R. v. Imperial Tobacco Canada Ltd.

R. v. Imperial Tobacco Canada Ltd.
Collection
Supreme Court Judgments
Date
2011-07-29
Neutral citation
2011 SCC 42
Report
[2011] 3 SCR 45
Case number
33559, 33563
Judges
McLachlin, Beverley; Binnie, William Ian Corneil; LeBel, Louis; Deschamps, Marie; Fish, Morris J.; Abella, Rosalie Silberman; Charron, Louise; Rothstein, Marshall; Cromwell, Thomas Albert
On appeal from
British Columbia
Subjects
Civil procedure
Torts
Notes
SCC Case Information: 33563, 33559
Decision Content
SUPREME COURT OF CANADA
Citation: R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45
Date: 20110729
Docket: 33559, 33563
Between:
Her Majesty The Queen in Right of Canada
Appellant / Respondent on cross-appeal
and
Imperial Tobacco Canada Limited
Respondent / Appellant on cross-appeal
- and -
Attorney General of Ontario and Attorney General of British Columbia
Interveners
And Between:
Attorney General of Canada
Appellant / Respondent on cross-appeal
and
Her Majesty The Queen in Right of British Columbia
Respondent
Imperial Tobacco Canada Limited, Rothmans, Benson & Hedges Inc.,
Rothmans Inc., JTI-MacDonald Corp., R.J. Reynolds Tobacco Company,
R.J. Reynolds Tobacco International Inc., B.A.T. Industries p.l.c.,
British American Tobacco (Investments) Limited, Carreras Rothmans Limited,
Philip Morris USA Inc. and Philip Morris International Inc.
Respondents / Appellants on cross-appeal
- and -
Attorney General of Ontario, Attorney General of British Columbia
and Her Majesty The Queen in Right of the Province of New Brunswick
Interveners
Coram: McLachlin C.J. and Binnie, LeBel, Deschamps, Fish, Abella, Charron, Rothstein and Cromwell JJ.
Reasons for Judgment:
(paras. 1 to 151)
McLachlin C.J. (Binnie, LeBel, Deschamps, Fish, Abella, Charron, Rothstein and Cromwell JJ. concurring)
R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45
Her Majesty The Queen in Right
of Canada Appellant/Respondent on cross‑appeal
v.
Imperial Tobacco Canada Limited Respondent/Appellant on cross‑appeal
and
Attorney General of Ontario and
Attorney General of British Columbia Interveners
‑ and ‑
Attorney General of Canada Appellant/Respondent on cross‑appeal
v.
Her Majesty The Queen in Right of British Columbia Respondent
and
Imperial Tobacco Canada Limited, Rothmans, Benson
& Hedges Inc., Rothmans Inc., JTI‑MacDonald Corp.,
R.J. Reynolds Tobacco Company, R.J. Reynolds
Tobacco International Inc., B.A.T. Industries p.l.c.,
British American Tobacco (Investments) Limited,
Carreras Rothmans Limited, Philip Morris USA Inc.
and Philip Morris International Inc. Respondents/Appellants on cross‑appeal
and
Attorney General of Ontario, Attorney General of
British Columbia and Her Majesty The Queen in
Right of the Province of New Brunswick Interveners
Indexed as: R. v. Imperial Tobacco Canada Ltd.
2011 SCC 42
File Nos.: 33559, 33563.
2011: February 24; 2011: July 29.
Present: McLachlin C.J. and Binnie, LeBel, Deschamps, Fish, Abella, Charron, Rothstein and Cromwell JJ.
on appeal from the court of appeal for british columbia
Civil procedure — Third‑party claims — Motion to strike — Tobacco manufacturers being sued by provincial government to recover health care costs of tobacco‑related illnesses, and by consumers of “light” or “mild” cigarettes for damages and punitive damages — Tobacco companies issuing third‑party notices to federal government claiming contribution and indemnity — Whether plain and obvious that third‑party claims disclose no reasonable cause of action.
Torts — Negligent misrepresentation — Failure to warn — Negligent design — Duty of care — Proximity — Tobacco manufacturers being sued by provincial government and consumers and issuing third‑party notices to federal government claiming contribution and indemnity — Federal government claiming representations constituted government policy immune from judicial review — Whether facts as pleaded establish prima facie duty of care — If so, whether conflicting policy considerations negate such duty.
Torts — Provincial statutory scheme establishing rights of action against tobacco manufacturers and suppliers — Whether federal government liable as a “manufacturer” under the Tobacco Damages and Health Care Costs Recovery Act, S.B.C. 2000, c. 30, or a “supplier” under the Business Practices and Consumer Protection Act, S.B.C. 2004, c. 2, and the Trade Practice Act, R.S.B.C. 1996, c. 457.
