I'm going to post some info. about the class action lawsuit against the Feed company that produced the feed in question, regarding the first BSE case in Canada.
What do you think, who will be held accountable?
This was sent to be by a lawyer friend, I'm sure it would be available through "freedom on information", but don't tell on me, just in case.
Sorry for the length, but I only had it in Word format, and not as a link. I';d suggest that you copy it and paste it into Word, if you are interested in reading it.
[/quote]2006 CarswellOnt 20
36 C.C.L.T. (3d) 296
Sauer v. Canada (Attorney General)
BILL SAUER (Plaintiff / Respondent) and THE ATTORNEY GENERAL OF CANADA on
behalf of HER MAJESTY THE QUEEN IN RIGHT OF CANADA as represented by THE
MINISTER OF AGRICULTURE, JOHN DOE, JANE ROE, RIDLEY INC. and RIDLEY CORPORATION
LIMITED (Defendants / Applicants)
Proceeding under the Class Proceedings Act, 1992
Ontario Superior Court of Justice
Winkler R.S.J.
Heard: November 15-16, 2005
Judgment: January 5, 2006
Docket: 05-CV-287428CP
Copyright © CARSWELL,
a Division of Thomson Canada Ltd. or its Licensors. All rights reserved.
Counsel: Cameron Pallett, Reynold Robertson, Gilles Gareau, Clint Docken for Plaintiff / Respondent
Gina M. Scarcella, Dale Yurka, Joseph Cheng for Defendant / Applicant, Attorney General of Canada (moving party)
Frank Newbould, Q.C., Barry Glaspell for Defendant / Applicant Ridley Inc.
David R. Byers, Allan L.W. D'Silva for Defendant / Applicant Ridley Corporation Limited
Subject: Civil Practice and Procedure; Public; Torts
Civil practice and procedure --- Pleadings -- Statement of claim -- Striking out for absence of reasonable cause of action -- Need for clearly unsustainable claim
Defendant R Inc. manufactured animal feed products in Ontario -- RC Ltd. was Australian company that owned most of R Inc. but did not itself carry on business in Canada -- Cow located in Alberta was diagnosed with "mad cow disease", with consequence that international borders were closed to Canadian cattle and beef products -- Owner of cow had fed it feed from R Inc. -- Plaintiff was commercial cattle farmer from Ontario who brought action against federal government, R Inc., and RC Ltd. for recovery of economic losses arising from international border closures -- Government, R Inc., and RC Ltd. brought motion for order striking out statement of claim as disclosing no reasonable cause of action -- Motion granted in part -- Only claim against RC Ltd. was struck as pleadings did not establish basis for piercing corporate veil -- Claim against government required complete evidentiary record in order to determine if it was acting in policy or operational capacity -- Plaintiff's claim against R Inc. was not bound to fail even though he was not purchaser of R Inc. feed and did not lose any cattle due to use of feed -- Possibility of border closures upon discovery of infected cow was reasonably foreseeable in light of considerable attention to issue in recent years and R Inc.'s apparent knowledge of issue -- Fact that proximity of relationship did not fall into established category for pure economic loss claim was not fatal to plaintiff's action -- Where contamination of cow was concerned, supplier of feed was brought into proximity with all cattle owners and duty of care could be found -- Policy concerns were not sufficiently developed or clear on record before court to drive plaintiff from judgment seat.
Civil practice and procedure --- Service of originating process -- Service ex juris of originating process -- Application to set aside order, service or document
Defendant R Inc. manufactured animal feed products in Ontario -- RC Ltd. was Australian company that owned most of R Inc. but did not itself carry on business in Canada -- Cow located in Alberta was diagnosed with "mad cow disease", with consequence that international borders were closed to Canadian cattle and beef products -- Owner of cow had fed it feed from R Inc. -- Plaintiff was commercial cattle farmer from Ontario who brought action against federal government, R Inc., and RC Ltd. for recovery of economic losses arising from international border closures -- RC Ltd. brought motion for order setting aside service ex juris or dismissing action for lack of jurisdiction, or for order striking out statement of claim as disclosing no reasonable cause of action -- Motion granted on other grounds -- RC Ltd. could not advance argument that statement of claim disclosed no reasonable cause of action without attorning to jurisdiction of court -- Certain procedural rules specifically permitted party to challenge jurisdiction without attornment to court, but such was not case with respect to striking out statement of claim as disclosing no reasonable cause of action -- Attempting to strike out statement of claim as disclosing no reasonable cause of action was, by logical extension, engagement on merits of action, which constituted attornment to jurisdiction of court -- Engagement on merits rendered jurisdiction argument moot -- Such combined approach was akin to unconditional appearance that negated protections of procedural rules dealing with challenges to jurisdiction.
Civil practice and procedure --- Pleadings -- Amendment -- Grounds for refusal -- General principles
Defendant R Inc. manufactured animal feed products in Ontario -- RC Ltd. was Australian company that owned most of R Inc. but did not itself carry on business in Canada -- Cow located in Alberta was diagnosed with "mad cow disease", with consequence that international borders were closed to Canadian cattle and beef products -- Owner of cow had fed it feed from R Inc. -- Plaintiff was commercial cattle farmer from Ontario who brought action against federal government, R Inc., and RC Ltd. for recovery of economic losses arising from international border closures -- Plaintiff had amended statement of claim five times in attempt to set out cause of action against RC Ltd. -- RC Ltd. brought motion for order striking out statement of claim as disclosing no reasonable cause of action without leave to amend -- Motion granted -- Bald conclusions in statement of claim relating to conduct of RC Ltd. were not supported by material facts -- Plaintiff did not plead material facts regarding conduct akin to fraud on part of RC Ltd. that would justify piercing of corporate veil -- After five attempts that had not yielded necessary factual basis to sustain claim against RC Ltd., no further amendments would be entertained, especially when plaintiff's response to comprehensive motion was insufficient -- Fairness dictated that plaintiff's claim against RC Ltd. be struck without leave to amend.
Cases considered by Winkler R.S.J.:
Anns v. Merton London Borough Council (1977), [1978] A.C. 728, [1977] 2 W.L.R. 1024, (sub nom. Anns v. London Borough of Merton) [1977] 2 All E.R. 492 (U.K. H.L.) -- followed
Bow Valley Husky (Bermuda) Ltd. v. Saint John Shipbuilding Ltd. (1997), 1997 CarswellNfld 207, 1997 CarswellNfld 208, 153 D.L.R. (4th) 385, 221 N.R. 1, 158 Nfld. & P.E.I.R. 269, 490 A.P.R. 269, [1997] 3 S.C.R. 1210, 48 C.C.L.I. (2d) 1, 37 B.L.R. (2d) 1, 40 C.C.L.T. (2d) 235, 1999 A.M.C. 108 (S.C.C.) -- considered
Canadian National Railway v. Norsk Pacific Steamship Co. (1992), 11 C.C.L.T. (2d) 1, 91 D.L.R. (4th) 289, 137 N.R. 241, (sub nom. Norsk Pacific Steamship Co. c. Cie des Chemins de Fer nationaux du Canada) [1991] R.R.A. 370, [1992] 1 S.C.R. 1021, 1992 CarswellNat 168, 53 F.T.R. 79, 1992 CarswellNat 655, 1992 A.M.C. 1910 (S.C.C.) -- considered
Cooper v. Hobart (2001), 2001 SCC 79, 2001 CarswellBC 2502, 2001 CarswellBC 2503, [2002] 1 W.W.R. 221, 206 D.L.R. (4th) 193, 96 B.C.L.R. (3d) 36, (sub nom. Cooper v. Registrar of Mortgage Brokers (B.C.)) 277 N.R. 113, 8 C.C.L.T. (3d) 26, (sub nom. Cooper v. Registrar of Mortgage Brokers (B.C.)) 160 B.C.A.C. 268, (sub nom. Cooper v. Registrar of Mortgage Brokers (B.C.)) 261 W.A.C. 268, [2001] 3 S.C.R. 537 (S.C.C.) -- followed
Falloncrest Financial Corp. v. Ontario (1995), (sub nom. Nash v. Ontario) 27 O.R. (3d) 1, 1995 CarswellOnt 910 (Ont. C.A.) -- referred to
Gregorio v. Intrans-Corp. (1994), 4 M.V.R. (3d) 140, 115 D.L.R. (4th) 200, 18 O.R. (3d) 527, 72 O.A.C. 51, 15 B.L.R. (2d) 109, 1994 CarswellOnt 237 (Ont. C.A.) -- referred to
Haskett v. Trans Union of Canada Inc. (2003), 2003 CarswellOnt 692, 169 O.A.C. 201, 224 D.L.R. (4th) 419, 15 C.C.L.T. (3d) 194, 63 O.R. (3d) 577 (Ont. C.A.) -- considered
Hercules Management Ltd. v. Ernst & Young (1997), [1997] 2 S.C.R. 165, 1997 CarswellMan 198, 211 N.R. 352, 115 Man. R. (2d) 241, 139 W.A.C. 241, (sub nom. Hercules Managements Ltd. v. Ernst & Young) 146 D.L.R. (4th) 577, 35 C.C.L.T. (2d) 115, 31 B.L.R. (2d) 147, [1997] 8 W.W.R. 80, 1997 CarswellMan 199 (S.C.C.) -- considered
Hunt v. T & N plc (1990), 4 C.C.L.T. (2d) 1, 43 C.P.C. (2d) 105, 117 N.R. 321, 4 C.O.H.S.C. 173 (headnote only), (sub nom. Hunt v. Carey Canada Inc.) [1990] 6 W.W.R. 385, 49 B.C.L.R. (2d) 273, (sub nom. Hunt v. Carey Canada Inc.) 74 D.L.R. (4th) 321, [1990] 2 S.C.R. 959, 1990 CarswellBC 759, 1990 CarswellBC 216 (S.C.C.) -- referred to
M.J. Jones Inc. v. Kingsway General Insurance Co. (2004), 72 O.R. (3d) 68, 6 C.P.C. (6th) 121, 242 D.L.R. (4th) 139, 2004 CarswellOnt 3244, 189 O.A.C. 272 (Ont. C.A. [In Chambers]) -- considered
Martel Building Ltd. v. R. (2000), 2000 SCC 60, 2000 CarswellNat 2678, 2000 CarswellNat 2679, 36 R.P.R. (3d) 175, (sub nom. Martel Building Ltd. v. Canada) 193 D.L.R. (4th) 1, (sub nom. Martel Building Ltd. v. Canada) 262 N.R. 285, 3 C.C.L.T. (3d) 1, 5 C.L.R. (3d) 161, 186 F.T.R. 231 (note), (sub nom. Martel Building Ltd. v. Canada) [2000] 2 S.C.R. 860 (S.C.C.) -- considered
Plas-Tex Canada Ltd. v. Dow Chemical of Canada Ltd. (2004), 42 Alta. L.R. (4th) 118, [2005] 7 W.W.R. 419, 245 D.L.R. (4th) 650, 27 C.C.L.T. (3d) 18, 357 A.R. 139, 334 W.A.C. 139, 4 B.L.R. (4th) 194, 2004 ABCA 309, 2004 CarswellAlta 1290 (Alta. C.A.) -- considered
Plas-Tex Canada Ltd. v. Dow Chemical of Canada Ltd. (December 13, 2004), Doc. 30657 (S.C.C.) -- referred to
Ryan v. Victoria (City) (1999), 1999 CarswellBC 79, 1999 CarswellBC 80, 50 M.P.L.R. (2d) 1, 234 N.R. 201, 168 D.L.R. (4th) 513, 117 B.C.A.C. 103, 191 W.A.C. 103, 40 M.V.R. (3d) 1, 44 C.C.L.T. (2d) 1, 59 B.C.L.R. (3d) 81, [1999] 6 W.W.R. 61, [1999] 1 S.C.R. 201 (S.C.C.) -- considered
Ultramares Corp. v. Touche (1931), 255 N.Y. 170, 174 N.E. 441, 74 A.L.R. 1139 (U.S. N.Y. Ct. App.) -- considered
Statutes considered:
Class Proceedings Act, 1992, S.O. 1992, c. 6
Generally -- referred to
s. 5(1)(a) -- referred to
Feeds Act, R.S.C. 1985, c. F-9
Generally -- referred to
Health of Animals Act, S.C. 1990, c. 21
Generally -- referred to
s. 64(1) -- referred to
Rules considered:
Rules of Civil Procedure, R.R.O. 1990, Reg. 194
Generally -- referred to
R. 17.02 -- referred to
R. 17.06 -- referred to
R. 17.06(1) -- referred to
R. 21.01 -- referred to
R. 21.01(1)(b) -- considered
R. 21.01(3) -- referred to
R. 21.01(3)(a) -- referred to
Regulations considered:
Feeds Act, R.S.C. 1985, c. F-9
Feeds Regulations, 1983, SOR/83-593
Generally -- referred to
Sched. IV -- referred to
Health of Animals Act, S.C. 1990, c. 21
Health of Animals Regulations, amendment, SOR/91-525
Generally -- referred to
APPLICATION by defendants for order striking out statement of claim as disclosing no reasonable cause of action.
Winkler R.S.J.:
1 In May of 2003 an Alberta cow was diagnosed with Bovine Spongiform Encephalopathy (BSE), a wasting disease in cattle known as "mad cow disease", with the consequence that the borders to the United States, Mexico and Japan were closed to Canadian cattle and beef products on May 21, 2003. This event and the reaction to it had dire consequences for the cattle industry in Canada.
2 In this intended class proceeding the proposed Representative Plaintiff, Bill Sauer, alleges that the infected Alberta cow consumed feed that included ruminant meat and bone meal (RMBM) contaminated with BSE.
