Walsh v. Atlantic Lottery Corporation, 2013 NSSC 409

Supreme Court of Nova Scotia Citation: Walsh v. Atlantic Lottery Corporation , 2013 NSSC 409 Date: 20131212 Docket: Hfx. No. 199763 Registry: Halifax Between: Bernard Patrick Joseph Walsh Plaintiff v. The Atlantic Lottery Corporation Inc., the Nova Scotia Gaming Corporation, the Nova Scotia Alcohol and Gaming Authority and the Attorney General for Nova Scotia Defendants Judge: The Honourable Justice Arthur J. LeBlanc Heard: September 5, 2013, in Halifax, Nova Scotia Counsel: Barry J. Mason, for the Plaintiff James P.

Boudreau and Selina Bath, for the Defendant Atlantic Lottery Corporation Duane Eddy for the Defendants Nova Scotia Alcohol and Gaming Authority and the Attorney General for Nova Scotia By the Court: [ 1 ] The Plaintiff is a former gambling addict who says the provincial government’s decision in 1991 to introduce video lottery terminals (“VLTs”) in Nova Scotia, and the manner in which that decision was carried out, was negligent and caused him devastating personal losses.

He alleges liability on the part of the Attorney General, representing her Majesty the Queen in right of the Province (“Province”), and the Province’s agents for their respective roles in exposing him to the allegedly unreasonable risks associated with this form of gambling. [ 2 ] The Defendants say the Plaintiff’s claims are certain to fail, and they have brought this motion for

summary judgment on the pleadings pursuant to Civil Procedure Rule 13.03. Background [ 3 ] In May of 1991, in response to the proliferation of illegal video lottery devices in Nova Scotia, the Province made the decision to legalize video lottery gambling. To that end, the Lieutenant Governor in Council enacted regulations under the Lottery Act , RSNS 1989, c. 266, authorizing the Atlantic Lottery Corporation (“ALC”) to conduct and manage video lottery gambling as agent for the province. The Lottery Act was repealed in 1995 with the enactment of the Gaming Control Act , SNS 1994-1995 c. 4.

Since that time, video lottery gambling has been governed by the Video Lottery Regulations made under that Act . [ 4 ] The Plaintiff, Bernard Walsh, began using VLTs in 1991. He went on to develop a gambling addiction. Mr. Walsh says that he first admitted to himself that he had a problem with VLT gambling in April of 1994, when his marital relationship began to deteriorate. He ceased using VLTs in 1997. Mr.

Walsh claims to have suffered significant harm as a result of his gambling addiction and sues the Defendants in negligence and the Province on the additional grounds of breach of fiduciary duty and strict liability. [ 5 ] The Defendants maintain that the Plaintiff’s Amended Statement of Claim does not disclose a cause of action and is clearly unsustainable. They seek

summary judgment on the pleadings pursuant to Rule 13.03.

The Pleadings [ 6 ] Mr. Walsh says that his claims relate to the introduction to the public of a “very specific machine” which the Defendants knew or ought to have known was “inherently deceptive and dangerous”. The particulars of the alleged inherent dangers and deceptive nature of VLTs are set out in the pleadings as follows: (

a) VLTs are electronically programmed to create cognitive distortions yielding a fake perception of winning; (

b) VLTs have hidden odds of the chance of winning; (

c) VLTs have asymmetric wheels that give a false impression of the odds of winning; (

d) VLTs have non-linear pay tables, which encourage players to bet higher amounts and incur higher losses; (

e) VLTs mimic on screen the mechanical reel slot machine, and have asymmetric virtual reels that are programmed to give a near miss effect by which the consumer is manipulated into believing that he almost won; (

f) VLTs combine randomness with concealed asymmetry to cheat the player; and (

g) VLTs have video displays that utilize subliminal priming to deceive consumers and manipulate them into hyper-focusing to create a dangerous dissociative mental state, wherein players cannot make rational decisions to continue to play or not. [ 7 ] Despite knowledge of these alleged dangers, the Province introduced VLTs in Nova Scotia.

Responsibility for the management and regulation of VLT gambling was allocated to the Province’s agents, the Nova Scotia Provincial Lotteries and Casino Corporation (“Corporation”) and the Nova Scotia Gaming Commission, now known as the Alcohol and Gaming Authority (“AGA”). [ 8 ] The Corporation’s role is to develop, undertake, organize, conduct and manage VLT gambling and other lottery schemes on behalf of the Province.

The Corporation delegates responsibility for the day-to-day operation of the video lottery business to the ALC. [ 9 ] The AGA regulates video lottery gambling and other gaming activity and is responsible for studying and reporting to the Province on certain aspects of gaming in Nova Scotia. Before VLTs can be installed at a particular location, the owner of the premises must apply to the AGA for a registration certificate. [ 10 ] Mr.

Walsh says that the Province and each of these agents breached a duty of care to the people of Nova Scotia “to protect them from inherently dangerous and deceptive products” by introducing, regulating and managing the practice of VLT gambling in the province without implementing proper safeguards. In Mr. Walsh’s view, if the Defendants insisted on introducing VLTs, they should have provided warnings to the public of the risks associated with VLT gambling and ensured that adequate facilities would be available to treat problem gamblers. [ 11 ] Mr.

Walsh further claims that by introducing VLTs without proper safeguards in place, the Province breached a fiduciary duty to protect him from the inherent risks associated with video lottery gambling. [ 12 ] Finally, Mr. Walsh claims that VLTs are inherently dangerous products by virtue of the fact that “their ordinary use has led to addictive and/or problem gambling” and the Province is therefore strictly liable for any damages suffered by those who have used the machines. [ 13 ] The Defendants say that the substance of Mr.

