A-355-82
David Baird, Elizabeth Baird, George A. Bayley,
Neil Baylor, Frederick Field, Marion Field, Ron
Forbes, Edward Kuta, Mira Kuta, Alexander
Leblovic, Carlo Lemma, Brian Moar, Marianne
Moar, Frances Salvo, Mark Smith, Jr., Pauline
Smith, Bruce Wilson and John Gatecliffe (Appel-
lants) (Plaintiffs)
v.
The Queen in right of Canada as represented by
the Attorney General of Canada (Respondent)
(Defendant)
Court of Appeal, Urie, Le Dain JJ. and Kelly
D.J.—Toronto, October 18, 1982; Ottawa, June
23, 1983. '
Crown — Torts — Negligence — Breach of statutory duty
— Plaintiffs losing money invested in Trust Company —
Company said to have conducted business in fraudulent
manner — Monies for deposit with Trust Company deposited
with uninsured mortgage business — Statutory duties of Su
perintendent of Insurance and Finance Minister — Superin
tendent failing to form opinion as to adequacy of Trust
Company's assets — Minister not revoking Company's licence
— Appeal from striking out of statement of claim as disclos
ing no cause of action — Appeal allowed — Court not to
consider whether legislative intention to create right of action
for breach of statutory duty but to apply common law negli
gence principles — Sufficiency of pleadings to show negligence
and causal connection — Whether duty of care owed
Whether recovery for purely economic loss — Whether Crown
Liability Act imposing vicarious liability for damage caused
by negligence re statutory duties imposed directly on Crown
servant — Whether Act imposing liability for purely economic
loss — Whether Minister Crown servant — Aeronautics Act,
R.S.C. 1970, c. A-3, s. 3 — Crown Liability Act, R.S.C. 1970,
c. C-38, ss. 3(1)(a),(6), 4(2) — Exchequer Court Act, R.S.C.
1970, c. E-11 — Trust Companies Act, R.S.C. 1970, c. T-16,
ss. 71, 74, 75.1 (as am. by R.S.C. 1970 (1st Supp.), c. 47, s. 29;
S.C. 1974-75-76, c. 7, s. 2), 76 (as am. by R.S.C. 1970 (1st
Supp.), c. 47, s. 30), 77, 78 — Proceedings Against the Crown
Act, R.S.O. 1980, c. 393, s. 5(3) — Crown Proceedings Act,
1947, 10 & I1 Geo. 6, c. 44 (U.K.), ss. 2, 38(2).
Practice — Motion to strike pleadings — Statement of
claim struck as disclosing no cause of action — Appeal
therefrom — Question being liability of Crown for negligence
or breach of statutory duty by Finance Minister or Superin
tendent of Insurance where investors in Trust Company losing
money due to allegedly fraudulent conduct — Not plain and
obvious plaintiffs could not succeed — Appeal allowed —
Federal Court Rules, C.R.C., c. 663, R. 419(1)(a).
An action was commenced against the Crown for breach of
statutory duty and negligence in the exercise of statutory duties
by the Minister of Finance and the Superintendent of Insur
ance. It was alleged that Astra Trust Company had been
permitted to conduct its business in such a manner that the
appellants lost the money which they had placed with that
Company. It was said that Astra had conducted its business in
a fraudulent manner in that its employees held out that
Re-Mor and Via Mare were the Trust Company's mortgage
division when they were in fact carrying on a separate, unin
sured mortgage brokerage business. Amounts received for
deposit with Astra were deposited to the credit of the mortgage
companies. It was alleged that the Superintendent was negli
gent in failing to: examine Astra's operations under section 74
of the Act; form an opinion as to the inadequacy of Astra's
assets and report to the Minister under section 75.1. In the
alternative, it was alleged that if the Superintendent had prop
erly discharged his duties, the Minister was in breach of his
section 75.1 duty in not revoking Astra's licence. It was further
alleged that the Minister had been negligent in licensing Astra
in view of certain facts known to him concerning the financial
condition and conduct of that Company's principal director and
shareholder.
The statement of claim was struck out by the Trial Division
as disclosing no cause of action. Mahoney J. held that a claim
to compensation for economic loss was not within the scope of
Crown liability when the statutory duties in issue were imposed
upon the Minister and Superintendent. The order of the
Motions Judge was appealed.
Held, the appeal should be allowed.
Per Le Dain J.: The Motions Judge relied on my reasons for
judgment in Canadian Pacific Air Lines, Limited v. The
Queen, [1979] 1 F.C. 39 (C.A.). The approach adopted there-
in—to consider whether there was a legislative intention to
create a private right of action for breach of statutory duty—
appears to have been rejected by the Supreme Court in the
Saskatchewan Wheat Pool case. That case stands as authority
for the proposition that the question as to whether civil liability
flows from the breach of a statutory duty must be determined
by the application of the common law principles of liability for
negligence rather than by attempting to ascertain legislative
intent. In the instant case, the Crown's liability could only be
vicarious liability under the Crown Liability Act, paragraph
3(1)(a). Subsection 4(2) makes it clear that the Crown cannot
be liable unless a cause of action exists against a Crown
servant.
Some six issues may be identified as having been raised in
argument upon this appeal. They are as follows: (1) the suf-
ficiency of the pleadings to show negligence and causal connec
tion; (2) whether the Minister or Superintendent owed a duty
of care to the appellants; (3) if a duty of care was owed and
there was negligence, could recovery be had for purely econom
ic loss; (4) does the Crown Liability Act impose vicarious
liability for damage caused by negligence in respect of statu
tory duties imposed directly on a Crown servant; (5) does the
Act impose on the Crown liability for purely economic loss; and
(6) is the Minister, under the Trust Companies Act, a servant
of the Crown within the meaning of the Crown Liability Act,
paragraph 3(1)(a).
(1) Subsection 71(2) of the Trust Companies Act notwith
standing, the financial condition of a controlling shareholder
could be relevant to the formation of an opinion by the Minister
as to whether the company is in a financial position to justify its
transaction of the business of a trust company. Whether the
practices complained of could have been detected by a section
74 examination into Astra's affairs is a question which can be
answered only upon an assessment of the evidence at trial. The
same can be said with respect to the sufficiency of the causal
connection between the alleged negligence and the loss.
(2) In answering the question as to whether, in exercising
their statutory duties, the Minister or Superintendent could
owe a common law duty of care to the appellants, reference
should be made to the judgment of Lord Wilberforce in Anns et
al. v. Merton London Borough Council, [1978] A.C. 728
(H.L.). It was there said that the problem must be approached
in two stages. First, as between the alleged wrongdoer and the
victim, is there such proximity that the former would reason
ably contemplate that his carelessness would likely cause
damage to the latter? If the answer to that question be "yes", it
is then necessary to look at any considerations which ought to
limit the scope of the duty or the class to whom it is owed. In
the instant case, the answer to the first of these questions will
depend upon what the facts show as to the appellants as
investors and what the Minister or Superintendent knew about
the company in relation to the appellants' investments. The
question of sufficient proximity was also to be determined on
the evidence. Turning to the second stage mentioned by Lord
Wilberforce, that too should be left for determination in
accordance with what the evidence shows as to the circum
stances surrounding the making of the deposits and the rela
tionship to them of what the Minister and Superintendent did
or did not do.
An analysis of the statutory duties in question to determine
whether they are of a policy or operational nature, gives rise to
serious questions as to whether their exercise or non-exercise
could in principle give rise to liability. But at least in respect of
the Superintendent's duty to examine the affairs of the Com
pany and to report thereon to the Minister, it was not obvious
that this could not in principle give rise to liability.
(3) The Court could find no authority to support the submis
sion that recovery for purely economic loss could be had only in
cases of negligent misrepresentation and negligent failure to
warn of a dangerous defect in the product. Caltex Oil (Aus-
tralia) Pty. Limited v. The Dredge "Willemstad" (1976), 136
C.L.R. 529 (H.C. Aust.) is an example of a case in which there
was recovery for purely economic loss although in a different
category than Hedley Byrne or Rivtow Marine.
