Date: 20001220
CALGARY, Alberta, Wednesday, the 20th day of December, 2000.
| PRESENT: THE HONOURABLE MR. JUSTICE JOHN A. O'KEEFE |
Docket: T-2690-92
BETWEEN:
CERVINUS INC.
Plaintiff
- and -
HER MAJESTY THE QUEEN, IN RIGHT OF CANADA
REPRESENTED BY THE MINISTER OF AGRICULTURE
Defendant
Docket: T-2691-92
BETWEEN:
COLDSTREAM DEER GROUP LTD.
Plaintiff
- and -
HER MAJESTY THE QUEEN IN RIGHT OF CANADA
REPRESENTED BY THE MINISTER OF AGRICULTURE
Defendant
REASONS FOR ORDER AND ORDER
O'KEEFE J.
[1] These are two actions for damages brought against Her Majesty the Queen, as represented by the Department of Agriculture which were heard together in Ottawa. The two plaintiffs allege damages under various heads, including loss of profit and business opportunity allegedly due to wrongful acts by servants of Her Majesty employed by the Department of Agriculture (hereinafter "Agriculture Canada"). The damages are alleged to have arisen out of the decision by Agriculture Canada to order the removal from Canada of two herds of New Zealand red deer which had been recently imported by the plaintiffs. One herd belonged to the plaintiff, Cervinus Inc. (hereinafter "Cervinus") and the other to the plaintiff, Coldstream Deer Group Ltd. (hereinafter "Coldstream").
BACKGROUND
[2] The plaintiffs are incorporated companies which attempted to establish a business in the breeding and sale of New Zealand red deer. The plaintiff, Coldstream, a Canadian subsidiary of the New Zealand company, Alpine Deer Group, had imported approximately 4,000 New Zealand red deer. It maintained a herd of approximately 1,500 animals in 1990. The plaintiff, Cervinus, incorporated in 1989, imported its first herd of red deer in 1990. Cervinus also intended to build up a reserve of deer to be used for breeding, with the balance being sold.
[3] The two herds of deer at issue in these actions were imported during 1991. The Coldstream herd of 233 animals arrived via Southern World Airlines on May 22, 1991 and the Cervinus herd of 285 animals arrived on July 15, 1991.
[4] The importation of the deer was preceded by a lengthy process of consultation with Agriculture Canada with the view to obtaining import permits for the animals. Import permits were eventually issued, with numerous terms and conditions attached. These import permits and attached protocols, formed the conditions to be placed on the importation of the deer. The insurers of Coldstream also sought information from Agriculture Canada as to what course of action would be taken in the event that any or all of the animals were subsequently found to be infected with a disease. Of particular importance to the importation of New Zealand red deer was a viral condition known as Elaphostrongylus cervi, or E. cervi. This is a parasitic condition wherein E. cervi worms breed inside the host. And while there do not appear to be many harmful effects of the virus in red deer, in some other hosts, which are present in Canada, E. cervi can be fatal.
[5] Inter alia, the conditions imposed on the importation of the deer in the case at bar were that the herds were to be held in quarantine in New Zealand for a period of time and were to undergo testing for E. cervi at regular intervals, with no evidence of spiny larvae. Subsequent to their arrival in Canada, the herds were to be quarantined for an additional period of time and continue to undergo testing for E. cervi at regular intervals, all with no evidence of spiny larvae.
[6] The import permit was issued subsequent to considerable discussion among the representatives of the plaintiffs and Agriculture Canada officials. Dr. McElheran was the official from Agriculture Canada who was in charge of the import division. He would develop the conditions to be attached to the import permits that were subsequently issued to the plaintiffs.
[7] The protocol was drafted in September, 1988. The protocol contained the requirements which would be needed to be made prior to the deer being allowed into Canada. The protocol was tightened in 1990, but mostly with respect to tuberculosis and foot and mouth disease. The most relevant is that portion which relates to E. cervi. The protocol stated as follows:
| In the case of Elaphostrongylus cervi, it would be necessary to carry out further tests on the remainder of the group. If it was found that a high percentage of the imported group was infected with E cervi, then it could result in the destruction of the entire group. |
[8] The Coldstream deer herd was imported into Canada on May 22, 1991 via Pearson International Airport. The total number of deer entered into the quarantine was 235--two deer had died during their journey.
[9] The Cervinus herd arrived on July 15, 1991. They proceeded to the quarantine facility in Lanark, Ontario. There were 285 deer in the herd.
[10] The Cervinus deer were tested for larvae as required by the import permit, with completely negative results being obtained in August and September. But subsequently, on samples taken on November 18th, 19th, and 20th, deer number 172 evidenced the shedding of one larva. An Order to Remove Animals from Canada was received by Cervinus principals on December 23, 1991.
[11] And with respect to the Coldstream herd, animal 6249 evidenced two larvae and 6215 evidenced a single larva from feacal samples taken on June 17th and 18th, 1991. Another set of faecal samples was taken but never analyzed. The deer were destroyed and a full post-mortem was to be performed. A notice to remove animals from Canada was issued on September 16, 1991 with respect to the Coldstream herd. The herd was slaughtered in the winter of 1992. The Minister of Agriculture denied the claim for compensation that was subsequently made.
[12] The plaintiffs, who were of the view that patriating the deer to New Zealand would be prohibitively expensive, euthanized the deer as a form of compliance with the orders.
[13] The plaintiffs subsequently applied for compensation from the Minister under section 51of the Health of Animals Act. Compensation was denied pursuant to section 54 of that same Act. The plaintiffs brought these actions on October 27, 1992.
THE CLAIMS
[14] Cervinus claims a total of $3,551,135 in damages for losses suffered upon the
destruction of its herd of red deer. The breakdown is as follows:
| [ · ] $783,750 for the market value of the imported herd ($2,750 each) |
| [ · ] $21,000 for the market value of stags ($3,500 each) |
| [ · ] $12,800 for land lease extensions occasioned by compliance with import permits |
| [ · ] $50,000 for the cost of maintaining the quarantine facility |
| [ · ] $25,000 for the cost of cleaning up the quarantine facility |
| [ · ] $2,658,585 for loss of economic opportunity over five years |
Six stags, not a part of the latest import shipment were apparently placed into the quarantine area to impregnate females. These stags were also ordered removed from Canada.
[1] Coldstream claims a total of $6,558,082 as follows:
| [ · ] $629,100 for the market value of its herd of deer ($2,700 each) |
| [ · ] $5,762 for its loss on the sale of equipment |
| [ · ] $25,574 for depreciation on equipment sold |
| [ · ] $68,014 for loss/write-off on equipment |
| [ · ] $36,250 for costs associated with the clean up of the quarantine area |
| [ · ] $81,151 for the Thorliefson claim |
| [ · ] $5,759,326 for loss of profits |
[1] Set off against these listed amounts are $1,775 for recovery of certain funds and $45,320 of income earned on the sale of deer carcasses.
THE TRIAL
[2] At the trial, which lasted three weeks, a considerable portion of time was spent hearing from various expert witnesses called from both sides of the case.
[3] As part of the case for the plaintiffs, Drs. Burt and Waldrup testified about the nature of E. cervi.
