McCreight et al. v. The Attorney General of Canada Representing Her Majesty the Queen in Right of Canada et al.

[Indexed as: McCreight v. Canada (Attorney General)]

Ontario Reports

Court of Appeal for Ontario,

Epstein, Pepall and Tulloch JJ.A.

July 16, 2013

116 O.R. (3d) 429 | 2013 ONCA 483

Case Summary

Civil procedure — Pleadings — Statement of claim — Striking out — Motion judge erring in striking claim for abuse of process where defendants did not specifically seek to strike that claim on motion to strike other parts of statement of claim.

Damages — Family Law Act — Male plaintiffs alleging that defendants laid charges against them under Income Tax Act and Criminal Code in order to retain seized documents — Male plaintiffs' spouses asserting claims under s. 61 of Family Law Act ("FLA") — Motion judge properly striking FLA claims — Post-traumatic stress alleged by male plaintiffs not qualifying as recognized psychiatric illness — Alleged stress arising from participation in criminal process and not attracting recoverable damages — Family Law Act, R.S.O. 1990, c. F.3, s. 61.

Torts — Malicious prosecution — Malice — Plaintiffs' claim of malicious prosecution based on allegation that defendants laid charges under Income Tax Act and Criminal Code in order to retain seized documents — Motion judge properly striking out claim — Pleadings containing bald allegations and not identifying collateral or improper purpose that motivated defendants — Retention of seized documents being in furtherance of prosecution rather than collateral to it.

Torts — Negligence — Duty of care — Motion judge erring in striking claim of negligence against Canada Revenue Agency investigators on basis that it was plain and obvious that CRA investigators do not owe duty of care to subjects under investigation.

After the Canada Revenue Agency's motion for an extension of the time during which they could retain seized documents and complete an investigation was dismissed, charges under the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) and the Criminal Code, R.S.C. 1985, c. C-46 were laid against the male plaintiffs. The plaintiffs were discharged at their preliminary inquiry. They sued the Attorney General of Canada, the CRA, and employees or agents of the CRA and the Department of Justice, alleging that the charges were laid in order to retain the seized documents. The motion judge struck out all of the causes of action in the statement of claim, except a claim of misfeasance in public office, for failing to disclose a reasonable cause of action. The plaintiffs appealed.

Held, the appeal should be allowed in part.

The motion judge did not err in striking the claim of malicious prosecution. In order to succeed in an action for malicious prosecution, a plaintiff must prove that the defendant was motivated by malice or a primary purpose other than carrying the law into effect. The statement of claim did not identify a collateral or improper purpose that motivated the defendants. Retention of the seized documents was in furtherance of the prosecution, not collateral to it. [page430]

The motion judge erred in striking a claim of abuse of process. While the defendants served and filed an extremely detailed notice of motion in support of their motion to strike, they did not seek to strike the abuse of process claim. It was inappropriate for the motion judge to strike that claim when such relief was not requested.

The motion judge erred in striking the negligence claim against the CRA investigators on the grounds that it was plain and obvious that CRA investigators do not owe a duty of care to suspects under investigation and that policy considerations would foreclose such a duty in any event. The action for negligence against the CRA investigators should be allowed to proceed to trial.

Claims by the plaintiffs' spouses under s. 61 of the Family Law Act were properly struck. In the absence of a physical injury to the plaintiffs, the spousal plaintiffs had to show that the plaintiffs suffered or had suffered from a recognizable psychiatric illness that was caused by the defendants' negligence, and that that psychiatric illness was reasonably foreseeable to the defendants. The post-traumatic stress from which the plaintiffs allegedly suffered did not qualify as a recognized psychiatric illness. Moreover, there was no pleading of the requirement of foreseeability, and the stress caused by participation in the criminal process did not attract any recoverable damages.

Hill v. Hamilton-Wentworth Regional Police Services Board, [2007] 3 S.C.R. 129, [2007] S.C.J. No. 41, 2007 SCC 41, 285 D.L.R. (4th) 620, 368 N.R. 1, J.E. 2007-1867, 230 O.A.C. 253, 64 Admin. L.R. (4th) 163, 50 C.C.L.T. (3d) 1, 50 C.R. (6th) 279, 40 M.P.L.R. (4th) 1, EYB 2007-124525, 160 A.C.W.S. (3d) 573; Leroux v. Canada Revenue Agency, [2012] B.C.J. No. 235, 2012 BCCA 63, 316 B.C.A.C. 187, 2012 G.T.C. 1019, 2012 D.T.C. 5050, 27 B.C.L.R. (5th) 125, [2012] 2 C.T.C. 249, [2012] 4 W.W.R. 1, 347 D.L.R. (4th) 122, [2012] G.S.T.C. 18, 211 A.C.W.S. (3d) 870, consd

