Crompton Co./cie v. Canada (Minister of Health), 2001 FCT 435

Date: 20010504

Docket: T-585-01

Neutral citation: 2001 FCT 435

BETWEEN:

                                   CROMPTON CO./CIE

                                                                                         Applicant

                                               - and -

                               MINISTER OF HEALTH and

             MINISTER OF AGRICULTURE AND AGRI-FOOD

                                                                                    Respondents

                       REASONS FOR ORDER AND ORDER

TREMBLAY-LAMER J.:

[1]    This is a motion under section 18.2 of the Federal Court Act, R.S.C. 1985 c. F.-7, as amended, for interim relief pending final disposition of an application for judicial review filed by Crompton Co./Cie (the applicant) on April 4, 2001, challenging the vires of the actions of the Minister of Health and the Minister of Agriculture and Agri-Food (the respondents) in acting contrary to the terms and conditions of the voluntary withdrawal dated October 28, 1999, and in acting contrary to section 16 of the Pest Control Products Regulations, C.R.C., c. 1253, as amended, (the Regulations), by interfering with and prohibiting the sale of the control product (lindane product) for use on canola/rapeseed seed.

[2]    The applicant requests interlocutory orders:

           (a) prohibiting the respondents from taking any actions to limit

(i) the sale of lindane product for use on canola/rapeseed seed prior to July 1, 2001, or

(ii) the subsequent use of any lindane product purchased prior to July 1, 2001;

(b) restraining the respondents from, in any manner, interfering or attempting to interfere with

(i) the sale of lindane product prior to July 1, 2001, and

(ii) the subsequent use of such purchased lindane product;

(c) requiring the respondents to issue such forms of public notice to inform the public and, in particular, the purchasers and potential purchasers of the lindane product that such lindane product purchased prior to July 1, 2001, may be subsequently used in accordance with the product label.

FACTS

[3]                The applicant, a successor corporation to Uniroyal Chemical, is a wholly-owned Canadian subsidiary of Crompton Corp. of the United States. The applicant produces and sells various products including agricultural insecticides, pesticides and fungicides. These products are sold and marketed in Canada through Gustafson Partnership, a partnership involving the applicant and Bayer Inc. whose principal business is the sale of seed treatment products.

[4]                The applicant is the registrant under the Pest Control Products Act, R.S.C. 1985, c. P-9, as amended, (the Act), of the lindane product sold commercially as "Vitavax® rs Flowable" whose active chemical ingredient is lindane. The registration has been in effect since 1980.

[5]                The lindane product was registered and approved for use in controlling flea beetles, seed rot, damping off or seedling blight and early-season root rot caused by pythium, rhizoctonia and alternaria of canola, rapeseed, mustard, cabbage, cauliflower, broccoli, rutabagas and brussel sprouts.

[6]                The lindane product is sold to seed treating companies including various agricultural retailers, wheat pools, seed companies and independent seed distributors to treat seed either prior to the sale of treated seed to end users or directly to end users for treatment of seed prior to planting.

[7]                The chemical active ingredient, lindane, is authorized for use on other seeds including wheat, barley, oats, rye, mustard and some vegetables in Canada and the United States.

[8]                The applicant has traditionally held more than 70% of the canola market for seed treatment products containing lindane.

[9]                The manufacture and sale of this lindane product is principally determined by the planting season in Western Canada. The principal selling time for the lindane product runs from November to April (inclusive) with all sales for the relevant crop year concluded by the end of June.

[10]            In June of 1998, the United States Environmental Protection Agency (USEPA) gave formal notice to Canada that seeds treated with non-U.S. registered pesticides must themselves be registered in the United States before lawful sale, distribution, or importation. Lindane for use on canola is not registered in the United States.

[11]            Following the announcement of the USEPA's position, the Canadian Canola Growers Association and the Canadian Canola Council (both of these represent the end users), the Canadian Seed Trade Association (which represents the people who treat canola seed with lindane), and the registrants of the lindane seed treatment products came up with a joint proposal for the voluntary withdrawal both of the sale of lindane ­based canola seed treatment products by registrants and of the use of such treated seed.

[12]            On November 26, 1998, the Canadian Canola Growers Association, on behalf of the registrants, proposed to the Pest Management Regulatory Agency (PMRA) the following:

(1) Interprovincial Cooperative Ltd, Rhone-Poulenc Seed Treatments, Uniroyal Chemical Ltd. and Zeneca Agro will voluntarily remove canola/ rapeseed claims from labels of registered canola seed treatments containing lindane by December 31, 1999.

(2) All commercial stocks of products containing lindane for use on canola and lindane treated canola seed can not be used after July 1, 2001.

