Monday, November 11, 2013

Ontario sues Big Tobacco for $50 Billion for "Tobacco Related Wrongs"

The Ontario Court of Appeal has held that the government of Ontario can proceed with a $50 billion lawsuit against several foreign tobacco companies to recover the cost of health care services arising from "tobacco related disease " and "tobacco related wrongs". See Ontario v. Rothmans Inc. 2013 ONCA 353
Ontario's case is based on legislation - The Tobacco Damages and Health Care Costs Recovery Act - enacted by the province in 2009.  The Act gave Ontario a stand-alone statutory right to sue tobacco manufacturers to recover the cost of health care services provided to the public as a result of "tobacco related disease arising out of tobacco related wrongs". 
In substance, Ontario is claiming that since the 1950s, several of the defendants committed tobacco related wrongs  by manufacturing and distributing cigarettes in Ontario when they knew or ought to have known that smoking cigarettes and being exposed to second-hand smoke could cause or contribute to disease.  In addition, Ontario claims that all of the defendants have engaged in various conspiracies to mislead the government and the public about the dangers of smoking and to suppress information about those dangers.
Many of the defendants are foreign - British American Tobacco (Investment) Limited, BAT Industries p.l.c., British American Tobacco p.l.c., Carreras Rothmans Limited, RJ Reynolds Tobacco Company and RJ Reynolds Tobacco International Inc.  Several of these foreign defendants asserted that the Ontario courts do not have jurisdiction to determine the claims against them and brought a motion to set aside the service ex juris of the statement of claim and to stay or dismiss the action on the basis of lack of jurisdiction.  Justice Conway of the Ontario Superior Court of Justice dismissed the defendants' motion.  They appealed to the Ontario Court of Appeal. 
The Ontario Court of Appeal dismissed the appeal for the following reasons:
Under rule 17.02(g) of Ontario's Rules of Civil Procedure, a defendant may be served out of Ontario with a statement of claim where there is an allegation that the damages sought  are based on a tort committed in Ontario.  The Supreme Court of Canada has confirmed that a claim in respect of a tort committed within the jurisdiction gives rise to a "presumptive connective factor" sufficient to establish a real and substantial connection with the jurisdiction. Unless rebutted, this factor is sufficient to provide the domestic court with "jurisdiction simpliciter" to determine the dispute before it.  In this case, the foreign defendants claimed that the offence created by the Act was not a tort for the purposes of rule 17.02(g).   However, the Court of Appeal held that, "If something looks like a duck, walks like a duck and quacks like a duck, it probably is a duck."   In the court's view, Ontario's claim against the defendants under the Act created a statutory tort and fell within the section of the rule.
In addition, the Court of Appeal held that t is a breach of a common law duty to engage in a civil conspiracy that causes harm to others.   A conspiracy occurs in the jurisdiction where the harm is suffered regardless of where the wrongful conduct occurred.  The Act addresses this sort of breach and provides for joint and several liability where two or more defendants jointly breach a duty or obligation described in the definition of tobacco related wrong.  The  Court of Appeal held that Ontario's claim in this action is founded on the common law tort of conspiracy, alleged to have been committed in Ontario because the damage flowing from the conspiracy was sustained in Ontario.  It is therefore an action in respect of a tort committed within Ontario was contemplated by the rule.  
Secondly, the Court of Appeal held that Ontario had established "a good arguable case" for the Ontario courts to assume jurisdiction. 
The Court of Appeal held that it is well established that an Ontario court will assume jurisdiction against a foreign defendant only where the plaintiff establishes a good arguable case for assuming jurisdiction either through the allegations in the statement of claim or a combination of the allegations in the statement of claim and evidence filed on the jurisdiction motion.  
The Court of Appeal found that Justice Conway did not err, when she concluded that, despite deficiencies in Ontario's statement of claim, Ontario had established a good arguable case for assuming jurisdiction.  
The case law on the issue did not go as far as the defendants had argued.  Even if Ontario's statement of claim was deficient, Justice Conway was of the view that it was capable of amendment.  In the Court of Appeals' opinion, on a jurisdiction motion, the motion judge is not required to subject the pleadings to the scrutiny applicable on a rule 21 motion (motion to strike pleadings).  So long as the statement of claim advances the core elements of a cause of action known to law and appears capable of being amended to cure any pleading deficiencies such that the claim will have at least some prospect of success, the issue for the motion judge is whether the claimant has established a good arguable case that the cause of action is sufficiently connected to Ontario to permit an Ontario court to assume jurisdiction.
The motion judge did that in the following way, by submitting the allegations on the motion to the following assessment:
(a)    the facts pleaded in the statement of claim are taken as true and if they are sufficient to establish a good arguable case, the pleadings alone can satisfy the court that it has jurisdiction;
(b)     the foreign defendants may put forth affidavit evidence for the purpose of challenging the factual allegations in the statement of claim, but any allegations in the statement of claim that remain unchallenged by the defendants may be challenged as true for the purpose of the jurisdiction motion; and
(c)    the plaintiff may respond to any evidence put forward by the foreign defendants in order to satisfy the court that there is a good arguable case.
The Court of Appeal held that the core allegations against the defendants were that they participated in three levels of conspiracy to breach duties to persons in Ontario:  an international conspiracy; a Canadian conspiracy, and intra-group conspiracies.  The court was satisfied that the pleadings, in combination with the affidavit evidence filed by the parties, adequately established a cause of action known to law with sufficient connection to Ontario.  It held that a jurisdiction motion is not the appropriate proceeding for scrutinizing in detail the adequacy of the pleadings, nor is it the proper place for engaging in a rigorous assessment of whether the plaintiff's claim would ultimately succeed.  
Ontario's case against the tobacco companies will proceed in the Ontario courts.

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