Other cases referred to

Anns v. Merton London Borough Council, [1978] A.C. 728, [1977] 2 All E.R. 492, [1977] 2 W.L.R. 1024, 75 L.G.R. 555, 141 J.P. 527, 5 Build. L.R. 1, 4 I.L.R. 21, 243 E.G. 523 (H.L.); Aristocrat Restaurants Ltd. (c.o.b. Tony's East) v. Ontario, [2003] O.J. No. 5331, 2003 CarswellOnt 5574 (S.C.J.); Attis v. Canada (Minister of Health) (2008), 93 O.R. (3d) 35, [2008] O.J. No. 3766, 2008 ONCA 660, 254 O.A.C. 91, 300 D.L.R. (4th) 415, 59 C.P.C. (6th) 195, 169 A.C.W.S. (3d) 684 [Leave to appeal to S.C.C. refused [2008] S.C.C.A. No. 491]; Bird v. Public Guardian and Trustee, [2002] O.J. No. 408, [2002] O.T.C. 74, 111 A.C.W.S. (3d) 850 (S.C.J.); Cooper v. Hobart, [2001] 3 S.C.R. 537, [2001] S.C.J. No. 76, 2001 SCC 79, 206 D.L.R. (4th) 193, 277 N.R. 113, [2002] 1 W.W.R. 221, J.E. 2001-2153, 160 B.C.A.C. 268, 96 B.C.L.R. (3d) 36, 8 C.C.L.T. (3d) 26, REJB 2001-26862, 110 A.C.W.S. (3d) 943; Healey v. Lakeridge Health Corp. (2011), 103 O.R. (3d) 401, [2011] O.J. No. 231, 2011 ONCA 55, 81 C.C.L.T. (3d) 67, 273 O.A.C. 179, 328 D.L.R. (4th) 248; Hunt v. Carey Canada Inc., 1990 90 (SCC), [1990] 2 S.C.R. 959, [1990] S.C.J. No. 93, 74 D.L.R. (4th) 321, 117 N.R. 321, [1990] 6 W.W.R. 385, J.E. 90-1436, 49 B.C.L.R. (2d) 273, 4 C.C.L.T. (2d) 1, 43 C.P.C. (2d) 105, 23 A.C.W.S. (3d) 101; Leadbeater v. Ontario, 2001 28341 (ON SC), [2001] O.J. No. 3472, [2001] O.T.C. 661, 16 C.P.C. (5th) 119, 87 C.R.R. (2d) 326, 107 A.C.W.S. (3d) 971 (S.C.J.); McCreight v. Canada (Attorney General), October 27, 1999, Daudlin J. (Ont. S.C.J); McCreight v. Canada (Attorney General), February 12, 2007, Quinn J. (Ont. S.C.J.); McCreight v. Canada (Attorney General), [2010] O.J. No. 2278, 2010 ONSC 2817 (S.C.J.); Miazga v. Kvello Estate, [2009] 3 S.C.R. 339, [2009] S.C.J. No. 51, 2009 SCC 51, [2010] 1 W.W.R. 45, EYB 2009-165741, J.E. 2009-2041, 395 N.R. 115, 337 Sask. R. 260, 69 C.C.L.T. (3d) 1, 313 D.L.R. (4th) 330; [page431] Montreal Trust Co. of Canada v. Toronto-Dominion Bank, [1992] O.J. No. 1274, 40 C.P.C. (3d) 389, 34 A.C.W.S. (3d) 38 (Gen. Div.); Nash v. Ontario (1995), 1995 2934 (ON CA), 27 O.R. (3d) 1, [1995] O.J. No. 4043, 59 A.C.W.S. (3d) 1083 (C.A.); Neumann v. Canada (Attorney General), [2011] B.C.J. No. 1273, 2011 BCCA 313, 239 C.R.R. (2d) 149, 308 B.C.A.C. 179, 20 B.C.L.R. (5th) 75, [2011] G.S.T.C. 107, [2011] 11 W.W.R. 498, 338 D.L.R. (4th) 348, 203 A.C.W.S. (3d) 751 [Leave to appeal to S.C.C. refused [2011] S.C.C.A. No. 422]; R. v. Imperial Tobacco Canada Ltd., [2011] 3 S.C.R. 45, [2011] S.C.J. No. 42, 2011 SCC 42, 308 B.C.A.C. 1, 419 N.R. 1, 2011EXP-2380, J.E. 2011-1326, 335 D.L.R. (4th) 513, 21 B.C.L.R. (5th) 215, 25 Admin. L.R. (5th) 1, 86 C.C.L.T. (3d) 1, [2011] 11 W.W.R. 215, 83 C.B.R. (5th) 169, 205 A.C.W.S. (3d) 92; Scott v. Ontario, [2003] O.J. No. 4407, 125 A.C.W.S. (3d) 535 (C.A.), affg [2002] O.J. No. 4111, [2002] O.T.C. 832, 117 A.C.W.S. (3d) 1007 (S.C.J.); Wellington v. Ontario (2011), 105 O.R. (3d) 81, [2011] O.J. No. 1615, 2011 ONCA 274, 277 O.A.C. 318, 81 C.C.L.T. (3d) 230, 333 D.L.R. (4th) 236 [Leave to appeal to S.C.C. refused [2011] S.C.C.A. No. 258]

Statutes referred to

Canadian Charter of Rights and Freedoms, s. 11(b)

Criminal Code, R.S.C. 1985, c. C-46 [as am.], s. 490(2)

Family Law Act, R.S.O. 1990, c. F.3, s. 61 [as am.], (1) [as am.]

Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) [as am.]

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 21, 21.01(1)(b), 25.06(7), (8)

Authorities referred to

Canada Revenue Agency, Tax Operations Manual

APPEAL from the order of Patterson J., [2012] O.J. No. 1996, 2012 ONSC 1983 (S.C.J.) striking parts of a statement of claim.