The appeal concerns two cases before the courts in British Columbia. In the Costs Recovery case, the Government of British Columbia is seeking to recover, pursuant to the Tobacco Damages and Health Care Costs Recovery Act (“CRA”), the cost of paying for the medical treatment of individuals suffering from tobacco‑related illnesses from a group of tobacco companies, including Imperial. British Columbia alleges that by 1950, the tobacco companies knew or ought to have known that cigarettes were harmful to one’s health, and that they failed to properly warn the public about the risks associated with smoking their product. In the Knight case, a class action was brought against Imperial alone on behalf of class members who purchased “light” or “mild” cigarettes, seeking a refund of the cost of the cigarettes and punitive damages. The class alleges that the levels of tar and nicotine listed on Imperial’s packages for light and mild cigarettes did not reflect the actual deliveries of toxic emissions to smokers, and alleges that the smoke produced by light cigarettes was just as harmful as that produced by regular cigarettes.
In both cases, the tobacco companies issued third‑party notices to the Government of Canada, alleging that if the tobacco companies are held liable to the plaintiffs, they are entitled to compensation from Canada for negligent misrepresentation, negligent design and failure to warn, as well as at equity. They also allege that Canada would itself be liable as a “manufacturer” under the CRA or a “supplier” under the Business Practices and Consumer Protection Act and the Trade Practice Act, and that they are entitled to contribution and indemnity from Canada pursuant to the Negligence Act. Canada brought motions to strike the third‑party notices, arguing that it was plain and obvious that the third‑party claims failed to disclose a reasonable cause of action. In both cases, the chambers judges struck all of the third‑party notices. The British Columbia Court of Appeal allowed the tobacco companies’ appeals in part. A majority held that the negligent misrepresentation claims arising from Canada’s alleged duty of care to the tobacco companies in both the Costs Recovery case and the Knight case should proceed to trial. A majority in the Knight case further held that the negligent misrepresentation claim based on Canada’s alleged duty of care to consumers should proceed, as should the negligent design claim. The court unanimously struck the remainder of the tobacco companies’ claims.
Held: The appeals should be allowed and the claims should be struck out. The tobacco companies’ cross‑appeals should be dismissed.
On a motion to strike, 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. The approach must be generous, and err on the side of permitting a novel but arguable claim to proceed to trial. However, the judge cannot consider what evidence adduced in the future might or might not show. Here, it is plain and obvious that none of the tobacco companies’ claims against Canada have a reasonable chance of success.
Canada’s Alleged Duties of Care to Smokers in the Costs Recovery Case
In the Costs Recovery case, the private law claims against Canada for contribution and indemnity based on alleged breaches of a duty of care to smokers must be struck. A third party may only be liable for contribution under the Negligence Act if it is directly liable to the plaintiff, in this case, British Columbia. Here, even if Canada breached duties to smokers, this would have no effect on whether it was liable to British Columbia.
The Claims for Negligent Misrepresentation
There are two relationships at issue in these claims: one between Canada and consumers and one between Canada and tobacco companies. In the Knight case, Imperial alleges that Canada negligently represented the health attributes of low‑tar cigarettes to consumers. In both the Knight case and the Costs Recovery case, the tobacco companies allege that Canada made negligent misrepresentations to the tobacco companies.
The facts as pleaded do not bring Canada’s relationship with consumers and the tobacco companies within a settled category of negligent misrepresentation. Accordingly, to determine whether the alleged causes of action have a reasonable prospect of success, the general requirements for liability in tort must be met. At the first stage, the question is whether the facts disclose a relationship of proximity in which failure to take reasonable care might foreseeably cause loss or harm to the plaintiff. In a claim of negligent misrepresentation, both of these requirements for a prima facie duty of care are established if there was a “special relationship” between the parties. A special relationship will be established where: (1) the defendant ought reasonably to foresee that the plaintiff will rely on his or her representation; and (2) reliance by the plaintiff would be reasonable in the circumstances of the case. If proximity is established, a prima facie duty of care arises and the analysis proceeds to the second stage, which asks whether there are policy reasons why this prima facie duty of care should not be recognized.
