Duff
C.J.C.—The
learned
trial
judge
in
his
reasons
for
judgment
Says
:—
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,
56
B.C.R.
103;
[1941]
W.W.R.
342;
[1941]
2
D.L.R.
279,
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
in
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
enquiry
as
to
the
motives
which
actuated
the
members
of
the
Board
in
passing
the
orders
which
are
now
attacked.
*
*
*
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
ease,
[1933]
A.C.
168.
With
a
view
to
escaping
from
that
attack
the
Board
was
instrumental
in
having
the
defendant
Milk
Clearing
House
Limited
incorporated
under
the
Companies
Act.
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
orders
are,
as
alleged
in
paragraph
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.
The
learned
trial
judge’s
findings
were
approved
by
the
majority
of
the
Court
of
Appeal.
There
was
sufficient
evidence
to
support
the
view
that
the
purpose
and
effect
of
the
impugned
orders
was
to
enable
the
Board,
in
co-operation
with
its
agent
the
Clearing
House,
to
equalize
prices
as
between
producers
who
have
a
market
for
their
milk
in
the
more
advantageous
fluid
milk
market
and
producers
whose
milk
is
not
sold
in
the
fluid
milk
market
but
must
be
sold
in
the
manufacturers
market
at
a
lower
price;
and
to
accomplish
this
by
abstracting
from
the
proceeds
of
the
sales
of
the
former
class
in
the
fluid
milk
market
a
sufficient
part
of
the
returns
from
the
sale
of
their
milk
to
enable
the
Board,
by
handing
that
part
over
to
the
other
producers,
to
bring
the
several
rates
of
return
for
the
two
classes
into
a
state
of
equality.
Mr.
Locke,
in
his
able
argument,
did
not
succeed
in
convincing
me
that
the
Board
is
entitled
to
employ
its
powers
respecting
marketing
and
the
regulation
of
prices
to
do
what
it
has
attempted.
Such
an
administrative
body
as
the
Board
in
exercising
its
statutory
powers—powers
affecting
the
rights
and
interests
of
private
individuals—is
under
an
obligation
not
only
to
observe
the
limits
of
its
powers
and
to
act
conformably
to
the
procedure
laid
down;
it
is
under
a
strict
duty
to
use
its
powers
in
good
faith
for
the
purposes
for
which
they
are
given.
The
application
of
this
principle
is
illustrated
in
the
judgments
in
the
House
of
Lords
in
The
Municipal
Council
of
Sydney
v.
Campbell,
[1925]
A.C.
338,
and
in
Campbell
v.
Village
of
Lanark
(1893)
O.A.R.
372.
The
impugned
orders
are
obnoxious
to
this
principle
in
the
purpose
disclosed
by
the
orders
themselves
and
the
evidence
adduced
to
accomplish
indirectly
what
the
King
in
Council
has
adjudged
they
cannot
lawfully
do
directly,
namely,
by
enacting
monetary
contributions
from
milk
producers
by
a
method
constituting
indirect
taxation.
Lower
Mainland
Dairy
Products
Sales
Adjustment
Committee
v.
Crystal
Dairy
Limited,
[1933]
A.C.
168,
at
176.
In
view
of
some
of
the
arguments
advanced
in
the
factums
and
elsewhere
I
think
it
is
wise
perhaps
to
call
attention
to
the
wide
difference
between
a.
provincial
legislature
which
exercises
powers
of
legislation
in
the
strict
sense,
the
Crown
being
a
party
to
its
enactments,
and
an
administrative
body
exercising
powers
of
administration
under
statutory
authority,
such
as
the
appellant
Board.
The
appeal
will
be
dismissed
with
costs.
The
judgment
of
Rinfret,
Crocket
and
Taschereau
JJ.
was
delivered
by
TASCHEREAU
J.—In
their
statement
of
claim,
the
plaintifs-
respondents
attack
the
validity
of
Orders
nos.
10,
12,
13,
14
and
15
formulated
by
the
Lower
Mainland
Dairy
Products
Board,
406
CANADA
T'AX
CASES
which
has
been
established
under
the
authority
of
the
Natural
Products
Marketing
Act
(Ch.
165,
R.S.B.C.,
1936),
and
submit
that
they
are
ultra
vires
of
the
Board.
They
also
ask
that
the
scheme
created
by
Order
in
Council
be
declared
illegal,
and
pray
for
an
injunction
restraining
all
the
defendants
from
exercising
any
of
the
powers
purported
to
have
been
invested
in
them.
Mr.
Justice
D.
A.
