Cooper v. Registrar of Mortgage Brokers (B.C.) et al.,

• Jurisdiction: Federal Jurisdiction (Canada)
• Judge: McLachlin, C.J.C., Gonthier, Major, Bastarache, Binnie, Arbour and LeBel, JJ.
• Court: Supreme Court (Canada)
• Citation: (2001), 160 B.C.A.C. 268 (SCC),2001 SCC 79
• Date: 20 June 2001

Cooper v. Mortgage Brokers (2001), 160 B.C.A.C. 268 (SCC);

    261 W.A.C. 268

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2001] B.C.A.C. TBEd. NO.047

Mary Francis Cooper (appellant) v. Robert J. Hobart and Her Majesty the Queen in right of the Province of British Columbia (respondents) and The Attorney General of Canada, the Attorney General for Ontario, the Attorney General for New Brunswick, Her Majesty the Queen in right of Alberta, the Minister of Justice and the Attorney General for Alberta, the British Columbia Securities Commission, the Ontario Securities Commission, and the Alberta Securities Commission (interveners)

(27880; 2001 SCC 79)

Indexed As: Cooper v. Registrar of Mortgage Brokers (B.C.) et al.

Supreme Court of Canada

McLachlin, C.J.C., Gonthier, Major, Bastarache, Binnie, Arbour and LeBel, JJ.

November 16, 2001.

Summary:

The plaintiff, an investor who lost money in an investment company, sued the Regis­trar of Mortgage Brokers (B.C.) for negli­gence, alleging a breach of a duty of care in failing to oversee the investment company's conduct. The plaintiff sought to certify the action as a class proceeding under the Class Proceedings Act (B.C.). Pursuant to s. 4(1)(a), in order to certify an action as a class proceeding, a court had to first deter­mine whether the pleadings disclosed a cause of action. Therefore, an issue arose as to whether the Registrar, a statutory regulator, owed a private law duty of care to members of the investing public for alleged negligence in failing to properly oversee the conduct of an investment company licensed by the regulator.

The British Columbia Supreme Court, in a decision reported in 8 B.C.T.C. 1, held that the pleadings disclosed a cause of action as required under s. 4(1)(a). The proceedings were subsequently certified after it was determined that the other requirements of s. 4(1) were met (see 14 B.C.T.C. 201). The Registrar appealed.

The British Columbia Court of Appeal, in a decision reported 135 B.C.A.C. 266; 221 W.A.C. 266, allowed the appeal holding that the pleadings did not disclose a cause of action against the Registrar. The plaintiff appealed.

The Supreme Court of Canada dismissed the appeal. The court held that the Registrar did not owe a duty of care to the investors. The court revisited the "Anns test" (from Anns v. Merton London Borough Council (H.L.), 1978) and discussed the policy con­cerns to be considered at each stage of the test.

Actions - Topic 1511

Cause of action - General principles - New or extended cause of action - Opening of floodgates - [See third Brokers - Topic 825].

Actions - Topic 1622

Cause of action - Torts - What constitutes - [See second Brokers - Topic 825].

Brokers - Topic 825

Regulation - Regulatory body - Duty of care - In Anns v. Merton London Borough Council (1978), the House of Lords estab­lished a test for determining when a duty of care arises - The Supreme Court of Canada revisited Anns and stated the test as understood in Canada today - The court attempted to clarify the policy consider­ations in applying the Anns test - The court then applied the test in determining that the Registrar of Mortgage Brokers (B.C.) did not owe a duty of care to investors who suffered economic losses allegedly because the Registrar was negli­gent in overseeing the conduct of an in­vestment company in dealing with the investors' money - See paragraphs 1 to 56.

Brokers - Topic 825

Regulation - Regulatory body - Duty of care - Investors, who lost money in an investment company, sued the Registrar of Mortgage Brokers (B.C.) for negligence, alleging a breach of a duty of care in failing to oversee the investment com­pany's conduct - The Supreme Court of Canada held that the pleadings did not disclose a cause of action against the Reg­istrar because the Registrar, a statutory regulator, did not owe a private law duty of care to members of the investing public - Even though the Registrar might reason­ably have foreseen that losses to investors would result if he was careless in carrying out his duties under the Mortgage Brokers Act, there was insufficient proximity between the Registrar and the investors to ground a prima facie duty of care (i.e., the first branch of the "Anns test" was not met) - See paragraphs 40 to 56.

