Capital Market Technologies Inc v. Government of Prince Edward Island

SUPREME COURT OF PRINCE EDWARD ISLAND

Citation: CMT et al. v. Government of PEI et al., 2019 PESC 40

Date: 20190925

Docket: S1-GS-27636

Registry: Charlottetown

Between:

And:

Capital Market Technologies Inc. and 7645686 Canada Inc.

Plaintiffs

Government of Prince Edward Island, Wes Sheridan,

Steve MacLean, Allan Campbell, Chris LeClair, Brad Mix,

Cheryl Paynter, Steven Dowling, William Dow, Melissa MacEachern,

Robert Ghiz, Gary Scales, Tracey Cutcliffe, Neil Stewart,

Paul Jenkins and 7628382 Canada Corporation

Defendants

Before: The Honourable Justice Gordon L. Campbell

Appearances:

John W. McDonald, Solicitor for the Plaintiffs

Jonathan Coady, Solicitor for the Defendants, Government of Prince Edward Island,

Wes Sheridan, Steve MacLean, Allan Campbell, Chris LeClair, Brad Mix, Cheryl Paynter, Melissa MacEachern,

Neil Stewart and Robert Ghiz

Greg Temelini, Solicitor for Steven Dowling

Gavin J. Tighe and Alexander Melfi, Solicitors for William Dow and Tracey Cutcliffe

R. Leigh Youd, Solicitor for Gary Scales

Place and date of hearing

Charlottetown, Prince Edward Island

April 23, 24, 25 and 26, 2019

Place and date of judgment

Charlottetown, Prince Edward Island

September 25, 2019

SUMMARY JUDGMENT - best foot forward - specific facts required - failure to provide relevant evidence -

adverse inference - documentary production - no evidence of damages - no genuine issue requiring a trial

MEMORANDUM OF UNDERSTANDING - contract - breach of contract - agreement to agree - agreement to

negotiate - uncertain terms - no intention to be bound - bargaining in good faith

MISFEASANCE IN PUBLIC OFFICE - public officer - performing public function - requires deliberate unlawful

conduct - must be cause of damages

SPOLIATION OF EVIDENCE - requires intentional destruction of evidence relevant to ongoing or contemplated

litigation - evidentiary rule - rebuttable presumption

AUDITOR GENERAL’S REPORT - status - Auditor General’s office is neither designed nor equipped to conduct an

inquiry to assess civil liability

SECURITIES ACT INVESTIGATION - illegal sale of securities - agreed statement of facts - settlement agreement

ISSUE ESTOPPEL AND ABUSE OF PROCESS - collateral attack - attempted relitigation

STRIKING STATEMENT OF CLAIM - multiple breaches of Rules of Court related to pleadings

COSTS - substantial indemnity

The plaintiffs commenced actions seeking a minimum of $150 million dollars against various defendants in relation to i) a

Memorandum of Understanding (MOU), ii) an investigation under the Securities Act, R.S.P.E.I. 1988, Cap. S-3.1, and iii) alleged

spoliation of evidence. They alleged breach of contract against the Government and misfeasance in public office on the part of

public servants and others not in the public service.

The plaintiffs’ principal allegations against the Government and related defendants are that they breached clauses of the MOU

granting the plaintiffs a period of time during which they could deal exclusively with the Government in hopes of establishing a

“financial services centre” on Prince Edward Island, and that various defendants improperly disclosed confidential information to

others.

The action also raised claims against various defendants in connection with a Securities Act investigation into alleged illegal sales by

3

the plaintiff(s) of hundreds of thousands of dollars of securities on Prince Edward Island. The plaintiffs contend the securities

investigation was undertaken on the basis of a false rumour, and was without merit. Notwithstanding that, the plaintiffs signed a

Settlement Agreement acknowledging certain contraventions of the Securities Act and other provisions.

The plaintiffs also seek to hold the Government and other defendants responsible for the loss of evidence, alleging they

intentionally destroyed evidence which could impact the outcome of the litigation.

Shortly after filing their statements of defence in which all allegations were denied, all defendants filed motions seeking summary

judgment against the plaintiffs. The defendants submit the plaintiffs have raised no genuine issue requiring a trial. Upon hearing the

motions and reviewing all submissions, the court found there were no genuine issues requiring a trial and granted summary

judgment to all defendants. The plaintiffs’ action was dismissed in its entirety.

STATUTES CONSIDERED: Securities Act, R.S.P.E.I. 1988, Cap. S-3.1; Archives and Records Act, R.S.P.E.I. 1988, c.

A-19.1; Canada Business Corporations Act (CBCA) R.S., 1985, c. C-44, , s.2(2)

TEXTS CONSIDERED: Sentinels of the Hryniak Culture Shift: Four Years On, Annual Review of Civil Litigation, 2018

(Archibald 2018 Thomson Reuters); Canadian Contractual Interpretation Law, 3^rded. (Markham, Ont.: LexisNexis. 2016);

Misfeasance in a Public Office, (Toronto: Thomson Reuters, 2016); Government Liability: Law and Practice, Looseleaf (Toronto:

Thompson Reuters, 2017);

RULES CONSIDERED: Prince Edward Island Rules of Civil Procedure, Rules 1.10, 4.06, 20 and 39.01

CASES CONSIDERED: CMT et al v. Gov’t of PEI et al. 2016 PESC 4; CMT et al v. Gov’t of PEI et al., 2018 PESC 9;

Hryniak v. Mauldin, 2014 SCC 7; York River Properties Inc. v. Creed’s Petroleum et ors., 2015 PESC 35; MacPherson

v. Ellis, 2005 PESCAD 10; National Bank v. S. Taha and K. Taha, 2019 PESC 14; Mallett v. Richard et. ors., 2018 PESC 50; Royal

Bank of Canada v. Trainor, 2017 PESC 13; McQuaid v. Government of P.E.I. et al, 2017 PECA 21; Trotter v. Trotter, 2014

ONCA 841; Dovbush v. Mouzitchka, 2016 ONCA 381; Weir-Jones Technical Services Incorporated v. Purolator Courier Ltd.,

2019 ABCA 49; Canada (A.G.) v. Lameman, 2008 SCC 14; Boland v. Lyle, 2016 ONSC 7418; Danos v. BMS Group Financial

Services Canada, 2014 ONCA 887; MacDonald v. Robichaud and Lenentine, 1996 3677 (PESCAD), [1995] 2 P.E.I.R. 294;

Mazza v. Ornge Corporate Services Inc., 2015 ONSC 7785; Summerside Seafood v. Prince Edward Island, 2012 PESC 3; Sweda

Farms v. Egg Farmers of Ontario, 2014 ONSC 1200 (), aff’d 2014 ONCA 878 (); Bank of Montreal v. Abdel-Messih,

2006 16475, (Ont. C.A.); Court v. Debaie, 2012 ABQB 640; Murphy Oil Company Ltd. v. Predator Corporation Ltd.,

2006 ABCA 69; Kolosov v. Lowe’s Companies Inc., 2018 ONSC 7541; Mazza v. Ornge Corporate Services Inc., 2016 ONCA 753;

Murphy v. Mullen, 2018 ONSC 4292; Smith v. Waterloo Taxi Limited, 2013 ONSC 1466; Smith v. Waterloo Taxi Limited, 2014

ONCA 37; Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONCA 878; Drummond v. The Cadillac Fairview Corp. Ltd., 2018

ONSC 4509 (); Pro-C Ltd. v. Computer City Inc. [2000] O.J. No. 2823, 2000 CarswellOnt 2696, 7 C.P.R. (4^th) 193; Pro-C

4

Ltd. v. Computer City, Inc. 2001 7375 (ONCA); Canada (A.G.) v. Canada (Krever Commission) 1997 323

(SCC); [1997] 3 S.C.R. 440; Mulroney v. Schreiber, 2009 QCCA 116; Foss v. Harbottle (1843), 2 Hare 461, 67 E.R. 189; Hercules

Managements Ltd. v. Ernst and Young, 1997 345, [1997] 2 S.C.R. 165; Meditrust Healthcare Inc. v. Shoppers Drug Mart,

2002 41710 (ONCA); McGowan v. Bank of Nova Scotia 2011 PECA 20; Bawitko Investments Ltd. v. Kernels Popcorn

Ltd., 1991 2734; Georgian Windpower Corp. v. Stelco Inc., 2012 ONSC 3759; Bhasin v. Hyrnew 2014 SCC 71; Odhavji

Estate v. Woodhouse, 2003 SCC 69, 2003 CarswellOnt 4851; Powder Mountain Resorts Ltd. v. British Columbia, 2001 BCCA 619,

94B.C.L.R. (3d) 14; Grand River Enterprises Six Nations v. A.G. (Canada), 2017 ONCA 526; Capital Solar Power Corporation

v.The Ontario Power Authority, 2019 ONSC 1137; St. Elizabeth Home Society v. City of Hamilton, 2010 ONCA 280;

Pikangikum First Nation v. Nault, 2012 ONCA 705; Martineau v. Ontario (Alcohol and Gaming Commission of Ontario), 2007

ONCA 204; Stenner v. British Columbia (Securities Commission) (1996), 141 D.L.R. (4^th) 122 (BCCA); Toronto v. C.U.P.E.,

Local 79, 2003 SCC 63; Schwartz v. Ontario, 2013 ONSC 7244; Behn v. Moulton Contracting Ltd., 2013 SCC 26; Danyluk v.

Ainsworth Technologies Inc., 2001 SCC 44; McDougall v. Black & Decker Canada Inc., 2008 ABCA 353; St. Louis v. R., (1896),

25 S.C.R. 649; 1896 CarswellNat 23; Catalyst Capital Group Inc., v. Moyse, 2016 ONSC 5271; The Catalyst Capital Group Inc., v.

Moyse, 2018 ONCA 283; Nova Growth Corp. et al. v. Andrzej Roman Kepinski et al., 2014 ONSC 2763; Endean v. Canadian

Red Cross Society et al., 1998 6489 (BCCA); Leon v. Toronto Transit Commission, 2014 ONSC 1600, (aff’d at, 2016

ONSC 3394 (Divisional Court); Bucknol v. 2280882 Ontario Inc., 2018 ONSC 5455; CMT et al. v. Government of PEI et al.,

2018 PECA 28

INDEX

Page

Introduction.................................................................................................................................................................................................9

1. Nature of claims

9

2. Procedural history .............................................................................................................................................................10

3. The motions before the court............................................................................................................................................... 11

Overview.................................................................................................................................................................................................... 11

1. The e-gaming project............................................................................................................................................................ 11

2. The MOU between Innovation PEI and 764.......................................................................................................................12

5

3. The Securities Act investigation

13

4. Cancellation of email accounts of departing employees...................................................................................................... 13

Issue ........................................................................................................................................................................................................... 14

Law of Summary Judgment....................................................................................................................................................................... 14

1. Culture shift...................................................................................................................................................................... 14

2. Two-part test ........................................................................................................................................................................ 18

3. Best foot forward

............................................................................................................................................ 20

4. “Specific facts” required .................................................................................................................................................. 22

5. Summary judgment is not restricted to any category,

type or size of cases...................................................................................................................................................................23

General evidentiary issues raised by the parties ........................................................................................................................................24

1. Rules of Court on summary judgment motions - potential for adverse inference .............................................................24

2. No explanation for failure to provide direct evidence .........................................................................................................32

3. Ample time was available to provide all affidavits ...............................................................................................................33

4. Strategic choices have strategic consequences - Failure to

produce affidavits and present witnesses for cross-examination.............................................................................................34

5. Adverse inference .................................................................................................................................................................35

6. Compelling documentary production .................................................................................................................................35

7. Documentary disclosure by defendants versus documents received

through FOIPP ........................................................................................................................................................................38

8. Pro-C case.............................................................................................................................................................................40

Auditor General’s Report .......................................................................................................................................................................... 41

Law of corporate personality .....................................................................................................................................................................45

1. Corporate information on CMT and 764 (and other names used

by the plaintiffs) .......................................................................................................................................................................46

2. Paul Maines......................................................................................................................................................................48

Page

Categorizing and addressing the plaintiffs’ claims....................................................................................................................................48

The MOU between Innovation PEI and 7645686 Canada Inc. (The “contract”) ....................................................................................49

6

General Allegations regarding breach of contract.....................................................................................................................................53

1. Individuals named in breach of contract claim ................................................................................................................53

2. Specific claims of breach of contract................................................................................................................................54

General statement of the parties’ positions regarding breach of contract allegations ..............................................................................56

The law of breach of contract - overview...................................................................................................................................................57

1. Agreement to agree, uncertain terms, no intention to be bound.........................................................................................57

2. Bargaining in good faith ......................................................................................................................................................61

Specific allegations of misfeasance in public office ...................................................................................................................................61

The law of misfeasance in public office - Identifying the essential elements ............................................................................................64

Evidence and allegations with respect to the MOU as it pertains to both breach of contract and misfeasance in public office..............69

1. Allegations against Sheridan and LeClair re: MOU ..........................................................................................................69

i) Emails of August 1 and 2, 2012.......................................................................................................................69

ii) Meetings in August and letter from Laslop on September 6, 2012 .............................................................73

Public statement by Sheridan ....................................................................................................................................................................79

Carta Worldwide .......................................................................................................................................................................................80

Conclusions concerning allegations against Sheridan re: MOU .............................................................................................................. 81

Conclusions concerning allegations against LeClair re: MOU ................................................................................................................ 81

Allegations against Mix - Attendance by Mix at SIBOS conference, and related

similar activities .........................................................................................................................................................................................82

Conclusions concerning allegations against Mix......................................................................................................................................86

Allegations against Paynter .......................................................................................................................................................................87

1. Re: Breach of contract by Paynter ........................................................................................................................................87

2. The “ask”..............................................................................................................................................................................88

7

Page

Conclusions concerning allegations of breach of contract against Paynter..............................................................................................93

Allegations of misfeasance in public office against Paynter ......................................................................................................................94

Conclusions concerning allegations of misfeasance against Paynter........................................................................................................95

Allegations against LeClair, MacLean, Campbell, and MacEachern regarding the securities investigation and its impact on the MOU95

1. LeClair and MacLean ...........................................................................................................................................................95

2. Campbell..............................................................................................................................................................................97

3. MacEachern..........................................................................................................................................................................97

Conclusions re: allegations against LeClair, MacLean, Campbell, and MacEachern regarding the securities investigation and its

impact on the MOU ..................................................................................................................................................................................98

Loyalty card program.................................................................................................................................................................................99

Allegations of misfeasance against Dow and Cutcliffe............................................................................................................................ 103

1. Issues on the Dow and Cutcliffe motions ................................................................................................................... 104

a) Are Dow and Cutcliffe public officers? ............................................................................................................ 104

b) Dow’s interactions with Dowling.................................................................................................................... 107

c) Drafting the MOU ...........................................................................................................................................108

d) The extension of the MOU.............................................................................................................................. 110

e) Was Dow involved in developing a loyalty card program?.............................................................................. 112

f) Cutcliffe’s interactions with Dowling........................................................................................................... 112

g) Failure of plaintiffs to put their best foot forward............................................................................................ 113

Conclusions concerning allegations against Dow and Cutcliffe ............................................................................................................ 116

Allegations against Scales ........................................................................................................................................................................ 117

1. Simplex’s invoices regarding e-gaming............................................................................................................................120

Conclusions concerning allegations against Scales.................................................................................................................................122

The Securities Act investigation - the defendant Dowling.....................................................................................................................122

8

Securities investigation Settlement Agreement.......................................................................................................................................127

1. Securities Act prohibits disclosure of information .........................................................................................................129

2. The “lady with cancer” rumour.......................................................................................................................................132

Page

Allegations of misfeasance against Dowling ........................................................................................................................................... 135

1. Negligence action barred by statute................................................................................................................................. 136

2. Issue estoppel and abuse of process................................................................................................................................. 137

Conclusions regarding allegations of misfeasance against Dowling, including as

was alleged to have involved other defendants........................................................................................................................................ 145

Misfeasance or negligence ....................................................................................................................................................................... 147

Status of MOU......................................................................................................................................................................................... 148

1. An agreement to agree................................................................................................................................................. 149

2. Good faith obligation.................................................................................................................................................. 149

3. Articles imposing binding obligations ........................................................................................................................ 150

The law of spoliation - overview.............................................................................................................................................................. 150

Allegations of spoliation against Government, Ghiz, and Stewart......................................................................................................... 156

1. LeClair’s emails ........................................................................................................................................................... 156

2. Beck’s emails ............................................................................................................................................................... 157

3. MacEachern’s emails................................................................................................................................................... 157

4. Standard practice......................................................................................................................................................... 158

5. Archives and Records Act ..........................................................................................................................................160

Conclusions regarding spoliation allegations against Government,

Ghiz and Stewart ..................................................................................................................................................................................... 161

Request to submit further documentation .............................................................................................................................................. 161

1. Plaintiffs’ counsel failed to respect Rule 1.10 .....................................................................................................................162

2. Nature of additional documentation ................................................................................................................................. 163

3. Where does the gap in Mix’s sent email take us? ............................................................................................................. 163

9

No evidence of damages .......................................................................................................................................................................... 164

Quality of evidence and presentation of plaintiffs’ materials and submissions ...................................................................................... 167

Summary judgment is appropriate.......................................................................................................................................................... 168

Request to strike amended statement of claim ........................................................................................................................................ 170

Costs ........................................................................................................................................................................................................ 171

Disposition...............................................................................................................................................................................................172

Campbell J.:

Introduction

1. Nature of claims

[1]

Cases coming before the court are resolved on the basis of evidence presented to the

court. If a plaintiff presents sufficient admissible evidence to substantiate their claim, and

the defendant does not present sufficient admissible evidence to refute that claim, the claim

will be proven and the plaintiff will succeed. If a plaintiff fails to present sufficient

admissible evidence which overcomes evidence to the contrary from the defendant, the

plaintiff’s claim will fail. Allegations made in a statement of claim are simply that,

allegations, or statements setting out the plaintiff’s claim. Denials in a statement of

defence are of the same nature. Such statements do not constitute evidence. These

fundamental facts and principles are what govern decisions on matters presented to the

court.

[2]

The plaintiffs, whose counsel is John W. McDonald (McDonald), are suing various

defendants for breach of contract, misfeasance in public office, and spoliation of evidence.

A brief description of the main thrust of their allegations is sufficient at this point of the

decision.

[3]

The breach of contract claims relate to a Memorandum of Understanding (MOU)

which contained articles relating to maintaining confidentiality and dealing exclusively

with the plaintiffs during the course of the MOU. The plaintiffs claim the defendants

breached the terms of the MOU by approaching competitors, recruiting them for the same

services, and otherwise dealing with them in ways contrary to the confidentiality and

exclusivity articles.

10

[4]

The claims of misfeasance in public office against various individuals relate to their

alleged improper conduct in failing to respect the existence of an MOU, initiating a

securities investigation against the plaintiffs for ulterior motives, and disclosing or

misusing confidential information.

[5]

The claims of spoliation relate to the cancellation of email accounts of three

former government personnel.

[6]

The plaintiffs claim the sums of $50,000,000 in relation to breach of contract, an

additional $50,000,000 in relation to misfeasance in public office, and an additional

$50,000,000 in damages for spoliation of evidence. The statements made by the plaintiffs

in their statement of claim remain as mere allegations until they are proven by the plaintiffs.

The burden on the plaintiffs, which they must discharge, is to provide admissible evidence

which establishes their claims on the balance of probabilities.

[7]

The defendants in this matter can be divided into four groups, each of whom are

represented by different counsel:

a) The Government of PEI and nine current or former government personnel

including the defendants Wes Sheridan, Steve MacLean, Allan Campbell, Chris

LeClair, Brad Mix, Cheryl Paynter, Melissa MacEachern, Robert Ghiz and

Neil Stewart. Their counsel is Jonathan M. Coady (Coady). The plaintiffs’ claims

against these defendants are as follows;

(i) The Government faces a claim of breach of contract;

(ii) The Government and seven of the nine other related defendants,

namely, Sheridan, MacLean, Campbell, LeClair, Mix, Paynter, and

MacEachern (not including Ghiz and Stewart), face claims of

misfeasance in public office;

(iii) The Government, Ghiz, and Stewart face claims of spoliation.

b) William Dow and Tracey Cutcliffe. Dow is a lawyer in private practice who

represented a PEI Crown Corporation called Innovation PEI (Innovation).

Cutcliffe is a lawyer and consultant who was retained as a consultant by the

plaintiff 7645686 (764) in connection with an MOU between Innovation and 764.

Their counsel is Gavin J. Tighe (Tighe) and Alexander Melfi (Melfi). Dow and

Cutcliffe face claims of misfeasance in public office;

c) Gary Scales is a lawyer in private practice with McInnes Cooper (MC) who was

retained by the Mi’kmaq Confederacy of Prince Edward Island (MCPEI). His

counsel is R. Leigh Youd (Youd). Scales faces a claim of misfeasance in public

office; and

11

d) Steven Dowling was General Counsel for the Consumer, Labour and Financial

Services Division of the Prince Edward Island Department of Environment, Labour

and Justice, and acted as counsel to the Superintendent of Securities on a securities

investigation with respect to Paul Maines (Maines), Capital Markets Technologies,

Inc. (CMT) and 7645686 Canada Inc. (764). His counsel is Greg Temelini

(Temelini). Dowling faces a claim of misfeasance in public office.

2. Procedural history

[8] In April 2015, the plaintiffs, Capital Markets Technologies, Inc. (CMT) and

7645686 Canada Inc. (764) initiated an action against the Government of Prince Edward

Island (Government), various government employees, and others not directly

associated with government. That statement of claim was struck out in its entirety on

February 3, 2016. (See CMT et al v. Gov’t of PEI et al. 2016 PESC 4).

[9]

On March 29, 2017, the plaintiffs filed a second statement of claim. Eight months

later on November 29, 2017, they filed a motion to amend their second statement of claim

to add further parties to the action. Several were added on consent. Three of the proposed

new defendants opposed the motion and asked, if they were added as parties, that they be

provided with security for costs similar to that granted to other defendants. Three new

defendants were added and they were granted security for costs on March 29, 2018. (See

CMT et al v. Gov’t of PEI et al. 2018 PESC 9). The amended statement of claim was

filed on June 14, 2018.

[10] On January 23, 2019, a Consent Dismissal Order and Notice of Discontinuance

were filed in relation to the plaintiffs’ action against the defendants Paul Jenkins and

7628382 Canada Corporation.

3. The motions before the court

[11] After filing their statements of defence, each of the defendant groups, through their

respective counsel, filed a notice of motion seeking summary judgment. Those motions

ask that the actions against them be dismissed, on the grounds there is no genuine issue

requiring a trial with respect to claims alleged in the plaintiffs’ amended statement of claim.

Alternatively, counsel on behalf of the Government and related defendants seeks an order

to strike out various portions of the statement of claim.

Overview

[12] The statement of claim makes broad reference to several time periods, events or

projects involving one or more of the defendants between 2010 and 2014:

12

1. The e-gaming project

[13] In late 2009, the Mi’kmaq Confederacy of Prince Edward Island (MCPEI)

approached the then Provincial Treasurer (Minister of Finance), Wes Sheridan (Sheridan),

to propose an economic development initiative by the First Nations in Prince Edward Island

to license and regulate online gaming. In February 2010, MCPEI engaged the law firm of

McInnes Cooper (MC) as its legal counsel. MC retained other experts, professionals and

consultants on behalf of its client MCPEI. A working group was formed to examine the

legal and technical issues involved in mounting a regulatory scheme for online gaming.

The working group included MCPEI’s in-house counsel Don MacKenzie (MacKenzie),

Sheridan, and professional advisors associated with MC including a senior accountant,

Mike O’Brien (O’Brien), and lawyers Gary Scales (Scales) and Kevin Kiley (Kiley).

[14] In June, 2011, in furtherance of the working group’s efforts, MC engaged a UK

company called Simplex Consulting Ltd., (Simplex), to carry out the first stages of design

to establish an electronic payments platform on PEI for the online gaming industry.

Simplex completed its report in October, 2011 and delivered it to MC. Following further

study and assessment, the working group made a presentation to the Government regarding

the initiative on February 10, 2012. The meeting was also attended by the Chiefs from the

First Nations in PEI, the Deputy Attorney General for PEI (Shauna Sullivan Curley), the

Clerk of Executive Council and Secretary to the Cabinet (Steve MacLean), and the CEO of

Simplex (Philip Walsh). It is worthy of note that Simplex is not a party to this action.

[15] Following the presentation, the Government assessed its legal position on the

proposed regulation of online gaming by the First Nations on PEI. On February 24, 2012,

Curley and MacLean met with Mackenzie, Kiley and O’Brien to inform the members of the

working group of the Government’s conclusions with respect to the project. Based on

Curley’s own opinion on legal impediments with respect to the scheme, and on advice

received from Tom Isaac, a well respected expert in Aboriginal Law, the Government had

decided to withdraw its support for the proposal by the Mi’kmaq Confederacy to license

and regulate internet gaming on PEI. The concerns focused on whether the proposed

scheme would be in contravention of the Criminal Code of Canada.

[16] Notwithstanding the Government’s withdrawal of support, MCPEI and MC

continued to pursue the project on their own for a few months before concluding the project

was not feasible in the absence of government support.

[17] Neither CMT nor 764 were ever involved in any way with the so-called

e-gaming project. However, some of the statements in the amended statement of claim

referred to events during that time period.

2. The MOU between Innovation PEI and 764

13

[18] In a separate development, on July 6, 2012, Innovation PEI (Innovation) and 764,

operating as Trinity Bay Technologies (TBT), entered into an MOU to explore the

possibility of TBT/764 establishing a financial services centre on Prince Edward Island.

The MOU first expired on September 4, 2012 and was renewed on September 10, 2012 for

a further 30 days, expiring for good on October 10, 2012.

[19] Specific articles in the MOU contained terms relating to confidentiality and

exclusivity during the term of the MOU. The MOU also stated that neither of the parties

shall be liable to the other for any consequential or economic loss suffered by the other as a

result of a breach of the MOU. With the exception of certain itemized articles, the MOU

was not intended to have legal effect or constitute a binding agreement between the parties.

Each party agreed to act in good faith in their further discussions and negotiations, but

neither was obliged to enter into any further agreements.

3. The Securities Act investigation

[20] In early September, 2012, Steven Dowling (Dowling), in his role as counsel for the

Prince Edward Island Superintendent of Securities, was contacted by Edward Curran, a

registered representative and branch manager of the Charlottetown office of ScotiaMcLeod

regarding what Curran perceived to be suspicious trading activity being undertaken by Paul

Maines (Maines), who was alleged to be illegally soliciting investment in Financial

Markets Technologies (FMT). Financial Markets Technologies and FMT were

unregistered “trade names” used interchangeably at times by both the plaintiffs, CMT and

764. At all material times, CMT owned 100% of the shares of 764. The use of Financial

Markets Technologies and FMT was eventually dropped in favour of the name Trinity Bay

Technologies, or TBT, which was used as a trade name for 764.

[21] Dowling undertook an investigation of the activities of Maines, CMT, and 764.

Dowling concluded that in excess of $700,000 had been raised for CMT from some 36

investors on Prince Edward Island in contravention of the Securities Act, R.S.P.E.I. 1988,

Cap. S-3.1, and in contravention of National Instrument 45-106. Each of CMT, 764 and

Maines, who at all material times was an officer of CMT, signed a Settlement Agreement

acknowledging the facts surrounding the illegal distribution of securities and confirming

they had each received full and proper independent legal advice prior to executing the

Settlement Agreement. The Order issued by the Superintendent of Securities imposed

restrictions on CMT’s ability to market its securities for a period of five years and required

CMT to pay a fine (administrative penalty) in the sum of $10,000, together with a further

sum of $5000 to cover the costs of the investigation.

4. Cancellation of email accounts of departing employees

[22] The plaintiffs claim against the defendants Ghiz, Stewart and the Government for

spoliation by way of the “destruction of emails” of Beck (a non-party), and of the

14

defendants LeClair and MacEachern.

[23] Additional allegations were alluded to in the plaintiffs’ factum notwithstanding they

were not pleaded in the amended statement of claim filed on June 14, 2018.

Issue

[24] The issue on each of the four motions for summary judgment is whether the

defendants have satisfied the court there is “no genuine issue requiring a trial”. The law

relating to summary judgment motions and the specific facts relating to the claims against

each defendant will be assessed to determine the outcome on each motion.

Law of Summary Judgment

1. Culture shift

[25] In 2015, this court reviewed the modernization of principles and procedures

applicable to summary judgment motions as a result of a recent decision from the Supreme

Court of Canada, in Hryniak v. Mauldin, 2014 SCC 7. Counsel for Dowling cited York

River Properties Inc. v. Creed’s Petroleum et ors., 2015 PESC 35, in which the Hryniak

decision was outlined and applied. The court in York River stated, starting at para.10:

[10] The law relating to summary judgment motions has undergone some

recent changes following the Supreme Court of Canada decision in January,

2014 in Hryniak v. Mauldin, 2014 SCC 7 (). Rule 20 of the Prince

Edward Island Rules of Civil Procedure was amended as of September 1, 2015,

to reflect the Hryniak decision. That decision addressed changes that had been

made to the Ontario Rules of Civil Procedure in 2010. Speaking for the court,

Karakatsanis J. explained at para. 36:

Rule 20 was amended in 2010, following the recommendations of the

Osborne Report, to improve access to justice. These reforms embody

the evolution of summary judgment rules from highly restricted tools

used to weed out clearly unmeritorious claims or defences to their

current status as a legitimate alternative means for adjudicating and

resolving legal disputes.

[11] In introducing her decision, Karakatsanis J. expressed at para. 2:

Increasingly, there is recognition that a culture shift is required in order

to create an environment promoting timely and affordable access to the

civil justice system. This shift entails simplifying pre-trial procedures

and moving the emphasis away from the conventional trial in favor of

proportional procedures tailored to the needs of the particular case. The

balance between procedure and access struck by our justice system

15

must come to reflect modern reality and recognize that new models of

adjudication can be fair and just.

[26] That “culture shift” is now embodied in Rule 20 of the

Prince Edward Island Rules of Civil Procedure, particularly at

Rule 20.04. The relevant portions of that Rule 20 read:

WHERE AVAILABLE

To Plaintiff

20.01

(1)

A plaintiff may, after the defendant has delivered a statement of defence or served a notice

of motion, move with supporting affidavit material or other evidence for summary

judgment on all or part of the claim in the statement of claim.

(2)

The plaintiff may move, without notice, for leave to serve a notice of motion for

summary judgment together with the statement of claim, and leave may be given

where special urgency is shown, subject to such directions as are just.

To Defendant

(3)

A defendant may, after delivering a statement of defence, move with supporting affidavit

material or other evidence for summary judgment dismissing all or part of the claim in the

statement of claim.

EVIDENCE ON MOTION

20.02

(1)

An affidavit for use on a motion for summary judgment may be made on information and

belief as provided in subrule 39.01(4), but, on the hearing of the motion, the court may, if

appropriate, draw an adverse inference from the failure of a party to provide the evidence of

any person having personal knowledge of contested facts.

(2)

In response to affidavit material or other evidence supporting a motion for summary

judgment, a responding party may not rest solely on the allegations or denials in the party’s

pleadings, but must set out, in affidavit material or other evidence, specific facts showing

that there is a genuine issue requiring a trial.

...

DISPOSITION OF MOTION

General

20.04

(1)

The court shall grant summary judgment if,

16

(a)

(b)

...

the court is satisfied there is no genuine issue requiring a trial with

respect to a claim or defence; or

the parties agree to have all or part of the claim determined by a

summary judgment and the court is satisfied that it is appropriate to

grant summary judgment.

(5)

In determining under clause 20.04(1) whether there is a genuine issue requiring a trial, the

court shall consider the evidence submitted by the parties and, if the determination is being

made by a judge, the judge may exercise any of the following powers for the purpose, unless

it is in the interest of justice for such powers to be exercised only at a trial:

(a)

(b)

(c)

weighing the evidence;

evaluating the credibility of a deponent;

drawing any reasonable inference from the evidence.

Oral Evidence

(6)

A judge may, for the purposes of exercising any of the powers set out in subrule (5), order

that oral evidence be presented by one or more parties, with or without time limits on its

presentation.

[27] The analysis in York River, supra, continued at paras

13-16:

[13] Rule 20.04(1) had been amended in 2014 to require the court to grant summary judgment “if the court was

satisfied there was no genuine issue requiring a trial”, as opposed to the court being “satisfied there [sic] no genuine

issue for trial”. Referring to that amendment and the additional amendments allowing motions judges to weigh

evidence, evaluate credibility and drawn reasonable inferences, Karakatsanis J. reiterated at para. 45 of the Hryniak

decision, “the amendments are designed to transform Rule 20 from a means to weed out unmeritorious claims to a

significant alternate model of adjudication. At paras. 49-50, she stated:

49. There will be no genuine issue requiring a trial when the judge is able to reach a fair and just

determination on the merits on a motion for summary judgment. This will be the case when the process

(1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the

facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

50. These principles are interconnected and all speak to whether summary judgment will provide a fair

and just adjudication. When a summary judgment motion allows the judge to find the necessary facts

and resolve the dispute, proceeding to trial would generally not be proportionate, timely or cost effective.

Similarly, a process that does not give a judge confidence in her conclusions can never be the

proportionate way to resolve a dispute. It bears reiterating that the standard for fairness is not whether

the procedure is as exhaustive as a trial, but whether it gives the judge confidence that she can find the

necessary facts and apply the relevant legal principles so as to resolve the dispute.

17

[28] At paragraphs 66-68, of Hryniak, Karakatsanis J. outlined a

two-part procedure under Ontario’s amended Rule 20.04. Prince

Edward Island has similarly changed its Rules to identify that

process.

[29] Coady, counsel for the defendant Government et al,

accurately summarized the principles to be extracted from Hryniak

as follows:

(a) A judge shall grant summary judgment if the judge is satisfied based on the

evidence that the claim discloses no genuine issue requiring a trial. (Hryniak,

para. 66);

(b) A genuine issue requiring a trial will not exist when a judge is able to reach

a fair and just determination of the claim on the merits. This will occur when

the hearing process (i) allows the judge to make the necessary findings of fact;

(ii) allows the judge to apply the law to the facts; and (iii) is a proportionate,

more expeditious, and less expensive means to achieve a just result. (Hryniak,

para. 49);

(c) When summary judgment allows a judge to find the necessary facts and

determine the dispute, requiring a trial will generally not be proportionate,

timely, or cost-effective. (Hryniak, para. 50);

(d) On a summary judgment motion, the evidence need not be equivalent to

that available at trial. Instead, the evidence must be such that the judge is

confident that the claim can be resolved fairly. (Hryniak, para. 57);

(e) The applicable standard for fairness is not whether the hearing process is

as exhaustive as a trial. Rather, the standard is whether the process gives the

judge confidence to find the necessary facts, and apply the relevant legal

principles, to decide the claim on a motion for summary judgment. (Hryniak,

para. 50);

(f) When presented with a motion, the judge should first determine if there is

“a genuine issue requiring trial” based on the evidence filed. If there appears to

be a genuine issue requiring a trial, the judge should then determine whether the

need for a trial can be avoided by using the fact-finding powers under Rules

20.04(5) and 20.04(6). Those additional powers may be exercised if their use is

not against the interest of justice. (Hryniak, para. 66);

(g) When a judge is able to fairly and justly adjudicate the claim through the

use of the fact-finding powers, it will generally not be against the interest of

justice for the judge to do so. (Hryniak, para. 59);

(h) The decision whether to use the expanded fact-finding powers is

discretionary. (Hryniak, para. 68).

18

2. Two-part test

[30] All counsel referred to cases reiterating the two-part test

applicable to motions for summary judgment. Those references

include MacPherson v. Ellis, 2005 PESCAD 10, at paras. 18-19,

National Bank v. S. Taha and K. Taha, 2019 PESC 14, at para 16,

Mallett v. Richard et. ors., 2018 PESC 50, at para. 45, Royal Bank

of Canada v. Trainor, 2017 PESC 13, at paras. 16-18, and

McQuaid v. Government of P.E.I. et al, 2017 PECA 21 at para.

12. In McQuaid, the Court of Appeal of Prince Edward Island

stated:

[12] The test on a motion for summary judgment is set out in MacPherson v.

Ellis, 2005 PESCAD 10 (), at paras.18-19:

The motions judge correctly applied and interpreted Rule 20 in relation

to this part of the motion. He cited the test as set out by the Supreme

Court of Canada in Guarantee Co. of North America v. Gordon

Capital Corp., 1999 664 SCC, [1999] 3 S.C.R. 423. This is a

two-part test. The first part requires the moving party to show

there is no material fact in issue which would create a genuine issue

for trial. The second part of the test provides that when the moving

party discharges this onus, the responding party must adduce

evidence to establish that the position taken in his pleading has a

real chance of success.

It is important in applying this two-part test to remember the onus

is always on the moving party to establish there is no genuine issue

for trial raised by the pleading they are attacking, whether it be the

statement of claim or the statement of defence. See: Rule 20.04(2).

Once the moving party establishes its right to summary judgment by

meeting this onus the responding party assumes the evidentiary burden

of showing there is a real chance the position taken in the pleading

under attack will succeed thereby negativing the moving party's right to

summary judgment. See: Rule 20.04(1). (Emphasis added.)

[31] As I have stated, the onus to prove the allegations in the

statement of claim rests squarely on the plaintiffs. However, once

the defendants filed their motions for summary judgment, the onus

shifted to the defendants to prove there is “no genuine issue

requiring a trial.” If they succeed in showing that, then the onus is

once again on the plaintiffs, as respondents to the motion, to

refute that finding and show their case has a real chance of success.

[32] In Trotter v. Trotter, 2014 ONCA 841, Benotto J.

19

addressed the need for the judge on a summary judgment motion to

ensure the evidence of the parties is properly assessed and

weighed:

[78] When conflicting evidence is presented on factual matters, a motion

judge is required to articulate the specific findings that support a

conclusion that a trial is not required. The dangers of not doing so were

highlighted by this court in Baywood Homes Partnership v. Haditaghi, 2014

ONCA 450 (), 120 O.R. (3d) 438, where Lauwers J.A. stated, at para 44:

Evidence by affidavit, prepared by a party’s legal counsel, which may

include voluminous exhibits, can obscure the affiant’s authentic voice.

This makes the motion judge’s task of assessing credibility and

reliability especially difficult in a summary judgment and mini-trial

context. Great care must be taken by the motion judge to ensure that

decontextualized affidavit and transcript evidence does not become the

means by which substantive unfairness enters, in a way that would not

likely occur in a full trial where the trial judge sees and hears it all.

[79] The evidence in this case was extensive and conflicting. The allegations

were not bald and the motion could not be resolved on the basis that there was

no genuine issue requiring trial on the face of the evidence alone. Rather,

credibility assessments, a weighing of the evidence and possibly oral evidence

were required. The motion judge’s conclusory findings do not provide the

analysis or reasoning necessary to support her ultimate conclusion that there

was no undue influence. (Emphasis added)

[33] Dovbush v. Mouzitchka, 2016 ONCA 381 also expressed

that a sufficient explanation is required on a motion in which

credibility is being assessed:

[29] Generic boiler-plate findings of credibility of that nature are not

helpful. A trial judge owes the losing party an explanation for rejecting the

evidence of a key witness or witnesses (particularly when the key witnesses

are, themselves, the losing parties), and, while the absence of such an

explanation is not necessarily dispositive, it may go a long way toward putting

the reasons beyond the reach of meaningful appellate review: R. v. J.J.R.D.

(2006), 2006 40088 (ON CA), 218 O.A.C. 37 (C.A.), at para. 36, citing

R. v. Maharaj (2004), 2004 39045 (ON CA), 186 C.C.C. (3d) 247, at

paras. 26-29 (Ont. C.A.), leave to appeal to S.C.C. refused, [2004] S.C.C.A. No.

340. (Emphasis added)

[34] The Alberta Court of Appeal recently referred to the

shifting evidentiary burden on a summary judgment motion, and to

the standard of proof required to conclude there is “no merit” or

“no defence” in respect of an action. In Weir-Jones Technical

Services Incorporated v. Purolator Courier Ltd., 2019 ABCA 49,

Slatter J. stated:

20

[31]

In Alberta, Hryniak v Mauldin must be applied having regard to the

specific wording of the Alberta Rules of Court. Rule 7.3 uses the expressions “no

merit”, “no defence” and “the only real issue is the amount”. The word “no”

can in some contexts be taken to mean “a complete absence”, but if that

standard of proof was required for summary judgment, summary judgment

would never be possible. That standard would appear to be even higher than

“incontrovertible” or “unassailable”, and would amount to proof to a certainty, a

standard that is rejected even in the criminal law as “unrealistically high”: R. v

Lifchus, 1997 319 (SCC), [1997] 3 SCR 320 at para. 31. The search for

a shift in culture would become illusory. The word “no” cannot be severed

from the phrases “no merit” or “no defence”, and should be viewed not in

absolute terms but in the context of there being “no real issue”.

[32] A notable aspect of summary judgment applications is that there is

no symmetry of burdens. The party moving for summary judgment must, at the

threshold stage, prove the factual elements of its case on a balance of

probabilities, and that there is no genuine issue requiring a trial. If the plaintiff is

the moving party, it must prove “no defence”. If the defendant is the moving

party, it must prove “no merit”. ...

[33] The threshold burden on the moving party with respect to the factual

basis of a summary judgment application is therefore proof on a balance of

probabilities. ...

[34] The suggestion that there is some intermediate standard of proof that

applies to summary dispositions is inconsistent with Hryniak v Mauldin,

McDougall and Fairmont Hotels. However, as a part of the overall assessment

of whether summary disposition is a suitable “means to achieve a just result”, the

presiding judge can consider whether the quality of the evidence is such

that it is fair to conclusively adjudicate the action summarily. Proof of the

factual basis of the claim or defence by the moving party at the stage of the

Hryniak v Mauldin test during which the “judge makes the necessary findings of

fact”, does not displace issues of fairness. The chambers judge’s ultimate

determination on whether summary resolution is appropriate, or whether there is

a genuine issue requiring a trial, must still have regard to the summary nature of

the proceedings. (Emphasis added)

3. Best foot forward

[35] Similarly, all counsel referred to the obligation of both

parties to a summary judgment motion to “put their best foot

forward”. Some courts referred to it as an obligation of counsel to

“lead trump or risk losing”. Regardless of the language used, it is

clear that it is unacceptable for a party to indicate they intend to

rely on “further or better evidence at trial” to prove their case. Each

party must present “specific facts” to refute allegations or evidence

going against their interests. Failure to provide affidavit or other

evidence doing so will be fatal to their case on a summary

21

judgment motion whether they are the moving party or the

respondent.

[36] The Supreme Court of Canada was clear in Canada (A.G.)

v. Lameman, 2008 SCC 14 when it stated, at para. 19:

[19] We add this. In the Court of Appeal and here, the case for the plaintiffs

was put forward, not only on the basis of evidence actually adduced on the

summary judgment motion, but on suggestions of evidence that might be

adduced, or amendments that might be made, if the matter were to go to trial. A

summary judgment motion cannot be defeated by vague references to what

may be adduced in the future, if the matter is allowed to proceed. To

accept that proposition would be to undermine the rationale of the rule. A

motion for summary judgment must be judged on the basis of the pleadings

and materials actually before the judge, not on suppositions about what

might be pleaded or proved in the future. .... (Emphasis added)

[37] In Royal Bank of Canada v. Trainor, supra, at para. 18,

Clements C.J. stated:

[18] As has been stated by numerous decisions in this jurisdiction (including

for example Connick v. Ramsay et ors., 2008 PESCTD 42 ()

(“Connick”), the obligation on the responding party facing a matter for summary

judgment is to put his or her “best foot forward”. The comments of Cheverie,

J., in Connick bear repeating:

[22] There is no arbitrary or fixed criterion that the motions judge must

apply. Each case must be decided on the law and the facts as found on

the evidence submitted. It is not sufficient for the responding party to

say that more and better evidence will, or may be, available at trial. The

onus is on the respondent to set out specific facts and coherent

evidence to show there is a genuine issue for trial... [additional

emphasis added]

[38] In Boland v. Lyle, 2016 ONSC 7418, at para. 13, the court

stated:

[13] The expectation that parties “put their best food (sic) forward” or

“lead trump or risk losing” in motions for summary judgment applies with

even more fervor after Hryniak. There are numerous cases confirming that

judges will generally assume that parties have played their best cards in bringing

or responding to motions for summary judgment. Based on this expectation,

judges will infer that no better evidence will be available at trial. In Danos v

BMS Group, 2014 ONSC 2060 (), Goldstein J. stated as follows:

“A party on a summary judgment motion cannot just sit back and

wait for more favorable evidence to develop at trial. I am entitled

to assume that the evidence filed by the Danos’s is as good as it

gets. I can and do draw an adverse inference from Peter Danos’s

failure to put forward any evidence whatsoever in relation to the

22

critical issues in this case. Assuming there is no better evidence

available, as I am entitled to do, it would be unjust to force the

Defendant to carry on with this litigation to trial.” (Emphasis added).

[39] The decision in Danos, supra, was affirmed by the Ontario

Court of Appeal in Danos v. BMS Group Financial Services

Canada, 2014 ONCA 887.

4. “Specific facts” required

[40] The Appeal Division of the Prince Edward Island Supreme

Court further defined what type of evidence is required in response

to evidence presented on a summary judgment motion. In

MacDonald v. Robichaud and Lenentine, 1996 3677

(PESCAD), [1995] 2 P.E.I.R. 294 Mitchell J.A. stated:

These statements indicate the motion judge had taken the wrong approach. The

question he should have asked himself was whether the respondent had set forth

evidence of “specific facts” to show the appellant caused or contributed to the

collision. If he had done so, he would have found there was no hard evidence

put before him to show the appellant’s snowblowing operation had in fact caused

the white out which led to the accident. Thus, the judge should have allowed

the motion because, without such evidence, there was no genuine issue for trial.

