Canada v. Cervinus Inc., 2002 FCA 398

Date: 20021022

Docket: A-34-01

Neutral citation: 2002 FCA 398

CORAM:        LINDEN J.A.

NOËL J.A.

NADON J.A.

BETWEEN:

                                                        HER MAJESTY THE QUEEN

                                                                                                                                                       Appellant

                                                                                 and

                                                                    CERVINUS INC.

                                                                                                                                                   Respondent

Docket: A-35-01

BETWEEN:

                                                        HER MAJESTY THE QUEEN

                                                                                                                                                       Appellant

                                                                                 and

                                                 COLDSTREAM DEER GROUP LTD.

Respondent

                                   Heard at Ottawa, Ontario, on September 24 and 25, 2002.

                                 Judgment delivered at Ottawa, Ontario, on October 22, 2002.

REASONS FOR JUDGMENT BY:                                                                                          NOËL J.A.

CONCURRED IN BY:                                                                                                         NADON J.A.

CONCURRING REASONS BY:                                                                                         LINDEN J.A.

Date: 20021022

Docket: A-34-01

Neutral citation: 2002 FCA 398

CORAM:        LINDEN J.A.

NOËL J.A.

NADON J.A.

BETWEEN:

                                                        HER MAJESTY THE QUEEN

                                                                                                                                                       Appellant

                                                                                 and

                                                                    CERVINUS INC.

                                                                                                                                                   Respondent

Docket: A-35-01

BETWEEN:

                                                        HER MAJESTY THE QUEEN

                                                                                                                                                       Appellant

                                                                                 and

                                                 COLDSTREAM DEER GROUP LTD.

Respondent

                                                        REASONS FOR JUDGMENT

NOËL J.A.

[1]                 These are two appeals from decisions of the Trial Division, issued December 20, 2000, allowing the actions for damages brought against Her Majesty the Queen represented by the Minister of Agriculture. The Trial Judge found the Queen liable for some of the damages claimed by reason of the negligent acts of her servants who were employed by the Minister of Agriculture. There are also two cross appeals with respect to the award of damages.

[2]                 At issue are decisions to order the removal from Canada of two herds of deer which had been imported from New Zealand by the respondents. The decisions were reached pursuant to paragraph 18(1)(b) of the Health of Animals Act, S.C. 1990, c. 21 (hereinafter "the Act") on the basis that the respective herds could be affected by a disease, namely, Elaphostrongylus cervi, otherwise referred to as E-cervi. Both herds were destroyed as a form of compliance with the orders and the respondents brought the aforesaid actions alleging that the decisions to order the removal of the deer had been made negligently.

[3]                 Subsection 18(1) provides:

[4]                 The Trial Judge concluded that the decisions to order the removal of the herds were unlawful by reason of having been made without reasonable grounds and as a result of reckless and negligent thinking and decision making (Reasons, paragraphs 107-110). Specifically, the orders were based on the finding of spiny larvae in three deer (animals 172, 6249 and 6215), and this, despite the failure to find an adult worm on necropsy (in the case of the Coldstream deer) and prior to even performing a necropsy (in the case of the Cervinus deer). It was this failure to utilize necropsy, to show that the three deer which had tested positive to spiny larvae were not patently infected, that led the Trial Judge to conclude that the standard of care owed to the plaintiffs had been breached.

[5]                 In reaching this conclusion, the Trial Judge failed to consider that the import permits and the protocol under which the animals were brought into the country, explicitly provided that the herds could be destroyed if any animal were to test positive to spiny larvae. Had the Trial Judge considered the terms of the protocol, he could not have held that the removal orders were unlawful or that conducting a necropsy was part of the standard of care owed to the plaintiffs.

[6]                 The Trial Judge misconstrued the terms of the protocol and, more importantly, he failed to appreciate the relevance of the protocol to the issue which he had to decide. He made reference to the conditions which attached to the import permit in the course of his Reasons. At paragraph 5, he notes:

Inter alia, the conditions imposed on the importation of the deer in the case at bar were that the herds were to be held in quarantine in New Zealand for a period of time and were to undergo testing for E. cervi at regular intervals, with no evidence of spiny larvae. Subsequent to their arrival in Canada, the herds were to be quarantined for an additional period of time and continue to undergo testing for E. cervi at regular intervals, all with no evidence of spiny larvae.

