Arvay Finlay Wins Right for Mill Workers to Sue Province

Reasons for Judgment of the Honourable Mr. Justice Esson:

1. The Encyclopedia of British Columbia, published in 2000, states at p. 787:
   
   Youbou is a sawmill community on the north shore of Cowichan Lk, 45 km west of Duncan on Vancouver Island. It was the site of the first sawmill on the lake in 1913. When the CNR reached the community in 1925 it was called Cottonwood; the next year it took the name Youbou after 2 pioneer loggers, Yount and Bouten. The forest industry has remained the economic mainstay.

In January 2001, Youbou ceased to be a sawmill community. The mill was permanently shut down and the jobs which it had provided ceased to exist. The plaintiff, who held one of those jobs until closure, brought this action under the Class Proceedings Act, R.S.B.C. 1996, c. 50, claiming damages against Her Majesty on the ground that she is vicariously liable for the negligence of the Minister of Forests and/or the staff of his Ministry in inadvertently removing from a tree farm licence ("TFL 46") a provision which would have prevented the mill from being closed without the Minister's approval.

2. The Crown now appeals the order of Mr. Justice R. D. Wilson certifying this action as a class proceeding. Subsection 4(1) of the Class Proceedings Act sets out five requirements which must be met on such an application. The Crown concedes that the plaintiff's case meets all of those requirements except the first: "(a) the pleadings disclose a cause of action." It now appears to be settled law that the plaintiff will be found to have met that requirement "unless it is plain and obvious that no reasonable cause of action is disclosed": Endean v. Canadian Red Cross Society (1998), 157 D.L.R. (4th) 465, 48 B.C.L.R. (3d) 90 (B.C.C.A.); Cooper v. Hobart, [2001] 3 S.C.R. 537, 2001 SCC 79, at para. 7.

THE PLAINTIFF'S CASE

3. The relevant pleading is the plaintiff's statement of claim, which is set out at length in the reasons for judgment of Wilson J., 2004 BCSC 608. I will summarize the substance of the claim.
    
4. For many years prior to 2001, much of the timber processed at the Youbou Mill came from TFL 46. In 1991, in granting an application by the then licensee, Fletcher Challenge, to split TFL 46 into two blocks in order to allow part of it to be transferred to another company, the Minister required the inclusion, in the licence covering the block to be retained by Fletcher Challenge, of a new clause ("Clause 7") which read:
   

   The Licensee will not cause its timber processing facility at Youbou to reduce production or to close for a sustained period of time, unless, and to the extent that the Minister, or his designate, exempts the Licensee from the requirement of this paragraph.

5. The plaintiff alleges that Clause 7 was specifically intended to address concerns expressed to the Minister by the mill's employees through their bargaining agent (the "IWA") regarding the impact on the employees of reducing the quantity of timber available to the Youbou Mill.
    
6. In 1993, Fletcher Challenge assigned TFL 46 to TimberWest Forest Limited, in which Fletcher Challenge held 51% of the shares.
    
7. In 1996, there was a revision of some of the terms of TFL 46. During the discussions leading up to that, the IWA made representations in writing to the Minister regarding the importance of retaining provisions, including Clause 7, which would "connect TFL #46 to the ongoing operation of the [mill] at Youbou, B.C."
    
8. The plaintiff alleges that it was only through carelessness on the part of the Minister and his assistants that the replacement TFL, when executed in 1997, did not include Clause 7. He also alleges that the union and the workers were unaware of that omission until October 2000, after notice of closure had been served by the licensee on the Minister. The Crown, while denying that it had a duty of care to the employees or that it breached any duty which it might have had, concedes that the omission of Clause 7 was "inadvertent".

GROUNDS OF APPEAL

9. The appellant's position on appeal is concisely summarized in a paragraph in the "Opening Statement" in its factum [for ease of reference, I have given each sentence a letter and will describe each as a 'point']:
   1. It is the position of the Province that the plaintiff's claim is bound to fail because there was no duty of care owed to the members of the proposed class with respect to the continued inclusion of Clause 7 in the Province's ongoing contract with Timberwest.
   2. The plaintiff's loss was purely economic.
   3. There was neither reasonable nor detrimental reliance by the plaintiff on the Province with respect to the continued inclusion of Clause 7 in the replacement of TFL 46.
   4. There was no contractual duty on the Province to ensure that Clause 7 was included in all subsequent replacements of the original TFL 46.
   5. In these circumstances, recognizing an ongoing duty of care in the circumstances of this case gives rise to a real concern of indeterminate liability.
   6. Finally, the plaintiff's entitlement to compensation on termination of his employment was governed by his contract of employment with Timberwest in any event.
   7. He was not without a remedy when his employment was terminated.
       
10. Points B and D can be dealt with quite briefly. With respect to B, the judge rejected the plaintiff's contention that this is not a case of pure economic loss. That contention was based on cases such as Wallace v. United Grain Growers Ltd. (c.o.b. Public Press), [1997] 3 S.C.R. 701, which have stressed the importance of employment to the well-being of the individual. I agree with the judge's conclusion that those cases do not apply to defining pure economic loss, which has consistently been held to be loss which is not accompanied by or does not result from personal injury or property damage.
     
11. With respect to point D, I do not understand the plaintiff to have contended that there was a contractual duty to ensure that Clause 7 was maintained in force or to dispute the right of the Minister, on policy grounds, to delete Clause 7. The submission is that the Minister, having required the inclusion of Clause 7 for the benefit of the employees and intending to maintain that clause in force, is liable to the plaintiff for having inadvertently, and thus negligently, allowed the clause to go by the boards.
     
12. Point A is clearly relevant to the question whether the pleadings disclose a cause of action capable of meeting the test in Endean v. Canadian Red Cross Society, supra, and, indeed, is of overriding importance in deciding that question. The remaining four points may also have some relevance to that question. To the extent they are relevant, they are subsidiary or peripheral to the issue raised in point A, which is whether the plaintiff can establish the existence of a prima facie duty of care. I will deal with those four points after considering point A.