Here, on the facts as pleaded, Canada did not owe a prima facie duty of care to consumers. The relationship between the two was limited to Canada’s statements to the general public that low‑tar cigarettes are less hazardous. There were no specific interactions between Canada and the class members. Consequently, a finding of proximity in this relationship must arise from the governing statutes. However, the relevant statutes establish only general duties to the public, and no private law duties to consumers. In light of the lack of proximity, this claim in the Knight case should be struck at the first stage of the analysis.
As for the tobacco companies, the facts pleaded allege a history of interactions between Canada and the tobacco companies capable of establishing a special relationship of proximity giving rise to a prima facie duty of care. The allegations are that Canada assumed the role of adviser to a finite number of manufacturers and that there were commercial relationships entered into between Canada and the companies based in part on the advice given to the companies by government officials, going far beyond the sort of statements made by Canada to the public at large. Furthermore, Canada’s regulatory powers over the manufacturers coupled with its specific advice and its commercial involvement could be seen as supporting a conclusion that Canada ought reasonably to have foreseen that the tobacco companies would rely on the representations and that such reliance would be reasonable in the pleaded circumstance.
Canada’s alleged negligent misrepresentations do not give rise to tort liability, however, because of conflicting policy considerations. The alleged representations constitute protected expressions of government policy. Core government policy decisions protected from suit are decisions as to a course or principle of action that are based on public policy considerations, such as economic, social and political factors, provided they are neither irrational nor taken in bad faith. The representations in this case were part and parcel of a government policy, adopted at the highest level in the Canadian government and developed out of concern for the health of Canadians and the individual and institutional costs associated with tobacco‑related disease, to encourage people who continued to smoke to switch to low‑tar cigarettes.
The claims for negligent misrepresentation should also fail because they would expose Canada to indeterminate liability. Recognizing a duty of care for representations to the tobacco companies would effectively amount to a duty to consumers. While the quantum of damages owed by Canada to the companies in both cases would depend on the number of smokers and the number of cigarettes sold, Canada had no control over the number of people who smoked light cigarettes.
The Claims for Failure to Warn
The tobacco companies make two allegations for failure to warn: (1) that Canada directed the tobacco companies not to provide warnings on cigarette packages about the health hazards of cigarettes and (2) that Canada failed to warn the tobacco companies about the dangers posed by the strains of tobacco it designed and licensed. These two claims should be struck. The crux of the first claim is essentially the same as the negligent misrepresentation claim, and should be rejected for the same policy reasons. The Minister of Health’s recommendations on warning labels were integral to the government’s policy of encouraging smokers to switch to low‑tar cigarettes. As such, they cannot ground a claim in failure to warn. The same is true of the second claim. While the tort of failure to warn requires evidence of a positive duty towards the plaintiff, nothing in the third‑party notices suggests that Canada was under such a positive duty here. A plea of negligence, without more, will not suffice to raise a duty to warn. In any event, such a claim would fail for the policy reasons applicable to the negligent misrepresentation claim.
The Claims for Negligent Design
The tobacco companies have brought two types of negligent design claims against Canada. They submit that Canada breached its duty of care to the tobacco companies when it negligently designed its strains of low‑tar tobacco. In the Knight case, Imperial submits that Canada breached its duty of care to consumers of light and mild cigarettes. The two negligent design claims establish a prima facie duty of care. With respect to Canada’s design of low‑tar tobacco strains, the proximity alleged with the tobacco companies is not based on a statutory duty, but on commercial interactions between Canada and the tobacco companies. In the Knight case also, it is at least arguable that Canada was acting in a commercial capacity towards the consumers of light and mild cigarettes when it designed its strains of tobacco. However, the decision to develop low‑tar strains of tobacco on the belief that the resulting cigarettes would be less harmful to health is a decision that constitutes a course or principle of action based on Canada’s health policy and based on social and economic factors. As a core government policy decision, it cannot ground a claim for negligent design. These claims should accordingly be struck.
Liability as a “Manufacturer” and a “Supplier”
The tobacco companies’ contribution claim in the Costs Recovery case that Canada could qualify as a “manufacturer” under the CRA should be struck. It is plain and obvious that the federal government does not qualify as a manufacturer of tobacco under that Act. When the Act is read in context and all of its provisions are taken into account, it is apparent that the British Columbia legislature did not intend Canada to be liable as a manufacturer. This is confirmed by the text of the statute, the intent of the legislature in adopting the Act, and the broader context of the relationship between the province and the federal government. Holding Canada accountable under the CRA would defeat the legislature’s intention of transferring the health‑care costs resulting from tobacco‑related wrongs from taxpayers to the tobacco industry. Similarly, the tobacco companies cannot rely on the recently adopted Health Care Costs Recovery Act in an action for contribution under the CRA. Finally, Canada could not be liable for contribution under the Negligence Act or at common law since it is not directly liable to British Columbia.
