New Brunswick v. Rothmans Inc. et al., (2010) 357 N.B.R.(2d) 160 (CA)

• Judge: Drapeau, C.J.N.B., Deschênes and Robertson, JJ.A.
• Court: Court of Appeal (New Brunswick)
• Case Date: January 21, 2010
• Jurisdiction: New Brunswick
• Citations: (2010), 357 N.B.R.(2d) 160 (CA);2010 NBCA 35

N.B. v. Rothmans Inc. (2010), 357 N.B.R.(2d) 160 (CA);

    357 R.N.-B.(2e) 160; 923 A.P.R. 160

MLB headnote and full text

Sommaire et texte intégral

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

.........................

Temp. Cite: [2010] N.B.R.(2d) TBEd. MY.028

Renvoi temp.: [2010] N.B.R.(2d) TBEd. MY.028

Imperial Tobacco Canada Limited, Rothmans Inc., Rothmans, Benson & Hedges Inc., Altria Group, Inc., Philip Morris U.S.A. Inc. and Philip Morris International Inc. (appellants) v. Her Majesty the Queen in Right of the Province of New Brunswick (respondent)

(93-09-CA; 97-09-CA; 2010 NBCA 35)

Indexed As: New Brunswick v. Rothmans Inc. et al.

Répertorié: New Brunswick v. Rothmans Inc. et al.

New Brunswick Court of Appeal

Drapeau, C.J.N.B., Deschênes and Robertson, JJ.A.

January 21, 2010.

Summary:

Résumé:

New Brunswick commenced an action under the Tobacco Damages and Health Care Costs Recovery Act for the recovery of tobacco-related health care costs against a number of tobacco product manufacturers. New Brunswick filed a motion for case management, requesting a procedural timetable up to the setting down for trial of the action and an order providing for the electronic discovery of documents. The defendants who had attorned to the court's jurisdiction did not oppose case management. However, the defendants filed a motion (the conflict of interest motion) challenging the constitutionality, legality and ethical integrity of an alleged contingency fee agreement (CFA) entered into by New Brunswick with a consortium of lawyers hired to conduct the action. The defendants asserted that this raised a critical threshold question that had to be determined before any other aspect of the litigation.

The New Brunswick Court of Queen's Bench, Trial Division, in a decision reported at (2009), 340 N.B.R.(2d) 313; 871 A.P.R. 313; 2009 NBQB 9, adjourned New Brunswick's motion pending the court's decision on the conflict of interest motion.

The New Brunswick Court of Queen's Bench, Trial Division, in a decision reported at (2009), 352 N.B.R.(2d) 226; 907 A.P.R. 226; 2009 NBQB 198, dismissed the conflict of interest motion. The defendants sought leave to appeal on four issues: a. whether the CFA was void under the Law Society Act; b. whether government counsel bringing claims under public laws had to act impartially in the interests of justice; c. whether outside counsel for the government were subject to the same ethical standards as internal counsel; and d. whether expenditures under the CFA lacked constitutional and legislative authority.

The New Brunswick Court of Appeal, per Quigg, J.A., in a decision reported at [2009] N.B.R.(2d) Uned. 83, granted leave to appeal on issue d. (whether expenditures under the CFA lacked constitutional and legislative authority) only. The defendants sought leave to appeal.

The Supreme Court of Canada, in a decision reported at (2010), 405 N.R. 392, denied leave to appeal. The appeal on issue d. proceeded.

The New Brunswick Court of Appeal dismissed the appeal.

Editor's Note: There are numerous reported decisions in this action.

Barristers and Solicitors - Topic 3133

Compensation - Agreements - Contingent fees - Invalid agreements - New Brunswick commenced an action under the Tobacco Damages and Health Care Costs Recovery Act for the recovery of tobacco-related health care costs against a number of tobacco product manufacturers - The conduct of the action was contracted to a consortium of U.S., Ontario and New Brunswick lawyers under a contingency fee agreement (CFA) - The defendants sought a declaration that the CFA was void and that the consortium should be removed because, inter alia, the CFA breached s. 126 of the Constitution Act, 1867 and s. 23 of the Financial Administration Act (FAA) and, as such, was ultra vires the Attorney General - The trial court dismissed the motion - The New Brunswick Court of Appeal dismissed the defendants' appeal - The defendants' argument was that the CFA prevented the contingent fee and any litigation-associated outlays from being paid into the province's Consolidated Fund, contravening the letter and spirit of certain provisions of the FAA and the Constitution Act, 1867, which were designed to ensure control of the "public purse" by the legislature - The defendants' interpretation of "Consolidated Fund" was overly narrow - That expression encompassed far more than the funds that were deposited in the province's bank accounts - The FAA defined "Consolidated Fund" as the "aggregate of all public moneys that are on hand and on deposit to the credit of the Province" - If and when settlement funds were received by the consortium, those funds constituted public moneys "on hand" and formed part of the Consolidated Fund - Once those funds were deposited in a trust account for New Brunswick's benefit, whether a lawyer's trust account or a discrete trust account, the funds were "on deposit to the credit of the Province" and continued to form part of the Consolidated Fund - The motion judge correctly concluded that the CFA contravened neither s. 23 of the FAA nor s. 126 of the Constitution Act, 1867 - See paragraphs 17 to 23.