(4) It was not plain and obvious that the Crown must
succeed with any of the following three submissions: (1) that
subsection 3(1) of the Act limits the vicarious liability of the
Crown for negligence in respect of statutory duties or powers to
those also given to private persons; (2) that liability is excluded
by subsection 3(6); and (3) that liability is excluded by the
Australian doctrine that an employer, including the Crown, will
not be liable for the wrongful acts or omissions of a servant in
the exercise of a duty or discretion imposed or conferred on him
by law rather than by the instructions of the employer. It was
arguable that the wording of subsection 3(1) was intended
merely to lift the common law immunity of the Crown. It was
arguable that subsection 3(6) applies to statutory powers but
not duties. Furthermore, it may be that it contemplates the
authority of the Crown itself rather than that conferred on
specific Crown servants chosen to perform a particular statu
tory function. The Australian doctrine has been criticized in
academic writing and should perhaps not be applied to the
Crown Liability Act despite the absence of a provision expressly
excluding it.
(5) It was argued that the tortious liability of the Crown is to
be governed by the common law of the province in which the
cause of action arose as it stood on May 14, 1953, when Part I
of the Crown Liability Act took effect and that the common
law of Ontario did not at that time recognize a right of
recovery for purely economic loss caused by negligence. The
Court was not, however, aware of any case holding that the
provincial common law applicable to statutory Crown liability
was to be regarded as frozen as of the date the liability was
imposed. There was an important distinction to be made be
tween common law developments and legislative activity. It was
arguable that the intention of Parliament was to render the
Crown subject to an evolving common law in respect of tortious
liability but only to such provincial legislation as existed when
the Act went into force. It was further argued that the common
law did not recognize recovery for purely economic loss caused
by negligence prior to May 28, 1963 when the judgment of the
House of Lords in Hedley Byrne was given. The date of the
introduction of that concept into Ontario law was not, however,
entirely clear in view of the Seaway Hotels v. Cragg case,
decided by the Ontario Court of Appeal in 1959.
(6) While there had been Exchequer Court decisions that a
Minister of the Crown is not a Crown servant or officer, the
contrary opinion has been expressed in England in the House of
Lords. It is arguable that the latter view is to be preferred for
purposes of the Crown Liability Act. In any event, the Superin
tendent is clearly a servant of the Crown.
Per Urie J.: Not wishing to be thought of as prejudging any
part of this action, I prefer not to comment on the issues or on
any of the related jurisprudence. While the statement of claim
herein is somewhat lacking in particularity, I am not satisfied
that it is plain and obvious that the plaintiffs could not succeed.
Per Kelly D.J.: For the reasons expressed by Le Dain J., I
concur in the disposition of this appeal made by him.
CASES JUDICIALLY CONSIDERED
FOLLOWED:
R. in right of Canada v. Saskatchewan Wheat Pool,
[1983] 1 S.C.R. 205; 45 N.R. 425; Attorney General of
Canada v. Inuit Tapirisat of Canada et al., [1980] 2
S.C.R. 735; Agnew-Surpass Shoe Stores Ltd. v. Cum-
mer- Yonge Investments Ltd., [ 1976] 2 S.C.R. 221.
APPLIED:
Anns et al. v. Merton London Borough Council, [1978]
A.C. 728 (H.L.); Caltex Oil (Australia) Pty. Limited v.
The Dredge "Willemstad" (1976), 136 C.L.R. 529 (H.C.
Aust.); Seaway Hotels Ltd. v. Cragg (Canada) Ltd. et al.
(1959), 21 D.L.R. (2d) 264 (Ont. C.A.), affirming
[1959] O.R. 177 (Ont. H.C.); Bank voor Handel en
Scheepvaart N.V. v. Administrator of Hungarian Prop
erty, [ 1954] A.C. 584 (H.L.); Ranaweera v. Ramachan-
dran, et al., [1970] A.C. 962 (P.C.).
NOT FOLLOWED:
Cutler v. Wandsworth Stadium Ld., [1949] A.C. 398
(H.L.); Darling Island Stevedoring and Lighterage Com
pany Limited v. Long (1957), 97 C.L.R. 36 (H.C. Aust.);
Enever v. The King (1906), 3 C.L.R. 969 (H.C. Aust.);
Baume v. The Commonwealth (1906), 4 C.L.R. 97 (H.C.
Aust.); Field v. Nott (1939), 62 C.L.R. 660 (H.C. Aust.);
McArthur v. His Majesty The King, [1943] Ex.C.R. 77;
Belleau v. Minister of National Health and Welfare, et
al., [1948] Ex.C.R. 288.
DISTINGUISHED:
Canadian Pacific Air Lines, Limited v. The Queen,
[1979] 1 F.C. 39 (C.A.).
CONSIDERED:
Welbridge Holdings Ltd. v. Metropolitan Corporation of
Greater Winnipeg, [1971] S.C.R. 957; Hedley Byrne &
Co. Ltd. v. Heller & Partners Ltd., [1964] A.C. 465
(H.L.); Tremblay v. His Majesty The King, [1944]
Ex.C.R. 1; His Majesty The King v. Armstrong (1908),
40 S.C.R. 229; Gauthier v. His Majesty The King
(1918), 56 S.C.R. 176; Schwella v. Her Majesty The
Queen et al., [1957] Ex.C.R. 226.
REFERRED TO:
Ultramares Corporation v. Touche et al., 174 N.E. 441
(N.Y. Ct. App. 1931); Rivtow Marine Ltd. v. Washing-
ton Iron Works et al., [1974] S.C.R. 1189; Haig v.
Bamford et al., [1977] 1 S.C.R. 466; Ross v. Caunters,
[ 1980] Ch. 297; Barratt v. Corporation of North Van-
couver, [1980] 2 S.C.R. 418; Harris v. The Law Society
of Alberta, [1936] S.C.R. 88; Kwong et al. v. The Queen
in Right of Alberta, [1979] 2 S.C.R. 1010; 105 D.L.R.
(3d) 576, affirming (1978), 96 D.L.R. (3d) 214 (Alta.
S.C. App. Div.); Sommers v. Her Majesty The Queen,
[1959] S.C.R. 678; Jones et Maheux v. Gamache, [1969]
S.C.R. 119.
COUNSEL:
W. Dunlop for appellants (plaintiffs).
P. Vita and C. Lyon for respondent (defend-
ant).
SOLICITORS:
Martin Dunlop Hillyer, Burlington, Ontario,
for appellants (plaintiffs).
Deputy Attorney General of Canada for
respondent (defendant).
The following are the reasons for judgment
rendered in English by
URIE J.: I agree with Mr. Justice Le Dain that
the appeal must be allowed and the order of the
Trial Division [(1982), 135 D.L.R. (3d) 371]
striking out the statement of claim should be set
aside.
However, since I am of the opinion that nothing
that is said in a refusal to grant a motion to strike
out a pleading should be construed by any of the
parties or the Judge presiding at the trial as in any
way prejudging any part of the action, I prefer not
to comment on the issues as they appear at this
early stage of the action or on any of the jurispru
dence relating to such issues. One must start, of
course, with the presumption that all facts alleged
in the statement of claim are true. Having accept
ed that presumption, neither the issues nor the
jurisprudence relating thereto can, of course, be
ignored in considering whether or not the motion
to strike the statement of claim should or should
not be granted. Given this consideration of them I
deem that the proper course for me is simply to
apply the general principle referred to by my
brother Le Dain in his reasons, as expounded by
Estey J. in Attorney General of Canada v. Inuit
Tapirisat of Canada et al., [1980] 2 S.C.R. 735 at
pages 740-741, viz. that I am not satisfied that it is
"plain and obvious beyond doubt" that the plain
tiffs could not succeed in their action.
I agree with Mr. Justice Le Dain that the
statement of claim "is not conspicuous for fullness
or particularity" and this lack has not assisted me
in reaching the conclusion to which I have come.
However, I think that sufficient particularity has
been expressed to enable it to be said that a cause
of action has been disclosed knowing that remedies
are available to the defendant to obtain better
particulars before pleading if they feel the necessi
ty therefor.
Accordingly, the appeal should be allowed and
the order striking out the statement of claim and
dismissing the appellants' action should be set
aside with costs both here and below.
