



COURT OF APPEAL FOR ONTARIO

CITATION: Pong Marketing and Promotions Inc. v. Ontario Media
    Development Corporation, 2018 ONCA 555

DATE: 20180615

DOCKET: C63780

Laskin, Miller and Paciocco JJ.A.

BETWEEN

Pong Marketing and Promotions Inc.

Applicant (Respondent)

and

Ontario Media Development Corporation

Respondent (Appellant)

Lisa La Horey and Farzin Yousefian for the appellant

Scott C. Hutchison and Kenneth Grad, for the respondent

Heard: Tuesday, December 19, 2017

On appeal from the order of the Divisional Court (Associate
    Chief Justice Frank N. Marrocco and Justice Ian V.B. Nordheimer, Justice
    Harriett E. Sachs dissenting), dated January 25, 2017, with reasons reported at
    2017 ONSC 434, allowing an application for judicial review of a decision of the
    Ontario Media Development Corporation dated December 11, 2015.

B.W. Miller J.A.:

A.

Overview

[1]

The Ontario Media Development Corporation (OMDC) is an agency of
    Ontarios Ministry of Tourism, Culture and Sport. Its purpose is to promote
    innovation, investment and employment in the cultural media industry in Ontario.
    Further to that objective, it jointly administers, alongside the Canada Revenue
    Agency, the Ontario Interactive Digital Media Tax Credit (DMTC), a tax credit
    provided to developers for digital products whose primary purpose is to
    educate, inform or entertain the user.

[2]

Pong Marketing and Promotions Inc. applied to the OMDC for a Certificate
    of Eligibility for a DMTC of approximately $2 million for its development of 15
    digital sweepstakes games, which it licenced to third party retailers. The OMDC
    denied Pongs application on the basis that the games were not developed for
    the primary purpose of educating, informing, or entertaining the user, but rather
    were developed for promoting the sale of long-distance phone cards and related
    products and services.

[3]

Pongs application for judicial review was successful. A majority of the
    Divisional Court agreed that the OMDCs decision was inconsistent with the
    plain meaning of the regulation governing eligibility for the DMTC, and was
    therefore unreasonable. It remitted the matter back to the OMDC for
    reconsideration.

[4]

The OMDC appealed to this court. For the reasons that follow, I would
    allow the appeal and restore the original decision of the OMDC.

B.

Legislative scheme and decision of the OMDC

[5]

The OMDC is a Crown agency, and its objects are to stimulate employment
    and investment in Ontario by supporting the cultural media industry, defined
    in s. 1 of
Ontario Media Development Corporation,
O. Reg 672/00 (the
    OMDC Regulation), as an industry whose main business includes,
inter alia
:

the development, production, distribution, marketing, sale or
    exhibition of audio-visual products with
substantive cultural content
including
    film and television productions, sound recording products, and
interactive digital
    media products.
[Emphasis added.]

[6]

One of the ways in which the OMDC is to support the cultural media
    industry, per s. 4(e) of the OMDC Regulation, is by administering provincial
    tax credits such as the DMTC. The nature of the DMTC is summarized in the majority
    reasons of the Divisional Court, at para. 8:

The Ontario Interactive Digital Media Tax Credit (DMTC) is a
    refundable tax credit, introduced in Ontario in 1998 and available to
    qualifying corporations for qualifying expenditures related to the creation,
    marketing and distribution of eligible interactive digital media products. The
    amount of the tax credit is based on a percentage of development labour
    expenditures and certain marketing and distribution costs incurred by a
    corporation that has developed an interactive digital media product for sale or
    license. The DMTC is not a grant. Qualifying corporations receive a payment in
    the amount of the tax credit after they have developed the interactive digital
    media product.

[7]

Eligible interactive digital media products are defined under a
    different regulation,
General,
O. Reg. 37/09, under the
Taxation
    Act
,

2007, S.O. 2007, c. 11, Sched. A (the Regulation). This
    appeal largely turns on the interpretation of that definition, set out under s.
    34(1) of the Regulation, which at the time of Pongs application read as
    follows:
[1]

34 (1) In this section,

interactive digital media product means a
    combination of one or more application files and one or more data files, all in
    a digital format, that are integrated and are
intended to be
    operated together
and that
have the following characteristics when they are
    being operated:

1.
Their primary purpose is to educate, inform or
    entertain the user.




2. They achieve their primary purpose by presenting
    information in at least two of the following forms:

i. text,

ii. sound,

iii. images.

