Darmar Farms Inc. v. Syngenta Canada Inc. et al.

[Indexed as: Darmar Farms Inc. v. Syngenta Canada Inc.]

Ontario Reports Ontario Superior Court of Justice Rady J. November 28, 2018 143 O.R. (3d) 774 | 2018 ONSC 7129

Case Summary

Negligence — Duty of care — Economic loss — Defendants manufacturing bio-engineered corn seed Agrisure — Plaintiff alleging that North American corn prices fell when China rejected shipments of North American corn after discovering that some shipments contained Agrisure — Plaintiff bringing proposed class action for damages for negligence — Plaintiff claiming that defendants undertook not to introduce Agrisure in North American market without obtaining [page775] necessary global approvals and failed to take measures to prevent Agrisure from commingling with other corn — Claim being for misrepresentation and therefore falling within recognized category of economic loss — Any reliance by plaintiff on alleged undertaking being unreasonable because undertaking was impossible to achieve — Claim stuck on basis that it plainly and obviously had no chance of success.

The plaintiff planted corn in 2013, 2014 and 2015. The defendants developed genetically modified corn seeds marketed as "Agrisure". The plaintiff itself did not purchase, plant or harvest Agrisure corn, but it claimed that North American corn prices fell when China rejected shipments of North American corn in 2013 and 2014 because some shipments contained Agrisure, which it did not approve for import until 2014. The plaintiff brought a proposed class action for damages for negligence and breach of the Competition Act, R.S.C. 1985, c. S.1. It claimed that the defendants owned and breached a duty and undertook not to commercialize Agrisure in the North American market prior to receiving import approval from China; that once Agrisure was introduced into the North American market, the defendants owed and breached a duty to prevent its commingling with the corn of farmers and other industry stakeholders; and that the defendants owed and breached a duty not to mislead the plaintiff and other farmers about the timing and substance of its application for import approval in China and its ability to prevent commingling of Agrisure with other North American corn bound for export to China. The plaintiff repeated the misrepresentation claim under the umbrella of the Competition Act. The defendants brought a motion under Rule 21 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 for an order striking the claim without leave to amend, arguing that the claim was a novel one for pure economic loss which was untenable at law because no duty of care existed.

Held, the motion should be granted.

The claim, read generously, was framed in one of the previously recognized categories of compensable economic loss, namely, misrepresentation. There was repeated reference in the pleading to "stakeholders", a term that was not defined. Industry stakeholders could conceivably capture an enormous number of entities in the industry other than corn farmers. The spectre of indeterminate liability to an indeterminate class for an indeterminate amount clearly existed. In its statement of claim, the plaintiff pleaded that commingling was inevitable because of the interdependence of the North American industry and the peculiarities of genetically modified seeds. It was illogical that the defendants would make an undertaking it could not fulfill to a huge swath of the North American corn market. Any reliance by the plaintiff on the defendants' alleged undertaking on that point could not have been reasonable because it was impossible to achieve. The only way to ensure that commingling and contamination did not occur would be to withhold the release of Agrisure to the North American market, a position the plaintiff explicitly disavowed. Furthermore, if the plaintiff's position prevailed, the importance of foreign import approvals would be elevated to a level of precedence over domestic approvals. The question would arise whether any foreign importer of a Canadian product must approve imports before the product could be marketed domestically. The answer to that question surely had to be no. It was plain and obvious that the claim could not succeed.

Deloitte & Touche v. Livent Inc. (Receiver of), [2017] 2 S.C.R. 855, [2017] S.C.J. No. 63, 2017 SCC 63, 416 D.L.R. (4th) 32, 43 C.C.L.T. (4th) 1, 55 C.B.R. (6th) 1, 71 B.L.R. (5th) 175, 2017EXP-3529, EYB 2017-288419, 286 A.C.W.S. (3d) 374; Hoffman v. Monsanto Canada Inc., [2005] S.J. No. 304, 2005 SKQB 225, [2005] 7 W.W.R. 665, 264 Sask. R. 1, 15 C.E.L.R. (3d) 42, 139 A.C.W.S. (3d) 436; Sauer [page776] v. Canada (Attorney General), [2007] O.J. No. 2443, 2007 ONCA 454, 225 O.A.C. 143, 31 B.L.R. (4th) 20, 49 C.C.L.T. (3d) 161, 159 A.C.W.S. (3d) 306, consd

Other cases referred to

1688782 Ontario Inc. v. Maple Leaf Foods Inc. (2018), 140 O.R. (3d) 481, [2018] O.J. No. 2417, 2018 ONCA 407, 425 D.L.R. (4th) 674, 49 C.C.L.T. (4th) 28, 294 A.C.W.S. (3d) 897; Anns v. Merton London Borough Council, [1977] 2 All E.R. 492, [1978] A.C. 728, [1977] UKHL 4 (H.L.); Canadian National Railway Co. v. Norsk Pacific Steamship Co., [1992] 1 S.C.R. 1021, [1992] S.C.J. No. 40, 91 D.L.R. (4th) 289, 137 N.R. 241, 11 C.C.L.T. (2d) 1, 33 A.C.W.S. (3d) 357; Cooper v. Hobart, [2001] 3 S.C.R. 537, [2001] S.C.J. No. 76, 2001 SCC 79, 206 D.L.R. (4th) 193, 277 N.R. 113, [2002] 1 W.W.R. 221, J.E. 2001-2153, 160 B.C.A.C. 268, 96 B.C.L.R. (3d) 36, 8 C.C.L.T. (3d) 26, 110 A.C.W.S. (3d) 943, REJB 2001-26862; Doe v. Metropolitan Toronto (Municipality) Commissioners of Police (1990), 74 O.R. (2d) 225, [1990] O.J. No. 1584, 72 D.L.R. (4th) 580, 40 O.A.C. 161, 5 C.C.L.T. (2d) 77, 50 C.P.C. (2d) 92, 1 C.R.R. (2d) 211, 22 A.C.W.S. (3d) 869, 10 W.C.B. (2d) 577 (Div. Ct.); Hedley Byrne and Co. v. Heller and Partners Ltd., [1964] A.C. 465, [1963] 2 All E.R. 575 (H.L.); Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959, [1990] S.C.J. No. 93, 74 D.L.R. (4th) 321, 117 N.R. 321, [1990] 6 W.W.R. 385, J.E. 90-1436, 49 B.C.L.R. (2d) 273, 4 C.C.L.T. (2d) 1, 43 C.P.C. (2d) 105, 23 A.C.W.S. (3d) 101; Kamloops (City) v. Nielsen, [1984] 2 S.C.R. 2, [1984] S.C.J. No. 29, 10 D.L.R. (4th) 641, 54 N.R. 1, [1984] 5 W.W.R. 1, J.E. 84-603, 66 B.C.L.R. 273, 11 Admin. L.R. 1, 29 C.C.L.T. 97, 8 C.L.R. 1, 26 M.P.L.R. 81, 26 A.C.W.S. (2d) 453; Mandeville v. Manufacturers Life Insurance Co. (2014), 120 O.R. (3d) 81, [2014] O.J. No. 2451, 2014 ONCA 417, 321 O.A.C. 83, 34 C.C.L.I. (5th) 171, 27 B.L.R. (5th) 86, 240 A.C.W.S. (3d) 778; Nash v. Ontario (1995), 27 O.R. (3d) 1, [1995] O.J. No. 4043, 59 A.C.W.S. (3d) 1083 (C.A.); Pearson v. Inco Ltd., [2001] O.J. No. 4990, [2001] O.T.C. 919, 16 C.P.C. (5th) 151, 110 A.C.W.S. (3d) 444 (S.C.J.); Perre v. Apand Pty. Ltd., [1999] HCA 36, 198 CLR 180 (H.C. (Aus.)); Prete v. Ontario (1993), 16 O.R. (3d) 161, [1993] O.J. No. 2794, 110 D.L.R. (4th) 94, 68 O.A.C. 1, 86 C.C.C. (3d) 442, 18 C.C.L.T. (2d) 54, 18 C.R.R. (2d) 291, 45 A.C.W.S. (3d) 235, 22 W.C.B. (2d) 157 (C.A.); R. v. Imperial Tobacco Canada Ltd., [2011] 3 S.C.R. 45, [2011] S.C.J. No. 42, 2011 SCC 42, 308 B.C.A.C. 1, 419 N.R. 1, 2011EXP-2380, J.E. 2011-1326, 335 D.L.R. (4th) 513, 21 B.C.L.R. (5th) 215, 25 Admin. L.R. (5th) 1, 86 C.C.L.T. (3d) 1, [2011] 11 W.W.R. 215, 83 C.B.R. (5th) 169, 205 A.C.W.S. (3d) 92; Rayner v. McManus, [2017] O.J. No. 2788, 2017 ONSC 3044 (Div. Ct.); Syl Apps Secure Treatment Centre v. D. (B.), [2007] 3 S.C.R. 83, [2007] S.C.J. No. 38, 2007 SCC 38, 284 D.L.R. (4th) 682, 365 N.R. 302, J.E. 2007-1512, 227 O.A.C. 161, 49 C.C.L.T. (3d) 1, 39 R.F.L. (6th) 245, 159 A.C.W.S. (3d) 464, EYB 2007-122390; Web Offset Publications Ltd. v. Vickery (1999), 43 O.R. (3d) 802, [1999] O.J. No. 2760, 123 O.A.C. 235, 89 A.C.W.S. (3d) 1315 (C.A.); Winnipeg Condominium Corp. No. 36 v. Bird Construction Co., [1995] 1 S.C.R. 85, [1995] S.C.J. No. 2, 121 D.L.R. (4th) 193, 176 N.R. 321, [1995] 3 W.W.R. 85, J.E. 95-274, 100 Man. R. (2d) 241, 23 C.C.L.T. (2d) 1, 18 C.L.R. (2d) 1, 43 R.P.R. (2d) 1, 52 A.C.W.S. (3d) 1398

