Respondents-Cross-Appellants Rothmans-Benson-and-Hedges

Transcription

Court File No. 33563
IN THE SUPREME COURT OF CANADA
(ON APPEAL FROM THE COURT OF APPEAL FOR BRITISH COLUMBIA)
BETWEEN:
THE ATTORNEY GENERAL OF CANADA
APPELLANT/RESPONDENT BY CROSS-APPEAL
(THIRD PARTY)
– and –
IMPERIAL TOBACCO CANADA LIMITED, ROTHMANS, BENSON & HEDGES INC.,
ROTHMANS INC., JTI-MACDONALD CORP., B.A.T INDUSTRIES P.L.C.,
BRITISH AMERICAN TOBACCO (INVESTMENTS) LIMITED,
CARRERAS ROTHMANS LIMITED, PHILIP MORRIS USA INC.,
PHILIP MORRIS INTERNATIONAL INC., R.J. REYNOLDS TOBACCO COMPANY
and R.J. REYNOLDS TOBACCO INTERNATIONAL, INC.
RESPONDENTS/APPELLANTS BY CROSS-APPEAL
(APPELLANTS)
– and –
HER MAJESTY THE QUEEN IN RIGHT OF BRITISH COLUMBIA
RESPONDENT
(RESPONDENT)
– and –
ATTORNEY GENERAL OF BRITISH COLUMBIA and
ATTORNEY GENERAL OF NEW BRUNSWICK
INTERVENERS
CONSOLIDATED FACTUM OF RESPONDENTS ON APPEAL AND
CONSOLIDATED FACTUM OF APPELLANTS ON CROSS-APPEAL OF
ROTHMANS, BENSON & HEDGES INC., ROTHMANS INC.,
PHILIP MORRIS USA INC. AND PHILIP MORRIS INTERNATIONAL INC.
(pursuant to Rules 42 and 43 of the Rules of the Supreme Court of Canada)
COUNSEL FOR ROTHMANS, BENSON &
HEDGES INC. AND ROTHMANS INC.
MACAULAY McCOLL LLP
1575 – 650 West Georgia Street
Vancouver, British Columbia V6B 4N9
Telephone: 604-687-9811
Facsimile:
604-687-8716
KENNETH N. AFFLECK, Q.C.
OTTAWA AGENT FOR ROTHMANS,
BENSON & HEDGES INC. AND
ROTHMANS INC.
GOWLING LAFLEUR HENDERSON LLP
2600 – 160 Elgin Street
Ottawa, Ontario K1P 1C3
Telephone: 613-233-1781
Facsimile:
613-563-9869
HENRY S. BROWN, Q.C.
COUNSEL FOR PHILIP MORRIS USA
INC.
DAVIS & COMPANY LLP
2800 – 666 Burrard Street
Vancouver, British Columbia V7Y 1K2
Telephone: 604-687-9444
Facsimile:
604-687-1612
D. ROSS CLARK, Q.C.
OTTAWA AGENT FOR PHILIP MORRIS
USA INC.
Telephone: 613-233-1781
Facsimile:
613-563-9869
COUNSEL FOR PHILIP MORRIS
INTERNATIONAL INC.
McCARTHY TÉTRAULT LLP
1300 – 777 Dunsmuir Street
Vancouver, British Columbia V7Y 1K2
Telephone: 604-643-5983
Facsimile:
604-622-5614
SIMON V. POTTER
MICHAEL A. FEDER
OTTAWA AGENT FOR PHILIP MORRIS
INTERNATIONAL INC.
Telephone: 613-233-1781
Facsimile:
613-563-9869
COUNSEL FOR THE ATTORNEY
GENERAL OF CANADA
DEPARTMENT OF JUSTICE
234 Wellington Street, East Tower
Ottawa, Ontario K1A 0H8
Telephone: 613-948-1483
Facsimile:
613-957-0195
PAUL VICKERY
TRAVIS HENDERSON
OTTAWA AGENT FOR THE ATTORNEY
GENERAL OF CANADA
DEPARTMENT OF JUSTICE
234 Wellington Street, East Tower
Ottawa, Ontario K1A 0H8
Telephone: 613-941-2351
Facsimile:
613-954-1920
CHRISTOPHER RUPAR
COUNSEL FOR IMPERIAL TOBACCO
CANADA LIMITED
HUNTER LITIGATION CHAMBERS
Vancouver, British Columbia V6E 4H1
Telephone: 604-891-2400
Facsimile:
604-647-4554
JOHN J.L. HUNTER, Q.C.
BRENT B. OLTHUIS
OTTAWA AGENT FOR IMPERIAL
TOBACCO CANADA LIMITED
OSLER, HOSKIN & HARCOURT LLP
1900 – 340 Albert Street
Ottawa, Ontario K1R 7Y6
Telephone: 613-787-1009
Facsimile:
613-235-2867
PATRICIA J. WILSON
OSLER, HOSKIN & HARCOURT LLP
Box 50, 1 First Canadian Place
Toronto, Ontario M5X 1B8
Telephone: 416-362-2111
Facsimile:
416-862-6666
DEBORAH A. GLENDINNING
COUNSEL FOR JTI-MACDONALD
CORP., R.J. REYNOLDS TOBACCO
COMPANY AND R.J. REYNOLDS
TOBACCO INTERNATIONAL, INC.
FARRIS, VAUGHAN, WILLS &
MURPHY LLP
Vancouver, British Columbia V7Y 1B3
Telephone: 604-684-9151
Facsimile:
604-661-9349
JEFFREY J. KAY, Q.C.
ROBERT J. McDONELL
TERESA M. TOMCHAK
OTTAWA AGENT FOR JTIMACDONALD CORP., R.J. REYNOLDS
TOBACCO COMPANY AND R.J.
REYNOLDS TOBACCO
INTERNATIONAL, INC.
Telephone: 613-233-1781
Facsimile:
613-563-9869
COUNSEL FOR B.A.T INDUSTRIES
P.L.C. AND BRITISH AMERICAN
TOBACCO (INVESTMENTS) LIMITED
SUGDEN, McFEE & ROOS LLP
700 – 375 Water Street
Vancouver, British Columbia V6B 5N3
Telephone: 604-687-7700
Facsimile:
604-687-5596
CRAIG P. DENNIS
MICHAEL D. SHIRREFF
OTTAWA AGENT FOR B.A.T
INDUSTRIES P.L.C. AND BRITISH
AMERICAN TOBACCO
(INVESTMENTS) LIMITED
STIKEMAN ELLIOTT LLP
1600 – 50 O’Connor Street
Ottawa, Ontario K1P 6L2
Telephone: 613-566-0546
Facsimile:
613-230-8877
NICHOLAS McHAFFIE
COUNSEL FOR CARRERAS
ROTHMANS LIMITED
HARPER GREY LLP
Vancouver, British Columbia V6B 4P7
Telephone: 604-687-0411
Facsimile:
604-669-9385
CHRIS RUSNAK
OTTAWA AGENT FOR CARRERAS
ROTHMANS LIMITED
STIKEMAN ELLIOTT LLP
1600 – 50 O’Connor Street
Telephone: 613-566-0546
Facsimile:
613-230-8877
NICHOLAS McHAFFIE
COUNSEL FOR HER MAJESTY THE
QUEEN IN RIGHT OF BRITISH
COLUMBIA
BULL, HOUSSER & TUPPER LLP
Vancouver, British Columbia V6E 3R3
Telephone: 604-687-6575
Facsimile:
604-641-4949
DANIEL A. WEBSTER, Q.C.
RYAN D.W. DALZIEL
OTTAWA AGENT FOR HER MAJESTY
THE QUEEN IN RIGHT OF BRITISH
COLUMBIA
BURKE-ROBERTSON LLP
70 Gloucester Street
Ottawa, Ontario K2P 0A2
Telephone: 613-566-2058
Facsimile:
613-235-4430
ROBERT E. HOUSTON, Q.C.
GENERAL OF BRITISH COLUMBIA
ATTORNEY GENERAL OF BRITISH
COLUMBIA
6th Floor, 1001 Douglas Street
Victoria, British Columbia V8W 9J7
Telephone: 250-356-8875
Facsimile:
250-356-9154
GEORGE H. COPLEY, Q.C.
GENERAL OF BRITISH COLUMBIA
BURKE-ROBERTSON LLP
70 Gloucester Street
Ottawa, Ontario K2P 0A2
Telephone: 613-566-2058
Facsimile:
613-235-4430
ROBERT E. HOUSTON, Q.C.
GENERAL OF NEW BRUNSWICK
BENNETT JONES LLP
Box 130, 1 First Canadian Place
Toronto, Ontario M5X 1A4
Telephone: 416-777-7472
Facsimile:
416-863-1716
JEFFREY S. LEON
GENERAL OF NEW BRUNSWICK
FASKEN MARTINEAU DuMOULIN LLP
1300 – 55 Metcalfe Street
Telephone: 613-236-3882
Facsimile:
613-230-6423
LESLIE MILTON
Table of Contents
i
CONSOLIDATED FACTUM OF RESPONDENTS ON APPEAL
PART I – STATEMENT OF FACTS ............................................................................................. 1
A. Overview ............................................................................................................................... 1
B. Key facts ................................................................................................................................ 3
PART II – QUESTIONS IN ISSUE ............................................................................................... 5
PART III – STATEMENT OF ARGUMENT ................................................................................ 6
A. Since this appeal arises from a motion to strike, Canada must show that it is plain and
obvious that the defendants’ claim has no chance of success under the Anns/Cooper
test.......................................................................................................................................... 6
B. The defendants’ claim arguably satisfies the first stage of the Anns/Cooper test. ................ 7
I. The potential for harm to the defendants was reasonably foreseeable. ....................... 7
II. There was proximity between Canada and the defendants.......................................... 8
(a) Proximity can be founded on the defendants’ reasonable and foreseeable
reliance. .......................................................................................................... 9
(b) The defendants do not rely on Canada’s statutory duties to establish
proximity. ..................................................................................................... 10
(c) The alleged duty to the defendants poses no conflict with Canada’s
duties to the public. ...................................................................................... 12
C. The defendants’ claim arguably satisfies the second stage of the Anns/Cooper test........... 14
I. Evidence is needed to determine if Canada’s prima facie duty should be negated... 14
II. Canada’s prima facie duty is not negated by concerns about indeterminate
liability. ...................................................................................................................... 15
(a) Canada knew the defendants’ identities and its statements were used for
their intended purpose. ................................................................................. 15
(b) Liability is not indeterminate as to amount, time or class............................ 16
III. Canada’s alleged misrepresentations were operational conduct, not policy
decisions..................................................................................................................... 17
IV. Canada’s prima facie duty does not create an “unintended insurance scheme”........ 20
PART IV – SUBMISSIONS CONCERNING COSTS ................................................................ 20
PART V – ORDER REQUESTED............................................................................................... 20
PART VI – TABLE OF AUTHORITIES ..................................................................................... 21
PART VII – PROVISIONS DIRECTLY AT ISSUE ................................................................... 24
Table of Contents
ii
CONSOLIDATED FACTUM OF APPELLANTS ON CROSS-APPEAL
PART I – STATEMENT OF FACTS ........................................................................................... 41
A. Overview ............................................................................................................................. 41
B. Statement of facts ................................................................................................................ 44
I. The Costs Recovery Act and British Columbia’s action against the defendants ....... 44
II. The defendants’ third party notices against Canada .................................................. 47
III. Canada’s motion to strike and the decisions below................................................... 49
PART II – QUESTIONS IN ISSUE ............................................................................................. 54
PART III – STATEMENT OF ARGUMENT .............................................................................. 55
A. As these cross-appeals arise from a motion to strike, the defendants’ claims cannot be
struck unless they are radically defective, and particular caution is warranted................... 55
B. Canada is a “manufacturer” within the meaning of the Costs Recovery Act and
potentially liable to British Columbia under it. ................................................................... 56
I. The plain language of the “manufacturer” definition captures Canada..................... 56
II. The Court of Appeal erroneously departed from the Act’s plain language based
on Hansard. ............................................................................................................... 59
III. The Court of Appeal erred by relying on its own policy concerns about Canada
being a “manufacturer”.............................................................................................. 61
C. Even if Canada were not a “manufacturer” within the meaning of the Costs Recovery
Act, it would be liable to British Columbia under the Health Care Costs Recovery Act. ... 63
D. The defendants have an arguable claim for contribution..................................................... 65
I. Canada can be directly liable to the plaintiff, British Columbia. .............................. 66
II. In any event, direct liability to the plaintiff is not required for a contribution
claim under the Negligence Act. ................................................................................ 66
(a) Contribution under the Negligence Act turns on fault, not liability. ............ 66
(b) Giffels is distinguishable or should no longer be followed. ......................... 69
III. The defendants have an arguable contribution claim at common law....................... 71
E. The defendants have an arguable claim for equitable indemnity. ....................................... 72
F. The defendants have arguable claims for negligent design and failure to warn.................. 75
I. There are no policy concerns about indeterminate liability for economic loss
because only the defendants have proximity with Canada and only British
Columbia may sue the defendants for economic loss................................................ 75
II. The defendants’ failure to warn claim concerns operational conduct, not a policy
decision. ..................................................................................................................... 77
PART IV – SUBMISSIONS CONCERNING COSTS ................................................................ 79
PART V – ORDERS REQUESTED............................................................................................. 79
PART VI – TABLE OF AUTHORITIES ..................................................................................... 80
PART VII – PROVISIONS DIRECTLY AT ISSUE ................................................................... 83
1
Consolidated Factum of Respondents on Appeal
PART I – STATEMENT OF FACTS
A.
Overview
1.
The respondents/appellants by cross-appeal are defendants in the action brought by Her
Majesty the Queen in Right of British Columbia (“British Columbia”) under the Tobacco Damages
and Health Care Costs Recovery Act.1 The appellant/respondent by cross-appeal, the federal Crown
as represented by the Attorney General of Canada (“Canada”), is a party to that action because of
third party notices filed against it by most of the defendants. Canada moved to strike the third party
notices, contending that they disclose no reasonable cause of action. A majority of the Court of
Appeal for British Columbia held that a single claim for negligent misrepresentation should survive.
2.
The defendants’ negligent misrepresentation claim is made against the backdrop of the
longstanding relationship between Canada and the defendants detailed in the third party notices.
Over decades, Canada devised a series of health and education programmes intended to reduce the
deleterious effects of smoking and to inform Canadians about the same. To implement these
programmes, Canada made wide-ranging representations to the defendants on topics including the
efficacy of warning labels, appropriate advertising practices and low-“tar” cigarettes, which Canada
represented as posing a reduced health risk to smokers.
3.
Indeed, Canada became a developer and promoter of tobacco for low-“tar” cigarettes, and
Canada’s tobacco eventually dominated the marketplace. Agriculture Canada selectively bred
tobacco to yield a higher ratio of nicotine to “tar”, so that lower-“tar” cigarettes and particularly very
low-“tar” cigarettes would be palatable to smokers. Agriculture Canada then licensed its tobacco to
growers in exchange for royalties. For its part, Health Canada urged the defendants to use that
tobacco to make low-“tar” cigarettes, told the defendants those cigarettes were safer and encouraged
the defendants to market those cigarettes so as to move smokers to them. By 1983, tobacco
developed and licensed by Canada was being used in nearly all cigarettes sold in British Columbia.
4.
On this appeal, Canada asks this Court to strike the defendants’ negligent misrepresentation
claim without a trial. Canada says that the claim fails at both stages of the Anns/Cooper test. At the
first stage, Canada argues that the defendants’ liability to British Columbia was not foreseeable and
1
S.B.C. 2000, c. 30 (the “Costs Recovery Act” or “Act”).
2
that there is no proximity. At the second stage, Canada argues that even if a prima facie duty of care
existed, policy concerns would negate it.
5.
An order striking pleadings is reserved for claims that are radically defective, so that allowing
them to proceed would result in an abuse of process. It must be plain and obvious that the claim is
certain to fail. Any other approach denies access to justice and dampens the development of the
common law. Here, it is not plain and obvious that the defendants’ claim fails under the
Anns/Cooper test, and so Canada’s appeal must be dismissed.
6.
As to proximity, it is not plain and obvious that Canada lacked the necessary close and direct
relationship with the handful of companies for which it produced, licensed and made available a vital
ingredient of their major product. A duty by Canada to take care in its representations to them
concerning the safety of that ingredient is consistent with Canada’s duties regarding public health.
7.
With respect to foreseeability, Canada misconstrues the relevant question, framing it too
narrowly. Canada argues that it must have been reasonably foreseeable that its representations would
cause the defendants to be liable under the Costs Recovery Act. However, all that is required in
negligence cases is foresight of the type or class of harm that carelessness might cause. The proper
question is thus whether Canada could have expected the defendants to incur some form of liability to
others if Canada’s representations proved incorrect. The answer to that question is “yes”, and
certainly not plainly and obviously “no”.
8.
An arguable prima facie duty thus established, no policy reasons plainly and obviously negate
it. There is no problem of indeterminate liability because Canada knew the defendants’ identities,
and the defendants relied on Canada’s representations for their intended purpose. Moreover,
Canada’s liability to the defendants is subject to the same geographic, demographic and other
constraints as the defendants’ liability to British Columbia, meaning it is far from indeterminate.
9.
Canada also argues that the defendants’ claim relates to policy-making. Here, however,
Canada was not making policy, it was making tobacco. It was urging use of that tobacco on the
defendants, and receiving royalties in connection with that use. Canada’s policy cannot have been to
misrepresent to the defendants the relative safety of its new tobacco strains and other matters
affecting public health, knowing the potentially harmful impact on smokers and the liability to which
the defendants could be exposed. If the alleged misrepresentations happened, they were mistakes at
the operational level, and Canada may be liable unless it met the standard of care.
3
10.
The Court of Appeal was right to decide that the defendants’ claim for negligent
misrepresentation should not be struck. This Court should dismiss Canada’s appeal.
B.
Key facts2
11.
In 2001, British Columbia sued the defendants under the Costs Recovery Act. British
Columbia alleges that defendants committed various “tobacco related wrongs” within the meaning of
the Act, causing British Columbians to smoke cigarettes and thereby to develop disease. British
Columbia seeks to recover the alleged cost of treating such disease.
12.
