COURT OF APPEAL FOR ONTARIO DATE: 20230111 DOCKET: C70480
Doherty, Feldman and Trotter JJ.A.
BETWEEN
His Majesty the King in Right of Ontario Plaintiff/Defendant by Counterclaim/Moving Party (Respondent)
and
Sanjay Madan (a.k.a. Sadanand Madan), Shalini Madan, Chinmaya Madan, Ujjawal Madan, Intellisources Inc., Newgen Solutions Inc., 10583570 Canada Ltd., 1846932 Ontario Inc., Vidhan Singh, Wang & Associates Professional Corporation, AVPS Holdings Inc., AVPS Recruiting Inc., AVPS Investments Inc., AVPS Properties Inc., 2305509 Ontario Inc., 1784357 Ontario Inc. and 6875459 Canada Inc. Defendants/Plaintiffs by Counterclaim/Responding Parties (Appellants)
Counsel: Christopher Du Vernet and Carlin McGoogan, for the appellants Christopher Wayland and Andrea Huckins, for the respondent
Heard: November 17, 2022
On appeal from the order of Justice Cory A. Gilmore of the Superior Court of Justice, dated March 10, 2022, with reasons reported at 2022 ONSC 1538.
A. Overview
1This is an appeal from an order made on a pleadings motion.
2The respondent, His Majesty the King in Right of Ontario (“Ontario”), sued Sanjay Madan (“Sanjay”), his wife, Shalini Madan (“Shalini”), and his two sons, Chinmaya Madan (“Chinmaya”) and Ujjawal Madan (“Ujjawal”). Shalini, Chinmaya and Ujjawal are the appellants on this appeal. The Crown alleged that Sanjay, using his senior IT position at the Ontario Ministry of Education (the “Ministry”), defrauded Ontario of millions of dollars. Ontario further alleged that Shalini, Chinmaya and Ujjawal were complicit in, and/or beneficiaries of the fraud. [1]
3Ontario alleged two distinct fraudulent schemes. One scheme targeted the Support for Families Program (“SFFP”), administered by the Ministry. That program was commenced in April 2020 to help Ontario families with the costs associated with the at-home learning necessitated by the pandemic. The program provided for grants of $200 to $250 per student. Applications could be made to the Ministry using a simple online process. Sanjay helped develop the computer applications for the program.
4Ontario alleged that between April 2020 and August 2020, Sanjay and the appellants made thousands of fraudulent applications under the SFFP using fictitious names. The applications were approved and funds paid into one of the over 2,500 bank accounts opened by Sanjay in his name or the names of the appellants. The Crown alleged that payments in excess of $10,800,000 were made into those accounts as a result of the fraudulent applications.
5The second fraudulent scheme alleged that Sanjay had been paid kickbacks by consultant vendors who obtained fee-for-service contracts with the Ministry. Sanjay was the person responsible for selecting the vendors and signing off on the consultants' timesheets. Ontario alleged that the kickback scheme had been going on for at least ten years.
6Ontario did not allege that the appellants actually participated in the kickback scheme. Ontario did allege that Sanjay diverted the proceeds, direct and indirect, from the kickback scheme to himself and to the appellants, either by way of money payments, or by way of property or other assets obtained from the proceeds of the kickback scheme. Ontario alleged that Sanjay and the appellants were unjustly enriched at Ontario’s expense.
7In the Amended Amended Statement of Claim (the “Statement of Claim”), Ontario alleged fraud, theft and conversion against the appellants. Ontario sought:
- damages;
- a constructive trust over all monies obtained from the frauds and any assets acquired with money obtained from the frauds;
- an accounting of, and restitution of, all funds obtained from the frauds;
- a tracing order; and
- a Mareva injunction.