[4] Dr. Burt, in both his written report and oral evidence, explained the nature of the E. cervi parasite and its life cycle:
| Essentially, the life cycle involves the ineffective stage which is the third larval stage [L3]...which lives in snails and slugs. In the snails and the slugs is where you find that third larval stage. |
| When a deer accidentally ingests the slug or the snail with whatever vegetation it is feeding on, then the third larval stage enters, goes into the intestine and somewhere in the intestinal tract it penetrates out of the gut, gets into the body cavity and makes its way to the nervous tissue. |
| In the case of parelaphostrongylus tenuis, or P, tenuis, the worms make their way into the brain and mostly reside there. Some of them may stop off en route, but the adults are found typically in the brain, in the sinuses of the brain. |
| In the case of elaphostrongylus cervi, E. cervi, what happens is there are two different variations in the literature, but they certainly make their way initially to the central nervous system again. There is one report that says they go into the brain and then come back out as adults to take up positions either in the axilla just under the armpits or in the groin. |
| ... |
| Once they reach maturity there is in fact a period between the ingestion of the infective stage, the third larval stage that is in the slug or the snailthere is a period of time between the ingestion of that and maturity of the worm so that the females are shedding eggs. |
| The way they shed their eggs is these are passed into the bloodstream, into the veins in the brain, and the blood, of course, eventually comes back to the lungs and then in the lungs these eggs hatch into first-stage larvae, the L1, and these L1 penetrate from the veins, the little venules there, the very small capillaries, and they get into the alveoli of the lungs, the small air passages. They pass from there into the bronchi up the trachea into the back of the throat, the back of the mouth of the deer, and then the deer swallows them. |
| After swallowing the L1 stage larvae, the larvae passes through the digestive system and is eliminated along with faeces. The larvae are then in the outside environment, and can be harmlessly ingested, or can find their way into an intermediate mollusc host and mature: |
| ...they are swallowed as the deer is eating and they pass all the way down through the intestine and passed out with the faecal pellets of the deer. They don't get right into the faeces. They are associated primarily with the mucous coat that surrounds each faecal pellet. |
| Once those faecal pellets are passed out of the deer and they get onto the ground, if it is wet and there needs to be some moisture through rainfall, the L1 larvae, the first-stage larvae...leave the faecal pellet and are found on grass. That, of course, is where the slugs and the snails are. So these penetrate the tissue, the foot of the slug or the snail, and they make their way into the body of the snail. |
| The first larval stage grows, sheds its larval coat, its sheath, its cuticle, and becomes a second larval stage. Then that grows once again, sheds the second coat, the cuticle, and becomes a third larval stage. That takes a period, depending on the temperature, of two to three weeks perhaps, and then they live in the snail until the snail is eaten or it may be the end of it if the snail isn't eaten. |
| That simply describes the life cycle of both E. cervi, which goes largely into the tissue and is called the muscle worm or the tissue worm, and P. tenuis that is called the meningeal worm or the brain worm because the adults reside primarily in the brain. |
(Transcript Volume 3 pages 562 - 566)
[5] Dr. Burt also described the normal administration of the Baermann test, the test prescribed by Agriculture Canada to test for E. cervi:
| [ · ] Collect roughly 10 - 20 grams of faecal matter, collected from source not from the ground |
| [ · ] Place the faecal pellets onto absorbent tissue paper |
| [ · ] Wrap up and place into a funnel and fill funnel with water |
| [ · ] Leave for 24 hours |
| [ · ] Release some of the fluid from the stem of the funnel, and examine |
| [ · ] Exam uses about 15 - 20 millilitres of water |
[1] Dr. Burt also described the adult E. cervi worm and the process for discovering it upon necropsy. The worm appears long and narrow and is found by dissecting the deer, usually by cutting off the head. They are usually found in the axilla, the armpit or the groin, but not always. The worms are long and very, very thin. After hatching the eggs and first stage larvae would be found in the lungs.
[2] A further significant portion of Dr. Burt's testimony concerned the concept of the "pre-patent" period:
| Yes. The pre-patent period is the period between the time that the infective stage larva is ingested by the deer and the time that it takes for that larva to mature into either a mommy or a daddy, for these to get together, and for the females to start producing eggs and eventually L1 larvae that start coming out at the other end. If you are doing this experimentally, on day one if you feed it the third larval stage either in a snail or without, you feed them that any you keep checking the faecal droppings. In the case of E. cervi, for example, perhaps they are as little as 100 days, perhaps they are a s high as 120 even 125 days as a record. Tom Watson gave a pre-patent period, I think, of between 107 and 125. |
(Transcript Volume 3 page 576)
| Our work in New Zealand has been between 95 and 120, but it's all within the three to four month period. That is the pre-patent period. In the case of P. tenuis, it's the same thing. The pre-patent period is in fact very similar, between 90 and 120 days. |
(Transcript Volume 3 page 577)
[3] Dr. Burt stated that an infective animal would be expected to shed "many" larva, with many varying widely--1,000; 12,000; 30,000. He stated that it is very seldom would you find only one larva shed by an infective animal.
[4] On the basis of his scientific knowledge and his knowledge of the facts and circumstances of these actions, Dr. Burt expressed the opinion that the deer which evidenced some larva shedding did not have a patent E. cervi infection. He did not believe that there was a female worm inside shedding eggs and larvae. This opinion was also supported on the basis that the pathologist report indicated that there were no adult worms found.
[5] Dr. Burt also addressed the issue of the nematodes in the lungs of one of the slaughtered deer--whitish things 10 to 20 centimetres in length. According to Dr. Burt, this was dictyocaulus.
[6] Dr. Burt testified that the larvae found in deer 172 "looked to be like a protostrongyle" but could not be identified as E. cervi. Such was beyond the capacity of any parasitologist. This was because they all look alike, lengths in many cases overlap. Actually, E. cervi was thought to have existed in Canada for years, until it was discovered that the item was in fact another elaphostrongle, E. rangiferi.
[7] The maximum length of P. tenuis is 410 micrometres; and the maximum for E. cervi in Dr. Burt's work was found to be 398 micrometres. Given the overlapping measurements, a positive identification as E cervi larvae could not be made. And importantly, Dr. Burt testified that the only way to confirm the presence of E. cervi would be to find an adult worm. If the deer has a patent infection, there must be at least two adult worms in the corpse (male/female). Dr. Burt allowed, however, that a heavy infestation of lungs by eggs or L1 larvae is indicative of a patent infection. Conversely, if no such larvae are observed in the lungs, there is no patent infection.
[8] Dr. Burt looked at slides of larva recovered from deer and could identify it as a protostrongyle, but could not identify it as E. cervi.
[9] Dr. Burt finally opined that the larvae could have been another protostrongyle, other than E. cervi, which does not exist in Canada, which was ingested by the deer through feeding.
[10] Concerning the accuracy of the Baermann test:
| The Baermann method, however, is not completely reliable and even if some L1 are found, especially if they are few in number, they may be larvae from another deer that were ingested along with vegetation that the tested deer was eating. Thus, in addition to the possibility of false negative results, the Baermann method could also give false positive results. |
| The efficacy of the Baermann method can be improved by repeated testing of the same animal over several days, weeks or months (the adult worms can live in their deer hosts for at least 4 years and probably much longer). If the deer is infected, the more times it is tested the better are the chances of larvae being found. If the deer is not infected and was only passing larvae it had ingested along with the vegetation it was eating, the likelihood of finding more larvae is greatly reduced. |
(Exhibit P-9 Page 3 of Dr. Burt's Report)
[11] Dr. Burt explained that the Baermann test problem is more that they are not always going to be shedding, and not that you are actually missing some of the larvae. Key though is that you get to the lungs to search for larvae and look for the adult worm.
[12] In cross-examination, Dr. Burt admitted that there was no definitive diagnostic test for E cervi; that abnormal hosts with E. cervi can cause great problems. Abnormal hosts abound in Canada. Further admitted that a low level of shedding meant that a positive Baermann test would be even less likely. However, Dr. Burt maintained that were an animal patently infected with E. cervi, there would be a high level of shedding, not low.
[13] Counsel for the defendant, Mr. Woyiwada, discussed a paper Dr. Burt co-authored with his ph.D. student, wherein the entire faecal output of a deer (1800 grams) was tested, 24 hours subsequent to the deer being force-fed 3,000 E. cervi larvae. The paper reported that in one case only 162; 39 and 32 larva were picked up via the Baermann method.
[14] The second plaintiff expert, Dr. Waldrup, is currently a field veterinarian with the Texas Animal Health Commission. He worked in New Zealand for four years with parasites of red deer, studying parasitology of E. cervi and was qualified to give expert testimony with respect to that and veterinary medicine.