The “tobacco related wrongs” allegedly committed by the defendants include defective
design, failure to warn, misrepresentation and breach of various consumer protection statutes.3
British Columbia’s pleadings make numerous allegations concerning the supposed properties of
tobacco used in cigarettes, the purported inadequacy of health warnings offered by defendants and
the supposed assertion by defendants that low-“tar” cigarettes are safer than other cigarettes.4
13.
In 2007, various of the defendants filed third party notices against Canada. The third party
notices are founded on multiple legal theories, including that Canada is directly liable to the
defendants in negligence. Within the negligence category, the Court of Appeal labelled the
defendants’ claims as (i) negligent misrepresentation, (ii) negligent design and (iii) failure to warn.
The Court of Appeal sustained only the negligent misrepresentation claim.
14.
The core of the defendants’ negligent misrepresentation claim is that Canada made
representations, and gave advice and directions, that led the defendants to engage in conduct now
alleged to constitute “tobacco related wrongs”. The defendants say that they reasonably relied on
Canada’s representations, advice and directions, and that it was reasonably foreseeable to Canada
that, if this reliance caused the defendants to breach any duties, they would be exposed to liability.
15.
The third party notice of Rothmans, Benson & Hedges Inc. and Rothmans Inc.5 (the “RBH/RI
TPN”) summarizes some of Canada’s representations to the defendants:
2
There is a more extensive statement of facts in these defendants’ Consolidated Factum of Appellants on Cross-Appeal.
Amended Statement of Claim (Appellant’s Record (“A.R.”), Vol. II, p. 6) (“Amended Claim”), at paras. 49-62 and 84-90.
4
See, e.g., Amended Claim, at paras. 39-46, 51, 53, 57-58 and 77.
5
A.R., Vol. II, p. 115.
3
4
(a) that warning labels were unnecessary, ineffective and potentially
counterproductive to inform consumers of the health risks of smoking and the
properties of cigarettes;
(b) the warning labels that were used were adequate to inform the public of the
risks of smoking;
(c) that “tar” and nicotine measuring standards provided reliable information to
consumers on which consumers could make informed smoking decisions;
…
(e) that light and mild cigarettes would reduce the incidence of tobacco related
diseases in the population of consumers;
(f) compensation [by smokers changing their smoking patterns], to the extent it
occurs, is partial; and
(g) there are no increased health risks associated with or caused by the design or
development of tobacco strains by Officials at Agriculture Canada that were sold
or licensed to [defendants] for use in their tobacco products sold to consumers in
British Columbia.6
16.
Elsewhere, the third party notices give particulars of these representations, including
particulars of when and by whom specifically the representations were made. For example, as to
whether warnings should be placed on cigarette packages and what the content of any warnings
should be, the RBH/RI TPN states as follows:
43. In 1965 … Officials advised cigarette manufacturers that it was unnecessary
or inadvisable to issue definitive public statements at that time on the relationship
between smoking and health.
…
53. … In particular, in May 1965 the Deputy Minister of Health asserted that the
labelling of cigarette packages with health warnings was unrealistic and “silly”.
…
60. … In December 1972, Officials requested the inclusion of the phrase, “avoid
inhaling” on packaging and requested the same warning be used in advertising,
which changes were agreed to by cigarette manufacturers and introduced in 1975.
6
RBH/RI TPN, at para. 175.
5
17.
Canada did not file any defence to the third party notices. Instead, it moved to strike them in
their entirety, on the ground that they disclosed no reasonable cause of action.
18.
At first instance, Canada’s motion was successful.7 The Court of Appeal for British
Columbia, however, restored the third party notices in part.8
19.
Considering all the facts alleged in the third party notices, a majority of the Court of Appeal
held that it was not plain and obvious that Canada had no prima facie duty of care to the defendants.
Writing for the majority, Tysoe J.A. found that the foreseeability and proximity requirements
imposed at the first stage of the Anns/Cooper test were arguably satisfied.9
20.
At the second stage of the Anns/Cooper test, the majority held that Canada’s prima facie duty
of care was not plainly and obviously negated by policy concerns.10 Tysoe J.A. referred to his
reasons in Knight v. Imperial Tobacco Canada Limited.11 There, he stated that “[g]enerally
speaking, the cause of action for negligent misrepresentation represents a significant exception to the
exclusionary rule against recovery of economic loss”,12 and that “the assessment of policy
considerations relevant to the issue of whether [Canada’s] prima facie duty of care should be negated
… ought not be concluded at this early stage without the benefit of evidence exploring Canada’s
actions in developing the tobacco strains for which it has received license fees and royalties”.13
PART II – QUESTIONS IN ISSUE
21.
The essential question on this appeal is whether it is so obvious that the defendants’ negligent
misrepresentation claim against Canada is radically defective and bound to fail that it should be
struck preliminarily, depriving the defendants of any response by Canada, discovery or trial. As the
Court of Appeal concluded, the answer to that question is “no”.
7
2008 BCSC 419 (A.R., Vol. I, p. 3) (“BCSC Decision”).
2009 BCCA 540 (A.R., Vol. I, p. 36) (“BCCA Decision”).
9
BCCA Decision, at paras. 70-83.
10
BCCA Decision, paras. 84-87.
11
2009 BCCA 541 (A.R., Vol. I, p. 80) (“Knight”).
12
Knight, at para. 71.
13
8
6
PART III – STATEMENT OF ARGUMENT
A.
Since this appeal arises from a motion to strike, Canada must show that it is plain and
obvious that the defendants’ claim has no chance of success under the Anns/Cooper test.
22.
This appeal arises from a motion to strike pleadings. An order striking pleadings is a severe
remedy that should be granted only rarely, where it is “beyond reasonable doubt” that a claim
“contains a radical defect” and is thus “certain to fail”.14 It must be “plain and obvious” that the
claim “amounts to an abuse of process”.15 If the claim’s viability depends on a “close analysis” of
the law,16 or a “difficult and important” legal point, it may be critical to let it proceed to trial.17
23.
There are at least three reasons for this stringent approach. First, an order striking pleadings
deprives litigants of their day in court, disposing of claims without any form of trial. Second, it
denies access to the discovery process and thus to the unearthing of facts that might fortify otherwise
tenuous claims. Third, the required determination of legal questions on a preliminary basis, in an
evidentiary vacuum, risks deadening the development of the common law.18
24.
Whether Canada had a duty of care to the defendants depends on the test set out in Anns v.
Merton London Borough Council,19 as modified by Cooper v. Hobart.20
That test has been
summarized as follows:
The test for determining whether a person owes a duty of care involves two
questions: (1) Does the relationship between the plaintiff and the defendant
disclose sufficient foreseeability and proximity to establish a prima facie duty of
care; and (2) If so, are there any residual policy considerations which ought to
negate or limit that duty of care?21
14
Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959 (“Hunt”), at p. 980, per Wilson J.
Hunt, at p. 988, per Wilson J.
16
Adbusters Media Foundation v. Canadian Broadcasting Corporation, 2009 BCCA 148, at paras. 14-15, per Donald
J.A., leave to appeal refused, [2009] S.C.C.A. No. 227 (QL).
17
Hunt, at pp. 990-91, per Wilson J. See also, e.g, Owners, Strata Plan LMS 1328 v. City of Surrey, et al., 2001 BCCA
693 and Sanofi-Aventis Canada Inc. v. Novopharm Ltd., 2010 FC 150.
18
See Hunt, at p. 990-91 and Schreiber v. Canada (Attorney General) (2001), 52 O.R. (3d) 577 (C.A.) (“Schreiber”), at
para. 15, aff’d, [2002] 3 S.C.R. 269, 2002 SCC 62.
19
[1978] A.C. 728 (H.L.).
20
[2001] 3 S.C.R. 537, 2001 SCC 79.
21
Hill v. Hamilton-Wentworth (Regional Municipality) Police Services Board, [2007] 3 S.C.R. 129, 2007 SCC 41
(“Hill”), at para. 20, per McLachlin C.J.
15
7
B.
The defendants’ claim arguably satisfies the first stage of the Anns/Cooper test.
I.
The potential for harm to the defendants was reasonably foreseeable.
25.
Canada argues that harm to the defendants was not foreseeable because Canada could not
have anticipated “that a provincial government might create a wholly new type of civil obligation to
reimburse costs incurred by a provincial health care scheme in respect of defined tobacco related
wrongs, with unlimited retroactive and prospective reach”.22 That highly specific description of what
was purportedly unforeseeable misconstrues the foreseeability requirement in negligence cases. It
has never been necessary for a party to “foresee the precise type of damage or sequence of events that
would result from its negligence”.23
26.
In the Court of Appeal, Tysoe J.A. found that Canada could have reasonably foreseen that the
defendants “would suffer harm”, in the form of liability, if “light and mild cigarettes were more
hazardous to the health of smokers than regular cigarettes”, and that this satisfied the requirement of
foreseeability.24
27.
In considering foreseeability at a more general level, the Court of Appeal’s decision is
consistent with Hughes and The Queen v. Côté et al.25 According to Hughes, what must have been
foreseeable by a defendant is the “type or kind of occurrence which in fact happened”, not “the
precise concatenation of circumstances” that affected the plaintiff.26 Similarly, Côté states that “[i]t
is not necessary that one foresee the precise concatenation of events”; it is sufficient for “the class or
character of injury” to have been reasonably foreseeable in “a general way”.27
28.
Here, the “type or kind of occurrence” or “class or character of injury” that must have been
foreseeable “in a general way” was liability on the part of the defendants if the low-“tar” cigarettes
manufactured with tobacco designed by Canada and promoted by Canada as safer actually turned out
22
Appellant’s Factum, at para. 36.
Bow Valley Husky (Bermuda) Ltd. v. Saint John Shipbuilding Ltd., [1997] 3 S.C.R. 1210 (“Bow Valley”), at para. 76,
per McLachlin J. (as she then was), citing Hughes v. Lord Advocate, [1963] A.C. 837 (H.L.) (“Hughes”) and Overseas
Tankship (U.K.) Ltd. v. Miller Steamship Co. Pty., [1967] 1 A.C. 617 (P.C.).
24
BCCA Decision, at para. 78.
25
[1976] 1 S.C.R. 595 (“Côté”). There is good reason to insist that foreseeability be considered at a general level at the
duty-of-care stage: even where a duty of care is made out, a defendant can always argue that the relatively low
foreseeability of a particular type of harm goes to the standard of care, or to the remoteness of damages.
26
Hughes, at p. 853, per Lord Morris, citing Harvey v. Singer Manufacturing Co., [1960] S.C. 155, at p. 172, per Lord
Mackintosh.
27
Côté, at p. 604 (internal citations omitted), per Dickson J. (as he then was).
23
8
to be just as or more hazardous than regular cigarettes. In arguing to the contrary, and advancing a
theory that it must have specifically foreseen a claim under costs recovery legislation, Canada adopts
the “precise concatenation” standard that this Court rejected.
29.
Even if this Court were to treat a claim under costs recovery legislation as what must have
been foreseeable, it is not plain and obvious that it was not. In the Court of Appeal, Tysoe J.A. went
on to find that Canada arguably could have foreseen harm to the defendants under the Costs Recovery
Act.28 In doing so, he noted that statutes creating similar claims have existed for decades.29
30.
Canada attempts to deal with these other statutes by asserting that only “subrogated statutory
claims were in existence prior to the Costs Recovery Act”,30 whereas claims under the Act are “direct
and distinct”.31 Canada’s argument is unsound, for two reasons.
31.
First, the distinction between subrogated and non-subrogated claims makes no difference for
purposes of the Hughes and Côté standard. Whether the claim is subrogated or not, the defendants’
liability to government for the costs of treating disease suffered by third parties – the harm that must
have been foreseeable – is the same.
32.
Second, a direct and distinct right of action in a government to recover health care costs is not
new. For roughly a century, the Canada Shipping Act provided that the government could sue to
recover medical expenses paid to treat an illness suffered by a seaman overseas.32
II.
There was proximity between Canada and the defendants.
33.
Canada also asserts that the Court of Appeal erred in finding that the proximity requirement
of the Anns/Cooper test was arguably satisfied. It points to (i) statutes setting forth Canada’s
regulatory mandates, (ii) the Court of Appeal’s purported failure to explain the nature of the “special
relationship” between Canada and the defendants and (iii) alleged conflicts in Canada’s duties to the
public and the imposition of any private law duty to the defendants. None of these points has merit.
28
30
Appellant’s Factum, at para. 40 (emphasis added).
31
Costs Recovery Act, s. 2(1).
32
Canada Shipping Act, R.S.C. 1906, c. 113, ss. 215-17; Canada Shipping Act, R.S.C. 1985, c. S-9, ss. 284-86.
29
9
(a)
Proximity can be founded on the defendants’ reasonable and foreseeable reliance.
34.
This Court has specified two requirements for proximity in negligent misrepresentation cases:
“(a) the defendant ought reasonably to foresee that the plaintiff will rely on his or her representation;
and (b) reliance by the plaintiff would, in the particular circumstances of the case, be reasonable”.33
35.
Here, it is at the very least arguable that both requirements are met. Canada ought reasonably
to have foreseen, as it researched smoking and health, then developed supposedly safer strains of
tobacco and promoted them to the defendants, explicitly asking them to use that tobacco to produce
low-“tar” cigarettes, that the defendants would rely on its representations about those strains and
various other matters bearing directly on the health of Canadians. At the same time, the defendants’
reliance on Canada’s representations was more than reasonable. Given Canada’s professed expertise
on the subjects of tobacco and smoking, not to mention its mandate to protect public health, it would
have been untenable for the defendants to conclude that Canada was passing along misinformation
and on that basis to ignore Canada’s representations about its tobacco and the safety of low-“tar”
cigarettes incorporating that tobacco.
36.
If Canada were a private company engaged in the same conduct alleged here, proximity
would be unquestionable. No court would find it plain and obvious that a private company that
promoted a component that it had developed could not be sued for misrepresenting to a manufacturer
of consumer products the risks of that component or the risks of products to be made with it. Indeed,
the law is clear that private companies owe a duty of care in making representations about their
products to intermediate manufacturers who use them.34
37.
In an attempt to argue that the defendants’ reliance on Canada’s representation was not
reasonable, Canada sets forth “five general indicia” of reasonable reliance identified by Professor
Feldthusen and approved in Hercules and denies the applicability here of all but the fourth:
(1) The defendant had a direct or indirect financial interest in the transaction in
respect of which the representation was made.
(2) The defendant was a professional or someone who possessed special skill,
33
Hercules Managements Ltd. v. Ernst & Young, [1997] 2 S.C.R. 165, at para. 24 (“Hercules”), per La Forest J.
See, e.g., C & B Corrugated Containers Inc. v. Quadrant Marketing Ltd., [2005] O.J. No. 1665 (S.C.J.) (QL), at paras.
42-43, in which Herold J. found that a cardboard supplier had a duty to avoid negligent misrepresentations to a company
using the supplier’s cardboard in marketing displays.
34
10
judgment or knowledge.
(3) The advice or information was provided in the course of the defendant’s
business.
(4) The information or advice was given deliberately, and not on a social
occasion.
(5) The information or advice was given in response to a specific enquiry or
request.
While these indicia should not be understood to be a strict “test” of
reasonableness, they do help to distinguish those situations where reliance on a
statement is reasonable from those where it is not.35
38.
In denying the applicability of all but (4), Canada ignores the allegations in the third party
notices. As to (1), Canada is alleged to have received licensing fees and royalties for the tobacco
strains it developed and promoted.36 As to (2), the third party notices are replete with allegations that
officials at Agriculture Canada and Health Canada promoted themselves as having special skill,
judgment or knowledge. Regarding (3), although officials at Agriculture Canada and Health Canada
were not operating a “business” in a commercial sense, they were acting within the scope of their
jobs and were developing and promoting strains of tobacco for commercial use. In this context,
Professor Feldthusen’s reference to “business” should not be read so narrowly that a court must
automatically exclude the activities of anyone outside the private sector even if those activities
involve the development, promotion and licensing of a commercial product. In other words, relating
the pleaded facts to the indicia does not detract from, but rather supports, the proposition that the
defendants’ reliance was reasonable.
(b)
The defendants do not rely on Canada’s statutory duties to establish proximity.
39.
Canada’s principal argument against proximity is that no statute provides that Canada shall be
liable to the defendants. In Canada’s words, “consideration of the governing statutory scheme is
central to the question of whether or not proximity occurs between a plaintiff and a statutory public
authority”, and statutes concerning the regulation of smoking and health “provide no indication of a
35
36
Appellant’s Factum, at paras. 67-68, quoting Hercules, at para. 43, per La Forest J.
11
duty to tobacco manufacturers”. Canada relies on numerous decisions of lower courts in which
claims based on a government’s negligent exercise of regulatory duties were rejected.37
40.
At the outset, it should be observed that many of the statutes cited by Canada are irrelevant
because they post-date the key time period – the 1960s and 70s – in which the conduct by Canada
that is at issue in defendants’ negligent misrepresentation claim occurred.38
41.
More importantly, every one of the decisions cited by Canada involved a claim where the
plaintiff’s alleged proximity to the government was grounded only in some statutory duty said to
exist for the plaintiff’s benefit but that the government had failed to perform.39 Put slightly
differently, the argument for proximity hinged upon the statute. In each case, the possibility of
proximity was rejected because the statutory duty was found to exist for the benefit of the public at
large, not the particular plaintiff.
42.
The situation here is very different. Canada’s duty rests on its actual relationship with the
defendants and the representations that Canada made to them, not on an inference from a statute.
The third party notices allege that Canada wanted low-“tar” cigarettes. It told the defendants that
they would reduce the hazards of smoking; told them to produce and sell and advertise those
cigarettes and developed the tobacco necessary for the defendants to do so; and told the defendants
that they should move the entire smoking market down-“tar”. Relying on these representations, the
defendants did so, only to be sued by British Columbia for having done so.
43.
Canada played an active, central and guiding role in the defendants’ industry for many
decades, and Canada took on a unique role as the developer and promoter of a key ingredient for
their products. It is Canada’s intimate relationship with the defendants on the facts, not some abstract
statutory duty to the defendants, that grounds proximity in this case.
37
Appellant’s Factum, at paras. 46-48.
For example, Canada extensively quotes the Tobacco Act, S.C. 1997, c. 13, and cites the Tobacco Products Control
Act, S.C. 1988, c. 20, even though these statutes were not passed until 1997 and 1988, respectively.
