Puddister Trading Corporation Ltd. v. Canada

In Fish Cases, Judicial Review/Crown Liability on (Updated )

This case involved an application by a licence holder for compensation arising out of the closure of the offshore seal fishery of Newfoundland. While the plaintiff was not successful in its primary objective, of obtaining compensation for the closure of the fishery, it obtained limited success in obtaining damages against the Department of Fisheries and Oceans (D.F.O.) for the failure of bureaucrats to follow the instructions of cabinet. The details are set out below.

As a result of protests by Green peace and other environmental organizations in the 1970’s and early 1980’s, the European Economic Community banned the importation of whitecoat and blueback seal pelts into Europe in 1983. As a result of this ban, in 1984 and 1985 no offshore seal hunters participated in the fishery. However, they did continue to renew their licences in the hopes that market conditions would improve. In 1986, a Royal Commission on the seal fishery released a report that recommended permanent closure of the fishery for new born seals and compensation for those persons affected by the closure. In 1987, prior to any action being taken to implement this report, the Plaintiff, who owned several licensed offshore sealing vessels, began fishing again. This renewed fishing caused more protests from animal rights groups along with a "thinly veiled threat" from one such group to release a video that would adversely affect the East Coast cod fishery. These renewed protests in turn caused the Minister of Fisheries, Thomas Siddon, to permanently close the offshore fishery in 1988.

Shortly after the closure of the fishery, the Minister’s delegate, John Crosbie, announced that the Government would appoint someone to look into the issue of compensation for persons displaced by the closure. At the time, the Minister and his delegate, were both in favour of compensation, while the bureaucrats including the Deputy Minister and the Atlantic Seal co-ordinator were against it. Consequently, because of the difference of opinion between the Minister and his bureaucrats, Cabinet decided to order and fund an independent study by John Gover into the issues surrounding compensation. John Crosbie then encouraged the offshore licence holders to get together and retain a consultant to assist them in presenting a case for compensation to John Gover. The Plaintiff and several other licence holders then retained independent consultants at a cost to them of roughly $28,000 dollars.

Unfortunately for the licence holders, the Minister did not occupy himself with the organization and implementation of the study. Instead, this task was left to the Atlantic Sealing Co-ordinator under the supervision of the Deputy Minister. Judge Simpson’s critical comments in this regard are worth quoting at length:

In my opinion, the Minister erred when he trusted the implementation of the Study to his Department’s officials without supervision by his personal staff when he knew that those officials opposed compensation. What happened was that Comeau and others did not ultimately arrange the broad independent study that the Minister and Crosbie had foreseen when the Study received Cabinet approval as part of the Sealing Policy, and which was reflected in the Draft Terms of Reference. Instead, the bureaucrats turned the Study into a narrow accounting exercise, compromised its independence and qualified it by introducing a requirement for ministerial or other undefined "official" approval prior to Phase Two. [emphasis added]

Ultimately D.F.O. never ordered the second phase of the study and the holders of offshore licences were never compensated for their losses arising from the closure of the fishery. The Plaintiff, Puddister Trading Co., then commenced its action claiming damages for breach of contract. Although the reasons for judgement are not entirely clear, it appears that the Plaintiff argued that the Government had made a binding offer to pay reasonable compensation to any fishers who participated in its study. It was argued that by participating in the study, the Plaintiff accepted this offer. It would also appear that the Plaintiff argued that the money it spent on consultants to provide the information for the study constituted the required consideration for the contract.

The court rejected the Plaintiff’s claim based upon the objective theory of contract law. Subjectively, the Plaintiff honestly believed that by providing funding for the study, D.F.O. had made a commitment to pay compensation, however, the court found that there was no contract because a reasonable person in the Plaintiff’s position would not have believed D.F.O. had made such a commitment simply by agreeing to study the issue. The court noted that upon the closure of a fishery D.F.O. was under no legal obligation to pay compensation to displaced fishers. Since the claim in contract failed, and since there was no legal obligation to compensate fishers for the closure, the Plaintiffs claim for compensation failed.

All was not lost, however, for the court concluded that D.F.O. had breached an obligation to perform a full study. Since it failed to do so, it was in breach of contract. Accordingly, damages were awarded to the Plaintiff to compensate it for the money it paid for consultants to participate in the study. In addition, the Plaintiff was awarded the costs of its action.

Counsel for the Crown: John J. Ashley and Glen Roebothan

Counsel for the Plaintiff: Cabot Marian and Peter O’Flaherty