



COURT OF APPEAL FOR ONTARIO

CITATION: The Catalyst Capital Group Inc. v.
    Dundee Kilmer
Developments Limited Partnership, 2022 ONCA 168

DATE: 20220228

DOCKET: C69380

Rouleau, van Rensburg and
    Roberts JJ.A.

BETWEEN

The Catalyst Capital Group Inc.

Plaintiff/Responding Party (Appellant)

and

Dundee Kilmer Developments
    Limited Partnership, Dundee Realty Corporation, KD Infrastructure L.P., Kilmer
    Van Nostrand Co. Limited., John Doe Corporations Partnerships, Infrastructure
    Ontario and Ontario Infrastructure and Lands Corporation (Formerly Ontario
    Infrastructure Projects Corporation), The Ministry of Infrastructure of Ontario
    and
Her Majesty the Queen in Right of Ontario

Defendants/Moving
    Party (
Respondent
)

David C. Moore
    and Kenneth G.G. Jones, for the appellant

Christopher P. Thompson and Mihaela
    Ion, for the respondent

Heard: January 5, 2022 by video conference

On appeal from the order of Justice Peter
    J. Cavanagh of the Superior Court of Justice, dated March 22, 2021, with reasons
    at 2021 ONSC 2132.

Rouleau J.A.:

[1]

The Catalyst Capital Group Inc. appeals from the
    order striking its claim against Her Majesty the Queen in Right of Ontario
    (HMQ) without leave to amend. The action relates to Catalysts participation
    in the development of the Pan Am Athletes Village Project for the 2015 Pan Am
    games in Toronto. Catalyst claims that it entered into contracts to provide a
    novel financial model to the Dundee Kilmer defendants (DKD). In turn, DKD
    used that model and certain financings provided by Catalyst to secure their selection
    by Infrastructure Ontario (IO), a Crown corporation, as the successful bidder
    for the construction of the Athletes Village.

[2]

In the action, Catalyst seeks damages against HMQ
    for misfeasance in public office based upon allegations that HMQ improperly
    caused its removal as a participant in the Athletes Village Project.
    Catalysts plea against HMQ is its third attempt to make out a viable claim. Its
    first two statements of claim were struck on December 16, 2014 and November 28,
    2016 respectively. The first claim was struck on the basis that it did not
    comply with the rule requiring causes of action to be properly and intelligibly
    pleaded. The second was struck as against HMQ but with leave to amend the claim
    for misfeasance in public office. That amended claim is the subject of the
    present appeal.

[3]

This court, at paras. 99-100 of its decision in
The
    Catalyst Capital Group Inc. v. Dundee Kilmer Developments Limited Partnership
,
    2020 ONCA 272, 447 D.L.R. (4th) 610 (
Catalyst 2020
), set out the
    background to Catalysts claim as follows:

[T]he factual context of Catalysts claim
    concerns the process to select the Projects developer. That process was set
    out in the [request for proposals (RFP)], which IO issued as agent for the
    Crown: RFP, s. 1.1(1). The RFP operated as a Contract A in the tendering
    process framework adopted by the Supreme Court in a series of cases starting
    with
R. v. Ron Engineering & Construction (Eastern) Ltd.
, [1981] 1
    S.C.R. 111.

The RFP set out
    the rights and obligations of the government sponsors and the various
    proponents and their team members.
Section 3.6 of the RFP
    specifically addressed the process to change members of a proponents team.
    Section 3.6(7) reserved to the government sponsors the right, in their sole
    discretion, to refuse to accept a change in an Identified Proponent Party that
    occurs or is requested by the Proponent after the Submission Deadline
    (Technical).
In essence, all of Catalysts claims come down to DKD not
    negotiating hard enough or in good faith to secure IOs consent to add Catalyst
    as a proponent team member and IOs refusal to so recognize Catalyst pursuant
    to s. 3.6(7) of the RFP. [Emphasis added.]

Properly framed, therefore, the
    allegation of misfeasance is not that HMQ caused the removal of Catalyst from
    the project. Rather, Catalyst claims that HMQ directed IO not to exercise its discretion
    to allow Catalyst to be added as a proponent team member. These directions were
    contrary to certain representations HMQ is alleged to have made to Catalyst
    through DKD (defined in the pleading as Governmental Representations) to the
    effect that Catalyst could participate in the project without IOs formal consent
    provided Catalyst was kept behind the curtain. These same alleged
    representations were the subject of a misrepresentation claim which this court
    struck as not disclosing a reasonable cause of action against HMQ at para. 114
    of
Catalyst 2020
.

