Date: 20050317
Docket: T-215-02
Citation: 2005 FC 386
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, 1935 and the present day
Plaintiffs
and
THE CANADIAN WHEAT BOARD, and
THE ATTORNEY GENERAL OF CANADA
Defendants
REASONS FOR ORDER
HARGRAVE P.
[1] The Statement of Claim in this action is in the form of a representative action in which the Plaintiffs, wheat producers in Manitoba, Saskatchewan, Alberta and the Peace River District of British Columbia, referred to as the "designated area", claim against the Canadian Wheat Board (the "Board") and the Attorney General of Canada for improper use of pooled funds from the sale of grain produced by the Plaintiffs in the designated area. The motion giving rise to these reasons seeks to strike out the Statement of Claim either in whole or as to the Attorney General. I turn first to some relevant background.
BACKGROUND
[2] By section 32 of the Canadian Wheat Board Act, R.S.C. 1985 c. 12, the Board markets the wheat produced in the designated area. The Statement of Claim, which as I have observed is styled as a representative action under Rule 114, which Rule was in force at the time, sets out, as background information, that the Board issued direct export licences for wheat to producers outside of the designated area and that the revenue from the direct export sales by those producers did not become a part of the pooled revenue from sales held for all who farmed in the designated area and provided wheat for the Board to sell. However, and this is the crux of the cause of action, the Board incurred expenses in granted the direct export licences which it then, wrongfully in the view of the Plaintiffs, deducted from the pooled sales proceeds account held for all producers of wheat in the designated area. The Plaintiffs say, in their Statement of Claim, that the Board, as a trustee, owed a fiduciary duty to the Plaintiffs, but by dipping into the pooled account acted in a highhanded manner, disregarding the rights of the Plaintiffs and thus breached the fiduciary duty owed to the Plaintiffs. The Plaintiffs seek various remedies, including damages.
[3] The Defendants seek to strike out the Statement of Claim on the basis that the Board is accountable only to Parliament and that neither the Board nor the Crown owe any duty to or are accountable to the Plaintiffs as producers of wheat. Thus, submit the Defendants, there is no cause of action or, alternatively, there is no cause of action against the Attorney General of Canada who should, in the view of the Defendants, be struck out as a Defendant.
[4] To round off this background and here I note that no defences have been filed, the Plaintiffs have given notice that they wish to amend their Statement of Claim to reflect the subsequently enacted Federal Court Class Action Rules and also to add an allegation that:
The Defendants by negligence and administrative misfeasance in public office and abuse of public office, breached their duty of care to the Plaintiffs and the producers they represent, exceeding their statutory and operational administrative authority under the Act.
I do not have to decide whether the Statement of Claim needs amending to reflect the present Class Action Rules, for I would observe that actions properly commenced under Rule 114, if not now suitable for the new Class Action Rules, have been allowed to proceed (at much less expense) under former Rule 114 as representative actions. Moreover, both in recognition of the Rule 200 right to amend a statement of claim before the other side has pleaded to it and to avoid a multiplicity of interlocutory proceedings, I have considered the Statement of Claim as if it contained the proposed paragraph alleging misfeasance and abuse of public office. Having set out the pertinent background, I now turn to a consideration of the motion.
CONSIDERATION
Striking out the Statement of Claim
[5] The Defendants characterize the Plaintiffs' cause of action as one of improper and arbitrary issuance of export licences between 1935 and the present and a failure to account for those export sales. In the Statement of Claim as issued, there is no allegation of improper issuance of export licences and in the proposed amended Statement of Claim which was circulated in advance of the hearing of this motion, there is no allegation of arbitrary issue of export licences: the issuance of export licences plainly and obviously is not an issue in this litigation.
[6] The Defendants also submit that at issue is a failure "to properly account for the export sales": this is not pleaded by the Plaintiffs and again is not an issue. However the Defendants do acknowledge the pleaded issue of wrongful deduction of expenses, related to the direct export licencing, from pooled accounts: this is set out in paragraphs 15 and 16 of the Statement of Claim.