Statutes referred to

Competition Act, R.S.C. 1985, c. C-34 [as am.]

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 21, 21.01(1)(b)

Authorities referred to

Linden, Allen M., and Bruce Feldthusen, Canadian Tort Law, 10th ed. (Toronto: LexisNexis, 2015) [page777]

MOTION for an order striking a statement of claim.

Michael J. Peerless, Matthew D. Baer and Emily Assini, for plaintiff. Eric S. Block, Brandon Kain and Stephanie Sugar, for defendants.

RADY J.: —

Introduction

[1] This is a proposed class action. The plaintiff is a commercial corn grower and the defendants market various field crops, including bio-engineered corn seed, called Agrisure Viptera and Agrisure Duracade, which for convenience, will be referred to collectively as "Agrisure".

[2] The plaintiff brings the action on behalf of corn producers in Canada, seeking general and special damages of $300 million and punitive or aggravated damages of $100 million. The claim, which has been amended twice, is framed in negligence and breach of the Competition Act, R.S.C. 1985, c. C-34. The plaintiff has also delivered a response to a demand for particulars, which appends a number of documents relevant to the particulars provided, to which reference is made in the material filed and during argument.

[3] The defendants move for an order striking the claim without leave to amend pursuant to rule 21.01(1)(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. They submit that the claim is a novel one for pure economic loss and which is untenable at law because, plainly and obviously, no duty of care exists.

The Facts

[4] The following factual recitation is derived from the statement of claim.

[5] The plaintiff is an Ontario corporation that planted corn in 2013, 2014 and 2015. The defendant Syngenta AG is a global agribusiness, agrochemical and biotechnology company headquartered in Switzerland. Sygenta Canada is a subsidiary based in Ontario.

[6] Syngenta developed two genetically modified corn seeds containing a genetic trait known as MIR 162 and marketed as Agrisure Viptera and Agrisure Duracade. Agrisure Viptera was approved for use in Canada and the United States in 2010 by the relevant government agencies. Beginning in 2011, Agrisure Viptera was sold in the North American market. Following its approval, Agrisure Duracade was released in 2013, 2014 and 2015. [page778]

[7] I pause here to note that the plaintiff never purchased, planted or harvested Agrisure corn. However, the plaintiff says the pleading does not limit class membership to those who did not plant Agrisure. It claims on behalf of Darmar and "others similarly situated in Canada". The plaintiff submits the necessary conclusion is that the proposed class includes all Canadian corn growers. The defendants disagree. They say the class must be comprised of non-Agrisure corn farmers because only they are similarly situated to the plaintiff.

[8] The essence of the claim is that North American corn prices fell when China rejected shipments of North American corn in 2013 and 2014, after it discovered some shipments contained Agrisure, a product it did not approve for import until December 2014. The plaintiff alleges that a glut in the domestic corn supply resulted, depressing the prices it could charge third parties for its non-Agrisure corn. It sustained an economic loss as a result.

[9] As already noted, the claim is for negligence and breach of the Competition Act.

[10] A parallel action was commenced in the United States. It survived a similar motion and the plaintiff relies heavily on the reasons of the U.S. court in support of its position that this motion should be dismissed. The plaintiff advises that the U.S. action has settled. The defendants say there is no evidence of a settlement in the material filed.

The Claim

[11] Three essential negligence claims are advanced:

(1) Syngenta owed and breached a duty and undertook not to commercialize Agrisure in the North American market prior to receiving import approval from China (the premature commercialization claim, paras. 20, 21, 30-31, 36-37 of the statement of claim);

(2) once Agrisure was introduced into the North American market, Syngenta owed and breached a duty to prevent its commingling with the corn of Agrisure farmers and other industry stakeholders (the failure to prevent commingling claim, paras. 22 and 41);

(3) throughout this period, Syngenta owed and breached a duty not to mislead the plaintiff and other farmers about the timing and substance of its application for import approval in China, and its ability to prevent commingling of Agrisure with other North American corn bound for export to China (the negligent misrepresentation claim, paras. 27, 38-46). [page779]

[12] The plaintiff repeats the misrepresentation claim under the umbrella of the Competition Act, using, at para. 48, the language of the Act for its particulars.

[13] There is a connection between the three categories of claims, which will be discussed more fully below. Suffice it to say that each category appears to be grounded either in misrepresentation or breach of an undertaking.

The Pleading

[14] The plaintiff has pleaded as follows:

7. Due to the interdependence and connectedness of the modern North American agricultural industry, and because of the peculiarities with which genetically modified seeds inevitably comingle [sic] and will be contaminated with non-genetically modified seeds, there exists a shared responsibility amongst industry participants, including Syngenta, to exercise reasonable care in the commercialization, handling, marketing, selling, and shipping of new biotechnology products to protect other known industry stakeholders, including farmers such as the plaintiff and putative class members with whom they share a close relationship, from an unreasonable risk of harm. Syngenta and plaintiff/class members share a mutual interdependency within the operation of the corn industry.

8. Through its own information, Syngenta's industry stakeholders explicitly include farmers, growers and individuals affected by Syngenta's business such as the plaintiff and class members.

9. This interdependence and duty on all participants, including Syngenta, in the North American agricultural industry is furthered by the need for approval by prospective buyers before comingled [sic] crops can be sold.

10. Further, the plaintiff and class members are particularly vulnerable in the circumstances given that they have no way to protect themselves against Syngenta's harmful and negligent actions in failing to obtain the adequate approvals before releasing Agrisure into the corn market.

11. Syngenta had been warned by the Industry not to introduce another MIR genetic trait without approval in export markets because of the detrimental consequences which can occur from such premature commercialization. Syngenta undertook not to cause damage to the corn market by introducing another MIR genetic trait product into the market without necessary global approvals and the Plaintiff and class members reasonably relied on that undertaking. Syngenta's duty arises from the multifaceted interdependence of the market between Syngenta and the Plaintiff/class where genetically modified crops are sold/exported.

