Regulator's 'bureaucratic ineptitude' a duty-of-care breach: Ontario Court of Appeal

'But for' the ministry's unreasonable conduct, meat processor could have sold property

Regulator's 'bureaucratic ineptitude' a duty-of-care breach: Ontario Court of Appeal
Jonathan Lisus and Zain Naqi, Lax O'Sullivan Lisus Gottlieb LLP

The Ontario Court of Appeal has awarded a former slaughterhouse owner more than $3.5 million in damages, finding the province’s Ministry of Agriculture, Food and Rural Affairs (OMAF) breached its duty of care via “bureaucratic ineptitude” due to its 19-month occupation of the facility.

In Aylmer Meat Packers Inc. v. Ontario, the Ontario Court of Appeal ruled that, had it not been for the duty-of-care breach, Aylmer Meat Packers could have sold their property during a time of high demand for slaughterhouses in Ontario. Aylmer later sold the land and facilities to pay outstanding municipal taxes. Aylmer brought the appeal after the Superior Court dismissed its claim for tort damages in negligence, and trespass and conversion.

“It's a very important validation for the rule of law,” says Jonathan Lisus, who acted for the appellant with co-counsel, Zain Naqi.

“Yes, regulators get a strike zone, but it has its boundaries. And in this case, the boundary was drawn at the point of bureaucratic ineptitude,”

In 2003, a confidential informant told a manager at the OMAF, who oversaw the operations at Aylmer, that the plant was processing animals who were sick, disabled, or had died before being slaughtered, counter to the Dead Animal Disposal Act.

Under the Meat Inspection Act (Ontario), an inspector from the OMAF evaluates and approves each animal before and after slaughter, giving the approved carcasses an ink stamp. The informant said Aylmer was using fake stamps on uninspected meat.

Following the tip, Ministry of Natural Resources inspectors conducted covert surveillance of the plant. After spotting suspicious activity, the ministry and the Ontario Provincial Police executed search warrants of the plant and related Aylmer properties. The investigators seized evidence and found unauthorized federal meat packaging material. The plant ceased operations and the OMAF moved in, occupying and controlling the plant for the next 19 months.

The OPP charged Alymer’s principal and his two sons for selling meat unfit for human consumption, deceptive labelling, and unlawfully possessing bags with the federal meat inspection legend and selling meat in those bags.

At trial, the Ministry of Natural Resources investigators said they had observed plant workers bringing nine “apparently dead” cows to the plant after ministry inspection staff had left for the day. More than 20 Aylmer employees had told the OPP that they processed animals when the ministry inspectors were not around and that those animals were typically already dead. Employees and former employees also told investigators they would stamp “Ontario Approved” inspection legends on uninspected carcasses.

Aylmer and the principal pled guilty and got a fine and a year’s probation.

In Aylmer, Justices Peter Lauwers, Lois Roberts, and Ian Nordheimer determined whether the OMAF owed Aylmer a private law duty of care in exercising its regulatory responsibilities; if so, whether that duty was breached; if it was, whether that breach caused Aylmer’s losses; and if it did, the damages amount.

To ground a private law duty of care in negligence in a situation where a regulator adversely affects a regulated entity, the Court of Appeal applied the two-stage Anns/Cooper analysis.

The first stage involves the 2011 Supreme Court of Canada case, R. v. Imperial Tobacco Canada Ltd., which lays out three situations where a government actor owes a prima facie duty of care to the plaintiff. One, where legislation explicitly or implicitly gives calls for it. Two, where “proximity essential to the private duty of care” arises out of “a series of specific interactions between the government and the claimant.” And the third is a combination of the first two, said Justice Lauwers, who wrote the Court of Appeal’s reasons.

In second stage of the Anns/Cooper analysis, the court determines whether there are “residual policy reasons” not to impose a duty of care.

The Court of Appeal determined that there were several specific interactions which were “not the ordinary day-to-day regulatory contacts” and established a duty of care. These included suspending the license, failing to hold a prescribed hearing, taking control of the plant, and securing it so that Aylmer personnel had to pass through security to enter.

On the second Anns/Cooper stage, Ontario argued the governing statutory scheme did not contemplate the province looking out for Aylmer’s economic interests, and that doing so would conflict with Ontario’s duty to protect the public from unsafe meat.

The trial judge agreed that a private duty of care could not coexist with OMAF’s public duties, but the Court of Appeal found three errors in her approach. Under the SCC rulings in Hill v. Hamilton-Wentworth Regional Police Services Board and Fullowka v. Pinkerton's of Canada Ltd., a conflict between a regulator’s public duty and a regulated entity’s economic interests “must be real and not speculative.” Hill and Fullowka also reject the argument that imposing a duty of care would chill government action. Finally, the court said the trial judge had conflated duty of care with standard of care, and ultimately found there was no residual policy reason not to impose the duty. “In my view, the Ministry’s duty of care was to ensure that its regulatory actions did not unreasonably or unnecessarily harm Aylmer’s business interests,” said Justice Lauwers.

The Court of Appeal found that the OMAF breached its standard of care for occupying the property long after it had any valid regulatory need to do so.

The determine whether the OMAF’s conduct led to Aylmer’s losses, the court applied the “but for” test from the 2012 SCC case, Clements v. Clements, and asked whether the risk of injury was so remote that it would be unforeseeable to a reasonable person in OMAF’s position.

The fall of 2003 was a good time to sell a meat processing facility, and the executive director of the Ontario Cattle Feeders Association testified that Aylmer had attracted an interested party. But the OMAF’s occupation was like selling trying to sell a house with squatters living in it, he said. The Court of Appeal found that but for the OMAF’s “unreasonable occupation,” which breached the duty it owed Aylmer, they would have been able to sell the plant.

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