3. They are intended to be used by individuals.

4. By interacting with them, the user can choose what
    information is to be presented and the form and sequence in which it is to be
    presented. [Emphasis added.]

[8]

The dispute over the eligibility of Pongs products centred on whether
    the products had the requisite characteristics when operated: specifically,
    that their primary purpose is to educate, inform or entertain the user. The other
    criteria from s. 34(1) were not in dispute.

[9]

Although Pong licences a range of products throughout North America, the
    application to the OMDC relates to a particular suite of 15 products licenced to
    clients in Ontario. Pong characterizes these products as sweepstakes games.
    For the most part, they function as games of chance, like video slot machines.
    Some also incorporate a modest skill component, such as stopping an arrow
    indicator in the middle of a horizontal bar.

[10]

Pongs
    business model with respect to these products is to generate revenue by
    licensing them to third party retailers (including owners of cafés, bars, and
    restaurants), which use the games to promote sales of pre-paid long distance phone
    cards. Purchasers of the phone cards  or of additional calling time on
    existing cards  obtain points that can be used to play the games. Playing the
    games can generate additional sweepstake win points. And the win points can
    be redeemed for additional phone card credit. Pursuant to its licencing agreements
    with the retailers, Pong is paid a percentage from the sales of phone cards. Pong
    markets the products to retailers as a means for them to differentiate their phone
    card products from those of their competitors.

[11]

In
    April, 2014 Pong applied for a Certificate of Eligibility for the DMTC from the
    OMDC. The application was provisionally denied on July 29, 2015, on the basis
    that the OMDC determined that the primary purpose of the games was to promote
    the sale of phone cards, and not to educate, inform, or entertain the user. Prior
    to issuing a formal Letter of Ineligibility, the OMDC invited Pong to file
    further documentation to support its claim that the primary purpose of the
    products was to entertain. Pong did so through submissions dated September 8,
    2015 and September 24, 2015. On October 23, 2015, the OMDC advised that, having
    reviewed the supplementary submissions, it would not be changing its initial
    assessment. It provided Pong with a final opportunity to provide additional documentation
    to support its claim. It received further written arguments from Pongs counsel
    on November 3, 2015.

[12]

The
    OMDC re-reviewed the application, but again its decision remained unchanged. In
    a letter dated November 30, 2015 it reiterated its initial conclusion: the primary
    purpose of the products was promotional as the games are sweepstakes promotions
    for long distance phone cards, and as such are not eligible for support under [the
    DMTC]. The letter explained the OMDCs methodology in coming to this decision,
    as it had set out in earlier correspondence with the respondent: OMDC looks at
    why and how a product was developed as a key factor in determining the
    products primary purpose, what audience or target market was it developed for,
    and who was the product marketed to, by reviewing all of the products
    development and marketing documentation.

[13]

In
    support of its conclusion that the primary purpose of the products was
    promotional, the OMDC quoted extensively from Pongs website and from promotional
    literature and licencing agreements supplied by Pong. These marketed the games
    to prospective licensees as a means to promote phone card sales. For example, Pongs
    template licencing agreement defines the sweepstakes games as [a] means of
    promotion to aid in the sale of long distance calling cards and other related
    products and services. The Pong website positioned Pong as being in the
    business of delivering a promotional sweepstakes system to enhance the sale of
    its pre-paid long distance phone time. Its stated rationale for the
    sweepstakes games was, at the relevant time, to create consumer involvement
    with a brand or product and thus encourage consumer consumption of the
    product.

[14]

The
    OMDC issued a formal Letter of Ineligibility on December 11, 2015, which stated
    that [b]ased on our review of the documentation and copies of the Products
    submitted, we find the primary purpose of the Products is to promote the sale
    of phonecards and other related products and services.

[15]

Pong
    brought an application for judicial review.

[16]

The
    majority of the Divisional Court allowed the application, concluding that the
    decision of the OMDC was inconsistent with the plain meaning of the wording of
    the [Regulation] and was therefore unreasonable. The majority held that the
    OMDCs interpretation was unreasonable because it wrongly equated Pongs
motivation
for developing the products with the products purpose, instead of the
    players purpose in playing the games. It also noted that, in the alternative,
    if the OMDCs interpretation
was
reasonable it would have nonetheless applied
    a residual presumption in favour of the interpretation of the taxpayer, Pong. It
    remitted the matter back to the OMDC for reconsideration. Sachs J. dissented,
    arguing that the OMDCs decision was based on a reasonable interpretation of
    the Regulation and that the application for judicial review should be dismissed.

