Date: 20050623

Docket: T-253-05

Citation: 2005 FC 895

Ottawa, Ontario, June 23, 2005

PRESENT: THE HONOURABLE MR. JUSTICE BLAIS

BETWEEN:

9101-9380 QUÉBEC INC. (les tabacs galaXy)

Applicant

and

CANADA CUSTOMS AND REVENUE AGENCY

Respondent

and

ATTORNEY GENERAL OF CANADA

Mis en cause

and

ATTORNEY GENERAL OF QUEBEC

Mis en cause

REASONS FOR ORDER AND ORDER

[1]                 This is an application for judicial review of a decision made on January 31, 2005, by the Director of the Canada Customs and Revenue Agency (CCRA), as the representative of the Minister of National Revenue (the Minister), the effect of which was to cancel tobacco licence 51-TL-35 held by 9101-9380 Québec inc. (the applicant) because that company had failed to comply with an Act of Parliament, the Excise Act, R.S.C. 1985, c. E-14, and an Act of a provincial legislature, the Tobacco Tax Act, R.S.Q., c. I-2, contrary to section 12 of the Regulations respecting Excise Licences and Registrations, SOR/2003-115 (the Regulations).

RELEVANT FACTS

[2]                 The applicant is a tobacco manufacturer and therefore holds a tobacco manufacturer's licence issued under the Excise Act, 1991, S.C. 2002, c. 22 (the Act).

[3]                 On May 5, 2004, a decision was made by the Court of Québec, Criminal and Penal Division, in the district of Trois-Rivières, convicting the applicant of two offences: first, that it did, on September 3, 2002, carry on activities subject to excise elsewhere than in the premises set out in its licence application, contrary to subsection 14(2) of the Excise Act, and second, that it did unlawfully transfer or permit the transfer of a tobacco product from a plant or establishment where tobacco is manufactured that had not been packaged as required, under the Excise Act.

[4]                 The applicant filed a notice of appeal to the Supreme Court, and on February 7, 2005, the Superior Court issued its decision dismissing the appeal. On May 12, 2005, the application for leave to appeal the judgment of the Superior Court was dismissed by the Quebec Court of Appeal.

[5]                 On May 14, 2004, nine days after the decision of the Court of Québec, the CCRA issued an administrative decision suspending the applicant's tobacco licence as of May 18, 2004, which operated as a total cancellation of the licence 90 days after May 18, 2004. The applicant filed an appeal from that decision under subsection 10(3) of the Regulations, but the appeal was denied on June 8, 2004.

[6]                 In response to the decision of May 14, 2004, the applicant also brought a motion for an injunction in the Superior Court, but that motion was dismissed on May 20, 2004, for want of jurisdiction. The applicant then made the same application to the Federal Court, which dismissed it on June 1, 2004, on the ground that the applicant had not exhausted all its administrative remedies, given that the decision on the internal appeal had not yet been made.

[7]                 In a letter dated June 14, 2004, sent to the applicant, the CCRA added a new ground to its decision to cancel the tobacco licence: a finding of guilt in respect of an offence under an Act of a provincial legislature. The respondent then asked the applicant to submit additional argument in response to the grounds, which then read as follows:

[TRANSLATION]

1          the failure of 9101-9380 Québec inc. (Les Tabacs Galaxy) to comply with an Act of Parliament, the Excise Act (1985), in relation to events that occurred on September 3, 2002, that further led to the conviction imposed by Judge Bergeron of the Court of Québec, Criminal and Penal Division, on May 5, 2004 (file # 400-73-00189-034);

2          the failure of 9101-9380 Québec inc. (Les Tabacs Galaxy) to comply with an Act of a provincial legislature, the Tobacco Tax Act (R.S.Q. c. I-2), in relation to events that occurred on or about August 1, 2001, in violation of section 6(c) of the Tobacco Tax Act, which further led to the conviction imposed by Judge Morier, of the Court of Québec, Criminal and Penal Division, on November 7, 2004 (file # 400-61-030981-033).

[8]                 On June 21, 2004, on the other hand, an out of court agreement was reached to interrupt the suspension of the tobacco licence, but with the proviso that upon expiry of 90 days after the notice of cancellation (May 14, 2004), the tobacco licence would still be cancelled.

