Court of Appeal for Ontario

Date: November 24, 2017

Docket: C63234

Judges: Hoy A.C.J.O., Huscroft and Paciocco JJ.A.

Between

J.K. Plaintiff (Respondent)

and

Her Majesty the Queen in Right of the Province of Ontario Defendant (Appellant)

and

Banyan Community Services Inc., Craigwood Youth Services, Pwi-Di-Goo-Zing-Ne-Yaa-Zhing Advisory Services, CAS of Nipissing and Parry Sound, William W. Creighton Youth Services, Ray of Hope Inc., Northern Youth Services Inc., Youth Services Bureau of Ottawa, Anago (Non) Residential Resources Inc., Kennedy House Youth Service Inc., North Eastern Ontario Family and Children's Services/Services a la Famille et a L'Enfance du Nord-Est de L'Ontario, St. Lawrence Youth Association, Kinark Child and Family Srvc. Corp. (Markham), Casatta Ltd., York Detention Centre Ltd. Third Parties (Respondents)

Counsel

Tamara D. Barclay and Jonathan Sydor for the appellant, Her Majesty the Queen in right of the Province of Ontario

Kirk Baert and James Sayce for the respondent plaintiff, J.K.

C. Kirk Boggs for the respondents Banyan Community Services Inc., Craigwood Youth Services, Pwi-di-Goo-Zing-Ne-Yaa-Zhing Advisory Services, CAS of Nipissing and Parry Sound, William W. Creighton Youth Services, Ray of Hope Inc., Northern Youth Services Inc., Youth Services Bureau of Ottawa, Anago (Non) Residential Resources Inc., Kennedy House Youth Services Inc., North Eastern Ontario Family and Children's Services/Services a la Famille et a L'Enfance du Nord-Est de L'Ontario, St. Lawrence Youth Association, Kinark Child and Family Srvc. Corp. (Markham), and York Detention Centre Ltd.

No one for the respondent Casatta Ltd.

Heard: September 11, 2017

On appeal from: the order of Justice Paul M. Perell of the Superior Court of Justice, dated December 22, 2016, with reasons reported at 2016 ONSC 8047.

Opinion of the Court

Hoy A.C.J.O.:

Introduction

[1] This is a proposed class proceeding against Her Majesty the Queen in Right of the Province of Ontario (the "Crown") alleging negligence, breach of fiduciary duty, and breach of Charter rights in the use of solitary confinement in youth detention centres across Ontario.

[2] At issue on this appeal is whether it is plain and obvious that the Crown's third party claim against 15 non-government, non-profit organizations (the "Third Parties"), which operated some of the youth detention centres under contract with the Crown, has no reasonable prospect of success and was properly struck, without leave to amend.

[3] For the following reasons, I conclude that it is not plain and obvious that the Crown's third party claim has no reasonable prospect of success. I would therefore allow this appeal. However, I further conclude that it is possible for J.K. to amend his Amended Statement of Claim in such a manner that the Crown's third party claim would have no reasonable prospect of success, at which point the Crown's third party claim could be properly struck without leave to amend. As requested by J.K., I provide guidance below on the kind of amendment that would enable the third party claim to be struck.

Background

[4] The Crown operates or oversees the operation of 23 youth detention centres in Ontario. Some are operated by the Ministry of Children and Youth Services (the "MCYS"), but others are operated by the Third Parties.

[5] J.K., the plaintiff in this proposed class action under the Class Proceedings Act, 1992, S.O. 1992 c. 6, alleges that children in these facilities are regularly subjected to lengthy and wholly inappropriate periods of solitary confinement. He sues the Crown for damages on behalf of all persons who were detained and/or incarcerated at one of the facilities between January 1, 2007 and the present day. He asserts that the Crown was negligent, breached its fiduciary duties, and breached class members' rights under ss. 7, 9 and 12 of the Canadian Charter of Rights and Freedoms.