Specific relevant facts, not speculations or theories, were the trumps the

respondent had to lead to avoid summary judgment. (Emphasis added)

[41] Regarding the obligation to put one’s best foot forward, in

Mazza v. Ornge Corporate Services Inc., 2015 ONSC 7785, aff’d

2016 ONCA 753, S.F. Dunphy, J. stated at para. 48(d):

In weighing a motion for summary judgment, the court is entitled to assume,

with some limited exceptions, that both parties have placed before it all of

the evidence that they would intend to lead at trial in relation to the issue or

issues raised: phrases such as “best foot forward”, “leading trump”, “not an

occasion to keep powder dry” and “not holding anything back” are commonly

employed to emphasize this point and have been approved by our Court of

Appeal (c.f. Sweda Farms v. Egg Farmers of Ontario, 2014 ONSC 1200

(); aff’d 2014 ONCA 878 (); Danos v. BMW Group Financial

Services Canada et al, 2014 ONSC 2060 (); aff’d 2014 ONCA 887

(); (emphasis added).

[42] Tighe, counsel for Dow and Cutcliffe, stated it succinctly

when summing up a party’s obligation on a summary judgment

motion. His submission was, “It’s Game Day!”.

[43] As I stated in an earlier decision on a summary judgment

motion, in the case of Summerside Seafood v. Prince Edward

Island, 2012 PESC 3, at para. 8:

23

8. The motion will be decided on the basis of the pleadings and the affidavit

evidence before the Court. As stated above, more or better evidence promised

for the trial is of no benefit to the parties on this motion. ...

5. Summary judgment is not restricted to any category, type

or size of cases

[44] Access to summary judgment motions is not restricted to

any special type or size of case.

[45] McDonald, counsel for the plaintiffs, made reference to an

article by David Alderson entitled Sentinels of the Hryniak

Culture Shift: Four Years On, which was published in the

Annual Review of Civil Litigation, 2018 (Archibald 2018

Thomson Reuters). Between pages 170 and 176, Alderson

discusses some circumstances which may require proceeding to a

trial rather than granting summary judgment. Those circumstances

may include cases involving such issues as unexplored or unsettled

areas of the law, complicated or complex factual and legal issues,

and questions of credibility.

[46] However, Hryniak itself addressed the question of

delineating categories for which summary judgment is appropriate.

At page 169 of the Annual Review , 2018, Alderson states:

The Court of Appeal for Ontario in Combined Air Mechanical Services Inc. v.

Flesch suggested that summary judgment would most often be appropriate when

cases were document driven, with few witnesses and limited contentious factual

issues, or when the record could be supplemented by oral evidence on discrete

points. Karakatsanis J. responded in Hryniak, [at para. 48] “These are helpful

observations but, as the court itself recognized, should not be taken as

delineating firm categories of cases where summary judgment is and is not

appropriate. For example, while this case is complex, with a voluminous

record, the Court of Appeal ultimately agreed that there was no genuine

issue requiring a trial.” (Emphasis added)

[47] In Sweda Farms v. Egg Farmers of Ontario, 2014 ONSC

1200 (), aff’d 2014 ONCA 878 (), Corbett J. stated,

at para 32:

[32] Summary judgment motions come in all shapes and sizes, and this is

recognized in the Supreme Court of Canada’s emphasis on

“proportionality” as a controlling principle for summary judgment

motions. This principle does not mean that large, complicated cases must

24

go to trial, while small, single-issue cases should not. Nor does it mean that

the “best foot forward” principle has been displaced; quite the reverse. If

anything, this principle is even more important after Hryniak, because on an

unsuccessful motion for summary judgment, the court will now rely on the

record before it to decide what further steps will be necessary to bring the matter

to a conclusion. To do this properly, the court will need to have the parties’

cases before it. (Emphasis added)

General evidentiary issues raised by the parties

[48] This is a legal proceeding undertaken in the normal

adversarial process in accordance with the Rules of Court. The

“evidence” tendered by the parties is subject to the rules of

evidence to determine its admissibility. Witnesses presenting

evidence are subjected to cross-examination so their evidence can

be challenged, probed, contradicted and scrutinized in light of the

tested evidence of other parties.

[49] The evidence presented on these motions has been by way

of affidavits, with exhibits, on which the deponents have been

cross-examined. A transcript of those cross-examinations was filed

with the court.

[50] The onus is on the defendants, who have brought these

motions, to show there is no genuine issue requiring a trial. One of

the first issues raised by the defendants relates to the nature and

quality of the evidence presented on behalf of the plaintiffs. The

defendants claim the plaintiffs have failed to provide “direct” or

“personal” evidence to support their allegations, notwithstanding

the plaintiffs claim they will produce such evidence at trial.

[51] The plaintiffs have relied on two affidavits of Paul Maines

to set out their evidence. The first was filed on November 29,

2017 (the “November” affidavit) and was initially used in relation

to earlier proceedings between several of the same parties. That

affidavit is 46 pages long and includes 100 exhibits. The second

affidavit from Maines, filed on January 4, 2019, (the “January”

affidavit), is 100 pages long and includes 125 exhibits.

1. Rules of Court on summary judgment motions - potential

for adverse inference

25

[52] The defendants argue Maines has no “personal” knowledge

of the facts he deposes to in his affidavits. In connection with that

argument, they make reference to various Rules, including

specifically those applying to summary judgment motions. They

refer to Rule 20.02(1), which states:

20.02 (1)

An affidavit for use on a motion for summary judgment may

be made on information and belief as provided in subrule

39.01(4), but, on the hearing of the motion, the court may, if

appropriate, draw an adverse inference from the failure of

a party to provide the evidence of any person having

personal knowledge of contested facts. (Emphasis added)

[53] Rule 39.01(4) states:

39.01 (4)

An affidavit for use on a motion may contain statements of the

deponent’s information and belief, if the source of the

information and the fact of the belief are specified in the

affidavit.

[54] Rule 39.01(4) provides a limited and narrowly construed

exception to the ordinary rule governing the content of affidavits,

which is set out in Rule 4.06(2):

4.06

(2)

An affidavit shall be confined to the statement of facts within

the personal knowledge of the deponent or to other evidence

that the deponent could give if testifying as a witness in court,

except where these rules provide otherwise.

[55] Affidavits are sworn statements. It is fundamental that the

deponent must have either direct personal knowledge of the facts

stated or, if the deponent is relying on information received from

another person, the deponent must, in their affidavit, name the

individual who provided that information and state that they

believe such information to be true. By naming the individual

from whom the information was received, opposing parties are able

to assess the knowledge and credibility of the informant, and if

they wish, pursue that informant directly to verify or challenge that

information. Without knowing who provided information to the

person swearing the affidavit, the evidence becomes equivalent to

the deponent stating, “Somebody told me X, Y, or Z”. Such

evidence is without value. As is referenced in Rule 20.02(1),

when facts are in dispute, the failure of a party to provide evidence

from individuals who have personal knowledge of the events

spoken of authorizes the court to draw an adverse inference. That

26

adverse inference applies with respect to both the evidence

presented, and the evidence not presented.

[56] Therefore, while evidence based on information from a

named informant, which information is stated to be believed, is

permissible, its use is not without risk of being discounted if it is

used as a substitute for direct personal evidence from the

informant.

[57] The defendants claim there is another serious deficiency in

the affidavits from Maines. Numerous times in the affidavit of

January, 2019, Maines commenced statements with the phrase,

“Based on information and belief”, followed by a purported fact of

which Maines has no personal knowledge, and for which no source

of information is identified. As an example, in commenting on

the securities investigation against Maines, CMT, and 764, Maines

stated at para. 160 of his January affidavit:

Based on information and belief, Dowling was instructed to use the securities

investigation to destroy the Financial Services Platform and the Loyalty Card

Program to advance the Newcourt/Laslop program.

[58] Absolutely no basis for that statement has been provided.

No source for such information was specified, as is required, and

there is no appropriate statement that Maines believed even the

unspecified informant. Whether he is endeavouring to say he was

“told” something by someone, or that he “concludes” something,

neither, in this fashion, is an acceptable presentation of evidence on

the motion before the court. A witness testifying in court would

be prohibited from making such a statement as Maines made in

para. 160 of his affidavit. As was stated in Bank of Montreal v.

Abdel-Messih, 2006 16475, (Ont. C.A.), at para 2:

Bald assertions without supporting evidence in a self-serving affidavit do not

create a triable issue.

[59] At other times, in his affidavit Maines inserts a surname in

brackets such as, “Based on information and belief (Jessop), ...”

followed by a statement. One such statement is in the middle of

para. 191 of Maines’ affidavit of January, 2019. It states, “Based

on information and belief (Jessop), Jessop will testify that ....”, and

is followed by what Maines says Jessop will testify to at trial.

Why should the court or opposing parties accept such evidence?

It is subject to an adverse inference, in part, because the “future”

27

witness, in this case Jessop, is shielded from cross-examination on

these summary judgment motions. Similarly, the evidence of

Maines is shielded from effective cross-examination by his lack of

direct personal knowledge of events to which he attests. The

evidence provided is diminished as a result. The evidence not

provided is not only of no value, but its absence leads the court to

conclude it would not be favourable to the plaintiffs’ case.

[60] The plaintiffs cited Court v. Debaie, 2012 ABQB 640, for

the proposition that respondents to an application may rely on

hearsay. In making that statement, the Alberta Court of Queen’s

Bench decision relies on Murphy Oil Company Ltd. v. Predator

Corporation Ltd., 2006 ABCA 69, a decision of the Alberta Court

of Appeal. However, on reading Murphy Oil, it becomes clear that

such an exception, if it was to be entertained, would be entertained

only where the respondent provided a valid explanation as to why

it was unable to provide the evidence directly. A full and proper

explanation was held to be even more relevant when those

unavailable witnesses are corporate personnel or, if they were

non-parties and the respondent failed to use the available Rules to

obtain evidence from them. To that I would add that a proper

explanation is equally or even more essential when the absent

witness is promised as a “future witness” at a trial should one be

ordered. The appeal court in Murphy Oil stated, starting at para.

38:

[38] At the second stage of the test for summary judgment, the appellants relied

on several hearsay statements to establish arguable merit to their conspiracy

claim. As noted by the chambers judge, this hearsay would be inadmissible

at trial. While in some instances hearsay may satisfy the evidentiary burden on

the responding party on a summary judgment application (see Scandinavian

Bank v. Shuman (1917), 1917 385 (AB CA), 37 D.L.R. 419 (Alta. S.C.

(C.A.)), some of the hearsay relied on was rightly rejected by the trial judge as

“not determinative of anything”: para. 67. For example statements to the effect

that someone’s “face dropped” when “Project Pistol” was mentioned do not

establish that “Project Pistol” was anything more than the respondents say it was.

[39] The hearsay consists of statements allegedly made to the affiant, the

appellant Shields. Some of the statements lack probative value because

they were made by unknown persons. Although it is possible to admit hearsay

at a summary judgment stage, the admission is predicated on the expectation that

the source of the evidence will be available for trial. When statements are made

by unknown persons, that expectation does not exist.

[40] In regard to some of the other alleged statements, the person who

made the statement did not provide an affidavit. These statements also do

28

not meet the evidentiary burden for two reasons. First, the author of the

statement did not provide an affidavit. Second, the alleged statement is capable

of more than one interpretation or emanates from a lower level employee [sic]

might merely be passing on corporate gossip. If a respondent to a summary

judgment motion intends to rely on hearsay, it must explain why it is unable

to adduce the evidence directly, particularly when the statements were

allegedly made by employees of a corporate party who is subject to be

examined at discoveries: Crusciel v. Nelson Lumber Co. (1991), 48 C.L.R.

104 (Q.B.) at paras. 28-32. The appellants could also have employed R. 266

of the Rules of Court to obtain evidence from non-parties in the

jurisdiction. See Georges R. Brosseau Professional Corp. v. Condominium

Plan No. 762 1095 (Owners) (1986), 1986 1954 (AB QB), 74 A.R. 362

(Q.B.) at paras. 20-21.

[41] Finally, many of the alleged sources of hearsay statements deny that they

made the statements. In those instances there is no expectation that the source of

the hearsay will testify and, indeed, the source can be expected to deny the

hearsay. Refusal to accept second and third hand hearsay in these

circumstances is not an error. (Emphasis added)

[61] The plaintiffs have relied on affidavits only from Paul

Maines. There was no affidavit from Gary Jessop, Gary Wright,

Phillip Walsh, or Gary Evans, all of whom play prominently in

the allegations set forth in the plaintiffs’ statement of claim. In

fact, Jessop is the lawyer who drafted the MOU between 764 and

Innovation PEI. He signed the MOU for 764. He had

discussions with Dow regarding the status of the MOU after it

became known there was a securities investigation into the conduct

of Maines, CMT and 764. He made various efforts to contact

Dowling during the course of the securities investigation. He was

actively engaged with Cutcliffe. He is CMT’s and 764's corporate

lawyer. He incorporated and essentially ran the company. He

appears to be the “directing mind” for both CMT and 764 at all

material times in respect of the matters currently before the court.

He is the key player. Significantly, at the hearings on this

motion, McDonald, counsel for CMT and 764, stated:

And Jessop was really an engineer, an architect of pretty much everything

that went on in this file. So that if you wanted to get a full understanding

before you rule, that would be a prime candidate for a mini trial witness.

[62] And yet we have no affidavit evidence whatsoever from

Jessop filed by the plaintiffs for the purposes of this motion.

Instead of the personal evidence of Jessop, we are left with second

hand information presented indirectly through Paul Maines. In

Maines’ affidavits and in the plaintiffs’ factum and submissions

before the court, we are told there will be further and better

29

evidence provided at trial. That further evidence is to come from

Maines, Jessop, Walsh, Wright, and Evans, all of whom are

individuals Maines suggests in his affidavits told him what

happened at certain events or meetings. If those individuals have

important information on behalf of the plaintiffs, then instead of

telling Paul Maines, who cannot answer questions on

cross-examination because he was not involved, they should have

been telling the court through direct, personal affidavits, which of

course would subject them to cross-examination on their evidence.

[63] Some examples will illustrate the nature of the evidence

presented by Maines in his affidavits.

[64] Counsel for the Government made reference to a meeting

which occurred on October 17, 2012, between Allan Campbell,

Steve MacLean, Gary Jessop, Gary Evans, Gary Wright (by

telephone), and Sameet Kanade. The only record of that meeting

presented to the court was the handwritten notes of Allan Campbell

taken during the meeting. Maines was not at the meeting. Yet,

in his affidavit, Maines contradicts affidavit evidence of others

who were at the meeting based on what he says others have told

him they will testify about if there is a trial.

[65] Another example of the information provided by Maines

highlights concerns about the completeness and accuracy of the

evidence he presents, and raises issues of credibility and reliability

of that evidence. The evidence shows that during the course of the

MOU, Innovation was repeatedly asking 764 to specifically

identify and explain what it was seeking from the province with

respect to the potential establishment of a financial services centre

on PEI. This request has frequently been referred to as the “ask”

from the province. The defendants associated with Innovation

show in their testimony that they did not receive a proper business

plan setting out what 764 wanted or expected of the province to

assist in creating the project. Even Cutcliffe, who worked for and

on behalf of 764, was after 764 to define the “ask” as soon as they

possibly could. The plaintiffs claim that they had provided their

business plan with the specific “ask” of the province, but that the

Government had not responded. The plaintiffs’ claim is that the

Government did not act in good faith in attempting to further the

objectives of the MOU.

[66] In Maines’ January, 2019, affidavit he quotes from an email

30

sent from Cutcliffe, 764's own consultant, to him on August 13,

2012, commenting on a recent meeting with Innovation with

respect to the MOU. I have set out the first part of the email

which Maines duplicates in his affidavit. However, there are two

significant statements in the email which Maines deleted, which I

have highlighted in bold below. Cutcliffe wrote:

Hello folks,

Had a good discussion over coffee with Mr. Maines this morning and just

wanted to confirm the follow up advice. I think the meeting on Friday went

reasonably well and took Trinity Bay a few steps forward in having government

understand the company’s intentions for North America, the range of

possibilities and the potential for PEI. However, I believe the folks at

[Innovation] still need to have the ask, particularly the immediate ask,

clearly articulated. As I discussed with Paul, my understanding for Trinity

Bay’s immediate ask is for support/endorsement from the province of PEI to

essentially recruit financial companies to the Trinity Bay gtp, in PEI.

If my understanding is correct, I think it would be worthwhile to present

exactly what Trinity Bay would like from the province to accomplish this

immediate goal. (Emphasis added)

[67] The two parts of the email which were deleted by Maines,

relate to further information the province required regarding the

“ask” that 764 or TBT wanted from the province. The sentence left

out of the first paragraph of Cutcliffe’s email to Maines is telling,

and reads as follows:

However, I believe the folks at [Innovation] still need to have the ask,

particularly the immediate ask, clearly articulated. (Emphasis added)

[68] The first sentence of the second paragraph of the email,

which is also excluded from Maines’ affidavit, reads as follows:

If my understanding is correct, I think it would be worthwhile to present

exactly what Trinity Bay would like from the province to accomplish this

immediate goal. (Emphasis added)

[69] The issue of the “ask” and the success or failure of TBT to

provide its business plans to Innovation will be addressed more

fully later in this decision. It is referred to here as an example of

the issues raised by the defendants concerning the nature and

quality of the evidence presented by the plaintiffs. The type of

shading of the evidence reflected in the above example

substantially impairs the credibility of the deponent’s evidence.

31

[70] In an email dated February 13, 2013, from Evans to

Campbell, MacLean, Dow, and Jessop, Evans speaks of first

becoming involved with Trinity Bay in May, 2012. After

highlighting some of his involvement, and referencing the MOU,

Evans refers to the slow progress experienced in moving the file

forward. He states:

Ten months have since passed and as far as I can see there is still a considerable

amount of work left to complete before these parties could sign a deal.

Although I remain a happy investor in TBT, I am no longer interested in

continuing my role as a facilitator or champion between TBT and government.

It is very clear to me that this is no longer a file that simply needs someone to

make a quick call to move things in one direction or another.

[71] Concerning another area which will be dealt with in more

depth later in this decision, the amended statement of claim speaks

of Simplex’s outstanding invoice in connection with Simplex’s

work on the e-gaming project at the request of Scales and MC.

The claim states, at para. 91, “the invoice was never satisfied

despite repeated assurances by Scales that it would be looked

after...” However, Maines confirmed on cross-examination that

he knew, by March 2013, a full 20 months before the statement of

claim was filed, that the invoice had been paid in full. The claim

was made notwithstanding it was known to be false.

[72] Further deficiencies are evident in the affidavits provided

by Maines. Affidavits are supposed to provide facts, which

constitute evidence. Hearsay is presumptively inadmissible, subject

to certain limited exceptions such as in Rules 20.02 and 39.01(4).

And yet in the affidavits from Maines he attaches numerous

“passive exhibits”, the contents or purported facts of which he has

no personal knowledge. Those exhibits include press releases,

investigation reports, letters involving third parties, letters received

by politicians, and newspaper articles. He also attaches statements

from Hansard, which are subject to parliamentary privilege, and are

inadmissible for proof of liability on a civil case. Other

inappropriate attachments which do not constitute evidence of any

fact in this proceeding are pleadings, letters between lawyers, legal

argument and submissions, opinion, speculation, and supposition.

[73] The cross-examination of Maines confirms that he does not

have personal knowledge of events and documents that bear

directly on the allegations made by the plaintiffs. He confirms

32

that he did not participate in any meetings with Innovation PEI in

connection with the MOU. In fact, in reference to a time prior to

the MOU, Maines stated that he did not go to government

meetings. Nor did he participate in any conference calls on the

MOU. Nor was he a member of the MOU working group.

Maines also confirmed that he was never an employee, director or

officer of Simplex, and had no involvement in the MOU through

Simplex. Finally, he was not a director of either CMT or 764 at

the times material to this proceeding. He only became a director

of CMT on April 24, 2014, and of 764 on January 16, 2017, both

dates being well after any events which are the subject of these

claims. He also confirmed on cross-examination he had nothing

to do with the finances of CMT and that it was Jessop who made

the material decisions in relation to CMT. Maines’ direct personal

knowledge of the facts of this case are truly insignificant. The

case of Kolosov v. Lowe’s Companies Inc., 2018 ONSC 7541,

dealt with similar affidavit evidence. Verbeem J. made the

following statements:

55. Argument, speculation and irrelevant information should not be contained

in an affidavit. Legal arguments belong in a factum, not in affidavit form.

Generally, legal submissions contained in an affidavit should be struck pursuant

to r. 25.11 of the Rules, as scandalous, frivolous, or vexations: see Chopik v

Mitsubishi Paper Mills Ltd. (2002), 26 C.P.C. (5^th) 104 (Ont. S.C.). Assertions

in an affidavit that are irrelevant, argumentative or inserted for colour, or

that constitute bare allegations may be struck out as scandalous: see George

v. Harris, 2000 CarswellOnt 1714 (S.C.) at paras. 19-20.

...

57. ... The bulk of her evidence does not serve to increase the probability of a

fact or facts that are material to the subject matter of the motions. Further, some

aspects of her evidence amount to unqualified opinion evidence. Finally,

aspects of her evidence are argumentative or otherwise constitute Ms.

Avery’s conclusory inferences that she has drawn ...

...

58. Throughout the majority of her affidavit, Ms. Avery purports to give

evidence concerning factual matters in which she was not directly involved.

...

74. To the extent that Ms. Avery gives evidence in which she purports to

subjectively interpret what other witnesses “meant” in, or by, their

evidence, she intrudes on the function of this court. ... The court is

well-equipped to comprehend, review and consider the evidence before it in

33

determining the defendants’ summary judgment motions without the need

for further evidence from a stranger (in this case Ms. Avery) to the factual

transaction that is the subject of the evidence, offering his or her own

evidence about how they interpret what a particular witness “really” meant when

they testified. The vehicles for such advocacy are not affidavits, but rather facta

and submissions. (Emphasis added throughout)

[74] And finally, at para. 84, responding to the submission that

Ms. Avery’s affidavit evidence was admissible, Verbeem J.

stated:

84. The difficulty with that submission is that the “evidence” said to be

placed “in its proper context” by Ms. Avery’s statements of position and her

conclusions is not primarily her own. Instead, her conclusions and statements

of position are said to place in context the portions of her evidence,

summarizing, partially summarizing, and quoting with emphasis, the evidence of

other witnesses. In actuality, it is her evidence purportedly summarizing and

quoting the evidence of other witnesses that frames the context for Ms. Avery’s

evidence of her own subjective conclusions, opinions, views, inferences, and

interpretations of the other evidence before the court. In turn, the latter aspects

of her evidence are consistent with an effort (whether intended or not) to argue

the plaintiffs’ case in affidavit form. (Emphasis added)

[75] The court struck out large portions of Ms. Avery’s affidavit

in Kolosov. In a lengthy decision, summary judgment was

granted. Maines’ affidavit bears all of the offensive features of Ms.

Avery’s affidavit.

[76] Regarding the facts related to this case, I am faced with two

starkly different types of evidence. On the one hand, I have direct,

personal testimony from witnesses who attended meetings,

participated in conversations, or wrote or received emails, letters or

other documents. On the other hand, I have testimony from an

individual who is not providing direct, personal evidence, but is

instead providing second hand information as an individual who

did not attend the meetings of which he speaks, did not participate

in the conversations of which he speaks, and did not write or

receive the emails, letters or other documents of which he speaks.

Where the facts are in dispute, unless there is something specific to

alter the assessment of a particular piece of evidence, I accept the

first-hand, direct, personal evidence over the second hand, indirect,

evidence presented through another individual.

2. No explanation for the failure to provide direct evidence

[77] The plaintiffs have offered no explanation for the failure to

34

provide affidavit evidence of these “trial” witnesses in advance of

the summary judgment motion. There was no explanation that the

would-be witnesses were suffering any physical or mental

disability which would prevent them from completing an affidavit

and responding to cross-examination. There was no explanation

that the whereabouts of any would-be witness were unknown.

There was no suggestion any of the proposed witnesses were

beyond the reach of a subpoena. There was no suggestion any of

the proposed witnesses were refusing to cooperate or comply with

a request to provide testimony. There was no indication that any

such witness was statutorily prohibited from providing testimony.

Instead, we are left with only a promise of evidence to come.

[78] Jessop, the “engineer, an architect of pretty much

everything that went on in this file”, is a lawyer practising in

Ottawa. Both the plaintiffs’ current and former counsel on the

actions by CMT and 764 against the Government et al are lawyers

practising in Toronto. It is common practice for lawyers to

present affidavits of witnesses living throughout Canada or indeed

around the world. With respect to this motion, the Government

filed 14 affidavits from the named defendants and several others

who were deemed to have important information. The

Government also filed an additional three reply affidavits. Some

of the Government defendants now reside outside of Prince

Edward Island. Cross-examination of 16 defence witnesses and

the one plaintiffs’ witness was arranged and conducted by video

conference between Charlottetown and Toronto, without challenge

or difficulty. Over a thousand pages of cross-examination

testimony were presented for use on this motion. Yet we were

not provided with any testimony from the various witnesses

claimed by the plaintiffs to have the most significant

information, including the key player for the plaintiffs’ own

case, Jessop. Even a local individual, declared to be a “trial

witness” for the plaintiffs, was not called upon to provide an

affidavit.

3. Ample time was available to provide all affidavits

[79] Separate and apart from the initial proceeding in which the

plaintiffs’ statement of claim was struck out in its entirety with

permission for the plaintiffs to recommence, numerous other steps

have been taken by the parties. The plaintiffs filed a second

statement of claim. They then filed a motion to add additional

35

parties. The plaintiffs succeeded on that aspect of their motion

before me, and less than three months later the plaintiffs filed the

third version of their statement of claim (the amended statement of

claim) on June 14, 2018.

[80] On the same day, counsel for the Government and related

defendants filed a statement of defence and a motion for summary

judgment. More than 10 months passed between the filing of the

initial summary judgment motions (June 14, 2018) and the hearing

of these motions (April 23-26, 2019). There was ample

opportunity for the parties to file whatever materials they chose to

file. Document filing deadlines were known well in advance.

Dates for cross-examination were agreed to well in advance.

Dates for interim motions in advance of the summary judgment

motion were set months in advance to address any disputes such as

the production of documents or requests for late filing, etc.

Through the case management process, the documentary filing

dates were adjusted upon request from certain defendants. After

the expiration of the final filing deadline the plaintiffs requested

and received permission to file additional documentation, on

consent. Notwithstanding time had been set aside to deal with

contested interim motions, no party sought any such motion.

[81] As I noted earlier and repeat here, the obligation of a

responding party on a summary judgment motion is set out in Rule

20.02(2):

20.02 (2)

In response to affidavit material or other evidence supporting a

motion for summary judgment, a responding party may not

rest solely on the allegations or denials in the party’s

pleadings, but must set out, in affidavit material or other

evidence, specific facts showing that there is a genuine issue

requiring a trial. (Emphasis added)

[82] Coupled with the obligation to put their best foot forward,

it is difficult to comprehend the plaintiffs’ strategic decision to not

provide direct, personal evidence from its purported list of star

witnesses, Jessop in particular.

4. Strategic choices have strategic consequences - Failure to

produce affidavits and present witnesses for cross-examination

[83] I previously referred to the Ontario Superior Court decision

in Mazza v. Ornge Corporate Services Inc., 2015 ONSC 7785,

36

regarding the need of each party to place before the court all of the

evidence they intend to lead at trial. That decision also addressed

the consequences that flow from a party’s, or their counsel’s,

strategic decisions in the course of litigation. At para. 50, Dunphy

J. stated:

... Strategic choices, including the choice to bring summary judgment

motions and how to respond to them, have strategic consequences. Parties

who fail to cross-examine on affidavits or adduce evidence available to them

that they require for argument will be held to the consequences of their

strategic choices: c.f. ThyssenKrup Elevator Canada Ltd. v. Amos, 2014

ONSC 3910 (). Both parties must assume that the service of a notice

of motion starts a train heading down the procedural tracks that will lead

to a decision on the merits of each and every issue raised by the notice of

motion subject only to those issues the court determines genuinely require a

trial in the interests of justice.

(Emphasis added)

[84] Dunphy J. went on to conclude that the plaintiff, “appears

to have opted for the ostrich strategy to responding to this motion.

He filed no first hand evidence at all. ...”

[85] The Court of Appeal affirmed the decision at Mazza v.

Ornge Corporate Services Inc., 2016 ONCA 753. I note they

specifically addressed the failure to provide an affidavit from “one

of the architects” of the structure and activities of the corporation

under scrutiny:

[9] The motion judge did not misapply the burden of proof as the appellant

asserts. He simply applied the well-established rule that both parties on a

summary judgment motion have an obligation to put their best foot forward: See

Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200 (), at

para. 32, aff’d 214 ONCA 878. The appellant did not swear an affidavit on

the motion. He simply relied on an affidavit filed by his wife. Considering

that the appellant was one of the architects of the corporate structure and

the senior officer of the corporate entity, the motion judge was entitled to

draw an adverse inference from his failure to adduce personal evidence.

(Emphasis added)

[86] In another Ontario case, Murphy v. Mullen, 2018 ONSC

4292, the court drew an adverse inference based on the failure of

the defendant to file direct evidence on a contested matter. The

defendant claimed an identified third party overheard a crucial

conversation between the plaintiff and defendant. However, the

defendant did not provide evidence from that individual to support

his position. Citing the summary judgment rules allowing for an

37

adverse inference, Hebner J. stated:

Given the absence of an affidavit from Mr. Pierce, or any explanation as to why

one was not provided, I draw the inference that he would not have supported

Timothy’s version of the conversation.

[87] In Smith v. Waterloo Taxi Limited, 2013 ONSC 1466, in

similar circumstances, speaking of the defendant’s evidence, the

court stated:

27. ... Significantly, none of this “information and belief” evidence was ever

relayed to the plaintiffs on discoveries and indeed most was categorically denied.

As well, not one of these people has sworn an affidavit to support these

very serious and significant allegations. No explanation whatsoever was

advanced before me as to why there was no direct evidence from these

individuals. I am entitled and I do draw an adverse inference from this

unexplained omission of direct evidence. (Emphasis added)

[88] The court concluded that “the evidence of Disano is much

more persuasive than that of the defendant and where they disagree

I accept the plaintiff’s evidence.”

[89] The case was appealed, and in Smith v. Waterloo Taxi

Limited, 2014 ONCA 37, the Court of Appeal concluded, at

para.10, that, “Given the seriousness of the allegations... and their

centrality to the litigation, the motion judge did not err in his

treatment of Waterloo’s Taxi evidence and in preferring the

Disano’s direct, specific responding evidence ...” .

5. Adverse inference

[90] After a thorough review of the evidence presented on behalf

of the plaintiffs, and of the law relating to such evidence, I draw an

adverse inference from the complete and utter failure of the

plaintiffs to produce direct evidence which was within their power

to produce. I can only conclude that the absence of evidence from

Jessop, Wright, Walsh, Evans, and others indicates their evidence

would not support or coincide with the second hand evidence

provided by Maines.

6. Compelling documentary production

[91] Counsel for the plaintiffs maintained that the defendants

failed in their duty to disclose all relevant material to the plaintiffs.

Further, he advised that he had presented a Request to Admit the

38

authenticity of up to 100 documents to each of the defendants, and

they failed to provide satisfactory responses. The plaintiffs filed

their amended statement of claim on June 14, 2018 and followed

that on June 15, 2018 with their first Request to Admit. The

defendants responded in various ways which included admitting

the authenticity of certain documentation and declining to admit

other documentation such as that between non-parties, documents

consisting of legal argument, privileged documents, or irrelevant

and non-material documentation.

[92] In addition, counsel for the plaintiffs wrote several letters to

counsel for the defendants referring to each party’s obligation to

produce all available evidence for assessment on a summary

judgment motion. He referred to this correspondence as

“Lameman letters”, being a reference to the case of Lameman,

supra, from the Supreme Court of Canada which confirmed the

stated obligation.

[93] The issue of the production and/or admission of documents

was repeatedly raised by counsel for the plaintiffs over the course

of numerous case management calls. It was suggested by defence

counsel and by the court that he ought to pursue a motion to the

court seeking documentary production, or further direction from

the court. This was particularly true with respect to the plaintiffs’

claim against Dowling who conducted the investigation on behalf

of the Superintendent of Securities. Dowling declined to produce

an affidavit of documents citing a statutory prohibition on the

production of any documentation obtained in the course of an

investigation. Counsel for the plaintiffs who preceded current

counsel commenced a motion for production but was replaced as

counsel before proceeding with the motion. The plaintiffs’ current

counsel was also encouraged to proceed with that motion, but he

elected to abandon it instead. He insisted his preference was to

make his motion for disclosure as part of his presentation on the

summary judgment motion.

[94] In the course of the plaintiffs’ oral submissions on this

motion counsel referred to a number of exhibits attached to the

January, 2019 affidavit of Maines. Those exhibits were the various

Requests to Admit together with the responses from defence

counsel and copies of the “Lameman letters” he had written.

Counsel then stated:

39

And I’m well aware of Sweda Farms and, you know, the fact that if I don’t take

certain initiatives and certain steps to get the evidence before you on a summary

judgment motion, I’ll have to live with those consequences and that, that’s the

state of the law.

[95] He expressed that he had been frustrated by the request to

admit procedure, and he acknowledged that he could not sit idly

by. He also stated in correspondence to defence counsel that he

would normally move for a further and better affidavit of

documents, but in this case he chose to present his argument for

further documents as part of his summary judgment motion. When

pressed by the court regarding his obligation to put his best foot

forward and take appropriate steps to present all available evidence

to the court, counsel acknowledged that presenting a motion to the

court was one avenue but instead he chose to write what he

described as “fairly powerful, lengthy letters” spelling out the

documents he wished to receive, and otherwise chose to pursue the

release of documentation under the FOIPP (Freedom of

Information) procedures. It seems the plaintiffs preferred to come

to court saying they have been denied documentary disclosure

rather than go to court in advance of the hearing seeking

documents, and risk being told they are not entitled to such

documents because they are irrelevant, subject to solicitor client

privilege, or their disclosure is prohibited by statute.

[96] In Sweda, supra, the court addressed the failure of counsel

to take appropriate measures under the Rules to obtain production

of documentation they felt they required. After expressing

concern about the manner in which the plaintiffs presented their

evidence in their case, the court stated:

[40] Overlaying this confusion, Sweda alleges that its difficulty establishing

its case arises because of non-production from Burnbrae. The materials do

not include motion materials for any motion to compel further production.

...

A motion for production from L.H. Gray was scheduled before the Master in

December 2013, and was pending at the time of the motion before C.J. Brown J.;

I was not advised of any motion that had been brought in respect to

contested production from Burnbrae. (Emphasis added).

...

[97] On appeal of that decision, in Sweda Farms Ltd. v. Egg

40

Farmers of Ontario, 2014 ONCA 878, the court stated:

2. On the main appeal, the appellants’ principal submission is that the granting

of summary judgement is premature. In counsel’s

words, repeated several times during oral argument,

the motion judge had only two percent of the

evidence.

...

4. ... If the appellants’ complaint was that Burnbrae had not complied with

its disclosure obligations, then the appellants were obliged to take steps to

compel production. They did not do so. Accordingly, they did not meet their

obligation to put their best foot forward on the motion.

...

6. Finally, as the motion judge observed, the appellants did not even put

forward evidence of those aspects of their claim within their own

knowledge. (Emphasis added).

[98] In this case the plaintiffs requested disclosure by way of the

Request to Admit procedures and by way of Lameman letters. But

they did not take steps to compel production. That was a

conscious decision taken by the plaintiffs.

[99] I repeat the statement from the Ontario Superior Court’s

decision in Mazza, supra, at para. 50:

... Strategic choices, including the choice to bring summary judgment

motions and how to respond to them, have strategic consequences. Parties

who fail to cross-examine on affidavits or adduce evidence available to them

that they require for argument will be held to the consequences of their

strategic choices:

[100] Each party is required to take appropriate and reasonable

steps to acquire and present all of the evidence they require for the

summary judgment motion. Failure to fully pursue the acquisition

of evidence they do not have but consider they require, constitutes

a failure to advance their best case. In Drummond v. The Cadillac

Fairview Corp. Ltd., 2018 ONSC 4509 (), Perell J. wrote:

[25] Hryniak v. Mauldin does not alter the principle that the court will

assume that the parties have placed before it, in some form, all of the

evidence that will be available for trial. The court is entitled to assume that

the parties have advanced their best case and that the record contains all the

evidence that the parties will present at trial.^[13]Thus, if the moving party meets

41

the evidentiary burden of producing evidence on which the court could conclude

that there is no genuine issue of material fact requiring a trial, the responding

party must either refute or counter the moving party’s evidence or risk a

summary judgment.^[14](Emphasis added) (footnotes omitted)

[101] The nature and extent of evidence required on summary

judgment motions is well-known. The plaintiffs and defendants

each had ample time to provide evidence from persons having

direct personal knowledge of the events in which they were

engaged. Ample time was built into the case management

schedule to allow for motions by the parties seeking the production

of evidence from opposing parties.

[102] As Corbett J. stated in Sweda Farms, supra, at para. 201,

“The plaintiff who treats a defence motion for summary judgment

as a speed bump on the long highway to trial risks crashing its case

in the deep ditch of dismissal.”

7. Documentary disclosure by defendants versus documents

received through FOIPP

[103] In the course of presenting his argument before the court in

April, 2019, counsel for the plaintiffs referred to Exhibit 15 of

Maines’ January 2019 affidavit. That exhibit shows an email

exchange between LeClair and Sheridan on August 1, 2012. I will

deal with the content of those emails below. However, in referring

to the exhibit, counsel for the plaintiffs expressed that in their

disclosure of documents counsel for the Government “left out”

some “pretty important evidence”, being the emails shown in

Exhibit 15. He pointed out that at the very top of the page on that

exhibit there was a stamp showing “FIN 2017", followed by some

additional numbers. He explained that the stamp was the indication

that the plaintiffs had received the information through the FOIPP

process, rather than through disclosure from opposing counsel.

He expressed that the emails were “conveniently left out of my

friend’s material”. Other follow-up emails were similarly described

as being received through FOIPP and not through disclosure.

[104] In effect, this was a not-so-subtle accusation that counsel

for the Government had intentionally not complied with the Rules

respecting disclosure.

[105] However, Coady replied, demonstrating he had indeed

provided the information to the plaintiffs as part of his disclosure

42

of documents to them. Coady reminded the court of the “great

moment” or fanfare plaintiffs’ counsel made of his struggle to

obtain the emails in question through a Freedom of Information

application because Government’s counsel “conveniently” did not

include them in his disclosure. Counsel for the Government then

referred to those documents which were documents 2086 and 2095

in the Government’s affidavit of documents given to the plaintiffs

well before any FOIPP application was made seeking the same

documents.

[106] Even after acknowledging during the cross-examination of

witnesses in January, 2019 (See Q. 40, p, 310, of the transcripts of

cross-examination) that he did receive those materials as part of the

disclosure from the defendants, McDonald made representations

to the contrary to the court at the hearing on these matters in

April, 2019. That is not the only occasion on which the plaintiffs

have made much of an alleged breach or failure of Government or

one of the other defendants when, all the while, the plaintiffs knew

their statements were false.

[107] Having said that, there were other documents obtained by

the plaintiffs through the FOIPP process which were not included

in the defendants’ disclosure. In general, the defendants challenge

the relevance or admissibility (eg., solicitor-client privilege,

statutory prohibition, etc.), of the information received by the

plaintiffs in that manner. It was noted as well that the plaintiffs

failed to produce or disclose documents they themselves had

created, which documents were instead produced by the defendants

after the plaintiffs had filed their own affidavit of documents.

When faced with confirmation of that during the

cross-examinations process, McDonald said, “That’s an irony, but,

you know, our document management is not perfect either.”

8. The Pro-C case

[108] In his oral presentation, McDonald, counsel for CMT and

764, referred to Pro-C Ltd. v. Computer City Inc. [2000] O.J. No.

2823, 2000 CarswellOnt 2696, 7 C.P.R. (4^th) 193, a case in which

he acted for Pro-C Ltd. on an alleged trademark infringement.

McDonald advised the court that he was successful on the case for

his clients and further because of the malicious behaviour of

Computer City, his client was awarded $750,000 in punitive

damages. He described it as a “good faith” case and expressed that

43

he saw “parallels”with the CMT/764 case against Government as it

related to the “lady with cancer” rumour of which you will hear

more later in this decision. He stated:

But I see parallels here because if you believe in the concepts of access to

justice, you know, if we believe that somebody that has a rumour like I

defrauded a lady with cancer of her life savings,, and you have to go up against a

very well-funded government, there’s got to be a balance that I’m asking you to

balance with the access to justice principle in mind.. And, I think Pro–C is, is, is

good precedent for that.

[109] However, in his reply, Coady, counsel for Government,

informed the court that, significantly, McDonald failed to advise

the court that the decision was fully overturned on appeal by the

Ontario Court of Appeal at Pro-C Ltd. v. Computer City, Inc.

2001 7375 (ONCA), O.J. No. 3600, 55 O.R. (3d) 577.

[110] There are two other significant aspects of that Ontario

Court of Appeal decision which do bear similarities to this case.

[111] First, McDonald argued in that case that Computer City

failed to produce documents that his client, Pro-C, felt ought to

have been produced, and they asked the court to draw an inference

against Computer City. Carthy J.A., with Doherty and Moldaver

JJ.A. concurring, stated at paras 17-18:

17. Pro-C’s argument was in part directed to Computer City’s failure to

produce documents and, in particular, those associated with its sales of

computers. We are asked to infer from the failure to produce that there were

sales in Canada of computers bearing the trademark Wingen, and thus that the

arguments against “use” in Canada have been met. The trial judge did not draw

that inference and I am not prepared to do so. Pro-C’s counsel wrote a letter

requesting documents early in the proceeding and was told that the defendant

had no documents other than those produced. No steps were taken to compel

production and the respondent [Pro-C] did not even conduct an oral discovery of

the appellant. ... No effort to seek third party production was made.

18. In these circumstances, it does not seem appropriate to fill in the major

holes in the respondent’s proof of its claim by an inference against the appellant,

particularly because there are no rulings, even at trial, indicating impropriety

concerning production.

[112] Second, the Court of Appeal addressed the issue of

damages and the failure of McDonald’s client, Pro-C, to produce

any evidence of damages. Carthy J.A. stated at para. 24:

24. In my view, the trial judge should have found that the plaintiff failed to

44

meet the onus of proving damages. This was not a case with the difficulty of

proof was such that the trial judge should make an unaided assessment. The facts

concerning damages were all available and in the hands of the plaintiff. If they

could not be moulded into anything but a mystical claim, the conclusion must be

that damages were not proved.

[113] I address the issue of damages claimed by CMT and 764

starting at para. 654 of this decision.

[114] The plaintiffs failed to put their best foot forward and failed

to present evidence of their claim within their own personal

knowledge. They failed to present all of the evidence they

described as necessary for the court to have on the summary

judgment motion. As I have stated earlier, this motion will be

decided on the evidence before the court, not on the promise of

further evidence that one party suggests would be produced at a

future trial. The plaintiffs will suffer the consequences of their

strategic decision not to produce evidence they say would help

their case at trial.

Auditor General’s Report

[115] In March 2015, the Auditor General of PEI was given a

specific assignment to examine “government support to the

Mi’kmaq Confederacy of Prince Edward Island in relation to

E-gaming, along with steps taken by government, throughout its

relationship with MCPEI, to protect the interests of taxpayers”. She

also considered “government’s dealings with Simplex, Capital

Markets Technologies (CMT) and related companies in relation to

the E-gaming and financial services, including the conduct of

current and former elected officials and staff”. The Auditor

General also examined Government’s efforts to initiate a loyalty

card program. The Auditor General’s focus was on whether there

was non-compliance with legislation, policies, and controls which

were designed to minimize risks to government and protect the

interests of taxpayers.

[116] The Auditor General found that “the Government of PEI

entered into a relationship with MCPEI and a local law firm

without documenting the terms ...”. She further found that “Due

diligence was not applied by various senior officials and staff in

approving, dispersing, monitoring, and reporting on loans and

grants provided to MCPEI”. She also stated that, “Basic due

diligence was not conducted on Trinity Bay Technologies, its

45

owners or affiliates prior to entering into the MOU. Basic due

diligence on a company would include gaining an understanding of

the ownership structure, obtaining financial statements, and

reviewing the corporate history.”

[117] Other matters addressed by the Auditor General included

the need for improved conflict of interest guidelines at the time in

question. She referred to circumstances where former senior

officials were engaged with businesses involved with government

within relatively short periods of time after leaving their

employment with government. The Auditor General stated:

Although there was no cooling off period in the conflict of interest policies for

Deputy Ministers at that time, all of these are post employment activities that are

normally restricted through a cooling off period. We noted that in the new

policy for Deputy Heads, post employment restrictions are included and the

conduct noted above would be in contravention of the new policy.

[118] The matter of records management was also addressed.

The Auditor General found that not all government records were

being managed and safeguarded as required by legislation and

policy. She noted that the Archives and Records Act, R.S.P.E.I.

1988, c. A-19.1, requires every public body having custody or

control over government records to “prepare a schedule for the

retention and disposition of those records”. However she also

found that, “When an employee leaves government, normal

practice is to have the e-mail account removed. We were

advised by ITSS that after a period of one year, an account that has

been removed cannot be recovered.”

[119] The plaintiffs have placed great weight on the findings of

the Auditor General’s report to support the claims they assert in

their statement of claim, even going so far as to say aspects of the

breach of the MOU were “proven” by the evidence contained in the

Auditor General’s report. However, there are some significant

issues with respect to the relevance, applicability, and reliance on

the Auditor General’s report in this or any other civil action.

[120] First, the objective of the Auditor General’s examination

was to focus on compliance with government policies and

procedures for the protection of taxpayers. That is a valid exercise

of the Auditor General’s powers and responsibilities. The report

concludes with a number of recommendations designed to ensure

further compliance with internal procedures in the future.