* * *
The following are the reasons for judgment
rendered in English by
LE DAIN J.: This is an appeal from an order of
the Trial Division under Rule 419(1)(a) [Federal
Court Rules, C.R.C., c. 663] striking out the
appellants' fresh statement of claim (hereinafter
referred to as "the statement of claim") and dis
missing their action with costs on the ground that
the statement of claim does not disclose a reason
able cause of action.
The action is against the Crown for breach of
statutory duty and negligence in the exercise of
statutory duties and powers by the Minister of
Finance and the Superintendent of Insurance in
the licensing, inspection and regulation, under the
Trust Companies Act, R.S.C. 1970, c. T-16, of
Astra Trust Company (hereinafter referred to as
"Astra") by which, it is alleged, Astra was permit
ted to conduct its business in such a manner as to
cause the appellants to lose their "entire invest
ment and deposit" in it.
It is alleged that the Minister of Finance was
negligent in licensing Astra under section 71 of the
Act because of certain facts known to him con
cerning the financial condition and conduct of one
Carlo Montemurro, its "principal director and
shareholder", who, it is said, was not in a financial
position to transact "indirectly" the business of a
trust company. Section 71 of the Act provides:
71. (1) No company to which this Act in whole or in part
applies, or person acting on its behalf, shall transact the
business of a trust company unless the company has obtained
from the Minister a licence authorizing it to do so.
(2) The Minister may issue to any such company that has
complied with this Act and is, in the opinion of the Minister, in
such a financial position as to justify its transaction of the
business of a trust company, a licence authorizing the transac
tion of the said business.
(3) The licence shall be in such form as may be from time to
time determined by the Minister and may contain any limita
tions or conditions that the Minister may consistently with the
provisions of this Act deem proper.
(4) The licence expires on the 31st day of March in each
year, but may be renewed from year to year subject, however,
to any qualification or limitation that is considered expedient,
and such licence may be from time to time renewed for any
term less than a year.
(5) The Minister shall cause to be published in the Canada
Gazette, a list of all companies to which licences have been
issued as aforesaid in the first issue in the month of April in
each year.
(6) Where any company makes application to the Minister
for the issue of a licence under this section or for the renewal of
such licence and the application is refused by the Minister, the
company has the right of appeal to the Governor in Council
against the decision of the Minister, and the Governor in
Council, after such hearing given to the company as it deems
necessary or desirable, shall render a decision on the appeal,
which decision is final.
It is further alleged that the Superintendent of
Insurance failed to perform, or negligently per
formed, his statutory duty under section 74 of the
Act to examine the condition and affairs of Astra
and to report thereon to the Minister. Section 74
provides:
74. (1) The Superintendent shall visit personally, or cause a
duly qualified member of his staff to visit, at least once in each
year, the head office of each company and examine carefully
the statements of the condition and affairs of each company,
and report thereon to the Minister as to all matters requiring
his attention and decision.
(2) For the purpose of such examination the company shall
prepare and submit to the Superintendent such statement or
statements, with respect to the business, finances or other
affairs of the company, in addition to that mentioned in section
72, as the Superintendent may require, and the officers, agents
and servants of the company shall cause their books to be open
for inspection, and shall otherwise facilitate such examination
so far as it is in their power.
(3) The company shall on the request of the Superintendent
file with the Superintendent a certified copy of its by-laws, and
notice of every repeal, or addition to, or amendment of, its
by-laws shall be tiled by the company with the Superintendent
within one month after the date of the repeal, addition or
amendment.
(4) The Superintendent may examine under oath the offi
cers, agents or servants of the company for the purpose of
obtaining any information that he deems necessary for the
purpose of the examination.
(5) The Superintendent shall also prepare for the Minister
from the said statements, an annual report, showing the full
particulars of each company's business.
As a consequence of this breach of statutory
duty, it is alleged, Astra was permitted to conduct
its business in "a deceptive, fraudulent and uneth
ical manner", the particulars of which may be
summarized as follows. Two mortgage brokerage
companies—Re-Mor Investment Management
Corporation ("Re-Mor"), which was controlled by
Montemurro, and Via Mare Ventures Limited
("Via Mare"), which was controlled by another
director of Astra—were held out and operated by
employees of Astra as a mortgage division of
Astra, although they were in fact carrying on a
separate, uninsured, unguaranteed mortgage
brokerage business. It was represented that invest
ments in these companies were as secure as those
in Astra and covered by the same deposit insur
ance. Advertising in the name of Astra was used to
attract customers for investment in Re-Mor and
Via Mare. Money received for deposit in Astra
and acknowledged by Astra receipt was deposited
in Re-Mor and Via Mare. Astra accepted funds as
guaranteed and unguaranteed investments and
transferred them to Re-Mor and Via Mare. The
mortgage investments of Re-Mor and Via Mare,
purporting to act as the mortgage division of
Astra, did not comply with the requirements of the
Trust Companies Act. Astra failed to comply with
conditions of the renewal of its licence respecting
advertising and rates of interest offered on certifi
cates. Astra made loans to its directors and offi
cers contrary to the provisions of the Act.
It is further alleged that the Superintendent of
Insurance was negligent in failing to form an
opinion as to the insufficiency of Astra's assets and
to report thereon to the Minister of Finance under
section 75.1 [as am. by R.S.C. 1970 (1st Supp.), c.
47, s. 29; S.C. 1974-75-76, c. 7, s. 2] of the Act, in
failing to make the necessary corrections or adjust
ments for unauthorized investments in his annual
report on Astra under section 76 [as am. by R.S.C.
1970 (1st Supp.), c. 47, s. 30], and in failing to
request the disposal and realization of unauthor
ized investments under section 77. Sections 75.1,
76 and 77 read as follows:
75.1 (1) The Superintendent shall report to the Minister in
any case where the Superintendent is of the opinion that
(a) the company is in violation of subsection 70(7) or (11) or
has borrowed money or accepted guaranteed trust money in
contravention of subsection 70(14);
(b) the assets of a company are not sufficient, having regard
for all the circumstances, to give adequate protection to
persons who have entrusted money to the company for
investment, the repayment of which is guaranteed by the
company, and to creditors of the company; or
(c) the guaranteed trust funds of the company in Canada are
less than the total amount of money accepted in Canada in
trust for investment, the repayment of which is guaranteed.
(2) Where the Minister, after full consideration of the matter
and after a reasonable time has been given to the company to
be heard, believes that the situation described in any paragraph
of subsection (1) exists, the Minister may take one or more of
the following actions:
(a) he may make the company's licence subject to such
limitations or conditions as he considers appropriate;
(b) he may prescribe a time within which the company shall
correct the violation described in paragraph (1)(a) or make
good the deficiency or inadequacy of assets described in
paragraph (1)(6) or (c); and
(c) he may direct the Superintendent to take control of the
assets of the company, the assets held in trust by the com
pany and all other assets under its administration.
(3) Upon the company's failure to correct a violation
described in paragraph (1)(a) or make good any deficiency or
inadequacy of assets described in paragraph (1)(b) or (c)
within the time that may have been prescribed pursuant to
paragraph (2)(b), or any extension thereof subsequently given
by the Minister, the Minister shall direct the Superintendent to
take control of the assets of the company, the assets held in
trust by the company and all other assets under its
administration.
(4) For the purpose of carrying out the provisions of this
section, the Minister may appoint such persons as he deems
proper, to appraise and report on the condition of the company
and its ability, or otherwise, to meet its obligations and
guarantees.
76. In his annual report prepared for the Minister under
section 74, the Superintendent shall
(a) subject to the provisions of section 68.4, allow as assets
only such of the investments of the several companies as are
authorized by this Act, or as were authorized by law at the
time of their acquisition;
(b) make all necessary corrections in the annual statements
made by the companies as herein provided; and
(c) be at liberty to increase or diminish the assets or liabili
ties of such companies to the true and correct amounts
thereof as ascertained by him in the examination of their
affairs at the head office thereof, or otherwise.
77. (1) The Superintendent may request any company to
dispose of and realize any of its investments acquired after the
28th day of June 1922, and not authorized by this Act, and the
company shall within sixty days after receiving such request
absolutely dispose of and realize those investments, and if the
amount realized therefrom falls below the amount paid by the
company for those investments, the directors of the company
are jointly and severally liable for the payment to the company
of the amount of the deficiency.
