Evaluating the Efficacy of Health Care Cost Recovery Litigation in Canada

(uniquement en anglais)

par Ciaran Moloney

ABSTRACT

Millions of individuals have died or developed serious disease as a direct result of using tobacco products. In a rationed healthcare system like Canada’s, where the provision of healthcare is through a single-payer and universal system, the externalities of tobacco companies on taxpayers and the stability of the healthcare system is significant. In response to the significant burden that tobacco companies have placed on the healthcare system, Canadian provinces have attempted to recover health care costs by enacting legislation that recognizes the negligence and liability of tobacco companies’, and have taken action against the companies in court. In March, 2019, Imperial, Rothmans, Benson & Hedges Inc. and JTI-Macdonald Corp., (the Tobacco Companies), were granted creditor protection in Ontario’s Superior Court through the Companies’ Creditors Arrangement Act (CCAA). In granting CCAA protection, the Court suspended all litigation against the tobacco companies, and barred new claims against them. The purpose of such protection was to allow for the negotiation of a global settlement of existing claims against the tobacco industry in Canada. The CCAA stay has been extended several times and is, most recently, set to expire on September 29, 2023. Since the original CCAA stay granted in 2019, Canadian Provinces and other Claimants have been participating in Court-supervised mediation, with the goal of reaching a global settlement agreement. This paper considers the case of tobacco to evaluate the efficacy of health care cost recovery litigation within the context of Canada’s publicly funded and highly regulated health care system. In doing so, it will argue that the mounting pressures on Canada’s finite healthcare resources will incentivize provinces to consider more expansive uses of litigation against large multinational firms whose business activities create negative externalities on end users.

INTRODUCTION

Long-term tobacco use is the leading cause of preventable death in Canada.¹ In inflicting serious illnesses on their customers, the business activities of tobacco companies have also taken a significant toll on healthcare systems.² In a rationed healthcare system like Canada’s, where the provision of healthcare is through a single-payer and universal system, the effects of tobacco companies on taxpayers and the stability of the healthcare system is even more pronounced.³ In response to the significant burden that tobacco companies have placed on the healthcare system, Canadian provinces have attempted to recover health care costs by enacting legislation that creates a novel cause of action specifically against tobacco companies.⁴ This paper will consider both the effectiveness and the legal implications of tobacco health care cost recovery litigation within the context of Canada’s publicly funded and highly regulated health care system. The mounting pressures on Canada’s finite healthcare resources will seemingly incentivize provinces to consider more expansive uses of litigation against industries whose business activities create negative health outcomes. However, such expansion could signal legal fungibility and present Canada as a country where laws can be retroactively upended to penalize otherwise-legitimate industry activity. Such a trend of expanded health care recovery litigation would have the additional effects of undermining the no-fault and universal principles of Canada’s health system, altering the stable regulatory and business landscape needed to fund public programs like healthcare, and would fail to bring about improved health outcomes.

UNITED STATES MASTER SETTLEMENT AGREEMENT

As the health consequences of tobacco use became more widely known in the 1950’s, individual and class action lawsuits began against tobacco companies in the United States. Decades of attempted litigation was largely unsuccessful as well-leveraged tobacco companies mounted costly and timely legal defenses against underfunded private citizens and anti-tobacco groups.⁵ Starting with Mississippi in the 1990s, state governments began to file claims against tobacco companies to recover the Medicaid costs of treating tobacco-related illnesses.⁶ By 1998 all U.S. states had initiated lawsuits. While litigation against the tobacco companies was pending, the state attorney generals began negotiating in private with tobacco companies. The result of these confidential negotiations was the Master-Settlement Agreement (MSA). Forty-six U.S. states signed onto the MSA in 1998, resulting in the largest civil litigation settlement in American history.⁷ The MSA awarded more than $200 billion and was structured so that states would receive damage payments in perpetuity.⁸ The tobacco industry was willing to pay a high price for legal finality. The merits of the government’s claims regarding industry wrongdoing were never fully challenged in court. Instead, state and local governments mounted mass-tort litigation pressure against the tobacco industry, forcing companies to the bargaining table.⁹ Notably, the MSA failed to include Americans suffering from smoking-related illnesses and only state governments were represented in its settlement negotiations.¹⁰