12. Notwithstanding the fact that China, one of North America's biggest importers of corn, had not yet approved Agrisure Viptera (containing MIR162), Syngenta brought Agrisure Viptera to market in North America for the 2011 crop year. Syngenta did this knowing that China would not approve Agrisure Viptera (containing MIR162) until possibly sometime after this product entered export channels. [page780]

13. Once in use, Agrisure Viptera contaminated the North American market throughout the supply chain, both through cross pollination and comingling [sic]. Syngenta failed to employ any meaningful or adequate segregation or identity preservation measures to isolate Agrisure Viptera from other Canadian corn. Syngenta failed to adequately educate Agrisure Viptera farmers and other industry stakeholders on the proper handling, stewardship, segregation, and channeling of Agrisure Viptera to prevent handling, stewardship, segregation, and channeling of Agrisure Viptera to prevent contamination of the Canadian corn supply.

14. Syngenta actively misled farmers about the importance of the Chinese market, the timing and substance of its application for approval in China, in particular, the timing of when China was likely to approve Agrisure Viptera (containing MIR162), its ability to channel Agrisure Viptera (containing MIR162) to non-Chinese markets, and its ability to contain the infiltration of Agrisure Viptera (containing MIR162) to the North American corn supply.

15. Syngenta knew that the timing, manner, and scope of how it commercialized Agrisure Viptera would contaminate the Canadian corn supply. Due to its significant business interests in Canada, Syngenta knew the size of the corn market and the number of stakeholders, many of which were vulnerable and unable to protect themselves against the actions taken by Syngenta that would be affected by the actions outlined herein. All of this was or could have been entirely foreseen by Syngenta. As such, the contamination was foreseen by Syngenta and, consequently, farmers such as the Plaintiff and class members suffered harm due to Syngenta's actions.

16. Syngenta knowingly, intentionally, and recklessly commercialized Agrisure Viptera and Agrisure Duracade corn in Canada, despite the fact that the corn was unapproved in China. Farmers like the Plaintiff who have not purchased or harvested Agrisure Viptera and/or Agrisure Duracade have sustained significant damages as a direct and proximate result of Syngenta's actions. Canadian corn producers who purchased or harvested Agrisure Viptera and/or Agrisure Duracade have sustained significant damages as a direct and proximate result of Syngenta's actions.

17. The Defendants at all material times owed a duty of care to the Plaintiff and putative class members to use reasonable care in the timing, scope and terms under which it commercialized MIR162-containing corn seeds.

18. As stated above, this duty of care is exacerbated by the interdependence and interconnectedness of various participants in the corn market and the particular vulnerability of the Plaintiff and class members. In fact, the Plaintiff's particular damages were not foreseeable, but were foreseen by Syngenta as described below.

19. The Plaintiff states that it had an expectation based on the Defendants' prior actions and the Defendants' release of information regarding the market in China with respect to Agrisure Viptera (containing MIR162) and Agrisure Duracade that the Defendants would act prudently to ensure that the proper regulatory approvals were granted in China before introducing [page781] Agrisure Viptera (containing MIR162) and Agrisure Duracade to the North American market.

20. Further, the Plaintiff relied upon the representations made by the Defendants regarding the market in China and/or the status of regulatory approvals in China with respect to the timing of the Defendants' release of Agrisure Viptera (containing MIR162) and Agrisure Duracade in North America.

21. Further, or more particularly, at the time of planting their crops, the Plaintiff and class members reasonably relied upon the representations made by the Defendants regarding the market in China and/or the status of regulatory approvals in China with respect to Agrisure Viptera and Agrisure Duracade. As such, if the Plaintiff and class members were aware that Agrisure Viptera and Agrisure Duracade did not have the regulatory approvals required, the Plaintiff and class members would have elected to plant alternate crops and/or make alternate use of their land.

22. The Plaintiff and class members allege that they could not have effectively prevented the resulting widespread contamination without the assistance of Syngenta. This is a significant vulnerability on the part of the Plaintiff and class members at the hands of Syngenta.

23. The Plaintiff and class members and the Defendants were in a special relationship given the expectation and reliance that the Plaintiff had on the Defendants. Specifically, as the Defendants were members of the Industry Associations, the Plaintiff and class members had an expectation of the Defendants that the Defendants would refrain from selling and distributing Agrisure Viptera and Agrisure Duracade in a manner that would foreseeably cause harm to the Plaintiff and class members, to use ordinary care in its commercialization, and to protect the Plaintiff and class members from an unreasonable risk of harm.

24. The Plaintiff and class members and the Defendants were in a special relationship given the representations made by the Defendants regarding the status of Agrisure Viptera and Agrisure Duracade in both the Canadian and Chinese markets. Specifically, as Syngenta was a member of the Industry Associations, the Plaintiff and class members had an expectation of Syngenta that Syngenta would not release incorrect and/or misleading information regarding the status of Agrisure Viptera and Agrisure Duracade. Further, the Plaintiff and class members relied to their detriment on the information and statements released by Syngenta regarding Agrisure Viptera and Agrisure Duracade.

25. The duty of care owed to the Plaintiff and class members is based on the duties that one party might owe to others in the interdependent and multifaceted market where genetically modified crops and seeds are sold. This is a unique situation. Due to the interdependence and proximity of the parties, Syngenta owes a duty of care to the Plaintiff and class members to ensure that the market can operate fairly and efficiently.

26. Syngenta owed the Plaintiff and class members a duty of reasonable care with respect to the timing, manner, and scope of Syngenta's commercialization of Agrisure.

27. The Defendants negligently breached their duty of care.

. . . . . [page782]

51. The Plaintiff's and other putative class members' damages are a direct result of relational economic loss caused by the actions of the Defendants, their servants, affiliates, and agents.

The Law Respecting Rule 21

[15] The relevant portions of Rule 21 provide as follows:

21.01(1) A party may move before a judge,

(a) for the determination, before trial, of a question of law raised by a pleading in an action where the determination of the question may dispose of all or part of the action, substantially shorten the trial or result in a substantial saving of costs; or

(b) to strike out a pleading on the ground that it discloses no reasonable cause of action or defence,

and the judge may make an order or grant judgment accordingly.

(2) No evidence is admissible on a motion,

(a) under clause (1)(a), except with leave of a judge or on consent of the parties;

(b) under clause (1)(b).

[16] The law that has developed around Rule 21 is well settled. The following guiding principles emerge from the cases:

(1) a claim will not be struck unless it is plain and obvious it cannot succeed: Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959, [1990] S.C.J. No. 93;

(2) the facts pleaded are to be assumed to be true unless they are patently ridiculous or incapable of proof: Prete v. Ontario (1993), 16 O.R. (3d) 161, [1993] O.J. No. 2794 (C.A.); Nash v. Ontario (1995), 27 O.R. (3d) 1, [1995] O.J. No. 4043 (C.A.);

(3) a claim must be read with a forgiving eye for drafting deficiencies: Doe v. Metropolitan Toronto (Municipality) Commissioners of Police (1990), 74 O.R. (2d) 225, [1990] O.J. No. 1584 (Div. Ct.);

(4) the novelty of a cause of action is not determinative: Hunt, supra; Doe, supra; R. v. Imperial Tobacco Canada Ltd., [2011] 3 S.C.R. 45, [2011] S.C.J. No. 42, 2011 SCC 42;

(5) the court is not precluded from striking a negligence claim simply because it asserts a novel duty of care. Whether such a duty of care exists is a question of law that is appropriately resolved on a Rule 21 motion: Syl Apps Secure Treatment Centre v. D. (B.), 2007 SCC 38, [2007] 3 S.C.R. 83, [2007] S.C.J. No. 38; and [page783]

(6) a critical analysis is required in order to prevent untenable claims from proceeding, particularly given scarce judicial resources and the challenges of systemic delay: Rayner v. McManus, [2017] O.J. No. 2788, 2017 ONSC 3044 (Div. Ct.).