(2) If any director present when any such investment is
authorized does forthwith, or if any director then absent does,
within twenty-four hours after he becomes aware of such
investment and is able to do so, enter on the minutes of the
board of directors his protest against the investment, and within
eight days thereafter gives notice of his protest by registered
letter to the Superintendent, that director may thereby, and not
otherwise, exonerate himself from such liability.
Alternatively, it is alleged that if the Superin
tendent of Insurance performed his duties and
exercised his powers under these sections without
negligence the Minister of Finance was in breach
of his duty under section 75.1 in not revoking
Astra's licence.
The appellants claim the sum of $350,000 as
damages for "monetary losses", this being the
total amount of the investment and deposit in
Astra and Re-Mor which they allegedly lost as a
result of the breach of statutory duty and negli
gence in the exercise of statutory duties and
powers by the Minister of Finance and the Super
intendent of Insurance.
The Trial Division struck out the statement of
claim as not disclosing a reasonable cause of action
on the ground that while it was fairly arguable
that the provisions of the Trust Companies Act
were enacted for the benefit of persons in the
position of the appellants there was no indication
in them or in the Act as a whole of an intention to
create Crown liability for purely economic loss.
In reaching this conclusion the learned Motions
Judge relied on certain passages in my reasons for
judgment in Canadian Pacific Air Lines, Limited
v. The Queen, [ 1979] 1 F.C. 39 (C.A.). He regard
ed the cause of action asserted in that case as "in
all essentials, identical" to the one pleaded in this
case. The action in Canadian Pacific Air Lines
was regarded by me, rightly or wrongly, as based
on a direct liability of the Crown, said to be
created by the Aeronautics Act, R.S.C. 1970, c.
A-3, for breach of the statutory duty to maintain
airports imposed by section 3 of that Act, and not,
as here, on a vicarious liability of the Crown under
the Crown Liability Act, R.S.C. 1970, c. C-38, for
breach of statutory duty and negligence in the
exercise of statutory duties and powers by servants
of the Crown. Be that as it may, the approach
which I adopted in Canadian Pacific Air Lines
was to consider whether there was a legislative
intention to create a private right of action for
breach of the statutory duty imposed by section 3
of the Aeronautics Act, in reliance on such author
ity as Cutler v. Wandsworth Stadium Ld., [1949]
A.C. 398 (H.L.). That approach appears to have
been rejected by the Supreme Court of Canada in
its recent judgment in R. in right of Canada v.
Saskatchewan Wheat Pool pronounced on Febru-
ary 8, 1983 and reported in [1983] 1 S.C.R. 205;
45 N.R. 425. There the Court, choosing between
the different views of liability for breach of statu
tory duty for which there was support in the
jurisprudence, decided against the notion of a
nominate tort of statutory breach and held that
liability for such breach is to be regarded as part
of the law of negligence. Mr. Justice Dickson,
delivering the judgment of the Court, summed up
his conclusions on this question as follows [at
pages 227-228 S.C.R.]:
1. Civil consequences of breach of statute should be subsumed
in the law of negligence.
2. The notion of a nominate tort of statutory breach giving a
right to recovery merely on proof of breach and damages
should be rejected, as should the view that unexcused breach
constitutes negligence per se giving rise to absolute liability.
3. Proof of statutory breach, causative of damages, may be
evidence of negligence.
4. The statutory formulation of the duty may afford a specific,
and useful, standard of reasonable conduct.
5. In the case at bar negligence is neither pleaded nor proven.
The action must fail.
While the issue in Saskatchewan Wheat Pool
was whether a breach of the statutory provision in
that case was sufficient by itself, without proof of
negligence, to give rise to liability, Mr. Justice
Dickson, in the course of his reasons, expressed
disapproval of the attempt to ascertain whether
there was a legislative intention to create civil
liability for breach of statutory duty. His views on
this matter are reflected in the following passages
of his judgment [at pages 215-216 and 226
S.C.R.]:
This fragmentation of approach has given rise to some
theoretical, and some not-so-theoretical, difficulties. The pre
tence of seeking what has been called a "will o' the wisp", a
non-existent intention of Parliament to create a civil cause of
action, has been harshly criticized. It is capricious and arbi
trary, "judicial legislation" at its very worst.
Not only does it involve an unnecessary fiction, but it may
lead to decisions being made on the basis of insignificant
details of phraseology instead of matters of substance. If the
question whether a person injured by breach of a statutory
obligation is to have a right of action for damages is in truth
a question to be decided by the court, let it be acknowledged
as such and some useful principles of law developed.
(Winfield & Jolowicz, supra, at p. 159)
It is a "bare faced fiction" at odds with accepted canons of
statutory interpretation: "the legislature's silence on the ques
tion of civil liability rather points to the conclusion that it either
did not have it in mind or deliberately omitted to provide for it"
(Fleming, The Law of Torts, 5th ed., 1977, at p. 123). Glan-
ville Williams is now of the opinion that the "irresolute course"
of the judicial decisions "reflect no credit on our jurisprudence"
and, with respect, I agree....
Assuming that Parliament is competent constitutionally to
provide that anyone injured by a breach of the Canada Grain
Act shall have a remedy by civil action, the fact is that
Parliament has not done so. Parliament has said that an
offender shall suffer certain specified penalties for his statutory
breach. We must refrain from conjecture as to Parliament's
unexpressed intent. The most we can do in determining whether
the breach shall have any other legal consequences is to exam
ine what is expressed. In professing to construe the Act in order
to conclude whether Parliament intended a private right of
action, we are likely to engage in a process which Glanville
Williams aptly described as "looking for what is not there"
(supra, at p. 244). The Canada Grain Act does not contain any
express provision for damages for the holder of a terminal
elevator receipt who receives infested grain out of an elevator.
What this indicates, I think, is that the question
whether there is to be civil liability for breach of
statutory duty is to be determined, in so far as it
necessarily remains a question of policy, not by
conjectures as to legislative intention but by the
application, in a public law context, of the
common law principles governing liability for neg
ligence. The liability is not to be regarded as
created by the statute, where there is no express
provision for it. In the present case the liability of
the Crown, if any, must be the vicarious liability
under paragraph 3(1)(a) of the Crown Liability
Act, which reads:
3. (1) The Crown is liable in tort for the damages for which,
if it were a private person of full age and capacity, it would be
liable
(a) in respect of a tort committed by a servant of the Crown
It is a condition of the Crown's liability that on the
facts alleged in the statement of claim there would
be a cause of action against the servant of the
Crown. This is made explicit by subsection 4(2) of
the Crown Liability Act, which reads:
4....
(2) No proceedings lie against the Crown by virtue of
paragraph 3(1)(a) in respect of any act or omission of a servant
of the Crown unless the act or omission would apart from the
provisions of this Act have given rise to a cause of action in tort
against that servant or his personal representative.
There are several issues raised by the argument
on the appeal. They fall broadly into two groups:
those which relate to the question whether, on the
allegations of fact in the statement of claim, there
would be a cause of action against either the
Minister of Finance or the Superintendent of In
surance; and those which relate to the question
whether, assuming such a cause of action against
either of them, the Crown Liability Act imposes
vicarious liability on the Crown for the damage
caused by a tort of this kind. The issues may be
summarized as follows:
1. Are there sufficient, relevant allegations of
fact to show negligence in the exercise of the
statutory duties and powers of the Minister of
Finance or the Superintendent of Insurance and
causal connection between that negligence and
the loss?
2. Did the Minister of Finance or the Superin
tendent of Insurance owe a duty of care to the
appellants in respect of the exercise of these
duties and powers?
3. Assuming there was a duty of care and
negligence, could there be recovery against
either of them for purely economic loss?
4. Does the Crown Liability Act impose vicari
ous liability on the Crown for damage caused by
negligence in respect of statutory duties and
powers which have been imposed or conferred
directly on a servant of the Crown?
5. Does the Act impose liability on the Crown
for purely economic loss?
6. Is the Minister of Finance, in the exercise of
his powers under the Trust Companies Act, a
servant of the Crown within the meaning of
paragraph 3(1)(a) of the Crown Liability Act?
