R. v. Chatwin Motors Ltd. et al., [1980] 2 SCR 64

Supreme Court of Canada

R. v. Chatwin Motors Ltd. et al., [1980] 2 S.C.R. 64

Date: 1980-03-27

Her Majesty The Queen Appellant;

and

Chatwin Motors Limited, Katila Chevrolet-Oldsmobile Ltd. (formerly Grant Katila Motors Ltd.), Meyers Holland Motors (Port Alberni) Ltd., Ohs Brothers Motors Limited and Western Motors Limited Respondents.

1979: October 24, 25; 1980: March 27.

Present: Martland, Ritchie, Pigeon, Dickson, Beetz, Estey and McIntyre JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR BRITISH COLUMBIA

Criminal law—Appeal from acquittal on charges under Combines Investigation Act—Questions of law alone not involved—Court of Appeal without jurisdiction—Trial judge, fully cognizant of applicable legal principles, deciding on facts that Crown failed to prove commission of offences charged—Combines Investigation Act, R.S.C. 1970, c. C-23, s. 32(1)(c) [re-en. 1974-75-76, c. 76, s. 14].

The respondent companies were, during the relevant time, motor vehicle dealers in Port Alberni, British Columbia. They were indicted on three counts under s. 32(1)(c) of the Combines Investigation Act. These counts charged that the respondents had unlawfully conspired, combined, agreed or arranged to prevent or lessen, unduly, competition in the sale, transportation or supply of parts and accessories for motor vehicles by (1) agreeing to add a common freight charge to the selling price of such parts and accessories, (2) agreeing to add a common surcharge to sales of such parts and accessories, and (3) agreeing to a common policy in relation to rebates given for returned parts and accessories. At trial, the Crown did not seek to prove a conspiracy relating to an undue lessening of competition in the total market for parts but rather only in connection with “captive” parts (i.e., parts which may only be obtained from an automobile manufacturer or his franchised dealer).

In respect of count (1), the trial judge found that the Crown had proved the existence of an agreement among all the respondents to add a 3 per cent charge to their

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list prices for certain parts of a “captive” nature on which they themselves had to pay freight. He concluded, though, that the offence itself had not been made out because the agreement had no effect on competition in the market. He also acquitted the respondents on the charge contained in count (2). He found that there was evidence of a meeting at which it was agreed to impose a 10 per cent surcharge but said that the agreement was not intended, nor shown, to have any effect on competition. As regards count (3), the trial judge found an agreement between the respondents Katila and Chatwin but held that the Crown had failed to show that the agreement would have effected or did effect an undue lessening of competition.

The Crown appealed the acquittals on counts (1) and (2) to the British Columbia Court of Appeal. The respondents moved to quash the appeal contending that the grounds of appeal did not involve questions of law alone. The motion was granted, Craig J.A. dissenting. The Crown appealed to this Court pursuant to subs. 1(a) of s. 621 of the Criminal Code.

The respondents moved to quash the appeal to this Court on the ground that the dissent of Craig J.A. was not on a question of law. This motion was dismissed prior to the argument of this appeal on the merits on the ground that the issue before the Court of Appeal was as to the jurisdiction of that Court to hear the appeal and Craig J.A. had dissented from the reasons of the majority on that issue.

Held: The appeal should be dismissed.

Read as a whole, and considering the substance of the trial judgment, the trial judge, after instructing himself as to the legal principles applicable, came to the conclusion, on the evidence, that the Crown had not established that the respondents had agreed to lessen competition unduly. Some passages in the judgment, taken out of context, if considered as stating propositions of law, might be subject to attack. A reference to the judgment of Rothman J. in R. v. Aluminum Co. of Canada (1976), 29 C.P.R. (2d) 183, at p. 211, was perhaps, unfortunate, but like the majority in the Court of Appeal, this Court did not construe the trial judgment as stating as a proposition of law that the Crown, to succeed in a prosecution under subs. (1) of s. 32 of the Combines Investigation Act, must prove that the agreement was intended as a device for controlling prices, or that the Crown must prove that the agreement contemplated the fixing of a common price; nor as stating as a

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proposition of law that a common surcharge can have no effect upon competition.