Paul J. Pape and Nicolas M. Rouleau, for appellants.

Wendy J. Linden and P. Tamara Sugunasiri, for respondents.

The judgment of the court was delivered

PEPALL J.A.: —

A. Introduction

[1] The motion judge struck out all of the causes of action in the appellants' amended statement of claim, except for the claim of misfeasance in public office, for failing to disclose a reasonable cause of action pursuant to rule 21.01(1)(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. He also denied the appellants leave to amend their amended statement of claim.

[2] The appellants appeal from this decision and ask this court to set aside the order and dismiss the respondents' motion to strike the causes of action of malicious prosecution, abuse of process, negligence and derivative claims made pursuant to s. 61 of the Family Law Act, R.S.O. 1990, c. F.3 ("FLA"). [page432]

B. Background Facts

(1) The CRA investigation

[3] In 1998, the audit department of the respondent Canada Revenue Agency (the "CRA") conducted an investigation into the use of research and development tax credits by several corporate taxpayers. The CRA's investigation extended to a team of tax advisors at the national accounting firm BDO Dunwoody LLP ("BDO"), which included the appellants Michael McCreight ("McCreight") and John Gregory Skinner ("Skinner"). McCreight was a chartered accountant and a BDO partner, and Skinner was a senior R&D consultant and claims preparer at BDO. The CRA's concern was that, with the help of BDO, the corporate taxpayers were applying for fraudulent preferential research and development tax credits in the 1996, 1997 and 1998 tax years.

[4] The respondent Anne Kamp was the lead CRA investigator. Between July 1998 and May 1999, she applied for and obtained three search warrants to search the homes and businesses of the corporate taxpayers, as well as those of their lawyers and accountants, including McCreight. Pursuant to these search warrants, approximately 60 boxes of materials and at least three hard drives were seized. The CRA was authorized to retain these materials until July 1999.

[5] The CRA had not completed its investigation by July 1999. It applied to the Superior Court of Justice and requested a nine-month extension to complete its investigation. This extension would also have given the suspects an opportunity to make exculpatory representations, in accordance with the provisions of CRA's Tax Operations Manual. On October 27, 1999, Daudlin J. rejected the CRA's application for an extension of time to complete its investigation. Recognizing the volume of materials and the potential need to copy at least some of them, Daudlin J. implicitly authorized the CRA to copy the materials seized but ordered it to return the original documents by 4:30 p.m. on November 9, 1999.

(2) The charges and their resolution

[6] On November 3, 1999, Kamp sought formal approval from the Windsor CRA office and the Department of Justice (the "DOJ") to lay an information charging various taxpayers and tax advisors, including McCreight and Skinner, with fraud and conspiracy under the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) ("ITA") and the Criminal Code, R.S.C. 1985, c. C-46. The DOJ provided its approval and on November 9, 1999, charges were [page433] laid. As a result, the CRA was entitled to retain all of the seized materials. Neither McCreight nor Skinner had had the opportunity to make any exculpatory submissions to the CRA. In subsequent court proceedings, Quinn J. found that Kamp had sworn the information in support of the charges "primarily to retain possession of the seized documents".

[7] On October 23, 2000, Kamp swore another information that alleged 23 additional offences. On November 16, 2000, all counts against McCreight that were contained in the first information were withdrawn at the Crown's request.

[8] The preliminary inquiry commenced in 2001 and ended in 2005. In 2006, Momotiuk J. discharged both McCreight and Skinner. Quinn J. subsequently stayed the charges against the corporate taxpayers on the basis of unreasonable delay pursuant to s. 11(b) of the Canadian Charter of Rights and Freedoms.

(3) Appellants' lawsuit

[9] The appellants then commenced proceedings against the Attorney General of Canada, the CRA and ten employees or agents of the DOJ or the CRA. In their statement of claim, the appellants pleaded that the CRA investigation had been mishandled and had resulted in the laying of false charges against McCreight and Skinner. They alleged that they were charged so that the CRA could keep the seized documents. McCreight and Skinner pleaded conspiracy, fraudulent and negligent misrepresentation, negligence, malicious prosecution, misfeasance in public office, breach of fiduciary duty and abuse of process, as well as breaches of the Charter. Their spouses, Kim McCreight and Joan Skinner, advanced claims under s. 61(1) of the FLA.

(4) Respondents' motion to strike

[10] The respondents moved to strike all of the appellants' causes of action, except misfeasance in public office, pursuant to rule 21.01(1)(b) of the Rules of Civil Procedure.

(a) Documents

[11] The parties disagreed as to the documents that could be relied upon at the hearing of the motion to strike.

[12] The body of the statement of claim referred to the October 27, 1999 order of Daudlin J. (at paras. 13 and 187); the discharge of McCreight and Skinner by Momotiuk J. and his finding that there was no evidence to support a conviction or inference of guilt (at paras. 16 and 196); the February 12, 2007 order of Quinn J. staying all of the remaining charges that were committed to trial based on a breach of s. 11(b) of the Charter [page434] and the adoption by the plaintiffs of the reasons in support of the ruling (at paras. 17 and 201); and the 75-page decision of Momotiuk J. discharging both McCreight and Skinner (at para. 226).