Four states (Mississippi, Florida, Texas and Minnesota) negotiated settlements prior to the MSA and are therefore not party to the agreement. Florida is of particular interest to this paper as its state legislation served as the basis for British Columbia’s  Health Care Costs Recovery Act, the first tobacco health cost recovery statute in Canada.¹¹ Florida’s Medicaid Third-Party Liability Act expanded the state’s existing broad (and not tobacco-specific) subrogation power that had existed since 1978.¹² Under Florida's Medicaid Third Party Liability Act, the State Health Department has a cause of action against a third party to recover the full amount of medical assistance provided when the Medicaid program has paid for care.¹³ Florida’s Statute took the concept of subrogation further by vitiating certain defences that tobacco companies could use to absolve their liability, allowing the state to bring suit without having to identify each insured person, and removing limitation periods.¹⁴ The legislation also allowed for the State to introduce statistical and epidemiological evidence to prove causation between tobacco products and aggregate health costs incurred by the state to treat tobacco-related illnesses, without the need to apportion costs incurred to specific patients or insured persons.¹⁵ Florida provided for a theory of market share liability to impose damage payments against companies in respect of their relative size in the tobacco market.¹⁶ Most of these features have now been incorporated into Canada’s legislative framework for tobacco health cost recovery.¹⁷

HEALTH COST RECOVERY LEGISLATION IN CANADA

Canadian common law has long recognized a right of subrogation.¹⁸ Subrogation prevents unjust enrichment by allowing the subrogee to recoup monies paid to the subrogor from a third-party.¹⁹ For example, Canadian insurance contracts provide that – after compensating an insured person for a loss – the insurance company may step into the insured person’s shoes and sue the party that caused the loss.²⁰ Provinces such as Ontario employ a dedicated unit of the Ministry of Health to pursue subrogation claims when insured persons receive public health services as a result of certain third-parties wrongdoings. Ontario’s health insurance plan recovers about $15 million annually through the Ministry’s subrogation activities.²¹ The tobacco health care cost recovery legislation in force across Canada significantly departs from the common law right of subrogation. Provinces are no longer limited to “stepping into the shoes” of specifically identified injured parties. Through legislation, an entirely new and direct cause of action is created which postulates that a tobacco-related illness inflicted upon an insured group of persons creates an independent actionable harm against the province. The legislative provisions go further to vitiate limitation periods for bringing a claim against the companies and abrogate affirmative defenses such as assumption of risk or comparative fault.²² Provinces are not burdened to link the individual insured persons illness to tobacco use, and can rely instead on generalized statistical models and epidemiological data.²³

In 1998, British Columbia became the first Canadian province to introduce tobacco health cost recovery legislation.²⁴ B.C.’s Tobacco Damages and Health Care Costs Recovery Act used Florida’s Medicaid Third Party Liability Act as a blueprint.²⁵ The constitutionality of B.C.’s new law was swiftly challenged in court by a consortium of tobacco companies. The companies argued that the legislation was executive interference with judicial independence to benefit the public treasury, and wrongfully imposed a retroactive penalty on otherwise legal business activities in a manner offensive to the rule of law. B.C.’s Supreme Court rejected these arguments, but ultimately struck down the legislation for its extraterritorial character.²⁶ Specifically, the Court found that the legislation was not limited enough in scope to British Columbia, and allowed the province to ensnare the national and multinational assets of the tobacco companies beyond the province’s constitutional authority under Section 92 of the Constitution Act.²⁷ B.C. revised the legislation and reintroduced a similar law in 2000.²⁸ This revised Tobacco Damages and Health Care Costs Recovery Act was upheld as constitutional by the Supreme Court of Canada in 2005.²⁹ Once the Supreme Court declared B.C.’s law constitutional, other Canadian provinces introduced nearly identical statutes.³⁰ Prince Edward Island (1988), Newfoundland (2001), Nova Scotia (2005), Manitoba (2006), Saskatchewan (2007), New Brunswick (2006), Alberta (2009), Ontario (2009), and Quebec (2009)  all have tobacco-specific health cost recovery legislation in force.³¹ The Territories have passed similar legislation, but it has not yet been proclaimed into force.³²