[4]

For that alleged misfeasance, Catalyst seeks
    $110 million in damages as well as a declaration that HMQ breached its legal
    obligations and duties to Catalyst.

[5]

Catalysts pleading alleges that HMQs directions
    or instructions to IO not to consent to DKDs request that Catalyst participate
    in the financing were unlawful and in bad faith on the basis that HMQ knew
    that:

a.

Catalyst had participated in the financing of DKDs
    bid, that DKDs bid was selected in part because of the financing, and that IO
    and HMQ had benefitted from the terms of the bid;

b.

IO told DKD that IO and HMQ did not have
    concerns with the source of funding or funders, including Catalyst; had decided
    that Catalyst could participate without IOs formal consent provided Catalyst
    was kept behind the curtain; and would raise no issue or difficulty if
    Catalyst were to participate in this manner. HMQ also knew that these Governmental
    Representations would be communicated to and relied on by Catalyst;

c.

the decision not to consent to Catalysts
    participation was made based on factually inaccurate information and
    assertions and irrelevant considerations;

d.

Catalyst was relying on DKD, and despite DKDs
    request for Catalyst to provide financing, DKD did not want Catalyst to provide
    financing and HMQ knew that not consenting to Catalyst improperly favoured DKD;
    and

e.

the decision was specific to and would cause
    harm to Catalyst.

[6]

Catalyst has made a similar claim of misfeasance
    in public office as against IO. That pleading was not addressed in the motion
    below.

[7]

The motion judge concluded that the second
    amended statement of claim as against HMQ should be struck on the ground that
    it discloses no reasonable cause of action against that defendant. In his view,
    HMQ was entitled to make decisions that targeted Catalyst and that it knew
    would exclude Catalyst from participation in the project and harm its financial
    interests, provided that it acted only in the public interest and not in a way
    that was inconsistent with the duties of the public office. The fact that HMQ
    knew that a decision to exclude Catalyst would harm Catalysts financial
    interests and advance those of DKDs does not, without more, amount to a
    decision taken for an improper purpose. In making decisions, HMQ was not
    required to have regard to Catalysts interests. The motion judge concluded
    that the facts pleaded in the second amended statement of claim did not
    plausibly support the conclusion that HMQ representatives excluded Catalyst
    from the project for reasons other than the public good. Nor did the pleading
    offer material facts to show that HMQ representatives acted unlawfully, in bad
    faith, or in other ways inconsistent with their office. Drawing such a
    conclusion based on the facts pleaded would be purely speculative.

[8]

As a result, the motion judge determined that
    the second amended statement of claim disclosed no reasonable cause of action
    against HMQ for misfeasance in public office.

[9]

The motion judge went on to find that, had he
    not struck the claim for disclosing no reasonable cause of action, he would
    have held that the
Crown

Liability and Proceedings Act, 2019
,
    S.O. 2019, c. 7, Sched. 17, applied to Catalysts claim against HMQ and that,
    pursuant to s. 17, the claim would be stayed and leave to proceed would have to
    be sought.

Issues

[10]

On appeal, Catalyst argues that the motion judge
    erred in several respects. Specifically, Catalyst argues that the motion judge
    erred:

a.

by misapplying his prior decision in
CUPE v.
    HMQ
, 2017 ONSC 4874, 40 C.C.L.T. (4th) 86, affd 2018 ONCA 309, 431 D.L.R.
    (4th) 12, to the case before him;

b.

by failing to follow the principles of law that
    apply to claims of misfeasance in public office;

c.

by treating the claim as being akin to a tender
    case;

d.

by concluding that the amended pleading
    contained bald allegations; and

e.

by holding that the
Crown Liability and
    Proceedings Act
applied to the claim.

[11]

In my view, the appeal must be dismissed. As I
    will explain, the motion judge did not misinterpret the relevant jurisprudence
    and did not err in concluding that the facts pled, if taken as true, fail to
    make out the elements of a claim for misfeasance in public office.