Walsh’s regulatory negligence claim is no different than the allegations made by the plaintiff in Burrell v. Metropolitan Entertainment Group , 2011 NSCA 108 . In Burrell , the plaintiff claimed that the defendants in that matter owed a duty of care to protect all Nova Scotians from the dangers of gambling, and breached that duty by failing to ensure that adequate safeguards were in place to protect him from the problems associated with gambling addiction. In the Defendants’ view, the Court of Appeal’s conclusion in Burrell that the Gaming Control Act does not create a duty of care to problem gamblers means Mr.

Walsh’s claim in regulatory negligence is certain to fail. [ 14 ] The Province also denies the existence of any fiduciary duty on its behalf to shield Mr. Walsh from the risks of VLT gambling.

Summary Judgment on the Pleadings [ 15 ]

Summary judgment on pleadings is governed by Rule 13.03, which reads, in part:

(1) A judge must set aside a statement of claim, or a statement of defence, that is deficient in any of the following ways: (

a) it discloses no cause of action or basis for a defence or contest; (

b) it makes a claim based on a cause of action in the exclusive jurisdiction of another court; (

c) it otherwise makes a claim, or sets up a defence or ground of contest, that is clearly unsustainable when the pleading is read on its own.

(2) The judge must grant

summary judgment of one of the following kinds, when a pleading is set aside in the following circumstances:

.... (

b) dismissal of the proceeding, when the statement of claim is set aside wholly; .... (

d) dismissal of a claim, when all parts of the statement of claim that pertain to the claim are set aside. A motion for

summary judgment on the pleadings must be determined only on the pleadings, and no affidavit may be filed in support of or opposition to the motion .... … [ 16 ]

Summary judgment on the pleadings should not be granted lightly. A party whose action is summarily dismissed under Rule 13.03 will be denied his or her day in court. The harsh nature of the remedy demands that the applicant meet a heavy burden. I must be satisfied, even after assuming that all allegations contained in the pleadings are true without the need to call evidence, that the claim “is certain to fail”, or is “absolutely unsustainable” or “discloses no reasonable cause of action”: Cape Breton (Regional Municipality) v. Nova Scotia (Attorney General) , 2009 NSCA 44 at para. 17 , Eisener v.

Cragg , 2012 NSCA 101 at para. 9 . The Nature of the Plaintiff’s Negligence Claim [ 17 ] I must first determine whether Mr. Walsh’s claim in negligence against the Defendants is, in fact, the same as that advanced in Burrell . [ 18 ] In Burrell , the plaintiff sued the Province and Metropolitan Entertainment Group, the operator of Casino Nova Scotia in Sydney. Mr. Burrell was a gambling addict who began gambling at Casino Nova Scotia in 1995. He was in consistent attendance at the casino and became well known to its employees. Occasionally, he stayed at the casino for 48 hours straight. The defendants allowed Mr.

Burrell to continue gambling and encouraged him by giving him small perks. Mr. Burrell gambled away large amounts of money, eventually losing his house by foreclosure and damaging his reputation in the community. [ 19 ] In 2004, Mr. Burrell notified casino staff that he was spending too much time and money there. As a result, he was given a notice by Metropolitan to stay away from the casino. Thereafter, Mr. Burrell managed to gain access to the casino on one occasion but was asked by staff to leave the premises. [ 20 ] Believing that Mr. Burrell had no valid cause of action, the defendants made a motion for

summary judgment on the pleadings that was heard by Justice Murphy in chambers: 2010 NSSC 476 . Justice Murphy summarized Mr. Burrell’s claim as follows: 5 Mr. Burrell says that the essence of his claim is that he was a patron who gambled at Casino Nova Scotia in Sydney and that the Defendants jointly and severally owed to him a duty of care to ensure that appropriate steps were taken by those Defendants to prevent, or at the very least to minimize, his gambling actions in order to avoid harm to him. … 6 The Plaintiff's claim is based on negligence.

He says the Defendants failed to take reasonable care to prevent gambling at the casino from becoming a negative issue for him. He claims that it was reasonably foreseeable to the Defendants that his gambling could develop into an addiction which would cause him substantial harm, that proper safeguards were not implemented and followed by the Defendants. [ 21 ] In coming to his decision, Justice Murphy noted that no Canadian authority existed as to whether a broad common law duty of care is owed to problem gamblers.

He proceeded to review decisions from the United Kingdom, Australia and the United States, all of which concluded that a broad common law duty does not exist except in exceptional circumstances. Finding that no exceptional circumstances existed in Mr. Burrell’s case, Justice Murphy granted the defendants’ motion for

summary judgment. [ 22 ] On appeal, the Court concluded that the provisions of the Gaming Control Act and the regulations enacted thereunder did not support a finding of a duty of care to a problem gambler whose losses were suffered prior to seeking self-exclusion, and who had not been individually induced by an operator or regulator to continue gambling. [ 23 ] Mr.

Walsh has sought to distinguish his negligence claim from that advanced in Burrell on the basis that his claim is not about the risks of gambling generally; it relates instead to the introduction by the Defendants of an inherently dangerous and deceptive machine to the public. However, on close examination of the pleadings, I am not convinced that this accurately captures the distinction between the two claims. [ 24 ] Mr. Walsh does not allege that a particular VLT machine is defective and thereby rendered exceptionally dangerous or deceptive.

Nor does he allege that the dangerous and deceptive properties described in the pleadings are unique to one kind or brand of VLT machine, perhaps chosen by the Defendants over other less deceptive alternatives. The allegedly dangerous and deceptive features are common to all VLT gambling machines in Nova Scotia. Accordingly, Mr. Walsh’s real complaint is that the Province introduced a form of gambling that it knew presented a higher risk of addiction, and it elected not to warn the public of this increased risk or to implement other safeguards. [ 25 ] In my view, Mr.

