Supreme Court of Canada
Central Canada Potash Co. Ltd. et al. v. Government of
Saskatchewan, [1979] 1 S.C.R. 42
Date: 1978-10-03
Central Canada
Potash Co. Limited and The Attorney General of Canada
(Plaintiffs) Appellants;
and
The Government of Saskatchewan (Defendant) Respondent;
and
The Attorney
General of Quebec, The Attorney General of New Brunswick, The Attorney General
of Manitoba, The Attorney General of Alberta, The Attorney General of
Newfoundland Interveners.
1977: December 6, 7, 8, 9; 1978: October 3.
Present: Laskin C.J. and Martland, Ritchie,
Spence, Pigeon, Dickson and Pratte JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR
SASKATCHEWAN
Constitutional law—Schemes for prorationing
production of potash in Saskatchewan—Fixing of minimum selling price applicable
to permitted production quotas—Regulations aimed at production for export
market—Regulations, prorationing schemes and all orders, directives, notices
and licences pursuant thereto ultra vires provincial legislative authority—The
Mineral Resources Act, R.S.S. 1965, c. 50, as amended—The Potash Conservation
Regulations, 1969, O.C. 1733/69, Sask. Reg. 287/69.
Intimidation—Potash Conservation Regulations
prohibiting appellant from exceeding specified production—Letter from deputy
minister calling on appellant to reduce its production or to face possibility
of cancellation of its mineral lease—Regulations subsequently held to be ultra
vires—Tort of intimidation not committed—Deputy minister seeking to induce
conformity with prorationing plan which had been created by legislation which
it was his duty to enforce—Legislation unchallenged at time threat made—No
evidence deputy minister intended to injure appellant.
The litigation culminating in this appeal was
initiated by the appellant company which sought a declaration of the invalidity
of the prorationing scheme, established pursuant to The Mineral Resources
Act, R.S.S. 1965, c. 50, as amended, and damages in tort. The trial judge
gave the relief sought, fixing the damages at $1,500,000. On appeal by the Government
of Saskatchewan and a
[Page 43]
claim by the appellant for a variation in the
judgment to increase the amount of damages, the Court of Appeal set aside the
judgment at trial in its entirety and, consequently, dismissed the notice to
vary.
The Mineral Resources Act, through which the Potash Conservation Regulations, 1969, were
promulgated, is skeleton legislation, giving very wide authority to the
responsible Minister and wide regulation-making power to the
Lieutenant-Governor in Council. The Act itself was not challenged. It was
common ground that at the time the Regulations were passed almost all of
Saskatchewan-produced potash was sold outside the Province and that the larger
part of the production, about 64 per cent, was marketed in the United States. Saskatchewan production, moreover, represented almost half, about 48 per cent,
of the United States potash
market. The appellant company itself had about 34 per cent of the Saskatchewan share of the United States market.
The Government of Saskatchewan was aware of
the course of certain dumping proceedings in the United
States affecting Saskatchewan potash, and was concerned about the damaging effect that a tariff
levy would have on exports from Saskatchewan. Equally, the authorities in the State of New Mexico, where potash
is also produced, were concerned about loss of tax revenue from declining
revenues and a federal tariff would not in itself be of any help to them. Both
were concerned about overproduction and, in consequence, a drop in world price.
There was no doubt that the Potash Conservation Regulations were the product of
meetings held in 1969 between representatives of Saskatchewan and New Mexico and
were prompted by the economic conditions then affecting the potash market. They
were passed on November 17, 1969, under Order in Council 1733/69 and amended on
March 8, 1970, under Order in
Council 404/70.
The Regulations provided for a prorationing
scheme to take effect on January 1, 1970. Under this scheme, known as the ABC
scheme, each producer was allowed to produce and sell 40 per cent of its
productive capacity. Only after every producer in the Province had produced and
sold its quota could a producer apply for a supplementary licence to produce
and sell an additional amount. As of July 1, 1972, the ABC prorationing scheme
was replaced by a flat prorationing scheme, the so-called FP scheme. A floor
price established under the ABC scheme as a licensing condition was retained
under
[Page 44]
the FP scheme.
The appellant, having regard to its supply
commitments to a Chicago-based co‑operative association, objected to the
FP scheme which, based on productive capacities of the various producers and on
allocation formulas involving market sharing, would prevent it from fulfilling
its commitments unless it obtained supplementary licences. When its allocation
for the 1972-73 fertilizer year was short of its contractual obligation, it
sought an increase and, on being refused, brought mandamus proceedings to
compel the issue of a licence for a production quota that would enable it to
meet its contractual commitment. It failed in those proceedings at first
instance, in the Saskatchewan Court of Appeal and in this Court. During those
proceedings it was advised by a letter of September 20, 1972, from the Deputy
Minister that its production schedule for the year commencing July 1, 1972, was out of line with governmental
requirements and that it must reduce its monthly production to conform thereto.
This the appellant did but on December 11, 1972, it instituted the action which
gave rise to the appeal to this Court.
The letter of September 22, 1972, calling on the
appellant to reduce its production or to face the possibility of a cancellation
of its mineral lease, was the primary basis of the claim for damages for the
tort of intimidation. The lease included a requirement that the appellant, as
lessee, would observe, perform and abide by all obligations imposed upon
holders of mineral leases by the Act or regulations thereunder in effect from
time to time.
The Mineral Resources Act was amended by 1976 (Sask.), c. 36. The amending Act was passed after judgment had been
rendered following the trial, but prior to the judgment of the Court of Appeal.
The enactment of s. 11A removed any doubt as to the power of the
Minister to cancel a production licence. The ratification and confirmation of
the Potash Conservation Regulations removed doubt as to whether they had been
validly enacted under the provisions of the Act. The amending Act also
contained a schedule of production of various companies, including the
appellant, fixing the limits of production of each such company from January 1,
1970, to June 30, 1976.
Held: The
appeal should be allowed in part; the judgment of the Court of Appeal should be
set aside on the constitutional issue but should be affirmed in dismissing the
claim for damages. The judgment of the trial judge holding that (1) Orders in
Council 1733/69
[Page 45]
and 404/70, (2) the Potash Conservation
Regulations, 1969, (3) the ABC and FP schemes and (4) the directives and
licences issued by the Minister and Deputy Minister for implementing the
schemes are ultra vires, should be restored.
While it is true that production controls and
conservation measures with respect to natural resources in a province are, ordinarily
matters within provincial authority, the situation may be different, however,
where a province establishes a marketing scheme with price fixing as its
central feature. Indeed, it has been held that provincial legislative authority
does not extend to the control or regulation of the marketing of provincial
products, whether minerals or natural resources, in interprovincial or export
trade: see In re Grain Marketing Act, 1931, [1931] 2 W.W.R. 146; Lawson
v. Interior Tree Fruit & Vegetable Committee of Direction, [1931]
S.C.R. 357; Re Sheep and Swine Marketing Scheme, [1941] 3 D.L.R. 569.
The present case reduced itself therefore to
a consideration of “the true nature and character” of the prorationing and
price stabilization schemes in question. This Court could not ignore the
circumstances under which the Potash Conservation Regulations came into being,
nor the market to which they were applied and in which they had their
substantial operation. In Canadian Industrial Gas & Oil Ltd. v.
Government of Saskatchewan, [1978] 2 S.C.R. 545, this Court, speaking in
its majority judgment through Martland J., said that “provincial legislative
authority does not extend to fixing the price to be charged or received in
respect of the sale of goods in the export market”. It may properly be said
here of potash as it was said there of oil that “the legislation is directly
aimed at the production of potash destined for export, and it has the effect of
regulating the export price since the producer is effectively compelled to
obtain that price on the sale of his product”.
Contrary to the opinion of the Court below,
the consequence of invalidating the provincial scheme in this case is not to
move to the Parliament of Canada the power to control production of minerals in
the Province and the price to be charged at the mine. There is no accretion at
all to federal power in this case, which does not involve federal legislation,
but simply a determination by this Court, in obedience to its duty, of a
limitation on provincial legislative power. It is true that (with some
exceptions, not relevant here) the British North America Act distributes
all legislative power either to Parliament or to the provincial Legislatures,
but it does not follow that legislation of a province held to be
[Page 46]
invalid may ipso facto be validly
enacted by Parliament in its very terms. It is nothing new for this Court, or
indeed, for any Court in this country seized of a constitutional issue, to go
behind the words used by a Legislature and to see what it is that it is doing.
It is especially important for Courts, called upon to interpret and apply a
constitution which limits legislative power, to do so in a case where not only
the authorizing legislation but regulations enacted pursuant thereto are themselves
couched in generalities, and the bite of a scheme envisaged by the parent
legislation and the delegated regulations is found in administrative
directions.
Where governments in good faith, as in this
case, invoke authority to realize desirable economic policies, they must know
that they have no open-ended means of achieving their goals when there are
constitutional limitations on the legislative power under which they purport to
act. They are entitled to expect that the Courts, and especially this Court,
will approach the task of appraisal of the constitutionality of social and
economic programmes with sympathy and regard for the serious consequences of
holding them ultra vires. Yet, if the appraisal results in a clash with
the constitution, it is the latter which must govern. That was the situation
here.
Attorney-General for Manitoba v. Manitoba
Egg and Poultry Association, [1971] S.C.R. 689; Carnation
Co. Ltd. v. Quebec Agricultural Marketing Board, [1968] S.C.R. 238; Shannon
v. Lower Mainland Dairy Products Board, [1938] A.C. 708; Reference re
The Farm Products Marketing Act (Ontario), [1957] S.C.R. 198; Reference
re Agricultural Products Marketing Act (Canada), Farm Products Marketing
Agencies Act (Canada) and The Farm Products Marketing Act (Ontario), [1978]
2 S.C.R. 1198, referred to.
As to the issue concerning the appellant’s
claim for damages, the tort of intimidation is not committed if a party to a
contract asserts what he reasonably considers to be his contractual right and
the other party, rather than electing to contest that right, follows a course
of conduct on the assumption that the assertion of right can be maintained.
Also, if the course of conduct which the person making the threat seeks to
induce is that which the person threatened is obligated to follow, the tort of
intimidation does not arise. In the present case the Potash Conservation
Regulations made under The Mineral Resources Act prohibited the
appellant from
[Page 47]
exceeding a specified production of potash.
By conforming to the requirements of the Regulations, the appellant would not
suffer damage and, therefore, the claim for intimidation was not well founded.
A subsequent finding that the Regulations
were ultra vires does not mean that there has been intimidation. The conduct
of the Deputy Minister in relation to the tort of intimidation must be
considered in relation to the circumstances existing at the time the alleged
threat was made. The Deputy Minister was then seeking to induce conformity with
the prorationing plan which had been created by legislation which it was his
duty to enforce. At the time the threat was made, the legislation stood
unchallenged. It would be unfortunate, in a federal state such as Canada, if it
were to be held that a government official, charged with the enforcement of
legislation, could be held to be guilty of intimidation because of his
enforcement of the statute whenever a statute whose provisions he is under a
duty to enforce is subsequently held to be ultra vires.