THE DECISION APPEALED FROM

13. I turn then to the grounds upon which the chambers judge held that it was not plain and obvious that no reasonable cause of action is disclosed by the pleadings. Having reached the conclusion that the case was one of pure economic loss, he turned to the question of identifying the category of such loss in accordance with the analysis of Professor Feldthusen in his article "Economic Loss in the Supreme Court of Canada: Yesterday and Tomorrow" (1990-91), 17 Can. Bus. L.J. 356. That analysis, at 357-58, identified five categories of pure economic loss as follows:
    1. The Independent Liability of Statutory Public Authorities;
    2. Negligent Misrepresentation;
    3. Negligent Performance of a Service;
    4. Negligent Supply of Shoddy Goods or Structures;
    5. Relational Economic Loss.

The judge held that the only categories which could possibly apply to this case were the first and third categories. That conclusion is not disputed.

14. Wilson J. went on to consider whether the case fell within the first category and concluded that it did not. He based that conclusion primarily upon his view that this case is indistinguishable from the decision of the Supreme Court of Canada in Cooper v. Hobart, supra, which, along with the companion decision in Edwards v. Law Society of Upper Canada, [2001] 3 S.C.R. 562, 2001 SCC 80, in which judgment was given on the same day, is the most recent and perhaps most significant decision in relation to the troublesome question of the liability of statutory public authorities for breach of the common law duty of care. In my view, the judge erred in ruling that the case could not be brought within the first category. Put shortly, I would hold that, if this case cannot be distinguished from Cooper, it would necessarily follow that the action must be dismissed on the ground that no cause of action is disclosed. However, I am also of the view that this case is distinguishable from Cooper in ways which, in several respects, provide support to the plaintiff's case.

ANALYSIS OF COOPER v. HOBART

15. The facts of that case, as stated in paragraphs 2 to 5 of the joint reasons of McLachlin C.J.C. and Major J., for the court, were:
    2. Eron Mortgage Corporation ("Eron") was registered as a mortgage broker under the Mortgage Brokers Act, R.S.B.C. 1996, c. 313 ("the Act"), from early 1993 until 1997. On October 3, 1997, the respondent, Robert J. Hobart, in his capacity as the Registrar under the Act, suspended Eron's mortgage broker's licence and issued a freeze order in respect of its assets.
    3. Eron acted as a mortgage broker for large syndicated loans. It arranged for numerous lenders (or investors) to pool their funds for the purpose of making a single loan to a borrower, which was typically a developer of commercial real estate. The syndicated loans were made in the name of Eron or one of its related companies, which held the security in trust for the investors.
    4. It is alleged that the funds provided by the investors were used by Eron for several unauthorized purposes, such as funding interest payments on other non-performing mortgages and paying for personal items for the benefit of the principals of Eron. It is currently estimated that $222 million is outstanding to the investors on these loans. Investors will likely realize only $40 million from the security taken from the loans, leaving a shortfall of $182 million.
    5. Soon after Eron's mortgage licence was suspended, it went out of business. The appellant Mary Francis Cooper ("Cooper"), one of over 3000 investors who advanced money to Eron, brought an action against the Registrar. The Statement of Claim alleged that the Registrar breached the duty of care that he allegedly owed to the appellant and other investors. The appellant asserted that by August 28, 1996, the Registrar was aware of serious violations of the Act committed by Eron but that he failed to suspend Eron's mortgage broker's licence until October 3, 1997 and failed to notify investors that Eron was under investigation by the Registrar's office. According to the appellant, if the Registrar had taken steps to suspend or cancel Eron's mortgage broker's licence at an earlier date, the losses suffered by the investors would have been avoided or diminished.
        
16. The action was brought under the Class Proceedings Act. On the application to certify, Mr. Justice Tysoe held ((1999), 68 B.C.L.R. (3d) 274 (S.C.)) that it was not plain and obvious that no reasonable cause of action was disclosed and granted the application for certification. The Registrar's appeal was allowed (184 D.L.R. (4th) 287, 75 B.C.L.R. (3d) 54, 2000 BCCA 151) on the ground that the pleadings did not disclose a cause of action against the Registrar. The principal reasons were those of Newbury J.A. (Southin J.A. concurring). Huddart J.A. concurred in separate reasons on somewhat different grounds.
     
17. The passage in the reasons of Wilson J. in this case, holding Cooper v. Hobart to be indistinguishable, is:
    24. Two statutes were referred to by counsel on this application: the Ministry of Forests Act [R.S.B.C. 1996, c. 300] and the Forest Act [R.S.B.C. 1996, c. 157].
    25. Section 3 of the Ministry of Forests Act defines the duties, powers and functions of the Minister of Forests. Section 4 defines the purposes and functions of the Ministry of Forests. Those provisions do not expressly, or by implication, impose a duty on the Minister, or the Ministry, to workers in the forest industry. I agree with the Province; the duty imposed by this statute is a duty to the public as a whole.
    26. Division 6 of the Forest Act prescribes the procedural and substantive conditions for the establishment of tree farm license areas, tree farm licenses, and the issuance and replacement of tree farm licenses. None of the provisions in Division 6, expressly or by implication, impose a duty on the Minister, or the Ministry, to workers in the forest industry. I agree with the Province; the duty imposed by the statute is a duty to the public as a whole. In that respect, this case is indistinguish­able from Cooper.
    27. In result, it is plain and obvious that Mr. James' claim is not included in the first category.
         
18. To demonstrate what I see as the error in that passage, it is necessary to have regard to the particular issues in Cooper which led to the emphasis, in paragraph 43 of the Supreme Court's reasons, upon the statute being the only source of the Registrar's duties.
     
