Docket: T-2547-14
Citation:
2016 FC 836
Ottawa, Ontario, July 20, 2016
PRESENT: The
Honourable Madam Justice Roussel
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BETWEEN:
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ROBBIE DICKSON and
RAINBOW TOBACCO G.P.
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Plaintiffs
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and
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HER MAJESTY THE
QUEEN IN RIGHT OF CANADA, LISE OUELLETTE, RONALD JEAN-LÉGER, DENIS
BEAUSOLEIL, VLADIMIR DESRIVEAUX, STAN LOACH and RCMP OFFICERS JANE and JOHN
DOE
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Defendants
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JUDGMENT AND REASONS
I.
Overview
[1]
The Plaintiffs, Robbie Dickson and Rainbow
Tobacco G.P., appeal an order of Prothonotary Richard Morneau, dated August 5,
2015, striking their amended statement of claim against all the Defendants
except Her Majesty the Queen in Right of Canada. The scope of their appeal
concerns only the Canada Revenue Agency [CRA] employees, Lise Ouellette, Ronald
Jean-Léger, Denis Beausoleil, Vladimir Desriveaux and Stan Loach, and the Royal
Canadian Mounted Police [RCMP] officers Jane and John Doe [collectively
referred to as the Individual Defendants].
[2]
The underlying action arises from a refusal by
the Minister of National Revenue to renew Rainbow’s federal tobacco
manufacturing licence, which it held from 2004 until 2011. The Plaintiffs
commenced an action against Her Majesty the Queen, the Attorney General of
Canada, the Minister of National Revenue, the RCMP, Commissioner Bob Paulson
and the Individual Defendants seeking fifty million dollars ($50,000,000) in
moral damages, an undetermined amount in material damages, one million dollars
($1,000,000) in punitive, exemplary and aggravated damages and damages pursuant
to subsection 24(1) of the Canadian Charter of Rights and Freedoms, Part
I of the Constitution Act, 1982, being Schedule B to the Canada Act
1982 (UK), 1982, c 11.
[3]
Her Majesty the Queen and the Attorney General
of Canada brought a motion to strike the Plaintiffs’ amended statement of claim
against all of the Defendants, except for Her Majesty the Queen. They argued
that the Federal Court does not have jurisdiction to entertain the claim
against the Commissioner of the RCMP and the Individual Defendants because the
claim against them is founded on principles of liability grounded in provincial
law and only incidentally requires the application of federal law. They also
moved to strike the Attorney General of Canada, the RCMP and the Minister of
National Revenue from the action on the basis that the action should only be
directed against the Crown. In response, the Plaintiffs argued that the Federal
Court has jurisdiction to entertain the claim against the Individual Defendants
on the basis that the claim, as pleaded, is governed by a detailed framework of
federal law that is essential to the disposition of their case and which
nourishes the statutory grant of jurisdiction to the Federal Court.
[4]
The Plaintiffs’ motion proceeded in writing
only. Prothonotary Morneau granted the motion to strike and struck out the
Plaintiffs’ amended statement of claim as against all of the Defendants with
the exception of Her Majesty the Queen.
[5]
The main issue in this appeal involves the
determination of whether it is plain and obvious that the Federal Court lacks
jurisdiction to entertain the Plaintiffs’ claim against the Individual
Defendants.
[6]
For the reasons set out below, I have concluded
that the appeal should be allowed.
II.
Background
[7]
The Plaintiffs allege the following facts in
their amended statement of claim.
[8]
Robbie Dickson is a Mohawk member of the
Kahnawá:ke community and a status Indian within the meaning of the Indian
Act, RSC 1985, c I-5. He is a partner of Rainbow Tobacco G.P., a general
partnership established under the laws of Québec.
[9]
In July 2004, the CRA granted Rainbow a federal
licence to manufacture tobacco products pursuant to the Excise Act,
2001, SC 2002, c 22. The licence permitted Rainbow to import, transport,
possess, store, sell and manufacture tobacco products. The tobacco
manufacturing licence issued to Rainbow by the CRA was renewed each year from
2005 to 2011. The CRA confirmed in correspondence to Rainbow that it did not
require Rainbow to hold any provincial tobacco licences as a condition of its
federal licence because it was producing products for sale on the reserve.
[10]
In addition to manufacturing tobacco products
for sale in Kahnawá:ke, Rainbow also sold its products to First Nations on
different reserves across Canada. The CRA expressed to Rainbow that it was its
position that the provinces had no jurisdiction over Rainbow’s business
activities and that Rainbow was not in contravention of any provincial laws.