The Law

[12]

The law governing the appeal is not in dispute.
    Pursuant to r. 21 of the
Rules of Civil Procedure
, R.R.O. 1990, Reg.
    194, a claim will be struck only where it is plain and obvious that the pleaded
    facts, taken as true, do not disclose a reasonable cause of action. In making
    the determination, the motion judge is required to read the claim generously,
    making allowances for drafting inadequacies:
Nash v. Ontario
(1995)
, 27 O.R. (3d) 1 (C.A.), at p. 7.

[13]

As this court set out in
L. (A.) v. Ontario
    (Minister of Community and Social Services)
(2006)
, 218 O.A.C. 150 (C.A.), at para. 35, leave to
    appeal refused, [2007] S.C.C.A. No. 36:

The tort of
    misfeasance in public office is founded on the principle that those that hold
    public office and exercise public functions are subject to the law and must not
    abuse their powers to the detriment of ordinary citizens.

[14]

The elements of the misfeasance tort were set
    out by the Supreme Court of Canada in
Odhavji Estate v. Woodhouse
,
    2003 SCC 69, [2003] 3 S.C.R. 63. The court explained that the tort of
    misfeasance in public office can arise in one of two ways. What it called Category
    A involves conduct that is specifically intended to injure a person or a class
    of persons. Category B involves a public officer who acts with knowledge both
    that she or he has no power to do the act complained of and that the act is
    likely to injure the plaintiff. The court explained, at para. 23, that there
    are elements common to both forms of the tort:

First, the public
    officer must have engaged in deliberate and unlawful conduct in his or her
    capacity as a public officer. Second, the public officer must have been aware
    both that his or her conduct was unlawful and that it was likely to harm the
    plaintiff. What distinguishes one form of misfeasance in public office from the
    other is the manner in which the plaintiff proves each ingredient of the tort.

[15]

The court in
Odhavji
went on to explain
    that the requirement that the defendant must have been aware that his or her
    conduct was unlawful reflects the well-established principle that misfeasance
    in public office requires an element of bad faith or dishonesty. The fact
    that a public official makes a decision that harms a member of the public is
    not, in and of itself, a basis to infer bad faith. As the court stated at para.
    28:

In a democracy,
    public officers must retain the authority to make decisions that, where
    appropriate, are adverse to the interests of certain citizens. Knowledge of
    harm is thus an insufficient basis on which to conclude that the defendant has acted
    in bad faith or dishonestly. A public officer may in good faith make a decision
    that she or he knows to be adverse to interests of certain members of the
    public.
In order for the conduct to fall within the
    scope of the tort, the officer must deliberately engage in conduct that he or
    she knows to be inconsistent with the obligations of the office.

[16]

In
Pikangikum First Nation v. Nault
,
    2012 ONCA 705, 298 O.A.C. 14
,
at para. 77, leave to
    appeal refused, [2013] S.C.C.A. No. 10, this court explained that:

The tort of
    misfeasance of public office is difficult to establish. The plaintiff must
    prove more than mere negligence, mismanagement or poor judgment. To succeed,
    the plaintiff must demonstrate that the defendant knowingly acted illegally and
    in bad faith chose a course of action specifically to injure the plaintiff.

Analysis

[17]

Contrary to the appellants submissions, the
    motion judge referenced and correctly applied the relevant jurisprudence. He
    did not, as the appellant suggests, misapply the decision in
CUPE
. His
    reference to that decision was simply for the uncontroversial principle that:

[C]are must be
    taken to focus on the material facts pleaded and avoid giving undue weight to
    conclusory statements or descriptive characterizations. A bald assertion that a
    public official acted unlawfully and in bad faith must be accompanied by
    pleadings of material facts which plausibly support such a conclusion.

[18]

After reviewing the jurisprudence, the motion
    judge determined that the central issue to be decided was the sufficiency of
    the pleadings and, specifically, whether they were capable of supporting the
    bad faith component of the tort. In my view, the motion judge properly analysed
    the pleading according to the appropriate principles.

