Date: 20060125
Docket: T-215-02
Citation: 2006 FC 71
Ottawa, Ontario, January 25, 2006
PRESENT: The Honourable Mr. Justice Blanchard
BETWEEN:
RENOVA HOLDINGS LTD., JOHN JACKSON,
DAVE BOUCHARD, and RON DUFFY each on their own behalf
and on behalf of all persons who have been producers or are producers
and do reside or have resided in the designated area
between July 5, 1935and the present day
Plaintiffs (Respondents)
and
THE CANADIAN WHEAT BOARD, and
THE ATTORNEY GENERAL OF CANADA
Defendants (Applicants)
REASONS FOR ORDER AND ORDER
1. Introduction
[1] The Canadian Wheat Board (the Wheat Board) and the Attorney General of Canada - the Defendants in the underlying action - appeal the order of Prothonotary Hargrave dated March 17, 2005. In his order, the Prothonotary refused to grant the Defendants' motion to strike out the Plaintiffs' statement of claim as disclosing no reasonable cause of action and to dismiss the Plaintiffs' action.
[2] In this appeal, the Defendants ask the following from the Court:
1) An order allowing the within appeal and setting aside the order of Prothonotary Hargrave;
2) An order striking out the statement of claim and dismissing the action with costs on the ground that the statement of claim discloses no reasonable cause of action;
3) In the alternative, an order striking out such parts of the statement of claim that disclose no reasonable cause of action and an order extending the time for serving a statement of defence to sixty (60) days from the date of the issuance of the order; and
4) Such other order as to this Honourable Court may seem just.
2. Factual Background
[3] The Plaintiffs are a corporation and individuals who qualify as "producers" under section 2 of the Canadian Wheat Board Act, R.S.C. 1985, c. C-24 (the Act) in the "designated area", as defined by the Act. For our purposes the designated area is defined to comprise Manitoba, Saskatchewan, Alberta, and the Peace River District of British Columbia.
[4] The defendant Wheat Board is a corporation created under the Act and is responsible for marketing wheat and barley, including wheat and barley produced in the designated area. The Attorney General of Canada is named as representing the defendant Crown (Her Majesty in right of Canada), pursuant to the Crown Liability and Proceedings Act, R.S. 1985 c. C-50, section 23.
[5] On February 8, 2002, the Plaintiffs filed a statement of claim as a proposed class action. The Plaintiffs make their claim against the Defendants for the improper use by the Wheat Board of monies in pooled accounts earned from the sale of grain produced by the Plaintiffs over the period of July 5, 1935 - when the Wheat Board was established - to the present day.
[6] In their original statement of claim, the Plaintiffs alleged, inter alia, that:
During the course of its existence, the Wheat Board did arbitrarily issue export licenses and licenses to process grains to individuals and corporations from regions outside the Designated Area which allowed them to purchase Products directly from Producers inside the Designated Area. The payments for such purchases did not enter the pooled accounts for Products sold from the Designated Area (hereinafter the "Pooled Accounts") and were not disbursed back to the Producers [paragraph 12].
Pursuant to Section 33 of the Act, certain expenses incurred during the course of handling Products from the Designated Area may be deducted from the aggregate funds received as a result of that handling [paragraph 14].
The Plaintiffs further alleged that the Wheat Board breached its fiduciary duty to the Plaintiffs and that the Wheat Board is accountable to the Plaintiffs for monies wrongfully deducted from the pooled account [paragraph 20].
[7] The Plaintiffs seek pecuniary damages, exemplary and punitive damages, and an accounting for all sums due to the Plaintiffs.
[8] On June 17, 2003, the Defendants filed a motion to strike the Plaintiffs' statement of claim pursuant to Rule 221(1)(a) of the Rules. I note that the Defendants have not sought particulars from the Plaintiffs nor have the Defendants filed a statement of defence to the action.
[9] In their written submissions in response to the motion, the Plaintiffs gave notice of their intention to amend their statement of claim. Among other things, the Plaintiffs proposed to amend the two paragraphs cited above to read as follows:
During the course of its existence, the Wheat Board did pursuant to Part IV of the Act and the Regulations thereunder, issue export licenses, interprovincial transport licenses, and licenses to process grains to individuals and corporations from regions outside and inside the Designated Area. The expenses incurred for such activities were contrary to the statutory directive taken from the pooled accounts for Products sold from the Designated Area [amended paragraph 12].