3 The Plaintiff claims as against the Attorney General of Canada, as regulator of the cattle industry in Canada, Ridley Inc. the manufacturer of the cattle feed alleged to have been consumed by the infected Alberta cow, and Ridley Corporation Limited, the Australian parent company of Ridley Inc., on behalf of a proposed class defined as " commercial farmers of cattle resident in Ontario, Manitoba, British Columbia, Newfoundland, Nova Scotia, New Brunswick and Prince Edward Island," seeking recovery of economic losses arising from the international border closures.
4 In the Amended Fresh as Amended Statement of Claim the Plaintiff alleges that the federal government was negligent in enacting, or failing to enact in a timely fashion, regulations pursuant to the Health of Animals Act, S.C. 1990, c.21 or the Feeds Act, R.S.C. 1985, c. F-9 with respect to the permissible ingredients in cattle or ruminant feed. It is alleged that Ridley Inc. was negligent and breached its duty to warn as a result of its continued inclusion of RMBM in cattle feed sold in Canada, despite alleged knowledge that RMBM use in feed could cause BSE in Canadian cattle and that Ridley Inc. knew or ought to have known that a diagnosis of BSE would result in a ban of importation of cattle and beef products into the United States. As against the Australian parent company, Ridley Corporation Limited, the Plaintiff claims that the corporate veil should be pierced and the parent company held liable for the alleged wrongs of Ridley Inc.
Nature of the Motions
5 The Attorney General of Canada moves pursuant to Rule 21.01(1)(b) of the Rules of Civil Procedure for an order striking out those portions of the Plaintiffs Statement of Claim alleging negligence with respect to various legislative action or inaction, without leave to amend, on the basis that they fail to disclose a reasonable cause of action against the federal Crown. The Crown submits that legislative action or inaction cannot form the basis for a claim in tort against the Crown on the basis that it is a well established principle that it would be inappropriate for courts to impose liability for the consequences of a particular legislative decision adopted by government. For this reason courts have consistently held that government cannot owe a duty of care in respect of a legislative policy, as distinct from operative, decision, in which category they state the present subject matter falls.
6 Ridley Inc. moves under Rule 21.01(1)(b) for an order striking out the Statement of Claim in its entirety as against it, without leave to amend, because the Statement of Claim does not allege that the Plaintiff, or any class member, purchased any feed from Ridley, fed any product of Ridley, lost a cow or a sale of a cow or with respect to the Plaintiff that he ever exported a cow across an international border. As such the claim pleaded against Ridley is for pure economic loss which Ridley states "falls well outside the bounds of any conceivable recovery under Canadian tort law". Ridley Inc. contends that the proximity necessary to give rise to a prima facie duty of care has not been pleaded, and if the pleaded facts did give rise to a prima facie duty of care, they raise the spectre of indeterminate liability.
7 Ridley Australia brings a motion pursuant to Rule 17.06(1) for an order setting aside the service outside of Ontario of the Statement of Claim on it or staying the proceeding against it, on the ground that service outside of Ontario is not authorized by the Rules of Civil Procedure. It also moves pursuant to Rule 21.01(3)(a) for an order staying or dismissing the proceeding as against Ridley Australia on the ground of lack of jurisdiction over the subject matter of the action as there is no "real and substantial connection" between Ridley Australia or the cause of action alleged against it and the Ontario court. Alternatively, Ridley Australia seeks to strike out the Statement of Claim in its entirety, without leave to amend, under Rule 21.01(1)(b) as disclosing no reasonable cause of action against it. Ridley Australia brings these motions with a concurrent assertion that it is not submitting or attorning to the jurisdiction of this court by doing so. I will have more to say about this attempted reservation of rights below in these Reasons.
8 The Attorney General does not, for the purposes of this motion, or for the purposes of satisfying the requirements of s. 5(1)(a) of the Class Proceedings Act, 1992, S.O. 1992, c. 6, at the certification motion, challenge any of the other causes of action raised by the Plaintiff in the Statement of Claim. All counsel agree that the present motions ought to be heard and determined prior to the certification motion, in the interests of litigation efficiency and to avoid unnecessary costs to their respective clients.
Factual Background
9 For the purposes of a motion to strike, the Court must accept the material facts as pleaded in the Statement of Claim as proven unless patently ridiculous or incapable of proof.
10 The present claim arises from the discovery of BSE in a cow in Alberta in 2003, and the ensuing international bans on the exportation of Canadian cattle and beef products. BSE is a fatal disease that affects the nervous system of infected cattle, characterized by the sponge-like qualities that occur within the brain of an affected animal. BSE is one of a group of diseases called Transmissible Spongiform Encephalopathies, which also includes the rare human disease called Creutzfeldt-Jacob Disease (CJD). A type of CJD, variant CJD (vCJD) is accepted as being caused by the same agent that causes BSE in cattle.
11 BSE is transmitted when healthy cattle eat the remains of infected cattle or other ruminants. The BSE prion is absorbed intact into the blood through the digestive tract. The only other known method of infection is where the prion is injected directly into the bloodstream.
12 Following a serious outbreak of "mad cow disease" in the United Kingdom in the 1980s, the Canadian government responded by introducing a requirement in 1987 that all cattle imported from the U.K. be from herds certified to be free of BSE. In 1990, the government of Canada took two actions in respect of BSE. BSE was made a reportable disease in Canada and an outright ban was placed on the importation of live cattle from the U.K. and Ireland. All remaining cattle that had been imported from the U.K. since 1982 were placed in a monitoring program. Also in 1990, Canada re-enacted a Feeds Act Regulation. Schedule IV to the Regulation specifically permitted the continued incorporation of RMBM into cattle feed.
13 In 1993, one of the monitored cattle from the U.K. in Alberta tested positive for BSE.
14 According to the government, 191 cattle were imported into Canada from the U.K. and Ireland between 1982 and 1990. At least 80 of these cattle could have entered the cattle feed system through rendering after slaughter or death from some other cause. Of that number, at least 10 cows were from herds in U.K. that contained animals diagnosed as having BSE. In early 1994, the government ordered the remainder of the original 191 cattle then in Canada to be exported or destroyed.
15 In 1996, the World Health Organization (WHO) identified the practice of rendering ruminant protein and incorporating it into ruminant feed as a public health issue. In April 1996, the WHO issued a recommendation that "all countries should ban the use of ruminant tissues in ruminant feed".
16 In August 1997, Canada enacted Regulations Amending the Health of Animals Regulations, S.O.R./97-362. They were enacted pursuant to section 64(1) of the Health of Animals Act, and prohibited the feeding of protein derived from mammals to ruminants, with the exception of porcine- or equine-derived protein. This ban came into effect in Canada in October 1997. A similar ruminant to ruminant ban became effective in the United States in August 1997.
17 There were no further cases of BSE in Canada from 1993 until 2003, six years after the ban was introduced, when the first case of BSE in a Canadian-born cow was diagnosed. Following this discovery, The United States, Mexico and Japan closed their borders to Canadian beef and live cattle.
18 The United States re-opened its markets to Canadian beef from cattle under 30 months of age in August 2003 and as of July 2005, live cattle exports to the United States have resumed for slaughter cattle aged 30 months or less.
19 In the result, the Plaintiff alleges that one or more of the 80 animals from the U.K. were infected with BSE, that one or more of these infected animals were rendered and incorporated into cattle feed, and ultimately infected other cattle with BSE. It is alleged that one of these infected cattle died and was rendered in or about the fall of 1996 and that the rendered remains of this animal were incorporated into the cattle feed manufactured and sold by the predecessor to Ridley Inc.
20 On January 31, 2003, a cow in northern Alberta was identified at slaughter as a "downer" or infected cow. The head was sent to the Alberta provincial laboratory for BSE testing. On May 16, 2003 the province made a preliminary diagnosis of BSE. This diagnosis was subsequently confirmed by the Canadian Food Inspection Agency's National Centre for Foreign Animal Disease on May 18, 2003 and by the CVL International Reference Laboratory in Great Britain on May 20, 2003.
21 The federal government identified the most likely source of BSE for the infected cow as being a product known as Feed-Rite Calf-Glow 18% SR Calf Starter w/DCX produced at the Feed-Rite mill in St. Paul, Alberta, that contained ruminant RMBM contaminated with the BSE prion. Feed-Rite was the predecessor company to Ridley Inc.
22 Mel McCrae of Baldwinton, Saskatchewan was the original owner of the infected cow which was born on his farm in March 1997. He had purchased the Feed-Rite feed in the spring of 1997 and fed it to the infected cow when it was a calf. Mel McCrae is not a party to this proceeding.
The Parties and the Claims
23 The Defendant Ridley Inc., a public company, is a corporation incorporated pursuant to the laws of Manitoba. It manufactures and sells animal feed products. Ridley is the successor to Feed-Rite Ltd. and is responsible for all liabilities of Feed-Rite. Ridley Australia, a corporation incorporated pursuant to the laws of Australia, is the parent company of Ridley Inc. and owns 69% of the subsidiary company. Ridley Inc. owns and operates a stock feed manufacturing plant at Mitchell, Ontario and carries on business in Ontario. Ridley Australia, although it is the largest stock feed company in Australia, does not carry on business in Ontario directly.
24 The claims against the federal Crown relate to allegations regarding the regulation of animal and public health and, more specifically, the regulation of feed.
25 The proposed Representative Plaintiff, Bill Sauer, resides in the Town of Niagara Falls, Ontario, and at all material times was engaged in the commercial farming of cattle.
26 The putative class for which the proposed representative Plaintiff seeks certification as a class proceeding under the Class Proceedings Act, 1992 is estimated to include some 100,000 farmers. This number is based on farms generating a certain threshold income level according to a Statistics Canada report. Accordingly, the class size may be somewhat underestimated.
27 The Plaintiff's claim may be summarized as a claim for $200,000 in general and aggravated damages on behalf of each of the approximately 100,000 Canadian farmers, for a total in excess of $20 billion, when the claim for $100,000,000 in punitive damages from the corporate defendants is included. In addition, the plaintiff claims damages for "past, present and future loss of income, as well as diminution of value of livestock, business interests and real property".
28 Since the Plaintiff does not claim that he purchased any Ridley Inc. product, sold a cow into the United States or elsewhere or had a cow infected with BSE, the claim is for economic losses "suffered...as a result of the international bans on the importation of Canadian beef and cattle following the May 20, 2003 confirmation of the diagnosis of bovine spongiform encephalopathy (BSE) in a cow from Alberta...".
The Claim Against Ridley Inc.
29 As against Ridley Inc. the Plaintiff pleads breaches of a duty of care and of a duty to warn. In particular, it is pleaded that Ridley Inc. owed a duty of care to the Plaintiff to use all due care in ensuring its animal feed products were safe, and was grossly negligent in the manufacture and sale of the calf starter to Mr. McCrae. As stated previously, it is to be noted that Mr. McCrae is not the plaintiff in this action.
30 It is also pleaded that Ridley Inc. failed to warn its product purchasers of risks involved in using RMBM in calf starter and thereby "represented" to the plaintiff, who was entitled to rely thereupon, that its products were safe, and the plaintiff was entitled to the reasonable expectation that Ridley Inc. would not knowingly market dangerous products. Again, it is not pleaded that the Plaintiff Mr. Sauer purchased or used any Ridley Inc. products.
31 The Statement of Claim acknowledges that Ridley Inc. lawfully incorporated RMBM into its feed products prior to August 1997, that Ridley Inc. complied with the 1997 Canada feed ban, and that if Canada had not permitted use of RMBM in cattle feed, Ridley Inc. would not have done so and the infected cow would not have contracted BSE.
32 The Plaintiff pleads that Ridley Inc. was aware since May 1996, when the feed industry in Australia placed a voluntary ban on RMBM incorporation into ruminant feed, that RMBM was potentially hazardous to the health of cattle, and particularly unsafe when incorporated into feed intended for calves. Despite being aware of the hazardous nature of RMBM, Ridley Inc. continued to incorporate RMBM into feed marketed throughout Canada, and intended for cattle and calves in the North American market, until it was prohibited by the 1997 legislation.
33 The Plaintiff pleads that Ridley Inc. knew or ought to have known that a finding of a single domestic BSE case would result in an importation ban of Canadian cattle and beef products into the United States.
34 It is pleaded that the Ridley Inc. calf starter containing RMBM supplied by a rendering plant in Edmonton, Alberta, contained the BSE prion that was transmitted to the infected cow when it was still a calf in or about May 1997.
35 The Plaintiff pleads that Ridley Inc.'s failure to ensure that its products were safe led to BSE in the infected cow as a result of being fed the contaminated feed. Ridley's failure to cease incorporating RMBM into cattle feed products following the ban of RMBM in Australia in May of 1996 constituted gross and willful negligence.
36 It is pleaded that Mr. McCrae, who owned the infected cow and who purchased the calf starter in the spring of 1997, was aware that feeding ruminant remains to cattle was a potential means of BSE transmission, but had no idea that the calf starter contained RMBM because there was no warning label on the feed bags that the product contained ruminant RMBM. Had he known that the feed contained ruminant RMBM in the spring of 1997, he would not have bought the feed nor fed it to his calves.
37 The Statement of Claim asserts that but for the breach of the duty to warn by Ridley Inc., the infected cow would not have contracted BSE and there would have been no international bans on the importation of Canadian cattle and beef in May of 2003.
38 Finally, it is pleaded that a failure to warn feed purchasers of the dangers associated with the consumption of calf starter, inferentially at the time of the sale of the product in the spring of 1997, constituted gross negligence and a breach of the duty to warn on the part of Ridley Inc. The duty to warn purchasers of the potential danger of using their products extended not only to purchasers of those products, Mr. McCrae, but also to the Plaintiff and all of the Class members. I note here that this means, in the context of this pleading, non-users and non-purchasers of the products and to all Canadian cattle farmers generally.
