Oct 28, 2014

The Policy/Operational Distinction in Canadian Tort Law: R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45

R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 SCR 45

The uninitiated might look at the Supreme Court’s recent decision in R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45 and suggest that the policy/operational distinction is no longer a feature of Canadian law. McLachlin C.J., in a scholarly judgment for the whole Court, acknowledged the problems of the distinction:

The main difficulty with the policy/operational approach is that courts have found it notoriously difficult to decide whether a particular government decision falls on the policy or operational side of the line. Even low-level state employees may enjoy some discretion related to how much money is in the budget or which of a range of tasks is most important at a particular time. Is the decision of a social worker when to visit a troubled home, or the decision of a snow-plow operator when to sand an icy road, a policy decision or an operational decision? Depending on the circumstances, it may be argued to be either or both. The policy/operational distinction, while capturing an important element of why some government conduct should generally be shielded from liability, does not work very well as a legal test… [D]efining a core policy decision negatively as a decision that is not an “operational” decision may not always be helpful as a stand-alone test. It posits a stark dichotomy between two water-tight compartments — policy decisions and operational decisions. In fact, decisions in real life may not fall neatly into one category or the other.[1]

Yet she found “considerable support” in a review of the jurisprudence from other jurisdictions “for the view that ‘true’ or ‘core’ policy decisions should be protected from negligence liability”.[2] Accordingly, she concluded:

…“core policy” government decisions protected from suit are decisions as to a course or principle of action that are based on public policy considerations, such as economic, social and political factors, provided they are neither irrational nor taken in bad faith.[3]

However, a core is inevitably surrounded by something that is not core; the existence of a “core” is dependent on the existence of a “non-core”. This is simply to restate the policy/operational distinction in slightly different form.

A consideration of the facts of the Imperial Tobacco case supports this skeptical view of McLachlin C.J.’s attempt to rehabilitate the policy/operational distinction. On a motion to strike, she held that the government was immune from liability in negligent misrepresentation. When tobacco manufacturers were sued by provincial governments to recover healthcare expenses, they initiated a third-party claim against the federal government. The pleadings alleged that there had been a history of interactions between government officials and tobacco manufacturers, the effect of which was to encourage the production of low-tar cigarettes. McLachlin C.J. took the view that the representations made were “part and parcel of a government policy to encourage people who continued to smoke to switch to low-tar cigarettes”:

This was a “true” or “core” policy, in the sense of a course or principle of action that the government adopted. The government’s alleged course of action was adopted at the highest level in the Canadian government, and involved social and economic considerations. Canada, on the pleadings, developed this policy out of concern for the health of Canadians and the individual and institutional costs associated with tobacco-related disease.[4]

One could easily rephrase this conclusion by saying that the government had a general policy of promoting low-tar tobacco use, but that this policy was made operational by the interactions and representations between the tobacco manufacturers and government officials. And in the argot of the core/non-core distinction, one could say that the core matter was the policy to promote low-tar tobacco. The actions of officials in liaising with the tobacco manufacturers were, however, not ‘core’ governmental activities. As Professor Feldthusen has argued:

Unless every high level government decision is to be immunized…there is nothing in [McLachlin C.J.’s] reasons that is inconsistent with the conclusion that switching to low-tar cigarettes was an operational decision. “Harm reduction” does sound like a government policy. It exists at a high level of generality and suggests considerable complexity. It is an end in itself…It involves choices between different strategies for dealing with the risks of smoking. Taken in isolation, “switching to low tar cigarettes” is an unlikely high level government policy. Governments are not in the tobacco business. Promoting low tar cigarettes was not an end in itself – it was a specific means of achieving the high level policy.[5]

Imperial Tobacco can thus be read as further evidence to support Lord Slynn of Hadley’s pithy observation: “Policy and operational acts are closely linked and the decision to do an operational act may easily involve and flow from a policy decision”.[6]

The policy/operational distinction, in its new core/non-core guise, has three features. First, it makes a categorical distinction between two different types of government action, one of which can give rise to liability, the other of which cannot. Second, it sorts government action into two spheres, one “core” and one not. Third, it shelters “core” decisions from judicial oversight. An administrative lawyer would look askance at each of these three features. Administrative law demonstrates the limitations of categorical approaches, dislikes the creation of distinct spheres of activity, and has become increasingly suspicious of exclusions of judicial oversight.

[1] Imperial Tobacco, at paras. 78, 86. As Professor Feldthusen aptly puts it: “Despite the apparent clarity, unless they are grounded in an unambiguous understanding of the purpose for the distinction, [the] words themselves do little to identify the scope of the immunity”. “Failure to Confer Discretionary Public Benefits: the Case for Complete Negligence Immunity” (1997), 5 Tort Law Review 17, at p. 22.

[2] Imperial Tobacco, at para. 85. This recalls Cory J.’s reference to “true” policy decisions in Just v. British Columbia, [1989] 2 S.C.R. 1228, at pp. 1242-1244.

[3] Imperial Tobacco, at para. 90. It is difficult to interpret the references to bad faith and irrationality. On the one hand, they may just refer to the manner of exercise of a statutory power rather than whether the exercise of a power was lawful. This is surely unobjectionable, though bad faith is perhaps better analyzed as part of the tort of misfeasance in public office. On the other hand, they may be seen as calling for a full-fledged administrative-law analysis as a condition precedent to a finding of liability in negligence, i.e. that in order to assess the elements of the tort of negligence, a court must first find that the public authority acted so irrationally as to act ultra vires. Yet McLachlin C.J. conducted no administrative law analysis in Imperial Tobacco and the Court has not indicated that a finding of administrative unlawfulness is always a condition precedent to liability in tort. On the contrary, the Court has insisted, “breach of a statute is neither necessary nor is it sufficient to ground a private cause of action”: “Tort liability, of course, is based on fault, not invalidity”. Canada (Attorney General) v. TeleZone Inc., [2010] 3 SCR 585, 2010 SCC 62, at para. 28. My interpretation is, accordingly, that McLachlin C.J. was simply making clear that a policy decision reached in a manifestly inappropriate way can give rise to liability because it was not a “bona fide exercise of discretion”. Just v. British Columbia, [1989] 2 S.C.R. 1228, at p. 1238. See also City of Kamloops v. Nielsen, [1984] 2 S.C.R. 2.

[4] Imperial Tobacco, at para. 95.

[5] Bruce Feldthusen, “Public Authority Immunity from Negligence Liability: Uncertain, Unnecessary and Unjustified” (2014), 92:2 Canadian Bar Review (forthcoming) at p. xxx. See also Lewis N Klar, “R. v. Imperial Tobacco Ltd.: More Restrictions on Public Authority Tort Liability” (2012) 50 Alta LR 157, at p. 168: “the Supreme Court in Imperial Tobacco decided that once having made the policy decision to encourage smokers to switch to low tar cigarettes, the way that the government went about this plan was also part of the policy decision” (emphasis original).

[6] Barrett v. Enfield London Borough Council, [2001] 2 A.C. 550, at p. 571.