46

[121] Second, the Auditor General’s office was neither designed

for nor equipped to conduct an inquiry to assess civil liability. Nor

was her examination undertaken in accordance with anything

resembling the processes relating to establishing civil liability in a

court of law. The Auditor General’s inquiry did not operate on the

basis of the rules of evidence. There are no recognized legal

parameters such as those required when pursuing a cause of action.

The Auditor General’s findings and conclusions are not subject

to the same rigour or standard of proof applicable to civil

proceedings. The Auditor General is not bound by the Rules of

Court as are the courts and the litigants participating in a civil

action.

[122] The Auditor General interviewed numerous people in the

course of her examination. Was their testimony under oath? Were

they subject to cross-examination? Were they entitled to

representation during the interview? Was all of the information she

gathered available to all affected parties? Did she accept hearsay or

second hand evidence? Was her process public? The Auditor

General is not a court of law. The Auditor General’s office

operates under different rules in an entirely different context than

that of a court of law. Her findings or conclusions reflect her

opinions and are neither conclusive nor binding when the same

parties of whom she spoke are facing off in a civil action to

determine if there is any basis for finding civil liability against one

or more of the defendants.

[123] These motions are proceeding under Rule 20 of the Rules

of Court. Even considering the application of that rule alone

highlights the substantial difference between the evidence

gathering and testing processes of a court and those employed by a

body such as the Auditor General’s office.

[124] Two significant Canadian cases confirm the status of such

bodies as commissions or boards of inquiry (or such as the Auditor

General’s Office in this case) and contrast their procedures and

purposes with those of the courts.

[125] In Canada (A.G.) v. Canada (Krever Commission) 1997

323 (SCC); [1997] 3 S.C.R. 440, dealing with a

commission of inquiry into Canadian blood services, Cory J.,

writing for the Supreme Court of Canada, stated:

47

B. The Scope of a Commissioner’s Power to Make Findings of Misconduct

34 A commission of inquiry is neither a criminal trial nor a civil action for

the determination of liability. It cannot establish either criminal

culpability or civil responsibility for damages. Rather, an inquiry is an

investigation into an issue, event or series of events. The findings of a

commissioner relating to that investigation are simply findings of fact and

statements of opinion reached by the commissioner at the end of the

inquiry. They are unconnected to normal legal criteria. They are based

upon and flow from a procedure which is not bound by the evidentiary or

procedural rules of a courtroom. There are no legal consequences

attached to the determinations of a commissioner. They are not

enforceable and do not bind courts considering the same subject matter.

The nature of an inquiry and its limited consequences were correctly set out in

Beno v. Canada (Commissioner and Chairperson,Commission of Inquiry into

the Deployment of Canadian Forces to Somalia), 1997 6346 (FCA),

[1997] 2 F.C. 527, at para. 23:

A public inquiry is not equivalent to a civil or criminal trial. . . . In

a trial, the judge sits as an adjudicator, and it is the responsibility

of the parties alone to present the evidence. In an inquiry, the

commissioners are endowed with wide ranging investigative powers

to fulfil their investigative mandate. . . . The rules of evidence and

procedure are therefore considerably less strict for an inquiry than

for a court. Judges determine rights as between parties; the

Commission can only “inquire” and “report”. . . . Judges may impose

monetary or penal sanctions; the only potential consequence of an

adverse finding . . . is that reputations could be tarnished.

Thus, although the findings of a commissioner may affect public opinion,

they cannot have either penal or civil consequences. To put it another way,

even if a commissioner’s findings could possibly be seen as determinations

of responsibility by members of the public, they are not and cannot be

findings of civil or criminal responsibility. (Emphasis added)

[126] The Québec Court of Appeal also dealt with the issue in

Mulroney v. Schreiber, 2009 QCCA 116. Starting at para. 7, the

court stated:

[7] On the one hand, the work of a board of inquiry, the determination of which

does not affect a civil remedy, must be distinguished from the action brought. A

board of inquiry is not used to establish civil liability or damages: Canada

(Attorney General) v. Canada (Commission of Inquiry on the Blood System in

Canada), 1997 323 (SCC), [1997] 3 SCR 440.

[8] On the other hand, commissions of inquiry evolve independently to judicial

remedies, one does not prevent the other: Phillips c. Nova Scotia (Commission of

Inquiry into the Westray Mine Tragedy), 1995 86 (SCC), [1995] 2 SCR

97.

48

[9] Although there is a clear link between the Commission’s work and the

civil remedy at issue, these are two separate proceedings, the fate of the first

does not depend on the fate of the other. Moreover, there is no risk of

conflicting judgements here, because the findings of a board of inquiry do

not bind the courts to decide on civil liability. (Emphasis added)

[127] In the course of her report, the Auditor General made

certain findings of fact. The Auditor General’s primary task was

to examine whether Government policies and procedures were

followed with respect to loan administration and approval of grants

from the government to MCPEI. The findings in that inquiry bear

no relationship to the claims asserted by the plaintiffs in their

statement of claim.

[128] In fact, if anything, contrary to the plaintiffs’ claim that

Government agents acted to harm the plaintiffs, the report

concludes there was an appearance of preferential treatment toward

the plaintiffs in respect of both the MOU and the loyalty card

program. Further, other than MCPEI and MC, the only company

the report identified as having entered a contract in relation to

e-gaming was Simplex, who is not a plaintiff in this action.

Neither of the plaintiffs, CMT or 764, were identified as having

any contractual arrangement in relation to the e-gaming project,

and based on the Auditor General’s examination she “could not

substantiate that there was an ownership interest between CMT and

Simplex before the end of December 2012", which was long after

the e-gaming project had been terminated, and after the MOU had

fully expired on October 10, 2012.

[129] I conclude the findings of the Auditor General have no

bearing on the claims for civil liability set forth by the plaintiffs in

their statement of claim.

Law of corporate personality

[130] Frequently, in the pleadings and evidence filed, and in their

submissions, the plaintiffs refer to Simplex, 764, and CMT

interchangeably. Counsel for the plaintiffs stated that 764 is 100%

owned by CMT, and CMT is a minority shareholder in Simplex.

He referred to the definition of “affiliate” in the Canada Business

Corporations Act (CBCA) R.S., 1985, c. C-44, , s.2(2), in making

his submission that the rule in Foss v. Harbottle (1843), 2 Hare

460, 67 E.R. 189, has no application to the companies identified in

49

the statement of claim. S. 2(2) of the CBCA states:

(2) For the purposes of this Act,

(a) one body corporate is affiliated with another body corporate if one of them is

the subsidiary of the other or both are subsidiaries of the same body corporate or

each of them is controlled by the same person; ... (Emphasis added)

[131] While that provision has effect for the purposes of the

CBCA, it does not override the rule in Foss v. Harbottle, or the

principle set out therein. The Supreme Court of Canada affirmed

that rule in the case of Hercules Managements Ltd. v. Ernst and

Young, 1997 345, [1997] 2 S.C.R. 165, at para. 59:

59 The rule in Foss v. Harbottle provides that individual shareholders have no

cause of action in

law for any

wrongs done to

the corporation

and that if an

action is to be

brought in respect

of such losses, it

must be brought

either by the

corporation itself

(through

management) or

by way of a

derivative action.

The legal

rationale behind

the rule was

eloquently set out

by the English

Court of Appeal

in Prudential

Assurance Co. v.

Newman

Industries Ltd.

(No. 2), [1982] 1

All E.R. 354, at

p. 367, as

follows:

The rule in [Foss v. Harbottle] is the consequence of the fact that a

corporation is a separate legal entity. Other consequences are

limited liability and limited rights. The company is liable for its

contracts and torts; the shareholder has no such liability. The

company acquires causes of action for breaches of contract and for

50

torts which damage the company. No cause of action vests in the

shareholder. When the shareholder acquires a share he accepts the

fact that the value of his investment follows the fortunes of the company

and that he can only exercise his influence over the fortunes of the

company by the exercise of his voting rights in general meeting. The

law confers on him the right to ensure that the company observes the

limitations of its memorandum of association and the right to ensure

that other shareholders observe the rule, imposed on them by the

articles of association. If it is right that the law has conferred or should

in certain restricted circumstances confer further rights on a shareholder

the scope and consequences of such further rights require careful

consideration.

To these lucid comments, I would respectfully add that the rule is also sound

from a policy perspective, inasmuch as it avoids the procedural hassle of a

multiplicity of actions. (Emphasis added)

[132] The Ontario Court of Appeal addressed the issue in

Meditrust Healthcare Inc. v. Shoppers Drug Mart, 2002

41710 (ONCA), at paras. 29-30:

[29] Meditrust submits that, because it was at the apex of a single

economic entity, the rule in Foss v. Harbottle does not preclude it from

maintaining this action. Meditrust points out that it completely controlled the

subsidiaries, that its control of them was augmented by the unanimous

shareholders' agreement, and was reflected in the consolidated financial

statements for the business.

[30] This submission shows the difference between economic reality and

legal reality. The economic reality of the mail-order business was a single

economic enterprise. But the legal reality was separate corporate entities.

And the rule in Foss v. Harbottle is a corporate law rule, not an economic

rule. A parent company that owns all the shares of its subsidiaries may

exercise complete and constant control over them. That control, however,

does not clothe the parent with the right to sue for the subsidiaries.

(Emphasis added)

[133] The Prince Edward Island Court of Appeal also adopted the

rule in Foss v. Harbottle in McGowan v. Bank of Nova Scotia

2011 PECA 20.

[134] As separate and distinct legal entities, CMT cannot

maintain any action on behalf of 764 or Simplex, and 764 cannot

maintain any action on behalf of CMT or Simplex. None of those

companies can maintain an action for Maines. Neither Simplex or

Maines have ever been a party to any of the claims filed in the

Supreme Court of Prince Edward Island, and any alleged harm

done to them shall not be entertained in this action.

51

1. Corporate information on CMT and 764 and other names

used by the plaintiffs

[135] The plaintiffs also referred to 764, Financial Markets

Technologies, (or FMT), and Trinity Bay Technologies, (or TBT),

interchangeably.

[136] Capital Markets Technologies, Inc., (CMT), was

incorporated in accordance with the laws of the State of Florida on

June 29, 1995. CMT was administratively dissolved as a

corporation on September 25, 2009. It was not reinstated as a

corporation in the State of Florida until July 19, 2012. Therefore

between September, 2009 and July 19, 2012, CMT was officially a

“dissolved Florida corporation”.

[137] CMT was not even registered to do business on Prince

Edward Island until November 10, 2014.

[138] Gary Jessop was a director and officer of CMT at the time

of its reinstatement on July 19, 2012. Paul Maines was not a

director of CMT at any time material to CMT’s claims, only

becoming a director of CMT on April 24, 2014.

[139] The company, 7645686 Canada Inc., (764), was

incorporated as a federal corporation pursuant to the laws of

Canada on September 10, 2010. Paul Jenkins was the initial and

sole director when Jessop signed the MOU for 764 on July 6, 2012.

Jessop was neither an officer or director of 764 at any time

material to the MOU, only becoming a director of 764 on May 31,

2013.

[140] Jenkins submitted his resignation as sole director of 764 on

October 5, 2012. Jessop, corporate counsel for 764,

acknowledged receiving the resignation, but chose to decline to

record it, citing the ongoing rumours around the company.

[141] Maines was not a director of 764 at any time material to

764 ‘s claims, only becoming a director of 764 on January 16,

2017.

[142] Neither Simplex nor CMT were parties to the MOU.

52

[143] Financial Markets Technologies, (FMT), was registered as

a business name of 764 on January 4, 2012.

[144] Trinity Bay Technologies (TBT) was a name frequently

used by CMT and 764 during material times in this case in 2012,

notwithstanding it was not legally registered as a trade name at that

time.

[145] At the time of the securities investigation, neither Maines,

nor CMT, nor 7645686 were registered to trade in or advise on

securities in the Province of Prince Edward Island. Nor had any of

them made any filings with respect to a prospectus, or any reports

of exempt distribution, as will be more fully discussed in relation

to the securities investigation.

2. Paul Maines

[146] Paul Maines was also the subject of the investigation. The

affidavit of Steven Dowling sworn on February 14, 2013, during

the course of the securities investigation, revealed certain

information about Paul Maines. Maines was cross-examined with

respect to those issues.

[147] Between 2002 and 2004 the New York Stock Exchange

Division of Enforcement received numerous complaints that

Maines violated policies regarding financing matters with clients.

While there were several complainants, three of them alleged that

“Maines, without their knowledge or authorization, had put

through a change of address for each of their accounts, had

transferred funds and securities in excess of $300,000 out of their

accounts, and had provided them with fictitious monthly account

statements that concealed the unauthorized transfers.” After being

advised of the complaints and of a scheduled hearing date on May

4, 2004, Maines chose not to appear or testify. Maines was found

guilty as charged and he was permanently barred from

membership, employment, or association with any member of the

New York Stock Exchange. The foregoing information on Maines’

improper activities with respect to investors was part of Jessop’s

affidavit, and was part of the Agreed Statement of Facts signed and

accepted by Maines and others as part of the securities

investigation. On cross-examination, Maines stated that he

accepted what Gary Jessop said in his affidavit of March 1, 2013 as

53

being true and adopted it as his own evidence for the purpose of

the motion.

Categorizing and addressing the plaintiffs’ claims

[148] The plaintiffs are pursuing claims in the nature of breach of

contract, misfeasance in public office, and spoliation. The claims

of breach of contract relate to the Government and the conduct of 7

other defendants. The claims of misfeasance in public office

relate to the Government and the conduct of 11 other defendants.

However, the plaintiffs claim the course of conduct of the

defendants, as set out in their amended statement of claim under

the heading, “BREACH OF CONTRACT BY GOVERNMENT

OF PRINCE EDWARD ISLAND”, also constitute misfeasance in

public office. They do add some additional, but very similar,

allegations under the heading, “MISFEASANCE IN PUBLIC

OFFICE”, together with new claims with respect to the four

additional defendants.

[149] Therefore, the summary and assessment of evidence with

respect to the majority of defendants will apply to both the breach

of contract and the misfeasance in public office claims.

[150] As each of the four additional defendants under the

misfeasance claim, namely, Dowling, Scales, Dow, and Cutcliffe,

have some unique aspects to their defences and are represented by

separate counsel, I will address the claims against them separately.

[151] The two remaining defendants, namely, Ghiz and Stewart,

are referred to only in respect of the claim of spoliation against the

Government.

[152] In presenting the claims, evidence, law, and conclusions, I

will proceed as follows:

a)

outline the contract, which is the primary subject of the

plaintiffs’ claims;

b)

identify the defendants alleged to have breached the

contract, and list the specific claims against them;

c)

provide an overview of the law relating to breach of

contract;

54

d)

identify the Government related defendants alleged to have

committed misfeasance in public office, and list the specific claims

against them;

e)

provide an overview of the law relating to misfeasance in

public office;

f)

review and assess the evidence pertaining to Government

and related defendants in respect of both breach of contract and

misfeasance in public office, and apply the law to the facts as I

have found them;

g)

identify the four additional defendants alleged to have

committed misfeasance in public office, and list the specific claims

against them;

f)

review and assess the evidence pertaining to the four

additio

nal

defend

ants,

and

apply

the law

to the

facts as

I have

found

them;

g)

identify the three defendants alleged to have committed

spoliation, and list the specific claims against them;

h)

review and assess the evidence pertaining to spoliation, and

apply the law to the facts as I have found them;

I)

address other issues, and draw conclusions on outstanding

matters.

The MOU between Innovation PEI and 7645686 Canada Inc.

(The contract)

55

[153] The MOU signed July 6, 2012 between Innovation PEI

and 764 is the agreement in relation to which the plaintiffs are

pursuing claims of breach of contract. 764 signed the agreement

“operating as” (“O/A”) Trinity Bay Technologies. The relevant

portions of that MOU, with emphasis added throughout, are as

follows:

This Memorandum of Understanding (hereinafter referred to as the “MOU”) is

made and entered into as of the 6th of July, 2012, between:

INNOVATION PEI

(“PEI”)

- and -

7645686 CANADA INC.

O/A TRINITY BAY TECHNOLOGIES

(“TBT”)

(PEI and TPT (sic) are hereinafter collectively referred to as the “Parties” and individually as a “Party”,)

WHEREAS:

(A)

TBT and its affiliates have extensive knowledge of financial transaction processing, and also have

extensive connections in the financial services industry and is in the process of determining a location to

establish a financial services centre to carry out global and domestic financial transaction processing and

other related services.

(B)

(C)

PEI is interested in TBT locating the financial services centre in Prince Edward Island (“Province”) and

is willing to provide TBT with any necessary information and contacts it has in order to facilitate the

creation of such a facility in the Province.

TBT and PEI are willing to enter into formal discussions regarding the terms and conditions of an

agreement to be entered into between them that will provide for the establishment by TBT of a

financial services centre in the Province.

In consideration of the above mentioned premises, NOW IT IS AGREED as follows:

1.

OBJECTIVE

The purpose of this MOU is to set out the parameters for the Parties to commence formal negotiations regarding

the terms and conditions to be set out in the agreement to be signed by the Parties to establish a financial services

centre in the Province.

56

...

3.

COLLABORATION

The parties shall use their commercially reasonable efforts to enter into an agreement (“Agreement” ) setting out

terms and conditions that will be satisfactory to both Parties to provide for the creation and ongoing operation of

the financial services centre in the Province. The Agreement would contain terms and conditions typical of such

an agreement and such other provisions necessary to reflect the matters described in this MOU or as are

reasonably required and agreed to by the Parties. Upon entering into this MOU, the Parties agreed to meet as

soon as possible in order to commence negotiations in good faith, and to continue meeting as often as necessary to,

conclude the Agreement. PEI also agrees to make immediate efforts to establish a third party organization or

agency dedicated to the establishment of a financial services centre in the Province. Each of the Parties agrees to

co-operate with each other, including committing sufficient resources, to ensure a successful conclusion of

negotiations of the Agreement.

4.

EXCLUSIVITY

The Parties agree as follows for a period of sixty (60) days followin g the signing of this MOU (the “Exclusivity

Period”):

(a)

provided PEI is not in breach of its obligations hereunder, TBT nor any of its employees,

officers, contractors, agents, representatives and/or professional advisors agrees not to

discuss with any other Canadian provincial government the opportunity and

know-how for a financial services centre to be created; and:

(b)

provided TBT is not in breach of its obligations hereunder, PEI nor any of its employees,

officers, contractors, agents, representatives and/or professional advisors agrees not to

discuss with any entity its interest and/or capabilities in hosting or creating a financial

services centre in the Province.

...

6.

CONFIDENTIALITY

(a)

In this MOU, “Confidential Information” means all information and data, including

without limitation, all business, planning, performance, financial, product, trade secret,

technical, sales, marketing, contractual, employee, supplier and customer information or

data, disclosed orally, in writing or electronically.

(b)

The receiving Party shall maintain the confidentiality of all Confidential Information

57

disclosed to it by the disclosing party, unless otherwise required by law, and shall take all

necessary precautions against unauthorized disclosure of the Confidential Information,

including unauthorized disclosure by the receiving Party’s authorized representatives,

management, directors, employees, contractors or agents.

...

7.

DURATION

(a)

This MOU shall take effect as from the date first above written and shall remain in full

force and effect until the earlier of: (i) the end of the Exclusivity period (sic); and (ii) the

date that the Agreement is executed, unless otherwise mutually agreed upon between

Parties in accordance with this Section 7.

(b)

Either Party may terminate this MOU upon providing 30 days written notice of such

termination to the other party (sic).

8.

Public Announcement.

Neither TBT nor PEI shall make any public announcement concerning this MOU or the establish (sic)

of a financial services centre or related negotiations without the other party’s (sic) prior approval, except

as may be required by law. If such an announcement is required by law, the Party required to make the

announcement shall inform the other Party of the contents of the announcement proposed to be made

and shall use its reasonable efforts to obtain the other Party’s approval for the announcement, which

approval may not be unreasonably withheld.

9.

CONSEQUENTIAL LOSS

Save as expressly set out herein, neither of the Parties shall be liable to the other for any consequential or

economic loss suffered by the other as a result of a breach of this MOU.

10.

GOVERNING LAW

This MOU shall be governed and construed in accordance with the laws of the Province of Prince Edward Island and

the applicable laws of Canada as applied therein.

11.

NON-BINDING NATURE

This MOU is a record of the general understandings reached among the Parties and, except for the provisions of

Section 4, 6 7 and 8, is not intended to have legal effect and shall not constitute a binding agreement among the

58

Parties. Each Party shall act in good faith in all further discussions and negotiations relating to the matters

contemplated by this MOU. However, for the avoidance of doubt, neither Party is obliged to enter into further

agreements.

(Emphasis added throughout)

[154] The MOU was signed by Cheryl Paynter on behalf of

Innovation PEI and by Gary Jessop on behalf of 764. The MOU

was in effect from July 6, 2012 until its expiration on September 4,

2012. It was then renewed on September 10, 2012 for an

additional 30 days, expiring again on October 10, 2012. There

was no request for any further renewal.

General allegations regarding breach of contract

[155] The allegations of breach of contract pertain only to the

defendant Government and only to the plaintiff 764. No defendant

signed the MOU as an individual, and CMT was not a party to it.

No actions taken prior to July 6, 2012 constitute a breach of

contract as no contract was in effect prior to that date.

[156] In its claim, 764 alleges the Government:

i)

breached its duty to act in good faith and honest performance of the

contract;

ii)

breached the exclusivity Article; and

breached the confidentiality Article.

iii)

1. Individuals named in breach of contract claim

[157] Notwithstanding no individual is being sued for breach of

contract, the plaintiff 764 bases its allegations with respect to

breach of contract on the conduct of specific individuals, whom

they describe as being Government officers or agents. The

individuals and their positions at all materials times are as follows:

a)

Wes Sheridan (Sheridan) was the Minister of

Finance and was a member of the e-gaming working group;

b)

Chris LeClair (LeClair) was the Chief of Staff to

Premier Robert Ghiz from June 12, 2007 until October 17,

2011. Following his departure from Government he formed

his own private consulting company;

59

c)

Brad Mix (Mix) was the Senior Director of the

Prospecting and Innovation Program at Innovation PEI at

all material times. He reported to Cheryl Paynter, the Chief

Executive Officer of Innovation PEI ;

d)

Cheryl Paynter (Paynter) was the Chief Executive

Officer of Innovation PEI between November 28, 2011 and

October 31, 2016. She reported to the Deputy Minister of

Innovation and Advance Learning, Melissa MacEachern;

e)

Steve MacLean (MacLean) was the Deputy

Minister of Finance between November 15, 2011 and June

28, 2012. From June 28, 2012 to May 14, 2015 he was the

Clerk of Executive Council;

f)

Allan Campbell (Campbell) was the Chief of Staff

to premier Robert Ghiz between October 17, 2011 and

February 22, 2015;

g)

Melissa MacEachern (MacEachern) was the

Deputy Minister of Innovation and Advanced Learning

between November 15, 2011 and April 20, 2013;

2. Specific claims of breach of contract

[158] The allegations of breach of contract are set out in paras.

187-193 of the amended statement of claim. A summary of the

specific actions of the Government officers or agents which the

plaintiff 764 claims contravened the contract is set out below. In

its claim, 764 alleges that:

(a)

Sheridan and LeClair, during the term of the

MOU

(i)

approached competitors of 764 seeking the

services contemplated by the MOU, (para. 187 (a)

of claim);

(ii)

put a proposal to Innovation PEI for another

60

company to provide the services contemplated by

the MOU; (para. 187 (b) of claim)

(iii) approached financial services companies in

Europe and disclosed confidential information in an

attempt to source a company to provide the services

being proposed by 764; (para. 192 (a) of claim),

and

(iv)

used confidential information obtained from

764 to provide its services by another group; (para.

192 (b) of claim)

(b)

Mix, during the term of the MOU

(i)

attended SIBOS, an international conference

for financial service organizations, and recruited

companies away from 764; (para. 187 (c) of

claim)

(ii)

used proprietary information that CMT and

Simplex had shared with Innovation PEI; (para. 187

(d) of claim)

(iii) had meetings with potential clients of 764;

(para. 187 (e) of claim)

(iv)

wrote to clients of 764 and recruited them to

relocate to PEI; (para. 187 (h) of claim)

(v)

used confidential information at the World

Gaming Conference in London in 2012; (para. 192

(c) of claim), and

(vi)

wrote to clients of 764 and CMT, advised

that he was attending the SIBOS conference in

Japan, and recruited them to relocate to PEI; (para.

192 (d) of claim)

(c)

Sheridan made public statements denying that the

Government had entered into the MOU with 764; (para.

187 (f) of claim)

61

(d)

Paynter took no steps to prevent Sheridan and

LeClair from proposing another supplier; (para. 187 (g)

of claim)

(e)

LeClair and MacLean initiated an investigation of

764 by the Superintendent of Securities when they knew

that there was no evidence that 764 had violated the

Securities Act; (para. 187 (I) of claim)

(f)

LeClair, MacLean, and Campbell:

(I) encouraged the Superintendent of Securities

to bring proceedings under the Securities Act for the

purpose of providing Innovation PEI with an excuse

to refrain from fulfilling the MOU; (para. 187 (l)

of claim) and

(ii)

used the securities investigation to suspend

the MOU when they knew that there was no basis to

the allegations against 764; (para. 187 (m) of

claim)

(g)

Campbell assured 764 that the securities

investigation would have no effect on the implementation

of the MOU; (para. 187 (n) of claim)

(h)

MacEachern prevented Innovation PEI from

completing the MOU after the Superintendent of Securities

had determined that 764 did not engage in any wrongdoing

under the Securities Act; (para. 187 (o) of claim)

(I)

MacLean and Campbell refused to provide 764

with a release from the exclusivity and confidentiality

provisions in the MOU to prevent 764 from negotiating

with other jurisdictions; (para. 187 (p) of claim)

(j)

MacLean obtained information from Dowling on

the investigation and shared this information with Paynter,

Mix, Dow, and MacEachern contrary to the Securities Act;

62

(para. 187 (s) of claim)

(k) Sheridan, Mix and LeClair, during the term of the

MOU, negotiated with Carta for the purpose of having

Carta provide the same services that 764 was to provide

under the MOU; (para. 187 (t) of claim)

(l)

Government:

(i)

deleted the emails of LeClair, Beck, and

MacEachern, (para. 187 (v) of claim) and

(ii)

breached the confidentiality provisions of

the MOU through the conduct of Sheridan LeClair

(para. 192 (a) and (b) of claim) and Mix, as outlined

above, (para. 192 (c) and (d) of claim).

[159] No breach of contract claims were made against Ghiz,

Stewart, Dowling, Scales, Dow, or Cutcliffe.

General statement of the parties’ positions regarding the

breach of contract allegations

[160] The Government submits the MOU is not a binding

contract in that:

i) it is an agreement to agree;

ii) an agreement to bargain in good faith is unenforceable;

iii) the essential terms of the agreement were not all agreed

upon, meaning there is uncertainty or lack of clarity with

respect to the terms of the contract;

iv) the agreement specifically expressed that, with the

exception of certain articles, the parties did not intend for

the MOU to be legally binding; and

v) 764 lacked the capacity or authorization to enter into the

MOU.

[161] The Government submits that while there is no valid and

enforceable contract

in place, in any event, neither it nor any of its related defendants

breached any of the terms of the MOU.

63

[162] The plaintiff 764 submits that the MOU with Innovation

PEI created a binding obligation on the parties to negotiate in good

faith, prohibited discussion with others during the exclusivity

period, and prohibited the disclosure of confidential information.

They further submit that an agreement to agree can create an

enforceable contract. They claim the contract was breached as set

out above.

The law of breach of contract - overview

[163] At this stage of the decision, I will briefly address the law

relating to breach of contract and will return to that discussion

when I apply the law to the specific facts presented on this motion.

[164] In order to sustain a cause of action for breach of contract, a

plaintiff must show:

i)

ii)

iii)

that a valid contract has been formed;

that its terms have been breached; and

that it suffered damages as a result.

1. Agreement to agree, uncertain terms, no intention to be

bound

[165] In Bawitko Investments Ltd. v. Kernels Popcorn Ltd.,

1991 2734, at p.13, the Ontario Court of Appeal held:

However, when the original contract is incomplete because essential

provisions intended to govern the contractual relationship have not been

settled or agreed upon; or the contract is too general or uncertain to be

valid in itself and is dependent on the making of a formal contract; or the

understanding or intention of the parties, even if there is no uncertainty as to the

terms of their agreement, is that their legal obligations are to be deferred until a

formal contract has been approved and executed, the original or preliminary

agreement can not constitute an enforceable contract. In other words, in

such circumstances the “contract to make a contract” is not a contract at

all. The execution of the contemplated formal document is not intended only as

a solemn record or memorial of an already complete and binding contract but is

essential to the formation of the contract itself. (Emphasis added)

[166] After commenting on the Bawitko decision, Hall, in his text

Canadian Contractual Interpretation Law, 3^rded. (Markham,

Ont.: LexisNexis. 2016) noted at p. 207:

In other words, there are three separate sub-propositions contained within

the basic notion that an agreement to agree is unenforceable. First, there is

64

no enforceable contract where essential terms have not been agreed but instead

have been left by the parties for future agreement. Second, there is no

enforceable contract where the provisions of what has been agreed are

insufficiently certain. Third, there is no enforceable contract where the parties

intend that a preliminary agreement is not to create binding contractual relations

until a subsequent formal document is executed.

[167] The plaintiffs referred the court to the case of Georgian

Windpower Corp. v. Stelco Inc., 2012 ONSC 3759. That case

involved an MOU between the plaintiff, GWC, and the defendant,

Stelco, with respect to the development of what was referred to in

the MOU as the “Industrial Biotricity Strategy”.

[168] Article 1 of the MOU in Georgian Windpower, which

outlined the purpose of the MOU, is set out at para. 43 of that case

as follows:

This Memorandum of Understanding (“MOU”) is intended to confirm the

general principles pertaining to the ongoing discussions between GWC and

Stelco with respect to the development of a multi part wind energy project

including:( Emphasis added)

[169] Georgian Windpower sets out the following provisions of

the MOU at paras. 47- 49, starting with a reference to the last

paragraph of Article 4.2 which provides, in part:

The parties agree to negotiate in good faith, terms and conditions necessary

to conclude an agreement ... .

Article 4.3, which is headed “Exclusivity”, provides the parties will not pursue

other interests related to the endeavour without written permission from the

other party or the termination of the MOU in accordance with its terms. ...

Article 5 states that the Strategy is at the conceptual stage and sets out the

items that are to be included in the Strategy which it notes are subject to

change. ... (Emphasis added)

[170] GWC submitted the MOU created binding obligations on

the parties to negotiate in good faith. They further submitted that

an agreement to agree can create an enforceable contract.

[171] Stelco submitted that the MOU was unenforceable in that it

is no more than an agreement to agree, there was no intention to

create legal obligations, and the parties did not agree on all

essential terms of the agreement. Further Stelco submitted that an

agreement to negotiate in good faith is equally unenforceable.

65

[172] With respect to the contested issues, the court in Georgian

Windpower concluded, commencing at para. 121, that:

(2) Agreements to agree or negotiate

[121] It has long been held that agreements to agree or negotiate are not

enforceable: Walford v. Miles, [1992] 2 A.C. 128, [1992] 1 All E.R. 453 (H.L.);

Cedar Group Inc. v. Stelco Inc., [1995] O.J. No. 3998, 59 A.C.W.S. (3d) 1096

(Gen. Div.), affd [1996] O.J. No. 3974, 66 A.C.W.S. (3d) 867 (C.A.). As Lord

Ackner stated in Walford, at p. 138 A.C., "The reason why an agreement to

negotiate, like an agreement to agree, is unenforceable, is simply because it

lacks necessary certainty."

(3) Essential terms

[122] In order for there to be a binding contract, the parties must agree on

all of the essential terms of the agreement: see Consulate Ventures Inc. v.

Amico Contracting & Engineering (1992) Inc., [2007] O.J. No. 1663, 2007

ONCA 324 (), 223 O.A.C. 330 (C.A.), at para. 81. The rationale is

similar to that in respect of agreements to agree or negotiate. An agreement

which lacks the essential terms is too uncertain to be enforceable.

[123] Where the essential terms have not been settled or agreed upon or

where the contract is too general or uncertain to be valid, the agreement is

not valid. Similarly, where the understanding or intention of the parties,

even where there is no uncertainty as to the terms of the agreement, is that

their legal obligations are to be deferred until a formal contract has been

approved and executed, the initial agreement is not binding: see Bawitko

Investments Ltd. v. Kernels Popcorn Ltd., 1991 2734 (ON CA), [1991]

O.J. No. 495, 53 O.A.C. 314 (C.A.), at para. 21.

[124] What constitutes the "essential terms" depends on the subject matter of the

contract and what transpired at the time of the alleged agreement: see United

Gulf Developments Ltd. v. Iskandar, [2008] N.S.J. No. 317, 2008 NSCA 71

(), 69 R.P.R. (4th) 176. Cromwell J.A. (as he then was) stated, at para.

14:

To have an enforceable contract, there must be agreement between

the parties as to all essential terms. To use the language of a leading

case, a contract ". . . settles everything that is necessary to be

settled and leaves nothing to be settled by agreement between the

parties": May & Butcher Ltd. v. R. [1934] 2 K.B. 17 (H.L.) at p. 21.

Determining what terms are "essential" in a particular case is, however,

more difficult than stating the principle. The sort of terms that are

considered essential varies with the nature of the transaction and the

context in which the agreement is made: Mitsui & Co. v. Jones Power

Co., 2000 NSCA 95 (), 189 N.S.R. (2d) 1 (C.A.), at para. 64.

66

[125] Agreements providing for future agreement can be binding. If the

concept is sufficiently certain to enable agreement, the fact that the agreement

provides for future mutual agreement does not result in it being too uncertain if

there is a mechanism or formula set out. The issue is whether the provision for

the future agreement is directory or mechanical as opposed to the substance of

the provision: see EdperBrascan Corp. v. 117373 Canada Ltd. (2000), 2000

22694 (ON SC), 50 O.R. (3d) 425, [2000] O.J. No. 4012 (S.C.J.), at

para. 31. (Emphasis added throughout)

[173] The court then concluded that, in essence, the MOU was

nothing more than an agreement to agree:

[126] In my view, when the MOU is read as a whole, the words are clear

and unambiguous. The MOU is primarily an agreement to agree on the

development of a proposed large multi part wind energy project, called the

"Industrial Biotricity Strategy", which will involve not only GWC and

Stelco but other parties as well. In that regard, it is, in my view, no more

than an agreement to agree and is accordingly unenforceable.

[127] The MOU begins with the statement that it is "intended to confirm

the general principles pertaining to the ongoing discussions between GWC

and Stelco with respect to the development of . . . the Industrial Biotricity

Strategy."

[128] Article 4.2 provides: "The parties agree to negotiate in good faith,

terms and conditions necessary to conclude an agreement to be a participant

in the Industrial Biotricity Strategy together with other consortium members to

be determined." Article 4.4 provides that details of the agreed upon sharing

mechanism for emission credits for all parties are to be included in the "final

agreements developed for Industrial Biotricity Strategy". Article 5, which sets

out certain technical requirements of the Industrial Biotricity Strategy

acknowledges that the Industrial Biotricity Strategy is still at the conceptual

stage and that "both parties agree that technical requirements outlined below are

subject to change".

[129] Although the MOU is primarily an agreement to agree in respect of

proceeding with the Strategy, it also contains specific obligations on the

parties to facilitate their ongoing discussions. In that regard, Article 4.3

provides that neither party will pursue "other interests" related to the

Strategy without the written permission of the other or the termination of

the MOU. Article 4.2 provides that Stelco will not align itself with another

potential wind power supplier on the Stelco Lands "that might seriously impede

the economic or technical viability of the Industrial Biotricity Strategy". Article

8 provides that apart from the requirements of securities laws and stock

exchange rules, neither party can make any public announcements with respect

to the MOU without the other party's prior approval. (Emphasis added

throughout)

[174] McDonald himself, in the course of oral argument, stated,

67

“Now I quite agree, the memorandum of understanding is exactly

that. You know, it was a, an opportunity to negotiate ...”.

2. Bargaining in good faith

[175] Cromwell J., in the Supreme Court of Canada decision in

Bhasin v. Hyrnew 2014 SCC 71, addressed the extent of any

obligation to bargain in good faith. He wrote:

[70]

The principle of good faith must be applied in a manner that is

consistent with the fundamental commitments of the common law of

contract which generally places great weight on the freedom of contracting

parties to pursue their individual self-interest. In commerce, a party may

sometimes cause loss to another — even intentionally — in the legitimate

pursuit of economic self-interest: A.I. Enterprises Ltd. v. Bram Enterprises

Ltd., 2014 SCC 12 (), [2014] 1 S.C.R. 177, at para. 31. Doing so is not

necessarily contrary to good faith and in some cases has actually been

encouraged by the courts on the basis of economic efficiency: Bank of America

Canada v. Mutual Trust Co., 2002 SCC 43 (), [2002] 2 S.C.R. 601, at

para. 31. The development of the principle of good faith must be clear not to

veer into a form of ad hoc judicial moralism or “palm tree” justice. In

particular, the organizing principle of good faith should not be used as a

pretext for scrutinizing the motives of contracting parties.

...

[73]

In my view, we should. I would hold that there is a general duty of

honesty in contractual performance. This means simply that parties must not

lie or otherwise knowingly mislead each other about matters directly linked

to the performance of the contract. This does not impose a duty of loyalty

or of disclosure or require a party to forego advantages flowing from the

contract; it is a simple requirement not to lie or mislead the other party

about one’s contractual performance. Recognizing a duty of honest

performance flowing directly from the common law organizing principle of good

faith is a modest, incremental step. The requirement to act honestly is one of

the most widely recognized aspects of the organizing principle of good faith:

see Swan and Adamski, at § 8.135; O’Byrne, “Good Faith in Contractual

Performance: Recent Developments”, at p. 78; Belobaba; Greenberg v. Meffert

(1985), 1985 1975 (ON CA), 50 O.R. (2d) 755 (C.A.), at p. 764;

Gateway Realty, at para. 38, per Kelly J.; Shelanu Inc. v. Print Three

Franchising Corp. (2003), 2003 52151 (ON CA), 64 O.R. (3d) 533

(C.A.), at para. 69. For example, the duty of honesty was a key component of the

good faith requirements which have been recognized in relation to termination of

employment contracts: Wallace, at para. 98; Honda Canada, at para. 58.

(Emphasis added)

68

[176] The obligation to bargain in good faith and to act honestly

in contractual dealings does not oblige any party to abandon its

own best interests.

Specific allegations of misfeasance in public office

[177] The specific allegations of misfeasance in public office are

set out in paras. 194-200 of the amended statement of claim. The

plaintiffs claim the course of conduct of the various defendants was

deliberate and unlawful in the exercise of their public functions,

and that they knowingly acted for the improper purpose of denying

the plaintiffs the benefits of establishing the Simplex Global

Transaction Platform in Prince Edward Island. They claim the

“Government Agents” knew their conduct was unlawful, was likely

to injure the plaintiffs, and did cause the plaintiffs to suffer

damages. In summary, they allege as follows:

(a)

Sheridan disclosed proprietary information he

received from CMT and 764 to competitors of the plaintiffs

contrary to the contractual obligations of the Government,

and while knowing that Simplex, CMT and 764 were

associated, he deliberately denied this knowledge to

Dowling and to the public with the intention of causing

reputational damage to the plaintiffs; (paras. 196 (a)-(c) of

claim)

(b)

MacLean recklessly encouraged the Superintendent

of Securities to initiate an investigation against Maines and

the plaintiffs when there were no reasonable grounds to do

so, obtained information from Dowling on the investigation

and shared that information with Campbell, Mix, Dow,

MacEachern and Paynter and with various individuals in

the business community for the purpose of discrediting

Maines and the plaintiffs, contrary to s.36 of the Securities

Act, and instructed Paynter and Mix to refrain from taking

any further steps to implement the MOU; (paras. 196

(d)-(g) of the claim)

(c)

Campbell obtained information from Dowling on

the investigation and shared the information with MacLean,

Mix, Dow, MacEachern and Paynter contrary to s.36 of the

Securities Act, and instructed Paynter and Mix to refrain

69

from taking any further steps to implement the MOU;

(paras. 196 (h) and (I) of the claim)

(d)

LeClair recklessly encouraged the Superintendent

of Securities to initiate an investigation against Maines and

the plaintiffs when there were no reasonable grounds to do

so, obtained information from Dowling on the investigation

and shared that information with Campbell, Mix, Dow,

MacEachern and Paynter, contrary to s.36 of the Securities

Act; (paras. 196 (j) and (k) of the claim)

(e)

Mix, while the MOU was in effect, wrote to many

of CMT’s clients advising he would be attending the

SIBOS conference at the end of October, 2012 as a

“payments expert” and recruited those companies to locate

PEI; (para. 196 (l) of the claim)

(f)

Paynter used the information she had wrongfully

obtained from MacLean and Campbell as a reason to

suspend the implementation of the MOU; (para. 196 (m) of

the claim)

(g)

Dowling unlawfully carried out investigation on

CMT and 764 without authority or authorization under the

Securities Act, continued the investigation even though he

knew no complaint at been made against 764, included

information about CMT in his affidavit of February 14,

2013, that he either knew to be false or was reckless as to

its validity with respect information obtained from Curran,

Hashmi, Maines, John Trainor, Kellie Trainor, Mark Rodd,

and Kevin Murphy, knowing the submission of the affidavit

would cause substantial reputational damage to CMT, filed

a Notice of Motion for sanctions against 764 knowing there

was no evidence of contravention of the provisions of the

Securities Act, made his findings public with the intention

of causing substantial reputational damage to the plaintiffs,

and shared information with Campbell, MacLean, Dow,

Paynter and MacEachern, for the purpose of discrediting

the plaintiffs, contrary to s. 36 of the Securities Act;

70

(paras.196 (n)-(s) of the claim)

(h) Dow received confidential information from the

plaintiffs pursuant to the MOU and used this information to

approach potential clients of the plaintiffs for the purpose

of discrediting the plaintiffs and preventing the potential

clients from contracting with the plaintiffs, unlawfully

received and used information he obtained regarding the

securities investigation to discredit the plaintiffs, contrary

to s. 36 of the Securities Act; (paras. 196 (t) and (u) of the

claim)

(I)

MacEachern, in conjunction with Sheridan and

LeClair, knowing the Government was subject to an

exclusionary Article, enabled a competitor of the plaintiffs

to obtain the business opportunity contemplated by the

MOU; (para. 196 (v) of the claim)

(j)

Manago, [who is not a named defendant], while

managing the Loyalty Card Program unlawfully required

Simplex to invoice its services through Internetworks Inc.

to disguise the fact the work contemplated to be carried out

by the plaintiffs under the MOU was being carried out by

the plaintiffs’ strategic partner; (Para. 196 (w) of the claim)

(k)

Scales unlawfully misled Simplex into providing

consulting services and induced them to invoice the

Government, unlawfully made promises of payment to

Simplex, while negotiating with a competitor of 764 met

with Walsh to elicit confidential information he used to

undermine the completion of the MOU; (paras. 196

(x)-(z) of the claim) and

(l)

Cutcliffe, while contractually bound to provide

government services advice to both the Government and the

plaintiffs unlawfully obtained information about the

plaintiffs from the investigation under the Securities Act

and conveyed this information to other Government Agents

knowing it would be detrimental to the plaintiffs, contrary

to s.36 of the Securities Act; (para. 196 (aa) of the claim).

[178] The defendants have denied each of the allegations against

them. In particular, LeClair states he was not a public officer or

71

Government agent and did not perform any public functions at any

time material to this case. Scales, Dow, and Cutcliffe each state

that they were never public officers or Government agents and

never performed any public functions at any time. Allegations

regarding the invoices from Simplex to Internetworks Inc., referred

to in relation to Manago, a non-defendant, are addressed in

MacEachern’s evidence about the loyalty card program.

The law of misfeasance in public office - Identifying the

essential elements

[179] Misfeasance in public office is an intentional tort. The

leading case on the subject is Odhavji Estate v. Woodhouse, 2003

SCC 69, 2003 CarswellOnt 4851. Writing for a unanimous

Supreme Court of Canada, Iacobucci J. summarized the elements

of the tort as follows:

32 To summarize, I am of the opinion that the tort of misfeasance in a public

office is an intentional tort whose distinguishing elements are twofold: (i)

deliberate unlawful conduct in the exercise of public functions and (ii)

awareness that the conduct is unlawful and likely to injure the plaintiff.

Alongside deliberate unlawful conduct and the requisite knowledge, a

plaintiff must also prove the other requirements common to all torts. More

specifically, the plaintiff must prove that the tortious conduct was the legal

cause of his or her injuries and that the injuries suffered are compensable

in tort law. (Emphasis added)

[180] Putting the elements in list form, to find someone has

committed the tort, it is necessary for the plaintiff to prove that the

person against whom they are claiming was:

1) a public officer,

2) performing a public function (or failing to do so),

3) who knew his conduct was unlawful,

4) who deliberately acted unlawfully,

5) who knew his conduct was likely to injure the plaintiff,

6) and whose tortious conduct was the legal cause of the

plaintiff’s injuries,

7) and that the injures suffered are compensable in tort law.

[181] If any one of those elements is missing from a plaintiff’s

proof then the tort of misfeasance in public office is not made out.

[182] Odhavji, (at para. 25), quoted favourably from Powder

72

Mountain Resorts Ltd. v. British Columbia, 2001 BCCA 619,

94B.C.L.R. (3d) 14, in which Newbury J.A. described the tort both

for what it includes and what it does not include:

... it may, I think, now be accepted that the tort of abuse of public office will

be made out in Canada where a public official is shown either to have

exercised power for the specific purpose of injuring the plaintiff (i.e., to

have acted in "bad faith in the sense of the exercise of public power for an

improper or ulterior motive") or to have acted "unlawfully with a mind of

reckless indifference to the illegality of his act" and to the probability of

injury to the plaintiff. (See Lord Steyn in Three Rivers, at [1231]. Thus

there remains what in theory at least is a clear line between this tort on the

one hand, and what on the other hand may be called negligent excess of

power — i.e., an act committed without knowledge of (or subjective

recklessness as to) its unlawfulness and the probable consequences for the

plaintiff. (Emphasis added)

[183] In Odhavji, Iacobucci J. also stated, “As each passage

makes clear, misfeasance in a public office is not directed at a

public officer who inadvertently or negligently fails adequately to

discharge the obligations of his or her office ... but, rather, at a

public officer who could have discharged his or her public

obligations, yet wilfully chose to do otherwise” (See para 26).