19. The broad issue upon the application to certify was whether the first stage test in Anns v. Merton London Borough Council, [1978] A.C. 728 (H.L.), could be satisfied. That is, was there foreseeable harm and proximity? The Supreme Court, in paragraph 42, held:
    
    ... it was reasonably foreseeable that the alleged negligence in failing to suspend Eron or issue warnings might result in financial loss to the plaintiffs. However, as discussed, mere foreseeability is not enough to establish a prima facie duty of care. The plaintiffs must also show proximity – that the Registrar was in a close and direct relationship to them making it just to impose a duty of care upon him toward the plaintiffs. In addition to showing foreseeability, the plaintiffs must point to factors arising from the circumstances of the relationship that impose a duty.
     

The principal hurdle faced by the plaintiff, which ultimately proved insurmountable, was that, as Tysoe J. held, there was no factual basis to support a finding of proximity.

20. In summarizing the decision of Tysoe J., the Supreme Court said, at paragraph 10:
    
    The trial judge stated that the prospect of indeterminate liability should negative the prima facie duty of care unless it is determined that one of the purposes of the Legislature in enacting the Act was to protect a class of persons, of which the plaintiff is a member. He concluded that it was not plain and obvious that the Legislature did not intend to create a private law duty of care owed by the Registrar in favour of investors dealing with mortgage brokers. In reaching this conclusion, the trial judge referred to various powers and duties of the Registrar which suggested that the Act was intended to protect investors.

The overriding issue on appeal was whether that conclusion of the trial judge was correct. Both this Court and the Supreme Court found it to be plain and obvious that the Legislature did not intend to create a private law duty of care owed by the Registrar in favour of investors dealing with mortgage brokers.

21. In this Court, the basis for that finding was stated thus by Newbury J.A., for the majority:
    49. ... The first stage of that analysis [Anns] is to ask whether there was a sufficiently close relationship between the parties in this case such that in the reasonable contemplation of the Registrar, carelessness on his part might have "caused" (in the sense of failing to prevent) damage to the plaintiff or the class of persons who had advanced funds to Eron.
    50. I am not satisfied that this test for the existence of a prima facie duty of care is met in this case, even though in my view the Registrar might reasonably have foreseen that losses to investors in Eron (or more specifically, to those who decided to invest after the time by which the Registrar knew or should have known about Eron’s precarious position) would result if he was careless in carrying out his duties under the Act. It cannot be said there was a "sufficiently close relationship" between the parties here — indeed, there really was no "relationship" between the plaintiff and the Registrar. As noted earlier, the plaintiff does not even allege that she was aware of the Registrar's existence or functions. ...
    51. In essence, then, the plaintiff's case goes no farther than foreseeability. No relationship of the kind normally necessary to ground liability for negligence is alleged; no reliance in fact is pleaded; and any reliance would not have been reasonable. It follows in my view that a prima facie duty of care cannot be established.
    52. Even if I were incorrect in concluding that the first branch of the Anns test is not met, there are on the second branch substantial factors that militate against a duty of care. First, the statutory scheme constituting the Mortgage Brokers Act and Regulations thereto was not in my view intended to create a private law duty of care owed by the Registrar and his employer (if such the Province was) to investors. I cannot phrase it any better than Taylor J.A. did in Kripps v. Touche Ross & Co., [(1992), 69 B.C.L.R. (2d) 62 (C.A.)]:
        

        The [public authority liability] principle cannot be invoked where the purpose of the legislative scheme is simply to accomplish whatever the implementing authority thinks best in the interests of the public in general. Here, as I have said, the statutory scheme seeks to maintain, or improve, the standard of offerings in the market generally, and the function discharged by the implementing authority involves no accompanying "private law duty of care" to individual lenders or investors who choose to take up a particular offering. ... [at 87]

22. The conclusion of the Supreme Court of Canada on this issue was stated thus:
    50. Accordingly, we agree with the Court of Appeal per Newbury J.A.: even though the Registrar might reasonably have foreseen that losses to investors in Eron would result if he was careless in carrying out his duties under the Act, there was insufficient proximity between the Registrar and the investors to ground a prima facie duty of care. The statute cannot be construed to impose a duty of care on the Registrar specific to investments with mortgage brokers. Such a duty would no doubt come at the expense of other important interests, of efficiency and finally at the expense of public confidence in the system as a whole.
         
23. Two of the points made by the court in arriving at that conclusion seem particularly compelling in demonstrating the absence of any legislative purpose to impose a duty upon the Registrar such as that contended for by the plaintiffs in that case. One is the statement, in paragraph 44, following the statement that the Registrar's duty is to the public as a whole, that:
    
    Indeed, a duty to individual investors would potentially conflict with the Registrar's overarching duty to the public.

The second point is in paragraph 48, where the court noted that the Legislature had expressly indicated its intentions in the matter:

48. Finally, s. 20 exempts the Registrar or any person acting under his authority from any action brought for anything done in the performance of duties under the Act or Regulations, or in pursuance or intended or supposed pursuance of the Act or Regulations, unless it was done in bad faith.

THE DISTINCTIONS BETWEEN COOPER AND THIS CASE

24. Both the relevant legislation and the factual circumstances of this case are radically different from those in Cooper in ways that, in important respects, are favourable to the plaintiff's case. I should make it clear that all references to the Ministry of Forests Act and Forest Act apply to the statutes as they stood at the relevant time, being 1991, when Clause 7 was required to be included in the licence.
     
25. The Ministry of Forests Act is a brief statute which grants broad discretionary powers. The version of that Act in force in 1991 is to be found at R.S.B.C. 1979, c. 272, as amended. Sections 3 and 4 of that Act, as it stood in 1991, read:

    Minister's duties

    3. The duties, powers and functions of the minister extend to and include all matters relating to forest and range resources in the Province that are not, by law or by order of the Lieutenant Governor in Council, assigned to another minister, ministry, branch or agency of the government.

