Case reference: R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45
This historical case summary discusses the decision identified above. Later decisions and legislative changes may affect how it applies today. Obtain legal advice about your circumstances.
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.
*source: Lexbox