Law and Analysis
39 A defendant may move to strike a pleading on the ground that it discloses no reasonable cause of action, that is, if it is "plain and obvious" that it discloses "no reasonable cause of action" so that the Plaintiff cannot succeed. A claim will not be dismissed simply because it is novel. See Rules of Civil Procedure, Rule 21.01; Hunt v. T & N plc, [1990] 2 S.C.R. 959 (S.C.C.), at 971 and 980; Falloncrest Financial Corp. v. Ontario (1995), 27 O.R. (3d) 1 (Ont. C.A.), at 5 -6.
40 On this motion, Ridley Inc. asserts that it is plain and obvious that it owed no duty of care to the plaintiff in the circumstances. This assertion is based on the underlying proposition that the claim of the plaintiff is for pure economic loss in that he was not a purchaser of Ridley Inc. feed and did not lose any cattle due to the use of the feed. As such, Ridley Inc. argues that the transaction between it and the actual farmer whose calf became infected does not provide a foundation for a duty of care owed to all cattle farmers in Canada for economic losses allegedly flowing as a consequence from the discovery of a BSE infection in a calf fed with RMBM feed it distributed.
41 Ridley Inc. states that its position on the motion is supported by Canadian law, which, it submits, places limits on the creation of a duty of care owed in respect of lawful actions allegedly causing pure economic losses suffered by others. Economic losses suffered by Canadian farmers arising from the closure of the United States border to Canadian cattle and beef do not fall into any category recognized by Canadian law as giving rise to a private law duty of care on the part of a commercial actor such as Ridley Inc. Accordingly, Ridley Inc. contends that the present case is one involving remote pure economic loss with indeterminate scope precluding a duty of care on policy grounds.
42 A pure economic loss is defined as a financial loss which is not causally consequent upon physical injury to the Plaintiff's own person or property. See Bruce Feldthusen, Economic Negligence: The Recovery of Pure Economic Loss. Fourth Edition (Toronto: Carswell, 2000) at p. 1. The Plaintiff acknowledges in his factum at para. 136 that "[a]ccording to this definition, the damages claimed by the plaintiff and intended class members for loss of income, diminution of value of business interests, livestock, and real property in this action are properly characterized as pure economic loss".
43 The Plaintiff concedes that the Canadian courts have not yet recognized the duty of care alleged in this case. In that respect, the Plaintiff contends that the question on the present motion is similar to the issue in Cooper v. Hobart, [2001] 3 S.C.R. 537 (S.C.C.), at 547, where the court stated that "[t]he question is therefore whether the law of negligence should be extended to reach the situation".
44 In considering whether the law of negligence should be extended, it is trite that the risk of harm must be foreseeable to a reasonable person. Forseeability, alone, however is not enough. There is also the factor of proximity, or neighbourhood, and the policy considerations that may serve to negative the imposition of a duty notwithstanding that there was a foreseeable harm and a sufficiently proximate relationship. (See Anns v. Merton London Borough Council (1977), [1978] A.C. 728 (U.K. H.L.)). This two part test, first determining whether a prima facie duty of care exists and then determining whether there are any policy considerations that would serve to negative such a duty has been adopted by the Supreme Court of Canada as the appropriate method for dealing with novel tort claims or novel categories of recognized torts. In revisiting the Anns test in Cooper, the Court stated that its significance "rests in the recognition that policy considerations play an important role in determining proximity in new situations". The present case is such a situation.
45 It is clear from Cooper, therefore, that policy considerations are paramount, both in respect of the proximity analysis and as part of the final analysis prior to the imposition of a duty of care in the particular factual matrix of the case before the court. However, it is equally clear that there are certain limitations imposed on the court with respect to the policy analysis where a pleadings motion is concerned. As stated by Feldman J.A. in Haskett v. Trans Union of Canada Inc. (2003), 63 O.R. (3d) 577 (Ont. C.A.) at para.. 24:
On a Rule 21 motion, the court applies this two-stage analysis to the facts as pleaded in the Statement of Claim in order to determine not whether a duty of care will be recognized, but whether it is plain and obvious that no duty of care can be recognized. If it is not plain and obvious then the action can proceed and the issue will be determined at a trial. In that context, the court may well recognize potential policy concerns at the second stage but should be circumspect in using those policy concerns to determine, without a Statement of Defence and without any evidence, that it is plain and obvious that there is no cause of action... (Emphasis added, internal citations omitted.)
46 The Supreme Court of Canada stated in Martel Building Ltd. v. R. , [2000] 2 S.C.R. 860 (S.C.C.), that claims concerning the recovery of economic losses, as a cause of action, are identical to other claims in negligence, that is, the plaintiff must establish a duty, a breach, damage and causation. The availability of recovery for economic losses is the result of a jurisprudential evolution. Traditionally the common law did not allow recovery where the plaintiff had suffered neither physical harm nor property damage. However, the evolution of the law has incorporated added policy based restrictions in that it is currently the case that in claims based on recovery for economic loss "...the threshold question of whether or not to recognize a duty of care receives added scrutiny relative to other claims in negligence". Therefore, although it is now recognized that damages for economic loss absent physical or proprietary harm may be recovered, there are limited circumstances where such damages have been awarded to date. The Court addressed the scarcity of successful economic loss claims directly in Martel at para. 37:
To a large extent, this caution derives from the same policy rationale that supported the traditional approach not to recognize the claim at all. First, economic interests are viewed as less compelling of protection than bodily security or proprietary interests. Second, an unbridled recognition of economic loss raises the spectre of indeterminate liability. Third, economic losses often arise in a commercial context, where they are often an inherent business risk best guarded against by the party on whom they fall through such means as insurance. Finally, allowing the recovery of economic loss through tort has been seen to encourage a multiplicity of inappropriate lawsuits.
47 Before I turn to the Cooper reiteration of the Anns test in this analysis, it is important to describe the nature of the claim being advanced by the plaintiff. As stated previously, there is no direct relationship between the plaintiff and Ridley Inc. in contract or arising from the usage of the Ridley Inc. product by the Plaintiff. Nor is it alleged that there is any other direct commercial relationship between them. Similarly, the Plaintiff has not lost any cattle or suffered any property damage from usage of the Ridley Inc. product. Rather, the Plaintiff claims, in essence, that Ridley Inc. negligently, recklessly or knowingly sold a product to another farmer that had the potential to, and did, shut down the Canadian cross border cattle trade when used by the purchasing farmer. As a result, the Plaintiff alleges that Ridley Inc. is liable to Canadian cattle farmers at large. The policy considerations and the implications for the law of tort raised by this claim are manifest.
48 As stated in Cooper at para. 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 established in the first part of this test, 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 that word. If foreseeability and proximity are established at the first stage, a prima facie duty of care arises. At the second stage of the Anns test, the question still remains whether there are residual policy considerations outside the relationship of the parties that may negative the imposition of a duty of care...[w]e think it useful expressly to ask, before imposing a new duty of care, whether despite foreseeability and proximity of relationship, there are other policy reasons why the duty should not be imposed. (Emphasis added.)
49 Simply put, the first element of the restated Anns test in Cooper requires a foreseeable risk of harm arising from the act of the defendant. Examined closely, it is apparent that the essence of the Plaintiff's claim is an allegation of harm flowing from the closing of borders to Canadian cattle and beef products. All of the Plaintiff's claims for damages or relief hinge on the assertion that the defendant owed a duty to take reasonable care to ensure that its actions or conduct did not result in this occurrence. It is against this claim that the foreseeability element must be measured.
50 The factual allegations in support of the foreseeability of the closing of borders to Canadian cattle and beef products as a result of the discovery of a single BSE case are set out in paras. 35-41 and 44 of the Statement of Claim. They are as follows:
35. On July 21, 1989 the United States enacted a law that prohibited the importation of live cattle from countries where a native case of BSE was confirmed. Initially this ban only affected the importation of live cattle from the United Kingdom (including Northern Ireland).
36. By the end of July 1989 the United States, Israel, Australia, Sweden and New Zealand had imposed a total ban on the importation of live cattle from the United Kingdom (UK).
37. In addition, Japan, Morocco, Canada and South Africa had all introduced requirements by this time that all live cattle imported from the UK be from herds certified as free of BSE. In Canada, this requirement was introduced in 1987.
38. In July of 1989 the European Union banned the importation from Great Britain of live cattle born before 18 July 1988, or born to dams in which BSE was suspected or officially confirmed. On March 1st of 1990 this ban was upgraded to include all live cattle other than those less than 6 months of age.
39. In November of 1989 the United States enacted an emergency ban on the importation of meat products (including meat and bonemeal) from countries with confirmed cases of BSE. This ban was made permanent in December of 1991.
40. Enforcing the laws enacted in 1989 and their successors, the United States banned the importation of live cattle and beef products from the United Kingdom (1989), Republic of Ireland (1989), Switzerland (1990), Oman (1990), France (1991), Portugal (1994), the Netherlands (1997), Luxembourg (1997) and Belgium (1997).
41. In 1997 the United States extended the import ban to include all the countries of Europe, whether a native case of BSE had been diagnosed or not.
. . . . .
44. In 1994 [Canada] adopted a policy that the importation of cattle and beef would be banned from any country with a confirmed domestic case of BSE, in accordance with an identical policy in the United States. This policy was known colloquially as 'one cow and you're out'.
51 In my view, these alleged facts are neither patently ridiculous nor incapable of proof. Accordingly, I must accept them as proven for the purposes of this motion. When considered in conjunction with other allegations in the Statement of Claim which include the voluntary ban on RMBM in Australia in 1996 as a prudent practice because of the potential for BSE infection from the use of such feed, the participation of Ridley Australia in the industry group that concluded a voluntary ban was advisable and the allegation that Ridley Australia and Ridley Inc. shared a common chairman of the board of directors, I am satisfied that the harm alleged by the Plaintiff was reasonably foreseeable by Ridley Inc.
52 I cannot accede to the argument of Ridley Inc. that the legislative framework existing when the product was sold to Mr. McCrae is a dispositive indicator that there was no objective reasonable foreseeability of the harm alleged by the Plaintiff. The basis for this submission is that Canada permitted RMBM for mixing with cattle feed under the Feeds Act Regulation until enacting the RMBM feed ban in 1997, and further, that at the time the ban was enacted, it was publicly stated by the government that Canada was known to be BSE free.
53 While this may be advanced at a later stage as part of Ridley Inc.'s defence, it is just that, a defence, rather than a "radical defect" in the Plaintiff's claim that serves as a bar to the action at the pleadings stage. As the Supreme Court of Canada stated in Ryan v. Victoria (City), [1999] 1 S.C.R. 201 (S.C.C.) at para. 29:
Legislative standards are relevant to the common law standard of care, but the two are not necessarily co-extensive. The fact that a statute prescribes or prohibits certain activities may constitute evidence of reasonable conduct in a given situation, but it does not extinguish the underlying obligation of reasonableness. ... By the same token, mere compliance with a statute does not, in and of itself, preclude a finding of civil liability. Statutory standards can, however, be highly relevant to the assessment of reasonable conduct in a particular case, and in fact may render reasonable an act or omission which would otherwise appear to be negligent. This allows courts to consider the legislative framework in which people and companies must operate, while at the same time recognizing that one cannot avoid the underlying obligation of reasonable care simply by discharging statutory duties. (Emphasis added, internal citations omitted.)
54 Foreseeability simpliciter is not sufficient to establish the existence of a duty of care. It must be found to exist in conjunction with proximity. Proximity characterizes the type of relationship in which a duty of care arises. In Canadian National Railway v. Norsk Pacific Steamship Co., [1992] 1 S.C.R. 1021 (S.C.C.) at p. 1151, McLachlin J. (as she then was) stated:
[p]roximity may be usefully viewed, not so much as a test in itself, but as a broad concept which is capable of subsuming different categories of cases involving different factors
(See also Cooper at para. 35)
55 There are a number of established "categories of cases" dealing with pure economic loss in Canada. However, it was common ground between the plaintiff and Ridley Inc. that the claim as pleaded does not fit into any established category. This is not fatal to the Plaintiff's claim. As stated by the Supreme Court in Cooper at para. 31:
...ufficiently proximate relationships are identified through the use of categories. The categories are not closed and new categories of negligence may be introduced. But generally, proximity is established by reference to these categories. This provides certainty to the law of negligence, while still permitting it to evolve to meet the needs of new circumstances. (Emphasis added.)
56 The Plaintiff asserts that a duty of care exists in the circumstances of this case by way of analogy to the existing categories, particularly with respect to those cases in the recognized "duty to warn" category.
57 The Plaintiff contends that the "duty to warn" does not require a contractual relationship and thus applies to Ridley Inc. in respect of all cattle farmers in Canada, including himself. He states that the support for this proposition is found in the statement of McLachlin J. in Bow Valley Husky (Bermuda) Ltd. v. Saint John Shipbuilding Ltd., [1997] 3 S.C.R. 1210 (S.C.C.), at 1229:
The law may be simply stated. Manufacturers and suppliers are required to warn all those who may reasonably be affected by potentially dangerous products: Lambert v. Lastoplex Chemicals Co, [1972] S.C.R. 569, and Hollis v. Dow Corning Corp. [1995] 4 S.C.R. 634. This duty extends even to those person who are not party to the contract of sale: Rivtow Marine Ltd. v. Washington Iron Works [1974] S.C.R. 1189. The potential user must be reasonably foreseeable to the manufacturer or supplier-manufacturers and suppliers (including a builder-supplier like SJSL) do not have the duty to warn the entire world about every danger that can result from improper use of their product. (Emphasis added.)
