Robertson v. Manitoba Keewatinowi Date:, 2011 MBCA 4

Citation: Robertson v. Manitoba Keewatinowi Date: 20110127 Okimakanak Inc. et al., 2011 MBCA 4 Docket: AI 10-30-07367 IN THE COURT OF APPEAL OF MANITOBA Coram: Mr. Justice Michel A. Monnin Madam Justice Freda M. Steel Madam Justice Holly C. Beard BETWEEN : CRYSTAL ROBERTSON ) ) F. J. Trippier and (Plaintiff) Appellant ) M. E. Low ) for the Appellant - and - ) ) MANITOBA KEEWATINOWI ) J. I. Jardine OKIMAKANAK INC. ) for the Respondent ) (Defendant) Respondent ) ) Appeal heard: - and - ) October 21, 2010 ) RICHARD HART ) ) Judgment delivered: (Defendant) ) January 27, 2011 BEARD J.A. I.

THE ISSUE 1 This is an appeal from an order striking the plaintiff’s statement of claim on the basis that it did not disclose any reasonable cause of action and/or that it was scandalous, frivolous and/or vexatious. 2 The plaintiff has raised the following issues on this appeal: (

i) what is the applicable standard of review; (ii) what is the test to be applied (

a) on a motion to strike a statement of claim as scandalous, frivolous or vexatious under Rule 25.11(

b) of the Queen’ Bench Rules ; and (

b) on a motion to strike a statement of claim for failing to disclose a reasonable cause of action under Rule 25.11(d); (iii) did the motions judge err in finding that the statement of claim failed to disclose a reasonable cause of action against Manitoba Keewatinowi Okimakanak Inc. (MKO) based on vicarious liability; (iv) did the motions judge err in finding that the statement of claim failed to disclose a reasonable cause of action against MKO based on negligence; and (

v) did the motions judge err in finding that the statement of claim failed to disclose a reasonable cause of action against MKO based on breach of fiduciary duty? 3 A further issue that arose from the oral arguments was that of what constitutes a material fact as opposed to evidence, as

referred to in Rule 25.06(1) of the Queen’s Bench Rules , and what constitutes a conclusion of law, as referred to in Rule 25.06(3). 4 The defendant, Richard Hart, is not a party to this appeal. II. THE FACTS 5 On a motion to strike a pleading under Rule 25.11(d), the issue is decided on the facts as set out in the pleading, and the matter proceeds on the basis that the plaintiff will be able to prove those facts.

In the case of a motion under Rule 25.11(b), the moving party is entitled to file an affidavit in support of the motion in addition to relying on the pleading, although no affidavit has been filed in this case. The facts set out herein are those contained in the statement of claim. 6 The plaintiff and the defendant, Richard Hart, were both employed by MKO, Mr. Hart as the executive director and the plaintiff as his executive assistant. The plaintiff alleges that, on November 27, 2008, she and Mr. Hart made arrangements, while they were at work, to socialize after work to celebrate her birthday.

The two of them, together with the plaintiff’s partner, went to a restaurant for dinner and then they all went to Mr. Hart’s residence. During the morning of November 28, 2008, while at Mr. Hart’s residence, Mr. Hart engaged in sexual intercourse with the plaintiff without her consent. 7 The plaintiff notified MKO about this assault, and MKO retained an independent investigator to investigate the incident and report on the findings. Upon receiving the report, Mr. Hart’s employment was terminated. 8 The plaintiff has sued both Mr. Hart and MKO for damages.

The basis of her claim against MKO is as follows: - that there was a fiduciary relationship between her and MKO and that MKO breached its duty to her; - that MKO owed her a duty of care and that it breached that duty to her; and - that MKO is vicariously liable for the wrongful conduct of Mr. Hart. 9 The statement of claim included reference to the report prepared by the independent investigator hired by MKO. The investigator found that Mr. Hart had committed sexual harassment against the plaintiff in contravention of MKO’s Respectful Workplace Policy and that a nexus to the workplace was established. Mr.

Hart was fired based, at least in part, on the report and the plaintiff argued that this finding supported her position that there was a connection between the employment and the sexual assault. MKO objected to the inclusion of this information in the statement of claim on the basis that it was hearsay and, therefore, inadmissible. I note, however, that MKO did not file a motion to have these allegations expunged. 10 The preparation of the report and the subsequent termination of Mr. Hart’s employment are facts that are relevant to the steps taken by MKO to respond to the plaintiff’s complaint about Mr.

Hart’s actions. As it relates to the legal conclusion that there was a nexus between the sexual assault and the workplace, however, the report is the opinion of the investigator on one of the issues to be determined by this court and, as such, it is irrelevant to this motion. III.

STANDARD OF REVIEW 11 MKO applied under Rule 25.11 of the Queen’s Bench Rules to strike the statement of claim, which rule states as follows: STRIKING OUT A PLEADING OR OTHER DOCUMENT 25.11 The court may on motion strike out or expunge all or part of a pleading or other document, with or without leave to amend, on the ground that the pleading or other document, (

a) may prejudice or delay the fair trial of the action; (

b) is scandalous, frivolous or vexatious; (

c) is an abuse of the process of the court; or (

d) does not disclose a reasonable cause of action or defence. 12 MKO limited its motion to the grounds set out in Rule 25.11(

b) and (d). 13 The parties were not in agreement as to the appropriate standard of review. The plaintiff argued that the only question posed by the motion is whether the statement of claim states a legally sufficient claim.

She argued that, given that the motions judge does not weigh any evidence in deciding the motion but addresses a purely legal question of whether, assuming the plaintiff can prove the allegations pled in the statement of claim, she will have established a cause of action entitling her to some form of relief from MKO, the applicable standard of review is that of correctness. 14 MKO takes the position that an order made under Rule 25.11 is a discretionary order, as evidenced by the discretionary wording, and that such orders are to be shown deference and ought to be interfered with only if this court is satisfied that the motions judge misdirected herself or her decision was so clearly wrong as to amount to an injustice. 15 This court has most recently dealt with the standard of review on an appeal from a decision on a motion to strike a pleading in Chrysler Canada Inc. v.

Eastwood Chrysler Dodge Ltd. et al., 2010 MBCA 75 . In that decision, Chartier J.A. described the standard of

review as follows (at paras. 23-24): The selection of the appropriate standard of review depends largely on the nature of the question in issue: whether it is a question of law,fact or mixed law and fact. Questions of law are reviewed for correctness. Questions of fact (including inferences drawn from theevidence) are reviewed only for palpable and overriding error.

Questions of mixed fact and law are also reviewed only for palpable andoverriding error, unless an extricable or severable legal error from the factual determination is evident, in which case deference is notowed and the correctness standard can be used. See Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235.

The first issue is whether the motions judge erred by failing to strike out the counterclaim for disclosing no reasonable cause of action.The motions judge has to decide whether it was plain and obvious the action did not disclose a reasonable cause of action (see Hunt v.Carey Canada Inc., (SCC), [1990] 2 S.C.R. 959 at 980, and Driskell v. Dangerfield et al., 2008 MBCA 60, 228 Man.R.(2d) 116 at para. 11).

Although the question whether the pleading discloses a cause of action is one of law, the question whether itwas plain and obvious that the pleading disclosed no reasonable cause of action is essentially a matter of discretion.

As a result,the standard of review on the motions judge’s decision on whether to strike out the counterclaim for disclosing no reasonablecause of action can be expressed as follows: absent an error in law or a palpable and overriding error on a question of fact, thedecision of the motions judge is entitled to deference and this court will not intervene unless the decision is so clearly wrong as toamount to an injustice. See Towers Ltd. v. Quinton’s Cleaners Ltd. et al., 2009 MBCA 81, 245 Man.R. (2d) 70 at paras. 24-28. [emphasis added] 16 In Towers Ltd. v.