[184] Further, commencing at para 28, Iacobucci J. stated:

28 ... The requirement that the defendant must have been aware that his or her

conduct was unlawful reflects the well-established principle that misfeasance in a

public office requires an element of “bad faith” or “dishonesty”. In a democracy,

public officers must retain the authority to make decisions that, where

appropriate, are adverse to the interests of certain citizens. Knowledge of harm

is thus an insufficient basis on which to conclude that the defendant had

acted in bad faith or dishonestly. A public officer may in good faith make a

decision that she or he knows to be adverse to interests of certain members

of the public. In order for the conduct to fall within the scope of the tort, the

officer must deliberately engage in conduct that he or she knows to be

inconsistent with the obligation of the office.

29 The requirement that the defendant must have been aware that his or her

unlawful conduct would harm the plaintiff further restricts the ambit of the tort.

Liability does not attach to each officer who blatantly disregards his or her

official duty, but only to a public officer who, in addition, demonstrates a

conscious disregard for the interests of those who will be affected by the

misconduct in question. This requirement establishes the required nexus

between the parties. Unlawful conduct in the exercise of public functions is a

public wrong, but absent some awareness of harm there is no basis on

which to conclude that the defendant has breached an obligation that she or

he owes to the plaintiff, as an individual. And absent the breach of an

73

obligation that the defendant owes to the plaintiff, there can be no liability

in tort.

30 In sum, I believe that the underlying purpose of the tort is to protect each

citizens reasonable expectation that a public officer will not intentionally injure a

member of the public through deliberate and unlawful conduct in the exercise of

public functions. ... (Emphasis added)

[185] Omissions to act may also constitute misfeasance.

Epstein J. writing for the Court of Appeal in Grand River

Enterprises Six Nations v. A.G. (Canada), 2017 ONCA 526, at

para. 81 said:

[81]

On my reading of the relevant paragraphs from Odhavji, there is no

requirement for a breach of a statutory duty to make out a claim for misfeasance

in public office. Conduct by a public officer may be unlawful even where there is

no positive duty to act, provided that the conduct was done with the intent to

harm. Similarly, a refusal to exercise a power with a specific intent to injure

might satisfy the test for misfeasance in public office. ...

[186] In the recent case of Capital Solar Power Corporation

v.The Ontario Power Authority, 2019 ONSC 1137, the court

stated:

116. Canadian courts have recognized the potential for the abuse of the tort of

misfeasance in public office, and the need to keep its ambit limited. [100] In

Powder Mountain Resorts Ltd. v. British Columbia, [101] Newbury J.A. of the

British Columbia Court of Appeal stated that:

[2] [T]he tort must be used cautiously. Otherwise, the courts risk

straying into the arena of political decision-making, bypassing the

normal restraints associated with judicial review, and becoming the

arbiters of the personal thought processes of public officials. One

recent commentator (Phillip Allott, “EC Directives and Misfeasance in

Public Office”, [2000] 59 Camb. L.J. 4) has written that the court

should not, by means of the tort, take on the role of “ombudsman, a

parliamentary committee, or an organ of public opinion in

reviewing even egregious acts of maladministration, official

incompetence, or bad judgement.” (at 6.) To avoid dangers of this

kind, a balance must be sought between curbing unlawful

behaviour on the part of governmental officials on the one hand,

and on the other, protecting officials who are charged with making

decisions for the public good, from unmeritorious claims by

persons adversely affected by such decisions. (Emphasis added)

[187] The court in Capital Solar Power also confirmed that

making assumptions or speculating about the motivations

underlying the conduct of a public officer are

74

insufficient to ground the mental component of the tort of public

misfeasance. (See para. 127).

[188] Conversely, public officials who honestly believe their acts

are lawful, and do not intend to cause harm or know that harm

would likely result from their actions, fall outside the ambit of

misfeasance in public office. (See St. Elizabeth Home Society v.

City of Hamilton, 2010 ONCA 280 at para. 21).

[189] The requirements to prove the mental element of the tort

were summarized succinctly in Pikangikum First Nation v. Nault,

2012 ONCA 705, when the court wrote, at para. 77:

[77] The tort of misfeasance in public office is difficult to establish. The

plaintiff must prove more than mere negligence, mismanagement or poor

judgment. To succeed, the plaintiff must demonstrate that the defendant

knowingly acted illegally and in bad faith chose a course of action specifically

to injure the plaintiff. (Emphasis added)

[190] The type of assessment conducted by the court in

determining whether there was misfeasance in public office was

under consideration in Martineau v. Ontario (Alcohol and

Gaming Commission of Ontario), 2007 ONCA 204. The court

held, at para. 8:

8. It is clear that the defendants considered the appellants’ application and

reviewed the eighty pages of material forwarded to them. They therefore acted in

furtherance of their duty to deal with the transfer application under s. 6(2) of the

Alcohol and Gaming Regulations and Public Protection Act, although they may

have done so carelessly. The trial judge carefully reviewed all of the legal

principles underlying the tort of misfeasance in public office and carefully

reviewed the evidence. He made specific factual findings that there was no

personal animosity towards the appellants and no malice or recklessness on

the part of the respondents. In effect, he found that, while the defendants’

conduct may have been negligent – even cavalier – it did not rise to the

level of either conduct necessary to support a finding of misfeasance in

public office, i.e. it was not conduct carried out with an ulterior motive and

an intention to injure the appellants (targeted malice), nor was it the

conduct of a public officer acting without an honest belief that her actions

were lawful and likely to injure the plaintiffs (the second branch of the

Three Rivers test). (Emphasis added)

[191] In other words, conduct only equates to misfeasance in

public office if it is undertaken with a particular state of mind, i.e.,

with the actual intent to inflict injury and the knowledge that injury

75

will likely result. If either intention or knowledge is absent, there

is no liability in tort.

[192] In Erika Chamberlain’s publication Misfeasance in a

Public Office, (Toronto: Thomson Reuters, 2016) she notes at p.

113-114:

However, since misfeasance in a public office is an intentional tort, the plaintiff

must show that the defendant’s actions were “deliberately” unlawful. Thus, a

defendant will not be held liable if the actions were committed through

negligence, honest (though mistaken) belief in their lawfulness, cavalier

behaviour, poor judgment, or simply bad practice. ... (Emphasis added)

(Footnotes omitted)

[193] As noted, failing to fulfill a public duty can also constitute

misfeasance in public office. However, if a public officer omits to

perform a duty because he or she misunderstands the legal

requirements of that duty, that omission does not constitute a

deliberate, bad faith decision not to act. (See Stenner v. British

Columbia (Securities Commission) (1996), 141 D.L.R. (4^th) 122

(BCCA) at para. 35).

[194] With respect to the need for damages, Chamberlain wrote,

at pp. 7-8:

Finally, as misfeasance in a public office descends from the action on the case, it

is only actionable when it results in material damage. A misfeasance claim

cannot be brought simply to vindicate a right or to denounce and deter official

misconduct. ...

The elements of bad faith, deliberately unlawful conduct, and material damage

thus form the backbone of misfeasance in a public office. ... Not only must the

defendant’s unlawful conduct cause the plaintiff material damage, but that

damage must have been subjectively foreseen. ... (Emphasis added)

[195] And continuing at p. 145 she stated, “Accordingly,

misfeasance claims should be dismissed if the plaintiff cannot

establish material damage.”

[196] Horsman and Morley, Government Liability: Law and

Practice, Looseleaf (Toronto: Thompson Reuters, 2017), at

7.20.50, under the heading “Damages”, it states:

Given that relatively few of the leading misfeasance cases have resulted in an

actual damage award, the principles of damage assessment have not been subject

to in-depth judicial analysis.⁷⁷The House of Lords has held that the tort of

76

misfeasance in public office is not actionable per se; proof of material

damage is required. (Emphasis added)

[197] And continuing with footnote 77 cited in the above

passage:

It is worth repeating that the predominant view is that the damages

suffered by the plaintiff must be foreseen by the defendant and not simply

foreseeable. Again it appears foresight can be established on a standard of

recklessness or willful blindness: Three Rivers D.C. v. Bank of England, [2000]

W.L.R. 1220 (H.L.)(“Three Rivers #1"). (Emphasis added).

[198] The bar for establishing misfeasance in public office has

indeed been set high.

Evidence and allegations with respect to the MOU as it

pertains to both breach of contract and misfeasance in public

office

[199] This case against the Government and other defendants has

frequently been referred to as the e-gaming case. In fact it has little

or nothing to do with e-gaming proposals initiated by the Mi’kmaq

Confederacy and researched by MC and a working group from

approximately 2010 until February 24, 2012. Neither of the two

plaintiffs, CMT or 764, were participants in that project. No other

project participants have presented any claim at all in respect of

that project.

[200] The major thrust of the plaintiffs’ claims for breaches of the

confidentiality and exclusivity articles of the MOU relate to three

areas of alleged activity by the defendants. Those are:

1)

of Continental 8 Technologies;

2) attendance by Mix at the SIBOS conference in

contact with Laslop of Newcourt Capital and Tobin

Japan in 2012 and related or similar contacts with others for

business recruitment or development purposes;

3)

disclosure of confidential information by various

defendants.

[201] The communications regarding these matters frequently

involve people other than named defendants and other than

77

Government officers or agents.

1. Allegations against Sheridan and LeClair re: MOU

[202] The plaintiffs allege Sheridan and LeClair had improper

contact with Keith Laslop of Newcourt Capital and Mike Tobin of

Continental 8 Technologies during the term of the MOU. The

contact consisted of emails sent in early August 2012, meetings in

late August 2012, and a letter received from Laslop in early

September 2012.

i) Emails of August 1 and 2, 2012

[203] One of the provisions in the MOU required that Innovation

PEI and its employees, officers, contractors, agents, representatives

and/or professional advisors agrees not to discuss with any entity

“its interest and/or capabilities in hosting or creating a

financial services centre in the Province.” Another provision

required each party to maintain the confidentiality of “all

Confidential Information disclosed to it by the disclosing

Party.” (Emphasis added).

[204] The MOU was in effect from July 6, 2012 to September 4,

2012, and again from September 10, 2012, to October 10, 2012. It

is the plaintiff’s submission that the email exchanges of August 1

and 2, 2012, between LeClair, Sheridan and various others who

had worked with Simplex on the e-gaming project, constitute proof

of the breach of these two articles of the MOU. The defendants

deny there was any breach of either section of the MOU.

[205] Before reviewing the content of the emails, I note that the

time stamps on the emails do not appear to coincide with the flow

of discussion taking place in those emails. It appears in some cases

that the questions are being answered before they are being asked.

No explanation was offered by the parties with respect to that. I

will present the emails, with their time stamps, in the order in

which the conversation appears to have taken place. I do not

believe anything of significance turns on that, given that the full

exchange occurred during the currency of the MOU.

[206] The exchange was as follows:

78

1. LeClair to Sheridan

Sent: 8/1/2012 8:00:34 AM

Subject: Payments processing

Wes, I am doing a bit of work for keith laslop... you met him before. He is still

interested in opening up a payments processing company in partnership with a

credit union.

He wants to process offshore canadian play - - - no need for setting up a

regulatory regime.

Would you meet with he and I on pei... I told him mike tobin might be here and

there might be synergies?

Here [sic] can come to pei on the either August 21-22 or August 28-30.

Can you give us a time to meet. Also, who is the best bet to speak with from thr

[sic] credit union side?

Thanks wes.

2. Sheridan to LeClair

2012-08-01, at 7:10 AM

The 21st in the afternoon would work Chris, let’s discuss details such as a CU

contact later today, TB this morning.

3. LeClair to Sheridan

8/1/2012 10:11 AM

Re: Payments processing

Thanks Wes... if we were to get Tobin setting up here and a payments processing company setting up here... that

would be a heck of a start.

Chris

4. O’Brien to Kiley, Scales, LeClair

Date: Wed, 1 Aug 2012 07:40:16 -0300

Subject:

79

Hi Guys. It looks like the best day for the golf and dinner is August 21st. Wes is available on that day and I believe we

should extend the invitation to others (Alan Campbell, Premier, Neil Stewart). Please provide your thoughts on this

and how any costs are to handled. Mike

5. LeClair to O’Brien

Sent: August 01, 2012 11:15 AM

Subject: Re:

Guys,tobin has been very supportive of mc... I would have the firm cover costs.

6. O’Brien to Scales, Kiley, LeClair, Sheridan

Date: 8/2/2012 12:34 PM

Subject: FW: Re:

Guys. I believe I mentioned that Wes is available on the 21st which means I would suggest Mike arrive on the

evening of the 20th and we would play golf at , say Dunderave, and have an evening meal on that night. I asked Mike

about his expectations from us and although he has nothing specific I have the impression he would want to have a

productive conversation around the ideas he has on his insurance model , treasury and processing functions , data

centre business and another company he owns called E COM ACCESS. He will send me more information on this

company and I will flip it to you. Also, I believe we should invite someone from

PEI. Please provide me with your thoughts. Mike

Innovation

[207] While the email exchange involves several people, only

three are defendants in this action, namely, LeClair, Sheridan, and

Scales.

[208] Defence counsel argued that this email chain does not

constitute evidence of any breach of the MOU. They also state the

evidence shows no meeting of any kind with Tobin ever

materialized.

[209] First, defence counsel references the fact that the

introduction of Laslop and Newcourt was unsolicited by

Government or its agents. LeClair was a private consultant

working on behalf of Laslop and he initiated contact. He was not

acting on behalf of Government. His resignation was announced on

October 11, 2011 and he left his employment with Government on

October 17, 2011. The request for a meeting was presented in

August, 2012. McDonald acknowledged that after October, 2011,

80

LeClair was not an officer or agent of the Government. For the

reasons starting at para. 383, in the section addressing the status

of Dow and Cutcliffe, I also find LeClair, at times material to this

action, not to have been an officer or agent of Government and not

to have been performing any public function.

[210] Second, defence counsel points out that pursuant to article

4(b) of the MOU, the Government and its employees, officers,

contractors, agents, representatives and/or professional advisors

agreed not to discuss with any entity “its interest and/or

capabilities in hosting or creating a financial services centre” in

PEI. (Emphasis added)

[211] LeClair indicated in his email that Laslop was interested in

establishing a payment processing centre. There are two points

made regarding this: one is that there is no definition in the MOU

of what constitutes a “financial services centre”, and the second is

that the email is expressing LeClair’s views of what he considers

Laslop’s intentions are, not the Government’s.

[212] O’Brien, a private consultant with MC, spoke of arranging

a golf game and dinner with Tobin. He speculated about what

Tobin would be interested in discussing.

[213] LeClair had indicated in his email about Laslop that Tobin

might be on PEI at that time as well. Sheridan confirmed on

cross-examination that the proposed golf game with Tobin never

took place. No evidence has been presented to the court that

would show that Innovation PEI or other employees, officers, etc.

of Government, including Sheridan, ever discussed any MOU

“interest” with Tobin. No evidence was presented to show any

further contact took place with Tobin.

[214] Scales was cross-examined with respect to the emails of

August 1 and 2, 2012. He declared that he never met Laslop

(Newcourt) or had any involvement with him. He also stated that

Tobin’s company was Continent 8 Technologies which provides

data hosting and data services for the online gaming industry. He

was then asked what similarity Tobin’s company had to Simplex

and whether the companies were doing the same thing. Scales

replied:

81

No, no, we had dealt ... I can give you some background on this. Okay. No, they

weren’t similar at all. (Emphasis added)

[215] Scales also testified that he was not aware of the MOU until

after the commencement of this lawsuit.

[216] Scales was then asked about the earlier presentation to

Government on February 10, 2012 with respect to the e-gaming

project. Scales described it as “a roundtable on the interactive

gaming initiative to try and advance the initiative.” He then

testified:

A. Michael Tobin and Philip Walsh were both present at that meeting. Philip

Walsh was giving an overview on a consulting report that he prepared for us, and

Michael Tobin is an expert and his company specializes in data hosting services

for interactive gaming companies.

Q. M’hm.

A. Both are required for the ... for interactive gaming that we were looking at

establishing, and so we had consulted with both of them for the interactive

gaming initiative.

[217] In response to a similar question on cross-examination

about a comparison between Simplex and Tobin’s company,

Sheridan stated:

...but let’s get one thing straight. Simplex and Continent 8 supplied two very

different and separate products. One does not overlap the other in any

fashion whatsoever. (Emphasis added)

[218] He then supported that statement by reference to the

briefing notes used by Walsh, CEO of Simplex, in the meeting

with Government on February 10, 2012, during which the working

group made a presentation regarding the e-gaming initiative. In

those notes, Walsh stated, “... Simplex, in conjunction with

Continent 8, will deliver the technical platform needed to deliver

i-gaming to meet commercial and regulatory imperatives...” After

reading that statement from the notes, Sheridan said, “Completely

and utterly separate delivery functions. No question they do

not overlap.” (Emphasis added)

ii) Meetings in late August, 2012, and letter from Laslop on

September 6, 2012

82

[219] Regarding Laslop, the plaintiffs allege that Sheridan and

LeClair put a proposal to Innovation PEI for Newcourt Capital to

provide the services contemplated by the MOU. The defendants

deny that allegation.

[220] The attempts to set up a meeting for August 21, 2012,

appear to have failed with respect to Laslop as well as with Tobin.

On the morning of August 7, 2012, LeClair again emailed

Sheridan’s office to ask for a meeting between LeClair, Sheridan

and Laslop. As a result, a meeting was scheduled for August 29,

2012. Late in the afternoon on August 7, 2012, in response to a

request he made, Sheridan received an email from MacEachern

stating that Innovation PEI had entered into an MOU with another

company. Sheridan thanked her, stating that was information he

needed to know.

[221] According to Sheridan’s testimony, a brief meeting took

place on August 29, 2012 in which he was introduced to Laslop by

LeClair. Sheridan described the meeting as “general in nature”.

[222] On September 6, 2012, Laslop, who was based in the U.K.

and Europe, sent an unsolicited letter to Sheridan with a proposal

for a payment processing company to be based on PEI. The same

correspondence was also sent to Paynter and to Al Roach, Minister

of Innovation and Advance Learning, which is the department

responsible for Innovation PEI. Sheridan stated that on the day

following the receipt of that correspondence from Laslop he was

advised by Minister Roach that they could not discuss the proposal

with Laslop because of the MOU that had been signed with another

company.

[223] It is worthy of note that the MOU was not in effect on

September 6, 2012, when Laslop’s proposal was received by

Government representatives, having expired on September 4, 2012.

Nor was it in effect the next day when Sheridan received that

communication from Roach. No request for an extension was made

by 764 until Friday, September 7, 2012. The MOU was renewed

on Monday, September 10, 2012, four days after the receipt of the

unsolicited proposal from Laslop and six days after the original

MOU expired. The extension was for an additional 30 days until

83

October 10, 2012.

[224] Regardless of the status of the MOU, Paynter forwarded the

email she received from Laslop to MacEachern “to avoid any

perception or allegation of a contravention of the MOU.”

[225] On September 10, 2012, MacEachern emailed Sheridan and

Roach stating:

I understand there may be some correspondence with a firm interested in

financial transaction processing of some nature. On behalf of the Province,

Innovation PEI has entered into an MOU with another party that has allowed for

a period of confidential negotiations between the company and Government. The

MOU precludes us from entering into discussions with a third party. If you have

any questions or concerns, please feel free to contact me.

[226] This correspondence is completely inconsistent with any

alleged misfeasance.

[227] On September 19, 2012, LeClair emailed Sheridan to ask

for an update with respect to Laslop’s proposal of September 6,

2012. Sheridan did not respond to that request.

[228] On September 25, LeClair again emailed Sheridan saying,

“just following up to my email of September 19th.” On that date,

Sheridan advised LeClair that, “Innovation has a pending

agreement with another firm working in this space that we must

honor”.

[229] Again, as opposed to any type of misfeasance, this conduct

reflects an intention to respect the MOU.

[230] Sheridan stated in his affidavit that no other information

related to Newcourt Capital was ever submitted to him or his office

by Laslop, any other representative of Newcourt, or by LeClair.

[231] LeClair stated in his affidavit that he had not seen the MOU

between 764 and Innovation PEI prior to his involvement in this

lawsuit. He further stated that he had no involvement whatsoever

in the performance of the MOU and confirmed that his

employment with government ended in October, 2011.

84

[232] LeClair confirmed that he and Laslop met with Sheridan on

August 29, 2012 during which he introduced Laslop to Sheridan.

LeClair stated the meeting was general in nature and “No specific

business proposal was discussed.” Sheridan declared on

cross-examination that he never saw Laslop again after that

meeting on August 29, 2012, and with the exception of the email

received on September 6, 2012, he never heard from Laslop again.

[233] LeClair’s affidavit also stated that on August 28, 2012 he

emailed Paynter inquiring about labour rebates on behalf of Laslop.

[234] On August 29, 2012, an introductory meeting was held with

Paynter, who spoke about labour and rental rebates available

through Innovation PEI for companies seeking such assistance.

Paynter stated in her affidavit that the meeting “was like any other

introductory meeting” she had with entrepreneurs during her time

at Innovation PEI. On cross-examination, Paynter was asked about

the confidentiality and exclusivity provisions of the MOU and

whether she breached those provisions in her meeting with Laslop.

She responded:

I did not. It was an introductory meeting, most of which could have been found

from a review of Innovation PEI’s website. I would have had

hundreds of introductory meetings over my course as CEO of a business

development agency. There was no confidentiality breached in this meeting

whatsoever, none.

[235] A similar brief introductory meeting of a general nature was

held with Campbell, Chief of Staff to Premier Ghiz, on August 30,

2012.

[236] LeClair declared as well that with the exception of the

proposal sent by Laslop to Sheridan and others on September 6,

2012, no business plan, proposal, application or other business

information was ever submitted to Innovation PEI or the

Government of Prince Edward Island by Laslop, any representative

of Newcourt Capital, or by himself. Further, he stated that no

company was ever established by Laslop in Prince Edward Island.

[237] In his affidavit, LeClair stated that he:

85

... never received or used any confidential information from 7645686 or Capital

Markets Technologies, Inc. (“CMT”), including any clients, proprietary

software, code specifications, SWIFT codes, technical requirements, or other

proprietary information belonging to 7645686 or CMT. I also never received or

used any such information from Jenkins.

[238] He went on to state that he never approached any financial

services corporations in Europe or any competitor of 764 or CMT

with respect to any business opportunity contemplated by the

MOU.

[239] Sheridan declared in his affidavit that he never approached

any financial services corporations in Europe during the terms of

the MOU and, similarly, never disclosed any confidential

information belonging to another person or company to any such

financial services corporations. He further stated that he never

received or used any proprietary or other confidential information

from 764 or CMT and that he never approached or solicited any

competitors of those companies, including Newcourt Capital, or

Laslop, to engage in business opportunities contemplated by the

MOU.

[240] The initial affidavit of Maines was filed on November 29,

2017. Affidavits from the various defendants were filed for this

motion in the latter portion of 2018. A second affidavit from

Maines was filed on January 4, 2019. All but two of the

cross-examinations were completed in mid-January, 2019, with the

other two being completed shortly thereafter.

[241] The evidence provided by the defendants directly

contradicted Maines’ evidence. They denied all of the allegations

and provided additional and explanatory evidence when necessary.

None of the testimony given on cross-examination by the

defendants was challenged or contradicted by further evidence

from the plaintiffs. As indicated earlier, the vast amount of

affidavit evidence from Maines was second hand at best. The

affidavit and cross-examination testimony given by the named

defendants was direct, first-hand testimony.

[242] Apart from broad generalizations and speculation in

Maines’ affidavits, there was no direct testimony to challenge or

contradict the statements of LeClair, Sheridan, Scales, Campbell or

Paynter regarding the contacts made with Tobin or Laslop, or their

respective companies. No evidence was presented of confidential

86

information being provided to any of those parties or of any such

information being discussed by those parties with either Tobin or

Laslop. No evidence was presented to contradict the statements of

various defendants to the effect that neither Tobin or Laslop were

in competition with 764 or CMT.

[243] The exclusivity article was very specific in identifying what

Innovation PEI and its agents and officers could not discuss. There

was no prohibition on Innovation PEI carrying on its general

business of promoting and developing investment on PEI during

the course of the MOU. That was acknowledged in correspondence

from Jessop. To do its regular work, Innovation meets with people

in all types of businesses from all around the world. As is shown

later in this decision, the MOU was drafted by Jessop. If the

MOU only prevented Innovation from conducting a narrow, very

specific type of its normal business development activities, that

failure lies at the hands of Jessop.

[244] I accept the evidence of LeClair, Sheridan, and Scales,

when they expressed that the nature of the business activities of

Tobin and his company, “weren’t similar at all”, did “not overlap

the other in any fashion whatsoever”, and were, “completely and

utterly separate delivery functions”, when compared with the

plaintiffs’ interest being pursued through the MOU.

[245] As well, I accept the evidence of LeClair, Sheridan, and

Scales, that they neither received or shared any confidential

information from 764 or CMT. They denied they received any such

information and nothing apart from speculation was presented in

the plaintiffs’ evidence to show otherwise. No “specific facts” or

details of confidential information disclosed by 764 to Government

or any of its representatives were presented as evidence and

similarly, no evidence of information purportedly disclosed by

Government or its representatives was provided. Nor were any

supposed recipients of such confidential information ever

identified, or presented as witnesses.

[246] The fact that Government officials such as Campbell and

Paynter had introductory meetings with Laslop is not evidence of a

breach of the MOU provisions relating to establishing a “financial

services centre”. There simply was no evidence to show there was

any discussion of the Government’s “interest or capacity in hosting

87

or creating a financial services centre” on PEI. Nor would it be

reasonable to draw an inference that such a proposal was

discussed. On the contrary, specific, direct evidence was presented

stating that no specific details of any business were discussed at the

introductory meetings. Further, the defendants in question were

aware that an agreement had been entered into with another

company and that until such an agreement expired, they were

required to honour the agreement and refrain from discussing their

interest in a financial services centre. Comments from

MacEachern, Paynter and Sheridan confirmed their intention to

honour that agreement.

[247] I note as well that the meetings under consideration took

place in the last week of the original term of the MOU. I also note

that the unsolicited correspondence from Laslop arrived after that

original term expired and before any request for a renewal from the

plaintiffs. Counsel for the plaintiffs repeatedly expressed the

theory that Innovation PEI and the various Government defendants

were intent on putting Simplex and CMT and 764 out of business,

and going with an alternative proposal for the creation of a

financial services centre. The plaintiffs also claim that the

Securities Act investigation, which appears to have started in the

first week of September, 2012, was part of that effort.

[248] However, several facts contradict the plaintiffs’ theory.

[249] First, the MOU was renewed on September 10, 2012, after

the securities investigation was commenced. There was no

obligation on Innovation PEI to renew or extend the MOU.

Paragraph 11 of the MOU included the statement, “However, for

the avoidance of doubt, neither Party is obliged to enter into further

agreements.” If by September 10, 2012, there was a plan to

replace 764 with another company, or put them out of business, or

invent a Securities Act investigation against Maines, CMT, and

764, or terminate the MOU, the MOU would simply not have been

renewed.

[250] Second, after September 6, 2012, there was no further

contact with Laslop or Newcourt, and there is no evidence before

the court that any financial services centre was ever established.

[251] Third, the securities investigation, which I address further

later in this decision, resulted in an admission of illegal activity,

88

with an Agreed Statement of Facts being signed by Maines, CMT

and 764.

[252] In summary regarding contact with Laslop and/or Tobin

and their respective companies, I find the following:

a)

The Government did not initiate any contact

contravening the exclusivity or confidentiality articles of

the MOU;

b)

during the currency of the MOU;

c) There was no similarity between the business

provided by

LeClair was not a government agent at any time

Tobin’s

company and

the business

either formerly

proposed by

Simplex or to

be provided by

764 under the

MOU;

d)

No discussion or meeting ever took place between

the Government and Tobin or his company during the

currency of the MOU;

e)

to the definition of a “financial services centre”;

f) There was no discussion by Innovation,

The MOU was imprecise and unclear with respect

Government, or any of its officers, agents or representatives

with Laslop or his company regarding the Government’s or

Innovation’s “interest and/or capabilities in hosting or

creating a financial services centre in the Province”;

g)

The defendants were aware of the MOU and their

obligations pursuant to it; they intended to respect those

obligations, and did so;

h)

Laslop’s unsolicited proposal was received after the

MOU expired, and nothing else was ever received from

Laslop;

I)

Laslop was received;

j) No confidential information disclosed by 764

The MOU was renewed after the proposal from

89

pursuant to the MOU was ever received by or disclosed by

Sheridan, LeClair or Scales, or ever disclosed by Paynter to

anyone in contravention of the MOU;

Public statement by Sheridan

[253] The plaintiffs allege Sheridan made public statements in

November, 2014, to the effect that CMT had nothing to do with the

work being conducted by the e-gaming working group. Sheridan

stated in his affidavit that he “never made any public statement

denying that the Government of Prince Edward Island had entered

into a memorandum of understanding with 7645686 for the

purpose of undermining the credibility of 7645686 or CMT” as

alleged in paragraph 187 (f) of the amended statement of claim.

He added that he never made any public statement for the purpose

of causing any damage whatsoever to 764 or CMT.

[254] What the plaintiffs submitted as evidence of such a public

statement is an email from a Charlottetown reporter to Jessop in

November, 2014, in which she (the reporter) asks Jessop to clarify

something she says Sheridan stated the week earlier. In her email,

the reporter says, “He stated the province’s work on E-gaming had

nothing whatsoever to do with the company CMT (Capital Markets

Technologies) and company director Paul Maines.”

[255] Counsel for Sheridan points out that there is no public

statement made by Sheridan in that email. Instead, the email

summarizes what the reporter says she understands from speaking

with Sheridan. While I find no fault whatsoever with the reporter’s

efforts, once again Maines is presenting a reporter’s email to a

third person (Jessop) in which the reporter summarizes what she

understands a fourth person (Sheridan) stated to her. The plaintiffs

did not provide any affidavit from the reporter, or from Jessop.

Had they done so, those parties would then have been subject to

cross-examination. The plaintiffs failed to provide such affidavits,

but chose instead to rely on second hand, or even third hand,

indirect evidence.

[256] As well, had Sheridan made such a statement, it would

have been accurate. As I set out earlier in this decision, CMT and

764 were not involved in the e-gaming project. The engagement of

the working group was with Simplex, not CMT. While CMT was a

minority shareholder in Simplex and may have suggested Simplex

90

become involved, MC, on behalf of its client MCPEI, contracted

with Simplex. I again refer to the section in this decision on

corporate personalities. CMT is not Simplex and Simplex is not

CMT.

[257] Further, in Sheridan’s affidavit, he stated that in his

dealings with Walsh of Simplex, Walsh never stated he was a

representative of Maines, CMT, 764, or TBT. Maines attended

one meeting of the e-gaming working group although Sheridan did

not know who invited him. Maines never stated he was a

representative of CMT, 764 or TBT. At a crucial meeting on

February 10, 2012, members of the working group made a

presentation regarding the initiative to representatives from the

Government. The Chiefs of the First Nations in PEI attended, as

did Walsh on behalf of Simplex. Neither Maines nor any

representative of CMT, 764, or TBT attended the presentation.

Sheridan stated he had no knowledge of any involvement or

participation in the working group by CMT or 764.

[258] The plaintiffs also referred to a November, 2014,

newspaper article written by the same reporter outlining the

e-gaming project from its initial stages to the termination of the

project in February, 2012. The article frequently refers to Simplex

and its dealings with the working group, etc. However, the article

does not once mention CMT or Maines.

[259] I note that both the newspaper article and the email from

the reporter to Jessop were written at the end of November, 2014.

That is more than two years after the expiration of the MOU and

almost three years after the termination of the e-gaming project

which are expressed by the plaintiffs to be the subject of their

causes of action.

Carta Worldwide

[260] The plaintiffs also claim that Sheridan, LeClair, and Mix

negotiated with Carta Worldwide during the term of the MOU for

the purpose of having Carta provide the same services 764 was to

provide under the MOU.

[261] In Sheridan’s affidavit he states, “I was never involved in

91

any negotiations, and have no knowledge of any negotiations, with

Carta Worldwide. I did not participate in any discussions or

negotiations with Carta Worldwide at any time.” Sheridan’s

statement was not challenged on cross-examination or contradicted

by further evidence from the plaintiffs.

Conclusions concerning allegations against Sheridan re: MOU

[262] The defendant Sheridan has met the onus upon him of

showing he did not approach competitors of the plaintiffs seeking

services contemplated by the MOU, or put a competitor’s proposal

to Innovation PEI to provide such services, or approach companies

in Europe seeking provision of such services, or disclose

confidential information obtained from 764. He has shown

specifically that he did not breach the confidentiality and

exclusivity articles of the MOU through contact with Laslop,

Tobin, and their respective companies.

[263] I accept as well that Sheridan never received or disclosed

any proprietary information of CMT or 764 and had never been

advised of or knew of any involvement of CMT or 764 in the

e-gaming project.

[264] Sheridan has also presented uncontradicted evidence that he

did not make negative public statements contrary to the interests of

CMT or 764, and that no statements he made were for the purpose

or with the intention of causing any harm to either of the plaintiffs.

[265] Finally, Sheridan confirmed that he had no knowledge or

participation in any negotiation with Carta Worldwide at any time.

[266] Sheridan has shown there is no genuine issue requiring a

trial with respect to the plaintiffs’ allegations against him. The

plaintiffs failed to satisfy the onus that fell upon them to provide

evidence of merit, or argument, to rebut that finding and establish

that their claims in this regard have a real chance of success. I

therefore grant summary judgment to the defendant, Sheridan, on

all of the foregoing aspects of the plaintiffs’ claims against him.

Conclusions concerning allegations against LeClair re: MOU

[267] With respect to above discussed allegations against LeClair,

the defendant LeClair has met the onus of showing the allegations

92

are without merit and there is no genuine issue requiring a trial.

[268] I find LeClair was not a public officer, Government

employee, or agent of the Government, and was not performing

any public function, at any time material to this action. Therefore,

he cannot be liable for misfeasance in public office.

[269] LeClair stated, and I accept, that he had no involvement

whatsoever with the MOU. He ceased being a government

employee on October 17, 2011, and the MOU was not even

contemplated until late June, 2012. LeClair’s testimony was that

he had never seen the MOU until reviewing it with his lawyer in

the course of defending against this action.

[270] Notwithstanding his lack of any such liability, he has also

provided evidence showing he did not approach any competitors of

the plaintiffs regarding any business opportunity contemplated by

the MOU, including specifically any financial services

corporations in Europe. Nor did he ever receive or use any

confidential information from 764 or CMT, including any clients

proprietary software, code specifications, SWIFT codes, technical

requirements, or other proprietary information belonging to 764 or

CMT.

[271] LeClair confirmed the meetings he and Laslop had with

Campbell, Paynter and Sheridan, were “general in nature”, “very

brief an introductory in nature”, and he stated, “no specific

business proposal was discussed.”

[272] LeClair was alleged to have negotiated with Carta

Worldwide, during the currency of the MOU, for the purpose of

having Carta provide the same services as 764. LeClair testified

he did not participate in any discussions with Carta at any time,

was never involved in any negotiations with Carta, and has no

knowledge of any such negotiations. His testimony was

unchallenged and uncontradicted by the plaintiffs.

[273] With LeClair showing these allegations of the plaintiffs to

be without merit and that they did not disclose any genuine issue

requiring a trial, the onus shifted to the plaintiffs to show those

claims have a real chance of success. The plaintiffs failed to

provide any evidence of merit to challenge or contradict the

evidence of LeClair, and have therefore failed to meet the onus

93

following upon them. I therefore grant summary judgment to the

defendant, LeClair, on all of the foregoing aspects of the plaintiffs’

claim against him.

[274] There are other allegations against LeClair which will be

dealt with in the context of the securities investigation.

Allegations against Mix - Attendance by Mix at SIBOS

conference, and related or similar activities

[275] The plaintiff 764 alleges Brad Mix, Senior Director of the

Prospecting and Innovation Program at Innovation PEI, breached

the MOU by attending a financial services conference, called the

SIBOS conference, in Osaka, Japan between October 29-31, 2012.

Specifically, they claim he arranged meetings, met with, and

recruited companies away from 764, and used proprietary

information that CMT and Simplex had shared with Innovation

PEI. The plaintiffs also allege Mix attended the World Gaming

Conference in London in 2012, using confidential information

while he was there. As was the case with Sheridan and LeClair,

they allege Mix negotiated with Carta Worldwide during the term

of the MOU for the purpose of having Carta provide the same

services that 764 was to provide under the MOU. (See paras. 187

(c), (d), (e), (h), and (t), and 192(c) and (d) of the claim).

[276] Mix responded to the allegations in his affidavit and during

his cross-examination denying all of the allegations and providing

additional and explanatory evidence when required.

[277] Mix stated that, contrary to the allegations, he never

received any proprietary software, code specifications, SWIFT

codes, technical requirements, or other proprietary information

belonging to 764 or CMT from Paul Jenkins. He further declared

he never used any confidential or other proprietary information for

the purpose of contacting clients of 764 or CMT or for the purpose

of recruiting clients to relocate to PEI. He denied having any

meetings with clients of 764 or writing to potential clients of 764

for the purpose of recruiting them away from 764.

[278] Overall, no evidence of merit was presented to the court to

show that either Innovation PEI who was a party to the MOU with

764, or any of its employees or any other Government agents or

employees, ever disclosed any confidential information received

94

pursuant to the MOU to any third party. We have only second

hand speculation and bald statements from the plaintiffs’ sole

witness.

[279] The goal of Innovation PEI is to attract investment and

recruit corporations to locate on Prince Edward Island. In the

ordinary course of business they deal with various corporations and

individuals involved in a broad range of businesses. They actively

recruit companies around the world and companies independently

approach them to discuss opportunities for which they might

receive assistance.

[280] With respect to attendance at the SIBOS conference, Mix

testified on cross-examination that he was invited to attend the

SIBOS conference by Philip Walsh, CEO of Simplex. He stated

that in a previous meeting with Walsh regarding Mix’s role in

attracting outside businesses to PEI, Walsh told him if he wished to

go to the next SIBOS conference, he could feel free to use Walsh’s

name as a reference. The exhibits attached to his affidavit

included an email exchange in May, 2012, with the organizers of

the SIBOS conference in which they asked Mix for the name of his

SWIFT contact person in order to gain approval from SWIFT for

his registration to be processed. (SWIFT is the Society for

Worldwide Interbank Financial Telecommunications). As offered

by Walsh, he provided them with Walsh’s name and telephone

number, following which Mix’s registration was approved.

[281] Mix used the services of HMC Global, a corporate

matchmaking service, for the purpose of arranging meetings for

Mix to introduce PEI as a near-shore location in North America for

business investment. Neither Mix or anyone else at Innovation

disclosed any information regarding CMT, 764, Maines or Walsh

to HMC Global when it was arranging meetings for Innovation.

[282] The MOU had fully expired on October 10, 2012. On

October 23, 2012, Jessop wrote to Dow acknowledging that 764

did not have the right to prevent Mix or the Province from meeting

with anyone, and stating they were not trying to prevent Mix from

doing his job, but felt it would be in everyone’s best interest for

them to have a discussion prior to him leaving for the SIBOS

conference.

[283] On October 24, 2012, in the week prior to the SIBOS

95

conference, Walsh emailed Mix saying:

Hi Brad,

It would be good to touch base whenever convenient, ideally sometime this

morning. I wanted us to align messages in relation to meetings you have at Sibos

next week. We’ve mentioned PEI and the prospect of it establishing a FSC to a

number of organisations including large banks and we might be able to help

refine your more direct message.

Let me know what works for you and I look forward to catching up.

Thanks, Philip

[284] Mix responded with his phone number and asked Walsh to

give him a call.

[285] During Mix’s meetings at SIBOS he introduced companies

to Innovation PEI and Prince Edward Island and discussed

opportunities and assistance available from the Government of

PEI. He declared that at no time did he speak of establishing a

financial services centre, nor did he use any confidential

information from Simplex, 764, or CMT in any manner for any

purpose.

[286] While there was no evidence of any specific confidential

information being used by Mix or anyone else, I note the slide

presentation 764 shared with Innovation in late 2012 was actually a

set of slides copyrighted by Simplex and identified as confidential

which had previously been in the possession of Paul Maines and

had been distributed by him to others in 2011 for the purpose of

soliciting investments. On cross-examination, Maines confirmed

that was the “core document” used by them, with some variations

as it was updated from time to time.

[287] Once again, it is important to note that the SIBOS

conference took place approximately three weeks after the

MOU expired for the second and final time.

[288] Mix also addressed the content of an email sent on October

15, 2012, from Simon Kalfon CEO of Sterci, to Walsh. Sterci was

a company associated with Simplex. Kaflon told Walsh he had

just received a meeting request to meet with a PEI representative

by the name of Brad Mix, who intends to promote PEI. Kaflon

asked for advice on how to respond. Walsh responded to Kaflon

96

saying it was ridiculous that PEI was randomly targeting

companies at SIBOS and suggesting they should walk away from

their relationship with PEI. No MOU was in place at this time.

Walsh also stated that Mix was “registered as a specialist in the

focus area of payments”, and that, “He probably has meetings with

CGI and Logica and other using the IP we’ve shared with him.”

[289] Mix testified on cross-examination that when he registered

he advised SIBOS that he was an “economic development officer”.

He did not register as a financial payments expert. He also

confirmed he did not meet with CGI or Logica and did not share

any “IP” with anybody.

[290] On October 15, 2012, Mix was advised by their

matchmaking consultant that they had arranged a meeting between

Mix and Kaflon of Sterci. Mix advised Paynter and asked if he

should decline the meeting. I note again that the email respecting a

future meeting was sent 5 days after the final expiration of the

MOU. Mix did meet with Kaflon at the SIBOS conference and

expressed in his travel summary that he felt Sterci had no interest

in following up on his invitation to invest in PEI.

[291] The plaintiffs also alleged that during the term of the MOU,

Mix dealt with Carta Worldwide, a data processing company, and

thereby breached the MOU.

[292] Mix declared in his affidavit that discussions with Carta

Worldwide began on June 10, 2013, after an introduction by a third

party, Dr. Joe Gabriele, CEO of Delivra, who does not otherwise

appear to be involved in any of these matters. The negotiations,

which occurred well after the expiration of the MOU, resulted in

Carta Worldwide opening a data centre at the Atlantic Technology

Centre in Charlottetown in 2014. Mix also declared that neither

LeClair or Sheridan had any involvement whatsoever in those

negotiations. Contrary to the plaintiffs’ allegations, Mix swore in

his affidavit that he never attended the World Gaming Conference

in London, England in January 2012.

[293] No additional evidence was presented by the plaintiffs to

challenge or contradict the direct testimony by Mix in his affidavit

or the first person testimony of Mix on cross-examination.

[294] Again, I note that Maines, who was the only source of

evidence for the plaintiffs, provided only second hand information.

97

He had no direct knowledge of Mix’s registration category at

SIBOS. He did not attend SIBOS. He did not attend the World

Gaming Conference in London in 2012. He was not a party to the

discussions between Mix and Walsh. He was not a party to the

discussions between Mix and Kaflon. He was not a party to any

negotiations with Carta Worldwide. The plaintiffs failed to provide

any witnesses with direct knowledge of those matters they allege in

their statement of claim. No evidence was presented to show what

confidential information had been disclosed by 764 pursuant to the

MOU, or what confidential information was allegedly disclosed by

Mix, or to whom. There was no evidence presented from Jessop,

Walsh, or Kaflon. However, McDonald expressed at the hearing

that he could have Jessop and Walsh and others testify at the trial.

As we have seen, i) the plaintiffs were obliged to provide such

evidence for the hearing on the motion, and ii) further evidence

would only be entertained if the summary judgment motion judge

could not reach a fair and just determination on the merits of the

case on the basis of the evidence presented on the motion.

Conclusions concerning allegations against Mix

[295] I accept the evidence of Mix that he attended the SIBOS

conference at the invitation of Walsh, and that he did not hold

himself out to be a financial services expert. I also accept his

evidence that his purpose was to introduce people to PEI and to

invite them to consider PEI as an opportunity for business

investment. I find there was no evidence presented showing he

disclosed any confidential information, or discussed any interest of

Innovation PEI or the Government in establishing a financial

services centre on PEI. Finally, once again, I note the SIBOS

conference was held weeks after the final expiration of the MOU.

[296] I find Mix did not attend the World Gaming Conference in

England in January 2012, and therefore did not meet with people

and disclose information as alleged.

[297] I accept Mix’s evidence regarding the negotiations with

Carta Worldwide which did not begin until June, 2013, 8 months

after the expiration of the MOU.

[298] The defendants have met the onus upon them of showing

that Mix did not use or disclose any proprietary or confidential

information of the plaintiffs, or of Simplex, gained through the

MOU or otherwise, or have any discussions prohibited by the

98

MOU, or improperly have discussions with or recruit any potential

clients of the plaintiffs. In doing so, the defendant Mix has shown

there is no genuine issue requiring a trial regarding the allegations

against him. With that, the onus shifted to the plaintiffs to show

through evidence or argument that their claims against Mix have a

real chance of success. The plaintiffs have failed to satisfy that

onus.

[299] At the hearing there was discussion regarding the full

disclosure of emails sent or received by Mix. That issue is

addressed later in this decision, in conjunction with the plaintiffs’

claim of spoliation. I therefore grant summary judgment to the

defendant, Mix, with respect to all of the foregoing aspects of the

plaintiffs’ claims against him.