58 While Ridley Inc. acknowledges that a finding of a "duty to warn" does not require the existence of a contractual relationship, it argues that the party to whom the duty is owed must at the very least be a user of the product in issue. As stated in its reply factum, there is "no case in Canada where a duty has been found with respect to pure economic loss suffered by a third party non-user of a manufactured product". No such case was drawn to my attention by the Plaintiff. The recent case of Plas-Tex Canada Ltd. v. Dow Chemical of Canada Ltd. (2004), 245 D.L.R. (4th) 650 (Alta. C.A.) leave to appeal denied [2004] S.C.C.A. No. 542 (S.C.C.), relied upon by the Plaintiff, is of no assistance on the point, since it was found that there was a direct property interest of the respondents involved.
59 In my view, the claim here is not analogous to the established category of cases where the imposition of a duty to warn has been a basis for permitting recovery for pure economic loss as opposed to cases where a duty to warn arises in respect of personal injury or damage to property. The cases in the category that were brought to my attention deal with claims between actual contracting parties or users of the products at issue or where there is a direct property interest involved. The direct proximal relationship apparent in those fact situations are such that any principles emanating from them cannot be logically extended to the present factual matrix. In contrast, here the Plaintiff did not purchase the product from Ridley Inc., he was not a user of the product and, in addition, there is no allegation that he had a direct property interest in the assets or operations of McCrae, the actual purchaser whose animal was infected with BSE.
60 The very essence of the harm alleged by the Plaintiff is based on the introduction into the marketplace of a contaminated feed product. The alleged negligence, therefore, is not a failure to warn of the dangers of the product but rather a failure to forebear from placing the product in the market. There is no suggestion in the claim that the product could have had a proper safe use. The claim is based in harm resulting to the industry at large. It is alleged that harm resulted from the sale of a product, the existence of which had the potential to and did disrupt the whole of the cattle industry in Canada. In keeping with those allegations, a warning issued only to purchasers would not absolve the seller from the theory of liability advanced by the Plaintiff. When all of these factors are considered it is clear that the duty alleged here is not analogous to the "duty to warn" category of cases permitting recovery for pure economic losses.
61 If a duty of care is owed by Ridley Inc. to the Plaintiff, and others similarly situated in the putative class, it must be grounded in an application of the principles enunciated in Anns and Cooper. Having found that the harm alleged was reasonably foreseeable, the next step is to conduct an analysis of the "proximity" of the relationship between Ridley Inc. and the Plaintiff.
62 The unsatisfactory nature of a bare "proximity" analysis has been the subject of comment by the Supreme Court. As La Forest J. stated in Hercules Management Ltd. v. Ernst & Young, [1997] 2 S.C.R. 165 (S.C.C.), at para. 23- 24:
...the term "proximity" itself is nothing more than a label expressing a result, judgment or conclusion; it does not, in and of itself, provide a principled basis on which to make a legal determination.
. . .
The label "proximity", as it was used by Lord Wilberforce in Anns, supra, was clearly intended to connote that the circumstances of the relationship inhering between the plaintiff and the defendant are of such a nature that the defendant may be said to be under an obligation to be mindful of the plaintiff's legitimate interests in conducting his or her affairs.
63 The preceding passages from Hercules were quoted by Iacobucci and Major JJ. writing for the court in Martel at para. 49. They went on to state in para. 50:
So as to infuse the term "proximity" with greater meaning, the courts take into account a variety of factors in ascertaining whether the relationship between two parties gives rise to a prima facie duty of care. See McLachlin J. in Norsk Pacific Steamship Co., supra, at p. 1153:
In determining whether liability should be extended to a new situation, courts will have regard to the factors traditionally relevant to proximity such as the relationship between the parties, physical propinquity, assumed or imposed obligations and close causal connection. And they will insist on sufficient special factors to avoid the imposition of indeterminate and unreasonable liability.
64 Considering the issue of proximity again in Cooper, McLachlin C.J.C and Major J., writing for the Court, stated at para. 34:
Defining the relationship may involve looking at expectations, representations, reliance, and the property or other interests involved. Essentially, these are factors that allow us to evaluate the closeness of the relationship between the plaintiff and the defendant and to determine whether it is just and fair having regard to that relationship to impose a duty of care in law upon the defendant.
65 This latter passage from Cooper follows an earlier statement in the reasons relating to the policy component of the proximity analysis at para. 30:
...[T]he 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. (Emphasis added).
66 It is clear from the preceding authorities that where a claim asserting a duty of care does not fall within a recognized category, the proximity analysis is a contextual one based on the factual underpinning of the claim.
67 In addressing the consideration of the relationship between the parties in light of the "expectations, representations, reliance, and the property or other interests involved", Ridley Inc. relies on the fact that the Plaintiff did not purchase the feed, did not own an infected animal and did not participate in cross border shipment of cattle or beef products. Hence, Ridley Inc. argues, there is no relationship, especially one that can be said to be close and direct, as between the Plaintiff and Ridley Inc.
68 Ridley Inc.'s assertion regarding the relationship does not, however, fully address the allegations in the Statement of Claim with respect to BSE. The thrust of those allegations is that one infected cow constitutes an outbreak resulting in cataclysmic consequences for the industry as a whole within the borders of a particular country. The current industry and governmental practice does not limit the reactive measures to what might otherwise appear to be proportional in terms of the traditional notions of proximity in physical, temporal or geographic terms in dealing with a BSE outbreak. Accordingly, where BSE is concerned, it brings the supplier of feed to one cattle owner into proximity with all other cattle owners. If feed is supplied which causes an outbreak of BSE, regardless of how isolated, all cattle and cattle owners are affected. In other words, all cattle owners are treated as one contiguous whole.
69 Proximity is a relative term. Here, there are recognized international procedures in place that in essence mandate a relationship between otherwise disparate interests where BSE is at issue. There does not seem to be any policy reason to ignore this reality in a consideration of whether a proximal relationship may exist between parties who, in other circumstances, might not be regarded as proximate. On the facts alleged in the Statement of Claim, I find that it is not plain and obvious that a prima facie duty of care could not be found to exist in these circumstances notwithstanding that there is no recognized category into which the claim falls.
70 In his paper Establishing Economic Loss, The Law Society of Upper Canada Special Lectures 2005: The Modern Law of Damages, John Lorn McDougall, Q.C., surveys the developments in the law from Anns to Cooper and concludes at p. 24-25:
It is helpful that the limited exclusionary rule seems to have been displaced by a policy based analysis of proximity. For recovery of pure economic loss, the five Feldthusen categories live on as a means chosen by the court to indicate the limitations on the prospective development of recovery for pure economic loss. They should not operate to limit extension of recovery of damages for pure economic loss but should instead serve as guideposts. It would be helpful if courts desisted from denying the existence of an overarching principle for recovery. There is one: it is fairness simpliciter. The trick is to make the determination in a principled manner. It is encouraging that, in Cooper, the court has drawn together the disparate views expressed in previous cases and recognized that compensation for pure economic loss is mostly about a balancing of private interests and policy considerations.
71 For the purposes of this motion the "balancing of private interests and policy considerations" is completed by the analysis under the second stage of the restated Anns test as set out in Cooper. It may be stated as follows: notwithstanding the possible existence of a prima facie duty of care, are there other policy reasons that would serve to negate the imposition of a duty in the circumstances. As stated in Cooper at para. 37:
...residual policy considerations fall to be considered here. These are not concerned with the relationship between the parties, but with the effect of recognizing a duty of care on other legal obligations, the legal system and society more generally. Does the law already provide a remedy? Would recognition of the duty of care create the spectre of unlimited liability to an unlimited class? Are there other reasons of broad policy that suggest that the duty of care should not be recognized? Following this approach, this Court declined to find liability in Hercules Managements, supra, on the ground that to recognize a duty of care would raise the spectre of liability to an indeterminate class of people.
72 Similarly, the Court stated in para. 39 of Cooper:
...where a duty of care in a novel situation is alleged, as here, we believe it necessary to consider both steps of the Anns test as discussed above. This ensures that before a duty of care is imposed in a new situation, not only are foreseeability and relational proximity present, but there are no broader considerations that would make imposition of a duty of care unwise.
73 With respect to this second stage policy analysis, however, the caution stated by the Court of Appeal in Haskett bears repeating:
... the court may well recognize potential policy concerns at the second stage but should be circumspect in using those policy concerns to determine, without a Statement of Defence and without any evidence, that it is plain and obvious that there is no cause of action...
This is consistent with the general approach adopted by the Supreme Court of Canada in respect of pleadings motions: that the plaintiff should not be "driven from the judgment seat" prematurely. (See Hunt v. T & N plc, at para. 18.)
74 In this case, the desirability of avoiding the "spectre of unlimited liability to an unlimited class" was the main argument against the imposition of a duty of care on policy grounds advanced by Ridley Inc. A secondary argument was advanced on the proposition that imposing a duty of care on Ridley Inc. in the circumstances was akin to making it an insurer for the cattle industry in circumstances where the industry participants had not paid anything to Ridley Inc. in return. Still another argument was advanced regarding the fact that the regulations in place until August 1997 permitted Ridley Inc. to use RMBM in its feed products.
75 Let me deal first with the "insurance argument" as I do not find it persuasive in the context of this case. This argument was specifically addressed in Cooper in obiter. There the Supreme Court held that if liability were imposed on the regulatory body, it would have the effect of making the general taxpaying public a private loss insurer. Similarly, the registrar in Cooper was essentially being pursued for negligence in relation to the misconduct of a participant in the mortgage industry. Here, the claim against Ridley Inc. is based on its own alleged misconduct. It is not a government regulator who must resort to the public purse with respect to its liabilities. Moreover, the Plaintiff is not seeking to hold Ridley Inc. liable for anything other than what he contends are the consequences of Ridley Inc.'s own conduct. Accordingly, Ridley Inc. is not, in these circumstances, in danger of becoming the insurer in respect of losses caused by the wrongful conduct of another.
76 In like fashion I am not attracted by the "legislative compliance" argument of Ridley Inc. In my view this argument appears to be based on an over-reaching interpretation of a passage in Ryan that deals with the prospect of specific legislative exemptions from liability, as opposed to a general exemption flowing from simple compliance. As stated in Ryan at para. 24:
The existence of a duty of care must be considered in light of all relevant circumstances, including any applicable statutes or regulations. Thus, a legislative exemption from liability can negate a duty of care in circumstances where that duty would otherwise arise. (Emphasis added.)
In fact, as noted above, Ryan specifically holds that legislative compliance is a factor in determining whether a standard of care has been met. Further, Major J. expressly states in Ryan that "mere compliance with a statute does not, in and of itself, preclude a finding of civil liability". Accordingly, if statutory or regulatory compliance does not serve to preclude a finding of liability with respect to existing torts, it is difficult to conclude that such compliance affords a sound policy reason to negate the imposition of a previously unrecognized duty of care.
77 Ridley Inc. approached its main argument regarding "indeterminate liability" on a dual footing:
(a) the "indeterminate" liability to the putative class with respect to the losses suffered by that class; and
(b) the indeterminate "liability" to an unknown number of secondary level of plaintiffs potentially including all of those doing business with the putative class members. (This group is not included in the proposed class.)
78 The phraseology "liability in an indeterminate amount for an indeterminate time to an indeterminate class" was first enunciated by Cardozo J.A. in the seminal case of Ultramares Corp. v. Touche, 255 N.Y. 170 (U.S. N.Y. Ct. App. 1931). The claim at issue was framed in negligence relating to an audit opinion, which would be characterized today as a claim in negligent misrepresentation, one of the recognized categories where recovery for pure economic loss is available. Cardozo J.A., writing for the court, held that while the actual party contracting for the audit opinion could bring a claim in negligence those parties outside the contractual relationship could not do so. As he stated at 189:
Our holding does not emancipate accountants from the consequences of fraud. It does not relieve them if their audit has been so negligent as to justify a finding that they had no genuine belief in its adequacy, for this again is fraud. It does no more than say that if less than this is proved, if there has been neither reckless misstatement nor insincere profession of an opinion, but only honest blunder, the ensuing liability for negligence is one that is bounded by the contract, and is to be enforced between the parties by whom the contract has been made. We doubt whether the average business man receiving a certificate without paying for it and receiving it merely as one among a multitude of possible investors, would look for anything more.
79 As the law has evolved, the contractual proximity concept enunciated by Cardozo J.A. with respect to cases sounding in negligent misrepresentation has been relaxed. It is no longer the case that a duty is owed only to those in a contractual relationship with the person making the statement. However, the concern about indeterminancy has been maintained as a restriction on the imposition of liability. In the seminal case of Hercules, La Forest J. addressed this concern at paras 27 and 28 by holding that the "potentially infinite liability" inherent in negligent misrepresentation cases could be circumscribed by requiring, in addition to a prima facie duty of care:
...(a) that the defendant know the identity of either the plaintiff or class of plaintiffs who will rely on the statement, and (b) that the reliance losses claimed by the plaintiff stem from the particular transaction in respect of which the statement at issue was made.
80 By imposing restrictions based on the representor's knowledge of the class that might rely on, or use, a representation and actual use of the representation by the representees, La Forest J. considered that the secondary policy concerns had been adequately addressed. As he stated at para. 28:
...In other words, these further requirements serve a policy-based limiting function with respect to the ambit of the duty of care in negligent misrepresentation actions.
81 In a manner of speaking, it is fitting that the "indeterminate liability" concerns were first enunciated in a negligent misrepresentation case in that if any analogy to existing categories could be drawn in respect of the claim asserted in this case, negligent misrepresentation cases would be the most likely candidates. In a negligent misrepresentation case, the proximal relationship between the parties giving rise to prima facie duty of care arises with the making of a statement in certain circumstances. Here, the relationship between Ridley Inc. and the Plaintiff may be said to have arisen when Ridley Inc. placed feed containing RMBM into the stream of commerce.
82 Similarly, the policy analysis with respect to whether a duty of care should be negated in a negligent misrepresentation case turns on a consideration as to whether the representation was 1) made to a known class, and, 2) used by that class, or a member of that class, for the purpose for which it was made. By analogy, Ridley Inc. allegedly knew or ought to have known that cattle farmers throughout Canada were at risk should a BSE outbreak occur as a result of the normal use of its product. Reading the Statement of Claim generously with regard to pleading deficiencies lea
What do you think, who will be held accountable?