[15] Dr. Waldrup expressed his opinion that the diagnosis of E. cervi, in the particular animals which evidenced shedding, was wrongly made. This opinion was arrived at based on the fact that the examiners were unable to locate any adult worms in the corpses of the animals as well as the fact that various previous tests for E. cervi had all been negative. Dr. Waldrup opined that the most prominent possibility was that some other infection was involved, perhaps P. tenuis. Dr. Waldrup felt that an increase in the number and frequency of Baermann test administrations could have eliminated the uncertainty.
[16] With respect to the Baermann test, Dr. Waldrup testified that it is widely accepted that the sensitivity of the Baermann test is 50%. Therefore, if 100 animals are infected, you would expect to find evidence of it through the Baermann procedure in 50 specimens. There are various variables which impact the level of sensitivity, including age of the subject; the rate of shedding; previous negative tests; the length of time in a quarantine.
[17] On cross-examination, Dr. Waldrup allowed that if deer were shedding few larvae, the Baermann test is much less sensitive. Also, he stated that in order for larva of some other parasite, ingested by the deer with hay to have been responsible for the positive tests in this case, the hay would have had to have some dampness to it. Drying it out in the sun would have killed the larvae.
[18] Dr. Waldrup also stated that simply because the deer may have come from the same area, the others are not necessarily infected, and bringing a group together does not increase the risk of infection.
[19] The expert witness called by the defence was Dr. Annie Prestwood.
Dr. Prestwood is acting head of the Department of Parasitology of the College of Veterinary Medicine at the University of Georgia. She conducted no work with red deer, but had done some work with white-tailed deer. Her testimony took into account the plaintiff expert reports and an article written by the examiner at the necropsy, Dr. Alvin Gajadhar.
[20] Concerning worm length, Dr. Prestwood testified that the shortest known length for E. cervi worms is 364 microns; with P. tenuis worms having an average length of 348 microns, and being as large as 380 microns, and P. andersoni being 351 microns.
[21] Dr. Prestwood testified that the pre-patent period for P. andersoni is greater than the length of time the deer in question in this case were in quarantine in Canada. Therefore, Dr. Prestwood opined that that the infection could not have been P. andersoni, as was suggested by the plaintiffs as a possible source of the larvae.
[22] In her expert report in writing, taken as read at the trial, Dr. Prestwood stated her opinion, which repeats the wording of relevant sections of the Health of Animals Act, that there were "reasonable grounds" to believe that the other deer (all of them), the deer which did not evidence any shedding of larvae were or could have been infected. When asked by Mr. Kronick, counsel for the plaintiffs, on which facts this opinion was based, Dr. Prestwood replied: "I have no facts sometimes we have to deal with less than perfect evidence." (Transcript page 2019). With respect to the deer which had evidenced some shedding of larvae, Dr. Prestwood stated that the fact that E. cervi was the only known protostrongylid to affect red deer and that the larvae were greater than 400 micrometers in length as the basis for the opinion.
[23] Dr. Prestwood was also very candid in articulating her belief that the animals in question should never have been allowed to come to Canada in the first place. So concerned was she about the possibility of E. cervi gaining entry into North America, that she stated on the stand that she would not have been satisfied that the animals were not infected with E. cervi until all the animals were slaughtered and thoroughly necropsied.
[24] A Dr. Stephen was called by the defendant to give testimony regarding risk assessment and factors which would enter into a decision such as that which Agriculture Canada was faced with in this matter. Only certain portions of his written report were admitted into evidence, as several portions of the report dealt with matters in which Dr. Stephen was not qualified to give expert opinion evidence. What remained was a largely theoretical framework for decision making concerning diseases.
[25] Dr. Alvin Gajadhar was the Agriculture Canada scientist who tested the faecal samples from the deer herd. In his direct testimony, he described the procedure used to test, and stated that he found the larvae to be 400 microns, and having a corkscrew tail. Dr. Gajadhar made a diagnosis of E. cervi given the size of the larva and its dorsal spined features. He also stated that "the animals were not over here in Canada long enough to have acquired another infection of dorsal-spined larva. Therefore the animals would have been infected in New Zealand where the only dorsal-spined larva known at that time, according to Mason, was E. cervi" (transcript page 1550).
[26] Dr. Gajadhar further testified that he sent his findings to a Dr. Mason, who confirmed that the larvae could not be anything but E. cervi. A seven day necropsy was conducted on the Coldstream animal. Dr. Gajadhar believed removal of the rest of the herd was necessary, as members may have also been infected, but were misdiagnosed given the relative insensitivity of the Baermann test. Meetings were conducted in order to get information about E. cervi.
[27] Dr. Gajadhar testified that the basis for the diagnosis of E. cervi was the fact that the animals came from New Zealand; the larvae were consistent with E. cervi; the Baermann test is insensitive; and the animals were kept in quarantine in Canada where precautions were being taken so that they could not become infected at the quarantine (transcript page1629).
[28] On cross-examination, Dr. Gajadhar indicated that the team had spent 12 hours a day for a week searching carcass for the adult worm. This exercise failed to locate the adult worm. He indicated that no measurements of the larvae were recorded; that no spine was seen in the larvae recovered from animals 6249 and 6215.
[29] In response to questions regarding the procedure to follow and whether there were any instructions with respect to discontinuing the testing of the Coldstream samples, Dr. Gajadhar could not recall. He did, however, recall that the larvae measured 400 micrometers, despite having not recorded such in notes.
[30] Dr. Michael Bringans, Coldstream principal, was a veterinarian and proprietor of Orr Lake Elk Ltd., a breeding stock company. He testified that he planned to sell the progeny while pregnant, keeping a small stock for future breeding when importing stopped. Dr. Bringans testified to having had conversations with Drs. Shantz and McElheran concerning the Agriculture Canada response in the event of E. cervi. Dr. Bringans stated that he was told by Dr. McElheran that if presented with evidence of E. cervi, the individual deer would be destroyed and the quarantine period extended. And if an increasing number of animals began testing positive for E. cervi, then the entire herd would be destroyed.
[31] The quarantine area was described by Dr. Bringans as defoliated with dirt and gravel floor; enclosed with a fence; with molluscacide in a drainage pipe which extended around the perimeter of the fence. This layout was prescribed by Agriculture Canada.
[32] Dr. Willard Shantz and an assistant would collect the faecal samples, and send them off in a plastic bag to an Agriculture Canada laboratory. When the positive test came back, followed quickly by the notice to remove, Dr. Bringans attempted to get the deer into Mexico, but that mitigation failed. Given that the cost of transporting the deer back to New Zealand was $1,000 per head and the market price for the deer in New Zealand was only $80 to $150 per head, the decision was made to euthanise the animals in Canada. Dr. McElheran told him that parasitologists out west weren't in favour of allowing the red deer into Canada.
PARTIES' ARGUMENTS
[33] Subsequent to having concluded the evidentiary portion of the trial, a schedule was decided upon for the parties to deliver written submissions. In addition, counsel for the defendant sought an additional court date in order to give oral closing arguments. However, upon further reflection, at a subsequent hearing, counsel withdrew the request for oral argument and judgment was reserved.
Plaintiff
[34] In their submissions, the plaintiffs argued that the evidence of Drs. Burt and Waldrup, the plaintiffs' expert witnesses, ought to be accepted and preferred over the evidence of Dr. Prestwood as well as that of Drs. Stephen and Gajadhar. Dr. Gajadhar was, of course, not qualified as an expert witness, but gave his own account of his knowledge of the events at issue; and Dr. Stephen's expert testimony was circumscribed considerably. Essentially, the plaintiffs argue that there were no reasonable grounds for concluding that the three animals which had shed larvae were infected with E. cervi and no grounds to conclude that the herds as a whole were infected. Accordingly, the Orders to remove where improperly issued and were "null".