Brokers - Topic 825

Regulation - Regulatory body - Duty of care - Investors, who lost money in an investment company, sued the Registrar of Mortgage Brokers (B.C.) for negligence, alleging a breach of a duty of care in failing to oversee the investment com­pany's conduct - The Supreme Court of Canada held that the pleadings did not disclose a cause of action against the Reg­istrar because it was not established that the Registrar owed a duty of care to the investors (i.e., the first branch of the "Anns test" was not met) - The court opined that even if a prima facie duty of care had been established under the first branch of the Anns test, it would have been negated at the second stage because of overriding policy reasons, the distinction between government policy and the execution of policy, problems with indeterminate liabil­ity and the burden on the taxpaying public in covering the losses of private investors -See paragraphs 40 to 56.

Damages - Topic 531

Limits of compensatory damages - Re­moteness - Torts - Recoverable damages - Purely economic loss - [See first Brokers -Topic 825].

Torts - Topic 60

Negligence - Causation - Foreseeability - [See second Brokers - Topic 825 and fourth and fifth Torts - Topic 76].

Torts - Topic 76

Negligence - Duty of care - General prin­ciples - [See first Brokers - Topic 825].

Torts - Topic 76

Negligence - Duty of care - General prin­ciples - The Supreme Court of Canada stated that the Anns analysis (i.e., Anns v. Merton London Borough Council (H.L.), 1978), is best understood as follows: "At the first stage of the Anns test, two ques­tions arise: (1) was the harm that occurred the reasonably foreseeable consequence of the defendant's act? and (2) are there reasons, notwithstanding the proximity between the parties established in the first part of this test, that tort liability should not be recognized here? The proximity analysis involved at the first stage of the Anns test focuses on factors arising from the relationship between the plaintiff and the defendant. These factors include ques­tions of policy, in the broad sense of that word. If foreseeability and proximity are established at the first stage, a prima facie duty of care arises." - The court continued with a discussion of the second stage - See paragraph 30.

Torts - Topic 76

Negligence - Duty of care - General prin­ciples - The Supreme Court of Canada stated that the Anns analysis (i.e., Anns v. Merton London Borough Council (H.L.), 1978), is best understood as follows: "At the first stage of the Anns test, two ques­tions arise: (1) was the harm that occurred the reasonably foreseeable consequence of the defendant's act? and (2) are there reasons, notwithstanding the proximity between the parties established in the first part of this test, that tort liability should not be recognized here?" - The court dis­cussed the first stage of the test and then stated that "at the second stage of the Anns test, the question still remains whether there are residual policy considerations outside the relationship of the parties that may negative the imposition of a duty of care. It may be, as the Privy Council sug­gests in Yuen Kun Yeu, that such con­siderations will not often prevail. However, we think it useful expressly to ask, before imposing a new duty of care, whether despite foreseeability and proximity of relationship, there are other policy reasons why the duty should not be imposed." - See paragraph 30.

Torts - Topic 76

Negligence - Duty of care - General prin­ciples - The Supreme Court of Canada stated the first question under the Anns analysis (i.e., Anns v. Merton London Borough Council (H.L.), 1978) was whether the harm that occurred was the reasonably foreseeable consequence of the defendant's act? - The court stated that the reasonable foreseeability of harm under the first branch of the test had to be supple­mented by proximity - With respect to what was meant by proximity, the court stated that " ... Two things may be said. The first is that 'proximity' is generally used in the authorities to characterize the type of relationship in which a duty of care may arise. The second is that sufficiently proximate relationships are identified through the use of categories. The cat­egories are not closed and new categories of negligence may be introduced. But generally, proximity is established by reference to these categories. This provides certainty to the law of negligence, while still permitting it to evolve to meet the needs of new circumstances." - See para­graph 31.

Torts - Topic 76

Negligence - Duty of care - General prin­ciples - The Supreme Court of Canada stated the first question under the Anns analysis (i.e., Anns v. Merton London Borough Council (H.L.), 1978) was whether the harm that occurred was the reasonably foreseeable consequence of the defendant's act? - The court stated that the reasonable foreseeability of harm under the first branch of the test had to be supple­mented by proximity - Sufficiently proxi­mate relationships are identified through the use of categories - The court set out the categories in which proximity has been recognized - The court stated that when a case falls within one of these situations or an analogous one and reasonable foreseeability is established, a prima facie duty of care may be posited - See para­graph 36.

Torts - Topic 76

Negligence - Duty of care - General prin­ciples - The Supreme Court of Canada stated that at the second stage of the Anns analysis (i.e., Anns v. Merton London Borough Council (H.L.), 1978) the ques­tion was whether there were reasons, not­withstanding the proximity between the parties established under the first part of the test, that tort liability should not be recognized in the particular circumstances -The court stated that residual policy con­siderations fell to be considered at the second stage of the Anns test - See para­graphs 37 to 39.