[11]
In September 2010, the Ontario Provincial Police
and the RCMP seized a large quantity of Rainbow’s manufactured tobacco products
while it was being transported between Kahnawá:ke and other First Nations in
Ontario. Mr. Dickson was charged with violations of Ontario’s Tobacco Tax
Act, RSO 1990, c T 10, for failing to possess provincial tobacco permits.
[12]
A few months later, the RCMP and the Alberta
Gaming and Liquor Commission seized a much larger quantity of Rainbow’s
manufactured tobacco while in storage on the Montana Cree First Nation in
Alberta. The RCMP charged Mr. Dickson with violations of Alberta’s Tobacco
Tax Act, RSA 2000, c T4, for failing to possess provincial tobacco permits.
[13]
As a result of the seizures conducted in Ontario
and Alberta, Rainbow’s tobacco products became stale and unmarketable.
[14]
In November 2011, Rainbow applied to the CRA for
the renewal of its tobacco manufacturing licence for 2012. By letter dated
December 15, 2011, the Defendant Lise Ouellette advised Rainbow that its licence
would not be renewed after December 31, 2011. The grounds provided were: 1)
Rainbow’s failure to comply with provincial legislation regarding the taxation
or control of tobacco products as required under subparagraph 2(2)(b)(i)
of the Regulations Respecting Excise Licences and Registrations,
SOR/2003-115 [the Regulations]; and 2) Rainbow had insufficient financial
resources to conduct its business in a responsible manner, as per the
requirements of subparagraph 2(2)(c)(ii) of the Regulations.
[15]
The Plaintiffs allege in their amended statement
of claim that the CRA Individual Defendants were required to exercise
reasonable diligence in the tobacco licensing process pursuant to the Excise
Act, 2001 and related regulations, and that they owed a fiduciary duty to
Mr. Dickson as a result of his alleged Aboriginal right to trade in tobacco
with other First Nations people. The Plaintiffs allege the following faulty
conduct committed by the CRA Individual Defendants:
i)
the failure to respect the rules of behaviour
incumbent upon them;
ii)
the failure to exercise the due diligence
required by their position;
iii)
the failure to provide relevant information to
Rainbow as required by their position;
iv)
the failure to honour the agreements and
understandings between the CRA and Rainbow;
v)
the provision of misleading or inappropriate
advice to Rainbow regarding federal and provincial licensing requirements and
Rainbow’s compliance with those requirements;
vi)
improperly charging excise duties that were not
owed by Rainbow;
vii)
making decisions with respect to issuing a
tobacco licence to Rainbow based on inappropriate or improper factors;
viii)
the failure to acknowledge Mr. Dickson’s
Aboriginal rights and to act in accordance with the Honour of the Crown;
ix)
the breach of Rainbow’s rights to natural
justice and procedural fairness.
[16]
As for the unnamed and yet to be identified RCMP
officers, Jane and John Doe, the Plaintiffs allege that they had a duty to
engage in the investigation of Rainbow’s business in a competent and
professional manner. The Plaintiffs state that the officers conducted a
negligent investigation, orchestrated unlawful seizures of merchandise,
inappropriately lobbied against the renewal of Rainbow’s tobacco licence, were
incompetent to carry out the duties of police officers and failed to exercise
the standard of care required by their position.
[17]
The Plaintiffs also allege in their amended statement
of claim that both the CRA and the RCMP Individual Defendants committed
misfeasance in public office and acted in a manner that is inconsistent with
their duties as outlined in the Canada Revenue Agency Act, SC 1999, c 17
and the Excise Act, 2001, as well as the duty of good faith incumbent
upon them pursuant to articles 6 and 7 of the Civil Code of Québec, CQLR
c C-1991. In support of their allegation, the Plaintiffs state that the
Individual Defendants intentionally and/or recklessly engaged in a course of
unlawful conduct in advocating and/or participating in the CRA’s refusal to
renew Rainbow’s licence based on improper and discriminatory grounds. The
Plaintiffs also state that the Individual Defendants knew or were reckless to
the fact that the taxation provisions of the Excise Act, 2001 were
inoperative as against the Plaintiffs because of their conflict with section 87
of the Indian Act.