McDonald
of
the
Supreme
Court
of
British
Columbia
declared
that
Orders
11,
12,
13,
14
and
15
were
ultra
vires,
ordered
that
the
defendant
Milk
Clearing
House
Limited
be
restrained
from
acting
as
the
agency
pursuant
to
these
Orders,
and
that
the
Board,
and
its
members
Williams
and
Barrow
be
also
restrained
from
taking
any
steps
to
compel
the
plaintiffs
to
comply
with
the
provisions
of
the
Orders.
The
court
further
held
that
the
action
against
the
defendant
Kilby,
one
of
the
members
of
the
Board,
and
the
claim
of
the
plaintiffs
for
a
declaration
that
the
Milk
Marketing
scheme
is
ultra
vires,
should
be
dismissed.
The
defendants
appealed
from
this
judgment,
and
the
plaintiffs
cross-appealed
claiming
that
the
judgment
should
be
varied
by
declaring
that
the
Milk
Marketing
scheme
is
ultra
vires.
The
Court
of
Appeal
for
British
Columbia
(Chief
Justice
MacDonald
dissenting)
dismissed
the
main
appeal
and
the
cross-appeal
with
costs.
As
there
has
been
no
crossappeal
here,
this
Court
is
concerned
only
with
the
validity
of
the
Orders,
and
the
injunction
restraining
the
Board,
the
Milk
Clearing
House
and
the
defendants
Williams
and
Barrow,
from
taking
any
steps
or
proceedings
to
compel
the
plaintiffs
to
comply
with
the
Orders.
The
plaintiffs,
except
W.
A.
Hayward
and
Charles
Hawthorne
who
produce
milk
for
sale,
are
engaged
in
distributing
milk
and
cream,
and
in
carrying
on
a
general
dairy
business
in
the
cities
of
Vancouver
and
of
New
Westminster.
In
that
region
of
the
province
of
British
Columbia
there
are
two
different
markets
for
milk.
One
is
called
the
Fluid
Milk
Market,
where
the
milk
is
used
in
fluid
form,
and
the
second
is
known
as
the
Manufacturers
Market,
where
the
milk
is
used
for
the
manufacture
of
ice-cream,
butter,
condensed
milk,
ete.
There
is
an
excess
of
milk
produced
in
that
area
over
the
requirements
of
the
Fluid
Milk
Market,
and
some
dairy
farmers,
therefore,
in
order
to
avoid
a
congestion
of
the
Fluid
Milk
Market,
are
necessarily
obliged
to
market
a
portion
of
their
milk
in
the
form
of
manufactured
products
at
world
market
prices,
which
are
lower
than
the
price
obtained
for
milk
in
fluid
form.
A
group
of
farmers
called
the
Independent
Farmers
have
sold
in
the
past
much
more
of
their
milk
proportionally
on
the
Fluid
Market
than
another
group
of
farmers
of
the
Fraser
Valley
Milk
Producers
Association.
This
situation
has
existed
for
many
years,
and
in
order
to
meet
the
demand
of
the
farmers
the
Legislature
passed
in
1929
the
Dairy
Products
Sales
Adjustment
Act,
which
required
all
dairy
farmers
and
distributors
to
make
returns
to
the
Committee
of
Adjustments
of
all
milk
sold
and
bought
and
the
prices
paid.
This
Committee
has
power
to
ascertain
the
price
during
each
month
of
milk
sold
on
both
markets,
and
had
also
the
power
to
spread
the
difference
between
the
two
sums,
so
that
each
dairy
farmer
would
receive
a
uniform
price
for
his
milk
per
pound
butter-fat,
regardless
of
the
market
in
which
the
commodity
was
sold.
The
farmer
receiving
more
than
the
ascertained
equalized
price
was
required
to
pay
to
the
Committee
an
amount
sufficient
to
reduce
his
return
to
the
equalized
price,
and
the
Committee
would
then
pay
from
the
sum
so
received
an
amount
sufficient
to
bring
up
to
the
same
level
the
prices
received
by
the
vendors
in
the
Manufacturers’
Market.
This
legislation
was
submitted
to
the
Supreme
Court
of
British
Columbia
(1931)
44
B.C.R.
508,
and
Mr.
Justice
Murphy
before
whom
the
case
was
tried,
found
that
this
adjustment
by
the
Committee
constituted
a
tax
on
one
farmer
and
a
bonus
to
the
other.
He
also
came
to
the
conclusion
that
this
tax,
and
the
levy
collected
to
pay
certain
expenses
was
indirect
taxation,
not
within
the
legislative
competence
of
the
Province.
