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Friday, March 19, 2010

Court allowing negligent misrepresentation suit to proceed against Tobacco Marketing Board

An Ontario Superior Court Judge has dismissed most of the claims brought by tobacco growers against their marketing board, but is allowing a claim of negligent misrepresentation to proceed.  Justice Thomas Heeney found that the following claims related to the dismantlement of the tobacco industry in Ontario raised no reasonable cause of action (i.e. there is no legal basis for the claims):
  • Refusal to share information: It was alleged that the Board was privy to information that it did not share with the producers that was critical to the survival of the industry.
  • Negotiating an exit strategy: It was alleged that the Board shifted its emphasis from its duties as a regulator and marketer of tobacco to one that it is not authorized by statute to do: that is, to negotiate with the federal and provincial governments for a compensation package for tobacco producers that would result in tobacco production ceasing permanently in Ontario. This involved seeking compensation for the lost value of tobacco quota, lost income, lost property values and transitional assistance.
  • Failure to properly negotiate annual crop sizes and to seek other markets: It was alleged that the Board called for an end to tobacco production in Ontario in 2006, and initially refused to negotiate the size of the 2006 crop. This had a negative effect on the actual crop size that was ultimately arrived at. In so doing, the Board acted negligently.
  • Passing a regulation that prevented renting or share-growing quota: It was alleged that, in 2006, the Board wrongfully and without statutory authority passed a regulation which prevented the plaintiff from renting or share-growing its production quota if it sold the tobacco kilns located on its farm.
The one claim that did survive the motion to dismiss brought by the Marketing Board was related to a kiln conversion program.  In 2001, the manufactures told the producers, through the Board, that the burners in their tobacco kilns had to be converted from direct to indirect heat, to eliminate cancer-causing nitrosamines in the cured leaf.  This would involve an expenditure on the part of the producers of approximately $7,000 per kiln.  Producers were told by the Board that 25% of the kilns had to be converted in 2001 and the remainder in 2002. Producers were given three year projections in relation to crop size and, based upon this, the plaintiff made its business decision to make the required investment.  The Board neglected to get a signed commitment from the manufacturers in relation to crop size, with the result that they ended up being significantly less than the plaintiff had been led to believe, and insufficient to justify or pay for the cost of conversion.

Justice Heeney found that the Statement of Claim issued against the Marketing Board did disclose a cause of action for negligent misrepresentation and ruled that this part of the claim could proceed toward trial.  One important difference between the surviving claim and those that were dismissed was that the kiln conversion decision by the Board was an operational decision as opposed to a policy decision.  Government bodies cannot generally be held liable for bad policy, but they can be held liable for negligently putting the policy into action.


Read the decision at: Marlor Farms Inc. v. The Ontario Flue-Cured Tobacco Growers' Marketing Board.