This was sent to be by a lawyer friend, I'm sure it would be available through "freedom on information", but don't tell on me, just in case.
Sorry for the length, but I only had it in Word format, and not as a link. I';d suggest that you copy it and paste it into Word, if you are interested in reading it.
[/quote]2006 CarswellOnt 20
36 C.C.L.T. (3d) 296
Sauer v. Canada (Attorney General)
BILL SAUER (Plaintiff / Respondent) and THE ATTORNEY GENERAL OF CANADA on
behalf of HER MAJESTY THE QUEEN IN RIGHT OF CANADA as represented by THE
MINISTER OF AGRICULTURE, JOHN DOE, JANE ROE, RIDLEY INC. and RIDLEY CORPORATION
LIMITED (Defendants / Applicants)
Proceeding under the Class Proceedings Act, 1992
Ontario Superior Court of Justice
Winkler R.S.J.
Heard: November 15-16, 2005
Judgment: January 5, 2006
Docket: 05-CV-287428CP
Copyright © CARSWELL,
a Division of Thomson Canada Ltd. or its Licensors. All rights reserved.
Counsel: Cameron Pallett, Reynold Robertson, Gilles Gareau, Clint Docken for Plaintiff / Respondent
Gina M. Scarcella, Dale Yurka, Joseph Cheng for Defendant / Applicant, Attorney General of Canada (moving party)
Frank Newbould, Q.C., Barry Glaspell for Defendant / Applicant Ridley Inc.
David R. Byers, Allan L.W. D'Silva for Defendant / Applicant Ridley Corporation Limited
Subject: Civil Practice and Procedure; Public; Torts
Civil practice and procedure --- Pleadings -- Statement of claim -- Striking out for absence of reasonable cause of action -- Need for clearly unsustainable claim
Defendant R Inc. manufactured animal feed products in Ontario -- RC Ltd. was Australian company that owned most of R Inc. but did not itself carry on business in Canada -- Cow located in Alberta was diagnosed with "mad cow disease", with consequence that international borders were closed to Canadian cattle and beef products -- Owner of cow had fed it feed from R Inc. -- Plaintiff was commercial cattle farmer from Ontario who brought action against federal government, R Inc., and RC Ltd. for recovery of economic losses arising from international border closures -- Government, R Inc., and RC Ltd. brought motion for order striking out statement of claim as disclosing no reasonable cause of action -- Motion granted in part -- Only claim against RC Ltd. was struck as pleadings did not establish basis for piercing corporate veil -- Claim against government required complete evidentiary record in order to determine if it was acting in policy or operational capacity -- Plaintiff's claim against R Inc. was not bound to fail even though he was not purchaser of R Inc. feed and did not lose any cattle due to use of feed -- Possibility of border closures upon discovery of infected cow was reasonably foreseeable in light of considerable attention to issue in recent years and R Inc.'s apparent knowledge of issue -- Fact that proximity of relationship did not fall into established category for pure economic loss claim was not fatal to plaintiff's action -- Where contamination of cow was concerned, supplier of feed was brought into proximity with all cattle owners and duty of care could be found -- Policy concerns were not sufficiently developed or clear on record before court to drive plaintiff from judgment seat.
Civil practice and procedure --- Service of originating process -- Service ex juris of originating process -- Application to set aside order, service or document
Defendant R Inc. manufactured animal feed products in Ontario -- RC Ltd. was Australian company that owned most of R Inc. but did not itself carry on business in Canada -- Cow located in Alberta was diagnosed with "mad cow disease", with consequence that international borders were closed to Canadian cattle and beef products -- Owner of cow had fed it feed from R Inc. -- Plaintiff was commercial cattle farmer from Ontario who brought action against federal government, R Inc., and RC Ltd. for recovery of economic losses arising from international border closures -- RC Ltd. brought motion for order setting aside service ex juris or dismissing action for lack of jurisdiction, or for order striking out statement of claim as disclosing no reasonable cause of action -- Motion granted on other grounds -- RC Ltd. could not advance argument that statement of claim disclosed no reasonable cause of action without attorning to jurisdiction of court -- Certain procedural rules specifically permitted party to challenge jurisdiction without attornment to court, but such was not case with respect to striking out statement of claim as disclosing no reasonable cause of action -- Attempting to strike out statement of claim as disclosing no reasonable cause of action was, by logical extension, engagement on merits of action, which constituted attornment to jurisdiction of court -- Engagement on merits rendered jurisdiction argument moot -- Such combined approach was akin to unconditional appearance that negated protections of procedural rules dealing with challenges to jurisdiction.
Civil practice and procedure --- Pleadings -- Amendment -- Grounds for refusal -- General principles
Defendant R Inc. manufactured animal feed products in Ontario -- RC Ltd. was Australian company that owned most of R Inc. but did not itself carry on business in Canada -- Cow located in Alberta was diagnosed with "mad cow disease", with consequence that international borders were closed to Canadian cattle and beef products -- Owner of cow had fed it feed from R Inc. -- Plaintiff was commercial cattle farmer from Ontario who brought action against federal government, R Inc., and RC Ltd. for recovery of economic losses arising from international border closures -- Plaintiff had amended statement of claim five times in attempt to set out cause of action against RC Ltd. -- RC Ltd. brought motion for order striking out statement of claim as disclosing no reasonable cause of action without leave to amend -- Motion granted -- Bald conclusions in statement of claim relating to conduct of RC Ltd. were not supported by material facts -- Plaintiff did not plead material facts regarding conduct akin to fraud on part of RC Ltd. that would justify piercing of corporate veil -- After five attempts that had not yielded necessary factual basis to sustain claim against RC Ltd., no further amendments would be entertained, especially when plaintiff's response to comprehensive motion was insufficient -- Fairness dictated that plaintiff's claim against RC Ltd. be struck without leave to amend.
Cases considered by Winkler R.S.J.:
Anns v. Merton London Borough Council (1977), [1978] A.C. 728, [1977] 2 W.L.R. 1024, (sub nom. Anns v. London Borough of Merton) [1977] 2 All E.R. 492 (U.K. H.L.) -- followed
Bow Valley Husky (Bermuda) Ltd. v. Saint John Shipbuilding Ltd. (1997), 1997 CarswellNfld 207, 1997 CarswellNfld 208, 153 D.L.R. (4th) 385, 221 N.R. 1, 158 Nfld. & P.E.I.R. 269, 490 A.P.R. 269, [1997] 3 S.C.R. 1210, 48 C.C.L.I. (2d) 1, 37 B.L.R. (2d) 1, 40 C.C.L.T. (2d) 235, 1999 A.M.C. 108 (S.C.C.) -- considered
Canadian National Railway v. Norsk Pacific Steamship Co. (1992), 11 C.C.L.T. (2d) 1, 91 D.L.R. (4th) 289, 137 N.R. 241, (sub nom. Norsk Pacific Steamship Co. c. Cie des Chemins de Fer nationaux du Canada) [1991] R.R.A. 370, [1992] 1 S.C.R. 1021, 1992 CarswellNat 168, 53 F.T.R. 79, 1992 CarswellNat 655, 1992 A.M.C. 1910 (S.C.C.) -- considered
Cooper v. Hobart (2001), 2001 SCC 79, 2001 CarswellBC 2502, 2001 CarswellBC 2503, [2002] 1 W.W.R. 221, 206 D.L.R. (4th) 193, 96 B.C.L.R. (3d) 36, (sub nom. Cooper v. Registrar of Mortgage Brokers (B.C.)) 277 N.R. 113, 8 C.C.L.T. (3d) 26, (sub nom. Cooper v. Registrar of Mortgage Brokers (B.C.)) 160 B.C.A.C. 268, (sub nom. Cooper v. Registrar of Mortgage Brokers (B.C.)) 261 W.A.C. 268, [2001] 3 S.C.R. 537 (S.C.C.) -- followed
Falloncrest Financial Corp. v. Ontario (1995), (sub nom. Nash v. Ontario) 27 O.R. (3d) 1, 1995 CarswellOnt 910 (Ont. C.A.) -- referred to
Gregorio v. Intrans-Corp. (1994), 4 M.V.R. (3d) 140, 115 D.L.R. (4th) 200, 18 O.R. (3d) 527, 72 O.A.C. 51, 15 B.L.R. (2d) 109, 1994 CarswellOnt 237 (Ont. C.A.) -- referred to
Haskett v. Trans Union of Canada Inc. (2003), 2003 CarswellOnt 692, 169 O.A.C. 201, 224 D.L.R. (4th) 419, 15 C.C.L.T. (3d) 194, 63 O.R. (3d) 577 (Ont. C.A.) -- considered
Hercules Management Ltd. v. Ernst & Young (1997), [1997] 2 S.C.R. 165, 1997 CarswellMan 198, 211 N.R. 352, 115 Man. R. (2d) 241, 139 W.A.C. 241, (sub nom. Hercules Managements Ltd. v. Ernst & Young) 146 D.L.R. (4th) 577, 35 C.C.L.T. (2d) 115, 31 B.L.R. (2d) 147, [1997] 8 W.W.R. 80, 1997 CarswellMan 199 (S.C.C.) -- considered
Hunt v. T & N plc (1990), 4 C.C.L.T. (2d) 1, 43 C.P.C. (2d) 105, 117 N.R. 321, 4 C.O.H.S.C. 173 (headnote only), (sub nom. Hunt v. Carey Canada Inc.) [1990] 6 W.W.R. 385, 49 B.C.L.R. (2d) 273, (sub nom. Hunt v. Carey Canada Inc.) 74 D.L.R. (4th) 321, [1990] 2 S.C.R. 959, 1990 CarswellBC 759, 1990 CarswellBC 216 (S.C.C.) -- referred to
M.J. Jones Inc. v. Kingsway General Insurance Co. (2004), 72 O.R. (3d) 68, 6 C.P.C. (6th) 121, 242 D.L.R. (4th) 139, 2004 CarswellOnt 3244, 189 O.A.C. 272 (Ont. C.A. [In Chambers]) -- considered
Martel Building Ltd. v. R. (2000), 2000 SCC 60, 2000 CarswellNat 2678, 2000 CarswellNat 2679, 36 R.P.R. (3d) 175, (sub nom. Martel Building Ltd. v. Canada) 193 D.L.R. (4th) 1, (sub nom. Martel Building Ltd. v. Canada) 262 N.R. 285, 3 C.C.L.T. (3d) 1, 5 C.L.R. (3d) 161, 186 F.T.R. 231 (note), (sub nom. Martel Building Ltd. v. Canada) [2000] 2 S.C.R. 860 (S.C.C.) -- considered
Plas-Tex Canada Ltd. v. Dow Chemical of Canada Ltd. (2004), 42 Alta. L.R. (4th) 118, [2005] 7 W.W.R. 419, 245 D.L.R. (4th) 650, 27 C.C.L.T. (3d) 18, 357 A.R. 139, 334 W.A.C. 139, 4 B.L.R. (4th) 194, 2004 ABCA 309, 2004 CarswellAlta 1290 (Alta. C.A.) -- considered
Plas-Tex Canada Ltd. v. Dow Chemical of Canada Ltd. (December 13, 2004), Doc. 30657 (S.C.C.) -- referred to
Ryan v. Victoria (City) (1999), 1999 CarswellBC 79, 1999 CarswellBC 80, 50 M.P.L.R. (2d) 1, 234 N.R. 201, 168 D.L.R. (4th) 513, 117 B.C.A.C. 103, 191 W.A.C. 103, 40 M.V.R. (3d) 1, 44 C.C.L.T. (2d) 1, 59 B.C.L.R. (3d) 81, [1999] 6 W.W.R. 61, [1999] 1 S.C.R. 201 (S.C.C.) -- considered
Ultramares Corp. v. Touche (1931), 255 N.Y. 170, 174 N.E. 441, 74 A.L.R. 1139 (U.S. N.Y. Ct. App.) -- considered
Statutes considered:
Class Proceedings Act, 1992, S.O. 1992, c. 6
Generally -- referred to
s. 5(1)(a) -- referred to
Feeds Act, R.S.C. 1985, c. F-9
Generally -- referred to
Health of Animals Act, S.C. 1990, c. 21
Generally -- referred to
s. 64(1) -- referred to
Rules considered:
Rules of Civil Procedure, R.R.O. 1990, Reg. 194
Generally -- referred to
R. 17.02 -- referred to
R. 17.06 -- referred to
R. 17.06(1) -- referred to
R. 21.01 -- referred to
R. 21.01(1)(b) -- considered
R. 21.01(3) -- referred to
R. 21.01(3)(a) -- referred to
Regulations considered:
Feeds Act, R.S.C. 1985, c. F-9
Feeds Regulations, 1983, SOR/83-593
Generally -- referred to
Sched. IV -- referred to
Health of Animals Act, S.C. 1990, c. 21
Health of Animals Regulations, amendment, SOR/91-525
Generally -- referred to
APPLICATION by defendants for order striking out statement of claim as disclosing no reasonable cause of action.
Winkler R.S.J.:
1 In May of 2003 an Alberta cow was diagnosed with Bovine Spongiform Encephalopathy (BSE), a wasting disease in cattle known as "mad cow disease", with the consequence that the borders to the United States, Mexico and Japan were closed to Canadian cattle and beef products on May 21, 2003. This event and the reaction to it had dire consequences for the cattle industry in Canada.
2 In this intended class proceeding the proposed Representative Plaintiff, Bill Sauer, alleges that the infected Alberta cow consumed feed that included ruminant meat and bone meal (RMBM) contaminated with BSE.