Quinton’s Cleaners Ltd. et al., 2009 MBCA 81, 245 Man.R. (2d) 70, this court described the standard forintervention in a discretionary decision as follows (at para. 28): The standard for intervention in a discretionary decision is very high. It is not enough that the appellate judges think the trial (ormotions) judge simply reached a wrong result; there rarely is, in truly discretionary matters, a “right” or “wrong” result. It is not enoughthat the appellate judges would have decided differently; they are to respect, and not replicate, the unique role of trial judges.

Assumingthere have been no reversible errors on fact or law, the appellate judges are not to usurp the trial judge’s role in discretionarymatters, barring a decision so “clearly wrong” as to yield a truly unjust result. [emphasis added] (See also, Bloomer Hotel Corp. et al. v. Boehm Hotel Corp. et al., 2009 MBCA 68, 240 Man.R. (2d) 69 at para. 14; Fegol v. NationalPost Co. et al., 2009 MBCA 46, 240 Man.R. (2d) 22 at para. 5; and Linda S. Abrams & Kevin P. McGuinness, Canadian CivilProcedure Law (Markham: LexisNexis Inc., 2008) at 461.) IV.

THE TEST TO BE APPLIED UNDER RULE 25.11 17 The parties were in agreement that the authority for the test to be applied under Rule 25.11 is Kreiner v. Auditor General(Man.), 2007 MBCA 154, 220 Man.R. (2d) 302, in which MacInnes J.A., for the court, stated as follows (at paras. 2-3): For relief under Queen’s Bench Rule 25.11(d), the appellants need show that it is plain and obvious or beyond doubt that there is nocause of action disclosed.

To strike out on the ground of frivolity under Queen’s Bench Rule 25.11(b), the appellants must show that there is no probablejustification at law for the claim advanced. 18 This same test was further explained by this court in Driskell v. Dangerfield et al., 2008 MBCA 60, 228 Man.R. (2d) 116 (atparas. 11-13): There is no disagreement about the test to be applied in deciding whether the assertion of a direct duty to disclose on the part of the[Winnipeg Police Service] to Driskell should be struck out at the pleading stage as disclosing no reasonable cause of action.

This test isconveniently set forth in the leading authority of Hunt v. T & N plc et al., (SCC), [1990] 2 S.C.R. 959; 117 N.R. 321(at p. 980): ... assuming that the facts as stated in the statement of claim can be proved, is it “plain and obvious” that the plaintiff’s statement of claimdiscloses no reasonable cause of action? As in England, if there is a chance that the plaintiff might succeed, then the plaintiff should notbe “driven from the judgment seat”.

Neither the length and complexity of the issues, the novelty of the cause of action, nor the potentialfor the defendant to present a strong defence should prevent the plaintiff from proceeding with his or her case. Only if the action iscertain to fail because it contains a radical defect ... should the relevant portions of a plaintiff’s statement of claim be struck out underRule 19(24)(a). As also explained in Hunt (at p. 989): ... It is not for this Court on a motion to strike out portions of a statement of claim to reach a decision one way or the other as to theplaintiff's chances of success.

As the law that spawned the “plain and obvious” test makes clear, it is enough that the plaintiff has somechance of success.

The general principles to be adverted to on an application to strike a cause of action include that the facts as pled be taken to be true, thestatement of claim is to be read generously to allow for some lack of precision in language, and that neither the complexity of the issuesnor the novelty of causes of action should by themselves preclude a plaintiff from proceeding with the action. See Hunt andMackinnon v.

Ontario Municipal Employees Retirement Board (Ont.) et al. (2007), 2007 ONCA 874 , 232 O.A.C. 3; 288D.L.R. (4th) 688; 2007 ONCA 874. 19 This is the test that was referred to by the motions judge in her oral decision, wherein she stated that “[i]t is plain andobvious to me that the plaintiff’s case cannot succeed under negligence or under breach of any fiduciary duty” and that, “[i]n my view,therefore, on the totality, it is plain and obvious to me that the action against MKO cannot succeed in the circumstances of this case.” V.

RULE 25.06 – MATERIAL FACTS AND EVIDENCE 20 After hearing the arguments of plaintiff’s counsel, it was clear that there was an issue as to whether the material facts, ascontained in the statement of claim, were sufficient to support the claim, and what type of statements would constitute evidence asopposed to material facts.

The contents of the pleadings, including a statement of claim, are governed by Rule 25.06 of the Queen’sBench Rules, the relevant parts of which state as follows: Material facts 25.06(1) Every pleading shall contain a concise statement of the material facts on which the party relies for a claim or defence, but notthe evidence by which those facts are to be proved.

Pleading law 25.06(3) A party may raise any point of law in a pleading, but conclusions of law may be pleaded only if the material facts supportingthem are pleaded. 21 In the text Canadian Civil Procedure Law, the authors explain the contents of a statement of claim as follows (at para. 5.78): The statement of claim is intended to set out the plaintiff’s view of the relevant events and other facts that give rise to the cause ofaction. It is intended to provide a full and detailed breakdown of the case, and at the very least must allege sufficient facts to constitute abasis for the claim.

The pleading must be sufficiently specific to establish the cause of action. It is critical that the statement of claiminclude allegations of all of the ingredients of the cause of action upon which reliance is placed.

For instance, in a case based onnegligence, the plaintiff must plead facts that, if true, would be sufficient to support a finding that the defendant owed theplaintiff a duty of care, that the defendant had acted (or refrained from acting) in breach of that duty, that in doing so it hascaused the plaintiff to suffer injury, loss or other damage (“loss”), that the loss was sufficiently foreseeable that it should not bebarred as too remote, and that the loss is of a kind of which the law will take cognizance.

These pleadings are necessary to bring theclaim within the general principles that govern negligence claims, specifically that there must have been a sufficiently close relationshipbetween the parties so that it would have been within the reasonable contemplation of the defendant, at the time of the act or inactioncomplained of, that carelessness on his or her part might cause damage to the plaintiff or a person in the plaintiff’s position. .... [emphasis added] 22 What constitutes a material fact in a given case depends on the circumstances of that case.

As is stated in Canadian CivilProcedure Law (at para. 5.18): .... The rule of thumb is that a fact is material if it is one which must be proved in order to establish a complete cause of action or obtaina particular remedy, so that if it were omitted, the pleading would be defective. A statement of claim must contain all facts which,assuming they can be proven, would be required to constitute a good cause of action. .... 23 I. H.

Jacob, Bullen and Leake and Jacob’s Precedents of Pleadings, 12th ed. (London: Sweet & Maxwell Limited, 1975)explains the statement of claim as follows (at p. 51): The statement of claim … constitutes the document in which the plaintiff formulates the factual grounds on which he bases his claim orthe relief or remedy which he seeks against the defendant …. … [T]he statement of claim must state in

summary form the material factson which the plaintiff relies for his claim …. It is not enough, however, for the statement of claim merely to state the material facts andto claim specific relief or remedy; there must be an inner connection, a legal nexus, between the facts relied on and the relief or remedyclaimed. The material facts relied on must disclose a reasonable cause of action against the defendant, otherwise the statement of claimis liable to be struck out precisely on the ground that it does not disclose a reasonable cause of action.