[9]                 Although the 90-day period was supposed to end on August 16, 2004, it was extended a few days before it expired, to September 12, 2004. On September 1, 2004, the applicant submitted its objections to the cancellation of its tobacco licence to the Minister.

[10]            On January 31, 2005, the Minister sent out his decision rejecting the applicant's objections and announcing that the tobacco licence would be cancelled on February 17, 2005, because the applicant no longer met the eligibility criteria set out in the Regulations. Since that time, there has been a decision of this Court granting an interlocutory injunction against the cancellation of the applicant's tobacco licence until judgment is given on the application for judicial control.

IMPUGNED DECISION

[11]            The impugned decision is the decision made by the Minister on January 31, 2005, cancelling the applicant's tobacco licence. Under section 12 of the Regulations, the Minister may cancel a tobacco licence if the licensee fails to comply with any Act of Parliament or of a provincial legislature or any regulations made under it. On August 1, 2001, and September 3, 2002, the applicant allegedly failed to comply with an Act of Parliament and an Act of a provincial legislature, and the Minister therefore cancelled its licence.

ISSUES

[12]            1. Did the respondent err in applying the Regulations to the actions committed by the applicant before the Regulations came into force?

2. Did the respondent state sufficient grounds for its decision?

3. Was the respondent entitled to add a second ground for its decision to cancel the tobacco licence?

4. Did the respondent enforce the Act against the applicant arbitrarily?

5. Are the applicable provisions of the Act and the Regulations ultra vires the federal government?

ANALYSIS

1. Did the respondent err in applying the Regulations to the actions committed by the applicant before the Regulations came into force?

[13]            The applicant submits, first, that the facts that form the basis of the allegations against it occurred before the Regulations came into force, and accordingly that those facts cannot provide justification for cancelling its licence. Subsections 2(2)(b) and 12(1)(c) of the Regulations read as follows:

[14]            Although the acts in question were committed before the Regulations came into force, a reference to a previous event does not automatically amount to giving the law retroactive effect. That very issue was discussed at length in Brosseau v. Alberta Securities Commission, [1989] 1 S.C.R. 301 at paragraphs 49 et seq.:

A sub-category of the third type of statute described by Driedger is enactments which may impose a penalty on a person related to a past event, so long as the goal of the penalty is not to punish the person in question, but to protect the public. This distinction was elaborated in the early case of R. v. Vine (1875), 10 L.R. Q.B. 195, where Cockburn C.J.

wrote at p. 199:

If one could see some reason for thinking that the intention of this enactment was merely to aggravate the punishment for felony by imposing this disqualification in addition, I should feel the force of Mr. Poland's argument, founded on the rule which has obtained in putting a construction upon statutes -- that when they are penal in their nature they are not to be construed retrospectively, if the language is capable of having a prospective effect given to it and is not necessarily retrospective. But here the object of the enactment is not to punish offenders, but to protect the public against public-houses in which spirits are retailed being kept by persons of doubtful character ... the legislature has categorically drawn a hard and fast line, obviously with a view to protect the public, in order that places of public resort may be kept by persons of good character; and it matters not for this purpose whether a person was convicted before or after the Act passed, one is equally bad as the other and ought not to be intrusted with a licence.

In Re A Solicitor's Clerk, [1957] 3 All E.R. 617, a statute concerning the practice of law by solicitors was amended so as to enable an order disqualifying a person from acting as a solicitor's clerk if such person had been convicted of larceny, embezzlement or fraudulent conversion of property. A clerk who had been convicted of one of those offenses before the coming into effect of the new law, contested his disqualification on the basis that the law was being given a retrospective effect. The Court of Queen's Bench dismissed these arguments. Lord Goddard C.J. found that there was no [page320] retrospective effect since the real aim of the law was prospective and aimed at protecting the public. He wrote at p. 619:

In my opinion, however, this Act is not in truth retrospective. It enables an order to be made disqualifying a person from acting as a solicitor's clerk in the future and what happened in the past is the cause or reason for the making of the order; but the order has no retrospective effect. It would be retrospective if the Act provided that anything done before the Act came into force or before the order was made should be void or voidable or if a penalty were inflicted for having acted in this or any other capacity before the Act came into force or the order was made. This Act simply enables a disqualification to be imposed for the future which in no way affects anything done by the appellant in the past.