[18]
The Plaintiffs also allege that the Individual
Defendants were reckless to the fact that the Plaintiffs’ conduct in
manufacturing, transporting and distributing cigarettes manufactured on reserve
to Indians and bands is a lawful exercise of Aboriginal rights. As such, the
Individual Defendants interfered with the Plaintiffs’ economic interests and
lawful exercise of Aboriginal rights.
[19]
Finally, the Plaintiffs allege that the
Individual Defendants unlawfully conspired for the purpose of causing economic
harm to the Plaintiffs and frustrating Mr. Dickson’s Aboriginal rights.
[20]
In addition to their allegations against the
Individual Defendants, the Plaintiffs allege that the Defendant Her Majesty the
Queen is liable, pursuant to section 3 of the Crown Liability and
Proceedings Act, RSC 1985 c C-50, in respect of damages resulting from the Individual
Defendants’ violations of the Canadian Charter of Rights and Freedoms,
the Canadian Bill of Rights, SC 1960, c 44 and the Québec Charter of
Human Rights and Freedoms, CQLR c C-12.
III.
Analysis
A.
Standard of review
[21]
A discretionary order of a prothonotary shall
not be disturbed on appeal unless the questions raised in the motion are vital
to the final issue of the case, or the order is clearly wrong, in the sense
that the exercise of discretion by the prothonotary was based upon a wrong
principle of law or upon a misapprehension of the facts (Merck & Co. v
Apotex Inc., 2003 FCA 488 at para 19 [Apotex]; Canada v Aqua-Gem
Investments Ltd., [1993] 2 FCR 425 (FCA) at paras 67-68).
[22]
This Court has held that where a defendant is
successful in bringing a motion to strike, the decision is vital to the final
issues of a case. In such circumstances, the Court will proceed to consider the
appeal on a de novo basis (Peter G. White Management Ltd v Canada
(Minister of Canadian Heritage), 2006 FCA 190 at paras 33 to 36 [Peter
G. White Management]; Teva Canada Ltd. v Pfizer Canada Inc., 2014 FC
69, [2014] FCJ No 856 (QL) at para 24; Bayer Healthcare AG v Sandoz Canada
Incorporated, 2007 FC 1068 at para 6).
[23]
The Defendants submit that the removal of the
Individual Defendants is not vital to the final issue of this case because the
claim will continue against Her Majesty the Queen. The Defendants argue that
the Crown is being sued for the same causes of action as the Individual
Defendants and that if any of the Individual Defendants were found to have
acted in a manner inconsistent with their public duties, the Crown would be
vicariously liable for their actions.
[24]
To the extent that the wrongs allegedly
committed by the Individual Defendants flow from their duties as Crown
servants, I agree with the Defendants that it is likely that the Crown would be
vicariously liable. Pursuant to subparagraph 3(a)(i) of the Crown
Liability and Proceedings Act, the Crown is liable in Québec for the
damages caused by the fault of a servant of the Crown, and pursuant to subparagraph
3(b)(i) of the same Act, the Crown is liable in any other province in
respect of a tort committed by a servant of the Crown. The Plaintiffs have
acknowledged the Crown’s liability for the damages committed by the Individual
Defendants in paragraph 47 of their amended statement of claim.
[25]
If, however, the alleged wrongs were found to be
outside the performance of their duties or insufficiently connected to the
Individual Defendants’ employment, then the Crown would not necessarily be held
vicariously liable. Although the Individual Defendants could be sued before the
provincial courts, the removal of the Individual Defendants from this claim
would put an end to the Plaintiffs’ action against them in the Federal Court.
The Federal Court of Appeal relied upon the same rationale in Peter G. White
Management at paragraph 35 to conclude that the removal of the individual
defendants was vital to the final issue of the case.
[26]
Even if I were to find that the removal of the
Individual Defendants is not vital to the final issue of the case on the basis
that the Crown would be held vicariously liable for the alleged wrongs
committed by the Individual Defendants, I am nonetheless of the view that the
second prong of the Apotex test has also been met. The Prothonotary’s Order
is based on a wrong principle in law and as such, it is clearly wrong.
[27]
In finding that it was plain and obvious that
the amended statement of claim could only be pursued in the Federal Court
against the Defendant Her Majesty the Queen, Prothonotary Morneau stated that
he adopted the reasons developed by the moving defendants in their
representations in chief as well as their written representations in reply. In
reply, they argued that the Federal Court lacked jurisdiction over the claim
against the Individual Defendants on the basis that the presence of the
Individual Defendants was not vital to the final issue of the case.
