Rothmans of Pall Mall Canacla Limited and Imperial Tobacco Limited v. Minister of National Revenue and Deputy Minister Of, [1976] CTC 339

Le Dain, J (concurred in by Pratte and Urie, JJ):—This is an appeal from a judgment of the Trial Division dismissing an application for relief in the nature of prohibition, mandamus, injunction and certiorari on the ground, among others, that the applicants lack status or locus standi.

The application is directed against action taken by the Minister of National Revenue and the Deputy Minister of National Revenue for Customs and Excise in respect of the interpretation and application of the definition of “cigarette” in section 6 of the Excise Act, RSC 1970, c E-12, for purposes of the imposition, levying and collection of excise duty under the said Act. The Deputy Minister is impleaded because of his authority under the Act to exercise the powers of the Minister. The respondent companies, upon whose representations such action was taken, were, at their request, added as parties by order of the Court.

Section 202 of the Excise Act provides:

202. There shall be imposed, levied and collected on tobacco and cigars manufactured in Canada and on Canadian raw leaf tobacco the duties of excise set out in the schedule, by means of stamps to be affixed to the packages in which tobacco, cigars and Canadian raw leaf tobacco are entered for consumption under departmental regulations.

“Manufactured tobacco” is defined in section 6 of the Act as follows:

“manufactured tobacco” means every article made by a tobacco manufacturer

from raw leaf tobacco by any process whatever, except cigars; and includes cigarettes and snuff;

The definition of “cigarette” in section 6, as replaced by RSC 1970 (1st Supp), c 15, section 3, is as follows:

“cigarette” means every description of cigarette and any roll or tubular

construction intended for smoking that is not a cigar; and where any cigarette exceeds four inches in length, each three inches or fraction thereof shall be deemed to be a separate cigarette;

The Schedule to the Act, as amended, provides that excise duties are to be imposed, levied and collected on cigarettes at the rate of $5 per thousand, where the weight is not more than 3 pounds per thousand, and at the rate of $6 per thousand, where the weight is more than 3 pounds per thousand.

The definition of “cigarette” in the Excise Act has a bearing on the duties collected under the Customs Tariff Act, RSC 1970, c C-41, as indicated by subsection 21(1) of the latter Act, which reads in part as follows:

21. (1) There shall be levied, collected and paid as custom duty on all goods hereinafter enumerated in this section when imported into Canada or taken out of warehouse for consumption therein, in addition to the duties otherwise established, an amount equal to. the amount that would have been imposed, levied and collected thereon under the Excise Act as excise duties i

(d) in the case of cigars, cigarettes and tobacco enumerated in tariff items 14305-1, 14315-1, 14400-1, 14450-1 and 14500-1, the goods were “tobacco, cigars and cigarettes manufactured in Canada” within the meaning of the Excise Act.

The issue of statutory construction raised in these proceedings is whether the filter tip portion of a cigarette should be included in determining its length for purposes of the definition in section 6 of the Excise Act. The Department of National Revenue, Customs and Excise, has adopted the position that it should not be included. The appellants contend that it should, and that the position adopted by the Department gives the respondent companies a competitive advantage which causes the appellants prejudice. The appellants seek by these proceedings to require the Minister to include the filter tip portion of a cigarette in determining its length for purposes of the definition in section 6. The issues on this appeal are whether the appellants have the required status or locus standi to bring these proceedings, and whether, in any event, the specific forms of relief sought would be appropriate to challenge the action of the Minister.

The affidavit evidence and cross-examination thereon disclose the following background to the appellants’ contention. The appellant and respondent companies are competitors in the manufacture and sale of tobacco products. Together they share about 99% of the Canadian market, with their estimated individual shares running approximately as follows: Rothmans—27%; Imperial (or its parent, Imasco)—38%; Macdonald—20%; and Benson & Hedges—14%. Prior to 1975 there were no cigarettes on the Canadian market having an overall length of more than four inches. Sometime early in 1975 the respondent companies, acting separately, decided to introduce cigarettes with a tobacco portion of less than four inches but an overall length, including the filter tip, of more than four inches. Macdonald proposed to introduce a cigarette called “More” and Benson & Hedges a cigareiie called “Plus”. Before doing so they sought clarification from the Department of National Revenue, Customs and Excise, as to how the definition in section 6 of the Excise Act would be applied to such cigarettes, and, specifically, whether the filter tip would be included in determining the length of the cigarettes for purposes of that definition. The practical question, for purposes of excise duty, is whether a cigarette of this length and composition is to be deemed to be one cigarette or two.