Pursuant to Section 7 and Section 33 of the Act, only certain expenses incurred during the course of selling Products from the Designated Area are permitted to be deducted from the aggregate funds received as a result of that selling, and the Wheat Board wrongfully deducted expenses in excess of its statutory mandate [amended paragraph 14].
[10] Further, the Plaintiffs proposed adding the allegations that by "negligence and misfeasance in public office and abuse of public office", the Defendants also breached their duty of care owed to the Plaintiffs, "exceeding their statutory and operational administrative authority under the Act" [paragraph 22].
[11] The Defendants' motion to strike was heard by Prothonotary Hargrave on July 14, 2003. The Prothonotary considered the statement of claim as if it contained the above proposed amendments.
[12] The Defendants argued that it is "plain and obvious from the reading of [the Act] and from previous judicial considerations of like-minded claims, that this claim discloses no reasonable cause of action". Specifically, the Defendants sought their motion on the grounds that:
1) the Wheat Board was accountable only to Parliament and not to individual producers;
2) the relationship between the Wheat Board and producers does not give rise to a duty of care;
3) the Act does not envisage the Wheat Board suffering litigious attack by producers as the Wheat Board endeavours to fulfil its statutory mandate; and
4) the legislation contains provisions which negative potential liability for policy reasons.
[13] The Plaintiffs submitted that the Defendants had not shown that it is "plain and obvious" and "beyond doubt" on the pleadings that the Plaintiffs would not succeed at trial. The Plaintiffs stated that their claim was for the non-fulfilment of statutory obligations by the Wheat Board to pay producers the amounts mandated as owing under the Act. Among their arguments, the Plaintiffs submitted that while government actors are not liable in negligence for policy decisions, they may be liable for operational decisions. The Plaintiffs further submitted that the Defendants had not identified any policy considerations which would negative the liability of the Defendants.
[14] The Prothonotary reserved his decision after the hearing. On March 17, 2005, he dismissed the Defendants' motion with costs.
3. The Impugned Decision
[15] The Prothonotary found that the Defendants had mischaracterized the Plaintiffs' pleadings. He held that the action was not for the improper issuance of export licenses, the failure to properly account for export sales, or an accounting for monies not entered into the pooled account, as alleged by the Defendants. Rather, the Prothonotary stated that the action was for an alleged improper deducting of expenses from the pooled account. He further held that "at this juncture there is reasonable doubt that the Plaintiffs have any case to answer on this motion". However, he proceeded to consider the Defendants' motion to strike.
[16] The Prothonotary applied the test for striking as set out in [1980] 2 S.C.R. 735">Attorney General of Canada v. Inuit Tapirisat of Canada et al., [1980] 2 S.C.R. 735, (1980), 115 D.L.R (3rd) 1. He articulated the test as follows: "facts pleaded in the statement of claim are deemed to be proven and [...] there should be a striking out only in plain and obvious cases, where the Court is satisfied beyond doubt, that the claim discloses no reasonable cause of action".
[17] The Prothonotary distinguished the authorities cited by the Defendants in support of their position that no cause of action lay in claims against the Wheat Board.
[18] With respect to the Defendants' submission that the Plaintiffs have no cause of action in accounting, the Prothonotary distinguished the present case from Riske et al. v. Canadian Wheat Board, [1977] 2 F.C. 143, (1976), 71 D.L.R. (3d) 686 (F.C.T.D.). The Prothonotary stated that the Plaintiffs in Riske sought an "arithmetical accounting" for the sale of each individual producer's grain and attacked the pooling scheme by demanding a new manner of accounting by the Wheat Board. In the Prothonotary's view, the present case is distinguishable since what is sought by the Plaintiffs is an accounting for sums due to them because expenses were improperly deducted from the pooled accounts without statutory authority.
[19] With respect to the Defendants' submission that the Plaintiffs have no cause of action in negligence, the Prothonotary held that the cases cited by the Defendants were authority for the proposition that the Wheat Board should not be attacked for endeavouring to fulfil its statutory mandate. In contrast, the Prothonotary stated, the present case concerns the failure by the Wheat Board to fulfil its statutory mandate. The Prothonotary referred to authorities cited by the Plaintiffs which state that government actors are only immune from liability in negligence for policy decisions and not operational decisions. He went on to refer to Brewer Bros. v. Canada (Attorney General), [1992] 1 F.C. 425, (1991), 80 D.L.R. (4th) 321, where the Federal Court of Appeal held that while a statutory breach of duty did not directly give rise to a cause of action, it was evidence of negligence.