[17] No evidence is admissible on the motion, although documents specifically referenced in the statement of claim can be considered because they are incorporated into it: Web Offset Publications Ltd. v. Vickery (1999), 43 O.R. (3d) 802, [1999] O.J. No. 2760 (C.A.). However, documents referred to in a response to a demand for particulars are not admissible: Pearson v. Inco Ltd., [2001] O.J. No. 4990, [2001] O.T.C. 919 (S.C.J.).

[18] In the latter case, Nordheimer J. explained [at paras. 9-14]:

Before turning to consider the submissions made on behalf of HMQ, I should address an issue that was raised during this motion regarding the permissible scope of material that can be referred to on a motion under rule 21.01(1)(b). Rule 21.01(2)(b) expressly prohibits evidence from being used on such a motion. The basic principle, therefore, is that the court will look at the statement of claim and nothing more. There are exceptions to that principle, however. The plaintiff relies on Montreal Trust Co. of Canada v. Toronto Dominion Bank (1992), 40 C.P.C. (3d) 389 (Ont. Gen. Div.) to assert that I can look at, not only the particulars given by the plaintiff in response to the demand for particulars by HMQ, but that I can also look to the contents of documents referred to in those particulars to find facts that could substantiate the plaintiff's claim.

In Montreal Trust Co. of Canada, Mr. Justice Borins said, at p. 396:

Because a motion under rule 21.01(1)(b) challenges the facts alleged on the face of a statement of claim, or, more accurately, the statements alleged in the statement of claim, when a statement of claim sufficiently pleads documents within the requirement of rule 25.06(7) it is necessary that the court have before it the relevant documents in assessing the substantive adequacy of the claim.

This issue is relevant to the claim here because, in the particulars, the plaintiff states that HMQ has conducted a number of studies of the risks in the Port Colborne area arising from the operations of the Refinery and then there are listed the names of nine such studies. In response to this motion, the plaintiff quotes from one of these studies in which it is stated that between the years 1972 and 1999, the MOE:

. . . conducted numerous investigations to document the impact of INCO's emissions on soil and vegetation in and around Port Colborne. These investigations concluded that 65 years of nickel refining has resulted in extensive heavy metal soil contamination in the Port Colborne area.

The plaintiff then says, based on Montreal Trust Co. of Canada. v. Toronto Dominion Bank, supra, that it can rely on this statement from this study as being a material fact pleaded of which I must take cognizance in determining whether there are sufficient material facts pleaded to establish a reasonable cause of action. There are a couple of other instances of like facts which the [page784] plaintiff would draw from the materials referred to in the particulars but the above statement was clearly the most important one.

In my view, the plaintiff's contention expands the scope of the decision of Mr. Justice Borins well beyond its permissible bounds. Rule 25.06(1) requires a pleading to contain a stament of the material facts upon which the party relies. Even assuming, without deciding, that particulars can be relied upon to add a material fact to a pleading, the absence of which would reveal that no reasonable cause of action or defence existed, I do not believe that one can refer to extraneous documents for material facts and then claim that those facts are pleaded within the meaning of rule 25.06(1) merely because they are referenced in the particulars. I do not find anything in the decision of Mr. Justice Borins that would countenance that procedure. What Mr. Justice Borins was addressing was the not uncommon situation where an agreement or like document is pleaded without pleading the specific language of the clauses of the agreement, as is expressly permitted by rule 25.06(7). Understandably, in that situation, Mr. Justice Borins said that the court can look to the document for the actual language in order to determine whether a cause of action exists. It is a very much different thing to assert that one can look to a document, which is not expressly pleaded, and seek to obtain from it an allegation of material conduct, such as the fact that a party undertook investigations, that is otherwise absent from the pleading.

I conclude, therefore, that the plaintiff cannot use this stratagem to fill any gaps that may exist in the amended amended statement of claim and thus avoid a finding that the pleading fails to disclose a reasonable cause of action, if that conclusion is otherwise dictated by the contents of the pleading itself.

[19] In my view of the foregoing, I have not considered the documents to which reference is made in the response to the demand for particulars.

Negligence, Economic Loss and Duty of Care

[20] The parties are agreed that the claim is correctly characterized as one of pure economic loss. Until the seminal case of Hedley Byrne and Co. v. Heller and Partners Ltd., [1964] A.C. 465, [1963] 2 All E.R. 575 (H.L.), economic loss claims were virtually non-existent. Since that decision, however, courts have been prepared to permit recovery for economic losses in a variety of different factual circumstances. See Canadian National Railway Co. v. Norsk Pacific Steamship Co., [1992] 1 S.C.R. 1021, [1992] S.C.J. No. 40 and, in particular, the dissent of La Forest J. His dissenting opinion was adopted by the full court in Winnipeg Condominium Corp. No. 36 v. Bird Construction Co., [1995] 1 S.C.R. 85, [1995] S.C.J. No. 2, which has been followed in many cases.

[21] Five distinct categories of pure economic loss claims have been recognized in Canada:

(1) negligent misrepresentation;

(2) negligent performance of a service; [page785]

(3) negligent supply of shoddy goods or structures;

(4) relational economic loss; and

(5) the independent liability of statutory public authorities.

[22] In respect of these five categories, the courts have recognized a sufficiently proximate relationship between the parties to ground a duty of care.

[23] Linden and Feldthusen, Canadian Tort Law, 10th ed. (Toronto: LexisNexis, 2015) sets out at 12.3, a helpful example for each category, which is reproduced below:

(1) Negligent Misrepresentation: An investor relies on negligently prepared corporate financial accounts to invest in a company which subsequently goes bankrupt. Had the accounts been properly prepared, the bankruptcy would have been predictable. The investor sues the accountant.

(2) Negligent Performance of a Service: A lawyer negligently draws a will in violation of the Wills Act, and in consequence the intended beneficiary is deprived of an inheritance. The frustrated beneficiary sues to recover the lost gift, even though the beneficiary had not been aware of the intended gift and had not otherwise relied on it.

(3) Defective Products or Buildings: A builder negligently constructs a home with faulty foundations. The home poses a risk of collapsing. The non-privity owner sues the builder for the cost of remedying the dangerous defect.

(4) Relational Economic Loss (consequent on physical damage to a third party): A negligent ship captain allows his vessel to damage a railway bridge. The bridge is owned by the government, who recovers routinely in negligence for the physical damage to the bridge. A railway company sues to recover extra shipping expenses it incurred because it had to reroute its trains while the government bridge was being repaired.

(5) Independent Liability of Statutory Public Authorities: A statutory public authority is given discretion to inspect a building construction. It either fails altogether to inspect or inspects in a manner which the court finds unreasonable. As a result, a latent defect goes undiscovered. When the defect is discovered, the owner sues the authority to recover the cost of remedying the defect. [page786]

[24] The existence of a duty of care in negligence causing economic loss turns on the two-stage Anns/Cooper 1 test, which has been expressed as follows:

(1) Is there a sufficiently close relationship between the parties so that, in the reasonable contemplation of the defendant, carelessness on its part might cause damage to the plaintiff?

(2) If the answer is yes, are there any reasons that should limit or negate

(i) the scope of the duty; and

(ii) the class of persons to whom the duty is owed; or

(iii) the damages that might arise?

[25] See Canadian Tort Law, op. cit., at 12.27, quoting from Kamloops (City) v. Nielsen, [1984] 2 S.C.R. 2, [1984] S.C.J. No. 29, which the authors note was the first reformulation by the Supreme Court of Canada of the Anns test.