The Canadian tobacco health cost recovery legislation significantly alters traditional common law rules regarding causation, enterprise liability, and damage assessment.³³ It is an exemption to the rule that recovery in civil matters be predicated on the demonstration of both causation and damages.³⁴ It is distinct from subrogation or class proceedings. It is novel insofar as it allows the provinces to sue on aggregate basis for past health costs (as well as costs anticipated in the future), provided to an unspecified segment of the population, who have been treated for tobacco-related illnesses.³⁵ The legislation in-force across Canadian provinces does not require the Crown to identify a specific insured person or persons to demonstrate causation, or to prove that certain health care services were rendered to these specific persons. The legislation further allows for provincial governments to submit statistical research as evidence in their litigation.³⁶ The health costs that provinces can claim against tobacco manufacturers are broadly defined in the legislation as the total of province’s expenditure for health services provided to insured persons who have suffered from, or are at significant risk of suffering from, tobacco-related diseases.³⁷

CANADIAN LITIGATION TO DATE

Shortly after enacting their tobacco health cost recovery legislation British Columbia (2001), Alberta (2012), Saskatchewan (2012), Manitoba (2012), Ontario (2009), Quebec (2012), New Brunswick (2008), Nova Scotia (2015), Newfoundland and Labrador (2011), and PEI (2012) all commenced actions against tobacco companies for health care cost recovery claims.³⁸ Nearly $500 billion in damages are sought by provinces in their claims against tobacco companies.³⁹ This flurry of state-sponsored litigation against tobacco companies has been percolating through Canadian courts, with no substantial monies having yet been recuperated by the provinces. In March, 2019, Imperial Tobacco, Rothmans, Benson & Hedges Inc. and JTI-Macdonald Corp., (the tobacco companies), were granted creditor protection in Ontario’s Superior Court through the Companies’ Creditors Arrangement Act (CCAA).⁴⁰ In granting CCAA protection, the Court suspended all litigation against the tobacco companies, and temporarily barred any new claims against them. The purpose of such protection was to allow for the negotiation of a pan-Canadian settlement of existing claims against the tobacco industry in Canada.⁴¹

The CCAA stay has been extended several times and is now set to expire on September 29, 2023.⁴² Since the original CCAA stay was granted in 2019, Canadian Provinces and other claimants have been participating in Court-supervised mediation, with the goal of reaching a global settlement agreement.⁴³ The Honourable Warren Winkler is serving as the court-appointed mediator, overseeing the confidential negotiations among the tobacco companies and key public stakeholders with the goal of settling the claims against each of the respective companies.⁴⁴ A key feature of the CCAA protection and ongoing Court-supervised mediation is that the tobacco companies continue normal business operations under the supervision of a court-appointed Monitor. The Monitor reports to the Court on the companies’ financial information and business activity at regular intervals.⁴⁵ Throughout the mediation process, the tobacco companies are limited in shifting major assets or profits, incurring new liabilities, or paying out dividends.⁴⁶ Unlike America’s MSA, the Canadian-mandated negotiation has been Ordered to include counsel representing the interests of Canadians suffering from smoking-related illnesses and private actors who may have justiciable matters against tobacco companies.⁴⁷ In 2020, the Court appointed Wagners Law Firm (Halifax, NS) to act as representative counsel for all Canadians suffering from tobacco-related wrongs.⁴⁸ Notably, all of the tobacco companies have maintained normal business operations since settlement conversations began. Most companies have also altered their business activities by launching into the sale of heat-not-burn tobacco products (vaping products) in 2019.⁴⁹