Elmer Driedger summarizes the point in "Statutes: Retroactive, Retrospective Reflections" (1978), 56 Can. Bar Rev. 264, at p. 275:

In the end, resort must be had to the object of the statute. If the intent is to punish or penalize a person for having done what he did, the presumption applies, because a new consequence is attached to a prior event. But if the new punishment or penalty is intended to protect the public, the presumption does not apply.

Stevenson J.A. of the Court of Appeal likened the situation in the present appeal to that in the Solicitor's Clerk case at p. 229:

In my view the principle in the Solicitor's Clerk case is indistinguishable. An additional power is given to the Commission -- based on previous conduct. A new punishment cannot be added but that is not the nature of the office of ss. 166 and 167. It is the same office that the Solicitor's Clerk case deals with, namely to provide a disqualification based on past conduct which may show unfitness for the exemption.

The present case involves the imposition of a remedy, the application of which is based upon conduct of the appellant before the enactment of ss. 165 and 166. Nonetheless, the remedy is not designed as a punishment for that conduct. Rather, it serves to protect members of the public.

The fact that the relief is not really punitive in nature is supported by the conclusion of Stevenson J.A. that the imposition of the new remedy did not lie at the root of the appellant's concern in this matter at p. 229:

In essence, the appellants fear the stigma arising from a finding that they did, or failed to do, what is alleged in the hearing notice. That root concern was well illustrated by the suggestion made in argument that neither would be particularly aggrieved by the remedy being imposed against them, indeed they could accept the remedies, but were concerned about the finding of wrong doing.

The provisions in question are designed to disqualify from trading in securities those persons whom the Commission finds to have committed acts which call into question their business integrity. This is a measure designed to protect the public, and it is in keeping with the general regulatory role of the Commission. Since the amendment at issue here is designed to protect the public, the presumption against the retrospective effect of statutes is effectively rebutted.

[15]            I would also add the comments made by P.A. Côté in "La position temporelle des faits juridiques et l'application de la loi dans le temps" (1988), 22 R.J.T. 207 at pages 236 and 237:

[TRANSLATION] In Paton v. The Queen, the court had to apply the provisions of the Criminal Code relating to the preventive detention of habitual criminals. Those provisions, which came into force in 1947, made it possible to sentence a person to preventive detention where, prior to being sentenced for a particular offence, the individual had been convicted on at least three occasions of offences punishable by imprisonment for five years or more. In the appellant Paton's case, one of the convictions relied on as the basis for the preventive detention was prior to the provisions of the Code that were to be applied, because it dated from November 8, 1946. A majority of the Supreme Court held that that conviction would be taken into account without applying the law retroactively. It was one fact out of many successive facts to which the law referred to denote habitual criminal states. It was that specific status, as a way of being, that justified preventive detention, which must not be regarded as an additional punishment for past crimes. Judson J. stated:

The purpose of the habitual criminal legislation is not to create a new offence nor to increase the penalties for offences with respect to which sentences have already been imposed. The purpose is crime prevention. The habitual criminal is not imprisoned for doing something but for being something.

It would be difficult to make a better statement of the distinction between a case in which the law attaches a consequence to an act in a moment in time and a case which rather involves the occurrence of a lasting fact situation that prompts it to be applied.

[16]            Although in Paton v. The Queen, [1968] S.C.R. 341, a criminal law provision was in issue, the principles laid down in that decision are applicable in this case. By adopting, as a ground for cancellation, failure to comply with the conditions of eligibility for the licence, Parliament has not attempted to give retroactive effect to past events, but rather to refer to a person's status, to a certain way of being that characterizes the person.