Finally, the tort of intimidation is one of
intention. There was no evidence here that the Deputy Minister intended to
injure the appellant. The correspondence, and particularly the letter of
September 20, 1972, made it clear that his purpose was to induce compliance
with an existing scheme.
Rookes v. Barnard, [1964] A.C. 1129, distinguished; Hoffman-La Roche & Co. v.
Secretary of State for Trade and Industry, [1975] A.C. 295, applied; Roman
Corporation et al. v. Hudson’s Bay Oil & Gas Co. Ltd. et al., [1973]
S.C.R. 820, referred to.
APPEAL from a judgment of the Court of Appeal
for Saskatchewan,
allowing an appeal from a judgment of Disbery J. wherein it was declared, inter
alia, that the Potash Conservation Regulations, 1969, of Saskatchewan and
amendments thereto are ultra vires, and wherein damages were awarded to
the appellant. Judgment of the Court of Appeal set aside on the constitutional
issue and affirmed in dismissing appellant’s claim for damages.
D.K. Laidlaw, Q.C., J.L. Robertson, Q.C.,
and A.J. Lenczner, for the appellant, Central Canada Potash Co. Limited.
[Page 48]
T.B. Smith, Q.C., and Barbara Reed, for
the appellant, Attorney General of Canada.
G.J.D. Taylor, Q.C., and Gwen Randall,
for the respondent.
For the interveners:
B. Flynn, for the Attorney General of
Quebec.
A. Reid and B.A. Crane, for the Attorney
General of New Brunswick.
M.S. Samphir and D.D. Blevins, for the
Attorney General of Manitoba.
W. Henkel, Q.C., and S.G. Fowler, for the
Attorney General of Alberta.
J.A. Nesbitt, Q.C., and Margaret Cameron,
for the Attorney General of Newfoundland.
Martland, Ritchie, Spence, Pigeon, Dickson and
Pratte JJ. concurred with the judgment delivered by
THE CHIEF JUSTICE—This appeal, which is here by
leave of this Court, concerns (1) the validity of what I may compendiously
refer to as a potash prorationing scheme, established pursuant to The
Mineral Resources Act, R.S.S. 1965, c. 50, as amended, and (2) a claim by
the appellants for damages against the Government of Saskatchewan for the tort
of intimidation by reason of certain circumstances connected with the
establishment of the prorationing scheme.
The litigation was initiated by the appellant,
which sought a declaration of the invalidity of the prorationing scheme and
damages in tort. Disbery J. gave the relief sought, fixing the damages at
$1,500,000. On appeal by the Government of Saskatchewan and a claim by the
appellant for a variation in the judgment to increase the amount of damages,
the Saskatchewan Court of Appeal, in a unanimous judgment delivered by Culliton
C.J.S., set aside the judgment at trial in its entirety and, consequently,
dismissed the notice to vary.
[Page 49]
On leave being given to come here, an order was
made for notice to be given of the following constitutional question and an
associated evidentiary question:
1. Is the potash prorationing scheme
constituted by the Province of Saskatchewan pursuant to the Potash
Conservation Regulations 1969 numbered 287/69, and the Orders in Council O/C
1733/69 and O/C 404/70 enacting and amending them, and the Potash Allocation
Formula effective January 1, 1970, and the Minister’s Directive PCD‑1,
Potash Prorationing, effective July 1, 1972, enacted pursuant to the Mineral
Resources Act, R.S.S., 1965, Chapter 50, and the various Notices, Directives,
Ministerial Orders and Licenses issued from time to time by the Minister of
Mineral Resources for Saskatchewan and his Deputy implementing the schemes, ultra
vires the Province of Saskatchewan?
2. Is extrinsic evidence admissible in this
case in relation to the constitutional issue and, if so, to what extent and of
what kind?
The Attorneys-General of Quebec, New Brunswick,
Manitoba, Alberta and Newfoundland intervened to support the judgment in
appeal. The Attorney-General of Canada had become a co-plaintiff at the trial
in respect of the constitutional question raised by the action and remained a
party to the proceedings in the Saskatchewan Court of Appeal and in this Court.
The Mineral Resources Act, R.S.S. 1965, as amended, through which the Potash Conservation
Regulations, 287/69, were promulgated, is skeleton legislation, giving very
wide authority to the responsible Minister and wide regulation-making power to
the Lieutenant‑Governor in Council. The Act itself is not challenged. It
is common ground that at the time the 1969 Regulations were passed almost all
of Saskatchewan-produced potash was sold outside the Province and that the
larger part of the production, about 64 per cent, was marketed in the United
States. Saskatchewan production, moreover, represented almost half, about 48
per cent, of the United States potash market. The appellant company itself had
about 34 per cent of the Saskatchewan share of the United States market. So far
as forecasts of future world con-
[Page 50]
sumption can be based on present knowledge and
on scientific assessment of known or proven reserves, evidence was given that
Saskatchewan could supply world demand for potash for almost 1,500 years or for
even a longer period. The trial judge relied on this evidence for finding that
the Potash Conservation Regulations could not be said to be a response to
threatened shortages of the mineral or to conservation needs.
Potash is also produced in the State of New
Mexico but production and quality, according to the evidence, did not match
that of Saskatchewan and reserves were, apparently, minimal. There was concern
about the penetration of Saskatchewan potash into the United States market, and
a dumping inquiry was instituted in the United States not only in respect of
Canadian exporters but as well in respect of French and West German exporters.
A finding of dumping was made by the United States Bureau of Customs in August
of 1969 and the matter was referred, as required by United States law, to the
United States Tariff Commission, which fixed a hearing for October 7, 1969.
Although the hearing commenced on that date and a determination was obligatory
by the end of November 1969, in the events that happened the tariff inquiry did
not prove damaging to Saskatchewan interests, although a determination of
injury and the likelihood of continuing injury was made on November 21, 1969.
The Government of Saskatchewan was aware of the course of proceedings in the
United States affecting Saskatchewan potash, and was concerned about the
damaging effect of a tariff levy on exports from Saskatchewan. Equally, the New
Mexico authorities were concerned about loss of tax revenues from declining
production and a federal tariff would not in itself be of any help to them.
Both were concerned about overproduction and, in consequence, a drop in world
price.
In the result, a meeting took place in Santa Fe,
New Mexico, on October 6, 1969, between the then Governor of New Mexico and the
then
[Page 51]
Premier of Saskatchewan and their respective
associates, at which time a draft of proposed Saskatchewan potash regulations
was produced and considered. A follow-up meeting took place in Regina,
Saskatchewan, on October 17, 1969. There is no doubt that the Potash
Conservation Regulations, 1969, were the product of the two meetings and were
prompted by the economic conditions that I have described. They were passed on
November 17, 1969, under Order in Council 1733/69 and amended on March 8, 1970,
under Order in Council 404/70. I will consider the proration scheme established
by the Regulations and the amendment thereof after I deal with the position of
the appellant Central Canada Potash Co. Limited in respect of its involvement
in the potash industry.
The appellant was born of an agreement between
Noranda Mines Limited and Central Farmers Fertilizer Company, a Chicago-based
co-operative association which supplied large quantities of fertilizer to
numerous co-operative associations and thus to farmer members thereof. Noranda
had done exploration work in Saskatchewan in respect of potash mining and
proposed to establish a mine if it could find a secure market for the
production. It had extensive mineral rights in Saskatchewan under freehold
interests and under Crown lease and held options to buy additional mineral
lands. Its agreement with Central Farmers, dated July 1, 1965, provided that it
would establish a mine with ancillary facilities, with a production capability
of not less than one million tons of muriate of potash annually. Central
Farmers agreed to buy half a million tons annually over a period of
twenty-years, with the right to increase its purchases to one and one-half
million tons annually. The price fixed for the purchases was the prevailing
commercial price less 15 per cent. Central Farmers was given the option of
requiring that the mine and facilities be conveyed to a new company in which
Noranda would have a controlling 51 per cent interest and Central Farmers the
remaining 49 per cent. The option was exercised, and the appellant was
incorporated and took a conveyance of the mine as a going concern at a price
just short of $90,000,000. The Crown lease which Noranda held was assigned to
the appellant on July 15,
[Page 52]
1970, with the consent of the Saskatchewan
Government. The lease covered mineral rights under statutory road allowances
and, overall, gave Noranda and later the appellant a continuous ore body
running through and connected with its other holdings. I should add that the
original agreement between Noranda and Central Farmers was amended on July 1,
1970, and on the same day a novation agreement was made between them and the
appellant affirming the obligation to supply potash to Central Farmers and the
latter’s obligation to buy. Supply under the agreement began in February 1970.
The provisions of The Mineral Resources Act, which
were relied on to underpin the Potash Conservation Regulations and orders and
directives made thereunder, were ss. 3, 9 and 10, reading as follows:
3. The purposes of this Act are:
(a) to promote and encourage
the discovery, development, management, utilization and conservation of the
mineral resources of Saskatchewan;
(b) to regulate the
disposition of Crown mineral lands;
(c) to protect the correlative
rights of the owners of surface rights and of mineral rights;
9. The minister may do such things as he
deems necessary to discover, develop, manage, utilize and conserve the mineral
resources of Saskatchewan and, without limiting the generality of the
foregoing, the minister may:
(a) make geological or mineralogical
surveys or examinations of Saskatchewan and carry on such operations as may be
considered necessary in connection therewith;
(b) make and carry out
investigations, examinations, experiments, tests and analyses of or pertaining
to minerals for the purpose of determining their scientific and economic value;
(c) prepare and publish such
reports, diagrams, drawings, maps and plans in connection with the mineral
resources of Saskatchewan as he deems necessary;
(d) establish and operate
facilities for instruction and training in the art of conserving, developing,
exploring for or prospecting for minerals;
(e) grant assistance upon
such terms and conditions as he deems advisable to promote exploration for,
[Page 53]
development, management, utilization and
conservation of the mineral resources of Saskatchewan;
(f) prescribe the fees to be paid
for any information or services and reports, maps and other documents furnished
by the department to the public; and
(g) purchase and sell or
otherwise dispose of or utilize any product of the mineral resources of
Saskatchewan.
10. (1) The Lieutenant Governor in Council
may make such regulations and orders not inconsistent with this Act as he may
deem necessary for the purpose of carrying out its provisions according to
their obvious intent or to meet cases that may arise and for which no provision
is made therein and without limiting the generality of the foregoing may make
regulations and orders:
…
(k) governing the issue of
licences under this Act;
(l) prescribing, in cases not
otherwise provided for, penalties for the breach of any regulations or orders
made under this Act;
(m) prescribing forms to be used
under this Act;
(n) requiring from the
holders, owners, occupiers or operators of mines or mineral lands, reports and
statements respecting the work and operations conducted at any time or on any
mineral land;
…
(3) Every regulation and order made under
this section shall be deemed to be a part of this Act.
