Court File and Parties
Court File No.: CV-17-131271-00A2 Date: 2023-09-05 Superior Court of Justice - Ontario
Re: ROYAL BANK OF CANADA, Plaintiff – and – LAVAN PALESWARAN and BALASINGAM NALLATHAMBY and 1458875 ONTARIO CORPORATION O/A YORKTOWN MOTORS, Defendants – and – AERO CAR RENTALS INC., ZAHIR MURJI, and HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO, Third Party Defendants
Before: The Honourable Justice S.E. Fraser
Counsel: Mr. Andi Jin, for the His Majesty the King, Third Party Defendant and Moving Party Mr. David Nuri, for the Defendant, 1458875 Ontario Corporation O/A Yorktown Motors No one appearing for the other parties, although properly served.
Heard: June 2, 2023
Endorsement
I. Nature of the Motion
1This Rule 21.01 motion by the Third Party Defendant, His Majesty the King in Right of Ontario (Ontario), raises the issue of whether it owes a private law duty to 1458875 Ontario Corporation O/A Yorktown Motors (Yorktown) to ensure the accuracy of vehicle permits and used vehicle information packages.
2The Plaintiff Royal Bank of Canada (RBC) financed the purchase of a Land Rover by way of an assignment agreement dated February 27, 2016 with Yorktown. Yorktown facilitated the purchase of the vehicle by purchasing the vehicle from Aero Car Rentals and selling the vehicle to the purchasers under a conditional sales agreement, and the assigning to RBC the conditional sales agreement. In this assignment agreement, RBC paid Yorktown the sale price of the vehicle and Yorktown assigned to RBC the rights under the conditional sales agreement including the right to a security interest in the vehicle.
3There was one problem. The vehicle did not exist.
4Yorktown Motors claims that it was the victim of a fraud committed by the purchasers and the sellers of the vehicle. It brought a cross-claim against the Defendants and a Third Party Claim against Aero Car Rentals and Zahir Murji, both of whom Yorktown alleges misrepresented the existence of the Land Rover.
5Yorktown’s Third Party claim is also against Ontario, who it alleges was negligent, asserting that the Ministry enabled the purchasers, Aero Car Rentals and Mr. Murji, to register fraudulent documents pertaining to the vehicle and that the Ministry ought to have known that Yorktown would rely on the documents.
6The documents relied upon by Yorktown are the Used Vehicle Information Package (UVIP) and two Vehicle Permits issued by the Ministry of Transportation (the Ministry). Yorktown states that it relied on them to verify the vehicle’s identification number (VIN), that the vehicle was registered to Aero Car Rentals, and that it had no liens registered against it.
7I must decide whether Yorktown’s Third Party Claim of 1458875 discloses a reasonable cause of action. That turns on whether it is plain and obvious that the claim cannot succeed.
II. Issues
8There are three key issues on this motion.
9The first is whether delay should be a bar to bringing this Rule 21 motion.
10The second is whether the decision to issue a vehicle permit is a regulatory decision under the Crown Liability and Proceedings Act, 2019, S.O. 2019, c.7, Sch.17 such that it is not actionable.
11The second issue on this motion is whether the claim discloses a reasonable cause of action. To determine this, we assume that the facts plead are true, and examine whether it is plain and obvious that the claim has no reasonable prospect of success (see R. v. Imperial Tobacco, 2011 SCC 42, at para. 17). This in turn depends on:
a. Do the circumstances disclose reasonably foreseeable harm and proximity sufficient to establish a duty of care? The inquiry at this stage is whether the case is analogous to an existing duty of care.
b. If the answer is no, the inquiry turns to whether a new duty of care should be recognized. The court must examine whether the relationship is one in which a new duty should be imposed.
12Further, in the case of defendants who are public actors, proximity is established only explicitly or implicitly through the governing legislation or from the nature of the interactions of the parties. As a result, it will be necessary to examine that framework.
13I begin the analysis by examining Yorktown’s argument on liability and the Crown’s response in order to further set out the issues.
III. Impact of Delay of Bringing this Motion
14Yorktown argues that I should not deal with Ontario’s motion because of the delay in bringing in this motion. Rule 21.02 provides that a motion under Rule 21.01 shall be made promptly and that a failure to do so may be considered by the court in awarding costs.
15The Third Party Claim was served November 9, 2019. Ontario’s motion to strike was brought March 15, 2022, over two years and four months later. This motion was brought after Yorktown engaged in the discovery process.
