Regulatory Restrictions – Recovering Financial Loss

Agricultural businesses subject to government regulation may suffer financial loss resulting from regulatory restrictions.  In what circumstances can such losses be recovered?

In a recent decision of the Federal Court of Appeal, the appellate court considered an appeal by commercial beekeepers from a motion judge’s decision summarily dismissing their proposed class action against the federal government for recovery of financial losses resulting from the Minister’s policy decision prohibiting importation of bee “packages”.  While the Minster admittedly had statutory authority to impose such a prohibition by regulation, earlier regulations to this effect had expired.  Under existing regulations, the Minister is required to issue importation permits provided that the imported product would not “result in the introduction into Canada, or spread within Canada, of a vector, disease or toxic substance.”

Bee “packages” contain a bee colony (including a queen) and are the most efficient method of replacing beekeepers’  losses due to winter-kill and other factors.  Although both the previous regulation and the ministerial policy permitted replacing colonies with imported queen bees, this requires more inputs and carries more risk in establishing a productive colony than bee “packages”.

The plaintiff beekeepers alleged that the ministerial policy imposing an absolute prohibition on the importation of bee “packages” conflicted with their regulatory right to the grant of a permit absent evidence of potential harm and that, in implementing this policy, the Minister was improperly responding to the lobbying efforts of a small faction of commercial beekeepers promoting their own financial advantage.  In allowing the appeal and authorizing the proposed class action to proceed, the appellate court commented:

“The beekeepers plead that in specific interactions, Canada assured them that imports effecting their economic interest would be banned only as long as there was scientific evidence of risk…Absent evidence of risk and but for the blanket guideline, Canada had to issue importation permits under .  In light of these considerations, the relationship between Canada and the beekeepers is sufficiently close and direct to make it fair and reasonable that Canada be subject to a duty to respect the beekeepers’ interests, at least to the extent of making rational, evidence- based decisions following proper legislative criteria…

“Put another way, the relationship between the beekeepers and Canada, as pleaded, is one of well-defined rights and entitlements based on specific legislative criteria, alongside specific interactions and assurances between the two.  It is not one where someone is seeking a general benefit that may or may not be granted depending on a subjective weighing and assessment of policy factors.”

The appellate court rejected the federal government’s position that it should bear no financial liability for loss where it acts in the public interest.  The court stated:

“As mentioned above, the beekeepers claim focuses on their inability to import honeybees from the United States under .  says that permits ‘shall’ be granted on a case by case basis where the importation would not bring a ‘vector, disease or toxic substance’ to Canada.  In other words, the public policy established by the law on the books favours importation in appropriate circumstances.  According to the beekeepers, those circumstances existed, and importation should have been allowed.  Thus, in this case, there is no inconsistency between the existence of a private law duty of care to the beekeepers and the public duty Canada owed.”

The appellate court concluded that the beekeepers’ claims of negligence and bad faith should be permitted to proceed, as well as their alternative claim for monetary relief in public law described by the appellate court as a “novel” claim.  With respect to this claim, the court stated:

“Taking the allegations in the claim as proven, Canada’s officials took it upon themselves to create and enforce an unauthorized, scientifically unsupported blanket policy preventing beekeepers from exercising their legal right to apply for importation permits on a case by case basis under .  This gives rise to a number of grounds for finding unacceptability and indefensibility… As alleged, Canada’s conduct has a flavour of maladministration associated with it, something that can prompt an exercise of discretion in favour of monetary relief.  The additional element of bad faith, pleaded here…, buttresses that conclusion.  As pleaded, interactions between Canada and the beekeepers suggest that monetary relief may be required to fulfill a clear and specific duty to act.”

Agricultural producers may, in some circumstances, obtain recovery of financial losses resulting from improper imposition by public authorities of regulatory restrictions.  Such recovery will depend upon the nature of the relationship between the public authority and the claimants, whether there is lawful authorization for the impugned restriction, the nature of the public duty being exercised, and whether the public authority has acted in bad faith.

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