The Estate of O.J. Paton, Deceased, by His Estate Trustee During Litigation, Ronald McKay et al. v. Ontario Lottery and Gaming Corporation, carrying on business as Fallsview Casino Resort and as OLG Casino Brantford

[Indexed as: Paton Estate v. Ontario Lottery and Gaming Corp.]

Ontario Reports

Ontario Superior Court of Justice,

Hambly J.

May 20, 2015

125 O.R. (3d) 519 | 2015 ONSC 3130

Case Summary

Equity — Unjust enrichment — Problem gambler defrauding plaintiffs and losing large amount of plaintiffs' money by gambling at casinos operated by defendant — Plaintiffs suing defendant for unjust enrichment — Statement of claim disclosing no reasonable cause of action — Defendant not unjustly enriched as it had juristic reason for retaining money in that it had entered into valid contract with gambler.

Torts — Conversion — Problem gambler defrauding plaintiffs and losing large amount of plaintiffs' money by gambling at casinos operated by defendant — Plaintiffs suing defendant for damages for conversion — Statement of claim disclosing no reasonable cause of action — Defendant a bona fide purchaser without notice of plaintiffs' claim.

Torts — Negligence — Duty of care — Problem gambler defrauding plaintiffs and losing large amount of plaintiffs' money by gambling at casinos operated by defendant — Plaintiffs suing defendant for damages for negligence — Statement of claim disclosing no reasonable cause of action — Defendant having no duty of care toward problem gambler and therefore having no duty of care towards plaintiffs.

Trusts and trustees — Trust funds — Knowing receipt of trust funds — Problem gambler defrauding plaintiffs and losing large amount of plaintiffs' money by gambling at casinos operated by defendant — Plaintiffs suing defendant for damages for knowing receipt of trust funds — Statement of claim disclosing no reasonable cause of action — Casinos having no obligation to investigate source of money lost by gambler.

The defendant was a Crown agency which operated and managed gambling sites in Ontario. S, a problem gambler, defrauded the plaintiff estates and then lost most of the proceeds of the offence by gambling at casinos operated by the defendant and by giving money to A, who also lost it at the defendant's casinos. The plaintiffs sued the defendant for damages, asserting causes of action for negligence, unjust enrichment, conversion and knowing receipt of trust funds. The defendant brought a motion under rule 21.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 to dismiss the action on the grounds that the statement of claim disclosed no reasonable cause of action.

Held, the motion should be granted.

The negligence claim had no chance of success. The defendant could only have a duty of care to the plaintiffs if they first had a duty of care to S and A, as problem gamblers, to prevent them from losing money. They had no such duty of care as, on the facts pleaded, there was insufficient proximity between S and A and the defendant. It was not pleaded that S and A recognized that they were problem gamblers and sought to have the casinos exclude them. The plaintiffs [page520] did not plead facts linking S and A to the casinos that would differentiate them to the staff from the general population of patrons. If there was sufficient proximity to establish a prima facie duty of care, there were residual policy considerations that justified denying liability. To impose a general duty of care on the defendant to problem gamblers would create indeterminate liability on the provincial government, making it responsible for the losses of problem gamblers while permitting the gamblers to keep their winnings, and it would make it impossible for casinos to operate at a profit, thereby destroying the system of gambling that the provincial government has found to be lawful.

The defendant was not unjustly enriched by S and A's losses as there was a juristic reason for the enrichment, in that the defendant had entered into valid contracts with S and A, and it was a bona fide purchaser without notice that it was receiving money obtained by fraud.

The fact that the defendant was a bona fide purchaser without notice was a complete defence to the claim of conversion.

The defendant was not guilty of knowing receipt of trust funds. The casinos had no obligation to investigate S and A as to the source of the money they were losing.

Burrell v. Metropolitan Entertainment Group, [2011] N.S.J. No. 654, 2011 NSCA 108, 309 N.S.R. (2d) 375, 15 C.P.C. (7th) 389, 344 D.L.R. (4th) 686, 209 A.C.W.S. (3d) 727, affg [2010] N.S.J. No. 686, 2010 NSSC 476, 329 D.L.R. (4th) 151, 297 N.S.R. (2d) 228, 199 A.C.W.S. (3d) 1372, consd