Torts - Topic 76

Negligence - Duty of care - General prin­ciples - The Supreme Court of Canada stated that it was at the second stage of the Anns analysis (i.e., Anns v. Merton London Borough Council (H.L.), 1978) that "the distinction between govern­ment policy and execution of policy falls to be considered. It is established that govern­ment actors are not liable in negli­gence for policy decisions, but only oper­ational decisions. The basis of this immu­nity is that policy is the prerogative of the elected Legislature. It is inappropriate for courts to impose liability for the conse­quences of a particular policy decision. On the other hand, a government actor may be liable in negligence for the manner in which it executes or carries out the pol­icy...." - See paragraph 38.

Torts - Topic 76

Negligence - Duty of care - General prin­ciples - The Supreme Court of Canada stated that it was at the second stage of the Anns analysis (i.e., Anns v. Merton London Borough Council (H.L.), 1978) that "the distinction between govern­ment policy and execution of policy falls to be considered. It is established that govern­ment actors are not liable in negli­gence for policy decisions, but only oper­ational decisions ... In our view, the exclu­sion of liability for policy decisions is properly regarded as an application of the second stage of the Anns test. The exclu­sion does not relate to the relationship between the parties. Apart from the legal character-ization of the government duty as a matter of policy, plaintiffs can and do recover. The exclusion of liability is better viewed as an immunity imposed because of con­siderations outside the relationship for policy reasons -- more precisely, because it is inappropriate for courts to second-guess elected legislators on policy matters. Simi­lar considerations may arise where the decision in question is quasi-judicial ..." - See paragraph 38.

Torts - Topic 76

Negligence - Duty of care - General prin­ciples - The Supreme Court of Canada stated that at the second stage of the Anns analysis (i.e., Anns v. Merton London Borough Council (H.L.), 1978) the ques­tion was whether there were reasons, not­withstanding the proximity between the parties established under the first part of the test, that tort liability should not be recognized in the particular case - The court stated that "the second step of Anns generally arises only in cases where the duty of care asserted does not fall within a recognized category of recovery. Where it does, we may be satisfied that there are no overriding policy considerations that would negative the duty of care. In this sense, I agree with the Privy Council in Yuen Kun Yeu that the second stage of Anns will seldom arise and that questions of liability will be determined primarily by reference to established and analogous categories of recovery. However, where a duty of care in a novel situation is alleged, as here, we believe it necessary to consider both steps of the Anns test as discussed above.This ensures that before a duty of care is imposed in a new situation, not only are foreseeability and relational proximity present, but there are no broader consider­ations that would make imposition of a duty of care unwise." - See paragraph 39.

Torts - Topic 77

Negligence - Duty of care - Relationship required to raise duty of care - [See first Brokers - Topic 825 and second to ninth Torts - Topic 76].

Torts - Topic 81

Negligence - Duty of care - Requirement that duty be owed to plaintiff - [See first Brokers - Topic 825].

Torts - Topic 9151

Duty of care - Particular relationships - Claims against public officials, authorities or boards - General - [See first Brokers - Topic 825, and seventh and eighth Torts -Topic 76].

Torts - Topic 9167

Duty of care - Particular relationships - Claims against public officials, authorities or boards - Statutory regulators (e.g., Registrar of Mortgage Brokers) - [See all Brokers - Topic 825].

Cases Noticed:

Anns v. London Borough Council of Merton, [1978] A.C. 728 (H.L.), consd. [para. 1].

Endean v. Canadian Red Cross Society et al. (1998), 106 B.C.A.C. 73; 172 W.A.C. 73; 48 B.C.L.R.(3d) 90 (C.A.), refd to. [para. 7].

Dorman Timber Ltd. v. British Columbia (1997), 97 B.C.A.C. 178; 157 W.A.C. 178; 40 B.C.L.R.(3d) 230 (C.A.), refd to. [para. 8].

Nielsen v. Kamloops (City) and Hughes, [1984] 2 S.C.R. 2; 54 N.R. 1; 10 D.L.R.(4th) 641; [1984] 5 W.W.R. 1; 29 C.C.L.T. 97; 8 C.L.R. 1, refd to. [para. 13].

Comeau's Sea Foods v. Canada (Minister of Fisheries and Oceans), [1997] 1 S.C.R. 12; 206 N.R. 363, refd to. [para. 19].

Donoghue v. Stevenson, [1932] A.C. 562 (H.L.), refd to. [para. 21].

Nova Mink Ltd. v. Trans-Canada Airlines, [1951] 2 D.L.R. 241 (N.S.C.A.), refd to. [para. 25].

Yuen Kun Yeu v. Hong Kong (Attorney General), [1988] 1 A.C. 175; 82 N.R. 321 (P.C.), refd to. [para. 29].

