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CIVIL PROCEDURE - Pleadings - Striking out pleadings or allegations

Wednesday, November 13, 2019 @ 7:37 AM  

Lexis Advance® Quicklaw®
Appeal by the plaintiff from a decision dismissing its action for failure to disclose a reasonable cause of action. The appellant was an Ontario corn grower. The respondent sold to North American corn growers Agrisure corn seed which contained a genetically modified trait. Agrisure was approved for sale in North America by Canadian and American regulators but had not been approved by regulatory authorities in China, a large and growing export market for North American corn. The appellant neither purchased nor planted Agrisure but commenced a proposed class action against the respondent for misrepresentation, breach of the Competition Act and premature commercialization on behalf of itself and others similarly situated in Canada. The respondent was alleged to have been negligent in commercializing its product when it knew or should have known that doing so before approvals in China had been obtained would have the effect of contaminating the entire North American corn supply with a genetic trait that would lead to the closing of that export market and a corresponding drop in prices. The respondent was alleged to have made negligent misrepresentations about the importance of the Chinese market, the timing and substance of its application for Agrisure approval in China, especially the timing of when China was likely to approve Agrisure, its ability to channel Agrisure to non-Chinese markets, and its ability to contain the infiltration of Agrisure to the North American corn supply. The appellant also alleged the respondent’s false or misleading representations were contrary to s. 52 of the Competition Act. The motion judge characterized the appellant’s claim as one for pure economic loss. She concluded it was plain and obvious the claims based in negligence could not succeed and held the conclusions that underpinned her analysis of the negligence claims were equally dispositive of the Competition Act claim.

HELD: Appeal allowed in part. The claim for negligent misrepresentation and breach of the Competition Act were properly dismissed. The adequacy of the statement of claim must be assessed from the standpoint of whether it disclosed that the appellant had a reasonable cause of action. The misrepresentation claim did not have a reasonable prospect of success, as any reliance by the appellant on the alleged misrepresentations about the timing and substance of the respondent’s application for approvals in China was for a purpose outside the pleaded purpose of those representations, and therefore outside the scope of any duty of care. The purpose of the representation was determinative of the scope of the relationship of proximity necessary to found a duty of care. The appellant’s allegation was that it relied on the representations to plant corn, but not to purchase and plant Agrisure. This was beyond the scope of any relationship of proximity. On the facts alleged, the appellant also did not have a reasonable prospect of successfully establishing that the civil remedy in the Competition Act was available to it. The claim for premature commercialization should not have been dismissed. The motion judge did not correctly consider this aspect of the appellant’s claim because she did not consider whether a full proximity analysis and a consideration of reasonable foreseeability here would reveal a reasonable prospect of success in establishing a duty of care sufficient to support the premature commercialization claim. It could not be said on the facts alleged that the appellant had no reasonable prospect of successfully establishing that the respondent owed it a duty of care not to negligently prematurely commercialize Agrisure. The premature commercialization claim was based on alleged facts that did not completely overlap with those on which the misrepresentation claim was brought, and it was therefore analytically distinct. It could not be concluded at this stage that there was no reasonable prospect that the appellant could succeed in establishing that it would be just and fair to impose a duty of care on the respondent.

Darmar Farms Inc. v. Syngenta Canada Inc., [2019] O.J. No. 5025, Ontario Court of Appeal, G. Huscroft, G.T. Trotter and B. Zarnett JJ.A., October 4, 2019. Digest No. TLD-November112019006