The statement of claim mustshow, on the basis of the material facts alleged, a viable legal and enforceable claim against the defendant. The basic function of the statement of claim is, therefore, to state in

summary form the material facts on which the plaintiff relies whichtogether constitute a cause of action entitling the plaintiff to the relief or remedy claimed. It is, of course, also the function of thestatement of claim to state such material facts to enable the defendant to know the case that he has to meet, but its central purpose is toformulate a cause of action against the defendant. ....

24 The author goes on to explain the meaning of a cause of action as follows (at pp. 53-54): A cause of action has been defined as being: “every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the court. It does not comprise every piece of evidence which is necessary to prove each fact, but every fact which is necessary to be proved”; or perhaps more accurately as being, “simply a factual situation the existence of which entitles one person to obtain from the court a remedy against another person.” . . . . .

It is necessary for the statement of claim to fulfil its function that the elements or components, which together constitute the substantiveright which is being claimed or enforced, must be alleged as the material facts of the pleading. What these “elements or components”are will depend upon the particular substantive right which is being raised in the pleading.

The pleader, therefore, who issettling a statement of claim has, as it were, to look over his shoulder and examine the substantive law in order to ascertain andallege the material facts which constitute the elements or components of the particular substantive right which he intends to raiseand to form the basis of the claim for the relief or remedy against the defendant.

Put shortly, therefore, it may be said that a causeof action consists of the factual elements or components of a legal claim or the factual constituents of a legal right, or the facts whichconstitute the essential ingredients of an enforceable right or claim. [emphasis added] 25 In

summary, one must first determine the essential elements or ingredients of the claim being advanced, and then set outsufficient facts about the specific events that form the basis of the claim so that, if proved, they will be sufficient to constitute all of theelements or ingredients of that claim. Those facts are the material facts. In this case, for example, the allegations of various breaches inpara. 14 of the statement of claim are conclusory statements that are not supported by any facts related to this specific employment toshow how this employer breached the duties.

Those are examples of material facts that are missing from this pleading. The conclusorystatements themselves cannot be taken as material facts that support the cause of action. VI. DID THE MOTIONS JUDGE ERR IN FINDING THAT THE STATEMENT OF CLAIM FAILED TO DISCLOSE AREASONABLE CAUSE OF ACTION AGAINST MKO BASED ON VICARIOUS LIABILITY? Standard of Review 26 Both parties have agreed that the leading case on the vicarious liability of an employer for acts of the employee is that ofBazley v. Curry, (SCC), [1999] 2 S.C.R. 534, aff’g B. (P.A.) v. Curry (1997), (BC CA), 30B.C.L.R. (3d) 1 (C.A.).

As this is the decision on which the motions judge based her decision on this issue, she applied the correct law. The motions judge based her decision on the facts in the statement of claim, so that there are no facts in dispute and, certainly, nopalpable and overriding error on any question of fact. Given that there is no question of law and no live issue of a palpable or overridingerror on a question of fact, the sole question is whether it is plain and obvious that the pleading discloses no reasonable cause of action,or whether it is scandalous, frivolous or vexatious.

This is an exercise of discretion which demands deference and this court is entitled tointervene only if the decision is so clearly wrong as to amount to an injustice. The Decision of the Motions Judge 27 The motions judge’s reasons for staying the claim of vicarious liability are as follows: Both counsel agree that the seminal case is Bazley v. Curry, a 1999 Supreme Court of Canada decision. The principles are set out inparagraph 41: The fundamental question is whether the wrongful act is sufficiently related to (the) conduct authorized by the employer to justify theimposition of vicarious liability.

And further it goes on to say that: Incidental connections to the employment enterprise, like time and place (without more), will not suffice. In my view we do not even have that here. The allegation is that a conversation about getting together for drinks for Ms. Robertson’s birthday took place at the office. That is it. The socializing was not at the office, it was not during business hours and it was not an event put on by MKO. As was said in Bazley: … to impose liability for costs unrelated to the risk …

And I would substitute the generally foreseeable costs of business: … would effectively make the employer an involuntary insurer . The Plaintiff’s Position 28 According to the plaintiff, although the motions judge referred to the Bazley case in her reasons, she erred when she placed undue emphasis on the location and time of the assault and the fact that only one single assault took place.

It was argued that it is not necessary for there to have been multiple assaults or for the assault to have taken place at the workplace during work hours and that, while these may be factors in finding vicarious liability, they are not prerequisites. The plaintiff argued that she has pled that her employment duties and those of Mr. Hart created a relationship of intimacy, dependency and trust, that she and Mr. Hart worked together on a daily basis, that she reported directly to Mr. Hart, and that Mr. Hart was in a position of authority to her and within the MKO organization.

She also argued that it is this type of power imbalance, created by the employment relationship, which has been found to lead to a situation where the employer will be vicariously liable for the conduct of the employee. She said that she trusted and relied on Mr. Hart and he took advantage of her trust and vulnerability. Finally, she argued that, while she did not allege that MKO was aware that Mr.

Hart had a predisposition to commit sexual assault, foreseeability is not a prerequisite to finding vicarious liability. 29 The plaintiff pointed to a number of cases in which the courts held employers vicariously liable for wrongs perpetrated by employees as examples of the application of the principles of vicarious liability. While acknowledging that none are factually similar to this case, she argued that she should be permitted to proceed with her case, as the law in this area is developing and the fact that this is a novel case should not preclude her from being permitted to proceed.

MKO’s Position 30 MKO argued that the requirements for finding vicarious liability, as they are set out in Bazley , are stated as follows (at paras. 42-43, 45): Applying these general considerations to sexual abuse by employees, there must be a strong connection between what the employer was asking the employee to do (the risk created by the employer’s enterprise) and the wrongful act. It must be possible to say that the employer significantly increased the risk of the harm by putting the employee in his or her position and requiring him to perform the assigned tasks.

The policy considerations that justify imposition of vicarious liability for an employee’s sexual misconduct are unlikely to be satisfied by incidental considerations of time and place. For example, an incidental or random attack by an employee that merely happens to take place on the employer’s premises during working hours will scarcely justify holding the employer liable. Such an attack is unlikely to be related to the business the employer is conducting or what the employee was asked to do and, hence, to any risk that was created.

Nor is the imposition of liability likely to have a significant deterrent effect; short of closing the premises or discharging all employees, little can be done to avoid the random wrong. Nor is foreseeability of harm used in negligence law the test. What is required is a material increase in the risk as a consequence of the employer’s enterprise and the duties he entrusted to the employee, mindful of the policies behind vicarious liability.

What factors are relevant to whether an employer’s enterprise has introduced or significantly exacerbated a risk of sexual abuse by an employee? (Again, I speak generally, supplementing the factors suggested above.) It is obvious that the risk of an employee sexually abusing a child may be materially enhanced by giving the employee an opportunity to commit the abuse. There are many kinds of opportunity and the nature of the opportunity in a particular case must be carefully evaluated in determining whether it has, in fact, materially increased the risk of the harm that ensued.

If an employee is permitted or required to be with children for brief periods of time, there may be a small risk of such harm – perhaps not much greater than if the employee were a stranger. If an employee is permitted or required to be alone with a child for extended periods of time, the opportunity for abuse may be greater. If in addition to being permitted to be alone with a child for extended periods, the employee is expected to supervise a child in intimate activities like bathing or toileting, the opportunity for abuse becomes greater still.

As the opportunity for abuse becomes greater, so the risk of harm increases. Other factors may be important too, depending on the nature of the case. To require or permit an employee to touch the client in intimate body zones may enhance the risk of sexual touching, just as permitting an employee to handle large sums of money may enhance the risk of embezzlement or conversion.