[26] The two-part test is abbreviated, however, where the court has already concluded that the relationship between the parties falls into or is analogous to one of the five previously recognized categories of proximity. This is because in recognizing a certain category, the court has already undertaken the step-two analysis.

[27] Even where the court is satisfied that the claim falls within or is analogous to an established category, the court must carefully evaluate the factors present underpinning the finding of proximity in those earlier decisions.

[28] The recent decision of the Supreme Court of Canada in Deloitte & Touche v. Livent Inc. (Receiver of), [2017] 2 S.C.R. 855, [2017] S.C.J. No. 63, 2017 SCC 63 is of assistance to the approach to be taken, at least in respect of economic loss arising from negligent misrepresentation. It is not yet clear whether Livent applies to other categories of economic loss.

[29] In Livent, the directors of Livent Inc. manipulated its financial record to make it appear successful. Deloitte & Touche was Livent's auditor. It did not discover the fraud, but in August 1997, it identified irregularities in the reporting of profit from an asset sale. Deloitte did not resign as auditor. Instead, for the purpose of helping Livent to attract investment, Deloitte helped to prepare, and approved, a press release issued in September 1997. [page787] It misrepresented the basis for the reporting of the profit. In October 1997, Deloitte provided a comfort letter in support of an offering of shares for sale to the public. It also prepared Livent's 1997 audit, which it finalized in April 1998.

[30] New shareholders later discovered the fraud. A subsequent investigation and re-audit resulted in restated financial reports. Livent filed for insolvency protection in November 1998. It sold its assets and went into receivership in 1999. Livent sued Deloitte in tort and contract. It argued that it relied on Deloitte's representations and services to prolong the corporation's life, causing ongoing losses. It was successful at trial and was awarded $84,750,000, which was upheld by the Court of Appeal.

[31] In a 6-3 decision, the Supreme Court of Canada reduced the damage award to $40,425,000. It held that Deloitte was only liable for losses flowing from the 1997 audit and not liable for losses flowing from the press release or comfort letter. The dissenting judges would have reversed the lower courts and dismissed the claim.

[32] The significant takeaway from the decision is the majority's reformulation of the Anns/Cooper analysis in cases of negligent misrepresentation of auditors.

[33] At para. 28, the court began by stating:

[W]here a party seeks to base a finding of proximity upon a previously established or analogous category, a court should be attentive to the particular factors which justified recognizing that prior category in order to determine whether the relationship at issue is, in fact, truly the same as or analogous to that which was previously recognized. And, by corollary, courts should avoid identifying established categories in an overly broad manner because, again, residual policy considerations are not considered where proximity is found on the basis of an established category . . . [A] finding of proximity based upon a previously established or analogous category must be grounded not merely upon the identity of the parties, but upon examination of the particular relationship at issue in each case.

[34] At para. 52, the court reiterated its caution about "an overly broad characterization of an established category of proximity which fails to consider the scope of the activity in respect of which proximity was previously recognized".

[35] In respect of new categories, issues formerly addressed at stage two are now to be considered at stage one. The court noted, at para. 39:

Cooper . . . has impacted the stage at which certain factors are considered within the Anns/Cooper framework. For example, principles that were traditionally considered at the second stage of the Anns test in cases of negligent misrepresentation, such as (1) whether the defendant knew the identity of the plaintiff or the class of plaintiffs who would rely on its representation; and (2) whether the reliance losses claimed by the plaintiff stem from the particular transaction in respect of which the statement at issue was made . . . are no [page788] longer considered at the second stage. . . . [T]hese factors arise from the relationship between the parties and are, therefore properly accounted for under the first stage proximity and reasonable foreseeability analysis.

[36] The court acknowledged that indeterminate liability can be a legitimate step-two consideration. However, the court considered that the issue would rarely arise because a robust analysis of proximity and foreseeability at the first stage of the analysis should eliminate any concern. Put another way, the court said a finding of indeterminate liability at the damages stage, "strongly suggests that a legal error occurred at the duty stage": para. 44.

[37] The court discussed the concern respecting indeterminacy [at paras. 43 and 44]:

[T]here are three pertinent aspects to so-called "indeterminacy" in these cases: (1) value indeterminacy ("liability in an indeterminate amount"); (2) temporal indeterminacy ("liability . . . for an indeterminate time"); and (3) claimant indeterminacy ("liability . . . to an indeterminate class") . . . Naturally, when a claim has value, temporal, and claimant indeterminacy, our legal tools are insufficient to resolve the quantum of infinite damages that will flow from such a claim.

In cases of negligent misrepresentation or performance of a service, the requisite proximity analysis will address claimant indeterminacy because the class of claimants is determinate, including only those in respect of whom the defendant undertook to act. Likewise, foreseeability, which is constrained by the purpose of the undertaking in question, should address concerns about value indeterminacy, because the value of damages is limited -- that is, determined -- by the reasonably foreseeable quality of the injury . . . Finally, proximity and foreseeability should both address temporal indeterminacy since the longer the period of time over which injury is said to have occurred, the less likely the defendant undertook to protect against it and the less foreseeable the injury, taken as a whole.

[Emphasis in original; citations omitted]

[38] The very recent decision of the Court of Appeal in 1688782 Ontario Inc. v. Maple Leaf Foods Inc. (2018), 140 O.R. (3d) 481, [2018] O.J. No. 2417, 2018 ONCA 407 succinctly summarizes the Livent principles [at paras. 75-78 and 82]:

In the context of negligent misrepresentation cases, proximity is most usefully considered before foreseeability because "[w]hat the defendant reasonably foresees as flowing from his or her negligence depends upon the characteristics of his or her relationship with the plaintiff, and specifically . . . the purpose of the defendant's undertaking": Livent, at para. 24.

While Livent affirms that when undertaking a full proximity analysis the court must examine all relevant factors arising out of the relationship between the plaintiff and the defendant, two factors are determinative in the case of negligent misrepresentation -- the defendant's undertaking and the plaintiff's reliance: Livent, at para. 30. "Where the defendant undertakes to provide a representation or service in circumstances that invite the plaintiff's reasonable reliance, the defendant becomes obligated to take reasonable care": Livent at para. 30. [page789]

According to Livent at para. 31, "[a]ny reliance on the part of the plaintiff which falls outside of the scope of the defendant's undertaking of responsibility -- that is, of the purpose for which the representation was made or the service was undertaken -- necessarily falls outside the scope of the proximate relationship and, therefore of the defendant's duty of care". A defendant "cannot be liable for a risk of injury against which he did not undertake to protect": Livent, at para. 31.

In cases of negligent misrepresentation, the proximate relationship informs the foreseeability inquiry in that "the purpose underlying [the] undertaking and [the] corresponding reliance limits the type of injury which could be reasonably foreseen to result from the defendant's negligence": Livent, at para. 34.

. . . [A] plaintiff has a right to rely on a defendant to act with reasonable care for the particular purpose of the defendant's undertaking, and his or her reliance on the defendant for that purpose is therefore both reasonable and reasonably foreseeable. But a plaintiff has no right to rely on a defendant for any other purpose, because such reliance would fall outside the scope of the defendant's undertaking. As such, any consequent injury could not have been reasonably foreseeable.

[39] To recap, the reformulation requires the following analysis:

(i) proximity is to be evaluated before the reasonable foreseeability of harm (Livent, para. 24);

(ii) the defendant's undertaking and the plaintiff's reasonable reliance drive the proximity analysis (Livent, para. 30);

(iii) the extent of the duty of care is informed by the purpose for which the defendant assumed responsibility (Livent, para. 31); and

(iv) the relationship of proximity is central to foreseeability (Livent, para. 34).

The Parties' Positions

[40] The defendants submit that the claim does not fall within and is not analogous to three of the five recognized categories and there is no reason to recognize a new category.

[41] The defendants note first that Syngenta is not a statutory public authority. Second, it did not supply shoddy goods or structures. In that regard, Agrisure had been approved for sale by the appropriate North American regulatory agencies and it was safe. Finally, the action does not involve relational economic loss, as that term is understood, because there is no physical damage to a third party.

