Canada: Agricultural Law Netletter – June 7, 2018

HIGHLIGHTS

  • The extent to which the Canadian Food Inspection Agency owes a duty to Canadian potato producers to negotiate on their behalf with foreign governments and agencies has recently been considered by the New Brunswick Court of Appeal. The Court upheld a trial decision which dismissed a $3.5 million damage claim made by two New Brunswick seed potato exporters who alleged that the CFIA had breached its duty of care to negotiate with the Government of Venezuela for the release of seed potatoes which had been delivered to an agency wholly owned by the Government of Venezuela, but which had been rejected due to alleged non-compliance with standards set out in Phytosanitary Certificates issued by the CFIA. The trial Judge had concluded that the CFIA owed a prima facie duty to negotiate on behalf of the potato producers based on a internal CFIA policy which set out CFIA's "responsibilities". The Court of Appeal also upheld the trial Judge's conclusion that this prima facie private law duty of care was negated by compelling policy considerations which limited the extent to which CFIA could negotiate and required CFIA to tread carefully to maintain the larger trade relationship with Venezuela. (Cropvise Inc. v. Canadian Food Inspection Agency, CALN/2018-015, [2018] N.B.J. No. 110, New Brunswick Court of Appeal)

NEW CASE LAW

Cropvise Inc. v. Canadian Food Inspection Agency;

CALN/2018-015,

Full text: [2018] N.B.J. No. 110;

2018 NBCA 28,

New Brunswick Court of Appeal,

J.C.M. Richard, B.L. Baird and R.T. French JJ.A.,

May 24, 2018.

Canadian Food Inspection Agency -- Private Law Duty of Care -- Protecting the Interests of Canadian Exporters -- Duty Negated by Policy Considerations.

Cropvise Inc. and Wolf & Wolf Seeds Inc. (collectively "Cropvise") sued the Canadian Food Inspection Agency (the "CFIA") for damages in negligence. Cropvise alleged the CFIA was negligent in its efforts to negotiate with Venezuelan authorities for the release of their seed potatoes, which had been rejected for entry into the country following an inspection at a Venezuelan port.

Cropvise had entered into contracts to supply seed potatoes to a company owned by the Venezuelan Government.

Cropvise delivered the potatoes in refrigerated containers which arrived at the Venezuelan port between November, 2009 and April, 2010.

An initial shipment was accepted without incident, however on December 6, 2009, 16 containers were rejected by the Venezuelan authorities, out of a shipment of approximately 50 containers.

The Venezuelan authorities alleged that the rejected potatoes did not meet the standards represented in the Phytosanitary Certificates which accompanied the potatoes.

The Certificates were issued by the CFIA pursuant to the International Plant Protection Convention (the "Convention") and a Bilateral Potato Protocol between Canada and Venezuela (the "Protocol").

In response to the rejection, the CFIA sent two inspectors to Venezuela, and had the rejected potatoes reinspected in the presence of Venezuelan inspectors. The CFIA inspectors advised the Venezuelan authorities that the potatoes conformed to the Certificates and met the standards required under the Protocol.

Notwithstanding this representation and the subsequent efforts to have the potatoes released, the Venezuelan position did not change. The rejected potatoes were not released and were ultimately destroyed by Venezuelan authorities.

The value of the potatoes was estimated to exceed $100,000.00.

Cropvise continued to deliver seed potatoes to Venezuela as required by their contracts. While parts of subsequent container shipments were similarly rejected, the vast majority were accepted.

Cropvise sought special damages of $3.5 million, and damages for lost profits.

Cropvise did not allege any error in the CFIA's inspection of their potatoes or the correctness of the CFIA's Phytosanitary Certificates. Cropvise agreed that the Venezuelan authorities wrongfully rejected their potatoes contrary to both the Convention and the Protocol.

Cropvise alleged that the CFIA failed to act reasonably in performing its duty to "negotiate" with the Venezuelan authorities for the release of their potatoes.