[28]
The determination of whether the inclusion of a
defendant is vital to the final issue of a case does not form part of the test
to be applied in determining whether this Court has jurisdiction. As stated by
the Supreme Court of Canada in ITO-International Terminal Operators Ltd v
Miida Electronics Inc, [1986] 1 S.C.R. 752 at 766 [ITO], the essential
requirements to support a finding of jurisdiction in the Federal Court are :
1)
There must be a statutory grant of jurisdiction
by Parliament;
2)
There must be an existing
body of federal law which is essential to the disposition of the case and which
nourishes the statutory grant of jurisdiction;
3)
The law on which the case is based must be a “law
of Canada” as the phrase is used in section 101 of the Constitution Act,
1867, 30 & 31 Vict, c 3.
[29]
By adopting the Defendants’ written
representations without further explanation, Prothonotary Morneau incorporated
a new requirement in the ITO test and for that reason, his Order is
clearly wrong. Consequently, I am of the view that I must consider the motion
to strike the Individual Defendants from the amended statement of claim on a de
novo basis.
B.
Motion to strike under Rule 221(a) of the
Federal Courts Rules
[30]
The test for striking an action pursuant to Rule
221(1)(a) of the Federal Courts Rules, SOR 98-106, with or
without leave to amend, for lack of jurisdiction is the same as the one for
striking a claim on the ground that the claim discloses no reasonable cause of
action; it is a stringent one (Hodgson v Ermineskin Indian Band No. 942, [2000]
FCJ No 313 at para 10 (FCA)). For such a motion to succeed, it must be “plain
and obvious” that the action cannot succeed because it is bereft of any chance
of success. The facts pleaded in the statement of claim must be presumed to be
true and the burden of satisfying this high standard lies with the party
seeking to strike the pleading (Hunt v Carey Canada Inc, [1990] 2 SCR
959 at 980; R v Imperial Tobacco Canada Ltd, 2011 SCC 42 at paras 17, 21
and 22).
[31]
The Plaintiffs argue that it is not
“plain and obvious” that their claim cannot succeed against the Individual
Defendants. The Defendants argue the contrary.
[32]
I now turn to the crux of the matter before this
Court which is to determine whether it is plain and obvious that this Court
does not possess jurisdiction to entertain the Plaintiffs’ claim against the
Individual Defendants.
C.
Jurisdiction of the Federal Court
[33]
As stated earlier, in order to support a finding
of jurisdiction in the Federal Court it must be established that: (1) there is
a statutory grant of jurisdiction by the federal Parliament; (2) there is an
existing body of federal law which is essential to the disposition of the case
and which nourishes the statutory grant of jurisdiction; and (3) the law on
which the case is based must be “a law of Canada” as the phrase is used in section
101 of the Constitution Act, 1987 (ITO, at 766).
[34]
The Defendants concede that the first
requirement of the ITO test has been met in that paragraph 17(5)(b)
of the Federal Courts Act, RSC 1985, c F-7 confers jurisdiction to the
Federal Court over the acts and omissions of officers, agents or servants of
the Crown. They argue however that the second and third requirements set out in
ITO are not met in the case at hand.
[35]
The issue is thus whether there is an “existing body of federal law which is essential to the
disposition of the case and which nourishes the statutory grant of jurisdiction”
and whether it may constitute a “law of Canada”.
[36]
The Plaintiffs submit that the Federal Court of
Appeal decision in Peter G. White Management is dispositive of the issue
and is binding authority with respect to the jurisdiction of the Federal Court.
In particular, the Plaintiffs rely on paragraphs 59 and 60 of the decision
where the Federal Court of Appeal states that “the fact
that a plaintiff’s cause of action is in tort or in contract does not
necessarily preclude the matter from federal jurisdiction” and that “when parties’ rights arise under and are extensively
governed by a ‘detailed statutory framework’, disputes may be adjudicated in
the Federal Court”. The Plaintiffs also rely on the earlier cases of the
Federal Court of Appeal in Oag v Canada, [1987] 2 FC 511 (FCA) [Oag]
and Kigowa v Canada, [1990] 1 FC 804 (FCA) (WL) [Kigowa] to
support their argument that the Federal Court has jurisdiction over the
Individual Defendants.
[37]
The Plaintiffs argue that, as in those cases,
there is a nexus between the Plaintiffs’ rights and federal law. The rights at
issue include first, a tobacco licence that is a creature of the Excise Act,
2001 and has no existence outside that statute, and secondly, the
Aboriginal rights of Mr. Dickson under the Indian Act and the Constitution
Act, 1867. The legal relationship between the parties can be expressed
either as that of federal tobacco licensee and licensor and/or enforcement
body, or as a relationship between First Nation member and federal Crown agent.