    Purposes and functions of ministry

    4. The purposes and functions of the ministry are, under the direction of the minister, to
    1. encourage maximum productivity of the forest and range resources in the Province;
    2. manage, protect and conserve the forest and range resources of the Crown, having regard to the immediate and long term economic and social benefits they may confer on the Province;
    3. plan the use of the forest and range resources of the Crown, so that the production of timber and forage, the harvesting of timber, the grazing of livestock and the realization of fisheries, wildlife, water, outdoor recreation and other natural resource values are coordinated and integrated, in consultation and cooperation with other ministries and agencies of the Crown and with the private sector;
    4. encourage a vigorous, efficient and world competitive timber processing industry in the Province; and
    5. assert the financial interest of the Crown in its forest and range resources in a systematic and equitable manner.
        
26. For present purposes, the Forest Act is more significant. It is a long and comprehensive enactment which deals in detail with virtually every aspect of government management of the forests and it is the statute under which tree farm licences are created and administered. The version of that Act in force in 1991 is to be found at R.S.B.C. 1979, c. 140, as amended.
     
27. Section 27 of that Act, as it stood in 1991, dealt specifically with the issuance of tree farm licences. It provided for a public hearing "in which any person may make a submission" respecting the application and went on to provide:
    27. (5) Following the public hearing the minister shall evaluate each application, including its potential for
    1. (a) creating or maintaining employment opportunities and other social benefits in the Province;
    2. (b) providing for the management and utilization of Crown timber;
    3. (c) furthering the development objectives of the Crown;
    4. (d) meeting the objectives of the Crown in respect of environmental quality and the management of water, fisheries, wildlife and cultural heritage resources; and
    5. (e) contributing to Crown revenues.

[Emphasis added.]

28. Section 28 of the Forest Act, as it stood in 1991, set out the content of tree farm licences which, subject to some qualifications, were required to be for a term of 25 years. Section 28(1)(l) provided that the licence shall require its holder:

    ... in accordance with a proposal made in the application for the tree farm licence,

    1. to undertake or continue the operation, construction or expansion of a timber processing facility, and
    2. to undertake specified measures in order to meet the objectives of the Crown in respect of any of the items referred to in section 27(5)(a) to (e);
29. Neither of those statutes limited the powers and duties of the Minister in the way that the Mortgage Brokers Act limited those of the Registrar. Specifically, in my view, they cannot be construed as having limited the duties of the Minister to "a duty to the public as a whole." No doubt there is a sense in which it could be said that the Minister of Forests had a duty to the public as a whole; after all, it can be said of any public statute that its purpose is to serve the public interest. But, in the case of the forest industry, it is clear that the Legislature's view was that that end could be achieved only by balancing a range of disparate interests. By way of example, the Minister was called upon to encourage maximum productivity of forest resources but, at the same time, to protect and conserve forest resources. In deciding whether to issue tree farm licences and in deciding what terms to impose upon a licensee, he was required to seek to create or maintain employment opportunities and had the power to require the licensee to continue the operation of a timber processing facility. The legislative scheme required the Minister to exercise an arbitral role between competing interests.
     
30. The Forest Act has been substantially amended since 1991. Notably, in 1996 s. 27(5) became s. 33(5), and in 2003 s. 33 was repealed and replaced with a provision that made no reference to evaluating applications on the basis of their potential for creating and maintaining employment opportunities and other social benefits in British Columbia. Also, in 1996 s. 28(1)(l) became s. 35(1)(m), and in 2003 s. 35(1)(m) was repealed. The effects of these statutory amendments, if any, are irrelevant for present purposes, because what is pertinent in the case at bar, as I have stated above, is the state of the legislative scheme in 1991. Furthermore, these provisions were not significantly altered until 2003, which was after the 2001 closure of the mill.
     
31. Having regard to the statutory provisions as they stood at the relevant time, I see no reason to doubt that the Minister had the power to require Clause 7 to be a term of the licence and had the power to require it to remain there for the benefit of the mill employees and perhaps other classes of persons.
     
32. I have referred to the power conferred on the Minister because, in this context, I consider it to be clear that he was called upon to exercise a power rather than a duty.
     
33. The emphasis in Cooper is upon the question whether the Registrar had a duty to mortgage holders. In the context of that case, in which the complaint was that the Registrar did not exercise his powers to benefit the mortgage holders, the question necessarily was whether he had a duty to do so. In this case, the complaint is that the Minister, after exercising his powers for the benefit of the employees, negligently failed to retain the clause which gave rise to that benefit. In that situation, it is enough to find that, in requiring Clause 7 to be in the licence, he exercised a statutory power. The only issue relating to "duty" which need be considered is whether there was a breach of the common law duty of care.
     
34. In Anns v. Merton, supra, at 758, Lord Wilberforce, referring to the question of the extent to which a common law duty of care is owed by a statutory authority, said:
    
    It is irrelevant to the existence of this duty of care whether what is created by the statute is a duty or a power: the duty of care may exist in either case. The difference between the two lies in this, that, in the case of a power, liability cannot exist unless the act complained of lies outside the ambit of the power. In Dorset Yacht Co. Ltd. v. Home Office [1970] A.C. 1004 the officers may (on the assumed facts) have acted outside any discretion delegated to them and having disregarded their instructions as to the precautions which they should take to prevent the trainees from escaping: see per Lord Diplock, at p. 1069. So in the present case, the allegations made are consistent with the council or its inspector having acted outside any delegated discretion either as to the making of an inspection, or as to the manner in which an inspection was made. Whether they did so must be determined at the trial. In the event of a positive determination, and only so, can a duty of care arise.
     
35. In the case at bar, the allegations made are consistent with Ministry personnel, by carelessly allowing Clause 7 to be removed from the licence when there was no intention to remove it, having acted outside any discretion delegated to them.

IS THERE A PRIMA FACIE DUTY OF CARE?