As stated in R. v. Odeon Morton Theatres Ltd. and United Artists Corp., [1974] 3 W.W.R. 304, where the right of the Crown to appeal from an acquittal was considered, “the problem whether the appeal involves a question of law alone is not one to be determined in the abstract but rather against the actualities of the record.” “Against the actualities of the record” in the present case, the Court was of the opinion that the trial judge, fully cognizant of the applicable legal principles, decided on the facts that the Crown had failed to prove commission of the offences charged in counts (1) and (2).

APPEAL from a judgment of the Court of Appeal for British Columbia[1], dismissing the appeal by the appellant and sustaining the acquittal of the respondents on charges alleging the commission of offences contrary to s. 32(1)(c) of the Combines Investigation Act, R.S.C. 1970, c. C-23. Appeal dismissed.

C.O.D. Branson and H. Wetston, for the appellant.

R.W. Lusk and P.G. Foy, for the respondents.

The judgment of the Court was delivered by

MARTLAND J.—The respondents were acquitted on three counts alleging the commission of offences contrary to subs. (1)(c) of s. 32 of the Combines Investigation Act, R.S.C. 1970, c. C‑23. The appellant filed a notice of appeal to the Court of Appeal for British Columbia. The respondents moved to quash the appeal contending that the grounds of appeal did not involve questions of law alone. The motion was granted, Craig J.A. dissenting. The appellant appeals to this Court pursuant to subs. (1)(a) of s. 621 of the Criminal Code.

The respondents moved to quash the appeal to this Court on the ground that the dissent of Craig J.A. was not on a question of law. This motion was dismissed prior to the argument of this appeal on the merits on the ground that the issue before the

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Court of Appeal was as to the jurisdiction of that Court to hear the appeal and Craig J.A. had dissented from the reasons of the majority on that issue.

The respondent companies were, during the relevant time, motor vehicle dealers in Port Alberni, British Columbia. They were indicted on three counts under s. 32(1)(c) of the Combines Investigation Act. These counts charged that the respondents had unlawfully conspired, combined, agreed or arranged to prevent or lessen, unduly, competition in the sale, transportation or supply of parts and accessories for motor vehicles by (1) agreeing to add a common freight charge to the selling price of such parts and accessories, (2) agreeing to add a common surcharge to sales of such parts and accessories, and (3) agreeing to a common policy in relation to rebates given for returned parts and accessories. These offences were alleged to have taken place between 1967 and 1972 and to have affected the city of Port Alberni and the surrounding market area.

The trial judge outlined the following relevant facts:

Chatwin Motors Limited was in existence during the whole period of the alleged conspiracies and sold the Pontiac-Buick line of General Motors. Katila Chevrolet‑Oldsmobile Ltd. came into existence originally under the name Grant Katila Motors Ltd., which was incorporated on September 29th of 1961 and had its name changed some time during 1969. This corporation also held a General Motors franchise and sold the Chevrolet-Oldsmobile line. Meyers Holland Motors (Port Alberni) Ltd. until January of 1970 held a Ford franchise dealing with the Lincoln‑Mercury line. Ohs Brothers Motors Limited also held a Ford franchise which entitled it to sell the Ford products. These last two named accused corporations ceased to do business as of January of 1970, when the whole of the Ford line including the Lincoln-Mercury and Ford products were handled by the defendant Western Motors Limited. Western Motors Limited started business in January of 1970, taking over from the other two Ford distributors and buying part of their assets.

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All of the defendants sold new and used automobiles and also sold automobile parts, both wholesale and retail. They wholesaled the automobile parts manufactured by the auto company from which they were franchised. Their wholesale customers were mainly service stations, auto body repair shops, and other dealerships. In addition they retailed auto parts to the general public and the customers who had their automobiles repaired in the dealership garage. Of the defendants, Katila and Ohs were equipped with collision repair facilities.