[7] The Defendants then say, in connection with the plea of trust or fiduciary duty owed the Plaintiffs, that the position of the Plaintiffs is that the Defendants "... are therefore accountable to the plaintiffs for the monies that did not enter the pooled account.": here the Defendants are again mistaken, for the latter is neither alleged by the Plaintiffs nor does it form any part of the Plaintiffs' cause of action.
[8] The Defendants, at paragraph 5 of their Memorandum of Fact and Law go on to say that:
The way the statement of claim is framed would require a full scale inquiry into the CWB's management of export licences and accounts of 1935 all the way to the present day.
If this is the conclusion of the Defendants, they have missed the whole thrust, intent and plain meaning of the claim of the Plaintiffs. Indeed, that appears to be the case, for the Defendants then state, in the opening paragraph of their points in issue, that:
Do the plaintiffs have a private law cause of action for an accounting, or in negligence or for breach of fiduciary duty for economic losses claimed in relation to the export licenses issued by the CWB?
The Defendants say that there is no such cause of action at law within the meaning of the Canadian Wheat Board Act or under the recognized authorities which have considered similar private law claims in the past.
[9] At this juncture there is a reasonable doubt that the Plaintiffs have any case to answer on this motion, however I will consider the submissions of the Defendants further.
[10] There is no issue as to the test for striking out, the Defendants referring to Dumont v. Canada (Attorney General) (1990) 67 D.L.R. (4th) 159 (S.C.C.) where at page 160 Madam Justice Wilson observed the plain and obvious and beyond doubt test in the context of Attorney General of Canada v. Inuit Tapirisat of Canada (1980) 115 D.L.R. (3d) 1, Mr. Justice Estey setting out, at page 5, that the facts pleaded in the statement of claim are deemed to have been proven and that 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. Here counsel for the Defendants makes the point that the second stage of the test set out in Anns v. Merton London Borough Council (1978) A.C. 1728 (H.L.) at 751-752, that is whether there are policy considerations which ought to negate, reduce or limit the scope of duty, may be dealt with in an interlocutory setting, the conclusion reached by Justice of Appeal Huband in M-Jay Farms Enterprises Ltd. v. Canadian Wheat Board (1997) 118 Man. R. (2d) 258 at 261.
[11] The Defendants next make the point that there is no cause of action for an accounting. Here the Defendants begin with the reference to Riske v. Canadian Wheat Board (1976) 71 D.L.R. (3d) 686 (F.C.T.D.), a case in which grain producers sought an accounting from the Wheat Board of proceeds of sales by the latter. In that case the Wheat Board was in the position of a statutory [1994] 3 S.C.R. 377 entity responsible for the orderly marketing of grain, with the statute requiring the Board, which had authority to fix prices, to report regularly to the Minister in charge. The plaintiffs were dissatisfied with what they were being paid and therefore sought an accounting to establish whether there was a proper basis for the price at which the Board sold the grain in question. The judge dismissed the action, as wanting a reasonable cause of action, because under the statute the responsibility of the Board was not to any individual producer, but rather to the Minister and to Parliament.
[12] The Riske case did not involve an accounting for unrelated Board expenses, but rather the selling price of the grain, being essentially an attack on the pooling system which would have the Wheat Board account for the sale of the grain produced by each individual. Of course, that is not the present issue: the present issue is whether the statutory requirement, set out in section 33(1)(a) of the Canadian Wheat Board Act has been met. That section of the Act requires a deduction from sale proceeds of the particular wheat, from the designated area, "of expenses incurred in connection with the operations of the Corporation attributable to that wheat, ..." [emphasis added]: this section clearly sets out that Board expense deductions must be attributable to the subject wheat, whereas in the present instance the allegation is that deductions from the pooled sale proceeds were used to pay for an unrelated activity. A further contrast is that while in Riske the focus and indeed the relief sought was an accounting, any accounting, in the present instance, is incidental to the real relief sought, that of damages for the wrongful use of pooled sale proceeds which should, by statute, have gone to the Plaintiffs.
