Cigarette Companies’ Appeals Dismissed: Major Tobacco Companies to Pay More Than $15 Billion in Damages

Summary of one of the most important civil rulings in Canadian history.

In a decision of more than 400 pages, the Court of Appeal dismissed appeals against a judgment condemning the three major tobacco manufacturers - Imperial Tobacco Canada Ltd., Rothmans Benson & Hedges Inc., and JTI-Macdonald Corp. - to pay more than $15 billion in moral and punitive damages.

These damages, which cover a period from 1950 to 1998, were awarded in the context of class actions commenced on behalf of two groups:

1) people with various illnesses resulting from the consumption of a certain number of cigarettes; 

2) people addicted to tobacco due to their cigarette consumption.According to the plaintiffs, the manufacturers knowingly failed in their duty to inform users about the risks associated with the use of their products, thereby violating the Civil Code of Quebec (C.C.Q.), the Consumer Protection Act (C.P.A.) and the Charter of Human Rights and Freedoms (Québec Charter).

Conclusions of the Court of Appeal's Judgment

While the Court of Appeal does not agree with the reasoning of the trial judge (the Honourable Brian Riordan) in its totality, it reaffirms his key conclusions:

• Manufacturers failed in their duty to inform by failing to provide users with information about the health effects of cigarettes or by providing inadequate information. Manufacturers also misinformed users by attacking the credibility of warnings, advice, and explanations issued by others about the harmful effects of cigarettes.
• The manufacturers failed to prove that the members of the groups knew or should have known the harm they were exposed to by consuming their products.
• There is a causal link between the manufacturers’ faults and the harm suffered by class members since this harm was the logical, direct, and immediate consequence of the impugned conduct. In addition, the Tobacco Health Care Cost Recovery and Damages Act (Recovery Act) allowed class members to establish causation on an epidemiological or statistical basis.
• The manufacturers violated sections 219 and 228 of the C.P.A, which prohibit the manufacturer from making false or misleading representations, thereby giving rise to punitive damages.
• The manufacturers also unlawfully and intentionally violated section 1 of the Quebec Charter, which enshrines the rights to life, personal security and inviolability of the person, also giving rise to punitive damages.
• Given the retroactive effect of the Recovery Act, claims by members suffering from various illnesses related to cigarette consumption were not statute-barred.
• The awarding and quantum of punitive damages did not give rise to any error justifying the intervention of the Court of Appeal.
• Similarly, the collective recovery ordered by the trial judge did not give rise to any reviewable error.

Impact on Companies Doing Business in Québec

The decision of the Court of Appeal, which will probably be the subject of an application for a motion for leave to appeal to the Supreme Court of Canada, is not only relevant for cigarette manufacturers and consumers, but to all those doing business in Québec.

For example, the Court of Appeal was of the opinion that misinformation is not excluded from the scope of the duty to inform imposed on manufacturers by the Civil Code.

The Court of Appeal also reiterated that a breach of certain statutory obligations contained in the C.P.A. can give rise to punitive damages, even in the absence of compensatory damages. In this case, punitive damages alone amounted to several billion dollars.

Finally, the Court of Appeal's decision demonstrates that class actions can constitute an existential threat for companies and institutions, regardless of their size, and that the concepts of causation and prescription are not as robust or predictable as defendants might expect.

To find out more the impact this important decision could have on your business, we encourage you to contact our class action defence specialists.