Thursday, October 01, 2015

Seminal Warehouse Decision

Human sperm is “property”. So sayeth the British Columbia Court of Appeal. In this seminal decision the Court had to decide whether human sperm was property and thus “goods” for the purposes of the Warehouse Receipt Act, R.S.B.C. 1996, c. 481 (the “WRA”).

Lam v. University of British Columbia, 2015 BCCA 2 involved a class action brought by men who had cancer and before undertaking radiation treatment deposited their frozen sperm at the University of British Columbia’s Andrology Laboratory. In May 2002, it was discovered that the freezer had suffered a power interruption which damaged or destroyed the stored sperm. The Court of Appeal acknowledged that it was a hard and emotional decision. The University charged little for its services and faced a significant exposure; the class members potentially lost the opportunity to procreate and were faced with a provision that denied them compensation.  At paragraph 32 of the decision the Court stated: “Although the result likely will be disquieting for one side or the other, the task of the courts is to determine the legal rights of the parties.”

At the time they deposited their sperm for storage, the men signed a Bank Facility Agreement (“Facility Agreement”).  It required depositors to pay a deposit fee, an annual storage fee and a withdrawal fee, all of which were fairly modest.  The agreement also stated:

You may at any time upon:
(a)   payment of the Withdrawal Fee;
(b)   delivery by your physician to us of 45 days prior written notice of withdrawal; and
(c)   delivery to us of such withdrawal forms or releases as we require;
require us to deliver to your physician within the 45 day notice period any part or all of the Specimen…. 
By signing this Agreement you agree that neither we nor our successors or assigns nor any of our governors, directors, officers, employees or agents will be liable to you or anyone else for any destruction of, damage or alteration to or misuse of your Specimen for any reason whatsoever, including:
(a)   the improper testing of your Specimen;
(b)   improper freezing of your Specimen;
(c)   improper maintenance and/or storage of your Specimen in a frozen state; or
(d)   improper withdrawal and/or delivery of your Specimen.
This exclusion of our liability extends to any damage, misuse or impropriety caused by or resulting from any malfunction of our freezing equipment (whether for causes within our control or not) or from any failure of utilities, strike, cessation of services or other labour disturbances or any failure or similar occurrence in our or any other laboratory or from any fire, earthquake or other acts of nature beyond our control, or caused by or resulting from any act, omission or negligent conduct on the part of us or our successors or assigns or any of our governors, directors, officers, employees or agents.

The University relied on the exclusion of liability in clause 7. The respondents raised s. 2(4) of the WRA which allows a warehouse to insert in a receipt any term or condition that is not contrary to the Act and does not impair the warehouser’s obligation to exercise the care and diligence in regard to the goods as a careful and vigilant owner of similar goods would exercise in the custody of them in similar circumstances. The University argued that the sperm were not “goods” and thus this limiting section of the WRA was not applicable and the University could therefore exclude liability without breaching the WRA.

The trial judge held that the University was precluded from relying upon the exclusion clause in the Facility Agreement by virtue of the WRA.

The judge concluded that the parties did not contemplate the application of the WRA at the time the men signed the Facility Agreement because the issue was not raised until well into the litigation.  He also observed that at the time the WRA was enacted it was not intended to apply to the storage of sperm because “technology for the storage of sperm was not in use and the common law did not recognize that sperm or body parts could be property”(*1).

The trial judge referred to several fairly recent cases that concluded sperm is property: Yearworth v. North Bristol NHS Trust, [2009] EWCA Civ 37; Kate Jane Bazley v. Wesley Monash IVF Pty Ltd, [2010] QSC 118 (T.D.); C.Cv. A.W., 2005 ABQB 290 (CanLII); J.C.M. v. A.N.A., 2012 BCSC 584 (CanLII), and concluded(*2):

[41]      These cases did not consider whether the term “property”, as used in legislation, could include sperm. They were concerned with whether the common law now regards stored sperm or embryos as property. That distinction is of no consequence to the analysis I must make in this case. Courts in a variety of jurisdictions have come to the conclusion that stored sperm is property. I agree with the conclusion arrived at in these cases. The frozen sperm at issue in this case is the property of the class members. The sperm was ejaculated, frozen and stored for the purpose of using it for conception. Applying the current state of the law of property to the definition in the WRA leads to a conclusion that frozen is “goods”.

 The judge continued his analysis stating (*3):

[42]      The next step in the analysis is to ask if the purpose of the provisions in the WRA justifies the application of those provisions to the new definition of property. One of the purposes of the WRA was to codify the common law of bailment. Under the common law, a bailee is required to exercise the same care and diligence with respect to the bailed goods as a careful and vigilant person would exercise over his own similar goods in like circumstances. Sections 2(4) and 13 of the WRA effectively accomplish that. There is no reason why these provisions should not be applied to property that can be stored for reward which was not contemplated at the time the legislation was enacted. The purpose of requiring bailees to exercise adequate care and diligence applies equally to all kinds of property that can be stored for reward.
[43]      The other step in the [Côté] analysis is to ask if the legislative provision in question is sufficiently general to permit its application to things unknown at the time of enactment. As I have already noted, the definition of goods is broad and inclusive. In other words, the provision is sufficiently general to apply to things unknown at the time of passage. There is no reason not to apply the provisions of the WRA to goods which fall within the current understanding of “all property other than things in action, money and land.”