[35] The grounds for concluding that the Orders were invalid and upon which liability for losses arising from compliance with the Orders attaches to the defendant, according to the plaintiffs are:
1. No definitive diagnosis of E. cervi was made, given the absence of an adult worm or the failure to locate an adult worm.
2. Agriculture Canada had concluded that the animals were infected with E. cervi even before the necropsy.
3. Agriculture Canada is contractually bound to the plaintiffs by reason of the conditions listed in the import permit.
4. Agriculture Canada ought to have at least confirmed a diagnosis of E. cervi before proceeding with the steps it took.
5. Agriculture Canada changed the conditions of the import permit by taking a much more risk averse approach to the case.
6. The terms in import permit must be read to require not only that there be E. cervi larva, but that the animal in question must be patently infected with E. cervi.
7. Accordingly, the Orders to remove were improperly issued and to the extent that the plaintiffs were required to comply with them, were damaged wrongfully thereby.
8. The only fair inference to draw from the evidence is that the slaughtered animals were not infected with E. cervi and there was no basis for Agriculture Canada to conclude that the herd as a whole "could be affected by a disease, E. cervi". The fact that the animals originated in New Zealand, where E. cervi is known to exist, cannot constitute "reasonable grounds" to support the validity of the Orders to remove.
Defendant
[1] For its part, the defendant argues that in order for it to be liable to the plaintiffs, the damages must not only be due to the result of an invalid decision of Agriculture Canada, that decision must also have been negligently made. According to the defendant, no liability results from the exercise of a statutory discretion if that discretion is exercised with reasonable care. The defendant argues that no separate duty of care was owed to the plaintiffs, and alternatively, even if such a duty exists, such a duty was not breached.
[2] The Orders to remove would be valid if a veterinary inspector forms a belief that an animal is infected with a disease and that belief is based on reasonable grounds. The inspector need not believe that the animal actually has the disease, but have only a reasonable suspicion that it does. Therefore, the defendant argues that the removal Orders can be valid even without a confirmed diagnosis of E. cervi. Drs. Shantz and Georgeson believed that the deer could be so infected; and they relied on their colleagues qualified to make such findings, in forming their belief.
[3] The reasonable grounds for concluding the animals could be affected by a disease specified by the defendant include: shedding of dorsal-spined larvae; the fact that the deer were imported from New Zealand; measurements of the larvae were 400 micrometres; the quarantine facility designed to minimize likelihood of contamination or infection by a Canadian protostronglid; the length of time the animals were present in Canada was not long enough for protostrongylid infection to occur and result in the shedding or larvae; dorsal-spined larvae were found in the lungs of an animal at necropsy. The failure to find an adult worm is not determinative, something which was concurred in by all expert witnesses.
[4] In addition, the defendant states that the terms of the import permit clearly specified that no deer testing positive for spiny larvae would be admitted to Canada and made no mention of there being a requirement for a positive diagnosis of E. cervi. There was also no evidence of any duty on the part of Agriculture Canada to perform the tests and there is no evidence of any contract or contractual obligations. Any obligation was specifically denied in the permit itself.
[5] Also, the evidence adduced at trial established that the Baermann test is unreliable, and additional testing would have been "futile". Diseased animals would not have been detected at least 50% of the time. As much as 99% of larvae would not be detected by the tests.
[6] Finally, concerning damages, the defendant argues that the plaintiffs are overstating the market value of the herds. The maximum value per head is $2,750 for Cervinus; and the loss of economic opportunity evidence was weak and contradictory--Cervinus was going to sell all but a few deer before they gave birth. The maximum value per head is $2,700 for Coldstream.
ANALYSIS
[7] A decision in these actions requires consideration of the considerable scientific evidence adduced and making those findings of fact which are appropriate, before finally applying the law in light of those findings in order to reach a decision. What follows are the findings of fact necessary to dispose of these actions.
Life Cycle
[8] Firstly, consideration must be given with respect to the evidence given concerning the life cycle of the E. cervi parasite. I take it that the evidence led concerning the life cycle of the E. cervi parasite, most thoroughly commented upon by Dr. Burt, and to a lesser degree by Dr. Waldrup, is accurate and accepted. The defence experts did not deal with this to any significant degree and certainly did not contradict the evidence of the plaintiffs' experts.
[9] The most significant aspect of the life cycle, to my mind, is that the E. cervi larvae must pass through an intermediate host in order to patently infect the ultimate host--a red deer. Subsequent to having been shed from another deer (which may or may not be patently infected), the larvae must enter a snail or other mollusc in order to mature. It is only upon maturing to the third stage, that a patent infection is enabled. Dr. Burt testified that this maturing process may take several weeks. Upon the mollusc being ingested by a deer, the larvae can mature further, to adulthood, and, if at least one male and one female adult worm are present in the deer, patently infect the deer.
[10] Therefore, the E. cervi infection cannot be transmitted directly among deer. This is not a case where the disease could quite reasonably be expected to be present, or transmitted quickly among a herd due to its members being in close proximity to each other. Of course, common sense does suggest that there is a risk of transmission among
closely associated animals given the characteristics of the life cycle. If one member of a herd sheds larvae, there is a chance that the larvae will find its way to a snail and mature, thereby potentially enabling the patent infection of another deer to result. However, merely because one deer is shedding larvae, another member of the herd is not necessarily infected nor at any risk of becoming infected. This will be even more true if risk factors, such as the presence of molluscs, is removed. The risk of infection comes from ingesting molluscs which are carriers of matured third stage larvae.
Status of Animals 172; 6249; 6215
[11] A finding concerning the E. cervi status of the three deer which tested positive for spiny larvae must be made. In making a finding on this subject, I have relied upon the expert testimony adduced at trial, as well as other evidence concerning the overall circumstances which were present. As stated earlier, I prefer the evidence of Drs. Burt and Waldrup over that of Dr. Prestwood.
[12] Concerning the scientific opinion evidence as a whole, I prefer the evidence of Drs. Burt and Waldrup over that of Dr. Prestwood. The reasons for this are the relatively greater expertise of the plaintiffs' experts with respect to work with red deer.
Dr. Prestwood is certainly an expert in parasitology (and such was readily conceded by the plaintiffs' experts) but she had no working experience with red deer and less with E. cervi in particular as well. I say this with the caveat that for the great portion of the evidence, I do not find that Dr. Prestwood contradicted the evidence of the plaintiffs' experts on critical points, to any significant degree.
[13] Dr. Burt opined that the three deer were not patently infected with E. cervi. In light of this opinion and the other evidence presented at trial, I find that the three animals were not infected with E. cervi. Dr. Burt's credentials are extensive and impressive--he clearly had more experience with red deer and E. cervi than any other expert who gave evidence at the trial.
[14] I have also considered other circumstances which Dr. Burt must be taken to have considered himself as well. The evidence suggests that the necropsy performed on the animals was very extensive. Dr. Gajadhar testified that he and others spent an entire week, working twelve hour days, in an effort to locate an adult worm in deer carcass. They failed to locate an adult worm. Dr. Burt testified that in his experience, an adult worm was recovered each time a reasonably thorough search was conducted.
[15] Another factor which entered into my finding of no E. cervi infection is the fact that the rate of larval shedding was extremely low. Notwithstanding the evidence concerning the lack of sensitivity of the Baermann test method, a recovery of only one or two larvae from a faecal sample must be taken to indicate a low rate of larval shedding. Dr. Burt indicated that high and relatively consistent rates of shedding are present in patently infected animals.
[16] The evidence concerning the length of the larvae was somewhat equivocal. It does, however, not rule out another protostrongylid as being the source of the larvae recovered from the Coldstream and Cervinus deer. It is possible that the larvae originated from an outside source, such as was suggested by the plaintiffs by leading the testimony of the farm hand, who observed white-tailed deer near where the hay for the quarantined Coldstream herd was harvested. I find this somewhat unlikely, but possible. In any event, the evidence of Dr. Burt is of more import.