This
judgment
was
upheld
by
the
Court
of
Appeal
of
British
Columbia
(1932)
45
B.C.R.
191
and
also
by
the
Judicial
Committee
of
the
Privy
Council
(Lower
Mainland
Dairy
Products
Sales
Adjustment
Committee
v.
Crystal
Dairy
Limited,
[1933]
A.C.
168.
In
view
of
this
decision
of
the
Privy
Council
declaring
the
Act
of
1929
ultra
vires,
the
Legislature
of
British
Columbia
enacted
in
1934
(amended
in
1936)
the
Natural
Products
Marketing
British
Columbia
Act.
This
law
purported
to
provide
for
the
control
and
regulation
in
any
or
all
respects
of
the
transportation,
packing,
storage
and
marketing
of
natural
products
within
the
province
;
and
marketing
was
defined
as
buying
and
selling,
for
sale
or
storage;
and
natural
products
included
any
product
of
agriculture,
or
of
the
forest,
sea,
lake,
or
river
and
any
article
of
food
or
drink
wholly
or
partly
manufactured
or
derived
from
any
such
product.
This
definition
clearly
included
milk.
Under
paragraph
2
of
section
4
of
the
Act,
the
Lieutenant-
Governor
in
Council
was
empowered
to
establish,
amend
and
revoke
schemes
for
the
control
and
regulation
within
the
province
of
any
natural
products,
and
was
also
authorized
to
consti-
tute
marketing
boards
to
administer
such
schemes.
The
validity
of
this
legislation
was
again
contested
before
the
courts,
and
in
1938
the
Judicial
Committee,
Shannon
v.
Lower
Mainland
Dairy
Products
Board
[1938]
A.C.
708,
held
that
this
legislation
was
intra
vires
and,
consequently,
the
impugned
statute
was
held
to
be
within
the
legislative
powers
of
the
province
of
British
Columbia.
On
the
31st
of
March,
1939,
an
Order
in
Council
was
passed
providing
a
scheme
to
regulate
the
transportation
and
marketing
of
milk
and
certain
milk
products
in
the
Lower
Mainland
of
the
province
of
British
Columbia.
As
a
consequence
of
this
Order
in
Council,
the
Lower
Mainland
Dairy
Products
Board
was
established
and
the
three
defendants
Messrs.
Williams,
Barrow
and
Kilby
were
appointed
members
of
that
Board.
The
defendant
the
Lower
Mainland
Dairy
Products
Board
passed
certain
Orders
nos.
1
to
9.
Later,
Orders
3,
4,
5,
6,
7,
8
and
9
were
repealed,
and
Orders
nos.
11,
12,
13,
14
and
15
were
passed
and,
in
one
of
these
Orders,
one
of
the
defendants
the
Milk
Clearing
House
Limited,
a
company
incorporated
under
the
laws
of
British
Columbia,
was
appointed
sole
agency
through
which
all
the
milk
produced
in
the
Lower
Mainland
area
is
to
be
marketed.
Although
a
certain
price
to
be
paid
to
the
farmers
per
pound
butterfat
has
been
determined
by
the
Board,
the
payment
is
to
be
made
only
after
going
through
quite
complicated
proceedings.
All
dairy
farmers
in
the
area
are
prohibited
from
selling
their
milk
to
any
one
but
a
single
agency
which
is
the
appellant,
the
Milk
Clearing
House
Limited,
and
which
is
also
given
sole
power
to
sell
to
dairies
and
manufacturers.
The
Milk
Clearing
House
Limited
receives
the
total
receipts
from
the
sale
of
the
milk,
and
at
a
certain
period,
which
is
called
the
settlement
period,
divides
amongst
the
producers
these
receipts
less
expenses.
This
payment
to
the
producers,
however,
is
not
made
in
the
usual
way,
but
each
farmer
has
a
base,
which
is
the
quantity
of
butterfat
determined
from
the
average
daily
weight
and
butterfat
test
of
eligible
milk
marketed
in
cans
by
a
producer,
during
the
first
three
and
last
three
calendar
months
of
the
previous
calendar
year,
and
during
which
period
the
producer
has
been
a
consistent
marketer
of
eligible
milk
in
cans.
The
dairy
farmer
then
receives
an
amount
for
his
fluid
milk
determined
by
his
base
in
proportion
to
the
total
bases.
This
is
called
his
quota.
Quota
in
other
words
is
the
percentage
of
a
producer
‘s
base
as
all
milk
marketed
by
the
Clearing
House
for
the
Fluid
Milk
Market
in
cans
during
such
settlement
period
is
of
the
total
of
all
bases
for
milk
marketed
in
cans.