Imperial’s claim in the Knight case that Canada could qualify as a “supplier” under the Trade Practice Act and the Business Practices and Consumer Protection Act which replaced it should also be struck. Canada’s purpose for developing and promoting tobacco as described in the third‑party notice suggests that it was not acting “in the course of business” or “in the course of the person’s business” as those phrases are used in those statutes. Those phrases must be understood as limited to activities undertaken for a commercial purpose. Here, it is plain and obvious from the facts pleaded that Canada did not promote the use of low‑tar cigarettes for a commercial purpose, but for a health purpose. Canada is therefore not a supplier and is not liable under those statutes.
Claims for Equitable Indemnity and Procedural Considerations
The tobacco companies’ claims of equitable indemnity should be struck. Equitable indemnity is a narrow doctrine, confined to situations of an express or implied understanding that a principal will indemnify its agent for acting on the directions given. When Canada directed the tobacco industry about how it should conduct itself, it was doing so in its capacity as a government regulator that was concerned about the health of Canadians. Under such circumstances, it is unreasonable to infer that Canada was implicitly promising to indemnify the industry for acting on its request.
Finally, the claims for declaratory relief should be struck. The tobacco companies’ ability to mount defences would not be severely prejudiced if Canada was no longer a third party in the litigation.
Cases Cited
Applied: Odhavji Estate v. Woodhouse, 2003 SCC 69, [2003] 3 S.C.R. 263; Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959; Anns v. Merton London Borough Council, [1978] A.C. 728; Cooper v. Hobart, 2001 SCC 79, [2001] 3 S.C.R. 537; Hercules Managements Ltd. v. Ernst & Young, [1997] 2 S.C.R. 165; referred to: Syl Apps Secure Treatment Centre v. B.D., 2007 SCC 38, [2007] 3 S.C.R. 83; Attorney General of Canada v. Inuit Tapirisat of Canada, [1980] 2 S.C.R. 735; Donoghue v. Stevenson, [1932] A.C. 562; Hedley Byrne & Co. v. Heller & Partners, Ltd., [1963] 2 All E.R. 575; Operation Dismantle Inc. v. The Queen, [1985] 1 S.C.R. 441; Giffels Associates Ltd. v. Eastern Construction Co., [1978] 2 S.C.R. 1346; Childs v. Desormeaux, 2006 SCC 18, [2006] 1 S.C.R. 643; Hill v. Hamilton‑Wentworth Regional Police Services Board, 2007 SCC 41, [2007] 3 S.C.R. 129; Canadian National Railway Co. v. Norsk Pacific Steamship Co., [1992] 1 S.C.R. 1021; Bow Valley Husky (Bermuda) Ltd. v. Saint John Shipbuilding Ltd., [1997] 3 S.C.R. 1210; Fullowka v. Pinkerton’s of Canada Ltd., 2010 SCC 5, [2010] 1 S.C.R. 132; Heaslip Estate v. Mansfield Ski Club Inc., 2009 ONCA 594, 96 O.R. (3d) 401; Eliopoulos Estate v. Ontario (Minister of Health and Long‑Term Care) (2006), 276 D.L.R. (4th) 411; Just v. British Columbia, [1989] 2 S.C.R. 1228; Home Office v. Dorset Yacht Co., [1970] 2 W.L.R. 1140; Brown v. British Columbia (Minister of Transportation and Highways), [1994] 1 S.C.R. 420; Swinamer v. Nova Scotia (Attorney General), [1994] 1 S.C.R. 445; Lewis (Guardian ad litem of) v. British Columbia, [1997] 3 S.C.R. 1145; X v. Bedfordshire County Council, [1995] 3 All E.R. 353; Stovin v. Wise, [1996] A.C. 923; Barrett v. Enfield London Borough Council, [2001] 2 A.C. 550; Sutherland Shire Council v. Heyman (1985), 157 C.L.R. 424; Pyrenees Shire Council v. Day, [1998] HCA 3, 192 C.L.R. 330; Office of Personnel Management v. Richmond, 496 U.S. 414 (1990); United States v. Neustadt, 366 U.S. 696 (1961); Dalehite v. United States, 346 U.S. 15 (1953); United States v. Gaubert, 499 U.S. 315 (1991); Berkovitz v. United States, 486 U.S. 531 (1988); United States v. S.A. Empresa de Viacao Aerea Rio Grandense (Varig Airlines), 467 U.S. 797 (1984); Design Services Ltd. v. Canada, 2008 SCC 22, [2008] 1 S.C.R. 737; Day v. Central Okanagan (Regional District), 2000 BCSC 1134, 79 B.C.L.R. (3d) 36; Elias v. Headache and Pain Management Clinic, 2008 CanLII 53133; British Columbia v. Imperial Tobacco Canada Ltd., 2005 SCC 49, [2005] 2 S.C.R. 473; Blackwater v. Plint, 2005 SCC 58, [2005] 3 S.C.R. 3; Parmley v. Parmley, [1945] S.C.R. 635.
