Makers of COVID-19 protective equipment seek over $5 billion in damages from Ottawa

Canadian manufacturers of masks and other equipment for protecting against COVID-19 are seeking more than $5 billion in damages from the federal government, saying Ottawa misled them about buying and helping to sell their products.

In a statement of claim filed in Federal Court, the companies and their industry association allege the government made "negligent misrepresentations" that prompted them to invest in personal protection equipment innovations, manufacturing and production.

The companies and the Canadian Association of PPE Manufacturers say the government made misleading statements about markets, direct assistance, flexible procurement and long-term support over a three-year period that began in March 2020.

The federal government will have an opportunity to file a defence to the unproven allegations as the court case proceeds.

The emergence of COVID-19 in early 2020 spurred governments and public-health officials to implement extraordinary measures including lockdowns, vaccine requirements and mask mandates to prevent the spread of the disease.

The companies and their association say they formed a "special relationship" with the government that gave rise to a duty of care to the small- and medium-size businesses that swiftly retooled to make protective equipment for Canadians.

"This promise came from the very top of our Canadian government and was supported and propagated through all the departments that dealt with the plaintiffs," the statement of claim says.

Claimants seeking over $5B in damages

The claim alleges Canada's misrepresentations resulted in about $88 million in investment losses and a further $5.4 billion in projected lost market opportunities over a 10-year period.

The government communicated to the companies through an initiative known as Canada's Plan to Mobilize Industry to fight COVID-19 that there would be new measures to directly support businesses to rapidly scale up production or revamp their manufacturing lines, the claim says.

But even though the government identified masks and respirators as vital items in an airborne pandemic as of May 2020, invoking a national security exception for procurement, it "did not contract with" the Canadian companies, the claim says.

It further alleges the government told the companies in June 2021 it would agree to a 10-year contract with the industry association and the businesses to make up for the fact it had been buying protective equipment from foreign firms.

In a similar vein, the claim says that last September, a federal official indicated the government would support the Canadian companies when procurement took place to replenish the National Emergency Strategic Stockpile of protective items.

However, another official would later tell the companies the government would "not be procuring masks and respirators" from them for the strategic stockpile, the claim says.

It contends that despite promises to support the domestic industry, the government shunned homegrown companies "and instead supported foreign competition." In turn, the government's actions denied the Canadian companies "fair and equitable access" to the Ontario and Quebec markets and the Canadian hospital market.

The claim also contends the government, through guidance provided by the Public Health Agency of Canada, "inappropriately misdirected" Canadians away from buying and using N95 and other manufactured masks in favour of "making, buying and wearing cloth masks for at least the first two-year period of the pandemic."