The Potash Conservation Regulations, passed on
November 17, 1969, provided for a prorationing scheme to take effect on January
1, 1970. Sections 2, 3, 4 and 5 of the Regulations, so far as relevant to these
proceedings, were as follows:
2. (1) On and after January 1, 1970, the
production of potash is prohibited unless a producing licence authorizing the
production is granted by the minister which licence shall be in such form and
subject to such conditions as the minister may determine.
(2) The minister may issue a producing
licence to produce potash in compliance with these regulations in such form as
the minister may determine and subject to such conditions as may be stated in
the licence, or he may refuse to grant a producing licence.
[Page 54]
3. (1) On and after January 1, 1970, the
disposal of potash is prohibited unless a licence authorizing the disposal is
granted by the minister.
(2) The minister may issue a licence to
dispose of potash in compliance with these regulations and subject to such
conditions as may be stated in the licence, or he may refuse to grant a
disposal licence.
4. (1) For the proper utilization and
conservation of potash and for the protection of correlative rights of the
owners of mineral rights the minister may, if he deems it advisable, order that
a public inquiry may be held at such time and at such place as he may designate
for the purpose of determining any or all of the following:
(a) a fair and reasonable price to the
producer of potash, free on board at the potash plant gate in Saskatchewan, for
all potash produced in the province;
(b) the productive capacity of each potash
mining property;
(c) a proportionate share of production, if
any, that may be allocated to each potash mining property required to meet the
market demand for potash;
(d) the demand for potash or potash
products for reasonable current requirements and current consumption or use
within and outside the province, together with such amounts as are reasonably
necessary for building up or maintaining reasonable storage reserves and
working stocks of potash and potash products;
(e) any other matter that the minister
deems advisable.
…
5. (1) Where the minister decides that it
is advisable to limit the total amount of potash that may be produced in the
province he shall allocate the allowable production among the potash mining
properties introduction in the province and may, in determining such
allocation, consider the following factors:
(a) basic allowables;
(b) definite and bona fide requirements
for disposal;
(c) inventory requirements;
(d) any other matter that the minister
deems advisable.
(2) The minister may amend, revise or vary
the allowable production allocated to any or all potash mining properties in
production, with or without an inquiry as he deems advisable, to meet changing
conditions or circumstances.
[Page 55]
The requirement of a disposal licence was
abandoned by an amending Regulation 64/70 of March 18, 1970, which repealed
s. 3 and substituted a new s. 2 and a new s. 4(1)(a). These
amendments were as follows:
2. (1) The production of potash is
prohibited unless a producing licence authorizing the production is granted by
the minister which licence may be issued on such basis and in such form and
subject to such conditions as the minister may deem appropriate to each
proposed production.
(2) Where the minister is satisfied that
the production proposed by the applicant for a licence to produce is consistent
with sound utilization and conservation principles relating to the potash
resources of the province he may issue a producing licence, and where not so
satisfied he may refuse to issue such licence.
4. (1) …
(a) the economic viability of the proposed
production, including such things as cost of production, method of production,
reserves for control of pollution, methods of mining, costs of transportation
and sale price.
On November 25, 1969, shortly after the Potash
Conservation Regulations were promulgated and pursuant thereto, the responsible
Minister sent the following notice to Saskatchewan potash producers:
NOTICE
UNDER THE POTASH CONSERVATION
REGULATIONS, 1969
To all potash producers in Saskatchewan:
Notice is hereby given that I, Alexander C.
Cameron, Minister of Mineral Resources, do hereby declare that a fair and
reasonable price to the producer of potash, free on board, at the potash plant
in Saskatchewan, shall be not less than thirty-three and three‑quarters
cents (33.750) Canadian per unit of potassium oxide equivalent for the purpose
of:
(a) determining the demand for potash or
potash products for reasonable current requirements, and current consumption or
use within and without Saskatchewan on and after January 1, 1970; and
(b) prorationing the production and
disposal of potash and potash products in Saskatchewan commencing January 1,
1970; and
(c) issuing producing licences and disposal
licences in Saskatchewan.
[Page 56]
The minimum producer price was thus fixed, for
the stated purposes, clause (a) of the notice referring to “current consumption
or use within and without Saskatchewan”.
The foregoing notice was followed by a
Ministerial directive of February 24, 1970, which elaborated on the minimum or
floor price fixed by the notice. It sought to outlaw any device or arrangement
that would reduce the established floor price. The directive is reproduced in
full in the reasons of the Saskatchewan Court of Appeal, and I reproduce it
here as well:
On November 25, 1969, the Minister of
Mineral Resources issued a directive concerning the minimum selling price of
thirty-three and three-quarter cents (33.75¢) per unit of potassium oxide
equivalent, free on board, at the plant gate in Saskatchewan, effective January
1, 1970.
In order that there is a common
understanding of the interpretation and meaning of ‘33.75¢ Canadian per
unit K2O equivalent f.o.b. Saskatchewan plant’, the Department
issues the following clarification:
1. MARKETING STRUCTURE—i.e.
(a) sales by producers with integrated
operations for production, marketing, sales and distribution; and
(b) sales by producers through third party
or independent brokers, distributors, wholesalers, dealers and other agents.
The established floor price is the minimum
net selling price for potash f.o.b. Saskatchewan plant and no discount,
commission or other consideration will be allowed out of the established floor
price, whether the producer has an integrated operation or employs third party
or independent contractors for its sales and distribution.
2. FREIGHT EQUALIZATION
The practice of absorbing freight costs
by way of freight equalization is in effect a discount and if such practice reduces the established floor price, it will
not be permitted.
3. NATURE OF DISCOUNT AGREEMENTS AND
ARRANGEMENTS:
(a) for North American dealers;
(b) for offshore dealers.
No discounts that reduce the established
floor price will be allowed in either case.
[Page 57]
4. DISCOUNTS ON CASH SALES
The established floor price shall not be
reduced by discounts for cash. The floor price is
based on cash sales or payment within 30 days of sale. No credit sales for
over 30 days that in effect reduce the established floor price will be
permitted.
5. ARRANGEMENTS BETWEEN PRODUCER AND
PRODUCER TO MEET THE OVERALL PRORATED ALLOWABLES
Subject to prior application to, and
approval of, the Minister of Mineral Resources, internal arrangements may be
made by a Saskatchewan potash producing company to meet its market requirements
from the allocated allowable of another Saskatchewan producer, without regard
to the established floor price in so far as such
transfer of allowable between one Saskatchewan producer to another Saskatchewan
producer is concerned, provided that the sale price of potash so
produced complies with the requirements of the established floor price when
such potash moves out of Saskatchewan.
6. APPLICATION OF FLOOR PRICE TO ALL
GRADES OF POTASH
The established floor price applies to
potassium oxide equivalent content, regardless of grades of potash.
7. UNDERESTIMATED COSTS FOR FREIGHT,
STORAGE, CONTAINER EXPENSES, ETC.
The department will not make any
allowance for errors, miscalculation of unexpected increases in freight,
storage and other costs on sales of potash, whether for present or future
delivery. Sales contracts must so provide that the
floor price for potash f.o.b. Saskatchewan plant will not be violated.
8. CONSIGNMENT SALES
All sales on consignment will be treated
as the consignor’s (seller’s) inventory and must comply with the floor price
requirement.
9. COST OF LEASING FREIGHT CARS,
DEMURRAGE, UNLOADING, ETC.
The cost of leasing freight cars,
demurrage, unloading, etc. cannot be charged against the established floor
price but shall be over and above the floor price.
The prorationing scheme first introduced under
the Regulations, and known as the ABC scheme, is
[Page 58]
described in the reasons of the trial judge, as
follows:
The ingredients of the formula for
prorationing production among the producers were: (1) the productive capacity
of each mining property; (2) the estimated demand for Saskatchewan potash or
potash products for reasonable current requirements and consumption or use
within and outside the Province; and (3) the amounts of potash and potash products
each producer reasonably required to keep in storage for working stock and for
reserves. The ABC scheme allowed each producer to produce and sell 40% of its
productive capacity and no more until every mine had produced and sold this
basic quota. Producers holding orders in excess of this amount could purchase
potash from mines that had not yet reached their 40% quota. After every
producer in Saskatchewan had produced and sold its quota, then and only then,
producers that still had unfilled orders could apply to the Minister for
supplementary licences to produce and sell additional amounts. The Minister in
his discretion could grant or refuse any such application. …The scheme allowed
each producer additional production for storage and reserve purposes up to 55%
of the producer’s storage capacity.
A similar description is found in the reasons of
the Saskatchewan Court of Appeal.
Producing and disposal licences were granted to
Noranda under date of December 12, 1969, to take effect from January 1, 1970, for
a term of three months. The licences authorized the production of 77,440 short
tons (K2O equivalent) of potash or potash products, and required
reporting to the Minister of production of potash or potash products in
accordance with the Potash Conservation Regulations and also required
compliance with all applicable Acts, regulations, orders and directives
governing, inter alia, production, conservation, processing, disposal,
marketing, supplying, delivering and storage of potash and potash products. The
disposal licence was in similar terms save that it referred to disposal rather
than production.
[Page 59]
A second producing licence was granted to
Noranda on February 24, 1970, for a four month term from March 1, 1970, and it
provided for the production of 120,294 short tons. It was made a condition of
the licence that the floor price (previously referred to herein) should be
observed. A disposal licence on the same terms was granted in respect of
116,056 short tons of potash. Shortly thereafter, the Government dispensed with
disposal licences. The trial judge in his reasons referred to a statement of
the then responsible provincial Minister that this was done “in compliance with
the request of the Department of Justice of the Federal Government”. The Minister
advised producers of the elimination of disposal licences in a letter of March
24, 1970, which read in part as follows:
Essentially the amendments dispense with
the provisions for disposal licences and prorationing and marketing will
be maintained through the issuance of producing licences. Other than this
change, the same rules and procedure that are now in effect will apply. The
form of the producing licence may have to be changed to comply with the present
procedure in order to permit production only for the purpose of fulfilling
commitments for the sale of potash at not less than the established floor
price.
The Department will be pleased to explain
any questions arising from the amendments to The Potash Conservation
Regulations, 1969.
On July 14, 1970, the appellant company, which
had by then come into existence, was given a twelve-month producing licence
effective from July 1, 1970, for the production of 362,242 short tons, subject
to certain quarterly limitations on the scale of production. As before, the
licence was conditioned on observance of the minimum price previously fixed. A
producing licence for a further twelve-month period from July 1, 1972, was
granted on June 20, 1972, authorizing the production of 442,647 short tons of K2O
equivalent of potash or potash products. The licensee was required to submit a
schedule of its planned production and the previous licence condition of
observance of the floor price was replaced by another formula reading as
follows:
[Page 60]
7. Other provisions: This production
licence is valid solely upon the condition that the production of potash is
only for the purpose of fulfilling commitments that are made for the sales of
potash which are in the opinion of the Minister or to the satisfaction
of the Minister at not less than the basic price established by the Minister,
unless otherwise specifically authorized by the Minister.