Status of the Balance of Herd Animals
[17] More importantly to the ultimate finding in these actions is the E. cervi status of the rest of the herds, numbering some 518 members. And quite simply put, I have had no difficulty in finding that the other members of the herds were not infected with E. cervi.
[18] The most noticeable aspect of this case is the absence of any evidence concerning the status of the rest of the herd animals. Not one witness called by the defendant (or the plaintiffs for that matter) led any objective evidence which tended to indicate a positive E. cervi status in the rest of the herd animals. The only objective evidence are the negative Baermann test results. For this reason, there is no basis upon which I could find that the rest of the herds, or any individual members of them were infected with E. cervi. Nor was there any evidence presented as to what could have given Agriculture Canada officials any such information.
[19] There was no evidence of any larvae shedding from any of the other 518 deer in the two herds. The Baermann tests, which Agriculture Canada required, were negative. The evidence led was that the sensitivity of this test leaves considerable accuracy to be desired, 50% sensitivity at best, with up to 99% of the individual larvae missed by the test. But that was the test established, and there is no basis for thinking that any other animal had the infection. I note that the evidence seems to me to indicate that increased frequency of tests; increased volume of faecal matter tested; would certainly have the effect of increasing the level of confidence in the test.
[20] Dr. Prestwood's evidence concerning the status of the other herd members was largely unhelpful to any determination of the question. Dr. Prestwood testified that she would not have been certain that the animals were not infected with E. cervi unless they were all killed and necropsied. This is not a very moderate approach. Dr. Prestwood did not provide any evidence which tended to show that the other herd members were infected.
[21] The defendant outlines the reasonable grounds for the Order, which reasonable grounds all relate only to the three deer which evidenced larvae shedding. In their written brief, there was no comment as to what the reasonable grounds were vis a vis the overwhelming numbers of herd members who did not shed larvae. I must assume that the defendant has nothing to offer in the form of reasonable grounds. I personally was not able to conceive of any reasonable grounds.
[22] Therefore, I find that the other herd animals, in both herds, were not infected with E. cervi.
[23] On the heels of these findings, I will now consider how they, along with some additional evidence, when applied to the law, affect the outcome in this case.
LAW
Health of Animals Act
[24] The statute under which Agriculture Canada issued the notices to remove is the Health of Animals Act, S.C. 1990, c.21. The statute provides for a regulatory system wherein the presence and importation of animals from abroad as well as the status of animals already present in Canada can be regulated in order to protect the environment, other animals and the public from various diseases and other ills.
[25] Of prime importance to this case is section 18 of the Act, which provides the authority for the issuance of the Orders to remove:
| 18. (1) Where an inspector or officer believes on reasonable grounds that an animal or thing has been imported into Canada and that it (a) was imported in contravention of this Act or the regulations, (b) is or could be affected or contaminated by a disease or toxic substance, or (c) is a vector, the inspector or officer may, whether or not the animal or thing is seized, require the owner or the person having the possession, care or control of the animal or thing to remove it from Canada. |
18. (1) S'il a des motifs raisonnables de croire qu'un animal ou une chose importés au Canada soit l'ont été en contravention avec la présente loi ou les règlements, soit sont contaminés par une maladie ou une substance toxique, ou sont susceptibles de l'être, soit encore sont des vecteurs, l'inspecteur ou l'agent d'exécution peut ordonner à leur propriétaire ou à la personne qui en a la possession, la responsabilité ou la charge des soins de les renvoyer à l'étranger, même quand ils ont été saisis. |
| [26] The statute gives an inspector the authority to order the removal of an animal, if he or she believes, on reasonable grounds, that the animals are, or could be, infected by a disease. Phrasing this jurisdiction more specifically, Agriculture Canada inspectors are given the authority to order the plaintiffs, Coldstream and Cervinus, to remove the deer from Canada, if they believed on reasonable grounds, that the animals were infected with E. cervi, or could be infected with E. cervi. |
| [27] The section also provides for the same action if the inspector believes, on reasonable grounds, that the animal was imported in contravention of the Act or the Regulations. |
| Breach of Statutory Duty or Contractual Term |
| [28] The case law relied upon by the plaintiffs as purportedly lending credence to the assertion that the import permit created contractual rights and responsibilities is not applicable to the facts of the case at bar. Moulding contract law principles onto the facts of this case would contort those principles beyond all recognition and therefore should not be done to make the finding in this case. |
| [29] There may be injustice at changing the rules, if that is what occurred, but there is not any principle that the Crown can refuse to exercise its jurisdiction. For instance, if new information arose, or a previously unknown disease was thought to arise in a particular group of animals. Furthermore, the Crown's duty extends far beyond the individuals it is purportedly "contracting" withthere are the owners of animals and property who may be affected by the introduction into Canada of a previously foreign disease. Surely, the servants who allowed that could potentially be liable for a separate negligence action, but the failure to exercise a duty could not form part of that action. The legislation requires the government to do certain things, it cannot resile from its obligations in order to abide by a contract entered into with one other party. There was no contact here, the import permits are not contracts. |
| [30] The plaintiffs argued that the McElheran memorandum gave rise to a legitimate expectation and a duty on the part of Agriculture Canada to comply with its terms in making a decision concerning the Coldstream herd in particular. However, such a finding could only be made if it formed the part of a contract, which is rejected. Also, the Supreme Court of Canada affirmed that the exercise of a statutory discretion cannot be fettered through the use of subsidiary departmental guidelines: Maple Lodge Farms v. Canada, [1982] 2 S.C.R. 2. |
| [31] Counsel for the plaintiffs provided many authorities along with their written submissions. Reports of cases decided upon applications for judicial review of administrative actions of various governmental bodies, however, formed a considerable portion of the authorities. Also, the authorities concerning legitimate expectations and similar doctrines are not helpful given the circumstances of the case at bar, and will not form any basis for a decision in this case. |
| [32] The cases of Re Armstrong Commercial Investigators of Canada Ltd. et al. and Turner et al (1975), 9 O.R. (2d) 284 (H.C.J.); and CIBC v. Canada (Attorney General), [1962] O.R. 253 (C.A.) provide some framework for the exercise of a statutory power based on "reasonable grounds". The finding in these cases holds that the test for the existence of "reasonable grounds" is objective. There must in fact be reasonable grounds for the belief formed on the part of the administrative decision maker. Moving to the case at hand, there must in fact be objectively reasonable facts for the inspector to form the belief that the animals are or could be infected with E. cervi. |
| [33] The Court's attention was directed to Kohl v. Canada (Department of Agriculture), Docket No. A-354-94 (July 21, 1995). That decision of the Court of Appeal concerned an application for judicial review of the decision of the Minister of Agriculture ordering the destruction of the applicant's bull in an aid to eliminate the threat of spread of Bovine Spongiform Encephalopathy--or "Mad Cow Disease". Marceau J.A. commented that the exercise of a statutory discretion would normally only be set aside upon the showing of bad faith or if the decision is thought to have been made "recklessly without verification of the existence of the factual circumstances that it was meant to deal with."(paragraph 18). Again, however, that case concerned judicial review of the decision and not an action for damages resulting from compliance with a decision. |
| [34] Also, Griffin v. Canada (Agriculture Canada, Inspections Division) (1989), 26 F.T.R. 185 was relied upon by the plaintiffs. That case concerned agricultural inspectors being empowered to refuse to issue sale permits if "in the opinion of the inspector" certain defects were present. The decisions were overturned on the grounds that subsidiary policy directives were treated as binding, notwithstanding legislative language to the contrary, thereby being a fettering of discretion case. Therefore, the McElheran memo is really not something that can be used to impose a specific duty on the part of Agriculture Canada vis a vis these plaintiffs. |
| Limitation of Liability under Import Permit |
| [35] The text of the import permit includes the following clause: |
| The importer, his heirs, executors, successors and assigns releases and discharges Agriculture Canada of and from all claims and demands, damages, actions or causes of action arising or to arise by reason of the importation of the animals and of and from all claims or demands which he, his heirs, executors, successors and assigns can, shall or may have by reason of the aforesaid. |