Walsh is alleging that the decision by the Defendants to introduce VLT gambling and the manner in which they introduced, managed and regulated VLT gambling breached a duty to protect him from harm caused by exposure to highly addictive gambling activities. I am not satisfied that this claim is foreclosed by the Court of Appeal’s decision in Burrell . Common Law Duty – General Principles [ 26 ] The test to be applied to determine whether a new duty of care should be recognized is the Anns test, as reformulated and

restated in Cooper v. Hobart , 2001 SCC 79 and its companion case, Edwards v. Law Society of Upper Canada , 2001 SCC 80 . [ 27 ] The Anns test has two stages. The first stage inquiry consists of two distinct components: foreseeability and proximity.

The plaintiff must establish not only that the harm suffered by the plaintiff was the foreseeable consequence of the defendant’s act, but also that the relationship between the parties was of sufficient closeness or proximity to justify imposing an obligation on the part of the defendant to take reasonable care not to injure the plaintiff: Cooper at para. 30, Edwards at para. 9, R. v. Imperial Tobacco Canada Ltd , 2011 SCC 42 at para. 41 .

The proximity analysis focuses on factors arising from the relationship between the specific parties, including broad questions of policy: Cooper at para. 30 . [ 28 ] If the plaintiff establishes foreseeability and proximity, a prima facie duty of care arises. At the second stage of the Anns test, sometimes called the “residual policy stage”, the question is whether, notwithstanding foreseeability and proximity, residual policy considerations exist that justify denying liability: Cooper at para. 30, Edwards at para. 10.

The policy considerations at this stage are concerned not “the relationship between the parties, but with the effect of recognizing a duty of care on other legal obligations, the legal system, and society more generally”: Cooper at para. 37 , Syl Apps Treatment Centre v. B.D. , 2007 SCC 38 at para. 32 . [ 29 ] In order to “trump” a prima facie duty of care, “these residual policy considerations must be more than speculative. They must be compelling; a real potential for negative consequences of imposing the duty of care must be apparent”: Fullowka v.

Pinkerton’s of Canada Ltd. , 2010 SCC 5 at para. 57 . [ 30 ] These are the principles that I must apply to Mr. Walsh’s claim in negligence. Common Law Duty – Stage One of the Anns Test [ 31 ] As noted by Justice Fichaud for the Court of Appeal in Burrell , it is clearly foreseeable that gamblers will lose money: Burrell at para 31. The existence of a duty of care therefore turns on the proximity analysis. [ 32 ] When a claim is made against a statutory regulator, the focus of the proximity inquiry will be the governing legislation.

As the Court noted in Cooper : 43 In this case, the factors giving rise to proximity, if they exist, must arise from the statute under which the Registrar is appointed. That statute is the only source of his duties, private or public. Apart from that statute, he is in no different position than the ordinary man or woman on the street. If a duty to investors with regulated mortgage brokers is to be found, it must be in the statute. The same approach applies to claims against agents of a regulator.

Their duties and powers are similarly limited to those prescribed by the legislation. [ 33 ] In Imperial Tobacco , Chief Justice McLachlin explained that when determining whether a government actor owes a prima facie duty of care, two situations may be distinguished: 43 … The first is the situation where the alleged duty of care is said to arise explicitly or by implication from the statutory scheme.

The second is the situation where the duty of care is alleged to arise from interactions between the claimant and the government, and is not negated by the statute. 44 The argument in the first kind of case is that the statute itself creates a private relationship of proximity giving rise to a prima facie duty of care. It may be difficult to find that a statute creates sufficient proximity to give rise to a duty of care. … [ 34 ] In the case at bar, there was no direct relationship between any of the Defendants and Mr. Walsh.

No specific interactions between the parties are alleged to have taken place at any time. Accordingly, a finding of proximity between Mr. Walsh and any of the Defendants must arise from the governing statutes. [ 35 ] The nature of the duties proposed by the Plaintiff will impact the degree of proximity necessary to support them. Mr. Walsh is alleging liability on the basis of both an overt act and a failure to act. The overt act was the introduction, management and regulation by the Defendants of VLT gambling. The failure to act was the failure by the Defendants to provide warnings that would alert Mr.

Walsh to any increased risks associated with VLT gambling, or to implement other safeguards such as adequate gambling addiction treatment services. [ 36 ] A failure to act, including a failure to warn, will give rise to liability only when there is a positive duty of care. Accordingly, Mr. Walsh must do more than establish that the Defendants had a duty not to harm him through their actions.

He must demonstrate that the nature of his relationship with the Defendants, as created by the statute, gave rise to a duty on the Defendants’ part to take positive steps to protect him: Imperial Tobacco , para. 108. [ 37 ] The Court of Appeal in Burrell was also considering a claim that the defendants owed a positive duty to the plaintiff. In that case, it was a duty to stop him from gambling once he became addicted. On this point, Justice Fichaud relied on the decision of the Supreme Court of Canada in Childs v.

Desormeaux , 2006 SCC 18 . [ 38 ] In Childs , the Chief Justice explained that where liability is alleged on the basis of a failure to act, the nature of the relationship between the parties “must be examined to determine whether there is a nexus between the parties. Although there is no doubt that an omission may be negligent, as a general principle, the common law is a jealous guardian of individual autonomy”: Childs at para. 31 . [ 39 ] The Chief Justice went on to note that three themes run through all of the situations in which courts have imposed a positive duty on a defendant.

The first is the defendant's material implication in the creation of risk or his or her control of a risk to which others have been invited. The second is a concern for the autonomy of the persons affected by the positive action proposed. The third is whether the plaintiff reasonably relied on the defendant to avoid and minimize risk and whether the defendant would have reasonably

expected this reliance: Childs at paras. 38-40. [40] The decision in Childs did not involve a statutory regulator. The jurisprudence considering positive duties in the regulatorycontext, both before and after Childs, suggests that such a duty will arise only in situations where the relationship between the plaintiffand the regulator is distinct from the relationship between the regulator and the public at large. The plaintiff will typically belong to anidentifiable group of individuals whom the regulator knows to be an increased risk of harm: see for example, Taylor v.