[6] At para. 45 of his Fresh as Amended Statement of Claim, J.K. purports to limit his and class members' claims to the Crown's several liability:

45. The Plaintiff's claim, and the claim of each Class Member, is limited to the amount of the Plaintiff's or other Class Member's damages that would be apportioned to the Defendant in accordance with the relative degree of fault that is attributable to the Defendant's negligence. The Plaintiff's claim is against the Defendant for those damages that are attributable to its proportionate degree of fault, and he does not seek, on his own behalf or on behalf of the Class, any damages that are found to be attributable to the fault or negligence of any other person, or for which the Defendant could claim contribution or indemnity.

[7] However, J.K. specifically pleads, at para. 50 of his Fresh as Amended Statement of Claim, that

by virtue of its quasi-parental, or in loco parentis, responsibility for the safety, care and control of residents, the Crown is vicariously liable for the harms perpetrated upon residents by its employees, representatives and agents.

[8] The Crown sought particulars about how this claim of vicarious liability related to the Third Parties.

[9] J.K. replied that it related to "[h]arms perpetrated on residents in the Facilities that are operated by the Third Parties:

i. by the Crown's employees, servants and agents; and, ii. by the Third Parties and their agents and employees, but only when acting within the authority granted to them by the Crown.

[10] In other words, J.K. has confirmed to the Crown that he claims that the Crown is liable for harms perpetrated by the Third Parties, their agents and employees, when acting within the authority granted to them by the Crown.

[11] The Third Parties had contracted to provide services to the Crown in accordance with the policies, guidelines and requirements of the Crown, as communicated to them. The service contracts which govern their relationship include the following indemnity clause:

Indemnification

12(a) The Service Provider will, both during and following the term of this contract, indemnify and save harmless Ontario from all costs, losses, damages, judgments, claims, demands, suits, actions, complaints or other proceedings in any manner based upon, occasioned by or attributable to anything done or omitted to be done by the Service Provider, its directors, officers, employees, agents or volunteers in connection with services provided, purported to be provided or required to be provided by the Service Provider pursuant to this contract.

[12] The Crown claimed against each of the Third Parties under the indemnity clause in the service contract in respect of any amounts found owing to J.K. and the class members in respect of any facility operated by the Third Party.

[13] In turn, J.K. and the Third Parties brought motions seeking to have the Crown's third party claims struck out, severed, or stayed.

The Motion Judge's Reasons

[14] The motion judge considered this court's decision in Taylor v. Canada (Health Canada), 2009 ONCA 487, 95 O.R. (3d) 561.

[15] In Taylor, a proposed representative plaintiff in a class action alleged that Health Canada's negligent regulation of jaw implants caused her injuries. She limited her claim and that of the other class members for damages to those attributable to Health Canada's proportionate degree of fault. Justice Laskin, writing for the court, found that because the plaintiff had limited her claim and the claim of the other class members to those attributable to the fault of Health Canada, the Attorney General's third party claim against the doctor and the hospitals for contribution and indemnity disclosed no reasonable cause of action.

[16] The motion judge concluded that Taylor applied and precluded third party claims for breach of fiduciary duty and class members' Charter rights. In his words, "…those claims are claims for which the Crown exclusively would be liable and thus these claims would not support any third party claim against the [Third Parties] which cannot be liable for matters for which the Crown exclusively would be liable." (para. 19).

[17] He acknowledged that Taylor did not consider a claim for vicarious liability. He noted that vicarious liability is not attributable to the proportionate degree of fault between the defendant and the non-party for whom the defendant is vicariously liable. However, in his view J.K.'s pleading makes it clear that J.K. only seeks to make the Crown liable to the limits of its several liability in negligence.

[18] At para 26, he wrote:

Put differently still, J.K. has pleaded his action in a way that the court will be required to determine what proportion of the liability for the Class Members' injuries rests exclusively with the Crown and to grant judgment exclusively for that sum, if any. The judgment award will, therefore, by definition, not include any award for injuries for which there would be a claim for relief over in third party proceedings. Thus, pleading as J.K. has in the main action, it is plain and obvious in the third party proceedings that the Crown does not have third party claims and the third party claims should be struck out.

[19] The motion judge declined to consider J.K.'s and the Third Parties' further argument that the Crown would not be entitled to indemnification under the provision in the service contracts because that would be tantamount to permitting it to be indemnified for its own negligence.

[20] The motion judge did not address their alternate request for a stay of the third party proceedings because he struck the Crown's third party claims.

