The decision by Justice Alexandra Hoy overturns an earlier decision last year from the Superior Court of Justice and is related to the 2009 15-month shut down of the Chalk River nuclear laboratories that supply medical isotopes.
In Lantheus Medical Imaging Inc. v. Atomic Energy of Canada Ltd. Lantheus Imaging, an American pharmaceutical company that obtained medical isotopes from the facility, has been requesting documentation around the cause of the shutdown. The evidence would be used in a lawsuit taking place in the U.S.
“My clients were buying isotopes from Chalk River and they have a very short shelf life, so you need to be close to the source. Flying them from a long distance is difficult, so when they shut down Chalk River it was a business interruption loss for them,” explains Brett Harrison, a partner with McMillan LLP who represented Lantheus Medical Imaging in the case here in Canada.
Lantheus says it suffered losses estimated at more than $70 million as a result of the extended closure at AECL’s reactor. The company issued a claim against its insurer for the business disruption loss. However, as with every insurance policy, there’s a broad range of exclusions and the insurer, Zurich, is taking the position the disruption falls under one of them because it was an issue of long-term maintenance that isn’t covered. Lantheus then commenced a lawsuit against its insurer in a U.S. court.
The position Lantheus has taken is that it was a sudden incident and should be covered by its insurer.
“The bottom line is that for this litigation to be completed, we need to figure out what caused the shut down and AECL clearly does not want to disclose that information,” says Harrison.
While letters of request — the documents issued by foreign courts to request the production of evidence located in Canada for use in foreign proceedings — have been routinely enforced by Canadian courts against private individuals or companies, there was scant law as to whether they could be enforced against the federal government and its Crown agents.
By overturning the lower court’s interpretation, the Court of Appeal has held the Ontario Evidence Act binds the Crown like anyone else in Ontario.
The Court of Appeal also clarified that the six factors often considered by courts when determining whether to enforce letters of request are “guideposts” and not “rigid preconditions to the exercise of a judge’s discretion.”
The previous decision “was running counter to the last 20 years of jurisprudence, which is more openness to foreign proceedings,” says Harrison. “It’s not like this was AECL up here in their role doing nuclear research. This was them acting in a commercial capacity selling isotopes for medical imaging internationally. You shouldn’t be surprised you might be dragged into a foreign proceeding.”
He adds that AECL has fought the request for evidence “vigorously” but suggests that with the appeal court’s decision, it would seem the agency should now have to comply unless it decides to seek leave to appeal from the Supreme Court.
“They’ve clarified that it’s not as hard, frankly, to get letters of request or at least the courts have discretion to enforce them,” says Harrison. “It is the direction the Supreme Court has indicated the court should be going.”
The appeal court decision provides much-needed guidance on the whole issue of federal agencies providing evidence to foreign jurisdictions.
“In effect, Justice [Kenneth] Campbell had said the federal Crown was not subject to the Ontario Evidence Act. When I made the arguments, he seemed to be going in that direction and I was shocked and actually quite appalled,” says Harrison. “I actually think the federal government thinks it’s compelled to comply with that act because it generally does and relies on the act. I was surprised at the time, but it was a great ruling for the federal government because it expanded Crown immunity.”