[13] The Defendants refer to M-Jay Farms Enterprises Ltd. v. Canadian Wheat Board (supra), a decision of the Manitoba Court of Appeal for the proposition that neither the Board nor the Crown owe any legal duty to the Plaintiffs. M-Jay Farms involved a sale of poor quality wheat for cattle feed, by the Board, at a price said to be too low. There the Court of Appeal made the point that the Board ought not to be attacked for endeavouring to fulfil its statutory mandate, because the legislation setting up the Board required it to be responsible to Parliament, but not answerable to producers in civil actions. This is an illustration of the application of the second branch of the test in Anns v. Merton London Borough Council [1978] A.C. 728 (H.L.), a consideration, once there is a determination of a proximate relationship in which if carelessness occurred might cause damage, of whether or not there are factors, including policy considerations, which ought to negate or limit the scope of the duty. The difficulty I have with the application of M-Jay Farms is that the Board in that instance was doing its best to fulfil a statutory duty and the Court of Appeal was not going to try to second guess the Board as to price, in the face of an attack by those not satisfied with the price obtained. In contrast, the allegation in the present case, an allegation of a very different sort, is that the Board did not observe its statutory duty to offset expenses incurred in marketing a given parcel of grain, against the price obtained for that specific grain. M-Jay Farms does not assist the Defendants.
[14] The Defendants rely upon A.O. Farms Inc. v. Canada, (2000) 28 Admin. L.R. (3d) 315, a decision of Mr. Justice Hugessen, to bolster their argument that the duty owed by the Canadian government is to the public collectively, not to the public individually, there a grain farmer who suffered economic loss when amendments to the Canadian Wheat Board Regulations were struck down as ultra vires. In A.O. Farms the issue was the freedom of Parliament to legislate, legislative decisions, as policy decisions, not being actionable. Here there is no issue as to legislative decisions, but merely the allegation that the Board failed to follow statutory instructions.
[15] The Defendants also submit that there can be no fiduciary duty owed by the Board to the Plaintiffs because the Board is exercising administrative or fiduciary duties. This is not at issue. Rather, the Board is said to have breached a statutory duty. Here there is a parallel in a Federal Court of Appeal decision, referred to by the Manitoba Court of Appeal in M-Jay Farms (supra), Devloo v. Canada (1991) 129 N.R. 39 (F.C.A.). Devloo was a case parallel with but subsequent to Brewer Bros. v. Canada (Attorney General) (1991) 80 D.L.R. (4th) 321 (F.C.A.): Brewer Bros. is an appropriate starting point in any consideration of breach of duty.
[16] Brewer Bros. involved alleged negligence, by the Crown, in overseeing statutory security provided by the operator of a grain terminal which failed, resulting in economic loss to the plaintiffs. There the Court of Appeal noted that the security provisions in the Canada Grain Act were there for a purpose, that of protecting grain producers whose crops were in the hands of the operator of a grain elevator. In Brewer Bros. the Court did not look upon the legislated security provisions as directly giving rise to a cause of action, but rather as evidence in support of a private law duty of care, a pertinent passage being the following:
It was not contended, and I do not suggest, that these provisions of themselves created liability in favour of the respondents. The learned trial judge pointed out that, in the words of Dickson J. (as he then was) in The Queen v. Saskatchewan Wheat Pool, supra a "nominate tort of statutory breach giving a right to recovery merely on proof of breach and damages should be rejected" although "[P]roof of statutory breach, causative of damages, may be evidence of negligence". In the same judgment, at page 225 S.C.R., Dickson J. stated: "Breach of statute, where it has an effect upon civil liability, should be considered in the context of the general law of negligence." It would seem, therefore, permissible to have regard to the foregoing provisions of the Act in considering whether one of the major elements of negligence--duty of care--exists.
