Canada: Paradis Honey: Novel Framework For Public Authority Liability Stickin' Around, For Now

Last Thursday, the Supreme Court of Canada denied leave to appeal in the case of Paradis Honey Ltd. v. Canada. As we've written about previously, the case suggest an entirely new legal framework for addressing claims for damages against public law authorities, replacing the traditional private law analysis with a new cause of action grounded in public law principles. The case raises important implications for class actions.

As the Supreme Court does not provide reasons on leave decisions, one can only speculate on the Court's rationale for denying leave in this case. Justice Stratas' comments on when an action may be brought for monetary relief based on public law principles are, strictly speaking, obiter, and so it is possible the Court preferred to wait for their direct application before weighing in on the issue. Although a decision of the Federal Court of Appeal is not binding on provincial courts, we expect Justice Stratas' comments to have considerable influence over creative class action counsel who are considering claims against the Crown, and over the courts tasked with addressing those claims.

Background

A group of commercial beekeepers started a class action against the Minister of Agriculture and Agri-Food and the Canadian Food Inspection Agency (collectively, the "defendants") for losses because a new, stricter policy prohibited them from importing honeybee colonies. The plaintiffs argued that the defendants acted without lawful authority in adopting this import policy and breached their duty of care, causing the plaintiffs harm in the form of lost profits.

Justice Stratas allowed the appeal of the lower court decision to strike the claim for failing to disclose a reasonable cause of action. Two aspects of his decision are significant.

First, on the question of whether the Supreme Court's decision in R. v. Imperial Tobacco Canada Ltd. creates a policy bar to recovery, Justice Stratas found that Imperial Tobacco does not establish "any hard and fast rule that decisions made under a general public duty, government policy or core policy are protected from a negligence claim."

Second, Justice Stratas proposed that instead of addressing the wrongful conduct of public authorities through the traditional framework of negligence, a new cause of action should be recognized that would be based on public law principles. That cause of action would allow individuals to claim against public authorities who have acted in an indefensible or unacceptable manner. The monetary relief for such a claim would be subjected to the court's remedial discretion.

The New Framework

In explaining the concepts of "unacceptability" or "indefensibility," Justice Stratas borrowed from the administrative law concept of reasonableness, observing that the range of acceptable and defensible decisions fall along a spectrum depending on the nature of the question and the circumstances. On the one end, where the decision is clear-cut or constrained by jurisprudence or statutory standards, the margin of appreciation (i.e. deference) is narrow. In these cases, the court is more likely to reach the remedial stage. On the other end, where the decision is imbued with discretion, policy considerations and regulatory experience, the margin of appreciation will be broader and may be so wide that, absent bad faith, the remedial stage will not be reached.

Justice Stratas noted that the court's remedial discretion in granting monetary relief will be informed primarily by the compensatory objective of monetary relief, as well as other considerations such as the acceptability and defensibility of the decision, the circumstances surrounding it, its effects, and the public law values that would be furthered by monetary relief.

By way of specific guidance, Justice Stratas pointed to cases where courts have allowed monetary recovery in cases involving "abuse of power", "bad faith", "pursuits of improper purposes", "fundamental breakdown of the orderly exercise of authority", or conduct that is "clearly wrong", "reckless", "irrational", or "inexplicable and incomprehensible".

Practical Implications for Class Actions

This new analytical framework has significant ramifications for the class action context.

Until the law develops further, one can expect that claims against public authorities will likely now include a claim for breach of public law alongside any claim for negligence.

Less clear is how the issue of commonality will be addressed in respects of this new cause of action. Certain elements of the test, including the nature of the decision at issue and the surrounding factual circumstances, may seem to lend themselves well to a determination on a class-wide basis. On the other hand, the impact of the decision on the proposed class (i.e. damages) may well be more individual in nature. Also unclear is whether the concept of causation would be a necessary element of the claim, as well as the range of defences that may be available.

Justice Stratas' decision also suggests a cross-pollination of principles between an application for judicial review and a civil action for tortious liability; however, it is unclear how such convergence of principles would play out procedurally in the context of a class action. For example, in situations where the alleged tortious conduct is not a singular event like the statement of a new policy, but a multitude of discrete actions and administrative decisions taken under similar contexts, would a class action be the preferable procedure over individual applications for judicial review?

These issues, among others, will have to be addressed by the courts as these legal principles develop in the common law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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