(3) The Pest Management Regulatory Agency (PMRA) and the U.S. Environmental Protection Agency will continue to work with registrants to facilitate access to lindane replacement products. The Canadian Canola Growers Association (CCGA) and the Canola Council of Canada (CCC) agree to work with the aforementioned bodies to facilitate these activities.

Applicant's Motion Record for Interlocutory Injunction, Affidavit of Alfred F. Ingulli, (sworn on April 2, 2001), Tab 2, Exhibit B at 28.

[13]            Thereafter, from late December of 1998, to October of 1999, the applicant attempted to secure with the PMRA, as a condition of its voluntary withdrawal, the commitment that stocks of lindane-based canola seed treatments and lindane-treated seeds in existence as of December of 1999, could be depleted without reference to any time limits.

[14]            The PMRA refused to allow stocks of the lindane product to be depleted through sales over an unlimited time. By letter dated October 27, 1999, the applicant proposed terms and conditions for a voluntary withdrawal which included that all of its "products containing lindane for use on canola/rapeseed are allowed to be used up to and including July 1, 2001." The PMRA confirmed its agreement with these terms and conditions by letter dated October 28, 1999.

[15]            In accordance with the voluntary withdrawal agreement, the applicant ceased production of its lindane product as of December 31, 1999. The lindane product produced to that date is, in accordance with its registration, labelled for uses that would include use on canola seed.

[16]            Shortly prior to February 12, 2001, Mr. Alfred F. Ingulli, Executive Vice- President, Crop Protection Division of Crompton Corp., and the person who had concluded the voluntary withdrawal agreement, became aware of statements attributed to the PMRA circulating within agricultural groups to the effect that not only was the sale of lindane-based products for use on canola prohibited after July 1, 2001, but also the use of any lindane-treated canola seed was likewise prohibited and that purchasers and users were threatened with fines up to $200,000.00. The specific statement which raised concerns is:

After July 1, PMRA can inspect facilities to ensure there are no Lindane products or Lindane treated seed on site. After this date the selling of Lindane or Lindane treated seed would be a criminal offence, and fines could be as high as $200,000.

Applicant's Motion Record for Interlocutory Injunction, Affidavit of Alfred F. Ingulli (sworn on April 2, 2001), Tab 2, paragraph 46, and Exhibit P at 70.

[17]            The applicant twice requested clarification of the PMRA's position in view of these statements being inconsistent with the voluntary withdrawal agreement.

[18]            On February 12, 2001, Mr. Ingulli wrote to the PMRA to bring these statements to its attention and protest that such statements were not in accordance with the terms and conditions of the voluntary withdrawal agreement. No response has been received to that letter, nor was any acknowledgement of receipt provided.

[19]            On March 7, 2001, Counsel for the applicant wrote to the PMRA requesting a response to the February 12, 2001, letter and that the PMRA take steps to correct the erroneous statements. The PMRA responded to the applicant via a meeting on March 23, 2001.

[20]            Since the time of the statements attributed to the PMRA, the applicant alleges that its ability to substantially exhaust its stock of lindane product through sales has been effectively thwarted.

[21]            There is a substantial amount of lindane product still to be sold, approximately 110,000 litres. Any unsold product will have to be dealt with as a hazardous product and disposed of at substantial cost.

RELEVANT PROVISIONS

[22]            Subsection 5(1) of the Pest Control Products Act reads as follows:

[23]            Sections 6 and 16 of the Pest Control Products Regulations read as follows:

ANALYSIS

[24]            The Supreme Court of Canada set out a tripartite test for the issuance of an interlocutory injunction in RJR-MacDonald Inc. v. Canada, [1994] 1 S.C.R. 311. The applicant must show that:

1) it has a serious issue to be tried;

2) it will suffer irreparable harm if the injunction is not granted, and;

3) the balance of convenience favours the granting of the injunction.

[25]            With respect to the first part of the test, the courts employ a low threshold for determining whether a serious issue exists. An application meets the threshold if the application is neither vexatious nor frivolous. (RJR-MacDonald, supra at 337).

[26]            In the present matter, the applicant first submits that section 16 of the Regulations is the only provision governing the voluntary withdrawal agreement. It is argued that the respondents have failed to act in accordance with the terms and conditions of the voluntary withdrawal agreement and that the respondents have acted ultra vires the Act and the Regulations in failing to allow stocks of the lindane product to be substantially exhausted through sales and in prohibiting the use of the control product after July 1, 2001.

[27]            In the alternative, the terms and conditions of the voluntary withdrawal agreement prohibit any sale of the lindane product prior to July 1, 2001, and/or prohibit the use of the lindane product prior to, or subsequent to July 1, 2001, those provisions are ultra vires the powers of the respondents provided in section 16 of the Regulations.