| If the import permit is not a contract, it is difficult to say how this term, such as it is, could make any sense. If it is considered to be a term of importation, then it would be valid. There are a plethora of instances where an agency such as Agriculture Canada could find itself embroiled in a lawsuit, as a third party or as a party to which set-off was claimed. I can see nothing in the language of that clause to indicate that the importer was surrendering itself to the damages it has sustained here and was accepting that it would be without recourse if servants negligently made the decisions that they did here. I have no doubt that the importers would have reacted with incredulity if, prior to import, they had been asked to ponder the situation wherein hundreds of deer would be destroyed on the basis of the evidence presented here, but I have no doubt that that isn't what the clause stands for. |
| Crown Liability |
| [36] The defendant bases its defence to the claims of damage due to governmental negligence or malice on the doctrines of Crown Liability outlined in Peter W. Hogg, Liability of the Crown, second edition, 1989, The Carswell Company Limited at pages 18 and 131. The defence sought to show the difficult burden facing the plaintiffs in a case such as this. Unfortunately for the defendant, I find that the plaintiffs have made out their claim in this respect. |
| [37] Section 3 of the Crown Liability and Proceedings Act, R.S.C. 1985, c. C-50 states as follows: |
| 3. The Crown is liable in tort for the damages for which, if it were a private person of full age and capacity, it would be liable (a) in respect of a tort committed by a servant of the Crown; or (b) in respect of a breach of duty attaching to the ownership, occupation, possession or control of property. |
3. En matière de responsabilité civile délictuelle, l'État est assimilé à une personne physique, majeure et capable, pour_: a) les délits civils commis par ses préposés; b) les manquements aux obligations liées à la propriété, à l'occupation, à la possession ou à la garde de biens. |
| [93] According to Hogg, supra, the principles of Crown liability in a case such as this |
| are as follows: liability for damage due to a governmental act does not result if the action was valid and lawful. Even in the event that the act was unlawful, liability does not result in the absence of a specific actionable tort under which the damage can properly be characterized. It is these types of actions which would most properly be the subject of an application for judicial review. |
| [94] But if the government action is invalid and unlawful, and the decision was made |
| negligently or deliberately, liability for damage under the tort of negligence can result. |
| [95] In addition to passages from Hogg, supra, G. (A.) v. B.C. (1989), 61 D.L.R. (4th) |
| (B.C.C.A.) outlines much the same principles. That case concerned a discretionary decision of a social service organization, from which damage was alleged and an action commenced. The Court found that when a discretionary decision is reached, even one from which damage results, liability on behalf of the governmental authority does not necessarily result: absent bad faith or recklessness, there is no cause of action. |
| Limitation of Liability under the Health of Animals Act |
| [96] Section 50 of the Health of Animals Act exempts Her Majesty from paying |
| damages which result from individuals having to comply with the Act: |
| 50. Where a person must, by or under this Act or the regulations, do anything, including provide and maintain any area, office, laboratory or other facility under section 31, or permit an inspector or officer to do anything, Her Majesty is not liable (a) for any costs, loss or damage resulting from the compliance; or (b) to pay any fee, rent or other charge for what is done, provided, maintained or permitted. |
50. Sa Majesté n'est pas tenue des pertes, dommages ou frais -- loyers ou droits -- entraînés par l'exécution des obligations découlant de la présente loi ou des règlements, notamment celle de fournir des terrains, locaux, laboratoires ou autres installations et d'en assurer l'entretien au titre de l'article 31. |
| [97] The defendant urges that this section absolves it of liability and relies upon David |
| Hunt Farms Ltd. v. Canada (Minister of Agriculture), [1994] 2 F.C. 625 (C.A.). That case concerned an appeal of a decision refusing an interlocutory injunction concerning mad cow disease destructions. Justice Robertson stated at page 634, " I am not persuaded that the appellant has a practical and viable tort remedy in the event it is determined that the animals were wrongfully slaughtered." |
| [98] But when Robertson J.A. stated that no tort remedy if "wrongfully slaughtered" |
| he means slaughtered even though it did not have mad cow disease the order was designed to eradicate. There was no question of negligence or reckless decision making in that case. Within the context of determining whether irreparable harm existed. This is not a proper authority for deciding here that the liability for actions which occurred are limited. |
| [99] Moreover, I hold that if the plaintiffs can satisfy its burden of proving negligence, |
| with all the components necessary (absence of reasonable grounds for belief; negligently believed reasonable grounds existed) the damage would not have been caused by anything done "by or under the [Health of Animals Act]" and the section would clearly not bar recovery. |
DISPOSITION
[100] In light of the provisions of the Health of Animals Act, the Crown Liability and Proceedings Act, and the case law, I find the following.
| [101] While the three deer which evidenced shedding of larvae have been found not to |
be infected with E. cervi, Agriculture Canada did have reasonable grounds for believing that those animals were, or could have been infected by a disease. While no final diagnosis of E. cervi was or could have been made, the fact that the animals were shedding larvae, the source of which could not be positively determined not to be an E. cervi infection provides, in my view, sufficient grounds for believing that the animals could have been infected by a disease.
| [102] The decision to slaughter those three animals, insofar as it was done pursuant to |
an Order of Agriculture Canada, was lawful. There was no invalid decision, nor obviously was the decision negligently or improperly made. Accordingly, there will be no compensation due in respect of those three deer which were found to be shedding larvae.
| [103] However, with respect to the balance of the herd animals, there were no |
reasonable grounds for believing that those animals were, or could have been infected with a disease. The Order to remove was invalidly issued. And if this were an application for judicial review, the inquiry would end here and the plaintiffs would be entitled to relief in the form of certiorari or mandamus. However, since the plaintiffs have brought an action for damages, they must also show that the Agriculture Canada officials committed a tort by which they were damaged.
| [104] That there were in fact no reasonable grounds for concluding that the animals |
were infected with E. cervi, the question then becomes whether the belief was arrived at in a way that a cause of action for negligence would result.
| [105] A review of the evidence of Dr. McElheran reveals the following exchanges at |
pages 2651 - 2652 of the transcript:
Q. After the finding of the Cervinus larva, did you ever make any inquiries concerning why the animals were ordered removed before the necropsy was done to confirm whether the animal was in fact diseased?
A. The animal was ordered destroyed because of the finding of E. cervi larva in the faeces.
Q. Was it the then policy of Agriculture Canada to order all of the animals removed even if it was subsequently found that the animal did not have a patent infection?
A. The fact that you have larvae in the faeces indicates you have a patent infection. That's what patency means.
Q. It does?
A. Yes.
Q. Are you sure about that?
A. Yes.
This evidence is not in agreement with Dr. Burt's expert testimony to the effect that you need large numbers of larvae to have a patent infection. Thus, there seems to be confusion on the part of the defendant as to the nature of a patent infection.
| [106] While there was some suggestion of malice on the part of Agriculture Canada in |
this case, the wrongful conduct most accurately comes within the rubic of negligence. I disagree that Agriculture Canada, and in particular Drs. Shantz, Gajadhar and Georgeson had any reasonable grounds to believe that all the herd animals could be infected with E. cervi. While the defendant argued that it was reasonable for the issuer of the Order to remove to rely on the opinions of those more expert, such as Dr. Gajadhar, the evidence discloses involvement of the principals at various stages of the inquiry. This is not a case where another person's opinion was merely rubber stamped by another.
| [107] Given the information I have been presented concerning the nature of E. cervi, I |
must conclude that the decision to order the removal of the Cervinus and Coldstream deer herds, on the basis that they could be infected with a disease, was negligently made. While I cannot be sure that the inspectors did not believe such reasonable grounds existed, I do know that at the very least, any such belief could only have been arrived at through reckless and negligent thinking and decision making.
| [108] The elements of the tort are all present here: while the officials have a broad |
range of stakeholders whose interests it must take care to protect, obviously there is a duty owed to the plaintiffs not to make a reckless or capricious decision, as it is quite clear that they would be damaged thereby.
| [109] The standard of care due to the plaintiffs was also clearly breached here. There |
were no grounds whatsoever for forming a belief that the animals could be infected with E. cervi. The level of knowledge on the part of the Agriculture Canada officials as concerned E. cervi was clearly lacking. The plaintiffs were entitled to expect that no Order to remove would issue in such circumstances. If Agriculture Canada had considered the evidence properly, and made a decision only in accordance with the statute, they could not have ordered the removal of the deer from Canada.
| [110] From G.(A.) v. B.C., supra at 149: |
. . . there can be no liability if the discretion is exercised with due care. There could only be liability if the person entrusted with discretion either unreasonably failed to carry out his duty to consider the matter or reached a conclusion so unreasonable as again to show failure to carry out the duty.