Allegations against Paynter

[300] The plaintiffs make two specific allegations against

Paynter, one of which relates to their claim the Government

breached its contract with 764, and the other which relates to

allegations of misfeasance in public office against Paynter.

1. Re: Breach of contract by Paynter

[301] With respect to breach of contract by the Government, at

paragraph 187(g) of the amended statement of claim the plaintiffs

state, “Paynter had knowledge that Sheridan and LeClair were

proposing another supplier in violation of the MOU, but took no

steps to stop their conduct and withheld this information from the

representatives of 7645686.”

[302] The plaintiffs’ reference at paragraph 187(g) of their claim

is to Paynter’s introductory meeting with Laslop on August 29,

2012, which was referred to above, at paras. 233-234.

[303] In her affidavit, Paynter described the meeting as

introductory and general in nature, and confirmed that no

confidential information whatsoever was divulged. Immediately

following the meeting she emailed Mix and stated her conversation

with Laslop was “very high level and general in nature.” That was

her one and only meeting with Laslop.

[304] She also expressed in her email to Mix that she was not

going to send any financial service sector prospecting information

99

to Laslop until later in the following week at which time the MOU

would expire.

[305] When asked on cross-examination what she did with

Laslop’s proposal received on September 6, 2012, she stated she

“did nothing with this proposal.” She pointed out it was not

addressed to her and was not hers “to action”. McDonald then

stated that when he looked at the “proposal”, “ I just see this letter

of introduction. I don’t see it as having any depth”. ... “You know,

I hardly see it as a proposal.” Paynter responded, “I agree.” No

further information was ever received from Laslop.

[306] I am satisfied that the evidence of Paynter’s interaction with

Laslop does not demonstrate any breach of any of the terms of the

MOU. With respect to this aspect of the plaintiffs’ claim, the

defendant has demonstrated there is no evidence of merit showing

there is any genuine issue requiring a trial. The plaintiffs have

failed to show these allegations regarding Paynter would have a

real chance of success at trial.

2. The “ask”

[307] The plaintiffs imply bad faith on the part of Paynter in

connection with the so-called suspension of the MOU. The

plaintiffs claim that Innovation suspended the MOU for the

purpose of dealing with another company. This is addressed in the

section referring to the “The extension of the MOU”, at para. 407

of this decision.

[308] Paynter was frustrated with the lack of information coming

from 764, as is shown in the next several paragraphs. Cutcliffe, the

consultant for 764, was aware of the lack of specific information

being put before the province and was also frustrated with her own

client’s progress.

[309] On August 10, 2012, over one month after the 60 day MOU

had started, Paynter had a video conference with Walsh of

Simplex. With the exception of one earlier discussion about 764's

ideas, this was the first information provided to Innovation

regarding 764's proposal. During the video conference, Walsh

referred to a slideshow, which had not previously been given to

Innovation, and discussed preliminary thoughts about what

“might” be possible and what “might” be required of the province.

100

[310] The following exchange between McDonald and Paynter

occurred during cross-examination:

Q.

... I have seen references where you’re saying, you know, “We have got

to be more specific on the ask, or we don’t have an ask.” You know,

would this be what you’re referring to as an ask? It’s entitled “TBT asks

of the province”.

...

A.

This presentation was put in front of us during the video call, not

before. So these random notes you see of mine were me trying to

reabsorb as the call was happening.

...

And certainly this would have been the second meeting of any

substance, but I would not consider this a refined ask by any stretch.

[311] And at a later point in the cross-examination:

Q.

You know, despite all the plans that were ... or some of the plans that

were put to you ...

A.

There were slide decks and presentations. There was no refined

business plan.

[312] Maines himself acknowledged that 764 had not provided

the necessary information to Innovation. In an email sent on

August 14, 2012, to Walsh and Wright, with a subject line of

“Follow Up ‘The Ask’ ”, Maines stated:

We need to narrow and articulate the immediate ask. ...

...

If this is correct, it would expedite things if this partnership could be articulated

and presented to the folks in IAL, perhaps in the form of a “partnership

agreement” or “memorandum of cooperation”. The subsequent phases don’t

necessarily need to be fully articulated at this stage but if my read on things for

the immediate need/ask is accurate, I would suggest that we need to provide

them with a document to respond to [sic] will help close.

...

We need to hammer this down ... please let me know a convenient time we can

try [sic] do a quick call and slot a time to hammer this out. (Emphasis added)

101

[313] On September 6, 2012, Paynter emailed MacEachern, with

a copy to Mix, stating:

Our 60 day MOU with Simplex/Trinity Bay comes to a conclusion today.

(signed July 6). Brad has reached out to Tracey as recent as early last week.

Sounds like they are still struggling to formulate the “ask”. Tracey did

suggest perhaps they would be looking for an extension on exclusivity. No

documents or ask have followed. Because there are so many involved in this file,

I wanted to make you aware and ask for any concerns or feedback.

Our last video conference was miles ahead of our dinner with them, but

miles away from an ask or a solid business plan.

I got a last minute call from Chris Leclair before I went away asking to meet a

client. Again, sounds like some former dealings on the gaming file. Client is

investigating setting up payment processing presence on PEI. I was

non-committal and it was a general info meeting. Chris also had a meeting

secured with Minister Sheridan. I will circulate the electronic communication

received today that I was CC’d on. I bring this up because, although MOU is

not really binding and the financial services center is not defined, I do not

want to run in contravention of that. Also something to think of if there is a

request to extent [sic].

... (Emphasis added)

[314] This email confirms 764 still had not provided a proper

business plan in Paynter’s view. It also confirms that Paynter was

intent on respecting the terms of the MOU, notwithstanding it

actually expired two days prior to this email being sent, and even if

Paynter did not consider it really to be binding at any rate. Paynter

expressed on cross-examination that she did realize she was

required to respect the terms of the MOU set out in sections 4, 6, 7,

and 8.

[315] The email prompted Mix to ask for a copy of the MOU.

Paynter responded, “Sure. I need to get some direction here. This is

silly”. Mix responded, “Silly was not the word I was using last

night but let’s go with that.”

[316] An email exchange between Paynter and Mix signals the

frustration Paynter was feeling with respect to the lack of progress

on the file.

Paynter: Heard Simplex/Trinity Bay folks are I [sic] town next couple of days.

Do we have any meetings with them or know what they are up

to?

102

Mix:

I have no meetings with them and have not been contacted by

them.

Paynter: Arggghh.

Mix:

Should we be calling them asking them what are their next

steps.

Paynter: I [sic] rather build a case to walk after this extension, but yes I suppose

we should.

Mix:

Reached his EA, Philip is in NYC today, intending to be in

PEI tonight or tomorrow, I asked him to call me.

Paynter: This file is actually making me crazy.

Mix: I think it will get a lot worse. When I spoke to my contact in

London, he mentioned one of Philips’ friends. Nancy did some

research on him and the company called One Signature (a past

investor in Simplex) and the background is not good.

[317] Again on cross-examination of Paynter, McDonald asked:

Q.

So my question to you, Ms. Paynter, is what case were you going to

build after the extension?

A.

What you’re seeing here is my frustration of learning these folks were

in town and no outreach to us, who they are supposed to be developing

a business case with. So yes, I’m pretty frustrated that I’m not getting

any information.

...

Q.

Do you have any knowledge related to whether HSBC was going to be

involved with Holland College and were in town that day?

A.

Exactly my point. I had no knowledge of any conversations with

Holland College.

Q.

A.

Right.

All happening outside of the relationship supposed to be happening

with Innovation PEI.

...

Q.

...So it appears that, you know, it’s almost like there is a plot against

Simplex and Walsh and Wright and Maines to make sure this thing

doesn’t happen, period, and Mix is somehow making up that

103

information. Would that be a wrong assumption on my part?

A.

From my vantage point, a very wrong assumption.

[318] At the hearing, plaintiffs’ counsel referred to an

introductory document, identified as “Premier’s Briefing Notes”, as

an example of the information provided by 764. This introductory

document was prepared when Simplex was in the exploratory

stages of the e-gaming project in 2011. Plaintiffs’ counsel argued

these notes showed the quality of clientele who relied on Simplex

and another company called Sterci for electronic transaction

management. He stated that over 240 banks, financial institutions

and corporate customers enjoyed “seamlessly integrated

technology” in continents around the world. He then made

reference to the fact that in connection with the MOU various

defendants repeatedly complained that 764 had not provided

Innovation PEI with “the ask” they wanted from government.

Plaintiffs’ counsel stated that this information, showing that

Simplex and Sterci had clients such as HSBC, Royal Bank of

Scotland and other large banking corporations demonstrated their

abilities.

[319] However, plaintiffs’ counsel is mixing apples and oranges.

The introductory

document to which he referred was prepared in May 2011, almost

14 months before any MOU was ever contemplated. Simplex was

not involved in the MOU. Simplex was not being pressed to tell

Innovation PEI what their “ask” was under the MOU. It was only

764 who had contracted with Innovation PEI. 764 was being

pressed to present its business plan and outline what it was

requesting from the province in terms of support to develop

business on Prince Edward Island. Even if 764 had been extolling

the virtues of Simplex in August 2012 during the currency of the

MOU, that does not constitute the provision of a business plan, or

the ‘ask” outlining what 764's expectations from the province

were.

[320] Further, there was no evidence these notes referring to

Simplex’s clientele (not 764's) were ever given to anyone in

Government in 2011, or in 2012, or at any time, let alone being

given to Paynter or others in fulfillment of a request for 764 to

identify the “ask” of the province pursuant to the MOU.

[321] I accept the evidence of Paynter when she expresses her

104

frustration at the failure of 764 to provide a proper business plan or

even to arrange to meet Innovation when they were on PEI. The

expression of frustration by Paynter and the undertaking of due

diligence by Mix do not constitute any part of a “plot” against

Simplex, Walsh, Wright, Maines, or anyone else.

[322] Even after the MOU expired, Paynter continued to work

with 764 in an effort to have them firm up their proposal and

provide a business plan so the matter could be advanced. Paynter

attended a meeting on October 18, 2012, with Mix, MacLean, and

Campbell. At that meeting, MacLean stated there was no harm in

Innovation continuing discussions with 764. On November 1,

2012, Jessop emailed Paynter asking if negotiations could continue

although he acknowledged the signing of any final agreement

would likely require the completion of the securities investigation.

Paynter responded favourably, suggesting that in advance of their

next meeting it would be helpful if he provided her with a

“Business plan that clearly articulates what a PEI presence looks

like”, together with other specific information such as estimated

job numbers, skill sets required, physical infrastructure needs,

recruiting/immigration assistance required, etc. Her final requested

Jessop was for him to provide the, “Ask of the province”.

[323] On November 16, 2012, Jessop wrote to Paynter stating

they were “in the final stages of putting this package of information

together and I want to make sure that it provides to you the

information that you are requesting in a complete and, more

importantly, a clear manner. We are targeting on delivering our

information package to you sometime next week.”

[324] On November 19, 2012 Paynter emailed Jessop stating, “I

am looking forward to having something concrete to consider and

discuss. As you know, our past discussions have been somewhat at

the 10,000 ft level with little specifics being provided. We need

these specifics to move forward in any meaningful fashion.”

[325] Jessop replied expressing that he wished to provide all of

the information requested and he asked if there was any particular

format required.

[326] On November 21, 2012, Paynter advised Jessop as follows:

Hi Gary

105

Thanks for your inquiry. We are much more concerned about the specifics of the

information provided rather than the format. Basically what we need to see is the

succinct business case ..... What the business is or hopes to be, who the

customers are, who the competitors are, what business lines are targeted for PEI,

what human resources are required, (numbers/salary levels) how these are

intended to be filled (immigration, local labour pool), what specific skill sets you

are in need of, physical location preferences and requirements, who Trinity Bay

is (ownership), financing model demonstrating all of the above, and of course the

ask of the PEI government. I do not need a glossy document but we do need to

move past the 10,000 foot level discussions that have us spinning our wheels and

move towards a more focused approach. My intent here is to drive to a solid

starting point for discussions between our two organizations. ...

If your submission answers those questions, we will succeed at getting a solid

discussion paper.

[327] Paynter’s affidavit confirms no further business information

was ever received by Innovation PEI from Jessop or any other

representative of TBT/ 764. She also confirmed in her affidavit

that she did not hear of the rumour about a “lady with cancer” until

she read documents related to this law suit. Her evidence was not

contradicted or challenged by the plaintiffs in any way. I devote a

section later in this decision, starting at para. 516, to the rumour

about a lady with cancer.

Conclusions concerning allegations of breach of contract

against Paynter

[328] The allegation that Paynter used information she allegedly

wrongfully obtained from MacLean and Campbell (and I add,

LeClair) with respect to the securities investigation to suspend the

implementation of the MOU is unfounded. There is no evidence of

such information being received from the other named defendants

and there is no evidence of the investigation having any impact on

Paynter’s interactions with 764. She was appropriately seeking the

detailed business plan information Innovation required in order to

assess 764's proposal. Notwithstanding her frustration, she

continued to deal with 764 in a businesslike manner. The only

impact the securities investigation had with respect to the MOU

was the appropriate reaction expressed by Dow, and later by

MacLean, and concurred in by Jessop, that no final agreement

could be concluded until the investigation was completed.

Allegations of misfeasance in public office against Paynter

[329] With respect to claims of misfeasance in public office

106

against Paynter, at paragraph 196(m) of the amended statement of

claim the plaintiffs state:

(m) Paynter used the information that she had wrongfully obtained from McLean

[sic] and Campbell and wrongfully used this information as a reason to suspend

the implementation of the MOU.

[330] The information she is alleged to have obtained from

MacLean and Campbell refers to information they allegedly

obtained from Dowling in connection with the securities

investigation and passed on to Paynter and others. (See paras. 196

(e) and (h) of the amended statement of claim). I note as well there

is an allegation at para. 196 (k) that LeClair also obtained such

information from Dowling and is alleged to have shared it with

Paynter and others.

[331] In Ms. Paynter’s affidavit she states that on October 3,

2012, she was contacted by Dowling with respect to an

investigation underway regarding Maines, CMT and TBT (764).

Dowling asked Paynter questions. He did not provide any details or

information regarding the investigation. Paynter stated she did not

receive any further information from Dowling regarding the

investigation until she saw a media release published by the Office

of the Superintendent of Securities on or about February 15, 2013.

[332] Paynter further stated:

No information gathered or obtained during the investigation by the Office of the

Superintendent of Securities was ever shared or given to me by Mr. MacLean,

Mr. Campbell, Mr. LeClair, or any other person in the Government of Prince

Edward Island.

I never received any instructions or other directions whatsoever from Mr.

Dowling, Mr. MacLean, Mr. Campbell, Mr. LeClair, Ms. MacEachern, Mr.

Dow, or any other person inside or outside the Government of Prince Edward

Island to refrain from taking further steps in relation to the MOU.

[333] Paynter stated that she never met Maines, and had never

had any dealings with him or CMT. Maines stated in

cross-examination that he met Paynter on two occasions. He

indicated that after “MOU meetings” at the Rodd Hotel, which he

did not attend, there were, on two occasions, informal

get-togethers, where he was present. He recalls Paynter sitting at

the same table he was sitting at. I accept that Paynter and Maines

may have met in such a fashion, but I accept as well that they never

107

met in any significant fashion and that she never had any dealings

with Maines or CMT.

[334] Paynter stated she never contacted anyone with whom TBT

had a relationship nor did she misuse any information received

from TBT. She neither took nor failed to take any actions for the

purpose of harming TBT. She stated, “At the end of the day, TBT

did not provide Innovation PEI with any specific business plan or

make any specific request for assistance from Innovation PEI.”

On cross-examination she confirmed the statements given in her

affidavit. Her evidence was not challenged or contradicted by the

plaintiffs.

Conclusion concerning allegations of misfeasance against

Paynter

[335] I am satisfied with respect to each of the allegations against

Paynter that the defendant has demonstrated by appropriate

evidence that the plaintiffs’ allegations of misfeasance in public

office against her are without merit and there is no genuine issue

requiring a trial. The plaintiffs have failed to provide evidence or

argument to demonstrate that their claims would have a real chance

of success. I therefore grant summary judgment to the defendant

Paynter on all aspects of the plaintiffs’ claims against her.

Allegations against various defendants regarding the securities

investigation and its impact on the MOU

[336] At paras. 187(e) to (k), and throughout para. 196 of the

amended statement of claim, the plaintiffs make allegations

regarding the conduct of various defendants with respect to the

securities investigation and the impact it was allegedly intended to

have on the MOU. Paragraph 187 of the statement of claim falls

under the heading “BREACH OF CONTRACT BY

GOVERNMENT OF PRINCE EDWARD ISLAND.” Paragraph

196, which contains very similar allegations, is under the heading,

“MISFEASANCE IN PUBLIC OFFICE OF GOVERNMENT

AGENTS”. As the claims are intermingled, it is difficult to

isolate the relevant evidence as it relates to one claim or the other.

I will therefore address the evidence as it relates to all of the listed

allegations. I will deal firstly with the allegations set out in

paragraph 187, under the Breach of Contract heading.

[337] The claims at paras. 187 (I), (l), (m), (n), (o), (p), and (s),

108

relate to one or more of LeClair, MacLean, Campbell, and

MacEachern.

1. LeClair and MacLean

[338] Essentially, the allegations are that LeClair and MacLean

initiated an investigation of 764 by the Superintendent of Securities

when they knew there was no evidence that 764 had violated the

Securities Act. It is alleged that Campbell, in conjunction with

LeClair and MacLean encouraged the Superintendent to bring

proceedings under the Securities Act for the purpose of providing

Innovation PEI with an excuse to refrain from fulfilling the MOU.

While Campbell allegedly assured 764 that the securities

investigation would have no effect on the implementation of the

MOU, MacEachern allegedly prevented Innovation from

completing the MOU even after the Superintendent has determined

that 764 did not engage in any wrongdoing under the Securities

Act.

[339] MacLean is also alleged to have improperly obtained

information from Dowling regarding the securities investigation.

He is then alleged to have shared it with Paynter, Mix, Dow, and

MacEachern. MacLean and Campbell are alleged to have refused

to provide 764 with a release from the exclusivity and

confidentiality provisions in the MOU in order to prevent 764 from

negotiating with other jurisdictions.

[340] In LeClair’s affidavit he flatly denied that he has ever

initiated any process of any kind at the Office of the

Superintendent of Securities, or has ever encouraged, counselled,

recommended, or otherwise suggested that the Superintendent

initiate any process of any kind. He also stated he never received

any information from Dowling arising from any investigation in

the Superintendent’s office; therefore, he never shared any such

information.

[341] MacLean’s affidavit made the same statements as

LeClair’s, but went on to discuss MacLean’s role as Clerk of

Executive Council. He stated that as such, he was generally aware

that the Office of the Superintendent of Securities was conducting

an investigation regarding investments in CMT and possibly other

companies. He stated that information was also known by the

responsible Deputy Minister, Ms. Sullivan Curley. MacLean

further stated that he did not share any information regarding the

109

investigation with any person for the purpose of discrediting

Maines, CMT or TBT, nor did he do anything for the purpose of

injuring, harming, or otherwise interfering with the businesses of

Maines, CMT or TBT.

[342] He also stated that he never suspended the MOU or gave

instructions or direction to Paynter, Mix or any other person in the

Government of Prince Edward Island, to refrain from taking further

steps in relation to the MOU with TBT or 764. In fact, on

November 1, 2012, he emailed Paynter expressing he had no

concerns about Innovation continuing discussions with TBT, and

that he was confident that she and Mix would work in a

professional manner with TBT. He confirmed as well that he was

never asked to and never refused to release TBT from the MOU.

[343] MacLean also stated that he was never in possession of any

complaint filed with the Office of the Superintendent of Securities

in PEI.

2. Campbell

[344] Similarly, Campbell stated he never initiated any process of

any kind at the Office of the Superintendent of Securities, nor did

he ever encourage, counsel, recommend or otherwise suggest the

Superintendent initiate any kind of process. He stated no

information gathered or obtained during the investigation by the

Office of the Superintendent of Securities, or arising from the

investigation, was ever shared or given to him, or by him, to any

person inside or outside the Government of Prince Edward Island.

[345] Campbell confirmed that he did attend a meeting with

MacLean, Evans, Jessop, and Sameet Kinade on October 17,

2012. Gary Wright participated in that meeting by telephone.

Each of Evans, Jessop, Kinade, and Wright, stated they were

representatives on behalf of TBT. None stated they were

representatives of CMT or Maines. Ghiz did not attend the

meeting. At the meeting, Evans and Jessop acknowledged the

MOU had expired and Jessop acknowledged TBT never got around

to renewing it. MacLean stated there were a number of structures

in place that would allow TBT to have discussions with Innovation

and which would allow the securities investigation to run its

course.

[346] No request for any extension of the MOU was ever made to

110

Campbell or refused by him. On October 18, 2012 Campbell

attended a meeting with MacLean, Paynter and, Mix at which

MacLean stated there was no harm in Innovation continuing to talk

to TBT .Paynter stated she would keep MacLean and Campbell

updated.

[347] In his affidavit, Campbell states he never told anyone there

was a conspiracy to discredit Maines, CMT, or TBT, nor did he tell

Evans that an investigation by the Superintendent of Securities

would be commenced against any person or company. Further he

stated Evans never requested any release of any kind from the

MOU, and Campbell never refused to provide any release from any

MOU at any time. Finally, Campbell stated he never suspended

the MOU at any time and never gave any instruction or direction to

Paynter, Mix, or any other person in government to refrain from

taking steps in relation to the MOU.

3. MacEachern

[348] The plaintiffs allege MacEachern prevented Innovation

from completing the MOU even after the Superintendent had

determined 764 did not engage in any wrongdoing under the

Securities Act.

[349] They also allege she enabled a competitor of the plaintiffs

to obtain the business opportunity contemplated by the MOU. (See

para. 196(v) of the claim).

[350] Regarding the allegations, MacEachern stated that she

never gave any instruction or direction to Dow, Paynter, Mix, or

any other person at Innovation PEI to not complete the MOU, nor

did she receive any instruction or direction from any person inside

or outside of Government to refrain from taking further steps in

relation to the MOU. She also stated she never approached or

enabled in any way any competitor of CMT or 764 or TBT, or any

other person or company, to obtain any business opportunity

contemplated by the MOU.

[351] Further, she stated that no information arising from the

investigation by the Superintendent of Securities was ever shared

or given to her by Dowling. Therefore, she did not share any such

information with any other person or company.

[352] MacEachern stated on cross-examination that MacLean

111

advised her that someone had complained about the company with

whom Innovation had an MOU, and there was an issue involving

her former spouse. For that reason, she was no longer engaged on

that file after September, 2012.

[353] MacLean confirmed in his affidavit that, as Clerk of

Executive Council, he informed MacEachern of the complaint

potentially involving 764, and that it also involved a potential

securities violation by her ex-husband. He stated that for that

reason he asked her to step aside and pass over responsibility for

the file to Paynter, who was managing the file in the first instance

in any event.

[354] As will be seen in the section dealing specifically with the

securities investigation, it was commenced in relation to activities

by Maines, and included activities of companies or business names

Maines may have been associated with, namely CMT, 764, TBT,

and FMT. The investigation was not finalized until a Settlement

Agreement and Agreed Statement of Facts were executed as of

June 5, 2013. That was the date by which it was determined, by

Settlement Agreement, that 764 was not held responsible for any

wrongdoing under the Securities Act. However, the MOU expired

on October 10, 2012, and was not renewed thereafter. It was

therefore impossible for MacEachern, or anyone else, to prevent

the MOU from being completed after June 5, 2013, when it expired

eight months earlier.

Conclusions re: allegations against LeClair, MacLean,

Campbell, and

MacEachern regarding the securities investigation and its

impact on the MOU

[355] No evidence was presented by the plaintiffs to challenge or

contradict the direct testimony and evidence given on

cross-examination by LeClair, Maclean, Campbell, or

MacEachern. Specifically, there was no evidence that LeClair or

MacLean initiated an investigation of 764 by the Superintendent of

Securities or that LeClair or MacLean or Campbell encouraged the

Superintendent to bring proceedings under the Securities Act or in

any way use the securities investigation to suspend the MOU.

Campbell neither received nor shared information with respect to

the securities investigation with anyone, including that the

securities investigation would have no effect on the

implementation of the MOU. Neither Campbell nor MacLean

112

were ever asked to release 764 from the MOU, or ever refused to

do so. No information MacLean received from Dowling on the

securities investigation was ever shared inappropriately with

Paynter, Mix, Dow or MacEachern.

[356] LeClair, Maclean, Campbell, and MacEachern have each

shown the plaintiffs’ claims against them are without merit and

there are no genuine issues requiring a trial. They have thereby

discharged the onus on them in this summary judgment motion.

As a result, the onus shifted to the plaintiffs to demonstrate by

evidence or argument that their claims have a real chance of

success. The plaintiffs have failed to present any evidence of

merit, or argument, showing that to be the case. I therefore grant

summary judgment to the defendants LeClair, MacLean, Campbell

and MacEachern, with respect to the plaintiffs’ claims against

them.

Loyalty Card Program

[357] The issue of a loyalty card program is frequently referred to

in Maines’ affidavits, and is referenced in the amended statement

of claim. The statements in the affidavits focus primarily on

MacEachern’s involvement in the project, so I will address it here,

in conjunction with other issues relating to MacEachern.

[358] The plaintiffs presented evidence confirming that in

November 2011, Tourism PEI was discussing a rewards based

loyalty program where members would be given an identification

card that would entitle the user to exclusive member benefits at

participating properties. The Department of Tourism and Culture

sent out an email to various operators in order to receive feedback

on the level of interest in such a program. One sentence in that

email stated:

...By using the technical platform connected to the Loyalty Program, we will be

able to capture tourism expenditures and consumer data that can be used for

future marketing initiatives.

[359] Plaintiffs’ counsel advised that the technology that was

intended to be used for the program belonged to Simplex. An email

message from Philip Walsh to Melissa MacEachern on September

26, 2011 confirms that. Plaintiffs’ counsel also contends the

loyalty card program was a “Maines initiative”. McDonald

(plaintiffs’ counsel) referred the court to Walsh’s email for support.

113

[360] In that email, Walsh provides his “initial thoughts” on

Simplex’s ability and timeline to create such a program for

Tourism PEI. He expressed he had no “single best route to

launching the card at the moment” and proposed a budget of

$50,000 to cover the cost of developing the program in London,

England, through Simplex. There was no discussion or mention

whatsoever in the email of either Paul Maines or CMT.

[361] Exhibit 61 to Maines’ affidavit of November, 2017, is a

copy of the affidavit signed by Gary Jessop on March 1, 2013 in

connection with the Securities Act investigation against Maines,

CMT and 764. On cross-examination on his own affidavits,

Maines adopted the statements in Jessop’s affidavit and expressed

that he was relying on those statements as his evidence. Paragraphs

12 and 13 of Jessop’s affidavit confirm that it was Simplex who

developed the “transaction platform report” for McInnes Cooper

(MC). Further, paragraph 21 of that same affidavit confirms that

Simplex was the company involved in the development of a loyalty

program for the Department of Tourism and Culture. Neither

CMT, 764, or Maines were mentioned as being involved in those

contracts.

[362] MacEachern, as Deputy Minister of the Department of

Tourism and Culture in 2011, was involved in discussions relating

to a loyalty card program. In cross-examining MacEachern on her

affidavit, McDonald asked MacEachern why there was no

reference in her affidavit to the loyalty card program. MacEachern

responded, “My understanding was that the loyalty card was

between Simplex and Tourism PEI, so I think that is why we were

silent on it.” Again, Simplex is not a party to this action. CMT

owns a limited number of shares in Simplex, but CMT is not

Simplex.

[363] MacEachern and Maines did have a discussion about such a

program. In the course of the conversation MacEachern

concluded that Simplex may have the technology to create such a

program. Following that conversation, MacEachern met with

Walsh of Simplex, and Interworks Inc., which was the company

that provided a search engine to Tourism PEI, to explore the

concept. Simplex and the Department of Tourism and Culture

entered into the contract referred to above.

[364] Maines also stated in his affidavit of January 2019 at

114

paragraph 42, the following:

May 20, 2011

Based on information and belief, Dow worked with

MacEachern on creating the Loyalty Card Program and

requested means to arrange to have Simplex executives

returned to PEI to continue dialogue on the Loyalty Card

Program: info and belief

[365] The statement in Maines’ affidavit is typical of many of his

statements. There is a reference to “information and belief” but

there is no source of that information and no express statement that

the deponent believes that statement. There is no explanation with

respect to the specific date referred to (May 20, 2011) and what it’s

relevance is, and there is no indication whether the information

relied upon comes from an email, a conversation or arises in some

other manner. Given that, the statement is simply inadmissible

hearsay.

[366] Notwithstanding that, Dow was asked about it on

cross-examination. He stated unequivocally that he had never

worked with MacEachern on creating a loyalty card program and

he had never requested Maines to arrange to have Simplex

executives returned to PEI to continue dialogue on such a program.

Dow was then shown the “announcement”, being the email the

Department sent out to gauge interest in such a program, and

declared he had never seen it before.

[367] The plaintiffs’ amended statement of claim, at paragraph

93, states that MacEachern “...engaged CMT and Simplex to adapt

the Simplex Global Transaction Platform to support a Loyalty/VIP

payment program for PEI Tourism.” Further it states, at paragraph

94, that “CMT and Simplex spent approximately 3 months meeting

with MacEachern and William Dow, ... to develop the Loyalty/VIP

program”.

[368] Those statements were completely contradicted by the

cross-examination testimony of Dow and MacEachern. Their

evidence remains unchallenged and uncontradicted on those points.

[369] I note as well that the itemized claims set out in the

amended statement of claim make only one passing reference to

the Loyalty Card Program, being at paragraph 196(w), where it

states:

Manago, while managing the Loyalty Card Program for Innovation PEI,

115

unlawfully required Simplex to invoice its services through Internetworks Inc. to

disguise the fact that the work contemplated to be carried out by the

plaintiffs under the MOU was being carried out by the plaintiffs’ strategic

partner; (Emphasis added)

[370] To be blunt, this is another nonsensical statement. The

work done with respect to the loyalty card program was done and

completed by Simplex alone, as confirmed in the plaintiffs’ own

evidence, at paragraph 21 of the previously mentioned affidavit of

Jessop. The invoices in connection with the loyalty card program

appear as Simplex invoice numbers 2742 and 2784, dated

December 1, 2011 and December 31, 2011 respectively.

MacEachern explained the basis for the Department of Tourism

and Culture’s interest in considering such a program during her

cross-examination by McDonald. MacEachern also explained the

involvement of Internetworks:

A.

Well, we didn’t create a loyalty program. The intent was to create one.

That would be the goal. So, again, this loyalty card program was a

concept. Like any other loyalty program, government’s interest looking

for a tourism destination, to be able to track consumer behaviour would

be a significant competitive move. We would have a lot of market

intelligence that other jurisdictions wouldn’t have. So that was really

the goal behind it and the thinking behind it. The question was, could

we technically implement and do this. And that was really what the

question before Simplex and Tourism PEI was, is to see if we could do

that.

[371] MacEachern referred to a meeting early on in the process

involving her, Walsh, and Internetworks “to kick-start it off to get

them, you know, figuring out what it would take, out of the box, so

to speak. And then my staff would have worked on it after that.”

Q.

Now, InternetWorks, why did you decide to involve them in the

project?

A.

InternetWorks owns our booking engine system. It is not a government

system. It belongs to InternetWorks. So, all of the technical backbone in

Tourism is owned by them and controlled by them so we can’t touch ...

we couldn’t touch that system without them involved.

...

And they would do all of the coding and programming and changes.

[372] Once again, the plaintiffs jumped to speculation and

fabrication to present an allegation that raises suspicion without

116

any factual basis. The loyalty card program exploration started

around May, 2011. The only invoices on that project were sent out

by the end of 2011. No MOU was even contemplated until late

June 2012, and it did not relate in any way shape or form to any

loyalty card program. Yet the plaintiffs do not hesitate to imagine

deception even when common sense confirms there could be none.

Throughout the amended statement of claim, the plaintiffs strain to

connect unrelated facts, dates, people, and events, resulting in

allegations which, at first glance, sound plausible. However, after

some basic examination and assessment of those claims, it

becomes evident they are without merit.

[373] While Maines may have been an instigator in getting

Simplex and the Department of Tourism and Culture into

discussions about a loyalty program, the contract with respect to

that project was strictly between Simplex and the Department.

Similarly, there were references to an individual named Eddie

Francis in the additional materials filed by the plaintiffs at the

commencement of the hearing. The documents show that he was

actively involved in email discussions with Tara Jackson of

Tourism PEI in refining details of the proposed program. That does

not change the fact that the plaintiff corporations CMT and 764

were not parties to the contract under which that work was

undertaken.

[374] Despite all of the discussion about the loyalty card

program, there was no specific claim of loss with respect to it in

the amended statement of claim. Further, during the course of the

hearing, McDonald acknowledged, on behalf of the plaintiffs, that

only Simplex can sue for damage done to Simplex.

Allegations of misfeasance against Dow and Cutcliffe

[375] The plaintiffs’ action against the defendants Dow and

Cutcliffe relate only to the intentional tort of misfeasance in public

office. Summarizing the elements of misfeasance in public office

outlined earlier, the plaintiffs must prove there was deliberate,

unlawful conduct by each defendant in the exercise of a public

office with the officer being aware that such conduct was unlawful

and was likely to injure the plaintiff. The wrongdoer must be a

public officer and the unlawful conduct must be in the exercise of

the wrongdoer’s public office.

[376] Dow is a lawyer in private practice who represented

117

Innovation PEI as one of his clients. Cutcliffe is a lawyer and

private consultant who was retained as a consultant by the plaintiff

764 in connection with the MOU.

[377] The plaintiffs claim that Dow’s misfeasance occurred by

him, allegedly acting as a public officer, in two ways. First, he

unlawfully received information regarding the securities

investigation. Second, for the purpose of discrediting the

plaintiffs at a meeting with the plaintiffs’ potential clients, HSBC

and Holland College, he disclosed that information and other

information he received directly from the plaintiffs. The only other

allegation concerning Dow was with respect to the Loyalty Card

Program, of which Dow has denied any knowledge.

[378] The plaintiffs claim that Cutcliffe’s misfeasance occurred

when she, in the exercise of her alleged public function, allegedly

received and disclosed confidential information concerning the

securities investigation.

[379] First, Dow and Cutcliffe each maintain they were not

“Government Agents” performing a public function as alleged by

the plaintiffs, nor were they public officials of any kind.

[380] Second, even if the tort of misfeasance in public office

somehow extended to private individuals, Dow and Cutcliffe

maintain they never engaged in any conduct designed or likely to

harm the plaintiffs, whether intentionally or otherwise, and that the

plaintiffs have not provided any evidence showing that the

defendants engaged in such conduct.

1. Issues on the Dow and Cutcliffe motions

[381] The overriding issue is whether the plaintiffs have raised a

genuine issue requiring a trial with respect to their claims against

Dow and Cutcliffe. The more specific issues to be determined

with respect to these two defendants are:

a)

b)

Are the defendants public officers?

If so, did the defendants act unlawfully in the

exercise of a public office?

c)

If so, did the defendants act unlawfully with the

intention of causing harm to the plaintiffs?

118

[382] If the answer to any of those three questions is “No”, then

the action against these defendants must be dismissed.

a) Are Dow and Cutcliffe public officers?

[383] At all times material to this lawsuit, neither Dow or

Cutcliffe were public servants in any ordinary sense of the word.

Their positions as private professionals were different than those of

many of the other defendants, including for example MacLean,

Campbell, Mix, Paynter, Dowling, MacEachern, and Stewart. They

were not part of the public service.

[384] In an effort to have Dow and Cutcliffe categorized as public

officers or Government “agents”, the plaintiffs rely on certain

provisions of the Crown Proceedings Act, R.S.P.E.I. 1988, Cap.

C-32, including ss. 1, 4(1), and 4(2) :

1.

Definitions

In this Act

(a)

(b)

(c)

“agent”, when used in relation to the Crown, includes an

independent contractor employed by the Crown;

“Crown” means Her Majesty the Queen in right of the

province of Prince Edward Island;

“officer”, in relation to the Crown, includes a minister of the

Crown and any servant of the Crown;

...

4.

Liability of Crown

(1)

Subject to this Act, the Crown is subject to all those liabilities in tort to

which if it were a person of full age and capacity, it would be subject

(a)

in respect of a tort committed by any of its officers or agents;

...

Liability of Crown for acts of its officers or agents

(2)

No proceedings lie against the Crown under clause (1)(a) with respect

to any act or omission of an officer or agent of the Crown unless the act

or omission would, apart from this Act, have given rise to a cause of

119

action in tort against that officer or agent or his personal representative.

(Emphasis added)

[385]

McDonald argues that Dow and Cutcliffe were independent

contractors who were “employed” by the Crown, thereby making them

agents of the Crown who are liable for misfeasance and for whom the

Crown is vicariously liable.

[386]

Coady, counsel for the Government and related defendants,

addressed the issue of who is and is not a Government “agent” as it

applied to his client, LeClair. Coady argued McDonald was

misinterpreting and misapplying the Crown Proceedings Act in

suggesting that Act applied to independent contractors such as LeClair,

who left his employment with Government many months before any

material times related to this action. Coady’s submissions also apply to

Dow, Cutcliffe, and Scales.

[387]

Coady referred again to the Odhavji case which repeatedly

states, in one form or another, that the unlawful conduct must be by a

public officer in the performance of his or her public functions, such

as at paras. 28 and 29, where the court states:

28 ... Unlawful conduct in the exercise of public functions is a public wrong

...

29 ... the underlying purpose of the tort is to protect each citizen’s reasonable

expectation that a public officer will not intentionally injure a member of the

public through deliberate and unlawful conduct in the exercise of public

functions. ... (Emphasis added).

[388] Coady then addressed the purpose of the Crown

Proceedings Act, which is to displace the immunity enjoyed by the

Crown. Historically, the Crown would not be directly liable in tort

and could not be vicariously liable for the actions of their public

officers. The purpose of the Crown Proceedings Act is only to

displace the immunity otherwise enjoyed by the Crown. The Act

does not expand the liability of the Crown.

[389] A careful reading of ss. 4(2) of the Crown Proceedings Act

confirms that the Crown is only liable for the actions of its officers

or agents if, “apart from this Act” the officer or agent would be

liable in tort. In the context of the tort of misfeasance in public

office, that means that, apart from the Crown Proceedings Act, or

setting aside the Crown Proceedings Act, the individual

wrongdoer has to be a public officer, as was described in Odhavji.

120

The Crown Proceedings Act does not make someone an agent who

is not otherwise an agent. Rather than it being that pursuant to the

Act someone can be found to be an agent of the Crown, it is that if

someone is already an agent of the Crown, then, pursuant to the

Act, their actions can vest liability on the Crown.

[390] In Johnston v. Prince Edward Island, [1995] P.E.I.J. No.

32, 128 Nfld & P.E.I.R. 1, 1995 CarswellPEI 4, DesRoches J.,

speaking of the Crown Proceedings Act, stated at para. 232:

The purpose of this Act, and s. 4 in particular, was to end the Crown’s common

law immunity from liability in tort by making it subject to the same general

principles of tort liability as if it were a private person of full age and capacity.

[391] I find neither Dow or Cutcliffe were public officers or

“agents” and neither were performing public functions. Nor were

either of them “employed” by the Crown as is referred to in the

definition of agent when it speaks of an agent including an

independent contractor “employed by the Crown”. Each of them

was a private professional who contracted with their separate

clients: Dow with Innovation; Cutcliffe with 764. They were not

employees of the Crown, and no evidence was presented to

indicate they had any indicia of employment.

[392] In fact, with respect to Cutcliffe, there is direct evidence

addressing the issue.

[393] As an independent contractor specializing in government

relations working as an associate of KCM Strategy Group Inc. in

Halifax, Nova Scotia, Cutcliffe acted as a consultant for private

individuals, corporations, and government. Prior to signing a

consulting contract with 764, KCM had entered into various

consulting contracts, including one with the Government of PEI

signed in November, 2011 for it to provide business development

and advice and business prospecting support “as it relates

specifically to shipbuilding opportunities for Prince Edward Island

resulting from the recent shipbuilding contract awarded to Irving

Ltd.”. On April 10, 2012, KCM had also entered into a

five-month contract with the Government of PEI. The “Scope of

work” required KCM to “Provide matchmaking services as it

relates to expanding export opportunities for Prince Edward

Island” and to “Conduct meetings and provide opportunities to

meet with key influencers in various supply chains including food

121

distribution, professional services and other government agencies

and partners in the procurement business.” Neither contract

included any work remotely similar to the work she was engaged to

do for 764.

[394] The terms of those contracts are significant with respect to

whether or not Cutcliffe was a public officer, agent, or employee of

Government. The terms of those contracts provided that the

“Contractor” “shall act as an independent contractor and that she is

entitled to no other benefits or payments whatsoever than those

specified in Payments, Records and Accounts hereof”. Clauses

5(b) and 6(a) of each of those contracts stated:

5 (b)

The parties agree that entry into this agreement will not result in the

appointment or employment of the “Contractor” as an officer,

clerk or employee of the Government, nor shall the Civil Service Act,

R.S.P.E.I. 1988, Cap. C-8 apply.

6 (a)

The “Contractor” agrees to accept sole responsibility to submit any

applications, reports, payments or contributions for Sales Taxes,

Income Tax, Canada Pension Plan, Employment Insurance, Workers’

Compensation assessments, Goods and Services Tax or any other

similar matter which the “Contractor” as a self-employed person

may be required by law to make in connection with the work to be

performed under this agreement. (Emphasis added).

[395] Having found Dow and Cutcliffe were not public officers

or agents of the Crown and were not exercising public functions,

they cannot be found liable for misfeasance in public office.

Notwithstanding that, I will address in more detail some of the

allegations made by the plaintiffs against Dow and Cutcliffe.

b) Dow’s interactions with Dowling

[396] Dow is alleged to have used confidential information

regarding the securities investigation to harm the plaintiffs by

speaking of the investigation at a meeting with Philip Walsh

(Simplex) and representatives of HSBC and Holland College on

September 20, 2012. In Dow’s affidavit he denies ever receiving

any confidential information regarding the plaintiffs about the

securities investigation and he specifically states he did not attend

any meeting with Philip Walsh or potential clients on September

20, 2012, and did not, at any time, advise any clients or potential

clients of the plaintiffs that a securities investigation against the

122

plaintiff was underway.

[397] This direct testimony of Dow was uncontradicted and

unchallenged by the plaintiffs. No questions were put to Dow on

cross-examination regarding information he received or used, and

he was not asked about his purported meeting of September 20,

2012, with Walsh and potential clients.

c) Drafting the MOU

[398] The plaintiffs claim Dow negotiated the MOU on behalf of

Innovation PEI. Contrary to that, Dow states in his affidavit that he

did not negotiate the terms of the MOU, and that by the time he

was engaged by Innovation the MOU had already been drafted.

He was retained “to provide Innovation with legal advice

concerning the meaning and effect of the language of the MOU”

proposed by Jessop.

[399] In Maines’ affidavit he refers to an email from Dow to

MacEachern and Paynter, which email attached the draft prepared

by Jessop. The email contains the legal advice from Dow to

Innovation regarding the effect of the MOU. The content of that

email is therefore subject to solicitor client privilege and is not

disclosed. After referencing the fact an email was sent, Maines

makes the following statement in his affidavit:

Dow is clearly negotiating the MOU for MacEachern and Paynter and has

claimed privilege on the content of the email. (Emphasis added)

[400] What is clear is that Maines has no idea whatsoever as to

the content of that email. Yet he has no hesitation in stating an

unfounded conclusion and swearing to the truth of it as a fact.

[401] An email from Jessop to Dow dated June 22, 2012,

confirms Jessop drafted the MOU:

Hi Bill,

Please find attached a draft of the memorandum of understanding regarding the

proposed creation of a financial services centre in PEI. Please let me know if you

have any comments or concerns regarding the attached. Once the document is

123

finalized between us, we can [sic] our respective clients to sign. Let me know if

you wish to discuss.

Regards,

Gary

[402] The only thing not determined in the draft was the proper

name for the entity on PEI which would sign the MOU. Jessop

had shown the first party to the agreement in brackets as being

[Province of Prince Edward Island] followed by [NTD - Need to

include proper name]. Dow replied with an email on July 5, 2012

stating:

Hi Gary

I’ve discussed the MOU with my client.

I’m waiting for final approval but it looks like the MOU is acceptable with the

exception that it should be made between Trinity and Innovation PEI (this is the

Crown corporation of the Province and they will be handling the negotiations on

behalf of the Province).

I’ll let you know as soon as I have approval. I’ve asked for instructions by

tomorrow.

Thanks for your patience.

Bill

[403] That email confirms Dow provided the one piece of

information Jessop required, being the proper name of Innovation

PEI. The MOU was signed the next day, on July 6, 2012, one day

after Dow asked for instructions from his client, and after Dow sent

Jessop the following email:

Gary

I now have the Provinces authority to proceed. Please change the party to

Innovation PEI and I will get it executed on my end.

Bill

[404] The only other change to the draft initially sent by Jessop

was that Jessop changed his party’s name from “Trinity Bay

124

Technologies Inc.”, to “7645686 Canada Inc. O/A Trinity Bay

Technologies”, as no such company was incorporated but 764 was

“O/A” (operating as), Trinity Bay Technologies.

[405] Dow was cross-examined by McDonald in relation to the

MOU:

Q,

And would some of the provisions that worked its way into the

memorandum of understanding, for example, the exclusivity and the

confidentiality, did you discuss those with Mr. Jessop?

A.

Q.

No, I did not.

Did Mr. Jessop, you know, more or less draft the memorandum of

understanding and then deliver it to you?

A.

Q.

A.

Yes, he did.

And did you then review it?

I reviewed the memorandum of understanding and advised my clients

what the legal implications were of executing it.

