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The Much Broader Future of Cost Recovery Litigation in British Columbia

The government of British Columbia has announced its ambition to sue a wide range of companies—including social media operators, vaping product manufacturers, and makers of energy drinks—for costs incurred addressing the alleged public health effects of their alleged mass torts. The government has introduced sweeping costs-recovery legislation to that end: the Public Health Accountability and Cost Recovery Act (also known as Bill 12).

The Legislature is likely to pass this new legislation by mid-May, with lawsuits under it to follow shortly after.

The current draft of Bill 12 would allow the governments of British Columbia or Canada to sue anyone who provides goods or services in British Columbia if:

  1. they have ever breached a common law, equitable, or statutory duty or obligation owed to persons in British Columbia;
  2. their product or service caused disease, injury, or illness—or even a risk of it; and
  3. the government has incurred costs related to that disease, injury, illness, or risk.

If history is a lesson, we can expect other provinces will follow suit with identical legislation and ultimately join the government of British Columbia in litigating. Litigation against companies in a variety of industries alleged to have harmed public health—or even put it at risk—is easy to imagine.

The proposed Act is modeled on—but far broader than—British Columbia’s health care costs recovery legislation targeting cigarette smoking and opioid medicines. Those statutes focus on specific industries, do not allow for the kind of risk-based claims Bill 12 seems to contemplate, and allow recovery of a relatively limited class of health care expenditures.

Bill 12 includes many of the key provisions from those statutes, including presumptions that favour the government, but goes much further. The draft legislation permits government recovery in relation to the risk of disease, injury, or illness. It also defines disease, injury, or illness to include addiction and “problematic product use”. The permitted recovery also extends beyond health care costs—it includes “other expenditures by the government, made directly or through one or more agents, other intermediate bodies or education authorities, for programs, services, benefits or similar matters associated with disease, injury or illness”—including presumably education and prevention. Further, the government can issue certificates as conclusive proof of its expenditures.

McCarthy Tétrault LLP has been defending cases under the tobacco and opioid statutes for decades. They provide the best guide to how cases under Bill 12 may be litigated.

The Tobacco Damages and Health Care Costs Recovery Act

In 1997, British Columbia was the first province to enact legislation designed to facilitate aggregate claims to recover past and anticipated future costs incurred due to cigarette smoking. The first version of the legislation was struck down: it was unconstitutionally extraterritorial.

But British Columbia enacted a new version of the legislation that the Supreme Court of Canada found constitutional in 2005. With only minor amendments, that legislation remains in force today. All other provinces enacted substantially similar legislation soon after.

The key features of tobacco costs recovery legislation include:

  1. A direct cause of action for the government: The government can sue cigarette manufacturers to recover health care costs caused or contributed to by a breach of a common law, equitable, or statutory duty or obligation owed to persons in the province.
  2. Presumptions favoring governments: Once the government proves a breach of duty, it benefits from several presumptions related to causation and damages. For example, the court must presume that (i) people exposed to cigarettes would not have been exposed but for the breach of duty and (ii) if exposure can cause disease, it did cause disease or the risk of it in some people who were exposed.
  3. Aggregate claims: The government’s direct cause of action allows it to recover health care costs on an aggregate basis (g., for all persons in the province exposed to cigarettes). Statistical information is admissible to quantify the government’s aggregate health care costs.
  4. Discovery blocking: Health care records and documents of particular individual insured persons are not compellable unless a rule related to expert witnesses requires their production. Otherwise, defendants may obtain only a statistically meaningful sample of records.
  5. Parent liability: A parent company (or other person) that acts in concert with a Canadian company that breaches a duty is jointly and severally liable for the health care costs resulting from that breach.
  6. Retroactive effect: The government may sue for a historical breach of duty—the legislation reset the running of limitation periods at the time of its enactment.