Preston v. Star City Ltd. (No. 3), [2005] NSWSC 1223, distd

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, [1977] E.G.D. 604 (H.L.); Bank of Montreal v. i Trade Finance Inc. (2009), 96 O.R. (3d) 561, [2009] O.J. No. 3400, 2009 ONCA 615, 310 D.L.R. (4th) 315, 252 O.A.C. 291, 56 C.B.R. (5th) 161, 15 P.P.S.A.C. (3d) 188, 180 A.C.W.S. (3d) 164; British Columbia v. Henfrey Samson Belair Ltd., 1989 CanLII 43 (SCC), [1989] 2 S.C.R. 24, [1989] S.C.J. No. 78, 59 D.L.R. (4th) 726, 97 N.R. 61, [1989] 5 W.W.R. 577, J.E. 89-1098, 38 B.C.L.R. (2d) 145, 75 C.B.R. (N.S.) 1, 34 E.T.R. 1, 2 T.C.T. 4263; Calvert v. William Hill Credit Ltd., [2008] EWCA Civ. 1427, [2008] All E.R. (D) 155 (C.A.), affg [2008] EWHC 454, [2008] All E.R. (D) 170 (Ch. D.); Childs v. Desormeaux, [2006] 1 S.C.R. 643, [2006] S.C.J. No. 18, 2006 SCC 18, 266 D.L.R. (4th) 257, 347 N.R. 328, J.E. 2006-986, 210 O.A.C. 315, [2006] R.R.A. 245, 39 C.C.L.T. (3d) 163, 30 M.V.R. (5th) 1, EYB 2006-104570, 147 A.C.W.S. (3d) 719; Citadel General Assurance Co. v. Lloyds Bank Canada, 1997 CanLII 334 (SCC), [1997] 3 S.C.R. 805, [1997] S.C.J. No. 92, 152 D.L.R. (4th) 411, 219 N.R. 323, J.E. 97-2034, 66 Alta. L.R. (3d) 241, 206 A.R. 321, 35 B.L.R. (2d) 153, 47 C.C.L.I. (2d) 153, 19 E.T.R. (2d) 93, 74 A.C.W.S. (3d) 898; 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; Dennis v. Ontario Lottery and Gaming Corp. (2013), 116 O.R. (3d) 321, [2013] O.J. No. 3468, 2013 ONCA 501, 365 D.L.R. (4th) 145, 37 C.P.C. (7th) 268, 307 O.A.C. 377, 229 A.C.W.S. (3d) 644, affg [2011] O.J. No. 5417, 2011 ONSC 7024, 286 O.A.C. 329, 344 D.L.R. (4th) 65, 19 C.P.C. (7th) 32, 209 A.C.W.S. (3d) 498 (Div. Ct.), affg (2010), 101 O.R. (3d) 23, [2010] O.J. No. 1223, 2010 ONSC 1332, 318 D.L.R. (4th) 110, 92 C.P.C. (6th) 119, 187 A.C.W.S. (3d) 38 (S.C.J.); Dynasty Furniture Manufacturing Ltd. v. Toronto-Dominion Bank, [2015] O.J. No. 945, 2015 ONCA 137, affg [2010] O.J. No. 2703, 2010 ONSC 436, 74 C.C.L.T. (3d) 286 (S.C.J.); [page521] Edwards v. Law Society of Upper Canada, [2001] 3 S.C.R. 562, [2001] S.C.J. No. 77, 2001 SCC 80, 206 D.L.R. (4th) 211, 277 N.R. 145, J.E. 2001-2152, 153 O.A.C. 388, 34 Admin. L.R. (3d) 38, 8 C.C.L.T. (3d) 153, 13 C.P.C. (5th) 35, REJB 2001-26863, 110 A.C.W.S. (3d) 944; Garland v. Consumers' Gas Co., [2004] 1 S.C.R. 629, [2004] S.C.J. No. 21, 2004 SCC 25, 237 D.L.R. (4th) 385, 319 N.R. 38, J.E. 2004-931, 186 O.A.C. 128, 43 B.L.R. (3d) 163, 9 E.T.R. (3d) 163, 130 A.C.W.S. (3d) 32; Graphicshoppe Ltd. (Re) (2005), 2005 CanLII 45183 (ON CA), 78 O.R. (3d) 401, [2005] O.J. No. 5184, 260 D.L.R. (4th) 713, 205 O.A.C. 113, 15 C.B.R. (5th) 207, 49 C.C.P.B. 63, 21 E.T.R. (3d) 1, 144 A.C.W.S. (3d) 355 (C.A.); Hunt v. Carey Canada Inc., 1990 CanLII 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; Kamloops (City) v. Nielsen, 1984 CanLII 21 (SCC), [1984] 2 S.C.R. 2, [1984] S.C.J. No. 29, 10 D.L.R. (4th) 641, 54 N.R. 1, [1984] 5 W.W.R. 1, J.E. 84-603, 66 B.C.L.R. 273, 11 Admin. L.R. 1, 29 C.C.L.T. 97, 8 C.L.R. 1, 26 M.P.L.R. 81, 26 A.C.W.S. (2d) 453; Nash v. Ontario (1995), 1995 CanLII 2934 (ON CA), 27 O.R. (3d) 1, [1995] O.J. No. 4043, 59 A.C.W.S. (3d) 1083 (C.A.); Reynolds v. Katoomba, [2001] NSWCA 234, 53 N.S.W.L.R. 43; Ross v. British Columbia Lottery Corp., [2014] B.C.J. No. 612, 2014 BCSC 320, 12 C.C.L.T. (4th) 57, 242 A.C.W.S. (3d) 1000; Syl Apps Secure Treatment Centre v. D. (B.), [2007] 3 S.C.R. 83, [2007] S.C.J. No. 38, 2007 SCC 38, 284 D.L.R. (4th) 682, 365 N.R. 302, J.E. 2007-1512, 227 O.A.C. 161, 49 C.C.L.T. (3d) 1, 39 R.F.L. (6th) 245, EYB 2007-122390, 159 A.C.W.S. (3d) 464

Statutes referred to

Criminal Code, R.S.C. 1985, c. C-46, s. 462.41(3) (a) [as am.]

Gaming Control Act, 1992, S.O. 1992, c. 24, ss. 3.6 [as am.], 3.8(1)(a) [as am.], (b) [as am.], (c) [as am.]

Ontario Lottery and Gaming Corporation Act, 1999, S.O. 1999, c. 12, Sch. L, ss. 0.1 [as am.], 3(3) [as am.]

Protection of Property Act, R.S.N.S. 1989, c. 363 [as am.]

Rules and regulations referred to

O. Reg. 78/12 (Gaming and Control Act), s. 23

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 21.01, (1)(b)

MOTION by the defendant to dismiss an action.

Don Morris, for plaintiff.

Matthew I. Milne-Smith, Bryan D. McLeese and Anisah S. Hassan, for defendant.

HAMBLY J.: —

Introduction

[1] The plaintiffs are two estates. They were defrauded by an addictive or problem gambler. They claim that this person and her mother, to whom she gave some of the money, lost the money that she obtained by defrauding the estates in gambling casinos. The defendant is the Ontario Lottery and Gaming Corporation ("OLGC"), carrying on business in the name of two gambling casinos in Ontario. OLGC is a Crown agency. Its function as [page522] provided by the Ontario Lottery and Gaming Corporation Act, 1999, S.O. 1999, c. 12, Sch. L is to manage and operate gambling sites. The plaintiffs commenced an action against OLGC on March 12, 2010 in which they seek damages of $950,000 and aggravated damages of $500,000. They assert causes of action of negligence, unjust enrichment, conversion and knowing receipt of trust funds. OLGC has not filed a statement of defence. It has brought a motion to dismiss the action under rule 21.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 on the grounds that the statement of claim discloses no reasonable cause of action.

Motion Under Rule 21.01

[2] The rule states the following:

21.01(1) A party may move before a judge,

(b) to strike out a pleading on the ground that it discloses no reasonable cause of action or defence,

and the judge may make an order or grant judgment accordingly.

[3] In considering a motion under this rule to strike out a statement of claim, the judge must assume that the facts pleaded are true. He must read the statement of claim generously allowing for inadequacies due to drafting deficiencies. Because a cause of action is novel, it should not be struck out on this basis. The statement of claim should only be struck out if it is "plain and obvious" and "certain" that the claim will fail (Hunt v. Carey Canada Inc., 1990 CanLII 90 (SCC), [1990] 2 S.C.R. 959, [1990] S.C.J. No. 93 and Nash v. Ontario (1995), 1995 CanLII 2934 (ON CA), 27 O.R. (3d) 1, [1995] O.J. No. 4043 (C.A.)).