Before turning to these questions it is desirable
to recall the approach which must be taken by a
court on a motion to strike out a statement of
claim and dismiss an action on the ground that it
does not disclose a reasonable cause of action. The
governing considerations were expressed by Estey
J., delivering the judgment of the Supreme Court
of Canada in Attorney General of Canada v. Inuit
Tapirisat of Canada et al., [ 1980] 2 S.C.R. 735 at
pages 740-741, as follows:
As I have said, all the facts pleaded in the statement of claim
must be deemed to have been proven. On a motion such as this
a court should, of course, dismiss the action or strike out any
claim made by the plaintiff only in plain and obvious cases and
where the court is satisfied that "the case is beyond doubt":
Ross v. Scottish Union and National Insurance Co. ((1920), 47
O.L.R. 308 (App. Div.)). Here Bell Canada in its statement of
defence has raised the issue of law as to the position of the
Governor in Council when acting under s. 64 of the National
Transportation Act, supra, and the power and jurisdiction of
the court in relation thereto. The issue so raised requires for its
disposition neither additional pleadings nor any evidence. I
therefore agree with respect with the judge of first instance that
it is a proper occasion for a court to respond in the opening
stages of the action to such an issue as this application raises.
On this matter the learned Motions Judge,
referring to the above passage in Inuit Tapirisat,
said [at page 371]:
Such a motion must be decided on the basis that all the facts
alleged are true and the motion can only succeed "in plain and
obvious cases and where the court is satisfied that the case is
beyond doubt". That is not, however, to say that the Court is
excused, on such a motion, from dealing with complex legal
questions and applying the law to the facts assumed, for the
purpose, to be true.
I would agree. But it must, after argument, be
plain and obvious and beyond doubt that the plain
tiff could not succeed. Otherwise, the plaintiff is
entitled to have the issues determined after trial.
I turn then to the first issue, which is the
sufficiency of the pleadings to show negligence and
causal connection. I will concede that the state
ment of claim is not conspicuous for fullness or
particularity, but that is not a reason, given the
possibility of amendment or particulars, for dis
missing the action. Counsel for the Crown con
tended that the allegations of fact in paragraph 5
of the statement of claim with respect to the
financial condition and conduct of the principal
shareholder of Astra, as indicating that he was not
in a financial position to transact "indirectly" the
business of a trust company, are not relevant to the
exercise of the licensing authority under subsection
71(2) of the Trust Companies Act, which requires
that the Minister of Finance be of the opinion that
the company is in such a financial position as to
justify its transaction of the business of a trust
company. Although that contention appears to
have considerable force, in my view the financial
condition and conduct of a controlling shareholder
could conceivably be relevant to the opinion to be
formed by the Minister of Finance as to whether
the company is in a financial position to justify its
transaction of the business of a trust company.
Whether it was so can only be properly determined
in the light of what the evidence actually discloses
concerning the relationship, if any, between the
financial condition and conduct of the shareholder
and the financial position of the company.
Counsel for the Crown also contended that the
allegations in paragraph 8 of the statement of
claim concerning the manner in which the business
of Astra was conducted in relation to that of
Re-Mor and Via Mare were not relevant to the
exercise of the duties and powers of the Superin
tendent of Insurance and the Minister of Finance
under sections 74, 75.1, 76 and 77 of the Trust
Companies Act. Again I am of the view that this is
a matter which can only be properly determined on
the basis of what the evidence discloses at trial.
The statement of claim alleges that Astra was
permitted by the negligence of the Superintendent
of Insurance to conduct its business in a deceptive,
fraudulent and unethical manner, with consequent
loss to the appellants. Specifically it is alleged that
money received for deposit in Astra was deposited
in Re-Mor and Via Mare where it was not subject
to the same guarantee and insurance protection
and where it was invested in a manner not author
ized by the Trust Companies Act. Whether the
practices complained of could have been detected
by an examination of the affairs of Astra under
section 74 and whether they were of a nature and
effect that might call for the exercise of the duties
and powers under sections 75.1, 76 and 77 are in
my opinion matters which can only be properly
determined on the basis of the evidence. I am not
prepared to say at this stage that it is plain and
obvious that the allegations in paragraph 8 are not
relevant to the exercise of these duties and powers.
Whether there was a sufficient causal connec
tion between the alleged negligence and the loss is
also in my opinion a matter which can only be
properly determined on the basis of the evidence.
There is a general allegation of causal connection
in the statement of claim. I am unable to say at
this stage that it is plain and obvious that the
appellants could not as a matter of fact and law
establish a sufficient causal connection, apart from
the question of recovery for purely economic loss,
between the loss and the acts or omissions of the
Minister of Finance and the Superintendent of
Insurance.
The next issue is whether, in respect of the
exercise of these statutory duties and powers, there
could be a common law duty of care owed by the
Minister of Finance or the Superintendent of In
surance to the appellants. The approach to that
question that is now treated as particularly
authoritative and helpful is that stated by Lord
Wilberforce in Anns et al. v. Merton London
Borough Council, [1978] A.C. 728 (H.L.) at
pages 751-752 as follows:
Through the trilogy of cases in this House—Donoghue v.
Stevenson [1932] A.C. 562, Hedley Byrne & Co. Ltd. v. Heller
& Partners Ltd. [1964] A.C. 465, and Dorset Yacht Co. Ltd. v.
Home Office [1970] A.C. 1004, the position has now been
reached that in order to establish that a duty of care arises in a
particular situation, it is not necessary to bring the facts of that
situation within those of previous situations in which a duty of
care has been held to exist. Rather the question has to be
approached in two stages. First one has to ask whether, as
between the alleged wrongdoer and the person who has suffered
damage there is a sufficient relationship of proximity or neigh
bourhood such that, in the reasonable contemplation of the
former, carelessness on his part may be likely to cause damage
to the latter—in which case a prima facie duty of care arises.
Secondly, if the first question is answered affirmatively, it is
necessary to consider whether there are any considerations
which ought to negative, or to reduce or limit the scope of the
duty or the class of person to whom it is owed or the damages
to which a breach of it may give rise: see Dorset Yacht case
[1970] A.C. 1004, per Lord Reid at p. 1027. Examples of this
are Hedley Byrne's case [1964] A.C. 465 where the class of
potential plaintiffs was reduced to those shown to have relied
upon the correctness of statements made, and Weller & Co. v.
Foot and Mouth Disease Research Institute [1966] 1 Q.B. 569;
and (I cite these merely as illustrations, without discussion)
cases about "economic loss" where, a duty having been held to
exist, the nature of the recoverable damages was limited: see
S.C.M. (United Kingdom) Ltd. v. W. J. Whittall & Son Ltd.
[1971] 1 Q.B. 337 and Spartan Steel & Alloys Ltd. v. Martin
& Co. (Contractors) Ltd. [ 1973] Q.B. 27.
The question whether there was a sufficient
relationship of proximity between the Minister of
Finance or the Superintendent of Insurance and
the appellants to give rise to a prima fade duty of
care will depend, at least in part, on what the
actual facts show was the position of the appellants
as investors, as well as the nature of their invest
ments, and what was known or could be known to
the Minister of Finance or the Superintendent of
Insurance about the financial position and conduct
of the company as it might affect those invest
ments. The statutory duties and powers relied on
by the appellants appear to have been created, at
least in part, for the protection of persons who
entrust money to a trust company. They have as
their general object to ensure that the company
maintains sufficient assets to meet its obligations.
They are, therefore, duties and powers which do
not on their face exclude the possibility of a
common law duty of care in respect of their exer
cise. The question of whether there was sufficient
proximity between the Minister of Finance or the
Superintendent and the appellants is closely relat
ed to the question of causal connection or remote
ness which I have referred to as one which should
also be left to be determined on the basis of the
evidence. There is also the question, related to the
issue of recovery for economic loss and probably
falling in Lord Wilberforce's second stage of anal
ysis, whether one should recognize a duty of care
to such a large class of persons, involving such a
large potential liability. That is the danger of the
liability "in an indeterminate amount for any
indeterminate time to an indeterminate class"
spoken of by Chief Justice Cardozo in Ultramares
Corporation v. Touche et al., 174 N.E. 441 (N.Y.