C.

Issues

[17]

There
    are two main issues raised in this appeal.

1. Did the majority of the Divisional Court err in its
    interpretation of s. 34(1) of the Regulation  specifically, in failing to adequately
    defer to the OMDCs interpretation?

2. Did the majority of the Division Court err in finding in the
    alternative that the residual presumption in favour of taxpayers would apply and
    work in favour of the interpretation advanced by the respondent?

D.

Analysis

(1)

Standard of review to be applied by the Divisional Court

[18]

The
    Divisional Court correctly identified the reasonableness standard as the
    appropriate standard of review to be applied to its review of the OMDC
    decision. The question of whether the primary purpose of the products is to
    educate, inform or entertain concerns the OMDCs interpretation of its home
    legislation. It is at the core of the OMDCs function, and falls within its
    specialized expertise:
Venngo Inc. v. Ontario Media Development Corp.
,
    2013 ONSC 1036 (Div. Ct.), at para. 1.

[19]

On
    review, the reasonableness standard entails that a decision can only be judged
    to be unreasonable if there is no line of analysis within the given reasons
    that could reasonably lead the [decision-maker] from the evidence before it to
    the conclusion at which it arrived:
Ryan v. Law Society (New Brunswick)
,
    2003 SCC 20, [2003] 1 S.C.R. 247, at para. 55. Reasonableness review requires
    the reviewing court to assess the reasons for the OMDCs decision and
    substantive decision together, to see whether an acceptable and defensible
    outcome has been reached. Reasonableness review is conducted in the knowledge
    that decision-making authority belongs to the OMDC. The courts role is limited
    to ensuring that the decision the OMDC makes is within the range of possible,
    acceptable decisions it was entitled to make:
Dunsmuir v. New Brunswick,
2008
    SCC 9, [2008] 1 S.C.R. 190, at para. 47. As this court has said in the context
    of assessing
reasonableness under the Ontario Review
    Board scheme, a reviewing
court is not to make its own judgment on the question before the decision
    maker, and then use

that judgment as the benchmark for
    assessing the reasonableness of the tribunals decision:
Carrick
    (Re),
2015 ONCA 866, 128 O.R.
    (3d) 209, at para. 26.

[20]

Administrative
    law recognizes that an administrative decision-maker will often be confronted
    with multiple possible solutions or choices, all of which will be consistent
    with the applicable law that guides and limits the exercise of discretion.
    These types of choices are legally underdetermined, in that the law does not
    identify a single alternative. The ultimate choice, from among the permissible
    alternatives, rests with the decision-maker.

[21]

That
    said, not every question of law faced by administrative decision-makers, even
    those questions to be reviewed on a reasonableness standard, will admit of
    multiple permissible options; sometimes only one answer will be reasonable. This
    is particularly the case with comparatively technical questions of statutory
    interpretation. As the Supreme Court explained in
McLean v. British
    Columbia (Securities Commission)
, 2013 SCC 67, [2013] 3 S.C.R. 895 at
    para. 38:

It will not always be the case that a particular provision
    permits multiple reasonable interpretations. Where the ordinary tools of
    statutory interpretation lead to a single reasonable interpretation and the
    administrative decision maker adopts a different interpretation, its
    interpretation will necessarily be unreasonable  no degree of deference can
    justify its acceptance; see, e.g.,
Dunsmuir
, at para. 75;
Mowat
,
    at para. 34. In those cases, the range of reasonable outcomes (
Canada
    (Citizenship and Immigration) v. Khosa
,

2009 SCC 12, [2009] 1
    S.C.R. 339, at para. 4) will necessarily be limited to a single reasonable
    interpretation  and the administrative decision maker must adopt it.

[22]

The
    presence of vague language in legislation often creates room for multiple
    reasonable interpretations. Sometimes statutes employ vague terms or standards
    with the intention that the meaning be fleshed out on a case-by-case basis by a
    specialized decision maker that has been given the authority to choose an
    interpretation that, in its discretion, best furthers its statutory mandate. As
McLean
directs, at para. 40, where the legislature charges an
    administrative decision maker with administering and applying its home statute it
    is the decision maker, first and foremost, that has the discretion to resolve [any
    indeterminacy] by adopting any interpretation that the statutory language can
    reasonably bear. Judicial deference in such instances is itself a
    principle of modern statutory interpretation.