The Facts

[4] I set out the facts which the plaintiffs allege in their amended amended statement of claim. Eva Paton ("E. Paton") died on April 21, 1995. Ollie John Paton ("O. Paton") died on September 26, 2006. On March 11, 2010, Justice Lococo appointed Ronald McKay ("McKay") estate trustee of both estates. He caused a statement of claim to be issued. The plaintiffs are the estates of O. Paton and of E. Paton ("Paton estates") by their estate trustee McKay. The defendant is OLGC, carrying on business as Fallsview Casino Resort ("Fallsview") and OLG Casino Brantford ("OLG"). They are gambling sites operated by OLGC. Shellie Spinks ("S. Spinks") was a law clerk employed by Michael Psukas, a lawyer, who assisted in the administration of [page523] the Paton estates. She forged the name O. Paton on a will in which she named herself as the executrix.

[5] She sold two properties owned by the estates on December 21, 2006. By this means, she defrauded the Paton estates of $1,500,000. OLGC, through advertising, invites citizens of Ontario to gamble at their casinos. S. Spinks responded to these advertisements by gambling at Fallsview and OLG. Between late 2006 and her arrest on March 13, 2006, she lost at least $750,000 of this money by gambling at Fallsview and OLG. She gave about $200,000 of the money which she obtained from the estates to her mother, Alice Spinks ("A. Spinks"). She also lost this money by gambling at Fallsview and OLG. S. and A. Spinks also gambled at other casinos owned by OLGC. S. Spinks held herself out to be a lawyer to OLGC. OLGC received from S. Spinks and A. Spinks about $950,000 of money lawfully belonging to the Paton estates. S. Spinks defrauded other estates of money resulting in total losses of estate money of over $4 million. On April 16, 2010, S. Spinks pleaded guilty in Hamilton Provincial Court to over 12 counts of fraud, at which time she admitted these frauds of estates.

[6] OLGC knows that some of its customers are addicted to gambling which the statement of claim refers to as "problem gamblers". These gamblers have lost large amounts of money. They have obtained this money by criminal activity including fraud. OLGC knows this. OLGC trains its employees to spot problem gamblers. 85 per cent of OLGC employees believe that they can identify problem gamblers. These employees can intervene when they identify problem gamblers losing inordinate amounts of money. OLGC knows that problem gamblers cause great harm to themselves and their families, employers and creditors. OLGC uses video cameras and computers to document the losses of its customers. OLGC has records that show how much S. and A. Spinks gambled and lost.

[7] OLGC can predict, with accuracy, the risk of problem gamblers losing money obtained by illegal means. S. and A. Spinks were problem gamblers. OLGC could have prevented S. and A. Spinks from gambling an inordinate amount of money obtained by fraud. OLGC is much more able to bear the loss of $950,000 than is the plaintiffs.

Legislation

[8] The plaintiffs plead and rely on the Ontario Lottery and Gaming Corporation Act, 1999, s. 3(3); the Gaming Control Act, 1992, S.O. 1992, c. 24, s. 3.8(1)(a), (b) and (c); O. Reg. 78/12 [page524] of the Gaming and Control Act; and the Criminal Code, R.S.C. 1985, c. C-46, s. 462.41(3)(a).

[9] The Ontario Lottery and Gaming Corporation Act, 1999 states the following:

0.1 The purposes of this Act are,

(a) to enhance the economic development of the Province;

(b) to generate revenues for the Province;

(c) to promote responsible gaming; and

(d) to ensure that anything done for a purpose set out in clause (a), (b) or (c) is also done for the public good and in the best interests of the Province.

It states the objects of the OLGC to be the following:

3. The following are the objects of the Corporation:

4. To develop, undertake, organize, conduct and manage lottery schemes on behalf of Her Majesty in right of Ontario.

5. To provide for the operation of gaming premises.

6. To ensure that lottery schemes and gaming sites are conducted and operated in accordance with the Criminal Code (Canada), this Act and the Gaming Control Act, 1992 and the regulations made under them.

7. To provide for the operation of any business that the Corporation considers to be reasonably related to operating a gaming site or lottery scheme, including any business that offers goods and services to persons who play lottery schemes in a gaming site.

8. If authorized by the Lieutenant Governor in Council, to enter into agreements to develop, undertake, organize, conduct and manage lottery schemes on behalf of, or in conjunction with, the government of one or more provinces of Canada.

9. To do such other things as the Lieutenant Governor in Council may by order direct.

[10] The Gaming Control Act, 1992 states the following:

3.6(1) In accordance with the regulations, the Registrar may issue a written direction to the person who conducts and manages a lottery scheme in a gaming site requiring it to refuse access to the site to any individual who meets the criteria prescribed by the regulations or to refuse to allow such an individual to play a lottery scheme in the site.

3.8(1) If the regulations have not prescribed standards and requirements for a matter described in this section, the Registrar may establish in writing standards and requirements for the conduct, management and operation of gaming sites, lottery schemes or businesses related to a gaming site or a lottery scheme or for goods or services related to that conduct, management or operation if the standards and requirements deal with, [page525]

(a) prohibiting or restricting certain persons from entering gaming sites or playing lottery schemes;

(b) the prevention of unlawful activities;

(c) the integrity of a lottery scheme[.]

[11] O. Reg. 78/12 of the Gaming Control Act states the following:

23. For the purposes of subsection 3.6(1) of the Act, the following are prescribed as criteria for refusing an individual access to gaming sites:

24. The individual has been excluded from gaming sites in another jurisdiction.

25. The individual has cheated or attempted to cheat at play.

26. The individual applied for registration or renewal of registration and was denied or the registration was revoked or is suspended.

27. A court has ordered the individual not to participate in lottery schemes.

28. The individual has acted in a way that would adversely affect public confidence or support for lottery schemes and related businesses.

[12] The Criminal Code states the following:

462.41(3) Where a court is satisfied that any person, other than

(a) a person who is charged with, or was convicted of, a designated offence, or

(b) a person who acquired title to or a right of possession of that property from a person referred to in paragraph (a) under circumstances that give rise to a reasonable inference that the title or right was transferred for the purpose of avoiding the forfeiture of the property,

is the lawful owner or is lawfully entitled to possession of any property or any part thereof that would otherwise be forfeited pursuant to subsection 462.37(1) or (2.01) or 462.38(2) and that the person appears innocent of any complicity in an offence referred to in paragraph (a) or of any collusion in relation to such an offence, the court may order that the property or part thereof be returned to that person.

Causes of Action Alleged by Plaintiffs

1. Negligence

[13] The plaintiffs allege that OLGC, by permitting S. and A. Spinks who were problem gamblers to lose a large amount of money by gambling, was negligent. The money that S. and A. Spinks lost was the plaintiffs' money. The plaintiffs allege that OLGC had a duty of care to them to prevent S. and A. Spinks from losing their money by stopping them from gambling. OLGC [page526] could only have a duty of care to the plaintiffs if they first had a duty of care to S. and A. Spinks as problem gamblers to prevent them from losing money. I consider first whether OLGC had a duty of care to problem gamblers to stop them from losing money.