In either case, the very existence of the relationship is entirely a function
of federal law emanating from the Excise Act, 2001 and its regulations,
the Canada Revenue Agency Act, the Royal Canadian Mounted Police Act,
RSC 1985 c R-10, the Indian Act, and the Constitution Act, 1982.
In summary, the Plaintiffs submit that the pith and substance of their claim is
that the conduct of the Individual Defendants was not authorized by the federal
laws under which they purported to act and the lawfulness of that conduct must
be decided by reference to those statutes.
[38]
The Defendants argue that the Plaintiffs’ claim
is in pith and substance one for damages arising from the alleged misuse of
statutory powers and that there is no general body of federal law “covering the area of the dispute”. The Defendants
note that the Plaintiffs rely upon the Civil Code of Québec and the Québec
Charter of Human Rights and Freedoms. As for the Plaintiffs’ claim
concerning Aboriginal title and the right to “sell and
exchange tobacco with other First Nations”, the Defendants argue that
the Plaintiffs have not alleged an Aboriginal treaty right and are not seeking
a declaration to that effect, in which case, such a declaration would have to
be directed against the Crown and not the individuals. With respect to the
Plaintiffs’ argument concerning the Honour of the Crown, the Defendants submit
that not all interactions between the Crown and Aboriginal peoples will engage
this principle and in any event, the Honour of the Crown is not a cause of
action in and of itself. In summary, the Defendants argue that the Plaintiffs’
claim is in pith and substance based on provincial law and the fact that the
claim incidentally requires the determination of a question of federal law does
not bring the action within federal jurisdiction. There is no statutory cause
of action for damages and there is no tort recognized in Canadian law arising
from a statutory breach in and of itself.
[39]
The issue of whether or not there is an “existing body of federal law which is essential to the
disposition of the case and which nourishes the statutory grant of
jurisdiction” has been widely examined by the courts. The decisions are
not always easy to reconcile, and as pointed out in Peter G. White
Management, the issue of how much federal law is required to justify
federal jurisdiction, particularly in the context of an action against Crown
servants in tort, remains difficult to determine (Peter G. White Management,
at para 60).
[40]
In a number of cases, the Courts have struck out
actions against Crown servants on the basis that the Federal Court did not have
jurisdiction because the right to damages emanated from provincial tort law (Pacific
Western Airlines Ltd. v The Queen, [1980] 1 FC 86 (FCA); Stephens v The
Queen, (1982) 26 CPC 1 (FCA); Braybrook v Canada, 2005 FC 417; Robinson
v Canada, [1996] FCJ No 1524 (QL); Leblanc v Canada, 2003 FCT 776).
[41]
The Federal Court has also found in certain
cases that it possesses jurisdiction over alleged torts committed by Crown
servants. For example, in Maguire v The Queen, [1990]
1 FC 742, a
fisherman alleged that he had been wrongly deprived of his commercial salmon
fishing licence by the actions of two fisheries officers. The fisheries
officers moved to be struck from the action for want of jurisdiction. This
Court determined that the Fisheries Act, RSC, 1985, c F-14 constituted a
detailed statutory framework sufficient to nourish the grant of jurisdiction to
the Federal Court as it provided a detailed regulatory regime governing the
terms and conditions for obtaining commercial salmon fishing licences.
[42]
Following the decision of the Supreme Court of
Canada in ITO, the Federal Court of Appeal appears to have gradually adopted
a more expansive interpretation of this Court’s jurisdiction over individual Crown
servants or agents who are sued personally for alleged torts.
[43]
Beginning in Oag, the Federal Court of
Appeal found that the Trial Division (as it then was) had jurisdiction to
entertain a claim in tort for false arrest, false imprisonment, assault and
battery against two individual defendants who served as members of the National
Parole Board. The plaintiff had been entitled to be released from prison on
mandatory supervision; however, due to the alleged actions of the defendants,
he was detained. The Federal Court of Appeal observed that the Parole Act, RSC
1970, c P-2 and the Penitentiary Act, RSC 1970, c P-6 were the source of
the plaintiff’s freedom and concluded that the alleged torts were committed
because the Plaintiff’s right to remain free had been interfered with. In other
words, the tort was dependant on a right which was created by federal law.
