Top 5 Civil Appeals from the Court of Appeal (July 2016)

  1. Paton Estate v. Ontario Lottery and Gaming Corporation (Fallsview Casino Resort and OLG Casino Brantford), 2016 ONCA 458 (Hoy A.C.J.O., Pardu and Roberts JJ.A.), June 10, 2016 2. Brown v. University of Windsor, 2016 ONCA 431 (Sharpe, Juriansz and Roberts JJ.A.), June 13, 2016 3. Groia v. The Law Society of Upper Canada, 2016 ONCA 471 (MacPherson, Cronk and Brown JJ.A.), June 14, 2016 4. Best v. Ranking, 2016 ONCA 492 (Blair, Pardu and Brown JJ.A.), June 21, 2016 5. Trinity Western University v. The Law Society of Upper Canada, 2016 ONCA 518 (MacPherson, Cronk and Pardu JJ.A.), June 29, 2016 1. Paton Estate v. Ontario Lottery and Gaming Corporation (Fallsview Casino Resort and OLG Casino Brantford), 2016 ONCA 458 (Hoy A.C.J.O., Pardu and Roberts JJ.A.), June 10, 2016 The appellants are two estates that were defrauded by a gambling addict. Shellee Spinks, a law clerk, stole over four million dollars from the appellants and others by forging documents, selling estate assets and taking the proceeds for herself. She spent the majority of the funds at an Ontario casino. Hoping to recover some of their losses, the appellants sued the Ontario Lottery and Gaming Corporation ("OLGC"), alleging knowing receipt of trust funds, unjust enrichment and negligence. Their statement of claim was struck by the motion judge, who held that it was plain and obvious that the action could not succeed. The appellants appealed from that dismissal, arguing that the motion judge erred in striking the claim at the pleadings stage. A majority of the Court of Appeal agreed, holding that while the action was by no means certain to succeed, it was also not certain to fail. As the Supreme Court explained in R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, the purpose of a motion to strike is to eliminate hopeless claims. The court must ask whether it is plain and obvious that the claim has no reasonable prospect of success. It must take the facts pleaded in the statement as claim as true, unless they are "patently ridiculous or manifestly incapable of being proven," and the approach to this inquiry must be generous. In Citadel General Assurance Co. v. Lloyds Bank Canada, [1997] 3 S.C.R. 805, the Supreme Court outlined the principle underlying the cause of action of the knowing receipt of trust funds: a stranger to a trust may be liable where it receives trust property for its own benefit, and has knowledge of facts which would put a reasonable person on inquiry, but fails to inquire as to the possible misapplication of the property. Pardu J.A. held that she was not convinced that the appellants' claim for knowing receipt could not possibly succeed. If a trier of fact were to conclude that OLGC had good reason to suspect that the money gambled by Spinks might have been stolen, the appellants may fall within the protection afforded by Citadel. On a generous reading of the statement of claim, and given the appellants' allegations that the OLGC had knowledge sufficient to put a reasonable person on inquiry but failed to do so, the appellants' claim for knowing receipt of trust funds should be allowed to proceed to trial. A claim for unjust enrichment requires enrichment of the defendant, a corresponding deprivation of the plaintiff and the absence of a juristic reason for the enrichment. The motion judge held that while the OLGC was enriched, and Spinks deprived, there were juristic reasons for the enrichment, namely a gambling contract and the fact that the OLGC was a bona fide purchaser for value without notice that it was receiving fraudulently obtained funds. In Justice Pardu's view, this conclusion failed to consider that the juristic reasons for the enrichment could have been vitiated on the ground of unconscionability. The appellants' statement of claim pleaded that the OLGC received an "unconscionable benefit", a claim that would not necessarily fail if a trier of fact were to determine that the OLGC knew that Spinks was a gambling addict but allowed her to continue gambling at its casinos nonetheless. While a novel argument, the categories of unconscionability can never be closed. Justice Pardu also pointed out that the remedy of a constructive trust may be imposed where required by good conscience in situations where unconscionable unjust enrichment occurs. She suggested that appellants could also rely on the Consumer Protection Act, 2002, S.O. 2002, c. 30, Sched. A, which may be relevant in the case of consumers who are not reasonably able to protect their own interests. The motion judge rejected the appellants' claim that the OLGC owed them a duty of care and that it acted negligently by permitting Spinks to continue gambling. He held that the OLGC could not owe a duty of care to the appellants unless it owed one to Spinks. He further held that the pleadings did not disclose facts sufficient to establish the required reasonable foreseeability and proximity between casinos and problem gamblers, and cautioned that imposing liability on the OLGC could create a policy problem of indeterminate liability. Pardu J.A. disagreed with the motion judge's view that the jurisprudence established that there is no duty of care owed by casinos to problem gamblers. While she agreed that casinos cannot be expected to assess their customers to determine whether each individual ought to be gambling, she suggested that "more may be expected" when one such individual is obviously out of control. Pardu J.A. further held that it was too early in the proceedings to determine that the issue of indeterminate liability could arise from recognizing such a duty of care. Justice Pardu acknowledged some "formidable barriers" to a finding that casinos owe a duty of care to third parties who are the victims of problem gamblers. The claim was for pure economic loss and, while the loss may have been reasonably foreseeable, the casinos had no relationship with the third parties. She suggested, however, that this issue might be analogous to that of a commercial host who serves alcohol to an intoxicated patron who then injures a third party when driving drunk. The Supreme Court has recognized a duty of care both to the intoxicated person and to the third party. Pardu J.A. concluded that a factual record was necessary to allow a court to confidently make judgments about the legal and policy issues raised, and to determine "whether it is fair and just to expect casinos to pay some compensation for the high social costs of gambling." She held that, ultimately, while the appellants' action was not certain to succeed, it was also not certain to fail. In a thorough dissent, Associate Chief Justice Hoy held that the motion judge did not err in striking the claim and that the appeal should be dismissed. Hoy A.C.J.O. held that there was no reasonable chance that a trier of fact would find that the OLGC had knowledge of circumstances that would put an honest and reasonable person on inquiry as to a breach of trust, and was accordingly liable as constructive trustee. On the issue of unjust enrichment, she held that the appellants could not rely on the doctrine of unconscionability to vitiate the OLGC's legal basis for retaining the gambled funds, as they did not plead any facts supporting the position that the OLGC's conduct was unconscionable or outside the normal course of business. She also disagreed with the majority's view that the Consumer Protection Act could have assisted the appellants. With respect to the claim of negligence, Hoy A.C.J.O. held that the appellants' claim had no prospect of success in the face of the relevant jurisprudence. The appellants were not proximate to the OLGC and it was not...

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