Class Action

Canadian companies shouldn't read too much into Bangladesh ruling

By Staff

Canadian companies with connections to foreign disasters could still find themselves on the hook for damages, even after the Court of Appeal recently dismissed a claim against a major retailer involving a building collapse in Bangladesh, says Toronto class action lawyer Margaret Waddell.

The ruling by the province’s top court upheld a motion judge’s decision to dismiss the $2-billion class action against the Canadian company, two of its affiliates, and other companies with which it contracted in respect to sourcing clothing from a factory where a 2013 collapse killed 1,130 and injured 2,500 more.

Waddell, partner with Waddell Phillips Professional Corporation, tells that while the facts were not with the plaintiffs in this case, corporate defendants shouldn’t read too much into the decision.

“If you have a corporate client in Canada with a more direct connection to the ultimate wrongful acts that caused the injuries, courts here will be much more willing to assume jurisdiction, even though the conduct took place outside Canada,” she says. “That’s what we’ve been seeing in a number of mining cases, and another one against a social media giant, where Canadian courts have been more willing to take jurisdiction over the claims.

“In the Bangladesh case, it was a very letter-of-the-law legalistic analysis, and the court obviously took the view that the claim, as pleaded against the Canadian defendant, was attenuated because they were a long way from the decisions that put the workers in peril,” adds Waddell, who is not involved in the matter and speaks generally.

According to the appeal court decision, the plaintiffs alleged that the Canadian retailer owed a duty to workers further down its supply chain thanks to a corporate social responsibility (CSR) policy it had adopted. In addition, they claimed that a French company that performed “social audits” of the factory relayed the information in Ontario to its Canadian counterpart, tying the case to this jurisdiction.

But a motion judge found that the action was governed, and barred by Bangladeshi law, which imposed a one-year limitation period on claims from all adult class members, and the Court of Appeal agreed.

The appeal court also held that the relationship between the Canadian retailer, and the supplier that operated in the collapsed building, could be distinguished from previous cases in which parent companies were held vicariously liable for the actions of subsidiaries for four main reasons:

  • The nature of their proximity was different from a parent/subsidiary relationship because the supplier was free to contract with other purchasers.
  • The companies were not in the same business.
  • There were no allegations that the Canadian company had superior knowledge or expertise about structural safety issues in the working environment.
  • Even if the social audit reports were not reviewed and monitored in line with the Canadian company’s CSR standards, the audits were not intended to deal with structural issues, removing the basis of any reliance.

Waddell says the plaintiffs in this case faced an uphill battle to overcome the findings of the motion judge. However, she was “disappointed” with the analysis of the relationship between the company and its supplier.

“It would have been a cutting-edge decision to find them vicariously liable, but you have to remember that we’re looking at Bangladeshi law, which may not be as developed and forward-thinking in its application of corporate accountability for wrongful acts,” she says.

“The idea is that you can’t let wrongs go uncompensated if they are so egregious that they breach the norms of the international community, and there could be enough meat on that bone for the Supreme Court to grab hold of if the plaintiffs seek leave to appeal.”

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