Executive Summary: Key Legal and Evidentiary Issues

• Plaintiffs alleged that Ontario regulators failed to properly oversee syndicated mortgage investments, leading to investor losses.

• Claims included misfeasance in public office and bad faith, requiring leave to proceed under the Crown Liability and Proceedings Act.

• Plaintiffs relied on expert affidavits to support their motion for leave; defendants moved to strike them on admissibility grounds.

• Court found both experts lacked impartiality and qualifications relevant to the regulatory conduct in question.

• Most of Mr. Vasiliou’s affidavit was struck, and key paragraphs of Mr. Butler’s were excluded due to lack of expertise or objectivity.

• Leave motion remained pending, but court clarified evidentiary standards for expert input in early stages of class proceedings.

Background and context of the dispute

Betty Wei and Lawrence Vanderklei launched a proposed class action against the Province of Ontario and several former senior officials of the Financial Services Commission of Ontario (FSCO), alleging regulatory failure in overseeing syndicated mortgage investments (SMIs). The plaintiffs claimed that FSCO’s mishandling of its regulatory responsibilities allowed entities like Tier 1 Transaction Advisory Services Inc. to market high-risk investments to the public, resulting in massive investor losses. The allegations included negligence, misfeasance in public office, and bad faith misconduct by public authority.

Under section 17 of the Crown Liability and Proceedings Act, 2019 (CLPA), plaintiffs cannot pursue claims of bad faith or misfeasance in public office without first obtaining leave from the court. In support of their leave motion, the plaintiffs submitted expert affidavits from William Vasiliou, a former Ministry of Finance employee, and Ronald Butler, a mortgage broker with experience in the SMI sector. The defendants challenged these affidavits on various admissibility grounds.

Legal framework and evidentiary challenges

The defendants moved under Rule 25.11 of the Rules of Civil Procedure to strike the expert affidavits on the basis of irrelevance, lack of qualification, bias, and inadmissible legal argument. The court considered the applicable test for leave under the CLPA, which requires plaintiffs to show the action is brought in good faith and that there is a reasonable possibility of success.

The court first addressed relevance and found that while the affidavits met the low threshold of potentially aiding in the leave analysis, their admissibility hinged on whether the experts were qualified and impartial. Upon review, the court concluded that Mr. Butler, though experienced in mortgage brokering, lacked the requisite regulatory knowledge to opine on FSCO’s conduct. Mr. Vasiliou, while more familiar with regulatory frameworks, was found to have engaged too closely with prior litigation and advocacy efforts against FSCO, compromising his impartiality.

The court emphasized that expert witnesses must provide fair, objective, and non-partisan evidence. Both Mr. Butler and Mr. Vasiliou were seen to have aligned themselves with the plaintiffs’ cause, with Mr. Butler’s combative conduct during cross-examination reinforcing the court’s conclusion. Their affidavits contained inadmissible opinion, hearsay, and legal argument, and were accordingly struck in whole (for Mr. Vasiliou) or in part (for Mr. Butler).

Outcome and implications

The court granted the defendants’ motion in part, striking Mr. Vasiliou’s affidavit entirely and excluding multiple paragraphs of Mr. Butler’s affidavit. The ruling clarified that only admissible portions of the affidavits could be relied on in the plaintiffs’ leave motion. While the decision did not dispose of the action or the leave motion itself, it significantly limited the plaintiffs’ evidentiary foundation for proceeding with their class action.

The judgment reinforces the rigorous evidentiary standards applicable even at the preliminary stage of class proceedings involving Crown defendants. It underscores the court’s gatekeeping role under the CLPA and signals that strong advocacy positions by expert witnesses may disqualify them from assisting the court in determining threshold questions of law.