[14] No court in Canada has recognized a duty of care by gambling casinos to prevent problem gamblers from losing money. In Edwards v. Law Society of Upper Canada, 2001 SCC 80, [2001] 3 S.C.R. 562, [2001] S.C.J. No. 77, the Supreme Court of Canada, in the judgment of Chief Justice McLachlin, considered whether the Law Society of Upper Canada owed a duty care to the plaintiffs who had deposited money in a solicitor's trust account not as clients but as participants in a third person business promotion. The case did not fall within analogous cases where such a duty had been recognized. The court decided that it did not. Chief Justice McLachlin, adopting the reasoning of the House of Lords in Anns v. Merton London Borough Council, [1978] A.C. 728, [1977] 2 All E.R. 492 (H.L.), set out the test to be applied in Canada to determine if there was a duty of care as follows [at paras. 9 and 10]:

At the first stage of the Anns test, the question is whether the circumstances disclose reasonably foreseeable harm and proximity sufficient to establish a prima facie duty of care. The focus at this stage is on factors arising from the relationship between the plaintiff and the defendant, including broad considerations of policy. The starting point for this analysis is to determine whether there are analogous categories of cases in which proximity has previously been recognized. If no such cases exist, the question then becomes whether a new duty of care should be recognized in the circumstances. Mere foreseeability is not enough to establish a prima facie duty of care. The plaintiff must also show proximity -- that the defendant was in a close and direct relationship to him or her such that it is just to impose a duty of care in the circumstances. Factors giving rise to proximity must be grounded in the governing statute when there is one, as in the present case.

If the plaintiff is successful at the first stage of Anns such that a prima facie duty of care has been established (despite the fact that the proposed duty does not fall within an already recognized category of recovery), the second stage of the Anns test must be addressed. That question is whether there exist residual policy considerations which justify denying liability. Residual policy considerations include, among other things, the effect of recognizing that duty of care on other legal obligations, its impact on the legal system and, in a less precise but important consideration, the effect of imposing liability on society in general.

[15] In Syl Apps Secure Treatment Centre v. D. (B.), 2007 SCC 38, [2007] 3 S.C.R. 83, [2007] S.C.J. No. 38, the Children's Aid Society of Halton Region ("CAS") had apprehended a 14-year-old girl who alleged that she had been physically and sexually abused by her family. Members of the family of the girl sued the CAS and the [page527] treatment centre. They alleged that their negligence in their treatment of her caused her not to return to her family thereby denying them a relationship with her. The Supreme Court of Canada held that a motion brought by the defendants pursuant to rule 21.01(1)(b) of the Rules of Civil Procedure to strike out the statement of claim on the grounds that it did not disclose a reasonable cause of action should be granted. To determine if the treatment centre and the CAS owed the family a duty of care, the Supreme Court of Canada in the judgment of Justice Abella applied the test set out in Anns v. Merton London Borough Council, supra, as adopted and refined by the Supreme Court in Kamloops (City) v. Nielsen, 1984 CanLII 21 (SCC), [1984] 2 S.C.R. 2, [1984] S.C.J. No. 29; Cooper v. Hobart, [2001] 3 S.C.R. 537, [2001] S.C.J. No. 76, 2001 SCC 79; Edwards v. Law Society of Upper Canada, supra; and Childs v. Desormeaux, [2006] 1 S.C.R. 643, [2006] S.C.J. No. 18, 2006 SCC 18.

[16] Justice Abella summarized the test to be applied as follows [at paras. 24-27 and 31-34]:

To determine whether there is a prima facie duty of care, we examine the factors of reasonable foreseeability and proximity. If this examination leads to the prima facie conclusion that there should be a duty of care imposed on this particular relationship, it remains to determine whether there are nonetheless additional policy reasons for not imposing the duty.

The basic proposition underlying "reasonable foreseeability" is that everyone "must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour" (Donoghue v. Stevenson, 1932 CanLII 536 (FOREP), [1932] A.C. 562 (H.L.), per Lord Atkin, at p. 580). The question is whether the person harmed was "so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected" (ibid.).

There must also be a relationship of sufficient proximity between the plaintiff and defendant. The purpose of this aspect of the analysis was explained by Allen Linden and Bruce Feldthusen in Canadian Tort Law (8th ed. 2006) as being to decide "whether, despite the reasonable foresight of harm, it is unjust or unfair to hold the defendant subject to a duty because of the absence of any relationship of proximity between the plaintiff and the defendant" (p. 304).

When the relationship occurs in the context of a statutory scheme, the governing statute is a relevant context for assessing the sufficiency of the proximity between the parties (Cooper, at para. 43; Edwards, at para. 9). As this Court said in Edwards: "Factors giving rise to proximity must be grounded in the governing statute when there is one" (para. 9).

If a prima facie duty of care is found to exist based on reasonable foreseeability and proximity, it is still necessary for a court to submit this preliminary conclusion to an examination about whether there are any residual policy reasons which make the imposition of a duty of care unwise. As noted [page528] in Cooper, "the Donoghue v. Stevenson foreseeability-negligence test, no matter how it is phrased, conceals a balancing of interests. The quest for the right balance is in reality a quest for prudent policy" (para. 29).

This means, the Court recognized, that policy is relevant at both the "proximity" stage and the "residual policy concerns" stage of the Anns test. The difference is that under proximity, the relevant questions of policy relate to factors arising from the particular relationship between the plaintiff and the defendant. In contrast, residual policy considerations are concerned not so much with "the relationship between the parties, but with the effect of recognizing a duty of care on other legal obligations, the legal system and society more generally" (Cooper, at para. 37).

The possibility of some blending of policy considerations was noted by McLachlin C.J. and Major J. in Cooper:

Provided the proper balancing of the factors relevant to a duty of care are considered, it may not matter, so far as a particular case is concerned, at which "stage" [policy is considered]. The underlying question is whether a duty of care should be imposed, taking into account all relevant factors disclosed by the circumstances. [para. 27]

Accordingly, in order to establish that the Syl Apps Secure Treatment Centre and Mr. Baptiste owed the family of R.D. a duty of care, (1) the harm complained of must have been reasonably foreseeable, (2) there must have been sufficient proximity between them and the family such that it would be fair and just to impose a duty of care, and (3) there must be no residual policy reasons for declining to impose such a duty.