[28]            The respondent submits that section 16 of the Regulations does not apply to the present matter. First, there is no evidence to the effect that any of the participants thought they were operating within the framework set out by section 16.

[29]            Second, section 16 of the Regulations operates where a registrant decides to discontinue the sale of a control product, and the Minister imposes conditions designed to prevent a disposal problem from arising in relation to the product. In those cases, the registrant does not cancel or amend the registration. While the Minister may prevent the registrant from bringing more products into the market, the registration continues in effect to allow those who have stocks on hand to sell and use them up in the normal course.

[30]            Here, the applicant did not keep its registration so that its stocks could be substantially exhausted before it applied to have the control product deregistered. The applicant deregistered its product without having sold down its stock pile, subject to an agreement with the PMRA that they would not take action between January 1, 2000, and July 1, 2001.

[31]            The respondent submits that the voluntary withdrawal agreement simply allows the applicant to continue to sell its lindane product up to July 1, 2001, despite the fact that it had not been registered from January 1, 2000.

[32]            In short, it is argued that the practical effect of the voluntary withdrawal agreement is that the respondents have undertaken not to enforce the Regulations for the period between January 1, 2000, and July 1, 2001 - a period during which it is technically illegal to sell lindane for canola because it is not registered for that use.

[33]            More particularly, the respondent's evidence suggests that the agreement for voluntary withdrawal which the canola growers worked out with the four affected registrants was intended, in large part, to avert the taking of action by U.S. authorities to prohibit the importation of lindane treated canola seed and canola products of such treated seed.

[34]            It was seen as important that the time limit placed on the use of lindane treatments and lindane treated canola seed be appropriate to accomplish that purpose. Proceeding under section 16 of the Regulations could have meant that the lindane seed treatments would have continued in use for a period of at least four years, whereas it was seen as important by the growers that the use be terminated by July 1, 2001.

[35]            Accordingly, the respondents requested that the registrants agree to the amendment of their registrations to remove the use on canola seed as of December 31, 1999, on the understanding that products manufactured prior to that date, and the canola seed treated with those products, could continue to be used until July 1, 2001.

[36]            The respondent suggests that pursuant to the voluntary withdrawal agreement, the applicant submitted applications under subsection 13(1) of the Regulations to amend the registrations of its products, Cloak Seek Protectant Liquid and Vitavax® rs Flowable (undyed) Seed Protectant, for the purpose of removing the authorized use on canola/rapeseed.

[37]            On the basis of the foregoing, considering the respondents' position that the voluntary withdrawal agreement is "technically illegal", I am satisfied that the legal basis for the arrangement in question is a serious issue to be tried.

[38]            Regarding the second part of the test, the applicant's evidence of irreparable harm must be clear and not merely speculative (see, e.g., Centre Ice v.National Hockey League (1994), 53 C.P.R. (3d) 34).

[39]            In the present matter, the applicant alleges to have suffered loss of sales, costs for hazardous waste disposal, new competition, loss of reputation and uncertainty concerning its business and products. However, the applicant failed to provide any evidence regarding these allegations.

[40]            The applicant only provided evidence with respect to a decline in its previous sales. As stated above, from January 1, 2001, to March 31, 2001, the applicant has sold 53,000 litres of lindane product to Gustafson, being 25% of normal sales for that quarter. In the same period, Gustafson's sales to the public have declined by 66% from traditional levels.

[41]            However, the applicant failed to provide clear evidence how this decline in its previous sales has been caused by the actions of the respondents. In any event, even if the applicant would have demonstrated such, I am satisfied that it could be adequately compensated for in damages.

[42]            Given my conclusion on the issue of irreparable harm, I need not go further. However, I will consider the third part of the test for the completion of the analysis. This part requires an assessment as to where the balance of convenience lies.

[43]            On one hand, the applicant submits that the granting of interlocutory relief is the only means by which it can reduce its inventory of the lindane product, mitigate its losses, stabilize the confusion in the market and maintain the status quo ante.

[44]            On the other hand, the respondents submit that any interlocutory relief would have the practical effect of prohibiting them from enforcing the prohibition found in section 5 of the Act and section 6 of the Regulations which require that control products sold and used in Canada be registered as prescribed.

[45]            In essence, the applicant's interests are financial in nature (and if proven, could be compensated for in damages) whereas the respondents' (and the public) interests are in the enforcement of the Act and Regulations. It is clear that the balance of convenience lies in refusing the relief sought.   

[46]            For these reasons, the motion is dismissed. In the circumstances, each party should bear its own costs of this motion.

                                                                 "Danièle Tremblay-Lamer"

JUDGE

OTTAWA (ONTARIO)

May 4, 2001.