[20] The Defendants argued that the Plaintiffs' action in negligence for breach of fiduciary duty must fail since they are owed no private law duty of care by the Defendants. The Prothonotary found, in the present instance, there to be an arguable private law duty owed by the Defendants to the Plaintiffs. The Prothonotary considered the principles of law summarized in Fairford First Nation v. Canada [1999] 2 F.C. 48, in respect to dependency or vulnerability required to establish a fiduciary obligation. He concluded that the principles in Fairford did not assist the Defendants in establishing that the Plaintiffs' case was plainly and obviously futile. The Prothonotary relied on Devloo v. Canada, [1991] F.C.J. No. 482 (QL), where the Federal Court of Appeal found that a private law duty may exist under the operative legislation; the legislation in that case was the Canada Grain Act, R.S.C. 1985, G-10. The Prothonotary determined in the present case, given the allegation of breach of statutory directive that it was arguable that the Defendants owed a private law duty to the Plaintiffs, and that an action for breach of fiduciary duty is not plainly and obviously futile.
[21] In dismissing the Defendants' motion, the Prothonotary accepted the Plaintiffs' submission that "whether the Plaintiffs' action is made in negligence, breach of fiduciary duty or the tort of malfeasance, it is not plain and obvious that the Plaintiffs will not be successful in establishing any cause of action at trial".
4. Order Sought on Appeal
[22] In this appeal, the Defendants seek an order setting aside the Prothonotary's decision and dismissing the Plaintiffs' action, in whole or in part. The Defendants state that the grounds for their motion are as follows:
1) that the Prothonotary erred in dismissing the Defendants' motion to strike in not concluding that the Plaintiffs' claim failed to disclose a reasonable cause of action; and
2) that the Prothonotary erred in law in failing to find that the legislative scheme in the Canadian Wheat Board Act contains provisions which negative potential liability for policy reasons.
[23] The Defendants, in their written submissions, state that the Plaintiffs' statement of claim and proposed amended statement of claim are both bereft of particulars of facts concerning allegations of negligence, impropriety or wrongdoing. The Defendants submit in argument that the Plaintiffs do not have a private law cause of action in negligence, or for an accounting, or for breach of fiduciary duty, or for abuse of public office. The Defendants allege that the Prothonotary erred in failing to consider "recent jurisprudence from the Supreme Court of Canada" on regulatory negligence.
[24] The Defendants say that even if the Plaintiffs were successful in establishing a prima facie duty of care, there are policy considerations that justify denying liability. These include the fact that the Wheat Board now has elected members, and that the Wheat Board has very specific obligations under the Act regarding the keeping of accounts of its operations and reporting to Parliament. The Defendants argue that given these statutory requirements imposed on the Wheat Board, Parliament did not intend that the Wheat Board have other private law obligations. The Defendants contend that the Prothonotary erred by failing to consider these policy considerations, which have been held to justify denying liability in similar cases.
[25] The Defendants further argue that the Plaintiffs' statement of claim should be struck because the Plaintiffs do not point to particular provisions in the legislation which restrict the expenditures of the Wheat Board. The Defendants submit that on the face of the Act, it is not clear that sections 7 and 33 referred to by the Plaintiffs provide for anything other than discretionary expenditures, and that neither the Act nor the Canadian Wheat Board Regulations, C.R.C., c. 397, prohibit the deduction of expenditures for direct export licensing from pooled accounts.
[26] Finally, the Defendants argue that the real allegation of the Plaintiffs is that the Wheat Board acted "contrary to the statutory directive", or that its actions are ultra vires. The Defendants contend that if there were any factual foundation for such a claim, it is not a proper matter for an action but rather an allegation that should proceed by way of an application for judicial review to determine if the actions complained about are in fact ultra vires the Wheat Board. In essence, the Defendants are arguing that the Plaintiffs are seeking declaratory relief, a remedy that can only be sought by way of an application for judicial review.
[27] Subsequent to the hearing in the present appeal, the Federal Court of Appeal released its decision in Her Majesty the Queen v. Grenier, 2005 FCA 348 (October 27, 2005). In that decision Mr. Justice Letourneau confirmed that a party who wishes to attack a decision of a federal institution does not have the option of proceeding by judicial review or by way of an action; the party must proceed by judicial review. At paragraph 20 of its reasons, the Court of Appeal affirmed the Court's previous decision in Tremblay v. Canada, 2004 FCA 172:
For the reasons I will express below, I think the conclusion arrived at by our colleague Madam Justice Desjardins, in Tremblay, supra, is the right one in that it is the conclusion sought by Parliament and mandated by the Federal Courts Act. She held that a litigant who seeks to impugn a decision of a federal agency is not free to choose between a judicial review proceeding and an action for damages; he must proceed by judicial review in order to have the decision overturned.
