Docket:
T-239-11
Citation: 2014 FC 337
Ottawa, Ontario, April 4, 2014
PRESENT: The Honourable Madam Justice Heneghan
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BETWEEN:
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WESTERN GRAIN ELEVATOR ASSOCIATION, CARGILL LIMITED, LOUIS
DREYFUS CANADA LTD., PARRISH & HEIMBECKER LIMIATED, PATERSON GLOBAL
FOODS INC., RICHARDSON INTERNATIONAL LIMITED, WEYBURN INLAND TERMINAL LTD., AND
VITERRA INC.
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Appellants
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and
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THE ATTORNEY GENERAL OF CANADA AND THE CANADIAN GRAIN COMMISSION
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Respondents
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REASONS FOR JUDGMENT AND JUDGMENT
I.
INTRODUCTION
[1]
Western Grain Elevator Association, Cargill
Limited, Louis Dreyfus Canada Ltd., Parrish & Heimbecker Limited, Paterson
Globalfoods Inc., Richardson International Limited, Weyburn Inland Terminal
Ltd., and Viterra Inc. (collectively the “Applicants”) bring this application
for judicial review to challenge section 30 of the Canada Grain Regulations,
C.R.C. c. 889 (the “Regulations”) as being ultra vires the
regulation-making authority of the Canadian Grain Commission (the “Commission”)
having regard to the Canada Grain Act R.S.C. 1985, c. G-5 (the “Act”).
[2]
The Commission is represented in this proceeding
by the Attorney General of Canada (collectively the “Respondents”), pursuant to
Rule 303 of the Federal Court Rules, SOR 198-106 (the “Rules”).
II.
THE EVIDENCE
[3]
The Applicants filed the affidavits of Mr. Wade
Sobkowich, sworn on February 25th, 2011 and of Mr. James B.
McKerchar, sworn on February 27th, 2011.
[4]
Mr. Sobkowich is the executive director of the
Western Grain Elevator Association. In his affidavit he describes the function
of his organization and its membership. He also addresses his perspective of
the steps leading up to both the 2003 and 2011 amendments to the Regulations,
including the communication and meetings between the Commission and his organization
with respect to those amendments. Attached as exhibits to his affidavit are
various communications between his organization and the Commission relating to
the Regulations, as well as various amendments to the Regulations and a legal
opinion from the Applicants’ counsel relating to the 2011 amendments.
[5]
Mr. McKerchar is the General Superintendent of
the Applicant Parrish & Heimbecker Limited. In his affidavit he describes
the process leading up to the 2011 amendments to the Regulations, from the
point of view of his employer, and the grain industry in general. Much of his
affidavit relates to the negative impact that section 30 of the Regulations
will have on the Applicants. He also describes the nature of shrinkage in the
grain industry and why it is unavoidable. Attached as exhibits to his affidavit
are a number of documents in support of his position.
[6]
The Respondents filed the affidavit of Catherine
Lampkin, a legal assistant with the Department of Justice in Winnipeg. The body
of her affidavit contains no evidence, but refers to attached exhibits that are
copies of amendments to the Regulations from June 28th, 1990, as
well as the 2011 amendments.
[7]
The Respondents argue that parts of the
Applicants’ affidavits are inadmissible since they contain improper hearsay and
opinion evidence.
[8]
The Respondents objected to parts of the
affidavit of Mr. McKerchar, filed by the Applicants, that they offend Rule 81
of the Rules because they contain material that is outside the personal
knowledge of the deponent and is hearsay and opinion evidence that he is not
qualified to give. Relying on the decision in P.S. Partsource Inc. v.
Canadian Tire Corp. (2001), 267 N.R. 135 at paragraphs 13 to 14, the
Respondents submit that there is no common law exception to the prohibition
against hearsay that would allow consideration of this evidence. In particular,
the Respondents objected to the inclusion by Mr. McKerchar of certain articles
that he did not write as exhibits to his affidavit. The Respondents
argued that the articles and summaries in the affidavit are inadmissible
hearsay evidence. Further, the opinions expressed in the articles are
inadmissible because they have not been submitted by a Court - approved expert.
[9]
For these reasons, the Respondents argue that
paragraphs 25 and 28, as well as exhibits G and H of Mr. McKerchar’s affidavit
are inadmissible and should not be considered.
[10]
In the result, I agree with the submissions of
the Respondents about the impropriety of certain parts of the affidavit of Mr. McKerchar.
[11]
Paragraphs 25 and 28, and exhibits G and H of
the McKerchar affidavit are impermissible hearsay evidence and will not be
considered.