In the sense in which the term [due care] is there employed, there will have been want of due care only if there has been a failure to carry out the duty to consider t he matter, or if the conclusion reached is so unreasonable as to show a failure to carry out the duty.
That's what we have here--the decision reached is so unreasonable as to allow a finding of negligence to follow almost absolutely from the decision.
| [111] Therefore, the Crown is liable to the plaintiffs for their proved damages, as a |
result of the Crown servants having had no reasonable grounds for believing that the herd animals, absent the dead three animals, were affected by a disease (E. cervi). Part and parcel of this, is that the decision, which the decision makers purportedly based on reasonable grounds, was negligent. There were no reasonable grounds. It is on this basis that the plaintiffs have been successful. They have been unsuccessful with respect to the other grounds for relief.
| [112] The waiver relied upon by the defendant is not operative to foreclose on the |
plaintiffs' cause of action. Much as the government could not contract out of its statutory responsibilities in favour of the plaintiffs and at the expense of others, nor can it contract out of the law of negligence in the manner in which the government argues it should be held to have done. For the most part, the contractual term incorporates some of the provisions of the legislation and similar areas in which the government would not be liable. There are infinite circumstances in which an importer such as the plaintiffs might consider or found a cause of action against the government absent such a clause. Suppose that the market price for the animals dropped precipitously and the importer sought to attribute blame to the government as a result of having required the animals to remain in quarantine for so long a time that the opportunity for a higher profit was lost. This is what may be covered and contemplated by the import permit. I do not consider the waiver in the import permit as the plaintiffs agreeing that the government would be untouchable should it decide to recklessly destroy the plaintiffs entire possibility for profit.
DAMAGES
| [113] In general, the damages proved, in my opinion, are for the loss resulting from the |
invalid and negligently made Orders to remove, insofar as they affected those animals which did not exhibit signs of E. cervi infection. Some of the evidence with respect to the plans of the importers and the market value of those plans was somewhat contradictory. However, I must determine from the evidence presented on damages, the quantum of damages to be awarded to each plaintiff.
Cervinus
| [114] A total of 285 deer were shipped to quarantine facilities operated by Cervinus. |
From this herd, one deer (number 172) exhibited evidence of larval shedding. Therefore, damages representing the market value of the remaining 284 deer are due to this plaintiff. In addition, the market value of six stags which were added to the herd is also payable.
| [115] The plaintiff's claim $2,750 per deer as their market value. However, the |
evidence of market value indicates that market value fluctuates with various characteristics of the deer. The evidence of Andrew Foreman, a chartered accountant, is to the effect that he was provided with information by the company and from this information he arrived at a market value of $2,750 for each deer and a market value of $3,500 for each red breeding stag. The stags were destroyed because they had been in quarantine with the female deer for breeding purposes. Although Dr. Tattersall stated that compensation had been paid for deer in the amount of $3,000 - $3,800, there are various contingencies. For this reason, I will not award damages in excess of that pleaded, and allow the claim for $2,750 per head. The claim for $3,500 per stag will be allowed.
| [116] With respect to damages associated with land lease extensions and quarantine |
maintenance and clean-up costs, I find that such costs are not due to any wrongful act on the part of Agriculture Canada. On the basis of the larval shedding by animal 172, Agriculture Canada would have been entitled to require the quarantine conditions to continue as they in fact did and Cervinus would have been forced to suffer the clean-up costs in any event. I would, however, allow the claim for $50,000 for the quarantine loss. Mr. Foreman testified that this amount was an approximation of all of the costs of the quarantine facility itself -- the fending, the gravel, the excavation work -- which basically has a continued value. That value is now lost as a result of the cessation of farming privileges on that land. As I found earlier in my Reasons, there is absolutely no evidence that any more than animal (172) were infected with E. cervi, hence, after any appropriate further quarantine Cervinus could still use the quarantine facility for any possible future shipments.
Claim for Loss of Business Opportunity (Profits) by Cervinus
| [117] Cervinus has claimed the sum of $2,884,461 for loss of profits. This loss covers |
a period of five years. It also presented a calculation for loss of profits over a three year period which it claimed would amount to $1,987,948. The Cervinus claim for loss of profits was based on a number of assumptions including:
It is assumed that the base herd will be retained intact at 285 female breeders and six male breeders.
Paul Croft, the principal of Cervinus Inc. testified as follows at pages 506 - 510 of the transcript:
A. Yes. You have one period a year of about three or four months when you can do the breeding. So we tried to time the shipment so that we could introduce the stags and by the time we are selling the animals they are all pregnant.
Q. So part of your normal business cycle, then, would have the quarantine area vacant for a period of time.
A. Correct.
Q. How long would that normally be? How long would you have planned for?
A. We had hoped that the quarantine period would only be the four months. But there were increases in the second year. You quarantine the animals for four months, and then some of the purchasers of the animals asked us to keep them on quarantine until they got their farms set up. They were actually out of quarantine, but we kept them on the farm. Sometimes animals stayed for an extra month or two.
I would say anywhere from four to six months, or seven months, that we had animals on the farm.
Q. During this period of time you had no other farming area. All you had was the quarantine area.
A. Correct. But we had a farmer that allowed us to use property for a fee, where we kept animals.
Q. How many did you keep there? Do you recall?
A. Well, we kept our six stags. And I think we had anywhere from eight to twelve females on that farm.
Q. I think yesterday your evidence was that from the first herd you kept four stags and seven or eight hinds. Do you think that is correct?
A. I stand corrected. We purchased two more stags.
Q. Later on.
A. Yes.
Q. Originally from the herd you actually imported you kept four stags. This is from the first herd.
A. Correct.
Q. You kept four stags from the imported herd.
A. Correct.
Q. And seven or eight hinds from that herd, and all the rest you sold. Correct?
A. Yes.
Q. I think it was your evidence yesterday that your business plan called for you, over a period of time, to build up your own herd of about 300.
A. Correct.
Q. For that reason you kept seven or eight hinds and a few stags from the first herd. Correct?
A. Correct.
Q. Presumably over a number of importations you would keep a few hinds from each importation until, over a period of years, you would have 300 a year. Is that correct?
A. Correct.
Q. How many years were you planning for? Five years?
A. I think we were looking at three or four years. It was a profitable business and we were waiting to accumulate some profits and expand. We wanted to expand our facility to handle a 1000-head shipment. When we got into those numbers and we were looking at that into the third year, we were going to keep a nice percentage of those.
If this had gone another year and we had gotten 1,000 animals, we would have probably taken 100 or 150 out of that to create our farm.
Q. Your first herd consisted of, as I recall, about 240 animals, in that area. Is that right?
A. I think it was 240 hinds, and then there were some stags included.
Q. Of that group you have kept roughly seven or eight hinds and four stags.
A. Correct.
Q. In the second herd there were no stags; they were all hinds. Correct?
A. They were all hinds.
Q. And presumably you would have kept roughly the same number from that group, eight or ten maybe.
A. No, we may have kept more. I think with all that went on that year, we didn't even have time to think about that. We were so stressed out about the problems.
