T-1385-82
John Dwight Ingle and Canadian Commercial
Properties Inc. (Plaintiffs)
v.
The Queen in right of Canada as represented by
the Attorney General of Canada, Richard Hum-
phreys, Lawrence Charles Savage, Harold Linton,
Jack Finlayson, John Holmes, Kenneth Bennett
(Defendants)
Trial Division, Muldoon J.—Toronto, October 24,
1983; Ottawa, February 17, 1984.
Jurisdiction — Federal Court Trial Division — Torts —
Negligence — Breach of statutory duty — Servants or agents
of Crown — Action for damages against federal Crown, Su
perintendent of Insurance and staff members — Negligent
representations as to insurance company's affairs — Individu
al defendants seeking to strike statement of claim as against
them — No action for negligence maintainable against
individual defendants in Federal Court — In absence of
express provision in federal law imposing personal liability on
individual defendants for tortious conduct towards private
persons, action to be prosecuted in provincial courts of civil or
common law jurisdiction — No such provision in Department
of Insurance Act nor in Canadian and British Insurance Com
panies Act — Federal Court Act, R.S.C. 1970 (2nd Supp.), c.
10, ss. 17(4)(b), 50(1),(2),(3) — Federal Court Rules, C.R.C., c.
663, R. 419(1)(a) -- Crown Liability Act, R.S.C. 1970, c.
C-38, s. 3(1) — Department of Insurance Act, R.S.C. 1970, c.
I-17 — Canadian and British Insurance Companies Act,
R.S.C. 1970, c. I-15 (as am. by R.S.C. 1970 (1st Supp.), c. 19).
Practice — Motion to strike pleadings — Motion to stay
proceedings — Plaintiffs suing federal Crown, Superintendent
of Insurance and staff members for damages due to negligent
representations as to insurance company's affairs — No provi
sion in Department of Insurance Act nor in Canadian and
British Insurance Companies Act imposing personal liability
on individual defendants for tortious conduct towards private
persons — Action maintainable only in provincial courts of
civil or common law jurisdiction — Action dismissed as
against individual defendants — Proceedings stayed as against
Crown, s. 50(2) of Federal Court Act requiring Court to stay
proceedings against Crown where same claim pending in other
court against some person acting so as to engage liability of
Crown — Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10,
ss. 17(4)(b), 50(1),(2),(3) — Federal Court Rules, C.R.C., c.
663, R. 419(1)(a) — Crown Liability Act, R.S.C. 1970, c.
C-38, s. 3(1) — Department of Insurance Act, R.S.C. 1970, c.
1-17 — Canadian and British Insurance Companies Act,
R.S.C. 1970, c. 1-15 (as am. by R.S.C. 1970 (1st Supp.), c. 19).
Crown — Torts — Negligence — Action for damages
against Crown and public servants — Allegedly negligent
representations relied on in acquiring insurance company
shares — Crown servants or agents allegedly failing to make
adequate examinations of corporate affairs — Allegedly neg
ligent in permitting registration renewal — No federal legisla
tion imposing personal liability on individual defendants for
tortious conduct towards private persons — Order to go dis
missing action as against them — Original defendants also
sued in Supreme Court of Ontario — Federal Court action
against Crown stayed under s. 50(2), claimant having action
pending in other court against person acting so as to engage
liability of Crown — Federal Court Act, R.S.C. 1970 (2nd
Supp.), c. 10, s. 50(2).
The first motion herein is brought by the individual defend
ants to strike the statement of claim as against them; the
second motion is to stay the proceedings as against all the
defendants. The plaintiffs are suing Her Majesty the Queen,
the Superintendent of Insurance and members of his staff for
recovery of damages allegedly incurred through reliance on
negligent representations in acquiring the shares of an insur
ance company. The plaintiffs allege that the individual defend
ants are servants or agents of Her Majesty and acted negligent
ly and in breach of statutory duty in failing to adequately
examine the affairs of the company and in renewing the latter's
certificate and registration. The issue is whether the plaintiffs'
action is maintainable in Federal Court.
Held, the statement of claim is struck out as against the
individual defendants and the proceedings are stayed as against
the Queen.
