Docket:
T-1481-12
Citation: 2014 FC 75
Winnipeg, Manitoba, January 22, 2014
PRESENT: The
Honourable Mr. Justice Mosley
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Docket:
T-1481-12
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BETWEEN:
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CHERYL ANNE SWARATH, CAROL LOVERNE, SHELDON JEROME MARIO RAI
SWARATH AND JODY WILLIAM BAXMEYER OPERATING AS NORTHREGENTRX AND
NORTHREGENTRX
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Plaintiffs
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and
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HER MAJESTY THE QUEEN IN RIGHT OF THE GOVERNMENT OF CANADA, HEALTH CANADA AND THE ATTORNEY GENERAL OF CANADA
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Defendants
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REASONS FOR ORDER AND ORDER
[1]
This is a motion to strike the plaintiffs’
statement of claim without leave to amend.
[2]
The plaintiffs began marketing and distributing
natural health products in early 2005. They carried on business under the name
NorthRegentRx. NorthRegentRx held a license, issued by Health Canada, to sell
such products.
[3]
In 2006, the plaintiffs’ primary product was
“Libidus”, described as a natural health product intended to increase blood
circulation and address symptoms of erectile dysfunction and enhance sexual
performance. Health Canada issued a direction to the plaintiffs on August 4,
2006 under the Natural Health Products Regulations, SOR/2003-196 to stop
the sale of Libidus in Canada and to recall all of the product that had been
distributed to retail outlets. The ground apparently cited for the issuance of
the direction was that Libidus contained undisclosed acetildenafil, an
analogue of sildenafil (Viagra), a controlled substance. Other similar
substances or adulterants were later said by Health Canada to be found in the
product.
[4]
The plaintiffs complied with the direction and
stopped selling Libidus. Over the course of the ensuing six years, they
attempted to persuade Health Canada that its analysis was incorrect by, among
other things, submitting independent laboratory analyses that contradicted the
Health Canada findings. Health Canada did not accept the plaintiffs’ analyses
and declined to revoke the direction and issue a license. There is no
indication in the record that the plaintiffs sought relief from those decisions
by way of a notice of application seeking judicial review. The exchange of
correspondence with Health Canada is not part of the record before the Court.
[5]
On August 2, 2012, the plaintiffs filed a
Statement of Claim against the defendants for general damages in the amount of
$77,144,036.00, punitive damages of $25,000,000.00, pre and post-judgment
interest, and for an Order directing the defendant, Health Canada, to issue a
license to the plaintiffs permitting them to market and distribute Libidus in
Canada. The plaintiffs alleged gross negligence, arbitrariness, bad faith and
malice on the part of Health Canada employees, and a conspiracy between the
defendants and the pharmaceutical industry to suppress the distribution of
Libidus.
[6]
The defendants filed this motion to strike on September
28, 2012, under Rule 221 of the Federal Courts Rules. The matter was
then adjourned several times, on each occasion but one at the request of the
plaintiffs, before being set down for hearing peremptorily on January 20, 2014.
Due to those adjournments and a change of plaintiffs’ counsel in October 2013,
the responding motion materials were not filed until January 16, 2014. Pursuant
to Rule 8 of the Federal Courts Rules, the time to file and serve those
materials is extended.
[7]
The defendants seek an Order striking the claim
in its entirety for failing to disclose a reasonable cause of action. In
particular, the defendants submit that the claim is deficient in that:
a) it appears to advance a tort claim based solely upon alleged
breach of statute, a tort not known at law;
b) the tort claim is framed as one of direct liability against the
Crown, not vicarious liability on the part of the Crown for an identifiable
Crown servant;
c) none of the causes of action in tort asserted in the claim are
sufficiently or adequately pleaded; and,
d) the circumstances of this case do not give rise to an actionable
private law duty of care.
[8]
The Court may, at any time on motion, order
under Rule 221(1)(a) that a pleading be struck, with or without leave to amend,
on the ground that it does not disclose a reasonable cause of action. The
parties are agreed that the test for motions to strike is that set out by the
Supreme Court of Canada in Knight v Imperial Tobacco Canada Ltd, 2011
SCC 42, [2011] 3 S.C.R. 45 at para 17:
[17] […] A claim will only be struck if it is plain and obvious,
assuming the facts pleaded to be true, that the pleading discloses no
reasonable cause of action […]. Another way of putting the test is that the
claim has no reasonable prospect of success. Where a reasonable prospect of
success exists, the matter should be allowed to proceed to trial [Citations
removed].