39
In Eliopoulos Estate v. Ontario (Minister of Health and Long-Term Care) (2006), 276 D.L.R. (4th) 411 (Ont. C.A.),
leave to appeal refused, [2006] S.C.C.A. No. 514 (QL), the claim was that the government had failed in its duty under the
Health Protection and Promotion Act to protect the health of Ontarians, including the plaintiff, in implementing a plan to
prevent the spread of West Nile Virus. In Klein v. American Medical Systems (2006), 278 D.L.R. (4th) 722 (Ont. C.A.),
the claim was that Health Canada failed to fulfill its duty under the Food and Drugs Act to protect the public health,
including that of the plaintiff and other recipients of medical devices, by licensing one such device without independent
testing. In Swift Current (City) v. Saskatchewan Power Corp., 2007 SKCA 27, the plaintiff claimed that the government
had not fulfilled a duty under The Crown Corporations Act, 1993 to review and approve a public utility’s rate increases
with the plaintiff and other customers in mind.
38
12
44.
Elsewhere, Canada’s counsel in this appeal has acknowledged that proximity between the
government and private parties may be founded on their actual relationship, rather than on a statute:
In cases where the Crown or another public authority has been held to owe a
private law duty of care to an individual or an identifiable group of individuals,
there has been evidence of direct contact between the plaintiff (class) and the
defendant or evidence of statements made directly to the plaintiff (class) and not
to the public at large that were of such a nature to create a proximity and a duty of
care.40
45.
To the extent Canada now argues that proximity derived from a statute is necessary to find a
prima facie duty of care, this point is far from plain and obvious. In the eyes of one respected
academic, acceptance of the point would result in an impossibility of liability on the part of
government, whatever its actual relationship with a would-be plaintiff. Professor Klar writes:
As I have argued previously, the search for proximity within statutory provisions
is inconsistent with the spirit, if not the letter, of the Supreme Court of Canada’s
decision in Saskatchewan Wheat Pool v. Canada[, [1983] 1 S.C.R. 205] and is, at
any event, generally a dead-end search in so far as plaintiffs are concerned. …
[T]he language of Saskatchewan Wheat Pool made it clear that in the absence of a
common law duty of care, a statute should not be interpreted as giving rise to a
common law right of action.41
46.
On both this view and the acknowledgment by Canada’s counsel, statutory indications of
proximity cannot be a necessary condition for a prima facie duty.
(c)
The alleged duty to the defendants poses no conflict with Canada’s duties to the public.
47.
Canada’s final argument against proximity is that a duty of care to the defendants would
conflict with its duty to protect the public health. This argument is meritless.
48.
As an initial matter, McLachlin C.J. has stated that “conflict or potential conflict does not in
itself negate a prima facie duty of care; the conflict must be between the novel duty proposed and an
‘overarching public duty’, and it must pose a real potential for negative policy consequences”.42
40
Paul Vickery and Travis Henderson, “Class Actions Against the Crown: What’s New and What’s Important”, at p. 8
(internal citations omitted), in 6th Annual Conference on Crown Liability (Toronto: Osgoode Hall Law School, 2009).
41
See Lewis Klar, Q.C., “Evolving Landscape of Crown Liability in Tort”, at p. 5, in 6th Annual Conference on Crown
Liability (Toronto: Osgoode Hall Law School, 2009). See also Lewis Klar, Q.C., “The Tort Liability of the Crown: Back
to Canada v. Saskatchewan Wheat Pool” (2007) 32 Advocates’ Quarterly 293.
42
Hill, at para. 40.
13
More recently, Cromwell J. has emphasized that negative consequences do not “follow from every
imposition of a duty of care on those who carry out statutory or public duties”.43
49.
Despite these admonitions, Canada provides only conclusory assertions as to the nature of
supposed conflicts between its public duties and a duty to avoid negligent misrepresentations to the
defendants. For example, Canada states “the creation of a duty of care between Canada and tobacco
manufacturers would undermine Canada’s ability to create and implement policies to protect public
health”.44 Canada goes on to say that it could not have fulfilled its duties to its various constituencies
– such as “smokers and non-smokers, young persons, anti-tobacco organizations, tobacco industry
employees, agricultural interests and the tobacco manufacturers themselves” –45 if it had been
required to act with reasonable care in making representations to the defendants.
50.
But Canada never explains how the defendants’ interests diverge from the interests of
Canada’s other constituencies, or how it might be necessary for Canada to make misrepresentations
to the defendants in order to fulfill public duties owed to those other constituencies. The fact is that
everyone would be better served by a duty on Canada to take care. As Tysoe J.A. observed in
Knight, “[i]t does not necessarily seem inconsistent to its duty to protect the interests of the public to
require Canada to take reasonable care in providing accurate information about the strains of tobacco
developed by it”.46 Here, British Columbia alleges that it was wrong to suggest that lower-“tar”
cigarettes presented a reduced risk to smokers.
If that is so, Canada was wrong, and its
representations to the defendants, on which they relied, were wrong too. Canada would have better
met its duties to all the constituencies it mentions by not making the representations that it did.
51.
To undermine the harmony between its public duties and the alleged duty to the defendants,
Canada repeatedly portrays the latter too loosely, as a duty “to be mindful of the economic interests
of tobacco manufacturers”.47 This is incorrect. The defendants do not claim Canada should be held
accountable if it did not mind the defendants’ “economic interests” in general. Rather, the
defendants claim that, once engaged in operational activities such as the development and promotion
43
Fullowka v. Pinkerton’s of Canada Ltd., [2010] 1 S.C.R. 132, 2010 SCC 5 (“Fullowka”), at para. 72.
45
46
47
See, e.g., Appellant’s Factum, at paras. 2-3, 51 and 59-60.
44
14
of tobacco strains and advising concerning warnings, Canada had a duty to take reasonable care that
its representations were correct. Canada’s supposed conflict of duties is illusory.
C.
The defendants’ claim arguably satisfies the second stage of the Anns/Cooper test.
52.
At the Anns/Cooper test’s second stage, Canada argues that policy concerns trump any prima
facie duty of care. Canada (i) points to the dangers of indeterminate liability, (ii) argues that its
decisions were matters of policy, not operational and (iii) asserts that a duty to the defendants would
create an unintended insurance scheme. None of these contentions has plain and obvious merit.
I.
Evidence is needed to determine if Canada’s prima facie duty should be negated.
53.
Canada’s alleged policy concerns must be considered in the context of an evidentiary record.
54.
Even in the context of a trial, Canada would bear a heavy burden to show that policy concerns
should negate its prima facie duty of care to defendants.48 This Court has recently explained that any
such policy concerns “must be more than speculative” – they “must be compelling; a real potential
for negative consequences of imposing the duty of care must be apparent”.49 Even in claims for
economic loss, where policy concerns about indeterminate liability often loom large, those large
concerns have “not always carried the day to exclude a duty of care”.50
55.
Here, in the context of a motion to strike pleadings without a trial or even discovery,
Canada’s burden is even more onerous. It must show that the existence, weight and apparency of a
competing policy concern are plain and obvious.
56.
One of the main policy concerns raised by Canada is the danger of indeterminate liability. At
the pleadings stage, courts frequently refuse to negate a prima facie duty based on this or other
concerns, finding that an evidentiary record is required.
57.
For example, in Anger v. Berkshire Investment Group Inc., where directors of an investment
company argued that indeterminate liability concerns should negate any duty to clients who received
bad investment advice from the company’s sales personnel, the Court of Appeal for Ontario stated:
48
Childs v. Desormeaux, [2006] 1 S.C.R. 643, 2006 SCC 18, para. 13.
Fullowka, at para. 57, per Cromwell J. See also Hill, at paras. 47-48.
50
Fullowka, at para. 70, per Cromwell J.
49
15
To attempt to apply policy considerations in a vacuum, and without the benefit of
a record, would be contrary to the principles upon which our case law has long
been understood to develop. That is why [Hunt] provides that a Court should
strike a claim only if it is clear that in law the case cannot succeed, based on
decided principles directly applicable to the case as set out in the pleadings. The
Court does not develop the law, including policy considerations, in order to strike
a claim. That should only be done after a trial.51
58.
Similarly, in Hughes v. Sunbeam Corp. (Canada) Ltd., the Court of Appeal for Ontario stated
that, although policy concerns (including concerns about indeterminate liability) might make it
“problematic” to impose a duty, the concerns were “better addressed on an evidentiary record”.52
II.
Canada’s prima facie duty is not negated by concerns about indeterminate liability.
59.
In any event, Canada’s concerns about indeterminate liability have no merit, and certainly are
not plain and obvious.
(a)
Canada knew the defendants’ identities and its statements were used for their intended
purpose.
60.
There is nothing “indeterminate” about Canada’s potential liability for negligent
misrepresentation in this case. This Court explained in Hercules that, in negligent misrepresentation
claims, “where the defendant knows the identity of the plaintiff (or of a class of plaintiffs) and where
the defendant’s statements are used for the specific purpose or transaction for which they were made,
policy considerations surrounding indeterminate liability will not be of any concern since the scope
of liability can readily be circumscribed”.53
61.
Here, Canada knew the identities of the defendants, with whom it maintained close contact. It
also knew that the defendants would rely on its statements, especially regarding the health risks of
the tobacco that Canada itself developed and promoted to the defendants. Canada not only advised
defendants but also directed them as to the very activities now alleged by British Columbia to be
51
[2001] O.J. No. 379 (QL) (“Anger”), at para. 15, per Feldman J.A.
(2002), 61 O.R. (3d) 433 (C.A.) (“Sunbeam”), at para. 35, per Laskin J.A., leave to appeal refused, [2002] S.C.C.A.
No. 446 (QL). See also, e.g., Haskett v. Transunion of Canada Inc. (2003), 224 D.L.R. (4th) 419 (Ont. C.A.), at para. 52,
leave to appeal refused, [2003] S.C.C.A. No. 208 (QL).
53
Hercules, at para. 37, per La Forest J. See, e.g., Manufacturers Life Insurance Co. v. Pitblado & Hoskin et al., 2009
MBCA 83, at para. 104 (rejecting concerns about indeterminacy where the defendants could expect the plaintiff’s
reliance on their representations), leave to appeal refused, [2009] S.C.C.A. No. 441 (QL).
52
16
“tobacco related wrongs”. The defendants had no reasonable choice other than to rely upon
Canada’s representations. Canada knew, and intended, that the defendants’ reliance would translate
into a change in the cigarettes smoked by millions of Canadians. Thus, the defendants used Canada’s
statements “for the specific purpose or transaction for which they were made”, the conditions
described in Hercules are met, and indeterminate liability is not a concern.
(b)
Liability is not indeterminate as to amount, time or class.
62.
Alternatively, even were Hercules not dispositive, liability is still not indeterminate.
Indeterminate liability means “liability in an indeterminate amount for an indeterminate time to an
indeterminate class”.54 In the negligent misrepresentation claim at issue here, the existence of
indeterminate liability is far from plain and obvious, for the reasons below.
63.
First, Canada’s prima facie duty is founded on its unique relationship with the very small and
readily identifiable group of tobacco manufacturers to whom it promoted its tobacco strains and
made representations. Only these tobacco manufacturers – the defendants – have the proximity with
Canada needed for a prima facie duty. Canada’s potential liability is thus to a determinate class.
64.
Second, Canada’s potential liability to the defendants is limited to the defendants’ liability to
British Columbia, which itself is limited by geographic, demographic and other boundaries: any
health care costs claimed must be for the treatment of “insured persons” in British Columbia for
“tobacco related diseases” caused or contributed to by “tobacco related wrongs”.55 Evidence may be
required to determine the scope of these costs, but uncertainty as to the total amount does not render
the liability indeterminate, especially at this preliminary stage.56
54
Appellant’s Factum, at para. 75, quoting Ultramares Corp. v. Touche, 174 N.E. 441 (N.Y. 1973), at p. 444, per
Cardozo C.J.
55
The same is true of Canada’s potential liability to the defendants respecting their liabilities to other provinces. The
defendants’ liability to each province is limited by the same sort of boundaries, since each province’s costs recovery
legislation is substantially similar to British Columbia’s Costs Recovery Act.
56
Canada states that liability in this case may include the health care costs of non-smokers arising from environmental
tobacco smoke; Canada also states that liability is not limited to costs resulting from a particular type of tobacco product:
Appellant’s Factum, at para. 80. Canada is wrong on both accounts. British Columbia does not claim for the health care
costs of non-smokers, and limits its claim to costs resulting from cigarettes. Indeed, British Columbia’s pleadings open
by stating that “the Government brings this action to recover the costs of health care benefits on an aggregate basis,
provided for a population of insured persons as a result of smoking cigarettes”: Amended Claim, at para. 2 (emphasis
added). See also, e.g., Amended Claim, at paras. 54, 62, 71, 75, 83, 87 and 90.
17
65.
Canada points to the potential cumulative dollar value of claims under the Act and similar
statutes passed in other provinces. It mentions a $50 billion claim in Ontario to speculate that its
eventual liability to the defendants could be “on a scale of hundreds of billions of dollars” unless this
Court intervenes.57
66.
This argument, focused on the dollar amounts potentially at issue, cannot support an
indeterminacy claim for at least two reasons. First, the $50 billion claim in Ontario is a pleader’s
fantasy. It is pointless at any stage, much less on a motion to strike, to start tallying up provinces’
aspirational claims. Second, and in any event, the possibility of a large judgment against Canada
provides no principled reason for negating its prima facie duty of care. As the Alberta Court of Appeal
has explained, “[t]he word ‘indeterminate’ does not mean large”; it means not “fixed in extent, amount,
character, etc.; of uncertain size, etc.; indefinite”.58 Wide liability does not equal indeterminacy,
particularly here, where Canada always knew and intended that its representations and encouragement
might affect the health of all smokers and that any liability in that regard would therefore be wide.
67.
A properly demanding approach to claims of indeterminacy is well illustrated by Baric v.
Tomalk.59 There, a patient sued the oral surgeons who implanted a medical device in her jaw. The
surgeons instituted third party claims against Health Canada for negligence in its monitoring,
approving, testing and regulating of the device. The court denied the government’s motion to strike,
explaining that Health Canada “is well-placed to assess the number of people using approved medical
devices, and to anticipate the number of claimants should it be negligent in its regulatory role”.60
68.
The negligent misrepresentation claim made here presents an even lesser indeterminacy
concern than that in Baric, as the boundaries of the Act and British Columbia’s pleadings confine
liability more precisely. Furthermore, as in Baric, the number of potential claimants is known.
III.
Canada’s alleged misrepresentations were operational conduct, not policy decisions.
69.
Threaded throughout Canada’s factum is an argument that the defendants’ claim is based on
Canada’s policy-making rather than on operational conduct. That argument has no merit. This Court
57
Appellant’s Factum, at paras. 5 and 16.
Gross v. Great-West Life Assurance Company, 2002 ABCA 37, at para. 38 (internal citations omitted), per curiam.
59
[2006] O.J. No. 890 (S.C.J.) (QL) (“Baric”).
60
Baric, at para. 94, per Pierce J. As in Anger and Sunbeam, the court emphasized the importance of the procedural
context to its analysis: Baric, at para. 101.
58
18
has emphasized that “complete Crown immunity should not be restored by having every government
decision designated as one of ‘policy’”,61 as Canada attempts here.
70.
The Court has distinguished between policy decisions and operational conduct as follows:
True policy decisions involve social, political and economical factors. In such
decisions, the authority attempts to strike a balance between efficiency and thrift,
in the context of planning and predetermining the boundaries of its undertakings
and of their actual performance. True policy decisions will usually be dictated by
financial, economic, social and political factors or constraints.
The operational area is concerned with the practical implementation of the
formulated policies, it mainly covers the performance or carrying out of a policy.
Operational decisions will usually be made on the basis of administrative
direction, expert or professional opinion, technical standards or general
standards of reasonableness.62
71.
Given the government’s burden to demonstrate that a decision is one of policy, and the
sometimes subtle nature of the policy/operational distinction, courts have been rightly reluctant to
reject claims at the pleadings stage based on assertions that the claims attack policy.
72.
For example, in Sauer v. Canada (Attorney General), the plaintiff alleged that Canada “was
grossly negligent in designing and promulgating” one regulation affecting the cattle-feed industry,
and in “failing to impose” another.63 Canada moved unsuccessfully to strike the claim. Despite the
fact that the impugned regulation-making fell far closer to the field of policy than Canada’s
misrepresentations alleged here,64 the Ontario Court of Appeal agreed with the motion judge that the
determination should be made on a “more complete evidentiary record”.65
73.
Similarly, in Baric, the court found “it would be unwise to deny the [third party] plaintiffs an
opportunity to make their case” on the limited record of the pleadings.66 It explained:
61
Just v. British Columbia, [1989] 2 S.C.R. 1228 (“Just”), at p. 1239, per Cory J.
Brown v. British Columbia (Minister of Transportation and Highways), [1994] 1 S.C.R. 420, at p. 441 (emphasis
added), per Cory J.
63
2007 ONCA 454 (“Sauer”), at para. 56, per Goudge J.A., leave to appeal refused, [2007] S.C.C.A. No. 454 (QL).
64
In an effort to move the defendants’ claim closer to Sauer, Canada asserts that the claim is based on “‘advice and
direction’ by Canada that took the form of regulations made under the Tobacco Products Control Act and Tobacco Act”:
Appellant’s Factum, at para. 86. That is untrue. The third party notices focus on Canada’s conduct prior to the
regulations’ adoption in 1988. None of Canada’s statements alleged by the defendants to have constituted a negligent
misrepresentation was at the time contained in regulations or legislation.
65
Sauer, at paras. 57 and 63, per Goudge J.A.
66
Baric, at para. 101, per Pierce J.
62
19
It is arguable that the role of Health Canada went beyond making policy about
medical devices. The allegations in the pleadings suggest that policy, once made,
was purposefully implemented with the end-users of devices in mind. Once a
government chooses to occupy a regulatory field, it must do so without
negligence. This, too, is an issue for trial on the evidence.67
74.
As in Sauer and Baric, it is not plain and obvious on the pleadings that Canada’s
representations to the defendants were policy decisions. Although the choice to develop and promote
supposedly safer tobacco strains may well have required consideration of “financial, economic, social
and political factors”, there was no plain and obvious balancing of those factors required when
Canada’s made its representations. One would more easily say that “administrative direction, expert
or professional opinion, technical standards or general standards of reasonableness” – operational
matters – were at play, given the scientific character of Canada’s representations. Canada cannot, as
a matter of policy, have elected to misrepresent the safety of its tobacco to the defendants.