At first blush, paragraph 17(4)(b) of the Federal Court Act
would appear to vest this Court with the jurisdiction to enter
tain plaintiffs' action for negligence against the individual
defendants. However, in accordance with the Supreme Court of
Canada decision in Saskatchewan Wheat Pool, for the Federal
Court to have jurisdiction there must exist some provision of
actual federal law imposing personal liability upon those in the
position of the individual defendants for tortious conduct
towards private persons, such as the plaintiffs herein. Such a
provision would then engage paragraph 17(4)(b) to pave the
way for an action against these or similar individual defend
ants. Without that provision, any such action against them
must be prosecuted in provincial courts of civil or common law
jurisdiction. In the case at bar, no such provision is to be found
in the Department of Insurance Act, nor in the Canadian and
British Insurance Companies Act, nor in any other pertinent
statutory provision enacted by Parliament which counsel cited,
apart from the Federal Court Act itself.
With respect to the issue of the stay of proceedings: subsec
tion 50(2) of the Federal Court Act provides that the Court
shall stay proceedings in respect of a claim against the Crown if
it appears that the claimant has an action in respect of the
same claim pending in any other court against "some person
who, at the time when the cause of action alleged in such action
or proceeding arose, was, in respect thereof, acting so as to
engage the liability of the Crown". The evidence shows that the
plaintiffs commenced an action against all of the original
defendants with respect to the same subject-matter in the
Supreme Court of Ontario. On the authorities, the alleged
conduct of the individual defendants, if proved, could engage
the liability of the Crown in this forum. However, since subsec
tion 17(1) of the Federal Court Act confers exclusive original
jurisdiction on the Trial Division of this Court in all cases
where relief is claimed against the Crown, the latter's liability
can hardly be engaged in the other forum, the Supreme Court
of Ontario. It follows that subsection 50(2), in relation to the
engagement of the liability of the Crown, cannot mean that a
stay is to ne entered in this Court if this Court is the forum in
which engagement of liability is sought since the Federal Court
is the forum par excellence in which to seek to engage the
liability of the Crown. However, since subsection 50(2) is
couched in mandatory terms, this cause, in respect of the claim
against the Crown, must be stayed.
CASES JUDICIALLY CONSIDERED
FOLLOWED:
R. in right of Canada v. Saskatchewan Wheat Pool,
[1983] 1 S.C.R. 205; 143 D.L.R. (3d) 9.
APPLIED:
Tomossy v. Hammond, et al., [1979] 2 F.C. 232; 13
C.P.C. 150 (T.D.).
REFERRED TO:
Baird, et al. v. The Queen (1983), 148 D.L.R. (3d) 1; 48
N.R. 276 (F.C.A.).
COUNSEL:
P. P. E. Du Vernet for plaintiffs.
P. A. Vita for defendants.
SOLICITORS:
E. A. Du Vernet, Q.C., Toronto, for plaintiffs.
Deputy Attorney General of Canada for
defendants.
The following are the reasons for order ren
dered in English by
MULDOON J.: The plaintiffs sue Her Majesty
the Queen, and the other defendants who hold the
offices of the Superintendent of Insurance and
members of his staff (the individual defendants),
for recovery of damages alleged to have been
incurred by the plaintiffs through reliance on
representations negligently made by the individual
defendants to the plaintiffs during the course of
negotiations for, and acquisition of, the shares of
Pitts Insurance Company (Pitts) and related com
panies. The plaintiffs allege that the individual
defendants were servants or agents of Her Majesty
and that they together with the Minister of
Finance, who is not impleaded, "are authorized by
statute, only on certain conditions being met from
year to year, to certify and register companies to
carry on business as insurance companies". It is
useful to quote here some passages of the state
ment of claim in order to appreciate the nature of
the claims which the plaintiffs assert against the
defendants. (The drafter of the document fre
quently designates the plaintiff, in the singular, in
contexts which seem to refer to the plaintiff Ingle,
alone.)
The excerpts from the statement of claim are:
10. In or about June, 1981, and thereafter, the principal, and
controlling shareholder of Pitts, Robert Trollop ("Trollop")
actively sought a buyer for it.
11. In or about August, 1981, the plaintiff herein engaged in
discussions with Trollop with a view to purchasing Pitts, and, as
it was at the instance of the Superintendent of Insurance that
Pitts was permitted to carry on business, at the same time was
required to deal with and had discussions with the Superinten
dent of Insurance Richard Humphreys, and members of his
staff being [the other individual defendants].
Then, after alleging the representations made by
the individual defendants and how the plaintiffs
relied upon them and how the plaintiffs discovered
that the affairs of Pitts were different from what
had been represented, the plaintiffs allege the
following:
18. The plaintiff says that Her Majesty's servants or agents
failed to make adequate annual examinations into the condi
tions and affairs of Pitts or failed to discover or report improper
or non-arm's length transactions, and were negligent and in
breach of statutory duty in failing to do so, as a result of which
negligence or breach the plaintiffs suffered damages.