[13] At the end of their 110-page statement of claim, the appellants also listed numerous documents that they "plead[ed] and rel[ied] upon".

[14] Prior to the return of the motion to strike before the motion judge, counsel attended before Cusinato J. and asked him to address their documentary dispute. He released his reasons on May 19, 2010 [[2010] O.J. No. 2278, 2010 ONSC 2817 (S.C.J.)] and released supplementary reasons on June 17, 2011. He noted that the respondents objected to an examination of the documents that did not form an integral part of the pleading. He concluded that the listed documents did not form an integral part of the pleading. He wrote as follows, at paras. 22 and 23 of his reasons:

[T]he listing of the Statutes, Code of Professional Conduct Report, Manuals, Guidelines, and Federal Prosecutions Service Desk books for the most part do not appear to comply with the essence of rule 25.06(7) [of the Rules of Civil Procedure]. . . .

Save for those paragraphs which specifically incorporate the document in reference to the material facts within the pleading, they should be excluded from examination by the court on a motion to strike the pleading.

[15] In his supplementary reasons, at para. 17, Cusinato J. wrote that "documents properly referenced to the material facts pleaded on which the party relies in its statement of claim may be viewed by the court, otherwise they are to be excluded from examination". It is clear from paras. 6 and 7 of his first reasons that Cusinato J. focused on the documents listed by the appellants at the end of their statement of claim. He decided that it was for the motion judge to determine what documents, if any, were sufficiently incorporated into the pleading as material facts and could therefore be relied upon for the purposes of the motion to strike.

[16] Following the release of Cusinato J.'s first reasons, the appellants amended their pleading to refer to specific paragraphs of the CRA's Tax Operations Manual (at paras. 284 and 292).

(b) The motion judge's decision

[17] The motion judge treated the amended statement of claim that resulted from Cusinato J.'s order as the pleading in issue. He commenced by correctly identifying the test to be applied on a rule 21.01(1)(b) motion as that set out in [page435] Hunt v. Carey Canada Inc., 1990 90 (SCC), [1990] 2 S.C.R. 959, [1990] S.C.J. No. 93, at p. 980 S.C.R.: assuming that the facts as stated in the statement of claim can be proved, is it plain and obvious that the statement of claim discloses no reasonable cause of action.

[18] As the appellants only seek to reinstate certain causes of action struck by the motion judge from the statement of claim, I shall only summarize the portions of the motion judge's reasons pertaining to those causes of action.

[19] With regards to malicious prosecution, the motion judge addressed the requirements for such a claim in some detail; he particularly focused on the fourth element of the cause of action, malice. The motion judge noted that an improper collateral purpose must be identified in the pleading, together with supporting material facts, in order to maintain the cause of action. He determined that, in essence, the pleading amounted to an allegation that the respondents wanted to injure McCreight and Skinner for the purpose of obtaining a conviction. He determined that this pleading was a bald allegation and insufficient to support a claim of malicious prosecution.

[20] He further struck the plaintiffs' claim for damages for abuse of process on the basis that it is not a stand-alone cause of action.

[21] The motion judge also found the claims of negligence against the CRA investigators to consist of bald allegations. He further determined that CRA officers do not owe a duty of care to the subjects of an investigation; and, in any event, policy considerations would negate any private law duty of care. Accordingly, he struck this claim from the amended statement of claim.

[22] He also struck out the appellant spouses' s. 61(1) FLA claims because the type of injury alleged here -- namely, anxiety surrounding involvement in a criminal investigation and prosecution -- was not the type of injury contemplated by that statute. He further struck Ms. McCreight and Ms. Skinner as plaintiffs.

[23] The motion judge did not grant the appellants leave to amend their pleading. The statement of claim had been issued for three years and had already been amended on three occasions. He concluded that the appellants had had ample opportunity to amend their pleading to address any deficiencies. A further opportunity was not justified.

[24] The motion judge did not make any express ruling as to which documents were incorporated into the pleading by reference, but in his reasons, he referred to the orders of Justices Daudlin, Momotiuk and Quinn, and to the CRA's Tax Operations Manual. [page436] He therefore implicitly considered these documents to have been properly incorporated into the appellants' pleading.

C. Grounds of Appeal

[25] The appellants appeal the motion judge's decision to strike the causes of action of malicious prosecution, abuse of process, negligence, the FLA claims and his refusal to grant leave to amend the statement of claim. They do not challenge the striking of numerous other elements of the statement of claim. These include the pleading of negligence against the Attorney General and the Crown prosecutors, the claim for breach of fiduciary duty by the Crown prosecutors and the CRA investigators, the Charter claims, the claims of fraudulent and negligent misrepresentation, the claim for conspiracy, and the personal claims asserted against the section head of the criminal litigation branch at the Toronto Regional Office of the DOJ, the regional director of the Public Prosecution Service of Canada and the senior counsel of criminal prosecutions assigned to the Ontario Regional Office of the DOJ, all of which were struck out.

D. Issues

[26] The issues to be addressed are as follows:

(1) What documents are properly considered as being incorporated into the amended statement of claim for the purposes of this appeal?

(2) Did the motion judge err in striking out the claims for malicious prosecution, abuse of process, negligence and the s. 61(1) FLA claims?

(3) Did the motion judge err in refusing to grant the appellants leave to amend their pleading?

