Turner’s Dairy, Limited, Et Al. v. Lower Mainland Dairy Products Board, Et Al., [1940-41] CTC 359

D. A. McDonald, J.:—This action is brought by various produeers and distributors of milk in the Lower Mainland area of British Columbia against the Lower Mainland Dairy Products Board, and Milk Clearing House Limited, for a declaration that orders numbered 10, 12, 13, 14 and 15 passed by the defendant Board pursuant to the Scheme set up under the statute, R.S.B.C., 1936, ch. 165, are ultra vires. In my view the case resolves itself into two principal though not involved questions. The difficulty has been to bring these questions into focus from the large mass of material and the extensive and careful arguments which are before the Court. The question of the sale and distribution of milk in the Lower Mainland has been so often before the Courts in recent years that it seems to me to be a word of supererogation to repeat the history of this litigation except in the briefest way. For the purposes of this decision it is only necessary to make the following observations. The statute in question was held by the Judicial Committee to be intra vires the provincial government. See Shannon v. Lower Mainland Dairy Products Board and Atty.-Gen. for B.C., [1988] 2 W.W.R. 604, [1938] A.C. 708, 107 L.J.P.C. 115. At an earlier date, namely, in 1933, a scheme set up under the then existing statute passed in 1929 was held to amount to indirect taxation and, hence, beyond the powers of the provincial Legislature. That decision is contained in Lower Mainland Dairy Products Sales Adjustment Committee v. Crystal Dairy Lid., [1932] 3 W.W.R. 639, [1933] A.C. 168, 102 L.J.P.C. 17.

The gravamen of the plaintiffs’ complaint in the present action is that in order to escape the results of the decision in the Crystal Dairy case, supra, the defendant Board adopted a colourable scheme whereby to make it appear that milk was actually being sold by the producers to the defendant Milk Clearing House Limited and resold by the Clearing House to the distributors at prices fixed by the Board whereas there was in fact intended to be no sale at all. The contention is that the clearing house was intended to operate as a mere conduit pipe, an instrument whereby the price to be paid to producers of milk should be equalized so that in effect the proceeds of milk produced by producer A. should in certain proportions be taken from him and handed over to producer B., as had been in effect the practice under the earlier scheme.

The plaintiffs are met on limine with the objection that, admitting that the statute is intra vires and the scheme set up by the Lieutenant-Governor in Council under the statute is intra vires and the orders issued by the Board are plain on their face, it is not open to the Courts to make any inquiry as to the motives which actuated the members of the Board in passing the orders which are now attacked. Speaking for myself that question is closed by my decision on an interlocutory application in this action, reported [1939] 3 W.W.R. 241, and by the judgment of Martin, C.J.B.C. on the appeal, reported [1940] 2 W.W.R. 193. I have examined again the cases cited in those judgments and I can find no reason to alter what is there said. On the contrary, with the greatest deference to the able argument presented by counsel for the defendants I think what is there said with regard to an inferior tribunal of the nature of the defendant Board is strengthened by an examination of what was said by the Judicial Committee in Union Colliery Co. of B.C. Ltd. v. Bryden, [1899] A.C. 580, 68 L.J.P.C. 118.

Being of that opinion I did allow an inquiry at the trial as to the history of the legislation and the various schemes and as to what was the purpose of the members of the Board in passing the orders in question.

I can see no useful purpose in analysing in detail the evidence which was admitted. Let it suffice to say that the whole picture in my view is similar to that described by-Lord Macmillan in another connection where his Lordship said they "‘consequently invented the imposing facade of a sale which sold nothing. ‘ ‘ The members of the Board who passed these orders knew that the agency theretofore existing would be attacked as being merely an agency formed for the purpose of equalizing prices and, hence, subject to being impugned under the decision in the Crystal Dairy case, supra. With a view of escaping from that attack the Board was instrumental in having the defendant Milk Clearing House Limited incorporated under the Companies Act, R.S.B.C., 1936, ch. 42. It is pretended that it was so incorporated as an ordinary commercial concern whose object is to buy in the cheapest market and sell in the dearest market and in the ordinary course of trade to make a profit for its shareholders. I think the more one examines the evidence the more he must become convinced that this is a mere sham. I do not believe it was ever intended that the Clearing House should make any profit and if there were any doubt on this one needs only to examine the evidence of Mr. Sherwood, one of the directors of the company.

If, as I think, the real purpose and effect of the impugned arders are, as alleged in par. 25 of the statement of claim, "‘to take from the producer supplying the fluid market a portion of his real returns and to contribute the same to other producers for the purpose of equalization (and that) the so-called sales and resales to and by the agency so-called are colourable ‘ ‘ then I am satisfied the orders cannot stand.

Any suggestion of moral turpitude or mala fides in any objectionable sense is expressly renounced by counsel for the plaintiffs. What is charged and what I think is proven is that the chairman of the Board and the defendant Barrow, in their zeal to make to operate the machine which had been placed in their charge, over-stretched their hands and sought to accomplish indirectly what the law had disclosed they could not do directly.

It follows that the declaration and injunction will go as sought in the prayer of the statement of claim. Costs will follow the event.