Hercules Management Ltd. et al. v. Ernst & Young et al., [1997] 2 S.C.R. 165; 211 N.R. 352; 115 Man.R.(2d) 241; 139 W.A.C. 241, refd to. [para. 33].

Canadian National Railway Co. et al. v. Norsk Pacific Steamship Co. Ltd. and Tug Jervis Crown et al., [1992] 1 S.C.R. 1021; 137 N.R. 241; 91 D.L.R.(4th) 289; 11 C.C.L.T.(2d) 1, refd to. [para. 35].

Davis v. Radcliffe, [1990] 2 All E.R. 536 (P.C.), refd to. [para. 35].

Copock et al. v. Chief Constable of the South Yorkshire Police, [1991] 4 All E.R. 907; 131 N.R. 194; [1992] 1 A.C. 310 (H.L.), refd to. [para. 36].

Alcock et al. v. Chief Constable of the South Yorkshire Police - see Copock et al. v. Chief Constable of the South York­shire Police.

Hedley Byrne & Co. v. Heller & Partners Ltd., [1963] 2 All E.R. 575 (H.L.), refd to. [para. 36].

Rivtow Marine Ltd. v. Washington Iron Works and Walkem Machinery and Equipment Ltd., [1974] S.C.R. 1189, refd to. [para. 36].

Just v. British Columbia, [1989] 2 S.C.R. 1228; 103 N.R. 1, refd to. [para. 36].

Swinamer v. Nova Scotia (Attorney Gen­eral) et al., [1994] 1 S.C.R. 445; 163 N.R. 291; 129 N.S.R.(2d) 321; 362 A.P.R. 321, refd to. [para. 36].

Bow Valley Husky (Bermuda) Ltd. et al. v. Saint John Shipbuilding Ltd. et al., [1997] 3 S.C.R. 1210; 221 N.R. 1; 158 Nfld. & P.E.I.R. 269; 490 A.P.R. 269; 153 D.L.R.(4th) 385, refd to. [para. 36].

Edwards et al. v. Law Society of Upper Canada et al. (2001), 277 N.R. 145 (S.C.C.), refd to. [para. 38].

Statutes Noticed:

Mortgage Brokers Act, R.S.B.C. 1996, c. 313, sect. 4 [para. 45]; sect. 5, sect. 6, sect. 7 [para. 46]; sect. 8, sect. 14 [para. 47]; sect. 20 [para. 48].

Authors and Works Noticed:

Street, Harry, The Law of Torts (6th Ed. 1976), p. 108 [para. 25].

Counsel:

David P. Church, Andrew J. Pearson and Ian G. Schildt, for the appellant;

D. Clifton Prowse, Karen Horsman and Keith L. Johnston, for the respondents;

Donald J. Rennie, for the intervener, the Attorney General of Canada;

Sara Blake, for the intervener, the Attorney General for Ontario;

Cedric L. Haines, Q.C., for the intervener, the Attorney General for New Bruns­wick;

Tim Hurlburt, for the interveners, Her Majesty the Queen in Right of Alberta, the Minister of Justice and the Attorney General for Alberta;

James A. Sasha Angus and Lorne Herlin, for the intervener, the British Columbia Securities Commission.

Neil Finkelstein and Johanna M. Superina, for the interveners, the Ontario Securities Commission and the Alberta Securities Commission.

Solicitors of Record:

Camp Church & Associates, Vancouver, British Columbia, for the appellant;

Ministry of the Attorney General, Vancouver, British Columbia, for the respondents;

Deputy Attorney General of Canada, Ottawa, Ontario, for the intervener, the Attorney General of Canada;

Ministry of the Attorney General, Toronto, Ontario, for the intervener, the Attorney General for Ontario;

Attorney General for New Brunswick, Fredericton, New Brunswick, for the intervener, the Attorney General of New Brunswick;

Minister of Justice and Attorney General for Alberta, Edmonton, Alberta, for the interveners, Her Majesty the Queen in Right of Alberta and the Minister of Justice and Attorney General for Alberta;

Blake, Cassels & Graydon, Toronto, Ontario, for the interveners, the Ontario Securities Commission and the Alberta Securities Commission;

British Columbia Securities Commission, Vancouver, British Columbia, for the intervener, the British Columbia Secu­rities Commission.

This appeal was heard on June 20, 2001, before McLachlin, C.J.C., Gonthier, Major, Bastarache, Binnie, Arbour and LeBel, of the Supreme Court of Canada. The following judgment of the court was delivered in both official languages on November 16, 2001, by McLachlin, C.J.C. and Major, J.