This is the common sense core of the “mode of conduct” argument accepted by the trial judge in this case. (The same factor might of course be analyzed in terms of enhanced opportunity.) Time and place arguments may also be relevant in particular cases. The mere fact that the wrong occurred during working hours or on the jobsite may not, standing alone, be of much importance; the assessment of material increase in risk cannot be resolved by the mechanical application of spatial and temporal factors.

This said, spatial and temporal factors may tend to negate the suggestion of materially enhanced risk of harm, insofar as they suggest that the conduct was essentially unrelated to the employment and any enhanced risk it may have created (for example, the employee’s tort occurred offsite and after hours.) The policy considerations of fair compensation and deterrence upon which vicarious liability is premised may be attenuated or completely eliminated in such circumstances. 31 MKO’s position is that, given that it is admitted in the statement of claim that the incident took place outside of the workplace, during non-working hours, and at a purely social, non-work-related function, there are no allegations in the statement of claim which meet the requirements, set out in Bazley , to support a finding of vicarious liability. 32 As regards the other cases referred to by the plaintiff, MKO took the position that they were all distinguishable on the facts, which were substantially different from the facts in this case, and, as a result, they could not be taken as precedents for the application of Bazley to the facts in this case.

Analysis of Vicarious Liability 33 McLachlin J. (as she then was) summarized the test for a finding of vicarious liability in Bazley as follows (at para. 46 ): In

summary, the test for vicarious liability for an employee’s sexual abuse of a client should focus on whether the employer’s enterprise

and empowerment of the employee materially increased the risk of the sexual assault and hence the harm. The test must not be applied mechanically, but with a sensitive view to the policy considerations that justify the imposition of vicarious liability – fair and efficient compensation for wrong and deterrence. This requires trial judges to investigate the employee’s specific duties and determine whether they gave rise to special opportunities for wrongdoing.

Because of the peculiar exercises of power and trust that pervade cases such as child abuse, special attention should be paid to the existence of a power or dependency relationship, which on its own often creates a considerable risk of wrongdoing. 34 This test must be interpreted in light of her earlier statement regarding the required connection between the employment and the tort at issue (at para. 40): On the other hand, this analysis’s focus on what might be called “general cause”, while broader than specific foreseeability, in no way implies a simple “but-for” test: but for the enterprise and employment, this harm would not have happened.

This is because reduced to formalistic premises, any employment can be seen to provide the causation of an employee’s tort. Therefore, “mere opportunity” to commit a tort, in the common “but-for” understanding of that phrase, does not suffice: Morris v. C. W. Martin & Sons Ltd. , [1966] 1 Q.B. 716 (C.A.) ( per Diplock L.J.) . The enterprise and employment must not only provide the locale or the bare opportunity for the employee to commit his or her wrong, it must materially enhance the risk, in the sense of significantly contributing to it, before it is fair to hold the employer vicariously liable.

Of course, opportunity to commit a tort can be “mere” or significant. Consequently, the emphasis must be on the strength of the causal link between the opportunity and the wrongful act, and not blanket catch-phrases. When the opportunity is nothing more than a but-for predicate, it provides no anchor for liability .

When it plays a more specific role – for example, as permitting a peculiarly custody-based tort like embezzlement or child abuse – the opportunity provided by the employment situation becomes much more salient. [emphasis added] 35 In considering the application of these principles to the facts of the case, McLachlin J. stated as follows (at para. 57): The appropriate inquiry in a case such as this is whether the employee’s wrongful act was so closely connected to the employment relationship that the imposition of vicarious liability is justified in policy and principle.

From the point of view of principle, a prime indicator is whether the employer, by carrying on its operations, created or materially enhanced the risk of the wrong that occurred, such that the policy considerations of fair recovery and deterrence are engaged.

In answering this question, the court must have regard to how the employer’s enterprise increased opportunity to commit the wrong, and how it fostered power-dependency relationships that materially enhanced the risk of the harm. .... 36 I would summarize the requirements for a finding of vicarious liability, as they are set out in Bazley , as follows: - the test for vicarious liability for an employee’s sexual abuse of a client should focus on whether the employer’s enterprise and empowerment of the employee materially increased the risk of the sexual assault and hence the harm; - the enterprise and employment must not only provide the locale or the bare opportunity for the employee to commit his or her wrong, it must materially enhance the risk, in the sense of significantly contributing to it, before it is fair to hold the employer vicariously liable; - opportunity to commit a tort can be “mere” or significant; consequently, the emphasis must be on the strength of the causal link between the opportunity and the wrongful act, and not blanket catch-phrases – when the opportunity is nothing more than a but-for predicate, it provides no anchor for liability; - the appropriate inquiry in a case such as this is whether the employee’s wrongful act was so closely connected to the employment relationship that the imposition of vicarious liability is justified in policy and principle; - in determining the sufficiency of the connection between the employer’s creation or enhancement of the risk and the wrong complained of, subsidiary factors, which will vary with the case, may be considered, such as: (

a) the opportunity that the enterprise afforded the employee to abuse his or her power; (

b) the extent to which the wrongful act may have furthered the employer’s aims (and hence be more likely to have been committed by the employee); (

c) the extent to which the wrongful act was related to friction, confrontation or intimacy inherent in the employer’s enterprise; (

d) the extent of power; and (

e) the vulnerability of potential victims to wrongful exercise of the employee’s power; and - an incidental attack by an employee that merely happens to take place on the employer’s premises during working hours will scarcely justify holding the employer liable because such an attack is unlikely to be related to the business the employer is conducting or what the employee was asked to do and, hence, to any risk that was created; nor is the imposition of liability likely to have a significant deterrent effect as, short of closing the premises or discharging all employees, little can be done to avoid the random wrong. 37 The plaintiff provided several cases in which the courts have dealt with the question of an employer’s vicarious liability for a sexual assault committed by an employee.

In each of those cases, the courts found that special circumstances existed which materially enhanced the risk.

38 The court in Bazley held the employer liable for a sexual assault by the employee on a child in a residential home foremotionally troubled children. As part of his employment, the employee was required to do those things that a parent would do for achild, including intimate duties like bathing and tucking in at bedtime.

While the employee had no known history of sexual misconduct,the court found that the opportunity for intimate private control and the parental relationship and power that was required by the terms ofthe employment created a special environment that fostered the risk that led to the ultimate harm. The abuse was not a mere accident oftime and place, but the product of the special relationship of intimacy and respect that the employer fostered, as well as the specialopportunities for exploitation of that relationship. 39 In L. (J.) v.

Canada (Attorney General) (1999), (BC SC), 175 D.L.R. (4th) 559 (B.C.S.C.), the plaintiffwas a supply technician in the Canadian Armed Forces, and her immediate supervisor at the time of the assault was Master CorporalTalbot. It was found that he committed a number of acts of a sexual nature at work, including using his position of control in the officeto gain access to the plaintiff to kiss and physically touch her when others were not present.

In finding the Armed Forces vicariouslyliable for the sexual misconduct of Master Corporal Talbot, the court found that the command structure within the military could not beequated to that in a civilian corporation as the military demands complete deference to those in command, while relationships betweenadults in the civilian world do not feature this type of complete subordination. The trial judge found that military commanders are likeparents to their subordinates, such that it was appropriate to equate this relationship to that of a parent and child. 40 In Boothman v.

R., (FC), [1993] 3 F.C. 381 (T.D.), the plaintiff worked alone in the office with hersupervisor. Throughout the plaintiff’s employment, the supervisor insulted, humiliated and harassed her at work while she wasperforming her duties. The trial judge found that the employer knew him to be a difficult individual, abrasive in his behaviour, evasivevis-à-vis his responsibilities and prone to losses of temper.