[17]            As my colleague Gauthier J. said in an application for an interlocutory injunction in this case (9101-9380 Québec Inc. (Tabacs Galaxy) v. Canada (Canada Customs and Revenue Agency), 2005 FC 309, [2005] F.C.J. No. 389):

The authors [See Note 5 below] and the courts [See Note 6 below] confirm that a reference to facts prior to the coming into force of an Act or regulations does not constitute retroactive application when the purpose of the reference is to define a person's status. Status is a continuing fact, to which Parliament may properly refer in defining the characteristics a person must have in order to obtain a privilege.

Note 5: In addition to Pierre-André Côté's book, cited above, the respondent relies on the article by P.-A. Côté, "La position temporelle des faits juridiques et l'application de la loi dans le temps" (1988), 22 R.J.T. 207, in particular at pages 210, 215, 228, 229, 236 and 237-239, and on Ruth Sullivan, Sullivan and Driedger on the Construction of Statutes, 4th ed. (Vancouver; Butterworths Canada Ltd., 2002), pages 553-563.

Note 6: Brosseau v. Alberta Securities Commissions, [1989] 1 S.C.R. 301; R. v. Vine (1875), L.R. 10 Q.B. 195; Bazile v. Fonds d'indemnisation en assurance de personnes, [1999] R.J.Q. 1; Ward v. Manitoba Public Insurance Corp. (1975), 49 D.L.R. (3d) 638; Paton v. The Queen, [1968] S.C.R. 341; Bonin v. Société de l'assurance-automobile du Québec, [2002] Q.J. No. 217; Re Royal Canadian Mounted Police Act, [1991] 1 F.C. 529 (C.A.).

(See 9101-9380 Québec Inc. (Tabacs Galaxy) v. Canada, supra, at paragraph 29.)

[18]            In my opinion, applying the provisions of the Regulations, the violations of the Acts of Parliament and the provincial legislature are not the acts of a moment in time, but rather are a continuing act that reveals the status of the applicant. Accordingly, the respondent was guilty of no wrongdoing when it determined that the Act and the Regulations under the Act applied to the applicant's earlier actions.

2. Did the respondent state sufficient grounds for its decision?

[19]            Although I agree with the position advanced by the applicant, that the principles of fairness impose an obligation to state reasons for decisions, I find that sufficient grounds were stated for the decision to cancel the tobacco licence that the applicant in a position to know and understand the reasons why it was convicted and to make its application for judicial review.

[20]            In this case, section 12 of the Regulations itself sets out the Minister's obligations when a tobacco licence is cancelled:

[21]            In its notice of cancellation, dated May 14, 2004, and in its follow-up letter on June 14, 2004, and its letter of August 13, 2004, the respondent met the requirements of subsection 12(2) of the Regulations, by stating the grounds for the suspension and cancellation of the applicant's tobacco licence. Once those grounds had been provided, there was nothing in the Act or Regulations that required that additional grounds be provided.

[22]            On the question of the principles of fairness, the applicant contends that the respondent's refusal to have regard to its arguments violates the principles of fairness in that it denies the applicant the opportunity to submit objections to the cancellation and does not allow it to present its arguments for review adequately.

[23]            There is nothing in the evidence to suggest that the applicant's submissions were not taken into account. On the contrary, in the third paragraph of the letter dated January 31, 2005, the respondent said:

[TRANSLATION] We would assure you that all of your representations, including those submitted on July 9, 2004, and September 1, 2004, were very carefully examined before we made our final decision regarding the cancellation. However, our decision to cancel your tobacco licence (51-TL-35) is upheld for the reasons that follow.

(Letter from the respondent dated January 31, 2005)

[24]            In addition, the grounds for cancelling the licence are quite apparent from reading the respondent's letter. The decision states that the grounds for cancellation are set out in section 12 of the Regulations and that one of those grounds is failure to comply with any Act of Parliament or of a legislature of a province respecting the taxation of or controls on alcohol or tobacco products (12(1)(c) and 12(1)(e)). The letter goes on to say that the licensee failed to comply with an Act of Parliament (the Excise Act) and an act of a provincial legislature (the Tobacco Tax Act), as was made plain in the letters of June 14, 2004, and August 13, 2004. Accordingly, having regard to the fact that the applicant had ninety days' notice as provided by the Act, the tobacco licence was to be cancelled on February 17, 2005.