[17] The terms "problem gambling" and "problem gambler" run through the cases that consider whether the party that makes gambling available to the public owes a duty of care to a person who is addicted to gambling to prevent that person from losing large amounts of money. In Dennis v. Ontario Lottery and Gaming Corp. (2010), 2010 ONSC 1332, 101 O.R. (3d) 23, [2010] O.J. No. 1223 (S.C.J.), affd [2011] O.J. No. 5417, 2011 ONSC 7024 (Div. Court), affd (2013), 116 O.R. (3d) 321, [2013] O.J. No. 3468, 2013 ONCA 501, Justice M. Cullity dismissed an application to certify a class of over 10,000 people who were self-excluded gamblers in an action against OLGC. Given that they had signed voluntary self-exclusion forms, they alleged that OLGC was negligent in not excluding them from gambling casinos. He held that there were insufficient common issues among the proposed class members to warrant certification. In his judgment, he referred to the terms "problem gambling" and "problem gamblers" as follows [at paras. 16-18 (S.C.J.)]:

Social evils associated with gambling, and particularly organized gambling, have long been recognized and are reflected in the prohibitions in the Criminal Code. The decision to establish the pilot project in Windsor in the early 1990s raised opposition and concerns that focused on, among other things, the personality disorder generally referred to as "problem gambling". [page529]

In paragraphs 28 and 29 of the statement of claim it is pleaded that Mr Dennis and members of the primary class he seeks to represent were problem gamblers in that they suffered from:

. . . a progressive behavioural disorder in which an individual develops a psychologically uncontrollable preoccupation and urge to gamble leading to excessive gambling.

Key features of problem gambling include uncontrollable feelings and compulsions relating to gambling such as preoccupation with gambling, irrational repeated gambling to recover losses due to gambling and the development of tolerance to the risk of gambling which requires gambling at high stakes with the attendant greater risks of greater losses to obtain the same "high" (paras. 29(a) and (b))

The terms "problem gambling" and "pathological gambling" were discussed in a report prepared in 1993 by Ernst & and Young for the Ministry of Consumer and Commercial Relations. The term "problem gambling" was used in the report to apply to gambling that may compromise, disrupt or damage family, personal or vocational pursuits. It was said that in this sense it would, in most cases, be characterised as "pathological gambling", a term which refers to a recognized psychiatric disorder:

. . . which consists of frequent, repetitive episodes of gambling which dominates the individual's life to the detriment of social, occupational, material and other family values and commitments. Those who suffer from this disorder may put their jobs at risk, acquire large debts, and lie or break the law to obtain money or evade payment of debts. They describe an intense urge to gamble which is difficult to control, together with preoccupation with ideas and images of the act of gambling and the circumstances which surround the act. These preoccupations and urges often increase at times when life is stressful.

[18] In Burrell v. Metropolitan Entertainment Group, [2010] N.S.J. No. 686, 2010 NSSC 476, affd [2011] N.S.J. No. 654, 2011 NSCA 108, an action by a gambling addict or problem gambler was dismissed. The Nova Scotia Gaming Corporation ("NSGC") was created by the Gaming Control Act to manage gambling casinos in the Province of Nova Scotia. It entered into an agreement with the Metropolitan Entertainment Group ("MEG") to manage gambling casinos. Harold Paul Burrell ("Burrell") lost about $500,000 gambling at Casino Nova Scotia in Sydney between 2000 and 2003. After he notified the staff that he had a gambling problem, MEG provided him with a notice under the Protection of Property Act, R.S.N.S. 1989, c. 363 that he was excluded from the casino. When he violated this notice by entering the casino, gambling and winning money, staff asked him to leave. He brought an action for his damages resulting from his gambling losses before his self-exclusion against NSGC and MEG in which he alleged that they were negligent in permitting him to gamble. The defendants brought a motion to dismiss the [page530] action on the grounds that it did not disclose a cause of action. Justice Murphy granted the motion.

[19] In Appendix A of his judgment, Justice Murphy referred to the English case of Calvert v. William Hill Credit Ltd., [2008] EWHC 454, [2008] All E.R. (D) 170 (Ch. D.), affd [2008] EWCA Civ. 1427, [2008] All E.R. (D) 155 (C.A.). In that case, Justice Briggs, who was the trial judge, recognized a duty of care by a bookmaker to a problem gambler who had signed a self-exclusion form but denied a duty of care generally to problem gamblers. Justice Murphy stated the following [at Appendix A]:

[48] Justice Briggs said:

(a) at paragraph 2 of his decision

". . . the recognition of a common law duty to protect a problem gambler from self-inflicted gambling losses involves a journey to the outermost reaches of the tort of negligence to the realm of the truly exceptional."

(b) at paragraph 146

. . . the prime cause of the claimant's loss, whether psychiatric or financial, was his own decision during the second half of 2006 to continue gambling; i.e. self-inflicted loss. In such a context, as the citation from Reeves v Commissioner of Police [2000] IAC 360 at 368, at the beginning of this judgment makes clear, the starting point is that the law imposes no general duty upon a person to prevent his neighbour from harming himself. As Lord Hoffman put it:

It reflects the individualistic philosophy of the common law. People of full age and sound under-standing must look after themselves and take responsibility for their actions."

(c) at paragraph 147

"In all cases where such a duty has been identified, there have been found to be special circumstances which justify a departure from that general rule."

[49] Justice Briggs, after citing, among other cases, a number of the Australian cases referred to in this submission rejected the Plaintiffs assertion that there was a duty of care to problem gamblers generally.

[50] Referring to the three stage test of Anns, in para. 172-173, he states that:

(a) "Turning to the three stage test, it seems to me again that the broad spectrum of differing levels of impairment of control of gambling falling within the general 'problem gambler' label impacts adversely at least at the second and third of those stages (i.e. proximity and fairness). Generally, it seems to me reasonably foreseeable that if a known problem gambler is permitted to continue gambling unrestrained, without an offer of self-exclusion or an invitation to seek counselling, he will be likely to suffer an aggravation of his condition due to the unrestrained feeding of his habit, and an ever growing risk of serious financial loss. But in my judgment the law should be very slow to recognize a sufficient proximity to justify a requirement to take protective steps [page531] to restrain a gambler from exercising his liberty to gamble on his own responsibility . . . " (My underlining)

(b) "Nor does it seem to me that it would be fair to impose the broad duty of care for which Miss Day contends. As Mr. Fenwick submitted, it would place a burden on the bookmaker pursuant to which the problem gambler could freely take home his profits, but look to the bookmaker for the return of his losses, without even seeking the bookmaker's assistance to help him control his gambling." (my underlining)

[51] In short, absent the existence of exceptional circumstances, the court in Calvert found that no common law duty of care was owed to a problem gambler to protect him/her from himself/herself.