As of July 1, 1972, however, the ABC
prorationing scheme was replaced by the so-called FP scheme, described as a
flat prorationing scheme. Plans for the replacement were indicated in a program
review dated March 2, 1972, sent to each producer. A directive of June 30,
1972, set up an allocation formula in these words:
Each producer’s share of production to meet
the market demand for Saskatchewan potash will be allocated according to a
proration formula based solely on the productive capacity of each producing
potash plant, except where the allocations are established by a production
agreement approved by the Minister of Mineral Resources.
The allocation made thereunder of the productive
capacity of each producer could be changed only with the approval of the
responsible Minister. A control procedure was also set out. The control
provisions included the following:
…
B2 A basic production allowable calculated
according to the allocation formula and based on 95 per cent of the estimated
market demand will be granted to each producer.
B3 Unless otherwise authorized, the
inventory of each producer at year end shall not be less than inventory at the beginning
of the year.
B4 After… a producing licence (has) issued
to each producer, each producer will be required to submit a production
schedule indicating how it proposes to fulfill the licence. Any reasonable
production schedule that does not adversely affect employment will be
approved.
B5 Since each producer’s production
allocation for the purpose of meeting the estimated market demand for
Saskatchewan potash will be limited to the same percentage of capacity that
total market sales for the year are of total productive capacity (i.e. all
producers
[Page 61]
operate at the same percentage of
capacity), it is important that each producer be aware of the performance of
the rest of the industry. Producers that may be short of allocation to meet
their requirements will be expected to plan their purchases from, or share
their markets with, other Saskatchewan producers early in the year to
ensure that each producer will have some allocation remaining during the spring
season and a reasonable degree of balance between producers is maintained
throughout the year. It is important to understand that additional allocations
will not be issued until the Department is convinced that each and every
producer will be able to market its basic production allowable.
B7 After the end of the fertilizer year the
allocation will be recalculated based on the proration formula and the actual
market deliveries. Producers that exceed these allocations will be required to
purchase potash from the producers that failed to meet their allocations. All
producers will be brought into balance in this manner by the end of the second
quarter of the next fertilizer year (December 31).
B8 Any infraction of the control procedures
herein contained may result in a suspension or cancellation of a producing
licence or a penalty by way of a reduced allowable at the discretion of the
Minister in consultation with the Potash Conservation Board.
C. The Department is in favour of a strong
export association, with membership by all producers, to handle all offshore
sales of Saskatchewan potash and therefore supports the organization Canpotex
Limited, now being reorganized with this goal in mind.
The Department will reduce the yearly
production allocation of any producer that is not a member of Canpotex by the
ratio of offshore sales to total sales of Saskatchewan produced potash in the
last calendar year. The degree to which each member company of Canpotex
participates in offshore sales will have no effect on its yearly allocation.
The reference to Canpotex was a reference to an
unincorporated association of Saskatchewan potash producers which was
incorporated on July 21, 1970, as Canpotex Limited. Evidence was given that the
purpose of Canpotex was to develop overseas markets for Saskatchewan potash.
The programme review of March 2, 1972, which contemplated the flat prorationing
scheme, contained
[Page 62]
a reference to Canpotex under the heading
“Export Association”, as follows:
Every effort will be made to have all
Saskatchewan producers intending to participate in offshore markets become
members of an export association now being reorganized under the name Canpotex
Limited. In order for the new formula to work effectively it is imperative an
export association be successful. Therefore all allocations for offshore
markets will be through Canpotex.
Another directive related to the introduction of
the FP scheme, entitled Potash Price Stabilization Directive, PCD-2, dated June
23, 1972, and also effective July 1, 1972, maintained the existing floor price
as a licensing condition, in the following terms:
A. MINIMUM PRICE CONDITION
Potash producing licences will be valid
solely upon the condition that the production of potash is only for the purpose
of fulfilling commitments that are made for the sales of potash which are in
the opinion of the Minister or to the satisfaction of the Minister, at not less
than the minimum price established by the Minister, unless otherwise
specifically authorized by the Minister.
The minimum net selling price shall be
thirty-three and three-quarter cents (33.750) Canadian per unit of potassium
oxide equivalent, free on board at the plant gate in Saskatchewan.
This directive was replaced in a few months by
Directive PCD-3, dated August 21, 1972, and effective September 1, 1972. It
prohibited all sales on consignment, on which there had formerly been
regulatory rules.
The appellant company, having regard to its
supply commitments to Central Farmers, objected to the FP scheme which, based
on productive capacities of the various producers and on allocation formulas
involving market sharing, would prevent it from fulfilling its commitments
unless it obtained supplementary licences. When its allocation for the 1972‑1973
fertilizer year was short of its contractual obligation, it sought an increase
and, on being refused, brought mandamus proceedings to compel the issue of a
licence for a production quota that would enable it to meet its contractual
commitment. It failed in those proceedings at first instance, in the
Saskatchewan
[Page 63]
Court of Appeal and in this Court: see [1972] 6
W.W.R. 62; [1973] 1 W.W.R. 193; [1973] 2 W.W.R. 672. During those proceedings
it was advised by a letter of September 20, 1972, from the Deputy Minister that
its production schedule for the year commencing July 1, 1972, was out of line
with governmental requirements and that it must reduce its monthly production
to conform thereto. This the appellant did but on December 11, 1972, it
instituted the action which gave rise to the appeal to this Court.
II
The trial judge came to the conclusion, upon his
review of the evidence (and I should note here that he admitted a wide range of
extrinsic evidence most of which the Court of Appeal held was inadmissible) and
upon a lengthy examination of applicable case law (1) Orders in Council 1733/69
and 404/70, (2) the Potash Conservation Regulations, 1969, being Regulation
287/69, (3) the ABC and FP schemes, and (4) the directives and licences issued
by the Minister and Deputy Minister for implementing the schemes were all ultra
vires as an invasion of the exclusive federal power in relation to the
regulation of trade and commerce. He also made a declaration that the Potash
Conservation Regulations, 1969 and amendments thereto were not passed for any
of the purposes authorized by ss. 3, 9 and 10 of The Mineral Resources Act and
were ultra vires as going beyond the powers delegated by the Act.
This Court is not concerned in this appeal with
the last-mentioned declaration, but I should point out that the Legislature of
Saskatchewan amended The Mineral Resources Act a year after the
declaration was made in order to rectify any deficiency in the statute to
support the validity of the Potash Conservation Regulations, 1969: see 1976
(Sask.), c. 36. The amending Act was given retroactive force for this purpose,
and counsel in the case were called back for re-argument in the Court of Appeal
on its effect. Chief Justice Culliton took the following position on the
amendment:
[Page 64]
In short, the effect of the amending
legislation, whether necessary or not, was to limit any basis for suggesting
that the Regulations, the Minister’s actions, the Minister’s and departmental
directives, the ABC and FP schemes and the right to cancel either a producing
licence or subsurface mineral lease were not authorized by The Mineral
Resources Act.
In my opinion, unless it can be said the
amendments are ultra vires, this end has been accomplished. Once the
effect is given to the amendments, then it can be said, the only issue is
whether or not in purporting to carry out schemes as authorized by the Statute
such schemes were invalid in that in their true nature and character they were
directed to the regulation of trade and commerce.
I can accept this assessment for the purpose of
reaching the constitutional question in the present case. It must, however, be
obvious that an authorizing statute which, in the generality of its terms, is
not itself impeachable (because it is open to a construction which assures its
validity), cannot sustain regulations or orders which, taken by themselves, are
ultra vires under the British North America Act. Indeed, if the
invalid regulations or orders are so intertwined with the authorizing statute
as to stamp it with their character, the statute itself would be vulnerable. I
do not find it necessary to enter into such an inquiry in the present case.
The declaration of unconstitutionality by the
trial judge was founded upon the following considerations as expressed in his
reasons:
A study of the regulations and a
consideration of the extrinsic evidence relevant to the purposes for which they
were passed establishes that the real aims and purposes of the [Executive]
Council were as follows:
Firstly: to
restrict and limit the export of Saskatchewan potash into the United States.
Secondly: to
control and impede the flow of trade in potash between Saskatchewan producers
and the residents of other provinces of Canada unless they paid such price and
obeyed such conditions as the Minister of Mineral Resources saw fit to demand
and impose from time to time. Thus the Regulations and the ABC scheme were, in
fact, designed to interfere with and to impede the free flow of trade in potash
within Canada and to
[Page 65]
curtail the right of Canadians in other
Provinces to make their own contracts with Saskatchewan producers.
Thirdly: to
control and impede the export trade in potash between Canada and other foreign
nations in like manner.
The mass of evidence before me irresistibly
points to the conclusion that these aims and purposes of the Council constituted
an intentional and deliberate invasion into “the exclusive legislative
authority of the Parliament of Canada” over “The regulation of trade and
commerce” assigned to it by Section 91(2) of The British North America Act. It
is completely beyond the competence of the provincial Legislature to legislate
to impede or prohibit the export from Saskatchewan of products produced or
manufactured in this Province:…
In the Court of Appeal, Culliton C.J.S. took a
different view. I think that he correctly assessed the trial judge’s reasons on
constitutionality as resting on the conclusion that what was before him was a
marketing scheme. The learned Chief Justice was of another opinion, namely,
that the scheme was directed to the conservation and orderly development of
Saskatchewan’s potash reserves; or, to put it in more specific terms, related
to the authorization of the scheme under The Mineral Resources Act, it
was a scheme for the management, utilization and conservation of the potash
industry. Chief Justice Culliton appreciated that this view of the ABC and FP
schemes did not ipso facto determine validity, but he also considered
that the aforementioned objectives encompassed “the promotion and adoption of
economic policies to assure a healthy and sound industry”; and he agreed with
the trial judge that “the purposes as disclosed in the Regulations are to
control the production and sale of potash, to determine fair prices and to
prorate production when advisable”.
Looking separately at the Regulations and at the
directives issued thereunder, the Chief Justice had this to say about the
Regulations:
…The Regulations, on their face, do not
disclose any purpose or intent to interfere with the flow of interprovincial or
international trade in potash. That being so, I
[Page 66]
am satisfied the Regulations are valid;
they disclose neither an attempt to invade the field of trade and commerce nor
are they inconsistent with the provisions of The Mineral Resources Act under
which they were passed. Whether or not the ABC and FP schemes, purported to
have been made in pursuance of such Regulations by ministerial orders and
directives, are valid and constitutional, are entirely different matters. The
validity or non-validity of these schemes are not the factors which determine the
validity of the Regulations.
He asserted that the trial judge had taken too
narrow a view of the empowering authority under The Mineral Resources Act to
provide for the management, utilization and conservation of mineral resources.