The employer also knew that another employee working under this supervisorhad left her job after suffering a mental breakdown, and an internal memo by the supervisor’s own supervisor expressed a concern thatthe plaintiff was exhibiting the same behaviour as the other employee. During her employment, the plaintiff had reported a number ofdeficiencies in the supervisor’s management style to his supervisor which led to a disciplinary interview with the supervisor.

In a report,the interviewer stated that he had observed instances wherein the supervisor’s behaviour was a clear case of harassment of the plaintiff,and he described those incidents. In this case, which preceded Bazley, the court found the employer vicariously liable for the wrongscommitted by the plaintiff’s supervisor. 41 In John Doe v. Fifield, 2007 NLTD 195, 61 C.P.C. (6th) 218, the plaintiff sued the defendant and his employer for sexualassaults perpetrated on him over a number of years while he was a child.

The plaintiff and his family, and about half of his smallcommunity in Newfoundland, were adherents of the Salvation Army. The defendant was a cleric and/or employee of the Salvation Armyand in that role, he boarded with the plaintiff’s family for approximately nine months when the plaintiff was about nine years old. Afterthe defendant left the plaintiff’s home, he continued his employment with the Salvation Army and also remained a friend of the plaintiffand his family, visiting back and forth and seeing each other at church events.

In finding that the Salvation Army should be heldvicariously liable for the assaults, the judge found that they were not random acts by an employee of a church group. The defendantacknowledged that he groomed the plaintiff, which the court found could have started while the defendant was residing with theplaintiff’s family. The court also found that the defendant continued to foster his relationship with the plaintiff during functions of theSalvation Army, during which the cleric would be in charge of the youth attending from outside congregations. 42 MKO provided the case of Schultz v.

Miki, 2006 BCCA 122, 264 D.L.R. (4th) 201. In that case, the defendant employer wasthe owner of a rental property. He arranged for his cousin, who was a carpenter, to do some repairs to the premises, and while he wasworking on the premises, the carpenter sexually assaulted the tenant. The motions judge dismissed the plaintiff’s claim against thelandlord, which dismissal was upheld on appeal.

Southin J.A., for the court, stated the issue to be, “whether a landlord who sends hisemployee, of whom he knows nothing to his detriment, to repair leased premises is vicariously liable for a sexual assault by theemployee on the tenant” (at para. 13). Based on the authority in Bazley, Southin J.A. dismissed the claim against the landlord, stating asfollows (at paras. 15-17): The guiding authority now, when an issue arises of vicarious liability for the acts of an employee, is, of course, Bazley v. Curry, ... ,especially the passage at paragraphs 41-46.

Applying that passage to the evidence in this case, I am of the opinion that vicarious liability does not arise. The policy considerations offair compensation and deterrence are eliminated in the circumstances of this case. If the appellant’s arguments were to succeed, we would be dangerously close to imposing absolute liability on employers for theintentional torts of their employees. 43 It is clear that, to find vicarious liability, one must find material or significant facts or circumstances that relate to theemployment, otherwise the employer becomes an involuntary insurer.

Application to the Facts of This Case 44 In determining whether a statement of claim contains the required material facts to support the claim, it is necessary todetermine, firstly, the basis of the claim being advanced, and then, secondly, whether it contains all of the material facts required toprove that claim, that is, to constitute the cause of action.

In this case, what must be proved is that the employer’s enterprise and itsempowerment of the employee committing the tort materially increased the risk of the sexual assault and hence the harm beyond merelyproviding the opportunity to commit the tort. 45 Paragraphs 15 and 16 of the statement of claim in this case set out the following facts regarding the employment situation: 15. The plaintiff states that: (

a) at all material times Hart was an employee and agent of MKO;

(

b) the nature of the employment of Hart and the plaintiff by MKO encouraged Hart to stand in a position of respect and trust in relation to the plaintiff; (

c) MKO required Hart to exercise power or authority over the plaintiff for MKO’s successful operation; (

d) there existed a fiduciary relationship of power and dependency between Hart and the plaintiff; and (

e) the authority and power that Hart exercised over the plaintiff enhanced the opportunity for Hart’s battery and sexual assault of the plaintiff. 16. In the premises, the plaintiff states that MKO’s enterprise created, or materially enhanced, the risk of harm occurring to the plaintiff and that there is a connection or nexus between the employment enterprise and the assault and battery such that MKO is vicariously liable for the wrongful conduct of Hart . 46 Paragraphs 15(

d) and 16 are conclusions of law, not material facts. 47 The statement of claim describes Hart’s wrongful conduct as follows: 7. The plaintiff states that on November 27, 2008, Hart made arrangements to socialize with the plaintiff after work in celebration of the plaintiff’s birthday. The social arrangements were made at MKO offices during work hours. 8. Following work on November 27, 2008, Hart met with the plaintiff and the plaintiff’s partner at a local restaurant. After leaving the restaurant, Hart, the plaintiff and her partner attended Hart’s residence.

The plaintiff states that, during the morning of November 28, 2008, while at Hart’s residence, Hart engaged in sexual intercourse with the plaintiff without the plaintiff’s consent. 9. The plaintiff states that Hart knew or ought to have known that his conduct was unwelcome, humiliating and offensive and that it would cause the plaintiff physical, emotional and psychological harm and distress. 10. The plaintiff states that, in the premises, Hart intentionally inflicted unlawful force on the plaintiff of a sexual nature and his conduct constituted battery and assault.

The plaintiff therefore claims damages against the defendants on the basis of battery and assault. 11. The plaintiff states that she notified MKO of the battery and assault and as a result thereof MKO retained an independent investigator. On or about April 7, 2009, the plaintiff was advised that the independent investigator had determined that Hart had committed sexual harassment against the plaintiff in contravention of MKO’s Respectful Workplace Policy and that a nexus to the workplace was established. 12.

The plaintiff was further advised that as a result of the determination of the independent investigator, MKO terminated the employment of Hart with cause. 48 When one looks at the facts of the assault in relation to the factors set out in para. 41 of Bazley , as summarized in para. 35 of this decision, they do not support a finding that the employment went beyond providing a bare opportunity, such that they were sufficient to constitute a material enhancement of the risk. I note as follows: - while the common employment of the plaintiff and Mr.

Hart by MKO put them in contact with each other, that was the only connection between the assault and the employment – the assault did not occur in the workplace or during work hours; - there is no allegation of inappropriate behaviour by Mr. Hart towards the plaintiff on any prior occasion, whether at work or otherwise; - there is no allegation that the wrongful act furthered the employer’s aims, and clearly it did not; - there is no allegation or inference that the sexual assault was related to friction, confrontation or intimacy inherent in the employer’s enterprise; - there is no allegation that Mr.

Hart exercised any power in relation to the plaintiff beyond that which is required in every supervisory position; and - there is no allegation that the plaintiff was particularly vulnerable to the wrongful exercise of Mr. Hart’s power. 49 The only connections to the employment were that Mr. Hart was the plaintiff’s immediate superior with supervisory authority over her while at work and that the arrangements regarding the after-work celebration were made during work hours. These facts describe an ordinary employment relationship.

The statement of claim does not allege any facts that are specific to this case, such as special circumstances related to the plaintiff or Mr.

Hart personally, their relationship, the employment situation, the work environment or the plaintiff’s specific duties, that would support the claim that this specific employment materially enhanced the risk of harm beyond that related to any ordinary workplace relationship. 50 While the plaintiff focussed on the supervisor-subordinate relationship, the reality is that, in the working world, every employee has a supervisor, and the essence of that relationship is that the supervisor will exercise power and authority over the subordinate for the successful operation of the business.