[9]
There are a number of evident deficiencies with
the pleadings that counsel for the plaintiffs submits could be cured by
amendment. As stated by the Federal Court of Appeal in Simon v Canada,
2011 FCA 6 at para 8, any defect in the statement must be one that is not
curable by amendment in order for a pleading to be struck without leave to
amend.
[10] Potential tort liability for the Federal Crown on the alleged facts
could arise from sections 3(b)(i) and 10 of the Crown Liability and
Proceedings Act, RSC 1985, c C-50. That liability is vicarious and
dependent upon a tort committed by a servant of the Crown. With the exception
of a reference to the employees of Health Canada at paragraph 17, the claim is
framed as one of direct liability against the Crown. As argued by the
defendants, absent an alleged tort committed by an identified Crown servant for
which tort the Crown is vicariously liable, the claim does not disclose a
reasonable cause of action.
[11] Moreover, the allegations of misfeasance in public office, at
paragraph 31 of the claim, fail in any way to identify the responsible
officials. The plaintiffs are required, under Rule 174, to plead material facts.
The identities of the individuals who are alleged to have engaged in
misfeasance are material facts that must be pleaded. The claim refers to six
years of correspondence with Health Canada in an effort to have the direction
set aside. This presumably put the plaintiffs in possession of the names of the
individuals or groups that were dealing with the matter, or at least their job
positions, branches or offices. Identification of at least that level of
particularity would have been sufficient: Merchant Law Group v Canada
(Revenue Agency), 2010 FCA 184. However, particulars of that nature do not
appear in the claim.
[12] Further, the pleading does not adequately describe the other parties
to the conspiracy alleged at paragraph 21, other than a vague reference to the
“pharmaceutical industry and/or other persons unknown”. It does not allege the
agreement between the defendants to conspire, the purpose or objects of the
conspiracy, and the overt acts which are alleged to have been done by each of
the alleged conspirators in furtherance of the conspiracy: Key Property
Management Inc v Middlesex Condominium Corp No 134, 1991 CarswellOnt 451 at
para 10 citing Bullen, Leake and Jacob’s Precedents of Pleadings, 12th
ed (London: Sweet & Maxwell, 1975) at p 341.
[13]
The claim includes allegations at paragraphs 26
and 32 that the defendants breached their statutory duty to comply with the
legislation and regulations governing drug usage and natural health products.
The defendants contend that these allegations appear to assert a claim based
upon alleged breach of statute and/or regulation, a tort unknown in Canada.
However, proof of statutory breach, causative of damages, may be evidence of
negligence if a tort committed by Crown servants could be established: R v
Saskatchewan Wheat Pool, [1983] 1 S.C.R. 205 at para 42. Moreover, intentional
breach of a statute may amount to misfeasance in office if it can be
established that the official concerned deliberately acted unlawfully with
knowledge that his or her actions would harm the plaintiff: Odhavji v
Woodhouse 2003 SCC 69 at para 23; [2003] 3 S.C.R. 263 at p. 281. Be that as
it may, those elements of the tort are not alleged in the pleading.
[14] Apart from these deficiencies, which could be cured by amendment, the
greater difficulty for the plaintiffs is the defendants’ argument that no
private law duty of care arises in the circumstances alleged. The claim does
not appear to fall within any category of cases in which a duty of care has
been previously recognized.
[15]
The parties agree that the test for determining
whether there is a duty of care in a novel situation is that set out by the
Supreme Court of Canada in Cooper v Hobart, 2001 SCC 79 [Cooper] adopting
the test enunciated by the House of Lords in Anns v Merton London Borough
Council (1977), [1978] AC 728 [Anns].
[16]
Cooper concerned
an action by an investor who claimed that the Registrar of Mortgage Brokers was
negligent in failing to properly oversee the conduct of a registered mortgage
broker licensed by the regulator. The Supreme Court held that the Registrar did
not owe a private law duty of care to the members of the investing public.
[17]
As described at para 30 of Cooper, the Anns/Cooper
test is composed of two stages:
[30] […] At the first stage of the Anns test, two questions
arise: (1) was the harm that occurred the reasonably foreseeable consequence of
the defendant’s act? and (2) are there reasons, notwithstanding the proximity
between the parties that tort liability should not be recognized here? The
proximity analysis involved at the first stage of the Anns test focuses on
factors arising from the relationship between the plaintiff and the defendant.