[19]

In para. 52 of his reasons, the motion judge
    fairly summarized the relevant paragraphs of the second amended statement of
    claim as follows:

[N]amed persons representing the Crown gave
    directions and instructions to IO knowing and intending that:

(1)

DKD wanted to exclude Catalyst from the project
    for its own economic benefit and the Crown representatives decisions and
    directives made it possible for DKD to achieve this objective;

(2)

the exclusion of Catalyst was contrary to the
    Governmental Representations;

(3)

Catalyst depended on DKD to protect and support
    its interests to be a participant in the project;

(4)

DKDs conduct and interests were in conflict
    with Catalysts interests;

(5)

their decisions and instructions were arrived at
    without regard for relevant facts pertaining to Catalysts participation in the
    DKD bid;

(6)

their actions were specific to and targeted at
    Catalyst and deliberately caused financial harm to Catalyst;

(7)

Catalysts involvement in the DKD bid had
    benefited DKD, IO and the Crown; and

(8)

their actions, decisions and instructions strongly favoured the
    interests of DKD to the detriment of Catalyst and intentionally disregarded and
    undermined (a) Catalysts lawful right to remain a participant in the DKD bid,
    (b) the Governmental Representation, (c) Catalysts reasonable belief in,
    reliance on, and expectations from the Governmental Representations; and (d) the
    obligations owed by DKD to Catalyst to protect Catalysts participation in the
    DKD bid.

[20]

Focussing on the bad faith component, the motion
    judge found nothing in the pleading to plausibly support the conclusion that HMQs
    representatives excluded Catalyst from the project for reasons other than the
    public good.

[21]

In its factum and in oral submissions, Catalyst
    reviewed the extensive pleadings contained in its second amended statement of
    claim and argued that the material facts pleaded against HMQ, when viewed in
    their totality, disclosed a reasonable cause of action. The claim contains
    specific allegations as to the timing and circumstances of Catalysts exclusion
    from the Athletes Village Project, and pleads that the actions of HMQ
    intentionally targeted Catalyst and that its removal after the successful
    bidder had been selected was wrongful. Catalyst maintains that the allegations
    identify specific individuals who gave directions and instructions to IO in
    order to harm Catalyst, and that their actions did in fact harm Catalyst.
    Catalyst further argues that the material facts as pleaded support the
    conclusion that HMQs actions were not solely for the public good but, rather,
    were specifically directed at frustrating Catalysts contractual rights in the
    Athletes Village Project at the instance of DKD. This, Catalyst submits,
    constitutes a Category A misfeasance in public office claim as set out by the
    Supreme Court of Canada in
Odhavji
because a public officer does not have the authority to exercise his or her
    power to harm a member of the public
.

[22]

Catalyst maintains that its claim against HMQ is
    sufficiently detailed by pointing to
Trillium Power Wind Corporation v.
    Ontario (Natural Resources)
, 2013 ONCA 683, 117 O.R. (3d) 721, and
Granite
    Power Corp. v. Ontario
(2004), 72 O.R. (3d) 194 (C.A.), leave to appeal
    refused, [2004] S.C.C.A. No. 409, where, it argues, this court allowed similar
    claims to proceed.

[23]

In my view, the motion judge did not err in concluding
    that the second amended statement of claim does not effectively plead the
    required element of bad faith or unlawful conduct. The pleadings, while
    extensive, do not provide the necessary factual underpinning to make out the
    tort of misfeasance in public office against HMQ.

[24]

The material facts contained in the pleadings,
    if accepted as I must on a r. 21 motion, certainly support the claim that HMQ
    knew that its decision not to consent to Catalysts inclusion in the project
    would harm Catalyst. However, neither HMQs decision to specifically exclude
    Catalyst from the project, nor its knowledge of the potential harm this
    decision would cause, are enough to ground the tort of misfeasance in public
    office. Absent bad faith, such conduct is not inconsistent with the office of a
    public actor.

[25]

Although I acknowledge that various paragraphs
    of the pleadings also allege that HMQ deliberately caused harm to Catalyst,
    targeted Catalyst and that HMQs conduct was unreasonable, arbitrary,
    deliberate, unlawful and in bad faith, these allegations are not supported
    by the facts as pleaded. A proper pleading of the tort requires more than bald
    allegations of bad faith and unlawful conduct.

[26]

As explained at para. 103 of
Gratton-Masuy
    Environmental Technologies Inc. v. Ontario
, 2010 ONCA 501, 101 O.R. (3d)
    321, leave to appeal requested but appeal discontinued, [2010] S.C.C.A. No. 397,
    broadly cast allegations of bad faith, malice and bias based merely on
    assumptions and speculation about the motivations underlying the conduct will
    not suffice.