16This Court has taken delay into account as a factor in refusing to grant a Rule 21 motion (See MacDonald v. Ontario Hydro, (1995), 26 O.R. (3d) 401). In Colonna v. Bell Canada, [1993] O.J. No. 332, 15 C.P.C. (3d) 65, this Court dismissed a Rule 21.01 motion where it was brought almost 18 months after trial. However, the Court of Appeal has stated that it would be “antithetical to the aim of litigation efficiency to insist that a claim that has no chance of success cannot be the subject of a rule 21 motion because of delay and must be brought to trial.” (See Brummell v. Ontario (Attorney General), 2014 ONCA 828, at para. 8). I find that this type of delay should be avoided but that I must examine the merits of the claim under Rule 21.01. I will consider this factor together with the arguments on the main questions. It is clear from the Rule that at a minimum, delay can factor into an award of costs.
IV. Yorktown’s Claim
17Yorktown’s claim must be understood to assess the two main issues on this motion. Yorktown argues that the Ministry:
a. failed to maintain an accurate index of all permits issued and in force;
b. failed to maintain an accurate index of the names and addresses of all persons to whom permits that are in force have been issued;
c. failed to acquire the appropriate documentation before issuing the permit for VIN SALGS2VF6FA238674;
d. erroneously issued permits to Aero Car Rentals twice, then Yorktown, and then the Purchasers.
18Yorktown acknowledges that there was no direct relationship between the Ministry of Transportation and Yorktown. Yorktown argues that the legislative provisions governing the issuance of permits nevertheless give rise to a statutory duty and make the following points in support:
a. The Highway Traffic Act, R.S.O. 1990, c. H.8 (HTA), which is the governing statute, required Yorktown to obtain a UVIP and a permit to sell a vehicle which if not followed could result in fine or penalties to Yorktown. Yorktown asserts that this creates an implied duty on the Ministry;
b. Under the HTA, the MTO must validate permits and maintain a registry;
c. There is no disclaimer on the permits; and
d. That the Ministry breached its duty as record keeper under s. 13(7) of the HTA when it represented through the issuance of a permit that a vehicle existed, when no such vehicle existed.
V. Is the Action Barred by the Crown Liability and Proceedings Act, 2019?
19Ontario asserts that the issuance of a vehicle permit is a regulatory decision and that it is not actionable under ss. 11(2) of the Crown Liability and Proceedings Act, 2019, S.O. 2019, c.7, Sch.17. Subsection 11(2) provides that:
No cause of action arises against the Crown or an officer, employee or agent of the Crown in respect of a regulatory decision made in good faith, where,
(a) a person suffers any form of harm or loss as a result of an act or omission of a person who is the subject of the regulatory decision; and
(b) the person who suffered the harm or loss claims that the harm or loss resulted from any negligence or failure to take reasonable care in the making of the regulatory decision.
20A regulatory decision is defined in ss. 11(6) as a decision respecting:
(a) whether a person, entity, place or thing has met a requirement under an Act,
(b) whether a person or entity has contravened any duty or other obligation set out under an Act,
(c) whether a licence, permission, certificate or other authorization should be issued under an Act,
(d) whether a condition or limitation in respect of a licence, permission, certificate or other authorization should be imposed, amended or removed under an Act,
(e) whether an investigation, inspection or other assessment should be conducted under an Act, or the manner in which an investigation, inspection or other assessment under an Act is conducted,
(f) whether to carry out an enforcement action under an Act, or the manner in which an enforcement action under an Act is carried out, or
(g) any other matter that may be prescribed. [Emphasis Added]
21There is no issue that the Ministry regulates UVIPs and Permits, including those that Yorktown relied on. Ontario states that issuing a permit is a decision respecting whether a permit should be issued within the meaning of the regulation.
22Yorktown pleads that the Ministry breached its duty as record keeper under s. 13(7) of the HTA when it represented through the issuance of a permit that a vehicle existed, when no such vehicle existed. Yorktown asserts that it does not fault Ontario for making a poor regulatory decision. It states that the case against Ontario is that it enabled the registration of fraudulent documents relating to the vehicle and for this reason is distinguishable from R. v. Campbell, 2022 O.J. No. 1585.
23That is a distinction without a difference. Enabling a registration is the same action as issuing a permit. No claim can be brought against such an action under ss. 11(2).
24For these reasons, I find that Yorktown’s Third Party claim is captured by ss. 11(2) and cannot proceed. Further, because the claim is not actionable against Ontario, I find that despite the delay, it would be antithetical to the aim of litigation efficiency if I were to decide this motion on the basis of delay only.
VI. Does the Claim Disclose a Reasonable Cause of Action?
25While I have determined that the action cannot proceed, if I am wrong, I now assess whether the claim should be struck for failing to disclose a reasonable cause of action. To grant the relief sought, I must assume that the facts pleaded are true and be satisfied that it is plain and obvious that that the claim has no reasonable prospect of success. (See R. v. Imperial Tobacco, 2011 SCC 42, at para 17.)