75.
Canada tries to conflate policy and operational conduct by attributing its development of
tobacco strains to a “policy decision to reduce tar and nicotine in cigarettes” and stating that its
representations to the defendants merely “reflected” this policy decision.68 The contention that the
representations “reflected” earlier policy decisions cannot convert them into policy, however. All
operational conduct “reflects” policy decisions – in the language of Brown, operational conduct is
how policy decisions receive “practical implementation” or are “carried out”.69
76.
This Court’s reasoning in Just is instructive. Just considered a claim for injuries resulting
from a boulder that fell from slopes above a public road. The plaintiff alleged that the government
was negligent in its system of road inspections. This Court recognized that the government, having
made a policy decision to carry out road inspections, had a duty of care since the manner and quality
of the inspection system were “manifestations of the implementation of the policy decision to inspect
and were operational in nature”.70
77.
Here, Canada may have made a policy decision to seek to reduce the health risk to smokers,
but it was at least arguably operational to recommend against warnings, to recommend the content of
later warnings, to advise that lower-“tar” cigarettes would present less risk and to develop and
67
Baric, at para. 86, per Pierce J.
Appellant’s Factum, at paras. 58 and 91-92
69
Brown, at p. 441, per Cory J.
70
Just, at p. 1246, per Cory J.
68
20
promote the tobacco strains that would make those cigarettes a reality. As in Just, these were
"manifestations ofthe implementation ofthe policy decision" for which Canada bore a duty of care.
IV.
Canada's primajacie duty does not create an "unintended insurance scheme".
78.
Finally, Canada argues that any primafacie duty ofcare should be negated because it creates
an "unintended insurance scheme" for manufacturers. 71 This argument simply repeats Canada's
point, already answered above,72 that there is no statutory basis for a duty of care to the defendants.
79.
The defendants' claim against Canada is nothing like an "insurance .scheme". An insurer
pays without any fault on its part, as part of a paid bargain to indemnify the insured against losses
caused accidentally or by the fault of third parties. Here, Canada's liability is based strictly on its
own fault - Canada will be exposed to liability only if, in making its representations, it failed to meet
the standard of care.
PART IV - SUBMISSIONS CONCERNING COSTS
80.
There is no reason to depart from the ordinary rule that costs ofthis appeal should follow the
event.
PART V - ORDER REQUESTED
81.
The appeal should be dismissed.
77th
~ D.ROSSCLARK,Q.~., 4~~
ALL OF WHICH IS RESPECTFULLY SUBMITT
Q.C., counsel for Rothmans,
Benson & Hedges Inc. and
Rothmans Inc.
71
72
Appellant's Factum, at paras. 98-101.
See paras. 39-46, above.
counsel for Philip Morris
USA Inc.
day of January, 201 I.
MICHAEL A. FEDER,
International Inc.
21
PART VI – TABLE OF AUTHORITIES
Paragraph(s)
Case law
Adbusters Media Foundation v. Canadian Broadcasting Corporation, 2009
BCCA 148, leave to appeal refused, [2009] S.C.C.A. No. 227 (QL)
22
Anger v. Berkshire Investment Group Inc., [2001] O.J. No. 379 (C.A.) (QL)
57 & 67
Anns v. Merton London Borough Council, [1978] A.C. 728 (H.L.)
5, 24,
33 & 52
Baric v. Tomalk, [2006] O.J. No. 890 (S.C.J.) (QL)
67, 68 &
73-74
Bow Valley Husky (Bermuda) Ltd. v. Saint John Shipbuilding Ltd., [1997] 3
S.C.R. 1210
Brown v. British Columbia (Minister of Transportation and Highways), [1994] 1
S.C.R. 420
25
70 & 75
C & B Corrugated Containers Inc. v. Quadrant Marketing Ltd., [2005] O.J. No.
1665 (S.C.J.) (QL)
36
Childs v. Desormeaux, [2006] 1 S.C.R. 643, 2006 SCC 18
54
Cooper v. Hobart, [2001] 3 S.C.R. 537, 2001 SCC 79
Eliopoulos Estate v. Ontario (Minister of Health and Long-Term Care) (2006),
276 D.L.R. (4th) 411 (Ont. C.A.), leave to appeal refused, [2006] S.C.C.A. No.
514 (QL)
Fullowka v. Pinkerton’s of Canada Ltd., [2010] 1 S.C.R. 132, 2010 SCC 5
5, 24,
33 & 52
41
48 & 54
Gross v. Great-West Life Assurance Company, 2002 ABCA 37
66
Harvey v. Singer Manufacturing Co., [1960] S.C. 155
27
Haskett v. Transunion of Canada Inc. (2003), 224 D.L.R. (4th) 419 (Ont. C.A.),
leave to appeal refused, [2003] S.C.C.A. No. 208 (QL)
58
Hercules Managements Ltd. v. Ernst & Young, [1997] 2 S.C.R. 165
34, 37 &
60-62
22
Paragraph(s)
Hill v. Hamilton-Wentworth (Regional Municipality) Police Services Board,
[2007] 3 S.C.R. 129, 2007 SCC 41
24, 48 & 54
Hughes v. Lord Advocate, [1963] A.C. 837 (H.L.)
25, 27 & 31
Hughes v. Sunbeam Corp. (Canada) Ltd. (2002), 61 O.R. (3d) 433 (C.A.), leave to
appeal refused, [2002] S.C.C.A. No. 446 (QL)
Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959
Just v. British Columbia, [1989] 2 S.C.R. 1228
58 & 67
22-23
69 & 76
Klein v. American Medical Systems (2006), 278 D.L.R. (4th) 722 (Ont. C.A.)
41
Manufacturers Life Insurance Co. v. Pitblado & Hoskin et al., 2009 MBCA 83,
leave to appeal refused, [2009] S.C.C.A. No. 441 (QL)
60
Overseas Tankship (U.K.) Ltd. v. Miller Steamship Co. Pty., [1967] 1 A.C. 617
(P.C.)
25
Owners, Strata Plan LMS 1328 v. City of Surrey, et al., 2001 BCCA 693
22
Sanofi-Aventis Canada Inc. v. Novopharm Ltd., 2010 FC 150
22
Sauer v. Canada (Attorney General), 2007 ONCA 454, leave to appeal refused,
[2007] S.C.C.A. No. 454 (QL)
72 & 74
Schreiber v. Canada (Attorney General) (2001), 52 O.R. (3d) 577 (C.A.), aff’d,
[2002] 3 S.C.R. 269, 2002 SCC 62
23
Swift Current (City) v. Saskatchewan Power Corp., 2007 SKCA 27
41
The Queen v. Côté et al., [1976] 1 S.C.R. 595
Ultramares Corp. v. Touche, 174 N.E. 441 (N.Y. 1973)
27 & 31
62
23
Secondary sources
Lewis Klar, Q.C., “Evolving Landscape of Crown Liability in Tort”, in 6th Annual
Conference on Crown Liability (Toronto: Osgoode Hall Law School, 2009)
45
Lewis Klar, Q.C., “The Tort Liability of the Crown: Back to Canada v.
Saskatchewan Wheat Pool” (2007) 32 Advocates’ Quarterly 293
45
Paul Vickery and Travis Henderson, “Class Actions Against the Crown: What’s
New and What’s Important”, in 6th Annual Conference on Crown Liability
(Toronto: Osgoode Hall Law School, 2009)
44
24
Canada Shipping Act, R.S.C. 1906, c. 113
PART VII – PROVISIONS DIRECTLY AT ISSUE
25
26
27
28
Canada Shipping Act, R.S.C. 1985, c. S-9
29
30
31
32
33
Tobacco Damages and Health Care Costs Recovery Act, S.B.C. 2000, c. 30
34
35
36
37
38
39
40
41
Consolidated Factum of Appellants on Cross-Appeal
PART I – STATEMENT OF FACTS
A.
Overview
1.
These cross-appeals arise from the partial success of Canada’s motion to strike the third party
notices filed against it by defendants in British Columbia’s action brought pursuant to the Costs
Recovery Act.1
2.
British Columbia’s theory is that the defendants breached duties owed to British Columbians
(or, in the language of the Act, committed “tobacco related wrongs”), which caused British
Columbians to smoke cigarettes and suffer from “tobacco related disease”. Relying on the Act, it
seeks to recover the alleged costs of treating such disease. The defendants deny that their acts were
wrongful, or that their acts caused any smoking or disease. However, they also allege that Canada
committed the same acts, and guided the defendants’ conduct. If the defendants are held liable to
British Columbia, they seek contribution, indemnity and damages from Canada.
3.
The third party notices, which must be taken as true for purposes of Canada’s motion to
strike, set out that Canada played a central role in the manufacture, marketing and promotion of
cigarettes, and did so for decades. In particular, Canada (i) directed the defendants regarding how
and when to warn – and not to warn – the public about the health risks of smoking; (ii) developed
new varieties of tobacco that yielded a higher ratio of nicotine to “tar”; (iii) represented that this
tobacco developed by Canada would lower “tar” deliveries to smokers; (iv) licensed this tobacco to
growers; (v) urged defendants to use this tobacco to make low-“tar” cigarettes; (vi) prodded
defendants to market those cigarettes in ways that would encourage smokers to switch from higher“tar” cigarettes to these lower-“tar” cigarettes; and (vi) urged smokers to switch to these cigarettes as
a safer alternative.
4.
If the defendants are liable to British Columbia for marketing low-“tar” cigarettes, or for
negligently designing them, or for the manner in which they warned smokers, the defendants say that
Canada should be liable, too. This result is justified under a number of legal theories, including a
1
This factum uses terms, including “Canada” and “Costs Recovery Act”, as they are already defined in these defendants’
Consolidated Factum of Respondents on Appeal.
42
contribution claim under the Negligence Act2 or at common law, a claim for equitable indemnity and
direct tort claims.
5.
While the Court of Appeal accepted the potential success of the defendants’ direct tort claim
in negligent misrepresentation (the claim now at issue in Canada’s appeal), it concluded that it was
plain and obvious that none of the other claims against Canada could succeed. The Court of Appeal
reached this conclusion in error.
6.
In concluding that the defendants’ contribution claim was bound to fail, the Court of Appeal
made two errors.
7.
First, it misinterpreted the plain language of the Costs Recovery Act. The Act unambiguously
brings within its scope all “manufacturers” of tobacco products, defined to include anyone who
“directly or indirectly” has ever caused “the manufacture of a tobacco product” or engaged “in the
promotion of a tobacco product”. On the defendants’ allegations, Canada unambiguously, not merely
arguably, qualifies as a “manufacturer”.
8.
Second, the Court of Appeal wrongly concluded that the defendants cannot claim contribution
unless Canada can be directly liable to British Columbia under the Costs Recovery Act. The
Negligence Act does not plainly and obviously impose any such requirement.
Its right of
contribution depends on “fault” causing loss to the plaintiff, which need not always be accompanied
by liability. In any event, if Canada were not liable to British Columbia under the Costs Recovery
Act, it would be liable under the generic Health Care Costs Recovery Act,3 by which British
Columbia can recover health care costs from everyone but “manufacturers”. The defendants can also
claim contribution from Canada at common law.
9.
In combination, the Court of Appeal’s two errors work a serious hardship on the defendants.
The Costs Recovery Act is already harsh: reaching back without limit in time, it revives stale claims,
eliminates traditional defences and imposes startling evidentiary presumptions, all for the benefit of
British Columbia. Now, according to the Court of Appeal, the Act also prevents the defendants from
obtaining contribution from Canada, no matter how responsible Canada might be for the very health
care costs for which British Columbia has sued the defendants. This is a remarkable conclusion, and
2
3
R.S.B.C. 1996, c. 333.
S.B.C. 2008, c. 27.
43
one this Court should be loath to adopt given the absence of clear (or, indeed, any) legislative intent:
had British Columbia brought an action at common law to recover the same health care costs, from
the same defendants, based on the same alleged misconduct, there could be no question but that the
defendants, alleging the same involvement by Canada alleged here, could bring a third party claim
against Canada for contribution.
10.
Furthermore, the Court of Appeal was wrong to find that, on the facts pleaded, it is plain and
obvious that the defendants have no claim for equitable indemnity from Canada. The principle of
equitable indemnity applies where one party requests or directs another to do something that causes
the other to incur liability. That is what Canada is alleged to have done here. The third party notices
state that Canada issued directions and requests to the defendants respecting health warnings and
marketing of low-“tar” cigarettes, on which British Columbia now bases its claim. The Court of
Appeal’s reason for rejecting the equitable indemnity claim – the absence of any promise by Canada
to indemnify the defendants – has repeatedly been rejected by other courts and would render the
principle a redundancy.
11.
Finally, the Court of Appeal was wrong to conclude that it is plain and obvious that the
defendants have no claims against Canada for negligent design and failure to warn. The reason given
by the Court of Appeal – the risk of Canada also being liable to other, hypothetical entities that may
have incurred economic harm from smoking – is inapplicable because none of those entities have the
relationship with Canada necessary to found a prima facie duty of care. The spectre of indeterminate
liability to imaginary plaintiffs to whom Canada owes no duty in the first place provides no plain and
obvious reason to negate the prima facie duty owed to the tiny class of defendants here, with whom
Canada was uniquely intimate. Moreover, since British Columbia’s claim against the defendants is
for economic harm, as measured by increased health care costs, it is not plain and obvious that
Canada can escape liability to the defendants based on policy concerns about this very type of claim.
The Court of Appeal was also wrong to find that the defendants’ claim for failure to warn was barred
because Canada was acting in a policy-making rather than an operational capacity. There is nothing
in the facts pleaded (and it defies common sense) to suggest that Canada made a policy decision, for
example, to see that the public received inadequate warnings; if the warnings were inadequate, that
was an operational flaw for which Canada may be held liable.
44
B.
Statement of facts
I.
The Costs Recovery Act and British Columbia’s action against the defendants
12.
The principal purpose and effect of the Costs Recovery Act is to facilitate an action by British
Columbia, and by British Columbia alone, against “manufacturers” of tobacco and tobacco products
for costs of treating British Columbians for tobacco related diseases, reaching back in time without
limit.
13.
The Costs Recovery Act alters traditional tort law to give British Columbia special procedural
and evidentiary advantages. The Act creates sweeping evidentiary presumptions in favour of British
Columbia, eliminates limitation defences, shields from defendants the identities of the persons whom
they are alleged to have harmed and sharply restricts defendants’ ability even to get medical records
respecting the treatments for which British Columbia seeks reimbursement.4
14.
The Act’s definition of “manufacturer” establishes the scope of persons and entities
potentially liable under the Act. The definition is expansive. Subject to some limited and precise
exceptions,5 a person or entity meeting any one of the four prongs of the definition can be liable to
British Columbia:
“manufacturer” means a person who manufactures or has manufactured a tobacco
product and includes a person who currently or in the past
(a) causes, directly or indirectly, through arrangements with contractors,
subcontractors, licensees, franchisees or others, the manufacture of a tobacco
product,
(b) for any fiscal year of the person, derives at least 10% of revenues,
determined on a consolidated basis in accordance with generally accepted
accounting principles in Canada, from the manufacture or promotion of
tobacco products by that person or by other persons,
(c) engages in, or causes, directly or indirectly, other persons to engage in the
promotion of a tobacco product, or
(d) is a trade association primarily engaged in
4
As explained below, British Columbia has passed a similar but generic statute, the Health Care Costs Recovery Act,
which permits it to recover health care costs from everyone except those who are “manufacturers” under the tobacco
statute. Remarkably, the generic statute lacks every one of these extraordinary and harsh features.
5
See Costs Recovery Act, s. 1(2).
45
(i) the advancement of the interests of manufacturers,
(ii) the promotion of a tobacco product, or
(iii) causing, directly or indirectly, other persons to engage in the
promotion of a tobacco product … .6
15.
Despite this expansive definition, British Columbia chose to sue only 14 alleged
“manufacturers”: a handful of cigarette makers in Canada and abroad, plus the Canadian Tobacco
Manufacturers’ Council. British Columbia did not sue any of the many tobacco companies situated
on Indian reserves that have made cigarettes for British Columbians. It did not sue any wholesalers
or retailers that promoted cigarettes, any trade associations representing such wholesalers or retailers
or any marketing companies that engaged in the promotion of cigarettes. And it did not sue Canada.
16.
The gist of British Columbia’s claim is that the defendants committed “tobacco related
wrongs” that caused persons in British Columbia to smoke cigarettes, and that smoking cigarettes
caused or contributed to disease in a number of these persons.
17.
The first “tobacco related wrong” alleged by British Columbia is “defective product” or
“negligent design”. British Columbia’s Amended Claim states as follows:
50. These Defendants breached their duty to consumers to design a reasonably
safe product by failing to eliminate or reduce to a safe level, substances in
cigarettes and by-products of combustion, including nicotine and tar, which are
addictive and which can cause or contribute to disease.
51. These Defendants, in further breach of their duty, increased the risks of
smoking by manipulating the level and bio-availability of nicotine in their
cigarettes, particulars of which include the following:
(a) these Defendants sponsored or engaged in selective breeding or genetic
engineering of tobacco plants to produce a tobacco plant containing increased
levels of nicotine;
…
53. These Defendants, in further breach of their duty, increased the risk to
consumers by designing and manufacturing “mild,” “low tar” and “light”
cigarettes, which they promoted in a manner which led reasonable consumers to
believe that the product was safer to use than it was in fact.
6
Costs Recovery Act, s. 1(1).
46
18.
The second alleged “tobacco related wrong” is “failure to warn”:
56. These Defendants breached their duty to warn, including, in particular, by
failing to provide any warning prior to 1972, or any adequate warning thereafter:
(a) of the risk of tobacco related disease; and
(b) of the risk of addiction to the nicotine contained in their cigarettes.
57. To the extent that these Defendants have purported to provide warnings, these
warnings:
(a) were designed to be as innocuous and ineffective as possible;
(b) were insufficient to give consumers an adequate indication of each of the
specific risks of smoking their cigarettes;
(c) were introduced only to forestall more government mandated warnings;
and
(d) failed to make clear, credible, complete and current disclosure to
consumers of the risks inherent in the ordinary use of their cigarettes in such
a way as to allow consumers to make free and informed decisions concerning
smoking.