36. The next question is whether there are grounds for finding a prima facie duty of care with respect to maintaining Clause 7 in force. That depends upon the plaintiff being able to establish both foreseeability of harm and proximity. The plaintiff's case is that Clause 7 was imposed on the licensee at the urging of the employees and their union to prevent harm to them from a mill closure. That being so, there is a reasonable basis upon which it could be found that it was foreseeable that negligently allowing the clause to disappear would cause harm to the employees.
37. The same considerations apply to and tend to support a finding of proximity. The Supreme Court, in Cooper, said:
    31. On the first branch of the Anns test, reasonable foreseeability of the harm must be supplemented by proximity. The question is what is meant by proximity. Two things may be said. The first is that "proximity" is generally used in the authorities to characterize the type of relationship in which a duty of care may arise. The second is that sufficiently proximate relationships are identified through the use of categories. The categories are not closed and new categories of negligence may be introduced. But generally, proximity is established by reference to these categories. This provides certainty to the law of negligence, while still permitting it to evolve to meet the needs of new circumstances.
    32. On the first point, it seems clear that the word "proximity" in connection with negligence has from the outset and throughout its history been used to describe the type of relationship in which a duty of care to guard against foreseeable negligence may be imposed. "Proximity" is the term used to describe the "close and direct" relationship that Lord Atkin described as necessary to grounding a duty of care in Donoghue v. Stevenson, supra, at pp. 580-81:
        
        Who then, in law is my neighbour? The answer seems to be -- persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question.

        * * *

        
        I think that this sufficiently states the truth if proximity be not confined to mere physical proximity, but be used, as I think it was intended, to extend to such close and direct relations that the act complained of directly affects a person whom the person alleged to be bound to take care would know would be directly affected by his careless act.

        [Emphasis of C.J.C. and Major J.]

        
        
        

        * * *

        
        
    34. Defining the relationship may involve looking at expectations, representations, reliance, and the property or other interests involved. Essentially, these are factors that allow us to evaluate the closeness of the relationship between the plaintiff and the defendant and to determine whether it is just and fair having regard to that relationship to impose a duty of care in law upon the defendant.
         
38. Even if the facts of this case do not bring it within any established category, that fact does not necessarily preclude the plaintiff being granted relief. The alleged facts demonstrate a high degree of "closeness of relationship" and the nature of the alleged negligence is purely operational. The dictum of Lord Wilberforce in Anns v. Merton, supra, at 754, is applicable:
    
    It can safely be said that the more "operational" a power or duty may be, the easier it is to superimpose upon it a common law duty of care.

Having regard to those matters, I am of the view that it is not plain and obvious that the plaintiff cannot establish a common law duty of care by application of the two-stage analysis in Anns v. Merton.

IS THE CATEGORY OF NEGLIGENT PROVISION OF A SERVICE APPLICABLE?

39. The chambers judge, having found that the governing statutes did not sanction a duty of care to the plaintiffs, nevertheless found for them on the ground that the failure of the Ministry to continue to include Clause 7 in the licence came within the category of "negligent performance of a service". That category applies to cases in which persons possessing particular knowledge or skills, generally professional in nature, have contracted with a client or customer to provide services and in carrying out the contract have, by their negligence, caused damage to a third person to whom it is found that a duty of care was owed.
     
40. To this point, I have dealt mainly with the question whether this case is indistinguishable from Cooper because if it is, there could be no proper basis upon which to find the Crown liable. Statutory authorities are a unique class of defendants in that no finding of liability can be made against them without finding that the statute demonstrates an intention to create a common law duty of care.
     
41. As with several of the rules and concepts with which the court must cope in cases involving pure economic loss, that issue requires the court to balance considerations of sometimes mystifying complexity. In giving the majority judgment of this Court in Cooper, 75 B.C.L.R. (3d) 54, Newbury J.A., at para. 27, after stating the rule that the court must decide as a matter of statutory interpretation whether the economic loss is of the type "the statute is intended to guard against", added:
    

    (This task seems no less difficult than that of deciding whether a statute is intended to create a cause of action for breach thereof. In Saskatchewan Wheat Pool v. Canada, [1983] 1 S.C.R. 205 (S.C.C.), at 215-6, Dickson J. (later C.J.C.) for the Court described that endeavour as "the pretence of seeking ... a 'will o' the wisp'" and held that the cause of action known as statutory breach should be "subsumed in negligence.")

42. In Cooper, it was held to be plain and obvious that the plaintiff could not get over the initial hurdle of establishing the requisite statutory intention. In this case, I have held it not to be plain and obvious that the plaintiff cannot clear that hurdle and, to that extent, I disagree with the analysis of the chambers judge. However, it does not follow that he erred in holding that the third of the five categories set out at paragraph 13, supra, has application. The first and third of those categories are not mutually exclusive. Indeed, they are categories of quite different matters. The first is a class of legal persons (statutory authorities) to whom, as I have said, unique considerations apply. Each of the other four is a class of careless conduct which has been held to provide a basis for imposing liability for economic loss against defendants other than statutory authorities. I see no reason why the third category could not apply to provide a basis for holding a statutory authority liable for economic loss. Indeed, that seems a fair description of the result in Anns v. Merton and in Kamloops (City) v. Nielsen, [1984] 2 S.C.R. 2.
     
43. The chambers judge stated his conclusion on this question as follows:
    41. As pleaded, Mr. James' case presents as the "voluntary acceptance" of a responsibility by the Province. Mr. James' case is not a case where a policy regime has been established by the legislative branch, which has been carelessly administered by the executive branch. It is a case where a policy decision has been taken by the executive branch, which has, allegedly, been carelessly administered by the executive branch.
    42. There was no duty on the Minister to impose a disability on the licensee in 1991. However, a disability was imposed on the licensee, for the benefit of the licensee's workers. Arguably, the Minister "[voluntarily] accepted" a responsibility to the workers to see that disability continued to prevail.
    43. In relation to the precedents in this category, cited above, Mr. James' case may be unique, but it is not novel. The analogy of Mr. James' case to those precedents is this -- the Minister is to the solicitor, professional engineer, notary, or financial consultant, what the licensee and Mr. James are to the client, or contractor, and the disappointed beneficiary and building owner.
    44. That conclusion is a necessary and sufficient condition for the order sought by Mr. James on the application. ...