[20] In Burrell, the plaintiff relied on Acts and regulations similar to the legislation relied on by the plaintiffs in this case. This legislation implements government policy. It does not create private law duties of care. Justice Murphy stated the following [at paras. 18 and 19]:

Neither the Act nor the Regulations create or provide for a private law right of action based on a breach of the legislation. If a statutory breach occurs, the offender is subject to prosecution, but the breach does not constitute negligence per se. Canada v. Saskatchewan Wheat Pool, 1983 CanLII 1 (SCC), [1983] 1 S.C.R. 43, addresses that issue.

I agree with the Defendants that the causes of action which the Plaintiff maintains are advanced in the Statement of Claim are not supported by the legislation. The Gaming Control Act and Regulations give rise to public duty directed toward the public good. Individual legal rights are not created and liability in negligence generating a damages remedy is not established by the legislation.

[21] Justice Murphy referred to the Australian case of Reynolds v. Katoomba, [2001] NSWCA 234, 53 N.S.W.L.R. 43, in which the New South Wales Court of Appeal in the judgment of Chief Justice Spigelman held that a casino owed no duty of care to a person who they recognized as a problem gambler who was losing large amounts of money. Justice Murphy referred to the Reynolds case in passages of his judgment as follows [Appendix A]:

[53] The Appeal Court noted that it had been found at trial that:

(a) The plaintiff, Reynolds, repeatedly gambled excessively during the years 1990-94 (para. 85);

(b) From about April 1992 to November 1993 Reynolds was a problem gambler (para. 90);

(c) From May 1992, the club manager ought to have been aware of the fact Reynolds was a problem gambler (para. 90);

NOTE: (i) plaintiff advised the manager he had a problem and couldn't control himself and asked the manager not to cash cheques or give credit; [page532]

(ii) plaintiff's father on three occasions told the manager his son had a problem and asked them not to cash cheques or extend credit (para. 4-7).

(d) The club, knowing the plaintiff to be a problem gambler, continued to cash cheques and make cash available;

(e) The club was aware the cash or a substantial portion would be used for gambling; (1) The plaintiff lost money at gambling;

(f) The plaintiff's losses exceeded the amount claimed.

[54] At trial it was held the club owed no duty of care to the plaintiff. The action was dismissed and Reynolds appealed.

[55] In a unanimous decision, the Court of Appeal dismissed Reynold's appeal.

[56] Chief Justice Spigelman in his reasons for judgment said inter alia:

(a) "The interest sought to be protected is the avoidance of a risk of loss of money through gambling. That risk when it came to pass was entirely occasioned by the Appellant's own conduct. It is not an interest which, in my opinion, the law should protect." (para. 15) (My underlining)

(b) "In my opinion, the law should not recognize a duty of care to protect persons from economic loss, where the loss only occurs following a deliberate and voluntary act on the part of the person to be protected. There may be, however, an extraordinary case where a duty should be recognized. The present case is not such." (para. 17) (My underlining)

(c) "This court should be very slow indeed to recognize a duty to prevent self-inflicted economic loss. Loss of money by way of gambling is an inherent risk in the activity and cannot be avoided." (para. 27) (My underlining)

[57] Justice Giles, concurring, stated at paragraph 142:

Gambling and cashing cheques for a person knowing that the person is to use the cash to gamble, are not of themselves disadvantageous to that person. We all spend money in ways which some would not find sensible, receiving in return goods or services or simply gratification thought to equate the expenditure. The person may be wealthy and untroubled by gambling losses, and even if not wealthy is entitled to choose to spend his money in gambling rather than on other avenues of gratification and to enter into debt so that he can do so. It would be an excessive interference with the gambler's individual autonomy and an excessive burden on the club to require, under pain of liability in damages, that the latter advise the former against gambling or deny to the former the facility of cashing cheques. (para. 142)

[22] Justice Spigelman did recognize that there could be special circumstances where such a duty could be found to exist (para. 17 in Reynolds referred to in Appendix A of Burrell (S.C.)). In Preston v. Star City Ltd. (No. 3), [2005] NSWSC 1223, Justice Hoeben found special circumstances in which a casino had [page533] a duty of care to a problem gambler. Justice Murphy refers to Preston as follows [at Appendix A]:

[74] In Preston, it was alleged the defendant had actively induced the plaintiff to game by:

a. Offering to make business contracts available to the plaintiff including contracts to design merchandise, purchase art work, supply prints, supply 12,000 to 15,000 Christmas gift packages if he remained a "high roller";

b. Allowing him to game when it knew be was intoxicated supplying him with drinks when they knew he was intoxicated. (decision para. 16).

[75] While referring with approval to the decision in Reynolds, the court noted that the special facts of the case brought it within the category of "extraordinary cases" identified by Spigelman CJ, Justice Hoeben stated at paragraph 45:

It seems to me that the assertions of a fact in para. 9 of the 5th statement of claim go beyond those found in Reynolds. In Reynolds, the plaintiff's addiction to gambling was known, but nothing was done to assist him despite his requests. The allegations in para. 9 go beyond that. Para. 9 asserts not only knowledge of the weakness, but active encouragement and exploitation of it. That is a consideration absent from Reynolds and Cole.

[23] Justice Murphy, in Burrell, came to a conclusion as follows [at para. 23]:

I have concluded in the circumstances, based on the pleadings in this case, that it is plain and obvious that the Statement of Claim discloses no cause of action based upon either a common law or statutory duty of care owed by any of the Defendants to the Plaintiff. I have found that the Plaintiff's claims relating to regulatory negligence, negligent promotion, and breach of statutory duty are unsustainable. Therefore, it is not necessary that I address the Defendant's argument that the claim is unsustainable as being solely for economic loss, and I am not giving a ruling on that issue.

The Court of Appeal in the judgment of Justice Fichaud upheld this ruling (para. 57).

[24] In this case, it is not pleaded that S. and A. Spinks recognized that they were problem gamblers and sought to have the casinos exclude them. The plaintiffs do not plead special circumstances as there were in Preston. The plaintiffs do not plead facts linking S. and A. Spinks to the casinos where they gambled that would differentiate them to the staff from the general population of patrons who attend to gamble there other than that they were problem gamblers. The case law establishes that this is not sufficient to create a duty of care to them by OLGC. That S. and A. Spinks would lose money at the casinos like every other person who gambled there for any length of time was foreseeable. It could hardly be otherwise or the casinos would go out of business. The facts pleaded, however, fail to assert sufficient [page534] proximity between S. and A. Spinks and OLGC to satisfy the second requirement of imposing a duty of care to them by OLGC.