Ct. App. 1931) at page 444 and treated in subse
quent judicial commentary as a legitimate policy
consideration, particularly in cases involving recov
ery for economic loss. See, for example, Rivtow
Marine Ltd. v. Washington Iron Works et al.,
[1974] S.C.R. 1189 at page 1218; Haig v. Bam-
ford et al., [1977] 1 S.C.R. 466 at page 476;
Caltex Oil (Australia) Pty. Limited v. The Dredge
"Willemstad" (1976), 136 C.L.R. 529 (H.C.
Aust.) at pages 568, 591; Ross v. Caunters, [1980]
Ch. 297 at page 300. There may be a duty of care
owing to the members of a limited class which is
known to the alleged tortfeasor: Haig v. Bamford,
supra. It is not in my opinion plain and obvious at
this stage that there could not be a duty of care
owing by the Minister of Finance or the Superin
tendent of Insurance to the appellants as the mem
bers of a limited class. That question should be left
to be determined upon the basis of what the evi
dence shows as to the circumstances surrounding
the making of the appellants' deposits and the
relationship to them of what the Minister of
Finance and the Superintendent of Insurance did
or did not do.
It is necessary now to consider the application to
the statutory duties and powers of the Minister of
Finance and the Superintendent of Insurance of
certain classifications or distinctions which would
result in immunity from tortious liability. There is
first the distinction between policy or planning
functions and operational functions which was dis
cussed in Anns and applied by the Supreme Court
of Canada in Barratt v. Corporation of North
Vancouver, [1980] 2 S.C.R. 418. There is no
liability for negligence in respect of policy or plan
ning functions involving discretionary decisions
concerning the allocation of resources. On the
other hand, there may be liability for negligence in
the implementation of such decisions at the operat
ing level. Essentially the same distinction was
drawn in somewhat different terms by the
Supreme Court of Canada in the earlier case of
Welbridge Holdings Ltd. v. Metropolitan Corpo
ration of Greater Winnipeg, [1971] S.C.R. 957
between the functions of a municipal corporation
at the legislative or quasi-judicial level and those
at the operating level, which were referred to as
"administrative" or "business" powers. Counsel
for the Crown placed particular reliance with ref
erence to certain of the powers and duties of the
Minister of Finance and the Superintendent of
Insurance on the principle affirmed in Welbridge
that there is no liability in tort for the exercise of
quasi-judicial powers in the absence of a wilful
intent to injure or bad faith. See also Harris v. The
Law Society of Alberta, [1936] S.C.R. 88. There
is also the principle, affirmed in Anns, that for a
duty of care to arise in connection with the exer
cise of a discretionary function at the operational
level it must be shown that the act complained of
was outside the limits of the discretion exercised
bona fide. There is finally the distinction between
misfeasance and non-feasance, which is still
applied as a basis for denying liability (see, for
example, Kwong et al. v. The Queen in Right of
Alberta (1978), 96 D.L.R. (3d) 214 (Alta. S.C.
App. Div.), affirmed by [1979] 2 S.C.R. 1010; 105
D.L.R. (3d) 576), although it was held in Anns
that there may be liability for failure to give
proper consideration to the question whether to
exercise a statutory power.
It is convenient first to consider the duties and
powers of the Superintendent of Insurance in the
light of these principles. Assuming that the distinc
tion between policy functions and operational
functions applies to statutory duties as well as
statutory powers, the duties of the Superintendent
of Insurance under section 74 of the Trust Com
panies Act to examine, or cause an examination to
be made of, the affairs of the company and to
report thereon to the Minister of Finance are
clearly, in my opinion, of an operational nature. In
so far as there is a discretion under section 74 as to
the nature and extent of the examination to be
carried out, it must be left to the evidence to
determine whether there was negligence in the
exercise of that discretion, having in mind the
requirement of ultra vires laid down in Anns. The
duties of the Superintendent of Insurance to form
an opinion as to whether there exist any of the
circumstances or conditions described in para
graphs (a), (b) and (c) of section 75.1, to report
thereon to the Minister of Finance, and in his
annual report to the Minister to make the correc
tions or adjustments in the financial statements of
the company provided for by section 76 are also in
my opinion of an operational nature. It was argued
that these corrections or adjustments are quasi-
judicial in nature, having regard to their nature
and effect and the fact that section 78 of the Act
provides for an appeal from them to the Federal
Court. It is not clear, however, that the Superin
tendent of Insurance is required to give the com
pany an opportunity to be heard before making a
determination or ruling of the kind contemplated
by section 76. Subsection 78(2) provides that in
the case of an appeal to the Federal Court the
Superintendent shall, if requested by the company,
provide it with a certificate setting forth the ruling
appealed from and the reasons therefor. This
rather suggests that the hearing on such a ruling is
to be provided on appeal. The power of the Super
intendent of Insurance under section 77 to order
the disposal of assets is clearly of a discretionary
nature, although I would regard it as being one at
the operational level. Whether there could be lia
bility for negligent failure to exercise that power
would depend on the application of the distinction
between misfeasance and non-feasance or the prin
ciple affirmed in Anns that proper consideration
must be given to whether a power should be
exercised having regard to what the evidence actu
ally shows, if anything, of circumstances which
might call for the exercise of the power and the
Superintendent's response to such circumstances.
The statutory powers of the Minister of Finance
which are invoked as a basis of liability are his
licensing authority under section 71 and his power
to take certain remedial action under subsection
75.1(2) upon a report from the Superintendent of
Insurance that there is one of the situations
described in paragraphs (a), (b) and (c) of subsec
tion 75.1(1). The licensing authority, despite the
conditions specified in subsection 71(2), would
appear to involve a residual discretion of a policy
nature. This is suggested by the appeal to the
Governor in Council from a refusal by the Minis
ter to issue or renew a licence. Apart from prob
lems of causation and foreseeability in the rela
tionship of the licensing authority and the loss of
investments in the company there is a serious
doubt in my mind as to whether negligence in the
exercise of such authority should in principle be
capable of giving rise to liability. But again I think
this is a question which should be left to be
determined after trial in the light of what the
evidence shows as to the manner in which the
power was exercised. It is not plain and obvious to
me at this stage that there could under no circum
stances be liability. The allegation of the statement
of claim with reference to the Minister's powers
under section 75.1 is somewhat ambiguous. It is
that if the Superintendent of Insurance exercised
his duties and powers without negligence the Min
ister of Finance was in breach of his duty to revoke
the company's licence. Apart from the question
whether revocation of a company's licence is tech
nically one of the actions that may be taken by the
Minister under subsection 75.1(2), or may neces
sarily be an effect of one of those actions, there is
the question whether the Minister has a duty to
take such action if he is of the opinion that a
situation described in paragraphs (a), (b) and (c)
exists. It would appear that the authority is per
missive. This conclusion is reinforced by the fact
that subsection 75.1(3) provides that where the
company fails to correct a situation described in
paragraphs (a), (b) and (c) within the time pre
scribed by the Minister the latter "shall" direct the
Superintendent to take control of the assets of the
company. Thus I would conclude that the Minis
ter's powers under paragraphs (a), (b) and (e) of
subsection 75.1(2) are of a discretionary nature.
They would further appear to be of a quasi-judi
cial nature. This is indicated by their nature and
effect and the requirement that the Minister give
the company an opportunity to be heard.
The foregoing characterizations of the duties
and powers of the Superintendent of Insurance and
the Minister of Finance raise serious questions as
to whether the exercise of them or the failure to
exercise them could in principle give rise to liabili
ty. It is to be noted that there is no allegation in
the statement of claim of wilful intent to cause
injury or of bad faith, nor even that in respect of
the exercise of discretionary powers the Superin
tendent of Insurance or the Minister of Finance
were acting outside the scope of their discretion. I
am of the opinion, however, that at least in respect
of the duty of the Superintendent of Insurance to
examine the affairs of the company or to cause
them to be examined and to report thereon to the
Minister, it is not plain and obvious that because
of the nature of that duty an act or omission in
respect of it could not in principle give rise to
liability. In so far as failure to exercise the various
statutory powers is concerned, I think it should be
left open to consider whether there was actionable
negligence for failure to give proper consideration
to whether they should be exercised, in the light of
what the evidence shows. It must be kept in mind,
moreover, that it is sufficient for purposes of the
vicarious liability of the Crown that there would
be a reasonable cause of action against either the
Superintendent of Insurance or the Minister of
Finance.
