This case involved an appeal from an order of the trial division of the Federal Court (2000 F.C.J. 1885) allowing an appeal from an order of a Prothonotary (reported at (1999) 175 F.T.R. 182). The alleged facts, as taken from several of the judgements, are quite complicated as the case arose out of what is commonly called a “licence swap” transaction. The aggrieved party in this case was the owner of an 86-foot fishing vessel with a category “T” trawl licence which had both a good history of landings and a high priority position in the Hake Consortium selection process (the “Owner”). In 1993 the Owner entered into an agreement to purchase a category “A” salmon licence from a fish processor for placement upon its vessel. An “A” licence was then transferred to the Owner’s vessel by way of a transaction whereby a married set of “A” and “T” licences belonging to the fish processor were transferred to the Owner’s vessel and the Owner’s single “T” licence was transferred back to the vessel from which the married licences had come. The result was a classic “swap” transaction.
It was alleged by the Owner, that prior to the swap it was known to all parties that a quota system would likely be introduced in the ground fish fishery and that catch history would be a factor in calculating individual vessel quotas. Subsequently, when the individual quota fishery was instituted into the ground fish fishery in 1997/8, the quota allocation was based 70 per cent upon the catch history of the vessel. Since the swapped “T” licence obtained from the fish processor did not have as good a landings record as the original “T” licence, the Owner lost a considerable amount of quota. In addition, it lost its priority on the Hake Consortium selection process.
It was alleged by the fish processor that prior to the swap, it had discussed the proposed transaction with the director of licensing for D.F.O., and had been given a verbal assurance that the transfers would be affected so that the catch histories of the vessels would stay with the vessels and not be transferred with the licences. Unfortunately for the Owner and fish processor, the director of licensing had died and there was no written record of the alleged agreement with him.
To make matters worse, the vessel to which the original “T” licence was transferred, was subsequently sold by the fish processor to a third party who claims to have specifically purchased the vessel because of the high landings associated with the swapped licence. It claimed to have had no knowledge of the alleged agreement with D.F.O. and opposed the enforcement of any such agreement.
The plaintiff originally commenced legal proceedings by way of a judicial review application under Federal Court Rule 300 seeking both mandamus and declaratory relief against the Crown. Upon the application of the third party purchaser, the court later ordered that the application be converted to an action so as to allow for full discovery and viva voce (oral) evidence. However, when converting the proceeding to an action, the Owner also claimed for damages in addition to the declaratory relief originally claimed.
During a summary trial application before Rouleau J., the third party purchaser was then successful in having the portion of the prayer for relief struck which claimed relief above and beyond what was originally contained in the (originating) application under Rule 300. In response, the Owner then commenced an action in Federal Court claiming both the declaratory relief and damages which had been claimed in the previous action as converted from an (originating) application. This action was against the Crown, the fish processor and the third party purchaser. An identical action was also commenced in the Supreme Court of British Columbia. In response, the Crown brought an application in Federal Court to strike out the Owners statement of claim pursuant to Rule 221(1) as disclosing no reasonable cause of action.
At first instance before Prothonotary Hargrave, the Court denied the motion to strike, provided the plaintiff amended its statement of claim to include grounds upon which the “a minister’s discretionary decision might be challenged, grounds which might include malfeasance, or grounds similar to those set out in Thomson v. MCI . . . or in Williams v. Canada . . .”
Upon Appeal to the trial division of the Federal Court (McKeown J.), the decision of the Prothonotary was reversed by striking out the statement of claim in the Federal Court action.
Decision of the Federal Court of Appeal
Upon further appeal to the Federal Court of Appeal by the Owner, the court of appeal in a decision written by Decarry J.A., allowed the statement of claim to be struck, but gave the Owner leave to file a re-amended statement of claim alleging negligent misrepresentation against the Crown. In doing so, the court applied the test set out in Hunt v. Carey Canada Inc,  S.C.R. 959 as modified as it relates to parallel Federal Court proceedings in the case of Sweet v. Canada,  F.C.J. No. 140 (F.C.A.). The court also rejected the assessments of the case provided by both the Prothonotary (malfeasance) and the Motions Judge (illegality). The appeal court was of view that the motions judge construed the decision of Comeau’s Sea Foods Ltd. v. Canada,  2 F.C. 467 to narrowly in rejecting negligent misrepresentation as a possible cause of action because of the availability of an administrative law remedy to the plaintiff.In this regard, the court said:
It is premature, at this early stage of the proceedings, to conclude that Radil has no chance, with appropriate amendments, to demonstrate that the alleged negligent misrepresentation was part of an operational, as opposed to policy decision, that there was a prima facie duty of care and that the scope of the duty was not, in the circumstances, to be negatived or limited. Radil has a steep hill to climb, but it cannot, at this state, be said that it cannot be done. (para. 37)
Editor’s note: With respect to the issue of negligence, see the dissent of the Federal Court of Appeal in Comeau’s Sea Foods v. Canada where Linden J. argues for a remedy against the Minister of Fisheries based upon the law of negligence as set out in Anns v. Merton London Borough Council. See also  76 CBR 253, where the author argues that in Comeau, the Supreme Court of Canada missed an opportunity to clarify the law regarding negligence of public officials. Given the dissenting opinion of Linden J., I would agree with the Federal Court of Appeal that the trial level appeal court was over zealous to the extent that it held that it was plain and obvious that a claim base upon negligence must fail.
See also the digest of this case under the heading, “Practise,Admiralty jurisdiction over fisheries matters”
Postscript: See also 2002 FCT 1237 where the Crown brings a partially successful motion on the grounds that the amended statement of claim exceeds what is allowed by the order of the Court of Appeal. See also 2003 FCT 79 where Prothonotary Hargrave fore the most part denies a Crown application to strike out the amended statement of claim.