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Federal Court - Pleadings (2). Toronto Regional Real Estate Board v. Sunderland [pleading mens rea]
In Toronto Regional Real Estate Board v. Sunderland (Fed CA, 2026) the Federal Court of Appeal dismissed appeals, these brought against the granting of motions to strike the claim in a proposed class action on grounds that they "not disclose a reasonable cause of action" - here brought "under the Competition Act, R.S.C. 1985, c. C-34 and relat[ing] to the commissions paid for buyer real estate brokerage services."
Here the court considers the adequacy of pleading for mens rea:(6) Mens Rea: Sufficiency of the Pleadings
[121] The motion judge concluded that sufficient material facts were pleaded to support mens rea for a subsection 45(1) offence by the Brokerage Defendants. The motion judge based this conclusion on the pleaded facts along with the common sense inferences that could be made from those pleadings: FC Reasons at paras. 129-37.
[122] The defendants allege that the motion judge erred because the statement of claim does not plead material facts supporting the existence of a "“true subjective ""mens rea”", and that only "“bald”" statements of subjective intention were made. The defendants also submit that the motion judge further erred by relying on inferred mens rea to show subjective intention of wrongdoing. We disagree.
[123] First, the defendants’ submissions rely on their theory that subsection 45(1) entails a "“double subjective”" mens rea. This is not the plaintiff’s theory. The plaintiff’s position is that the mens rea test is subjective/objective and the motion judge concluded, as have we, that this argument was not doomed to fail. It was not necessary for the plaintiff to plead sufficient material facts in support of an alternate theory and the defendants’ submissions regarding failure to plead to this alternative theory are rejected.
[124] Second, in any event, the motion judge found that the statement of claim pleaded sufficient material facts in support of both elements of the subjective/objective test as well as, alternatively, a subjective intention to perform conduct proscribed by paragraph 45(1)(a). The motion judge concluded that the failure to provide additional material facts was not fatal: FC Reasons at paras. 133-34. This conclusion is entitled to deference, and the motion judge was permitted to make logical inferences from the pleaded facts to determine that the mens rea had been sufficiently pleaded.
[125] Like all other essential elements of any cause of action, mental elements such as knowledge and intent must be particularized to the degree necessary to fulfill the purposes of pleadings. Sufficient material facts must be pleaded to define the issues in the action and enable the defendants to plead a defence: Federal Courts Rules, r. 181; Merchant Law Group at paras. 35-38; St. John’s Port Authority v. Adventure Tours Inc., 2011 FCA 198 at para. 29 [Adventure Tours].
[126] However, the test for sufficient pleadings must be applied with sensitivity to the unique challenges faced by plaintiffs required to allege subjective mens rea. As the motion judge observed, subjective mental fault resists particularization, especially at this early stage, before discovery: FC Reasons at para. 134; see also Merchant Law Group at para. 38. The pleadings must be evaluated based on the information reasonably available to the plaintiff. The fundamental question is whether the issues have been sufficiently defined to make the proceedings "“manageable and fair”": see Mancuso at paras. 17-18; Merchant Law Group at para. 38.
[127] Watson involved a motion to strike a proposed class action alleging, among other things, breach of subsection 45(1). There were no pleadings specific to mens rea in the statement of claim. However, the Court of Appeal for British Columbia held that the motion judge was entitled to infer mens rea from other pleaded facts, including those for the actus reus and an alleged agreement: Watson at paras. 97-98, 110. The Court explained that review of pleadings must be undertaken "“with common sense as to what may be drawn from proof of the facts alleged, bearing in mind always that pleadings should not be redundant, prolix, or pedantic”":While I would not suggest that a sentence may be inferred into the pleading, for the reason that all pleadings must be overt, the mental element need not always be pleaded; depending on the cause of action and the facts already pleaded, proof of an element may be by inference. So, for example, in a claim of battery, an intentional tort of trespass against the person, we do not always see a plea of intention such as “the defendant intended to strike the blow”.