Within the trade there are two classifications or categories of automobile parts known generally as “captive” or “competitive” parts.

“Captive” parts are parts which may only be obtained from an automobile manufacturer or his franchised dealer. “Captive” parts included generally body parts such as fenders, doors, bumpers, grilles, interior mouldings, etc.

“Competitive” parts are parts which are not only available from a franchised auto dealership but also from a number of independent jobbers and wholesalers. Examples of “competitive” parts would include spark plugs, shock absorbers, mufflers, brake linings. In this line could be included also what are known as “accessories” and which may loosely be defined as parts which are not necessary for the running of the automobile. These too could be obtained from a number of independent wholesalers and generally from all the franchised dealers.

Evidence was tendered to show that there was very brisk competition in the area of the general parts business in Port Alberni and the competition continued throughout the time covered by these indictments. By far the greatest competition was in the “Competitive Parts” category. It was estimated that about 80% to 85% of all the Parts business in the area was of a “Competitive Parts” nature.

In the field of “Captive Parts” those manufactured by General Motors were distributed in Port Alberni only through the two General Motors dealers, the accused Chatwin and Katila; while those from Ford were distributed first by the two defendants, Ohs and Meyers Holland, and latterly solely by Western.

At trial, the Crown did not seek to prove a conspiracy relating to an undue lessening of competition in the total market for parts but rather only in connection with “captive” parts.

At the commencement of his judgment, the trial judge said this:

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I am indebted to both counsel for the exhaustive reviews contained in their written submissions of the law on this statute and specifically relating to that section confined to conspiracy to restrict competition unduly. I do not find any significant dispute in the submission of counsel on the current interpretation of this section of the Act, and I content myself with stating what I consider to be the governing principles and with which counsel appear to be in full agreement.

In summary, the applicable law was stated as follows:

1. The offence lies, not in any overt act, but in the conclusion of an agreement to carry out certain acts.

2. The “intention” with which the parties made their agreement is irrelevant. If the effect of the agreement is unduly to lessen or prevent competition, the agreement is a criminal one, no matter what may have been the intention of the parties.

3. The agreement or conspiracy is only unlawful where, if the agreement were carried out, an undue restriction of competition would result.

4. While it is not necessary for there to be any evidence that the conspiracy has been carried out, the Court may look at any overt acts that may result from the carrying out of the conspiracy.

He cited the following passage from the judgment of my brother, Ritchie, in the case of Aetna Insurance Co. et al. v. The Queen[2], at p. 747:

The fact that an agreement existed to prevent or lessen competition in the price of insurance does not of itself constitute an offence under the section; the illegal character of the agreement lies in the fact that the prevention or lessening is undue and it appears to me that the best if not the only way in which to determine this is by considering whether competition would be unduly prevented or lessened if the design evidenced by the agreement were carried into effect. In my view it is only by assessing what the result would be if the agreement were implemented that the elusive quality of undueness can be measured, and it was for this reason that the learned trial judge in the present case heard evidence as to the effect of the plan on free competition in the insurance business.

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The trial judge then proceeded to consider the evidence.

In respect of count (1), the trial judge found that the Crown had proved the existence of an agreement among all the respondents to add a 3 per cent charge to their list prices for certain parts of a “captive” nature on which they themselves had to pay freight. He concluded, though, that the offence itself had not been made out because the agreement had no effect on competition in the market.

He also acquitted the respondents on the charge contained in count (2). He found that there was evidence of a meeting at which it was agreed to impose a 10 per cent surcharge but said that the agreement was not intended, nor shown, to have any effect on competition.

As regards count (3), the trial judge found an agreement between Katila and Chatwin but held that the Crown had failed to show that the agreement would have effected or did effect an undue lessening of competition.

