



COURT OF APPEAL FOR ONTARIO

CITATION: McCreight v. Canada (Attorney
    General), 2013 ONCA 483

DATE: 20130716

DOCKET: C55540

Epstein, Pepall and Tulloch JJ.A.

BETWEEN

Michael McCreight, Kim
    McCreight, John Gregory Skinner, Joan Skinner
and BDO Dunwoody LLP

Plaintiffs (
Appellants
)

and

The Attorney General of
    Canada Representing Her Majesty the Queen in Right of Canada, Canada Revenue
    Agency, formerly The Canada Customs and Revenue Agency
, Henry George
    Kehl, William Carter a.k.a. Bill Carter, Gregory Mee a.k.a. Greg Mee, Ed Hooft,
Anne Kamp, Ian McGuffin
, Rod Mercer, Stephane
    Marinier, Morris Pistyner, Elaine Krivel,
Bruck Easton
,
    Stephen Harvey and
Damien Frost

Defendants (
Respondents
)

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

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

Heard: January 23, 2013

On appeal from the order of Justice Terrence L.J.
    Patterson of the Superior Court of Justice, dated April 27, 2012, with reasons
    reported at 2012 ONSC 1983.

Pepall J.A.:

A.

Introduction

[1]

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

[2]

The appellants appeal from
    this decision and ask this court to set aside the order and dismiss the
    respondents motion to strike the causes of action of malicious prosecution,
    abuse of process, negligence, and derivative claims made pursuant to s. 61 of
    the
Family Law Act
,

R.S.O. 1990, c. F.3 (
FLA
).

B.

Background Facts

(1)

The CRA Investigation

[3]

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

[4]

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

[5]

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

(2)

The Charges and Their
    Resolution

[6]

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

[7]

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

[8]

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

(3)

Appellants Lawsuit

[9]

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

(4)

Respondents Motion
    to Strike

[10]

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

(a)

Documents

[11]

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

[12]

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

[13]

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

[14]

Prior
    to the return of the motion to strike before the motion judge, counsel attended
    before Cusinato J. and asked him to address their documentary dispute. He
    released his reasons on May 19, 2010 and released supplementary reasons on June
    17, 2011. He noted that the respondents objected to an examination of the
    documents that did not form an integral part of the pleading. He concluded that
    the listed documents did not form an integral part of the pleading. He wrote as
    follows, at paras. 22 and 23 of his reasons:

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

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

[15]

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

[16]

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

(b)

The
    Motion Judges Decision

[17]

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

[18]

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

[19]

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

[20]

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

[21]

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

[22]

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

[23]

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

[24]

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

C.

Grounds of Appeal

[25]

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

D.

Issues

[26]

The
    issues to be addressed are as follows:

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

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

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

E.

Analysis

(1)

Documents Referred to
    in the Pleading

[27]

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

[28]

The
    respondents argue that these five documents should be disregarded because they
    were not included in the motion record before the motion judge; there was no
    argument before the motion judge that they formed part of the appellants pleading;
    the documents were not considered by the motion judge, who made no ruling on this
    issue; and, based on the authority of
Montreal Trust Co. of Canada v.
    Toronto Dominion Bank
(1992), 40
    C.P.C. (3d) 389

(Ont. C.J.
    (Gen. Div.)),
Leadbeater v. Ontario
(2001), 16 C.P.C. (5th) 119 (Ont. S.C.),

and
Bird v. Public Guardian and Trustee
, [2002] O.J. No. 408 (S.C.),
    they ought not to form part of the amended statement of claim.

[29]

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

[30]

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

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

[31]

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

[32]

As
    noted by Borins J. (as he then was) in
Montreal Trust Co.,
at para. 4,

a statement of claim is deemed to include any
    documents incorporated by reference into the pleading and that form an integral
    part of the plaintiffs claim. Among other things, this enables the court to
    assess the substantive adequacy of the claim. In contrast, the inclusion of evidence
    necessary to prove a fact pleaded is impermissible. A motion to strike is
    unlike a motion for summary judgment, where the aim is to ascertain whether
    there is a genuine issue requiring a trial. On a motion to strike, a judge simply
    examines the pleading; as mentioned, evidence is neither necessary nor allowed.
    If the document is incorporated by reference into the pleading and forms an
    integral part of the factual matrix of the statement of claim, it may properly
    be considered as forming part of the pleading and a judge may refer to it on a
    motion to strike.

[33]

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

[34]

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

[35]

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

[36]

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

[37]

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

(2)

Causes of Action

[38]

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

[39]

As
    mentioned, on a rule 21.01(1)(b) motion, a claim will only be struck if it is
    plain and obvious, assuming the facts pleaded to be true, that the pleading
    discloses no reasonable cause of action:
R. v. Imperial Tobacco Canada Ltd.
,

2011 SCC 42, [2011] 3 S.C.R. 45, at para. 17. The principles that may be
    extracted from this and other cases, some of which I have already mentioned,
    are as follows:

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

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

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

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

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

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

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

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

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

[40]

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

(a)

Malicious
    Prosecution

[41]

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

[42]

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

[43]

Firstly,
    in
Miazga v. Kvello Estate
, 2009 SCC 51, [2009] 3 S.C.R. 339, at paras.
    53ff., the Supreme Court stated that in order to succeed in an action for
    malicious prosecution, a plaintiff must prove that the prosecution was: (i)
    initiated by the defendant; (ii) terminated in favour of the plaintiff; (iii) commenced
    or continued without reasonable and probable cause, and; (iv) motivated by
    malice or a primary purpose other than that of carrying the law into effect.  In
    this case, the fourth element of the claim is in issue.

[44]

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

[45]

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

[46]

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

(b)

Abuse
    of Process

[47]

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

[48]

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

[49]

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

[50]

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

[51]

I
    would allow the appeal on this ground.

(c)

Negligence

[52]

The
    appellants do not contest the motion judges finding that negligence is not a
    recognized cause of action against Crown prosecutors.

[53]

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

[54]

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

[55]

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

the
ITA
s
    statutory scheme, the availability of alternative remedies, and the fact that
    CRA investigators owe a duty to the public and the Crown, rather than to
    individuals.

[56]

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

[57]

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

(i)

Does the relationship between the plaintiff and the defendant disclose
    sufficient foreseeability and proximity to establish a
prima facie
duty of care; and

(ii)

If so, are there any residual policy considerations which ought to
    negate or limit that duty of care?

This is a reformulation of the
Cooper-Anns
test
    that originated in
Cooper v. Hobart
, 2001 SCC 79, [2001] 3 S.C.R. 537,
    and
Anns v. Merton London Borough Council
, [1978] A.C. 728 (H.L.).

[58]

Foreseeability
    is conceded by the respondents in this case.

[59]

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

at para. 29.

[60]

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

[61]

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

[62]

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

[63]

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

(d)

Section
    61(1) of the
Family Law Act

[64]

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

[65]

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

[66]

Section
    61(1) of the
FLA

states:

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

[67]

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

[68]

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

[69]

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

[70]

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

[71]

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

(3)

Leave to Amend

[72]

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

F.

Costs

[73]

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

G.

Disposition

[74]

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

S. E. Pepall J.A.

I agree Gloria Epstein J.A.

Released: July 16, 2013  MT                               I
    agree M. Tulloch J.A.