[25] If I am wrong on this, the facts pleaded also do not address the policy concerns in the third requirement to impose a duty of care on OLGC. To impose a general duty of care on the OLGC to problem gamblers would create indeterminate liability on the provincial government. It would make the government responsible for the losses of problem gamblers while permitting them to keep their winnings. It would make it impossible for casinos to operate at a profit and thereby destroy the system of gambling that the provincial government has declared to be lawful. OLGC, having no duty of care to S. and A. Spinks, it is impossible that they could have a duty of care to the plaintiffs from whom they acquired the money which they gambled and lost.

[26] Even if OLGC could be held to have a duty of care to S. and A. Spinks, S. Spinks defrauded the plaintiffs and gave some of the money from the estates to A. Spinks before they began to gamble. This is where they obtained the money to gamble. If OLGC had stopped them gambling because they were losing so much money, they would retain the money from the estates that remained. It is not pleaded that OLGC should have assumed the role of the police and investigated where they had the obtained the money that they had lost.

[27] Further, if OLGC could be held to have a duty of care to S. and A. Spinks it does not follow that it would have a duty of care to the plaintiffs which were the source of the money that S. and A. Spinks lost. In Dynasty Furniture Manufacturing Ltd. v. Toronto-Dominion Bank, [2010] O.J. No. 2703, 2010 ONSC 436 (S.C.J.), affd [2015] O.J. No. 945, 2015 ONCA 137, the Toronto Dominion Bank accepted deposits from S.I.B., a private bank, which that bank had obtained by a fraudulent scheme. The victims of the fraudulent scheme brought an action against the Toronto Dominion Bank in which they alleged negligence and knowing receipt of trust funds. Justice Wilton-Siegel dismissed the action. He stated the following [at para. 68]:

Similarly, there is no relationship of proximity to support the alleged duty of T-D to monitor SIB's use of the bank's facilities and/or SIB's business activities in order to ensure the legitimacy of its customer's activities. The only relationship between the plaintiffs and T-D that could be asserted is the very indirect one of a drawer of a cheque that is deposited by the payee SIB in its account at T-D. However, as a correspondent bank, T-D could not know the identities of the parties with whom SIB was doing business nor could it know the purpose of any cheque deposited into SIB's account unless, in either case, it actually conducted an investigation. The proximity requirement of the Anns test requires a much more direct relationship to justify the imposition of a duty of care involving an obligation to investigate the business of a customer of a bank. [page535]

Similarly, there is no connection between the plaintiffs and OLGC. Gambling casinos operating lawful businesses cannot be expected to investigate the source of money being lost by its customers even when they lose large amounts.

2. Unjust enrichment

[28] The plaintiffs submit that OLGC has been unjustly enriched in the amount of $950,000 which belongs to them and that it should be required to pay this amount to them. In my view, that can only be the case if it would be required to pay this amount to S. and A. Spinks from whom it received the money.

[29] In Bank of Montreal v. i Trade Finance Inc. (2009), 96 O.R. (3d) 561, [2009] O.J. No. 3400, 2009 ONCA 615, the Court of Appeal in the judgment of Justice Blair stated the following [at para. 39]:

A valid contract leading to a debtor-creditor relationship between the person enriched and another -- as was the case here -- is sufficient to establish the existence of a juristic reason for an enrichment that can be accounted for on the basis of that contractual relationship. In this regard, the absence or presence of a juristic reason in connection with the enrichment need not necessarily arise out of the relationship between the party asserting the claim for unjust enrichment (i Trade) and the party enriched (BMO): see Re Attorney General of Canada v. Confederation Life Insurance Company (Gen. Div.) at p. 771; Rathwell v. Rathwell at p. 455[.]

[30] The requirements to establish unjust enrichment are well known. They were stated by the Supreme Court of Canada in Garland v. Consumers' Gas Co., [2004] 1 S.C.R. 629, [2004] S.C.J. No. 21, 2004 SCC 25, in the judgment of Justice Iacobucci, to be the following [at para. 30]:

As a general matter, the test for unjust enrichment is well established in Canada. The cause of action has three elements: (1) an enrichment of the defendant; (2) a corresponding deprivation of the plaintiff; and (3) an absence of juristic reason for the enrichment (Pettkus v. Becker, 1980 CanLII 22 (SCC), [1980] 2 S.C.R. 834, at p. 848; Peel (Regional Municipality) v. Canada, 1992 CanLII 21 (SCC), [1992] 3 S.C.R. 762, at p. 784).

[31] In Ross v. British Columbia Lottery Corp., [2014] B.C.J. No. 612, 2014 BCSC 320, the plaintiff signed a voluntary self-exclusion ("VSE") form from two casinos. Notwithstanding this, she entered the casinos and lost $78,000. She commenced an action against the British Columbia Lottery Corporation ("BCLC") who managed the casinos to recover her losses. She alleged that BCLC was unjustly enriched by the amount of her losses. Justice Truscott denied the claim. There was enrichment and a corresponding deprivation but there was a juristic [page536] reason for the enrichment. He held that when she placed a bet at the casino, she entered into a valid contract. The chance of winning and the thrill of gambling was consideration for the money that she advanced. He stated the following [at paras. 510 and 511]

At all times, I am satisfied the consideration the plaintiff received for her gambling during her VSE period was the chance to win and receive her winnings before being identified and asked to leave, and the enjoyment or thrill of that gambling.

If the plaintiff's submission were correct that her gambling contracts were void or voidable if she lost, it would mean that she and any other banned patron could gamble with impunity by keeping their winnings and recovering their losses. This cannot be the case. It would also mean that every gambler would want to be self-excluded solely to have their contracts declared void or voidable so they could recover their losses. This can't be the case either.

[32] The plaintiffs have not pleaded that OLGC knew that the casinos were acquiring money from S. and A. Spinks knowing that they had obtained the money by fraudulent means. OLGC is a bona fide purchaser without notice of a prior claim. In my view, it is entitled to keep the money on this basis. In Bank of Montreal, Justice Blair stated the following [at para. 41]:

This brings me to the final consideration. BMO's position as a bona fide purchaser for value without notice of the fraud is not inconsequential in the third branch of the unjust enrichment analysis. Equity has long protected the interests of someone in such a position, for the reasons summarized in the quotation from Bump on Fraudulent Conveyances, cited at para. 21 above. There will always be irregular or unknown transactions ensuing from a fraudulent scam. As the text notes, however, at pp. 489-490:

It is of no public utility to destroy titles [honestly acquired] on account of the taint of a prior secret fraud, which may be unsuspected and unknown, and which, probably, no diligence could detect. A purchaser who pays a fair price for an ostensibly fair title without notice of any latent fraud in any previous link of the title has a higher equity than the creditors. They may lose their debts; if they can recover the property from him he may lose the money which he paid for it. The equities between them are equal, and he has the legal title, and consequently the prior right, for the law never divests one of a legal title in order to invest another with it where there are no equitable reasons for so doing. He will therefore hold the estate purged of the anterior fraud that infected the title.