III.
BACKGROUND
[12]
The Applicant Western Grain Elevator Association
is an association composed of elevator operators, including the Applicants Cargill
Limited, Louis Dreyfus Canada Ltd., Parrish & Heimbecker Limited, Paterson
Globalfoods Inc., Richardson International Limited, Weyburn Inland Terminal
Ltd., and Viterra Inc.
[13]
The facts set out below are drawn from the
affidavits filed by the parties.
[14]
The challenged Regulation came into force
following amendments to the Regulations in 2011. Section 30 addresses “grain
shrinkage” and the allowance made in the Regulations to compensate for that
shrinkage.
[15]
Shrinkage is defined in section 2 of the Act as
the loss in weight of grain resulting from the handling or treatment of grain.
It can be caused by several factors, including drying, transportation and dust.
It is generally accepted as an unavoidable circumstance in the grain industry.
Comprehensive shrinkage refers to shrinkage that occurs during the handling and
transportation of grain. Moisture shrinkage refers to the shrinkage caused by
the drying of grain received from grain producers.
[16]
Pursuant to the Act, upon receipt of grain by an
elevator from a grain producer, the grain must be graded and weighed, and a
receipt is issued to the grain producer recording this information. Upon
delivery of grain from the elevator to a terminal or other destination, it must
arrive at the same grade and weight shown on the receipt issued to the grain
producer.
[17]
The Commission has long allowed elevators to
adjust the weight of grain received from a producer, shown on the receipt, to
compensate for future shrinkage. These are referred to as shrinkage allowances.
They have been regulated by a provision in the Regulations setting a maximum
shrinkage allowance. There are different types of elevators, and maximum
allowances were fixed at different levels to accommodate different types of
elevators.
[18]
In 2001, the Commission decided to consider
reform of the shrinkage allowance system, and issued a Discussion Paper
exploring options for the future of the shrinkage allowance system. These
options included maintenance of the status quo, deregulation of shrinkage
allowances entirely, and setting the maximum shrinkage allowance at zero.
[19]
On November 19th, 2001 the Western
Grain Elevator Association responded to the Commission’s discussion paper and
set out its position that setting the maximum shrinkage allowance at zero was
arbitrary and unfair, as it would require only elevator operators to bear the
costs of shrinkage.
[20]
On August 1st, 2003 the Commission
amended the Regulations to set the maximum shrinkage allowance for primary
elevators at zero. On July 20th, 2009 the Commission issued another
Discussion Paper, this time stating its intention to set the maximum shrinkage
allowance at zero for transfer and process elevators. On October 29th,
2009 the Western Grain Elevator Association again responded to this Discussion
Paper, and offered to work with the Commission to implement a study to
determine a process for setting the appropriate shrinkage allowance. This offer
was not accepted.
[21]
On February 8th, 2010, the Commission
advised the Western Grain Elevator Association by letter that it would be amending
the Regulations to set shrinkage allowances for all elevators at zero. In
amendments that took effect on March 19th, 2011, the Commission set
the maximum shrinkage allowance at zero. The change was set out in section 30
of Regulations.
[22]
The Applicants filed a notice of application
challenging the vires of section 30 of the Regulations on February 11th,
2011. The notice of application was amended on July 5th, 2012 to
reflect the proper wording of the challenged Regulations.
IV.
ISSUES
[23]
The Applicants’ principal issue is the legality
of section 30 of the Regulations. They submit that the Commission and the
Governor in Council lack the authority under the Act to enact this provision.
Insofar as reliance is placed on paragraph 116(1)(f) of the Act, the Applicants
argue that this provision only allows the establishment of a maximum allowance,
not the elimination of such an allowance.
[24]
They submit that the power to regulate is not
equivalent to a power to prohibit, relying in this regard on the decision in Reference
Re Bill 30, an Act to amend the Education Act (Ont.), [1987]
1 S.C.R. 1148 at paragraph 55.
[25]
Further, the Applicants argue that if section 30
was enacted pursuant to valid statutory authority, it falls outside that power
because it was made for an improper purpose and was based on irrelevant
factors, thereby yielding an absurd result. They submit that a regulation that
is made for reasons unrelated to carrying out the intent and purposes of the
Act may be found to be unreasonable, relying in that regard on the decision in Montreal
(City) v. Montreal Port Authority, [2010] 1 S.C.R. 427 at paragraphs 32-33
and 38.