The dismay of some with the amount of time it is taking to reach a settlement through the mediated process is perhaps evidenced by Ontario’s application to Superior Court to release the stay on proceedings.⁵⁰ Ontario argued that it should be allowed to proceed with its own cost recovery action against the tobacco companies, under the Province’s Tobacco Damages and Health Care Costs Recovery Act, on the condition that it would stay any judgment the province may receive, pending resolution of the global settlement.⁵¹ Alberta, Newfoundland, and Quebec supported Ontario’s application.⁵² Presumably, because they also are frustrated with the slow progress and believe they would be able to recover costs more expeditiously through their own province-specific litigation. The other provinces opposed the application.⁵³ Presumably, believing that the global settlement offers a better chance of health cost recovery than go-it-alone litigation. Ultimately, the Court rejected Ontario’s application, citing the preferential treatment it would afford the province in recovering tobacco-related damages, and the delays it would have on the pan-Canadian settlement negotiations.⁵⁴

ANALYSIS

Can the legal concept of health care cost litigation be rebuked when it makes such a powerful and logical case for cost recovery? It’s great sin is to face the fact that public health systems need more revenue, and then pry it away from some of the most unpopular actors in Canada’s corporate landscape. Everybody knows that tobacco companies in Canada have profited while their customers were hospitalized as a result of smoking-related illness.⁵⁵ This is a truth so axiomatic that you don't actually have to bother with the evidence in the court of public opinion. It is beyond rational dispute. If there is shaky legal ground underpinning the retroactive litigation scheme, it does not diminish the magisterial self-confidence of its political pronouncement.

I. Government Condonation, Double Taxation, and Relief Under Equity Law

At the heart of this global settlement is a sense among provinces that their health systems were mugged to pay for the sins of bad corporate actors. Tobacco companies profited millions while inflicting cancerous diseases, and the provinces ended up paying. That this is only part of the truth does not diminish the fervour with which it is declared. Tobacco companies did profit from selling a harmful product, with ruinous consequences on the health and lives of millions of people.⁵⁶ But tobacco companies in this country have not operated with impunity or wreckless abandon. Such a mischaracterization overlooks decades of government market-making regulation and aggressive excise taxation. By collecting taxes from the industry, governments have at least tacitly consented to the sale and widespread use of tobacco products.

Beyond regular commercial and corporate tax burdens imposed on tobacco manufacturers, Canada and the provinces both further impose additional ‘sin taxes’ (excise taxes) uniquely levied against tobacco products. The modern excise tax scheme is a far cry from legislators' historical treatment of tobacco use. When Christopher Columbus’ Crew were first introduced to smoking tobacco by Indigneous people, the Spanish responded with near decade-long prison terms for any found smoking in public. In the 1600’s Catholic Papal Bulls and edicts from King James threatened excommunication and lamented the immoral act of smoking.⁵⁷ As cigarettes became more prominent and accessible following the industrial revolution, governments seized upon the opportunity to collect revenues through the taxation of tobacco.⁵⁸ Today, it is inescapable that Canada enjoys a positive correlation between cigarette use and government tax revenue.⁵⁹ Federal excise duties are imposed on cigarettes and tobacco products under the federal Excise Act.⁶⁰ Provinces also impose their own tobacco taxes under their own enabling legislation.⁶¹ For instance, Ontario’s Tobacco Tax Act and Regulations imposes an excise tax of 18.475¢ on every single cigarette.⁶² Annually, government revenue from tobacco excise taxes totals nearly $9 billion. Approximately 40% flows to the federal government, with the remaining 60% going to the provinces.⁶³ This $9 billion that public treasuries collect from tobacco sales provides support to the argument that Canada has entered into an unwritten Faustian pact.