Canada (AttorneyGeneral), 2012 ONCA 479, Fullowka, supra, Doe v. Metropolitan Toronto (Municipality) Commissioners of Police (1990), (ON SC), 74 OR (2d) 225 (HCJ Div Ct). [41] The Plaintiff, in support of his duty to warn claim, relies on Deshane v. Deere & Co. (ON CA), [1993]O.J. No. 2233 (Ont. CA), leave denied, [1993] SCCA No 494, and Kamloops (City) v. Nielsen, (SCC), [1984] 2 SCR 2(SCC). The Court in Deshane was considering the liability of a manufacturer for injuries suffered by the respondent when he fell into aforage harvester owned and operated by his employer.

The facts are clearly distinguishable from the present case where the claim isagainst a statutory regulator. [42] In Kamloops, the City Council of Kamloops exercised its discretion under the Municipal Act of British Columbia, RSBC1960, c 255 to assume responsibility for regulating the construction of buildings in the city, and enacted a By-law to that end. [43] The By-law prohibited construction without a building permit, provided for a series of inspections at various stages ofconstruction, prohibited occupancy without an occupancy permit, and most importantly, imposed a duty on the building inspector toenforce the By-law’s provisions. [44] When the building inspector inspected a home being constructed by Mr.

Hughes, Jr. for his father, the inspector realized thefoundations were not being set in the manner required by the building permit. A stop work order was issued. Mr. Hughes hired a firmof engineers to prepare new plans that would remedy the structural defects. On receipt of these plans, the stop work order was lifted. Mr. Hughes, however, did not cooperate with the engineers and chose instead to continue constructing the house according to his originalplans.

To protect themselves from liability, the engineers immediately notified the building inspector. [45] After again visiting the site, the building inspector sent Mr. Hughes a letter informing him that the stop work order wouldremain in effect until he submitted a report from a structural engineer. Mr. Hughes ignored the letter and completed the building. Despite further inspections made by building inspectors, nothing was done to enforce the stop work order. [46] The house was eventually completed and purchased by Mr. Hughes’ father. No occupancy permit was ever issued. Thehouse was later sold to Mr.

Nielsen who was not informed of the construction issues. When Mr. Nielsen became aware that thefoundations had subsided, he filed an action against the vendor and the City. The lower courts apportioned liability between thedefendants, 75 per cent against the Hughes’ and 25 per cent against the City.

The City’s appeal to the British Columbia Court of Appealwas dismissed, and it appealed to the Supreme Court of Canada. [47] The majority of the Court held that the City of Kamloops breached a private law duty owed to the purchaser of the home toenforce the City’s by-laws and thereby prevent the construction and eventual sale of a house with defective foundations. The Courtfound that once the City became aware that the home was being constructed improperly, it was required to at least consider the optionsavailable to it to enforce the By-law.

Possible options included taking legal action, condemning the home, or posting warning notices onthe building. The Court noted that since the decision whether or not to take legal action was one of policy, the City could not have beenfaulted if it had considered and rejected it. To not even consider its options, however, was unacceptable. [48] Contrary to the Plaintiff’s précis of the decision, the Court in Kamloops did not impose a duty on the defendant to warn aconsumer of the dangerous nature of a product.

The Court did, however, impose a positive duty to act on the part of a regulator and isinstructive in that regard. Critical to the Court’s decision to impose a positive private law duty on the City was the clear statutorylanguage requiring the inspector enforce the provisions of the By-law. Of equal importance was the close nature of the relationshipbetween the City and Mr. Nielsen. By virtue of its role in inspecting the home, the City’s relationship with Mr. Nielsen was distinctfrom its relationship with the general public.

This is consistent with the jurisprudence discussed earlier. [49] With the foregoing in mind, I must now examine the governing statutes to determine whether they give rise to a relationshipof sufficient proximity to establish a prima facie duty owed by the Defendants to Mr. Walsh not to introduce particularly high risk formsof gambling, or a positive duty to warn Mr. Walsh of the risks associated with such forms of gambling and/or to implement othersafeguards once they are introduced.

a) The Lottery Act [50] Mr. Burrell began using VLTs in 1991. At that time, video lottery gambling was governed by the Lottery Act and the VideoLottery Regulations enacted thereunder. The Lottery Act was a much less detailed statute than its successor legislation. Section 3(1)establishes a corporation known as the Nova Scotia Lottery Commission.

Section 8 outlines the powers of the Commission: Powers of Commission 8 The Commission may, with the approval of the Governor in Council, (

a) develop, organize, undertake, conduct and manage lottery schemes on behalf of the Government of the Province and the governmentsof other provinces that have any agreement with the Province respecting any such lottery schemes; (

b) enter into arrangements or agreements to develop, organize, undertake, conduct and manage lottery schemes on behalf of thegovernment of one or more of the provinces or any agencies thereof; (

c) enter into and carry out agreements with the governments of one or more of the provinces or any agencies thereof for the purpose of

incorporating a body corporate to undertake, conduct and manage lottery schemes on behalf of the parties thereto; (

d) issue licenses to conduct and manage lottery schemes in the Province; (

e) do all such other things as the Commission may from time to time deem necessary in respect of lotteries. [ 51 ] The Video Lottery Regulations made under the Lottery Act limits those persons who may conduct and manage video lottery in the Province to licensees who have been granted a registration certificate by the Commission: 3(1).

Regulation 3(5) lists a number of factors the Commission may consider when determining whether to grant a registration certificate, including the nature of the business carried out at the premises, the security of the premises, and the estimated net revenues from video lottery operations as a percentage of general business revenues generated at the premises. [ 52 ] The Regulations dictate that only approved video lottery devices may be used by licensees in the conduct of a video lottery.