[44]
Later, in Kigowa, an immigration officer
was found to have been appropriately named as an individual defendant in an
action for damages due to unlawful detention. In that case, the plaintiff was
stopped by the officer after he jumped off a ship and entered Canada. He was
detained on the basis that he was a danger to the public or would fail to
appear, however he contested the officer’s grounds for his detention. The
Federal Court of Appeal found that the Court had jurisdiction over the claim as
the plaintiff’s right to be at liberty in Canada while awaiting an inquiry into
his potential removal was governed by the Immigration Act, 1976, SC
1976-77, c 52. In concurring reasons, Justice Heald articulated the connection
between the plaintiff’s claim and the federal law as follows: “[i]f the torts were committed, it was because the
plaintiff’s right to remain free pursuant to the provisions of the Immigration
Act were interfered with” (Kigowa, at para 18).
[45]
Similarly, in Canada v Smith, 2002 FCA
348 [Smith], two individual defendants who served as RCMP officers were
allowed to remain on the statement of claim as their presence met the
requirements of the ITO test. The Federal Court of Appeal found that the
essence of the plaintiff’s claim was supported by an existing body of federal law,
notably the Witness Protection Program Act, SC 1996, c 15. Under the
terms of section 8 of that statute, a protection agreement was deemed to
include an obligation on the part of the Commissioner to take such reasonable
steps as are necessary to provide the protection referred to in the agreement
to the person protected. The plaintiff argued that he had fulfilled his
obligations under the agreement and that as a result, the officers were
responsible for his protection. The plaintiff sued the Crown and five RCMP
officers personally for negligence, undue influence, and breach of fiduciary,
statutory and contractual duties in relation to the plaintiff’s rights under
the Witness Protection Program Act. The Federal Court of Appeal found that
the damage alleged consisted of the deprivation of rights under a federal
statute and was purportedly caused by federal officers’ abuse of their powers under
that statute (Smith, at para 18).
[46]
Finally, in Peter G. White Management, a claim
against a Minister and three federal public servants was held to be within the
jurisdiction of the Federal Court. The plaintiff was the assignee of a lease
granted for use of a commercial ski area in Banff National Park. It asserted
that the lease entitled it to the use of a gondola during the summer months.
The Field Unit Superintendent of Banff National Park declined to issue the plaintiff
a licence for such use on the basis that it was not in compliance with Banff
National Park Management Plan that had been adopted and tabled in the House of
Commons pursuant to a provision in the National Parks Act, 1985 RSC c
N-14. In a statement of claim seeking damages against Her Majesty the Queen and
other defendants including the CEO of Parks Canada and the Superintendent and
Field Superintendent of the Banff National Park personally, the plaintiff made
numerous allegations including breach of contract, tortious interference with
business relations and abuse of public office. The essence of the claim was
that the Crown, by enacting the Management Plan for Banff National Park which
included a prohibition against summer operation of the plaintiff’s gondola,
made it impossible for the plaintiff to obtain a business licence, and thus to
have the quiet enjoyment of the leased premises, something to which the Crown
had engaged itself contractually when it leased the land.
[47]
While recognizing that the causes of action
pleaded against the non-Crown defendants were common law torts, the Federal
Court of Appeal found that the lease to operate the gondola in the summer
months was a key element in each cause of action. Additionally, although the
rights under the lease were contractual in nature, they had been created in a
legal environment that was heavily regulated by federal legislation and which
also established the parameters within which leases could be granted. The Federal
Court of Appeal found that the plaintiff’s rights under the lease were expressly
made subject to applicable federal legislation and the need to obtain a licence
and in particular, the National Parks of Canada Businesses Regulations,
1998, SOR/98-455, which dealt extensively with the licensing of business
operations in national parks. The Federal Court of Appeal concluded that, on
the facts of the case, the claim against the individual defendants was in “pith
and substance” based on federal law, with provincial law being only incidental.
Federal legislation respecting national parks, which governed leases and the
operation of businesses, comprised a detailed statutory framework. The federal
legislation upon which the Court relied to reach this conclusion consisted of
the National Parks Act, the Parks Canada Agency Act, SC 1998, c
31, the National Parks of Canada lease and Licence of Occupation Regulations,
SOR/92-25, and the National Parks of Canada Businesses Regulations, 1998.