Statutes and Regulations Cited
Business Practices and Consumer Protection Act, S.B.C. 2004, c. 2, s. 1(1) “supplier”.
Department of Agriculture and Agri-Food Act, R.S.C. 1985, c. A‑9, s. 4 .
Department of Health Act, S.C. 1996, c. 8, s. 4(1) .
Federal Tort Claims Act, 28 U.S.C. §§2680(a), (h).
Health Care Costs Recovery Act, S.B.C. 2008, c. 27, ss. 8(1), 24(3)(b).
Negligence Act, R.S.B.C. 1996, c. 333.
Supreme Court Civil Rules, B.C. Reg. 168/2009, r. 9‑5.
Supreme Court Rules, B.C. Reg. 221/90, rr. 19(24), (27).
Tobacco Act, S.C. 1997, c. 13, s. 4 .
Tobacco Damages and Health Care Costs Recovery Act, S.B.C. 2000, c. 30, ss. 1(1) “manufacture”, “manufacturer”, 2, 3(3)(b).
Tobacco Products Control Act, R.S.C. 1985, c. 14 (4th Supp.), s. 3 [rep. 1997, c. 13, s. 64].
Trade Practice Act, R.S.B.C. 1996, c. 457, s. 1 “supplier”.
Authors Cited
British Columbia. Official Report of Debates of the Legislative Assembly (Hansard), vol. 20, 4th Sess., 36th Parl., June 7, 2000, p. 16314.
New Oxford Dictionary of English. Oxford: Clarendon Press, 1998, “policy”.
APPEAL and CROSS‑APPEAL from a judgment of the British Columbia Court of Appeal (Hall, Saunders, Lowry, Tysoe and Smith JJ.A.), 2009 BCCA 541, 99 B.C.L.R. (4th) 93, 313 D.L.R. (4th) 695, [2010] 2 W.W.R. 9, 280 B.C.A.C. 160, 474 W.A.C. 160, [2009] B.C.J. No. 2445 (QL), 2009 CarswellBC 3300, reversing in part a decision of Satanove J. striking out third‑party notices, 2007 BCSC 964, 76 B.C.L.R. (4th) 100, [2008] 4 W.W.R. 156, [2007] B.C.J. No. 1461 (QL), 2007 CarswellBC 1806 (sub nom. Knight v. Imperial Tobacco Canada Ltd.). Appeal allowed and cross‑appeal dismissed.
APPEAL and CROSS‑APPEAL from a judgment of the British Columbia Court of Appeal (Hall, Saunders, Lowry, Tysoe and Smith JJ.A.), 2009 BCCA 540, 98 B.C.L.R. (4th) 201, 313 D.L.R. (4th) 651, [2010] 2 W.W.R. 385, 280 B.C.A.C. 100, 474 W.A.C. 100, [2009] B.C.J. No. 2444 (QL), 2009 CarswellBC 3307, reversing in part a decision of Wedge J. striking out third‑party notices, 2008 BCSC 419, 82 B.C.L.R. (4th) 362, 292 D.L.R. (4th) 353, [2008] 12 W.W.R. 241, [2008] B.C.J. No. 609 (QL), 2008 CarswellBC 687 (sub nom. British Columbia v. Imperial Tobacco Canada Ltd.). Appeal allowed and cross‑appeal dismissed.
John S. Tyhurst, Paul Vickery and Travis Henderson, for the appellant/respondent on cross‑appeal Her Majesty the Queen in Right of Canada (33559).
Paul Vickery, John S. Tyhurst and Travis Henderson, for the appellant/respondent on cross‑appeal the Attorney General of Canada (33563).
Deborah Glendining and Nada Khirdaji, for the respondent/appellant on cross‑appeal Imperial Tobacco Canada Limited (33559).
Ryan D. W. Dalziel and Daniel A. Webster, Q.C., for the respondent Her Majesty the Queen in Right of British Columbia (33563).