In his opinion, the trial judge had limited these matters to their physical
connotation, and a more expansive view of them should be taken to embrace
economic considerations, and this apart from the subsequent 1976 amendment of
the Act. I readily agree with this broader approach, but it is one which does
not in itself establish provincial legislative authority.
The sensitivity of the provincial Government to
economic factors, in so far as they might reveal an invasion of exclusive
federal power in relation to the regulation of trade and commerce, is shown (as
Chief Justice Culliton himself observed) by the rescission of the provision in
the Regulations for a disposal licence. The obvious question is whether the
removal of the requirement for such a licence makes any difference in the
constitutional appraisal of the scheme. In short, assuming the scheme would
have fallen if the provision for a disposal or sale licence would have
remained, is it saved because the only licence requirement is for production?
To put the matter another way, is the character of the scheme any different by
reason of the limitation to a production licence with price control as a
condition thereof? In this case, I think not, and I shall come to my reasons in
due course.
I may note, however, at this point that for
Culliton C.J.S. the fact that “The prorationing and price fixing were directed
only to potash produced in Saskatchewan” (to use his very words) distinguished
the scheme in this case from that
[Page 67]
involved in the Manitoba Egg Reference, Attorney-General
for Manitoba v. Manitoba Egg and Poultry Association. This latter case involved, of course, a
marketing scheme, and I am mindful of Chief Justice Culliton’s rejection of
such a characterization of the prorationing and price stabilization scheme in
issue here. Nonetheless, he found comfort in another marketing case, Carnation
Company Ltd. v. Quebec Agricultural Marketing Board, where a marketing and price control plan
for the sale of milk by Quebec producers to a processor in Quebec was sustained
and held applicable to the appellant processor, notwithstanding that it sold
most of its purchased milk, after processing, outside the Province. In
upholding the Quebec legislation and the scheme under it, as directed to
marketing in intraprovincial trade, Martland J., speaking for this Court,
referred to the Shannon case (Shannon v. Lower Mainland Dairy
Products Board) as
expressing the general principle that a provincial statute regulating
intraprovincial transactions is at least prima facie valid, and he went
on to say this (at pp. 253‑4) after considering also the various reasons
for judgment of this Court in Reference re The Farm Products Marketing Act
(Ontario):
The view of the four judges in the Ontario
Reference was that the fact that a transaction took place wholly within a
province did not necessarily mean that it was thereby subject solely to
provincial control. The regulation of some such transactions relating to
products destined for interprovincial trade could constitute a regulation of interprovincial
trade and be beyond provincial control.
While I agree with the view of the four
judges in the Ontario Reference that a trade transaction, completed in a
province, is not necessarily, by that fact alone, subject only to provincial
control, I also hold the view that the fact that such a transaction
incidentally has some effect
[Page 68]
upon a company engaged in interprovincial
trade does not necessarily prevent its being subject to such control.
I agree with the view of Abbott J., in the Ontario
Reference, that each transaction and each regulation must be examined in
relation to its own facts. In the present case, the orders under question were
not, in my opinion, directed at the regulation of interprovincial trade. They
did not purport directly to control or to restrict such trade. There was no
evidence that, in fact, they did control or restrict it. The most that can be
said of them is that they had some effect upon the cost of doing business in
Quebec of a company engaged in interprovincial trade, and that, by itself, is
not sufficient to make them invalid.
Culliton C.J.S. was of the view that the same
considerations which supported the validity of the provincial scheme in the Carnation
case operated here. He concluded as follows:
Applying the same reasoning in determining
the validity of the ABC and FP plans, I think it can properly be said that they
were not directed to the regulation of trade and commerce. They did not purport
directly to control or restrict trade in potash. There was no evidence that, in
fact, the plans did control and restrict the potash. There was no evidence that
the international demand for Saskatchewan potash was not fully met. The most
that can be said is that the plans may have had some incidental effect on the
international market but that was a result and not a purpose. The true purpose
of the schemes as in the attainment of objects of The Mineral Resources Act to
manage, utilize and conserve the mineral so as to protect and maintain the
potash industry as a viable economic industry within the province. That, in my
opinion, was the true subject matter of the schemes and consequently within the
legislative competence of the Province within the powers assigned to a
provincial Legislature under Section 92(10), (13) and (16) of the British
North America Act. While the schemes may have had some ultimate economic
results in the market of potash it is the subject matter of the schemes, and
not their results, which determine their true nature and character.
It is true that under the FP scheme Central
Canada Potash was unable to supply CF Industries Limited with the quantity of
potash it had agreed to sell and CF Industries had agreed to buy. As a matter
of fact, it is
[Page 69]
apparent, that the only real complaint of
Central Canada Potash respecting the FP program was because of the loss of
profits it suffered from its inability, under the control program, to perform
its contractual commitments with CF Industries. It had no real complaint
respecting the ABC program, as when that program was in effect, it was given
supplementary licences which enabled it to produce virtually to its full
capacity. However, notwithstanding the inability of Central Canada Potash to
fulfill its contractual commitments to CF Industries under the FP program there
was no evidence that the schemes prevented CF Industries from acquiring
elsewhere in Saskatchewan its requirements of the Saskatchewan production.
He arrived at this result without finding it
necessary to rely on the 1976 amendment of The Mineral Resources Act.
III
In coming to his conclusion, the Chief Justice
rejected as inadmissible a good deal of the extrinsic evidence which the trial
judge found relevant and admissible. He felt that the constitutional problems
in the case “are so readily determinable from the impugned regulations,
licences and directives that most of the extrinsic evidence which was admitted
was inadmissible and unnecessary”. What was admissible was summarized by the
Chief Justice in these words:
Evidence as to the circumstances leading up
to the adoption of the Regulations and evidence relating to the potash
resources of the Province, the history of the industry, its productive
capacity, the demand for its production, the state of the market and the
economic problems which it faced, were all properly admissible. Such evidence
gave “the underpinning for the issues” as Laskin, J. (as he then was), stated
in Attorney General for Manitoba v. Manitoba Egg and Poultry Association, et
al, [1971] S.C.R. 689. Too, such evidence sets out the evil sought to be
remedied.
However, he went on to say that there was no
need for extrinsic evidence since “…the true nature and character of the
Regulations as well as that of the programs of prorationing and price
stabilization and the effects resulting therefrom can be ascertained from a
study of the Regulations and of the directives from time to time issued by the
Minister and his departmental officials…”.
[Page 70]
Nonetheless, he did refer to and quote some
remarks of the then Premier of Saskatchewan, made on the day the Regulations
were adopted, as showing the need for the Regulations under the prevailing
circumstances; and he added that the Premier had correctly stated “the direct
objectives of the Regulations, licences and schemes [to be] for the
conservation and orderly development of Saskatchewan’s potash reserves… through
a licensing scheme or schemes to provide for controlled production and a
minimum price, free on board, the mine”.
It was the appellant who introduced the wide
range of extrinsic evidence which was canvassed in the reasons of the trial
judge. In its factum in this Court, this evidence was classified by it as (1)
circumstantial and (2) direct, a classification which the respondent Government
of Saskatchewan did not accept. The arguments of the parties in this Court did
not, however, produce any division between them on whether or not it was
necessary to go beyond what Chief Justice Culliton considered to be admissible.
Counsel for the appellant contended that it was
not at all clear what was the evidence upon which the Court of Appeal acted.
The Court did not detail it, but it did make findings upon which the
constitutional question fell to be determined and, at the risk of some
repetition of what has gone before in these reasons, I wish to reproduce those
findings in the exact words of Chief Justice Culliton, and as well his
prefatory remarks, as follows:
While I admire the industry of the learned
trial Judge in his thorough and exhaustive review of virtually every piece of
evidence, I do not think there is any real dispute as to the factual situation,
in so far as it relates to the problems of constitutionality, validity and
applicability. I think it can properly be said that the following statements of
fact are fully and completely substantiated by the admissible evidence, and by
the inferences which must necessarily be drawn from the schemes as established
by ministerial and departmental directives and set out in the potash producing
licences:
(1) that in 1969, for all practical
purposes, the entire potash production of Saskatchewan was sold and disposed of
outside of the province: at that time
[Page 71]
64% of the production was sold in the
United States and the remainder in other parts of the world; Saskatchewan
producers had captured 48% of the potash market in the United States;
(2) that prior to the adoption of The
Potash Conservation Regulations, 1969, as set out in Order in Council
1737/69 and amended by Order in Council 404/70, the potash industry of
Saskatchewan was facing difficult economic conditions due to over-production
and depressed market prices; conditions that were accentuated by the imposition
of dumping duties by the United States Tariff Commission and by the threat of
legislative action by the United States Congress to further protect the
American potash industry by the imposition of import quotas and tariffs;
(3) that the potash industry of the United
States was situated primarily in the State of New Mexico, and that the industry
was suffering the same economic problems as was the industry in Saskatchewan as
a result of discussions between representatives of the Government of
Saskatchewan and those of the State of New Mexico, it was agreed that each
would do what it could to protect and conserve the potash industry, in their
respective jurisdictions;
(4) that The Potash Conservation
Regulations were adopted for the purpose of conserving and maintaining the
industry in Saskatchewan as a viable industry through a program of controlled
production and price stabilization;
(5) that both the ABC scheme and the FP
scheme provided for strict prorationing of production as well as the
establishment of a fixed minimum price, free on board at the mine; a price that
could not be affected or reduced by discounts, commissions or other
considerations or by loading costs incurred after loading at the plant gate—the
licences were valid only as long as the producer complied with the price
requirement;
(6) that the prorationing and price
stabilization schemes would result in a reduction of potash available on the
international market but there was no evidence that at any time there was
insufficient potash available to meet the market requirements;
(7) that the prorationing and price
stabilization schemes did result in benefit to the industry, both in New Mexico
and in Saskatchewan; did forestall the imposition of import quotas and tariffs
by the United States Congress; did stabilize pro-
[Page 72]
duction and assist in the establishment of
an economic price, and these schemes were supported by every potash producer in
Saskatchewan except Central Canada Potash.
I am content to proceed on the basis of these
findings and on an examination of the Regulations, directives and licences
involved in the prorationing and price fixing scheme, without any further
regard for any of the other extrinsic evidence adduced before the trial judge.
IV
What is evident from the circumstances under
which the Potash Conservation Regulations were promulgated, and from the terms
of the directives and licences through which the ABC and FP schemes were
instituted and administered, is that the Government of Saskatchewan had in view
the regulation of the marketing of potash through the fixing of a minimum
selling price applicable to the permitted production quotas. The only market
for which the schemes had any significance was the export market. There could
be no suggestion that the schemes had any relation to the marketing of potash
within the Province of Saskatchewan when there was hardly any Saskatchewan
market for the mineral. There was no question here of any concluded
transactions of sale and purchase in the Province, as was the situation in the Carnation
case. Out of Province and offshore sales were the principal objects of the
licences and directives.