Both Macdonald and Benson & Hedges approached the Department separately, without notice to each other or the other members of the industry. Nor did the Department notify anyone else in the industry that this question was being raised. The question appears to have been first raised with departmental officials by Macdonald in May 1975. A memorandum dated June 3, 1975 was sent by WM Horner, Chief Excise Duty, Department of National Revenue, to regional directors, excise, but without notification to the industry, in the following terms:

There is evidence that a market is developing in other countries for long cigarette (over 4 inches).

The manufacturer of cigarettes in Canada in excess of 4 inches would require consideration of length as well as weight when assessing duty.

The definition of a cigarette in the Excise Act stipulates that where a cigarette exceeds 4 inches in length, each 3 inches or fraction thereof shall be deemed to be a separate cigarette.

The weight of the cigarettes is determined as the weight of the tobacco paper and tip. The length of the cigarette should be determined by including these same materials.

Would you kindly adjust your tobacco audit program to make provisions for reviewing the length of cigarette products produced.

There were discussions by representatives of Macdonald and Benson & Hedges with departmental officials in the course of June 1975, and the Department agreed to consider its interpretation of the definition of “cigarette” in section 6 of the Excise Act. Some time around the end of June or the beginning of July, officials in the Department agreed to adopt the view urged by Macdonald and Benson & Hedges, and these companies were so advised. It was conceded on cross- examination by Howard Perriago, Assistant Deputy Minister—Excise of the Department of National Revenue, Customs and Excise, that this represented a “change” of administrative policy or interpretation. Some time in late June or early July the appellant companies learned of the proposed change of policy through their own inquiries and made strong representations against it, but departmental officials indicated that they would adhere to their position. On the strength of the assurances received from departmental officials as to the manner in which the definition of “cigarette” would be applied to “Plus” cigarettes, Benson & Hedges imported these cigarettes for a short period from an affiliated company in the United States and began manufacture of them in Canada in July 1975. Since being introduced into Canada “Plus” and “More” cigarettes have been treated for purposes of excise duty as being cigarettes under four inches in length.

The appellants applied in July 1975 by originating notice of motion for writs of prohibition, mandamus, injunction and certiorari, to have the effect of requiring the Minister of National Revenue and the Deputy Minister of National Revenue for Customs and Excise to include the filter tip portion in determining the length of cigarettes for purposes of calculating the number of cigarettes upon which duties are to be imposed, levied and collected under the Excise Act. On the hearing of the motion the respondents made what the trial judge described as “a preliminary objection to the Court’s jurisdiction to grant the relief asked for”. After hearing argument on this issue and reserving judgment, he dismissed the motion on the ground that the applicants lacked status or locus standi for any of the relief claimed, and on the further grounds that, apart from the question of status, the powers and duties of the respondent officials and the nature of the action taken by them were not such as to give rise to the specific forms of relief sought. The applicants appealed from this judgment.

The complaint of the appellants is that the change in departmental policy was adopted without first giving them an opportunity to be heard and that it had the effect of conferring a competitive advantage on the respondent companies by permitting them to market a longer cigarette for the same amount of excise duty as is paid by the appellants. The appellants do not contend, nor is there any evidence to suggest, that they themselves have had any interest in marketing a cigarette with a tobacco portion of less than four inches but an overall length, including the filter tip, of more than four inches. They do not seek the interpretation which they contend to be the correct one in order to permit them to do anything in particular that they are not able to do now, but rather to prevent the respondent companies from doing something which is thought to give the latter a commercial advantage.