Analysis

[21] The Crown's primary concern is that J.K seems to assert (1) that he is permitted to seek damages based on the Crown's vicarious liability for harms perpetrated on residents in the Facilities that are operated by the Third Parties and their agents and employees, when acting within the authority granted to them by the Crown, and (2) that contribution and indemnity would not be available to the Crown in such circumstances. The Crown argues that it is not plain and obvious that it would not have a claim for contribution and indemnity against the Third Parties if it were found vicariously liable for tortious acts of the Third Parties, their agents or employees. It also argues that the motion judge erred in concluding that it is plain and obvious that a claim for breach of fiduciary duty cannot found a third party claim for contribution and indemnity.

(1) Contribution and Indemnity if the Crown is Vicariously Liable

[22] Turning to the first issue, in my view, the motion judge's decision is properly viewed as determining only that if damages for negligence for which the Crown is vicariously liable are within the limited scope of the damages claimed by J.K. in the first sentence of para. 45 (and they may not be), then J.K. does not seek any such damages attributable to the fault or negligence of the Third Parties or for which Crown could claim contribution or indemnity against the Third Parties, whether under the service contracts or s. 1 of the Negligence Act. In my view, it is on that basis that the motion judge concluded that the Crown does not have any third party claims and that they could be struck.

[23] The motion judge did not consider whether, if such damages were within the limited scope of damages claimed by J.K., the law would attribute the damages for which the Crown is vicariously liable to the negligence of the Third Parties, their agents and employees, who committed the tortious acts. Nor did the motion judge determine that the Crown would not have rights of contribution and indemnity in such circumstances.

[24] Indeed, the extent to which the Crown could claim contribution or indemnity will presumably be an important issue in the litigation. Contrary to J.K.'s submission at the hearing, the Crown did not concede that it would not have rights of indemnity under the service contracts, if it were found vicariously liable for harms perpetrated on residents in the Facilities that are operated by the Third Parties and their agents and employees, when acting within the authority granted to them by the Crown. Further, it is not plain and obvious that the Crown would not be entitled to contribution and indemnity from the Third Parties pursuant to the service contracts it entered into with the Third Parties or under s. 1 of the Negligence Act, R.S.O. 1990, c. N.1. As Gerald Fridman points out in The Law of Torts in Canada, 3d ed. (Toronto: Carswell, 2010), at p. 274, there is a difference between authorizing a wrongful act and authorizing an employee or agent to do something, in the course of which the employee or agents commits an improper act.

[25] The law governing Crown liability, vicarious liability, and the apportioning of that liability on the basis of fault is complex. In order for this court to strike the Crown's third party claim, J.K. must have drafted his Fresh as Amended Statement of Claim so as to make it plain and obvious that such a claim has no reasonable prospect of success.

[26] I agree with the motion judge that J.K. could preclude third party claims arising out of his claim based in vicarious liability, but para. 45 is not clear enough to justify striking the Crown's third party claim. I would not strike the Crown's third party claim as having no reasonable prospect of success unless J.K. amended his Fresh as Amended Statement of Claim to explicitly reflect what I believe to be the reasoning underpinning the motion judge's decision to strike the Crown's third party claim. That is, if J.K. seeks damages against the Crown based on vicarious liability for harms perpetrated on residents of Facilities that are operated by the Third Parties, by the Third Parties and their agents and employees, when acting within the authority granted to them by the Crown, he is not entitled to any such damages for which the Crown could claim contribution and indemnity from the Third Parties. At para. 33 below, I suggest language that accomplishes this task.

(2) Claims against the Third Parties arising out of J.K.'s Claims for Breach of Fiduciary Duty

[27] I agree with the Crown that it is not plain and obvious that J.K.'s claim that the Crown breached its fiduciary duty could not also support a third party claim. It is possible that the damages suffered by J.K. were caused concurrently by the Crown's breach of its fiduciary duty and the Third Parties' negligence.

[28] In concluding that J.K.'s claims for breach of fiduciary duty could not support a third party claim, the motion judge relied on Johnston v. Sheila Morrison Schools, 2012 ONSC 1322, 20 C.P.C. (7th) 103. In that case, the Divisional Court held that there can be no right of contribution and indemnity on account of a breach of fiduciary duty because such liability is not subject to apportionment. It did not cite authority for this proposition.