[33] OLGC was enriched by the amount that S. and A. Spinks lost and they were correspondingly deprived. However, OLGC has juristic reasons for retaining the money -- namely, they entered into valid contracts with S. and A. Spinks and they are a bona fide purchaser without notice that they were receiving money obtained by fraud. [page537]

3. Conversion

[34] The plaintiffs submit that OLGC converted to its own use money that belonged to them. OLGC, being a bona fide purchaser without notice, is a complete defence to this assertion. Also, the $950,000 of the plaintiffs' money could not be traced. It has passed into the general revenue of OLGC. In Graphicshoppe Ltd. (Re) (2005), 2005 CanLII 45183 (ON CA), 78 O.R. (3d) 401, [2005] O.J. No. 5184 (C.A.), employees made a claim for their pension contributions against a trustee in bankruptcy. The Court of Appeal, in the majority judgment of Justice Moldaver (as he then was), in rejecting the claim relied on the decision of the Supreme Court of Canada in the judgment of Justice McLachlin (as she then was) in British Columbia v. Henfrey Samson Belair Ltd., 1989 CanLII 43 (SCC), [1989] 2 S.C.R. 24, [1989] S.C.J. No. 78. In reference to that case, Justice Moldaver stated the following [at para. 122]:

The passages that I consider to be apposite are found at pp. 741 and 742. They are reproduced below:

I turn next to s. 18 of the Social Service Tax Act and the nature of the legal interests created by it. At the moment of collection of the tax, there is a deemed statutory trust. At that moment the trust property is identifiable and the trust meets the requirements for a trust under the principles of trust law. The difficulty in this, as in most cases, is that the trust property soon ceases to be identifiable. The tax money is mingled with other money in the hands of the merchant and converted to other property so that it cannot be traced. At this point it is no longer a trust under general principles of law. In an attempt to meet this problem, s. 18(1)(b) states that tax collected shall be deemed to be held separate from and form no part of the collector's money, assets or estate. But, as the presence of the deeming provision tacitly acknowledges, the reality is that after conversion the statutory trust bears little resemblance to a true trust. There is no property which can be regarded as being impressed with a trust. Because of this, s. 18(2) goes on to provide that the unpaid tax forms a lien and charge on the entire assets of the collector, an interest in the nature of a secured debt.

Nor does the argument that the tax money remains the property of the Crown throughout withstand scrutiny. If that were the case, there would be no need for the lien and charge in the Crown's favour created by s. 18(2) of the Social Service Tax Act. The province has a trust interest and hence property in the tax funds so long as they can be identified or traced. But once they lose that character, any common law or equitable property interest disappears. The province is left with a statutory deemed trust which does not give it the same property interest a common law trust would, supplemented by a lien and charge over all the bankrupt's property under s. 18(2) [emphasis added]. [page538]

4. Knowing receipt of trust funds

[35] S. and A. Spinks lost substantial amounts of money gambling that was received by OLGC. S. Spinks obtained this money fraudulently from the plaintiffs. S. Spinks held herself out to be a lawyer. The plaintiffs submit that OLGC was in receipt of trust money which it obtained from the S. and A. Spinks that it knew was obtained by them illegally.

[36] In Citadel General Assurance Co. v. Lloyds Bank Canada, 1997 CanLII 334 (SCC), [1997] 3 S.C.R. 805, [1997] S.C.J. No. 92, a bank received insurance premiums from a company which was a customer. The bank knew the funds were insurance premiums. The bank used the funds in the company's account to pay off a debt owed to it by the parent company of the customer. The insurance premiums belonged to an insurance company. The customer and its parent went out of business. The Supreme Court of Canada, in the judgment of Justice La Forest, held that the bank was liable to the insurance company on basis that it was in knowing receipt of trust funds which it used to its own benefit. The court stated the following [at paras. 48 and 49]:

. . . in "knowing receipt" cases, which are concerned with the receipt of trust property for one's own benefit, there should be a lower threshold of knowledge required of the stranger to the trust. More is expected of the recipient, who, unlike the accessory, is necessarily enriched at the plaintiff's expense. Because the recipient is held to this higher standard, constructive knowledge (that is, knowledge of facts sufficient to put a reasonable person on notice or inquiry) will suffice as the basis for restitutionary liability[.]

. . . In "knowing receipt" cases, relief flows from the breach of a legally recognized duty of inquiry. More specifically, relief will be granted where a stranger to the trust, having received trust property for his or her own benefit and having knowledge of facts which would put a reasonable person on inquiry, actually fails to inquire as to the possible misapplication of trust property. It is this lack of inquiry that renders the recipient's enrichment unjust.

(Emphasis added)

[37] I refer again to para. 68 from Dynasty, quoted above, and, in particular, the following:

. . . T-D could not know the identities of the parties with whom SIB was doing business nor could it know the purpose of any cheque deposited into SIB's account unless, in either case, it actually conducted an investigation.

S. Spinks held herself out to be a lawyer to the operators of the gambling casinos. Many people lose money at gambling casinos who will represent themselves truthfully or not as being from various occupations. This cannot be sufficient to put the casinos on notice to investigate these people as to the source of the money that they are losing. Such a practice would destroy the business of the casinos which they are conducting legally. [page539]

Conclusion

[38] The plaintiffs have no chance of success on the causes of action that they have asserted against OLGC -- namely, negligence, unjust enrichment, conversion and knowing receipt of trust funds. It is plain and obvious that the action is bound to fail. I decline to give the plaintiffs an opportunity to amend their statement of claim. I note that the action was commenced in 2010. Apart from the delay, however, the fundamental flaw in the causes of action asserted by the plaintiffs is that they all would require gambling casinos to investigate customers who are losing money to determine the source of their funds. This would put the gambling casinos out of business. If people are prepared to lose money at gambling casinos operating within the law for whatever reasons, it is not for the casinos to interfere with their personal autonomy. There is no amendment that could cure the statement of claim. The motion is allowed.

[39] OGLC may make submissions on costs within ten days of receipt of these reasons and the plaintiffs may have ten days to respond from the time that they receive OLGC's submissions.

Motion granted.

End of Document