Canada: Agricultural Law NetLetter - Saturday, July 7, 2018

HIGHLIGHTS

* A Justice of the Alberta Court of Queen's Bench has summarily dismissed the claims of two Alberta seed potato growers who sought damages against the CFIA on the ground that the CFIA was allegedly negligent in testing for the presence of Potato Cyst Nematode ("PCN"). Based on alleged false positive PCN tests, the CFIA had required the potato growers to destroy their seed potato crops, and prevented them from producing or selling seed potatoes. Both potato producers had applied for and received funding pursuant to a Seed Potato Assistance program partially funded by the Federal Government, which had been established to compensate potato growers for losses sustained as a result of PCN destruction orders and quarantines, and the closure of the US and Mexican borders to the export of Alberta seed potatoes. The claims were summarily dismissed based on the provisions of s. 9 of the Crown Liability and Proceedings Act which provides that "no proceedings lie against the Crown.in respect of a claim if.compensation has been paid.out of the Consolidated Revenue Fund.in respect of.damage or loss and in respect of which the claim is made". (North Bank Potato Farms Ltd. v. Canadian Food Inspection Agency, CALN/2018-017, [2018] A.J. No. 818, Alberta Court of Queen's Bench)

NEW CASE LAW

North Bank Potato Farms Ltd. v. Canadian Food Inspection Agency;

CALN/2018-017,

Fulltext: [2018] A.J. No. 818;

2018 ABQB 505,

Alberta Court of Queen's Bench,

J.A. Fagnan J.,

June 29, 2018.

Section 9 of Crown Liability and Proceedings Act -- Receipt of Federal Assistance for Crop Quarantine -- Bar Against Subsequent Negligence Action.

North Bank Potato Farms Ltd. and Haarsma Farms Ltd. (collectively, the "Potato Producers") sued The Canadian Food Inspection Agency (the "CFIA") and ABC Laboratory in negligence, claiming the loss of profits, goodwill and land value. The Potato Producers alleged the CFIA had been negligent in testing their land for the presence of Potato Cyst Nemotode ("PCN"), and in concluding that PCN was present in their land, when the tests only disclosed "false positive" results.

The CFIA appealed to the Alberta Court of Queen's Bench from a decision of a Master, who refused to strike out the Potato Producers' pleadings or to summarily dismiss the Potato Producers' claim against the CFIA.

In 2006, the Governments of Quebec, Idaho, Canada and the United States had negotiated and agreed to a protocol on the sampling and surveillance of potato farms for the presence of PCN.

In mid-2007, the CFIA tested soil samples from the Potato Producers' fields for the presence of PCN.

In late 2007 PCN cysts were identified in the test results of potato fields farmed by the Potato Producers.

The Potato Producers were consequently required to destroy their existing seed potatoes and were prevented from producing and selling their crops from the lands on which the cysts were detected, and were required to follow a cleaning protocol for their farm equipment.

In the summer of 2008 the Government of Canada and the Government of Alberta announced the creation of an Alberta Seed Potato Assistance program for seed producers who were directed to destroy seed potatoes, or who are prevented from producing or selling them and to clean their equipment, in accordance with restrictive measures imposed pursuant to the Plant Protection Act, SC 1990, c. 22 and its regulations.

The Government of Canada contributed $8 million to this program and losses directly and indirectly related to the quarantine of their farms and the subsequent border closure to Alberta seed potatoes in the United States and Mexico pursuant to s. 34 of the Financial Administration Act, RSC 1985, c. F-11. Sixty percent of the funding for the program was provided by the Federal Government. The balance of the funding was provided by the Alberta Government. The program was administered by an Alberta agency - Agriculture Financial Services Corporation ("AFSC").

Approximately 120 Notices of Prohibition and Restricted Activity were issued by the CFIA in Alberta with respect to the Potato Producers' fields, and the fields of a number of other potato producers.

The Potato Producers applied for and received assistance in 2008 and 2009 pursuant to the Seed Potato Assistance program.

The CFIA argued that s. 9 and 38 of the Crown Liability and Proceedings Act, RSC 1985, c. C-50 barred the Potato Producers' claim because the Federal Government had already paid the claims, and that because these claims arose from actions authorized and required by the Plant Protection Act. Sections 9 and 38 provide:

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The CFIA argued, in the alternative, that the CFIA did not owe a duty of care in negligence to the Potato Producers.