[7]                 These conditions were at the forefront of the discussions which led to the issuance of the import permits. The respondents were concerned that the protocol, as it was drafted in 1988, could lead to the destruction of the entire herd in the event that only one animal or a few were to test positive for spiny larvae (testimony of Michael John Bingams, Appeal Book, volume III, page 98, line 6 et seq.; page 100, line 19 et seq.; testimony of Todd Grignon, Appeal Book, volume III, page 1203, line 16 et seq.; page 1205, line 18 et seq., pages 1212 to 1216, page 1225, line 19 et seq.; testimony of Paul Croft, Appeal Book, volume III, page 361, line 6 et seq.).

[8]                 An internal departmental memorandum dated October 23, 1990, signed by Mr. William McElheran who held the position of Chief, Animal Imports and Quarantines (hereinafter "the McElheran memorandum"), indicates that isolated positive tests for E-cervi would not lead to the destruction of the herd. The evidence discloses that a copy of this memorandum was obtained by the respondent Coldstream and provided to its insurer who was attempting to assess the risk involved in insuring the shipments (testimony of Todd Grignon, Appeal Book, volume III, pages 1217 to 1222 and page 1271).The principal of the respondent Cervinus testified that although he did not receive a copy of the McElheran memorandum, he was aware of its contents and relied on the position expressed therein (testimony of Paul Croft, Appeal Book, volume III, pages 361 and 365).

[9]                 The Trial Judge concluded that the McElheran memorandum became part of the protocol sometime in 1990. He states at paragraph 7 of his Reasons:

The protocol was drafted in September, 1988. The protocol contained the requirements which would be needed to be made prior to the deer being allowed into Canada. The protocol was tightened in 1990, but mostly with respect to tuberculosis and foot and mouth disease. The most relevant is that portion which relates to E. cervi. The protocol stated as follows:

In the case of Elaphostrongylus cervi, it would be necessary to carry out further tests on the remainder of the group. If it was found that a high percentage of the imported group was infected with E cervi, then it could result in the destruction of the entire group.

[10]            It is clear from the record that the above extract, which the Trial Judge quotes from the McElheran memorandum, never found its way into the protocol and never formed part of the import permits that were issued to the respondents. Somehow, the Trial Judge came to the conclusion that the import permits had been modified to address the respondents' concerns, when in fact they were not. He thereafter held that the protocol, as he read it, could be discarded because it was not a relevant document (Reasons, paragraphs 84, 85, 89).

[11]            The relevance of the import permits and the protocol stems from the fact that an import permit is authorized by law and has the force of a regulation. Section 14 of the Act authorizes the Minister to make regulations prohibiting the importation of animals. These regulations are found in the Health of Animals Regulations (hereinafter "the Regulations"). In Barnett v. Canada [1996] F.C.J. No. 1686, this Court stated at paragraph 3:

Paragraph 10(1)(a) of the Regulations (now 12(1)(a))prohibits the importation of animals unless the importer does so under and in accordance with a permit issued by the Minister who can impose in the permit the conditions that he considers advisable to prevent the introduction of communicable diseases in Canada. Section 160.1 of the Regulations further provides that:

                 "Every person to whom a permit or license is issued under these regulations shall comply with the conditions contained in the permit or license."

The breach of the conditions of a permit is therefore a breach of the Regulations. (Emphasis added)

[12]            The front page of the import permits issued in this case indicates that they were issued by the Minister of Agriculture Canada:

The permits go on to authorize the importation of the selected animals:

[13]            The protocol, in which the conditions are stated and which forms an integral part of the permits, provides inter alia:

      8. The animals selected for export to Canada were:

      b) subjected to tests for the following diseases during the on-farm isolation or pre-export quarantine within thirty (30) days of the date of departure for Canada:

(i) ...

(ii) ...

(iii)       one fecal examination for elaphostrongylus cervi; deer positive for spiny larvae must be excluded from the shipment.

14. ...

Upon arrival at the first Canadian port of entry, the deer will be subjected to veterinary inspection and, if healthy, will be permitted to proceed directly to the Canadian quarantine station, where they will undergo a minimum one hundred and twenty (120) day quarantine period during which time they will be required to pass the following tests with negative results:

a) ...

b) ...

c) ...

                   d) at at least three (3) fecal examinations for elaphostrongylus cervi larvae at forty (40) day intervals with no evidence of spiny larvae, the first of which will be performed at least forty (40) days after the test mentioned in 8 b);

e) ...

                   f)    ...