E. Analysis

(1) Documents referred to in the pleading

[27] On this appeal, the appellants seek to rely on five documents. They submit that these documents form part of their pleading. The documents consist of a transcript from the criminal proceedings; the three decisions of Justices Daudlin, Momotiuk and Quinn; and the CRA's Tax Operations Manual. The appellants do not seek to rely on the other documents listed at the end of their pleading.

[28] The respondents argue that these five documents should be disregarded because they were not included in the motion [page437] record before the motion judge; there was no argument before the motion judge that they formed part of the appellants' pleading; the documents were not considered by the motion judge, who made no ruling on this issue; and, based on the authority of Montreal Trust Co. of Canada v. Toronto-Dominion Bank, [1992] O.J. No. 1274, 40 C.P.C. (3d) 389 (Gen. Div.), Leadbeater v. Ontario, 2001 28341 (ON SC), [2001] O.J. No. 3472, 16 C.P.C. (5th) 119 (S.C.J.) and Bird v. Public Guardian and Trustee, [2002] O.J. No. 408, [2002] O.T.C. 74 (S.C.J.), they ought not to form part of the amended statement of claim.

[29] No evidence is admissible on a rule 21.01(1)(b) motion to strike out a pleading on the basis that it discloses no reasonable cause of action. On such a motion, the allegations in the statement of claim are taken as being proven, unless they are patently ridiculous or incapable of proof: Nash v. Ontario (1995), 1995 2934 (ON CA), 27 O.R. (3d) 1, [1995] O.J. No. 4043 (C.A.), at p. 6 O.R. Therefore, no evidence is either necessary or permissible on such a motion.

[30] Rule 25.06(7) of the Rules of Civil Procedure provides that:

25.06(7) The effect of a document or the purport of a conversation, if material, shall be pleaded as briefly as possible, but the precise words of the document or conversation need not be pleaded unless those words are themselves material.

[31] The issue is whether the documents the appellants seek to rely upon are sufficiently pleaded and therefore form part of the amended statement of claim upon which the motion judge could make his decision.

[32] As noted by Borins J. (as he then was) in Montreal Trust Co., at para. 4, a statement of claim is deemed to include any documents incorporated by reference into the pleading and that form an integral part of the plaintiff's claim. Among other things, this enables the court to assess the substantive adequacy of the claim. In contrast, the inclusion of evidence necessary to prove a fact pleaded is impermissible. A motion to strike is unlike a motion for summary judgment, where the aim is to ascertain whether there is a genuine issue requiring a trial. On a motion to strike, a judge simply examines the pleading; as mentioned, evidence is neither necessary nor allowed. If the document is incorporated by reference into the pleading and forms an integral part of the factual matrix of the statement of claim, it may properly be considered as forming part of the pleading and a judge may refer to it on a motion to strike.

[33] Turning to the application of these principles to this case, the motion judge made no express ruling on the issue of [page438] documents incorporated into the pleading, but in my view, very little turns on this issue on this appeal.

[34] Firstly, while the documents were not referred to in the record before the motion judge, this is unsurprising given that the motion record was that of the respondents. The appellants did provide the motion judge with a "Document Book" that contained the documents in issue.

[35] Secondly, the three orders of Justices Daudlin, Momotiuk and Quinn are expressly pleaded in the amended statement of claim. In my view, these documents have been incorporated into the appellants' pleading and the motion judge appropriately relied upon them in deciding the Rule 21 motion. In contrast, the entire reasons for decision of the three judges and a transcript of the criminal proceeding constitute evidence and are not properly considered as forming an integral part of the amended statement of claim. That said, for the most part, the requisite facts that emanated from these documents have been pleaded and the motion judge was therefore at liberty to rely on those elements of the pleading in reaching his decision.

[36] On two occasions, the motion judge did refer to the contents of certain documents that had not been incorporated into the amended statement of claim. At para. 59 of his reasons, the motion judge referred to Daudlin J.'s statement that under s. 490(2) of the Criminal Code, the government has a right to keep items seized when proceedings are instituted in which the thing detained may be required. This was not mentioned in the amended statement of claim. That said, the appellants take no issue with the motion judge's reliance on this element of Daudlin J.'s reasons and it only accrued to the respondents' benefit. That said, nothing in this appeal turns on the admission of the statement by the motion judge.

[37] Also at para. 59 of his reasons, the motion judge referred to the Tax Operations Manual of the CRA in considering whether a duty of care was owed to McCreight and Skinner. Specifically, the manual provides that a taxpayer would be given an opportunity to make exculpatory submissions. Such an opportunity had not been accorded to McCreight and Skinner. The underlying facts associated with this allegation were included in the amended statement of claim and the manual could be relied upon by the motion judge for that purpose. In contrast, at para. 69 of his reasons, the motion judge reviewed the contents of the manual to ascertain whether a fiduciary relationship was created between the CRA and the appellants. This constituted an improper use of the manual because the appellants had not pleaded the factual underpinning for such [page439] reference. That said, in my view this error is immaterial in the context of this appeal as the motion judge struck out the appellants' claim for damages for a breach of fiduciary duty and they have not appealed that element of the motion judge's order.