[42] The defendants submit that the only possible analogous categories are negligent misrepresentation or perhaps negligent performance of a service. They point out that the cases previously [page790] decided under those headings have not imposed a duty of care on the kind of relationship that exists here because the necessary proximity does not exist. They submit that the plaintiff appears to link relational economic loss to negligent misrepresentation or negligent performance of a service, claims that cannot succeed.

[43] They argue that the plaintiff has not identified any material facts that Syngenta's undertaking went beyond promoting Agrisure to investors or purchasers and prospective purchasers of the seed. They say that the plaintiff cannot demonstrate that it relied on any alleged misrepresentation in making a decision to plant non-Agrisure corn instead of a crop other than corn. Such reliance would be unreasonable in any event, because the sale of Agrisure had North American regulatory approval.

[44] To this latter point, in Mandeville v. Manufacturers Life Insurance Co. (2014), 120 O.R. (3d) 81, [2014] O.J. No. 2451, 2014 ONCA 417, the Ontario Court of Appeal refused to impose a prima facie duty of care on an insurance company to refrain from transferring some of its policies to a Barbadian insurer (thereby excluding those policy holders from the economic benefit of a demutualization the company became legally entitled to undertake after the transfer), since the transfer was authorized by Canadian and Barbadian laws and regulators [at paras. 183-185, 187-189 and 192]:

[A]t the time of the transfer, the class members did not have a right to, or interest in, something that did not exist and was not legally possible. Thus, at the time of the transfer, the class members had no legally recognized right, claim or interest to share in the value of Manulife on a future demutualization. At most, they had a hope or mere expectancy that if and when Manulife could and did demutualize, they would still be participating policyholders and therefore have a right to share in that value.

It is self-evident that this is an extremely tenuous interest. In my view, the inchoate and tenuous nature of the interest militates against finding that it is "just and fair" to impose a duty of care upon Manulife to prevent harm to this interest.

I agree with the appellants that they could not guard against interference with this hope or mere expectancy, but that is because of the legislation which governed the transfer . . . That legislation is a consideration that arises in the first stage of the Anns test and is the second reason I find a lack of sufficient proximity.

The transfer, as structured, was lawful under the relevant statues. It was approved by the regulators in both jurisdictions . . .

This consideration speaks to the class members' expectations, a factor going to the court's evaluation of proximity. Knowing that the legislation permitted Manulife to transfer their policies and end their relationship, was it reasonable to expect that Manulife would protect their voting rights? In my view, it was not. [page791]

Moreover, from a policy perspective, it is difficult to comprehend how Manulife could be given the statutory right to end its relationship with the class members (so long as it followed certain processes and obtained regulatory approvals) and yet be legally obligated to maintain one aspect of that relationship, potentially in perpetuity, by preserving the policyholders' voting or other rights in the company.

In conclusion, given the tenuous and inchoate nature of the "interest" that the Barbados policyholders seek to have protected through the recognition of a duty of care and the legislation that empowered Manulife to transfer the Barbados policies, in my view, the proximity requirement has not been satisfied.

[45] The defendants also refer to Hoffman v. Monsanto Canada Inc., [2005] S.J. No. 304, 2005 SKQB 225 and Sauer v. Canada (Attorney General), [2007] O.J. No. 2443, 2007 ONCA 454, the latter a case on which the plaintiff also relies. In Hoffman, a group of organic canola farmers brought a negligence claim against manufacturers of genetically modified canola when their organic crop became unmarketable due to contamination with the genetically modified variant sold to other growers. Smith J. held it was plain and obvious the manufacturers did not owe the plaintiffs a duty to prevent contamination. She reasoned [at paras. 67, 72 and 77]:

The plaintiffs must also allege proximity . . . They have not alleged physical harm to themselves or their property. They have alleged no special relationship between themselves and the defendants. Indeed, they have not alleged any relationship at all, either in the pleadings or in argument before me, that would give rise to an argument for sufficient relational proximity to support a prima facie duty of care.

[T]he bulk of plaintiffs' claim, for loss of use of organic canola as a marketable crop, is a claim for pure economic loss of a category not previously recognized by Canadian courts. In effect, the alleged damage is not of physical harm to the plaintiffs' crops, but arises from the alleged inability to meet the requirements of organic certifiers or of foreign markets for organic canola. There is no allegation that GM canola is unhealthy or causes detrimental physical problems to humans or plant life. . . .

Imposing a duty on the defendants in this case in relation to the economic losses of all those who claim loss of the ability to market canola due to the adventitious presence of GM canola in their crops would indeed expose the defendants to a "liability in an indeterminate amount for an indeterminate time to an indeterminate class." Nothing in the nature of the plaintiffs' claim, for example, would impose a temporal limitation on the liability sought to be imposed, and, indeed, the plaintiffs seek to assert the claim on behalf of any organic farmer who has suffered a loss up to the time of certification. [page792]

[46] In Sauer, a cow in Alberta was diagnosed with bovine spongiform encephalopathy, commonly referred to as BSE or mad cow disease. As a result, the United States, Mexico and Japan refused shipments of Canadian cattle and beef products. The commercial cattle industry suffered disastrous financial consequences. Mr. Sauer was an Ontario cattle farmer who commenced a proposed class action on behalf of commercial cattle farmers in seven provinces.

[47] The claim alleged that the defendant Ridley was negligent in making feed contaminated with BSE that infected the Alberta cow. The plaintiff also alleged that -- in breach of a duty owed to him -- it failed to warn the Alberta farmer that its feed might be contaminated. Similar to the facts in this case, the plaintiff had purchased no feed from Ridley.

[48] The plaintiff also alleged that Canada was negligent in passing a regulation in 1990 that permitted the inclusion of the contaminant in cattle feed, and in failing until 1997 to pass a regulation prohibiting that contaminant.

[49] Ridley brought a Rule 21 motion to strike both claims against it, arguing there was no proximate relationship between it and the plaintiff. Canada also sought a dismissal, submitting that it could not be liable for legislative action or a failure to take action.

[50] The Court of Appeal upheld the motion judge's conclusions that

(1) it was not plain and obvious that the claim of negligent manufacture would fail because of a lack of proximity;

(2) the failure to warn could not succeed. Because the plaintiff did not purchase its feed, Ridley owed him no duty to warn;

(3) however, with respect to the negligent manufacturing claim and notwithstanding that the plaintiff had not purchased Ridley's product, it was not plain and obvious that this claim would fail. This was because of the pleaded relationship between the cattle farmers and feed manufacturers.

[51] The defendants say Sauer is different than this case because it was more akin to the recognized categories of the supply of a defective product or relational economic loss. Unlike Sauer, the defendants here did not cause property damage to intended users. Rather, they pursued legitimate commercial interests in marketing an approved product.

[52] However, the defendants do rely on Sauer because of the court's conclusion that any warning by the defendants could not [page793] have ensured the perfect compliance necessary to eliminate the prospect of contamination. At para. 54 of the decision, the Court of Appeal observed:

Second, the duty to warn is designed to reduce the safety risk through voluntary compliance. No warning can compel perfect compliance. Yet in circumstances like these, a single noncompliant cattle farmer feeding a single cow can produce catastrophic economic consequences for commercial cattle farmers in Sauer's position. Since a warning cannot compel compliance by all, the risk of harm to commercial cattle farmers would hardly be different whether or not Ridley was obliged to warn. Thus, in these circumstances, imposing a duty on Ridley to commercial cattle farmers to warn purchasers and users would have little, if any, impact on the harm suffered by those farmers. In my view, it would be irrational for the law to do so. It would be neither just nor fair where the duty imposed is so unrelated to the harm suffered. Sauer's claim cannot therefore survive the first stage of the proximity analysis.