The Master dismissed the CFIA's applications on the basis that the action raised novel but arguable claims, and that a fair and just adjudication could not be made on the record.

Additional Affidavits were filed by the CFIA prior to the appeal hearing before a Queen's Bench Justice.

Decision: Fagnan, J allowed the CFIA's appeal and summarily dismissed the Potato Producers' claims [at para. 81 and 82].

Fagnan, J observed [at para. 48] that while it may be possible to determine in a summary judgment application whether a novel duty of care is owed, it is often preferable to consider novel claims at a trial, on a full factual record, relying on Condominium Corporation No. 0321365 v Cuthbert, 2016 ABCA 46, [2016] A.J. No. 174.

Fagnan, J reviewed the case law with respect to Crown liability in detail at para. 49 to 61.

She observed [at para. 63] that there is no dispute that PCN falls within the definition of a "pest" under the Plant Protection Act, that there was also no dispute that the CFIA had authority to exercise powers under various statutes and regulations, including the Plant Protection Act, to regulate production of seed potatoes, or of the authority of CFIA inspectors, who believe on reasonable grounds that a thing is infested by a pest to issue a Notice of Prohibition including orders of seizure, quarantine, confiscation and destruction.

Fagnan, J also observed [at para. 65 and 66] that it was also not in dispute that the CFIA had an obligation to conduct sampling and surveillance of potato farms to test for the presence of PCN, in order to meet its obligations under the agreement Canada had negotiated with the United States.

Fagnan, J also observed [at para. 70] that the 2008 and 2009 assistance programs administered by AFSC were intended to assist producers in dealing with expenses and losses sustained as a result of quarantine measures imposed by the CFIA and subsequent border closures to Alberta seed potatoes for export.

Fagnan, J held [at para. 72] that there was no doubt that 60% of the funding for the assistance program came from the Federal Consolidated Revenue Fund, and that the critical question was not how the funds under the program was administered, but whether the Potato Producers received benefit of funding from the Consolidated Revenue Fund through the programs.

Fagnan, J rejected the Potato Producers' arguments that the CFIA was required to obtain an acknowledgement or release in relation to the compensation they had received in order to be able to successfully rely on the immunity provided for under s. 9 of the Crown Liability and Proceedings Act [at para. 73].

Fagnan, J summarized the case law in a number of cases in which the receipt of compensation from the Federal Government triggered the application of s. 9 of the Crown Liability and Proceedings Act [at para. 77]:

• ordering destruction of cattle in the face of a lack of evidence to support such a measure, and negligently testing for disease [Langille v Canada (Minister of Agriculture), [1992] 2 FC 208, [1992] FCJ No 139 (CA)]
• failing to make compensation for a lost herd in a timely way resulting in loss to a restaurant business and mental and physical anguish [Vona v Canada (Minister of Agriculture) (1996), [1996] OJ No 3621 (CA)]
• allowing bovine tuberculosis to get into Canada and failing to take appropriate actions to eradicate the disease when it was first detected [Begg v Canada, No 808, aff'd, 2005 FCA 362,[2005] FCJ No 1819]
• failing to intervene in a timely manner to prevent contamination from another producer [Ferme Avicole Kiamike v Canada, 2006 FC 872,[2006] FCJ No. 1107]
• negligently investigating by way of delays in testing (River Valley Poultry) [River Valley Poultry, 2009 ONCA 326,[2009] OJ No 1605,95 OR (3d) 1, leave denied [2009] SCCCA No 259]
• failing to guard against importation of diseased cattle [Vancise v Canada (Attorney General) [2018] OJ No 16].

Fagnan, J then concluded [at para 78 and 80] as follows:

[78] In all of these cases, the courts determined that receipt of compensation, even partial compensation, from the federal government triggered the application of s. 9 of the CLPA. This is a consistent body of largely appellate authority. The fact that those cases dealt with livestock rather than potatoes does not mean the law is unsettled in this area.

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[80] In this case, the Court is able to reach a fair and just determination on the merits as the summary judgment process allows the Court to make the necessary findings of fact, and to apply the law to the facts. The Respondents received payments in relation to measures imposed following positive PCN test results in 2007. They received the benefit of funding which came from the Consolidated Revenue Fund as part of those payments. While the payments may not have fully compensated the Respondents for all of the loss they suffered as a result of the testing done in 2007, they nevertheless constitute "compensation" paid "in respect of the.damage or loss in respect of which the claim is made" for the purposes of s. 9.

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