8Sanjay and the appellants are all represented by the same lawyer. However, they filed separate statements of defence. In his Statement of Defence, Sanjay denied “each and every allegation” in the Statement of Claim. Sanjay also denied that the appellants had any knowledge of, or anything to do with the frauds. [2]
9In addition to denying any knowledge of, or involvement in the frauds, Sanjay pled that Ontario was primarily responsible for any losses it had suffered. Among other things, Sanjay alleged that Ontario hired incompetent employees, failed to use appropriate hardware and software safeguards, and failed to take proper steps to guard against unscrupulous employees, presumably including himself, who exploited the inadequacies in the procedures established by Ontario to process applications for payments under the SFFP. Sanjay specifically pled that Ontario’s conduct made it contributorily negligent to any losses Ontario had suffered as a result of the frauds. He pled:
Insofar as the Plaintiff [Ontario] was contributorily negligent, its damages, if any, ought to be reduced by the degree of its proportionate fault.
10Sanjay did not counterclaim against Ontario.
11The appellants denied any knowledge of, or involvement in, the fraudulent schemes in their statements of defence. Like Sanjay, the appellants pled Ontario was contributorily negligent in that it failed to take reasonable steps to prevent and limit the frauds perpetrated by Sanjay. They claimed that Ontario’s damages should be reduced to reflect Ontario’s responsibility for the frauds.
12Sanjay’s sons not only denied any involvement in the fraudulent schemes, but also pled that their father had admitted to them that, without their knowledge or consent, he had deposited proceeds from the SFFP fraud into bank accounts in their names that he had opened for that purpose. Sanjay’s wife also pled that she was a victim of Sanjay’s identity theft, fraud, and “wrongful acts”. Despite these allegations, the appellants did not crossclaim against Sanjay.
13The appellants did, however, counterclaim against Ontario. In essence, the counterclaims alleged that Ontario, as a result of the dishonesty, negligence and ineptitude of its employees, and the inadequacy of its computer systems, was largely responsible for any losses resulting from the frauds. The appellants claimed that several named employees of Ontario had engaged in various dishonest or negligent acts that had resulted in damage to the appellants. The counterclaims further alleged that Ontario, as Sanjay’s employer, was vicariously liable for his “wrongful acts” including his invasion of the appellants’ privacy through his use of their private information to open fraudulent bank accounts in their names into which he directed the proceeds of the SFFP fraud.
14Ontario moved to strike parts of the statements of defence, including the contributory negligence defences advanced by the appellants. Ontario also moved to strike the counterclaims in their entirety, with the exception of a wrongful dismissal claim made by Shalini. The motion judge accepted the Crown’s arguments and struck the contested parts of the statements of defence and the counterclaims. The motion judge also refused leave to amend the pleadings.
15The three appellants appealed from the order of the motion judge. Sanjay does not appeal.
16At the end of oral argument, the court advised the parties that the appeal was dismissed with reasons to follow. In the reasons below I explain why the court has concluded the motion judge properly struck the pleadings in issue and did not err in the exercise of her discretion when she refused to grant leave to amend the pleadings.
B. Issues and analysis
17The appellants raised four issues on appeal. They submitted that the motion judge erred in striking:
- the contributory negligence defences;
- the claims in the statements of defence and counterclaims relating to Ontario’s alleged misuse of the Mareva injunction;
- the allegation in the counterclaims that Ontario was vicariously liable for Sanjay’s invasion of the appellants’ privacy; and
- the allegations in the counterclaims that Ontario was either directly or vicariously liable to the appellants in negligence.
(i) The contributory negligence defence
18The contributory negligence defence advanced by the appellants is predicated on Ontario’s alleged failure to take adequate steps to protect itself from the fraud perpetrated against it. The defence, as framed in the statements of defence, applies to all of the claims advanced by Ontario, including the fraud, theft, and conversion claims: see e.g., Shalini’s Statement of Defence, at paras. 30-33, 35.