[29] However, in Ault v. Canada (Attorney General), 2011 ONCA 147, this court apportioned liability between one group of wrongdoers who were found liable for negligent misrepresentation and breach of fiduciary duty, and the Attorney General of Canada, who was found liable for negligent misrepresentation. Ault illustrates that one party's breach of fiduciary duty and another's negligence may contribute to a plaintiff's loss.

[30] The indemnity clause in the service contracts might permit the Crown to seek indemnity for any damages for which it is found liable as a result of its breach of fiduciary duty if the damages were also "occasioned by or attributable to" the Third Party's negligence.

[31] Further, the right to contribution under s. 1 of the Negligence Act has been held to apply not only to negligence, but to other fault-based causes of action: Pet Valu Inc. v. Thomas, [2004] O.J. No. 497, at para. 24, citing Bell Canada v. Cope (Sarnia) Ltd. (1980), 11 C.C.L.T. 170 (Ont. H.C.), at 179-80, affirmed (1981), 119 D.L.R. (3d) 254 (Ont. C.A.). As a result, it is not plain and obvious that the Crown would not have a claim under that Act in such a situation.

(3) Further Amendments to the Fresh as Amended Statement of Claim

[32] Counsel for J.K. urged that if the court were not satisfied that para. 45 makes it plain and obvious that the Crown's third party claim has no reasonable prospect of success, this court should provide guidance as to how he might modify para. 45 to do so, and, in his words, "Taylorize" his claim.

[33] In my view, if J.K. amended para. 45 to read as follows, then the principle in Taylor would apply and preclude third party claims for contribution and indemnity. I have marked the required amendments below. If these amendments are made, the motion judge could then strike the Crown's third party claim in negligence, without leave to amend to plead a right of contribution and indemnity under the Negligence Act in addition to under the indemnity provisions of the service contracts:

The Plaintiff's claim, and the claim of each Class Member, is limited to the amount of the Plaintiff's or other Class Member's damages that would be apportioned to the Defendant in accordance with the relative degree of fault that is attributable to the Defendant. The Plaintiff's claim is against the Defendant for those damages that are attributable to its proportionate degree of fault, and he does not seek, on his own behalf or on behalf of the Class, any damages that are found to be attributable to the fault or negligence of any other person, or for which the Defendant could claim contribution or indemnity. For greater certainty, without limiting the foregoing, and notwithstanding para. 50, the Plaintiff does not seek, on his own behalf or on behalf of the Class, any damages for which the Crown is vicariously liable as a result of harms perpetrated on residents in the Facilities that are operated by the Third Parties and their agents and employees, whether or not acting within the authority granted to them by the Crown, for which the Crown could claim contribution or indemnity.

[34] Replacing the words "Defendant's negligence" with the word "Defendant" in the first sentence of para. 45 is intended to make clear that J.K.'s claim and the claim of each class member against the Crown for breach of fiduciary duty also excludes damages that can be attributed to the concurrent fault or negligence of any other person. The final sentence is added to address the concern about clarity that I expressed in paras. 25 and 26 above.

(4) J.K.'s Request for a Stay or Severance of the Third Party Claim

[35] As noted above, in light of his conclusion that the Crown's third party claims should be struck, the motion judge did not consider J.K. and the Third Parties' alternate request that the claims against the Third Parties should be stayed until after any common issues trial or severed under rules 29.08 and 29.09 of the Rules of Civil Procedure, R.R.O. 1990, reg. 194. I would return this issue to the motion judge for consideration in the event that J.K. does not first amend his Fresh as Amended Statement of Claim as suggested above or in another manner satisfactory to the parties and the motion judge.

Disposition

[36] For the reasons above, I would allow the appeal. Counsel advised that the Class Proceedings Fund has provided funding to J.K. I would permit the parties, together with the Class Proceedings Fund, to make written submissions on the issue of costs, no more than three pages in length, within 21 days following the release of these reasons.

Released: November 24, 2017

"Alexandra Hoy A.C.J.O."

"I agree Grant Huscroft J.A."

"I agree David Paciocco J.A."