[23]

It
    is important to emphasize the consequences of this approach. As the Supreme Court
    explained in
McLean
, at para. 40, under reasonableness review, we
    defer to
any
reasonable interpretation adopted by an
    administrative decision maker,
even if
other reasonable
    interpretations may exist (emphasis in original). It is not enough for a party
    seeking judicial review of a decision to establish that a competing
    interpretation is reasonable; the applicants burden is to establish that the
    interpretation adopted by the administrative decision maker is unreasonable:
McLean
,
    at para. 41.

(2)

The OMDCs interpretation of s. 34(1)

[24]

Did
    the majority of the Divisional Court err, as the OMDC contends on appeal, in
    its application of the reasonableness standard, by concluding that the only
    reasonable interpretation available was the one it identified? In my view it
    did.

[25]

This
    court owes no deference to a decision of the Divisional Court on judicial
    review:
Law Society of Upper Canada v. Abbott,
2017 ONCA 525, 414
    D.L.R. (4th) 545. On appeal, this court effectively steps into the shoes of the
    Divisional Court to determine whether the court identified the appropriate
    standard of review and applied it properly:
Ottawa Police Services v.
    Diafwila,
2016 ONCA 627, 352 O.A.C. 310, at para. 50.

[26]

For
    the OMDC to succeed on this appeal, it does not need to establish that the
    majoritys interpretation is unreasonable. Neither does it need to establish
    that the majoritys interpretation is less compelling than its own. It merely
    needs to demonstrate that its own interpretation, and its own decision, were
    reasonable.

[27]

The
    majority held that the OMDCs interpretation of s. 34 of the Regulation was not
    consistent with the text and was therefore unreasonable. The source of the
    error, the majority held, was that the OMDC considered Pongs reasons (or
    motivation) for developing the games as the requisite primary purpose,
    rather than the purpose of the users when playing the games. The majority drew
    a distinction between the purpose of the digital files themselves, which it
    said must be assessed from the perspective of the user (that is, the reason
    that the user sits down to play the games), and the purpose of the developer in
    creating the digital files, which might be a matter of selling phone cards or otherwise
    generating revenue.

[28]

The
    majority argued that the priority of the users intention in playing the games
    was compelled by the text of s. 34. It understood the phrase while they are
    being operated as requiring the purpose of the files to be assessed when the
    user is playing it; not the moment when it is created or licensed. From this
    premise, the majority concluded that [t]he definition requires the [OMDC] to
    look at the primary purpose of the game from the perspective of the player.

[29]

The
    majority concluded that Pongs marketing material and licence agreement
    templates did not shed any light on the users purpose in playing the games, but
    only evidenced Pongs motivation for developing the products. The OMDC therefore
    erred in considering these materials.

[30]

The
    majority accordingly found the OMDCs decision to be inconsistent with the
    plain meaning of the wording of the [Regulation], which required primary
    purpose to be assessed as the purpose of a person playing the games. This
    plain meaning, according to the majority, directed a particular answer: the
    purpose of a person playing the games was to be entertained, therefore the
    purpose of the games was to entertain. In support of this conclusion, it
    further held that because the legislature intended to use the tax credit to
    assist high-technology, knowledge-based industries, the OMDCs focus on the
    purpose of the developer in creating the games undermines legislative intent.

[31]

In
    dissent, Sachs J. argued that the OMDCs decision was based on a reasonable
    interpretation of the Regulation. It was reasonable, in her view, for the OMDC
    to have regard to what the intended purpose of the product was when it was
    being developed. After all, it is the products primary purpose that governs
    the analysis and it is reasonable to assume that a successfully developed
    product, when it is being operated, will fulfill the primary purpose for which
    it was developed. As the OMDCs task was to determine the primary purpose of
    the product, it was entitled to deference in its determination that the
    primary purpose of the products while being operated was to encourage users to
    buy phone cards, not to entertain.

[32]

I
    agree, substantially for the reasons given by Sachs J., that the majority erred
    and the OMDCs interpretation of the Regulation was reasonable. In my view, the
    majority erred in finding that the text of s. 34(1) mandated the result it
    reached, to the exclusion of any other.