[53] Finally, if the plaintiff's position were to prevail, the defendants raise the prospect of the kind of open ended or indeterminate liability recognized in Hoffman.

[54] The plaintiff responds that it advances two claims, one for negligence and the other pursuant to the Competition Act. The negligence claim is divided into the three categories (identified at para. 11, above).

[55] The plaintiff emphasizes its pleading respecting the interdependence of the North American agricultural industry and the vulnerability of the plaintiff and class members to Syngenta's actions, which created a special relationship between them.

[56] The plaintiff takes the position that the duty of care arising from premature commercialization is a novel issue that is relatively unexplored and not yet determined. On that basis alone, the pleadings should survive the motion.

[57] It distinguishes Livent on the basis that the plaintiff here has pleaded the existence of the special relationship that is based on its vulnerability. This is also said to be responsive to the concern expressed in Hoffman, supra, where no special relationship was pleaded at all.

[58] Further, in Hoffman, the plaintiffs argued that the defendant had a duty to refrain altogether from marketing its GMO product to the relevant consumer purchasers.

[59] The plaintiff says that it does not make that argument. Significantly, it acknowledges that the defendants were not prohibited from selling their products domestically because they had the necessary regulatory approvals. However, the plaintiff alleges the approval did not permit the defendants to commercialize the products unreasonably. [page794]

[60] With respect to the misrepresentation claim, the plaintiff agrees with the defendants that Livent has modified the law governing the analysis of proximity and foreseeability. It stresses the following passages from the case [at paras. 30 and 35]:

In cases of pure economic loss arising from negligent misrepresentation or performance of a service, two factors are determinative in the proximity analysis: the defendant's undertaking and the plaintiff's reliance. Where the defendant undertakes to provide a representation or service in circumstances that invite the plaintiff's reasonable reliance, the defendant becomes obligated to take reasonable care. And, the plaintiff has a right to rely on the defendant's undertaking to do so.

Both the reasonableness and the reasonable foreseeability of the plaintiff's reliance will be determined by the relationship of proximity between the parties; a plaintiff has a right to rely on a defendant to act with reasonable care for the particular purpose of the defendant's undertaking, and his or her reliance on the defendant for that purpose is therefore both reasonable and reasonably foreseeable. But a plaintiff has no right to rely on a defendant for any other purpose, because such reliance would fall outside the scope of the defendant's undertaking. As such, any consequent injury could not have been reasonably foreseeable.

[Citations omitted]

[61] The plaintiff describes the relationship of proximity, at para. 74 of its factum, as follows:

74. Proximity exists between the plaintiff/class members and the defendants -- the defendants are participants in the global corn market and were fully aware of market conditions and China's concerns about genetically modified corn and comingled [sic] corn. The defendants would not have given promises not to harm the global markets if they did not know of the existence of such markets and such concerns. Specifically, on the issue of proximity and the defendants' argument that the alleged misrepresentation were made only to planters of Agrisure Viptera, there are three underlying flaws:

a. the misrepresentations were made in "commercial advertising" which was targeted at a wider audience than simply those farmers who had planted Agrisure Viptera seeds;

b. the misrepresentations were negligently made and Syngenta knew they would be relied upon by the plaintiff and class members to their probable detriment; and

c. if the defendants had not misrepresented the status of China's approval, the plaintiff and class members could have had the opportunity to attempt to stop the introduction of Agrisure Viptera and/or to have planted alternative crops.

[62] It says there is no concern respecting indeterminate liability. It quotes from the American decision in the U.S. proceedings, at pp. 14-15: [page795]

Syngenta also points to concerns about the potential for open-ended liability. This case does not involve the possibility of an endless stream of claims by strangers further and further removed from Syngenta's conduct, however, as the inter-connected web of relationships within the market provides a natural cutoff for liability. Nor does the court agree that recognition of a duty here would create an undue risk of speculative or duplicative damages (that is, a risk greater than in the usual case), particularly in light of the commodities market by which damages would be measured. Nor is the Court persuaded by Syngenta's argument that this case simply involves too many steps in the causal chain, as plaintiffs have alleged acts by Syngenta creating the specific risk of contamination and a resulting disruption of the export market, which would naturally and directly cause the alleged market damages. Finally, the court does not believe that the risk of a flood of new litigation is sufficiently great and sufficiently unfair to preclude the recognition of a legal duty here.

[63] I pause here to observe that the American decision is of interest given the identity of subject matter on the two motions. However, I have misgivings in relying on it. It is not clear to me whether the test applicable on the motion there is the same or similar to Rule 21. Further, I was given no material that would assure me that Canadian and American law in this area is the same or similar.

[64] The plaintiff also argues that the defendants made a promissory misrepresentation, a term that finds no expression in its statement of claim, but which it describes as a promise that something will be done, in circumstances where the defendants have assumed responsibility to assist the plaintiff. The defendants reply that the cause of action has not been pleaded and in any event, there is no legal support for it. I interpret the term to be synonymous to an undertaking -- a term discussed below.

[65] The plaintiff responds to the defendants' argument respecting Hoffman, supra, again returning to the American decision, at p. 16:

Hoffman, however, which was decided by a Canadian provincial trial court, did not involve circumstances that are completely identical to those here, and the court believes that with respect to the issue of duty, which must be examined in light of the particular circumstances of the case, a different result is warranted here. . . . The court noted that the plaintiffs there had no alleged any expectations, representations, reliance, or special relationship between the parties. In the present case, however, as noted above, plaintiffs have alleged facts showing a relationship between the parties in an inter-connected market, as well as representations by Syngenta concerning steps that it would take to protect stakeholders.

[66] The plaintiff also relies on Sauer given its obvious factual similarity to this case. It relies on the following discussion by the Court of Appeal [at paras. 37-39]:

Ridley's main argument is that there is simply no proximity between it and Sauer and therefore it is plain and obvious that it owes no prima facie duty of care in these circumstances. Ridley's position is that since Sauer did not [page796] purchase or use its feed, it and Sauer are strangers to each other for the purposes of the proximity analysis.

I do not agree. In essence, Sauer argues that the proximity examination must be done keeping in mind the circumstances relevant to the cause of action being alleged. The relationship of commercial cattle farmers and cattle feed manufacturers must be examined in the context of the manufacturer of feed contaminated with BSE.

In this light, Sauer says that he and Ridley are part of one integrated industry, from the supply of feed through to the sale of cattle. Beyond this economic link, Sauer points out that there is a regulatory link: the feed component of the industry is regulated nationally in the interests of the participants in it and the public. Most importantly, the catastrophic economic consequences of BSE contamination due to a single infected cow are shared by all commercial cattle farmers. Foreign sales are eliminated for all. This economic catastrophe dwarfs the impact of the loss of one cow on the cattle farmer who purchased the Ridley feed. In this critical way, all commercial cattle farmers are linked to Ridley as the victims of feed contaminated by BSE.

[67] The plaintiff points to para. 53 of the Sauer decision as the basis to distinguish the court's conclusion there respecting a duty to warn. The court noted:

First, any warning by Ridley would have had no impact on Sauer's conduct. Since he neither purchased nor used Ridley's product, a warning would never have come to his attention . . . In Economic Negligence: The Recovery of Pure Economic Loss, 4th ed. (Toronto: Thomson Canada, 2000) at 190, Professor Felthusen described that rationale this way:

A manufacturer's duty to warn of known dangers associated with its products is premised on safety concerns. The premise of the duty ought to control its ambit. Thus, the duty should extend to those persons who are in a position to respond to the warning, and hence to reduce the safety risk.

[Footnote omitted]

[68] The plaintiff submits that unlike Sauer, class members could have taken steps to protect themselves -- for example, by planting alternative crops if they had been forewarned. And because of the unique interconnected nature of the corn market, a warning would have come to its attention.