[48]
The requirements of the second branch of the ITO
test were recently examined by the Federal Court of Appeal in Canadian
Transit Company v Windsor (Corporation of the City), 2015 FCA 88 [Canadian
Transit Company]. The issue to be determined in that case was whether the
Federal Court had jurisdiction to entertain an application brought by Canadian
Transit Company seeking a declaration to the effect that the city of
Windsor’s bylaws did not apply to its properties on the basis of the
constitutional doctrines of interjurisdictional immunity and paramountcy. The
Federal Court struck out the application because there was insufficient federal
law in the proceeding to support its jurisdiction; however, the Federal Court
of Appeal overturned this decision on appeal.
[49]
In discussing the application of the second
branch of the ITO test, the Federal Court of Appeal noted that the first
step consists of assessing the nature of the proceeding, including what body of
law will be necessary to determine the outcome of the case. The second step requires
an assessment of whether overall, federal law will play a primary role, in the
sense of being “essential to the outcome of the case
and nourishing the statutory grant of jurisdiction” (Canada Transit
Company, at para 29). The Court found that the provisions of the relevant
federal statute would bear on the issue of whether Canadian Transit Company
would be entitled to the declarations it was seeking. Upon review of several
provisions in the statute, the Court found that federal law was essential to
the determination of the proceedings (Canada Transit Company, at paras
34, 36) and that provincial law played only a subsidiary or incidental role.
The Court also noted the different words and approaches used to describe the
degree of federal law that is sufficient to support a finding of federal jurisdiction:
[39] Different
cases use different words and approaches to describe the degree of federal law
that is sufficient. ITO-Int’l Terminal Operators, above, inquires into
whether provincial law is only “incidentally necessary” to the federal law in
the case (at pages 781-782). Other authorities start with the federal law and
ask whether it bears upon the case. For example, one formulation is whether
“the rights and obligations of the parties are to be determined to some
material extent by federal law” or whether the cause of action “is one affected”
by federal law: Bensol Customs Brokers Ltd. v. Air Canada, [1979] 2 F.C.
575 at pages 582-83, 99 D.L.R. (3d) 623 (C.A.). Yet another formulation is
whether “the federal statute has an important part to play in determining the
rights of the parties”: The Queen v. Montreal Urban Community Transit
Commission, [1980] 2 F.C. 151 at page 153, 112 D.L.R. (3d) 266 (C.A.).
[50]
The Court then provided examples of cases
involving elements of provincial law in which the Federal Court was found to
have jurisdiction, including the Peter G. White Management decision to
which I referred to earlier.
[51]
The decision of the Federal Court of Appeal in Canadian
Transit Company has been appealed to the Supreme Court of Canada. Leave was
granted on October 8, 2015, and the appeal was heard on April 21, 2016; however
no decision has yet been made. Until then, the principles emanating from the decisions
of the Federal Court of Appeal remain the law.
[52]
Having provided an overview of the principal
decisions in which the Federal Court’s jurisdiction has been considered, I now
turn to the case at hand.
[53]
The Plaintiffs’ claim in damages essentially involves
allegations of misuse of statutory powers by the Individual Defendants. The
Courts have found that the rights arising from such misuse of power are common
law torts which generally fall within provincial jurisdiction (Stephens
Estate v Canada, [1982] FCJ No 114 at para 15). However, the examination of
this Court’s jurisdiction does not end there. As stated by the Federal Court of
Appeal in Peter G. White Management, the fact that the Plaintiffs’ causes
of action may be in tort, or in Québec, civil liability, does not necessarily
preclude the matter from federal jurisdiction (Peter G. White Management,
at para 59; Rhine v The Queen, [1980] 2 S.C.R. 442 at 447). The Court must
examine whether overall, federal law plays a primary role in the sense that it
is essential to the outcome of the case and nourishes the grant of
jurisdiction, or as stated in Peter G. White Management, whether the Plaintiffs’
claim against the Individual Defendants is “in pith and substance” based on
federal law and whether the rights arise under, or are extensively governed by,
a detailed federal statutory framework (Canadian Transit Company, at
paras 29 and 60).
[54]
While the Plaintiffs’ causes of action against
the Individual Defendants may be based in civil liability and in tort, I am
satisfied that the Plaintiffs’ claim is “in pith and substance” that the
conduct of the Individual Defendants was not authorized by the federal
legislation under which they purported to act. I am also satisfied that the
federal legislation provides a sufficiently detailed framework to nourish the
Federal Court’s jurisdiction and which is essential to the outcome of the case.