[25]            The grounds for cancellation are set out in paragraphs 12(1)(b) to (f) of the Regulations. The respondent does not have discretion to add grounds or apply grounds of cancellation other than those set out. Accordingly, by specifying in its decision that the tobacco licence would be cancelled under paragraph 12(1)(b) and paragraph 12(1)(e), the respondent fulfilled its obligations under the Act and did not violate the applicant's right to procedural fairness.

3. Was the respondent entitled to add a second ground for its decision to cancel the tobacco licence?

[26]            With respect to the applicant's assertion that the Minister should have added a new ground, I find no fault on the part of the respondent. It has an obligation to notify the applicant of any ground of cancellation under the Act or Regulations, and it did this in its letter of August 13, 2004, in which it stated:

[TRANSLATION] However, we recognize that our letter of June 14, 2004, informed you that in addition to failing to comply with the Excise Act (1985), Les Tabacs Galaxy had also failed to comply with an Act of a provincial legislature respecting the taxation of or controls on alcohol or tobacco products, that is, the Tobacco Tax Act (R.S.Q. c. I-2). ... On the other hand, and out of a concern for fairness, please note that the 90 days' notice of cancellation will run from June 14, 2004, the date on which we informed you of a second ground of cancellation, rather than from May 18, 2004.

(Letter from the respondent dated August 13, 2004)

[27]            The respondent provided additional time within which the applicant had to respond, and so on that point I do not see how the Minister might have erred in law or been in any way at fault in such a way as to require the intervention of this Court.

4. Did the respondent enforce the Act against the applicant arbitrarily?

[28]            The applicant's position, that the Minister applied the Act arbitrarily and contrary to the principle of equality before the law, is not supported by any evidence and cannot stand. The respondent's decision was not arbitrary, given that the obligation to take certain factors into account gives the applicant no right to a particular outcome or to the application of a particular legal test (Baker v. Canada (Minister of Citizenship and Immigration), [1999] 2 S.C.R. 817).

5. Are the applicable provisions of the Act and the Regulations ultra vires the federal government?

[29]            The applicant contends that under the rules governing the division of powers, the federal government has no power to give the Tobacco Tax Act (an Act of a provincial legislature) direct effect in the Act of Parliament.

[30]            When we read the Act and Regulations, we see that there is no "true incorporation"; rather, the Regulations merely refer to "any Act of Parliament, other than the Act, or of the legislature of a province respecting the taxation of or controls on alcohol or tobacco products, or any regulations made under it". In this case, there is no "true incorporation":

Some documents are simply mentioned in legislative instruments; they need not be consulted before the operation of the instrument in question can be understood. Others are

"incorporated by reference" in the sense that they are an integral part of the primary instrument as if reproduced therein. It is this latter type of incorporation that can be termed "true incorporation" ... (Reference re Manitoba Language Rights, [1992] 1 S.C.R. 212 at paragraph 33)

[31]            A reference to an Act of a provincial legislature is valid, and cannot be considered to be an unlawful delegation of power. As Cartwright J. said in Coughlin v. Ontario Highway Transport Bd., [1968] S.C.R. 569:

In my opinion there is here no delegation of law-making power, but rather the adoption by Parliament, in the exercise of its exclusive power, of the legislation of another body as it may from time to time exist, a course which has been held constitutionally valid by this Court in Attorney General for Ontario v. Scott, [1956] S.C.R. 137, 114 C.C.C. 224, 1 D.L.R. (2d) 433 and by the Court of Appeal for Ontario in Regina v. Glibbery [1963] 1 O.R. 232, [1963] 1 C.C.C. 101, 38 C.R. 5, 36 D.L.R. (2d) 548.

[32]            In this case, the provincial Act is in no way affected by being mentioned by the Regulations, and the National Assembly of Quebec does not lose its right to repeal or amend that Act if it wishes. Accordingly, on this first point, the federal government did not act ultra vires.