[406] There was no negotiation with respect to the terms of the

MOU. It was drafted by Jessop and the content remained

completely unchanged, with the exception of confirming the proper

names of the parties. This is another example of the reckless

comments made by Maines in his sworn affidavit, as referred to

earlier. Maines acknowledged on cross-examination that he had

nothing whatsoever to do with the negotiation or preparation of the

MOU.

d) The extension of the MOU

[407] There is a great deal of discussion about the need for the

MOU to be extended after it expired on September 4, 2012 and

then to what extent it was suspended or put on hold following its

renewal on September 10, 2012.

[408] Paynter and Mix were both frustrated with the lack of

progress from 764 in clearly expressing what they were seeking

from the Government in respect of the project described in the

MOU. Paynter had repeatedly indicated they needed a proper

business plan from 764 and none was forthcoming. The original

125

MOU expired on September 4, 2012. On September 6, 2012,

Paynter emailed MacEachern referencing the expiration of the

MOU and then said:

...Brad has reached out to Tracey as recent as early last week. Sounds like they

are still struggling to formulate the “ask”. Tracey did suggest perhaps they

would be looking for an extension on exclusivity. No documents or ask have

followed... (Emphasis added)

[409] On September 4, 2012, the MOU had expired.

[410] Two days later, on September 6, 2012, the unsolicited

proposal from Laslop was sent to Sheridan, Roach, and LeClair

and was CC’d to Paynter. Paynter advised MacEachern of the

receipt of the proposal to ensure she did not contravene the MOU.

MacEachern emailed Sheridan and Roach advising of the MOU,

stating that no other proposals can be considered during the

currency of the MOU.

[411] On the same day, MacEachern called Cutcliffe to advise her

that another company was expressing interest in the same sort of

development as 764 was interested in. Prompted by that call,

Cutcliffe, 764's consultant, immediately emailed Jessop and

Maines stating:

... TBT has an immediate risk issue right now that needs to be dealt with. The

lack of movement on the clear ask is being questioned, and I have some

confidential intelligence regarding other interests looking to move a similar

agenda. I would like to send an email on behalf of TBT this evening requesting

an extension to the MOU and confirming that TBT is in a position to articulate

the ask. Can I have some direction on that please.

[412] On September 7, 2012, Cutcliffe sent MacEachern an email

asking for an extension of the MOU. On September 10, 2012, it

was extended for 30 days.

[413] The fact that an unsolicited proposal, which McDonald

himself described as being nothing more than an introductory

letter, was sent to Sheridan and LeClair after the expiry of the

MOU does not support the conclusion reached by the plaintiffs in

their amended statement of claim that the MOU had been violated.

[414] Again, I point out the MOU had expired before the

126

unsolicited “proposal” was received. The receipt of that proposal

actually prompted the request for the MOU to be reinstated, which

request was granted.

[415] Cutcliffe was asked on cross-examination why an extension

was necessary. She responded:

Because the client hadn’t to date put anything down on paper that clearly

articulated what they were looking for from government.... So the 30-day ask

was to provide them with some more time to try and put something down on

paper that the government could potentially respond to.

Later on she added:

I can tell you that the difficulty with the asks, which is reflected in what I just

read as well, is that it was difficult to understand and difficult for people to get

any kind of clarity on what exactly was being asked of government, and we, as

the consultants, trying to assist our client, were advising on that very issue

consistently, and the fact is I don’t have a clear understanding of what it was at

that point, and this is, I think, another reflection of that.

[416] With respect to the MOU being on hold, Jessop emailed

Cutcliffe on September 18, 2012 saying:

I am looking forward to seeing you tomorrow.

You may be wondering about the delay in getting further information to

PEI. The delay is deliberate and is based on my recommendation. As you

may be aware there have been a number of potentially slanderous allegations

regarding Capital Markets/Trinity Bay being circulated in PEI... (Emphasis

added)

Again on September 19, 2012, Jessop emailed Cutcliffe:

I have just arrived. I have just been briefed on a few issues regarding unfounded

allegations. I will need to deal with this this afternoon. I am trying to meet with

the branch manager at Scotia Mcleod - the source of the allegations. I will

also be meeting with Bill Dow as well. I will need to reschedule our meeting

until tomorrow. ... (Emphasis added)

[417] On September 20, 2012, Dow and Jessop met. At that time,

Jessop was aware of the allegations surrounding the plaintiffs and,

based on that, had already made his own determination to hold off

on providing further information to PEI in connection with the

MOU. Dow advised that he understood a securities investigation

was underway, and stated that “obviously” the parties could not

127

negotiate an agreement until the matter was cleared up. Dow

confirmed on cross-examination that he never received any

confidential information relating to the investigation, only that one

had been commenced. He further stated, “The particulars of the

investigation, I’ll be quite honest, even today I didn’t follow it.”

e) Was Dow involved in developing a loyalty card program?

[418] Yet another example of statements from Maines, in his

January affidavit, at para. 42, is as follows:

Based on information and belief, Dow worked with MacEachern on creating

the Loyalty Card Program and requested Maines to arrange to have Simplex

executives return to PEI to continue dialogue on the Loyalty Card Program:

(Emphasis added)

[419] No source of the information is provided. McDonald read

that statement to Dow on cross-examination and Dow stated:

Yes. That information and belief is wrong. I never worked with McEachern on

creating a loyalty card program. (Emphasis added)

[420] And elsewhere during the cross-examination in January,

2019, Dow was asked about an event in May 2011, and whether

there was any discussion related to the loyalty card program on that

occasion. Dow responded, “I have never heard of the loyalty card

program until about a year ago.”

[421] No additional evidence was provided by the plaintiffs with

respect to that matter, or to challenge or contradict Dow’s

testimony. Notwithstanding that, the same statements end up in the

plaintiffs’ factum where it states, “Dow conveniently ignores his

involvement in the Loyalty Card Program which is proven with the

following documents...” McDonald then refers to three emails

involving various people but not including Dow. Those emails do

not make any reference to Dow, directly or indirectly, in any

manner whatsoever. Nor were they ever put to Dow during

cross-examination. This, unfortunately, is not atypical of the

scattered and shotgun approach seen in the bulk of Maines’

evidence, the plaintiffs’ pleadings and in the plaintffs’ presentation

in court.

f) Cutcliffe’s interactions with Dowling

128

[422] In her affidavit, Cutcliffe swore that, contrary to the

allegations at paragraphs 187(q) and 196 (aa) of the amended

statement of claim, she did not receive any confidential

information regarding the plaintiffs with respect to a securities

investigation. She confirmed that she never spoke with,

corresponded with, or met the defendant Steven Dowling and she

did not receive any information from him concerning any

investigation into the plaintiffs. In Maines’ affidavit he stated,

“Cutcliffe confirmed as part of her crisis management retainer, she

would reach out to Dowling to try and arrange a meeting and

answer any concerns Dowling had.” When presented with that

statement on cross-examination Cutcliffe replied, “It is not true,

never happened.” Cutcliffe was not shaken on cross-examination

and the plaintiffs provided no evidence to challenge or contradict

the her testimony.

g) Failure of the plaintiffs to put their best foot forward

[423] At the hearing of this motion, Tighe, counsel for Dow and

Cutcliffe, referenced my earlier decision in which I allowed Dow,

Cutcliffe, and Scales to be added as parties to the action. (See

CMT et al. v. Gov’t of PEI et al., 2018 PESC 9). In paragraph 33

of that decision I stated:

[33]

The plaintiffs allege the three proposed defendants were acting as

“Government Agents”. The defendants’ counsel submits they were not “public

officers” and asks that the amendment be denied. While I harbour some level

of doubt as to their status as public officers, I am not, on the face of the

pleadings alone in respect of a motion which is presumptively to be granted,

prepared to determine their status and conclude the plaintiffs’ claim is

untenable as a result. Such a determination may be sought at a later date

and would be dealt with then in the context of any such motion. (Emphasis

added).

[424] Tighe submits that all of the allegations that supported the

causes of action as pleaded and which were deemed to be

presumptively true on the motion with respect to the pleadings,

have now been categorically disproven. He further submits that

the “later date” at which the matter may be determined on a motion

has arrived, and in conjunction with that, the plaintiff no longer has

the benefit of the doubt or the advantage of the presumption all

facts pleaded are true. On this point, Tighe is correct. The time for

the presumptions of the earlier motion to be proven by admissible

129

evidence, has arrived. Plaintiffs’ counsel acknowledged at various

points in his factum and on the hearing of these motions that the

plaintiffs do not have the luxury of indicating that better evidence

would be presented at trial but are required to put their “best foot

forward” or suffer the consequences.

[425] In the plaintiffs’ factum, in the final paragraph relating to

each defendant or group of defendants it states:

The evidence that “a genuine issue for trial exists” is considerable and difficult

to manage efficiently on a summary judgment motion:

[426] That comment is then followed by a chart outlining the

“material facts” pleaded on one side and the “evidentiary proof” to

be presented on the other.

[427] In the chart, for a great many significant “material facts”

listed, the “evidentiary proof” is stated to be the “trial evidence” of

various witnesses. None of those promised witnesses have

provided any evidence to date with the exception of Maines. For

example, one “material fact” set out in the chart is the claim at

paragraph 115 of the amended statement of claim reads as follows:

Material Fact

115. Ghiz met with Evans and assured him that he personally wanted the

Simplex Global Transaction Platform to be in Prince Edward Island. At a

meeting with Ghiz and Dow, Ghiz directed CMT to submit a memorandum of

understanding that he assured would be signed immediately by the Government

of Prince Edward Island.

[428] The “evidentiary proof” supporting that material fact is

stated in the chart to be:

Evidentiary Proof

- trial evidence of Maines;

- trial evidence of Gary Evans;

- trial evidence of Ghiz;

[429] Another example refers to the claim at paragraph 187 (q) of

the amended statement of claim:

Material Fact

130

187.(q) Dowling, during the term of the MOU, was sharing information on the

investigation into 7645686, with MacLean, Campbell, Mix, MacEachern, Dow

and Cutcliffe contrary to the provisions of s. 36 of the Securities Act;

Evidentiary Proof

- trial evidence of Maines;

- trial evidence of Jessop;

And another example refers to paragraph 195 of the amended statement of claim:

Material Fact

195. The plaintiffs state that the Government Agents knew that their conduct was unlawful and likely to injure the

plaintiffs.

Evidentiary Proof

- trial evidence of Maines;

- trial evidence of Jessop;

- trial evidence of Walsh;

- trial evidence of Wright;

[430] The plaintiffs are defending summary judgment motions.

They have acknowledged the Supreme Court of Canada’s

statement in Lameman. They have acknowledged being aware of

the Sweda test and other similar expressions in other case law.

They have acknowledged that on a summary judgment motion

there is no opportunity to present further or better evidence at a

future date. After all of those acknowledgments, it is unfathomable

that any plaintiff would state that the evidentiary proof of their

claims will come in the form of further evidence at trial.

[431] Further, by advising the court there will be trial evidence

from Jessop, Walsh, Evans, and Wright, they effectively declare

that such evidence exists today. The matters of which they

complain allegedly occurred 6-8 years ago. They first filed notice

of their action over 4 and a half years ago. However, with all the

time and opportunity they have had to gather their evidence,

including evidence from the person McDonald described as “an

engineer, an architect of pretty much everything that went on in

131

this file”, i.e., Jessop, that evidence is not before the court. They

were required to “lead trump or risk losing”. They have failed in

spades to lead trump.

[432] I note as well the plaintiffs’ factum refers to the former, less

stringent test of showing there is a genuine issue “for” trial. The

revised rules provide that the court shall grant summary judgment

if the court is satisfied that there is no genuine issue “requiring” a

trial with respect to a claim or defence.

[433] Summary judgment motions involve shifting onuses. In this

case, the defendants have shown through direct, admissible

evidence that there is no genuine issue requiring a trial. With that,

the onus shifted to the plaintiffs to respond and show, through

evidence, they have a “real chance of success” on their claims.

The plaintiffs have utterly failed to provide any evidence refuting

or contradicting the defendants’ evidence, and have thereby failed

to meet the onus that fell upon them.

[434] I reiterate, the evidence of Maines was mostly indirect and

second hand. Such evidence is of limited evidentiary value.

Frequently, his evidence was based on “information and belief”

without disclosing the source of the information. Such evidence

has no evidentiary value. That evidence is contrasted with the

direct, personal, first-hand evidence of the defendants who denied,

challenged, contradicted, and refuted the vast majority of Maines’

evidence on material matters before the court.

[435] I refer again to the plaintiffs’ “material fact” and

“evidentiary proof” as it relates to the statement in paragraph 115

of the amended statement of claim, relating to a purported meeting

between Ghiz, Dow, and Evans at which Ghiz allegedly directed

CMT to submit an MOU which would be signed immediately.

[436] The plaintiffs’ evidence on this issue comes from Maines’

January, 2019, affidavit in which Maines states:

Based on information and belief (Evans), Evans met with Premier Ghiz and Dow

and Evans was told by Premier Ghiz and Dow that they thought everything was

on track for the Financial Services Platform with Innovation PEI. Premier Ghiz

and Dow told Evans to go back to Jessop to get the negotiation back on track.

132

[437] On cross-examination, Maines acknowledged he had no

personal knowledge of whether any such meeting took place or

who might have been there.

[438] The relevant part of Dow’s cross-examination reads as

follows:

Q.

Did you ever attend a meeting with the following persons present

Evans, Dow and the Premier, Premier Ghiz?

...

A.

I never met ... with Gary Evans and the Premier and I have never met

on this matter.

Q.

A.

I’m talking about the memorandum of understanding.

Never. I met with Evans, but not with the Premier and Evans.

[439] In the absence of any further evidence from the plaintiffs, I

accept the direct, uncontradicted evidence of Dow that the three

people referred to in Maines’ affidavit and in the statement of

claim never met together. The quality of Maines’ evidence is

inferior and less credible and reliable because he has no direct

personal knowledge of the vast majority of what he attests to.

[440] He is prone to speculation and supposition and when his

statements are disproven there is no reply affidavit or other

information offered. Bald assertions, especially when relying on

second hand information, have very low, if any, credibility and

reliability.

Conclusions concerning allegations re: Dow and Cutcliffe

[441] Dow and Cutcliffe have each shown the plaintiffs’ claims

against them are without merit and there are no genuine issues

requiring a trial. They have thereby discharged the onus on them

in this summary judgment motion. As a result, the onus shifted to

the plaintiffs to demonstrate by evidence or argument that their

claims have a real chance of success. The plaintiffs have failed

to present any evidence of merit, or argument, showing that to be

the case. I therefore grant summary judgment to the defendants

Dow and Cutcliffe with respect to the plaintiffs’ claims against

133

them.

Allegations against Scales

[442] The allegations of misfeasance in public office against

Scales are set out at paragraphs 196 (x), (y), and (z) of the amended

statement of claim, as follows:

196. (x) Scales, while under retainer to provide management services on behalf

of the Government of Prince Edward Island to the PEI Gaming

Committee, unlawfully misled Simplex, whom he knew was being

funded by CMT, into providing consulting services and inducing them

to invoice the Government of Prince Edward Island;

(y) Scales, while he was retained to provide management services to the

PEI Gaming Committee unlawfully made promises of payment to

Simplex on their invoices at a time when he knew that all of the funding

that had been allocated to the PEI Gaming Committee had been fully

dispersed to his law firm, McInnis Cooper;

(z) Scales, while he and Sheridan were negotiating with another competitor

to 7645686 under the MOU, contacted and met with Walsh for what he

represented to Walsh was for the purpose of discussing strategies with

Sheridan to move forward with the MOU, but in fact was used to illicit

confidential information from Walsh that he used to undermine the

completion of the MOU in contravention of the terms of the MOU;

[443] For convenience, I will repeat the essential features and

material time line as it relates to the e-gaming project.

[444] In late 2009, the Mi’kmaq Confederacy of Prince Edward

Island (MCPEI) approached Sheridan with the idea of having

MCPEI establish infrastructure on PEI to license and regulate

online gaming. In February 2010, MCPEI engaged their law firm,

MC, of which Scales is a partner, as its legal counsel to examine

the legal and technical issues involved in achieving MCPEI’s

objective. MC established a working group made up of lawyers,

accountants, consultants, the in-house counsel and Executive

Director of MCPEI, and Sheridan, on behalf of the Government of

Prince Edward Island. The group examined the issues, obtained a

report on technical issues and eventually presented a proposal to

Government. On February 24, 2012, the government rejected the

proposal based on advice from both the Province’s Deputy

Attorney General and an outside expert on aboriginal law. The

principal concerns were that implementing such a scheme could

134

contravene the provisions of the Criminal Code of Canada.

[445] Notwithstanding the Government rejection, MCPEI,

through MC and with members of the working committee,

continued to pursue the idea for several months until they

concluded it was not feasible to proceed.

[446] The plaintiffs claim Scales was a Government “agent”,

based on their submission that he was under retainer to provide

management services on behalf of the Government, by way of

doing so for the e-gaming committee. They base that conclusion

largely upon comments made by the Auditor General in a report

she prepared in 2016. The report examined the e-gaming project

particularly in light of a loan of $950,000 from the Government of

Prince Edward Island to MCPEI, which loan she concluded was

not approved in accordance with normal government policies and

procedures.

[447] As I have expressed earlier, the focus of the Auditor

General was on whether there was noncompliance with legislation,

policies and controls which were designed to minimize risks to

government and protect the interests of taxpayers. I also stated that

the Auditor General’s office was neither designed for nor equipped

to conduct an inquiry to assess civil liability. Her procedures are

disconnected from any normal legal criteria. The rules of evidence

do not apply to her conclusions or expressions of opinion.

[448] In the course of her inquiry, the Auditor General asked MC

for a copy of materials, including the retainer agreement between

MC and MCPEI. MC refused to provide those documents on the

basis of solicitor client privilege. The Auditor General expressed

her opinion that some of the work performed by MC included

project management services for the working group and

Government, and as such that work would not be subject to

solicitor client privilege. MC disagreed, once again expressing

their reliance on solicitor client privilege. The Auditor General did

not pursue the matter further.

[449] In the course of this litigation, the plaintiffs have asked

Scales for the retainer agreement between MC and MCPEI and the

invoices sent by MC to MCPEI. Counsel for Scales again refused

to provide those documents based on solicitor client privilege, and

135

further, they submit the documents are not relevant to the case

pleaded against Scales.

[450] During the cross-examination of Scales in January, 2019,

McDonald stated, “My position is I can’t argue a Rule 20

motion unless I have those documents.” (Emphasis added) In

the plaintiffs’ factum at para. 131(d), it states, “the document

disclosure issue shall require a motion ruling by Justice

Campbell related to numerous disclosure issues.” (Emphasis

added). In the course of the case management process, plaintiffs’

counsel was encouraged to make a motion to seek further

production or disclosure of documents. As indicated earlier, court

time was set aside to hear such a motion. No such motion was ever

presented to the court. In seeking document disclosure from the

defendant Dowling, plaintiffs’ previous counsel filed such a

motion but plaintiffs’ current counsel abandoned it.

[451] Once again, the plaintiffs have been fully aware of the fact

summary judgment decisions are made on the basis of evidence

then before the court. Promises of more or better evidence in the

future are of no value. The plaintiffs have also been fully aware of

the requirement that they put their best foot forward. The position

taken on behalf of Scales that the retainer agreement and invoices

between MC and MCPEI are the subject of solicitor client privilege

is not an unreasonable position for a defendant’s counsel to take.

Nor is it unreasonable to take a position that the documents are not

relevant to this case. It is not unusual for lawyers to take differing

positions with respect to another party’s entitlement to documents

arising during the course of a solicitor client relationship. Those

conflicting positions are resolved by way of a motion presented to

the court seeking either an order requiring the documents be

disclosed, or directions from the court regarding the documents.

The plaintiffs did not exercise their right to bring an appropriate

motion to determine if they were entitled to those documents.

That was a strategic decision they made in directing their own case.

[452] In Scales’ affidavit, he stated that in February 2010, he and

his firm were retained by MCPEI to provide legal advice to MCPEI

and to represent their interests in dealing with the Government and

other third parties in connection with the potential development of

an interactive gaming initiative. He further states the initiative

136

“was focused on developing a regulated framework for licensing

Internet gaming sites and distributing tax revenues to MCPEI,

Government, and the Province of residence of participating

Canadian gamers.”

[453] He also stated:

Both MCPEI and Government had common interests and a common goal in

advancing the IGaming Initiative. In this respect, much of our work on behalf of

our client was also for the benefit of Government. However, our retainer was

solely and exclusively with MCPEI. Notwithstanding the common goals and

the nature of the relationship between MCPEI and Government, MC’s only

client with respect to the IGaming Initiative was MCPEI. Government did not

retain either MC or myself to provide services with respect to the IGaming

Initiative. (Emphasis added).

[454] Scales also gave evidence stating the “e-gaming” project

(which he referred to as the IGaming Initiative), was unrelated to

the MOU and that the plaintiffs in this matter were not involved in

the e-gaming project. He states as well that he was not retained by

any party in respect of the MOU, had no involvement in drafting it,

had no knowledge of when it was signed or cancelled, had no

communications with Government, the plaintiffs, or any other

party in relation to the MOU, and was unaware of the MOU’s

existence until after it became publicly known.

[455] The evidence given by Scales stands uncontradicted and

unchallenged by any other evidence.

[456] No evidence has been presented to this court substantiating

the plaintiffs’ position that Scales was an agent of Government. As

was the case with Dow and Cutcliffe, I reject the plaintiffs’

argument relating to their interpretation of definition of “agent” as

it appears in the Crown Proceedings Act.

[457] As for the claims set forth in paragraph 196 (x) and (y),

Scales confirmed that neither he nor MC were ever under retainer

to the Government in relation to this matter. In addition, he

confirms he was advised that Ms. Stevenson of Carr Stevenson and

MacKay (CSM) law firm had been retained as external legal

counsel by Government with respect to the e-gaming initiative.

Correspondence dated March 15, 2010, between Kiley of MC and

Stevenson of CSM was attached as an exhibit to Scales’ affidavit.

137

The subject line of the letter is: “RE: “Mi’kmaq Confederacy of

Prince Edward Island - Government Special Project”, and Kiley’s

opening line reads, “We understand that you have been retained by

the Province of Prince Edward Island in relation to the above-noted

matter.”

1. Simplex’s invoices regarding e-gaming

[458] In the first half of Maines’ 2017 affidavit, he makes

reference to a number of contacts between Philip Walsh of

Simplex and LeClair, MacEachern, Mix, Sheridan, and Scales.

These contacts were mostly related to initiating discussion and

exploring the possibility of MCPEI and Prince Edward Island

establishing a system for regulating and licensing the online

gaming industry.

[459] The affidavit confirms other evidence that Simplex had

been engaged by MC, on behalf of the e-gaming working

committee, to produce a report for the committee regarding the

feasibility of establishing such a scheme on PEI. Simplex did

prepare such a report in relation to e-gaming, and an invoice of

$60,000 was submitted to MC for payment. Maines’ affidavit also

supports other evidence that Simplex was in frequent contact with

Scales (at MC) for a period in excess of one year in an effort to

have its $60,000 invoice paid in full.

[460] While such information may be accurate, it is irrelevant to

this action. It was Simplex that was engaged to produce a report,

not CMT or 764. The fact that CMT owned some shares in

Simplex does not entitle them to take an action on behalf of

Simplex. Even if CMT had been instrumental in some way in

having Simplex contract with the committee to explore the project,

that does not provide CMT with any legal basis for action.

Furthermore, Simplex itself would have no action to take because

it’s invoice was paid in full prior to the commencement of this

action by CMT and 764. Maines confirmed on cross-examination

that in March 2013, more than a year and a half before any

statement of claim was issued, he knew the invoice had been paid

in full. It is worth repeating that Simplex is not a party to this

action, and Maines has never been a director, an officer, or an

employee of Simplex.

[461] Neither CMT nor 764 were contractually engaged in any

way with respect to the e-gaming project. Simplex was contracted

138

to write a report, wrote it, and was paid. It is incomprehensible

that either CMT or 764 considers themselves entitled to pursue a

claim in connection with a report they had nothing to do with, and

which was prepared by a completely separate legal entity. The

plaintiffs are not Simplex, and Simplex is not a plaintiff. The

plaintiffs’ claim is even more incomprehensible in the face of the

evidence that Simplex had been paid in full and would not itself

have any viable claim to present, a fact known by the plaintiffs

since 2013. With no apparent regard for the facts, or the law

relating to corporate personality, the plaintiffs claim the invoices

are outstanding and that Simplex were unlawfully misled. Such

statements further diminish the credibility of Maines and the

reliability of his evidence.

[462] Scales’ evidence confirmed, contrary to Maines’ allegation,

that Simplex never invoiced Government for their services and

were never asked to invoice Government. The invoices were sent

to MC, and it is correct they were not paid quickly after they were

sent. MCPEI borrowed money from the Government in

connection with its efforts to create a viable e-gaming system on

PEI. The proceeds of that loan to MCPEI were dispersed to them

in instalments after security provisions were put in place. In order

for MC to have funds to pay invoices on behalf of MCPEI, it had

to receive those funds from MCPEI. As part of the email

exchange between Scales and the accounting department of

Simplex, who were inquiring about when payment would be made,

Scales emailed them saying:

We should have funds very shortly. Sorry for the delay, but because of the nature

of the transaction we’ve had to finalize loan and security agreements between the

Province and MCPEI, so that funds can flow from the Province to MCPEI. This

has just been completed.

[463] Regardless of the delay in payment, or the efforts to acquire

funds to make payment, it is essential to bear in mind we are

speaking of invoices from Simplex, a nonparty, and not invoices

from CMT or 764.

[464] In his affidavit, Scales categorically denies the allegations

in the claim in paragraph 196 (z) of the amended statement of

139

claim, that during the currency of the MOU, Scales and Sheridan

negotiated with competitors of 764 and improperly elicited

confidential information from Walsh to undermine the MOU.

Scales confirmed that during the currency of the MOU he met

Walsh on two occasions. Once was with Kiley when they spoke

about options MCPEI were still trying to pursue on the e-gaming

initiative. They also assured Walsh that payment of Simplex’s

invoices would be made. No confidential information was provided

during that discussion and Scales was not advised of any other

project Walsh was pursuing with Government. There was no

discussion of the MOU. Scales was unaware of the MOU’s

existence.

[465] The second meeting Scales had with Walsh was September

20, 2012 when Walsh advised Scales he was working on other

projects with the Government. Scales stated that no particulars of

the project or other information was given by Walsh or used by

Scales at any time.

[466] Finally, Scales stated he had no knowledge or information

as to the identity of any competitor with whom Sheridan and Scales

were allegedly negotiating, either after the MOU commenced, or at

all.

[467] Again, none of the evidence Scales provided was

contradicted or challenged by any evidence presented by the

plaintiffs. As counsel for Scales expressed it, Scales and the

plaintiffs “were never on the same train together”. Scales was

involved in the e-gaming initiative, but the plaintiffs were not.

The plaintiffs were involved in the MOU, but Scales was not.

Conclusions concerning allegations against Scales

[468] There is no evidence showing the plaintiffs’ allegations

against Scales have any merit. With no factual or legal basis to

support the claims made by the plaintiffs against Scales, I am

satisfied there is no genuine issue requiring a trial. I therefore grant

summary judgment to the defendant Scales in respect of the

plaintiffs’ claims against him.

The Securities Act investigation - The defendant Dowling

[469] Steven Dowling is a lawyer employed by the Government

140

of PEI. In 2012 one of his assigned clients was the Superintendent

of Securities. He was contacted by Edward Curran, the branch

manager of the Charlottetown office of ScotiaMcLeod regarding

what Curran perceived to be suspicious trading activity being

undertaken by Paul Maines. Specifically, Maines was alleged to

be illegally soliciting investment funds for a company referred to as

either CMT, Financial Markets Technologies (FMT) or Trinity Bay

Technologies (TBT).

[470] Dowling met with Curran on September 6, 2012, and met

again with Curran and Curran’s associate, Yousef Hashmi, on

September 14, 2012. On September 17, 2012, Katharine

Tummons, the Superintendent of Securities issued a formal

“Investigation Order” into the activities of Paul Edward Maines to

determine if he was violating the Securities Act.

[471] Briefly, the suspected violations of the Securities Act

related to the fact that it is illegal for people to promote or solicit

investment in securities (such as the promoted investment in FMT)

without being properly trained and licensed to do so. Even when

one is registered to sell such securities, it is necessary to file a

detailed prospectus setting out the nature of the proposed

investment and detailing the specific risks associated with such an

investment. Selling securities to so-called “accredited investors” is

possible without the ordinary prospectus, provided those investors

meet certain specified conditions and a notice of exempt

distribution is filed with the Superintendent at the time of the sale.

Maines, who was promoting this investment, was not registered to

trade or advise on investing in securities in the province of Prince

Edward Island, nor had any prospectus in respect of the investment

been filed. No notices of exempt distribution had been filed either.

[472] Following several months of investigation into the

allegations, Dowling completed an affidavit summarizing his

findings.

[473] Dowling’s affidavit showed that in October, 2011, Hashmi

was approached by Edward Francis (Francis) to discuss an

investment opportunity, and met with Francis and Maines to do so.

Maines had been promoting the investment locally and was

soliciting people to invest in FMT. The day after their meeting,

Hashmi received a follow-up email from Maines regarding the

investment and outlining the corporate relationships of FMT.

141

[474] Subsequent to Hashmi’s meeting with Francis and Maines,

Hashmi was contacted by other clients and non-clients who had

invested in the company promoted by Maines. In late 2011,

Curran also became aware of other individuals who invested,

including someone he described as a part-time employee of

ScotiaMcLeod. Curran obtained copies of the promotional

materials furnished to the purchaser by Maines, which materials

were provided to Dowling.

[475] Initially, Paul Maines was the only subject of the

investigation. The affidavit of Steven Dowling sworn on February

14, 2013, during the course of the securities investigation revealed

certain information gathered about Paul Maines. Maines was

cross-examined with respect to that information. Maines was

permanently barred from the New York Stock Exchange after he

was found guilty of transferring over $300,000 of three different

clients’ money out of their accounts. (See para. 147 above).

[476] Maines had previously been discharged by Morgan Stanley

DW Inc., for “violation of Firm policy regarding financing

(arrangements or lending) with clients”, following numerous

complaints.

[477] On September 7, 2012, Dowling attempted to contact

Maines by telephone, but there was no answer, and there was no

option to leave a message. On September 10, 2012, Maines called

Dowling and left a voicemail. Dowling contacted Maines the same

day, explaining that he had received information concerning

Maines with regard to security regulations. Dowling provided his

full contact information. Maines declined to speak further with

Dowling and the conversation ended.

[478] As noted, no affidavit was filed by Jessop on these

summary judgment motions. However, an affidavit Jessop filed in

connection with the securities investigation was attached as an

exhibit to Maines’ affidavit of November, 2017, in respect of this

matter.

[479] According to Jessop’s affidavit, on September 20, 2012,

Jessop emailed Dowling stating he was counsel for “Capital

Markets/Trinity Bay” and that he would like to meet with Dowling

142

to get further information on what he understands might be a

complaint against Trinity Bay. Dowling responded on September

21, 2012 indicating he was not aware of a complaint referencing

Trinity Bay. Jessop then suggested the claim might reference

FMT and asked Dowling to let him know if he would like to meet

Jessop to discuss it. Dowling thanked him for his email and

advised he would let him know. Jessop made other efforts to

arrange a meeting with Dowling, but Dowling did not accept the

invitations to meet until later in the process.

[480] Jessop and Evans met with Campbell and MacLean on

October 17, 2012. At the meeting, MacLean advised Jessop that,

notwithstanding the investigation had not yet been completed, he

did not see any reason why the parties could not continue

negotiating even though, if any further agreement was reached, it

could not be signed until the investigation was completed.

MacLean also agreed to inform Dowling that Jessop was available

to talk if need be. The following day, on October 18, 2012,

Dowling advised Jessop that he was aware Jessop was available to

talk and that Dowling would get in touch with him if he needed to

do so.

[481] Jessop wrote to Dow on October 23, 2012, speaking of

various matters, including that he was hoping to restart

negotiations with the Province.

[482] On January 21, 2013, Jessop wrote to Deputy Minister

Curley asking her to intervene with Dowling to have him speak

with them about the investigation, or provide them with a letter

confirming there was no investigation. He reiterated that his clients

had done nothing wrong. In the same correspondence he expressed

that as a result of MacLean’s efforts [in October], Paynter advised

she was prepared to recommence negotiations however Trinity Bay

(764) determined it would be prudent to continue to suspend

negotiations until they were cleared of the investigation or

otherwise able to assess the issues. Curley acknowledged receipt

of the correspondence and indicated she forwarded it to Dowling

asking that he respond as appropriate.

[483] I note that, even though Jessop was anxious to meet with

Dowling as early as possible during the investigation, there was no

obligation on Dowling to meet with Jessop, or Maines, or any other

particular individual at any point in time. How he conducted his

143

investigation was for him to decide, within the limits of the law.

[484] Through the course of the investigation, Dowling obtained

various emails and other documentation confirming that Maines

was soliciting investments. In particular, Garth Jenkins and Paul

Jenkins each invested $100,000 at the invitation of Maines. Neither

of those investors were presented with a prospectus nor was there

any discussion of the meaning of accredited investor. Paul Jenkins,

and other investors provided their investment funds to Gary Jessop.

In processing their investments, they entered into convertible loan

agreements with CMT.

[485] Dowling also received affidavits from two other CMT

investors who stated they were not solicited by Maines, but heard

about the opportunity and chose to invest. Dowling’s affidavit also

refers to information he received from Curran regarding an

investment by Jeff and Kellie Trainor. In Dowling’s affidavit,

based on information he received from Curran, which Dowling

stated he believed, he described Ms. Trainor as a part time

employee of RBC Dominion Securities and described the

investment as being $30,000. Trainor’s husband filed an affidavit

in relation to the securities investigation in which he stated he had

been informed by his wife, whom he believed, that she was never

an employee of RBC. Jeff Trainor also disputed the amount of his

investment in CMT stating it was not $30,000 as expressed by

Dowling in his affidavit.

[486] Dowling also described the contents of an email and

attachments originally sent by Maines to Jeff Trainor which

included the same investment information Hashmi had received

from Maines. The information included a 2011 slide presentation

referring to CMT as the company which “delivers” Claimatrix

(reference to another tech company and its services) in the UK.

Dowling’s affidavit does not state that Maines solicited the

Trainors to invest. However, there is no denial an investment was

made.

[487] While the collateral issues of whether Ms. Trainor was ever

an employee of RBC, or what the precise amount of Trainor’s

investment in CMT was were unresolved, in the context of the

overall investigation I do not find the discrepancies to be of

significance. There was no evidence presented to show any

intentional misstatement by Dowling, and if the statements were

144

incorrect through inadvertence, negligent conduct does not

constitute misfeasance. The fact remains, CMT accepted their

investment without having issued any prospectus and without filing

any notice of exempt distribution.

[488] Based on the information Dowling received in the course of

his investigation, the inquiry was expanded beyond just Maines, to

include reference to CMT, 764, TBT, and FMT. Those company

names, or business names, were used interchangeably at times.

The connection between each is described in the earlier section on

corporate personality. The fact that in the end, pursuant to the

Settlement Agreement, it was only CMT that was held responsible

for the illegal trading does not lead to a conclusion it was improper

for Dowling to investigate each of the associated entities or names

under which they operated, particularly 764 which is 100% owned

by CMT.

[489] In Maines’ affidavit, without identifying the source of the

information he purported to rely upon, he stated, “Based on

information and belief, Dowling was instructed to use the

securities investigation to destroy the Financial Services Platform

and the Loyalty card Program to advance the Newport/Laslop

program”. This is a bold, and bald, accusation.

[490] On cross-examination he was asked about his very specific

allegation and to provide the information upon which he relied.

Over the course of several questions and answers, some of which

were answered by Maines’ counsel, Maines complained of the fact

Dowling did not meet with him or Jessop until late in the

investigation, met with various government officials, and never

provided Maines with a copy of the complaint. Dowling did

contact Maines at the outset, and Maines declined to talk to him.

Dowling and Jessop did discuss the investigation from February,

2013, until June 5, 2013, when it was settled by agreement.

Questions about the basis of Maines’ allegations against Dowling

concluded with this exchange:

Q. Okay, so it’s fair to say, then, you’re taking everything that you complain

about in respect of the securities investigation, and you’re surmising or

speculating that Dowling was instructed to use the securities investigation to

destroy the financial services platform and the loyalty card program?

A. Correct. ...

145

[491] Notwithstanding the outrageous nature of the allegations,

Maines admitted it was based merely on speculation and

assumption (surmising).

[492] Another example of the disjointed and disconnected

evidence presented in Maines’ affidavits appears at page 12 of his

affidavit of November, 2017. It reads:

Exhibit 09

May 16, 2011:

Email between Paul Jenkins and Shane

Maceachern at RBC had the subject line “Premier Briefing Notes” they prepared

but Dowling never produced the “Premier Briefing Notes in his affidavit:

“Attachments: Premier’s Briefing notes.doc”;

[493] There is no narrative explaining what is meant by that

statement in the affidavit. Exhibit 9 actually contains the headings

of 3 emails. In chronological order, there is an email from Maines

to Jenkins with the subject line “Ruff draft”, which appears to be a

very brief, very basic introductory outline of Financial Markets

Technologies which sets out the company’s purpose. It would

then appear Jenkins forwarded that email to Shane MacEachern, in

an email with the subject line “Fwd: Ruff draft”. Shane

MacEachern then replied to Jenkins with the subject line, “RE:

Ruff draft”, followed by a line saying: “Attachments: Premier’s

Briefing notes.doc”.

[494] It would appear that these so-called “briefing notes” were

prepared by Maines and were labelled “Premier’s Briefing notes”

by Shane MacEachern. Was the intention to use this as an

introductory note to inform the Premier about the company? And

what was meant by saying Dowling never produced the briefing

notes in his affidavit? There is no evidence Dowling was included

in this exchange of emails nor does anything of import appear in

the briefing note itself. However, there is some suggestion of

failure, or innuendo of wrongdoing, on Dowling’s part. There is

no evidentiary basis for concluding that the briefing note is of any

significance or that it has any connection whatsoever to Dowling.

[495] During the course of the investigation, CMT filed a Report

of Exempt Distributions claiming that all 36 investors were

“accredited investors”. In addition to being filed substantially later

than required, the Report was also not correct. Fifteen of the

146

so-called accredited investors either failed to meet the requirements

to be so designated, or the Superintendent of Securities was unable

to confirm they qualified as such.

Securities investigation Settlement Agreement

[496] On May 31, 2013, a Settlement Agreement was entered into

between Maines, CMT, FMT, 764, and TBT, as respondents, and

Dowling on behalf of the Superintendent of Securities. As part of

the Agreement, each of the respondents accepted the Agreed

Statement of Facts attached to the agreement. In that Agreed

Statement of Facts, the parties acknowledge that between July 1,

2010 and December 17, 2012, CMT raised $701,030 from 36

Prince Edward Island investors in violation of both the Securities

Act of Prince Edward Island and the National Instrument 45-100.

Each of the respondents admitted that CMT failed to obtain a

prospectus with respect to the investment and failed to follow the

security requirements with respect to reporting exempt

distributions.

[497] In accordance with the Settlement Agreement:

1. CMT was barred for a period of 5 years from soliciting

or accepting investment pursuant to National Instrument

45-100;

2. CMT was ordered to pay a fine or administrative

penalty in the sum of $10,000;

3. CMT was ordered to offer a right of rescission and

refund to investors who were not identified as “accredited

investors”;

4. CMT was required to pay investigation costs of $5000;

5. CMT was ordered to provide proper audited financial

statements of CMT to the Superintendent by December 31,

2013.

[498] In addition to the specific sanctions imposed, the plaintiffs

and Maines undertook and agreed:

Not to make any statement, either directly or through any of their counsel,

147

representatives, partners, associates or agents, which is inconsistent with the

Agreed Statement of Facts [set out in the Settlement Agreement]. Any such

statement will constitute a breach of [the] Settlement Agreement.

[499] They each also acknowledged “having received full and

proper independent legal advice with respect to their entry into the

Settlement Agreement”, and “agreed to waive any right to a

hearing and/or appeal with respect to the matter”. The Settlement

Agreement was structured to become binding on the parties upon

approval by the Superintendent of Securities, and to be made

public on approval, both of which occurred on June 5, 2013.

[500] In June 2014, the Ontario Securities Commission (OSC)

issued a Statement of Allegations and a Notice of Hearing

respecting CMT. On June 26, 2014, CMT consented to an order

from the OSC based on the admissions made in the PEI Settlement

Agreement signed in June 2013.

[501] In November, 2015, former counsel to CMT and 764 filed a

Notice of Application for judicial review relating to the securities

investigation. That Notice of Application was abandoned in

October, 2018, by the plaintiffs’ current counsel.

1. Securities Act prohibits disclosure of information

[502] Sections 21 and 36 of the Securities Act govern the

disclosure of information gathered pursuant to the Act:

21.

(1)

Superintendent is not a compellable witness

The Superintendent or anyone acting on the Superintendent’s behalf

(a)

(b)

is not a compelled witness before a court; and

may not be compelled to produce or give evidence in any

proceeding before a court,

with respect to information, records, property or things obtained or

acquired by the Superintendent in the exercise of his or her powers,

functions or duties as Superintendent, or obtained or acquired by an

employee of the Government or an appointee or agent of the

Superintendent in the performance of their powers under Prince Edward

Island securities laws.

Employees, appointees and agents are not compellable witnesses

148

(2)

An individual who is or was an employee of the Government or an

appointee or agent of the Superintendent, in any proceeding in a court

to which the Superintendent is not a party,

(a)

(b)

is not a compellable witness before the court;

may not be compelled to produce or give evidence in any

proceeding before the court; and

(c)

shall not give evidence or produce evidence before the court

without the consent of the Superintendent,

with respect to information, records, property or things obtained or

acquired by that individual in the exercise of his or her powers,

functions or duties under Prince Edward Island securities laws.

...

36.

(1)

Confidentiality of investigation and disclosure of information

Any record, property or thing and all information or evidence obtained

under this Part is confidential and shall not be disclosed by any person

except

(a)

(b)

(c)

to a person’s counsel;

where authorized by the Superintendent; or

as otherwise permitted by Prince Edward Island securities

laws.

Section prevails

(2)

This section prevails notwithstanding the Freedom of Information and

Protection of Privacy Act and any information, evidence or records

referred to in this section are exempt from disclosure under that Act.

[503] Pursuant to the terms of the Securities Act, Dowling did

not personally file an affidavit or provide an affidavit of documents

in the course of this proceeding.

[504] An affidavit was filed on his behalf by one of his solicitors,

Janice Wright. In her affidavit, she referenced the claim against

Dowling, and the Settlement Agreement approved by the

Superintendent of Securities on June 5, 2013. She also advised that

publicly available documents could be downloaded on the

Securities website. She provided the URL for the website, together

with a list of documents showing their titles and the date upon

149

which they were issued.

[505] She disclosed additional documents including:

a)

two press releases issued pursuant to the securities

investigation, dated February 15, 2013 and June 5, 2013;

b)

a Notice of Appeal dated April 24, 2013, and

subsequent Notice of Abandonment dated June 6, 2013;

c)

documents relating to the Ontario Securities

Commission’s reciprocal Order, dated June 2, June 3, and

June 26, 2014;

d)

a Notice of Application for judicial review filed

November 10, 2015, by John W Findlay, previous counsel

to CMT and 764;

e)

a Notice of Abandonment of the application for

judicial review dated November 11, 2018, signed by John

W McDonald, current counsel to CMT and 764; and

f)

various correspondence between McDonald and the

Superintendent of Securities and/or Temelini, counsel for

Dowling.

[506] In correspondence written by McDonald, counsel for the

plaintiffs, to Temelini, counsel for Dowling, McDonald itemized

documents and information he was requesting. In response,

Temelini pointed out that Dowling had been sued personally, and

repeatedly advised McDonald, that Dowling was statutorily

prohibited from releasing records, information, or evidence relating

to the investigation, even for use before a court, other than with the

consent of the Superintendent. Temelini referred to the sections of

the Securities Act under which McDonald could seek consent for

the disclosure of documentation gained in the course of an

investigation. He also advised that in his view the Securities Act

prohibited his client from filing an affidavit of documents as

referenced in Rule 30.02(1).

[507] In the course of case management conferences on this

matter, McDonald was encouraged to seek consent for further

disclosure from the Superintendent, or pursue the judicial review

application filed by previous counsel, or file a motion before the

court in advance of the summary judgment motions in an effort to

secure documentation he felt was required.

[508] McDonald did write to the Superintendent of Securities

specifically stating, “I do not need any consent or decision from the

150

Superintendent of Securities related to the Securities Act, section

21.(2) or section 36.(1), but request a sworn affidavit of documents

and an executed lawyers certificate since the following documents

are part of the public record...” He then listed various documents,

many of which I would not consider to be public documents.

[509] In the application for judicial review filed by the plaintiffs’

previous counsel, some of what the plaintiffs were seeking

included:

(c)

authorization in accordance with s. 36(1)(b) of the Securities Act, for

the public disclosure of the following:

(i)

the affidavits of Steven Dowling, sworn on February 14, 2013;

March 15, 2013; April 15, 2013 and April 26, 2013, together

with all attached exhibits;

(ii)

all notes, recordings, records, property or thing obtained by

Steven Dowling in the course of his investigation from: [a list

of various witnesses].

[510] That application for judicial review was not pursued by the

plaintiffs.

[511] In correspondence to all counsel on this matter on October

31, 2018 McDonald stated:

The affidavit of documents are incomplete. Ordinarily, my clients would move

for a further and better affidavit of documents but this further disclosure of

material and relevant documents can now be argued as part of the summary

judgment motions.

[512] In fact, more than 6 months in advance of the hearing of the

summary judgment motions, all counsel and the court had

determined a schedule for various matters such as the filing of

affidavits and responses, and the cross-examination of witnesses.

As part of the scheduling process, a week of court time was set

aside for the hearing of preliminary motions related to any

outstanding issues including motions for further disclosure or

production of documents. No such motions were made.

