Flex denied any settlement, describing the deal as a conditional transfer of a partially built automation unit whose terms Rebel allegedly breached.
   
• Nothing in the documentary record referred to the “as is” acceptance or mutual release on which Rebel’s version of the July 2023 agreement depended.
   
• Credibility conflicts over a conversation with no one else present could not be resolved on a written record and required viva voce evidence at trial.
   
• The court declined to draw an adverse inference from the absence of an affidavit from the Flex manager who took part in that conversation.
   
• Which party’s terms and conditions governed the contract, and what Flex knew about the Product’s condition, were further issues left for trial.
   

Facts of the case

Rebel Automated Systems Ltd. (Rebel) is a manufacturer focused on automation, with six employees. Ventra Group Co., operating as Flex-N-Gate Bradford (Flex), is a large multinational company that manufactures products and systems for the automotive industry, with approximately 20,000 employees worldwide. In 2022, Flex put out a request for quotation to design, build, and implement an automation unit (the Product) to assist workers on its assembly line, which makes swing gate hinges for a Ford F-150 model.

On July 18, 2022, Rebel submitted a proposal pricing the Product at $809,095.00, plus HST. Flex responded on August 11, 2022, with a letter of intent that authorized Rebel to proceed with the design portion, not exceeding $10,000.00 CAD, until it received the purchase orders. Purchase Order No. 97871, dated August 31, 2022, covered the building stage, and Purchase Order No. 64129, dated October 14, 2022, covered the tooling stage.

The project ran into difficulties, with each side blaming the other. By July 2023 the Product was still unfinished. That month, Rebel’s principal, Jeff Cybulski, and Flex manager Andrew Hodgson reached an agreement in a conversation with no one else present. In general terms, the agreement contemplated a payment to Rebel and Flex completing the Product. On October 16, 2023, Mr. Cybulski followed up on the expected payment, and Mr. Hodgson replied the same day seeking a $153,000.00 reduction because Flex had found several issues with the Product. Rebel rejected that request on October 19, 2023. A compromise later discussed by email was rejected by Flex’s board of directors, which Mr. Hodgson communicated on November 2, 2023. Rebel issued its statement of claim on January 25, 2024, and Flex delivered a statement of defence and counterclaim dated March 24, 2024.

Contractual terms and rules at issue

On Rebel’s account, the July 2023 agreement required it to accept an immediate payment of $385,470.25, reflecting the balance of capital costs on the purchase order, and to forgo payment for the balance of the project, including tooling costs and any other expenses. Flex, in turn, would accept the Product “as is” and finish it as it saw fit. Under the same alleged terms, Rebel would release the Product immediately and neither party would make further claims against the other. Rebel said the deal was memorialized in July 12, 2023 email correspondence between Mr. Cybulski and Mr. Hodgson, while conceding that the email neither stated that Flex would take the Product “as is” nor described any term preventing Flex from suing Rebel for the future costs of completing it. According to Mr. Cybulski’s affidavit, Mr. Hodgson agreed to a “clean split,” without which Mr. Cybulski would not have accepted less than was owed and released the Product.

Flex’s account was different. It said its own standard terms and conditions governed, entitling it to take possession of the Product and complete it using its own forces or other suppliers. On its version, the July 2023 agreement was for Rebel to transfer the partially completed Product so that Flex could take steps to mitigate potential damages from a delay claim by Ford. Its possession of the Product and its agreement to pay $385,470.25 were, Flex said, conditional on three promises by Rebel. The first was that the Product had been produced in a good and workmanlike manner in compliance with the purchase order and standard terms and conditions. The second was that only its incomplete elements needed finishing, and the third was that it was ready to “debug.” Flex also pointed out that no release was ever drafted or signed.

The motion turned on Rule 20.04(2)(a), under which the court shall grant summary judgment if satisfied that there is no genuine issue requiring a trial. Under Rule 20.02(1), affidavits may be made on information and belief, but the court may, “if appropriate,” draw an adverse inference where a party fails to provide evidence from a person with personal knowledge of contested facts.

Reasoning and analysis

Citing Hryniak v. Mauldin, 2014 SCC 7, the court noted that there is no genuine issue requiring a trial when the process allows the judge to make the necessary findings of fact, apply the law to those facts, and reach a just result in a proportionate, more expeditious, and less expensive way. It identified several genuine issues requiring a trial, including the four below.

First came the foundational question of whose terms and conditions governed the contract for the manufacture of the Product. Rebel relied on its own terms to claim it was entitled to maintain possession of the Product, while Flex relied on its terms to justify taking possession and completing it. That dispute bore directly on the terms and consequences of the July 2023 agreement and could not be resolved without a trial.

Second, the parties offered completely different versions of the July 2023 agreement, and its terms were never clearly documented. Granting the motion would have required the court to accept that Flex agreed to take the Product “as is” and that the parties agreed to a mutual release, yet nothing in the documentary record referred to either term. Both sides asked the court to draw competing inferences from certain documents. Because those inferences depended on whose account was correct, the question turned on credibility, which the court said it could not decide on a written record or by simply preferring one party’s evidence over the other’s.

Rebel argued that Mr. Cybulski’s account was uncontradicted, since Flex’s only responding affidavit came from Hussein Chaitou, Flex’s primary contact on the project, who relayed what Mr. Hodgson told him. Characterizing this as hearsay, Rebel asked the court to draw an adverse inference from the lack of direct evidence from Mr. Hodgson, or to give Mr. Chaitou’s account little or no weight. It relied on Pomata Investment Corp. v. Yang, 2021 ONSC 6786, affirmed 2023 ONCA 747, and Mitusev v. General Motors Corporation, 2014 ONSC 2342. The court found both cases distinguishable. Mr. Chaitou had been closely involved in the project, swore that he spoke to Mr. Hodgson, and set out the substance of Mr. Hodgson’s evidence about the July 2023 discussions. Since Rule 20.02(1) permits, but does not require, an adverse inference, the court concluded that drawing one would not be appropriate.

Third, the condition of the Product in July 2023, and whether and to what extent Flex knew about it, remained unresolved. A finding that Flex knew of the alleged defects could support Rebel’s version, while a finding that it did not could support Flex’s version, including its counterclaim. Fourth, if Flex’s account of the agreement prevailed, a trial would need to determine whether Rebel breached it, whether and to what extent Flex suffered damages, and whether Rebel was liable for them.

The court also noted that, as an associate judge, it could not use the expanded fact-finding powers under Rule 20.04(2.1). Even had those powers been available, it would have declined to use them, finding a trial to be the appropriate forum.

Ruling and overall outcome

The Ontario Superior Court of Justice dismissed Rebel’s motion for summary judgment, leaving Flex successful on the motion and the disputed issues to be determined at trial. No money was ordered in either party’s favour. Rebel’s request for $385,470.25, plus interest, was not granted, and the endorsement did not separately address its alternative request for return of the Product. Costs of the motion were not fixed. The parties were directed to agree on costs or, failing agreement, to file written submissions of no more than five double-spaced pages, excluding costs outlines and authorities, within 20 days of the endorsement’s release, so no exact costs amount can be determined from this decision.