I am not persuaded that the reasoning in that passage is erroneous. It has particular application in providing an answer to the Crown's point C, which is:

3. There was neither reasonable nor detrimental reliance by the plaintiff on the Province with respect to the continued inclusion of Clause 7 in the replacement of TFL 46.

44. The Crown's submission that the plaintiff cannot succeed without pleading and proving "detrimental reliance" finds support in some cases and some academic writing but, with respect, appears to be based on a misapprehension of the extent of the "new law" propounded in Hedley Byrne & Co. v. Heller & Partners Ltd., [1964] A.C. 465 (H.L.). Because that case overruled the longstanding rule that there could be no recovery in tort for pure economic loss, and because it was held that detrimental reliance was an essential element of the cause of action, it seems to have been assumed by some that the requirement of proving detrimental reliance applies to all actions seeking recovery of damages for pure economic loss.
     
45. That requirement, however, was "old law". It flowed, not from the decision to change the law with respect to claims for pecuniary loss, but from the fact that Hedley Byrne was a claim in misrepresentation. In such an action, it was always incumbent upon the plaintiff to plead and prove reliance upon the false representa­tion. With respect to that issue, there is no logical reason to distinguish between fraudulent misrepresentation and negligent misrepresentation. In either case, proof of reliance is essential to establish causation.
     
46. On the facts alleged here, the causal relationship established by reliance in a misrepresentation case is arguably covered by the finding of foreseeability and proximity. The essential feature of each concept is the "something more" which the Supreme Court, in Cooper, held must be demonstrated in order to establish that the plaintiff and the defendant were in a sufficiently close relationship. As McLachlin C.J.C. and Major J. said, in paragraphs 34 and 35 of Cooper:
    34. Defining the relationship may involve looking at expectations, representations, reliance, and the property or other interests involved. Essentially, these are factors that allow us to evaluate the closeness of the relationship between the plaintiff and the defendant and to determine whether it is just and fair having regard to that relationship to impose a duty of care in law upon the defendant.
    35. The factors which may satisfy the requirement of proximity are diverse and depend on the circumstances of the case....

[Emphasis added.]

47. In this case, it would be unrealistic to impose upon the plaintiffs a burden to establish detrimental reliance. That is not their case. However, the facts may demonstrate a different form of reliance. The employees can be said to have relied upon the Minister to exercise reasonable care to retain Clause 7 in the licence unless and until he reached a decision on policy grounds to remove it. That view of the matter can be inferred from the facts alleged. It does not support the view that the law requires these plaintiffs to prove detrimental reliance.
     
48. Perhaps the best known cases in the negligent service category are those brought by a disappointed beneficiary. The earliest such case was the decision of Mr. Justice Aikins (later J.A.) in Whittingham v. Crease & Co. (1978), 88 D.L.R. (3d) 353, [1978] 5 W.W.R. 45 (B.C.S.C.) [cited to D.L.R.], to which counsel did not refer. The cases which were cited included Ross v. Caunters, [1979] 3 All E.R. 580 (Ch.), in which Vice-Chancellor Megarry, relying in part on the reasoning in Whittingham, came to the same conclusion as Aikins J., holding that the disappointed beneficiary was entitled to recover. Ross v. Caunters was accepted as the leading authority on the issue until a sharply divided House of Lords upheld the claim of a disappointed beneficiary in White v. Jones, [1995] 2 A.C. 207, [1995] 1 All E.R. 691 (H.L.), also cited to us.
     
49. It is regrettable that the decision of Aikins J., which exhibited the thorough and careful reasoning characteristic of the decisions of that learned judge, has been ignored for so long. To return to the present issue, I would adopt his analysis of the relationship between reliance and liability in cases of this kind, which is the clearest exposition of the issue which has come to my attention. I quote from pp. 373-74:
    

    The facts in the present case differ in one particular and troublesome aspect from those in the general run of cases in which Hedley Byrne has been successfully invoked. I have not been referred to a case, nor have I been able to find one, in which the principle of Hedley Byrne has been applied where the plaintiff had not acted on the strength of the representation made by the defendant and it was the plaintiff's own act which was the immediate cause of the loss.
    
    In this case the plaintiff has suffered a loss but without his having done anything in reliance on the implied representation made by [the solicitor]. In my opinion there are two reasons, linked to each other, which enable the plaintiff to succeed in this case, notwithstanding that he remained passive and did nothing, relying on [the solicitor's] implied representation. First, it was unnecessary for the plaintiff to act at all on the implied representa­tion in order to attract the loss which he has suffered; second, [the solicitor] could reasonably foresee that if he, in the performance of his duty, failed to see to it that the will was properly witnessed, then that neglect would cause the very loss the plaintiff has suffered, without the plaintiff doing anything at all. Granted that there was an implied duty on the part of [the solicitor] to the plaintiff and that the plaintiff relied on [the solicitor] fulfilling that duty, it seems to me on principle that it is immaterial that the plaintiff himself did nothing in reliance on the implied representation made by [the solicitor] which brought about his loss. This is so because the negligence of the solicitor caused the loss without there having to be any intervening act by the plaintiff to perfect the chain of causation.
    
    For these reasons I hold on the line of authorities headed by Hedley Byrne and on the particular facts in this case that the defendant is liable to the plaintiff in negligence.