19The proposition that a fraudster’s liability for damages flowing from its fraud should be reduced to reflect a victim’s failure to protect itself from the fraud would, if accepted, strongly suggest that if perpetrated against the right victim, crime would indeed pay. Thankfully the law is to the contrary. As the motion judge held, a victim’s negligence or carelessness affords no defence, partial or otherwise, to an allegation of dishonesty: Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19, [2002] 1 S.C.R. 678, at paras. 67-71; Man Financial Canada Co. v. Keuroghlian, 2008 ONCA 592, 47 B.L.R. (4th) 190, at paras. 44-46.
20In argument, the appellants submitted that the “contributory negligence” allegations, presented as a partial defence, targeted Ontario’s unjust enrichment claim and not the fraud claims. The appellants submitted that the many references to “contributory negligence” in the statements of defence and counterclaims are actually intended to invoke the equitable doctrine of “clean hands”, although that phrase is not used in the pleadings. The appellants argued that Ontario’s failure to take reasonable steps to protect itself and others from the frauds constituted “misconduct”, which is properly taken into account when deciding whether Ontario should be entitled to equitable relief by way of its unjust enrichment claim. In oral argument, counsel limited this submission to Ontario’s claim to assets that are allegedly the indirect proceeds of the frauds and did not maintain the appellants were entitled to keep any of the money that was the actual direct proceeds of the frauds.
21To establish unjust enrichment, Ontario must show, first, an enrichment of the appellants, second, a corresponding deprivation of Ontario and, third, an absence of a juristic reason for the enrichment: Garland v. Consumers’ Gas Co., 2004 SCC 25, [2004] 1 S.C.R. 629, at para. 30. The appellants contend that even if Ontario establishes the requisite criteria, the appellants are entitled to keep at least some of the indirect proceeds of fraud because Ontario failed to take proper steps to protect itself from fraud.
22The appellants’ position is untenable in law. I am unaware of any case which suggests that a plaintiff’s carelessness or negligent conduct can demonstrate the kind of moral turpitude required to justify invoking the “clean hands” doctrine to deny what would otherwise be appropriate equitable relief based on unjust enrichment.
23The appellants rely on Love v. Turf Management Systems Inc. (1997), 38 B.L.R. (2d) 70 (Ont. Gen. Div.). The appellants submit that in Love, the application judge found, based on negligence, that a party did not have “clean hands”. While it is true that the phrase “clean hands” appears in the reasons at para. 10, Love has nothing to do with either unjust enrichment claims or the kind of misconduct that can bar access to equitable relief.
24In Love, the franchisee breached its franchise agreement. The franchisor had the right to terminate the franchise agreement and moved to do so. The franchisee sought relief from forfeiture of the agreement under s. 98 of the Courts of Justice Act, R.S.O. 1990, c. C.43. In denying that relief, the application judge referred to the usual factors relevant on a motion for relief from forfeiture, including the nature of the breach of the contract which precipitated the franchisor’s right to terminate the agreement. The application judge pointed out that the breach was not premised on “mistake, surprise or accident”, but rather on “forgetfulness or perhaps negligence”: Love, at para. 7. After a review of the relevant factors, the application judge concluded, at para. 11, that the franchisee had not made out a case for relief from forfeiture. Love is of no relevance here.
25Apart from the state of the case law, the appellants’ claim fails on a first principles analysis. The appellants maintain that even if they are in possession of assets that are the indirect proceeds of the frauds perpetrated against Ontario, and even though the appellants have no legitimate claim to any part of the proceeds of those frauds, they should be entitled to keep the assets, or at least part of the assets, which are the indirect proceeds of the fraud, presumably to “punish” Ontario for not taking adequate steps to protect itself from the fraud.
26On this approach, the appellants become the beneficiaries of what can only be described as a windfall, occasioned by Ontario’s failure to protect itself from Sanjay’s fraud. I am unaware of any equitable principle which justifies this result. Indeed, the result, a permanent financial loss for Ontario, the victim of the fraud, and a windfall gain for the appellants, bystanders to the fraud, seems the antithesis of equity.