[33]

The
    OMDC took the position, in common with Pong, that the primary purpose with
    which the Regulation is concerned is the primary purpose of the products
    themselves. The dispute is therefore over whether that purpose is better
    understood by reference to the designers intention for the products, or by the
    users intention in using them.

[34]

An
    interactive digital media product is defined in the Regulation by reference to both
    its attributes (a combination of one or more application files and one or more
    data files, all in a digital format, that are integrated and
are intended
    to be operated together
 (emphasis added)) and its functions (and that have
    the following characteristics when they are being operated:[t]heir primary
    purpose is to educate, inform or entertain the user).

[35]

To
    satisfy the definition of interactive digital media product, the Regulation
    requires that the digital files be of the sort that are integrated and are 
intended
to be operated together (emphasis added). To whose intention could this refer?
    Not the users. The user knows nothing of data files and application files and
    whether or how they are to be combined and to what purpose. The user would have
    no reason to have any thoughts about the matter whatsoever. It is the developer
    that intends that the files will be combined and operated together. So when the
    text carries on, in the very next clause, to address the characteristics of the
    files that are manifest when [the files] are being operated, it is not an
    irresistible conclusion that the perspective should suddenly shift in
    mid-sentence  as the majority would have it  from the perspective of the
    developer to the perspective of the user. The majoritys reasoning that the
    phrase when [the files] are being operated can only mean that the relevant purpose
    is the users purpose is thus, at the least, questionable.

[36]

As
    the OMDC points out, all the Regulation directs is that the OMDC ascertain the
    primary purpose of a product by determining what functions the digital files
    perform
when they are being operated
. Nothing in this text directs
    that the users purposes in playing the games must take priority over any other
    purpose the products serve.

[37]

In
    assessing what it is the digital files do when they are being operated, the
    OMDC considered the documentation that it received from the respondent,
    including promotional materials and licencing agreements. These provided some
    evidence of the purposes of the digital files by providing evidence of what the
    developer intended for them to do, and how they were to do it, when they were
    being operated. As these materials clearly stated, the games were marketed to retailers
    not for the purpose of entertaining users as an end in itself, but to be used,
    when operated, as a means to a further, more ultimate end of inducing users to
    purchase phone cards from the retailers.

[38]

Additionally,
    as part of its review, the OMDC viewed videos of the games in operation. It was
    not able to conclude from watching the games in operation that their purpose
    was to entertain, as that term was used in the context of a tax credit operated
    as part of a regulatory scheme intended to promote products with substantive
    cultural content.

[39]

As
    Sachs J. noted, the OMDC
s role is not only to determine the meaning
    and application of relatively open-ended criteria such as educate, inform, and
    entertain, but also to determine which of a products potentially several
    purposes are
primary
. These are all
    qualitative assessments. They fall within the expertise of the
OMDC, and
    are to be afforded deference.

[40]

As
    stated above, to succeed on this appeal the OMDC does not need to establish
    that its interpretation of the Regulation is more plausible than the one
    identified by the majority. All it needs to do is establish that its
    interpretation was reasonable, and that its decision flowed from the evidence
    before it. It has done that, in my view. The majority of the Divisional Court
    erred in overturning the OMDCs decision and allowing Pongs application for
    judicial review.

(3)

The residual presumption

[41]

In
    the alternative, the majority held that even if it was wrong, and the Regulation
    was capable of more than one interpretation, it would have relied on an
    interpretive presumption that where there is more than one interpretation of a
    taxation statute that is reasonably available, the decision maker is required
    to adopt the interpretation most favourable to the taxpayer: see
Québec
    (Communauté urbaine) v. Corp. Notre-Dame de Bon-Secours
, [1994] 3 S.C.R. 3,
    at pp. 14-16;
Placer Dome Canada Ltd. v. Ontario (Minister of Finance),
2005
    SCC 20; [2006] 1 S.C.R. 715.

[42]

The
    OMDC, echoing the dissent of Sachs J., argues that this alternative argument is
    in error. It argues this approach cannot account for the deference that is to
    be accorded to the decisions of administrative decision makers. It argues that
    a rule that legislative indeterminacy must always be resolved by choosing the interpretation
    advanced by the taxpayer would be inconsistent with the core function of administrative
    decision makers of interpreting their home statutes in a manner that advances
    statutory objectives.

