Canada: Class Action Certified Against Federal Government As Farmers Seek Damages Arising From "Mad Cow" Crisis

Sauer v. Canada (Attorney General)

On September 3, 2008, Madame Justice Joan Lax of the Ontario Superior Court certified a $10 billion class proceeding brought on behalf of 115,000 Canadian cattle farmers (excluding those in Quebec) against the Government of Canada.

The class action was commenced in April 2005 and seeks damages for economic losses arising from the 2003 closure of international borders to Canadian cattle and beef products (including a 26-month ban from the U.S.) immediately following the diagnosis of bovine spongiform encephalopathy (BSE) or "mad cow disease" in an Alberta cow. The claim alleges that the Government was negligent in its regulation of the Canadian cattle industry. In particular, it alleges that a government monitoring program failed to prevent potentially infected imported cows from entering the food chain in Canada. Ridley Inc., a Canadian animal feed manufacturer, and its Australian parent, were also named as defendants and were alleged to have been negligent in using ruminant meat and bone meal as a feed ingredient, notwithstanding the known risk of BSE transmission associated with such use.1

As against the Government, Justice Lax found that the proposed class action satisfied all five required elements of the test for certification.

Justice Lax dealt swiftly with the first prong of the certification test, finding that the proposed class action discloses a cause of action. The "plain and obvious" test used in such a determination is the same test courts use on a Rule 21 motion to strike a claim for failure to disclose a cause of action. Since the negligence claims against the Government were previously the subject of a Rule 21 motion, in which both the Ontario Superior Court and the Court of Appeal refused to strike those allegations, and the Supreme Court of Canada refused leave to appeal2. Justice Lax found that the existence of a cause of action had already been conclusively determined in favour of the plaintiff.

Justice Lax also agreed with the plaintiff that the class definition of "cattle farmers" constitutes an "identifiable class" based on objective criteria under the second prong of the test. She disagreed with the Government's argument that the class definition is subjective, unworkable and leaves "a whole host of questions unanswered." Although it was clear from the evidence that there are a myriad of ways one could be involved in cattle farming, she found that all of the potential class members share a common defining characteristic, namely that "they all have a relationship to the farming of cattle from which they earn a livelihood in whole or in part." Pointing to the existence of industry organizations and Statistics Canada data, Justice Lax added that neither cattle farmers themselves nor the Government had historically any trouble identifying cattle farmers and cattle farms. On the related question of whether the requisite rational connection existed between the class definition and the common issues, she noted that this issue had also been previously determined by the outcome of Rule 21 motions. It would be an "extraordinary paradox," she concluded, for the Court of Appeal to have found, as it did, that the defendants were in a relationship of such proximity to Canadian cattle farmers to give rise to a duty of care, but for her to find that the plaintiff had failed to show a rational connection between the class and the common issues.

The plaintiff proposed five common issues in support of certification. The question of whether the Government was negligent was the most contentious of these and at the center of the Government's arguments in opposition to certification. The Government argued that causation, an essential element of negligence, is an individual issue in this case, since each class member will have to prove the nature and extent of the losses caused by the border closure. Justice Lax disagreed, stating that in cases such as this where there is evidence of causation of harm to the class as a whole, a generic negligence question is appropriate3. Justice Lax found that BSE was a "common disaster" for all Canadian cattle farmers, and that while individual circumstances would determine the extent of the losses, the question of causation could be dealt with by the class as a whole. The other common issues relating to liability of the Government and damages were also held to be acceptable.

As to whether there is an appropriate representative plaintiff and whether a class action is the preferable procedure, Justice Lax again agreed with the plaintiff. She stated that a decision on the common issue of whether the Government was negligent is at the "heart of this litigation" and a resolution on that issue would either end the litigation or advance it to the point where only an assessment of damages would remain. She was not persuaded by the Government's argument that the individual issues related to the assessment of damages from BSE would make a class proceeding unsuitable. She also believed that aggregate damages may be a possibility in this case, and noted that if the Government succeeds on its argument that losses were mitigated by federal compensation payments to class members, there may never need to be individual damage assessments.

For the purposes of an agreed-upon settlement, Justice Lax also certified the proceeding against the defendant Ridley Inc. Finding the settlement to meet the requirement of "fair and reasonable and in the best interests of the class as a whole," Justice Lax approved an arrangement, which in consideration of a $6 million settlement payment, would effectively remove Ridley from the legal proceedings, except to defend claims against it for contribution and indemnity, or any claim to apportion liability against Ridley on the grounds that the Government is not wholly responsible for the BSE crisis.

The author thanks Kathleen Chevalier, articling student at Stkeman Elliott, for her assistance in writing this article.

Footnotes

1 Stikeman Elliott, on behalf of the Australian parent, successfully stayed the proceeding against it on the basis of corporate veil doctrine
2Sauer v. Canada (Attorney General) [2006] 79 O.R. (3d) 19 (Sup. Ct. J.), aff'd [2007] 225 O.A.C. 143 (C.A.), leave appeal to S.C.C. refused [2007] S.C.C.A. No. 454.
3 A similar question was found acceptable in Taylor v. Canada (Minister of Health) (2007) 285 D.L.R. (4th) 296 (Ont. Sup. Ct. J.).

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