If
a
farmer
has
a
base
of
1,000
pounds
and
if
the
total
bases
are
100,000
pounds,
and
if
the
total
sales
by
the
agent
amount
only
to
50,000
pounds
butterfat
of
fluid
milk,
which
is
50
per
cent
of
the
milk
available,
then
this
farmer
will
be
paid
only
for
50
per
cent
of
what
he
sold,
which
is
500
pounds.
This
50
per
cent
or
500
pounds
is
the
quota
of
this
farmer.
Assuming
now
that,
only
400
pounds
of
another
producer’s
milk,
who
has
also
a
base
of
1,000
pounds,
has
been
sold
on
the
Fluid
Market,
he
would
nevertheless
on
account
of
his
base
and
quota
be
paid
for
200
pounds.
For
the
amount
of
milk
sold
in
excess
to
the
Clearing
House,
these
dairy
farmers
receive
the
manufacturers’
price
which
is
substantially
lower.
Under
the
Act
of
1929
which
was
declared
ultra
vires
of
the
British
Columbia
Legislature
in
the
Crystal
ease,
[1933]
A.C.
168,
equalization
was
obtained
by
allowing
the
farmer
to
receive
the
full
amount
of
the
price
of
his
commodity,
and
compelling
him
to
pay
to
the
Board
such
portion
as
would
reduce
his
balance
to
the
equalized
price.
The
amount
paid
by
the
farmer
was
declared
to
be
an
indirect
tax,
and,
therefore,
ultra
vires.
Under
the
new
scheme
the
proceeds
of
the
sale
are
kept
by
the
agent
but
the
amount
that
the
farmer
vendor
is
to
receive
is
determined
only
at
the
end
of
the
month
when
the
returns
of
the
dairies
are
in.
From
that
total
amount
which
the
agent
receives,
each
month
the
expenses
incurred
are
deducted
and
the
balance
is
paid
to
the
farmers
on
the
basis
of
an
equalized
price,
and
without
regard
to
the
quantity
of
milk
sold
by
each
individual
farmer
on
the
Fluid
Market.
It
seems
plain
that
the
orders
go
beyond
the
authority
granted
by
the
Act
and
that
the
appeal
could
be
dismissed
on
the
ground
that
the
Board
has
exceeded
its
delegated
powers.
But,
it
has
gone
a
step
further
in
the
field
of
illegality,
and
has
attempted
to
do
something
upon
which
the
legislature
itself
could
not
legislate,
and
that
is
to
impose
indirect
taxation.
For
I
fail
to
see
any
substantial
difference
between
the
results
obtained
under
the
Act
of
1929,
and
the.
consequences
that
flow
from
the
impugned
orders.
In
the
Crystal
ease,
[1933]
A.C.
168,
the
farmer
had
to
reimburse
a
portion
of
what
he
had
received
for
the
benefit
of
another
one,
and
under
the
new
scheme,
a
part
of
the
money
to
which
he
is
entitled
is
intercepted
and
paid
to
one
of
his
less
fortunate
competitors.
Both
schemes
have
indeed
the
same
object
which
is
to
effect
equalization
by
two
different
methods
in
form,
but
similar
in
substance.
As
in
the
Crystal
case,
[1933]
A.C.
168,
the
amount
of
which
the
farmer
is
deprived
is
a
tax.
These
adjustments
are
compulsorily
imposed
by
a
statutory
com-
mittee
which
is
a
public
authority,
are
enforceable
by
law
and
imposed
for
public
purposes.
I
do
not
think
that
this
Clearing
House
which
has
been
created
alters
the
situation
which
arose
under
the
Act
of
1929,
in
any
substantial
manner.
It
came
to
life
for
the
sole
purpose
of
evading
the
legal
consequences
of
the
judgment
of
the
Judicial
Committee
in
the
Crystal
case,
[1933]
A.C.
168,
and
of
doing
indirectly
all
that
has
been
declared
ulta
vires.
As
Lord
Thankerton
said
in
the
Crystal
Dairy
ease,
[1933]
A.C.
168:—
The
substantive
provision
of
the
Act
is
to
transfer
compulsorily
a
portion
of
the
returns
obtained
by
the
traders
in
the
Fluid
Milk
Market
to
the
traders
in
the
Manufactured
Products
Market
*
*
*
In
the
opinion
of
their
Lordships
the
adjustment
levies
are
taxes
*
*
*
it
seems
to
follow
that
the
expense
levies
in
the
present
case,
which
are
ancillary
to
the
adjustment
levies,
must
also
be
characterized
as
taxes.