19. Her Majesty's servants or agents were negligent in renew
ing or permitting the certificate and registration of Pitts to be
renewed from time to time, or at all after May, 1981, as a
result of which negligence the plaintiffs suffered damages.
20. Her Majesty's servants or agents were in breach of statu
tory duty, or obligation, or responsibility in renewing, or per
mitting the certificate and registration of Pitts to be renewed
from time to time, or at all after May, 1981, as a result of
which breach the plaintiffs have suffered damages.
21. The plaintiffs further say that [the individual defendants]
were negligent, both personally and in their capacities as
servants or agents of Her Majesty, in making misstatements
and misrepresentations respecting the business and affairs of
Pitts, intending that they would be relied upon by the plaintiffs,
or recklessly, not caring that they might be relied upon by the
plaintiffs, which misstatements and misrepresentations were
relied on by the plaintiffs and induced them to enter into the
agreements hereinbefore described, as a result of which the
plaintiffs have suffered damages.
The statement of claim sets the scene. Counsel
for the parties do not indicate that there is any
other action between these parties on this matter
commenced or pending in this Court. The defend
ants in this action have not yet pleaded. The
plaintiffs have brought a motion for judgment in
default of defence but it was not argued, for its
resolution must surely await the outcome of the
motions lodged in Court concurrently by the
defendants.
The first of the defendants' motions is brought
by means of a "Further Amended Notice of
Motion", on behalf of the individual defendants,
for an order pursuant to Rule 419(1)(a) [Federal
Court Rules, C.R.C., c. 663] striking out the
statement of claim and dismissing the action as
against those defendants. No evidence is admis
sible on an application under that Rule.
As Mr. Justice Mahoney said in Tomossy v.
Hammond, et al.,' at first blush paragraph
17(4)(b) of the Federal Court Act 2 would appear
to vest this Court with the necessary jurisdiction,
because the plaintiffs herein are clearly seeking
relief against the individual defendants allegedly
for something tortiously done or omitted to be
done in the performance of their duties as officers
or servants of the Crown. In Ontario, where this
' [1979] 2 F.C. 232; 13 C.P.C. 150 (T.D.).
2 R.S.C. 1970 (2nd Supp.), c. 10.
action is situated, tort is a branch of the ever-
developing common law and it comes under this
Court's jurisdiction in relation to common law
associated with the Crown's position as a litigant.
In the Tomossy case, Mahoney J. reasoned thus
[at page 233]:
The personal liability of an individual for a tort committed
by him arises under the common law. It arises whether he
commits it in the course of his employment or in other circum
stances. The fact that the individual is a servant of the Crown
and commits a tort in the course of that employment in no way
alters the basis in law for his liability. It does not arise under
"the Laws of Canada" or "federal law" as the term has been
defined by the McNamara and Quebec North Shore decisions.
The import of those decisions was extensively canvassed by the
Federal Court of Appeal in Associated Metals & Minerals
Corporation v. The "Evie W" ([1978] 2 F.C. 710 at 711 to
716, per Jackett C.J.) and it would be an exercise of some
leisure on my part either to recite or summarize that analysis.
Accordingly, unless there be some provision of
actual federal law visiting personal liability upon
those in the positions of the individual defendants
for tortious conduct towards private persons, like
the plaintiffs herein, any such action against them
must be prosecuted in provincial courts of civil, or
common law, jurisdiction. Such a provision in
some Act of Parliament would then engage para
graph 17(4)(b) of the Federal Court Act to pave
the way for an action against these or similar
individual defendants. No such provision is to be
found in the Department of Insurance Act,' nor
yet in the Canadian and British Insurance Com
panies Act, 4 nor indeed in any other pertinent
statutory provision enacted by Parliament which
counsel could cite, apart from the Federal Court
Act itself.
The Supreme Court of Canada, speaking unani
mously through the reasons rendered in February
1983, by Mr. Justice Dickson, in R. in right of
Canada v. Saskatchewan Wheat Pool 5 stated that
... the proposition that every statutory breach gave rise to a
private right of action was still untenable, as it is today. 6
' R.S.C. 1970, c. I-17.
' R.S.C. 1970, c. I-15 (as am. by R.S.C. 1970 (1st Supp.), c.
19).