In Grenier, the Court of Appeal held that the Plaintiff could not indirectly challenge the lawfulness of the decision to place him in administrative segregation through an action; he had to first directly apply to the Court to nullify or invalidate the decision by way of judicial review.
[28] In the present case, while the question of whether the Plaintiffs' claim is properly before the Court as an action was raised by the Defendants in their written submissions, as a result of the Federal Court of Appeal's decision in Grenier clarifying the law on the issue, I thought it best to afford the parties an opportunity to file supplementary submissions on the question. I therefore directed the parties to address the following two questions:
(1) On what basis should the Court proceed to consider the Defendants' argument when it was not raised before the Prothonotary?
(2) Assuming that an alternative administrative law remedy by way of judicial review is available to the Plaintiffs, does the availability of such a remedy preclude the bringing of the underlying action?
Supplementary submissions were filed by both parties on the two questions.
5. The Issues
[29] The following issues are raised in this appeal:
A. Should the proceeding be struck out on the ground the Plaintiffs used the wrong originating procedure in respect to the administrative law remedy sought?
B. Should the statement of claim be struck out on the ground that it shows no reasonable cause of action?
6. Analysis
[30] Orders of a prothonotary may be appealed by a motion to a judge of the Federal Court pursuant to Rule 51 of the Federal Courts Rules, SOR/98-106 (the Rules). The standard for reviewing discretionary orders of prothonotaries is the Aqua-Gem test as reformulated by Mr. Justice Décary in Merck & Co. v. Apotex Inc., [2004] 2 F.C.R. 459, 2003 FCA 488 at paragraph 19:
Discretionary orders of prothonotaries ought not be disturbed on appeal to a judge unless:
a) the questions raised in the motion are vital to the final issue of the case, or
b) the orders are clearly wrong, in the sense that the exercise of discretion by the prothonotary was based upon a wrong principle or upon a misapprehension of the facts.
[31] I am of the view that the questions raised in this appeal are vital to the final issue of the case. I will therefore conduct this appeal on a de novo basis.
A. Should the proceeding be struck out on the ground the Plaintiffs used the wrong originating procedure in respect to the administrative law remedy sought?
[32] Before I consider the parties' arguments on the alternative administrative law remedy, I will deal with a preliminary matter raised by the Plaintiffs. The parties essentially agree that in this appeal I should exercise my discretion de novo. However, in their supplementary submissions the Plaintiffs argue that an appeal from a Prothonotary is a modified de novo hearing where new evidence and new law may not be admitted or argued unless there are special reasons. It is the Plaintiffs' position that no such special reasons are present in the instant case and that in this appeal the review de novo should proceed on the basis only of the evidence adduced and the law argued before the Prothonotary.
[33] I find the Plaintiffs' argument to be without merit. In my view, it does not matter that the issue of whether the Plaintiffs' claim is properly before the Court as an action was not raised before the Prothonotary. The issue involves no new evidence, only argument on how the law is to be applied. It is open to a reviewing Court in the circumstances to consider such legal arguments. As Mr. Justice Estey affirmed in [1982] 2 S.C.R. 418">R. v. Amato, [1982] 2 S.C.R. 418, "...the common law is always speaking." The recent decision of the Court of Appeal in Grenier, above, clarifies the law on the issue of the proper procedure for challenging the legality of decisions of a federal agency. The Prothonotary did not have the benefit of the Court of Appeal's decision since it was decided after the Prothonotary rendered his decision. In my view, a reviewing Court has an obligation to apply the law as it stands at the time of the appeal.
[34] I now consider the Defendants' argument that the Plaintiffs should have proceeded by way of an application for judicial review, and not by way of an action.