The next question is whether, if there were a
duty of care owed by the Minister of Finance or
the Superintendent of Insurance to the appellants
and a breach of that duty, there could in principle
be recovery for purely economic loss. Counsel for
the Crown contended that the kinds of cases in
which there could be recovery for economic loss
that is not consequential upon personal injury or
property damage were limited to those represented
by Hedley Byrne & Co. Ltd. v. Heller & Partners
Ltd., [1964] A.C. 465 (H.L.) and Rivtow Marine,
supra: negligent misrepresentation, and negligent
failure to warn of a dangerous defect in a product.
There is in my opinion nothing in subsequent
judicial commentary on this question which sug
gests that recovery for purely economic loss is to
be limited in principle to these categories of cases.
In Agnew-Surpass Shoe Stores Ltd. v. Cummer-
Yonge Investments Ltd., [1976] 2 S.C.R. 221 at
page 252 there was the following general reference
to the significance of Rivtow Marine: "It is now
settled by the judgment of this Court in Rivtow
Marine Ltd. v. Washington Iron Works et al.
([1974] S.C.R. 1189) that recovery for economic
loss caused by negligence is allowable without any
recovery for property damage." It would appear
that whether such recovery will be permitted in a
particular case of negligence will depend on the
application of general principles or considerations
not confined to certain categories or types of cases.
These principles and considerations are very fully
examined in Caltex Oil, supra, which was itself an
example of recovery for purely economic loss in a
case which did not fall within the Hedley Byrne
and Rivtow Marine categories. Whether the ques
tion is to be approached from the point of view of
duty of care or remoteness of damage or generally
as a policy question it is not plain and obvious to
me at this stage that the possibility of such recov
ery in the present case should be excluded as a
matter of principle. Again, in my opinion, it is a
question that should be left to be determined at
trial upon the basis of what the evidence actually
discloses concerning the relationship between the
appellants' loss and the acts or omissions of the
Minister of Finance and the Superintendent of
Insurance.
For the foregoing reasons I am of the opinion
that it is not plain and obvious that there could not
be a reasonable cause of action against either the
Superintendent of Insurance or the Minister of
Finance.
I turn now to consideration of the issues raised
with respect to the vicarious liability imposed on
the Crown by the Crown Liability Act.
The first of these issues is whether the Act
imposes Crown liability for damage caused by
negligence in the exercise of statutory duties and
powers which have been imposed or conferred
directly on a servant of the Crown. Counsel for the
Crown based his contention that the Act does not
impose such liability on three submissions: (a) that
the words "for which, if it were a private person of
full age and capacity, it would be liable" in subsec
tion 3(1) of the Act limit the vicarious liability of
the Crown for negligence in respect of statutory
duties or powers to duties or powers which are also
imposed or conferred on private persons; (b) that
such liability is excluded by subsection 3(6) of the
Act, and in particular, by the words "Nothing in
this section makes the Crown liable in respect of
anything done or omitted in the exercise of ... any
power or authority conferred on the Crown by any
statute"; and (c) that such liability is excluded by
the doctrine to be found in the Australian cases of
Darling Island Stevedoring and Lighterage Com
pany Limited v. Long (1957), 97 C.L.R. 36
(H.C.); Enever v. The King (1906), 3 C.L.R. 969
(H.C.); Baume v. The Commonwealth (1906), 4
C.E.R. 97 (H.C.); and Field v. Nott (1939), 62
C.L.R. 660 (H.C.), that an employer, including
the Crown, will not be liable for the wrongful acts
or omissions of a servant in the exercise of an
independent duty or discretion which is imposed or
conferred directly on the servant by law and not by
the instructions of the employer.
In my opinion it is not plain and obvious that the
Crown must succeed with these submissions, and
in view of the conclusion reached with respect to
the first group of issues, they should be left to be
decided by the Trial Court on the basis of what the
pleadings as a whole and the evidence disclose as
to the precise relationship of the alleged negligence
to the statutory duties and powers in question. It is
arguable in my opinion that the words "for which,
if it were a private person of full age and capacity,
it would be liable" in section 3 of the Crown
Liability Act are merely the formula by which the
common law immunity of the Crown is lifted, and
that their purpose is to indicate that the Crown is
to be as fully liable as a private person of full age
and capacity would be in respect of a particular
tort and not to limit the situations in which the
Crown may become liable, in the categories of
liability specified by the Act, to those in which a
private person could become liable. Cf. the
assumptions implicit in subsections 2(2) and 2(3)
of the United Kingdom Crown Proceedings Act,
1947 [10 & 11 Geo. 6, c. 44], as to the effect of
these words in subsection 2(1) and the opinion
expressed in Hogg, Liability of the Crown, pages
69, 102 that there is no limitation in the United
Kingdom statute on the vicarious liability of the
Crown for breach of statutory duty. In so far as
subsection 3(6) of the Crown Liability Act is
concerned, it is arguable that it applies to statutory
powers but not to statutory duties, and further,
that it contemplates power or authority of the
Crown itself, such as prerogative power and statu
tory authority that should be regarded as con
ferred on the Crown, as distinct from that con
ferred on specific Crown servants chosen to
perform a particular statutory function. The
application to the Crown of the independent duty
or discretion rule found in the Australian cases, to
which reference has been made, is excluded by
subsection 2(3) of the United Kingdom Crown
Proceedings Act, 1947 and by subsection 5(3) of
the Ontario Proceedings Against the Crown Act,
R.S.O. 1980, c. 393. The rule, as applied to Crown
liability, has been strongly criticized (see Hogg,
op. cit., pages 104, 107-108), and it is arguable, in
my respectful opinion, that it should not be applied
under the Crown Liability Act, despite the absence
of a provision expressly excluding it similar to that
found in the United Kingdom and Ontario
statutes.
The second issue with respect to the vicarious
liability of the Crown is whether the Crown Lia
bility Act imposes liability for purely economic
loss. The contention of counsel for the Crown that
it does not is based on the submissions that the
tortious liability of the Crown is to be governed by
the common law of the province in which the cause
of action arose as it stood on May 14, 1953, when
Part I of the Crown Liability Act took effect, and
that the common law of Ontario on that date did
not recognize a right of recovery for purely eco
nomic loss caused by negligence.
With respect to the first submission, there are a
number of decisions based on the provisions of the
former Exchequer Court Act [R.S.C. 1970, c.
E-11] imposing tortious liability on the Crown, in
which it was held that the Crown's liability was to
be determined by the law of the province in which
the tort occurred, including any relevant provincial
statute law which was in force at the time the
Crown liability was imposed, except in so far as
such provincial law was repugnant to the terms of
the Exchequer Court Act or sought to impose a
liability on the Crown different from that imposed
by that Act. See particularly Tremblay v. His
Majesty The King, [1944] Ex.C.R. 1, applying
His Majesty The King v. Armstrong (1908), 40
S.C.R. 229 and Gauthier v. His Majesty The King
(1918), 56 S.C.R. 176. Although the references to
the applicable provincial law in these cases were
expressed in broad terms, the issue appears to have
been whether a particular provincial statute affect-
ing tortious liability applied to the liability of the
federal Crown. It was held that Parliament was
presumed to have intended that that liability
should be determined by provincial law, including
any relevant provincial statutes that were in force
at the time the liability was imposed on the Crown,
but that provincial statutes subsequently enacted
could not validly affect the liability of the federal
Crown unless adopted by Parliament. The case of
Schwella v. Her Majesty The Queen et al., [1957]
Ex.C.R. 226, where reference was made to the law
which determined liability under paragraph
3(1)(a) of the Crown Liability Act, was also a case
in which the question was the application of a
provincial statute, the Negligence Act of Ontario.