50. In the reasons of Megarry V.-C. in Ross v. Caunters and in the speeches of the majority in White v. Jones, the absence of reliance was held not to preclude recovery because its place was taken by the voluntary assumption of responsibility by the solicitor. I agree with the chambers judge that that approach may be properly applicable to the position of the Minister in this case. He was, of course, not a party to a contract but, as I noted earlier, was subject to statutory powers and duties which provided a basis for conferring the benefit of Clause 7 upon the employees. I would not give effect to the ground of appeal in point C.
     
51. I turn then to point E, the submission that to recognize a duty of care in this case would give rise to a real concern of indeterminate liability. On this issue, the chambers judge said:
    56. The first policy consideration raised by the Province, in the second part of the Anns two-step test, is "the spectre of indeterminate liability". This is the Province's shorthand for the proposi­tions stated by Cardozo C.J. in Ultramares Corp. v. Touche [255 N.Y. Rep. 170 (1931) at 44] -- "liability in an indeterminate amount for an indeterminate time to an indeterminate class".
    57. There is no evidence upon which to make any determination of the quantum (if that is what is meant) of the liability (should it be found); therefore, it is not possible to say that it is plain and obvious that to allow this action to proceed would raise the spectre of liability in an indeterminate amount.
    58. If liability were found in this case, it would not extend for an indeterminate time. The class has been determined. It is defined in the pleadings. If the members of that class were found entitled to damages, there would be no more indeterminacy in their claims than there would be indeterminacy in the claims of the plaintiffs in Ogden v. Gulf Log Salvage Co-Operative Assn. [2004 BCSC 53].
    59. It is not plain and obvious that, as a policy consideration, indeterminacy will negative, or restrict, a duty of care in this case.
         
52. I agree in substance with that analysis. Again, it is helpful to compare the circumstances of this case to those of cases in which it has been held that there was sufficient likelihood of indeterminate liability as to justify barring recovery. In Cooper v. Hobart, the Supreme Court of Canada, after holding that the absence of sufficient proximity required the dismissal of the action, went on to set out, in paragraphs 51 to 55, several policy grounds which would have led to the same result. In paragraph 54, the court said:
    54. Further, the spectre of indeterminate liability would loom large if a duty of care was recognized as between the Registrar and investors in this case. The Act itself imposes no limit and the Registrar has no means of controlling the number of investors or the amount of money invested in the mortgage brokerage system.

No similar circumstances exist in this case.

53. In this Court, the appellant submitted that the analysis of the chambers judge was inadequate because it concentrated on the specific facts of the case without regard to the broader concern that a decision in favour of the employees would tend to open the floodgates. Having regard to the particular circumstances of this case, which seem in some respects to be unique, I am not persuaded that it is plain and obvious that there is a serious risk of opening the floodgates. That is not to say that the point may not be developed at trial to become a ground for dismissing the action.
     
54. That leaves for consideration these points:
    6. Finally, the plaintiff's entitlement to compensation on termination of his employment was governed by his contract of employment with Timberwest in any event.
    7. He was not without a remedy when his employment was terminated.
        
55. These appear to be different ways of raising the same issue. This also may prove to be one of significance if and when the action gets to trial, but I do not see it as being relevant to the narrow question of whether it is plain and obvious that the plaintiff has not pleaded a cause of action.
     
56. In my reasons, I have stressed the extent to which the case for the plaintiff in this action is stronger than was the case in Cooper v. Hobart. I would not wish to leave the impression that I consider that the case is bound or is even likely to succeed. I say only that it is not bound to fail. It should be kept in mind that, at trial, there likely will be positive defences available to the Crown which may well prevail. The chambers judge, near the end of his reasons, referred to an argument advanced by the Crown to the effect that the mill closure in 2001 came about because of "market forces" so dire that the Minister surely would have permitted the closure. The chambers judge characterized that as a "strong defence" but as not being an issue which could be resolved on the application to certify. In view of the only issue being whether the pleadings disclose a cause of action, that was a proper conclusion.
     
57. The point regarding market forces was raised in extensive affidavit evidence filed by the defence to which the chambers judge had regard because, as he said:
    70. However, s. 5 of the Class Proceedings Act mandates the filing of affidavits on the application for certification. Therefore, it is not sufficient to confine the inquiry into the issue of causation to the pleading. Nevertheless, the affidavit material must establish that it is plain and obvious that the Province's omission was not a cause, or materially contributing cause, to Mr. James' loss of his job.
         
58. Section 5 of the Act reads as follows:
    5. (1) An application for a certification order under section 2(2) or 3 must be supported by an affidavit of the applicant.
       
       

       * * *

       
       (4) Unless otherwise ordered, a person to whom a notice of motion and affidavit is delivered under this section or on whom a notice of motion and affidavit is served under this section must, not less than 5 days or such other period as the court may order before the date of the hearing of the application, file an affidavit and deliver a copy of the filed affidavit to all persons who are parties of record.
       (5) A person filing an affidavit under subsection (2) or (4) must
       1. set out in the affidavit the material facts on which the person intends to rely at the hearing of the application
       2. swear that the person knows of no fact material to the application that has not been disclosed in the person's affidavit or in any affidavits previously filed in the proceeding, and
       3. provide the person's best information on the number of members in the proposed class
           
59. With respect, I think it doubtful that the legislative intent was to require, or perhaps even permit, affidavit evidence to be introduced in relation to the question whether "the pleadings disclose a cause of action". The point was touched upon in the reasons of McLachlin C.J.C., for the court, in Hollick v. Toronto (City), [2001] 3 S.C.R. 158. In paragraph 25 of her reasons, she said, in relation to the Ontario statute:
    

    In my view, the class representative must show some basis in fact for each of the certification requirements set out in s. 5 of the Act [s. 4 of the British Columbia Class Proceedings Act], other than the requirement that the pleadings disclose a cause of action. That latter requirement is of course governed by the rule that a pleading should not be struck for failure to disclose a cause of action unless it is "plain and obvious" that no claim exists: [citation omitted].

