In June, 2016, the Court of Appeal released its decision in the Paton Estate v. OLGC, 2016 ONCA 458. The appellants were two estates that suffered losses when a law clerk, Spinks, stole money from their trust accounts. The estates sued the respondent which operates casinos where Spinks and her mother lost about $950,000 of the estates’ money. While gambling, Spinks held herself out to be a lawyer.
At the Court of Appeal, the appellants sought to dismiss the judgement of Justice P.B. Hambly that their statement of claim contained no reasonable cause of action. Specifically, the motion judge found that no reasonable cause of action existed in relation to three claims: (1) that OLGC was knowingly in receipt of trust funds, (2) unjust enrichment and (3) negligence. The motion’s judge found that: (1) the fact that an individual held themselves out to be a lawyer could not mean that OLGC had notice that Spinks was gambling with trust money or that this was sufficient to put the OLGC on notice to investigate. (2) To conclude that an unjust enrichment occurred between the appellants and the respondents, one would first have had to have occurred between Spinks and the respondents. Given that OLGC (i) entered into a valid contract with Spinks and (ii) was a bona fide purchaser without notice that the money was obtained by fraud, no unjust enrichment could have occurred. (3) No duty of care was owed by OLCG to the appellants as one would first need to be established as being owed to Spinks which the jurisprudence revealed may only exist in very limited circumstances that did not apply to this case. Even if such a duty existed, it would be negated by the residual policy concerns of indeterminate liability, there would be issues with causation, as Spinks would still have possession over the stolen money, and OLGC would not owe a duty to the appellants to investigate the source of its costumers’ money.
The Court of Appeal, in a two to one decision, found that these were novel claims and that a full factual record was needed to make any definitive judgments about the issues raised in the statement of claim. The majority of the Court of Appeal refused to shut the door on the prospect that casinos owe a duty of care to victims of “problem gamblers”. First, as to the issue of being knowingly in receipt of trust funds, the motion judge erred by arriving at a factual assertion that OLGC did not knowingly receive trust fund money. Based on the appellants’ allegations, which must be taken as true in the context of the motion, that OLGC had knowledge sufficient to put it on inquiry and subsequently failed to take action, it is not plain and obvious that the cause of action would fail. Second, as to the issue of unjust enrichment, an argument based on the ground of unconscionable benefit may not necessarily fail based on a factual determination that OLGC acted unconscionably with respect to a problem gambler. An alternative argument that requires a trial is that a constructive trust may have been imposed on OLGC. Finally, the Consumer Protection Act may also be of consideration. All of these issues required a trial and could not be dismissed at this stage. Third, as to the claim in negligence, while casinos cannot investigate every customer, there may exist an obligation to do so where an individual is obviously addicted to gambling. Furthermore, the factual finding that casinos would go out of business requires an evidentiary record as does the conclusion that indeterminate liability would be the result of recognizing a duty of care limited to victims of obvious problem gamblers where a reasonable person would have realized that stolen trust funds could be used. Notably, the Court used the analogy of commercial alcohol providers who owe a duty to innocent third parties to demonstrate that it is not plain and obvious that the claim will fail.
Associate Chief Justice Hoy, dissident, would have dismissed the appeal as the appellants failed to plead the facts they required to demonstrate a potential cause of action. (1) She agreed with the motion judge that no facts were pleaded that would be a reasonable person on notice. Notably, she highlighted the fact that just because one spends large amounts of money at a casino does not mean one is spending trust money. (2) That no facts pleaded would reasonably lead to a conclusion that the appellants could vitiate the contract between Spinks and OLGC on the ground of unconscionable benefit. (3) Finally, in the duty of care analysis, there is a possibility that foreseeability may be established. However, there is no reasonable prospect that sufficient proximity could be found and, even if it were found, there would be residual policy concerns of indeterminate liability which would negate a duty of care.