[35] Subsection 18.1(1) of the Federal Courts Act provides that any person affected by a "matter" in which relief is sought against a federal board may bring an application for judicial review.
| 18.1 (1) An application for judicial review may be made by the Attorney General of Canada or by anyone directly affected by the matter in respect of which relief is sought.
|
18.1 (1) Une demande de contrôle judiciaire peut être présentée par le procureur général du Canada ou par quiconque est directement touché par l'objet de la demande.
|
In Morneault v. Canada(Attorney General), [2001] 1 F.C. 30 at paragraph 42, the Federal Court of Appeal affirmed that judicial review under section 18.1 is not limited to "a decision or order" by a federal board:
It is plain from the section as a whole that, while a decision or order is a "matter" that may be reviewed, a "matter" other than a decision or order may also be reviewed. This Court's decision in Krause v. Canada, [1999] 2 F.C. 476 (C.A.) illustrates the point. It was held there that an application for judicial review pursuant to section 18.1 for a remedy by way of mandamus, prohibition and declaration provided for in section 18 [as am. by S.C. 1990, c.8, s. 4] of the Act, were "matters" over which the Court had jurisdiction and that the Court could grant appropriate relief pursuant to paragraphs 18.1(3)(a) and 18.1(3)(b).
[36] In the present case, there is no dispute that the Wheat Board is a "federal board" as defined under subsection 2(1) of the Federal Courts Act. In their statement of claim, the Plaintiffs allege that certain expenses incurred by the Wheat Board in selling products from the designated area were contrary to the Board's statutory directive under section 33 of the Act, and that those expenses were wrongfully deducted from the pooled accounts. The Plaintiffs claim that, as a result, the sums paid to them were lower than they ought to have been. In substance, in this proceeding, the Plaintiffs are challenging the legality of the Wheat Board's deductions of allegedly improper expenses from the pooled accounts which resulted in reduced payments to the Plaintiffs for their wheat over a number of years. I am satisfied that the issue raised by the Plaintiffs is a "matter" which falls within section 18.1 of the Federal Courts Act.
[37] The next question to consider is whether the Plaintiffs must proceed by way of judicial review in order to challenge the legality of the Wheat Board's actions. To make such a determination, it is necessary to ascertain the true nature of the remedy sought. This is not readily apparent from the Plaintiffs' amended statement of claim, at least in so far as the Plaintiff's challenge to the legality of the Wheat Board's actions. However, in my view, by claiming that the Wheat Board's actions are ultra vires the Act, the Plaintiffs are, in effect, asking the Court to determine and declare that Wheat Board's actions are invalid.
[38] Subsection 18(1) of the Federal Courts Act provides the Federal Court with exclusive original jurisdiction to grant injunctive and prerogative remedies, including declaratory relief, against any federal board.
| 18. (1) Subject to section 28, the Federal Court has exclusive original jurisdiction
(a) to issue an injunction, writ of certiorari, writ of prohibition, writ of mandamus or writ of quo warranto, or grant declaratory relief, against any federal board, commission or other tribunal; and
(b) to hear and determine any application or other proceeding for relief in the nature of relief contemplated by paragraph (a), including any proceeding brought against the Attorney General of Canada, to obtain relief against a federal board, commission or other tribunal.
|
18.(1) Sous réserve de l'article 28, la Cour fédérale a compétence exclusive, en première instance, pour :
a) décerner une injonction, un bref de certiorari, de mandamus, de prohibition ou de quo warranto, ou pour rendre un jugement déclaratoire contre tout office fédéral;
b) connaître de toute demande de réparation de la nature visée par l'alinéa a), et notamment de toute procédure engagée contre le procureur général du Canada afin d'obtenir réparation de la part d'un office fédéral.
|
Subsection 18(3) stipulates that the remedies provided for in subsection 18(1) may only be obtained through an application for judicial review.
| 18. (3) The remedies provided for in subsections (1) and (2) may be obtained only on an application for judicial review made under section 18.1.
|
18.(3) Les recours prévus aux paragraphes (1) ou (2) sont exercés par présentation d'une demande de contrôle judiciaire.
|
[39] As I stated above, I would characterize the nature of the relief sought by the Plaintiffs as declaratory. The Court of Appeal in Grenier, above, clarifies and affirms that, in such circumstances, proceeding by way of an action is not an option. At paragraph 10 of its reasons, the Court wrote:
In the interests of justice, equity and efficiency, subject to the exceptions in section 28, Parliament assigned the exercise of reviewing the lawfulness of the decisions of federal agencies to a single court, the Federal Court. This review must be exercised under section 18, and only by the filing of an application for judicial review.
The Plaintiffs therefore can only challenge the legality of the Wheat Board's actions by way of an application for judicial review and not through an action.