60. That passage is clearly obiter because, in that case, the only requirement for certification which was not in issue was that as to whether the pleadings disclosed a cause of action. Furthermore, although the Ontario statute is very similar to our Class Proceedings Act, it does not have an express provision requiring affidavit evidence such as section 5 of our Act.
     
61. Nevertheless, the expression of opinion by the Chief Justice in Hollick is significant because of the reason given for not requiring evidence relevant to the question whether it is "plain and obvious" that the pleadings do not disclose a cause of action.
     
62. That observation of the Chief Justice should be considered along with the decision in Endean v. Canadian Red Cross Society, supra, which was approved in Cooper. In Endean, Braidwood J.A., giving judgment for the Court, held in paragraph 7 that the test for determining the issue raised by section 4(1)(a) of our Class Proceedings Act is that applicable to Rule 19(24)(a) as defined in Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959 at 980. As Rule 19(27) expressly excludes evidence on an application under Rule 19(24)(a), it would seem to follow that the court's intention or assumption was that no evidence would be admitted under section 4(1)(a).
     
63. In this case, the judge gave no effect to the evidence, and before us no reference was made to the matter. I have raised it in the hope that the question will not be overlooked in future cases.

REFLECTIONS

64. Over the last several months, while struggling at excessive length to make sense of the mass of jurisprudence touching on the subject of pure economic loss, I have at times thought back to my first contact with that issue, which was 50 years ago when I was in my first year of law school.
     
65. The subject could then be more than adequately dealt with by reading one case: Candler v. Crane, Christmas & Co., [1951] 2 K.B. 164, [1951] 1 All E.R. 426, a decision of the English Court of Appeal (coram: Cohen, Asquith and Denning L.J.J.). Candler had invested in a company for which Crane, Christmas & Co. were accountants. He brought action to recover against them on the ground that they had been careless in preparing the accounts with the result that false statements in them induced him to invest in the company and lose his investment. The trial judge found the accountants to have been extremely careless and to have thereby caused loss to the plaintiff, but dismissed the action on the ground that no duty of care was owed to him. That decision was based on the long-established rule that there was no liability in negligence for economic loss.
     
66. Denning L.J., who gave the first judgment, delivered a lengthy, learned and eloquent plea for a more "enlightened" view which would allow recovery in that case. At p. 178, he said:
    
    If you read the great cases ... you will find that in each of them the judges were divided in opinion. On the one side there were the timorous souls who were fearful of allowing a new cause of action. On the other side there were the bold spirits who were ready to allow it if justice so required.
    
67. Cohen and Asquith L.L.J. gave separate reasons for upholding the trial decision. Somewhat unusually, Cohen L.J. quoted at length from an American authority which had been drawn to his attention by Professor Goodhart, Ultramares Corporation v. Touche, 255 N.Y. Rep. 170 (1931). That was also an action brought against accountants for loss allegedly caused by their negligent preparation of a balance sheet. The learning and eloquence in the reasons of Cardozo C.J. was equal to that of Denning L.J. – we neophytes in the law found it a much better read than most of the authorities with which we were required to grapple. The phrase "liability in an indeterminate amount for an indeterminate time to an indeterminate class" has been quoted time out of mind but, to demonstrate that the concerns of Cardozo C.J. were not confined to that phrase, I think it is worth setting out the passage in which it appears. At pp. 203-204 of Candler, Cardozo C.J. is quoted as saying:
    

    We are brought to the question of duty, its origin and measure. The defendants owed to their employer a duty imposed by law to make their certificate without fraud, and a duty growing out of contract to make it with the care and caution proper to their calling. Fraud includes the pretence of knowledge when knowledge there is none. To creditors and investors to whom the employer exhibited the certificate, the defendants owed a like duty to make it without fraud, since there was notice in the circumstances of its making that the employer did not intend to keep it to himself. . . .
    
    A different question develops when we ask whether they owed a duty to these to make it without negligence. If liability for negligence exists, a thoughtless slip or blunder, the failure to detect a theft or forgery beneath the cover of deceptive entries, may expose accountants to a liability in an indeterminate amount for an indeterminate time to an indeterminate class. The hazards of a business conducted on these terms are so extreme as to enkindle doubt whether a flaw may not exist in the implication of a duty that exposes to these consequences. ... The expression of an opinion is to be subject to a warranty implied by law. What, then, is the warranty, as yet unformulated, to be? Is it merely that the opinion is honestly conceived and that the preliminary inquiry has been honestly pursued, that a halt has not been made without a genuine belief that the search has been reasonably adequate to bring disclosure of the truth? Or does it go farther and involve the assumption of a liability for any blunder or inattention that could fairly be spoken of as negligence if the controversy were one between accountant and employer for breach of a contract to render services for pay?
    
    The assault upon the citadel of privity is proceeding in these days apace. How far the inroads shall extend is now a favourite subject of juridical discussion. . . .

68. Asquith L.J., who delivered somewhat less colourful reasons, concluded his reasons by saying, at p. 195:
    

    I am not concerned with defending the existing state of the law or contending that it is strictly logical – it clearly is not. I am merely recording what I think it is.
    
    If this relegates me to the company of "timorous souls", I must face that consequence with such fortitude as I can command.

69. That remained the law for something over a decade until the five law lords who sat on Hedley Byrne delivered their speeches, consisting essentially of obiter, which led to the Denning view being adopted. Having regard to the manifest and multitudinous difficulties which the courts have experienced in applying that enlightened approach, I cannot resist paraphrasing, however awkwardly, the words of Mr. Churchill in qualifying his praise of the modesty of Mr. Attlee. It is now apparent that the timorous souls had a great deal to be timorous about.

CONCLUSION

70. I would dismiss this appeal.
    "The Honourable Mr. Justice Esson"
    
    I agree:
    "The Honourable Chief Justice Finch"
    
    I agree:
    "The Honourable Madam Justice Newbury"