There is nothing in that relationship, by itself, that results in a material enhancement of the risk that the supervisor will commit a sexual assault on the subordinate or takes the employment situation out of the category of “provid[ing] the locale or the bare opportunity for the employee to commit his or her wrong” and into that of “ materially

enhanc[ing] the risk, in the sense of significantly contributing to it” (Bazley, at para. 40). Further, the allegation that the nature of theemployment encouraged Mr. Hart to stand in a position of respect and trust to the plaintiff is common to all supervisor-subordinaterelationships, and probably to co-workers as well, and does not constitute a material enhancement of the risk that the supervisor willcommit a sexual assault on the subordinate. To find otherwise would constitute every employer an involuntary insurer of everysubordinate. The plaintiff did not argue that Mr.

Hart was in any type of a legal trust relationship towards her other than the type of trustthat would occur between co-workers or a supervisor-subordinate, and there were no material facts alleged to support any other finding. 51 The plaintiff also alleged, in the statement of claim, that there existed a fiduciary relationship between her and Mr. Hart. Thisis a conclusion of law that must be supported by material facts.

The motions judge found, and I agree, that there are no facts to support afinding of a fiduciary relationship (see paras. 69-82). 52 The facts of this case can be contrasted with those in the cases referred to by the plaintiff, wherein the courts in those casesdescribed an employment relationship in the military that was akin to that of a parent and child (L. (J.)), or one in which the employeewas a cleric who used church events over many years to groom and then assault the victim, who was, at the beginning, a young boy(Fifield), or where there was a history of problems of abuse by the supervisor and the employer was aware of ongoing problems with thesupervisor (Boothman).

In these cases, the courts found that the facts did support the claim of vicarious liability. 53 One case not referred to by counsel is that of Jacobi v. Griffiths, (SCC), [1999] 2 S.C.R. 570, which wasreleased together with Bazley. Mr. Griffiths was employed as the program director for the Vernon Boys’ and Girls’ Club (the club)which provided recreational facilities and activities for boys and girls, but it did not have a residence and did not provide any parentingtype of support.

One of the objectives of the club was to provide behaviour guidance and to promote the health, social, educational,vocational and character development of the boys and girls, and, as part of his job, Mr. Griffiths was to develop a positive rapport withthe children. When the two complainants were 13 and 11, they were experiencing instability at home and used the club as a form ofsanctuary from the problems at home. Mr. Griffiths invited the children, separately, to his home, and while there he sexually assaultedthem.

He also placed one child’s hand on his exposed penis while driving her to a club-related event in a van owned by the club. 54 The majority found that there was no vicarious liability on the part of the club because the employment only provided theopportunity to commit the tort. Binnie J., for the majority, found that the club did not confer any real “power” over the children, as theywere free to leave at any time. He also found that the one event of touching the penis in the van was not sufficiently serious to triggerno-fault liability. Binnie J. agreed with the following example by Newbury J.A. in B. (P.A.) v.

Curry, at pp. 39-40) (at para. 83): .... Where, for example, a teacher uses his or her authority to develop a relationship with a pupil in his or her class and then abuses thatrelationship by approaching the child at a park during the summer holidays, it may be said that by employing the teacher and giving himor her some authority (albeit not parental authority) over the child, the teacher’s employer “made the wrong more probable.” But it islikely vicarious liability would not be imposed on the employer given the absence of a close connection between the teacher’s duties andhis or her wrongful acts.

To put the matter another way, the fact that the teacher took advantage of his opportunity at the school todevelop a relationship with the child is not enough: something more is required – a close connection between the teacher’s duties and hisor her wrongful acts – to render the school board liable without proof of negligence or other fault on its part. [Emphasis added] 55 The power-dependency relationship was much stronger in Jacobi than in the current case, yet the majority in that case did notfind it sufficiently strong to constitute more than mere opportunity. In the context of this case, the fact that Mr.

Hart took advantage ofhis opportunity at work to develop a social relationship with the plaintiff (something that is quite common in the workplace) that led tosexual assault away from work (which is not common) is not enough: something more is required – a close connection between Mr.Hart’s duties and his wrongful act – to render MKO liable on the basis of vicarious liability. 56 The plaintiff argued that the court should permit the matter to proceed to discoveries, where the facts would be disclosed. What is at issue in this case is the nature of the working relationship between the plaintiff and Mr.

Hart, and whether that relationshipcaused a material increase in the risk of the sexual assault and the resulting harm to the plaintiff. The plaintiff was a party to thatrelationship and, therefore, had personal knowledge of it. She would know all of the relevant facts of that relationship and she should nothave to proceed to discoveries to obtain further facts about the employment or the relationship in order to determine whether it caused amaterial increase in the risk of a sexual assault. The discovery is not to be a fishing expedition to look for facts to fill the holes in adefective claim.

The whole purpose of permitting a party to challenge the sufficiency of a pleading is to weed out those claims for whichthere is not a sufficient foundation to succeed at trial, so to permit a plaintiff to proceed to discoveries in the hope of obtaining materialfacts in support of the claim would defeat the purpose of requiring pleadings and make it impossible for the other party to know the caseto be met. 57 The plaintiff also argued, albeit not strongly, that the law in this area is developing and the fact that this is a novel caseshould not preclude her from being permitted to proceed.

The tort of vicarious liability is not a novel tort, there is a significant body oflaw in this area. The Supreme Court of Canada set out the test to be applied where the alleged tortious activity was a sexual assault inBazley, so the law in that area of the tort has been clarified for a number of years. The fact that there may not be a case exactly on pointfrom a factual perspective does not make this a novel case or an area of developing law, as the facts in most cases are unique, and to theextent that new factual scenarios are presented in all areas of the law, the law is always developing.

Thus, it is not correct to state thatthis is a novel case and the law in the area is developing. The problem in this case is not related to this being a novel case or that the lawis in a state of flux, but that the plaintiff has not set out sufficient material facts to support a finding of liability according to the law as ithas been determined in Bazley. Conclusion – Vicarious Liability 58 The motions judge relied on the correct law and applied it to the facts as set out in the statement of claim.

Given thedeference that is required to be shown to the decision of a motions judge when deciding an application to strike a statement of claim

under Rule 25.11, it was certainly open to her to make the finding that she made as regards the claim based on vicarious liability. In fact, not only was that decision open to her, but she was correct in that regard. VII. DID THE MOTIONS JUDGE ERR IN FINDING THAT THE STATEMENT OF CLAIM FAILED TO DISCLOSE A REASONABLE CAUSE OF ACTION AGAINST MKO BASED IN NEGLIGENCE? The Standard of Review 59 Again, there are no questions of law and the facts are not in dispute.

As a result, the only issue was whether it was plain and obvious that the pleading disclosed no reasonable cause of action, or that the pleading was scandalous, frivolous or vexatious. This is a discretionary decision and this court will only intervene if the decision is so wrong as to amount to an injustice. The Decision of the Motions Judge 60 The motions judge found as follows: Paragraphs 13 and 14 in the statement of claim set out the purported duty of care, contractual duty and fiduciary duty owed by MKO to the plaintiff in subparagraphs (

a) to (i). …. The one tort committed by Mr. Hart did not occur in the workplace. There is nothing alleged in Mr. Hart’s background that should have alerted MKO to not hire him. There is no suggestion that the plaintiff did not have a safe and secure work environment and there is nothing to show that the workplace somehow increased the risk of harm to the plaintiff. There are no facts set out to provide a factual basis for the assertions of the duties owed to the plaintiff.