John J. L. Hunter, Q.C., and Brent B. Olthuis, for the respondent/appellant on cross‑appeal Imperial Tobacco Canada Limited (33563).
Written submissions only by Kenneth N. Affleck, Q.C., for the respondents/appellants on cross‑appeal Rothmans, Benson & Hedges Inc. and Rothmans Inc. (33563).
Written submissions only by Jeffrey J. Kay, Q.C., for the respondents/appellants on cross‑appeal JTI‑MacDonald Corp., R.J. Reynolds Tobacco Company and R.J. Reynolds Tobacco International Inc. (33563).
Written submissions only by Craig P. Dennis and Michael D. Shirreff, for the respondents/appellants on cross‑appeal B.A.T. Industries p.l.c. and British American Tobacco (Investments) Limited (33563).
Written submissions only by Christopher M. Rusnak, for the respondent/appellant on cross‑appeal Carreras Rothmans Limited (33563).
Written submissions only by D. Ross Clark, for the respondent/appellant on cross‑appeal Philip Morris U.S.A. Inc. (33563).
Simon V. Potter, Michael A. Feder and Angela M. Juba, for the respondent/appellant on cross‑appeal Philip Morris International Inc. (33563).
Malliha Wilson and Lynne McArdle, for the intervener the Attorney General of Ontario (33559‑33563).
Jeffrey S. Leon, Robyn M. Ryan Bell and Michael A. Eizenga, for the intervener Her Majesty the Queen in Right of the Province of New Brunswick (33563).
Nancy Brown, for the intervener the Attorney General of British Columbia (33559‑33563).
The judgment of the Court was delivered by
The Chief Justice —
TABLE OF CONTENTS
Paragraph
I. Introduction....................................................................................................... 1
II. Underlying Claims and Judicial History............................................................... 6
A. The Knight Case.............................................................................................. 6
B. The Costs Recovery Case.............................................................................. 11
III. Issues Before the Court................................................................................... 15
IV. Analysis........................................................................................................... 17
A. The Test for Striking Out Claims................................................................... 17
B. Canada’s Alleged Duties of Care to Smokers in the Costs Recovery
Case............................................................................................................... 27
C. The Claims for Negligent Misrepresentation................................................. 32
(1) Stage One: Proximity and Foreseeability.......................................................... 40
(2) Stage Two: Conflicting Policy Considerations.................................................. 61
(a) Government Policy Decisions........................................................................ 63
(i) Conduct at Issue.............................................................................................. 67
(ii) Relevance of Evidence..................................................................................... 68
(iii) What Constitutes a Policy Decision Immune From Judicial Review?.................. 72
(iv) Conclusion on the Policy Argument.................................................................. 92
(b) Indeterminate Liability.................................................................................. 97
(c) Summary on Stage-Two Policy Arguments................................................. 102
D. Failure to Warn........................................................................................... 103
(1) Labelling Claim.............................................................................................. 104
(2) Failure to Warn Imperial About Health Hazards............................................. 106
E. Negligent Design.......................................................................................... 110
(1) Prima Facie Duty of Care............................................................................ 112
(2) Stage-Two Policy Considerations.................................................................. 116
F. The Direct Claims Under the Costs Recovery Acts..................................... 117
(1) Could Canada Qualify as a Manufacturer Under the Tobacco
Damages and Health Care Costs Recovery Act?........................................ 121
(a) Text of the Statute....................................................................................... 122
(b) Legislative Intention.................................................................................... 127
(c) Broader Context.......................................................................................... 129
(d) Summary...................................................................................................... 132
(2) Could Canada Be Found Liable Under the Health Care Costs Recovery
Act?.............................................................................................................. 133
(3) Could Canada Be Liable for Contribution Under the Negligence Act
if It Is Not Directly Liable to British Columbia?............................................... 135
(4) Could Canada Be Liable for Common Law Contribution?.............................. 138
G. Liability Under the Trade Practice Act and the Business Practices and
Consumer Protection Act............................................................................ 140
H. The Claim for Equitable Indemnity............................................................. 146
I. Procedural Considerations.......................................................................... 149
V. Conclusion.................................................................................................... 151
I. Introduction
[1] Imperial Tobacco Canada Ltd. (“Imperial”) is a defendant in two cases before the courts in British Columbia, British Columbia v. Imperial Tobacco Canada Ltd., Docket: S010421, and Knight v. Imperial Tobacco Canada Ltd., Docket: L031300. In the first case, the Government of British Columbia is seeking to recover the cost of paying for the medical treatment of individuals suffering from tobacco-related illnesses from a group of 14 tobacco companies, including Imperial (“Costs Recovery case”). The second case is a class action brought against Imperial alone by Mr. Knight on behalf of class members who purchased “light” or “mild” cigarettes, seeking a refund of the cost of the cigarettes and punitive damages (“Knight case”).