Regulation 4(2) lists the mandatory characteristics of approved devices: 4(2) An approved device shall include the following characteristics: (

a) it shall divide all money it accepts into credits denominated in the twenty-five cent, ten cent, or five cent values; (

b) it shall accept wagers of one credit; (

c) it shall not expose a player to the chance of losing at any one play credits of a total value exceeding two dollars and fifty cents; (

d) it shall permit a player at any time to withdraw for payment or reimbursement any accumulated or unused credits; (

e) it shall not award a prize exceeding one thousand dollars for one wager; (

f) it shall not pay prizes in cash; (

g) it shall be programmed to award as prizes not less than eighty percent (80%) of the money it accepts; and (

h) it shall issue a ticket or receipt to indicate the value or a prize or credit. [ 53 ] Regulations 5 and 6 of the Regulations prohibit licensees from granting credit or cashing cheques to enable persons to play a video lottery or permitting persons under the age of majority to play a video lottery. Regulation 7 dictates that all advertising and promotion of the availability of a video lottery shall be limited to the approved premises. Regulation 9 provides that any amounts due to the Province by a licensee are to be remitted to ALC.

Under Regulation 14, every person contravening any provision of the regulations commits an offence and is liable to a fine of not less than ten thousand dollars and, in default of payment, to imprisonment for a term not exceeding six months. [ 54 ] The Lottery Act and the Video Lottery Regulations are exceedingly limited in scope and are of little assistance to Mr. Walsh in establishing a sufficiently proximate relationship to ground either of the posited private law duties. If there is a duty to Mr.

Walsh on the part of the Defendants, the factors establishing proximity must be found in the Gaming Control Act or the Video Lottery Regulations enacted thereunder. (

b) The Gaming Control Act [ 55 ] The Gaming Control Act is a much more comprehensive statute than its predecessor. The purpose of the Act is set out at

section 2: Purpose of Act 2 The purpose of this Act is to (

a) establish a framework for conducting, managing, controlling, regulating and investing in casinos, other lottery schemes and related businesses so as to increase the level of sustainable economic activity within the Province and increase the net revenue of the Province; (

b) ensure that casinos and other lottery schemes are conducted in a socially responsible manner; and (

c) ensure that any measures taken with respect to casinos and other lottery schemes are undertaken for the public good and in the best interests of the public and, without limiting the generality of the foregoing, to minimize the opportunities that give rise to problem gambling and other illnesses, crime and social disruption. [ 56 ] Following the purpose and

interpretation provisions, the Act is divided into three parts. As discussed earlier, responsibility for gaming in Nova Scotia belongs to two separate and distinct organizations: the Corporation and the AGA. The Corporation develops and carries out the business of gaming, including ticket lotteries, video lotteries and casinos, while the AGA, formerly known as the Commission, regulates, studies and evaluates gaming activity in the province. [ 57 ]

Part I of the Act pertains entirely to the Corporation and its membership, powers, duties and accounting requirements. The Corporation’s objects are enumerated at

section 10: Objects of Corporation

10 The objects of the Corporation are to (

a) develop, undertake, organize, conduct and manage casinos and other lottery schemes on behalf of the Province or on behalf of the Province and another province of Canada; (

b) provide for the operation of casinos and any business that the Corporation considers reasonably related to operating a casino, including any business that offers goods or services to persons playing games of chance in a casino; (

c) ensure that lottery schemes conducted and managed by the Corporation are conducted and managed in accordance with the Criminal Code (Canada) and this Act and the regulations; and (

d) with the approval of the Minister, do such other things within the expertise of the Corporation in respect of casinos, lottery schemes and lottery and gaming services in order to increase the net revenue of the Province. The duties of the Corporation are set out at section 24(1): Duties of Corporation and tabling of report 24

(1) The Corporation shall (

a) subject to this Act and the regulations, comply with any direction given to it by the Governor in Council; (

b) conduct and manage casinos and other lottery schemes in accordance with this Act and the regulations and the Criminal Code (Canada) ; (

c) make available to the public a copy of the rules of play for games of chance offered in a casino as approved pursuant to

Part II; (

d) ensure that proper security clearance is given in accordance with the regulations for each member of the Board and the Chief Executive Officer and each other officer and employee of the Corporation; (

e) report forthwith to the Minister and the Commission any defect, abuse, illegality or criminal activity in relation to casinos and other lottery schemes; and (

f) submit annually to the Minister a report respecting the administration, operation and management by or on behalf of the Corporation of casinos or other lottery schemes in the Province, including the matters referred to in clause (e). [ 58 ] The remainder of

Part I addresses topics such as operating expenses, taxation, priority of payment of revenue, and the Corporation’s accounting system and financial reports. [ 59 ]

Part II of the Act , entitled “Gaming Control”, relates to the powers, duties and operations of the AGA. This part of the Act is supervised by the Minister of Service Nova Scotia and Municipal Relations.

Section 40 states: 40 The Minister is responsible for regulating casinos and other lottery schemes and for administering this

Part in the public interest and in accordance with the principles of honesty and integrity. [ 60 ] The duties of the AGA are listed at section 56(1): 56