[26]
The Respondents argue that paragraph 116(1)(f)
of the Act authorizes the Commission to fix the maximum grain shrinkage
allowance at elevators and that the Act does not impose constraints in the
exercise of that provision. Since the
provision is permissive the Commission has discretion to set, or not set, the
maximum shrinkage allowance as it sees fit.
[27]
In response to the
Applicants’ second argument the Respondents submit that the Act does not
prescribe how the shrinkage allowances are to be fixed, nor how the discretion
to set those allowances must be exercised.
[28]
Further, the reasonableness of a regulation is
not a determining factor in assessing the vires of such regulation. In
this regard the Respondents rely on the decision of the Federal Court of Appeal
in Li v. Canada (Citizenship and Immigration), [2012] 4 F.C.R. 479.
V.
DISCUSSION
AND DISPOSITION
[29]
The first matter
to be considered is the standard of review that applies in this proceeding.
Since the dispositive issue is a question of vires, the applicable
standard of review is correctness. I refer to the decision in Canada (Wheat Board) v. Canada (Attorney General), [2010] 3 F.C.R. 374 at paragraph 36
where the Federal Court of Appeal said the following:
Turning
first to the vires issue, the Court must determine
on a standard of correctness whether the Direction Order was authorized by the
power delegated to the Governor in Council pursuant to subsection 18(1) of the
Act.
[30]
The question in
this application is whether section 30 of the Regulations is authorized by the
Act. Section 30 of the Regulations provides as follows:
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Shrinkage
Allowance
30. The maximum shrinkage allowance that may be made on the
delivery of grain to any licensed elevator is zero.
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Marge de perte
de poids
30. La marge
maximale de perte de poids qui peut être déduite du grain livré à toute
installation agréée est de zéro.
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[31]
The authority to
enact section 30 of the Regulations is found at Paragraph 116(1)(f) of the Act
and provides as follows:
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Regulations
116. (1) The Commission may, with
the approval of the Governor in Council, make regulations
…
(f) fixing the maximum shrinkage allowance that may be
made on the delivery of grain to an elevator;
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Règlements
116. (1) Avec l’approbation du
gouverneur en conseil, la Commission peut, par règlement :
…
f) fixer la marge maximale de perte de
poids qui peut être calculée lors de la livraison de grain à une
installation;
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[32]
The analytical framework for
considering the vires of subordinate legislation is set out in Canada (Wheat Board), supra at paragraph 46, as
follows:
The
first step in a vires analysis is to identify the
scope and purpose of the statutory authority pursuant to which the impugned
order was made. This requires that subsection 18(1) be considered in the
context of the Act read as a whole. The second step is to ask whether the grant
of statutory authority permits this particular delegated legislation.
[33]
In my opinion, paragraph
116(1)(f) of the Act clearly authorizes the establishment of a maximum
shrinkage allowance, without any restrictions on the exercise of the
regulation-making power. The statutory authority in paragraph 116(1)(f) is
broad enough to allow for the maximum shrinkage allowance to be set at zero. There
is nothing in the Act limiting the values at which the maximum shrinkage
allowance may be set.
[34]
The Act does not contain a
purpose section. It does, however, contain a section setting out the objects of
the Commission. Those objects are set out in section 13 as follows:
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Objects
13. Subject to this Act and any directions
to the Commission issued from time to time under this Act by the Governor in
Council or the Minister, the Commission shall, in the interests of the grain
producers, establish and maintain standards of quality for Canadian grain and
regulate grain handling in Canada, to ensure a dependable commodity for
domestic and export markets
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Mission
13. Sous réserve des autres dispositions de
la présente loi et des instructions que peuvent lui donner le gouverneur en
conseil ou le ministre, la Commission a pour mission de fixer et de faire
respecter, au profit des producteurs de grain, des normes de qualité pour le
grain canadien et de régir la manutention des grains au pays afin d’en
assurer la fiabilité sur les marchés intérieur et extérieur.
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[35]
There is no evidence that
section 30 is inconsistent with these objects and the Applicants submissions in
that regard must fail.
[36]
The further arguments of the
Applicants concerning the unreasonableness of section 30 are likewise doomed to
failure insofar as this argument is based upon a challenge to the merits of the
policy behind the Regulations.
[37]
The jurisprudence clearly
directs that the underlying policy choices at issue in legislation, including
regulations, are beyond review by the Courts; see the decision in Jafari v. Canada (Minister of Employment and Immigration) (1995), 180 N.R. 330 at paragraph 14.
[38]
In the result, the application
for judicial review is dismissed with costs to the Respondents.
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