B. Should the statement of claim be struck out on the ground that it shows no reasonable cause of action?
[40] In addition to challenging the legality of the Wheat Board's actions, the Plaintiffs in their statement of claim also claim in negligence for a breach of duty of care and a breach of fiduciary duty. On the original motion to strike and in this appeal, the Plaintiffs gave notice that they wish to amend their statement of claim by adding allegations that the Defendants by "negligence and administrative misfeasance in public office and abuse of public office" breached the duty of care owed to the Plaintiffs. The Plaintiffs seek various remedies, including pecuniary, exemplary and punitive damages. For the purpose of this appeal, I have considered the statement of claim as if it contained the proposed amendments, as did the Prothonotary. As opposed to the matter of the legality of the Wheat Board's actions discussed earlier in these reasons, I am of the opinion, that the above allegations and the remedies sought are properly before the Court by way of an action. I now turn to consider the Defendants' motion to strike the above claims.
[41] I agree with the Prothonotary that the test for striking out pleadings for failing to disclose a reasonable cause of action is that set out in Inuit Tapirisat, above: "facts pleaded in the statement of claim are deemed to be proven and [...] there should be a striking out only in plain and obvious cases, where the Court is satisfied beyond doubt, that the claim discloses no reasonable cause of action". This high standard for striking was reaffirmed by the Supreme Court of Canada in Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959.
[42] In the present case, although the Plaintiffs' pleadings are not very detailed, I am not of the opinion that it is plain and obvious and without doubt that the Plaintiffs' statement of claim discloses no reasonable cause of action. In consequence, the Plaintiffs' action should not be dismissed in its entirety. The following are my reasons.
[43] At the outset, I observe that the jurisprudence has established that granting immunity from negligence is only granted sparingly in the cases of Crown agencies: [see Just v. British Columbia, [1989] 2 S.C.R. 1228 and Comeau's Sea Foods Ltd. v. Canada (Minister of Fisheries and Oceans) (C.A.), [1995]2 F.C. 467.
[44] To succeed on a claim in negligence, a duty of care must be established between the plaintiff and the defendant. Whether such a duty of care exists involves considering the two-step approach set out by the House of Lords in Anns v. Merton London Borough Council, [1977] 2 W.L.R. 1024 and adopted by the Supreme Court of Canada in [1984] 2 S.C.R. 2">Kamloops v. Neilsen, [1984] 2 S.C.R. 2 at page 10:
(1) is there a sufficiently close relationship between the parties... so that, in the reasonable contemplation of the [defendant], carelessness on its part might cause damage to that person? If so,
(2) are there any considerations which ought to negative or limit (a) the scope of the duty and (b) the class of persons to whom it is owed or (c) the damages to which a breach of it may give rise?
[45] The Defendants argue that the Plaintiffs' claim in negligence cannot succeed for two reasons. First, the Defendants argue that a prima facie duty of care cannot be established because there is no proximity between the Wheat Board and the Plaintiffs. Second, the Defendants submit that even if such a duty of care exists, policy considerations negative the imposition of a duty of care.
[46] The Defendants submit that the jurisprudence reveals no analogous categories where proximity between the Wheat Board and the Plaintiffs is identified. The Defendants point to Riske, above; M-Jay Farms Enterprises Ltd. v. Canadian Wheat Board, [1997] M.J. No. 462 (QL); and A.O. Farms Inc. v. Canada, [2000] F. C. J. No. 1771 (QL), as establishing that there is no private law duty of care in the context of the Wheat Board and the Act. In my opinion, these cases can be distinguished from the circumstances in the present case. In A.0. Farms, while Mr. Justice Hugessen held that there was no proximity between "the government and the governed", the matter before the Court concerned a legislative decision by the Minister and not an operational decision of the Wheat Board. Further, I note that neither in Riske nor M-Jay Farms did the Court conclude that no proximity existed between the plaintiffs and the defendant Wheat Board. In fact, although he ultimately granted the motion to strike on the second ground of the Anns test, Mr. Justice Huband of the Manitoba Court of Appeal did not find in M-Jay Farms that the plaintiffs had not established a prima facie duty of care. Rather, he stated at paragraph 12 that:
I would be hesitant to rule in favour of the [Wheat Board] based on the arguments advanced with respect to the first stage of that Anns test. Whether a prima facie duty of care arises would be more properly settled within the context of an action which proceeded to trial.
The above cases, in my view, do not assist the Defendants in their argument that no proximity can exist between the Wheat Board and the Plaintiffs in the circumstances. They are of little help to the Defendants on this appeal.
[47] The Defendants also argue that residual policy considerations negate the imposition of a duty of care. Specifically, the Defendants contend that since section 9 of the Act requires the Wheat Board to submit monthly and annual reports to the Minister, who must in turn submit an annual report to Parliament, the Wheat Board is responsible to Parliament and not to individual producers. In Cooper, above at page 570, the Supreme Court of Canada clarified the "policy components" to be considered in determining whether the duty of care is negated.