[513] Considering the specific statutory prohibition on the release

of information set forth in the Securities Act, I find the onus is on

a person seeking the disclosure of documents amassed in the

course of an investigation to seek the Superintendent’s consent, or

to seek the direction of the court by way of a motion for judicial

151

review or a motion for the defendant to provide a further and better

affidavit documents. I find also that the specific statutory

provisions of the Securities Act take precedence over the general

provisions of Rule 30.02 of the Rules of Court.

[514] Counsel for the plaintiffs repeatedly stated, both before the

hearing and during it, with respect to several issues, that they

intend to provide further and better evidence and more witnesses at

trial than they present on the summary judgment motions.

Counsel maintains this position despite the Lameman decision of

the Supreme Court of Canada to which he frequently refers,

particularly wherein the court states:

[19]

We add this. In the Court of Appeal and here, the case for the plaintiffs

was put forward, not only on the basis of evidence actually adduced on the

summary judgment motion, but on suggestions of evidence that might be

adduced, or amendments that might be made, if the matter were to go to trial....

A motion for summary judgment must be judged on the basis of the pleadings

and materials actually before the judge, not on suppositions about what might be

pleaded or proved in the future. ...

[515] As set out in reasons earlier in this decision, the plaintiffs’

position with respect to providing additional witnesses at a later

date is simply untenable.

2. The “Lady with cancer” rumour

[516] The plaintiffs spent an inordinate amount of time and effort

implicitly or explicitly making claims and allegations against each

of the defendants in respect of a rumour which their own evidence,

received prior to the issuance of the statement of claim, confirmed

did not originate with any of the defendants.

[517] At about the same time as Dowling was contacted by

Curran of ScotiaMcLeod regarding Maines’ solicitation of

investors for CMT, a rumour began to circulate that Maines had

solicited funds for investment from a lady who was dying with

cancer. Several of the defendants did not hear of the rumour until

either “after the fact”, or “in the course of this lawsuit”, or “when it

appeared in the paper”. The defendant MacEachern did hear the

rumour in early September, 2012. Notwithstanding any rumour she

may have heard by then, she approved the renewal of the MOU on

September 10, 2012.

[518] The plaintiffs commissioned Bruce MacDonald, a private

152

investigator from Nova Scotia, whose company is RB MAC

Investigations Ltd., to conduct an investigation into the matters

relating to CMT, and in particular into the securities investigation

on PEI. Counsel for the plaintiffs described the report as being

very thorough entailing the assessment of some 2000 pages of

documentation. With respect to the “Lady with cancer” rumour, the

report of November 14, 2014 concluded:

Based upon my inquiries and the documentation I have reviewed, it appears that

the complaint that triggered the Securities investigation against CMT and Maines

originated from an alleged client of Mr. Edward Curran, who is the Scotia

MacLeod [sic] branch manager for both the Moncton and Charlottetown offices.

The Client was a woman who was supposedly suffering from cancer and

according to the Curran complaint had purportedly been solicited by Maines to

invest all of her savings into CMT.

[519] And further on in the report:

The initial complaint, to the PEI Securities Commission, against CMT was said

to have come from a sick investor that was in danger of being “swindled” out of

her money. Simply put, this person does not and never did exist; based upon my

investigation it appears that this woman was a total fabrication of Mr.

Edward Curran, manager of ScotiaMcLeod in Charlottetown. Although

reported as the catalyst of the securities investigation into illegal trading by CMT

the affidavit of the securities investigator does not mention this investor. The

investigator reports Mr. Curran and his co-worker, Mr. Yousef Hashmi, as the

initiators of the complaint against CMT. (Emphasis added).

[520] That report was in the hands of the plaintiffs a month and a

half before the plaintiffs provided notice of their intention to sue

the Government and others, and almost 5 months before the

statement of claim was filed.

[521] In the course of the oral hearing, in response to a question

from the court, McDonald stated, “I don’t think I can tag the

Government with, as the source of the rumour. Nobody’s been able

to say who was it that started that rumour.” Shortly after he added:

And yeah, I can’t definitively say oh, that gentlemen started the rumour, you

know but knowing the rumour was there you’d expect an investigation to be, to

be done and you’d expect that investigation to be wholesome and thorough. ...

And I’m, I’m cognizant of the fact too that, you’re asking some very good

questions, but don’t forget you’ve got mini trial powers. You know, you can if

you want, you can bring Jessop down and, and we can bring in MacLauchlan.

You know, I don’t know that I wanna fly Walsh over from England, but I, you

know, this is an important action. You know, we, we’d likely be prepared to do

153

it. You know, but ...

[522] Further, during the cross-examination of Maines,

McDonald intervened to respond to a question regarding the source

of the rumour about the lady with cancer. McDonald interjected:

We have got no idea who started the rumour. ... But the fact is we don’t know,

and we don’t have evidence of who created that vicious rumour related to the

lady with cancer.

[523] Paragraph 18 of Maines’ January 2019 affidavit is another

example of unsupported allegations against the defendants. In this

case the allegation was against Jenkins prior to that action being

withdrawn by the plaintiffs in advance of the oral hearing. At

paragraph 18 Maines states, “Jenkins was a willing and

sophisticated investor until the Superintendent of Securities

cover-up was initiated by Jenkins.”

[524] When that statement and other statements like it were

made, the plaintiffs had no evidence whatsoever to support the

allegation. In fact, their own information identified Curran as the

source. Yet, that did not stop them from making their unsupported

allegations in the statement of claim.

[525] Of interest as well is paragraph 156 of the same affidavit in

which Maines quotes an email dated September 19, 2012, from

Jessop to Cutcliffe, copied to Maines. The quote reads:

I have just arrived. I have just been briefed on a few issues regarding unfounded

allegations. I will need to deal with this this afternoon. I am trying to meet with

the branch manager at Scotia McLeod - the source of the allegations. I will

also be meeting with Bill Dow as well. I will need to reschedule our meeting

until tomorrow. ... (Emphasis added)

[526] The theory of the plaintiffs’ case centers on the rumour

about the lady with cancer. They repeatedly suggest that nearly all

of the various defendants were somehow engaged in promoting and

pursuing that rumour in a coordinated effort to take down CMT

and 764 and replace them with local investors to pursue the

objectives of the MOU. They reference the fact that the securities

complaint surfaced at the time the MOU was initially expiring.

They suggest the Superintendent of Securities was instructed to

destroy CMT and was using his pursuit of this “vicious rumour” to

do so.

154

[527] They ignore the fact the MOU was renewed. They ignore

the fact Innovation PEI continued to deal with 764 and seek a

business plan from them well after the renewal of the MOU and

during the currency of the investigation. They ignore the fact there

were no other investors or competitors engaged with Innovation

PEI or any of the other defendants in pursuit of the same objectives

set out in the MOU, with the exception of an unsolicited

introductory letter sent to Government after the original term of the

MOU expired.

[528] The plaintiffs used the rumour about a lady with cancer in

an effort to divert and deflect attention away from what was their

illegal activities. The Superintendent of Securities received a

complaint regarding the illegal distribution of securities. That

investigation concluded with CMT admitting its guilt of breaches

of the Securities Act and National Instrument 45-100. The fact

that many people apparently heard a rumour that some of the

activities involved attempting to sell securities to a “Lady with

cancer” is completely irrelevant. The fact is that a complaint was

received on September 6, 2012, and as a result of the subsequent

investigation it was determined that CMT had illegally sold over

$700,000 of securities to approximately 36 Prince Edward

Islanders. They had violated the Securities Act. Whether one of

those individuals had cancer or not, or was prepared to go public

with that information or not, had no bearing on the outcome of the

securities investigation.

[529] Even if someone had made up a rumour about a lady with

cancer and filed such a complaint with the Superintendent of

Securities, thereby prompting an investigation, the investigation

that was conducted determined there were illegal activities being

undertaken by CMT. I hasten to repeat, there was no evidence

that such a report was filed other than the supposition contained

in RB MAC’s report done on behalf of the plaintiffs. There has

been absolutely no evidence presented showing the investigation

was conducted improperly, was conducted in any malicious

manner, was not conducted in good faith, or that any officer acted

outside the scope of his or her legislative authority, or that the

investigation came to an incorrect conclusion. There have been

allegations, suspicions, and supposition, but what is lacking is

evidence. Apart from all of that, Maines and the plaintiffs each

acknowledged and adopted the Agreed Statement of Facts related

to the Settlement Agreement in which it was clearly and

unequivocally stated the complaint originated with individuals

155

from Scotia McLeod. That acknowledgment of CMT’s guilt was

reiterated over a year later when, by consent of the respondents, the

Ontario Securities Commission issued its own order against CMT.

Allegations of misfeasance against Dowling

[530] The plaintiffs claim Dowling deliberately and unlawfully

exercised his public function and knowingly acted for the improper

purpose of denying the plaintiffs the benefits of establishing the

Simplex Global Transaction Platform in PEI. They claim he

engaged in this unlawful conduct to wrongfully terminate the

MOU. They state he carried out his investigation without

authority, without reasonable grounds, and without evidence; that

in the course of his investigation he shared information with others

in breach of the Securities Act; that he knowingly or recklessly

included false information in an affidavit in support of a motion for

a cease trade order and, without notice to Maines or the plaintiffs,

and without authority, issued a press release regarding the

completion of the investigation and the Settlement Agreement. In

respect of these claims against Dowling, the plaintiffs seek

damages of $50 million.

[531] Dowling specifically denies each of the allegations.

[532] For the plaintiffs to succeed in their claim of misfeasance in

public office against Dowling, they must establish that he engaged

in deliberate unlawful conduct with the intent to harm the

plaintiffs, knowing that his actions would cause such harm.

Further, the plaintiffs must show that Dowling’s conduct was the

legal cause of injuries suffered by them and that those injuries are

compensable in tort law. Negligent conduct does not provide a

basis for a claim of misfeasance in public office.

1. Negligence action barred by statute

[533] Section 2 of the Securities Act states:

2.

Purposes of the Act

The purposes of this Act are

(a)

to provide protection to investors from unfair, improper or

fraudulent practices; and

156

(b)

to foster fair and efficient capital markets and confidence in

capital markets.

[534] The Act sets out the previously discussed requirements for

a prospectus to be filed and includes reference to the provisions for

prospectus exemptions contained in the National Instrument

45-106.

[535] The Office of the Superintendent of Securities is

responsible for administering and enforcing PEI’s security laws to

protect Prince Edward Islanders from fraud and other improper or

unfair conduct. Those called upon to enforce such laws are

required to take actions in the public interest. Those actions may

adversely affect the interests of specific individuals including, in

particular, those who have or are alleged to have violated those

laws. In order to allow agents of the Superintendent to perform

their public functions, they are granted immunity from suit for any

act done in good faith. They are also protected for actions taken in

good faith, but performed negligently or in default of the exercise

of their powers. Section 142 of the Securities Act speaks to that

immunity:

142.

Immunity for persons acting under Prince Edward Island securities

law

No action or other proceeding for damages may be instituted against the

Superintendent, an employee of the Government, an appointee or agent

of the Superintendent, a delegate of the Superintendent, or a recognized

entity acting under powers, functions or duties subdelegated by the

Superintendent,

(a)

for any act done in good faith in the

(i)

performance or intended performance of any duty

under Prince Edward Island securities laws, or

(ii)

exercise or intended exercise of any power or

function under Prince Edward Island securities laws;

or

(b)

for any neglect or default in the performance or exercise in

good faith of the powers, functions or duties described in

clause (a).

[536] This clause will be of significance as I discuss the

particulars of the plaintiffs’ claim against Dowling later in this

decision.

157

2. Issue estoppel and abuse of process

[537] The plaintiffs claim, in effect, that the Settlement

Agreement was the product of Dowling’s misfeasance and bad

faith conduct. Defence counsel argues the plaintiffs themselves

consider their claim against Dowling to be one of negligence,

which is not actionable pursuant to s. 142 of the Securities Act.

Regardless, they submit the plaintiffs’ claims are barred by the

doctrines of issue estoppel and abuse of process.

[538] The plaintiffs rely upon the decision in Toronto v.

C.U.P.E., Local 79, 2003 SCC 63,(C.U.P.E.), for the proposition

they are entitled to “relitigate” the securities investigation and

subsequent Settlement Agreement. However, the plaintiffs have

failed to show their case meets any of the suggested bases for

reopening an investigation referred to in paragraph 52 of C.U.P.E..

For better context, I include references from C.U.P.E., starting at

para. 50:

50 It has been argued that it is difficult to see how mounting a defence can be

an abuse

of

process

(see

Martin

Teplitsk

y, “Prior

Criminal

Convicti

ons: Are

They

Conclusi

ve

Proof?

An

Arbitrat

or’s

Perspect

ive,” in

K.

Whitake

r et al.,

eds.,

Labour

Arbitrati

on

Yearboo

158

k

2001-20

02, vol.

1

(Toronto

:

Landcast

er

House,

2002),

279. A

common

justificat

ion for

the

doctrine

of res

judicata

is that a

party

should

not be

twice

vexed in

the same

cause,

that is,

the party

should

not be

burdene

d with

having

to

relitigate

the same

issue

(Watson,

supra, at

p. 633).

Of

course, a

defenda

nt may

be quite

pleased

to have

another

opportu

nity to

litigate

an issue

originall

159

y

decided

against

him. A

proper

focus on

the

process,

rather

than on

the

interests

of a

party,

will

reveal

why

relitigat

ion

should

not be

permitt

ed in

such a

case.

51 Rather than focus on the motive or status of the parties, the doctrine of

abuse of process

concentrates on the

integrity of the

adjudicative process.

Three preliminary

observations are useful in

that respect. First, there

can be no assumption

that relitigation will

yield a more accurate

result than the original

proceeding. Second, if

the same result is reached

in the subsequent

proceeding, the relitigation

will prove to have been a

waste of judicial resources

as well as an unnecessary

expense for the parties and

possibly an additional

hardship for some

witnesses. Finally, if the

result in the subsequent

proceeding is different

from the conclusion

reached in the first on the

160

very same issue, the

inconsistency, in and of

itself, will undermine the

credibility of the entire

judicial process, thereby

diminishing its authority,

its credibility and its aim

of finality.

52 In contrast, proper review by way of appeal increases confidence in the

ultimate result and affirms both the authority of the process as well as the

finality of the result. It is therefore apparent that, from the system’s point of

view, relitigation carries serious detrimental effects and should be avoided unless

the circumstances dictate that relitigation is in fact necessary to enhance the

credibility and the effectiveness of the adjudicative process as a whole. There

may be instances where relitigation will enhance, rather than impeach, the

integrity of the judicial system, for example: (1) when the first proceeding is

tainted by fraud or dishonesty, (2) when fresh, new evidence, previously

unavailable, conclusively impeaches the original results, or (3) when

fairness dictates that the original result should not be binding in the new

context. This was stated unequivocally by this Court in Danyluk, supra, at

para. 80.

53 The discretionary factors that apply to prevent the doctrine of issue

estoppel from operating in

an unjust or unfair way are

equally available to

prevent the doctrine of

abuse of process from

achieving a similar

undesirable result. There

are many circumstances in

which the bar against

relitigation, either through

the doctrine of res

judicata or that of abuse of

process, would create

unfairness. If, for

instance, the stakes in the

original proceeding were

too minor to generate a

full and robust response,

while the subsequent

stakes were considerable,

fairness would dictate that

the administration of

justice would be better

served by permitting the

second proceeding to go

forward than by insisting

that finality should prevail.

An inadequate incentive

161

to defend, the discovery of

new evidence in

appropriate circumstances,

or a tainted original

process may all overcome

the interest in maintaining

the finality of the original

decision (Danyluk, supra,

at para. 51; F. (K.), supra,

at para. 55).

54

These considerations are particularly apposite when the attempt is to

relitigate a criminal conviction. Casting doubt over the validity of a criminal

conviction is a very serious matter. Inevitably in a case such as this one, the

conclusion of the arbitrator has precisely that effect, whether this was intended

or not. The administration of justice must equip itself with all legitimate means

to prevent wrongful convictions and to address any real possibility of such an

occurrence after the fact. Collateral attacks and relitigation, however, are

not, in my view, appropriate methods of redress since they inordinately tax

the adjudicative process while doing nothing to ensure a more trustworthy

result. (Emphasis added).

[539] The challenge in showing there is any acceptable basis for

relitigation is exponentially more difficult when the respondents

have agreed to and executed a Settlement Agreement with the full

benefit of independent legal advice in advance, after having

reviewed a detailed Agreed Statement of Facts which they

acknowledged and to which they each consented. The plaintiffs are

seeking to relitigate a Settlement Agreement 6 years after the fact

without having provided any evidence of merit showing fraud or

dishonesty and without providing any new, fresh, previously

unavailable evidence which would conclusively impeach the

original findings. Nor have they shown any new context exists

which would render it unfair to maintain the binding nature of the

original conclusions.

[540] The plaintiffs have taken no steps before the Court to

attempt to set aside the Settlement Agreement on the basis of

some ulterior motive being pursued, or to show that the basis of the

Settlement Agreement, being the illegal activity of CMT, did not

occur. Not only have Maines and the two plaintiffs admitted and

agreed that CMT violated fundamental investor protection

provisions under PEI securities laws by illegally distributing

securities, they have not disavowed or even denied the admissions

contained in the Settlement Agreement respecting such illegal

distribution of securities.

162

[541] As mentioned above, an application for judicial review

filed in November, 2015, was not pursued and was formally

abandoned in October, 2018. During the course of the

investigation itself, and prior to the Settlement Agreement being

concluded by the parties, the plaintiffs commenced an appeal

before the PEI Court of Appeal raising the various procedural

irregularities they now seek to pursue in this action. Their appeal,

filed April 24, 2013, was against the Superintendent of Securities.

That appeal was abandoned on June 6, 2013, and the plaintiffs

agreed in the Settlement Agreement not to raise a further appeal.

They have now brought the action against Dowling, the

Superintendent’s agent at the time, rather than against the then

Superintendent herself.

[542] The plaintiffs alleged apprehension of institutional bias

against the Superintendent of Securities in both the Notice of

Appeal filed in 2013 and in the Notice of Application for judicial

review filed in 2015. Both documents allege the investigation was

not conducted in an appropriate manner. Those are the same

issues they raise now in their action against Dowling, despite the

terms of the Settlement Agreement.

[543] In C.U.P.E., Arbour J., writing for herself and 6 other

judges of the Supreme Court of Canada, defined “issue estoppel” at

para. 23 as “... a branch of res judicata (the other branch being

cause of action estoppel) which precludes the relitigation of issues

previously decided in court in another proceeding”. She then

confirmed that for issue estoppel to be successfully invoked, three

preconditions must be met:

(1) the issue must be the same as the one decided in the prior decision,

the prior judicial decision must have been final, and

(2)

(3) the parties to both proceedings must be the same, or their privies.

[544] The Settlement Agreement represents a full and final

settlement of the issues which were the subject of the investigation.

The commitments of each party to the Agreement are set out, with

the plaintiffs agreeing to the sanctions referred to earlier. In return,

the Superintendent agrees not to initiate any other proceedings in

respect of the facts set out in the Agreed Statement of Facts. The

plaintiffs (respondents in the Agreement) waived any right to a

hearing and/or appeal with respect to the matter and undertook and

agreed not to make any statement, directly or indirectly which was

inconsistent with the Agreed Statement of Facts. The final

163

statement of the Settlement Agreement confirms the document

“shall constitute a binding agreement” between the parties.

[545] The Ontario Superior Court of Justice decision in Schwartz

v. Ontario, 2013 ONSC 7244, bears many similarities to the case

currently presented by the plaintiffs. The opening paragraphs

summarize the plaintiff’s action and provide the basis for the

courts disposition of the plaintiff’s case:

1. The Plaintiff brings this action against the Ontario Securities Commission

(“OSC”), its Chair, several of its staff members, the Crown, and the Attorney

General of Ontario, claiming damages for misfeasance in public office and a

number of different causes of action. The Defendants moved to dismiss the claim

under Rule 21.01(3)(d) of the Rules of Civil Procedure on the grounds that it an

abuse of process, or under Rule 21.01(1)(b) to strike the Statement of Claim as

disclosing no reasonable cause of action or constituting a frivolous or vexatious

claim, with no leave to amend.

2

The primary argument put forward by the Defendants is that the

Plaintiff’s claim is res judicata, the crucial issue having already been

decided in prior regulatory and criminal proceedings. For the reasons that

follow, that characterization of the claim is correct and the action must be

dismissed. (Emphasis added)

The court continues:

32 The within claim is not, of course, estopped because its stated causes of

action have been previously adjudicated - the actual causes of action pleaded in

this civil claim are different from those in the prior regulatory and criminal cases

against the Plaintiff. However, the principle of res judicata applies not just to

cause of action estoppel but to issue estoppel. This is relevant “where, the

subject matter of the two actions being the same, it is sought to raise in the

second action matters of fact or law directly related to the subject matter

which could have been but were not raised in the first action.” Chevron

Canada Resources Ltd. v. R. (1998), 232 N.R. 44 (Fed. C.A.), at para 36.

(Emphasis added).

[546] The court then referenced the constituent elements of issue

estoppel, being the same as those cited by Arbour J. in C.U.P.E.,

supra. At para. 34, the court found the various proceedings before

OSC panels were final decisions and, although regulatory in nature,

were “judicial” in that their procedures conformed with natural

justice as is required for issue estoppel to apply.

[547] Schwartz noted the plaintiff had an opportunity to appear

and plead his case or plead guilty, and even to appeal the decision

at first instance. The court stated, at para. 41:

164

41 ...In bringing the claim herein, he is “attempting to challenge the validity

of a binding order in the wrong forum, in the sense that the validity of the

order comes into question in separate proceedings when that party has not

used the direct attack procedures that were open to it (i.e. appeal or judicial

review).” ... More than that, to the extent that the Plaintiff has in fact used the

“direct attack procedures” that were open to him - i.e. the appeal of his criminal

conviction - his appeal has been dismissed. (Emphasis added).

[548] In the case of CMT and 764, both of their “direct attack

procedures” were abandoned. The court made a clear statement

on the impropriety of relitigation, at para. 42, as follows:

42 There is nothing in the record to suggest that putting an end to the

Plaintiff’s case here will work an injustice. The Plaintiff’s claim represents a

stark case of precisely what the doctrine of issue estoppel is designed to

prohibit. For over a century, courts have stressed that they “will not ...

permit the same parties to open the same subject of litigation in respect of

matters which might have been brought forward as part of the subject in

contest ...”, Especially where “the [prior] decree concluded the whole matter,

that [the present court] could not rehear that decree, and that it was final and

conclusive, unless reversed by... the proper appellate tribunal. Henderson v.

Henderson (1843), 67 E.R. 313 (Eng. V.-C.), at 319, 318. (Emphasis added)

[549] Morgan J., in Schwartz, also addressed the precondition for

issue estoppel to be successfully invoked, being that the parties to

both proceedings must be the same, “or their privies”. In that

circumstance the court was dealing with previous findings in both

criminal and regulatory environments. The court noted, at para. 46,

that “the OSC, as agent for the Crown, is interchangeable with Her

Majesty in Right of Ontario, who is in turn interchangeable with

the Attorney General of Ontario, as a party to the criminal

prosecution.” The court then noted that the individual defendants

from the Securities Commission were equally interchangeable with

their employer as parties. In fact if they had not been acting as

agents for their employers, they would not be the subject of a

lawsuit.

[550] The court then concluded that the third precondition was

met, starting at para. 47:

47 As a formal matter there appears to be an almost-but-not-quite-perfect

mirroring of the parties to the prior regulatory/criminal proceedings and the

present proceeding. Blair J.A. pointed out in EnerNorth Industries Inc., Re,

[2009] O.J. No. 2815 (Ont. C.A.) that directors, officers, and, in certain

circumstances, even creditors have sufficient identity of interest with a corporate

party that they are its “privies”. As far back as Ontario Sugar Co., Re,

[1911] O.J. No. 76 (Ont. C.A.), the Ontario Court of Appeal held that a

165

prior judgement on the same issue is “binding and conclusive between the

parties and their privies.” In this context, “[p]rivity requires parallel

interests in the merits of the proceeding, not simply a financial interest in

the result.” Glenko Enterprises Ltd. v. Keller, [2008] M.J. No. 65 (Man. C.A.),

at para 42. (Emphasis added).

48. This language has remained until modern times an integral part of the way

that courts have explained issue estoppel. The Court of Appeal indicated in Bear

Island Foundation v. Ontario (1999), 126 O.A.C. 385 (Ont. C.A.), at para 29,

that issue estoppel “means that any action or issue that has been litigated

and decided cannot be retried in a subsequent lawsuit between the same

parties or their privies.” [emphasis added] As the Manitoba Court of Appeal

explained in Glenko Enterprises Ltd., supra, at para. 42, a person is for these

purposes a privy of a party - i.e. adequately identified with a party - where,

as among the Defendants here, there is a “community or privity of interest

between them, or a unity of interest between them.” (Emphasis added).

[551] The court concluded that further proceedings were barred

by issue estoppel from being relitigated.

[552] Schwartz also addressed the issue of abuse of process,

citing C.U.P.E., supra:

52 Even if the doctrine of issue estoppel were not to apply because of

concerns about the identity of the parties to the series of proceedings, the

present claim would amount to an abuse of process. As the Supreme Court

stated in Toronto (City) v. C.U.P.E., Local 79, [2003] 3 S.C.R. 77 (S.C.C.), at

para 38-39 that, “the doctrine of abuse of process has been extended beyond

the strict parameters of res judicata while borrowing much of its rationales

...” Arbour J. indicated that those rationales include: “that there be an end

to litigation and that no one should be twice vexed by the same cause”.

C.U.P.E., Local 79, ibid., citing Donald J. Lange, The Doctrine of Res Judicata

in Canada (Markham, ON: Butterworths, 2000), at 347. (Emphasis added)

...

55

Successive OSC panels and the courts have already concluded that the

Plaintiff’s entire claim is built on an incorrect view of the Cease Trade Order of

May 1, 2006, as continued. That issue cannot be relitigated in the guise of the

present action; to do so would be an abuse of process. (Emphasis added).

[553] In Behn v. Moulton Contracting Ltd., 2013 SCC 26,

Lebel, J., writing for the court stated:

40

The doctrine of abuse of process is characterized by its flexibility. Unlike

the concepts of res judicata and issue estoppel, abuse of process is

unencumbered by specific requirements. In Canam Enterprises Inc. v. Coles

(2000), 51 O.R. (3d) 481 (Ont. C.A.), Goudge J.A., who was dissenting, but

whose reasons this Court subsequently approved (2002 SCC 63, [2002] 3 S.C.R.

307 (S.C.C.)), stated at paras. 55-56 that the doctrine of abuse of process

166

engages the inherent power of the court to prevent the misuse of its

procedure, in a way that would be manifestly unfair to a party to the

litigation before it or would in some other way bring the administration

of justice into disrepute. It is a flexible doctrine unencumbered by the

specific requirements of concepts such as issue estoppel. See House of

Spring Gardens Ltd. v. Waite, [1990] 3 W.L.R. 347 [C.A.], at p.358.

(Emphasis added in Behn)

One circumstance in which abuse of process has been applied is

where the litigation before the court is found to be in essence an

attempt to relitigate a claim which the court has already

determined. See Solomon v. Smith, supra. It is on that basis that

Nordheimer J. found that this third party claim ought to be terminated

as an abuse of process.

added.]

[Emphasis

41 As can be seen from the case law, the administration of justice and

fairness are at the heart of the doctrine of abuse of process. In Canam

Enterprises and in C.U.P.E, the doctrine was used to preclude relitigation of an

issue in circumstances in which the requirements for issue estoppel were not met.

But it is not limited to preventing relitigation. For example, in Blencoe v. British

Columbia (Human Rights Commission), 2000 SCC 44, [2000] 2 S.C.R. 307

(S.C.C.), the Court held that an unreasonable delay that causes serious prejudice

could amount to an abuse of process: paras. 101-21. The doctrine of abuse of

process is flexible, and it exists to ensure that the administration of justice is

not brought into disrepute. (Emphasis added).

[554] Finally, Binnie J., in Danyluk v. Ainsworth Technologies

Inc., 2001 SCC 44, at para. 54, stated:

... Issue estoppel simply means that once a material fact such as a valid

employment contract is found to exist (or not to exist) by a court or tribunal

of competent jurisdiction, whether on the basis of evidence or admissions,

the same issue cannot be relitigated in subsequent proceedings between the

same parties. The estoppel, in other words, extends to the issues of fact, law,

and mixed fact and law that are necessarily bound up with the determination of

that “issue” in the prior proceeding. (Emphasis added).

[555] The Superintendent of Securities is a “tribunal of

competent jurisdiction” with its own structures and powers to

investigate and determine matters in accordance with the Securities

Act. As such, when considering the application of the doctrines of

issue estoppel and abuse of process, previous decisions of the

Superintendent of Securities ought to be treated in the same

manner as previous decisions of a “court” as referred to in Behn

above, and elsewhere. They may be appealed, where appropriate,

or be the subject of a judicial review, but they are not to be

relitigated in a new proceeding.

167

[556] I find each of the three preconditions have been met. The

plaintiffs’ claim against Dowling is barred both by the application

of the doctrine of issue estoppel and by the application of the

doctrine of abuse of process, as further addressed below.

[557] It is difficult to imagine a more clear-cut case for the

application of issue estoppel than with respect to the claim against

Dowling. Not only are the plaintiffs seeking to have this court, in

the context of a summary judgment motion, relitigate matters

determined by a tribunal of competent jurisdiction, but the

plaintiffs confirmed the Agreed Statement of Facts, made

admissions of CMT’s guilt, and agreed to the sanctions imposed by

the Settlement Agreement and subsequent order.

[558] The plaintiffs’ claim against Dowling for misfeasance in

public office is based upon their claim the investigation was illegal,

unauthorized, and conducted for improper purposes. In signing the

Settlement Agreement, the plaintiffs themselves chose to verify

and validate the conclusions of the investigation, abandon any right

to a hearing or further inquiry, and forego any right to an appeal.

[559] With respect to the first precondition for the application of

issue estoppel, the plaintiffs are seeking to have the matter

reopened to relitigate the very issues they chose to acknowledge

and resolve.

[560] As for the second precondition, the Superintendent is a

tribunal of competent jurisdiction with procedural safeguards and a

right of appeal. The plaintiffs were not unaware of their rights, or

silent with respect to the issues they envisioned. They filed and

abandoned an appeal, and subsequently filed and abandoned an

application for judicial review. The decision of the

Superintendent and the Settlement Agreement were, and were

intended to be, final and binding. In addition, as I stated earlier, the

plaintiffs have not even denied the admissions they made regarding

CMT’s illegal distribution of securities.

[561] The circumstances of this case seemed to be captured in a

quote cited at para. 30 of Schwartz:

30

In a description that is particularly apt to the Plaintiff’s approach to this

litigation, the House of Lords commented in Hoystead v. Commissioner of

Taxation (1925), [1926] A.C. 155 (Australia P.C.), at 165, that:

168

Parties are not permitted to begin fresh litigations because of new

versions which they present as to what should be a proper apprehension

by the court of the legal result either of the construction of the

documents or the weight to certain circumstances. If this were

permitted litigation would have no end, except when legal ingenuity

is exhausted. (Emphasis added).

[562] With respect to the third precondition, I find the parties to

both proceedings are the same, in that Dowling is the “privy” of the

Superintendent, being an agent of the Superintendent and the

designated investigator with respect to the matters against Maines

and the plaintiffs. Dowling and the then Superintendent share a

“community or privity of interest between them, or a unity of

interest between them”.

[563] I am satisfied that the defendants have met the

preconditions necessary to invoke issue estoppel with respect to the

action against Dowling, thereby showing there is no genuine issue

requiring a trial with respect to Dowling. The plaintiffs have

provided no evidence of merit or argument sufficient to counter the

evidence and submissions of the defendant Dowling and I am

satisfied I can fairly and justly dispose of the action against

Dowling pursuant to the defendant’s summary judgment motion,

and that I can do so without any need to exercise the additional

powers available to the court pursuant to Rule 20 and I hereby do

so.

[564] The Superintendent of Securities made a final and binding

determination. In addition, that final and binding determination

was consented to and accepted by the plaintiffs. I further find that

to allow the issues which were the subject of the Settlement

Agreement to be relitigated in the guise of the present action would

be an abuse of process, and would bring the administration of

justice into disrepute.

Conclusions regarding allegations of misfeasance against Dowling, including as was alleged to

have involved other defendants

[565] Separate and apart from all of the above, the defendant

Dowling has shown through evidence and argument that there is no

meritorious evidence to support any of the plaintiffs’ allegations of

misfeasance against him. Included in the allegations is that

information Dowling acquired in the course of the investigation

169

was unlawfully shared by him with Campbell, MacLean, Dow,

Paynter, and MacEachern, for the purpose of discrediting the

plaintiffs. There are also allegations with respect to other

defendants’ interactions with Dowling, suggesting they initiated or

encouraged, or instructed Dowling to undertake an investigation.

Nine of the other defendants provided affidavits directly addressing

those interactions. Eight of them were cross-examined by counsel

for the plaintiffs. Dowling’s counsel prepared, in summary form,

the substance of the evidence of those other defendants, and one

non-defendant, with respect to their interactions with Dowling. I

have reviewed the affidavit evidence and cross examinations and I

accept the summary as an accurate reflection of their evidence.

The summary is as follows:

Campbell

Never initiated, encouraged, counseled, recommended or

otherwise suggested any process of any kind at the Office of

the Superintendent of Securities; No information arising from

the securities investigation was ever shared or given to him

by Dowling.

MacLean

Never initiated, encouraged, counseled, recommended or

otherwise suggestion any process of any

kind at the Office of the Superintendent of

Securities; Was generally aware that the

Superintendent was conducting an

investigation regarding investments in CMT

and possible other companies.

Curley

Dowling was acting pursuant to investigation orders issued

pursuant to the Securities Act.

Paynter

Dowling called her by telephone on October 3, 2012, and

stated an investigation was underway regarding Maines, CMT

and TBT; Dowling asked questions about Maines, CMT and

TBT but did not provide any details or information; Dowling

requested documents and correspondence respecting these

parties; Did not receive any further information from Dowling;

Never received any instructions or other directions whatsoever

from Dowling.

Mix

On October 4, 2012, received an email from Paynter stating

that she had been interviewed by Dowling; No information

from the securities investigation was ever shared or given to

him by Dowling; Never received any instructions or other

directions from Dowling.

MacEachern

No information arising from the investigation by the

Superintendent was ever shared or given to her by Dowling.

170

LeClair

Dow

Never initiated, encouraged, counseled, recommended or

otherwise suggested any process of any kind at the Office of

the Superintendent of Securities; No information arising from

the securities investigation was ever shared or given to him by

Dowling.

Did not receive any confidential information regarding the

Plaintiffs with respect to the securities investigation.

CutcliffeDid not receive any confidential information regarding the plaintiffs

with respect to the securities investigation; Never spoken,

corresponded with or met Dowling and did not receive any

information from Dowling.

[566] The evidence in the affidavits of the foregoing witnesses

was not altered or impeached on cross-examination. Once again,

the direct evidence from those defendants is more reliable and

credible than the second hand and indirect evidence contained in

Maines’ affidavits.

Misfeasance or negligence

[567] Notwithstanding the plaintiffs’ present their claim as one

for misfeasance in public office, Maines’ January affidavit

summarizes the plaintiff’s theory of their case against Dowling as

one in negligence, in paras. 2(f) and (g) as follows:

(f)

when the decision was made to endorse an alternative payment services

platform the securities investigation was contrived based on the false

rumour that an elderly “LADY WITH CANCER” was deprived of her

life savings;

(g)

no action was issued by the plaintiffs against the Superintendent of

Securities because the Superintendent had a clear duty to investigate the

“LADY WITH CANCER” allegation and disclose the true facts to the

public but the investigation was negligently conducted by Dowling

and the true facts were not disclosed; (Emphasis added)

[568] Further, there was an exchange of correspondence in

December, 2018, between McDonald and the Office of the

Superintendent of Securities, to which I have referred earlier. On

behalf of the Superintendent of Securities, who is not a party to this

action, Curtis Toombs, a departmental solicitor responded to

McDonald. In his correspondence of December 14, 2018, to

171

Toombs, McDonald stated, “Our complaint against Mr. Dowling

is that he conducted a negligent investigation and failed to

conduct a balance [sic] investigation...”

[569] Similarly, in correspondence to Temelini on November 20,

2018, McDonald stated, “A portion of our Summary Judgment

Motion argument is that Dowling conducted a negligent

investigation by failing to interview the following persons ...”

[570] In the course of the cross-examination of Dow, McDonald

stated to Dow’s counsel, Mr. Tighe, “The whole point, though,

Mr. Tighe, is we’re saying this investigation conducted by Mr.

Dowling was a negligent investigation. ...”

[571] As noted above, s. 142 of the Securities Act is a complete

statutory bar to any lawsuit against Dowling for the negligent

performance of his public functions. In light of that fact, counsel

for Dowling submits that, much as the court found in Schwartz, at

paras. 56-57, the plaintiffs are taking a claim of what they believe

to be a negligent investigation and are attempting to convert it into

a claim in misfeasance in public office.

56 Separate from the res judicata argument, the Defendants submit that

the entire

claim is, in effect, a veiled malicious prosecution claim. Having

concluded that the present action is barred by operation of issue estoppel and/or

abuse of process, there is no need to review this argument in detail.

57 I will observe, however, that the gist of the present claim is that the

Plaintiff was misled, or his complaints ignored, by the Crown, the OSC, and

prosecutors in the prior proceedings. That is just what one would allege if this

action were to sound in malicious prosecution; however, since malicious

prosecution can only be a cause of action where a plaintiff was acquitted in

the prior proceedings, and here the Plaintiff was either found liable or

pleaded guilty in those proceedings, malicious prosecution would not fit the

facts. The causes of action that are actually pleaded here appear to have

been manufactured by the Plaintiff as attempts to raise a malicious

prosecution claim indirectly where it cannot be pleaded directly. (Emphasis

added)

[572] The plaintiffs have failed to provide any evidence showing

Dowling was “instructed” to use the securities investigation to

destroy the plaintiffs’ business in favour of another company, or

that Dowling acted in any deliberate or intentional manner with the

intent to injure the plaintiffs.

[573] The plaintiffs have failed to show misfeasance. Even if the

172

plaintiffs’ claim against the defendant Dowling had been in

negligence, for which there was no evidence, such a claim is barred

by the Securities Act at any rate.

[574] There are other allegations against Dowling all of which

relate to matters that would have been known to the plaintiffs prior

to the execution of the Settlement Agreement. Those allegations

represent another example of the plaintiff’s attempt to relitigate a

matter to which res judicata applies.

[575] In light of all of the foregoing, I grant summary judgment to

the defendant, Dowling, with respect to all of the plaintiffs’ claims

against him.

Status of MOU

[576] Earlier I outlined the law relating to breach of contract. The

defendants submitted the MOU was not a valid and binding

contract. The plaintiffs submitted it was. Rather than determine the

status of the MOU at the outset, I elected first to address all of the

claims of breach of contract against the various defendants. I have

done so and I have found the evidence presented by the plaintiffs

regarding their allegations to be without merit. I did not find any

satisfactory or sufficient evidence of breach of contract. Having

said that, I will now draw my conclusions regarding the status of

the MOU, considering in particular the summary of the law of

breach of contract set out at paras. 163 to 176 of this decision.

1. An agreement to agree

[577] The MOU states in the recitals that the parties “are willing

to enter into formal discussions regarding the terms and conditions

of an agreement to be entered into between them...”

[578] The objective, or purpose of the MOU, stated in Article 1,

“is to set out the parameters for the Parties to commence formal

negotiations regarding the terms and conditions to be set out in an

agreement to be signed ...”

[579] Article 11 specifically states the MOU is a record of the

general understandings reached among the Parties and “is not

intended to have legal effect and shall not constitute a binding

agreement among the Parties...”. After stating each party shall act

in good faith in further discussions and negotiations, it states that,

173

“for the avoidance of doubt, neither Party is obliged to enter into

further agreements.”

[580] In examining the MOU as a whole, with the exception of

four specified articles, the MOU is not a binding contract, but an

agreement to agree. That intention is clearly and unequivocally

specified in the body of the document.

2. Good faith obligation

[581] The plaintiffs also claimed Innovation PEI did not act in

good faith after the execution of the MOU. Article 3 states that,

“Upon entering into this MOU, the Parties agreed to meet as soon

as possible in order to commence negotiations in good faith...”

Further, in Article 11, it states, “Each Party shall act in good faith

in all further discussions and negotiations relating to the matters

contemplated by this MOU.”

[582] In Georgian Windpower, supra, and in Bhasin v. Hrynew,

supra, the courts expressed the need to recognize the basic or

fundamental principle involved in negotiating a contract that each

party seeks to maximize its own interests. At para. 168 of

Georgian Windpower the court stated:

168

Similarly, an agreement to negotiate in good faith is unenforceable. As

Lord Ackner said in Walford, at p. 138, “... the concept of a duty to carry on

negotiations in good faith is repugnant to the adversarial position of the parties

when involved in negotiations.” See too Cedar Group, supra, trial decision, at

paras. 3 to 6.

[583] Continuing at para. 171, the court addressed clauses

requiring parties to use “reasonable efforts” or “best efforts” to

reach an agreement:

171

It follows, in my view, that an agreement to use best efforts to negotiate,

like good faith, is similarly unenforceable. Such an agreement is uncertain and

incapable of giving rise to an enforceable obligation. It is also contrary to the

rationale behind negotiation that each party seeks to reach the most favourable

agreement for themselves.

[584] Bhasin concluded that contracting parties owed a general

duty of honesty to each other. That “means simply the parties must

not lie or otherwise knowingly mislead each other about matters

directly linked to the performance of the contract.”

174

[585] I find there was no enforceable obligation for either party to

act in good faith or to “use their commercially reasonable efforts to

enter into [a further] agreement”, as is set out in Article 3.

[586] Having said that, I found no evidence whatsoever of any

bad faith conduct on the part of any defendant or of any breach of

any defendant’s general duty of honesty to the plaintiffs.

3. Articles imposing binding obligations

[587] The MOU expresses that Articles 4, 6, 7, and 8 are binding

obligations.

[588] I have dealt with Articles 4 and 6, referring to exclusivity

and confidentiality respectively. I find both parties were bound by

the terms of those articles. I have also found there was no breach of

either article by any of the defendants.

[589] Article 7 simply stated what the duration of the MOU was

and that it could be terminated on 30 days written notice from

either party.

[590] Article 8 simply stated neither party would make any public

announcement concerning the MOU without the other party’s prior

approval.

[591] I find there were no breaches by any defendant of any

binding obligations set out in the MOU.

The law of Spoliation - overview

[592] The plaintiffs are seeking to hold the Government liable for

spoliation, or destroying evidence, in the course of terminating

various email accounts of former employees. The Government

denies those claims.

[593] Spoliation is defined in The Canadian Oxford Dictionary

(Oxford University Press, Toronto, 1998) as “the destruction,

mutilation, or alteration of a document to prevent its being used as

evidence.”

[594] The Alberta Court of Appeal set forth a useful explanation

of what constitutes “spoliation”. In the case of McDougall v.

175

Black & Decker Canada Inc., 2008 ABCA 353, at para. 18, the

Alberta Court of Appeal said:

[18]

St. Louis, therefore, stands for the following proposition. Spoliation in

law does not occur merely because evidence has been destroyed. Rather, it

occurs where a party has intentionally destroyed evidence relevant to

ongoing or contemplated litigation in circumstances where a reasonable

inference can be drawn that the evidence was destroyed to affect the

litigation. Once this is demonstrated, a presumption arises that the evidence

would have been unfavourable to the party destroying it. This presumption

is rebuttable by other evidence through which the alleged spoliator proves that

his actions, although intentional, were not aimed at affecting the litigation, or

through which the party either proves his case or repels the case against him.

(Emphasis added).

...

[25] In my view, the court’s conclusion in Lamont is a symptom of a

broader semantic problem that exists in the case law concerning the

meaning of the word “spoliation”. The original meaning of this word,

adopted by the Supreme Court in St. Louis, comes from the Latin phrase

omnia praesumuntur contra spoliatorem and refers to the act of intentionally

destroying evidence. Spoliation should not be confused, however, with the

unintentional destruction of evidence. This may also give rise to a remedy, but

the remedy will be founded on other principles. For example, where the

opposing party is put to the task of having to prove its case through the use of

other evidence, in circumstances where it could reasonably have anticipated that

the evidence would exist, an award of costs might be appropriate. In addition,

the courts have a broad discretion to fashion remedies to avoid abuse of process,

and the court’s rules of procedure are designed to assist the parties in ensuring

trial fairness. Obviously, where the goal is to award remedies to even the playing

field, the reason for destruction is less important. Generally such remedies are

covered, and should be covered, through application of existing practice rules

(or the development of further rules) and the exercise of the court’s discretion to

avoid an abuse of process or award costs. Intention may not be necessary in

those circumstances. But the unintentional destruction of evidence is not

spoliation, and it is not appropriate to presume that missing evidence would

tell against the person destroying it where the destruction is unintentional

and the trier of fact cannot draw the adverse inference that the evidence

was destroyed because it would tell against the spoliator. (Emphasis added)

[595] In Black & Decker, the court concluded that courts in

Canada “have not yet found that the intentional destruction of

evidence gives rise to an intentional tort, nor that there is a duty to

preserve evidence for purposes of the law of negligence, although

these issues, in most jurisdictions, remain open.”

[596] The Supreme Court of Canada dealt with spoliation in the

early case of St. Louis v. R., (1896), 25 S.C.R. 649; 1896

CarswellNat 23, referenced in Black & Decker above. In that

176

case the head timekeeper for a bridge construction project verified

the presence of individual workers on the job site at different

points during each day and recorded that information in his log.

