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AECL must testify in U.S. lawsuit, Ontario Court of Appeal rules

Atomic Energy of Canada Ltd. shut down its Chalk River reactor in Ontario for 15 months in 2009 and 2010. Lantheus Medical Imaging Inc., in a lawsuit against its insurance firm, said it lost more than $70-million after its supply of medical isotopes was cut off following the shutdown of the Chalk River reactor.

CHRIS WATTIE/REUTERS

The Ontario Court of Appeal has ruled that officials from Atomic Energy of Canada Ltd. can face questioning in a U.S. lawsuit involving the Crown corporation's 2009 emergency shutdown of its Chalk River nuclear reactor.

In a decision released Monday, the Ontario appeal court overturned a lower-court decision last year that ruled AECL did not have to comply with a U.S. court order seeking documents and oral testimony from executives about its decision to shut down the Chalk River reactor in Ontario for 15 months in 2009 and 2010.

Chalk River produces medical isotopes that are sold to various commercial suppliers, and the closing of the reactor left companies in the lurch with no immediate replacement supplier.

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The appeal court said AECL should be subject to questioning in the case, and cannot rely on legal rules that generally make the federal government – and, by extension, government-owned Crown corporations such as AECL – immune from legal action for its decisions.

Madam Justice Alexandra Hoy ruled AECL is covered by the Ontario Evidence Act in this case, noting it is a "modern legislative trend" to increasingly put the Crown on equal footing with others before the courts when it is engaging in business matters.

"In this case, disclosure is not contrary to the public policy," Judge Hoy wrote. "AECL is faced with the disclosure request as a result of engaging in a commercial activity."

The U.S. case involves a civil suit filed by Lantheus Medical Imaging Inc. against its insurance firm, Zurich American Insurance Co. Lantheus sued Zurich after the insurer refused to cover more than $70-million (U.S.) in losses Lantheus said it suffered when the Chalk River reactor was shut down and its supply of isotopes was cut off. Zurich argued the shutdown "peril" was not covered in Lantheus's insurance policy.

As part of the lawsuit, Lantheus sought information from AECL and its officials about the causes of the shutdown of the reactor, saying those factors were key in determining whether Lantheus's losses were covered under its policy.

A U.S. court issued an order requiring AECL to provide evidence to Lantheus, but Mr. Justice Kenneth Campbell of the Ontario Superior Court refused to enforce the U.S. order, saying that AECL was immune.

Judge Campbell also ruled that Lantheus's claim did not meet all six required tests for approving an order issued by a foreign court, including the test that the information "is not otherwise obtainable."

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Judge Hoy disagreed, however, saying the tests are "guideposts" and not "preconditions." She said Judge Campbell wrongly concluded that the evidence sought by Lantheus could be obtained elsewhere because AECL had already handed over documents in the case.

Lantheus argued the documents were heavily redacted, did not include relevant scientific data and did not provide an explanation of how or why AECL made its decisions on key matters.

"Oral testimony is required in order to provide context in this complex technical matter," Judge Hoy wrote.

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Real Estate Reporter

Janet McFarland is the real estate reporter for The Globe and Mail’s Report on Business, with a focus on residential real estate trends. She joined Report on Business in 1995, and has specialized in reporting on corporate governance, executive compensation, pension policy, business law, securities regulation and enforcement of white-collar crime. More

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