All Canadian provinces have been pursuing claims against Canadian cigarette manufacturers and their foreign parent companies since the Supreme Court of Canada upheld British Columbia’s legislation. No action has proceeded to trial, but the cases have generated substantial litigation. For example, the Supreme Court of Canada dismissed the defendants’ third-party claims against the federal government and addressed the scope of the discovery blocking provisions. Provincial appellate courts have dismissed jurisdictional challenges by foreign parent companies.

Currently, the provinces’ lawsuits are stayed because the Canadian cigarette manufacturers commenced restructuring proceedings. Those proceedings have been ongoing since 2019.

The Opioid Damages and Health Care Costs Recovery Act

In 2018, British Columbia was the first province to enact similar health care costs recovery legislation targeting manufacturers and distributors of opioid medicines. Again, other provinces followed its lead. The opioid legislation is modeled heavily on the tobacco legislation, but there are a few significant differences, including:

  1. Government class actions: The British Columbia government may bring a class action on behalf of other Canadian governments. British Columbia has applied to certify a class action on behalf of all provinces and territories and the federal government. The Court of Appeal found this additional provision constitutional but the Supreme Court of Canada will hear an appeal on this issue in May 2024. Meanwhile, the certification ruling is under reserve.
  2. Officer and director liability: A director or officer who directs, authorizes, assents to, acquiesces in, or participates in a company’s breach of duty is jointly and severally liable with the company unless they exercised reasonable diligence.
  3. Consultant liability: The government may sue consultants to manufacturers and distributors.
  4. Federal government cause of action: The opioid legislation confers a direct cause of action on the federal government (in addition to British Columbia) for health care costs.

Bill 12: The Public Health Accountability and Cost Recovery Act

Bill 12 adopts most of the key features of the tobacco and opioid legislation, but is far broader in scope and provides additional advantages to the government:

  1. Near universal applicability: Bill 12 applies to any “product”, but product is defined to include any good, service, or by-product. Thus, unlike the special-purpose tobacco and opioid statutes, Bill 12 can create liability for almost any business with a connection to British Columbia.
  2. Claims based on only the risk of harm: Bill 12 applies to products that cause or contribute to disease, injury, or illness, but that now includes products that contribute to even the risk of disease, injury, or illness. Indeed, Bill 12 appears to contemplate lawsuits based only on the risk of harm posed by a product and creates special presumptions for that purpose. For example, if the government proves that (i) a defendant breached a common law, equitable, or statutory duty or obligation owed to people in British Columbia and (ii) they were exposed to the risk of disease, injury, or illness, then a court must presume that the breach actually caused or contributed to disease, injury, or illness. Put differently, it appears that if the government proves a product is risky, the court must presume it did in fact cause harm.
  3. Broader cost recovery: Bill 12 expands what costs the government can recover. For example, expenditures made by education authorities for programs or services associated with disease, injury, or illness—or the risk thereof—are recoverable. The government may seek to recover at least some costs of preventing harm, not just treating it.
  4. Government can certify its costs: Bill 12 allows the government to provide two kinds of certificates that may help it quantify its claim. First, the government may certify the benefits it provided to people. That kind of certificate is proof of those benefits. Second, the government may certify the costs of the benefits it provided. That kind of certificate is conclusive proof of those costs.
  5. Longer limitation period: Bill 12 creates a 15-year deadline for claims, running from when the new legislation comes into force or when a claim is discovered—whichever is later.
  6. Previous settlements and cases irrelevant: Previous settlements are not a defence to a claim under Bill 12. Further, even previous adjudications are not a defence. It appears the government may litigate claims that the courts have previously dealt with.

Next steps

Costs recovery litigation by provincial governments is enterprise-threatening. Defending it is a significant and costly undertaking. McCarthy Tétrault has a long track record of developing and implementing highly innovative and aggressive defences in this and other mass and toxic tort litigation, for some of the world’s most sophisticated litigants. 

If you face or are concerned about potential litigation under British Columbia’s new legislation, our Cost Recovery Litigation team would be glad to discuss potential defence strategies with you—please contact Michael Feder, K.C., Deborah Templer or Patrick Williams