I am in agreement with the learned trial judge that such an interest is not sufficient to give the appellants the required status or locus standi to obtain any of the relief sought in their application. The appellants do not have a genuine grievance entitling them to challenge by legal proceedings the interpretation which the respondent officials have given to the definition of “cigarette” in section 6 of the Excise Act for purposes of their administrative application of the Act. Such interpretation does not adversely affect the legal rights of the appellants nor impose any additional legal obligation upon them. Nor can it really be said to affect their interests prejudicially in any direct sense. If it permits the respondent companies to do something which the appellants are not doing, it is because the appellants choose not to do it.

The appellants do not derive any rights, procedural or otherwise, from what may have been their own assumption as to how section 6 of the Excise Act would be applied to a cigarette in which the tobacco portion is less than four inches long but the overall length, including the filter tip, is more than four inches. Before May or June 1975, officials of the Department had not been called on to consider this question so there was no basis in their action for such an assumption. In so far as the interpretation is to be considered a “change” of administrative policy it can only be considered as such in relation to the internal memorandum circulated by Horner at the beginning of June. When the question was raised by the respondent companies in May and June the departmental officials were under no duty to advise the appellant companies and offer them an opportunity to make representations. I know of no authority which supports a general duty, when considering a change of administrative policy to be applied in individual cases, to notify and offer anyone who may be interested an opportunity to make representations.

The circumstances of the present case are distinguishable, for example, from those in Regina v Liverpool Corporation, ex parte Liverpool Taxi Fleet Operators’ Association, [1972] 2 QB 299, in which the Court of Appeal granted an application for prohibition to prevent the Corporation from giving effect to a change of policy respecting the number of taxi cab licences to be issued before hearing representations from taxi cab owners and other interested persons. When the corporation had originally considered a change in the existing policy it had invited representations from the owners and following such representations the corporation had given an undertaking to the owners that there would be no increase in the number of licences issued before certain legislation to regulate private cars for hire had been adopted and put into force. Contrary to this undertaking, which the corporation had been advised was not binding on it, and without notice to the owners and a further opportunity to them to make representations, the corporation adopted resolutions providing for an increase in the number of licences. On learning of this the owners asked for an opportunity to make representations and were in effect denied an adequate opportunity. The Court held that the Corporation had dealt unfairly with the owners. Lord Denning, MR held that, given the nature of the power to grant taxi licences, there was a duty to act fairly by giving persons interested an opportunity to make representations before adopting a change of policy with respect to the issue of licences. The Court as a whole held that the corporation was bound by the undertaking that it had given, at least to the extent that it should not be permitted to set it aside before hearing all those who were interested. In my opinion the decision in this case cannot be taken as authority for the proposition that whenever an administrative authority, regardless of the nature of its function, contemplates a change in the policy to be applied in individual cases, it has a duty to notify persons who may conceivably be interested and offer them an opportunity to make representations. The conclusion that the Corporation had not acted fairly in the Liverpool Taxi case must be viewed in the light of the particular circumstances of that case: the general nature of the power to grant licences; the early assurances given to the taxi owners that they would be heard before there was any change of policy, and the fact that they were heard in the first instance; and, finally and most importantly, the undertaking given by the Corporation to the owners that there would be no increase in the number of licences before certain legislation had come into force, which carried with it the necessary implication that there would be no departure from this undertaking without a further opportunity to the owners to make representations. The importance to be attached to these circumstances, in considering the general significance of this case, is reflected, I think in the judgments of the other members of the Court, which, as I read them, rested essentially on the undertaking that the Corporation had given. Roskill, LJ said:

It has been said that the council and its relevant committee and subcommittee were never under any duty to hear any representations from the applicants. That may or may not be correct. In the tight of what has happened, I do not think it necessary to express any opinion upon that question.

Sir Gordon Willmer said:

It seems to me that in these very special circumstances, having regard to the history of how this matter had been dealt with in the past, and having regard especially to the giving of the undertaking, the applicants are justified in regarding themselves as “aggrieved” by what I can only describe as unfair treatment on the part of the Liverpool Corporation.

