The federal government is facing a lawsuit from a Canadian cannabis company that claims its licence was revoked without due processThe company, CannTrust Holdings Inc., alleges that Health Canada acted unlawfully and unfairly when it suspended and then cancelled its licence in 2020.
CannTrust’s licence suspended and cancelled after non-compliance
CannTrust was one of the largest licensed producers of cannabis in Canada until it was found to be growing cannabis in unlicensed rooms at its facility in Pelham, Ontario, in 2019. Health Canada seized more than 5,000 kilograms of cannabis from the company and suspended its licence in September 2019. The regulator then cancelled the licence in May 2020, citing “repeated and serious non-compliance” with the Cannabis Act and its regulations.
CannTrust filed a notice of application in the Federal Court of Canada on December 23, 2023, seeking a judicial review of Health Canada’s decision to revoke its licence. The company argues that Health Canada violated its right to procedural fairness and natural justice by not giving it a reasonable opportunity to respond to the allegations and evidence against it. The company also claims that Health Canada acted in bad faith and abused its discretion by imposing “disproportionate and excessive” sanctions on the company.
CannTrust seeks reinstatement of licence and damages
CannTrust is asking the court to quash Health Canada’s decision and reinstate its licence, or alternatively, to order Health Canada to reconsider its decision in accordance with the law and the principles of fairness. The company is also seeking damages for the losses it suffered as a result of the licence revocation, as well as costs and interest.
CannTrust says that the licence revocation has caused it “irreparable harm” and that it has been unable to operate its business, sell its products, or access its assets since the suspension. The company says that it has lost millions of dollars in revenue and market value, and that it has been forced to lay off hundreds of employees and restructure its debt.
The company also says that it has taken steps to address the issues that led to the non-compliance, such as implementing new management, governance, and compliance systems, and cooperating with Health Canada’s investigation. The company says that it has “demonstrated its commitment to operating in full compliance with the law and the highest standards of ethical conduct” and that it deserves a second chance.
Health Canada defends its decision and actions
Health Canada has not yet filed a response to the lawsuit, but it has previously defended its decision and actions regarding CannTrust. In a statement issued in May 2020, the regulator said that it “takes its responsibility to protect the health and safety of Canadians very seriously” and that it “will continue to monitor compliance with the Cannabis Act and its regulations”.
Health Canada said that it cancelled CannTrust’s licence after conducting a thorough review of the company’s compliance history and the information it submitted to the regulator. Health Canada said that it found that CannTrust had “failed to comply with a number of key requirements” under the Cannabis Act and its regulations, such as:
- producing and distributing cannabis from unlicensed rooms and areas;
- providing false and misleading information to Health Canada;
- failing to maintain proper records and inventory controls;
- failing to implement adequate security measures and quality assurance programs; and
- failing to meet the terms and conditions of its licence.
Health Canada said that it gave CannTrust several opportunities to correct the non-compliance and to provide additional information and evidence to support its licence reinstatement, but that the company “did not satisfactorily address the regulator’s concerns”.
Health Canada said that it “will not hesitate to take appropriate action when there is a risk to public health and safety, including issuing fines, suspending or cancelling licences, or laying criminal charges” under the Cannabis Act and its regulations.
Implications of the lawsuit for the cannabis industry
The lawsuit filed by CannTrust is one of the first legal challenges to Health Canada’s authority and discretion to enforce the Cannabis Act and its regulations. The outcome of the case could have significant implications for the cannabis industry, as it could set a precedent for how Health Canada deals with cases of non-compliance and licence revocation.
The case could also affect the public perception and trust in the cannabis industry, as it could raise questions about the quality and safety of the products, the transparency and accountability of the producers, and the effectiveness and fairness of the regulator.
The case is expected to take several months or even years to resolve, as it involves complex legal and factual issues, and could involve multiple appeals. In the meantime, CannTrust remains without a licence and unable to operate its business, while Health Canada continues to oversee and enforce the Cannabis Act and its regulations.