5 [1983] 1 S.C.R. 205; 143 D.L.R. (3d) 9.
6 Ibid., S.C.R. at p. 217; D.L.R. at p. 18.
Further, in the same decision, Mr. Justice Dickson
reasoned:
The use of breach of statute as evidence of negligence as
opposed to recognition of a nominate tort of statutory breach is,
as Professor Fleming has put it, more intellectually acceptable.
It avoids, to a certain extent, the fictitious hunt for legislative
intent to create a civil cause of action which has been so
criticized in England. It also avoids the inflexible application of
the legislature's criminal standard of conduct to a civil case.
Glanville Williams is of the opinion, with which I am in
agreement, that where there is no duty of care at common law,
breach of non-industrial penal legislation should not affect civil
liability unless the statute provides for it. As I have indicated
above, industrial legislation historically has enjoyed special
consideration. Recognition of the doctrine of absolute liability
under some industrial statutes does not justify extension of such
doctrine to other fields, particularly when one considers the
jejune reasoning supporting the juristic invention.'
In regard to the particular breaches of statutory
duties alleged to give a remedy by civil action in
that Saskatchewan Wheat Pool case, Mr. Justice
Dickson held:
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.'
The last cited passage from Mr. Justice Dick-
son's reasons reinforces, although perhaps uninten
tionally, the import of the Tomossy 9 decision. If
Parliament, which is neither ordinarily nor exclu
sively vested with the constitutional competence to
make laws in relation to that class of subject
referred to as property and civil rights, is to be
found to have provided a remedy by civil action
personally against individual officers or servants of
the Crown, or against the Crown itself, such provi-
' Ibid., S.C.R. at pp. 222-223; D.L.R. at p. 22.
8 Ibid., S.C.R. at p. 226; D.L.R. at p. 24.
9 Supra, fn. 1.
sions must be found in what is actually expressed
in relevant statutes of Parliament. Such a state of
affairs does not, of course, immunize those
individual officers or servants from actions sound
ing in tort or delict which are maintainable in the
provincial courts of civil jurisdiction. Again, such a
state of affairs does not even immunize the Crown
in right of Canada from actions sounding in tort or
delict maintainable in the Federal Court of
Canada, in light of the combined effect of subsec
tion 3(1) of the Crown Liability Act 10 and the
provisions of the Federal Court Act." (The vicari
ous liability of the Crown, if any, in particular
circumstances of alleged negligence on the part of
its servants, is thoroughly canvassed by Mr. Jus
tice Le Damn in his own reasons in Baird, et al. v.
The Queen 12 a unanimous disposition by the
Appeal Division of this Court, rendered on June
23, 1983.) However, that previously mentioned
state of affairs does appear to immunize officers
and servants of the Crown personally from actions
in the Federal Court sounding in tort or delict.
Thus, no action for negligence is maintainable in
this Court against the individual defendants, and
their application for an order striking out the
statement of claim and dismissing the action as
against them, must be sustained. The time within
which Her Majesty, however, is to file and serve a
statement of defence must be extended so as to
permit the plaintiffs herein to amend their state
ment of claim as a consequence of "losing" the
individual defendants.
This disposition does not exhaust these proceed
ings. The solicitor and counsel for the individual
defendants, now on behalf of Her Majesty, have
included other applications in the further amended
notice of motion which were also argued at the
hearing of the above application on behalf of the
individual defendants. Of course, the alternative
application which depended upon the outcome of
the first one, falls by the wayside.
Accordingly, the next application presented on
behalf of Her Majesty is for an order striking out
10 R.S.C. 1970, c. C-38.
" Supra, fn. 2.
12 (1983), 148 D.L.R. (3d) 1; 48 N.R. 276 (F.C.A.). No
further appeal proceedings have been taken.
the words "in right of Canada as represented by
the Attorney General of Canada" in the style of
cause of this action. No objection to this applica
tion was pressed by counsel for the plaintiffs and it
will be so ordered.
The next application made by counsel, apparent
ly for all the defendants, but in consequence of the
first disposition herein, now only on behalf of Her
Majesty, is for an order pursuant to subsections
50(1) and (2) of the Federal Court Act (supra) for
a stay of proceedings of this action. The action
now survives only as against Her Majesty the
Queen, as noted, and the application must be
viewed in light of this development. Evidence is
admissible in this proceeding.