[43]

I
    agree with the OMDCs argument. To explain why, however, requires a brief account
    of different types of indeterminacy in legislative language, and how the
    presumption identified by the majority interacts differently with each.

Forms of
    indeterminacy

[44]

Legislation
    is indeterminate (or more precisely, underdeterminate) to the extent that its
    meaning and application are not clear. It is a very common phenomenon: In all
    fields of experience, not only that of rules, there is a limit, inherent in the
    nature of language, to the guidance which general language can provide.: H.L.A.
    Hart,
The Concept of Law
, 2nd ed. (Oxford: Oxford University Press, 1994)
    at p. 126. The most common forms of indeterminacy are ambiguity, vagueness, and
    generality, although lawyers and judges commonly refer to any instance of
    indeterminacy as ambiguity: Stéphane Beaulac,
Handbook on Statutory
    Interpretation: General Methodology, Canadian Charter and International Law,
(Markham:
    LexisNexis Canada Inc., 2008), at

pp. 24-26. This assimilation of all
    indeterminacy to ambiguity is often harmless, but in some cases can be an
    impediment to sound legal reasoning. This appeal is one such case.

[45]

Ambiguity
    can result from the use of words that have more than one meaning, or from
    unclear sentence structure. Where a word or a sentence is ambiguous, it unintentionally
    gives rise to (usually) two rival interpretations. For example, a requirement
    that a form be filed by 5:00 may mean 5 a.m. or 5 p.m. The interpretive problem
    is to ascertain, if possible, which of the two meanings is the one actually
    intended by the legislature. It is an either-or choice between two different
    pre-established alternatives. Ambiguity in this strict sense is resolved either
    by context (in easy cases) or by resort to principles of statutory
    interpretation: see Ralf Poscher, Ambiguity and Vagueness in Legal
    Interpretation in L.M. Solan and P.M. Tiersma, eds.,
Oxford Handbook of
    Language and Law
(Oxford: Oxford University Press, 2012), at pp. 129-133; Lawrence
    Solum, Vagueness and Ambiguity,
Legal Theory Lexicon
(28 June 2015) online:
    <http://lsolum.typepad.com/legaltheory/2015/06/legal-theory-lexicon-vagueness-ambiguity.html>.
    Where it is still not possible to say with any confidence which meaning is the
    one intended, it makes sense to have a residual rule of statutory
    interpretation, such as the presumption at issue here, to resolve the ambiguity
    where other means are exhausted.

[46]

Ambiguity
    in the strict sense  with a stark choice between given interpretations  is comparatively
    rare in legislative drafting. Although courts are often presented by the
    parties with a stark choice between rival interpretations, the cause of the
    disagreement between them is not necessarily ambiguity. The interpretive
    disagreement could stem from another cause, such as vagueness.

[47]

Vagueness
    is a much more common type of legislative indeterminacy. A vague concept may
    have a settled core of meaning, but also admits borderline cases that may be
    difficult to classify. The difficulty with vague concepts is in deciding
    whether some apparent instance at the margins is inside or outside of the
    concept. The classic example: does the rule no vehicles in the park prohibit
    ambulances? An ambulance is a vehicle in the ordinary sense, but it might not
    be a vehicle in the sense given by this particular legal rule: H.L.A. Hart, Positivism
    and the Separation of Law and Morals (1958) 71 Harvard L. Rev. 593 at pp. 606-15
    (1958); see also Fred Schauer, A Critical Guide to Vehicles in the Park (2008)
    83 N.Y.U. L. Rev. 1109. A decision maker given statutory authority to determine
    the meaning of vehicle on a case-by-case basis is tasked with taking the given
    rule and making it more specific and concrete.

Administrative law and vagueness

[48]

Concretizing
    vague criteria is a creative yet bounded role. It is different in kind from the
    task of resolving legislative ambiguity, which is presents a closed choice
    between given alternatives. A decision maker that is required to interpret the
    vague criteria of a statute is required to make a decision that renders the
    statute more specific. The decision maker is constrained by the text of the
    statute and by the requirement that the interpretation further the objectives
    of the statute and be consistent with the rest of the law as a whole. In
    administrative law, legislation is often deliberately worded vaguely, the
    intention being that vaguely worded standards will be made more concrete by the
    decisions of specialized administrative actors, who are best placed to develop
    the relevant policies. These interpretive decisions will sometimes be of a
    nature that different decisions could reasonably have been made  decisions equally
    consistent with the guidance and constraints provided by existing law.