The Crown appealed the acquittals on counts (1) and (2) to the British Columbia Court of Appeal. The Notice of Appeal alleged that eleven errors of law had been committed by the trial judge. These errors are as follows:

1. That the learned trial judge erred in law in his interpretation of what constitutes preventing or lessening competition within the meaning of section 32(1)(c) of the Combines Investigation Act.

2. That the learned trial judge erred in law in deciding that with respect to Count 1, the Crown was required not only to prove an agreement to pass on a 3% charge reflecting an increase in freight rates in relation to captive automobile parts, but was also required to prove that this agreement was intended as a device for controlling prices and thereby limiting competition.

3. That the learned trial judge erred in law in deciding that with respect to Count 2, the Crown was required not only to prove an agreement to pass on

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a further 10% charge reflecting labour costs in relation to captive automobile parts, but was also required to prove that this agreement was intended as a device for controlling prices and thereby limiting competition.

4. That the learned trial judge erred in law in that he misdirected himself as to the intention necessary to constitute an offence under Section 32(1)(c) of the Combines Investigation Act.

5. That the learned trial judge erred in law by considering the motives of the parties to the agreements as a factor in the determination of whether such agreements were unlawful.

6. That the learned trial judge erred in holding that he could not as a matter of law find a common agreement between the Ford dealers and the General Motors dealers as to the addition of a common 3% freight charge.

7. That the learned trial judge erred in holding that he could not, as a matter of law, find a common agreement between the Ford dealers and the General Motors dealers as to the addition of a common 10% surcharge.

8. That the learned trial judge erred by holding that it is at law necessary for the unlawful agreement contemplated in section 32(1)(c) of the Combines Investigation Act to fix a common price or follow a common pricing formula or listing.

9. That the learned trial judge erred in law in holding that a common surcharge, not in any way related to a common pricing policy, can have no effect upon competition.

10. That the learned trial judge erred in law in finding there was no evidence of any minimum or base prices to which the common 3% freight charge was agreed to be added.

11. That the learned trial judge erred in law in finding there was no evidence of any minimum or base price to which the common 10% surcharge was agreed to be added.

The appellant’s factum, in stating the order which it is desired this Court should make, seeks an order allowing the appeal and directing the

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Court of Appeal to hear the appeal upon grounds 1, 2, 3, 6, 7, 8, 9, 10 and 11. However, in the statement of the points in issue, the error alleged on the part of the Court of Appeal is only as to grounds 1, 2, 3, 8, 9, 10 and 11, and those were the points in issue before this Court.

In the Court of Appeal, the respondents contended that the only questions raised in the appeals to that Court were ones of fact or of mixed fact and law and that, consequently, the Court was without jurisdiction. Seaton J.A., Bull J.A. concurring, allowed the motion and quashed the appeals.

Seaton J.A. dealt with the grounds in groups, as that had been the approach taken by counsel. Grounds 1, 2, 3, 8 and 9 were all seen to involve an alleged error as to the interpretation of the term “competition” in subs. 32(1)(c) of the Act. The Crown conceded that the trial judge had accurately stated the applicable principles of law at the beginning of his judgment, but argued that he had subsequently committed errors. The Crown placed particular emphasis on a passage the trial judge had extracted from The Queen v. The Aluminum Company of Canada et al.[3] at p. 211, and the reliance that it was alleged he had placed on it. The trial judge had extracted these words:

…here there is no evidence whatever of price fixing or common prices and no indication that this was the intended effect. …I am not aware, and counsel were not aware, of any Canadian decision in which an agreement to pass on a bare increase in cost, in the absence of price-fixing or common prices, was found to be illegal under section 32(1)(c) or the equivalent provision previously contained in the Criminal Code. In virtually every case that comes to mind, where price competition was held to be lessened, there were common prices fixed.

He had then said:

So in the present case if price does play an important role, it can only do so because of some agreement to fix a common price or follow a common pricing formula or listing. There was no evidence here of any relationship between the 3% or the 10% surcharges and real prices,

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since the respective dealers did not agree to fix common prices or price lists.