Cropvise relied on a policy established by the CFIA with respect to the issue of Phytosanitary Certificates. This policy listed a number of "CFIA responsibilities" including the following:

"Negotiate release of shipments that are detained, as a result of alleged Phytosanitary reasons."

The Protocol required, among other things, that Phytosanitary Certificates issued by the CFIA must conform to the shipments in accordance with the tolerances set out in the Protocol; that shipments found out of tolerance of the Protocol are to be determined by the "commercial parties", and that:

"Any disagreements in the interpretation or execution of this Protocol will be resolved amicably between the parties, through diplomatic channels."

The trial Judge dismissed Cropvise's claim. The trial Judge concluded that the CFIA did not owe a duty of care in connection with its efforts to negotiate the release of the rejected potatoes and that while the CFIA owed Cropvise a prima facie duty of care, residual policy considerations negated that duty. The trial Judge also concluded that even if a duty of care was owed to Cropvise, Cropvise did not establish the CFIA failed to meet the standard of care, or that the losses were in any way caused by the breach.

On appeal, Cropvise maintained that the Judge erred in determining whether or not they were owed a duty of care based on policy considerations. Cropvise took the position that CFIA's efforts to negotiate the release of the rejected potatoes was "operational" and did not reflect a government policy decision or a government undertaking of a type which, for policy reasons, should be insulated from liability in negligence. Cropvise argued that the trial Judge erred in concluding that the CFIA had no legal responsibility for conduct that would otherwise be viewed as negligence and maintained that the trial Judge also erred in concluding that the CFIA meet the requisite standard of care and that causation had not been established.

Decision: French, JA, who delivered the judgment of the Court (Richard, Baird and French, JJA) dismissed the appeal [at para. 120].

French, JA reviewed the facts in substantial detail at para. 7 to 68.

French, JA considered the following issues:

1. Whether the trial Judge misapprehended Cropvise's position and that Cropvise had asserted that the CFIA had a duty to bring about entry of its rejected potatoes into Venezuela?

French, JA concluded that in view of the context of certain comments made by the trial Judge in this regard with the decision as a whole, the trial Judge's statement in this regard did not evidence any misapprehension of the Cropvise claim [at para. 77].

2. Whether the Judge failed to find a duty of care had been established by analogy failing to proceed to conduct a whole Anns/Cooper analysis?

French, JA observed that the trial Judge had relied on Adams et al v Borrell et al, 2008 NBC 62, 336 N.B.R. (2d) 223 in determining that Cropvise's claim fell within an analogous category of cases in which a duty of care had been previously recognized. The trial Judge had observed that Cropvise, in the conduct of its potato export business, was "no less dependent upon the actions of the CFIA than potato farmers were in the inspection related activities" in Adams v Borrell [at para. 80 of the appeal decision].

French, JA concluded that the trial Judge did not err when he undertook an analysis of policy considerations under the second part of the Anns test simply because he had determined that Cropvise's claim fell within an analogous category of cases in which a duty of care had been recognized, and with a prima facie duty of care having been established, it was necessary for the trial Judge to undertake a second stage analysis [at para. 82 and 83].

3. Whether the CFIA's duty of care was negated under the second stage of the Anns test with respect to whether policy considerations negate a duty of care?

French, JA observed [at para. 90] that the issue of whether policy considerations factor into the proximity analysis is beyond question, stating, at para. 91:

"That policy considerations factor into the proximity analysis is beyond question. Where the relationship to be analyzed exists under a statutory framework, the analysis begins with the statute and any policy considerations that bear on the relationship..."

French, JA emphasized the following comments of Abella, J in Syl Apps Secure Treatment Centre v BD, 2007 SCC 38, [2007] 3 S.C.R. 83 [at para. 92]:

"Where an alleged duty of care is found to conflict with an overarching statutory or public duty, this may constitute a compelling policy reason for refusing to find proximity (Cooper, at para. 44; Edwards, at para. 6). Such a conflict exists where the imposition of the proposed duty of care would prevent the defendant from effectively discharging its statutory duties...In both cases, the serious negative policy consequences of these conflicting duties were found to justify denying a finding of proximity...