If any or all of the imported deer are not classed as negative to any of the tests, show clinical signs of disease or fail to meet any other import requirement as outlined in this permit, the imported deer may be ordered to be slaughtered and the carcasses disposed of by an approved method without compensation to the owner. (Emphasis added)

[14]            The uncontradicted evidence in this instance is that two animals in the Coldstream herd and one animal in the Cervinus herd tested positive to spiny larvae upon one of the mandated fecal examinations conducted in Canada. According to the above-quoted terms of the protocol, this allowed the Minister to order that the imported deer be disposed of without compensation to the owner.

[15]            If this constituted sufficient grounds for ordering the disposition of the imported animals, I do not believe that the Minister or his servants can possibly be said to have breached the standard of care owed to the respondents or to have somehow acted negligently by ordering the removal of the deer on this basis. More importantly perhaps, the herds became subject to lawful removal pursuant to paragraph 18(1)(a) of the Act from the moment when one or more of the animals within the respective herds tested positive to spiny larvae (see Barnett, supra). This in itself forecloses a finding of negligence (see Superintendent of Family and Child Services for B.C., [1989] 61 DLR (4^th) 136; see also Peter Hogg, Liability of the Crown, second edition 1989, the Carswell Company Limited at page 18).

[16]            While the evidence showed that a comprehensive necropsy (i.e. one covering every conceivable part of the deer's anatomy) could have confirmed whether the deer that tested positive were infected with E-cervi, the Minister was free to limit the extent of testing to fecal examinations; just as the respondents were free to decide whether to import deer under such conditions. It is significant that at no time during the discussions which preceded the issuance of the two import permits or in their attempts to reverse the orders once they were issued, did the respondents mention the need for a necropsy or even allude to this procedure (Minutes of meeting held on November 4 and 5, 1991 on E-cervi risk management, Appeal Book, volume I, pages 148 to 150; testimony of Todd Grignon, Appeal Book, volume III, pages 1196 to 1207, 1212 to 1216; testimony of Paul Croft, Appeal Book, volume III, pages 359 to 360).

[17]            Contrary to the argument raised by counsel at the hearing of the appeal, I do not believe that the protocol can reasonably be read as limiting the power of the Minister to order the destruction of the imported deer to only those which tested positive. It is true that a positive spiny larvae test, while the animals were in New Zealand, would only have prevented the entry into Canada of those deer which tested positive (paragraph 8(b)(iii) of the protocol, supra). But this was explained by the fact that, in drafting the protocol, it was assumed that the likelihood that the deer would "pass" larvae picked up through feed would diminish after the mandatory 30 day quarantine in New Zealand (Appeal Book, volume I, page 130; see also the Reasons at paragraph 71). In any event, no such limitation applied with respect to the fecal examinations (or any other mandatory test) once the deer entered quarantine in Canada (paragraphs 14(d) and (f) of the protocol, supra). The relevant words of paragraph 14 make clear that "If any or all of the deer" test positive "to any of the tests, ..., the imported deer may be ordered to be slaughtered and the carcasses disposed of ..." (emphasis added).

[18]            While an ambiguity could result if the word "deer" was used in isolation (because it is singular and plural neutral), the term "imported deer", when considered in context with the subsequent word "carcasses", must be read in the plural (unless, of course, one were to tinker with the words). There is simply no ambiguity to be found within the clause or the protocol read as a whole. In this respect, I cannot but emphasize the testimony of the representatives of the respondents who read the protocol as authorizing the destruction of the herd on the basis of isolated instances of positive testing and who sought assurances from Mr. McElheran and others that the protocol would not be applied as it read (see the testimony referred to in paragraph 5, supra).

[19]            In this last connection, I note that according to the terms of the import permits, only the Minister of Agriculture and the Assistant Deputy Minister (Food and Inspection Branch) had the authority to prescribe the conditions under which the animals could be imported and that the protocol, which the respondents must be taken to have read, specified that: "Any change in this permit by an unauthorized person will render it invalid" (see protocol, 4^th paragraph from close). It simply cannot be argued that the protocol was somehow modified by the McElheran memorandum.

[20]            The protocol must be understood as it reads, and when so understood, it becomes clear that the Minister could lawfully order the removal of the herds as of the moment when one animal within the herd (two in the case of Coldstream) tested positive to spiny larvae. It follows that it was not open to the Trial Judge to hold that the decision to order the removal of the deer was made unlawfully or negligently.