(1) The Commission shall (

a) perform such duties as are imposed upon it by this Act or the regulations; (

b) ensure that casinos and other lottery schemes conducted and managed by the Corporation are conducted and managed in accordance with this Act and the regulations and the Criminal Code (Canada) ; (

c) carry on a continuous study of the operation and administration of casinos, other lottery schemes and gaming control laws in effect in other jurisdictions, including the Criminal Code (Canada) , that may affect the operation and administration of casinos or other lottery schemes in the Province; (

d) carry on a continuous study of the public interest and reaction of residents of the Province to existing and potential features of casinos, other lottery schemes and games of chance; (

e) carry on a continuous study of the social, health, justice, economic and environmental impact of casinos and other lottery schemes; (

f) make recommendations to the Minister for changes to this Act and the regulations to correct any defect, abuse, illegality or criminal activity in relation to casinos and other lottery schemes; and (

g) submit annually to the Minister a report respecting the matters referred to in clauses (

b) to (f). [ 61 ] The AGA is empowered under the Act to issue licenses for lottery schemes upon receipt of an application made in accordance

with the regulations: s. 67(1). [ 62 ] The remainder of

Part II addresses the powers of the Director of Registration with respect to suppliers and gaming assistants, and the AGA’s powers of investigation and enforcement. [ 63 ]

Part III of the Act prescribes offences and penalties for contravening or failing to comply with

Part II, giving false information in an application to the AGA, entering and gambling in a casino while prohibited from doing so, assisting a prohibited person to enter and gamble in a casino, and contravening the regulations: ss. 119-124. [ 64 ] With respect to problem gamblers, s. 99 of the Act empowers the AGA to issue a written direction to the Corporation requiring it to refuse access to a casino to any individual meeting the criteria set out in the regulations. At the time of Mr. Walsh’s gambling addiction, the Casino Regulations made under the Act said: 20(1) No casino operator shall permit the following individuals to play games of chance in a casino: (

c) individuals who appear to be addicted to gambling, and the casino operator shall implement policies and procedures designed to identify individuals exhibiting behaviour evidencing a problem with gambling. [ 65 ] This

section was subsequently repealed. The Casino Regulations currently allow an individual who is concerned about his or her gambling habit to request in writing to the Corporation, AGA or casino operator that the individual be refused access to the casino: 252(1)(e).

Neither the Act nor the Video Lottery Regulations impose a duty on any individual or organization to prevent gambling addicts from playing VLTs outside of a casino, and the option of self-exclusion for problem gamblers under the Act is limited to casinos. [ 66 ] The Video Lottery Regulations enacted under the Gaming Control Act contain several of the same provisions as those made under the Lottery Act . Regulation 4(1) dictates that no person other than ALC or a licensee shall conduct and manage a video lottery. Those who wish to become licensees may apply to the AGA for a registration certificate: 3(1).

Regulation 3(2) sets out a list of factors that the AGA may consider when deciding whether to issue a registration certificate. [ 67 ] Regulation 5 empowers the AGA to refuse to issue a registration certificate or amend, suspend, cancel or refuse to renew a registration certificate if certain conditions are met. Like its predecessor, the Video Lottery Regulations prohibit the display and operation of video gaming devices that have not been approved by the AGA: 6(1).

Regulation 6(2) sets out the same list of characteristics of an approved device as found in the earlier regulations. [ 68 ] Regulation 10(1) prohibits licensees and their employees and agents from permitting a person under the age of 19 to play video lottery or to enter a premises where video lottery is being played. Regulation 10(2) further provides: 10(2) No licensee, its employees, servants or agents shall fail to take necessary steps to prevent a person under the age of 19 years from (

a) having access to the gaming premises where a video lottery is being played; or (

b) playing a video lottery. Advertising by licensees of video lottery is strictly limited by Regulation 11: Advertising 11

(1) A licensee shall not enter into a contract with a person under which the person offers gifts or the chance of receiving gifts as an inducement for individuals to play video lotteries.

(2) No licensee shall in any way engage in advertising or permit anyone with whom the operator contracts, to engage in advertising that (

a) implies video lotteries promote or are required for social acceptance, personal or financial success or the resolution of any economic, social or personal problems; (

b) contains endorsements by well-known personalities that suggest playing video lotteries contributed to their success; (

c) is specifically directed at encouraging individuals under 19 years of age to play video lotteries; or (

d) compares playing video lotteries to other forms of gaming in Nova Scotia.

(3) All advertising and promotion of a video lottery or the availability at any approved premises of a video lottery shall be limited to the interior of the approved premises. [ 69 ] Finally, Regulation 18 mirrors the offence provision found in the earlier version of the Regulations . [ 70 ] The Gaming Control Act clearly imposes a general duty to the public as a whole.

Section 2 dictates that any measures taken under the Act must be undertaken in a socially responsible manner and in the best interests of the public. As Justice Doherty observed in Taylor :

78 Legislative schemes under which regulators operate almost inevitably impose public duties on those regulators. Plaintiffs have,generally speaking, had little success in demonstrating that those schemes impose a private law duty of care.

To the contrary, courts havebeen more inclined to find that legislative schemes by implication preclude a private law duty of care to individuals affected by thoseschemes. [71] The authority of the Province to decide which gambling activities present an acceptable level of risk is limited only by itsduty to exercise its statutory functions in a manner consistent with the public good.

Nothing in the Act or the Regulations discloses alegislative intent to create private law tort duties to individuals or distinct segments of the population who may be adversely affected by adecision of the Province to introduce a particular form of gambling to the public. [72] It follows from this conclusion that the legislation, without more, also fails to establish the special link or proximitynecessary to give rise to a positive duty to protect Mr.

Walsh from any increased risk associated with a particular form of gambling,whether by issuing a warning or ensuring the availability of adequate gambling addiction treatment facilities. [73] In this case, the relationship between the Province and Mr. Walsh is indistinguishable from the Province’s relationship withthe public at large. Mr.

Walsh does not belong to a discrete and identifiable segment of the community that the Defendants knew orought to have known was at an increased risk of suffering significant harm due to the introduction of VLT gambling. [74] I also find that the decision to introduce video lottery gambling and collect revenue therefrom is insufficient on its own tobring the Province or its agents within the categories of defendants identified in Childs who owe a positive duty to a plaintiff by virtue oftheir material implication in the creation of risk to which others have been invited. [75] Finally, Mr.