(ii) The allegations in the statements of defence and counterclaim relating to the Mareva injunction and preservation order
27In October 2020, Ontario obtained an ex parte Mareva injunction and a preservation order under the Civil Remedies Act, 2001, S.O. 2001, c. 28. The appellants subsequently consented to the continuation of the Mareva injunction and the preservation order.
28In their statements of defence and counterclaims, the appellants alleged that Ontario “seized or froz[e]” funds to which Ontario “has no entitlement”. The appellants further alleged that Ontario “abused the authority it obtained from this Honourable Court” when it seized or froze those funds. These allegations are presumably references to steps taken by Ontario pursuant to the authority granted by the Mareva injunction and preservation order. The appellants also allege that they are entitled to damages based on the undertaking given by Ontario as a term of the granting of the Mareva injunction.
29The pleadings relating to the Mareva injunction and preservation order were properly struck for several reasons. First, the appellants have not pled any material facts capable of supporting the claim that Ontario “froz[e] funds”. Presumably, they pled no such facts because, as is self-evident, funds were frozen by court orders and not by any action of Ontario.
30Second, there is no allegation that any of the funds frozen by court order were frozen in violation of the terms of those orders. The appellants make no reference in the counterclaims to any of the specific terms of the Mareva injunction or preservation order.
31Counsel’s submission that the allegations in the statements of defence and counterclaims to the effect that the seized funds were “never taken from the Plaintiff” and were funds to which “the Plaintiff has no entitlement”, constitute allegations that the injunction was improperly obtained and/or executed has no merit. Mareva injunctions are not necessarily limited to property “taken from the Plaintiff” or property to which “the Plaintiff has no entitlement”. Without any reference in the pleadings to the actual terms of the Mareva injunction or preservation order, there is no basis upon which the appellants can plead that the seizures were in contravention of the terms of the orders. [3] Furthermore, having consented to the orders being made, the appellants are hard pressed to plead that the orders were improperly made.
32Finally, the appellants’ bald claims that Ontario “abused the authority it obtained from this Honourable Court” and that Ontario “simply grabbed all the money it could find” were properly struck as entirely unsupported by any material facts in the appellants’ pleadings.
33The allegations in the appellants’ statements of defence and counterclaims in respect of the granting and execution of the Mareva injunction and preservation order were properly struck. If it should ultimately develop that the orders were improperly granted or executed, the appellants may, of course, call upon Ontario to fulfill its undertaking to abide by any order the court might make with respect to damages arising from the granting and enforcement of the orders.
(iii) The intrusion upon seclusion claim
34In their counterclaims, the appellants pled that by giving Sanjay access to its computer networks, failing to install the appropriate systems and safeguards, and failing to heed various warnings about misuse of the SFFP, Ontario provided Sanjay with the opportunity and means to commit “identity theft and fraud”. The appellants further contended that Sanjay used the appellants’ identities to receive payments from the SFFP. They alleged that Ontario was vicariously liable for Sanjay’s “wrongful acts” and for his intrusion upon the seclusion of the appellants. The allegations in para. 97 of Chinmaya’s Statement of Defence and Counterclaim are typical of the pleading made with respect to intrusion upon seclusion:
In such circumstances, the Plaintiff (Defendant to Counterclaim) is vicariously liable for the intrusion upon seclusion committed by its employee, Sanjay Madan….
35The pleadings contain no further reference to the intrusion upon seclusion claim. At no point do the pleadings draw any distinction among the terms “intrusion upon seclusion”, “identity theft”, “fraud”, or “wrongful acts”. The pleadings do not specify the exact nature of the invasion of privacy alleged by the appellants.
36The appellants did allege that Sanjay was the person in the family who was primarily responsible for the financial affairs of all family members. Consequently, they trusted him with their private banking information. The appellants pled that they did not know that Sanjay was misusing their personal information to open thousands of bank accounts in their names, or that he was causing the proceeds of the SFFP fraud to be deposited into those accounts. The appellants, particularly Sanjay’s sons, claimed to have been betrayed by their father.