[21]            Even if one ignores the terms of the protocol as the Trial Judge did, I do not believe that his judgment can be allowed to stand because it disregards the statutory standard under which animals can be removed. Specifically, the Trial Judge misconstrued the standard of care owed to the respondents when he held that the Minister could not order the removal of the herds without first using necropsy to confirm the existence of E-cervi in the animals which tested positive. This was not the standard to be applied as paragraph 18(1)(b) makes clear that the removal orders could be issued on the basis of "a reasonable belief that the animals are or could be affected" by E-cervi.

[22]            The Trial Judge concluded that there were reasonable grounds to believe (pre-necropsy) that the deer which tested positive to spiny larvae were or could be affected by E-cervi. This was a significant finding because it recognized that the testing method adopted by the Minister and the logic behind it was sound insofar as the particular animals which tested positive were concerned. With respect to the other animals in the herds, they were also susceptible inasmuch as they shared a common origin with the deer which tested positive (testimony of John Bringans, Appeal Book, volume III, page 130; testimony of Paul Croft, Appeal Book, volume III, page 359).

[23]            The Trial Judge discarded this possibility on the sole basis of his definitive finding that (post-necropsy) the three deer which tested positive to spiny larvae were not affected by E-cervi. In coming to this conclusion, however, the Trial Judge ignored that no conclusive necropsy had been performed on the three deer which tested positive to spiny larvae and that, accordingly, no definitive conclusion could be reached. In this respect, it is important to note that Dr. Burt, on whose testimony the Trial Judge relied, could not and did not assert definitively that the three animals did not have E-cervi. What he expressed was his belief that the animals were not so affected.

[24]            While the expert evidence from both sides revealed that a necropsy has the potential to yield confirmative results, the elimination of the possibility that an animal hosts an adult worm through necropsy is another matter altogether. This is because the adult worms, if they are present, are usually found in certain parts of the anatomy, but could be anywhere in the anatomy. Dr. Burt explicitly agreed with this and described the exercise as "in no way simple" (Appeal Book, volume III, pages 576, 715).

[25]            The evidence is clear that Dr. Gajadhar did not perform a comprehensive search for the adult worms. While Dr. Gajadhar testified that he spent between 70 and 80 hours looking in the musculature, he did not look in the vicera or other areas (testimony of Dr. Gajadhar, Appeal Book, volume IV, pages 1707 to 1710, 1819). Considering this evidence in light of Dr. Burt's testimony that finding the adult worms can require looking "right through the whole deer" (Appeal Book, volume III, page 576), it becomes apparent that the Trial Judge had no evidentiary basis from which he could find as a fact that the three deer were not affected by E-cervi. The most that he could do was find that they were not likely affected by E-cervi; which, of course, does not eliminate the possibility that they were.

[26]            The approach taken by Dr. Gajadhar is consistent with the opinion of Dr. Prestwood, who testified for the Appellants on the basis of her 20 years of experience in clinical parasitology. While she admitted that it could be useful to try to find adult worms, she explained that time, personnel and monetary constraints often prevent the use of necropsy as a means of ruling out the possibility of infection (Appeal Book, volume IV, at page 1888). This view is particularly apt in the present case where reasonable grounds to believe that the herds could be affected by E-cervi were present, prior to the performing of the necropsies; such grounds being based, inter alia, on the common origin of the deer and the fact that no other likely explanation could be offered for the shedding of spiny tailed larvae (Reasons, paragraph 71).

[27]            As noted earlier, paragraph 18(1)(b) requires no more than a reasonable belief that the animals were or could be affected. It did not require Dr. Gajadhar to conduct necropsies on the three deer, nor did it require him to extend his search for the adult worms throughout their entire anatomies in order to rule out the possibility of E-cervi infection. Having regard to the inconclusive results of the necropsies that were performed and the lack of any other reasonable explanation for the shedding of spiny larvae, the Trial Judge was bound to conclude that the three animals could be affected by E-cervi, and, that the remainder of the deer were also suspect by reason of their common origin.

[28]            In light of this conclusion, I need not address whether section 50 of the Act would operate to exempt the Minister and his servants from liability in this instance nor do I need to consider the scope of the exemption clause contained in the import permits.