[55]
The issuance of a licence authorizing the
manufacture of tobacco products is governed by the Excise Act, 2001
and its Regulations, which both deal with the production and possession of
tobacco products and are administered by the Minister of National Revenue. Parts
3 and 3.1 of the Excise Act, 2001 are specifically dedicated to tobacco
and establish its regulations, duties, special duties, excise warehouses and
inventory tax. In terms of tobacco manufacturing licensing requirements, paragraph
14(1)(d) establishes the Minister’s discretion to issue a licence and paragraph
23(1)(b) provides that the Minister may refuse to issue a licence if he has
reason to believe that the refusal is otherwise in the public interest. Subsection
23(3) of the Excise Act, 2001 also stipulates that the Minister
or his authorized representative can specify the activities that may be
exercised under the licence and impose any conditions considered appropriate to
carry-on the activities under the licence. The Minister can also require an
applicant to provide adequate security in an amount that is determined in accordance
with the Regulations.
[56]
The Regulations also provide a detailed
framework governing the issuance and cancellation of licences to manufacture
tobacco. Specifically, subparagraph 2(2)(b)(i) provides that an applicant
is eligible for a licence if they have complied with provincial law respecting
the taxation of or control of tobacco products during the five years preceding
the application. Section 5 establishes the amount and the type of security that
must be provided by an applicant. Additionally, section 9 details the
requirements for the renewal of a licence and sections 10 and 11 establish the
conditions for suspending and cancelling a licence.
[57]
The Excise Act, 2001, also sets out the
role of the RCMP in the federal regulation of tobacco products. RCMP members are
designated as “officers” under section 2 of the Excise Act, 2001, and as
such they are entitled to enforce its provisions. Part 6 of the Excise Act,
2001 is dedicated to the enforcement of the Act, and specifies the duties
of officers and the scope of their enforcement responsibilities. In particular,
section 260 sets out the responsibilities of an officer who conducts an
inspection, section 261 details officers’ responsibilities regarding the
custody and retention of seized goods and sections 264 to 266 provide for the
return of seized goods upon the payment of a security. Section 271 also
provides for a certain procedure to be followed if the Minister decides that a
penalty or seizure was imposed in error.
[58]
The Plaintiffs also rely on paragraph 87(1)(b)
of the Indian Act which provides that the “personal
property of an Indian or a band situated on a reserve” is exempt from
taxation. The Plaintiffs argue that because the partners of Rainbow are
“Indians”, they are not subject to tax on personal property, and that the
taxation provisions under the Excise Act, 2001 and related regulations
are also inapplicable to tobacco products manufactured by Rainbow in
Kahnawá:ke. They further argue that as a member of the Kahnawá:ke community, Mr.
Dickson possesses an Aboriginal right to sell and exchange tobacco with other
First Nations people pursuant to subsection 35(1) of the Constitution Act,
1982.
[59]
The Canada Revenue Agency Act and the Royal
Canadian Mounted Police Act are also alleged by the Plaintiffs to be
applicable.
[60]
That being said, there is also a provincial
element to the Plaintiffs’ claim. The Plaintiffs’ licence was not renewed as a
result of the charges which were brought against Mr. Dickson in Ontario and
Alberta for failing to comply with their respective provincial tobacco tax
acts. The Plaintiffs also rely on the duty of good faith found in articles 6
and 7 of the Québec Civil Code.
[61]
In my view, the determination of whether the
Individual Defendants are liable for wrongfully refusing to renew the
Plaintiffs licence on the basis that they failed to comply with provincial
legislation respecting the taxation of tobacco products, will ultimately depend
on whether the Plaintiffs are exempt from taxation pursuant to section 87 of
the Indian Act. For this reason, I am satisfied that the Plaintiffs have
successfully demonstrated that, on the basis of the amended statement of claim
as pleaded, their claim is “in pith and substance” based on federal law and is
governed by a detailed federal statutory framework essential to the outcome of
the case.
[62]
As for the third branch of the ITO test,
the Excise Act, 2001 and the Indian Act are federal legislation
and clearly constitute a “law of Canada” as the phrase is used in section 101
of the Constitution Act, 1867 (Peter G. White Management, at para
55).
[63]
Accordingly, on the basis of the record before
me, I am satisfied that it is not plain and obvious that this Court lacks
jurisdiction to entertain the Plaintiffs’ claim against the Individual
Defendants.
[64]
In light of my conclusion, it is not necessary
for me to consider the Plaintiffs’ other arguments in relation to the
sufficiency of reasons, the failure to order an oral hearing on the motion to
strike and whether leave to amend should have been granted.
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