37In argument, the appellants maintained that their intrusion upon seclusion claim referred not only to Sanjay’s misuse of the appellants’ private information to open fraudulent bank accounts in their names, but also to Sanjay’s causing of the proceeds of the SFFP fraud to be deposited into those accounts.
38The appellants no doubt frame the intrusion upon seclusion claim to include the transfer of funds into the fraudulent bank accounts in an effort to fix Ontario with vicarious liability for Sanjay’s invasion of the privacy of the appellants. However, like the motion judge, I cannot agree that the tort of intrusion upon seclusion encompasses the subsequent fraud on Ontario, perpetrated by Sanjay when he caused Ontario to deposit funds into the accounts he had opened in the names of the appellants.
39The tort of invasion of privacy, or intrusion upon seclusion, is complete when the alleged tortfeasor invades or intrudes upon the private affairs or concerns of another. That invasion or intrusion must be intentional or reckless, and it must be sufficiently serious that a reasonable person would regard the invasion of privacy as highly offensive causing distress, humiliation or anguish: Jones v. Tsige, 2012 ONCA 32, 108 O.R. (3d) 241, at para. 71; Owsianik v. Equifax Canada Co., 2022 ONCA 813, at paras. 53-54. The tort is complete without proof of pecuniary damage: Jones, at para. 71.
40The tort of intrusion upon seclusion seeks to protect the integrity and autonomy of one’s personal information through the recognition of one’s right to control access to, dissemination of, and use of one’s private information by others. On the facts as pled by the appellants, their right to control access to and use of their private information was compromised by Sanjay’s dishonest use of the information entrusted to him by his family members to open thousands of bank accounts as a step in furtherance of a scheme to defraud the SFFP. The use of the information to establish the accounts is clearly an infringement of the appellants’ right to control their private information. The use of the bank accounts established by the misuse of the appellants’ private information as depositories for the fraud perpetrated against Ontario by Sanjay did not involve any further invasion of the appellants’ privacy. The use of the private information obtained by Sanjay through the invasion of the appellants’ privacy in his fraud on Ontario may have relevance to the quantification of any damages caused by Sanjay’s invasion of the appellants’ privacy. Pecuniary damages are not, however, an element of the tort of intrusion upon seclusion: Jones, at para. 71.
41A proper understanding of the elements of the tort of intrusion upon seclusion is essential to a determination of whether the appellants have pled a basis upon which Ontario could be vicariously liable for Sanjay’s commission of that tort. Ontario could only be vicariously liable if Ontario could be said to be legally responsible for Sanjay’s misuse of the appellants’ private banking information to establish the false accounts as a step in his scheme to defraud Ontario.
42Nothing alleged in the pleadings could support a finding that Ontario should be held vicariously liable for Sanjay’s invasion of the appellants’ privacy. In Bazley v. Curry, [1999] 2 S.C.R. 534, McLachlin J. dealt at length with the nature and scope of an employer’s vicarious liability for the actions of its employees. She observed, at para. 37:
Underlying the cases holding employers vicariously liable for the unauthorized acts of employees is the idea that employers may justly be held liable where the act falls within the ambit of the risk that the employer’s enterprise creates or exacerbates. Similarly, the policy purposes underlying the imposition of vicarious liability on employers are served only where the wrong is so connected with the employment that it can be said that the employer has introduced the risk of the wrong (and is thereby fairly and usefully charged with its management and minimization). The question in each case is whether there is a connection or nexus between the employment enterprise and that wrong that justifies imposition of vicarious liability on the employer for the wrong, in terms of fair allocation of the consequences of the risk and/or deterrence. [Emphasis added.]
43The risk that Sanjay would misuse the private banking information entrusted to him by his family was not a risk “that the employer’s enterprise creates or exacerbates.” Nor was the violation of the appellants’ privacy rights by Sanjay’s misuse of their private banking information “so connected with the employment that it can be said that the employer has introduced the risk of the wrong”. In fact, there is no connection between Sanjay’s employment with Ontario and the wrong underlying the intrusion upon seclusion claim.