58. Without restricting the generality of the foregoing, although these Defendants
knew or ought to have known that children and adolescents in British Columbia
were smoking or might smoke their cigarettes, they failed to provide warnings
sufficient to convey to such persons the risks of smoking.
19.
In addition, the Amended Claim alleges other “tobacco related wrongs” by the defendants,
involving, for example, breaches of consumer protection statutes. As in the case of the “defective
product” and “failure to warn” allegations described above, the Amended Claim describes these
“tobacco related wrongs” by way of extensive allegations concerning the supposed properties of
tobacco used in cigarettes, the purported inadequacy of health warnings offered by the defendants
and the supposed assertion by the defendants that low-“tar” (or “light” and “mild”) cigarettes are
safer than other cigarettes.7
7
See, e.g., Amended Claim, at paras. 39-46, 51, 53, 57-58 and 77.
47
II.
The defendants’ third party notices against Canada
20.
In 2007, most of the defendants filed third party notices against Canada, seeking contribution,
indemnity, damages and declaratory relief. These third party notices contain detailed allegations
concerning the active, central and guiding role that Canada has played in the tobacco industry for
many decades.
21.
The RBH/RI TPN is generally representative of the third party notices. It alleges that Canada
not only guided but also itself engaged in many of the activities that British Columbia now alleges
constitute “tobacco related wrongs”. Some of the key allegations are as follows:
(a)
Canada reviewed and conducted research (both independently and jointly with the
defendants) concerning the health risks of smoking cigarettes and the behaviour of smokers.
Canada initially advised the public that smoking was not addictive and had not been
established as a cause of lung cancer. Later, having recognized the health risks of smoking,
Canada implemented a National Smoking and Health Programme intended to advise and
educate smokers about those risks and about the properties of cigarettes.8
(b)
In the implementation of its National Smoking and Health Programme, Canada
considered the utility of health warnings on cigarette packages, and told the defendants that
such warnings were unnecessary, unrealistic and “silly”. Once it determined that warnings
would be beneficial, Canada gave advice and recommendations to the defendants about the
warnings that should be used – the very warnings now alleged by British Columbia to be
inadequate.9
(c)
Later, Canada sought to induce smokers to select cigarettes with relatively low levels
of “tar” and nicotine and represented that such low-“tar” cigarettes posed a lesser risk to their
health. To further its efforts, Canada published “league tables” showing the “tar” and
nicotine yields of various cigarette brands and eventually requested or directed that the
defendants publish those yields on cigarette packages and in cigarette advertising. Canada
8
9
RBH/RI TPN, at paras. 13-52.
RBH/RI TPN, at paras. 53-62. See para. 18, above.
48
also advised, requested or directed that the defendants produce and promote low-“tar”
cigarettes, and advised smokers to avoid “compensation” when smoking them.10
22.
The third party notices go on to allege in detail that officials of Agriculture Canada and
Health Canada ultimately came to participate directly in the commercial aspects of the Canadian
tobacco industry in a way that is most atypical for government. As part of a programme to develop a
less hazardous cigarette, Canada developed, licensed and promoted its own strains of tobacco with a
lower “tar”-to-nicotine ratio, for the purpose of facilitating the manufacture of marketable low-“tar”
cigarettes. Canada encouraged the defendants to produce these cigarettes and to move smokers
towards them. Eventually, Canada’s tobacco came to dominate the Canadian marketplace, and
Canada collected royalties for it. Canada congratulated itself when the defendants succeeded in
converting the great bulk of smokers to low-“tar” cigarettes. For example, the RBH/RI TPN states as
follows:
127. … [A]griculture Canada Officials at the Delhi Research Station had,
between about 1979 and 1983, created varieties of tobacco leaf, including Nordel,
Delgold, Newdel and Candel, which contained significantly higher levels of
nicotine than previously available varieties which when smoked produced a lower
“tar” to nicotine ratio and were therefore believed to produce a safer cigarette.
These varieties were tested at the Delhi Research Station for their relative safety
and to determine whether they were consistent with levels of biological activity or
mutagenicity acceptable to Officials, and whether they were acceptable to
consumers when manufactured into cigarettes. Officials licensed those varieties
and promoted them for use by all growers of tobacco in Canada, and for use by
the cigarette manufacturers in their products for sale in British Columbia.
128. By the summer of 1980, Officials at Agriculture Canada were advising the
public and the cigarette manufacturers that the new varieties of tobacco “that
Agriculture Canada had developed, could be tailor-made for today’s light
cigarette brands, combining low-tar and high nicotine.” By the spring of 1981,
Officials at Health Canada advised and represented to consumers and cigarette
manufacturers in published material that, “The relatively low-tar/nicotine ratio of
Canadian tobacco offers manufacturers greater flexibility in producing lighter
cigarettes and still maintains sufficient nicotine and flavour to satisfy consumer
demands.” Similar statements were published on multiple occasions including
those in Volumes 53, 54, and 55 of “The Lighter,” a publication of Agriculture
Canada.
129. By 1983 the tobacco varieties developed by Agriculture Canada Officials, in
10
RBH/RI TPN, at paras. 68-109.
49
response to grower requirements and the international market for tobacco leaf,
and in order to satisfy consumer demand for “light” cigarettes, comprised about
95% of the tobacco available to the cigarette manufacturers. By 1983 nearly all
tobacco products consumed in B.C. were manufactured from these varieties.
130. Licensing fees and royalties earned on those tobacco strains have been paid
to the Federal Government.
23.
All of these allegations correspond precisely to “tobacco related wrongs” that British
Columbia contends were committed by the defendants.
24.
Based on the allegations in the third party notices, the defendants asserted that if they were
liable to British Columbia, then Canada was liable to them, under at least three separate legal
theories. First, Canada was liable to make contribution to the defendants, on the premise that British
Columbia’s health care costs were caused by Canada’s wrongful conduct. Second, Canada was liable
under the principle of equitable indemnity because it requested or directed the defendants’ impugned
conduct. Third, Canada breached duties of care it owed directly to the defendants, with the damages
for such breaches to be measured by reference to the defendants’ liability to British Columbia.
25.
With respect to the theory that Canada breached duties owed directly to the defendants, the
defendants’ allegations were grouped by the Court of Appeal into three separate claims: (i) Canada
made negligent misrepresentations to the defendants about the relative safety of the tobacco strains
created, promoted and licensed by Canada for low-“tar” cigarettes and about other matters affecting
the public health; (ii) Canada negligently designed those tobacco strains; and (iii) Canada engaged in
a failure to warn respecting the necessity and content of printed health warnings.
III.
Canada’s motion to strike and the decisions below
26.
Canada did not file any defence to the third party notices. Instead, it moved under Rule
19(24)(a) of British Columbia’s Supreme Court Rules11 to strike them in their entirety, on the ground
that they disclosed no reasonable cause of action. In accordance with Hunt, for the purposes of the
motion, the allegations in the third party notices were required to be taken as true.
27.
At first instance, Canada’s motion was successful. On April 10, 2008, Wedge J. struck the
third party notices on the view that Canada enjoys a constitutional immunity from the Costs Recovery
11
B.C. Reg. 221/90.
50
Act that defeats all of the defendants’ claims (including, without any explanation, claims not based on
the Act).12
28.
The appeal from Wedge J.’s order was heard over several days in June 2009, together with
the appeal in Knight. On December 8, 2009, the Court of Appeal allowed the defendants’ appeal in
part. The Court of Appeal held that the defendants’ negligent misrepresentation claim against
Canada should be permitted to proceed, but that all the other claims should be struck.
29.
With respect to the claim for contribution, the Court of Appeal, writing through Hall J.A.,
reasoned that the defendants may make this claim only under the Negligence Act, and only where the
third party from whom contribution is claimed is directly liable to the plaintiff (here, British
Columbia). For this proposition, the Court of Appeal cited Laskin C.J.’s decision in Giffels v.
Eastern Construction.13 The court concluded that Canada could not be liable to British Columbia
because Canada is not a “manufacturer” within the meaning of the Costs Recovery Act. Having
concluded that the Costs Recovery Act did not capture Canada, the Court of Appeal did not consider
the constitutional immunity point on which Wedge J. originally decided the motion.
30.
The Court of Appeal provided three justifications for its view that Canada is plainly and
obviously not a “manufacturer”. First, it looked at the Act’s definition of “manufacturer”, and
assumed, without supporting evidence, that Canada did not fit within the definition because it does
not derive 10% of its revenue from tobacco and lacks a market share in tobacco products:
[W]hen one goes on to consider other provisions of the statute, it seems less likely
that Canada was intended by the legislature to be within the parameters of the
Costs Recovery Act. For instance, subsection (b) of the definition of
“manufacturer” adverts to the derivation of at least 10% of revenues for a fiscal
year from the manufacture or promotion of tobacco products. I note also that
potential liability of defendants is stipulated to be based on market share. …
Manifestly, Canada has not been engaged in the business of selling tobacco
products in British Columbia, nor does it derive at least 10% of annual revenues
from the manufacture or promotion of tobacco products.14
12
BCSC Decision.
[1978] 2 S.C.R. 1346 (“Giffels”).
14
13
51
31.
Second, the Court of Appeal looked beyond the Act to isolated statements in Hansard that it
said did not evince a legislative intent to impose liability on Canada (even though, at first instance,
British Columbia had argued that Canada fits within the “manufacturer” definition):
At the time this legislation was introduced by the British Columbia government of
the day, the minister responsible indicated that the government believed that “the
industry” manufactured a product that killed people, and that the government
believed that “the industry” should be held accountable for the costs of treating
tobacco related illnesses. The minister made reference to “tobacco companies”.
The terms used by the minister are not at all apt to include Canada as a target of
the legislation.15
32.
Third, the Court of Appeal speculated that the Legislature would have seen policy reasons not
to create a claim under the Costs Recovery Act against Canada:
It is also to be noted that there have been in existence for many years fiscal
arrangements between Canada and British Columbia providing for health care
cost transfers from the federal government to the provincial government based on
formulas incorporating tax revenues and cost sharing. If the Costs Recovery Act
were to be construed to permit the inclusion of Canada as a manufacturer targeted
for the recovery of provincial health costs, this would permit a direct economic
claim to be advanced against Canada by British Columbia to obtain further
funding for health care costs. In light of these longstanding fiscal arrangements
between governments, I cannot conceive that the legislature of British Columbia
could ever have envisaged that Canada might be a target under the Costs
Recovery Act. At the very least, having regard to the definition of government
contained in the current Interpretation Act, it seems to me that if Canada was
intended to be a target, it would have been specifically named in the legislation.
For one level of government to directly target another level of government
seeking to exact financial compensation from that level of government seems to
me a matter sufficiently fraught with constitutional considerations to require a
clear indication that this was intended and there is no such indication in this
legislation.16
33.
Turning to the defendants’ equitable indemnity claim, the Court of Appeal found that the
principle of equitable indemnity could not apply given the absence of any implied promise by
Canada to indemnify the defendants. Hall J.A. stated:
I am of the opinion that if the notional reasonable observer were asked whether or
not Canada, in the interaction it had over many decades with the appellants, was
15
16
52
undertaking to indemnify them from some future liability that might be incurred
relating to their business, the observer would reply that this could not be a rational
expectation, having regard to the relationship between the parties. Likewise, if
Canada through its agents had been specifically asked or a suggestion had been
made to its agents by representatives of the appellants that Canada might in future
be liable for any such responsibility or incur such a liability, the answer would
have been firmly in the negative.17
34.
With respect to the defendants’ claims for negligent misrepresentation, negligent design and
failure to warn, a majority of the Court of Appeal, writing through Tysoe J.A., adopted the majority’s
analysis in Knight on the question of proximity at the first stage of the Anns/Cooper test. It held that
proximity arguably existed between Canada and the defendants with respect to all of those claims.
The relevant portion of Knight states as follows:
ITCAN asserts that Canada represented to it that the tobacco strains developed
and licensed by Canada for use in light and mild cigarettes were less hazardous to
the health of smokers than regular cigarettes. The class members [like British
Columbia in this case] are alleging that the same representation made to them by
ITCAN was deceptive and misleading, thereby contravening the Trade Practice
Act. ITCAN’s position is that if class members are correct, Canada should be
liable to ITCAN because ITCAN’s contravention of the Trade Practice Act was a
consequence of its reasonable reliance on the representation made by Canada. …
[ITCAN’s] complaint is that Canada made misrepresentations to it about the
tobacco strains developed and licensed by Canada for use in light and mild
cigarettes, including the accuracy of information provided by standard measuring
methods, the deliveries of tar and nicotine, and the extent of compensation made
by smokers of light and mild cigarettes.
In my opinion, it is not plain and obvious that Canada did not owe a prima facie
duty of care to ITCAN with respect to representations made by it to ITCAN in
connection with tobacco strains developed for use in light and mild cigarettes. …
In my view, it also is not plain and obvious that Canada did not owe a prima facie
duty of care to ITCAN with respect to the design of the tobacco strains developed
for use in light and mild cigarettes. If sufficient proximity exists in the
relationship between the designer of a product and a purchaser of the product, it
would seem to me to follow that there is sufficient proximity in the relationship
between a designer of a product and a manufacturer who uses the product in
goods sold to the public. Also, the designer of the product ought reasonably to
17
53
have the manufacturer in contemplation as a person who would be affected by its
design in the context of the present case.18
35.
The Court of Appeal also found that the Anns/Cooper requirement of foreseeability was made
out on the pleadings.
36.
At the second stage of the Anns/Cooper test, the Court of Appeal rejected Canada’s
contention that the defendants’ negligent misrepresentation and negligent design claims plainly and
obviously concerned an unchallengeable policy decision by Canada. It again did this by reference to
Knight:
However, on my reading of the facts alleged in ITCAN’s third party notice, which
must be assumed to be true for the purposes of a Rule 19(24) application, the
allegations against Canada go beyond its role as a regulator. It is alleged that
Canada made the decision to develop strains of tobacco that were less harmful to
smokers than the strains of tobacco then being utilized (which could fairly be
characterized as a policy decision) but it developed strains of tobacco that were
actually more hazardous to the health of smokers, and it made misrepresentations
to smokers about the relative safety of cigarettes containing the strains of tobacco.
It is also alleged that Canada was paid licensing fees and royalties in respect of
the strains it developed.19
37.
Referring to Knight, the Court of Appeal nonetheless concluded that, notwithstanding all this,
policy reasons relating to indeterminate liability plainly and obviously weighed against a duty of care
permitting the defendants to recover for their economic losses (i.e., their alleged liabilities to British
Columbia):
[T]here may be innumerable other persons who suffer economic loss as a result of
the injury to the third party in question (here, the class members) or damage to or
loss of property of the third party. For example, employers of key employees
who became incapacitated as a result of smoking light and mild cigarettes could
claim for lost profits. Suppliers of the employer may suffer a financial loss.
Persons having contracts with smokers of light and mild cigarettes could claim for
economic loss occasioned by the incapacity of the smokers. Family members of a
smoker of light and mild cigarettes could suffer financial loss.
In my view, therefore, the claim of ITCAN for recovery of pure economic loss
from Canada gives rise to indeterminate liability, and this consideration is
18
19
Knight, at paras. 64-67.
54
sufficient to negate the prima facie duty of care found to be owed by Canada at
the first stage of the Anns test.20
38.
The Court of Appeal permitted only the defendants’ claim against Canada for negligent
misrepresentation to proceed, because the law has long permitted misrepresentation claims for
economic loss.21
39.
In addition, the Court of Appeal found that the defendants’ claim for failure to warn (unlike
the claims for negligent misrepresentation and negligent design) plainly and obviously attacked a
policy decision by Canada, rather than its operational conduct, and failed for that reason:
As I read ITCAN’s third party notice, the allegation of a failure to warn does not
relate specifically to the tobacco strains developed by Canada for use in light and
mild cigarettes. Paragraphs 149 and 150 of its third party notice assert that if, as
alleged by British Columbia, warnings of the health risks of smoking cigarettes
generally should have been given prior to 1972 and inadequate warnings were
given after 1972, this was known by Canada, and the failure of the appellants
resulted from conduct of Canada.
The principal point of difference between Hall J.A. and myself in Knight is Hall
J.A. believes that all of Canada’s actions fall within its purview as regulator and
that policy considerations militate against the imposition of a duty of care on
Canada. In contrast, it appears to me that the allegations against Canada with
respect to its development of the tobacco strains used in light and mild cigarettes
may go beyond Canada’s role as regulator, and it is not plain and obvious that
policy considerations negate the prima facie duty of care. However, the
difference between us does not apply to this claim of a failure to warn. This claim
is against Canada in its role as regulator … .22
PART II – QUESTIONS IN ISSUE
40.
The essential question on these cross-appeals is whether it is plain and obvious that the
defendants have no possible claim against Canada apart from their claim in negligent
misrepresentation, despite Canada’s involvement in and direction of the very conduct now alleged by
British Columbia to constitute “tobacco related wrongs”, despite Canada’s central and participatory
role in the tobacco industry over many decades and despite Canada’s development, licensing and
20
Knight, at paras. 82-83.
22
21
55
promotion to the defendants of tobacco strains specifically intended, on health grounds, for the low“tar” cigarettes that are now alleged to have in fact been more dangerous.
41.
Given the allegations in the third party notices, it is arguable, at a minimum, that the
defendants have the following claims:
(a)
a claim for contribution and indemnity under s. 4 of the Negligence Act or at common
law;
(b)
a claim for equitable indemnity; and
(c)
claims for negligent design and failure to warn.
PART III – STATEMENT OF ARGUMENT
A.
As these cross-appeals arise from a motion to strike, the defendants’ claims cannot be
struck unless they are radically defective, and particular caution is warranted.
42.
Like the appeal, these cross-appeals arise from a motion to strike pleadings. Canada has filed
no defence, been subjected to no discovery, led no evidence and taken part in no trial. Accordingly,
the allegations in the third party notices must be taken as true, and each issue must be resolved in the
defendants’ favour unless the answer plainly and obviously goes Canada’s way. None of the
defendants’ claims can be struck unless it is, beyond any doubt, radically defective and certain to
fail.23
43.
Although the standard on a motion to strike is already stringent, particular caution is
warranted here. The defendants raise many claims, the viability of which depends on a great number
of legal issues. Many of the issues are difficult and several are overlapping. In the case of some
issues, this Court does not have the benefit of analysis and adjudication by both of the lower courts or
sometimes by even one of them. While the third party notices lay out extensive factual allegations,
the defendants have had no discovery of Canada and Canada has not offered any response to those
allegations.