Someone from the paymaster’s office would then make a copy of

the information and prepare pay envelopes for the workers based

on that information. After the information was re-copied, the

original time books were routinely destroyed. Sometime later,

there were allegations that workers’ names had improperly been

added to the pay lists. There was a claim that the time records had

been intentionally destroyed and that it should be presumed the

destroyed records would have been detrimental to the case of the

person destroying them, the so-called spoliator. In rejecting this

claim, the Supreme Court of Canada stated:

6

I have assumed that the books and documents destroyed by the appellant all

had connection with his present claim and would have been evidence if they had

not been destroyed. But, as far as I can make out, none of these books, with the

exception of the original time-books kept on the works themselves, could at all

have any bearing on this issue. And as to these time-books, it is in evidence

that they were always destroyed after having been recopied in the office.

And, that this is so, is made evident in the case by the respondent whose own

time-books kept by its own officers have also been destroyed and could not be

produced. As to cheque books and bank pass-books, they would have thrown no

light on the case, as it is in evidence that the appellant who had other large

contracts going on at the same time as this one used to draw indiscriminately on

his bankers for the funds wanted for all his contracts.

...

38 What are the facts in the present instance? The appellant has burnt his

books and all his papers, except those relating to the firms of Berger, St. Louis

& Cousineau, and St. Louis Brothers, and the pay-lists and rolls produced at the

trial. He had done so long before the institution of the present action, at a

time when he did not have any cause to suspect that the government would

contest his claim. He has himself stated that if he had had any reason to

entertain any such suspicion, or that his books and other papers would have

been required for the purposes of this suit, he would not have destroyed

them. (Emphasis added)

[597] The documents in St. Louis were destroyed in the regular

course of business and prior to the commencement or

contemplation of any litigation. What happened did not constitute

spoliation. In the alternative, the Supreme Court concluded that any

adverse presumption was rebutted by other evidence presented.

[598] Catalyst Capital Group Inc., v. Moyse, 2016 ONSC 5271,

provides a good summary of the law relating to spoliation and

demonstrates how evidence relating to the allegation is assessed.

177

Newbould J. stated:

[134] Catalyst says that Mr. Moyse engaged in spoliation of documents and

that an inference should be drawn that the destroyed evidence would have been

damaging to the defence of Mr. Moyse, and by extension West Face. It says the

spoliation should detract from the reliability and credibility of Mr. Moyse.

[135] Spoliation is an evidentiary rule that gives rise to a rebuttable

presumption that destroyed evidence would be unfavourable to the party

that destroyed it. Catalyst argues that spoliation in this case should be

recognized as an independent tort. In argument Catalyst contended that damages

could be assessed against Mr. Moyse and that an award covering the costs of the

case would be appropriate. Catalyst also contended that West Face would be

liable for the same amount on a theory of vicarious liability.

[136] The parties agree that a finding of spoliation requires four elements

to be established on a balance of probabilities, namely:

(1) the missing evidence must be relevant;

(2) the missing evidence must have been destroyed intentionally;

(3) at the time of destruction, litigation must have been ongoing or

contemplated; and

(4) it must be reasonable to infer that the evidence was destroyed

in order to affect the outcome of the litigation.

[137] The drawing of an inference was described in Spasic Estate v. Imperial

Tobacco Ltd. (2000), 2000 17170 (ON CA), 49 O.R. (3d) 699 (C.A.),

leave to appeal refused, [2000] S.C.C.A. No. 547, at para. 10 as:

The spoliation inference represents a factual inference or a legal

presumption that because a litigant destroyed a particular piece of

evidence, that evidence would have been damaging to the litigant.

[138] Thus there must be evidence of a particular piece of evidence that

was destroyed.

[139] Courts in Canada have permitted a pleading of a tort of spoliation to

stand to proceed to trial on the basis articulated in Hunt v. Carey Canada Inc.,

1990 90 (SCC), [1990] 2 S.C.R. 959 that it was not plain and obvious

that such an action could never succeed. See Spasic, supra and McDougall v.

Black & Decker Canada Inc. (2008), 2008 ABCA 353 (), 97 Alta. L.R.

(4th) 199 (C.A.). I was referred to no case in which spoliation was

recognized as a tort and I do not believe the tort of spoliation has been

recognized in Canada. Catalyst contends that the tort should be recognized

in this case.

[140] I will deal with the various claims of spoliation made by Catalyst. The

178

first has to do with Mr. Moyse deleting his browsing history from his personal

computer.

...

[144] I accept Mr. Moyse's evidence as to why he deleted his internet

browsing history. There is no evidence to contradict his statements as to

why he deleted his internet browsing history. He was a young man at the

time who had a very close relationship with his girlfriend who is now his fiancée.

He did not want his internet searching to become part of the public record. In

deleting this history, he did not intend to breach the order of July 16, 2014 or to

destroy any evidence relevant to this litigation. This lack of intention to

destroy relevant evidence precludes any finding of spoliation resulting from

the deletion of his internet browsing history.

...

[165] I accept that Mr. Moyse had no intent to destroy relevant evidence on his

BlackBerry, and there is no evidence that any relevant evidence was

destroyed. The call logs of his calls with West Face are in evidence.

[166] In summary, I find that Catalyst has not established that Mr. Moyse

intentionally destroyed evidence in order to affect the outcome of this

litigation. There is no basis to find that or infer a presumption that Mr.

Moyse destroyed evidence that would be unfavourable to him.

(Emphasis added)

[599] That decision was upheld by the Ontario Court of Appeal in

The Catalyst Capital Group Inc., v. Moyse, 2018 ONCA 283. At

para. 43 of its decision, the Court of Appeal referred to Robb

Estate v. Canadian Red Cross Society (2001), 2001 24138

(ONCA), and noted that the existence of an independent tort of

spoliation was an open question in that court.

[600] The decision in Nova Growth Corp. et al. v. Andrzej

Roman Kepinski et al., 2014 ONSC 2763 is similar to the Catalyst

case, and followed the same principles. In that case, Newbould J.

also stated:

[314] The inference requested by the plaintiffs is that some destroyed document

would have helped the plaintiffs’ case. Speculating about what might have

been destroyed is not good enough for an inference to be raised. There must

be a particular piece of evidence that has been destroyed that is relevant.

Without knowing that it would not be possible to make any meaningful

inference. (Emphasis added).

[601] The British Columbia Court of Appeal described

“spoliation”, or the destruction of documents, as “an evidentiary

179

rule which raises a presumption - not an independent tort.”, in

Endean v. Canadian Red Cross Society et al., 1998 6489

(BCCA).

[602] In Leon v. Toronto Transit Commission, 2014 ONSC

1600, (aff’d at 2016, ONSC 3394 (Divisional Court), the plaintiff

was a passenger on the TTC bus on August 20, 2010. She claimed

that before she was able to sit down, the bus accelerated and she

fell, causing her to be injured.

[603] At an earlier date, the buses had been fitted with video

cameras in an effort to address an increasing number of assaults

against TTC employees. The cameras recorded events on the bus,

which recordings were stored on the buses hard drive. After 15

hours of operational time, new recordings would overwrite the

previous recording unless there was reason to take specific steps to

retain the initial recording for a longer period.

[604] On October 6, 2010, the TTC received the first notice that

the appellant planned to commence litigation against it as a result

of her alleged fall. The plaintiff asked the court to draw an

inference that the recording would have supported the plaintiff’s

case.

[605] Penny J. concluded, at paras. 39-40 that:

[39] ... The mere fact that Ms. Leon said she was injured from an alleged fall

on the bus is insufficient, standing alone, to give rise to an apprehension of

intended litigation or to found an intention to destroy records in the face of

contemplated litigation.

[40] ... on these facts, it is simply not possible for any reasonable trier of

fact to draw an inference that the TTC knew, on August 20, 2010, that

litigation would be brought or that the video was destroyed intentionally to

affect contemplated litigation. Any such conclusion would, at best, have

been pure speculation. (Emphasis added)

[606] In Bucknol v. 2280882 Ontario Inc., 2018 ONSC 5455,

the defendant operated a nightclub called Classic Lounge

(“Classic”). On May 5, 2012, the plaintiff was a customer in the

lounge when a fight broke out between two other patrons. The

plaintiff alleges he was struck in the face with a beer bottle and

was injured. Classic had surveillance cameras on the premises

which captured footage 24 hours a day, 7 days a week. The video

footage was catalogued for one month, after which it was deleted if

180

there was no notice given that there was a reason to retain it.

Counsel for the plaintiff wrote to Classic on June 29, 2012

advising it was contemplating litigation. By that time, the footage

had already been overwritten. The plaintiff argued that an adverse

presumption should be made against the defendant as a result of

the destruction of the video.

[607] The court found that, notwithstanding Classic was aware of

the incident when it occurred, it was not reasonable for Classic to

assume litigation was contemplated and they had no notice of such

intention until after the evidence was destroyed in the ordinary

course of business. The court therefore held (at para. 126) that,

“there is no evidence that would allow me to infer that the evidence

was destroyed in order to affect the outcome of the litigation.”

Classic’s motion for summary judgment was granted.

[608] While courts have identified the legal elements of

spoliation necessary to seek an evidentiary presumption, (as

itemized in Catalyst, above, and elsewhere), no court has yet found

spoliation to form the basis of an actionable tort, or to extend to a

remedy which includes an award of damages. (See also Endean

supra, at para. 9).

Allegations of Spoliation against Government, Ghiz, and

Stewart

[609] The plaintiffs claim against Ghiz, Stewart, and the

Government for damages for spoliation in the amount of $50

million. They claim the Government “deliberately and

permanently deleted contrary to the provisions of the Archives and

Records Act the emails of LeClair, Beck and MacEachern which

emails would have confirmed the allegations made by the

plaintiff”. Specifically, they claim that Ghiz, “without the

authority to do so under the provisions of the Records and Archives

Act [sic], ordered the destruction of the emails of,” LeClair and

Beck, and that Stewart did so with respect to the “destruction of the

emails of MacEachern”. The plaintiffs seek to hold the

Government vicariously liable for the alleged actions of Ghiz and

Stewart. (See paras. 2A(a), 187 (v), 200A - 200M, and 214 of the

amended statement of claim).

[610] The plaintiffs allege the emails were “important public

records that were relevant to current issues of public interest” and

that they were destroyed “to prevent their scrutiny in the future,”

181

and that the destruction of emails “may prevent” the plaintiffs from

proving their claim. The claim does not allege, however that the

emails were destroyed to affect this litigation, nor does it allege

that this litigation was ongoing or even contemplated on the

“destruction” dates.

[611] The defendants Ghiz and Stewart acknowledged that the

necessary forms to cancel the email accounts respectively of

LeClair and MacEachern were completed by them.

[612] The affidavits of Stewart and Ghiz showed that they

understood that such forms had to be completed for all employees

who were no longer employed by the Government of Prince

Edward Island. They understood the forms were used by IT Shared

Services (ITSS), who were responsible for government technology,

for the purposes of security and administration of email accounts

and further, that former employees would no longer have access to

their accounts after the forms were completed. Neither Stewart or

Ghiz had any knowledge of the procedures followed by ITSS after

a form was received.

1. LeClair’s emails

[613] LeClair left his employment with the Government on

October 17, 2011, and Ghiz signed the required “Employee

Removal Request Form” on October 19, 2011. Ghiz had never

met Maines in his capacity as Premier of Prince Edward Island, nor

during his tenure did he ever have any dealings with Maines, CMT

or 764.

[614] On October 19, 2011, Ghiz had no knowledge of any

emails in the email account of LeClair that related to Maines, CMT

or 764, and Ghiz had no knowledge of any MOU, (which was not

created until July 6, 2012). Further, as of December 3, 2018,

when Ghiz executed his affidavit, he had never seen a copy of the

MOU and confirmed he had not directed anyone to submit an

MOU to Innovation PEI; had provided no assurance to anyone that

any such MOU would be signed by the Government or any other

party; and did not insist on any article being included in the MOU,

and did not author, negotiate or suggest any contents of the MOU.

His testimony was confirmed on cross-examination, and was not

contradicted by any other testimony.

2. Beck’s emails

182

[615] Beck, who held the position of Clerk of Executive Council,

passed away suddenly on April 13, 2012. The Employee Removal

Request Form with respect to Beck was signed on September 4,

2012. It was signed by Karen Stanley, Finance Manager in the

Executive Council Office, not by Ghiz as alleged by the plaintiffs.

When Ms. Stanley signed the form to cancel Beck’s email account,

she had no knowledge of any emails in the account, and had no

knowledge of any MOU involving the plaintiffs, and had no

knowledge whatsoever of, or dealings with, Maines, CMT or 764.

3. MacEachern’s emails

[616] MacEachern’s employment with Government ceased on

April 20, 2013. On September 10, 2013, Stewart signed a LAN

Access Removal Information Form which had been filled in by

human resources manager, Leah Eldershaw, in relation to

MacEachern’s email account. At the time of signing the Form,

Stewart had no knowledge of any emails in the account relating to

Maines, CMT or 764 and had no knowledge of any dispute

regarding the MOU or of any pending lawsuit. Notice of this

lawsuit was first provided on December 30, 2014.

[617] Regarding the cancellation of MacEachern’s email account

after her departure from Government, steps were taken to appoint

an assistant as a proxy to have access to MacEachern’s email

accounts. On the form, the question, “Do you want user files on

network deleted?”, was answered “No”. In that way the assistant

had access to the account to deal with email continuing to come

into the account. Without any knowledge of a pending or

contemplated lawsuit on any matter, the discussion regarding the

preservation of any of MacEachern’s emails focused on whether

there was a need to preserve every single email, given the

limitation of licenses and storage capacity for the Government.

For example, Stewart, his assistant, and the Department’s human

resource manager discussed whether it was necessary to retain all

emails granting approval for loans. It was concluded that any such

loan approval emails would be housed in other files of other

sections of Innovation as support for the issuance of a cheque on a

loan. They concluded, therefore, there was no need to retain the

electronic version of those emails.

[618] Numerous emails to and from MacEachern are found

throughout the documents filed with the court. No evidence was

183

presented to show any specific email or information was deleted

knowing litigation was contemplated, or was deleted intentionally

to affect the outcome of that litigation. As was stated by

Chamberain in Misfeasance in a Public Office (Toronto: Thomson

Reuters, 2016) at p. 6:

Equally important are the types of conduct that are not susceptible to

misfeasance claims. ... Similarly, there can be no action in misfeasance for ...

the legitimate exercise of discretion. ... The misfeasance tort is not intended to

give plaintiffs a forum ... to challenge the exercise of discretion by public

officers.

4. Standard practice

[619] Tracy Wood, Chief Operating Officer of IT Shared Services

(ITSS) for the Government stated in her affidavit that:

As a matter of standard practice, Forms are required to be filled in for all

employees who leave the civil service. (Emphasis added).

[620] Wood stated in her affidavit that ITSS received

approximately 1696 such forms between 2007 and 2013. She

further advised that the general procedure following receipt of a

Form was that the email accounts of former employees were

disabled and, after a brief period, the email accounts were removed

by staff of ITSS. A backup of the email accounts was available to

ITSS for a period of 365 days, after which the accounts were no

longer recoverable. She stated:

There were a number of reasons for this email account procedure at ITSS,

including the cost and types of licenses available to the Government of Prince

Edward Island for email accounts and the volume of storage available to the

Government of Prince Edward Island.

[621] None of the evidence given by those involved in

completing the forms and procedures to cancel the email accounts

of the three former employees, namely LeClair, Beck, and

MacEachern was shaken or altered on cross-examination, or

contradicted by other evidence presented.

[622] I note that the Auditor General concluded in her report that,

“When an employee leaves government, normal practice is to

have the email account removed.”

[623] In Maines’ 2019 affidavit he states:

184

The PEI Auditor General confirms her findings in Public Accounts February 15,

2017 that Premier Ghiz authorized the destruction of Beck’s email account on

September 04, 2012 which breached the Archives and Records Act.

[624] In their amended statement of claim, at paragraph 200E,

CMT and 764 stated:

On or about September 4, 2012, Ghiz, without the authority to do so under the

provisions of the Records and Archives Act, [sic] ordered the destruction of the

emails of Beck, while the MOU with the plaintiff, 7645686, was still in effect.

[625] Both Maines’ statement in his affidavit and the plaintiffs’

statement in their amended statement of claim are false. On

cross-examination on that affidavit, Maines was shown a copy of

the transcript from which he had claimed to have taken the Auditor

General’s quote. He acknowledged no such quote was there. He

acknowledged his statement was not correct and that Ghiz was not

involved in the cancellation of Beck’s email account.

[626] Also in Maines’ 2019 affidavit he alleged that the emails

and records of Ghiz were deleted on May 29, 2015, which he

maintains is evidence of “bad faith” litigation and further

confirming evidence of “misfeasance in public office”. In fact,

Ghiz’s emails were never deleted. The email account of Ghiz was

copied and preserved the day after the initial statement of claim in

this matter was filed. That was done notwithstanding i) Ghiz was

not a party to the action in 2015 (he was added some 3 years later),

and ii) counsel for the plaintiffs did not identify Ghiz as having any

relevant documents for the purpose of the litigation.

[627] Maines confirmed on cross-examination that in their notice

pursuant to the Crown Proceedings Act, in which the plaintiffs

identified the persons they considered had processed, authored, or

received documents relevant to the litigation, they themselves did

not identify Ghiz, Beck, or MacEachern as having any such

documents.

[628] Counsel for the plaintiffs stated in his factum that, “The

spoliation of evidence is proven in the PEI AG Report and the

Standing Committee Transcripts and numerous other documents...”

He then refers to other documents such as the press release

announcing Ghiz’s intention to resign as Premier, and the RB

MAC investigation report.

185

[629] The information to which McDonald refers confirms the

cancellation of the email accounts of three former civil servants,

namely LeClair, Beck, and MacEachern. However, the plaintiffs’

evidence is missing the essential elements necessary to establish

spoliation, as set out in the Catalyst decision above.

[630] First, as the Alberta Court of Appeal pointed out in Black

& Decker, “Spoliation in law does not occur merely because

evidence has been destroyed. Rather, it occurs where a party

has intentionally destroyed evidence relevant to ongoing or

contemplated litigation in circumstances where a reasonable

inference can be drawn that the evidence was destroyed to

affect the litigation.” (Emphasis added).

[631] In this case, while the destruction of information was

intentional in that it occurred as a result of a deliberate act and not

an accident, it occurred in the regular course of business, or as “a

matter of standard practice”. It was not an isolated action or one

that occurred out of the ordinary course.

[632] In order to intentionally destroy “evidence” you must know

or be able to reasonably infer that the information you are

eliminating is, or is likely to be, evidence. Hence, it is necessary to

know that the information is relevant to ongoing or contemplated

litigation. The three email accounts in question were cancelled in

October 2011, September 2012 and September 2013, respectively,

shortly after the departures of each of the former employees. The

first account cancellation happened some 3 years and 3 months

before any litigation was contemplated or any notice given. The

last account cancellation was 1 year and 4 months prior to any

contemplation or notice of litigation. It is simply not reasonable

to infer that these email accounts were eliminated with any

intention to affect the outcome of this current litigation, or any

contemplation thereof.

[633] In addition, the plaintiffs must prove on the balance of

probabilities that the information they indicate was destroyed was

relevant to the matters before the court. In order to assess the

relevance of any information, it is essential to know precisely what

that information is. Catalyst confirmed the spoliation inference

represents a factual inference or a legal presumption that because

a litigant destroyed a particular piece of evidence, that

evidence would have been unfavourable to the litigant. Thus, as

186

Catalyst concludes, “there must be evidence of a particular

piece of evidence that was destroyed.” The plaintiffs in this case

have presented no evidentiary basis for that inference because no

relevant document or documents have been identified as having

been destroyed. Speculating about what has been destroyed is of

no value. Imagining a cache of information existed which may

have helped one prove their case does not satisfy the requirements

necessary to prove spoliation has occurred.

5. Archives and Records Act

[634] The plaintiffs referenced the Auditor General’s report in

which they state she found there had been noncompliance by

certain branches of Government with the requirements of the

Archives and Records Act, R.S.P.E.I. 1988, Cap. A-19.1. That

Act refers to a process whereby it can be determined whether or for

how long government records are to be retained or when they may

be destroyed. Even if the plaintiffs had shown that the emails they

suggest were missing were “records” pursuant to the Archives and

Records Act, which they did not do, breach of a statute is neither

a tort nor misfeasance. The plaintiffs have failed to provide any

evidence demonstrating anything remotely close to the essential

elements required to establish spoliation.

Conclusions regarding spoliation allegations against

government, Ghiz and Stewart

[635] In summary, the defendants have successfully shown that

the plaintiffs have failed to satisfy the essential elements to

establish spoliation. The plaintiffs have failed to show that the

eliminated information or “destroyed evidence” would have been

relevant to the issues currently before the court. The plaintiffs

have also failed to show that the evidence was destroyed

intentionally or that it would be reasonable to infer that the

evidence was destroyed in order to affect the outcome of the

litigation. It is clear that at the time of the destruction of the

information, litigation was not ongoing, nor was it shown that it

was contemplated, or ought reasonably to have been contemplated.

The unintentional loss or destruction of information which, if

relevant, might constitute evidence, does not provide the

foundation for spoliation.

[636] As well, there was some reference during the hearing to

emails from Mix’s account not being found. They were not

187

shown to have been removed or destroyed pursuant to any request

of any official, nor was there evidence of any individual conduct

leading to any removal of emails. Again, without any evidence of

intentional conduct undertaken for the purpose of affecting pending

or contemplated litigation, there is no basis for finding an

evidentiary presumption that any cancelled, deleted, or destroyed

emails would have been unfavourable to the plaintiffs.

[637] The defendants have shown there is no genuine issue

requiring a trial with respect to the plaintiffs’ allegations of

spoliation. The plaintiffs presented no evidence of merit, and no

argument that would refute the evidence presented by the

defendants or show the plaintiffs’ claims had a real chance of

success.

[638] The plaintiffs also failed to identify any damage, injury or

harm resulting to them from the alleged spoliation other than the

potential inability to prove their allegations, which is based on their

speculation that the eliminated information would have been

relevant and favourable to them.

[639] For the reasons set out above, I grant summary judgment to

the Government, Ghiz and Stewart with respect to the allegations

of misfeasance and spoliation of evidence.

Request to submit further documentation

[640] The hearings in this matter were completed on April 26,

2019. On August 29, 2019, the court received notification that

plaintiffs’ counsel was seeking permission to file additional

evidence. Prior to considering that request, all counsel were asked

to provide their brief written submissions on the matter. Following

receipt of those submissions, I held a conference call with counsel.

[641] Counsel for the defendants were unanimously opposed to

allowing the plaintiffs to file any further documentation on the

summary judgment motions, which had been the subject of four

days of hearing in April, 2019. A deadline for the provision of all

documents to be considered on the motion had been determined by

agreement of all counsel in mid-2018.

[642] Notwithstanding the deadline had passed, plaintiffs’

counsel asked for permission to file additional documentation in

February, 2019. All opposing counsel, while reluctant to reopen the

188

document review, consented to McDonald filing additional

documents on the condition those would be the final documents

filed in light of the approaching hearing date. A consent order to

that effect was prepared and signed.

[643] Once again, early in the course of the hearing in late April,

2019, McDonald asked permission to file additional

documentation. Defence counsel again consented, on condition

there would be no further requests. McDonald confirmed no further

requests would be forthcoming.

[644] The latest request comes some four months after the

completion of the hearings. It is not surprising that defence counsel

expressed their opposition to allowing any further documents to be

filed at this point in time. They also objected to the manner in

which McDonald presented his request to the court.

1. Plaintiffs’ counsel failed to respect Rule 1.10

[645] Rule 1.10 of the Rules of Court prohibits any counsel from

having direct or indirect communication with the court on a matter

without the consent of all other counsel. If counsel wishes to bring

a matter before the court and fails to receive consent, they are

required to file a motion in order to proceed. McDonald sought

consent from opposing counsel to contact the court, and was

refused. Notwithstanding that, McDonald wrote to the court and

asked to have his additional documentation accepted. On previous

occasions on this matter I have had to advise McDonald to refrain

from corresponding to the court without the consent of opposing

counsel. I confirmed to all counsel that McDonald was in breach of

Rule 1.10 and that the proper manner to present his report would

have been by way of a motion.

[646] Despite that, I considered the nature of the information

counsel wanted to submit and the fact it had not been available to

plaintiffs’ counsel prior to the completion of the hearing. After

hearing from all counsel on the conference call on September 6,

2019, I concluded I would accept the additional documentation

referred to in McDonald’s five-page letter of August 29, 2019. I

also stated that, apart from accepting the letters I had already

received from McDonald and each of the defendants’ counsel, I

would accept no further submissions on these motions prior to

making my decision.

189

2. Nature of additional documentation

[647] Pursuant to a FOIPP request, McDonald received a copy of

a letter dated July 10, 2019 from the current Deputy Minister of

Economic Development, Tourism and Culture, Erin

McGrath-Gaudet to Karen Rose, the Information and Privacy

Commissioner for Prince Edward Island. The correspondence

referred to an Information Technology Shared Services (ITSS)

report regarding Brad Mix’s email account. The incident report

was initiated on March 17, 2015 and was closed on March 22,

2015.

[648] The ITSS report of March 2015 confirms that emails sent

by Mix between June 12, 2010 and April 11, 2012 were not

contained in the archived records of his emails. Other emails

remained intact. It appears from the report that efforts to recover

the sent emails, or to explain why they were not archived, were

unsuccessful. According to the report, the ITSS technician assigned

to respond to the request attempted to locate another archive which

might contain the files, but found none. He attempted to re-create

the archive and allow it to be opened in GroupWise (GW), but the

emails were not re-created. The report concluded with the

statement that, “He [Mix] got a new BB [BlackBerry] in August

2012 so it’s possible emails got deleted accidentally at that time”.

The report offered no further conclusion to explain the absence of

the emails, other than the suggestion they may have been

accidentally deleted during a technology upgrade.

3. Where does the gap in Mix’s sent email take us?

[649] In effect, the plaintiffs’ request to submit further

documentation constitutes an extension of their claim of spoliation

of evidence by the Government or its related defendants.

[650] I have explained the specific factors that are required to be

proven to establish spoliation. Those specifics are required for

good reason. The fact alone that somebody is missing some emails

does not allow us to jump to the conclusion they are missing for

some sinister reason. Nor does it allow a plaintiff to embrace the

failure to retain emails and convert that failure into a presumptive

award of damages. That would be equivalent to a plaintiff being in

a head-on collision with a defendant, and arguing the defendant is

liable because his brake lights were burned out. While it is an

offence to drive without properly functioning brake lights, without

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more, that has no relevance to the cause of a head-on collision.

[651] Regarding any missing emails, it is necessary to show

specifically what information is absent, and to show it was

deliberately deleted or destroyed for the specific purpose of

affecting the outcome of ongoing or pending litigation.

[652] It is essential to note that the claims against Mix in the

plaintiffs’ amended statement of claim relate to the period of time

during which the MOU was in place - i.e., between July 6, 2012

and September 4, 2012, and again from September 10 – October

10, 2012. The claims against Mix specifically relate to actions

occurring “during the course of the MOU” or “during the period of

exclusivity”, which is the same period of time as the MOU was in

place. The issue regarding non- archived sent emails relates to a

period well before that, being between June 2010 and April 2012.

The claims against Mix do not relate to matters in 2010, 2011, or

prior to July 6, 2012. No relevance has been shown to Mix’s

emails from earlier periods.

[653] The court has been advised that counsel acting for the

Government and Mix expressed in the requisite affidavit of

documents that all relevant materials have been provided to the

plaintiffs in accordance with the Rules. The plaintiffs have filed

nothing to indicate anything to the contrary. Specifically, they

have not provided any evidence indicating how emails sent years or

months before any discussion whatsoever about entering into a

specific MOU are of any relevance to the claims before the court.

While the defendants have been able to establish there is no

evidence raising a genuine issue for trial with respect to the

additional documentation filed, the plaintiffs have failed to satisfy

the onus upon them and provide some evidence indicating the

opposite is the case. I find the failure to archive all of Mix’s sent

emails has not been shown to be of any relevance to the motions

before the court.

No evidence of damages

[654] There is a complete dearth of evidence in relation to any

damages purportedly suffered or incurred by the plaintiffs.

Whether one considers the plaintiffs’ claims for breach of contract

or misfeasance in public office, (including misfeasance in public

office by way of spoliation of evidence), such a claim is not

complete or actionable unless the plaintiff has suffered damages

191

and has provided evidence of such damages.

[655] Apart from staking their claims in multiples of $50 million,

the plaintiffs have referred to damages in paras. 211 and 212 of the

amended statement of claim, as follows:

211.

The financial projections of the revenue that would be generated to

CMT and 7645686 had the Simplex Global Transaction Platform been

implemented in Prince Edward Island were substantial and were

estimated to be $60 million per annum in a report prepared by

PriceWaterhouseCooper.

212.

As a result of the breach of contract.[sic] 7645686 suffer damages as

follows:

(a)

the lost opportunity costs of having an established Simplex

Global Transaction Platform operating in Prince Edward

Island, including lost potential profits that would have

resulted, and

(b)

the reputational damage and the loss of opportunity costs of

establishing the Simplex [sic] in other jurisdiction in North

America and the loss of the goodwill associated with the

exclusive licence with Simplex to establish their platform in

other jurisdictions in North America.

[656] Regarding para. 211, I have reviewed the facts with respect

to the lack of evidence connecting CMT and 764 to the e-gaming

project in which MC engaged Simplex to provide a report.

[657] Regarding para. 212, I have reviewed the terms of the

MOU, noting in particular Article 9 of that document states:

9. Save as expressly set out herein, neither of the Parties shall be liable to

the other for any consequential or economic loss suffered by the other as a

result of a breach of this MOU. (Emphasis added)

[658] While Article 9 begins by saying, “Save as expressly set out

herein”, there is no further reference to damages in the MOU. I

note as well that there was no evidence whatsoever presented by

the plaintiffs showing they had any license, exclusive or otherwise,

with Simplex to establish any “platform” in Prince Edward Island

or elsewhere in North America. I note further that the MOU itself

did not speak of establishing a Simplex Global Transaction

Platform, but only of entering into formal discussions with respect

to TBT (764) potentially establishing a “financial services centre”,

which concept was undefined, on PEI.

192

[659] McDonald focuses on saying his clients have suffered

“direct” damages and therefore they are not claiming

“consequential” damages which are prohibited by the MOU. He

ignores the fact that in addition to not being responsible for any

“consequential loss”, neither party is responsible for any

“economic loss suffered by the other party as a result of a breach of

this MOU.”

[660] Quite apart from that, however, the plaintiffs have failed to

provide one iota of financial evidence setting out even one dollar

of damages. They state in paragraph 211 that had Simplex’s

Platform (with which they have not shown they were connected)

been established, its revenue was estimated to be $60 million per

annum according to Price Waterhouse Cooper (PWC). The

plaintiffs did not file any report from PWC or anyone else showing

any loss whatsoever. In fact, in their factum, they advise they will

submit their PWC report “at the trial”. This presents another

situation in which the plaintiffs have made a strategic decision for

which they must accept the consequences. By withholding their

PWC report, the report is not subject to review by opposing

counsel. No one can be cross-examined with respect to its

purported contents. Again, it is appropriate to draw an adverse

inference against the plaintiff for its failure to present direct

evidence on the motion.

[661] The plaintiffs stated the nature of loss they are claiming,

but never supported those claims with anything but numbers drawn

out of thin air. Even if they had somehow shown the estimated

revenue to be $60 million per year, for which there is not a scintilla

of evidence, they have failed to show what the estimated expenses

would have been. What if their expenses were in the range of $61

million a year? Basic common sense shows how completely

untenable their position is. Again, I am left in disbelief that the

plaintiffs could claim what is a minimum of $150 million in

damages, and yet on a summary judgment motion in which they are

required to put their best foot forward, they filed nothing to show

they incurred any damages at all.

[662] Another inexplicable statement in their factum regarding

damages is that, “A motion for bifurcation may be initiated.”, as if

that somehow relieves them of the obligation to provide evidence

of damages as opposed to presenting puffery.

[663] A breach of contract is not compensable unless a plaintiff

193

“proves” it has suffered damages. A finding one has committed

misfeasance in public office is not made in the abstract. A

fundamental element of misfeasance in public office, as set out in

Odhavji and other cases, requires that the plaintiff “prove” it has

suffered material damages which were not only foreseeable, but

were actually foreseen. As I stated before, an allegation in the

statement of claim is simply that; an allegation, until it is proven.

The bar has been set high, and the plaintiffs’ claims have failed

even to get off the ground.

[664] The Court of Appeal in its decision in CMT et al. v.

Government of PEI et al., 2018 PECA 28, at paragraph 36, stated:

36 As well, there is nothing in the plaintiffs’ evidence that pertains to the

fourth element of damages. In that regard, the plaintiffs’ submissions on the

appeal do not address the harm done to them, except to speak of a future PWC

report and a future request for bifurcation of the trial by liability and damages.

(Emphasis added).

[665] On the aspect of damages alone, the plaintiffs’ claims for

breach of contract and misfeasance in public office fail, and I grant

summary judgment to all defendants on all aspects of the claims

against them. The defendants have shown there is no merit to the

plaintiffs’ claims regarding damages. The plaintiffs failed to

provide evidence or argument to show there is any real chance their

position would meet with success. As a result, I find there is no

genuine issue requiring a trial.

Quality of evidence and presentation of material and

submissions on behalf of the plaintiffs

[666] After considering all of the materials presented on this

matter, together with the oral submissions made during the several

days of the hearing, I am struck by the similarities between the

plaintiffs’ materials and presentation in this case, and that

described by the court in paras. 39-43 inclusive in Sweda, (2014

ONSC 1200):

[39] This is a difficult exercise, not just because of the size or complexity of the

claim, but because Sweda has not organized its materials and analysed the

evidence to make it clear what evidence it has in respect to each of the

allegations. There is evidence in the record, not referenced in the factum, which

bears on some allegations. There are details of evidence pleaded that have not

194

been analysed in the affidavits. There are exhibits to the affidavit evidence that

are referenced in general terms in the affidavits, but are not analysed or

explained.

[40] Overlaying this confusion, Sweda alleges that its difficulty establishing its

case arises because of non-production from Burnbrae. The materials do not

include motion materials for any motion to compel further production. What I

have been told is that Burnbrae has refused to produce its own internal

egg-grading documents on the basis that they are not relevant. The extent of the

requested production is not clear: the conspiracy allegations spread from 2000

“to the present” (presumably around 2009 or 2010). It is not clear whether the

inspection reports for impugned shipments to Sweda have been produced,

although it seems to be common ground that those shipments passed inspection

at Burnbrae but failed inspection at Sweda (in both instances the inspections

were carried out by federal inspectors). It was not clear to me what other

disclosure has been requested from Burnbrae and refused, and there is nothing

identified in the record that provides this information. A motion for production

from L.H. Gray was scheduled before the Master in December 2013, and was

pending at the time of the motion before C.J. Brown J.; I was not advised of any

motion that had been brought in respect to contested production from Burnbrae.

[41] The so-called missing production is not described with precision (aside

from the general category of egg-grading data). It is not tied to specific issues

in the case. And in the final pages of Sweda’s factum, it is linked to every

conceivable issue in the case. For example:

(a) In respect to the unparticularized allegations of negligence, Sweda

argues: “At this stage of the proceedings where there has been

non-disclosure of nearly every significant document by [Burnbrae] and

L.H. Gray, the Court should not dismiss any claim until full disclosure

is complete. In the event the documents and discovery show every

action against the Plaintiffs was intentional then the Plaintiffs will drop

the negligence claim. Without proper disclosure it is premature to

make that decision now.”[23]

(b) In respect to the allegations of libel, Sweda argues that the

so-called “Jackson letter” libeled Sweda. Mr Klei, who apparently

wrote and sent the letter, had some “contact” with Burnbrae. This

claim against Burnbrae ought not to be struck because Sweda “need[s]

disclosure and discovery to provide the information required to

properly investigate this claim.”[24] There is no evidence that there is

outstanding disclosure from Burnbrae relevant to this issue. On the

record before me, there is no evidence, whatsoever, that Burnbrae

published the Jackson Letter or is responsible in law for its publication

by Mr Klei.

[42] It is Sweda’s responsibility to present its case systematically, in a way

where the significance of its evidence can be grasped. Sweda has not done this

anywhere in its materials. For example, as summarized above, there are

multiple allegations of conspiracy, covering a broad range of anti-competitive

trade torts and statutory causes of action over roughly a decade. In paragraph

62 of its factum, Sweda sets out a four part test for civil conspiracy in roughly

195

the formulation I adopt in my analysis of these claims, below. Following a

summary of emails in 2008 and 2009 that seem directed towards the issue of

L.H. Gray deliberately sending substandard eggs to Sweda, Sweda then argues:

“these emails and other documents are evidence of conspiracy between all the

Defendants, however it is likely that [Burnbrae] has been the instigator of the

conspiracy. Only full disclosure and discovery will tell”. This is not analysis

of the evidence as it relates to the multiple allegations of conspiracy over a ten

year period. And there is no justification for the statement that “likely

[Burnbrae] has been the instigator of the conspiracy”.

[43] To be clear, I am not dismissing this action against Burnbrae for a failure

of advocacy in the organization and presentation of materials. In this section,

below, I analyse the claims as summarily as I can, based on my review of the

entire record. Then I review the record, from beginning to end, addressing

specific items of evidence that I have not referenced in my analysis of the claims.

And third, I return to the statement of claim, to cover any allegations made in it

that, arguably, are not encompassed in my earlier analysis of the claims and the

evidence, and my summary of the case derived from the claim for relief in

paragraph 1 of the Fresh Statement of Claim. I do this, despite the inevitable

repetition of materials, to make it clear to Sweda that I have considered its case

from all angles. I am firm in my conclusion that, at least as regards the claims

as against Burnbrae, Sweda has failed to put its best foot forward and

demonstrate evidence on which it could succeed at trial, and that its failure to do

so cannot be laid at the feet of Burnbrae for any failure of disclosure.

[667] As in Sweda, I have not dismissed the plaintiffs’ action

against any defendant for a failure of advocacy in the organization

and presentation of materials. However, the overall failure of the

plaintiffs to put their best foot forward and present evidence on

which the court could conclude its claims have a real chance of

success, has led me to grant summary judgment to the defendants

in respect of all claims made by the plaintiffs.

Summary judgment is appropriate

[668] These motions are about evidence. First, did the

defendants present enough evidence for the court to conclude there

is no genuine issue requiring a trial? Second, did the plaintiffs

present enough evidence for the court to conclude their case has a

real chance of success?

[669] We operate on the basis of the Rules of Court and the rules

and law of evidence. That governs our approach to acceptance of

evidence. We rely on the adversarial process to provide us with

testimony that is subjected to challenge by the parties opposite who

present a different version of events. All evidence is assessed for

credibility in light of its staying power on cross-examination and

any supporting or contradictory evidence presented to the court.

196

[670] People are free to say many things in public without having

to substantiate them. However, when it comes to a hearing in

court, one is required to substantiate what they claim. There is a

huge difference between what might be accepted for public

consumption and that which can be demonstrated to be legally

worthy of support in a court of law. With all due respect to

members of the media, many allegations and accusations that make

their way into the media die on the vine when their proponents are

required to provide proof of what they have claimed. Regardless

of the number of times a plaintiff has managed to have their claim

repeated in the public domain, a court cannot ignore or set aside

conflicting evidence, or evidence disproving that party’s claim, and

find in their favour.

[671] This motion for summary judgment is not a government

inquiry seeking to determine if the government got value for its

investments in various projects or followed all of its policies and

procedures in issuing grants or loans to recipients. It is not a

newspaper story reciting the untested allegations of one party or

another to a dispute. It is not a private investigation undertaken by

one of the interested parties. By comparison to other types of

processes such as the ones to which I have just referred, a motion

before the court subjects the evidence presented by each side to far

greater scrutiny in a manner designed to uncover the truth

respecting contested events. Irrelevant statements, supposition,

suspicion, rumour, hearsay, unattributed comments,

unsubstantiated allegations, argument, and opinion do not carry the

day. Facts do: facts supported by admissible evidence.

Conclusions reached are based on applying the law to the proven

facts.

[672] It is at the very essence of our system of justice that anyone

pursuing a claim against another must present proof of that claim,

or have their claim dismissed. In this case, the plaintiffs have

failed completely to substantiate their allegations against the

defendants. It is due to the complete lack of any credible or reliable

evidentiary basis for the plaintiffs’ claims that they are being

dismissed in their entirety.

[673] Summary judgment motions, as detailed in Hryniak, are

about proportionality. The prescribed “culture shift” is to move

away from the conventional trial in favour of proportional

procedures tailored to the needs of the particular case. Summary

197

judgment rules must be interpreted broadly, favouring

proportionality and fair access to the affordable, timely and just

adjudication of claims. The reformed summary judgment

procedures were described by the Supreme Court of Canada as “a

legitimate alternative means for adjudicating and resolving legal

disputes.”

[674] The present case is a textbook example of the type of case

that should proceed by way of summary judgment motion.

Several thousand pages of documents were presented to the court

and reviewed and discussed by counsel from all sides, and by the

court. In accordance with the principles of Hryniak, I have

concluded that this matter can be fairly and justly adjudicated in a

timely, affordable, and proportionate manner provided by the

summary judgment procedures. I find the evidence presented on

behalf of the plaintiffs discloses no genuine issue requiring a trial. I

have also concluded that no issue meets the threshold requiring me

to use the additional fact-finding powers granted to the court under

Rules 20.04 (5) and (6).

[675] A full trial of this matter would have exposed all parties to

a tremendous amount of time, effort and expense. Instead, after a

detailed review of the best evidence the plaintiffs could present, it

is clear their claims are wholly without merit. It would be a

complete failure to respect the principle of proportionality if this

matter was allowed to proceed any further.

Request to strike statement of claim

[676]

The defendants also attacked the nature and quality of the

pleadings presented in the plaintiffs’ amended statement of claim.

In addition to seeking summary judgment, the Government and

related defendants have asked, in the alternative, i.e., if summary

judgment is not granted, that the amended statement of claim be

struck out in its entirety as it violates the rules of pleadings.

[677]

As a start, it was acknowledged during the hearing that CMT cannot maintain an

action with respect to the MOU, as it was not a party to that document.

[678] In addition there are various comments in the plaintiffs’

factum which address claims not referenced in the amended

statement of claim, such as their submissions regarding a claim for

“breach of confidence”, for which no evidence was presented.

198

[679] However, the problems with the plaintiffs’ amended

statement of claim are even more fundamental than that. The

statement of claim in a civil action lays the foundation for the

causes of action being asserted. The tone and content are strictly

within the control and discretion of the plaintiff. It ought to

provide a roadmap for the court to follow in considering the case

for the plaintiff and in determining the case to be met by the

defendant. Its contents are critically important to all involved,

namely, the plaintiffs, the defendants, and the court.

[680] As noted at the beginning of this decision, the initial

statement of claim was struck out in its entirety for flagrantly and

repeatedly breaching the rules of pleading. (See CMT v. Gov’t of

PEI et al. 2016 PESC 4). The plaintiffs were granted permission to

recommence their claim, provided their new statement of claim

respected the rules of pleading. Their second statement of claim

was filed, and it was subsequently amended to add additional

parties.

[681] The amended statement of claim now before the court is

substantially the same as the original statement of claim, and

breaches virtually all of the same rules of pleading as the original

statement did. In addressing the Government’s alternative

argument, a paragraph by paragraph review of the amended

statement of claim reveals the repeated breaches. While I am not

setting forth the detail of each of the offending paragraphs, as I did

with the original claim, I am satisfied that a very large proportion

of the entire claim should be struck out for the same reasons given

in my previous decision. After striking out the offending

paragraphs, what remains is an unintelligible statement of claim,

incapable of repair. Therefore, in the alternative to my decision

on the summary judgment motions, I strike out the amended

statement of claim in its entirety, without leave to amend.

[682] I say that after consideration of all of the factors addressed

in my previous decision at CMT v. Gov’t of PEI et al. 2016 PESC

4, where I struck out CMT’s claim and granted them leave to

amend. At para. 83 of that decision I stated:

[83]

Having said that, Rule 25.11 provides that when the court strikes out all

or part of the pleading, it may do so “with or without leave to amend”. I

consider it only fair and just to grant the plaintiffs the opportunity to start afresh

and file a newly drafted statement of claim. The Rules of Court are not difficult

to follow. If the plaintiffs are incapable of succinctly stating the material facts

199

of their claim without reliance on inappropriate or improper pleadings, their

claim should not be allowed to proceed. Any newly drafted statement of claim

must not only take into account the specific issues addressed herein, but must

also reflect the overall intention of the rules of pleading.

[683] It is evident the amended statement of claim filed in this

matter was filed without any regard whatsoever for the findings set

out in CMT v. Gov’t of PEI et al. 2016 PESC 4.

Costs

[684] The defendants have been successful in all aspects of their

motions. They seek costs on a substantial indemnity basis in light

of the plaintiffs’ unfounded assertions the defendants committed

intentional unlawful acts either by violating the terms of the MOU

or by committing misfeasance in public office. The plaintiffs also

alleged the Government acted in bad faith.

[685] Allegations of this nature strike directly at the core of the

defendants’ reputations, whether they are public servants,

politicians, lawyers, or private individuals. In this case, it is not as

if the plaintiffs came close to proving the serious and scandalous

allegations they made, but just fell short. Their allegations were

without any factual basis. Because their reputations are at stake,

each defendant was obliged to mount a vigourous defence. Given

the complete absence of any evidence of merit supporting the

plaintiffs’ allegations, the defendants are entitled to recover their

costs on a substantial indemnity basis. Further, I declare the costs

to be payable forthwith from the funds held in court as security

pursuant to the previous orders of this court.

Disposition

[686] I hereby grant each of the defendants’ motions for summary

judgment with costs on a substantial indemnity basis payable

forthwith from the funds held by the court as security for costs. In

the alternative, I strike the plaintiffs’ amended statement of claim

in its entirety, without leave to amend.

____________

______

200

J.

September 25, 2019