The documentary evidence leaves no doubt about
this. The first directive fixing the minimum floor price for potash to the
producer, f.o.b. the potash plant, dated November 25, 1969, was stated to be
for the purpose of determining the demand for it “for reasonable current
requirements and current consumption or use within or without Saskatchewan”.
The first producing licence to Noranda, dated December 12, 1969, required the
licensee to comply with “all applicable Acts, regulations, orders and
directions governing production, conservation, processing, disposal, marketing,
transporting…”. The second producing licence conditioned its validity on
[Page 73]
observance of the minimum selling price, f.o.b.
the producer’s plant in Saskatchewan. Subsequent producing licences did not
indicate any change of focus, although they fortified ministerial control.
A directive of August 24, 1971, to all producers
fixed the minimum price f.o.b. vessel, Vancouver. On August 27, 1971, a letter
to producers from the Deputy Minister advised of approval given, on certain
conditions, to an agreement for delivery of potash to a business organization
in France. One of the conditions required that “all potash delivered to Europe
from Saskatchewan pursuant to the agreement shall be for consumption in
Europe”. The new allocation formula prescribed by the directive of June 30,
1972, from which I have already quoted, was concerned with the sharing of
production “to meet the market demand”. The purpose of Canpotex, to which I
have also referred above, was to make it the instrument for offshore sales of
Saskatchewan potash.
In all of the foregoing, the Government of
Saskatchewan, and its responsible Ministers and their Deputies, were acting not
under proprietary right but in pursuance of legislative and statutory authority
directed to the proprietary rights of others, including the appellant. It was
strenuously contended by the respondent Government (and in this they were
supported by the intervening Provinces) that the natural resources, the mineral
wealth of the Province was subject to provincial regulatory control alone, and
that production controls or quotas were peculiarly matters within exclusive
provincial legislative authority. Chief Justice Culliton gave force to this
point in two concluding paragraphs of his reasons, which he prefaced by saying
that “courts must approach constitutional problems with a sense of realism and
practicality”. The two paragraphs read as follows:
It was admitted by all parties that the
potash industry of Saskatchewan was facing difficult problems—problems which,
if not solved, would have a most detrimental
[Page 74]
effect on the industry and on the Province.
In these circumstances, the potash industry had a right to seek assistance from
whatever Government had the power to grant that assistance. Natural resources,
being exclusively within the provincial jurisdiction, the industry turned to
the Province. The Province, to protect and conserve the potash industry,
implemented controlled production and established minimum prices in the
Province. These programs did assist the industry, but at the same time, had
some effect on areas within Federal jurisdiction. However, in pith and
substance, they were programs directed to a matter within Provincial
jurisdiction and thus were valid notwithstanding such ultimate effects.
If I am not right in this conclusion, then
it must be said the right to control production of potash within the Province,
and to establish a minimum price at the mine, rests with the Parliament of
Canada, for the right to do so must rest somewhere. Clearly, in my opinion, the
Parliament of Canada does not have the power to control the production of
potash within the Province, or to set a minimum price at the mine. Thus, in my
opinion, to hold that the prorationing and price stabilization programs are ultra
vires the Province, is to determine their validity by the ultimate effects
of such programs and not by their true nature and character.
It is, of course, true, that production controls
and conservation measures with respect to natural resources in a Province are,
ordinarily, matters within provincial legislative authority. This Court’s
reasons in its recent judgment in the Ontario Egg Reference (Reference re
Agricultural Products Marketing Act (Canada), Farm Products Marketing Agencies
Act (Canada) and The Farm Products Marketing Act (Ontario)), judgment delivered January 19, 1978, and
as yet unreported, supports that view. The situation may be different, however,
where a province establishes a marketing scheme with price fixing as its
central feature. Indeed, it has been held that provincial legislative authority
does not extend to the control or regulation of the marketing of provincial
products, whether minerals or natural resources, in interprovincial or export
trade. The Saskatchewan Courts recognized this almost fifty years ago in the
judg-
[Page 75]
ment in In re Grain Marketing Act, 1931. Legislation with this thrust in other
Provinces has likewise been struck down: see Lawson v. Interior Tree Fruit
& Vegetable Committee of Direction, Re Sheep and Swine Marketing Scheme
(P.E.I.).
The present case reduces itself therefore to a
consideration of “the true nature and character” of the prorationing and price
stabilization schemes which are before us. This Court cannot ignore the
circumstances under which the Potash Conservation Regulations came into being,
nor the market to which they were applied and in which they had their
substantial operation. In Canadian Industrial Gas & Oil Ltd. v.
Government of Saskatchewan, this
Court, speaking in its majority judgment through Martland J., said (at
p. 568) that “provincial legislative authority does not extend to fixing
the price to be charged or received in respect of the sale of goods in the
export market”. It may properly be said here of potash as it was said there of
oil that “the legislation is directly aimed at the production of potash
destined for export, and it has the effect of regulating the export price since
the producer is effectively compelled to obtain that price on the sale of his
product” (at p. 569).
I do not agree with Chief Justice Culliton that
the consequence of invalidating the provincial scheme in this case is to move
to the Parliament of Canada the power to control production of minerals in the
Province and the price to be charged at the mine. There is no accretion at all
to federal power in this case, which does not involve federal legislation, but
simply a determination by this Court, in obedience to its duty, of a limitation
on provincial legislative power. It is true, as he says that (with some
exceptions, not relevant here) the British North America Act distributes
all legislative power either to Parliament or to the provincial Legislatures,
but it does not follow that legislation of a Province held to be invalid may ipso
facto be
[Page 76]
validly enacted by Parliament in its very terms.
It is nothing new for this Court, or indeed, for any Court in this country
seized of a constitutional issue, to go behind the words used by a Legislature
and to see what it is that it is doing. It is especially important for Courts,
called upon to interpret and apply a constitution which limits legislative
power, to do so in a case where not only the authorizing legislation but
regulations enacted pursuant thereto are themselves couched in generalities,
and the bite of a scheme envisaged by the parent legislation and the delegated
regulations is found in administrative directions.
Where governments in good faith, as in this
case, invoke authority to realize desirable economic policies, they must know
that they have no open-ended means of achieving their goals when there are
constitutional limitations on the legislative power under which they purport to
act. They are entitled to expect that the Courts, and especially this Court,
will approach the task of appraisal of the constitutionality of social and
economic programmes with sympathy and regard for the serious consequences of
holding them ultra vires. Yet, if the appraisal results in a clash with
the Constitution, it is the latter which must govern. That is the situation
here.
In my opinion, the judgment of the Saskatchewan
Court of Appeal on the constitutional question posed for this Court should be
set aside and the declaration of invalidity by the trial judge should be
restored.
V
On the second main issue in this case, namely,
the claim for damages by the appellant against the respondent for the tort of
intimidation, I am in agreement with the reasons of my brother Martland and
would therefore dismiss the appellant’s appeal on this issue.
[Page 77]
VI
Success being divided, there will be no order as
to costs as between the parties either in this Court or in the Courts below.
Further, there will be no order as to costs either to or against the
Attorney-General of Canada or any of the intervenants.
The Chief Justice and Ritchie, Spence, Pigeon,
Dickson and Pratte JJ. concurred with the judgment delivered by
MARTLAND J.—The appellant claimed damages
against the respondent for intimidation. At trial damages were awarded in the
amount of $1,500,000. This judgment was reversed on appeal by the Court of
Appeal.
The circumstances which gave rise to the claim
that the respondent had committed the tort of intimidation are as follows.
Pursuant to the Potash Conservation Regulations,
the relevant portions of which are set out in the judgment of the Chief
Justice, the Minister of Natural Resources, hereinafter referred to as “the
Minister”, evolved and implemented what was known as the “ABC” scheme for
prorationing the production of potash in Saskatchewan. In that scheme the
formula for prorationing was founded upon:
(1) the productive capacity of each mine;
(2) the estimated demand for Saskatchewan
potash;
(3) the amount of potash required for working
stock and reserve.
Under the scheme, each producer was allowed to
produce and sell 40 per cent of its productive capacity. Only after every
producer in Saskatchewan had produced and sold its quota could a producer apply
for a supplementary licence to produce and sell an additional amount.
The appellant obtained production licences from
the Minister authorizing the production, between January 1 and June 30, 1970,
of 197,734 short tons K2O equivalent, between July 1, 1970, and
[Page 78]
June 30, 1971, of 410,642 tons, and between July
1, 1971, and June 30, 1972, of 632,096 tons.
In December 1971, the Minister advised all
producers of potash that a new method of proration would take effect for the
year July 1, 1972, to June 30, 1973. The new method, which was adopted, was
that the producing licence to be issued to each producer would be in accordance
with a prorationing formula based solely upon the productive capacity of each
mine.
The appellant took objection to the application
of this formula to its production. Mr. Schmitt, the president of the
appellant, wrote to the Minister on May 29, 1972, requesting a licence for the
1972-73 year to authorize production of 805,500 tons of K2O
equivalent of which, he said, 744,500 tons would be required to meet the
appellant’s supply commitment to C.F. Industries Inc. Subsequently, on June 19,
1972, Mr. Row, the executive vice-president of the appellant, met with the
Minister, Mr. Thorson.
On June 22, 1972, the Minister wrote a letter to
Mr. Row, referring to Mr. Schmitt’s letter, and to the meeting of
June 19. He advised Mr. Row that:
…upon careful consideration, it is not
deemed to be in the public interest to make an exception to a producer or to
the method of allocation which is to come into effect on July 1, 1972.
He went on to add:
While it is recognized that the allocation
to Central Canada Potash under the revised proration rules may not be
sufficient to meet all the requirements of C.F. Industries, Inc., an exception
could not be tolerated or justified without upsetting the whole potash
prorationing program. Moreover, such exception would be tantamount to giving
Central Canada Potash an undue advantage by government regulation.
Central Canada Potash and other
Saskatchewan producers have benefited from the prorationing program and they
will continue to share those benefits under the revised prorationing formula.
The sharing of markets is a basic and essential principle of any prorationing
scheme.
[Page 79]
A licence was issued to the appellant
authorizing production of 442,647 tons.
The appellant commenced proceedings for a writ
of mandamus to compel the Minister to issue to the appellant a producing
licence for the twelvemonth period commencing July 1, 1972:
…according to law and upon relevant
considerations, and not upon irrelevant considerations or improper purposes
including regulation of the extra-provincial marketing and price of potash.
This application was dismissed on August 17,
1972, ([1972] 6 W.W.R. 62). An appeal from this judgment was dismissed by the
Court of Appeal on November 6, 1972, ([1973] 1 W.W.R. 193). A further appeal to
this Court was dismissed on February 5, 1973, ([1973] 2 W.W.R. 672).
