Appeal Watch: the legality of multi-Crown class proceedings in Sandoz Canada Inc. v British Columbia

Last November, the Supreme Court of Canada (“SCC”) granted leave to Sanis Health Inc., Shoppers Drug Mart Inc., Sandoz Canada Inc. and McKesson Canada Corporation to appeal Sandoz Canada Inc. v British Columbia, 2023 BCCA 306 (“Sandoz Canada”). The appellants are defendants in a proposed class action brought by the Province of British Columbia (“the Province”) under new provincial legislation permitting class action recovery for “opioid-related wrongs.” 

The British Columbia Court of Appeal (“BCCA”) upheld the summary trial judge’s decision to dismiss the application of the defendants in the underlying action. The applicants (now appellants) asserted that a provision of the legislation, which presumptively included other Canadian governments in the plaintiff class, exceeded provincial authority. In getting to its decision, the BCCA addressed trends in multi-jurisdictional class proceedings and conflict of laws jurisprudence. 

Background

In 2018, the Province of British Columbia enacted the Opioid Damages and Health Care Costs Recovery Act, SBC 2018, c 35 (“ORA”), creating a direct cause of action to recover health care costs related to opioid-related wrongs allegedly committed by manufacturers or distributors of such drugs (Sandoz Canada, para 1).

Section 11 of the ORA authorises the Province to bring an action on behalf of a class of one or multiple governments in Canada; subsection 11(2) reserves the right for any named government to opt out of the proceeding in order to not participate in the ORA class action (Sandoz Canada, para 2). The defendants sought a declaration that s. 11 of the ORA is ultra vires provincial jurisdiction and of no force and effect because the opt-out mechanism shirks territorial limits on provincial jurisdiction and binds other governments, usurping their litigation autonomy.

The summary trial judge held that the purpose of the opt-out provision is to “provide a procedural mechanism to presumptively authorise the Province to act on behalf of governmental parties” in the class action (Sandoz Canada, para 60). The effect of s. 11 is to authorise the executive of the Province as the representative plaintiff to efficiently pursue the collective claims of all named Canadian governments in one proceeding (Sandoz Canada, para 63). Therefore, s. 11 is a procedural mechanism that presumes authorization of the Province to act as plaintiff in ORA-related claims without impermissibly binding other Canadian governments (Sandoz Canada, para 66).

British Columbia Court of Appeal

Issues on Appeal

The appellants, Sandoz Canada Inc., asserted three grounds of appeal:

1. The lower court incorrectly held that the pith and substance of s. 11 is merely a “procedural mechanism to presumptively authorise the [B.C. Government] to act on behalf of other Canadian governments in the Action”
2. The lower court incorrectly held that s. 11 falls within the administration of justice in the province under s. 92(14) of the Constitution Act, 1867 (the “Constitution”).
3. The lower court incorrectly held that s. 11 respects the s. 92 of the Constitution’s territorial limits of provincial legislative powers.

Decision

Justice Newbury for the appeal court agreed with the trial judge finding that s. 11 of the ORA merely creates a procedural mechanism allowing the Province to act as class plaintiff on behalf of other consenting Canadian governments, and the opt-out provision does not bind the named plaintiffs (Sandoz Canada, para 93).

Pith and Substance

Asserting unconstitutionality, the appellants argued that the pith and substance of s. 11 is to legislate over the substantive civil rights of other provinces by forcing them to decide whether to remain in or opt out of the action (Sandoz Canada, para 90). The BCCA took an expansive read of the ORA and extrinsic evidence. The court found the pith and substance (or dominant purpose) of the impugned provision is simply to permit the Province as representative plaintiff to bring other governments’ claims—on their behalf and under their respective laws—to the British Columbia Supreme Court (“BCSC”) for a more efficient and less expensive process (Sandoz Canada, para 84). 

That said, the BCCA acknowledge that if British Columbia were to create or confer a cause of action on another province which did not exist in that other province, or if it brought an existing cause of action without the other provinces’ consent, the legislative effects would be substantive and thus ultra vires (Sandoz Canada, para 76). Ultimately, the BCCA was satisfied that the practical effect of s. 11 is not to force governments into a consideration of whether to remain in an action or to opt out, but to presume participation as a starting point.

Administration of Justice in the Province

Disposing of the issue briefly, Newbury J.A. stated her agreement with the summary trial judge in that, as a procedural mechanism permitting the Province to act as plaintiff on behalf of consenting Canadian governments, the dominant purpose falls within the Constitution s. 92(14)’s administration of justice within the province. This is because it offers nothing more than an opportunity for other governments to have their own causes of action tried in a British Columbia court (Sandoz Canada, para 93). 

Territoriality

The appellants contended that no relationship exists between the Province and other governments named as class members by the Province; no relationship between the Province and the claims of the other governments’; and no relationship between the subject matter of s. 11 of the ORA and the Province (Sandoz Canada, para 95). 