The Plaintiff’s Position 61 The plaintiff argued that the breaches of the standard of care, as set out in para. 14 of the statement of claim, relate largely to MKO’s hiring and supervision of Mr. Hart. Counsel for the plaintiff acknowledged, in argument, that he had found no cases to support his position and, while he argued that Mr. Hart should not have been socializing with his assistant because this breached the boundaries, he did not point to any authorities to support a finding of legal liability on that basis.

MKO’s Position 62 MKO took the position that the first five allegations of breach of duty set out in para. 14 of the statement of claim are not applicable to this sexual assault because all relate to conduct in the workplace, and the sexual assault took place away from the workplace and outside of working hours. It points out that there is no allegation of any other improper conduct towards the plaintiff in the workplace, and that MKO had no duty of care in relation to Mr.

Hart’s behaviour outside the workplace, during non-working hours and during a social event, for which it was in no position to monitor, supervise or train him. Further, the employer took immediate action upon being advised of the allegation, thereby assuring the plaintiff of a safe and secure work environment. 63 The sixth breach related to improper hiring practices, but MKO argued that the plaintiff has not alleged, in her statement of claim, that Mr. Hart had either a propensity or predisposition to sexual assault. As a result, it argued, background checks before hiring Mr.

Hart would not have revealed anything that would have prevented the situation from occurring. 64 The last allegation related to a failure to adopt appropriate policies and training with respect to the bounds of appropriate conduct between persons in the positions of the plaintiff and Mr. Hart.

MKO’s position, again, is that this must refer to workplace conduct, and that MKO cannot be held responsible for policing the conduct of its employees outside of the workplace at non-work functions. 65 MKO argued that the motions judge was correct in concluding that there were no facts set out to provide a factual basis for the assertions of duties owed to the plaintiff. Employer’s Liability in Negligence 66 In Bazley , McLachlin J. commented on an employer’s liability for negligence in the course of discussing the policy and principles of vicarious liability.

She stated as follows (at para. 39): The connection between the tort and the employment is broad. To say the employer’s enterprise created or materially enhanced the risk of the tortious act is therefore different from saying that a reasonable employer should have foreseen the harm in the traditional negligence sense, making it liable for its own negligence. As Fleming explains ([John G.

Fleming, The Law of Torts , 9th ed. (Sydney: LBC Information Services, 1998)] at p. 422): Perhaps inevitably, the familiar notion of foreseeability can here be seen once more lurking in the background, as undoubtedly one of the many relevant factors is the question of whether the unauthorized act was a normal or expected incident of the employment. But one must not confuse the relevance of foreseeability in this sense with its usual function on a negligence issue.

We are not here concerned with attributing fault to the master for failing to provide against foreseeable harm (for example in consequence of employing an incompetent servant), but with the measure of risks that may fairly be regarded as typical of the enterprise in question. The inquiry is directed not at foreseeability of risks from specific conduct, but at foreseeability of the broad risks incident to a whole enterprise. [Emphasis added.] 67 The question in this case, on the issue of negligence, is whether MKO should have foreseen the risk that Mr. Hart would have sexually assaulted the plaintiff.

There are no facts alleged in the claim that would support such a finding, and, in fact, it is acknowledged, at para. 22 of the plaintiff’s factum, that the statement of claim does not contain a pleading that MKO was aware that Mr. Hart had a predisposition to commit sexual assault.

68 The plaintiff argued in her factum that the breaches relate largely to MKO’s hiring and supervision of Mr. Hart. Given thatthere are no facts to support the allegation that MKO should not have hired Mr. Hart, together with the acknowledgment that there is noallegation that MKO was aware that Mr. Hart had a predisposition to commit sexual assault, there can be no breach in relation to hiringMr. Hart. While the employer is responsible to supervise all employees, including Mr. Hart, that supervision does not extend to socialactivities that are completely removed from the workplace.

As the allegation of sexual assault relates to events that were completelyremoved from the workplace, there is no basis for a finding of negligence on the part of the employer. 69 The motions judge was correct in concluding that it was plain and obvious that the plaintiff’s case could not succeed undernegligence. VIII. DID THE MOTIONS JUDGE ERR IN FINDING THAT THE STATEMENT OF CLAIM FAILED TO DISCLOSE AREASONABLE CAUSE OF ACTION AGAINST MKO BASED ON BREACH OF FIDUCIARY DUTY? The Standard of Review 70 The leading case on the law related to ad hoc fiduciary relationships is Galambos v.

Perez, 2009 SCC 48, [2009] 3 S.C.R.247, and this is the case on which the motions judge relied in coming to her decision. As already noted above, the facts are as set out inthe statement of claim, and there is no palpable and overriding error on any question of fact. As a result, the decision of the motionsjudge is entitled to deference and this court will not intervene unless the decision is so clearly wrong as to amount to an injustice.

The Decision of the Motions Judge 71 On the claim based on a breach of a fiduciary duty, the motions judge stated as follows: The plaintiff alleges a power dependency relationship. As was affirmed by the Supreme Court of Canada in Galambos at paragraph 69: … fiduciary relationships … are always dependent on the fiduciary’s undertaking to act in the beneficiary’s interests. There is absolutely no basis for the suggestion that MKO undertook to act in Ms. Robertson’s interests.

Further in that case at paragraph 71: … “power-dependency” relationships are not a special category of fiduciary relationships and the law is, in my view, clear that fiduciaryduties will only be imposed on those who have expressly or impliedly undertaken them. That is not the case in the statement of claim before me. It is plain and obvious to me that the plaintiff’s case cannot succeed under negligence or under breach of any fiduciary duty.

The Plaintiff’s Position 72 The plaintiff takes the position that there is a factual or ad hoc fiduciary relationship between the plaintiff and MKO becausethe parties were in a relationship such that the plaintiff was entitled to expect that MKO would act in her best interests and for thepurpose of the relationship. Counsel pointed to para. 13(

h) of the statement of claim as supporting the claim based on a fiduciary duty,and he argued that the existence of the duty would be established by the evidence to be called at the trial. MKO’s Position 73 MKO takes the position that, taking into account the factors required to establish a factual or ad hoc fiduciary relationship asdetermined by the Supreme Court of Canada in Galambos, MKO does not and did not owe any fiduciary obligations to the plaintiff.

Itfurther argues that the statement of claim does not contain any facts or particulars that would support the existence of either a fiduciaryduty or the allegation that the duties were breached. Analysis of Fiduciary Duty 74 The law regarding ad hoc fiduciary relationships was recently clarified by the Supreme Court of Canada in Galambos. Indefining such relationships, Cromwell J., for the court, stated as follows (at paras. 69, 71, 79, 82 ): … [A] critical aspect of a fiduciary relationship is an undertaking of loyalty: the fiduciary undertakes to act in the interests of the otherparty.

This was put succinctly by McLachlin J. in Norberg [Norberg v. Wynrib, (SCC), [1992] 2 S.C.R. 226], at p. 273,when she said that “fiduciary relationships … are always dependent on the fiduciary’s undertaking to act in the beneficiary’s interests”. .... I return to the Court of Appeal’s holding that a fiduciary duty may arise in “power-dependency” relationships without any express orimplied undertaking by the fiduciary to act in the best interests of the other party.

I respectfully disagree with this approach, for tworeasons: “power-dependency” relationships are not a special category of fiduciary relationships and the law is, in my view, clear thatfiduciary duties will only be imposed on those who have expressly or impliedly undertaken them. This does not mean, however, that an express undertaking is required. Rather, the fiduciary’s undertaking may be implied in theparticular circumstances of the parties’ relationship.