[2] In both cases, the tobacco companies issued third-party notices to the Government of Canada, alleging that if the tobacco companies are held liable to the plaintiffs, they are entitled to compensation from Canada for negligent misrepresentation, negligent design, and failure to warn, as well as at equity. They also allege that Canada would itself be liable under the statutory schemes at issue in the two cases. In the Costs Recovery case, it is alleged that Canada would be liable under the Tobacco Damages and Health Care Costs Recovery Act, S.B.C. 2000, c. 30 (“CRA”), as a “manufacturer”. In the Knight case, it is alleged that Canada would be liable as a “supplier” under the Business Practices and Consumer Protection Act, S.B.C. 2004, c. 2 (“BPCPA”), and its predecessor, the Trade Practice Act, R.S.B.C. 1996, c. 457 (“TPA”).
[3] In both cases, Canada brought motions to strike the third party notices under r. 19(24) of the Supreme Court Rules, B.C. Reg. 221/90 (replaced by the Supreme Court Civil Rules, B.C. Reg. 168/2009, r. 9-5), arguing that it was plain and obvious that the third-party claims failed to disclose a reasonable cause of action. In both cases, the chambers judges agreed with Canada, and struck all of the third-party notices. The British Columbia Court of Appeal allowed the tobacco companies’ appeals in part. A majority of 3-2 held that the negligent misrepresentation claims arising from Canada’s alleged duty of care to the tobacco companies in both the Costs Recovery case and the Knight case should proceed to trial. A majority in the Knight case further held that the negligent misrepresentation claim based on Canada’s alleged duty of care to consumers should proceed, as should the negligent design claims in the Knight case. The court unanimously struck the remainder of the tobacco companies’ claims.
[4] The Government of Canada appeals the finding that the claims for negligent misrepresentation and the claim for negligent design should be allowed to go to trial. The tobacco companies cross-appeal the striking of the other claims.
[5] For the reasons that follow, I conclude that all the claims of Imperial and the other tobacco companies brought against the Government of Canada are bound to fail, and should be struck. I would allow the appeals of the Government of Canada in both cases and dismiss the cross-appeals.
II. Underlying Claims and Judicial History
A. The Knight Case
[6] In the Knight case, consumers in British Columbia have brought a class action against Imperial under the BPCPA and its predecessor, the TPA. The class consists of consumers of light or mild cigarettes. It alleges that Imperial engaged in deceptive practices when it promoted low-tar cigarettes as less hazardous to the health of consumers. The class alleges that the levels of tar and nicotine listed on Imperial’s packages for light and mild cigarettes did not reflect the actual deliveries of toxic emissions to smokers, and alleges that the smoke produced by light cigarettes was just as harmful as that produced by regular cigarettes. The class seeks reimbursement of the cost of the cigarettes purchased, and punitive damages.
[7] Imperial issued a third-party notice against Canada. It alleges that Health Canada advised tobacco companies and the public that low-tar cigarettes were less hazardous than regular cigarettes. Imperial alleges that while Health Canada was initially opposed to the use of health warnings on cigarette packaging, it changed its policy in 1967. It instructed smokers to switch to low-tar cigarettes if they were unwilling to quit smoking altogether, and it asked tobacco companies to voluntarily list the tar and nicotine levels on their advertisements to encourage consumers to purchase low-tar brands. Contrary to expectations, it now appears that low-tar cigarettes are potentially more harmful to smokers.
[8] Imperial also alleges that Agriculture Canada researched, developed, manufactured, and licensed several strains of low-tar tobacco, and collected royalties from the companies, including Imperial, that used these strains. By 1982, Imperial pleads, the tobacco strains developed by Agriculture Canada were “almost the only tobacco varieties available to Canadian tobacco manufacturers” (Knight case, amended third-party notice of Imperial, at para. 97).
[9] Imperial makes five allegations against Canada:
(1) Canada is itself liable under the BPCPA and the TPA as a “supplier” of tobacco products that engaged in deceptive practices, and Imperial is entitled to contribution and indemnity from Canada pursuant to the provisions of the Negligence Act, R.S.B.C. 1996, c. 333.
(2) Canada breached private law duties to consumers by negligently misrepresenting the health attributes of low-tar cigarettes, by failing to warn them against the hazards of low-tar cigarettes, and by failing to design its tobacco strain with due care. Consequently, Imperial alleges that it is entitled to contribution and indemnity from Canada under the Negligence Act.