[27]

Despite the lengthy pleadings, a careful reading
    reveals no material facts from which a finding or inference can be drawn that
    the alleged decision and instructions were motivated by the desire to cause harm
    and injure Catalyst, that they were made in bad faith, or that they were made for
    some other purpose inconsistent with the obligations of public office.

[28]

It is noteworthy that, at para. 85(1)-(5) of the
    second amended statement of claim, Catalyst alleges that HMQ refused to consent
    to its participation in the project based on factually inaccurate information. Making
    decisions on bad or incorrect information does not, of course, constitute bad
    faith.

[29]

Having advanced this as a possible explanation, Catalyst
    appears to discount it later in its pleading. At paras. 120 and 150, Catalyst
    pleads that HMQ made decisions and gave instructions knowing that these were
    arrived at without regard for the relevant facts pertaining to Catalysts
    participation in the DKD bid, as pleaded in paras. 85(1)-(5). Catalyst further
    claims that HMQ knew or ought to have known that its factual information and
    assumptions were inaccurate and deliberately relied on them, nonetheless.
    Again, the suggestion that HMQ knew that it was relying on incorrect
    information for the alleged instructions and directions, and nonetheless acted
    on it in bad faith, is simply a bald allegation. No material facts are pleaded
    that plausibly support this claim nor explain why one would look beyond the
    reasons that HMQ gave for its decision.

[30]

Moreover, at para. 120(11)(b), Catalyst pleads
    that, in excluding it from participating in the project, HMQ intentionally
    disregarded and undermined the Governmental Representations. However, other
    than the bald allegation at para. 120(10) that the alleged actions, decisions,
    directions and instructions were for unlawful and improper purposes, the
    second amended statement of claim offers no material facts to support the
    suggestion that HMQ deliberately engaged in conduct that [it] knows to be
    inconsistent with the obligations of the office:
Odhavji
at para. 28.

[31]

I turn now to
Trillium and Granite
, the
    cases relied on by Catalyst. In my view, those cases are of no assistance to
    Catalyst. They describe quite different situations in that the pleadings
    disclosed that government agents targeted the plaintiffs in a manner inconsistent
    with the duties of their office. In other words, there were material facts
    pleaded that could plausibly support a finding of bad faith.

[32]

In
Trillium
, for example, the pleading
    went beyond a bald allegation that, in deciding to suspend or cancel the
    provinces wind power program, the government had specifically and deliberately
    targeted
Trillium

in bad faith
. Trillium alleged that the
    government:

[S]pecifically targeted
    Trillium by cancelling Ontarios wind power projects in order to undercut
Trilliums
pending financing and thereby
    place
Trillium
in a position
    where it would not have the resources to litigate against Ontario: at para.
    36(b).

[33]

This court considered that these facts, taken as
    true, provided sufficient support for the allegation that the decision was not
    made in good faith but rather, was made with the specific intention of harming
Trillium
.

[34]

Similarly, in
Granite
, the court
    allowed the claim to proceed because the statement of claim contained a
    plausible explanation in support of the allegation that the ministers decision
    was inconsistent with the duties of his office and was targeted to harm
Granite
by interfering with its
    contractual rights. That alleged motivation was:

[T]o put
Granite
out of business long before the
    expiry of its agreement in 2004 in order to fulfill the ministers pre-determined
    policy that there would be no room in the new electricity regime in Ontario
    for small private utilities: at para. 40.

[35]

The court then listed several facts pleaded
    which supported the claim and satisfied the court that there existed a narrow
    window of opportunity for Granite to make out its claim in misfeasance.

Conclusion

[36]

Therefore, I agree with the motion judge that it
    is plain and obvious that the allegations against HMQ cannot succeed. I would
    dismiss the appeal and award the respondent its costs in the agreed amount of
    $10,000 inclusive of disbursements and appropriate taxes.

[37]

As I have concluded that the second amended
    statement of claim discloses no reasonable cause of action against HMQ, I need
    not address the appellants other ground of appeal: that the motion judge erred
    in applying the provisions of the
Crown Liability and Proceedings Act,

2019,
to Catalysts claims against HMQ. I should not, however be taken
    as agreeing with the motion judges findings on that issue.

Released: February 28, 2022 P.R.

Paul
    Rouleau J.A.

I agree K. van Rensburg J.A.

I agree L.B. Roberts J.A.