23
See these defendants’ Consolidated Factum of Respondents on Appeal, at para. 22.
56
44.
As Doherty J.A. has observed, the “exact nature of a claim is often an amalgam of fact and
law which is melded through the trial process and only properly tested at the end of the trial”.24 The
intricate and contentious legal analysis required here is not well suited for a pleadings motion. In the
circumstances, the prudent and proper course is to leave the defendants’ claims against Canada to
proceed, with the issues they raise to be resolved only if the proven facts require it.
B.
Canada is a “manufacturer” within the meaning of the Costs Recovery Act and
potentially liable to British Columbia under it.
45.
A significant, and erroneous, ground underlying much of the Court of Appeal’s analysis was
its conclusion that Canada is not a “manufacturer” within the meaning of the Costs Recovery Act.
The Court of Appeal reasoned that, unless the Act’s novel cause of action against “manufacturers”
extends to Canada, Canada cannot be directly liable to British Columbia, and Canada can be liable to
the defendants for contribution only if it can be directly liable to British Columbia.25
46.
The meaning of “manufacturer” is a question of statutory interpretation. In interpreting a
statute, “there is only one principle or approach, namely, the words of an Act are to be read in their
entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act,
the object of the Act, and the intention of Parliament”.26
47.
When the words in the Costs Recovery Act’s definition of “manufacturer” are “read in their
entire context and in their grammatical and ordinary sense”, and in light of the facts alleged in the
third party notices, Canada is plainly a “manufacturer”. Nothing in the scheme of the Act, the object
of the Act or any plain and obvious intention of the Legislature undercuts that conclusion.
I.
The plain language of the “manufacturer” definition captures Canada.
48.
The Court of Appeal arrived at its interpretation of “manufacturer” not exclusively upon
analysis of the Costs Recovery Act’s definition but also by way of a review of selected statements of
a Minister found in Hansard and an appeal to policy. The Court of Appeal’s interpretation is
irreconcilable with the Act’s unambiguous text.
24
Schreiber, at para. 15.
BCCA Decision, at paras. 27 and 33.
26
Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27 (“Rizzo”), at para. 21, per Iacobucci J., quoting with approval Elmer
Driedger, Construction of Statutes, 2d ed. (Toronto: Buttersworth, 1983), at p. 87.
25
57
49.
The definition of “manufacturer” found in the Costs Recovery Act is clear and precise. In an
effort to cast the net as broadly as possible, the British Columbia Legislature utilized a disjunctive
definition, under which an entity will be a “manufacturer” if it undertakes any one of a number of
activities.27
50.
At first instance, Wedge J. correctly recognized that Canada arguably meets the definition of
“manufacturer”:
On the facts as pleaded in the Third Party Notices, the employees of Agriculture
Canada were involved in the production, assembly or packaging of a tobacco
product and are therefore, at least arguably, “manufacturers” under the Act.28
51.
For example, paragraph (a) of the definition captures anyone who “causes, directly or
indirectly, through arrangements with contractors, subcontractors, licensees, franchisees or others,
the manufacture of a tobacco product”. Canada directly or indirectly caused the manufacture of
certain tobacco strains, and caused the use of those strains in the manufacture of cigarettes, and did
so through arrangements with, among others, licensees. Paragraph (c) captures anyone who “engages
in, or causes, directly or indirectly, other persons to engage in the promotion of a tobacco product”.
Canada promoted its tobacco strains, and directly or indirectly caused the defendants to promote low“tar” cigarettes made with Canada’s tobacco strains.
52.
The Court of Appeal, however, mistakenly read the definition of “manufacturer” to be
conjunctive, so that Canada’s failure to satisfy any one paragraph of the definition – for example, the
paragraph referring to “10% of revenues” on a consolidated basis – would erroneously take it outside
the scope of that definition.
53.
Unsurprisingly, the Court of Appeal’s conjunctive reading of the “manufacturer” definition is
inconsistent with that of British Columbia. Its pleadings properly treat the definition as disjunctive:
Each of the Defendants described above is a manufacturer pursuant to the Act by
reason of one or more of the following:
(a) it manufactures, or has manufactured, tobacco products, including
cigarettes;
27
28
See para. 14, above.
BCSC Decision, at para. 70.
58
(b) it causes, or has caused, directly or indirectly, through arrangements with
contractors, subcontractors, licensees, franchisees or others, the manufacture
of tobacco products, including cigarettes;
(c) it engages in, or has engaged in or causes or has caused, directly or
indirectly, other persons to engage in, the promotion of tobacco products,
including cigarettes; and
(d) for one or more of the material fiscal years, it has derived at least 10% of
its revenues, determined on a consolidated basis in accordance with generally
accepted accounting principles in Canada, from the manufacture or
promotion of tobacco products, including cigarettes, by itself or by other
persons.29
54.
The Court of Appeal also erred in giving significance to the fact that the Act initially allocates
liability on a market-share basis.30 Market share is not necessary to establish an entity’s status as a
“manufacturer” under the Act; indeed, it is irrelevant to the definition. This is clear from the fact that
the definition includes “trade associations” that do not themselves sell or promote tobacco products,
and others who “indirectly” cause the promotion of tobacco products. Indeed, British Columbia
alleges that the Canadian Tobacco Manufacturers’ Council qualifies as a “manufacturer”:
The Defendant CTMC is the trade association of the Canadian tobacco
industry. …
The Defendant CTMC is a manufacturer pursuant to the Act in that it has been
primarily engaged in one or more of the following activities:
(a) the advancement of the interests of manufacturers,
(b) the promotion of cigarettes, and
(c) causing, directly or indirectly, other persons to engage in the promotion of
cigarettes.31
55.
Furthermore, a “manufacturer” with no market share can have significant liability to British
Columbia. Under s. 3(4) and 4 of the Act, liability among “manufacturers” can be readjusted based
on considerations other than market share and the liability of multiple “manufacturers” who conspire
is joint and several.
29
Amended Claim, at para. 18 (emphasis added).
31
Amended Claim, at paras. 20-21.
30
59
56.
In any event, even if market share were needed to be a “manufacturer”, the defendants could
lead evidence (or, at this stage, simply amend the third party notices to allege) that Canada does
possess a market share based on the tobacco strains that it developed, licensed and promoted, and for
which it is already alleged to have obtained licensing fees and royalties, which strains found their
way into virtually all cigarettes sold legally in British Columbia.
II.
The Court of Appeal erroneously departed from the Act’s plain language based on
Hansard.
57.
In support of its contra-textual reading of the Costs Recovery Act’s definition of
“manufacturer”, the Court of Appeal relied upon statements by a Minister quoted in Hansard. On
their face, none of these statements contradicts Canada being a “manufacturer” within the meaning of
the Act. Certainly the Minister never stated that Canada was not a “manufacturer”.
58.
While this Court has on occasion permitted recourse to Hansard, it has also consistently
expressed reservations about the use of isolated statements of individual legislators as a guide to
statutory interpretation.32 This Court’s decisions also confirm that caution is particularly appropriate
where, as here, the statements in question do not directly address the question at hand.
59.
For instance, in A.Y.S.A. Amateur Youth Soccer Assn. v. Canada (Revenue Agency),33 this
Court rejected an argument based on Hansard that was very similar in form to the reasoning of the
Court of Appeal. Rothstein J. explained:
The government cites various passages from Hansard to argue that in 1971, when
Parliament amended the ITA creating the RCAAA provisions, in intended to
exclude sports associations other than RCAAAs from the tax benefits of
charitable status. … When faced with the issue of whether to provide tax relief
for sport under the ITA, according to the government, Parliament chose to extend
charity-like benefits to only a small number of sports associations and did so, not
by expanding the definition of charity, but through the alternative mechanism of
the RCAAA. …
32
See, e.g., Rizzo, at para. 35 (“the frailties of Hansard evidence are many”), per Iacobucci J. and Dagg v. Canada
(Minister of Finance), [1997] 2 S.C.R. 403, at para. 49 (Hansard evidence has “limited reliability and weight”), per Cory
J. See also, e.g., R. v. Morgentaler, [1993] 3 S.C.R. 463, at p. 485, where Sopinka J., quoting Professor Peter Hogg,
suggests that while Hansard may be consulted for “the characterization of the entire statute for purposes of judicial
review” under the pith and substance test, the use of Hansard is far less appropriate when it comes to “the interpretation
of a particular provision of a statute”.
33
[2007] 3 S.C.R. 217, 2007 SCC 42 (“A.Y.S.A.”).
60
It is clear from the wording of the definition of RCAAA in s. 248(1) that
Parliament intended the benefit of RCAAA status to be available only to
nationwide associations. However, I have difficulty accepting the government’s
“occupied field” argument based on excerpts from Hansard. While Hansard may
offer relevant evidence in some cases, comments of MPs or even Ministers may
or may not reflect the parliamentary intention to be deducted from the words used
in the legislation. “It is clear that no single participant in the legislative process
can purport to speak for the legislature as a whole.” (R. Sullivan, Sullivan and
Driedger on the Construction of Statutes (4th ed. 2002), at 489).
In any event, there is nothing in the passages cited by the government to indicate
that the creation of the RCAAA regime precluded the registration of other sports
associations as charities. Parliament can be taken to have put its mind to the
question of which athletic associations would qualify as RCAAAs and to have
chosen nationwide organizations only. It may also be that Parliament was
operating under the assumption that athletic associations were not considered
charitable at common law, which explains the special provisions ensuring charitylike status for RCAAAs … . However, neither of these propositions evince a
parliamentary intent to freeze the development of the common law on charitable
status or to occupy the field for all amateur sports.34
60.
As in A.Y.S.A., so too here, “there is nothing in the passages” cited by the Court of Appeal to
indicate that British Columbia’s intent to target the defendants was to the exclusion of other
“manufacturers” such as Canada. The issue of Canada’s potential liability simply was not discussed.
Perhaps the Minister “was operating under the assumption” that Canada did not meet the definition
of “manufacturer” in the Costs Recovery Act. Perhaps he was aware that Canada would be included
but chose not to highlight it in his remarks. Neither of these entirely plausible explanations can
evince legislative intent to exclude Canada from the definition of “manufacturer”. That is, the
negative inference Canada wishes to draw from the Minister’s comments “may not reflect the …
intention to be deducted from the words used in the legislation” at all.
61.
At most, the Hansard passages cited by Court of Appeal are ambiguous. As such, they are
insufficient to overcome the plain language of the Costs Recovery Act.35 Indeed, on the basis of the
Act’s plain language, British Columbia itself argued at first instance that Canada indeed qualified as a
34
A.Y.S.A., at paras. 11-13.
See, e.g., Placer Dome Canada Ltd. v. Ontario (Minister of Finance), [2006] 1 S.C.R. 715, 2006 SCC 20, at para. 39
(“Although both parties rely on Hansard evidence related to the movement of the hedging provision from the Regulation
to the Act, I find that evidence to be ambiguous and of little assistance in this case. Accordingly, any analysis of the 1987
amendments must be grounded in an examination of the scheme and context of the revised Act”), per LeBel J.
35
61
“manufacturer”. It can hardly be plain and obvious now that British Columbia – the author of the
statute – was wrong.
III.
The Court of Appeal erred by relying on its own policy concerns about Canada
being a “manufacturer”.
62.
The Court of Appeal’s speculation as to what the Legislature “could ever have envisaged”
with respect to an action against Canada is not a proper basis for determining legislative intent,
especially on a motion to strike.36 If reliance on statements of legislators and ministers found in
Hansard is rarely appropriate, speculation about what those individuals might have been thinking
never should be. Perhaps discovery and trial will show that the Legislature did consider that Canada
would fit within the definition of “manufacturer”, and adopted that definition regardless.37
63.
This Court has already observed that it is inappropriate to rely on a mere inference of
legislative intent:
In matters of statutory interpretation the courts cannot usurp the function of the
legislature in the absence of clear language and legislative guidelines leading
inevitably to a given conclusion. As Professor Côté points out, supra, at p. 248:
It would be unfair for the courts to impose a legislative intent, however true it
might be, that the citizen could not infer from the text considered in its
context. The interpretative role of the courts does not allow them to add terms
to a statute that are not already implicit therein. Even in the name of true
intention, they may not override the public’s reasonable expectation of the
statute’s meaning, as revealed by the words read in context. This is true even
if the results of interpretation obtained by reading the text in its context are
less satisfactory than those resulting from inferred intention: “... it is better
the law should be certain, than that every judge should speculate upon
improvements in it”. [Emphasis added].
…
36
Indeed, though one judge might consider it difficult to envisage that British Columbia would seek to recover from
Canada notwithstanding the monies already paid by Canada to British Columbia with respect to health care, another
might think it proper that a province seeking recovery should recover from wherever it can. In any event, getting more
money from Canada is no different from British Columbia’s efforts to recover from the defendants. Cigarette-specific
excise taxes and duties, explicitly justified by the Legislature with reference to health care costs attributed to smoking,
have already netted British Columbia many billions of dollars. British Columbia is already seeking to recover amounts
far in excess of its true cost of smoking; seeking additional amounts from Canada would be no different.
37
62
However much sympathy one may feel for the appellants, who have here been
deprived of certain benefits resulting from the contract of employment with their
employer, that does not give a court of law the authority to confer on them rights
which Parliament did not intend them to have.38
64.
This case is no different. While the Court of Appeal was indisputably responsible for
evaluating the intent of the Legislature, it could not “impose a legislative intent” where none is
apparent to change the words of the Act.
65.
The Act contains a precise and easily understood definition of “manufacturer”. The definition
exhibits care in the choice of words, especially respecting what kinds of entities to exclude from the
definition. As set out above, the facts pleaded in the third party notices establish that Canada meets
the definition, and no one but the Legislature is now “at liberty to rewrite legislation simply because
it does not manifest the policy [choice]” that could have been made, but was not.39 A would-be
“manufacturer” cannot be excluded just because the prospect of its inclusion now troubles the court.
66.
Even if this Court does not find the intent of the Legislature as to who constitutes a
“manufacturer” transparent from the plain statutory language, this language at a minimum makes the
question arguable. This is well demonstrated by the conflicting conclusions reached by the motions
judge and the Court of Appeal on the question,40 and by British Columbia’s own position at first
instance. It is not plain and obvious that the British Columbia Legislature did not intend all those
that satisfy the “manufacturer” definition to be subjected to the Act.
67.
Hall J.A. was also incorrect when he characterized the issue of Canada’s status as a
“manufacturer” as “fraught with constitutional considerations”.41 The manufacture of tobacco,
including the development, promotion and licensing of tobacco strains, is not an inherently public
function. Government liability under what is essentially a tort-law theory on the same basis as
private entities is nothing extraordinary.
38
Barrette v. Crabtree Estate, [1993] 1 S.C.R. 1027, at pp. 1050-51 (emphasis in original), per L’Heureux-Dubé J.
Western Surety Co. v. National Bank of Canada, 2001 NBCA 15, at para. 63, per Drapeau J.A., leave to appeal refused,
[2001] S.C.C.A. No. 187 (QL). See also British Columbia v. Imperial Tobacco Canada Ltd., [2005] 2 S.C.R. 473, 2005
SCC 49, at para. 52.
40
See para. 50, above.
41
39
63
68.
Where, because of constitutional considerations or otherwise, the Legislature has intended to
exclude Canada from a particular British Columbia statute, it has not hesitated to say so expressly,
and to specify the terms. For instance, s. 8 of the Boundary Act states as follows:42
Despite any other provision of this Part, or any agreement entered into under this
Part, Canada is not bound or liable to pay any costs in respect of this Part or any
agreement entered into under this Part, except costs that Canada may incur for
boundary inspections and meetings of the boundary commissioners.
69.
The Costs Recovery Act contains no similar provision. The Court of Appeal was wrong to
invent an exclusion for Canada based on its own speculative concerns.
C.
Even if Canada were not a “manufacturer” within the meaning of the Costs Recovery
Act, it would be liable to British Columbia under the Health Care Costs Recovery Act.
70.
Even if the Court of Appeal were correct that Canada is not a “manufacturer”, Canada would
necessarily be liable to British Columbia for its breaches of duty under the Health Care Costs
Recovery Act, which permits British Columbia to recover health care costs from everyone but
“manufacturers”.
71.
Section 8 of the Health Care Costs Recovery Act gives British Columbia a cause of action
against “wrongdoers” responsible for health care costs. It states, in its relevant part:
(1) Despite section 2 [beneficiary’s right to recover] and independent of its
subrogated right under section 7 [government has subrogated right], if, as a direct
or indirect result of the negligence or wrongful act or omission of a wrongdoer, a
beneficiary suffers a personal injury for which the beneficiary receives or could
reasonably be expected to receive one or more health care services, the
government may recover from the wrongdoer
(a) the past cost of health care services, and
(b) the future cost of health care services.
(2) The government may commence a legal proceeding in its own name for the
recovery of the past and future costs of health care services referred to in
subsection (1).
42
R.S.B.C. 1996, c. 32. See also, e.g., Occupiers Liability Act, R.S.B.C. 1996, c. 337, s. 8(2).
64
72.
Like the cause of action created by the Costs Recovery Act, British Columbia’s cause of
action under the Health Care Costs Recovery Act is non-subrogated, and good for both past and
future costs of care.
73.
Section 1 of the Health Care Costs Recovery Act defines “wrongdoers” – those made liable
by the statute – to include those who breach a duty and thereby cause personal injury:
“wrongdoer” means
(a) a person whose negligent or wrongful act or omission causes or
contributes to a beneficiary's personal injury or death, and
(b) a person who is responsible at law for the acts or omissions of a person
referred to in paragraph (a),
but does not include the beneficiary.
74.
The reference in the Health Care Costs Recovery Act’s definition of “wrongdoer” to a
“negligent or wrongful act or omission” is broad enough to include what the Costs Recovery Act calls
a “tobacco related wrong”. The statute implicitly admits so. To avoid imposing liability under both
statutes, the Health Care Costs Recovery Act specifically excludes recovery for “tobacco related
wrongs”. Section 24(3)(b) states as follows:
This Act does not apply in relation to health care services that are provided or are
to be provided to a beneficiary in relation to … personal injury or death arising
out of a tobacco related wrong as defined in the Tobacco Damages and Health
Care Costs Recovery Act … .
75.