These factors include questions of policy, in the broad sense of the word. If
foreseeability and proximity are established at the first stage, a prima
facie duty of care arises. At the second stage of the Ann’s test, the
question still remains whether there are residual policy considerations outside
the relationship of the parties that may negative the imposition of the duty of
care. […]
[18]
Thus in applying the two-part test it must be
first determined whether a prima facie duty of care exists. To make that
determination, the court must consider whether there was reasonable
foreseeability of the harm, as well as a relationship of proximity. Proximity
is generally established by reference to previously recognized or analogous
categories of negligence. In a novel case, the issues of foreseeability and
proximity must be freshly considered. In my view, this is a novel case in that
it concerns a claim that the Crown is liable for making a decision in the
interest of maintaining public health.
[19]
In Cooper, at paragraph 43, the Supreme
Court of Canada specifically instructed that the factors giving rise to
proximity, if they existed, must arise from the statute under which the
Registrar was appointed, as that statute was the only source of his duties. On
the question of proximity, the Court concluded at paragraph 50:
[50] […] even though the Registrar might reasonably have foreseen
that losses to investors […] would result if he was careless in carrying out
his duties under the Act, there was insufficient proximity between the
Registrar and the investors to ground a prima facie duty of care.
[20]
In this matter, the Crown concedes, for the purposes
of this motion, that it is reasonably foreseeable that tortious conduct on the
part of its employees could damage the plaintiffs’ economic interests. However,
it denies the existence of any relationship that would establish proximity
between the parties. The duties imposed under the statutes and regulations
governing the actions of Health Canada and its employees, the defendants argue,
are public law duties owed to the public at large, and not to the private
economic interests of the manufacturers or distributors of natural health
products: Department of Health Act, SC 1996, c 8 s 4; Food and Drugs
Act, RSC, 1985, c F-27, s 30(1); Natural Health Products Regulations,
above, s 17.
[21]
This matter is distinguishable from the cases in which
a government agency has been found to be negligent in carrying out inspections.
See for example, Ingles v Tutkaluk Construction Ltd., [2000] 1 S.C.R. 298,
2000 SCC 12, where a municipality was determined to be liable for negligent
inspection of renovation work carried out by a contractor. In this case,
a policy decision was made to inspect construction even if it had commenced
prior to the issuance of a building permit. Once the city chose to
implement this decision, and exercised its power to enter upon the premises to
inspect the renovations at the appellant’s home, it owed a duty of care to all
who it was reasonable to conclude might be injured by the negligent exercise of
that power. That is not analogous to the exercise of a duty to protect consumers
of a product licensed for sale by the government body, as in this case.
[22]
The legislative scheme in the present matter is
also distinguishable from that considered by the New Brunswick Court of Appeal
in Adams v Borrel et al., 2008 NBCA 62, cited by the plaintiffs. In that
case, the federal government had a statutory obligation under the Plant
Protection Act, SC 1990, c 22 s 2 to protect plant life and the
agricultural sector of the economy by preventing the spread of pests. On that
basis, the Court of Appeal found a prima facie duty of care owed to potato
farmers in the province. Similarly, the Ontario Court of Appeal upheld a
finding of a prima facie duty of care on the part of Canada in Sauer v
Canada (Attorney General) et al., 2007 ONCA 454 where Canada had publicly
assumed a duty to ensure the safety of cattle feed. In neither case, was the
question of Canada’s duty to the broader public at issue.
[23]
In my view, the case at bar is analogous to
those decisions in which it was found that the Crown owes a duty to the public
at large but no private law duty to the manufacturers, distributors or
retailers of regulated products.
[24]
In Attis v Canada (Health), 2008 ONCA 660
the Ontario Court of Appeal upheld the dismissal of a proposed class proceeding
with respect to alleged negligence in relation to the government’s regulation
of breast implants. The motion judge, applying the Anns/Cooper analysis,
had found that the claim disclosed no cause of action because the underlying
legislative and regulatory scheme did not support the plaintiff’s argument that
the Crown owed them a private law duty of care. The Court of Appeal agreed with
that conclusion. Referring to the powers and obligations under s 4 of the Department
of Health Act, above, the Court stated at paragraph 54:
[54] […] since Cooper held that a relationship of proximity
between a plaintiff and a government must be found in the governing statute, I
begin with the legislative framework. As I have already noted, the umbrella
statute of the Department of Health Act, at s. 4, provides that the Minister’s
obligations are to the people of Canada for the promotion of their health and
the prevention of risk generally. Thus, under the statute, the Minister’s duty
is to the people of Canada as a whole, not to individual residents.