(Watson at para. 101.) [128] Applying this principle, the motion judge here found that it could be inferred from the plain language of the Buyer Brokerage Commission Rule "“that a reasonable business person who is familiar with the residential real estate business in the GTA would likely conclude that this rule likely had as its object or purpose at least some forms of ‘control’ of the price of Cooperating Broker Services, ""i.e., Cooperating Broker commissions/compensation”": FC Reasons at para. 136. This inference, combined with other pleadings in support of the actus reus for the subsection 45(1) offence of control of the price of buyer brokerage services, demonstrated to the motion judge that the cause of action had been sufficiently pleaded.
[129] We see no error in the motion judge’s approach. As the Court of Appeal for British Columbia held in Watson, motion judges are entitled to make common sense inferences when evaluating whether a reasonable cause of action is pleaded: see, e.g., Mull v. National Bank of Canada, 2011 ONCA 488 at para. 5, leave to appeal ref’d 2012 CanLII 11265; Lin v. Airbnb, Inc., 2019 FC 1563 at para. 55; Zanin v. Ooma, Inc., 2025 FC 51 at para. 420, aff’d 2026 FCA 98, leave to appeal requested. It is also well-established that a finder of fact can infer, as a matter of common sense, that "“a person usually knows what the predictable consequences of his or her actions are and [intends] to bring them about”": R. v. Walle, 2012 SCC 41 at para. 64 [Walle]. See also, e.g., R. v. Roks, 2011 ONCA 526 at para. 137; R. v. Seymour, 1996 CanLII 201 (SCC), [1996] 2 S.C.R. 252 at para. 19.
[130] Moreover, the inference drawn by the motion judge was premised on the allegation that the Brokerage Defendants joined and maintained membership in TRREB and expressly agreed to the TRREB and CREA Rules, including the Buyer Brokerage Commission Rule: see Statement of Claim at para. 114. Absent fraud or misrepresentation, a signatory to an agreement is presumed to know its contents, especially when an agreement is made between commercial parties: Karroll v. Silver Star Mountain Resorts, 1988 CanLII 3094 at para. 19 (B.C.S.C.) (per McLachlin C.J., as she then was); Apps v. Grouse Mountain Resorts Ltd., 2020 BCCA 78 at para. 79; 908593 Ontario Limited v. Atradius, 2023 ONCA 156 at para. 8. It was open to the motion judge to infer from the pleadings that the Brokerage Defendants intended to enter into the alleged arrangement and had knowledge of its terms.
[131] Finally, we address a submission raised by the Interveners, who say that the motion judge erred in law by relying on PANS because the case was overruled by R. v. Villaroman, 2016 SCC 33 [Villaroman].
[132] The plaintiff asks the Court to reject this argument out of hand because it is an impermissible new issue. As the plaintiff correctly notes, interveners are limited to making submissions based on the issues that have already been raised by the parties to the appeal: Tsleil-Waututh Nation v. Canada (Attorney General), 2017 FCA 174 at paras. 54-56 [Tsleil-Waututh]; Canada (Attorney General) v. Canadian Civil Liberties Association, 2026 FCA 6 at para. 479, leave to appeal requested. Consistent with this rule, in an August 2024 order, this Court ordered that the Interveners could not raise any issues not already raised by the parties to the appeal.
[133] Nevertheless, the continued relevance of PANS and the requisite mens rea under subsection 45(1) were placed squarely in issue by the parties before the Federal Court and this Court. Accordingly, we will consider Villaroman. As we shall see, we reject the Interveners’ submission.
[134] As discussed above, in PANS, the Supreme Court of Canada held that the mens rea of the former version of section 45 required objective intent to perform the acts prohibited by the section. The Court held that, once a trial judge concludes that the actus reus of an agreement to lessen competition unduly is proven, it would be a "“logical inference”" that "“a reasonable business person […] would or should have known that the likely effect of such an agreement would be to unduly lessen competition”", satisfying the objective mens rea element (at pp. 659-60). The motion judge cited this aspect of PANS when considering whether the plaintiff’s theory of a mixed subjective/objective mens rea under the post-2010 version of section 45 had been sufficiently pleaded: FC Reasons at paras. 112-13.
[135] In the passages of Villaroman relied on by the Interveners, the Supreme Court of Canada considered the rule in Hodge’s Case, 1838 CanLII 1 (Eng. Ct. Assizes). The so-called "“rule”", as the Court explained in Villaroman at para. 30, means that "“it will generally be helpful”" for a criminal trial judge to caution the jury that, to convict based on circumstantial evidence, guilt must be the "“only reasonable inference that such evidence permits”". This principle arises from the requirement that the Crown must prove its case beyond a reasonable doubt and the concern that a jury will jump to conclusions without proper instruction: Villaroman at paras. 25-29. Needless to say, this principle long-predates PANS.