A “tobacco related wrong” can only be committed, however, by a “manufacturer” within the
meaning of the Costs Recovery Act. Subsection 1(1) of the Costs Recovery Act defines “tobacco
related wrong” as follows (emphasis added):
“tobacco related wrong” means,
(a) a tort committed in British Columbia by a manufacturer which causes or
contributes to tobacco related disease, or
(b) in an action under section 2 (1), a breach of a common law, equitable or
statutory duty or obligation owed by a manufacturer to persons in British
Columbia who have been exposed or might become exposed to a tobacco
product … .
65
76.
On the facts alleged in the third party notices, these provisions thus give rise to only two
possible scenarios:
(a)
Canada is a “manufacturer” within the meaning of the Costs Recovery Act that
committed “tobacco related wrongs”, and is liable to British Columbia under s. 2(1) of this
statute (and s. 24(3)(b) of the Health Care Costs Recovery Act excludes liability under that
statute on account of these “tobacco related wrongs”); or
(b)
Canada is not a “manufacturer” within the meaning of the Costs Recovery Act but is a
“wrongdoer” within the meaning of the Health Care Costs Recovery Act and liable to British
Columbia under s. 8 of this statute.
77.
Under either scenario, Canada is liable to British Columbia for the cost of health care
resulting from the breaches of duty alleged in the third party notices.43 To the extent that direct
liability by Canada to British Columbia is a pre-requisite to the defendants’ claim for contribution, it
is, at the very least arguably, made out.
D.
The defendants have an arguable claim for contribution.
78.
The defendants have an arguable claim against Canada for contribution based on s. 4 of the
Negligence Act. Contrary to the Court of Appeal’s holding, that claim should not and does not
depend on Canada being directly liable to British Columbia. In any event, Canada is directly liable
to British Columbia under either the Costs Recovery Act as a “manufacturer” or the Health Care
Costs Recovery Act as a “wrongdoer”. Even if Canada were not directly liable to British Columbia,
however, the defendants would have an arguable contribution claim at common law.
43
In the absence of the Costs Recovery Act and the Health Care Costs Recovery Act, Canada might also be liable to
British Columbia for its health care costs (i) by way of a subrogated claim, or (ii) on the theory, previously advanced by
British Columbia in this litigation, that it “has, and has always had, a free standing right to recover pecuniary and
consequential damages arising from the defendants’ wrongs” founded on the public-interest jurisdiction discussed in
British Columbia v. Canadian Forest Products Ltd., [2004] 2 S.C.R. 74, 2004 SCC 38: see “Attorney General’s
Supplemental Outline of Argument: Jurisdiction”, at paras. 99-102, as filed in the Supreme Court of British Columbia in
2005. Given, however, that the Costs Recovery Act and the Health Care Costs Recovery Act, taken in combination, make
Canada’s liability plain, the point will not be pressed here.
66
I.
Canada can be directly liable to the plaintiff, British Columbia.
79.
The Court of Appeal concluded that because Canada could not be directly liable to British
Columbia for its health care costs, it was plain and obvious that the defendants could not maintain a
claim for contribution against Canada.
80.
For the reasons given above, it is arguable that Canada is either a “manufacturer” under the
Costs Recovery Act or a “wrongdoer” under the Health Care Costs Recovery Act and, in either case,
liable to British Columbia. To the extent that direct liability by Canada to British Columbia is a
prerequisite to claim for contribution, it is arguably met.
II.
In any event, direct liability to the plaintiff is not required for a contribution claim
under the Negligence Act.
(a)
Contribution under the Negligence Act turns on fault, not liability.
81.
The Court of Appeal was wrong to treat a direct liability to British Columbia as a necessary
condition for a contribution claim. To claim contribution under the Negligence Act, all that is
required is that Canada’s “fault” caused or contributed to British Columbia’s loss. Here, that means a
“tobacco related wrong” contributing to health care costs, just as the third party notices allege.
82.
The relevant provision of the Negligence Act states as follows:
4 (1) If damage or loss has been caused by the fault of 2 or more persons, the
court must determine the degree to which each person was at fault.
(2) Except as provided in section 5 if 2 or more persons are found at fault
(a) they are jointly and severally liable to the person suffering the damage or
loss, and
(b) as between themselves, in the absence of a contract express or implied,
they are liable to contribute to and indemnify each other in the degree to
which they are respectively found to have been at fault.
83.
Under this section, “as between themselves”, each party who is found to have caused a
plaintiff’s damage or loss is “liable to contribute to or indemnify each other in the degree to which
they are respectively found to have been at fault”. Nothing in the words of this provision requires
that the plaintiff have a viable cause of action against each such party – all that is required is that
67
each party be at “fault”. In this context, “fault” simply means “blameworthiness”,44 a concept that
the British Columbia courts have held is broad enough to capture a person’s breach of a duty of care
or commission of an intentional tort.45
84.
The distinction between “fault” and liability to the plaintiff is confirmed by s. 2(1) of the
Negligence Act, which reads as follows:
If by the fault of 2 or more persons damage or loss is caused to one or more of
them, the liability to make good the damage or loss is in proportion to the degree
to which each person was at fault.
85.
Subsection 2(1) reduces a defendant’s liability to the extent that a plaintiff is at “fault” for its
own loss. “Fault” cannot mean liability since a plaintiff is never technically liable to itself.
86.
The essence of British Columbia’s claim is that the defendants breached duties owed to
persons in British Columbia (or, in the language of the Costs Recovery Act, committed “tobacco
related wrongs”), which caused “tobacco related disease”, which led to British Columbia providing
medical treatment and incurring health care costs. The facts alleged in the third party notices support
a claim that, if the defendants breached any such duties and caused any such health care costs, then
so did Canada through its breaches of duties or, in different words, its “fault”. The Negligence Act
was intended to afford a right of contribution in precisely such circumstances, where “fault” causes
loss. Whether Canada is directly liable to British Columbia is beside the point. The Court of Appeal
was wrong in concluding otherwise.
87.
With its focus on “fault”, s. 4 of the Negligence Act stands apart from other legislation
creating rights of contribution between wrongdoers. For example, s. 2(1) of The Tortfeasors and
Contributory Negligence Act46 of Manitoba makes an enforceable liability to the plaintiff, and not
mere “fault”, the pre-requisite to contribution:
Where damage is suffered by any person as a result of a tort, whether a crime or
not,
44
Cempel v. Harrison Hot Springs Hotel Ltd. (1997), 43 B.C.L.R. (3d) 219, at para. 19, per Lambert J.A. See also, in the
context of the Negligence Act, R.S.O. 1990, c. N-1, Snushall v. Fulsang (2005), 78 O.R. (3d) 142 (C.A.), at para. 29,
leave to appeal refused, [2005] S.C.C.A. No. 519 (QL).
45
Brown v. Cole (1995), 14 B.C.L.R. (3d) 53 (C.A.), at para. 20.
46
C.C.S.M. c. T90. Section 3 of the Tortfeasors Act, R.S.N.S. 1989, c. 471 is substantially identical.
68
…
(c) any tortfeasor liable in respect of that damage may recover contribution
from any other tortfeasor who is, or would if sued have been, liable in respect
of the same damage, whether as a joint tortfeasor or otherwise, so, however,
that no person is entitled to recover contribution from any person entitled to
be indemnified by him in respect of the liability in respect of which the
contribution is sought. [Emphasis added.]
88.
One of the oldest general contribution statutes in the Commonwealth, Ontario’s Negligence
Act of 1930,47 referred to both “fault” and liability:
3. In any action founded upon the fault or negligence of two or more persons the
court shall determine the degree in which each of such persons is at fault or
negligent, and where two or more persons are found liable they shall be jointly
and severally liable to the person suffering loss or damage for such fault or
negligence, but as between themselves, in the absence of any contract express or
implied, each shall be liable to make contribution and indemnify each other in the
degree in which they are respectively found to be at fault or negligent. [Emphasis
added.]
89.
In making “fault” causing the plaintiff’s loss, rather than liability to the plaintiff, the sole
trigger for rights of contribution under s. 4 of British Columbia’s Negligence Act, the Legislature
must be taken to have appreciated the distinction.
90.
Indeed, in establishing rights of contribution as between wrongdoers, there is no reason to
take into consideration whether the plaintiff has a viable cause of action against each of them. The
plaintiff’s interest is in either case secured, because liability to the plaintiff is joint and several. All
that is at issue is an equitable distribution of responsibility “as between” those whose wrongs have
caused the plaintiff’s loss or damage, an issue not implicating the plaintiff.
91.
On the other hand, conditioning one wrongdoer’s ability to seek contribution and indemnity
from the other on the existence of a direct cause of action by the plaintiff against both poses a risk of
great iniquity: the entire burden of a plaintiff’s loss might be borne by a wrongdoer whose
responsibility is minor compared to that of another.
47
The Negligence Act, 1930, Ont., 20 Geo. V, c. 27.
69
92.
Glanville Williams observed this potential for unfairness in commenting on the English
contribution legislation of his day – the so-called Tortfeasors Act –48 which, like the Manitoba
statute, made liability to the plaintiff the touchstone of contribution:
There are situations where injustice would be caused by a strict rule that
contribution lies only between parties who can be sued by the plaintiff, and then
one naturally struggles against it.49
93.
Professor Williams noted a variety of situations in which a wrongdoer might escape liability
to the plaintiff (including the lapse of limitation periods,50 the later acquisition of a release51 and the
existence of a constitutional or statutory immunity),52 but suggested that there would be in none of
them a fair or principled reason for restricting rights of contribution between wrongdoers inter se.
The Court of Appeal’s erroneous interpretation of the Costs Recovery Act, addressed already,53 raises
the spectre of another situation involving a wrong without liability to the plaintiff where fairness
would demand that contribution nonetheless be made available: a statutory cause of action in favour
of a plaintiff (here, British Columbia) grafted onto wrongs committed to others (British Columbians)
that places the entire burden of liability on some parties (“manufacturers”) while excluding liability
for other wrongdoers (supposedly, Canada). Happily, the British Columbia Legislature has avoided
this prospect of unfairness in its Negligence Act, by making “fault”, not liability, the prerequisite to
contribution. The Court of Appeal erred in concluding to the contrary and discarding the defendants’
contribution claims preliminarily.
(b)
Giffels is distinguishable or should no longer be followed.
94.
Despite the “fault”-focussed wording of s. 4 of the Negligence Act, the Court of Appeal
wrongly relied on Giffels for the proposition that the defendants could not seek contribution from
Canada unless it could be directly liable to British Columbia. Giffels, however, is distinguishable
(and, indeed, distinguishes itself) from the present case. Alternatively, if Giffels makes direct
48
Law Reform (Married Women and Tortfeasors) Act, 1935 (UK), 25 & 26 Geo. 5, c. 30, s. 6.
Glanville Williams, Joint Torts and Contributory Negligence: A Study of Concurrent Faults (London: Steven & Sons,
1951) (“Williams”), at p. 96.
50
Williams, at p. 98.
51
Williams, at p. 98.
52
Williams, at p. 100.
53
See paras. 45-69, above.
49
70
liability to British Columbia a pre-requisite to contribution from Canada despite the words of s. 4, it
should no longer be followed.
95.
Giffels was decided under s. 2(1) of The Negligence Act54 of Ontario, which reads similarly,
but not identically, to s. 4 of the Negligence Act here. In Giffels, Laskin C.J. held that an engineer
could not seek contribution from a contractor respecting a defective roof installed for their shared
client because the contractor had, through its contract with the plaintiff, negotiated to provide a
limited guarantee within which the contractor’s defective work did not fall. Significantly, the
contract in question, “the very instrument by which [the contractor’s] relationship with the plaintiff
was established”,55 was prepared by the engineer, and the engineer had itself approved the
contractor’s work and thereby limited the contractor’s liability to that provided under the guarantee.
In other words, before the loss was occasioned, the engineer had arranged for the contractor to bear
no responsibility for such a loss as arose. In all the circumstances, it is fair to say that the contractor
committed no “fault” according to what the plaintiff, the contractor and the engineer had all agreed.
96.
Importantly, Laskin C.J. distinguished the scenario before him from one in which “the
immunity of [the contractor] from liability [arose] from some independent transaction or settlement
made after an actionable breach of contract or duty”.56 This case thus falls squarely within the
scenario that Laskin C.J. distinguished. Canada did not bargain with British Columbia to bear no
liability for its breaches of duty alleged in the third party notices, and the defendants did not
themselves arrange or bring about that result. If Canada is not liable to British Columbia, it is only
because British Columbia decided decades after the alleged breaches to give itself a cause of action
against the defendants but not Canada based on those breaches. It is not a function of some
understanding to which the defendants were privy (let alone one which they themselves drafted) and
in place from the start.
97.
If, however, Giffels cannot be distinguished, it should no longer be followed. Nothing in s. 4
of the Negligence Act suggests that direct liability to the plaintiff should be required to make a
contribution claim against someone else at “fault” for the plaintiff’s loss, and there is no policy
reason for superimposing that requirement. Indeed, that requirement could result in significant
54
R.S.O. 1970, c. 296.
Giffels, at p. 1355.
56
Giffels, at p. 1355 (emphasis added).
55
71
unfairness where, as here, the plaintiff is a government suing on a statutory cause of action with
retroactive application. A requirement of direct liability to the plaintiff would permit the government
selectively to assign liability among all responsible parties, placing the entire burden of its loss on
those it chooses to target. Furthermore, following Giffels here makes meaningless the differences in
drafting of the provincial statutes mentioned above.
III.
The defendants have an arguable contribution claim at common law.
98.
Even if it were plain and obvious that both (i) Canada cannot be liable to British Columbia for
health care costs and (ii) the Negligence Act requires liability to British Columbia for a contribution
claim, the defendants would still have an arguable contribution claim at common law.
99.
Historically, the common law prohibited contribution between wrongdoers,57 although the
courts recognized soon enough that the prohibition did “not appear … to be founded on any principle
of justice or equity, or even of public policy”.58 In Bow Valley, this Court called the prohibition
“anachronistic and not in keeping with modern notions of fairness”,59 and accordingly made “an
incremental change to the common law in compliance with the requirements of justice and fairness”
to recognize a right of contribution in the context of maritime torts, where no statutory right had been
afforded.60
100.
Since Bow Valley, this Court has recognized that a common law right of contribution is
available outside the maritime context, even where there is a statutory but more narrow contribution
right. In Blackwater v. Plint,61 this Court held Canada and the United Church vicariously liable, on a
joint and several basis, for sexual assaults at an Indian residential school. This raised the question of
whether vicarious liability was “fault”, such that responsibility might be assigned between them
unequally under the Negligence Act. McLachlin C.J. concluded that the issue did not need to be
resolved, because “if vicarious liability is not ‘fault’ …, then the [Negligence Act] does not apply”, in
which case liability could be unequally assigned “at common law, with the same result”.62
57
See, e.g., Merryweather v. Nixan (1799), 8 T.R. 186, 101 E.R. 1337.
Palmer v. Wick and Pulteneytown Steam Shipping Co. Ltd., [1894] A.C. 318 (H.L.), at p. 324, per Lord Herschel.
59
Bow Valley, at para. 101, per McLachlin J. (as she then was).
60
Bow Valley, at para. 102, per McLachlin J.
61
[2005] 3 S.C.R. 3, 2005 SCC 58 (“Blackwater”).
62
Blackwater, at para. 67.
58
72
101.
Based on Blackwater, it is at least arguable that, even if Negligence Act s. 4 does not apply,
the defendants have a right of contribution against Canada at common law given the “tobacco related
wrongs” by Canada alleged in the third party notices. This right should not be made dependent on
Canada being directly liable to British Columbia, for all the reasons already given.
E.
The defendants have an arguable claim for equitable indemnity.
102.
The principle of equitable indemnity applies where one party requests or directs another to do
something that causes the other to incur liability:63
If one person does an act at the request of or under the directions of another,
which is neither manifestly tortious nor tortious to his knowledge, he will be
entitled to be indemnified by that other against all liability which he may incur by
reason of that act proving to be a tort, whether he be servant or agent of that other
or not.64
103.
The purpose of equitable indemnity is therefore to ensure that liability fairly rests with the
party responsible for a plaintiff’s injury, even if that party’s act was not the proximate cause, unless
the party whose conduct actually caused the injury was doing something obviously unlawful. For
example, in Rawlins v. Monsour, a “bailiff acted throughout on the specific instructions of the
landlord” in seizing property of a delinquent tenant.65 Although the Ontario Court of Appeal
concluded that the bailiff should have known that the instructions called for an excessive and illegal
seizure, still the court explained:
[W]here an act has been done by the Plaintiff under the express directions of the
Defendant, which occasions an injury to the rights of third persons, yet if such an
act is not apparently illegal in itself, but is done honestly and bona fide in
compliance with the Defendant’s directions, he shall be bound to indemnify the
Plaintiff against the consequences thereof.66
63
Parmley v. Parmley, [1945] S.C.R. 635 (“Parmley”), at pp. 647-49 and Birmingham and District Land Co. v. London
and North Western Railway Company (1886), 34 Ch. D. 261, at p. 275.
64
Parmley, at p. 647, per Estey J., quoting Sir Arthur Underhill.
65
(1978), 88 D.L.R. (3d) 601 (Ont. C.A.) (“Rawlins”), at p. 603, per Lacourciere J.A.
66
Rawlins, at pp. 603-04, per Lacourciere J.A., quoting Toplis v. Grane (1839), 5 Bing. (N.C.) 636, 132 E.R. 1245 at
p. 1250, per Tindal C.J.
73
104.
Relying upon the same principle, the Supreme Court of the Northwest Territories in
Robertson v. Taylor67 concluded that indemnification was appropriate where a sheriff had seized
property of a debtor at the direction of a creditor’s lawyer, and was thereafter sued by the debtor.
Likewise, in Saskatchewan Co-operative Elevator Co. v. Grand Trunk Pacific Railway,68 the
Saskatchewan Court of Appeal found a claim for equitable indemnity viable where one company
requested that a railroad dispose of certain grain that in fact belonged to a different company.
105.
The principle of equitable indemnity at least arguably gives the defendants a claim against
Canada because, on the facts pleaded in the third party notices, some or all of the defendants’ liability
to British Columbia is a function of Canada’s requests and directions, none of which called for
conduct that was then manifestly tortious or illegal or even wrong. As set forth extensively in the
third party notices and summarized above, Canada in large measure dictated the defendants’ response
to health concerns about smoking over the decades.