It is perhaps surprising then that tobacco’s attempts to implead the federal government in health cost recovery actions brought by the provinces has been rejected by the Supreme Court. The tobacco companies tried to argue that they were entitled to relief from the federal government on the grounds of negligent misrepresentation (i.e of the tobacco regulatory regime) and negligent design (i.e. of the mandated tobacco warning labels). The companies also sought indemnity under equity law for acting as agents under the instructions given by Canada’s regulatory regime for tobacco sales. In 2011, the Supreme Court dismissed the third-party claims, leaving the tobacco companies as the sole defendants in the multi-billion dollar litigation.⁶⁴ In part, the Supreme Court’s decision was based on the policy concern of extending mass tort liability to the federal government for industry regulation. The court further held that the provincial legislatures never contemplated ensnaring the federal government as a tortfeasor in cost recovery legislation, and that regulating and taxing the tobacco industry did not constitute an implicit promise to indemnify.⁶⁵

II. On the Rule of Law and the Fungibility of Commercial Certainty

The concept of tobacco cost recovery litigation engages theoretical legal debates about where the line should be drawn between one’s own responsibility to take care of their health, and society’s responsibility to ensure the public is shielded.⁶⁶ However, health care cost recovery doesn’t posit that the province is litigating on behalf of smokers. It posits that the province is litigating on behalf of taxpayers who bore the burden of publicly-insured persons receiving health care as the result of a tobacco-related wrong. The theory of unjust enrichment supports recovering monies from tobacco companies who were “unjustly enriched to the extent that taxpayers have had to pay these [health care] costs.”⁶⁷ Here, assumption of risk arguments made by the plaintiff tobacco companies are easily rebutted. It is not the province who chose to use harmful products, it was the individual insured person who benefits from a no-fault public insurance scheme.

At first glance, it appears that tobacco health cost recovery legislation condones the executive branch applying its controlling legislative capacity to bind the independent judiciary to enforce rules that favour the province as the plaintiff. Such legislative maneuvering strikes at the idea of a judiciary that is independent of the executive branch of government. Government’s have the authority to tax industry into oblivion if they so choose, or impose an administrative fee regime. Why then draft legislation that necessitates the judiciary enforcing such specific and purposed-tailored damage awards? However, Canadian courts have strongly refuted this criticism as grounds to strike down the legislation, noting in part that Canada lacks the separation of powers doctrine that exists in the United States.⁶⁸

Beyond blurring the role of the executive and the judiciary, critics charge that the narrowly-targeted cause of action offends the broader rule of law. It does so, they argue, by retroactively imposing a penalty that was unascertainable until after the breach of law occurred. The legislative regime is thus likened to a bill of attainder. While perhaps a persuasive critique, it is devoid of legal teeth. Canadian courts have ruled that the regime awards restitutionary monies, not punitive damages against the tobacco companies.⁶⁹ The Supreme Court has held the recovery legislation to be retrospective in nature, not retroactive.⁷⁰ The difference between the two legislative concepts is well described by E.A. Driedger: “A retroactive statute is one that operates as of a time prior to its enactment. A retrospective statute is one that operates for the future only. […] A retrospective statute operates forwards but it looks backwards in that it attaches new consequences for the future to an event that took place before the statute was enacted.”⁷¹ That this is a mere theoretical and rhetorical distinction does not diminish its legal significance. The Supreme Court has articulated that there is no constitutional requirement of legislative prospectivity in Canadian civil lawn – only in Criminal law.⁷² Further, a general presumption against the retrospectivity of legislation in Canada is escaped when the retrospective nature can be said to be intended for the benefit of the public, or where a penalty is imposed not for punishment of a prior act, but for restitution.⁷³ Such is the legislative intent here. Thus, governments are legally shielded from the assertion that health recovery legislation imposes retroactive punishment. It imposes (a much different, but ostensibly the same) retrospective restitution. This technicality is not only legally obnoxious, it ought to be fiscally alarming for corporations carrying out business in Canada.

The signals that such legislative and judicial posturing sends to industry are significant. The hard-nosed reality is that nearly all the slack in provincial coffers is provided by a small number of large industries with significant health, social, and/or environmental externalities.⁷⁴ For example, the extraction of oil and other energy-producing activities accounts for over 10% of Canada’s economic activity.⁷⁵ Should the energy industry, whose operations navigate a far more complex regulatory regime than tobacco, fear similar retrospective restitution? The academic consensus is decisively shifting towards the conclusion that climate change will have significant public health implications.⁷⁶ Should prudential corporate planning suggest that energy companies start considering what sort of health cost recovery litigation they might find themselves ensnared in down the road? While perhaps a provocative example, such folly ignores a synergy with industry which an elaborately-funded, universal, and public health care system has to maintain. We ought not frighten the gift horses.