[49]

It
    is readily apparent that the residual presumption employed by the majority of
    the Divisional Court fits more easily with resolution of ambiguity than with
    specifications of vague criteria, particularly in the context of the
    policy-advancing function of an administrative body like the OMDC. Where an
    ambiguity cannot be resolved, it cannot be determined what the legislature
    intended. But where there is generality and vagueness in the context of an
    administrative scheme, the intention is for the decision maker to supply a
    specification.

[50]

In
    this latter circumstance, there will often be no uniquely right answer to a
    question: only determinations, chosen from among equally acceptable
    alternatives, which could conceivably have been made differently. Where these
    determinations are reasonable, courts are not permitted to intervene.

[51]

In
    this case, the Regulation requires the OMDC to determine a products primary purpose
    as well as whether that purpose is to educate, inform or entertain the user. As
    discussed above, these criteria require evaluations of what is primary, and
    specifications of what it means to educate, inform or entertain.

[52]

Were
    the residual presumption to be applied in the manner suggested by Pong, it would
    eliminate much of the authority conveyed on the OMDC by statute. This would undermine
    the statutory scheme and be inconsistent with the rationale for and nature of a
    reasonableness standard of review. The majority of the Divisional Court accordingly
    erred in its conclusion that this presumption applied to support the
    interpretation advanced by Pong.

E.

DISPOSITION

[53]

I
    would allow the appeal and reinstate the decision of the OMDC. I would award
    costs of the appeal to the OMDC in the agreed upon amount of $10,000, inclusive
    of taxes and disbursements. I would also reverse the costs award from the
    Divisional Court.

B.W. Miller J.A.


Laskin J.A. (Concurring):

[54]

Pong
    Marketing and Promotions Inc. applied to Ontario Media Development Corporation
    (OMDC) for a tax credit for its 15 digital sweepstakes games under s. 34 of
    O. Reg. 37/09
.
Section 34
    allows corporations to claim a tax credit for eligible products, which are
    defined by subsection (1) as those with a primary purpose that serves to educate,
    inform, or entertain the user. Eligibility for the tax credit is determined by
    OMDC.

[55]

OMDC
    reviewed the material Pong had submitted concerning its games, and applied the
    Regulation to it. OMDC told Pong that it was of the preliminary view that the
    games did not qualify for the tax credit, but it
offered Pong the
    opportunity to file further materials and submissions.
Pong did so.
    After considering these additional materials and submissions, OMDC denied the
    tax credit. It held that the primary purpose of the games was to promote the
    sale of long distance calling cards, not to educate, inform, or entertain
    users.

[56]

Pong
    applied for judicial review to the Divisional Court. Everyone agrees that
    OMDCs decision is reviewable on a standard of reasonableness. The narrow
    debate in the Divisional Court was over the interpretation of the Regulation:
    specifically whether the primary purpose of the games should be assessed by
    looking at Pongs purpose or motivation in developing the games, or by looking
    at the users or players purpose in playing the games.

[57]

OMDC
    had decided that the primary purpose had to be looked at from Pongs
    perspective. The majority of the Divisional Court disagreed and held that
    OMDCs decision was unreasonable because, in the majoritys view, the primary
    purpose of the games had to be assessed from the players perspective. The
    majority remitted the matter to the OMDC to determine whether, from the
    players perspective and not Pongs, the primary purpose of Pongs products is
    to entertain the user. Justice Sachs dissented, holding that OMDCs decision to
    look at Pongs purpose in developing its products was reasonable.

[58]

The
    majority of the Divisional Court also considered Pongs submission that, where
    more than one interpretation of a taxation provision is available, a residual
    presumption dictates that the interpretation most favourable to the tax payer
    should be adopted. The majority found it unnecessary to resort to this residual
    presumption because OMDCs interpretation was not reasonable. However, the
    majority added that, if it was wrong and, in fact, there were two reasonable
    interpretations of the Regulation  theirs and OMDCs  then the residual
    presumption would apply to give Pong the tax credit it sought. Again, Sachs J.
    dissented. She noted, correctly, that a residual presumption in favour of the
    tax payer has only a limited role in interpreting tax legislation. In this case
    she held that the presumption did not apply.