[25]
A similar conclusion was reached by the British
Columbia Court of Appeal in Los Angeles Salad Company Inc v Canadian Food
Inspection Agency, 2013 BCCA 34 (leave to appeal to SCC refused, 35293
(August 15, 2013) [Los Angeles Salad], a case that involved allegedly negligent
acts committed by employees of the Crown engaged in food inspection. As a
result of an inspection by the Canadian Food Inspection Agency (CFIA) and a
finding that carrots imported by the plaintiffs might be infected with
bacteria, the carrots were recalled and destroyed. The carrots were
subsequently determined to not be infected. The importers sued the Crown
alleging negligence on the part of the CFIA. In striking the claim, the motion
judge concluded that the CFIA owed the carrot importers no duty of care. The
Court of Appeal upheld that decision finding, at paragraph 55:
[55] […] the clear purpose of the relevant legislative
scheme is to protect the health of Canadians by preventing the sale of
contaminated food in Canada. To recognize a private duty of care to food
sellers would conflict with that purpose. It would put food inspectors in the
untenable position of having to balance the paramount interests of the public
with private interests of food sellers and would thereby have a chilling effect
on the proper performance of their duties. Thus, the statutory scheme excludes
the possibility of sufficient factual proximity to make it just and reasonable
to impose a prima facie duty of care in the circumstances of this case
[…]
[26]
In this instance, as in Attis, the
statutory analysis begins with the Department of Health Act. Section 4
of that statute grants the Minister of Health powers, duties and functions for
the administration of the Acts, and such orders and regulations of the
Government of Canada assigned to her department for, among other things, the
promotion and preservation of the well-being of the people of Canada,
protection against risks to health and the spreading of diseases, and
investigation and research into public health. Subsection 30(1) of the Food
and Drugs Act provides for the making of regulations respecting any food,
drug, cosmetics or devices. The Natural Health Products Regulations
apply to the sale and distribution of natural health products, including the
product at issue in these proceedings.
[27]
The plaintiffs’ argument that the Minister is
obliged to issue a product license to them under s 7 of the Natural Health
Products Regulations upon application ignores the legislative and
regulatory framework within which that provision operates. In particular, it
ignores the powers granted the Minister in s 17 of the Regulations to direct a
licensee, manufacturer, importer and distributor to stop their sale of a
natural health product.
[28]
The clear purpose of the relevant legislative and
regulatory scheme in this matter is to protect the health of Canadians by
preventing the sale of contaminated natural health products in Canada. To
recognize a private duty of care to the importers and distributors of those
products would conflict with that purpose. I am unable to agree with the
argument of the plaintiffs that the duty to promote and preserve the health of
the people of Canada encompasses a duty to the distributors of products such as
Libidus.
[29]
I find, therefore, that there is no proximity in
the relationship of the parties that would make it reasonable to impose a duty
of care on the defendants to ensure that their examination of the products and
administration of the regulatory scheme does not result in economic damage to
the plaintiffs.
[30]
In considering the second stage of the Anns/Cooper
test, the concern, as stated in Los Angeles Salad, above, at paragraph
63, is that the duty of care claimed may be so broad that its limits are
indeterminable and therefore, as a matter of policy, imposition of the duty
should be negated. The plaintiffs argue that this policy concern is not a
relevant consideration in this case as the numbers of those involved in the
import, distribution and sale of the product are limited. While that may be
true in this particular case, the residual policy concern extends to the precedential
value of the application of a finding of a duty of care to other claims of a
similar nature.
[31]
The plaintiffs contend that if the claim is
struck without leave to amend they will be denied “their right to a day in
court”. While access to justice is an important value in our society, it does
not mean that every case should be litigated.
[32]
For the foregoing reasons, I am satisfied that
the claim should be struck in its entirety without leave to amend.
[33]
The defendants have requested costs and
submitted a Bill of Costs for fees and disbursements totalling $2,591.82. The
amount of fees claimed is in accordance with the Tariff and the disbursements
appear to be reasonable. In the circumstances, however, I think it appropriate
to exercise my discretion not to award costs against the plaintiffs.
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