In stating the above, the appellants refer to the doctrine of territoriality and territorial limits on provincial legislative competence. As held in British Columbia v Imperial Tobacco Ltd., 2005 SCC 49 (“Imperial Tobacco”), where legislation’s pith and substance is intangible (i.e., a cause of action or procedural mechanism), the legislation must have a meaningful connection to the enacting province (e.g., a connection between the province and the damages suffered) and respect the legislative sovereignty of other jurisdictions (Sandoz Canada, para 94, citing Imperial Tobacco, para 36). 

Justice Newbury held that, in any case, by either opting in or opting out, each government will make the choice to participate in a given class proceeding, which constitutes a “meaningful connection” between the action’s subclass members and BCSC. Similarly, even the commonality of issues addressed could constitute a sufficient connection. As a result, the appeal court decided the ORA’s s. 11 does respect the Constitution’s s. 92 territorial limits.

Discussion

It is notable that the appellants exclusively challenged the legislation on the assertion that the Province lacked legislative competency. Specifically, they argued that s. 11 of the ORA is ultra vires because it infringes on other governments’ litigation autonomy (British Columbia v Apotex Inc., 2022 BCSC 2147, para 53 (“Apotex Inc.”). As the summary trial judge observed, the bulk of the ORA closely mirrors the Province’s Tobacco Damages and Health Care Costs Recovery Act, SBC 2000, c 30 [“TRA”]. This legislation was enacted for the tobacco-related equivalent of ORA’s opioid wrongs. The SCC upheld the constitutionality of the TRA in Imperial Tobacco; the relevance of which lies in the similarity between the two acts. If, for all intents and purposes, the ORA resembles the TRA, it becomes less likely the SCC will find an extraterritorial encroachment. However, a key distinction between the two legislative frameworks is the ORA’s s. 11.

The summary trial judge acknowledged that s. 11’s constitutionality is a novel issue (Apotex Inc., para 29). And while it called on Imperial Tobacco for the intangible pith and substance analysis, the question also touches upon broader policy questions for multi-Crown class proceedings and conflict of laws (the context for which was addressed in the BCCA’s reasons, but did not factor into the decision given the appellants’ narrow challenge). While I agree with the BCCA’s findings on constitutionality, addressed below, it will be interesting to see if the SCC extends its analysis to take the opportunity to clarify how the jurisprudence on both comity and order and fairness relates to multi-Crown and national class actions following cases like Morguard Investments Ltd. v De Savoye, [1990] 3 SCR 1077 (“Morguard”) and Hunt v T&N plc, [1993] 4 SCR 289 (“Hunt”), two cases referred to in Sandoz Canada but not directly applicable to the issues on appeal, given their focus on courts’ jurisdiction. Perhaps there’s an argument that order and fairness to multi-jurisdictional litigants would support and bolster the preference for presumptively included government plaintiff class members.

Regarding constitutionality, both the summary trial judge and the BCCA were decisive about the findings on the opt-out provision—which makes sense on the face of it. First, it seems intuitive that an opt-out provision does not result in a binding effect, even if it requires the called-upon party to make the decision to exit. As the Ontario Court of Appeal held in Johnson v Ontario, an opt-out approach adequately preserves the personal autonomy to initiate and participate in litigation (2021 ONCA 650, para 16). For the summary trial judge, the opt-out provision made “little real-world difference” (“Apotex Inc., para 67). 

Second, s. 11 of the ORA is a procedural mechanism by which the substantive claims of other governments can be litigated in the BC Supreme Court. As the SCC held in Pioneer Corp. v Godfre, 2019 SCC 42, “the advantages conferred by class proceeding legislation are purely procedural, and … do not confer substantive rights” (para 116). If proposed government plaintiffs do not opt out, they will be governed by British Columbia’s rules of court, but those governments’ substantive rights, though adjudicated by the British Columbia court, will be determined according to their own laws (Apotex Inc., para 64).

This is not a case like Reference re Upper Churchill Water Rights Reversion Act, [1984] 1 SCR 297 (“Upper Churchill”), where Newfoundland drafted legislation to revert all claims and rights to use of a hydro-electric dam, held by Hydro-Québec, back to Newfoundland. While the dam was located in Newfoundland, the colourable legislation was directed at interfering with the hydro contract and rights held outside Newfoundland, resulting in an impermissible extraterritorial reach beyond provincial competence. In favour of the Sandoz Canada finding, the Upper Churchill Court held that where the pith and substance of provincial legislation relates to matters within provincial legislative competence, both incidental and consequential effects on extra-provincial rights do not necessarily make the provisions ultra vires (p. 332). 

Conclusion

While the BCCA concluded that the provisions do not encroach extraterritorially, the existing case law is notably sparse when it comes to the potentially government-binding context. That may leave the SCC to turn to general conflict of laws principles if it does not find Imperial Tobacco’s intangible pith and substance analysis dispositive. While it was adequate for the BC courts, the SCC may deem it appropriate to elaborate on how Morguard’s order and fairness speaks to multi-Crown class proceedings.