[33]            With respect to the applicant's argument that inter-jurisdictional immunity prevents the federal authority from enforcing provincial legislation in an area that falls within federal jurisdiction, I would simply say that in this case the federal government is not attempting to enforce a provincial Act. Rather, it is simply taking into consideration the violation of a provincial Act, as a ground for refusing to issue - or for cancelling - a tobacco licence. Accordingly, inter-jurisdictional immunity does not apply in this case.

[34]            The applicant also submits that the federal jurisdiction over tobacco is based on its exclusive jurisdiction over criminal law, and accordingly that paragraphs 2(2)(b) and 12(1)(e) of the Regulations are ultra vires because they do not relate to criminal law. That argument must be rejected, having regard to what was said by the Quebec Court of Appeal in Crédit Ford du Canada Ltée v. Canada (ministère du Revenu national - M.R.N.), [1996] Q.J. No. 2697 at paragraphs 16 and 19:

[TRANSLATION] The Excise Act was enacted under the federal taxing power (subs. 91(3) of the Constitution Act, 1867). It establishes a normative and regulatory scheme that provides for the rules by which goods are liable to excise, an indirect tax. In particular, it sets the conditions on which distillers, brewers, tobacco and cigar manufacturers, bonded manufacturers and manufacturers of non-palatable alcohols may be issued licences, and the charges for the issuance of those licences. The Act also determines the method for establishing and paying excise duties to the Receiver General. The Act contains an enforcement mechanism to ensure that its objective is met: the collection of revenue and control over the standards for the manufacture of goods. Under the heading "Offences and Punishment", Parliament has provided forfeiture measures, such as the seizure of goods and transport vehicles, and provided penal measures for punishment, such as imprisonment, fine and restitution, to sanction violations by offenders.

...

Accordingly, I find that the Excise Act is primarily a statutory measure to provide for regulation and control, which has been enacted under a taxing power, and which also includes enforcement provisions that fall within both the federal jurisdiction over taxation and the federal jurisdiction over criminal law. In fact, it is settled law, as a rule, that a statutory measure may be the vehicle for exercising more than one head of jurisdiction among the powers that have been assigned to a level of government (R. v. Hauser, [1979] 1 S.C.R. 984; R. v. Wetmore, [1983] 2 S.C.R. 284).

[35]            The consequences of enforcing paragraphs 2(2)(b) and 12(1)(e) of the Regulations are cancellation of the tobacco licence, which in itself cannot be regarded as a penal consequence, in the criminal law sense. Rather, it is an exercise of the regulatory power in relation to taxation, and is therefore intra vires the federal government.

[36]            Because the respondent was not at fault when it made the decision to cancel the applicant's tobacco licence, and because the constitutional arguments cannot stand, the application for judicial review must be dismissed.

ORDER

THE COURT ORDERS that:

-           The application for judicial review be dismissed;

-           With costs against the applicant.

                 "Pierre Blais"

Certified true translation

K.A. Harvey

STATUTORY PROVISIONS

Regulations respecting Excise Licences and Registrations(E-14.1 - DORS/2003-115)

Canadian Charter of Rights and Freedoms (Schedule B to the Constitution Act, 1982)

Charter of human rights and freedoms(R.S.Q., chapter C-12)

Excise Act(R.S. 1985, c. E-14)

FEDERAL COURT

SOLICITORS OF RECORD

DOCKET:                                          T-253-05

STYLE OF CAUSE:                          9101-9380 QUÉBEC INC. (LES TABACS GALAXY)            v. CANADA CUSTOMS AND REVENUE AGENCY

PLACE OF HEARING:                    Québec

DATE OF HEARING:                      June 15, 2005

REASONS:                                        Mr. Justice Blais

DATE OF REASONS:                      June 23, 2005

APPEARANCES:

Louis Masson                                                                            FOR THE APPLICANT

Jacques Mimar                                                                          FOR THE RESPONDENT

Michel Morel                                                                             MIS EN CAUSE

SOLICITORS OF RECORD:

Joli-Coeur, Lacasse, Jetté, Saint-Pierre

Québec, Quebec                                                                       FOR THE APPLICANT

Attorney General of Canada                                                      FOR THE DEFENDANT

Montréal, Quebec

Veillette et associés                                                                    MIS EN CAUSE

Québec, Quebec