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Appeal of certification and unique role of province in hydroelectric project

(June 21, 2021, 1:23 PM EDT) — Newfoundland and Labrador’s Court of Appeal has granted an appeal by the Province of Newfoundland and Labrador from the certification of a proposed class action against it, arising from flooding of the Churchill River in May of 2017 (Chiasson v. Nalcor Energy 2021 NLCA 34 ). The flooding, which required emergency evacuation and caused damage to properties in the impacted area of Mud Lake, was alleged to be caused by the impact of construction of the Muskrat Falls hydroelectric generating project on the Churchill River.

Two defendants were named in the proposed class action filed on Nov. 23, 2017 on behalf of a proposed class of residents: Nalcor Energy, a Crown corporation and an agent of the Crown, and the province of Newfoundland and Labrador.

The lower court certified the proposed class action against both the province and Nalcor on the basis of negligence and nuisance (Chiasson v. Nalcor Energy 2019 NLSC 133). The defendants each sought leave to appeal certification on several grounds and were granted it on a narrow issue: whether the pleadings disclosed a cause of action against them (Newfoundland & Labrador v. Chiasson 2020 NLCA 28).

Nalcor was unsuccessful in its appeal of certification on the basis of nuisance, and the class action will proceed ahead against it on both causes of action.

With respect to the province, the Court of Appeal accepted the province’s arguments that the pleadings failed to disclose causes of action against it either nuisance or negligence.

The question of liability in negligence of a government entity entails the two-part Anns/Cooper test from Cooper v. Hobart 2001 SCC 79. At the first stage, the question is whether the circumstances disclose reasonably foreseeable harm and proximity sufficient to establish a prima facie duty of care. If there is a prima facie duty of care recognized on the basis of proximity and reasonable foreseeability, the analysis advances to the second stage, where the question is whether there are residual policy considerations that may negate the imposition of a duty of care, such as the claim impugning “core policy” decisions or raising the spectre of indeterminate liability. The Anns/Cooper test has been said to engage delicate determinations, and accordingly, in the context of a pleadings analysis where the question is whether it is plain and obvious from the pleadings alone that there is no reasonable prospect of success, courts have often reasoned that it is best left to be answered in full at trial, where relevant evidence of the potential political, economic and social factors can be considered.

The Court of Appeal in Chiasson did not adopt that reasoning. The court concluded that there was a lack of proximity at the first stage of the Anns/Cooper test. It then reasoned that, even if proximity had been found at stage one, at the second stage, residual policy considerations would negate a duty of care. To support its conclusion, it highlighted that Nalcor was responsible under the applicable legislation for constructing, maintaining and operating the waterworks for which a permit had been granted. The reasons in Chiasson fail to identify what type of residual policy consideration would be engaged at stage two to negate a prima facie duty of care. The decision makes no note of any “economic, social or political factors” apparent from the pleadings, so as to truly render this a “core policy” decision.

With respect to proximity, at the first stage of the Anns/Cooper test, the Court of Appeal emphasized that the legislative scheme did not support the necessary relationship of proximity to establish a prima facie duty of care, and it did not consider the plaintiff to have pleaded a special relationship between the class and the province to justify the imposition of a duty of care. Significantly, in the context of the proximity analysis, the decision fails to address or contend with the Respondent’s submission that the quality of the province’s role in relation to the Muskrat Falls project – Nalcor is a Crown agent for which the province is the 100 per cent shareholder – was a relevant factor to consider, moving the province out of the realm of a pure regulator.

Relying on the reasoning of the Supreme Court of Canada in R. v. Imperial Tobacco Canada Ltd. 2011 SCC 42, in which the sec determined that in certain of the circumstances it was considering, in which the federal government was not simply acting as a conventional arm’s length regulator but rather had commercial involvement in the impugned conduct, the requisite close and direct proximate relationship was present. In the Court of Appeal’s analysis in Chiasson, there is no mention made of the significance, or not, of this factor in its analysis. This overlooks a significant and distinct factual circumstance that should have been brought into the court’s analysis and, the respondent argued, would preclude the conclusion that it was plain and obvious from the pleadings that no duty of care would be found at trial.

The decision in Chiasson fails to take account of, or even reference, the contemporary and diverse roles of governments in commercial undertakings, such as is the case with the Muskrat Falls hydroelectric project. If the principles concerning government liability in tort do not consistently keep step with the evolving reality of the nature of government, beyond conventional regulatory roles, individuals affected by the negligence of governments will suffer from this gap in the law.

The whole realm of the law concerning when public authorities will be found to owe a private law duty of care has a huge impact on the remedies available to those impacted by government action or inaction. The Supreme Court of Canada has taken steps to acknowledge that the greater involvement of government in the everyday lives of citizens must necessitate a corresponding degree of liability – we have Just v. British Columbia [1989] 2 S.C.R. 1228, as just one earlier example of that – but it’s not enough to make small, incremental inroads that don’t keep pace with the fact that government often assumes non-traditional roles. Even in my relatively short career, I’ve been faced a few times with legal principles that don’t reflect the reality of governments’ chosen roles. It seems to be a big gap, and one worthy of thoughtful reconsideration.

The respondent is in the process of determining whether an application for leave to appeal to the Supreme Court of Canada will be filed.

Maddy Carter is a lawyer at Wagners in Halifax, Nova Scotia. She represents plaintiffs in class actions and was co-counsel for the respondent in Chiasson v. Nalcor Energy 2021 NLCA 34.

This article was originally published by The Lawyer’s Daily (www.thelawyersdaily.ca), part of LexisNexis Canada Inc.

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