It appears in the supplementary affidavit sworn
by Alan Stanley Davis, a law officer of the Crown,
that his office received from the plaintiffs' solici
tors by letter in September 1983, a copy of a writ
of summons in the Supreme Court of Ontario,
dated February 26, 1982. It shows that the same
two plaintiffs in these proceedings have com
menced an action against all of the same original
defendants herein with respect to what appears to
be the same subject-matter as inspires this action.
Now, of course, the individual defendants are
being sued only in the Supreme Court of Ontario,
because they have now been discharged from the
proceedings in this Court. Whether the plaintiffs
will now discontinue their action against Her
Majesty in the Ontario Court, or whether Her
Majesty will now move the Ontario Court to be
discharged from that action remains to be seen.
Subsection 50(2) of the Act provides:
50....
(2) The Court shall, on the application of the Attorney
General of Canada, stay proceedings in any cause or matter in
respect of a claim against the Crown if it appears that the
claimant has an action or proceeding in respect of the same
claim pending in any other court against some person who, at
the time when the cause of action alleged in such action or
proceeding arose, was, in respect thereof, acting so as to engage
the liability of the Crown.
Now, the individual defendants viewed through the
optic of the Baird judgment (supra) certainly
appear to be, each one "some person who, at the
time when the cause of action alleged in such
[Supreme Court of Ontario] action or proceeding
arose, was, in respect thereof, acting so as to
engage the liability of the Crown." This subsection
of the Act requires some interpretation because it
does not clearly specify in which forum the liabili
ty of the Crown is engaged, or whether that
engagement is to be regarded as being at large,
somewhere, sometime, if ever, maybe never. On
the authorities, especially Baird, it is possible that
the alleged conduct of the individual defendants, if
proved, could indeed engage the liability of the
Crown in this forum, the Federal Court. However,
because of the provisions of subsection 17(1) of the
Federal Court Act conferring exclusive original
jurisdiction on the Trial Division in all cases where
relief is claimed against the Crown, the liability of
the Crown can hardly be engaged in the other
forum, the Supreme Court of Ontario.
Subsection 50(2) in relation to the engagement
of the liability of the Crown cannot mean that a
stay is to be entered in this Court if this Court be
the forum in which such engagement of liability is
sought, because the Federal Court is the forum par
excellence in which to seek to engage the liability
of the Crown in right of Canada. In any event the
complete phrase "acting so as to engage the liabili
ty of the Crown" is a modifier of "some person",
against whom an action or claim is pending in any
other court. In the circumstances here revealed,
that means the individual defendants, even though
they are now discharged from these proceedings in
this Court.
Since the subsection is couched in mandatory
terms, this cause, in respect of a claim against the
Crown as it is, must now be stayed.
When and if the stay is ever lifted pursuant to
subsection 50(3), the plaintiffs will have leave to
amend their statement of claim in consequence of
the discharge of the individual defendants and
thereupon, after service of such amended state
ment of claim upon the remaining defendant, the
usual 30-day period will run for filing and service
of a statement of defence.
The plaintiffs herein have commenced still
another action in the Supreme Court of Ontario in
relation to their dealings with Pitts, but it was
taken against private defendants other than those
against whom they sought to proceed here. It
seems not to engage the provisions of section 50,
but there is no need to decide that question here
and now, in view of the stay already ordered.
ORDER
1. IT IS ORDERED that as against the defendants,
Richard Humphreys, Lawrence Charles Savage,
Harold Linton, Jack Finlayson, John Holmes
and Kenneth Bennett, only, the statement of
claim herein be, and it is hereby, struck out, and
this action is dismissed as against the immedi
ately above-mentioned defendants;
2. IT IS FURTHER ORDERED that all words fol
lowing "Her Majesty the Queen" be struck from
the style of cause and that she be hereinafter
designated as "defendant" (singular) therein;
3. IT IS FURTHER ORDERED that this action be,
and it is hereby, stayed until further direction of
the Court;
4. IT IS FURTHER ORDERED that if and when the
stay ordered herein be later lifted, then in such
event
(1) the plaintiffs shall be thereupon accorded
ten juridical days within which to make such
amendment to their statement of claim as
may be advised consequent upon the dis
charge of the above-named individual defend
ants; and
(2) the defendant shall be accorded a period
of thirty days (immediately following upon
the ten-day period provided in paragraph (1)
above) for delivery of the statement of
defence;
5. IT IS FURTHER ORDERED that the defendant
Her Majesty the Queen do recover from the
plaintiffs her costs of and incidental to this
application in any event of the cause, and that
no costs be awarded to the individual defend
ants.
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