In no case of which I am aware was there a
suggestion that the provincial common law, appli
cable to the categories of Crown liability created
by the provisions of the Exchequer Court Act or
the Crown Liability Act, was to be regarded as
frozen as of the date the liability was imposed.
There is an important difference, in respect of the
intention to be ascribed to Parliament as to the law
which is to determine the scope of liability, be
tween changes or developments in the common law
and legislative provisions. In my opinion it is
arguable that the intention in the Crown Liability
Act was to make the Crown subject to an evolving
common law in respect of tortious liability but only
to such provincial legislation as existed at the time
the Act went into force.
The second submission of the Crown on this
issue is based on the view that recovery for purely
economic loss caused by negligence was not recog
nized at common law before the judgment of the
House of Lords on May 28, 1963 in Hedley Byrne
& Co. Ltd. v. Heller & Partners Ltd., [1964] A.C.
465. See Harvey, "Economic Losses and Negli
gence" (1972), 50 Can. Bar Rev. 580 at page 581:
"Before the case of Hedley Byrne & Co. Ltd. v.
Heller & Partners Ltd., it was generally accepted
as a rule of law that liability in negligence did not
extend to pure financial loss." In 1959, however, in
Seaway Hotels Ltd. v. Cragg (Canada) Ltd. et al.
(1959), 21 D.L.R. (2d) 264, affirming [1959]
O.R. 177, the Ontario Court of Appeal affirmed a
judgment of the High Court which awarded dam
ages for purely economic loss in a case of negli
gence. Although there was also property damage
in that case the economic loss has been viewed as
not having been consequential upon the property
damage. Cf. Caltex Oil (Australia) Pty. Limited v.
The Dredge "Willemstad", supra, at pages 548-
549, 586. At the very least, this decision makes it
unclear as to when the common law of Ontario
should be regarded as having recognized the right
to recover for purely economic loss caused by
negligence.
The third issue with respect to the vicarious
liability of the Crown is whether the Minister of
Finance is a servant of the Crown within the
meaning of paragraph 3(1)(a) of the Crown Lia
bility Act. The contention of counsel for the
Crown that he is not is based on decisions of the
Exchequer Court that a Minister of the Crown
was not a servant or officer of the Crown within
the meaning of the provisions of the Exchequer
Court Act imposing vicarious liability on the
Crown and conferring jurisdiction on the Court in
"cases in which demand is made or relief is sought
against any officer of the Crown for anything done
or omitted to be done in the performance of his
duty as such officer". See particularly McArthur
v. His Majesty The King, [1943] Ex.C.R. 77;
Belleau v. Minister of National Health and Wel
fare, et al., [1948] Ex.C.R. 288. A Minister of the
Crown has been held by the Supreme Court of
Canada to be an officer of the Crown for certain
purposes. See Sommers v. Her Majesty The
Queen, [1959] S.C.R. 678; Jones et Maheux v.
Gamache, [1969] S.C.R. 119. While reference was
made in these cases to McArthur and Belleau the
Court did not express an opinion as to whether
they were correctly decided in their particular
legislative context. In England there have been
expressions of judicial opinion, in a sense directly
opposed to that of the Exchequer Court in McAr-
thur, that despite the fact he is an advisor of the
Crown, a Minister of the Crown is a servant of the
Crown. See Bank voor Handel en Scheepvaart
N.V. v. Administrator of Hungarian Property,
[1954] A.C. 584 (H.L.) per Lord Reid at page
615, and Ranaweera v. Ramachandran, et al.,
[1970] A.C. 962 (P.C.) per Lord Diplock [dissent-
ing] at page 973. Lord Diplock referred to the
definition of "officer" in subsection 38(2) of the
Crown Proceedings Act, 1947, as indicating the
assumption that at common law a Minister of the
Crown is a servant of the Crown. It reads: " 'Offic-
er,' in relation to the Crown, includes any servant
of His Majesty, and accordingly (but without
prejudice to the generality of the foregoing provi
sion) includes a `Minister of the Crown' " (empha-
sis added). In my respectful opinion it is arguable
that this is the view which should now be taken for
purposes of the Crown Liability Act. In any event,
the contention of the Crown on this issue, even if
sound, would not exclude the possibility of vicari
ous liability for the alleged tort of the Superin
tendent of Insurance, who is clearly a servant of
the Crown.
For the foregoing reasons I am of the opinion
that it is not plain and obvious and beyond doubt
at this stage that the appellants do not have a
cause of action against the respondent. I would
accordingly allow the appeal, set aside the order of
the Trial Division, and dismiss the application for
an order striking out the statement of claim and
dismissing the action, with costs in both the
Appeal and Trial Divisions.
* * *
The following are the reasons for judgment
rendered in English by
KELLY D.J.: Despite an understandable reluc
tance to say, in deciding a motion to strike out a
statement of claim, anything which might be con
strued as prejudging any part of an action which a
Trial Judge may be called upon later to decide, I
do not consider that in every case, a motion to
strike out a statement of claim as disclosing no
reasonable cause of action should be disposed of by
a bald grant or refusal thereof.
Whichever way the motion may be decided, the
whole or part of the issues between thè parties will
be dealt with finally. As has been said by the
learned Motions Judge, the Court is not excused
"on such a motion, from dealing with complex
legal questions and applying the law to the facts
assumed, for the purpose, to be true".
It would seem to follow that in cases where the
resolution of the motion involves complex ques
tions of law, it is in the interest of the litigants and
future litigants that the Court should not refrain
from formulating its views upon the questions it is
called upon to answer.
That the questions before this Court in the
present proceedings are complex does not require
any exposition. As to the finality resulting from
the disposition of the motion, the granting of it
precludes the same cause of action from again
being summoned to any court; if it be dismissed,
the questions of law raised in support of the
motion will have been irrevocably decided at that
stage and the identical questions of law will have
been thereby precluded from being raised at trial.
As such a motion antedates the adducing of any
evidence and is dependent solely upon the assumed
accuracy of the facts as pleaded, the Court must
proceed on the assumption that every fact pleaded
has been proven and that there are no exculpatory
circumstances which are not established by the
allegations in the statement of claim. In many
respects, this type of motion is but one variation of
the determination, before a trial, of a preliminary
point of law and has the same consequences.
Since there are no facts to be decided by the
judge hearing the motion, his sole function is to
hear argument and apply the relevant law, striking
out the statement of claim only if he be of the
opinion that there is in the facts alleged a complete
absence of any foundation for the cause of action
alleged.
By launching a motion to dispose of an action on
the basis that the statement of claim discloses no
cause of action, the applicant (defendant) assumes
the burden of supporting, by legal argument, his
right to be absolved from having to defend, at
trial, the respondent's action against him because,
as he maintains the cause of action pleaded does
not exist in law. The applicant then is asking for a
decision before trial upon an issue or issues of law
which normally would be brought before the Trial
Judge in counsel's submission after all the evidence
has been put in; by doing so, the applicant asks for
and submits to the resolution of these questions of
law in the preliminary proceedings and will be
prevented by the rejection of his motion from
raising the identical questions of law during the
trial.
No doubt, normally the testimony during the
trial will add to or vary the facts relevant to the
claim from those pleaded in the statement of claim
so that the question before the Trial Judge will not
be identical to those decided upon by the motion;
but if there be no variation between the facts
pleaded in the statement of claim relevant to a
particular question of law and those found by the
Trial Judge, as the trier of fact, relevant to the
same question of law, every question of law raised
by the applicant in the preliminary proceedings
will have been judicially decided and cannot again
be raised by the applicant.
Because of this view of the nature of the pro
ceedings, above expressed, and the admittedly
complex questions submitted to the Court on the
argument in support of the granting of the motion,
I am of the opinion that it is appropriate for a
member of the Court in a case such as this to give
reasons in support of his conclusions reached and
not dispose of the appeal without making any
reference to or comment upon the questions of law
argued before the Court.
Obviously, the intent of such reasons is to deal
exclusively with the questions of law raised for
determination; such reasons are not to be con
strued so as to make them an attempt to deal with
or comment upon any issue of fact since such
would be an infringement upon the preserves of
the Trial Judge.
For the same reasons as are expressed in the
reasons for judgment of my brother Le Dain, I
concur in the disposition of this appeal made by
him.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.