(3) Canada breached its private law duties to Imperial by negligently misrepresenting the health attributes of low-tar cigarettes, by failing to warn Imperial about the hazards of low-tar cigarettes, and by failing to design its tobacco strain with due care. Imperial alleges that it is entitled to damages against Canada to the extent of any liability Imperial may have to the class members.
(4) In the alternative, Canada is obliged to indemnify Imperial under the doctrine of equitable indemnity.
(5) If Canada is not liable to Imperial under any of the above claims, Imperial is entitled to declaratory relief against Canada so that it will remain a party to the action and be subject to discovery procedures under the Supreme Court Rules.
[10] Canada brought an application to strike the third-party claims. It was successful before Satanove J. in the Supreme Court of British Columbia (2007 BCSC 964, 76 B.C.L.R. (4th) 100). The chambers judge struck all of the claims against Canada. Imperial was partially successful in the Court of Appeal (2009 BCCA 541, 99 B.C.L.R. (4th) 93). The Court of Appeal unanimously struck the statutory claim, the claim of negligent design between Canada and Imperial, and the equitable indemnity claim. However, the majority, per Tysoe J.A., held that the two negligent misrepresentation claims and the negligent design claim between Canada and consumers should be allowed to proceed. The majority reasons did not address the failure to warn claim. Hall J.A., dissenting, would have struck all the third-party claims.
B. The Costs Recovery Case
[11] The Government of British Columbia has brought a claim under the CRA to recover the expense of treating tobacco-related illnesses caused by “tobacco related wrong[s]”. Under the CRA, manufacturers of tobacco products are liable to the province directly. The claim was brought against 14 tobacco companies. British Columbia alleges that by 1950, these tobacco companies knew or ought to have known that cigarettes were harmful to one’s health, and that they failed to properly warn the public about the risks associated with smoking their product.
[12] Various defendants in the Costs Recovery case, including Imperial, brought third-party notices against Canada for its alleged role in the tobacco industry. I refer to them collectively as the “tobacco companies”. The allegations in this claim are strikingly similar to those in the Knight case. The tobacco companies plead that Health Canada advised them and the public that low-tar cigarettes were less hazardous and instructed smokers that they should quit smoking or purchase low-tar cigarettes. The tobacco companies allege that Canada was initially opposed to the use of warning labels on cigarette packaging, but ultimately instructed the industry that warning labels should be used and what they should say. The tobacco companies also plead that Agriculture Canada researched, developed, manufactured and licensed the strains of low-tar tobacco which they used for their cigarettes in exchange for royalties.
[13] The tobacco companies brought the following claims against Canada:
(1) Canada is itself liable under the CRA as a “manufacturer” of tobacco products, and the tobacco companies are entitled to contribution and indemnity from Canada pursuant to the Negligence Act.
(2) Canada breached private law duties to consumers for failure to warn, negligent design, and negligent misrepresentation, and the tobacco companies are entitled to contribution and indemnity from Canada to the extent of any liability they may have to British Columbia under the CRA.
(3) Canada breached its private law duties owed to the tobacco companies for failure to warn and negligent design, and negligently misrepresented the attributes of low-tar cigarettes. The tobacco companies allege that they are entitled to damages against Canada to the extent of any liability they may have to British Columbia under the CRA.
(4) In the alternative, Canada is obliged to indemnify the tobacco companies under the doctrine of equitable indemnity.
(5) If Canada is not liable to the tobacco companies under any of the above claims, they are entitled to declaratory relief.
[14] Canada was successful before the chambers judge, Wedge J., who struck all of the claims (2008 BCSC 419, 82 B.C.L.R. (4th) 362). In the Court of Appeal, the majority, per Tysoe J.A., allowed the negligent misrepresentation claim between Canada and the tobacco companies to proceed (2009 BCCA 540, 98 B.C.L.R. (4th) 201). Hall J.A., dissenting, would have struck all the third-party claims.
III. Issues Before the Court
[15] There is significant overlap between the issues on appeal in the Costs Recovery case and the Knight case, particularly in relation to the common law claims. Both cases discuss whether Canada could be liable at common law in negligent misrepresentation, negligent design and failure to warn, and in equitable indemnity. To reduce duplication, I treat the issues common to both cases together.
[16] There are also issues and arguments that are distinct in the two cases. Uniquely in the Costs Recovery case, Canada argues that all the contribution claims based on the Negligence Act and Ca