44The appellants rely on Evans v. Bank of Nova Scotia, 2014 ONSC 2135, 55 C.P.C. (7th) 141, leave to appeal to Div. Ct. refused, 2014 ONSC 7249. In that case, however, the employee, in respect of whom the employer was potentially vicariously liable, had misused private customer information made available by the employer to the employee in the course of his employment. On those allegations, the employer could potentially be held vicariously liable for the employee’s use of the private information of the bank’s customers entrusted to the employee by the bank in the course of his employment with the bank. On the facts alleged here, Ontario did not provide any information to Sanjay in respect of the private affairs of the appellants. It was the appellants who provided their private information directly to Sanjay, not because he worked for Ontario, but because, as their husband and father, they trusted him to look after their financial affairs.
45The claim that Ontario is vicariously liable for Sanjay’s breach of his family’s privacy rights in their banking information was properly struck.
(iv) The negligence claims
46In their counterclaims, the appellants alleged that Ontario was directly liable to the appellants in negligence. They claimed that Ontario owed them a duty of care and had failed to take appropriate steps to protect them from the negligent actions of Ontario’s employees. The appellants also pled that a special relationship arose between Ontario and the appellants giving rise to a duty of care by virtue of Ontario’s transfer of funds into bank accounts in the names of the appellants. They further pled that Ontario failed to take reasonable steps to guard against the risk that its employees would misuse Ministry computer systems and other facilities to defraud the appellants and commit identity theft.
47In addition to making a direct claim against Ontario in negligence, the appellants alleged that Ontario was vicariously liable for the negligence of its employees. In their pleadings, the appellants specifically identified by name and/or position several employees who they claimed were negligent in the performance of their duties and whose negligence had caused damage to the appellants.
48In the pleadings, the appellants further alleged that Ontario was vicariously liable for the “wrongful acts” of Sanjay. The pleadings particularized those acts as fraud and identity theft. Ontario submits that the pleadings do not, however, include an allegation that Ontario is vicariously liable for Sanjay’s negligence.
49There is merit to this position advanced by Ontario. However, as I am satisfied the appellants have not pled a viable claim based on Ontario’s vicarious liability for the negligence of any of its employees, I will assume for the purpose of the analysis that the pleading includes an allegation that Ontario is vicariously liable for Sanjay’s negligence.
(a) Can Ontario be directly liable for negligence?
50The motion judge struck the claims alleging that Ontario was directly liable to the appellants in negligence. She held that under s. 8 of the Crown Liability and Proceedings Act, 2019, S.O. 2019, c. 7, Sched. 17 (the “Act”), the Crown could not be held directly liable in tort. The Crown could be held vicariously liable for the tortious acts of its officers, employees or agents.
51The relevant parts of s. 8 are set out below:
Crown liability
8(1) Except as otherwise provided under this Act or any other Act, the Crown is subject to all the liabilities in tort to which it would be liable if it were a person,
(a) in respect of a tort committed by an officer, employee or agent of the Crown;
Same
(2) For greater certainty, nothing in clause (1) (a) subjects the Crown to liability for a tort that is not attributable to the acts or omissions of an officer, employee or agent of the Crown.
Limitation of government actors’ liability applies to the Crown
(3) The negation or limitation under an Act of the liability of an officer, employee or agent of the Crown in respect of a tort committed by him or her applies to the same extent and in the same manner with respect to the Crown, and no proceeding may be brought against the Crown in respect of an act or omission of an officer, employee or agent of the Crown if a proceeding in tort in respect of such an act or omission may not be brought against that officer, employee or agent or against his or her personal representative.
52The provisions in s. 8 abrogate to some extent the Crown’s immunity from tort liability. Under the Act, Ontario is liable for torts committed by an officer, employee or agent of the Crown and Ontario’s liability in tort extends only to acts or omissions attributable to an officer, employee or agent of the Crown. Finally, the Crown is liable in tort for an act or omission, only if a proceeding in tort in respect of that act or omission could be brought against an officer, employee or agent of the Crown. Ontario’s tort liability is vicarious and depends on the plaintiff’s ability to prove the tortious conduct or omission of an officer, employee or agent of Ontario.