On August 3, 1972, the Deputy Minister of
Mineral Resources, Mr. Wotherspoon, wrote to the appellant’s manager at
Colonsay, Saskatchewan, as follows:
Please be advised that the production
schedule for 750,000 K2O tons for the twelve month period is
unacceptable as it is based on a larger volume of production than is currently
authorized by Central Canada’s Potash Producing Licence. Therefore, please submit,
as soon as possible, a planned production schedule for the 442,647 K2O
tons of production now authorized by Producing Licence No. P72-C-1.
This was followed by a letter dated September
20, 1972, from Mr. Wotherspoon to Mr. Schmitt. As this letter constitutes
the primary basis of the appellant’s claim for damages, based on intimidation.
I will set it out in full:
Mr. D.E.G.
Schmitt,
President,
Central Canada Potash Co. Limited,
Suite 1700,
44 King Street West,
Toronto 105, Ontario.
Dear Mr. Schmitt:
Re: Potash Production Schedule for
1972-73 Fertilizer Season
[Page 80]
Upon issue of the 1972-73 potash producing
licence, dated June 20, 1972, Central Canada Potash Co. Limited was requested
to submit its potash production schedule for the 1972-73 fertilizer year
commencing July 1, 1972.
On July 26, 1972, you submitted a
production schedule totally out of line with the Department’s guideline of a
monthly production not exceeding 10% of the allocated annual production
authorized by your producing licence.
We informed you by letter on August 3,
1972, that your production schedule was unacceptable to the Department and that
you must revise your schedule so that your monthly production will be in
accordance with the guideline as a percentage of the allocated production. To
date we have not received your revised production schedule.
Furthermore, according to the production
reports your company produced in the month of July, 1972, 109,395 tons of
muriate or 66,428 tons of K2O equivalent, and in August, 1972, your
company produced 101,448 tons of muriate or 61,720 tons of K2O
equivalent. Moreover, all indications show that your company is producing
similar tonnage in September, 1972. Under these circumstances your company will
produce in the first three months of the 1972-73 fertilizer year about 190,000
tons of K2O equivalent or about 57,400 tons of K2O
equivalent over and above the production guideline which is applicable to all
other potash producers in Saskatchewan.
Your company is required, therefore, to
reduce the monthly production of potash in Saskatchewan to not more than 30,000
short tons of K2O equivalent in each month for the balance of the
1972-73 fertilizer year until your allocated production has been produced,
unless otherwise authorized, by the Minister of Mineral Resources. Failure to
comply with the above requirement will necessitate drastic action of serious
consequence and the Minister will have no choice but to cancel your potash
producing licence P72-C-1. In addition, the Department will recommend the
cancellation of your Subsurface Mineral Lease No. KL108 pursuant to Paragraph 1
and Section 13 of the lease.
In order to avoid any misunderstanding or
delay your written assurance of compliance with the production schedule as set
forth by the Department above is requested not later than September 27, 1972.
Yours truly,
(sgd.) J. Wotherspoon
J.G. Wotherspoon.
[Page 81]
After the receipt of this letter by the
appellant, a meeting took place which was attended by Mr. Schmitt,
Mr. Thorson, Mr. Wotherspoon and others at which Mr. Schmitt
sought to persuade Mr. Thorson to issue a production licence for the
appellant’s production requirements. Mr. Schmitt’s representations were
unsuccessful. As a result, the appellant reduced its production to the level
required by the Minister. Mr. Schmitt says that this reduction was
effected because of the threat of the appellant’s losing its sub-surface
mineral lease. Thereafter the appellant kept its production within the limits
set by its producing licence.
The present action attacking the constitutional
validity of the regulations in question here was commenced on December 11,
1972.
The appellant’s case is that its production of
potash was reduced in consequence of the threats contained in the letter of
September 20, 1972, that the demanded reduction in its production was not
lawful, and that the appellant has suffered loss by reason of its being unable
to effect sales of potash which, otherwise, it could have made, with a
consequent loss of profits.
The tort of intimidation is defined in Clerk
& Lindsell on Torts (14th ed.) para. 802, p. 414, as
follows:
A commits a tort if he delivers a threat to
B that he will commit an act or use means unlawful as against B, as a result of
which B does or refrains from doing some act which he is entitled to do,
thereby causing damage either to himself or to C. The tort is one of intention
and the plaintiff, whether it be B or C, must be a person whom A intended to
injure.
The very existence of the tort of intimidation
was questioned in argument before the House of Lords by Gerald Gardiner, Q.C.,
(as he then was) in the leading case of Rookes v. Barnard. The House of Lords confirmed the
existence of the tort as had the Court of Appeal in the same case, [1963] 1
Q.B. 623. The difference of opinion between the two Courts was that the Court
of Appeal held that intimidation was restricted to
[Page 82]
acts of violence or threats of a tortious or
criminal nature and could not be extended to cover a threat to break a
contract, while the House of Lords took the view that a threat to break a
contract could be a foundation for the tort.
The facts of that case were these. The
plaintiff, an employee of B.O.A.C., resigned from his trade union which had an
oral understanding, which was not legally binding, with B.O.A.C. that when a
section or unit of B.O.A.C.’s employees were all union members it would
not thereafter recruit non-union staff for that section. Of the three
defendants, B and F were lay officials of the union employed by B.O.A.C. and S
was a full-time official employed by the union. These three, in accordance with
the terms of a resolution passed at a meeting of union members, threatened
B.O.A.C. that a strike of all the employees would take place within three days
if the plaintiff non-unionist were not removed. In consequence, B.O.A.C.
suspended and later (lawfully and with due notice) dismissed the plaintiff.
Under a collective agreement between the union B.O.A.C. the union agreed that
employees would not strike. The strike would have been a breach of contract by
employees as against B.O.A.C.
It will be noted that the threats which were
made were not made to the plaintiff. They were made to his employer, B.O.A.C.,
which lawfully dismissed the plaintiff. The threatened strike would have been a
clear breach of the collective agreement between the union and B.O.A.C. His
only recourse, if it existed, and the House of Lords found that it did, was
against those persons whose threat to B.O.A.C. resulted in its dismissal of the
plaintiff from its employment.
The judgment of the House of Lords has been the
subject of criticism. A good example of this is to be found in the article
written by Professor K.W. Wedderburn published in (1964) 27 Modern Law Review
257. There are substantial arguments in favour of the opinion expressed by the
Court of Appeal in the Rookes case. The question has not come up for
consideration in Canada. As the trial judge pointed out in the present case,
that decision
[Page 83]
has been mentioned in a number of Canadian
cases, but, so far, only in relation to what it decided in respect of the
awarding of exemplary damages. I do not, however, consider it is necessary
presently to determine that issue, because it is my view that for other reasons
the appellant is not entitled to succeed.
In reaching that conclusion, the following
matters have to be considered.
At the time the letter of September 20, 1972,
was written and prior thereto the Potash Conservation Regulations, 1969, made
pursuant to The Mineral Resources Act were in existence. Section 2 of
those regulations expressly prohibited the production of potash unless a
producing licence authorizing the production had been granted by the Minister
in such form as he might determine.
At that time the appellant had a potash
producing licence, dated June 20, 1972, for a period of twelve months
commencing July 1, 1972, authorizing the production of 442,647 short tons (K2O
equivalent) of potash. This licence required the appellant, within thirty days
of its receipt, to submit a schedule showing the planned production for each
month of the total production authorized. It also provided that the Minister
might amend, revise or vary the production authorized if, in his opinion,
conditions had changed or if he deemed an adjustment necessary, or in the
public interest.
The appellant had sought unsuccessfully to
persuade the Minister to authorize production of a larger quantity, in order to
meet its business requirements. At the time the letter was written, judgment
had been given dismissing the appellant’s application for mandamus to compel
the Minister to grant a licence for a larger quantity.
The appellant has been requested, upon the issue
of its licence, to submit its production schedule for the twelve-month period.
The production schedule submitted was not in line with the departmental
guideline of a monthly production not exceeding 10 per cent of allocated annual
production. The appellant’s production reports showed production in July 1972
of 66,428 tons of K2O equivalent and
[Page 84]
in August of 61,720 tons of K2O
equivalent. Indications were that there would be similar tonnage produced in
September.
The appellant was directed in the letter to
reduce production to 30,000 short tons of K2O equivalent in each
month for the balance of the period until the allocated production had been
produced, unless otherwise authorized by the Minister.
In the event of failure to comply with the
requirement, Mr. Wotherspoon, the Deputy Minister, said that the Minister
would have no choice but to cancel the licence and that the Department would
recommend cancellation of the appellant’s subsurface mineral lease.
Mr. Schmitt said in evidence that the appellant reduced production because
of the threat of losing this lease.
The lease in question, which was dated June 23,
1967, was for a term of 21 years, subject to renewal. Paragraph 1 of the lease
stated that it was granted “subject to The Mineral Resources Act, 1959, the
Subsurface Mineral Regulations, 1960… and any other applicable regulations
under the Act, as the Act or the said regulations or any of them may be
amended, revised or substituted from time to time”.
Clause 13 of the lease provided that:
13. The Lessee shall observe, perform and
abide by all the obligations and conditions imposed upon the holders of subsurface
mineral leases by the Act or regulations thereunder in effect from time to
time.
Clause 16 provided that in the event of any
default, breach, non-observance or non‑performance on the part of the
lessee of the covenants, obligations, conditions, restrictions or stipulations
contained in the lease, the Minister, after having given to the lessee sixty
days’ written notice of intention to cancel and specifying the default, might
cancel the lease if the default had not been remedied or was not being remedied
to the satisfaction of the Minister within the sixty-day period.
Mr. Wotherspoon in his letter of September
20, 1972, referred to paragraph 1 and to clause 13 of the lease as a basis for
cancellation.
[Page 85]
The Mineral Resources Act was amended on May 7, 1976, by c. 36 of the Statutes of
Saskatchewan, 1976. Among other things, a new s. 11A was enacted
which enables the Minister to cancel a production licence if the holder
contravenes or fails to comply with any term or condition of the licence and if
such contravention or failure continues for more than thirty days after being
brought to the holder’s attention. This section was declared to be deemed
to have always been contained in the Act.
In addition, the Potash Conservation Regulations
and amendments thereto were ratified and confirmed retroactively to their
respective dates of enactment.
The amending Act was passed after judgment had
been rendered following the trial, but prior to the judgment of the Court of
Appeal. The enactment of s. 11A removed any doubt as to the power
of the Minister to cancel a production licence. The ratification and
confirmation of the Potash Conservation Regulations removed doubt as to whether
they had been validly enacted under the provisions of the Act.
The amending Act also contained a schedule of
production of various companies, including the appellant, fixing the limits of
production of each such company from January 1, 1970, to June 30, 1976. It was
stated that no such company was entitled to produce amounts of potash in excess
of the fixed amounts. This provision was deemed to be in force from January 1,
1970. The amount fixed, in respect of the appellant, for the period July 1,
1972, to June 30, 1973, was 469,703 short tons K2O equivalent. The
amounts fixed for the next succeeding three twelve-month periods were 660,005,
900,000 and 900,000 tons, respectively.