Q. Your business plan essentially called at this point for you to build up to about 300 over a period of time.
A. Correct.
Q. You were going to make your first major contribution to that herd with your third shipment, as I recall.
A. Correct.
Q. So you were going to try to import perhaps 1,000 with your third shipment and keep perhaps 150 out of that.
A. That's why we have those expenses to expand the quarantine.
As Mr. Foreman's report with respect to loss of profits was based on the assumption that there would be 285 female breeders in each of the years there is no factual evidence from the trial to substantiate this assumption. Mr. Croft stated that the practice was to sell most of the female breeders when they were pregnant and only keep a few hind (female deer) from each shipment thus building up his breeding herd to approximately 300 head over a period of three or four years. These are not the facts upon which the chartered accountant, Mr. Foreman, based his estimation of the loss of profits. The facts on which the expert's report are based must be proven at trial. They were not in this case and therefore, I am not prepared to award any sum for loss of profits to the plaintiff, Cervinus.
| [118] I am also prepared to award the plaintiff, Cervinus, prejudgment interest and its |
costs of the action.
| [119] In summary, I would award the following amounts to Cervinus Inc.: |
| (1) The sum of $783,750 for the market value of the deer herd; |
| (2) The sum of $21,000 for the six red stags; |
| (3) The sum of $50,000 for the quarantine loss; |
| (4) Prejudgment interest; |
| (5) Its costs of the action. |
Coldstream
| [120] The testimony of Graeme Ramshaw shows that he originally established a |
conservative figure of $2,700 as the market value per deer. However, he also testified that he later obtained information that some red deer owners had been compensated $3,000 for deer by the government for the destruction of their deer which had contracted tuberculosis. I cannot apply the evidence of Dr. John Tattersall so as to arrive at a higher price per deer as the testimony indicates that the value of a red deer will fluctuate according to factors such as age, health, quality, condition of the animal and other factors. I do not know whether the Coldstream deer were the same as those referred to by Dr. Tattersall. I am prepared to allow damages in the amount of $2,700 per animal for Coldstream. This is in respect of the claim for 233 deer; the two deer which shed larvae having been excluded from that total. From that amount, I would deduct the amount of $45,320 which represents the amount received from the sale of the venison from the slaughtered animals.
| [121] The plaintiff, Coldstream has also claimed the following: |
(1) Loss on sale of equipment sold prior
| to March 31, 1992 $ 5,762 |
(2) Depreciation year ended March 31, 1992
| on equipment sold year ended March 31, 1993$25,574 |
(3) Loss on sale or write-off of equipment in
| April, 1992 accounted for in year ended |
| March 31, 1993 $68,014 |
(4) Loss recovery on two items year
| ended March 31, 1993 $(1,775) |
| Total Amount $97,575 |
As these sums, as explained by Mr. Ramshaw, relate to the inability to continue using the quarantine because the whole herd was ordered removed, I would allow the plaintiff, Coldstream's claim for these items in the amount of $97,575.
| [122] The plaintiff, Coldstream claims for the sums of $15,250 and $21,000 in |
connection with the close down and the clean-up of the quarantine. I am not prepared to allow these amounts as the clean-up of the quarantine would have to be done in any event due to the finding of the larvae.
| [123] In addition, the plaintiff, Coldstream has claimed the sum of $5,759,326 for loss |
of profits. This represents a period of thirteen years. It must be remembered that Coldstream, in its business plan stated:
CDG's policy in regard to sales was to sell imported stock after mating to maximize the value and to ensure a good conception rate.
(Transcript pages 1093 - 1094).
Mr. Ramshaw's report was based on the assumption that the female deer were to be kept by Coldstream to produce new calves. He agreed that the figures in his report would change if the female deer were sold after they became pregnant but before the calves were born. Mr. Ramshaw testified at page 1094 of the transcript:
Q. . . . Isn't that essentially what we have just been discussing; that in the case of these imported deer, the best business plan for you or for Coldstream would have been to sell these deer when their value was the highest; that is, after mating and shortly before calving?
A. Yes.
Q. And presumably the only deer that would not have left the herd, then, would be those that for whatever reason could not be sold; those that were left over, basically.
A. Yes, that had not been sold at that particular point in time.
Based on this testimony, I am not prepared to allow Coldstream's claim for loss of profits. In any event, even had I been persuaded to allow a claim for lost profits, a period of 13 years is far too long. Mr. Foreman testified accountants are only comfortable forecasting three years in advance, but that some will forecast up to five years. Beyond five years, the forecast is unreliable.
| [124] The final claim made by Coldstream is for the sum of $81,151, being the cost |
related to the cancellation of the Thorliefson sale. This was a sale of elk to Mr. Thorliefson which did not get finalized as the Saskatchewan government would not let the elk enter Saskatchewan because of the E. cervi scare. The elk were sold to others but there was an $81,151 shortfall due to a lower price and grazing costs. I find that this amount cannot be claimed as it is too remote.
| [125] In summary, I would allow the following claims of Coldstream: |
(1) The value of 233 deer at $2,700 per deer, less
the proceeds of the sale of the venison from the
| slaughtered animals in the amount of $45,320$583,780 |
(2) Loss on sale of equipment sold prior to
| March 31, 1992 $ 5,762 |
(3) Depreciation year ended March 31, 1992 on
equipment sold year ended March 31, 1993$ 25,574
(4) Loss on sale or write-off of equipment in
April, 1992 accounted for in the year
| ended March 31, 1993 $ 68,014 |
(5) Less recovery on two items year ended
| March 31, 1993 $ (1,775) |
Total Amount$681,355
| [126] I would also allow the plaintiff, Coldstream prejudgment interest and its costs of |
the action.
ORDER
| [127] IT IS ORDERED that the actions of the plaintiffs be allowed as outlined in the |
Reasons hereof.
"John A. O'Keefe"
J.F.C.C.
Calgary, Alberta
December 20, 2000
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-2690-92
STYLE OF CAUSE:
CERVINUS INC.
- and -
HER MAJESTY THE QUEEN, IN RIGHT OF CANADA
REPRESENTED BY THE MINISTER OF AGRICULTURE
AND
| DOCKET: T-2691-92 |
STYLE OF CAUSE:
COLDSTREAM DEER GROUP LTD.
- and -
HER MAJESTY THE QUEEN IN RIGHT OF CANADA
REPRESENTED BY THE MINISTER OF AGRICULTURE
PLACE OF HEARING: OTTAWA, ONTARIO
DATE OF HEARING: NOVEMBER 1-5, 8, 9, 10, 12, 15, 16 - 19, 26, 1999
REASONS FOR ORDER AND ORDER OF O'KEEFE J.
DATED: WEDNESDAY, DECEMBER 20, 2000
APPEARANCES:
Mr. Russell Kronick, Q.C.
Mr. Barry Garland
| FOR PLAINTIFFS |
Mr. Frederick Woyiwada
Ms. Lysanne Lafond
FOR DEFENDANT
SOLICITORS OF RECORD:
Goldberg Shinder & Kronick
307 Gilmour Street
Ottawa, Ontario
K2P 0P7
FOR PLAINTIFFS
Morris A. Rosenberg
Deputy Attorney General
Ottawa, Ontario
| FOR DEFENDANT |
FEDERAL COURT OF CANADA
TRIAL DIVISION
Date: 20001219
Docket: T-2690-92
BETWEEN:
CERVINUS INC.
Plaintiff
- and -
HER MAJESTY THE QUEEN,
IN RIGHT OF CANADA
REPRESENTED BY
THE MINISTER OF AGRICULTURE
Defendant
Docket: T-2691-92
BETWEEN:
COLDSTREAM DEER GROUP LTD.
Plaintiff
- and -
HER MAJESTY THE QUEEN
IN RIGHT OF CANADA
REPRESENTED BY
THE MINISTER OF AGRICULTURE
Defendant
REASONS FOR ORDER AND ORDER