(2) Causes of action

[38] The standard of review on a rule 21.01(1)(b) motion to strike is correctness: Attis v. Canada (Minister of Health) (2008), 93 O.R. (3d) 35, [2008] O.J. No. 3766, 2008 ONCA 660, at para. 23, leave to appeal to S.C.C. refused [2008] S.C.C.A. No. 491.

[39] As mentioned, on a rule 21.01(1)(b) motion, a claim will only be struck if it is plain and obvious, assuming the facts pleaded to be true, that the pleading discloses no reasonable cause of action: R. v. Imperial Tobacco Canada Ltd., [2011] 3 S.C.R. 45, [2011] S.C.J. No. 42, 2011 SCC 42, at para. 17. The principles that may be extracted from this and other cases, some of which I have already mentioned, are as follows:

In the interests of efficiency and correct results, there is a need to weed out hopeless claims -- this housekeeping dimension underlies Rule 21: Imperial Tobacco, at paras. 19-20.

If the cause of action pleaded has been recognized, all of its essential elements must be pleaded: Aristocrat Restaurants Ltd. (c.o.b. Tony's East) v. Ontario, [2003] O.J. No. 5331, 2003 CarswellOnt 5574 (S.C.J.), at para. 19.

If the cause of action has not been recognized, this is not necessarily fatal. One must ask whether there is a reasonable prospect that the claim will succeed: Imperial Tobacco, at para. 21.

The claim should not be struck merely because it is novel: Imperial Tobacco, at para. 21.

Unless manifestly incapable of being proven, the facts pleaded are accepted as being true for the purposes of the motion: Imperial Tobacco, at para. 22.

The pleading forms the basis of the motion; possible future facts that have not been pleaded may not supplement the pleading: Imperial Tobacco, at para. 23.

No evidence is admissible on such a motion: Imperial Tobacco, at para. 22.

The pleading must be read generously in favour of the plaintiff, with allowances for drafting deficiencies: Wellington v. Ontario (2011), 105 O.R. (3d) 81, [2011] O.J. No. 1615, 2011 ONCA 274, at para. 14, leave to appeal to S.C.C. refused [2011] S.C.C.A. No. 258. [page440]

A motion to strike should not be confused with a summary judgment motion which has a different test, a different purpose and different rules relating to evidence: Leadbeater, at para. 14.

[40] Having considered the applicable principles, I will now turn to the causes of action in issue on this appeal.

(a) Malicious prosecution

[41] The appellants submit that the cause of action of malicious prosecution asserted against the Attorney General, the CRA, the CRA investigators Anne Kamp and Ian McGuffin, as well as the agents of the DOJ Bruck Easton and Damien Frost, ought not to have been struck. They submit that the motion judge erred in concluding that the material facts pleaded in support of the fourth element of the test for malicious prosecution, namely, that the respondents were actuated by malice, were bald and insufficient. The appellants argue that they pleaded as follows: the prosecution was launched for the purpose of retaining documents belonging to the appellants that were otherwise to be returned pursuant to statute and a court order. This purpose was improper and therefore malicious. As such, the appellants submit that it was not plain and obvious that a claim for malicious prosecution would not succeed at trial.

[42] In my view, the motion judge was correct in striking out this claim.

[43] Firstly, in Miazga v. Kvello Estate, [2009] 3 S.C.R. 339, [2009] S.C.J. No. 51, 2009 SCC 51, at paras. 53ff., the Supreme Court stated that in order to succeed in an action for malicious prosecution, a plaintiff must prove that the prosecution was (i) initiated by the defendant; (ii) terminated in favour of the plaintiff; (iii) commenced or continued without reasonable and probable cause and; (iv) motivated by malice or a primary purpose other than that of carrying the law into effect. In this case, the fourth element of the claim is in issue.

[44] In my view, the pleading does not identify a collateral or improper purpose that motivated the respondents. Retention of the appellants' seized documents was in furtherance of the prosecution, not collateral to it. Although the charges may have been laid in order to retain the documents, those documents were sought to be kept to pursue a prosecution of ITA and Criminal Code offences. Even read generously, a claim of mishandling a prosecution does not amount to a plea of malice. [page441]

[45] Secondly, rule 25.06(8) provides that where malice is alleged, the pleading shall contain full particulars. Here, the motion judge correctly concluded that the pleading contained merely bald allegations.

[46] In my view, the claim for malicious prosecution was properly struck.

(b) Abuse of process

[47] The appellants argue that para. 293 of the amended statement of claim, which claims, among other things, damages for abuse of process, ought not to have been struck by the motion judge. They assert that the respondents did not request such relief in their notice of motion and the motion judge did not address it. Furthermore, the test for abuse of process is similar to that for malicious prosecution and the appropriate factual basis for each claim was pleaded.

[48] The respondents submit that abuse of process was not expressly pleaded in the amended statement of claim, nor were the requisite elements or material facts in support of such a claim. Furthermore, the CRA officers are not "parties to a proceeding", and therefore such a claim does not lie against them. They argue that the motion judge was correct in striking this claim.

[49] The reference to abuse of process in the amended statement of claim is scant. Page 100 of the claim contains the heading "Fiduciary Duty, Legitimate Expectation and Abuse of Process", and para. 293 of the pleading also refers to a claim for damages for abuse of process. As noted by the motion judge, both references to abuse of process were made within the section of the pleading that claimed damages for breach of fiduciary duty. As noted above, the motion judge struck out the appellants' claim for damages for abuse of process on the basis that it is not a stand-alone cause of action for civil damages.