A statutory immunity provision may also be relevant..."

French, JA considered the issue of CFIA's duty of care, and related policy considerations, and whether the CFIA's private law duty of care conflicted with overriding policy considerations, at para. 96 to 108, and concluded, at para. 108 to 111 as follows:

"The incompatibility of the CFIA's statutory duties with a private law duty of care to the appellants is not theoretical; it is evident from the facts at the heart of the appellants' claim. As soon as the CFIA became involved with the rejected potatoes, officials were necessarily mindful of the need to act with sensitivity to the ongoing relationship with Venezuelan authorities and to avoid exacerbating problems that could affect both future shipments of Canadian potatoes and the larger trade relationship. This was particularly so since, at the time, Venezuela was more politically uncertain than had previously been the case and there was an increased need to work at preserving the existing relationship, including the CFIA's reputation and credibility under the Protocol and the benefit of the phytosanitary system under the Convention. There could be no expectation the CFIA would pursue the negotiations as though it were an agent of the appellants. Despite its efforts to achieve the release of the rejected potatoes, the CFIA ultimately concluded, having regard to its other duties, it was best to work cooperatively with the representatives of INSAI and attempt to work through the issues that were behind the rejection of the appellants' potatoes. At this point, in mid-January 2010, the objectives of the CFIA and the appellants were clearly diverged. The appellants, unconstrained by the same duties or responsibilities, were free to remain focused on only their own interest, the release of the rejected potatoes. This divergence reflects more than a different assessment of what was achievable or a difference of opinion as to how best conduct the negotiations. It reflects the point at which the CFIA concluded that, in order to fulfil its broader duties, the efforts to secure the release of the appellants' potatoes had to be subordinated, if not abandoned. Indeed, the appellants implicitly recognized the CFIA's statutory duties when they asserted the CFIA was not doing enough to cause the Venezuelans to respect the Protocol.

The dispute resolution provision under the Protocol required Canada to resolve disagreements in the interpretation of execution of the Protocol "amicably" and "through diplomatic channels"...

The 2009-2010 export season was unique and difficult. The appellants, the CFIA and Canadian trade officials were presented with a sensitive and uncertain political climate, giving rise for all to reasonably question what was truly at play and leading to considerable debate on how to proceed. For the CFIA, this meant there was an effort to carefully walk a line between being as assertive as possible in the effort to secure the release of what it accepted were wrongfully rejected potatoes and not increasing the risk to future shipments or damaging the larger trade relationship.

In my opinion, the appellants have not established an error in the judge's analysis and I would dismiss this ground of appeal."

4. Assuming there was a standard of care, whether the standard of care had been breached?

French, JA rejected Cropvise's argument that the trial Judge was mistaken in concluding

that in any event, the standard of care had not been breached [at para. 112 to 119]. French, JA compared and equated the conduct of the CFIA authorities in negotiating a resolution to the conduct of police in which it is alleged that there was a negligent police investigation [at para. 115], referring to the decision of McLachlin J in Hill v Hamilton- Wentworth Regional Police Services Board, 2007 SCC 41, [2007] 3 S.C.R. 129. In this case, McLachlin, CJ observed as follows:

"I conclude that the appropriate standard of care is the overarching standard of a reasonable police officer in similar circumstances. This standard should be applied in a manner that gives due recognition to the discretion inherent in police investigation. Like other professionals, police officers are entitled to exercise their discretion as they see fit, provided that they stay within the bounds of reasonableness...A number of choices may be open to a police officer investigating a crime, all of which may fall within the range of reasonableness. So long as discretion is exercised within this range, the standard of care is not breached..."

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