If provinces are intent on remedying the significant burden that tobacco companies are having on public health systems, they ought to consider the cost of the recovery itself. Beyond the cost of the twenty-year litigation saga detailed above, there are likely inordinate fees that flow through to private counsel representing the Crown on a contingency fee basis. In the United States Master Settlement, some two-dozen lawyers retained by three states walked away with over $8 billion in legal fees, representing nearly 25% of those state’s share of settlement monies.⁷⁷ At least some provinces have entered into similar contingency-fee agreements with external counsel to pursue tobacco health cost recovery litigation.⁷⁸ While it is too early to quantify the legal fees incurred throughout Canada’s global settlement, a process this complex and drawn out will surely result in similarly eye-watering fees collected by lawyers.

If one considers the result of the American MSA, further challenge is offered to the argument that this litigation is about cost recovery. The MSA negotiated settlement of $240 billion bore no mathematically significant relation to the actual anticipated Medicaid expenses incurred in treating patients with tobacco-related illnesses.⁷⁹ The actual Medicaid costs were closer to $35 billion when tobacco excise tax revenues are taken into account, according to academic research. A 2018 research report by the Conference Board of Canada estimated tobacco-related illnesses cost Canada’s health care system $6.5 billion a year.⁸⁰ However, as discussed, the federal and provincial governments are collecting nearly $9 billion annually from tobacco excise taxes.⁸¹ It has further been suggested that social service delivery costs may actually be neutralized when pension and social security payments are reduced because of shortened life spans of tobacco users.⁸²

FUTURE AVENUES FOR HEALTH COST RECOVERY

What is the legal and political future of health cost recovery legislation in Canada? Much seemingly depends on the eventual outcome of the mediated global settlement. It’s too soon to tell whether the (anticipated) windfall provinces will collect from tobacco conglomerates will be a fleeting joy, an enticement to vices, or a new normal for health care budgeting. With the very high levels of public debt Canada has shouldered over decades of elaborate government programming, many no longer see the current tax regime as either sustainable or adequate for funding a no-fee healthcare system able to bear the burden of a rapidly aging population.⁸³ All Canadian provinces were quick to adopt Saskatchewan’s model of universal health care system introduced in 1947 under the leadership of then-Premier Tommy Douglas. Part of the reason for the swift-adoption of universal health coverage by the provinces was the promise of a 50% funding agreement with the federal government.⁸⁴ A struggling Canadian economy in the 1970s, allied with rapidly increasing health care costs, meant that the 50% funding commitment promised by the feds was halted.⁸⁵ As federal transfer payments were tapered, provinces gained more autonomy in how they administered their respective health systems.⁸⁶ The 1984 Canada Health Act was introduced and, among other things, clarified the obligations of provincial health system in order to receive federal health transfer payments. The central tenants of the Canada Health Act include: public administration; comprehensiveness; universality; portability; and accessibility.⁸⁷ While these principles serve as the legislated criteria for provincial health programs, the reality is that they operate in tension with the finite resources of a strained public purse.

Enter health care cost litigation which postulates to think honestly about how a mature democracy can raise the monies it needs to sustain its fragile healthcare system. Traditionally, tortious claims for relief against industry for cost recovery would require overcoming causation and assumption of risk issues. However, the tobacco legislation has seemingly provided a roadmap for how legislatures might create novel causes of action designed to recover damages from specific industry wrongdoers by vitiating the usual defenses and procedural remedies available in tort law. One can take some comfort in knowing that future health cost recovery litigation will seemingly respect the non-disclosure of personal health records and patient data. In British Columbia v Philip Morris International, Inc, the Supreme Court ruled that even when anonymized, health care records are documents of a particular insured person and are subject to relevant privacy legislation.⁸⁸ As a result, health care record databases are not compellable in any way, according to the SCC.