[50] That said, even though the respondents served and filed an extremely detailed notice of motion in support of their motion to strike, they did not seek to strike the claim for abuse of process. In keeping with principles of practice and fairness, they should have done so. I am of the view that in the circumstances, it was inappropriate for the motion judge to strike that claim when such relief was not requested.

[51] I would allow the appeal on this ground.

(c) Negligence

[52] The appellants do not contest the motion judge's finding that negligence is not a recognized cause of action against Crown prosecutors. [page442]

[53] However, the appellants do submit that the motion judge erred in law by finding that it was plain and obvious that CRA investigators do not owe a duty of care to suspects under investigation. It was on this basis that the motion judge struck the appellants' pleading. The appellants pleaded that the CRA and its investigators, Kamp and McGuffin, owed a duty of care to McCreight and Skinner and that they breached that duty by failing to investigate the matter properly, failing to comply with Daudlin J.'s order, rushing to lay charges against the appellants before the investigation was complete, and by particularly targeting McCreight and Skinner for criminal prosecution without cause.

[54] The appellants argue that Canadian case law supports the recognition of a duty of care towards suspects on the part of CRA investigators. Firstly, they assert that the relationship between a CRA investigator and his or her suspect is analogous to that between a police officer and the subject of his or her investigation. In Hill v. Hamilton-Wentworth Regional Police Services Board, [2007] 3 S.C.R. 129, [2007] S.C.J. No. 41, 2007 SCC 41, the Supreme Court confirmed that the police may owe a duty of care to a suspect under investigation. Secondly, they also argue that in Neumann v. Canada (Attorney General), [2011] B.C.J. No. 1273, 2011 BCCA 313, 338 D.L.R. (4th) 348, leave to appeal to S.C.C. refused [2011] S.C.C.A. No. 422, the British Columbia Court of Appeal was prepared to assume that the CRA owed a duty of care to a third party whose documents they seized during an investigation. The appellants say that there is greater proximity between the CRA and the subjects of its investigations than third parties. Thirdly, in Leroux v. Canada Revenue Agency, [2012] B.C.J. No. 235, 2012 BCCA 63, 347 D.L.R. (4th) 122, that same court refused to strike a negligence claim against the CRA and recognized that it is at least arguable that the CRA owes a duty of care to individual taxpayers in the administration or enforcement of taxing statutes. The appellants therefore argue that this cause of action should not have been struck as plainly and obviously having no reasonable prospect of success. They also ask this court to establish the existence of such a duty of care on the part of the CRA, thus obviating the need for a trial of the issue.

[55] The respondents answer by submitting that such a duty of care has not been previously recognized and the CRA investigator-suspect relationship is not analogous to the police-suspect relationship from which the decision in Hamilton-Wentworth arose. The motion judge was correct in finding no proximity between the parties. Proximity between the Crown and an individual member [page443] of the public may arise from a statutory scheme or from specific interactions. Neither gave rise to proximity in this case. Even if proximity were established, the motion judge was correct in determining that it was negated for policy reasons, specifically the ITA's statutory scheme, the availability of alternative remedies, and the fact that CRA investigators owe a duty to the public and the Crown, rather than to individuals.

[56] To ground a claim in negligence, CRA investigators must be found to owe a duty of care to suspects. As no precedent for such a duty was advanced, one must therefore consider whether this duty of care could be recognized.

[57] As described by McLachlin C.J.C. in Hamilton-Wentworth, at para. 20, the test for determining whether a person owes a duty of care involves two questions:

(i) does the relationship between the plaintiff and the defendant disclose sufficient foreseeability and proximity to establish a prima facie duty of care; and

(ii) if so, are there any residual policy considerations which ought to negate or limit that duty of care?

This is a reformulation of the Cooper-Anns test that originated in Cooper v. Hobart, [2001] 3 S.C.R. 537, [2001] S.C.J. No. 76, 2001 SCC 79 and Anns v. Merton London Borough Council, [1978] A.C. 728, [1977] 2 All E.R. 492 (H.L.).

[58] Foreseeability is conceded by the respondents in this case.

[59] The factors to be considered in an analysis of whether the plaintiff and defendant are in a relationship of proximity are diverse and depend on the circumstances of the case. The categories of proximate relationships are not closed. In looking at the relationship between the parties, the focus is on whether the acts of the alleged wrongdoer have a close or direct effect on the victim, such that the wrongdoer ought to have had the victim in mind as a person potentially harmed: Hamilton-Wentworth, at para. 29.

[60] In my view, in this case, the motion judge erred in concluding that it was plain and obvious that the respondent CRA investigators did not owe a duty of care to McCreight and Skinner, policy considerations would foreclose such a duty in any event and, therefore, the negligence claim had no reasonable prospect of success and should be struck.

[61] Firstly, given the Supreme Court's ruling in Hamilton-Wentworth that, in certain circumstances, police officers may owe a duty of care to their suspects, surely it is not plain and obvious that a CRA investigator owes no such duty when operating under [page444] ITA provisions that attract criminal sanction and under the Criminal Code. The same analogical reasoning applies to any residual policy rationale that could negate such a duty.