Barristers and Solicitors - Topic 3133

Compensation - Agreements - Contingent fees - Invalid agreements - New Brunswick commenced an action under the Tobacco Damages and Health Care Costs Recovery Act for the recovery of tobacco-related health care costs against a number of tobacco product manufacturers - The conduct of the action was contracted to a consortium of U.S., Ontario and New Brunswick lawyers under a contingency fee agreement (CFA) - The defendants sought a declaration that the CFA was void and that the consortium should be removed because, inter alia, the CFA breached the Constitution Act, 1867 and the Financial Administration Act (FAA) and, as such, was ultra vires the Attorney General - The trial court dismissed the motion, rejecting, inter alia, the argument that s. 61 of the FAA had been contravened because the CFA involved a transfer of property of the province to the consortium - The New Brunswick Court of Appeal dismissed the defendants' appeal - The defendants' argument was that the CFA assigned a portion of the anticipated proceeds of the action to the consortium, creating an immediate and existing equitable property right - However, the CFA provided, through the deemed term specified in s. 38(2) of the FAA, that no payment under the CFA was to be made without prior appropriation from the legislature - This occurred only once, after the consortium submitted its account in accordance with the CFA - Prior to that appropriation, no legal entitlement to payment arose - The cumulative effect of the CFA's terms, both actual and deemed, was to exclude any execution-attendant contractual right to payment of a portion of the anticipated proceeds of the action - The absence of any such right stripped the argument based on s. 61 of the FAA of whatever semblance of seriousness it otherwise might have had - See paragraphs 24 to 30.

Contracts - Topic 6531

Illegal contracts - Violations of statute law - Statutes - General - [See both Barristers and Solicitors - Topic 3133 ].

Crown - Topic 1009

Contracts with Crown - General principles - Financial approval (incl. appropriation of funds) - [See second Barristers and Solicitors - Topic 3133 ].

Avocats et notaires - Cote 3133

Rémunération - Accords d'honoraires conditionnels - Accords invalides - [Voir Barristers and Solicitors - Topic 3133 ].

Contrats - Cote 6531

Contrats illégaux - Infractions à la loi - Lois - Généralités - [Voir Contracts - Topic 6531 ].

Couronne - Cote 1009

Contrats avec la Couronne - Principes généraux - Approbation financière (y compris crédits budgétaires) - [Voir Crown - Topic 1009 ].

Words and Phrases

Consolidated fund - The New Brunswick Court of Appeal considered the meaning of the phrase "consolidated fund" as found in s. 1(1) of the Financial Administration Act, R.S.N.B. 1973, c. F-11 - See paragraph 21.

Cases Noticed:

Hogan v. Hello et al. (1962), 1 N.B.R.(2d) 306 (Q.B.), refd to. [para. 1].

Mealey v. Godin et al. (1999), 221 N.B.R.(2d) 372; 567 A.P.R. 372 (C.A.), refd to. [para. 1].

Rizzo & Rizzo Shoes Ltd. (Bankrupt), Re, [1998] 1 S.C.R. 27; 221 N.R. 241; 106 O.A.C. 1, refd to. [para. 22].

Coronation Insurance Co. et al. v. Florence et al. (1992), 19 B.C.A.C. 90; 34 W.A.C. 90; 73 B.C.L.R.(2d) 239 (C.A.), refd to. [para. 24].

Coronation Insurance Co. v. Florence, [1994] S.C.J. No. 116, refd to. [para. 24].

Durakovic v. Durakovic, [1994] B.C.T.C. Uned. H12 (S.C.), refd to. [para. 24].

Graham v. Canada (1997), 151 D.L.R.(4th) 506 (T.C.C.), refd to. [para. 24].

Commissioner of Internal Revenue v. Banks (2005), 543 U.S. 426 (Sup. Ct.), refd to. [para. 24].

Rhode Island v. Lead Industries Association Inc. (2008), 951 A.2d 428 (R.I. Sup. Ct.), refd to. [para. 24].

Pharmacie Acadienne de Beresford ltée v. Beresford Shopping Centre Ltd./ltée et al. (2008), 328 N.B.R.(2d) 205; 841 A.P.R. 205; 2008 NBCA 12, refd to. [para. 27].

Statutes Noticed:

Financial Administration Act, R.S.N.B. 1973, c. F-11, sect. 1(1) [para. 21].

Authors and Works Noticed:

Driedger, Elmer A., Construction of Statutes (1st Ed. 1974), p. 67 [para. 22].

Counsel:

Avocats:

Thomas G. O'Neil, Q.C., Deborah Glendinning and Mahmud Jamal, for the appellant, Imperial Tobacco Canada Limited;

David T. Hashey, Q.C., and Charles D. Whelly, Q.C., for the appellant, Rothmans Inc. and Rothmans, Benson & Hedges Inc.;

Rodney J. Gillis, Q.C., for the appellant, Philip Morris U.S.A. Inc. and Altria Group Inc.;

G. Robert Basque, Q.C., for the appellant, Philip Morris International Inc.;

Philippe J. Eddie, Q.C., and Robyn Ryan Bell, for the respondent.

This appeal was heard and judgment was rendered on January 21, 2010, by Drapeau, C.J.N.B., Deschênes and Robertson, JJ.A., of the New Brunswick Court of Appeal. On May 13, 2010, Drapeau, C.J.N.B., delivered the following written reasons for judgment for the court in both official languages.