Where might this leave other industries responsible for disease, such as the food industry or the petro-chemical industry? Perhaps there is more than a fat chance of tackling the fiscal fallout from obesity. Governments will arguably be able to use the pathway paved by tobacco cost recovery litigation to legislate a similar cause of action to against food and drink manufacturers who promoted high sugar and chemically-infused products to the knowing detriment of public health. But should they? Most people know that obesity is a serious problem that has the potential to destabilize one’s health.⁸⁹ Still, governments aren’t taking serious enough steps to prepare for the eventual burden this will place on the healthcare system. A tax on sugary sodas, similar to tobacco taxes, might be a place to start if provinces wanted to get serious about preparing for an eventual financial strain on healthcare resources. Like any policy there would be pros and cons, but it would at least take seriously a health care funding problem that is clearly on the government’s radar. Ad hoc budgeting is oxymoronic but seemingly an accurate characterisation of a systemic governance approach that condones harmful industry behaviour with significant health externalities, and then seeks to recuperate ‘non-punitive’ remedies on the backend.

The recent epidemic of opioid misuse and addiction also represents a significant strain on public healthcare resources.⁹⁰ A number of provinces have passed legislation establishing a cause of action against opioid manufacturers, similar to tobacco cost recovery legislation. To recover the costs of health care benefits caused or contributed to by opioid-related wrongs, Alberta, British Columbia, Nova Scotia, Ontario, and Saskatchewan have created distinct causes of action.⁹¹ Provinces can exercise this recovery for the benefits of an individual insured person, or an aggregate population who have suffered damages by the use or exposure to opioids.⁹² It is worth considering whether future uses of litigation to recover health-care costs should be based on narrowly enacted causes of action like this, or whether legislation creating broader causes of action against unspecified industries would be more appropriate. This paper takes the position that, if it must be employed as a tool by the legislature, recovering health expenditures through litigation merits public discussion and debate. Litigation by stealth may violate the distributive justice principle, which is central to the ethos of Canada's single-payer health-care system.⁹³ Specifically, aggressive litigation by provinces to recoup health costs could have the effect of casting public health care as no different than a commercial insurance scheme, where the provision of medical care is akin to a loss meriting recovery from a wrongful party. This conceptualization is at odds with how Canada’s public health care system has been set up as a universal no-fault public benefit system that provisions reasonable access care without financial or other barriers. The collection of taxes from all citizens and industry along a progressive taxation schedule is an important part of this system, in part, because it recognizes that health care services are a pre-paid for benefit or liability. Industries operating in Canada have arguably discharged their liability for industrial externalities through the taxes they remit, of which a large share flow through to the provision of healthcare funding.⁹⁴

It seems the question to be decided is whether Canada’s health care system is to be conceived of as a mere insurance scheme, or a properly-funded public benefit. If the former is true, then expanded subrogation may exist as a valid proposition to ensure losses are paid for by the wrongdoer. However, if the system is to be conceived of as a true social benefit then there is a theoretical issue with allowing for cost recovery litigation to expand along its natural trajectory. Taken to its extreme, such litigation could undermine the no-fault model of healthcare funding and drive a system that seeks to apportion blame for health outcomes.

CONCLUSION

Health care cost recovery litigation that results in windfalls for provincial coffers would naturally make the prospect of its expanded use an appealing prospect for cash-strapped governments. This paper has attempted to consider how the expanded use of such litigation could undermine the no-fault and universal principles of Canada’s health system, the stable regulatory and business landscape necessary to attract industry to Canada’s economy, and the behavioural modifications that good health policy should seek to bring about to improve future health care outcomes. Canada is not the ingenue of the global economy. It can’t rely on the back-door retroactive taxing of industry to exempt us from the duties of good governance and proper budgetary planning. This includes taking responsibility for funding the health care system, and not relying on litigation to apportion blame for health outcomes. A more aggressive approach to health-cost litigation would not be a statement of strength, but a distress signal. It radiates legal fungibility and presents Canada as a country where the laws of the land can be retroactively – pardon, retrospectively – upended once enough political momentum develops to hold an industry’s feet to fire.