If the plaintiff is successful at the first stage of the Anns such that a prima facie duty of care has been established (despite the fact that the proposed duty does not fall within an already recognized category of recovery), the second stage of the Anns test must be addressed. That question is whether there exists residual policy considerations which justify denying liability. Residual policy considerations include, among other things, the effect of recognizing that duty of care on other legal obligations, its impact on the legal system and, in a less precise but important consideration, the effect of imposing liability on society in general.
While the reporting provisions of the Act, may be an indicator to a particular policy consideration underlying the legislation, they do not, in my view, fall within the "residual policy considerations" contemplated by the Supreme Court of Canada in Cooper. The arguments of the Defendants fail to convince me that the reporting obligations of Wheat Board under the Act negate any duty of care owed to the Plaintiffs by the Defendants in the circumstances. Further, the cases cited by the Defendants in support of their argument - namely, Riske and M-Jay Farms -can be distinguished on their facts. Those cases involve the Wheat Board exercising its "day to day discretion" in fulfilling its statutory mandate; that is, in setting the selling prices for the product. Neither of those cases involves an allegation that the Wheat Board exceeded its statutory mandate, as is alleged in this case. Upon considering the arguments of the parties, in light of the jurisprudence cited, I am not satisfied that it is beyond doubt that the Plaintiffs' claim in negligence will necessarily fail at trial.
[48] The Defendants adduce other cases which they say support their argument that there is no proximity between the Wheat Board and the Plaintiffs, and thus no duty of care. Specifically, the Defendants cite: Cooper, above; Edwards, above; Longchamps v. Farm Credit Corporation, [1990] A.J. No. 709 (QL), [1990] 6 W.W.R. 536 (Alta. Q.B.), aff'd [1993] 1 W.W.R. 162 (Alta. C.A.); and Farm Credit Corporation v. Pipe el al., [1992] O.J. No. 2373 (QL), (1993), 106 D.L.R. (4th) 595 (Ont. C.A.). In my view, these cases do not preclude a finding of a proximate relationship between the Wheat Board and the Plaintiffs. These cases can all be distinguished on their facts. In addition, none of the cases cited concern the Act or the Wheat Board. Further, in both Cooper and Edwards, the Supreme Court of Canada held that there was "no close and direct relationship" between the plaintiffs and the defendants - that is, no proximity - and that these were not circumstances in which a new category of negligence should be recognized. In contrast, the Act in the present case appears to acknowledge a relationship between the Plaintiffs and the Wheat Board; that is the Wheat Board is to market and pay the producers [the Plaintiffs] for their wheat after proper expenses are taken. As a result, it is at least arguable that proximity exists for the purposes of establishing a prima facie duty of care. In my view, the cases cited are of little assistance to the Defendants in meeting the high threshold required for striking the claim.
[49] In its written representations, the Defendants further contend that the availability of an alternative administrative law remedy supports their argument that any private law duty owed to the Plaintiffs is negated. I have already dealt with the implications of an alternative administrative law remedy above in my reasons. However, with respect to its impact on the Plaintiffs' claim in negligence, the Defendants have not satisfied me that this factor is sufficient to negate any duty of care that may be owed to the Plaintiffs in the circumstances, particularly for the purposes of a motion to strike.
[50] I turn now to the Plaintiffs' allegation of breach of fiduciary duty. The Plaintiffs claim that "the Wheat Board was and is in a relationship of trust with the Plaintiffs, and at all material times owed a fiduciary duty to the Plaintiffs". That duty, the Plaintiffs allege, was breached by the Wheat Board when it wrongfully deducted monies from the pooled account. As a starting point, determining whether a fiduciary obligation exists between the Wheat Board and the Plaintiffs involves considering the analytical structure set out by Madam Justice Wilson in Frame v. Smith, [1987] 2 S.C.R. 99. At page 136, she stated that relationships in which a fiduciary obligation has been imposed are marked by the following three characteristics: (1) scope for the exercise of some discretion or power; (2) that power or discretion can be exercised unilaterally so as to effect the beneficiary's legal or practical interests; and, (3) a peculiar vulnerability to the exercise of that discretion or power. The Supreme Court of Canada has elaborated on the indicia for recognizing fiduciary relationships. In such cases as Lac Minerals Ltd. v. International CoronaResources Ltd., [1989] 2 S.C.R. 574 and Hodgkinson v. Simms, [1994], 3 S.C.R. 377. However, the basic analytical framework set out in Frame v. Smith remains applicable.