[136] Contrary to the Interveners’ submissions, Villaroman does not call PANS into question, much less overrule it. Indeed, Villaroman does not even cite PANS. In short, Villaroman and the rule in Hodge’s Case have nothing to do with PANS or the requisite mens rea under subsection 45(1) in this case. Villaroman and Hodge’s Case address when an inference of guilt based on circumstantial evidence may be drawn in the context of a criminal trial where the offence must be proven beyond a reasonable doubt. They have nothing to do with whether—as part of a class action where an offence is provable on a balance of probabilities—a judge hearing a motion to strike may infer facts in support of mens rea from the pleadings. After concluding that the plaintiff’s theory that section 45 retained a mixed subjective/objective mens rea following the 2010 amendments was not doomed to fail, the motion judge properly considered whether facts in support of that element could be inferred from the pleadings. That approach was justified and Villaroman is irrelevant.
[137] Therefore, we find no reviewable error in the motion judge’s conclusion that mens rea for the alleged paragraph 45(1)(a) offence was sufficiently pleaded. Accordingly, we agree with the motion judge that the plaintiff’s claim against the Brokerage Defendants under paragraph 45(1)(a) regarding an alleged arrangement to "“control the price”" of buyer brokerage commissions is not doomed to fail.
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[196] .... we reject the plaintiff’s argument that allegations of mens rea or state of mind are inherently exempt from the requirement to plead sufficient material facts because of the manner in which they may be proven at trial. Indeed, Rule 181 of the Federal Courts Rules specifically requires pleadings to include "“particulars of any alleged state of mind of a person”". See, e.g., Merchant Law Group at paras. 35-38; Adventure Tours at para. 29; Apotex Inc. v. Shire LLC, 2017 FC 831 at para. 17; Alexion Pharmaceuticals, Inc. v. Amgen Canada Inc., 2024 FC 1137 at para. 13.
[197] The plaintiff’s reliance on Gladstone v. Prince Albert (City), 1937 CanLII 150 (Sask. Dist. Ct.) for the proposition that bald pleadings of mens rea are sufficient, is misplaced. The case relies on a rule of court in Saskatchewan that allows knowledge and other conditions of mind to be pleaded as a fact without setting out the circumstances from which they can be inferred (see, for the current version of this rule, The King’s Bench Rules, (2013) S. Gaz. I, p. 2684, r. 13-10(3)). There is no equivalent to this rule in the Federal Courts Rules and it is contrary to Rule 181 and the case law applying it cited above.
[198] On the second point, we agree with the plaintiff that it is open to the finder of fact at trial to infer a state of mind, such as knowledge or intention, from circumstantial evidence such as the acts performed by a person: see, e.g., Walle at para. 64; David Watt & Jill Makepeace, Watt’s Manual of Criminal Evidence 2026 (Toronto: Thomson Reuters, 2026), § 1:37. In line with this principle, the motion judge considered whether he could make a common sense inference regarding the mens rea of the Franchisor Defendants, but found it not possible based on the pleaded facts. While the motion judge may have applied the wrong framework—mens rea for party offences is a subjective test and the motion judge appears to be relying on an objective test relating to the knowledge of a reasonable businessperson—this is of no consequence. The motion judge concluded that it was not possible to draw an inference regarding the Franchisor Defendants’ state of mind.
[199] Contrary to the plaintiff’s submission, it was not inherently illogical for the motion judge to infer the mens rea of the Association Defendants and Brokerage Defendants but decline to do so for the Franchisor Defendants. As noted above, there were pleaded facts regarding the extensive alleged involvement of the Association Defendants and the Brokerage Defendants in the impugned arrangement, including their participation in the creation and adoption of the Buyer Brokerage Commission Rule. The Franchisor Defendants, according to the pleadings, are one step removed. There is no allegation that the Franchisor Defendants are themselves members of TRREB or CREA or that they are parties to the Buyer Brokerage Commission Rule. Their sole impugned conduct is requiring adherence to the Rule under their franchise agreements.
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