The judge observed that the thrust of the University’s argument was that it is an offence under the Assisted Human Reproduction Act, S.C. 2004, c. 2, to sell human sperm.  If a warehouser were to issue a negotiable receipt or a transferrable non-negotiable receipt for frozen human sperm, the sperm could be sold, creating a conflict between the WRA and the Assisted Human Reproduction Act.  The judge rejected the University’s argument. The judge found that the fact that sperm cannot be purchased does not prevent it from falling within the definition of ‘goods’ in the WRA. It simply reflects the fact that sperm, like other classes of property, is subject to control or regulation by other statutory provisions. If sperm is property that can be stored and for which a receipt can be issued, then it falls within the definition of ‘goods’ in the WRA.(*4)

The judge dealt with how section 7 of the Facility Agreement breached the provisions of the WRA, stating at paragraph 90:

On a plain reading of clause 7, it is clear that it is directly contrary to s. 13 of the WRA. As previously noted, s. 13 imposes liability on a warehouser for the loss of or injury to goods caused by the warehouser’s failure to exercise the care and diligence that a careful and vigilant owner of similar goods would exercise in the custody of them in similar circumstances. Clause 7 attempts to shield the Andrology Lab from the same liability that s. 13 assigns to it as a warehouser. Clause 7 excludes the Andrology Lab from liability for any acts, omissions or negligent conduct, and covers a wide variety of circumstances including freezer malfunction, labour disturbances, or conduct of its employees. The clause is patently contrary to s. 13. It does not merely provide a limitation of damages in a manner similar to the warehouse receipt in Evans Products.

The judge recognized that while the WRA did not permit exclusion of liability, limiting liability is allowed. The University could simply have stated in its Facility Agreement that its liability was limited to $50 per deposit.

The Court of Appeal agreed with the findings of the trial judge and dismissed the appeal. It acknowledged at paragraph 95 of its decision that “Historically, there was no property interest in the human body, dead or alive. Save for the despicable period of history when slavery and ownership of humans was legally recognized, ownership of the human body has been eschewed.” The Court, however, agreed with the comments of Madame Justice Russell in the J.C.M. decision (*5) that “jurisdiction developments in medical science now require a re-analysis of the common law’s treatment of and approach to the issue of ownership of parts or products of a living human body, whether for present purposes (viz. an action in negligence) or otherwise.”

The Court of Appeal recognized that defining human sperm as “property” under the WRA in this case could widen the available remedies to Mr. Lam and the class members, stating at paragraph 94:

For example, Mr. Lam arranged to freeze his sperm as he was about to receive cancer treatment that could leave him infertile. He froze his sperm as a contingency plan for having children of his genetic make-up should he no longer be able to produce viable sperm. If someone broke into the lab and stole the sperm, could he or she be charged with theft? Theft is a crime against property. Could Mr. Lam have donated his sperm to a sperm bank if he chose not to have his own children? What would happen if Mr. Lam had died? Would he be able to leave his sperm to his family or someone else in a will? Could he leave it to a sperm bank in his will? These are all questions that may arise if human sperm is generally classified as property.

The Court of Appeal cautioned against using this decision as a basis for determining the property interests that a person can have in human sperm, stating at paragraphs 113 and 114:

The nature and scope of property interests that a person can have in human sperm need not be decided on the facts of this case. This case, unlike for example, J.C.M. v. A.N.A., 2012 BCSC 584 (CanLII), does not deal with competing property interests in human sperm. This case considers whether Mr. Lam, a cancer patient, has ownership of the sperm he produced, such that he can contract for its storage to enable his personal use of the sperm at a later date. If so, the sperm is property, as something must be property if it is capable of being owned. There may also exist things that are property that cannot be owned, but that is not something that needs to be decided in the context of this case… Ownership of body parts must be contextual, and often limited by legislation because of public policy reasons. No one would argue that if a cancer patient cut her hair and stored it for the purpose of later making a wig after treatment that she did not “own” her hair in that context. On the other hand, legislation prevents the selling of sperm and organs such as kidneys, but does not prevent their donation. The prohibition on sale does not necessarily mean the legislation is inconsistent with ownership. It has provided limits to ownership in some contexts.

For warehousemen this decision is germane to the issue of exclusion and limitation of liability and how this is dealt with in contract in relation to legislation in place in each province. The decision is not anticipated to sow the seeds of discontent in the industry.

(*1) Paragraph 21 Lam v. University of British Columbia, 2009 BCSC 196
(*2) Paragraph 41
(*3) Paragraphs 42 and 43
(*4) Paragraph 49
(*5) J.C.M. v. A.N.A., 2012 BCSC 584 referring to comments in Yearworth v. North Bristol NHS Trust, [2009] EWCA Civ 37


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