Walsh’s responsibility for his autonomous choice is a further factor weighing against a finding of proximity:Burrell at para. 41. Mr. Walsh made the autonomous choice to participate in VLT gambling. After becoming addicted, he chose not toseek help until 1997. Mr. Walsh cannot expect this Court to absolve him of all responsibility for the effects of these autonomouschoices. [76] Even if I am wrong that the relationship between Mr.

Walsh and the Defendants lacks the necessary proximity to give rise toa prima facie duty of care, any such duty would be negatived at the second stage of the Anns test for overriding policy reasons. Common Law Duty – Stage Two of the Anns Test [77] In a negligence action against a government regulator, the most significant consideration at the second stage of the Anns testwill be the policy/operational distinction. It is settled law that government actors are immune from liability in negligence for policydecisions.

That immunity, however, does not necessarily extend to the manner in which those policy decisions are carried out: Cooper atpara. 38. [78] In Imperial Tobacco, Chief Justice McLachlin observed that much judicial ink has been spilled on the “vexing” question ofwhat constitutes a true policy decision protected from negligence liability.

After reviewing the authorities, she concluded: 90 I conclude that "core policy" government decisions protected from suit are decisions as to a course or principle of action that arebased on public policy considerations, such as economic, social and political factors, provided they are neither irrational nor taken in badfaith. … Difficult cases may be expected to arise from time to time where it is not easy to decide whether the degree of "policy" involvedsuffices for protection from negligence liability. … [79] As noted in the above passage, the immunity of a policy decision from suit is contingent on the decision having been made ingood faith.

In other words, in order for a policy decision to give rise to tort liability, the plaintiff must establish that the decision is “soirrational or unreasonable as to constitute an improper exercise of government discretion” or “so patently unreasonable that it exceedsgovernmental discretion”: (Brown v.

British Columbia (Minister of Transportation and Highways), (SCC), [1994] 1SCR 420 at para. 28) [80] I am satisfied that the decision to introduce and regulate VLT gambling in Nova Scotia, like the decision considered inBurrell to allow gambling in casinos, is a policy decision based on economic, social and political factors. In deciding whether theintroduction of a particular form of gambling is in the best interests of the public, the Province must balance a myriad of competingobjectives and interests.

It is not for the court to second guess the Province’s conclusion that the benefits of VLT gambling to the publicoutweigh the risks. [81] The Plaintiff contends that even if the decision to introduce VLT gambling is a policy decision, it is a policy decision soirrational and unreasonable that it cannot be said to constitute a proper exercise of discretion. I disagree.

There is nothing in thepleadings to support an allegation that the decision to introduce and regulate VLT gambling in Nova Scotia was made in bad faith. [82] It is an unfortunate reality that not all members of the public will benefit from every policy decision made by government. Infact, some individuals will be harmed by government decisions. That being said, evidence of harm, without more, will not be sufficientto establish that a policy decision was made in bad faith. As the Ontario Court of Appeal noted in Attis v.

Canada (Minister of Health),2008 ONCA 660, leave to appeal denied, [2008] SCCA No 491: 65 … The job of the government is to govern and, in the course of doing so, to make broad-based policy decisions for the benefit of thepublic collectively, even if those decisions may not have positive implications for all individuals. It would severely curtail thegovernment's ability to govern if it were found to have the necessary direct and close relationship to an individual member of the publicto support a claim in tort for bad government policy decisions.

It is accepted that, if the government fails to make good decisions in theseareas, the public will demonstrate its displeasure at election time.

[ 83 ] The Plaintiff further contends that even if I conclude that the decision to introduce VLT gambling is a policy decision made in good faith, the decision to allow VLTs to be installed in so many different locations, and the decisions not to affix warning labels to the machines or to provide adequate addiction treatment facilities, are operational decisions that expose the Defendants to liability. I cannot agree.

In my view, each of these is a policy decision. [ 84 ] An evaluation of the level of risk associated with VLT gambling is inherent to the policy decision to introduce this form of gambling to the public.

The Province clearly concluded that the risks of VLT gambling, when weighed against the political, social and economic benefit, did not rise to a level requiring the Province to warn the public of the risks or to refuse to introduce this form of gambling altogether. [ 85 ] The Province’s awareness that VLTs, like all forms of gambling, present a risk of addiction is borne out by the measures adopted in the legislation to reduce the risk to what the Province considered an acceptable level.

These steps include limiting the amount of money a player can lose on any one play, permitting players to withdraw for payment or reimbursement at any time, programming the machines to pay out not less than 80% of the money deposited, restricting advertisement of VLTs to the interior of an approved premises, prohibiting advertisement that compares VLTs to other forms of gambling, and imposing a duty on licensees to take all necessary steps to prevent persons under 19 years of age from playing VLTs. [ 86 ] The decision as to the locations at which VLT machines would be installed also involves the consideration and weighing of political, social and economic factors.

The Video Lottery Regulations offer some insight into the variety of factors that may be relevant to the decision whether to grant or deny an application for a registration certificate: 3(2) In considering an application for a registration certificate, the Commission may require information and evidence from the applicant concerning, but not limited to, (

a) the nature of the business carried on or to be carried on at the premises seeking approval; (

b) the hours of operation of the business carried on at the premises seeking approval; (

c) in the case of premises licensed by the Alcohol and Gaming Authority* under the Liquor Control Act , evidence that such premises have been approved and a valid licence issued by the Authority; (

d) the public, storage and other facilities at the premises; (

e) the security of the premises; (

f) the estimated net revenues from video lottery operations as a percentage of general business revenues generated at the premises; (

g) the geographic location of the premises; and (

h) the names and addresses of all owners of the business, their respective interests and a statement of all financial encumbrances against the business including amounts and the name of the holder of the encumbrances. [ 87 ] As this

section demonstrates, a decision as to the appropriateness of a particular location for the installation of VLT machines is based on a number of public policy factors. The degree of policy involved in the decision is sufficient to justify protection from tort liability. [ 88 ] Finally, the decision whether to provide gambling addiction treatment facilities or programs is plainly one of policy dictated by budgetary, social and political constraints. [ 89 ] The other overriding policy consideration that would negative any prima facie duty of care in this case is the potential for indeterminate liability.