I am aware there were manufacturers’ master sheets with suggested retail prices. But there is no suggestion in the evidence that these master sheets were followed carefully by the distributors, even between the two dealers of General Motors products in the same town of Port Alberni. So whatever the agreement was between the parties, there was no apparent effect on real prices, since there was no base price on which agreements took effect.

Seaton J.A. noted that the trial judge had correctly stated the relevant principles of law at the outset of his judgment. He then went on to say:

What Mr. Justice Rothman said in the Aluminum case may be very good common sense or very bad common sense; but it was not law. If that reasoning is not applicable to this case, then the trial judge might have been wrong in adopting it, but it was not error of law. The fact that logic is found in a decision does not make it law. Mr. Justice Rothman was not stating and did not purport to be stating that it would be wrong in law to find that an agreement to pass on a bare increase in cost can constitute a breach of section 32(1)(c). Indeed, he specifically rejected that suggestion later in his judgment. The part that I have read is now reported at page 211 of the Canadian Patent Reporter. At page 213 of that report, this is said:

“I do not wish to suggest that an agreement to increase prices is, in itself, always insufficient to constitute a ‘lessening of competition’,…”

and he went on in a similar vein. I think it quite clear that Mr. Justice Rothman did not purport to be stating law and I think it equally clear that the trial judge here did not understand the judgment in the Aluminum case, that part of it at any rate, to be a statement of law. The learned trial judge adopted the reasoning, not in the sense of adopting law but as adopting reasoning that appealed to him, and it has apparently appealed to others. But it is reasoning in answering the second question, that is, whether or not there was or would be an undue lessening of competition.

There were other specific errors alleged in this group or groups of appeal with which I am now dealing, but I think it unnecessary to go through them separately. They raise, in my view, question of fact—they are stated as issues of law but, as such, they lack reality. By taking phrases out of context and putting before them the words “The trial judge erred in law in finding” one can

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create the appearance of an issue of law. But in my view, in this case, when the grounds are tested against the judgment, the appearance is found not to be sound—the issues are really of fact.

Turning to grounds 4 and 5, Seaton J.A. found that in so far as these grounds purported to state issues of law, they did not state questions that arose in this case. The trial judge had not misdirected himself as to the necessary intention. He had mentioned the intention and purpose of the agreements when discussing the surrounding circumstances but that was not an error.

Grounds 6 and 7 were disposed of on the basis that they concerned alternative reasons for finding that the Crown’s case had not been made out. It was conceded that unless the main grounds had merit that grounds 6 and 7 were only academic.

Seaton J.A. also found that grounds 10 and 11 disclosed no error in law on the part of the trial judge. The Crown’s argument was based on the following passages from the trial judgment:

So in the present case if price does play an important role, it can only do so because of some agreement to fix a common price or follow a common pricing formula or listing. There was no evidence here of any relationship between the 3% or the 10% surcharges and real prices, since the respective dealers did not agree to fix common prices or price lists.

…

They charged 3% of the total list price of the invoice as a freight charge on special order items. But of course they were charging on their own list prices and there is no suggestion that the prices were identical or even similar as between two distributors for the same manufacturer, i.e., Chatwin Motors and Katila Chevrolet. Certainly the list prices were different even for similar parts where the dealer represented a separate manufacturer, as was the case with Meyers Holland and Ohs, who represented Ford Motors.

The Crown relied upon the words “no suggestion” and “no evidence”. Seaton J.A. said that those statements were not to be likened to a find-

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ing of no evidence at the end of a Crown case. The trial judge had simply found that on the evidence it was not shown that there was a base price.

Craig J.A. was of the view that motions of this kind should only be granted in the clearest cases and he dissented from the opinion of the majority. He said:

The appellant has, as my brother presiding mentioned, raised 11 grounds. The respondents concede that two of them, namely, grounds 6 and 7, do raise questions of law alone. Both counsel agree, however, that these are, in effect, alternative reasons for a finding of guilt or acquittal, and a decision with respect to them would be academic if a judge found that there was competition but that it had not been unduly lessened by that agreement.