[Ibid. p. 23]
Central in Brewer Bros. was the clear and close connection between, on the one hand, the harm that the statute was designed to prevent and, on the other hand, the damage suffered by the plaintiffs. Moreover, in Brewer Bros. the Court of Appeal referred to, in the above passage, the Saskatchewan Wheat Pool case in the Supreme Court of Canada for the proposition that while there was no nominate tort of statutory breach, "... proof of statutory breach, causing damages, may be evidence of negligence". All of this, as Justice of Appeal Stone points out in the above passage, provides "... strong evidence of a private law duty of care.". Here I would note that the Defendants rely upon a passage from [1984] 2 S.C.R. 335">Guerin v. The Queen [1984] 2 S.C.R. 335 at 385 in which Mr. Justice Dickson (as he then was) observed that generally fiduciary duties arise only in a private law context, but then went on to find that the Crown had a duty in the nature of a private law duty. Clearly, in Brewer Bros. the Court of Appeal found a private law duty and went on to approve the recovery of losses, even to the extent that the losses were purely economic losses. I would add that in the present instance there is a direct connection between the legislation, which provided for a matching of sale proceeds and expenses, and the alleged breach of that concept, whereby unrelated expenses were charged against funds which should arguably, on the plain wording of the Canada Grain Act, have gone to the Plaintiffs.
[17] Similarly, in the Devloo case (supra) the Court was faced with a broad spectrum of issues which include statutory construction, existence of a duty of care, breach of that duty and resulting damages, together with the issue of whether the Canadian Grain Commission might be exempt from liability by reason of its nature or the nature of the alleged acts and omissions. In Devloo the Court of Appeal adopted the reasoning and results from the earlier case of Brewer Bros. and reiterated that the Canada Grain Act, while not imposing civil liability, furnished evidence of a private law duty of care, in appropriate circumstances (p. 55). The Court of Appeal analysed the situation in the manner set out by the majority of the Supreme Court of Canada in Just v. British Columbia [1989] 2 S.C.R. 1228, where that Court espoused the two-stage approach for determining the existence of a private law duty of care as set out in Anns (supra). The Court of Appeal in Devloo went on to find a breach of the required standard of care, causation as to damages and no barrier to liability either as a result of the nature of the Grain Commission or the nature of what had occurred.
[18] On a motion to strike out a statement of claim it is for the Defendants to establish, taking the Statement of Claim as proven, that plainly and obviously the claim cannot succeed, which the Defendants have failed to establish. However, the contrary arguments of the Plaintiffs, are interesting and instructive, for uncommon case material is cited, and here I would refer to Keeping v. Canada (2002) 210 Nfld. & P.E.I.R. 1, a decision of Justice Aylward of the Newfoundland and Labrador Supreme Court. At issue in Keeping was a claim for damages arising out of an improper measurement of the gross tonnage of a fishing vessel by a Department of Fisheries and Oceans officer. In the result a fishing licence was denied and the plaintiffs were awarded damages, a finding upheld by the Newfoundland Court of Appeal, (2003) 226 D.L.R. (4th) 285.