3 The Plaintiff claims as against the Attorney General of Canada, as regulator of the cattle industry in Canada, Ridley Inc. the manufacturer of the cattle feed alleged to have been consumed by the infected Alberta cow, and Ridley Corporation Limited, the Australian parent company of Ridley Inc., on behalf of a proposed class defined as " commercial farmers of cattle resident in Ontario, Manitoba, British Columbia, Newfoundland, Nova Scotia, New Brunswick and Prince Edward Island," seeking recovery of economic losses arising from the international border closures.
4 In the Amended Fresh as Amended Statement of Claim the Plaintiff alleges that the federal government was negligent in enacting, or failing to enact in a timely fashion, regulations pursuant to the Health of Animals Act, S.C. 1990, c.21 or the Feeds Act, R.S.C. 1985, c. F-9 with respect to the permissible ingredients in cattle or ruminant feed. It is alleged that Ridley Inc. was negligent and breached its duty to warn as a result of its continued inclusion of RMBM in cattle feed sold in Canada, despite alleged knowledge that RMBM use in feed could cause BSE in Canadian cattle and that Ridley Inc. knew or ought to have known that a diagnosis of BSE would result in a ban of importation of cattle and beef products into the United States. As against the Australian parent company, Ridley Corporation Limited, the Plaintiff claims that the corporate veil should be pierced and the parent company held liable for the alleged wrongs of Ridley Inc.
Nature of the Motions
5 The Attorney General of Canada moves pursuant to Rule 21.01(1)(b) of the Rules of Civil Procedure for an order striking out those portions of the Plaintiffs Statement of Claim alleging negligence with respect to various legislative action or inaction, without leave to amend, on the basis that they fail to disclose a reasonable cause of action against the federal Crown. The Crown submits that legislative action or inaction cannot form the basis for a claim in tort against the Crown on the basis that it is a well established principle that it would be inappropriate for courts to impose liability for the consequences of a particular legislative decision adopted by government. For this reason courts have consistently held that government cannot owe a duty of care in respect of a legislative policy, as distinct from operative, decision, in which category they state the present subject matter falls.
6 Ridley Inc. moves under Rule 21.01(1)(b) for an order striking out the Statement of Claim in its entirety as against it, without leave to amend, because the Statement of Claim does not allege that the Plaintiff, or any class member, purchased any feed from Ridley, fed any product of Ridley, lost a cow or a sale of a cow or with respect to the Plaintiff that he ever exported a cow across an international border. As such the claim pleaded against Ridley is for pure economic loss which Ridley states "falls well outside the bounds of any conceivable recovery under Canadian tort law". Ridley Inc. contends that the proximity necessary to give rise to a prima facie duty of care has not been pleaded, and if the pleaded facts did give rise to a prima facie duty of care, they raise the spectre of indeterminate liability.
7 Ridley Australia brings a motion pursuant to Rule 17.06(1) for an order setting aside the service outside of Ontario of the Statement of Claim on it or staying the proceeding against it, on the ground that service outside of Ontario is not authorized by the Rules of Civil Procedure. It also moves pursuant to Rule 21.01(3)(a) for an order staying or dismissing the proceeding as against Ridley Australia on the ground of lack of jurisdiction over the subject matter of the action as there is no "real and substantial connection" between Ridley Australia or the cause of action alleged against it and the Ontario court. Alternatively, Ridley Australia seeks to strike out the Statement of Claim in its entirety, without leave to amend, under Rule 21.01(1)(b) as disclosing no reasonable cause of action against it. Ridley Australia brings these motions with a concurrent assertion that it is not submitting or attorning to the jurisdiction of this court by doing so. I will have more to say about this attempted reservation of rights below in these Reasons.
8 The Attorney General does not, for the purposes of this motion, or for the purposes of satisfying the requirements of s. 5(1)(a) of the Class Proceedings Act, 1992, S.O. 1992, c. 6, at the certification motion, challenge any of the other causes of action raised by the Plaintiff in the Statement of Claim. All counsel agree that the present motions ought to be heard and determined prior to the certification motion, in the interests of litigation efficiency and to avoid unnecessary costs to their respective clients.
Factual Background
9 For the purposes of a motion to strike, the Court must accept the material facts as pleaded in the Statement of Claim as proven unless patently ridiculous or incapable of proof.
10 The present claim arises from the discovery of BSE in a cow in Alberta in 2003, and the ensuing international bans on the exportation of Canadian cattle and beef products. BSE is a fatal disease that affects the nervous system of infected cattle, characterized by the sponge-like qualities that occur within the brain of an affected animal. BSE is one of a group of diseases called Transmissible Spongiform Encephalopathies, which also includes the rare human disease called Creutzfeldt-Jacob Disease (CJD). A type of CJD, variant CJD (vCJD) is accepted as being caused by the same agent that causes BSE in cattle.
11 BSE is transmitted when healthy cattle eat the remains of infected cattle or other ruminants. The BSE prion is absorbed intact into the blood through the digestive tract. The only other known method of infection is where the prion is injected directly into the bloodstream.
12 Following a serious outbreak of "mad cow disease" in the United Kingdom in the 1980s, the Canadian government responded by introducing a requirement in 1987 that all cattle imported from the U.K. be from herds certified to be free of BSE. In 1990, the government of Canada took two actions in respect of BSE. BSE was made a reportable disease in Canada and an outright ban was placed on the importation of live cattle from the U.K. and Ireland. All remaining cattle that had been imported from the U.K. since 1982 were placed in a monitoring program. Also in 1990, Canada re-enacted a Feeds Act Regulation. Schedule IV to the Regulation specifically permitted the continued incorporation of RMBM into cattle feed.
13 In 1993, one of the monitored cattle from the U.K. in Alberta tested positive for BSE.
14 According to the government, 191 cattle were imported into Canada from the U.K. and Ireland between 1982 and 1990. At least 80 of these cattle could have entered the cattle feed system through rendering after slaughter or death from some other cause. Of that number, at least 10 cows were from herds in U.K. that contained animals diagnosed as having BSE. In early 1994, the government ordered the remainder of the original 191 cattle then in Canada to be exported or destroyed.
15 In 1996, the World Health Organization (WHO) identified the practice of rendering ruminant protein and incorporating it into ruminant feed as a public health issue. In April 1996, the WHO issued a recommendation that "all countries should ban the use of ruminant tissues in ruminant feed".
16 In August 1997, Canada enacted Regulations Amending the Health of Animals Regulations, S.O.R./97-362. They were enacted pursuant to section 64(1) of the Health of Animals Act, and prohibited the feeding of protein derived from mammals to ruminants, with the exception of porcine- or equine-derived protein. This ban came into effect in Canada in October 1997. A similar ruminant to ruminant ban became effective in the United States in August 1997.
17 There were no further cases of BSE in Canada from 1993 until 2003, six years after the ban was introduced, when the first case of BSE in a Canadian-born cow was diagnosed. Following this discovery, The United States, Mexico and Japan closed their borders to Canadian beef and live cattle.
18 The United States re-opened its markets to Canadian beef from cattle under 30 months of age in August 2003 and as of July 2005, live cattle exports to the United States have resumed for slaughter cattle aged 30 months or less.
19 In the result, the Plaintiff alleges that one or more of the 80 animals from the U.K. were infected with BSE, that one or more of these infected animals were rendered and incorporated into cattle feed, and ultimately infected other cattle with BSE. It is alleged that one of these infected cattle died and was rendered in or about the fall of 1996 and that the rendered remains of this animal were incorporated into the cattle feed manufactured and sold by the predecessor to Ridley Inc.
20 On January 31, 2003, a cow in northern Alberta was identified at slaughter as a "downer" or infected cow. The head was sent to the Alberta provincial laboratory for BSE testing. On May 16, 2003 the province made a preliminary diagnosis of BSE. This diagnosis was subsequently confirmed by the Canadian Food Inspection Agency's National Centre for Foreign Animal Disease on May 18, 2003 and by the CVL International Reference Laboratory in Great Britain on May 20, 2003.
21 The federal government identified the most likely source of BSE for the infected cow as being a product known as Feed-Rite Calf-Glow 18% SR Calf Starter w/DCX produced at the Feed-Rite mill in St. Paul, Alberta, that contained ruminant RMBM contaminated with the BSE prion. Feed-Rite was the predecessor company to Ridley Inc.
22 Mel McCrae of Baldwinton, Saskatchewan was the original owner of the infected cow which was born on his farm in March 1997. He had purchased the Feed-Rite feed in the spring of 1997 and fed it to the infected cow when it was a calf. Mel McCrae is not a party to this proceeding.
The Parties and the Claims
23 The Defendant Ridley Inc., a public company, is a corporation incorporated pursuant to the laws of Manitoba. It manufactures and sells animal feed products. Ridley is the successor to Feed-Rite Ltd. and is responsible for all liabilities of Feed-Rite. Ridley Australia, a corporation incorporated pursuant to the laws of Australia, is the parent company of Ridley Inc. and owns 69% of the subsidiary company. Ridley Inc. owns and operates a stock feed manufacturing plant at Mitchell, Ontario and carries on business in Ontario. Ridley Australia, although it is the largest stock feed company in Australia, does not carry on business in Ontario directly.
24 The claims against the federal Crown relate to allegations regarding the regulation of animal and public health and, more specifically, the regulation of feed.
25 The proposed Representative Plaintiff, Bill Sauer, resides in the Town of Niagara Falls, Ontario, and at all material times was engaged in the commercial farming of cattle.
26 The putative class for which the proposed representative Plaintiff seeks certification as a class proceeding under the Class Proceedings Act, 1992 is estimated to include some 100,000 farmers. This number is based on farms generating a certain threshold income level according to a Statistics Canada report. Accordingly, the class size may be somewhat underestimated.
27 The Plaintiff's claim may be summarized as a claim for $200,000 in general and aggravated damages on behalf of each of the approximately 100,000 Canadian farmers, for a total in excess of $20 billion, when the claim for $100,000,000 in punitive damages from the corporate defendants is included. In addition, the plaintiff claims damages for "past, present and future loss of income, as well as diminution of value of livestock, business interests and real property".
28 Since the Plaintiff does not claim that he purchased any Ridley Inc. product, sold a cow into the United States or elsewhere or had a cow infected with BSE, the claim is for economic losses "suffered...as a result of the international bans on the importation of Canadian beef and cattle following the May 20, 2003 confirmation of the diagnosis of bovine spongiform encephalopathy (BSE) in a cow from Alberta...".
The Claim Against Ridley Inc.
29 As against Ridley Inc. the Plaintiff pleads breaches of a duty of care and of a duty to warn. In particular, it is pleaded that Ridley Inc. owed a duty of care to the Plaintiff to use all due care in ensuring its animal feed products were safe, and was grossly negligent in the manufacture and sale of the calf starter to Mr. McCrae. As stated previously, it is to be noted that Mr. McCrae is not the plaintiff in this action.
30 It is also pleaded that Ridley Inc. failed to warn its product purchasers of risks involved in using RMBM in calf starter and thereby "represented" to the plaintiff, who was entitled to rely thereupon, that its products were safe, and the plaintiff was entitled to the reasonable expectation that Ridley Inc. would not knowingly market dangerous products. Again, it is not pleaded that the Plaintiff Mr. Sauer purchased or used any Ridley Inc. products.
31 The Statement of Claim acknowledges that Ridley Inc. lawfully incorporated RMBM into its feed products prior to August 1997, that Ridley Inc. complied with the 1997 Canada feed ban, and that if Canada had not permitted use of RMBM in cattle feed, Ridley Inc. would not have done so and the infected cow would not have contracted BSE.
32 The Plaintiff pleads that Ridley Inc. was aware since May 1996, when the feed industry in Australia placed a voluntary ban on RMBM incorporation into ruminant feed, that RMBM was potentially hazardous to the health of cattle, and particularly unsafe when incorporated into feed intended for calves. Despite being aware of the hazardous nature of RMBM, Ridley Inc. continued to incorporate RMBM into feed marketed throughout Canada, and intended for cattle and calves in the North American market, until it was prohibited by the 1997 legislation.
33 The Plaintiff pleads that Ridley Inc. knew or ought to have known that a finding of a single domestic BSE case would result in an importation ban of Canadian cattle and beef products into the United States.
34 It is pleaded that the Ridley Inc. calf starter containing RMBM supplied by a rendering plant in Edmonton, Alberta, contained the BSE prion that was transmitted to the infected cow when it was still a calf in or about May 1997.
35 The Plaintiff pleads that Ridley Inc.'s failure to ensure that its products were safe led to BSE in the infected cow as a result of being fed the contaminated feed. Ridley's failure to cease incorporating RMBM into cattle feed products following the ban of RMBM in Australia in May of 1996 constituted gross and willful negligence.
36 It is pleaded that Mr. McCrae, who owned the infected cow and who purchased the calf starter in the spring of 1997, was aware that feeding ruminant remains to cattle was a potential means of BSE transmission, but had no idea that the calf starter contained RMBM because there was no warning label on the feed bags that the product contained ruminant RMBM. Had he known that the feed contained ruminant RMBM in the spring of 1997, he would not have bought the feed nor fed it to his calves.
37 The Statement of Claim asserts that but for the breach of the duty to warn by Ridley Inc., the infected cow would not have contracted BSE and there would have been no international bans on the importation of Canadian cattle and beef in May of 2003.
38 Finally, it is pleaded that a failure to warn feed purchasers of the dangers associated with the consumption of calf starter, inferentially at the time of the sale of the product in the spring of 1997, constituted gross negligence and a breach of the duty to warn on the part of Ridley Inc. The duty to warn purchasers of the potential danger of using their products extended not only to purchasers of those products, Mr. McCrae, but also to the Plaintiff and all of the Class members. I note here that this means, in the context of this pleading, non-users and non-purchasers of the products and to all Canadian cattle farmers generally.