[69] Finally, the plaintiff relies on Perre v. Apand Pty. Ltd., [1999] HCA 36, 198 CLR 180 (H.C. (Aus.)) a case referred to in Hoffman. In that case, the defendant sold contaminated seed to a third party, Sparnon, damaging its potato crop, which triggered a legislative ban on the import of potatoes grown within 20 km of the Sparnon property into Western Australia. The Perres grew potatoes near the Sparnon property. Their potatoes were not contaminated but were part of the export ban into the lucrative Western Australia market. The High Court overturned the courts below, holding that a duty of care was owed, the loss was foreseeable and the plaintiffs were a known vulnerable class. [page797]

[70] The plaintiff submits that its claim is similar and merely seeks to extend to the broader class a similar, if not the precise, duty the defendants already owed to the value chain. Class members who purchased the seeds in question from the defendants and those who did not were working together in the same market and suffered the same damages as a result of the defendants' action. These damages were entirely foreseeable to the defendants.

Analysis

[71] It is helpful here to set out in brief the essential facts pleaded in the statement of claim that are assumed true for the purposes of this motion:

• the North American agricultural industry is interdependent and connected;
• there is a shared responsibility among industry participants to exercise reasonable care respecting the commercialization of new biotechnology products;
• commingling is inevitable;
• approval by prospective buyers is necessary before commingled crops can be sold;
• the plaintiff and class members are vulnerable if the defendants fail to obtain adequate approvals;
• the defendants were warned by the industry not to introduce another MIR genetic trait without export market approvals;
• the defendants undertook (or made a promissory representation) not to cause damage by introducing its product without necessary global approvals;
• the defendants brought Agrisure to the North American market in 2011 knowing China would not approve Agrisure until later;
• Agrisure contaminated the North American market and the defendants failed to take measures to prevent it; and
• the defendants misled farmers about the importance of the Chinese market and the status of its approval of Agrisure for import and the plaintiff and class members relied upon their misrepresentations.

[72] I have concluded that it is plain and obvious that the claim for relational damages cannot succeed. There is no economic loss [page798] that is consequent to physical damage to a third party, which is the foundation of the duty of care. See the Norsk decision, supra.

[73] In my view, the claim -- read generously -- is framed in only one previously recognized category of compensable economic loss, namely, misrepresentation. The claim for premature commercialization is somewhat misleading or a misnomer in the sense that the plaintiff does not assert that the defendants could not market its product domestically as they saw fit. Rather, the allegation is that the defendants undertook not to do so unreasonably. The plaintiff emphasizes that the important point is that the regulatory process did not confer immunity if the defendants acted wrongfully. By failing to take reasonable steps to prevent it, Agrisure contaminated the plaintiff's non-Agrisure crop. This led to China's rejection of all Canadian corn, leading to economic losses in the domestic corn market.

[74] Although the claim is characterized as a misrepresentation claim and therefore, it falls within a recognized category of economic loss, it is necessary, by virtue of Livent, to carefully examine the basis of which a duty of care arises in the circumstances of these facts. As a result, the defendants' misrepresentation, undertaking and the reasonableness of the plaintiff's reliance must be evaluated.

[75] Given that this is a Rule 21 motion, I am entitled to assume that a misrepresentation was made. Paragraph 27 of the claim alleges that the defendants misled farmers about the importance of the Chinese market and the timing and substance of its application for approval in China. I assume this to be true for the purposes of the motion.

[76] The undertaking is that for which the defendants assumed responsibility. This in turn delimits the duty of care. At para. 20, the plaintiff pleads that the defendants undertook not to cause damage to the corn market by introducing another MIR genetic trait product without global approvals.

[77] In particular, the plaintiff pleads:

20. Syngenta had been warned by the industry not to introduce another MIR genetic trait without approval in export markets because of the detrimental consequences which can occur from such premature commercialization. Syngenta undertook not to cause damage to the corn market by introducing another MIR genetic trait product into the market without necessary global approvals and the Plaintiff and class members reasonably relied on that undertaking. Syngenta's duty arises from the multifaceted interdependence of the market between Syngenta and the Plaintiff/class where genetically modified crops are sold/exported.

[78] Paras. 39 and 40 also speak to the plaintiff's reliance.

[79] To reiterate then, the plaintiff asserts that the defendants undertook not to introduce Agrisure into the market without [page799] global approvals. This was important to the plaintiff and class members because of their vulnerability in the interconnected North American corn market and the "inevitable" commingling of Agrisure and non-Agrisure corn. This, in turn, influenced the plaintiff's decision (and that of other class members) about what crop they would plant.

[80] In its particulars of negligence, the plaintiff says that after introducing Agrisure in Canada, the defendants negligently failed to take safeguards or other reasonable steps to prevent contamination. At para. 15, the plaintiff alleges that "comingling [sic] of different varieties of corn occurs during planting, harvesting, drying, storage and transportation of corn". At para. 22, it alleges that the defendants failed to employ any meaningful or adequate segregation or identity preservation measures to isolate Agrisure Viptera from other Canadian corn. Syngenta "failed to adequately educate Agrisure Viptera farmers and other industry stakeholders on the proper handling, stewardship, segregation, and channeling of Agrisure Viptera to prevent contamination of the Canadian corn supply".

[81] In my view, it is at this point that the plaintiff's claim founders for several reasons.

[82] There is repeated reference in the pleading to "stakeholders", a term that is undefined in the statement of claim. To the extent that a claim is advanced on behalf of stakeholders, the concern respecting indeterminate liability arises most starkly. Industry stakeholders could conceivably capture an enormous number of entities in the industry other than corn farmers but whose livelihood could be affected by depressed corn prices. They are arguably persons similarly situated to the plaintiff. The spectre of indeterminate liability to an indeterminate class for an indeterminate amount clearly exists.

[83] It is illogical that the defendants would make an undertaking it could not fulfill to a huge swath of the North American corn market.

[84] Furthermore, at para. 41, the plaintiff faults the defendants' failure to prevent commingling of Agrisure and non-Agrisure corn. However, at para. 7, it pleads commingling was inevitable because of the interdependence of the North American industry and the peculiarities of genetically modified seeds.

[85] I pose the rhetorical question: how does one prevent that which is inevitable? Any reliance by the plaintiff on the defendants' alleged undertaking on this point could not have been reasonable because it was impossible to achieve. It parallels the point that was made in Sauer, supra, because no amount of education will ensure that commingling will be prevented. Only one [page800] non-compliant Agrisure farmer or "stakeholder" could compromise non-Agrisure Canadian corn crops.

[86] If the plaintiff's argument is taken to its logical conclusion, Syngenta would necessarily be prevented from selling Agrisure in the domestic market, notwithstanding Canadian and American approvals. The only way to ensure that commingling and contamination did not occur would be to withhold the release of Agrisure to the North American market, a position the plaintiff explicitly disavows -- as it must, given the outcome in Hoffman.

[87] Furthermore, if the plaintiff's position prevailed, I agree with the defendants that the importance of foreign import approvals would be elevated to a level of precedence over domestic approvals. The question would arise whether any foreign importer of a Canadian product must approve imports before the product could be marketed domestically. The answer must surely be no. If only large foreign markets are relevant, one might ask how that would be determined and by what decision maker. The potential for arbitrariness is self-evident.

[88] It is for this reason that I have concluded that it is plain and obvious that the claim cannot succeed. Amendments will not remedy the defects identified in these reasons. The motion is granted, and the claim is dismissed.

[89] These conclusions are equally dispositive of the Competition Act claim.

[90] If the parties cannot agree, I will receive written costs submissions by January 31, 2019 according to a timetable that I will leave to the parties to organize.

Motion granted.

Notes

1 Anns v. Merton London Borough Council, [1977] 2 All E.R. 492, [1978] A.C. 728 (H.L.) and Cooper v. Hobart, 2001 SCC 79, [2001] 3 S.C.R. 537, [2001] S.C.J. No. 76.

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