53The vicarious nature of the Crown’s liability in tort under the Act is clear on a careful reading of s. 8 of the Act. [4] Several judgments from this court have affirmed that reading: see Walters (Litigation Guardian of) v. Ontario, 2017 ONCA 53, 136 O.R. (3d) 53, at para. 34, leave to appeal refused, [2017] S.C.C.A. No. 100; Ontario v. Phaneuf, 2010 ONCA 901, 104 O.R. (3d) 392, at para. 13; Bruno v. Dacosta, 2020 ONCA 602, 69 C.C.L.T. (4th) 171, at paras. 33-34, leave to appeal refused, [2020] S.C.C.A. No. 412; Francis v. Ontario, 2021 ONCA 197, 154 O.R. (3d) 498, at paras. 142-45.
54Despite the language of s. 8 of the Act, and the line of authority referred to above, the appellants maintain that the Crown can be directly liable in tort. In their factum, the appellants make no reference to the language of the Act but instead, refer to an authority from British Columbia, where the comparable legislation, differently worded, does permit claims directly against the Crown: see Just v. British Columbia, [1989] 2 S.C.R. 1228.
55The appellants also misread this court’s decision in Francis, and make no reference to the other cases cited above, in para. 53. In Francis, at para. 144, this court said:
On a fair reading of the amended statement of claim, it is clear that the allegations being made against Ontario arise from its vicarious liability for the negligent acts of its servants. The amended statement of claim expressly references Regulation 778, by which administrative segregation decisions are left to the individual Superintendents. It is also clear from the amended statement of claim that the negligent acts are those of servants of Ontario. [Emphasis added.]
56Finally, the appellants’ reliance on Aylmer Meat Packers Inc. v. Ontario, 2022 ONCA 579, 162 O.R. (3d) 532 does not assist. Whether the Ministry of Agriculture, Food and Rural Affairs’ liability was direct or vicarious was not debated in Aylmer. Neither the Act, nor the cases referred to above were discussed or cited in the judgment. The parties and this court treated any distinction between the Ministry of Agriculture, Food and Rural Affairs’ direct liability in negligence and its vicarious liability for the actions of its employees as irrelevant to the issues addressed on the appeal.
57The motion judge correctly struck the negligence claims in the counterclaims to the extent they advanced a direct claim in negligence against Ontario.
(b) Can the pleading that Ontario is vicariously liable in negligence stand?
58The motion judge struck the claims alleging that Ontario was vicariously liable for the negligence of its employees on the ground that the appellants did not plead facts on which a relationship of proximity necessary to a finding of a duty of care could be made. The motion judge concluded that the appellants were required to plead facts which could establish the requisite proximity as between named or otherwise identified employees of Ontario and the appellants.
59For the reasons set out in the previous section, at paras. 50-57, I agree with the motion judge that the relationship giving rise to the requisite proximity must be one between identified officers, agents or employees of Ontario and the appellants. For the purposes of considering this submission, I include Sanjay as an identified employee of Ontario. It is only if the appellants have properly pleaded the existence of the requisite proximity between identified Crown employees and the appellants that the inquiry can properly turn to Ontario’s responsibility in law for the acts or omissions of those identified employees: Francis, at paras. 144-45.
60The appellants chose not to plead the existence of any special relationship between the appellants and any identifiable officer, agent or employee of Ontario. Instead, the appellants pled a “special relationship” with Ontario. The claim fails on that ground alone.
61Assuming the appellants could amend their claim to allege the requisite relationship between the appellants and identified officers, agents or employees of Ontario, the negligence claim would still be properly struck. I agree with the motion judge that the mere transfer of funds into accounts in the names of the appellants could not, on its own, establish the requisite proximity between the appellants and any employee, officer or agent of Ontario.