Law and Analysis
39 A defendant may move to strike a pleading on the ground that it discloses no reasonable cause of action, that is, if it is "plain and obvious" that it discloses "no reasonable cause of action" so that the Plaintiff cannot succeed. A claim will not be dismissed simply because it is novel. See Rules of Civil Procedure, Rule 21.01; Hunt v. T & N plc, [1990] 2 S.C.R. 959 (S.C.C.), at 971 and 980; Falloncrest Financial Corp. v. Ontario (1995), 27 O.R. (3d) 1 (Ont. C.A.), at 5 -6.
40 On this motion, Ridley Inc. asserts that it is plain and obvious that it owed no duty of care to the plaintiff in the circumstances. This assertion is based on the underlying proposition that the claim of the plaintiff is for pure economic loss in that he was not a purchaser of Ridley Inc. feed and did not lose any cattle due to the use of the feed. As such, Ridley Inc. argues that the transaction between it and the actual farmer whose calf became infected does not provide a foundation for a duty of care owed to all cattle farmers in Canada for economic losses allegedly flowing as a consequence from the discovery of a BSE infection in a calf fed with RMBM feed it distributed.
41 Ridley Inc. states that its position on the motion is supported by Canadian law, which, it submits, places limits on the creation of a duty of care owed in respect of lawful actions allegedly causing pure economic losses suffered by others. Economic losses suffered by Canadian farmers arising from the closure of the United States border to Canadian cattle and beef do not fall into any category recognized by Canadian law as giving rise to a private law duty of care on the part of a commercial actor such as Ridley Inc. Accordingly, Ridley Inc. contends that the present case is one involving remote pure economic loss with indeterminate scope precluding a duty of care on policy grounds.
42 A pure economic loss is defined as a financial loss which is not causally consequent upon physical injury to the Plaintiff's own person or property. See Bruce Feldthusen, Economic Negligence: The Recovery of Pure Economic Loss. Fourth Edition (Toronto: Carswell, 2000) at p. 1. The Plaintiff acknowledges in his factum at para. 136 that "[a]ccording to this definition, the damages claimed by the plaintiff and intended class members for loss of income, diminution of value of business interests, livestock, and real property in this action are properly characterized as pure economic loss".
43 The Plaintiff concedes that the Canadian courts have not yet recognized the duty of care alleged in this case. In that respect, the Plaintiff contends that the question on the present motion is similar to the issue in Cooper v. Hobart, [2001] 3 S.C.R. 537 (S.C.C.), at 547, where the court stated that "[t]he question is therefore whether the law of negligence should be extended to reach the situation".
44 In considering whether the law of negligence should be extended, it is trite that the risk of harm must be foreseeable to a reasonable person. Forseeability, alone, however is not enough. There is also the factor of proximity, or neighbourhood, and the policy considerations that may serve to negative the imposition of a duty notwithstanding that there was a foreseeable harm and a sufficiently proximate relationship. (See Anns v. Merton London Borough Council (1977), [1978] A.C. 728 (U.K. H.L.)). This two part test, first determining whether a prima facie duty of care exists and then determining whether there are any policy considerations that would serve to negative such a duty has been adopted by the Supreme Court of Canada as the appropriate method for dealing with novel tort claims or novel categories of recognized torts. In revisiting the Anns test in Cooper, the Court stated that its significance "rests in the recognition that policy considerations play an important role in determining proximity in new situations". The present case is such a situation.
45 It is clear from Cooper, therefore, that policy considerations are paramount, both in respect of the proximity analysis and as part of the final analysis prior to the imposition of a duty of care in the particular factual matrix of the case before the court. However, it is equally clear that there are certain limitations imposed on the court with respect to the policy analysis where a pleadings motion is concerned. As stated by Feldman J.A. in Haskett v. Trans Union of Canada Inc. (2003), 63 O.R. (3d) 577 (Ont. C.A.) at para.. 24:
On a Rule 21 motion, the court applies this two-stage analysis to the facts as pleaded in the Statement of Claim in order to determine not whether a duty of care will be recognized, but whether it is plain and obvious that no duty of care can be recognized. If it is not plain and obvious then the action can proceed and the issue will be determined at a trial. In that context, the court may well recognize potential policy concerns at the second stage but should be circumspect in using those policy concerns to determine, without a Statement of Defence and without any evidence, that it is plain and obvious that there is no cause of action... (Emphasis added, internal citations omitted.)
46 The Supreme Court of Canada stated in Martel Building Ltd. v. R. , [2000] 2 S.C.R. 860 (S.C.C.), that claims concerning the recovery of economic losses, as a cause of action, are identical to other claims in negligence, that is, the plaintiff must establish a duty, a breach, damage and causation. The availability of recovery for economic losses is the result of a jurisprudential evolution. Traditionally the common law did not allow recovery where the plaintiff had suffered neither physical harm nor property damage. However, the evolution of the law has incorporated added policy based restrictions in that it is currently the case that in claims based on recovery for economic loss "...the threshold question of whether or not to recognize a duty of care receives added scrutiny relative to other claims in negligence". Therefore, although it is now recognized that damages for economic loss absent physical or proprietary harm may be recovered, there are limited circumstances where such damages have been awarded to date. The Court addressed the scarcity of successful economic loss claims directly in Martel at para. 37:
To a large extent, this caution derives from the same policy rationale that supported the traditional approach not to recognize the claim at all. First, economic interests are viewed as less compelling of protection than bodily security or proprietary interests. Second, an unbridled recognition of economic loss raises the spectre of indeterminate liability. Third, economic losses often arise in a commercial context, where they are often an inherent business risk best guarded against by the party on whom they fall through such means as insurance. Finally, allowing the recovery of economic loss through tort has been seen to encourage a multiplicity of inappropriate lawsuits.
47 Before I turn to the Cooper reiteration of the Anns test in this analysis, it is important to describe the nature of the claim being advanced by the plaintiff. As stated previously, there is no direct relationship between the plaintiff and Ridley Inc. in contract or arising from the usage of the Ridley Inc. product by the Plaintiff. Nor is it alleged that there is any other direct commercial relationship between them. Similarly, the Plaintiff has not lost any cattle or suffered any property damage from usage of the Ridley Inc. product. Rather, the Plaintiff claims, in essence, that Ridley Inc. negligently, recklessly or knowingly sold a product to another farmer that had the potential to, and did, shut down the Canadian cross border cattle trade when used by the purchasing farmer. As a result, the Plaintiff alleges that Ridley Inc. is liable to Canadian cattle farmers at large. The policy considerations and the implications for the law of tort raised by this claim are manifest.
48 As stated in Cooper at para. 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 established in the first part of this test, 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 that word. If foreseeability and proximity are established at the first stage, a prima facie duty of care arises. At the second stage of the Anns test, the question still remains whether there are residual policy considerations outside the relationship of the parties that may negative the imposition of a duty of care...[w]e think it useful expressly to ask, before imposing a new duty of care, whether despite foreseeability and proximity of relationship, there are other policy reasons why the duty should not be imposed. (Emphasis added.)
49 Simply put, the first element of the restated Anns test in Cooper requires a foreseeable risk of harm arising from the act of the defendant. Examined closely, it is apparent that the essence of the Plaintiff's claim is an allegation of harm flowing from the closing of borders to Canadian cattle and beef products. All of the Plaintiff's claims for damages or relief hinge on the assertion that the defendant owed a duty to take reasonable care to ensure that its actions or conduct did not result in this occurrence. It is against this claim that the foreseeability element must be measured.
50 The factual allegations in support of the foreseeability of the closing of borders to Canadian cattle and beef products as a result of the discovery of a single BSE case are set out in paras. 35-41 and 44 of the Statement of Claim. They are as follows:
35. On July 21, 1989 the United States enacted a law that prohibited the importation of live cattle from countries where a native case of BSE was confirmed. Initially this ban only affected the importation of live cattle from the United Kingdom (including Northern Ireland).
36. By the end of July 1989 the United States, Israel, Australia, Sweden and New Zealand had imposed a total ban on the importation of live cattle from the United Kingdom (UK).
37. In addition, Japan, Morocco, Canada and South Africa had all introduced requirements by this time that all live cattle imported from the UK be from herds certified as free of BSE. In Canada, this requirement was introduced in 1987.
38. In July of 1989 the European Union banned the importation from Great Britain of live cattle born before 18 July 1988, or born to dams in which BSE was suspected or officially confirmed. On March 1st of 1990 this ban was upgraded to include all live cattle other than those less than 6 months of age.
39. In November of 1989 the United States enacted an emergency ban on the importation of meat products (including meat and bonemeal) from countries with confirmed cases of BSE. This ban was made permanent in December of 1991.
40. Enforcing the laws enacted in 1989 and their successors, the United States banned the importation of live cattle and beef products from the United Kingdom (1989), Republic of Ireland (1989), Switzerland (1990), Oman (1990), France (1991), Portugal (1994), the Netherlands (1997), Luxembourg (1997) and Belgium (1997).
41. In 1997 the United States extended the import ban to include all the countries of Europe, whether a native case of BSE had been diagnosed or not.
. . . . .
44. In 1994 [Canada] adopted a policy that the importation of cattle and beef would be banned from any country with a confirmed domestic case of BSE, in accordance with an identical policy in the United States. This policy was known colloquially as 'one cow and you're out'.
51 In my view, these alleged facts are neither patently ridiculous nor incapable of proof. Accordingly, I must accept them as proven for the purposes of this motion. When considered in conjunction with other allegations in the Statement of Claim which include the voluntary ban on RMBM in Australia in 1996 as a prudent practice because of the potential for BSE infection from the use of such feed, the participation of Ridley Australia in the industry group that concluded a voluntary ban was advisable and the allegation that Ridley Australia and Ridley Inc. shared a common chairman of the board of directors, I am satisfied that the harm alleged by the Plaintiff was reasonably foreseeable by Ridley Inc.
52 I cannot accede to the argument of Ridley Inc. that the legislative framework existing when the product was sold to Mr. McCrae is a dispositive indicator that there was no objective reasonable foreseeability of the harm alleged by the Plaintiff. The basis for this submission is that Canada permitted RMBM for mixing with cattle feed under the Feeds Act Regulation until enacting the RMBM feed ban in 1997, and further, that at the time the ban was enacted, it was publicly stated by the government that Canada was known to be BSE free.
53 While this may be advanced at a later stage as part of Ridley Inc.'s defence, it is just that, a defence, rather than a "radical defect" in the Plaintiff's claim that serves as a bar to the action at the pleadings stage. As the Supreme Court of Canada stated in Ryan v. Victoria (City), [1999] 1 S.C.R. 201 (S.C.C.) at para. 29:
Legislative standards are relevant to the common law standard of care, but the two are not necessarily co-extensive. The fact that a statute prescribes or prohibits certain activities may constitute evidence of reasonable conduct in a given situation, but it does not extinguish the underlying obligation of reasonableness. ... By the same token, mere compliance with a statute does not, in and of itself, preclude a finding of civil liability. Statutory standards can, however, be highly relevant to the assessment of reasonable conduct in a particular case, and in fact may render reasonable an act or omission which would otherwise appear to be negligent. This allows courts to consider the legislative framework in which people and companies must operate, while at the same time recognizing that one cannot avoid the underlying obligation of reasonable care simply by discharging statutory duties. (Emphasis added, internal citations omitted.)
54 Foreseeability simpliciter is not sufficient to establish the existence of a duty of care. It must be found to exist in conjunction with proximity. Proximity characterizes the type of relationship in which a duty of care arises. In Canadian National Railway v. Norsk Pacific Steamship Co., [1992] 1 S.C.R. 1021 (S.C.C.) at p. 1151, McLachlin J. (as she then was) stated:
[p]roximity may be usefully viewed, not so much as a test in itself, but as a broad concept which is capable of subsuming different categories of cases involving different factors
(See also Cooper at para. 35)
55 There are a number of established "categories of cases" dealing with pure economic loss in Canada. However, it was common ground between the plaintiff and Ridley Inc. that the claim as pleaded does not fit into any established category. This is not fatal to the Plaintiff's claim. As stated by the Supreme Court in Cooper at para. 31:
...
56 The Plaintiff asserts that a duty of care exists in the circumstances of this case by way of analogy to the existing categories, particularly with respect to those cases in the recognized "duty to warn" category.
57 The Plaintiff contends that the "duty to warn" does not require a contractual relationship and thus applies to Ridley Inc. in respect of all cattle farmers in Canada, including himself. He states that the support for this proposition is found in the statement of McLachlin J. in Bow Valley Husky (Bermuda) Ltd. v. Saint John Shipbuilding Ltd., [1997] 3 S.C.R. 1210 (S.C.C.), at 1229:
The law may be simply stated. Manufacturers and suppliers are required to warn all those who may reasonably be affected by potentially dangerous products: Lambert v. Lastoplex Chemicals Co, [1972] S.C.R. 569, and Hollis v. Dow Corning Corp. [1995] 4 S.C.R. 634. This duty extends even to those person who are not party to the contract of sale: Rivtow Marine Ltd. v. Washington Iron Works [1974] S.C.R. 1189. The potential user must be reasonably foreseeable to the manufacturer or supplier-manufacturers and suppliers (including a builder-supplier like SJSL) do not have the duty to warn the entire world about every danger that can result from improper use of their product. (Emphasis added.)
58 While Ridley Inc. acknowledges that a finding of a "duty to warn" does not require the existence of a contractual relationship, it argues that the party to whom the duty is owed must at the very least be a user of the product in issue. As stated in its reply factum, there is "no case in Canada where a duty has been found with respect to pure economic loss suffered by a third party non-user of a manufactured product". No such case was drawn to my attention by the Plaintiff. The recent case of Plas-Tex Canada Ltd. v. Dow Chemical of Canada Ltd. (2004), 245 D.L.R. (4th) 650 (Alta. C.A.) leave to appeal denied [2004] S.C.C.A. No. 542 (S.C.C.), relied upon by the Plaintiff, is of no assistance on the point, since it was found that there was a direct property interest of the respondents involved.