Justice Cromwell in Fullowka explained the nature of this concern as follows: 70 … At the root of the concern is that the duty, and therefore the right to sue for its breach, is so broad that it extends indeterminately.

In this sense, the policy concern about indeterminate liability is closely related to proximity; the question is whether there are sufficient special factors arising out of the relationship between the plaintiff and the defendant so that indeterminate liability is not the result of imposing the proposed duty of care. … What is required is a principled basis upon which to draw the line between those to whom the duty is owed and those to whom it is not … [ Emphasis added ] [ 90 ] A common thread running through the cases where a duty of care has been rejected on the basis of indeterminate liability is the inability on the part of the defendant to control the extent of its potential liability: see for example: Cooper at para.15, Imperial Tobacco at para. 99. [ 91 ] In the case at bar, there is nothing about the relationship between the Defendants and Mr.

Walsh that distinguishes it from the Defendants’ relationship with the general public. Nor was there any means by which the Defendants could control the number of persons who chose to play VLTs in Nova Scotia since 1991, or the amount of money they won or lost as a result. If this Court were to recognize the duties posited by Mr. Walsh, the liability of the Defendants would be indeterminate. [ 92 ] For the foregoing reasons, the Plaintiff’s claims in negligence have no chance of success.

Fiduciary duty [93] Recent jurisprudence establishes that claims of a fiduciary duty on the part of government will rarely be successful. [94] In Lac Minerals Ltd. v. International Corona Resources Ltd., (SCC), [1989] 2 SCR 574, the Court adoptedand applied the three-step analysis proposed by Justice Wilson in Frame v. Smith, (SCC), [1987] 2 SCR 99, to guide thecourts in identifying new fiduciary relationships: 32 Relationships in which a fiduciary obligation have been imposed seem to possess three general characteristics:

(1) The fiduciary has scope for the exercise of some discretion or power.

(2) The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary's legal or practical interests.

(3) The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power. [95] In Alberta v. Elder Advocates of Alberta Society, 2011 SCC 24, the Court cautioned that the Frame analysis is not a completecode for identifying fiduciary duties. Vulnerability alone will be insufficient to support a fiduciary claim. [96] Building on the groundwork laid by Justice Wilson, the Court set out the following general requirements that must be metbefore a fiduciary duty will arise: 36 In

summary, for an ad hoc fiduciary duty to arise, the claimant must show, in addition to the vulnerability arising from therelationship as described by Wilson J. in Frame: (1) an undertaking by the alleged fiduciary to act in the best interests of the allegedbeneficiary or beneficiaries; (2) a defined person or class of persons vulnerable to a fiduciary's control (the beneficiary or beneficiaries);and (3) a legal or substantial practical interest of the beneficiary or beneficiaries that stands to be adversely affected by the allegedfiduciary's exercise of discretion or control. [97] These requirements apply not only to relationships between private actors, but also to cases where a fiduciary duty is allegedon the part of government.

That being said, the requirements will be significantly more difficult to establish in the latter context due tothe government’s broad responsibility to act in the public interest: Elder Advocates at paras. 41-44. [98] As the Supreme Court of Canada reiterated in Professional Institute of the Public Service of Canada v. Canada (AttorneyGeneral), 2012 SCC 71: 124 It is now definitely a requirement of an ad hoc fiduciary relationship that the alleged fiduciary undertake, either expressly orimpliedly, to act in accordance with a duty of loyalty.

It is critical that the purported beneficiary be able to identify a forsaking of theinterests of all others on the part of the fiduciary, in favour of the beneficiary, in relation to the specific interest at issue. [99] In cases such as this where there are no direct interactions or agreements between the parties, any undertaking by thegovernment to act in the best interests of a plaintiff must be found in an imposition of responsibility by statute: Elder Advocates at para.32.

The undertaking must be “clearly supported” by the language of the legislation, and a grant to a public authority of discretionarypower to affect a person’s interest, without more, will not suffice: Elder Advocates at para. 45. [100] The Gaming Control Act imposes a duty on the Province and its agents to act in the best interests of the public. There isnothing in the statute which could be construed as imposing any degree of responsibility on the Province to protect Mr. Walsh’sinterests. Such a burden would be inherently at odds with the Province’s duty to act in the best interests of the public at large.

ThePlaintiff’s claim for breach of fiduciary duty therefore fails at the first requirement, and I need not consider the remaining tworequirements. Strict Liability [101] The Plaintiff alleges in his pleadings that VLTs are an inherently dangerous product and, as such, fall within the rubric of strictliability. This allegation deserves only brief comment. The application of the doctrine of strict liability is extremely limited in Canada. For example, unlike our neighbours to the South, we have chosen not to extend its application to manufacturers of defective products:Andersen v. St.

Jude Medical Inc., [2002] OJ No 260 (SCJ), Goodridge et al. v. Pfizer Canada Inc. et al., 2010 ONSC 1095. [102] The suggestion by the Plaintiff that any basis exists in law for this Court to extend the doctrine of strict liability to a statutoryregulator is entirely without merit. The Plaintiff’s claim on this ground has no chance of success. Conclusion [103] I have determined that each of the allegations contained in the Plaintiff’s Amended Statement of Claim are certain to fail. TheDefendants’ motion for

summary judgment on the pleadings pursuant to Rule 13.03 is granted and the Plaintiff’s action is dismissed. [104] If the parties are unable to agree on costs, they may submit their positions to me in writing no later than January 31, 2014.

LeBlanc, J.