62The appellants do not claim that the requisite proximity arose out of any statutory provision. They rely exclusively on “interactions between the claimant and the government”: R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45, at para. 43. On the pleadings, the transfer of the funds into the accounts in the names of the appellants is the only interaction relied on by the appellants to establish proximity.
63It was central to the appellants’ defence as pleaded that they had no knowledge of the existence of the vast majority of accounts Sanjay had opened in their names, and no control over, or access to, any of those accounts. For example, Shalini specifically pled that she had no knowledge of any of the accounts in her name that were used for the purposes of the SFFP fraud until some time after this lawsuit began. Even in respect of the accounts that the appellants had opened themselves, they had no knowledge of, or any control over, the transfer of any funds into those accounts under the SFFP.
64In addition to pleading they had no knowledge of the vast majority of the accounts, and no knowledge of any transactions in the accounts, the appellants also did not plead any communication or any other form of contact, direct or indirect, with any employee, officer or agent of Ontario in respect of those accounts. Nor did the appellants claim any involvement in, or knowledge of, the SFFP applications that generated the funds deposited into the accounts. Finally, as I understand the appellants’ position as advanced in argument, they do not claim any entitlement, or interest in any of the funds transferred into those accounts under the auspices of the SFFP.
65On the pleadings, there is nothing that could reasonably be described as an “interaction” between the appellants and Ontario. The appellants’ claim to a special relationship arising exclusively out of the transfer of funds into accounts in their names by Sanjay as part of the fraud comes down to the assertion that Sanjay’s fraudulent scheme created a special relationship between the appellants, the victims of his identity theft, and Ontario, the victim of his fraud. The mere fact that Ontario and the appellants were both cheated by Sanjay as part of the same scheme cannot create a “special relationship” giving rise to a duty of care owed to the appellants by any officer, agent or employee of Ontario.
66The motion judge properly struck the negligence claims advanced in the counterclaims.
C. Should the appellants have been granted leave to amend their pleadings?
67The motion judge declined to exercise her discretion and grant the appellants leave to amend their pleadings. Most of the deficiencies in the pleadings are not amenable to any possible amendment. For example, the contributory negligence defence, the counterclaims in respect of Ontario’s vicarious liability for Sanjay’s invasion of the appellants’ privacy, and the counterclaims alleging Ontario’s direct liability in negligence, are not legally tenable claims and cannot be amended.
68To the extent that any of the pleadings may have been capable of amendment, I would defer to the motion judge’s exercise of her discretion and her refusal to permit any amendment: see Darmar Farms Inc. v. Syngenta Canada Inc., 2019 ONCA 789, 148 O.R. (3d) 115, at para. 30, leave to appeal refused, [2019] S.C.C.A. No. 409. The appellants had already amended their pleadings once, and they offered no concrete suggestions to the motion judge, or in this court, as to any appropriate amendments that could be made.
D. Conclusion
69The appeal is dismissed. The appellants accept, in light of the outcome of the appeal, that Ontario should have its costs fixed at $35,000, inclusive of relevant disbursements and taxes. So ordered.
Released: “January 11, 2023 DD”
“Doherty J.A.”
“I agree. K. Feldman J.A.”
“I agree. G.T. Trotter J.A.”
1Ontario also sued companies controlled by Sanjay. Neither Sanjay, nor his companies, have appealed from the motion judge’s order. There is also a group of defendants referred to as the “Singh defendants”. They did not take part in the motion and are not parties to this appeal.
2Sanjay subsequently admitted under oath that he had committed the frauds. His Statement of Defence was not changed to reflect his admission.
3The Mareva injunction and preservation order were filed as part of the appeal record. Not surprisingly, the terms of those orders are not limited to property taken from Ontario, or property to which Ontario has some entitlement.
4Similar language, to the same effect, is found in the predecessor legislation, the Proceedings Against the Crown Act, R.S.O. 1990, c. P.27, s. 5.