The grounds of appeal, on their face, in my view, do raise questions of law. With deference, I think there are some parts of the judgment which could be related to these particular grounds. Grounds 1, 2, 3, 8 and 9 have been lumped together by counsel for the appellant. Ground 1, of course, makes the broad statement that the judge erred in law in his interpretation of what constitutes preventing or lessening competition within the meaning of Section 32(1)(c) of the Combines Investigation Act. Grounds 2 and 3 refer specifically to the fact that the judge erred by imposing a burden on the Crown which should not have been imposed, namely, that the Crown also had to prove that the agreement was intended as a device for controlling prices and therefore limiting competition.

As I say, looking at the judgment and taking some statements out of context, I think there is some support for these propositions.

Grounds 4 and 5, in my view, perhaps do not really raise an issue of law alone.

Grounds 10 and 11, with deference to my brother presiding, do, in my opinion, raise questions of law alone. In my opinion, when a judge asserts that there is no evidence upon which to make a certain finding, and the appellant alleges that that particular issue is an essential issue in the case, then the judge has erred in law.

Craig J.A. went on to say:

I feel constrained to say, however, that had we heard the appeal completely on the merits (and I am not

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entirely sure that we have not), I would have been disposed to dismiss the appeal, because I think the judgment, taken in its entirety, indicates that the judge did in fact direct himself as to the proper principles and that he did in fact, although he did not say so expressly, with regards to grounds 1 and 2, make a finding that the agreement did not unduly lessen competition. However, in the circumstances, I would dismiss the motion.

I am in agreement with the conclusions reached by Seaton J.A. Read as a whole, and considering the substance of the trial judgment, the trial judge, after instructing himself as to the legal principles applicable, came to the conclusion, on the evidence, that the Crown had not established that the respondents had agreed to lessen competition unduly. Some passages in the judgment, taken out of context, if considered as stating propositions of law, might be subject to attack. The reference to the judgment of Rothman J. in The Queen v. The Aluminum Company of Canada et al, supra, was, perhaps, unfortunate, but like Seaton J.A. I do not construe the trial judgment as stating as a proposition of law that the Crown, to succeed in a prosecution under subs. (1) of s. 32 of the Combines Investigation Act, must prove that the agreement was intended as a device for controlling prices, or that the Crown must prove that the agreement contemplated the fixing of a common price; nor as stating as a proposition of law that a common surcharge can have no effect upon competition.

In Regina v. Odeon Morton Theatres Ltd. and United Artists Corporation[4], Chief Justice Freedman, considering the right of the Crown to appeal from an acquittal, said at p. 304:

Manifestly the problem whether the appeal involves a question of law alone is not one to be determined in the abstract but rather against the actualities of the record. It is not usually difficult for an experienced Crown counsel to frame the appeal in language suggesting that a question of law is there involved. In that way a prima facie basis for the court’s jurisdiction to hear the appeal is made to appear. But a ground of appeal thus framed may on analysis prove to be without validity, for one of two reasons. It may, in the first place, be wholly without support in the record—a theoretically good ground

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poised, as it were, in the air but not rooted in the factual situation facing the court. Or, secondly, it may on examination prove to involve questions of fact rather than of law. Its form may give jurisdiction but its substance deny it. It is in the light of these considerations that the present grounds of appeal must be tested.

“Against the actualities of the record” in the present case, it is my opinion that the trial judge, fully cognizant of the applicable legal principles, decided on the facts that the Crown had failed to prove commission of the offences charged in counts (1) and (2).

I would dismiss the appeal.

Appeal dismissed.

Solicitors for the appellant: Edwards, Kenny & Bray, Vancouver.

Solicitors for the respondents: Ladner, Downs, Vancouver.