[19] In the present instance Keeping is relevant in its discussion of the second branch of the test in Anns, that of considerations which might negate or limit the scope of the Defendants' duty. Mr. Justice Aylward makes the point at paragraph 58 that immunity from liability in negligence, when it is afforded to the Crown, is a concept that is applied to policy decisions, but not to operational decisions implementing policy: he relies upon the decision of Mr. Justice of Appeal Linden which, although a dissenting decision, is instructive in the area of Crown immunity, policy decisions and operational decisions. Mr. Justice of Appeal Linden, in Comeau's Sea Foods Ltd. v. Canada [1995] 2 F.C. 467 at 510, began with a reference to a Supreme Court of Canada decision in Just v. British Columbia [1989] 2 S.C.R. 1228, introducing a discussion of the empty territory between administrative law and tort law, thereby exploring a number of areas including the difference between policy decisions and implementational or operational decisions implementing the policy. Mr. Justice of Appeal Linden, referring to Just, observed that "Mr. Justice Cory ..., warned about the inadvisability of restoring government immunity and obliterating the recent advances in the law." (loc. cit.), and in doing so distinguished true policy decisions from the implementation of those decisions. He then, at pages 510 and 511, relied upon several passages from Mr. Justice Cory's decision in Just:
... The early governmental immunity from tortious liability became intolerable. This led to the enactment of legislation which in general imposed liability on the Crown for its acts as though it were a person. However, the Crown is not a person and must be free to govern and make true policy decisions without becoming subject to tort liability as a result of those decisions. On the other hand, complete Crown immunity should not be restored by having every government decision designated as one of "policy". Thus the dilemma giving rise to the continuing judicial struggle to differentiate between "policy" and "operation". Particularly difficult decisions will arise in situations where governmental inspections may be expected.
[Just at p. 1239]
Mr. Justice Cory considered the need for exempting policy decisions from claims in tort so as not to restrict government decision making:
True policy decisions should be exempt from tortious claims so that governments are not restricted in making decisions based upon social, political or economic factors. However, the implementation of those decisions may well be subject to claims in tort.
[Just at pp. 1240-1241]
Mr. Justice Cory then went on to summarize the applicable principles, including the general rule that the tort law duty of care will apply to a Crown agency just as it will apply to an individual, subject to proximity to warrant the duty being imposed:
As a general rule, the traditional tort law duty of care will apply to a government agency in the same way that it will apply to an individual. In determining whether a duty of care exists the first question to be resolved is whether the parties are in a relationship of sufficient proximity to warrant the imposition of such a duty.
[Just at p. 1244]
However, there is a great deal of variation in what might be a true policy decision to remove whatever happened from the category of decisions to which a duty of care should apply:
The duty of care should apply to a public authority unless there is a valid basis for its exclusion. A true policy decision undertaken by a government agency constitutes such a valid basis for exclusion. What constitutes a policy decision may vary infinitely and may be made at different levels although usually at a high level.
[Just at p. 1242]
Mr. Justice Linden, in Comeau's Sea Foods summarized Mr. Justice Cory's statements by observing:
In other words, immunity from negligence should be granted sparingly to Crown agencies; only their "true policy decisions," generally made at higher levels, involving "social, political and economic factors" and "budgetary allotments for departments" should be exempt from negligence law's reach.
[Comeau's Sea Foods at p. 511]
With this observation, that of granting immunity from negligence only sparingly in the case of Crown agencies, I will return to Keeping, at paragraph 70 where Mr. Justice Aylward made a practical application, finding that the refusal of the fishing licence was not a policy decision, made for the better management and protection of the fishery, but rather a negligent decision, in measuring the tonnage of a fishing vessel, thus resulting in the denial of a licence, made at a departmental level. In the present instance it is completely arguable that the policy decision, that made by government in the course of governing is, in this instance, contained in the Canadian Wheat Board Act requirement that expenses be matched against relevant parcels of wheat and that the negligence, for which the Wheat Board could be liable, was a failure to make that match between revenue and expense.