106.
For example, Canada’s officials initially rejected the notion of printed warnings as “silly”
given the “ubiquitous” public knowledge of the health risks of smoking, then insisted on particular
warnings that British Columbia now considers to have been a “tobacco related wrong”, but ascribes
only to the obedient defendants.69 To give another example, Canada’s officials directed the
defendants to participate in a campaign to encourage the public to smoke high-nicotine/low-“tar”
cigarettes based on the belief that such cigarettes would be safer than higher-“tar” cigarettes, conduct
that again British Columbia now deems a “tobacco related wrong” committed by the defendants.70
The third party notices are replete with similar instances of Canada directing and requesting the
defendants to engage in conduct now alleged to constitute “tobacco related wrongs”.
107.
Nothing in the requests made and directions given by Canada to the defendants was, in the
words of Parmley, “manifestly tortious”, and it is not plain and obvious that it was “tortious to [the
defendants’] knowledge”. In addressing smoking and health concerns, rather, it is more arguable that
the defendants were entitled to rely in good faith on Canada’s determinations concerning what
warnings to give and not give, what breeds of tobacco to use and what kinds of cigarettes to bring to
market. Certainly the question of the defendants’ good faith cannot be decided on a motion to strike.
67
(1901), 4 Terr. L.R. 474 (“Robertson”), rev’d on other grounds, (1901), 31 S.C.R. 615.
[1923] 2 W.W.R. 8.
69
70
68
74
108.
While acknowledging the existence of the principle of equitable indemnity, the Court of
Appeal held that it had no possible application here because there could not be any implied promise
by Canada to indemnify any of the defendants:
I am of the opinion that if the notional reasonable observer were asked whether or
not Canada, in the interaction it had over many decades with the appellants, was
undertaking to indemnify them from some future liability that might be incurred
relating to their business, the observer would reply that this could not be a rational
expectation, having regard to the relationship between the parties. Likewise, if
Canada through its agents had been specifically asked or a suggestion had been
made to its agents by representatives of the appellants that Canada might in future
be liable for any such responsibility or incur such a liability, the answer would
have been firmly in the negative.71
109.
The law, however, is that no agreement by the would-be indemnitor that it “might in future be
liable for any such responsibility” is necessary to support a claim for equitable indemnity.72 This
makes sense: were there the requirement of an agreement, express or implied, the principle of
equitable indemnity would be redundant.
110.
Moreover, the Court of Appeal’s analysis is irreconcilable with its conclusion, in discussing
the defendants’ misrepresentation claim against Canada, that Canada could reasonably have foreseen
that the tobacco strains it developed for low-“tar” cigarettes might actually produce more danger
rather than less, in which case injury to the defendants could result:
It also seems to me that Canada could reasonably have foreseen that, if additional
harm were caused to smokers of light and mild cigarettes, the appellants, as the
manufacturers of the cigarettes, had potential liability for the damages flowing
from the additional harm. The potential increased liability is the harm or injury to
the appellants that was reasonably foreseeable by Canada. The potential
increased liability is the general way in which the harm or injury occurred, and it
was reasonably foreseeable by Canada.73
71
See, e.g., Robertson, at para. 24 (“Having come to this conclusion [that equitable indemnity applies] it is unnecessary
to enquire whether there was in fact any express promise to indemnify”), per McGuire J.; Secretary of State for India v.
Bank of India Ltd., [1938] 2 All E.R. 797 (P.C.), at p. 800 (“[Equitable indemnity] is often … said to be based on a
contract implied by law, the request importing a promise to indemnify the other party against the consequences to him of
acting on the request” but “[t]he fiction of a contract implied by law adds nothing”), per Lord Wright and Reference re:
Goods and Services Tax (Alta.) (1991), 84 D.L.R. (4th) 577 (Alta. C.A.), at pp. 590-91 (“The authorities do not require
any contract to indemnify”), per curiam, rev’d on other grounds, [1992] 2 S.C.R. 445.
73
72
75
111.
In light of the harm that Canada could reasonably have foreseen flowing from the tobacco
strains that it developed and then directed the defendants to use, it is at least arguable that “the
notional reasonable observer” would have seen an implicit obligation to indemnify to arise.
112.
On the facts pleaded in the third party notices, it is not plain and obvious that the principle of
equitable indemnity does not apply. The defendants’ claim for equitable indemnity should therefore
be permitted to proceed to discovery so that the defendants may explore the extent to which their
alleged “tobacco related wrongs” are traceable to Canada’s directions and requests.
F.
The defendants have arguable claims for negligent design and failure to warn.
113.
The Court of Appeal correctly found that the defendants have an arguable negligent
misrepresentation claim against Canada, but wrongly upheld the striking of the defendants’ negligent
design and failure to warn claims. While accepting that Canada owed a prima facie duty regarding
those claims at the first stage of the Anns/Cooper test (largely for reasons already discussed in the
factum on appeal),74 the Court of Appeal found that duty negated at the second stage by policy
concerns, discussed in Knight, as to indeterminate liability for relational economic losses, and a
conclusion that the failure to warn claim attacked policy-making. The Court of Appeal erred.
I.
There are no policy concerns about indeterminate liability for economic loss because
only the defendants have proximity with Canada and only British Columbia may sue
the defendants for economic loss.
114.
The Court of Appeal’s concern about indeterminate liability emanated from the supposed
prospect of “innumerable other parties” – e.g., “employers of key employees who became
incapacitated as a result of smoking”, “suppliers of the employer”, “persons having contracts with
smokers” or “family members of a smoker” –75 making claims for relational economic loss based on
injury to smokers, presumably either directly against Canada or against the defendants, who would in
turn make corresponding claims against Canada. However, this parade of horribles is impossible.
115.
None of the parties identified by the Court of Appeal could advance a claim against Canada
because none have the proximity necessary to assert a prima facie duty of care; only the defendants
can say that Canada played an active, central and guiding role in their industry for many decades,
74
75
See these defendants’ Consolidated Factum of Respondents on Appeal, at paras. 25-51.
76
taking on a unique role as the developer and promoter of a key component of their products and
advising the defendants about what to make, what to make it with and how to promote it. The
spectre of indeterminate liability to “innumerable other” imaginary plaintiffs to whom no duty is
owed in the first place provides no policy reason to negate the duty owed to this tiny class of
defendants, with whom Canada is alleged to have been uniquely intimate.
116.
Neither could the hypothetical parties identified by the Court of Appeal advance a claim
against the defendants. This case only exists because British Columbia passed a statute giving it, and
it alone, the right to sue for its alleged relational economic loss from injury to smokers.
117.
In this connection, the Court of Appeal’s observation that relational economic loss ordinarily
is not recoverable ignores that this case is already about relational economic loss, quite apart from
the third party claims: British Columbia’s claim against the defendants, for which the defendants
seek corresponding damages from Canada, is entirely for relational economic loss as measured by the
allegedly increased cost of health care. The question presented here is therefore quite narrow: may
defendants exposed to an action for relational economic loss – an action brought by a province under
a statute granting only the province the right to recover such loss – seek damages from a third party
that negligently exposed the defendants to the action?
118.
The answer to that question is at least arguably “yes”. “No”, the Court of Appeal’s answer,
would leave the defendants completely exposed to a relational economic loss claim, but excuse the
party that placed the defendants in that situation, and do so based on a policy-born fear about this
very type of claim. This cannot be fair, and it is certainly not plain and obvious that it is correct.
119.
The Court of Appeal sought to downplay the unfairness of its reasoning by observing that,
under the Negligence Act, a party may ordinarily seek contribution from another party whose fault
contributed to a plaintiff’s harm, obviating any need for an independent claim against that party for
relational economic loss.76 That, however, was cold comfort, given that the Court of Appeal also
found that the defendants cannot seek contribution here. The defendants’ ability to claim relational
economic losses consequent on breaches of duty owed to them is crucial if this Court agrees with the
Court of Appeal that British Columbia has statutorily decided to expose to liability only some of a
76
77
number of parties at “fault”, and that these defendants cannot claim contribution from Canada, whose
analogous “fault” contributed to the loss for which they may be held liable.
120.
In sum, there is no problem of indeterminate liability that plainly and obviously negates
Canada’s duty of care to the defendants respecting negligent design and failure to warn. The only
relational economic loss claims faced by Canada are those made here by this narrow class of
defendants, and, for the reasons given in the factum on appeal,77 these claims are not indeterminate.
II.
The defendants’ failure to warn claim concerns operational conduct, not a policy
decision.
121.
As set out in the factum on appeal, true policy decisions “will usually be dictated by financial,
economic, social and political factors or constraints”. By contrast, the operational sphere covers the
“performance or carrying out of a policy”, usually “on the basis of administrative direction, expert or
professional opinion, technical standards or general standards of reasonableness”.78
122.
The defendants’ failure to warn claim is that Canada directed the defendants not to provide
warnings about the health hazards of cigarettes and that, if British Columbia is right that this was
negligent, Canada is just as negligent. This claim at least arguably concerns operational conduct, not
policy-making, because it is unreasonable to conclude on the pleadings that Canada plainly and
obviously chose, based on “financial, economic, social and political factors or constraints”, to ensure
that the public would receive warnings that were inadequate. Canada’s decisions about whether,
when and how to warn appear instead have been based on “expert or professional opinion, technical
standards or general standards of reasonableness”, putting them firmly in the operational sphere.
123.
The third party notices allege that Canada monitored the scientific literature to assess the
nature of the health risks associated with smoking and funded research to explore the relationship
between smoking and health. Then, based on the knowledge it had acquired, Canada decided first
that warnings were “silly” because public awareness of the potential health risks was ubiquitous.
Later, Canada decided that particular warnings would adequately remind smokers of the risks of
smoking. Canada then decided that smokers should be informed about the “tar” and nicotine
deliveries of cigarettes, and encouraged to reduce their intake of “tar” by smoking cigarettes made
77
78
See these defendants’ Consolidated Factum of Respondents on Appeal, at paras. 62-68.
Brown, at p. 441, per Cory J.
78
with tobacco developed by Canada itself. In these decisions, expert or professional opinion (about
the health risks of smoking and public awareness of the same), technical standards (regarding “tar”
and nicotine deliveries of cigarettes and the tobacco developed by Canada) and general standards of
reasonableness (concerning what warnings would give adequate information) must all have had a
central role to play. There were, on the other hand, no plain and obvious economic, social or political
factors at work, except regarding Canada’s initial choice – a choice that the defendants do not attack
– to seek to reduce to health hazards to smokers and, in that regard, to provide advice and directions
to the defendants.
124.
The Court of Appeal nonetheless concluded that the defendants’ failure to warn claim attacks
Canada’s policy-making, because it “is against Canada in its role as a regulator”.79 In Knight, the
Court of Appeal elaborated as follows:
It seems clear to me from the pleadings that at all material times Canada acted as
a regulator in relation to members of the tobacco industry such as ITCAN who
sold and advertised these products to consumers. Canada was not in the business
of advertising and selling cigarettes nor did it have any commercial interaction
with consumers of tobacco products. … Policy considerations underlaid all of
[the] various activities undertaken by departments of the federal government.80
125.
There are two errors in this reasoning. First, the Court of Appeal’s focus on Canada’s
regulatory role would immunize virtually all government activity from tort claims because the
government rarely acts as anything other than “a regulator”. If, as the Court of Appeal has
suggested, the government needs to be engaged in “business” or a “commercial interaction” for it
potentially to owe a duty of care, then the government faces no tort claims except in rare, strictly
commercial contexts, and non-commercial cases in which this Court found a duty was owed, like
Just and Fullowka, must now be considered to have been wrongly decided.81 In any event, it is
arguable that Canada was engaged in “business” and “commercial interaction” with the defendants
79
81
On the Court of Appeal’s reasoning, this Court’s very recent decision in Nu-Pharm Inc. v. Canada (Attorney General),
2010 SCC 65, must have been wrongly decided, too. There, one of the plaintiff’s allegations was that Health Canada had
negligently prohibited the marketing of the plaintiff’s generic drug. Despite the fact that the plaintiff’s claim was against
Canada in its role as a regulator, and despite the expectation “that in the case on its merits, [Canada] will argue the
defence of statutory authority”, Rothstein J. held that Canada’s defence, and necessarily the threshold question of a duty
of care, would “have to be resolved at trial” (para. 19).
80
79
when it advised them about what warnings to give concerning cigarettes made with the low-"tar"
tobacco strains that Canada had developed, licensed and promoted to them.
126.
Second, policy considerations and decisions based on them can always be said to have
underlain the government's activities at some level because the government never professes to have
acted arbitrarily. The whole point ofthe policy/operational distinction is to ensure that only policy
decisions themselves are off-limits from tort claims, while requiring that "the performance or
carrying out" of policy decisions be done with reasonable care.
127.
On a proper view ofthe difference between policy decisions and operational conduct, it is at
least arguable that the defendants' failure to warn claim pertains to the latter. The policy/operational
distinction provides no basis to negate Canada's prima facie duty in that relation.
PART IV - SUBMISSIONS CONCERNING COSTS
128.
There is no reason to depart from the ordinary rule that costs of the cross-appeals should
follow the event.
PART V - ORDERS REQUESTED
129.
The cross-appeals should be allowed. The portion ofthe Court ofAppeal's order that strikes
claims by the defendants against Canada should be set aside, with no order made in substitution for
it.
ALL OF WHICH IS RESPECTFULLY SUBMITTED,
KENNETH N. AFFLECF
Q.c., counsel for Rothmans,
Benson & Hedges Inc. and
Rothmans Inc.
7th day of January, 2011.
6e<~SIMON V. OTTER and
MICHAEL A. FEDER,
International Inc.
80
PART VI – TABLE OF AUTHORITIES
Paragraph(s)
Case law
A.Y.S.A. Amateur Youth Soccer Assn. v. Canada (Revenue Agency), [2007] 3
S.C.R. 217, 2007 SCC 42
Anns v. Merton London Borough Council, [1978] A.C. 728 (H.L.)
Barrette v. Crabtree Estate, [1993] 1 S.C.R. 1027
Birmingham and District Land Co. v. London and North Western Railway
Company (1886), 34 Ch. D. 261
Blackwater v. Plint, [2005] 3 S.C.R. 3, 2005 SCC 58
Bow Valley Husky (Bermuda) Ltd. v. Saint John Shipbuilding Ltd., [1997] 3
S.C.R. 1210
59-60
34-36 & 113
63
102
100-101
99-100
British Columbia v. Canadian Forest Products Ltd., [2004] 2 S.C.R. 74, 2004
SCC 38
77
British Columbia v. Imperial Tobacco Canada Ltd., [2005] 2 S.C.R. 473, 2005
SCC 49
65
Brown v. British Columbia (Minister of Transportation and Highways), [1994] 1
S.C.R. 420
121
Brown v. Cole (1995), 14 B.C.L.R. (3d) 53 (C.A.)
83
Cempel v. Harrison Hot Springs Hotel Ltd. (1997), 43 B.C.L.R. (3d) 219 (C.A.)
83
Cooper v. Hobart, [2001] 3 S.C.R. 537, 2001 SCC 79
Dagg v. Canada (Minister of Finance), [1997] 2 S.C.R. 403
Fullowka v. Pinkerton’s of Canada Ltd., [2010] 1 S.C.R. 132, 2010 SCC 5
Giffels v. Eastern Construction, [1978] 2 S.C.R. 1346
Just v. British Columbia, [1989] 2 S.C.R. 1228
Merryweather v. Nixan (1799), 8 T.R. 186, 101 E.R. 1337
34-36 & 113
58
125
29 & 94-97
125
99
81
Paragraph(s)
Nu-Pharm Inc. v. Canada (Attorney General), 2010 SCC 65
Palmer v. Wick and Pulteneytown Steam Shipping Co. Ltd., [1894] A.C. 318
(H.L.)
Parmley v. Parmley, [1945] S.C.R. 635
125
99
102
Placer Dome Canada Ltd. v. Ontario (Minister of Finance), [2006] 1 S.C.R. 715,
2006 SCC 20
61
R. v. Morgentaler, [1993] 3 S.C.R. 463
58
Rawlins v. Monsour (1978), 88 D.L.R. (3d) 601 (Ont. C.A.)
103
Reference re: Goods and Services Tax (Alta.) (1991), 84 D.L.R. (4th) 577 (Alta.
C.A.), rev’d, [1992] 2 S.C.R. 445
109
Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27
Robertson v. Taylor (1901), 4 Terr. L.R. 474 (N.W.T.S.C.), rev’d (1901), 31
S.C.R. 615
Saskatchewan Co-operative Elevator Co. v. Grand Trunk Pacific Railway, [1923]
2 W.W.R. 8 (Sask. C.A.)
Schreiber v. Canada (Attorney General) (2001), 52 O.R. (3d) 577 (C.A.), aff’d,
[2002] 3 S.C.R. 269, 2002 SCC 62
45 & 58
104 & 109
104
44
Secretary of State for India v. Bank of India Ltd., [1938] 2 All E.R. 797 (P.C.)
109
Snushall v. Fulsang (2005), 78 O.R. (3d) 142 (C.A.), leave to appeal refused,
[2005] S.C.C.A. No. 519 (QL)
83
Toplis v. Grane (1839), 5 Bing. (N.C.) 636, 132 E.R. 1245
Western Surety Co. v. National Bank of Canada, 2001 NBCA 15, leave to appeal
refused, [2001] S.C.C.A. No. 187 (QL)
103
65
82
Paragraph(s)
Secondary sources
Elmer Driedger, Construction of Statutes, 2d ed. (Toronto: Buttersworth, 1983)
Glanville Williams, Joint Torts and Contributory Negligence: A Study of
Concurrent Faults (London: Steven & Sons, 1951)
45
92-93
83
Health Care Costs Recovery Act, S.B.C. 2008, c. 27
PART VII – PROVISIONS DIRECTLY AT ISSUE
84
85
86
87
88
89
90
91
92
93
94
95
96
Negligence Act, R.S.B.C. 1996, c. 333
97
98
99
Supreme Court Rules, B.C. Reg. 221/90
100
The Tobacco Damages and Health Care Costs Recovery Act, S.B.C. 2000, c. 30 is reproduced in
Part VII of these defendants’ Consolidated Factum of Respondents on Appeal.

Respondents-Cross-Appellants Rothmans-Benson-and-Hedges

Transcription

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