The circumstances in the present case are quite different and afford no basis for a conclusion that the respondent officials acted unfairly towards the appellants. There had been no previous representations by the appellants as to how the definition in section 6 in the Excise Act should be applied to cigarettes of the kind introduced by the respondent companies. There had been no undertaking to the appellants with respect to this question. Nor did such practice as there was with respect to industry representation give any reasonable expectation that representations of the kind made by the respondent companies, involving a matter of a competitive nature, were such as would come from the industry as a whole or be promptly communicated to the industry as a whole. in any event, the appellant companies learned of the proposed policy soon after it was adopted and had an opportunity to make representations.

It is unnecessary to review the many cases that were cited to us as purporting to show that the courts are increasingly disposed to take a broad view of the requirement of locus standi. The expression that is given to the requirement of locus standi may vary somewhat from one recourse to another, and it may be that the requirement is not as strict with respect to certiorari and prohibition, where in certain circumstances a stranger may be recognized as having standing, as it is with respect to other recourses. Cf de Smith, Judicial Review of Administrative Action (3rd ed), pp 366-9. But in none of the cases on certiorari and prohibition, however broad a view is taken of the requirement of locus standi, do I find anything to suggest that persons in the position of the appellants in relation to the official action complained of would be considered to be persons aggrieved for purposes of these remedies. It may be conceded that in certain contexts a competitive interest may be regarded as conferring status to challenge administrative action, as for example, on certicrari to quash the grant of a licence allegedly in excess of jurisdiction: The King v Richmond Confirming Authority, [1921] 1 KB 248. A person should not, however, in my view, have the right to interfere with or meddle in official action affecting an existing competitor for the sole purpose of preventing that competitor from obtaining some advantage, particularly where the action complained of is something that the person complaining is free to take advantage of himself. That kind of interest appears to have been clearly rejected in the case of Regina v Commissioners of Customs and Excise, [1970] 1 WLR 450 (aibeit one of mandamus), where Lord Parker, CJ said:

Secondly, as it seems to me, in any event the interest, or the motive, which is moving this application is what I would term an ulterior motive, a motive of putting people out of business and nothing more.

The public interest in competition must be borne in mind in exercising the judicial discretion as to whether to recognize standing in a competitive relationship.

The decisions of the Supreme Court of Canada in Thorson v Attorney General of Canada, [1975] 1 SCR 138, and McNeil v Nova Scotia Board of Censors (1975), 5 NSR (2d) 43, were urged upon us as indicating a relaxation of the requirement of locus standi. A caretui reading of these decisions shows, in my respectful opinion, that the principal consideration governing them is the importance in a federal state of opportunity to challenge the constitutional validity of statutes. No such consideration is applicable here. It was suggested that there is a comparable consideration of public policy in broad access to challenge the validity of administrative action, and this view finds some support in the recognition of a judicial discretion to permit a stranger to bring certiorari or prohibition in certain cases. The present case is not one that raises any question of the limits of statutory authority. The most that is raised is a question of administrative interpretation that the authorities are obliged to make in their application of the governing statute. Indeed, the action in this case is not of the Kind that is subject to challenge by certiorari or prohibition. There is no decision here determining rights or obligations in an individual case, much less a determination of those of the appellants. See Landreville v The Queen, [1973] FC 1223. There is no duty to act judicially or fairly in a procedural sense. In so far as mandamus is concerned, there is no public duty of any kind that the appellants have a right to enforce. The duty of the respondent officials under section 202 of the Excise Act is one owing to the Crown rather than the appellants. Cf Queen v Lord Commissioners of the Treasury (1872), LR 7 QB 387. In so far as injunction is concerned, apart from the question of whether it may lie in certain cases against servants of the Crown, there is no interference with the rights of the appellants such as would entitle them to bring it against public authorities. Cowan v CBC, [1966] 2 OR 309.

For all of the above reasons the appeal should be dismissed with costs.