[20] All of this provides an arguable alternative to the position of the Defendants that there can be no fiduciary role because there is no private law duty. In the present instance there is certainly an arguable private law duty. As a further consideration counsel for the Defendants makes much of the point that dependency or vulnerability is an indispensable requirement upon which to build a fiduciary obligation, referring to Fairford First Nation v. Canada [1999] 2 F.C. 48 at 77-78, a decision of Mr. Justice Rothstein, as he then was. However this generalization overlooks the meaning of vulnerability, which Mr. Justice Rothstein sums up at page 78 as the position of someone who, despite his or her best efforts, is unable to prevent the injury brought about by the exercise of an action of the fiduciary. Moreover, Mr. Justice Rothstein pointed out that vulnerability could depend upon the reasonable expectations of the parties (p. 79), an expectation that one party would act in the other's best interests; here relying upon Hodgkinson v. Simms [1994] 3 S.C.R. 377 at 405 for the proposition that "vulnerability is not the hallmark of fiduciary relationship though it is an important indicum of its existence.". Indeed, in the Fairford case Mr. Justice Rothstein went on to consider reasonable vulnerability in the context of both reasonable expectations and power-vulnerability. A reasonable expectation may arise in many ways, including by statute, giving rise to a mutual understanding that the party with the statutory power would act in the other's best interests and that certainly permeates activities of the Board, acting in the best interests of the producer in order to market grain in an orderly and profitable manner. This reasonable expectation approach is considered at page 82 and following of Fairford. That consideration leads, at page 87, to a brief consideration of the power and vulnerability approach, which again can be based upon statute.
[21] The Fairford First Nation case, when one applies the basic principles summarized in and taught by that case, does not particularly help the Defendants in the context of establishing that the case of the Plaintiffs is plainly and obviously futile.
The Attorney General as a Party
[22] As an alternative to striking out the whole of the claim the Defendants ask, not in specifically the motion itself, but in the grounds for the motion, that the claim against the Attorney General of Canada be struck out.
[23] The appropriateness of the Attorney General, as a party, was not deal with in detail beyond, on the one hand, the general assertions set out in the grounds for the motion and, on the other hand, a plea in the Statement of Claim that the Attorney General is a necessary party pursuant to section 23 of the Crown Liability and Proceedings Act, and the assertion by counsel for the Plaintiffs that the Crown, as represented by the Attorney General of Canada, should have paid the unrelated expenses of the marketing of non-pooled grain, out of general revenues. I would observe that the Board is a separate Crown corporation and that there is a separate allegation in the Statement of Claim that the Crown owes a separate trust and a separate fiduciary duty to the Plaintiffs.
[24] There is insufficient material by which to establish that the Attorney General of Canada is not a proper defendant or that plainly and obviously there is no reasonable cause of action against the Attorney General of Canada and thus the Attorney General of Canada should as a party be struck out. I would also note that it is optional whether the Crown be named as Her Majesty the Queen, or as the Attorney General of Canada: here see Jose Pereira E Hijos SA v. The Attorney General of Canada (1996) 126 F.T.R. 167 at 187, where Mr. Justice MacKay also makes reference to Liebmann v. Canada (Minister of National Defence) (1993) 69 F.T.R. 81 at 92.
CONCLUSION
[25] Counsel for the Plaintiffs makes the overall arguable point that whether one considers the claim in the context of debt, in tort for negligence, or in administrative law for the tort of misfeasance, or in the context of breach of fiduciary duty, it is not plain and obvious that the Plaintiffs will not be successful in establishing any cause of action at trial, for there are no compelling policy reasons by which the neglect of the Board, in failing their statutory duty to match expenses with relevant income, which might summarily prevent the Plaintiffs from having a day in Court. I accept this as an appropriate summary. The motion is dismissed with costs to the Plaintiffs.
(Sgd.) "John A. Hargrave"
Prothonotary
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-215-02
STYLE OF CAUSE: Renova Holdings Ltd. et al. v. The Canadian Wheat Board et al.
PLACE OF HEARING: Vancouver, BC
DATE OF HEARING: July 14, 2003
REASONS FOR ORDER : HARGRAVE P.
DATED: March 17, 2005
APPEARANCES:
Mr. E.F. Anthony Merchant, Q.C FOR PLAINTIFFS
Mr. Ronald J. Dumonceaux
Mr. Brian Hay FOR DEFENDANTS
SOLICITORS OF RECORD:
Merchant Law Group
Regina, Saskatchewan FOR PLAINTIFFS
Dinning Hunter Lambert & Jackson
Victoria, British Columbia FOR PLAINTIFFS
Mr. John H. Simms FOR DEFENDANTS
Deputy Attorney General of Canada
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