[29]            Costs usually follow the event. In my respectful view, the suggestion that this rule not be followed because of the McElheran memorandum is a function of speculation and results from a misunderstanding of these reasons. In particular, my colleague's suggestion that the approach proposed by the McElheran memorandum reflects a more fair and reasonable way of dealing with the imported deer ignores the fact that further fecal examinations (as proposed by the McElheran memorandum) were not required, by law or by virtue of the protocol to rule out the possibility that the deer could be affected by E-cervi (see paragraphs 21 to 27). To accept the approach proposed by the McElheran memorandum is to accept that the animals were to be allowed to remain in Canada despite the existence of a reasonable belief that they were affected by E-cervi. Keeping in mind the reasons which I have given, I do not see how the approach espoused by the McElheran memorandum can be said to be "fair" or "reasonable".

[30]            Furthermore, there has been no trial of the issue whether the respondents could reasonably rely on this memorandum having regard to the terms of the protocol which expressly provided that no unauthorized person could alter its terms (see paragraph 19, supra). In the same vein, we do not know what representations were made to the insurer with respect to this memorandum which, on the face of it, is an internal memorandum, not intended for public dissemination. Having regard to the position adopted by my colleague, the question arises as to how a prudent person would have treated this memorandum and whether the respondents could reasonably rely on it to the exclusion of the protocol and indeed the law. Based on the limited evidence that we have, it is not clear to me that the respondents acted prudently. In my respectful view, costs cannot be denied to the winning party on the basis proposed by my colleague.

[31]            I would therefore allow the appeal, set aside the decision of the Trial Judge and rendering the Judgment that the Trial Judge ought to have rendered, I would dismiss the actions of the respondents with costs here and below.

[32]            Having regard to this result, it is not necessary to deal with the cross appeals.

                "Marc Noël"                 

J.A.

"I agree.

M. Nadon J.A."

LINDEN J.A. (Concurring Reasons)

[33]            It is with some regret that I must concur in the legal reasoning and the result reached by my brother Justice Noël, except for the matter of costs.

[34]            The reason I am regretful is the fact that I am troubled by the lack of any effect whatsoever on this litigation by the McElheran memorandum, dated October 23, 1990. This memorandum indicated that "if it was found that a higher percentage of the imported group was infected with E cervi, then it could result in the destruction of the entire group." I must say that, especially given the fact that no compensation is paid for imported animals that must be destroyed or removed, to administer the quarantine system in this way would be a fair and reasonable method of so doing. Unfortunately, however, this statement was not an accurate reflection of the very strict system in place, the policy and the regulations.

[35]            The McElheran memorandum, it turns out, did not reflect the terms of the statute, the Permits and its protocol, the purport of which is accurately described in detail by Justice Noël. The preparation and distribution of this memorandum was ill-advised in that it was confusing and not capable of altering the clear meaning of the Permits and its protocol, as Draconian as that meaning may be.

[36]            Nevertheless, the McElheran memorandum seems to have misled the respondents and perhaps their insurers in their assessment of the risk involved in importing the deer. I cannot comment on what might have occurred if a tort claim had been based on the misinformation contained in the memorandum, rather than on the tough but legally authorized decision of Agriculture Canada to remove the deer.

[37]            It is because of the confusion and uncertainty created by this memorandum, written by an official of the Crown and apparently relied on by the respondents, that I am of the view that costs should not follow the event in this case and that no costs should be awarded.

                   "A.M. Linden"                

J.A.

                          FEDERAL COURT OF APPEAL

    NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                       A-34-01 & A-35-01

STYLE OF CAUSE:     

A-34-01                           HER MAJESTY THE QUEEN

and CERVINUS INC.

A-35-01                           HER MAJESTY THE QUEEN

and COLDSTREAM DEER GROUP LTD.

PLACE OF HEARING:                                   OTTAWA, ONTARIO

DATE OF HEARING: SEPTEMBER 24 & 25, 2002

REASONS FOR JUDGMENT : Noël J.A.

CONCURRED IN BY:                                    Nadon J.A.

CONCURRING REASONS:                          Linden J.A.

DATED:                          October 22, 2002

APPEARANCES:

Mr. Frederick B. Woyiwada

Mr. R. Jeff Anderson        FOR THE APPELLANT

Mr. Russell Kronick, Q.C.

Mr. Barry Garland            FOR THE RESPONDENTS

SOLICITORS OF RECORD:

Mr. Morris Rosenberg

Deputy Attorney General of Canada

Ottawa, Ontario              FOR THE APPELLANT

Goldberg Shinder & Kronick LLP

Ottawa, Ontario              FOR THE RESPONDENTS