To summarize, the situation in the present case
is this. Pursuant to The Mineral Resources Act a scheme for the control
of production of potash in Saskatchewan had been put into effect. The
appellant, as a potash producer, was prohibited from producing potash in excess
of the amounts prescribed by the licences issued to it. It was required after
receiving a licence to submit a production
[Page 86]
schedule, showing monthly production during the
twelve-month term of the licence not exceeding the total production authorized.
The appellant, being understandably unhappy with
the quota allotted to it, endeavoured to persuade the Minister to increase its
allocation, but without success. It sought to compel such an increase by
mandamus, again without success. It failed to submit a proper production
schedule within thirty days of the receipt of its licence for the 1972-1973
year. It continued its production upon a scale beyond that which was
contemplated by its licence.
This was the situation in which the Deputy
Minister wrote the letter of September 20, 1972, calling on the appellant to
reduce its production or to face the possibility of a cancellation of its
mineral lease. That lease, as has been noted, included a requirement that the
appellant, as lessee, would observe, perform and abide by all obligations
imposed upon holders of mineral leases by the Act or regulations thereunder in
effect from time to time.
In the present case, the threat by the Deputy
Minister was the possible exercise by the Minister of powers which he had
reasonable grounds for believing the Minister possessed. In the Rookes case
the threat was to pursue a course of action which the defendants knew would be
a breach of the collective agreement between the union and B.O.A.C.
In the present case, the Deputy Minister sought
to induce the appellant to limit the amount of its production to conform with
the prorationing scheme which had been established. In the Rookes case,
the object of the threat was to compel B.O.A.C. to discharge the plaintiff, an
action which, except for the pressure, it did not wish to take and which it was
under no legal obligation to take.
In the Rookes case, the threat was not
made to the plaintiff. It was made to a third party, B.O.A.C., with a view to
compel it to take a course of action detrimental to the plaintiff. In the
present case, the threat was made directly to the appellant and no third party
was involved.
[Page 87]
I will deal with this distinction now, and will
revert to the other distinctions later. It is significant because the
plaintiff, in the Rookes case, was not in a position to claim a breach
of contract by his employer when he was dismissed. The only recourse he could
seek was against the defendants who had threatened a breach of the collective
agreement between the union and the employer as a means to compel the employer
to discharge Rookes. Here the appellant is a party to the contract which it
says was threatened to be breached, i.e. the lease, and would have been
entitled to pursue its contractual remedies had that contract been illegally
breached.
On this point, I am in agreement with the view
expressed by the author of Winfield and Jolowicz on Tort (10th
ed.) p. 458, as follows:
It is submitted, therefore, that the
two-party situation is properly distinguishable from the three-party situation
and that it does not necessarily follow from Rookes v. Barnard that
whenever A threatens B with an unlawful act, including a breach of his contract
with B, he thereby commits the tort of intimidation. In fact the balance of
advantage seems to lie in holding that where A threatens B with a breach of his
contract with B, B should be restricted to his contractual remedies. The law
should not encourage B to yield to the threat but should seek to persuade him
to resist it. If he suffers damage in consequence he will be adequately
compensated by his remedy in damages for breach of contract, as his damage can
scarcely be other than financial. Where, however, what is threatened is a tort,
and especially if the threat is of violence, it is both unrealistic to insist
that proceedings for a quia timet injunction afford him adequate
protection against the consequences of resistance and unreasonable to insist
that if violence is actually inflicted upon him he is adequately compensated by
an award of damages thereafter. The view is preferred, therefore, that although
A commits the tort of intimidation against B where he threatens B with violence
or perhaps with any other tort, no independent tort is committed when all that
is threatened is a breach of contract.
In my opinion the tort of intimidation is not
committed if a party to a contract asserts what he reasonably considers to be
his contractual right and the other party, rather than electing to contest that
right, follows a course of conduct on the
[Page 88]
assumption that the assertion of right can be
maintained.
I am also of the view that if the course of
conduct which the person making the threat seeks to induce is that which the
person threatened is obligated to follow, the tort of intimidation does not
arise. If, in the Rookes case, the collective agreement between the
union and B.O.A.C. had contained a closed shop provision so as to require
B.O.A.C. to discharge the plaintiff upon his ceasing to be a member of the
union, the plaintiff could not have succeeded in his suit because of the threat
of a strike, even though the agreement provided that there should be no
strikes.
In the present case the Potash Conservation
Regulations made under The Mineral Resources Act prohibited the
appellant from exceeding a specified production of potash. By conforming to the
requirements of the Regulations, the appellant would not suffer damage and, therefore,
the claim for intimidation is not well founded.
What, then, is the position if, subsequently, it
is found that the Regulations were ultra vires? Does that finding then
mean that there has been intimidation?
In my opinion it does not. The conduct of the
Deputy Minister in relation to the tort of intimidation must be considered in
relation to the circumstances existing at the time the alleged threat was made.
The Deputy Minister was then seeking to induce conformity with the prorationing
plan which had been created by legislation which it was his duty to enforce. At
the time the threat was made, the legislation stood unchallenged.
On this question the judgment of the House of
Lords in Hoffman-La Roche & Co. v. Secretary of State for Trade and
Industry is of
assistance. In that case a statutory order had been made requiring the company
to reduce the prices of certain drugs. The company contested the validity of
the order and took proceedings to have the order declared to be ultra vires.
The company advised
[Page 89]
the Secretary of State that it would not obey
the order, but offered to pay the difference between its prices and those set
by the order into a special bank account pending a decision as to the validity
of the order. The Secretary of State then issued a writ seeking an injunction
to restrain the company from charging prices in excess of the prices fixed by
the order. He applied for an interim injunction to this effect but stated he
was not prepared to give an undertaking as to damages.
The House of Lords, with one dissent, held that
the Secretary of State was entitled to the order. It was decided that where the
Crown sought an injunction for the purpose of enforcing the law in the manner
prescribed by the statute, it was for the person against whom the injunction
was sought to show special reason why justice required that it should only be
granted on terms.
At p. 341, Lord Reid said:
It must be borne in mind that an order made
under statutory authority is as much the law of the land as an Act of
Parliament unless and until it has been found to be ultra vires.
Lord Morris of Borth-y-Gest said at p. 350:
The order had effectively the full force of
law unless and until it could be shown to be ultra vires. It is in the public
interest that the law should be obeyed. It is in the public interest that
resistance to it should be suppressed. Unless some very good reason could be
shown a court would, therefore, accede to an application to enforce the law and
to enforce it in the way in which Parliament had prescribed as the appropriate
way. So in the present case the question which, in my view, arises is whether
there was any valid and sufficient reason why an injunction should not have
been granted.
Lord Diplock, at p. 367, said:
So in this type of law enforcement action
if the only defence is an attack on the validity of the statutory instrument
sought to be enforced the ordinary position of the parties as respects the
grant of interim injunctions is reversed. The duty of the Crown to see that the
law declared by the statutory instrument is obeyed is not suspended by the
commencement of proceedings in which the validity of the instrument is
challenged. Prima facie the Crown is entitled as of right to an interim
injunction to enforce obedience to it. To displace this right or to fetter it
by the imposition of conditions it is
[Page 90]
for the defendant to show a strong prima
facie case that the statutory instrument is ultra vires.
It appears, from this reasoning, that the
Minister was properly entitled to seek to enforce the Regulations unless and
until they were found to be ultra vires. This being his duty, it cannot
constitute intimidation to seek to enforce them.
In my opinion it would be unfortunate, in a
federal state such as Canada, if it were to be held that a government official,
charged with the enforcement of legislation, could be held to be guilty of
intimidation because of his enforcement of the statute whenever a statute whose
provisions he is under a duty to enforce is subsequently held to be ultra
vires.
This brings me to the latter portion of the
definition of intimidation from Clerk & Lindsell which I have adopted. “The
tort is one of intention and the plaintiff, whether it be B or C, must be a
person whom A intended to injure.” The authority for this statement is found by
the authors in the judgments of Lord Devlin and Lord Evershed in the Rookes case,
and I am in agreement with it. There is no evidence that the Deputy Minister
intended to injure the appellant. The correspondence, and particularly the
letter of September 20, 1972, make it clear that his purpose was to induce
compliance with an existing legislative scheme.
So far as I am aware, there has only been one
case before this Court in which a claim was founded on intimidation, Roman
Corporation et al. v. Hudson’s Bay Oil & Gas Company Limited et al. That case involved an oral agreement for
the sale of shares in Denison Mines Limited by the appellants to the respondent
company. The sale involved about 38 per cent of the shares of Denison which
operated a mine at Elliot Lake for the production of uranium oxide. The
respondent company was controlled by an American corporation. Shortly after the
agreement was made, the Prime Minister announced in the House of Commons that
the Government was concerned about the passing of a substantial ownership
interest in Deni-
[Page 91]
son into non-Canadian hands and that, if
necessary, legislation to amend the Atomic Energy Control Act would be
introduced to prevent the transaction. Later, the Minister of Energy, Mines and
Resources announced that the Government would pass regulations restricting
foreign ownership of any uranium property or plant in Canada.
As a result of the announcements, the appellants
and the respondent company did not complete their agreement.
The appellants claimed damages against the two
Ministers, inter alia, on the basis that their announcement constituted
a threat which had intimidated the appellants causing them to abandon a
valuable contract.
Up to the date of issuance of the statement of
claim, there had been no amendment to the Atomic Energy Control Act and
no regulation had been enacted. Two months prior to the issuance of the
statement of claim, Denison had issued a writ of summons against the
Attorney-General of Canada claiming a declaration that the Atomic Energy
Control Act was ultra vires.
The respondent Ministers moved to strike out the
statement claim as disclosing no reasonable cause of action. The action against
the Ministers was dismissed as were appeals to the Court of Appeal and this
Court. In this Court, on the issue of intimidation, it was said, at
p. 829:
The appellants also make a claim in tort
for intimidation. In order to succeed under this head, the facts relied upon by
the appellants would have to disclose that they had sustained damage by reason
of a threat, made by the respondents, of an unlawful act. In my opinion, it
cannot be said that a declaration made in good faith by a Minister of the Crown
as to Government policy and the intent to implement that policy by appropriate
legislation is a threat of an unlawful act. On the contrary, it is part of a
Minister’s duty to the public to disclose that policy from time to time.
I would dismiss the appellant’s claims for
damages.
Appeal allowed in part.
[Page 92]
Solicitors for the plaintiff, appellant,
Central Canada Potash Co. Ltd.: McCarthy & McCarthy, Toronto.
Solicitors for the Attorney General of
Canada: Gauley, Dierker & Dahlem, Saskatoon.
Solicitors for the defendant, respondent:
Goldenberg, Taylor & Tallis, Saskatoon.
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