WORKS CITED

Legislation

(AB) Crown’s Right of Recovery Act, SA 2009, c. C-35 (ss. 41-50).

Excise Act, 2001, SC 2002, s. 44.

Medicaid Third-Party Liability Act, 409.910 Fla.Stat. (1995).

Opioid Damages and Health Care Costs Recovery Act, SA 2019, c. O-8.5.

Opioid Damages and Health Care Costs Recovery Act, SBC 2018, c. 35.

Opioid Damages and Health Care Costs Recovery Act, SNL 2019, c. O-6.2.

Opioid Damages and Health-care Costs Recovery Act, SNS 2020, c. 4.

Opioid Damages and Health Care Costs Recovery Act, 2019, SO 2019, c. 17.

Opioid Damages and Health Care Costs Recovery Act, SS 2020, c. 32.

Tobacco Damages Recovery Act, SBC 1997, c. 41.

Tobacco Damages And Health Care Costs Recovery Act, SBC 2000, c 30.

Tobacco Damages and Health Care Costs Recovery Act, CCSM c. T70.

Tobacco Damages and Health Care Costs Recovery Act, SNB 2006, c. T-7.5.

Tobacco Health Care Costs Recovery Act, SNL 2001, c. T-4.2.

Tobacco Damages and Health-care Costs Recovery Act, SNS 2005, c. 46.

Tobacco Damages and Health Care Costs Recovery Act, 2009, SO 2009, c. 13.

Tobacco Damages and Health Care Costs Recovery Act, RSPEI 1988, c. T-3.002.

Tobacco-Related Damages and Health Care Costs Recovery Act, CQLR, c. R-2.2.0.0.1.

Tobacco Damages and Health Care Costs Recovery Act, SS 2007, c. T-14.2.

Tobacco Tax Act, RSO 1990, c. T.10.

Jurisprudence

British Columbia v. Imperial Tobacco Canada Ltd., 2005 SCC 49.

JTI-Macdonald Corp (Re), 2019 ONSC 2611.

JTI-Macdonald Corp v British Columbia (Attorney General), [2000] BCJ No 349.

JTI-Macdonald Corp v British Columbia (Attorney General), 2000 BCSC 312.

Re Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36, As Amended and In The Matter of a Plan of Compromise or Arrangement, 2020 ONSC 61.

Re: Imperial Tobacco Canada Ltd, 2019 ONSC 1684.

Re: Imperial Tobacco Canada, [2020] S.D.N.Y. 19-10771 (SCC).

R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42.

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Berryman, Jeff “Up in Smoke, What Role Should Litigation Play in Funding Canada’s Health Care” (2004) 12 Health L J at para 47.

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Elizabeth Edinger, “Retrospectivity in Law”(1995) 29 UBC L Rev 5-25.

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Government of Canada, “Excise duties technical information” (20 September 2022), online.

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Kleefeld, John, and Anila Srivastava “Resolving Mass Wrongs: A Command-Consensus Perspective”, (2005), 30 Queen’s LJ.

Leonard, Nelson, “A Tale of Three Systems: A Comparative Overview of Health Care Reform in England, Canada, and the United States” (2006) 37 CUMB. L. REV. at 524.

Makarenko, Jay, “Canadian Federalism and Public Health Care: The Evolution of Federal-Provincial Relations” (January 2008) online: Maple Leaf.

Norton Rose Fulbright, “The Canadian tobacco litigation: Imperial Tobacco, Rothmans, Benson & Hedges and JTI-Macdonald under creditor protection” (2019), online (blog): Norton Rose Fulbright Insights [NRF: The Canadian Tobacco Litigation].

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Ontario Tobacco Research Unit, “Litigation against the Tobacco Industry: Monitoring Update” (September 2013) online: Ontario Tobacco Research Unit.

Physicians for a Smoke Free Canada, “Canadian government revenues from tobacco taxes: an update” (15 December 2019), Online.

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Endnotes