[51] In this case, the Defendants argue that the Crown does not normally incur a fiduciary duty in the exercise of administrative or legislative functions, and that fiduciary obligations arise only from special relationships and in particular fact circumstances. In my opinion, the Defendants' arguments fail to address in a meaningful way the above factors set out by the Supreme Court of Canada in establishing a fiduciary duty. The Defendants have failed to convince me in their submissions that it is plain and obvious that no fiduciary duty between the Wheat Board and the Plaintiffs can exist in the circumstances. Although the Plaintiffs' pleadings are sparse in respect of the material facts which would support a claim for breach of fiduciary duty, I must nevertheless accept the pleadings as proven. Striking a statement of claim is a draconian measure and should only be done where it is beyond doubt that the Plaintiffs' action cannot succeed. I am satisfied that the Defendants have not met the high threshold required for striking the Plaintiffs' claim for a breach of fiduciary duty.
[52] Further, I agree with the Prothonotary's assessment of the Court of Appeal's jurisprudence in Brewers Bros., above, and Devloo, above. In those cases, the Court of Appeal held that a breach of statutory duty was evidence of negligence and that a private law duty may exist under the operative legislation [the Grain Act in Devloo]. Applying these principles to the present case, I am of the view that it is arguable on the strength of the allegations in the pleadings that a private law duty may be owed to the Plaintiffs by the Wheat Board and that an action for breach of fiduciary duty is not plainly and obviously futile.
[53] Finally, regarding the Plaintiffs' claim that the Wheat Board through administrative misfeasance in public office and abuse of public office has breached its duty of care to the Plaintiffs, I am in substantial agreement with the Defendants' submissions at paragraphs 45 and 46 of their written representations. The Defendants submit that in order to establish liability for abuse of public office, the Plaintiffs have to allege that the Defendants engaged in "deliberate and unlawful conduct" directed at the Plaintiffs. In my opinion, the Plaintiffs' statement of claim does not disclose any such allegations nor is there any allegation that the alleged erroneous deductions were done by the Wheat Board in bad faith and/or dishonestly. These factors must be pleaded to establish claims in administrative misfeasance in public office and abuse of public office. Further, the pleadings disclose no facts to support any such claim. As a result, I am of the opinion that these allegations have no chance of success and will consequently be struck from the statement of claim.
7. Conclusion
[54] I have determined that, in substance, the Plaintiffs are challenging the legality of the Wheat Board's deductions of allegedly improper expenses from the pooled accounts which resulted in reduced payments to the Plaintiffs for their wheat over a number of years. I have also determined that the Plaintiffs cannot challenge the legality of the Wheat Board's actions through an action and that the administrative law remedy sought can only be obtained on application for judicial review.
[55] Nevertheless, on the record before me and for the above reasons, I decline to strike the statement of claim in its entirety. I will, however, for the reasons exposed in paragraph 53 above, strike the Plaintiffs' claims in administrative misfeasance in public office and abuse of public office.
[56] In respect to the Plaintiffs' claim in negligence for a breach of duty of care and a breach of fiduciary duty, I stay the action in order to preserve the parties' rights in the event they are successful in pursuing their administrative law remedy.
[57] The Plaintiffs may file a motion for an extension of time to file an application for judicial review challenging the legality of the Wheat Board's actions, if necessary, and if successful on the motion, an application for judicial review.
[58] However, should the Plaintiffs be unsuccessful in their application for judicial review, or on their motion for an extension of time to file an application for judicial review, if made, then the action may be dismissed on motion by either party.
[59] In view of the mixed results on this appeal I would not award costs.
ORDER
THIS COURT ORDERS that:
1. the Defendants' motion is allowed in part;
2. the Plaintiffs' claim in administrative misfeasance in public office and abuse of public office is struck out;
3. the Plaintiffs will have sixty (60) days from the date of this order to serve and file:
(a) an application for judicial review challenging the legality of the Wheat Board's actions, if timely; or
(b) a motion for an extension of time, if required, to file the said application for judicial review;
4. the Plaintiffs' action is stayed pending the final outcome of the above application for judicial review, if made;
5. in the event that an application for judicial review is not made within sixty (60) days of the date of this order, or the motion to extend time if made, is dismissed, or the application for judicial review is dismissed by final judgment, then the action may be dismissed on motion by either party; and
6. no costs are awarded on the within appeal.
"Edmond P. Blanchard"
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