Relevant to the enquiry of whether there is such an implied undertaking areconsiderations such as professional norms, industry or other common practices and whether the alleged fiduciary induced the other partyinto relying on the fiduciary’s loyalty. In

summary, my view is that the Court of Appeal erred in holding that in the case of power-dependency relationships, a fiduciary dutymay arise absent some undertaking on the part of the fiduciary to act in the interests of the other party. The Court of Appeal did not

suggest that there was any such undertaking here and in any event, it would be inconsistent with the judge’s factual findings to concludethat any such undertaking should be implied. 75 The statement of claim in this case does not include any reference to MKO having undertaken to act in the best interests ofthe plaintiff, either expressly or by implication. Further, it does not refer to any material facts to establish that there was such anundertaking in this case.

While there is reference to a power-dependency relationship in the statement of claim, Cromwell J. stated, inGalambos, that “identifying a power-dependency relationship does not, on its own, materially assist in deciding whether the relationshipis fiduciary or not” (at para. 74). 76 Cromwell J. did say that an undertaking by one party to act in the best interests of the other party may be implied in theparticular circumstances of the parties’ relationship, but to do that, one must look at industry norms and the nature of the relationship.

Inthis case, we are dealing with an employment relationship, and there are no facts alleged in this case to differentiate it from any otherordinary employment relationship. An employment relationship is not, without more, a fiduciary relationship. In fact, it is often quitethe opposite, in that the interests of the employer are often in conflict with those of the employee because the employer is obligated toadvance the best interests of the business, even if they are to the detriment of the best interests of the employees.

Historically, this realityhas led to the rise of labour unions and to government legislation to protect employees from unfair labour practices by employers. 77 Cromwell J. referred to one case in which an employer was found to be in a fiduciary role vis-à-vis the employee, but thecircumstances were quite different from the current matter. He described those circumstances as follows (at para. 56): .… Mustaji [Mustaji v. Tjin (1995), 24 C.C.L.T. (2d) 191 (B.C.S.C.), aff’d (1996), (BC CA), 25 B.C.L.R. (3d) 220(C.A.)] involved a claim by a nanny brought to Canada under the Foreign Domestic Movement Program.

There were findings of factthat the defendants had taken over her affairs concerning her immigration and employment in Canada, that they had the opportunity toexercise power or discretion over her, were capable of using that power or discretion without her knowledge or consent so as to affect herlegal and practical interests and that she was especially vulnerable to that exercise of discretion and control …. 78 In discussing the argument that the relationship in Mustaji v.

Tjin (1995), 24 C.C.L.T. (2d) 191 (B.C.S.C.), was a fiduciaryone, Vickers J., the trial judge, comments as follows regarding the argument that an employment relationship is a fiduciary relationship(at paras. 29-30): Fiduciary relationships, including doctor-patient relationships, agent-principal relationships, trustee-beneficiary relationships, and parent-child relationships, have as their essence discretion, influence over interests and inherent vulnerability. The parties’ relationship,although rife with the indicia typical of a inherently fiduciary relationship, cannot be said to have these essential qualities.

It cannot besaid that the inherent purpose of the parties’ relationship was to compel the defendants to act in the plaintiff’s best interests. Whateverobligation the defendants had to so act was, in my view, incidental to their relationship, which was essentially contractual in nature. Therelationship remains fundamentally one of domestic employment. Such relationships are not within the class of relationships normally recognized as fiduciary, although employment relationships do oftengive rise to fiduciary obligations on their peculiar facts (for example, the duty of loyalty and confidentiality).

Thus, while it isundeniable that fiduciary obligations arise in employment relationships in appropriate circumstances, those situations are moreappropriately dealt with under the second branch of the Hodgkinson [Hodgkinson v. Simms, (SCC), [1994] 3 S.C.R. 377]test. It would be going too far in the present case to say the jury’s findings lead inexorably to the conclusion that the relationshipbetween the parties was inherently fiduciary. 79 Thus, there is nothing inherent in the employment relationship that leads to the conclusion that it is, by definition, a fiduciaryrelationship.

Further, there are no material facts alleged in this case to differentiate this employment relationship from other ordinaryemployment relationships, so as to make this specific employment relationship also a fiduciary relationship. 80 The plaintiff, in her factum, referred to the case of Blanco et al. v. Canada Trust Co. et al., 2003 MBCA 64, 173 Man.R. (2d)247, as supporting her position that the matter should be permitted to proceed to trial to see what evidence would come from thediscovery.

That case is factually different from this case, as the alleged fiduciary was a third party which had not had any direct dealingswith the plaintiffs, unlike this case, where the relationship at issue was between the plaintiff and Mr. Hart so that the plaintiff would havehad personal knowledge of the relevant facts and circumstances. Further, the relevant provision in the statement of claim in Blancoclearly alleged material facts on which the court could find that Canada Trust Co. was acting as a fiduciary, even if there was noallegation of a fiduciary relationship in the statement of claim. A review of para. 8(

b) of the statement of claim in that case is ofassistance in seeing the type of facts that are material and should be pled (at para. 11): (

b) Canada Trust was the escrow holder under Deposit Agreements dated July 1987 and December (sic) 1987 among the LimitedPartnership, Lakeview Development of Canada Ltd. (“Lakeview”) and Canada Trust. As such, Canada Trust was to be an independent,impartial third party to hold the Plaintiffs’ subscriptions for units of the Lakeview syndication of the Limited Partnership for the moneyagainst a certain series of closing conditions. As such, Canada Trust’s duty was to ensure that there was strict compliance with theconditions of escrow and closing.

Canada Trust owed a duty to ensure that each Plaintiff, as a subscriber, would have his or her interestsprotected on closing. That duty to the Plaintiffs was to ensure that the conditions of closing were properly met before releasing thePlaintiffs’ money to Lakeview, the promoter, or to whichever entity within the Lakeview group of companies was to receive thePlaintiffs’ subscription proceeds. 81 The court noted that escrow agents have been held to be both trustees and fiduciaries and, when they act contrary to the termsof their contract, to have been held liable for breach of fiduciary duty.

82 The statement of claim in this case does not contain any material facts on which one could find that MKO, as an employer, had undertaken, either expressly or impliedly, to act in the best interests of its employee, the plaintiff, particularly in relation to a voluntary social event that was not related to the employment, that took place away from the workplace and after work hours.

Conclusion – Fiduciary Duty 83 As I noted earlier, the motions judge found that there was no basis for the suggestion that MKO had undertaken to act in the plaintiff’s best interests, and that such an undertaking was not disclosed in the statement of claim. This is an essential element for a finding that MKO had a fiduciary duty towards the plaintiff, without which this aspect of the claim must fail.

Given that the motions judge applied the law as set out in Galambos and there was no palpable and overriding error on any question of fact, the issue to be determined was whether it was plain and obvious that the statement of claim did not disclose a reasonable cause of action or was frivolous, scandalous or vexatious. On that issue, the standard of review is one of deference and this court will not intervene unless the decision is so clearly wrong as to amount to an injustice.

The motions judge found that it was plain and obvious that the plaintiff’s case could not succeed under breach of fiduciary duty, and her decision is entitled to deference. Not only was that decision open to her, but also it was the only conclusion that she could correctly have drawn in this case. IX. DISPOSITION OF THE APPEAL 84 The plaintiff has not convinced me that the motions judge erred in the exercise of her discretion. I would dismiss the appeal with costs to MKO. __________________________ J.A. I agree: __________________________ J.A. I agree: __________________________ J.A.