59 In my view, the claim here is not analogous to the established category of cases where the imposition of a duty to warn has been a basis for permitting recovery for pure economic loss as opposed to cases where a duty to warn arises in respect of personal injury or damage to property. The cases in the category that were brought to my attention deal with claims between actual contracting parties or users of the products at issue or where there is a direct property interest involved. The direct proximal relationship apparent in those fact situations are such that any principles emanating from them cannot be logically extended to the present factual matrix. In contrast, here the Plaintiff did not purchase the product from Ridley Inc., he was not a user of the product and, in addition, there is no allegation that he had a direct property interest in the assets or operations of McCrae, the actual purchaser whose animal was infected with BSE.
60 The very essence of the harm alleged by the Plaintiff is based on the introduction into the marketplace of a contaminated feed product. The alleged negligence, therefore, is not a failure to warn of the dangers of the product but rather a failure to forebear from placing the product in the market. There is no suggestion in the claim that the product could have had a proper safe use. The claim is based in harm resulting to the industry at large. It is alleged that harm resulted from the sale of a product, the existence of which had the potential to and did disrupt the whole of the cattle industry in Canada. In keeping with those allegations, a warning issued only to purchasers would not absolve the seller from the theory of liability advanced by the Plaintiff. When all of these factors are considered it is clear that the duty alleged here is not analogous to the "duty to warn" category of cases permitting recovery for pure economic losses.
61 If a duty of care is owed by Ridley Inc. to the Plaintiff, and others similarly situated in the putative class, it must be grounded in an application of the principles enunciated in Anns and Cooper. Having found that the harm alleged was reasonably foreseeable, the next step is to conduct an analysis of the "proximity" of the relationship between Ridley Inc. and the Plaintiff.
62 The unsatisfactory nature of a bare "proximity" analysis has been the subject of comment by the Supreme Court. As La Forest J. stated in Hercules Management Ltd. v. Ernst & Young, [1997] 2 S.C.R. 165 (S.C.C.), at para. 23- 24:
...the term "proximity" itself is nothing more than a label expressing a result, judgment or conclusion; it does not, in and of itself, provide a principled basis on which to make a legal determination.
. . .
The label "proximity", as it was used by Lord Wilberforce in Anns, supra, was clearly intended to connote that the circumstances of the relationship inhering between the plaintiff and the defendant are of such a nature that the defendant may be said to be under an obligation to be mindful of the plaintiff's legitimate interests in conducting his or her affairs.
63 The preceding passages from Hercules were quoted by Iacobucci and Major JJ. writing for the court in Martel at para. 49. They went on to state in para. 50:
So as to infuse the term "proximity" with greater meaning, the courts take into account a variety of factors in ascertaining whether the relationship between two parties gives rise to a prima facie duty of care. See McLachlin J. in Norsk Pacific Steamship Co., supra, at p. 1153:
In determining whether liability should be extended to a new situation, courts will have regard to the factors traditionally relevant to proximity such as the relationship between the parties, physical propinquity, assumed or imposed obligations and close causal connection. And they will insist on sufficient special factors to avoid the imposition of indeterminate and unreasonable liability.
64 Considering the issue of proximity again in Cooper, McLachlin C.J.C and Major J., writing for the Court, stated at para. 34:
Defining the relationship may involve looking at expectations, representations, reliance, and the property or other interests involved. Essentially, these are factors that allow us to evaluate the closeness of the relationship between the plaintiff and the defendant and to determine whether it is just and fair having regard to that relationship to impose a duty of care in law upon the defendant.
65 This latter passage from Cooper follows an earlier statement in the reasons relating to the policy component of the proximity analysis at para. 30:
...[T]he 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. (Emphasis added).
66 It is clear from the preceding authorities that where a claim asserting a duty of care does not fall within a recognized category, the proximity analysis is a contextual one based on the factual underpinning of the claim.
67 In addressing the consideration of the relationship between the parties in light of the "expectations, representations, reliance, and the property or other interests involved", Ridley Inc. relies on the fact that the Plaintiff did not purchase the feed, did not own an infected animal and did not participate in cross border shipment of cattle or beef products. Hence, Ridley Inc. argues, there is no relationship, especially one that can be said to be close and direct, as between the Plaintiff and Ridley Inc.
68 Ridley Inc.'s assertion regarding the relationship does not, however, fully address the allegations in the Statement of Claim with respect to BSE. The thrust of those allegations is that one infected cow constitutes an outbreak resulting in cataclysmic consequences for the industry as a whole within the borders of a particular country. The current industry and governmental practice does not limit the reactive measures to what might otherwise appear to be proportional in terms of the traditional notions of proximity in physical, temporal or geographic terms in dealing with a BSE outbreak. Accordingly, where BSE is concerned, it brings the supplier of feed to one cattle owner into proximity with all other cattle owners. If feed is supplied which causes an outbreak of BSE, regardless of how isolated, all cattle and cattle owners are affected. In other words, all cattle owners are treated as one contiguous whole.
69 Proximity is a relative term. Here, there are recognized international procedures in place that in essence mandate a relationship between otherwise disparate interests where BSE is at issue. There does not seem to be any policy reason to ignore this reality in a consideration of whether a proximal relationship may exist between parties who, in other circumstances, might not be regarded as proximate. On the facts alleged in the Statement of Claim, I find that it is not plain and obvious that a prima facie duty of care could not be found to exist in these circumstances notwithstanding that there is no recognized category into which the claim falls.
70 In his paper Establishing Economic Loss, The Law Society of Upper Canada Special Lectures 2005: The Modern Law of Damages, John Lorn McDougall, Q.C., surveys the developments in the law from Anns to Cooper and concludes at p. 24-25:
It is helpful that the limited exclusionary rule seems to have been displaced by a policy based analysis of proximity. For recovery of pure economic loss, the five Feldthusen categories live on as a means chosen by the court to indicate the limitations on the prospective development of recovery for pure economic loss. They should not operate to limit extension of recovery of damages for pure economic loss but should instead serve as guideposts. It would be helpful if courts desisted from denying the existence of an overarching principle for recovery. There is one: it is fairness simpliciter. The trick is to make the determination in a principled manner. It is encouraging that, in Cooper, the court has drawn together the disparate views expressed in previous cases and recognized that compensation for pure economic loss is mostly about a balancing of private interests and policy considerations.
71 For the purposes of this motion the "balancing of private interests and policy considerations" is completed by the analysis under the second stage of the restated Anns test as set out in Cooper. It may be stated as follows: notwithstanding the possible existence of a prima facie duty of care, are there other policy reasons that would serve to negate the imposition of a duty in the circumstances. As stated in Cooper at para. 37:
...residual policy considerations fall to be considered here. These are not concerned with the relationship between the parties, but with the effect of recognizing a duty of care on other legal obligations, the legal system and society more generally. Does the law already provide a remedy? Would recognition of the duty of care create the spectre of unlimited liability to an unlimited class? Are there other reasons of broad policy that suggest that the duty of care should not be recognized? Following this approach, this Court declined to find liability in Hercules Managements, supra, on the ground that to recognize a duty of care would raise the spectre of liability to an indeterminate class of people.
72 Similarly, the Court stated in para. 39 of Cooper:
...where a duty of care in a novel situation is alleged, as here, we believe it necessary to consider both steps of the Anns test as discussed above. This ensures that before a duty of care is imposed in a new situation, not only are foreseeability and relational proximity present, but there are no broader considerations that would make imposition of a duty of care unwise.
73 With respect to this second stage policy analysis, however, the caution stated by the Court of Appeal in Haskett bears repeating:
... the court may well recognize potential policy concerns at the second stage but should be circumspect in using those policy concerns to determine, without a Statement of Defence and without any evidence, that it is plain and obvious that there is no cause of action...
This is consistent with the general approach adopted by the Supreme Court of Canada in respect of pleadings motions: that the plaintiff should not be "driven from the judgment seat" prematurely. (See Hunt v. T & N plc, at para. 18.)
74 In this case, the desirability of avoiding the "spectre of unlimited liability to an unlimited class" was the main argument against the imposition of a duty of care on policy grounds advanced by Ridley Inc. A secondary argument was advanced on the proposition that imposing a duty of care on Ridley Inc. in the circumstances was akin to making it an insurer for the cattle industry in circumstances where the industry participants had not paid anything to Ridley Inc. in return. Still another argument was advanced regarding the fact that the regulations in place until August 1997 permitted Ridley Inc. to use RMBM in its feed products.
75 Let me deal first with the "insurance argument" as I do not find it persuasive in the context of this case. This argument was specifically addressed in Cooper in obiter. There the Supreme Court held that if liability were imposed on the regulatory body, it would have the effect of making the general taxpaying public a private loss insurer. Similarly, the registrar in Cooper was essentially being pursued for negligence in relation to the misconduct of a participant in the mortgage industry. Here, the claim against Ridley Inc. is based on its own alleged misconduct. It is not a government regulator who must resort to the public purse with respect to its liabilities. Moreover, the Plaintiff is not seeking to hold Ridley Inc. liable for anything other than what he contends are the consequences of Ridley Inc.'s own conduct. Accordingly, Ridley Inc. is not, in these circumstances, in danger of becoming the insurer in respect of losses caused by the wrongful conduct of another.
76 In like fashion I am not attracted by the "legislative compliance" argument of Ridley Inc. In my view this argument appears to be based on an over-reaching interpretation of a passage in Ryan that deals with the prospect of specific legislative exemptions from liability, as opposed to a general exemption flowing from simple compliance. As stated in Ryan at para. 24:
The existence of a duty of care must be considered in light of all relevant circumstances, including any applicable statutes or regulations. Thus, a legislative exemption from liability can negate a duty of care in circumstances where that duty would otherwise arise. (Emphasis added.)
In fact, as noted above, Ryan specifically holds that legislative compliance is a factor in determining whether a standard of care has been met. Further, Major J. expressly states in Ryan that "mere compliance with a statute does not, in and of itself, preclude a finding of civil liability". Accordingly, if statutory or regulatory compliance does not serve to preclude a finding of liability with respect to existing torts, it is difficult to conclude that such compliance affords a sound policy reason to negate the imposition of a previously unrecognized duty of care.
77 Ridley Inc. approached its main argument regarding "indeterminate liability" on a dual footing:
(a) the "indeterminate" liability to the putative class with respect to the losses suffered by that class; and
(b) the indeterminate "liability" to an unknown number of secondary level of plaintiffs potentially including all of those doing business with the putative class members. (This group is not included in the proposed class.)
78 The phraseology "liability in an indeterminate amount for an indeterminate time to an indeterminate class" was first enunciated by Cardozo J.A. in the seminal case of Ultramares Corp. v. Touche, 255 N.Y. 170 (U.S. N.Y. Ct. App. 1931). The claim at issue was framed in negligence relating to an audit opinion, which would be characterized today as a claim in negligent misrepresentation, one of the recognized categories where recovery for pure economic loss is available. Cardozo J.A., writing for the court, held that while the actual party contracting for the audit opinion could bring a claim in negligence those parties outside the contractual relationship could not do so. As he stated at 189:
Our holding does not emancipate accountants from the consequences of fraud. It does not relieve them if their audit has been so negligent as to justify a finding that they had no genuine belief in its adequacy, for this again is fraud. It does no more than say that if less than this is proved, if there has been neither reckless misstatement nor insincere profession of an opinion, but only honest blunder, the ensuing liability for negligence is one that is bounded by the contract, and is to be enforced between the parties by whom the contract has been made. We doubt whether the average business man receiving a certificate without paying for it and receiving it merely as one among a multitude of possible investors, would look for anything more.
79 As the law has evolved, the contractual proximity concept enunciated by Cardozo J.A. with respect to cases sounding in negligent misrepresentation has been relaxed. It is no longer the case that a duty is owed only to those in a contractual relationship with the person making the statement. However, the concern about indeterminancy has been maintained as a restriction on the imposition of liability. In the seminal case of Hercules, La Forest J. addressed this concern at paras 27 and 28 by holding that the "potentially infinite liability" inherent in negligent misrepresentation cases could be circumscribed by requiring, in addition to a prima facie duty of care:
...(a) that the defendant know the identity of either the plaintiff or class of plaintiffs who will rely on the statement, and (b) that the reliance losses claimed by the plaintiff stem from the particular transaction in respect of which the statement at issue was made.
80 By imposing restrictions based on the representor's knowledge of the class that might rely on, or use, a representation and actual use of the representation by the representees, La Forest J. considered that the secondary policy concerns had been adequately addressed. As he stated at para. 28:
...In other words, these further requirements serve a policy-based limiting function with respect to the ambit of the duty of care in negligent misrepresentation actions.
81 In a manner of speaking, it is fitting that the "indeterminate liability" concerns were first enunciated in a negligent misrepresentation case in that if any analogy to existing categories could be drawn in respect of the claim asserted in this case, negligent misrepresentation cases would be the most likely candidates. In a negligent misrepresentation case, the proximal relationship between the parties giving rise to prima facie duty of care arises with the making of a statement in certain circumstances. Here, the relationship between Ridley Inc. and the Plaintiff may be said to have arisen when Ridley Inc. placed feed containing RMBM into the stream of commerce.
82 Similarly, the policy analysis with respect to whether a duty of care should be negated in a negligent misrepresentation case turns on a consideration as to whether the representation was 1) made to a known class, and, 2) used by that class, or a member of that class, for the purpose for which it was made. By analogy, Ridley Inc. allegedly knew or ought to have known that cattle farmers throughout Canada were at risk should a BSE outbreak occur as a result of the normal use of its product. Reading the Statement of Claim generously with regard to pleading deficiencies lea