[62] Secondly, I see no relevant distinction between the above-cited case of Leroux and this case. That case involved a claim of negligence against CRA employees as well and the British Columbia Court of Appeal dismissed an appeal of an order permitting the cause of action to proceed to trial. The court was not persuaded that the claim should be struck because it was at least arguable that such a cause of action could succeed and the issue was to be considered at trial.

[63] The action for negligence against the CRA investigators should be permitted to proceed to trial along with the causes of action for misfeasance in public office and abuse of process, and thereby benefit from a full factual record.

(d) Section 61(1) of the Family Law Act

[64] The appellants further submit that their s. 61(1) FLA claims should not have been struck, as their claims were arguable. Contrary to what the motion judge found, McCreight and Skinner pleaded that they suffered from post-traumatic stress disorder, which is a recognized psychiatric illness.

[65] The respondents answer that under s. 61(1) FLA, in the absence of a physical injury to McCreight and Skinner, the spousal appellants must show that McCreight and Skinner suffer or have suffered from a recognizable psychiatric illness that was caused by the respondents' negligence. Furthermore, that psychiatric illness must have been reasonably foreseeable to the respondents. The respondents note that the injuries alleged in this case by the appellants arose solely from having been subjected to the legal process, which was not foreseeable and is not recoverable in law even by a primary plaintiff. This application of s. 61(1) of the FLA would far expand its intended reach. In addition, the FLA claim is derivative of the negligence claim and, consistent with the respondents' position on that assertion, this claim should also fail.

[66] Section 61(1) of the FLA states:

61(1) If a person is injured or killed by the fault or neglect of another under circumstances where the person is entitled to recover damages, or would have been entitled if not killed, the spouse, as defined in Part III (Support Obligations), children, grandchildren, parents, grandparents, brothers and sisters of the person are entitled to recover their pecuniary loss resulting from the injury or death from the person from whom the person injured or killed is entitled to recover or would have been entitled if not killed, and to maintain an action for the purpose in a court of competent jurisdiction. [page445]

[67] In my view, the spousal claims brought by the appellants pursuant to this section were properly struck out.

[68] Paragraph 304 of the amended statement of claim pleads that McCreight's and Skinner's physical, emotional and psychological well-being have been damaged and that they suffer from post-traumatic stress. Paragraphs 311, 312 and 313 address the FLA claims of their spouses, Kim McCreight and Joan Skinner. Those paragraphs allege that the two spouses suffered loss and damage and were without the care and companionship of their husbands due to their injuries.

[69] Firstly, as held by this court in Healey v. Lakeridge Health Corp. (2011), 103 O.R. (3d) 401, [2011] O.J. No. 231, 2011 ONCA 55, at paras. 60-66, in the absence of physical injury, plaintiffs must establish that they have suffered a recognized psychiatric illness caused by the negligence of the defendants in order to recover. As Ms. McCreight's and Ms. Skinner's claims for damages pursuant to s. 61 FLA are derivative of their husbands' primary claims, such an illness -- caused by the respondents' negligence -- must have been pleaded in the amended statement of claim in order for those paragraphs not to be struck. Post-traumatic stress was the injury alleged in the appellants' pleading and this does not qualify as a recognized psychiatric illness. While a pleading should be read generously for the purposes of a rule 21.01(1) (b) motion, no mention is made of any disorder or syndrome that would constitute a recognized psychiatric illness.

[70] Secondly, even if one were to accept that on a generous reading of the amended statement of claim, a recognized psychiatric illness had been pleaded, the stress alleged arises from being subject to a tax investigation and the criminal process. In Healey, at para. 40, this court stated that "the plaintiff must satisfy the court that the psychological injury was caused by the negligence of the defendant. This involves asking whether psychological damage was a reasonably foreseeable consequence of the defendant's negligence." There is no pleading of the requirement of foreseeability. Moreover, the expected type of stress or upset caused by participation in the criminal process does not attract any recoverable damages: Scott v. Ontario, [2002] O.J. No. 4111, [2002] O.T.C. 832 (S.C.J.), at para. 31, affd [2003] O.J. No. 4407, 125 A.C.W.S. (3d) 535 (C.A.); see, also, Healey, at para. 65.

[71] As a result, I would not give effect to this ground of appeal.

(3) Leave to amend

[72] The appellants ask this court to strike the existing amended statement of claim and grant them leave to file the [page446] fresh statement of claim appended to their factum. The fresh pleading is premised on the appellants' being fully successful on their appeal. As they have only been successful with respect to the claims of abuse of process and negligence against the CRA investigators, it would be inappropriate to grant leave to file the appended pleading. Furthermore, the statement of claim has already been amended on three prior occasions. Absent consent, a further amendment cannot be justified.

F. Costs

[73] Counsel agreed that $33,100 should be awarded to the successful party on the appeal. The appellants were only partially successful. In my view, in the circumstances, an award of $17,500, inclusive of disbursements and applicable taxes, in favour of the appellants is fair and reasonable. In addition, I would order the respondents to pay the appellants $5,000, inclusive of disbursements and applicable taxes, on account of costs below.

G. Disposition

[74] Accordingly, I would allow the appeal in part and both reinstate the claim for abuse of process and set aside para. 4 of the order under appeal [at para. 109], insofar as it strikes the appellants' claims in negligence against the CRA respondents.

Appeal allowed in part.

End of Document