The
orders
of
the
Board
are
also
levies
imposed
on
the
farmers
to
obtain
revenues,
and
to
equalize
the
returns
of
the
farmers
by
giving
to
some
of
them
out
of
the
receipts
more
than
they
should
get,
and
to
some
others
less
than
what
they
are
entitled
to,
and
for
the
reasons
given
by
Mr.
Justice
O’Halloran
of
the
Court
of
Appeal
of
British
Columbia,
and
with
whom
I
agree,
I
believe
that
the
tax
is
indirect,
and,
therefore,
invalid.
Under
the
orders,
the
farmers
for
the
fluid
milk
receive
from
the
Clearing
House
56
cents
per
pound
butterfat,
and
the
dealers
pay
60
cents
to
the
same
Clearing
House.
These
prices
are
substantially
higher
than
the
prices
paid
before,
and
it
seems
clear
that
the
tendency
will
be
to
pass
that
increase
on
to
the
ultimate
consumer,
thus
bringing
the
tax
within
the
well
known
principles
that
make
it
indirect,
and
therefore
invalid.
The
appellants
have
also
submitted
that
some
evidence
given
to
show
the
intent
and
effect
of
the
orders
was
improperly
admitted.
I
agree
with
the
majority
of
the
Court
of
Appeal,
that
the
evidence
was
admissible
and
that
the
objection
cannot
stand.
In
certain
cases,
in
order
to
avoid
confusion
extraneous
evidence
is
required
to
facilitate
the
analysis
of
legislative
enactments,
and
thus
disclose
their
aims
which
otherwise
would
remain
obscure
or
even
completely
concealed.
The
true
purposes
and
effect
of
legislation,
when
revealed
to
the
courts,
are
indeed
very
precious
elements
which
must
be
considered
in
order
to
discover
its
real
substance.
If
it
were
held
that
such
evidence
may
not
be
allowed
and
that
only
the
form
of
an
Act
may
be
considered,
then
colourable
devices
could
be
used
by
legislative
bodies
to
deal
with
matters
beyond
their
powers.
The
Privy
Council
took
similar
views
in
Attorney-General
for
Alberta
v.
Attorney-
General
for
Canada,
[1939]
A.C.
130,
and
Lord
Maugham
delivering
Judgment
for
the
Judicial
Committee
said:—
(Re
Object
or
Intent.
)
A
closely
similar
matter
may
also
call
for
consideration,
namely,
the
object
or
purpose
of
the
act
in
question.
It
is
not
competent
either
for
the
Dominion
or
a
province
under
the
guise
or
the
pretence
or
in
the
form
of
an
exercise
of
its
own
powers
to
carry
out
an
object
which
is
beyond
its
powers
and
a
trespass
on
the
exclusive
powers
of
the
other.
Here
again
matters
of
which
the
Court
would
take
judicial
notice
must
be
borne
in
mind
and
other
evidence
in
a
case
which
calls
for
it.
(Re
Effect.)
The
next
step
in
a
case
of
difficulty
will
be
to
examine
the
effect
of
the
legislation.
For
that
purpose
the
Court
must
take
into
account
any
public
general
knowledge
of
which
the
Court
would
take
judicial
notice
and
may
in
a
proper
case
require
to
be
informed
by
evidence
as
to
what
the
effect
of
the
legislation
will
be.
I
believe
that
this
is
the
law
that
should
govern
this
case.
It
applies
to
the
interpretation
of
federal
and
provincial
statutes,
and
I
cannot
see
why
the
courts
should
withhold
its
application
to
orders
of
a
board
which
is
an
emanation
of
a
body
subject
to
this
rule.
The
appeal
should
be
dismissed,
but
with
a
slight
variation
in
the
formal
judgment.
In
their
statement
of
claim
the
respondents
asked
that
Orders
10,
12,
18,
14
and
15
be
declared
ultra
vires.
The
Supreme
Court
of
British
Columbia
and
the
Court
of
Appeal
declared
ultra
vires
Orders
nos.
11,
12,
13,
14
and
15.
Order
no.
10
which
is
the
order
repealing
previous
orders
should
stand
as
decided
by
the
courts
below,
but
Order
no.
11
has
obviously
been
set
aside
by
mistake.
It
provides
for
the
licensing
of
producers,
dairies,
producer
vendors,
etc.,
and
the
Act
authorizes
the
fixing
and
collection
of
licence
fees
which
are
within
the
powers
of
the
Legislature.
The
respondents
will
be
entitled
to
their
costs.
Appeal
dismissed
with
costs.
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