The Alberta Court of Appeal (“CA”) recently heard the case of Rieger v Plains Midstream Canada ULC, an appeal from the certification of a class proceeding granted to respondents Suzanne Rieger and Darin Rieger (“Respondents”) against Plains Midstream ULC (“Plains”) for a claim of pure economic loss by the class members in connection with an oil spill. The oil spill occurred when light sour crude oil was released from a pipeline owned and operated by Plains into the Red Deer River and migrated downstream to Gleniffer Lake, resulting in the closure of the river and lake for recreational use.

The Respondents in this case did not have any other cause of action but pure economic loss: their claim related entirely to the loss of use of Gleniffer Lake and the Red Deer River. The Respondents jointly owned two lots located at Gleniffer Lake that they were in the process of attempting to sell, but their properties did not abut the lake. Rather, the Respondents claimed that the value they hoped to achieve for the lots was diminished because of the oil spill. The Respondents did not plead any physical damage to their property as a result of the spill. 

Certification of class proceeding in lower court

The certification of the class proceeding by the chambers judge was heard in February 2020 before the Supreme Court of Canada (“SCC”) released its decision in the case of Maple Leaf Foods, which we previously discussed on the blog here. One of the main issues for the certification hearing in the Court of King’s Bench was whether Plains owed a duty of care to the Respondents, with Plains arguing that there was no precedent for imposing a duty of care in favour of landowners claiming pure economic loss due to environmental damage to public or other third-party lands. 

Notwithstanding the chambers judge acknowledging that the Respondents would have to overcome the challenge of a claim for relational economic loss in negligence, the chambers judge was satisfied their cause of action was not hopeless, the pleadings disclosed a cause of action within the meaning of section 5(1)(a) of the Class Proceedings Act (the “Act”), and certified the action as a class proceeding with Ms. Rieger as the representative. 

CA set aside certification order

In deciding the appeal, the CA ultimately allowed the appeal and set aside the certification of the class proceeding by the chambers judge.  The CA observed that the chambers judge that certified the proceeding did not have the benefit of the SCC’s decision in Maple Leaf Foods, which clarified the law regarding sustainable claims for pure economic loss. Applying Maple Leaf Foods, the CA held that the classes that were certified should not have been certified due to, among other reasons:

• The classes’ cause of action against Plains for pure economic loss was hopeless because the claims did not fit within a pre-existing category (negligent misrepresentation in the performance of services, negligent supply of shoddy goods or structures, or relational economic loss) and Plains and class members did not otherwise have a sufficient “proximate” relationship because Plains had not interfered with a “legally cognizable right”. Therefore, the requirements of section 5 of the Act were not met;
• The chamber judge’s decision regarding the size of the class was to a large extent informed by his earlier findings of the then-uncertain state of the law for pure economic loss; and
• The class definition certified by the chambers judge was too large and arbitrary to be certified. 

CA application of Maple Leaf Foods

This decision is, to our knowledge, the first application of Maple Leaf Foods by the CA in Alberta. As we previously discussed on the blog, Maple Leaf Foods is an important SCC case because the Supreme Court confirmed that there is no general right in tort law protecting against pure economic loss in negligence. Rather, the current recognized categories of pure economic loss are: negligent misrepresentation or performance of a service, negligent supply of shoddy goods or structures, and relational economic loss. Plaintiffs may also succeed in a claim for pure economic loss if they can establish a “proximate” relationship based on the “Anns test”: the test for duty of care set out in Anns v Merton London Borough Council, [1977] UKHL 4.

The CA reiterated the SCC’s emphasis that the issue of proximity is the controlling concept for these types of claims in negligence, and applied Maple Leaf Foods in determining that the Respondents’ loss in this case could not be recovered in tort law as there was insufficient proximity between the Respondents and Plains. Accordingly, the CA concluded that the Respondents’ claim for pure economic loss was “hopeless” as the Respondents could not point to an established category of proximity, nor could they show that Plains otherwise owed them a duty of care. 

The CA also made clear that while certification does not require a prima facie successful case, claims that are hopeless should not be certified.

Claims of pure economic loss in negligence 

This case makes abundantly clear that class proceeding actions for claims of pure economic loss will be strictly analyzed by courts in reference to the categories of proximity outlined by the SCC in Maple Leaf Foods. Pure economic loss claims that advance arguments for a novel relationship of proximity present a high threshold for a plaintiff (or class of plaintiffs) to meet, as they must establish a sufficiently close and direct relationship with the defendant. For such a claim to succeed, a plaintiff must show the loss of a “cognizable” right – the loss of use of a public space by the Respondents was not a “cognizable” right.

Although the bar for certification is low, hopeless claims will not be certified. Additionally, although class size alone is not a reason to deny certification, a large class size makes it far more likely that the class is over-inclusive and contains members who have no tenable claims against the defendant. 

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