26I have discussed Yorktown’s claim above. I note that many buyers will see that a vehicle exists before purchasing it. There is a unique peril to Yorktown and dealers like it who deal in selling used vehicles. Yorktown acts as this middle person and its business model is to rely exclusively on the permits and the UVIPs to confirm the existence of vehicles without ever seeing the vehicle.
27Yorktown submits that it was reasonably foreseeable that harm would result if the Ministry issued Permits or UVIPs for vehicles that did not exist, or authorized the registrations of such permits. It was also reasonably foreseeable that a dealer like Yorktown would rely on the UVIP and Permits produced by the Ministry to confirm the existence of the vehicle. Such reliance was reasonable in the circumstances of the case.
28Ontario argues that Yorktown’s claim fails at both stages of the Anns/Cooper test because the parties are not in a relationship and that any prima facie duty of care should be rejected for policy reasons.
29Ontario submits that the legislation does not contemplate reliance by third parties. It states that there is an express disclaimer on the UVIP that it is not a warranty. Yorktown argues that it was reasonably foreseeable that a dealer like Yorktown would rely on the UVIP and the Permits. It complains that the permit does not contain a similar disclaimer and that creates room for an implied duty of care.
30Yorktown relies on Cheltenham v. Ontario, 64 OR (3d) 620, in support of its position that it is not plain and obvious that the claim cannot succeed. The facts of Cheltenham are distinct. That case involved fraudulent registrations where the police had specifically advised the government that their system was being used for fraudulent purposes. There is no such allegation here. At the hearing of the motion, the Third Party attempted to file a recent new article about fraudulent representations. The information in that article is about circumstances unconnected to this case and which occurred after the events that are the subject of this case. I find that it does not assist me.
31In addition, in Cheltenham, Justice Sachs permitted the claim to proceed because it was not plain and obvious that the claim could not succeed. I believe that her analysis in the duty has been superseded by the decision of the Court of Appeal in Am-Stat Corporation v. Ontario, 2018 ONCA 877.
32The plaintiff in Am-Stat Corporation v. Ontario claimed that the government owed a duty of care to ensure the accuracy of information it collected and provided in the corporate profile report and claimed that the defendant knew or ought to have known that the plaintiff would rely on such information. The motions judge found no such duty existed. The Court of Appeal upheld the decision and, at para. 6, set out the approach to the analysis:
As the motion judge noted, when the defendant is a public actor, a relationship of proximity giving rise to a prima facie duty of care may only arise explicitly or by implication from the language of the governing legislation or from the nature of the interactions between the parties. See R. v. Imperial Tobacco, 2011 SCC 42, at paras. 43-45; Cooper v. Hobart, 2001 SCC 79, at para. 43.
33Factually, the registration of motor vehicles is different from the registration of corporate information. The HTA calls upon the Registrar to validate permits. But there is no express duty in the statute to third parties whose business is the trade of used vehicles. I can see no express duty.
34Yorktown asserts that the HTA requires the Ministry to maintain an index of all permits that are “issued and in force” and of the names and addresses of all persons “to whom permits that are in force have been issued”. It contains provisions for the accuracy of information and the maintenance of the record, it sets out violations and fines under the HTA where a permit is altered, among other things. Yorktown asserts that this “creates a system in which the accuracy of that index is central to the operation of motor vehicles on highways, and to the transfer of ownerships of motor vehicles in Ontario” (see ss. 6, 7, 9, 11, 11.1 and 12).
35I accept that these are public duties but nothing in this language gives rise to an implied private duty of care. Read generously, there is no nexus between Yorktown and Ontario.
36Further, unlike Cheltenham, there are no specific facts plead that would counter the concerns of an indeterminate class. While Yorktown asserts that the class is limited to those who have been defrauded such that the class is limited, I do not see it that way and what Yorktown proposes has the potential to create an unlimited class.
37Yorktown argues that it matters not that there are no specific transactions between the government and itself, relying on R. v. Imperial Tobacco, supra at para. 50. I read that paragraph as saying that the general principles relating to duty of care do not foreclose liability where the factual basis grounds liability. That is not the case here.
38I find that it is plain and obvious that there is no duty of care to Yorktown.
VII. Conclusion
39I find that this claim fails as it is not actionable under the Crown Liability and Proceedings Act, 2019.
40If I am wrong, I find that it is plain and obvious that the claim has no reasonable prospect of success.
VIII. Costs
41The parties are encouraged to agree on costs. If the parties are unable to agree on the quantum of costs for this motion by September 20, 2023, I will receive written submissions of no more than three pages, along with bills of costs and offers to settle. Ontario shall provide their cost submissions within 10 days following September 20, 2023 and Yorktown may respond within a further 10 days. There will be no reply.
Justice S.E. Fraser Date: September 5, 2023