[59]

My
    colleague, Miller J.A., has written reasons, which I have had an opportunity to
    read, in which he would overturn the decision of the Divisional Court and
    restore the decision of OMDC. On the main issue he concludes that OMDCs
    decision was reasonable. On the secondary issue he concludes that even if there
    is more than one reasonable interpretation of s. 34(1), the residual presumption
    in favour of the tax payer does not apply.

[60]

I
    agree with my colleagues conclusions on both issues. I also entirely agree
    with his excellent analysis of the first and main issue, the reasonableness of
    OMDCs decision. But, though I agree with my colleagues conclusion on the
    secondary issue of the presumption, I do not agree with the way he has arrived
    at his conclusion.

[61]

To
    reach his conclusion that the presumption does not apply, my colleague, on his
    own initiative, has embarked on an entirely new analysis of the inapplicability
    of the presumption. His analysis focuses on the topic of legislative
    indeterminacy, draws a distinction between legislation that is ambiguous and
    legislation that is vague, and relies on six authorities, which are all either texts
    or scholarly articles.

[62]

Justice
    Millers analysis of legislative indeterminacy and the distinction he draws
    between ambiguity and vagueness were not relied on by the Divisional Court, and
    were not referred to by either party before this court or the Divisional Court.
    None of the six authorities my colleague relies on were cited in the Divisional
    Courts reasons or by the parties to this appeal. Neither party has been given
    an opportunity to address my colleagues analysis of legislative indeterminacy,
    to consider the authorities he relies, or to put forward their own authorities
    in response. Speaking for myself, without full argument on the issue, I am
    unable to decide whether I agree or disagree with my colleagues analysis.

[63]

More
    important, respectfully, in my view, my colleague is wrong to embark on this
    new analysis. Doing so is both unfair and unnecessary.

[64]

It
    is unfair to these parties, especially the losing party, Pong, to decide the
    issue of the inapplicability of the residual presumption on an analysis that
    they have not relied on, have not seen before, and have not had an opportunity
    to make submissions on. Under our adversarial system, we rely on the parties to
    a dispute to frame the issues and their analysis of those issues. When a judge
    goes beyond the issues and analyses framed by the parties, without giving those
    parties an opportunity to meet the judges analysis, the adversarial process is
    subverted. A judge may, in a rare case, be entitled to do so, but only if
    interests of justice require it. This is not one of those rare cases.

[65]

The
    inapplicability of the residual presumption can be dealt with quite simply on
    either of two bases. One basis is that there is only one reasonable
    interpretation of primary purpose under the Regulation: it must be considered
    from the perspective of the purpose of the products developer. That was the
    perspective OMDC adopted.

[66]

I
    incline to the view that OMDCs interpretation is the only reasonable
    interpretation. Indeed my colleagues reasons at paras. 35 and 36 strongly
    suggest that the majority of the Divisional Courts alternative interpretation
    is unreasonable. Neither my colleague nor the parties have suggested any other
    interpretation that might be reasonable. Of course, if the OMDCs
    interpretation is the only reasonable interpretation, then the residual
    presumption unquestionably cannot apply: see
McLean v. British Columbia
    (Securities Commission)
, 2013 SCC 67, [2013] 3 S.C.R. 895, at para. 38.

[67]

The
    other basis on which I would still find the residual presumption inapplicable
    is on the assumption that the Regulation gives rise to two reasonable
    interpretations: the majority of the Divisional Courts interpretation and
    OMDCs interpretation. Even on that assumption, the residual presumption cannot
    apply. To apply it would be incompatible with reasonableness review.

[68]

In
    the two Supreme Court of Canada cases referred to by counsel, the residual
    presumption in favour of the tax payer is said to apply in the exceptional
    case where application of the ordinary principles of interpretation does not
    resolve the issue:
Québec (Communauté urbaine) v. Corp. Notre‑Dame
    de Bon‑Secours
, [1994] 3 S.C.R. 3, at p. 19; and
Placer Dome
    Canada Ltd. v. Ontario (Minister of Finance),
2006 SCC 20, [2006] 1 S.C.R.
    715, at para. 24. In both cases, courts were interpreting taxation statutes. In
    neither case was the Supreme Court looking at the interpretation of a statute
    by an administrative decision maker, which is reviewable on a deferential
    standard of reasonableness.

[69]

It
    seems to me that if reasonableness review applies, as it does here, and if a
    reviewing court concludes that the administrative decision makers
    interpretation is reasonable, as Miller J.A. does, that is the end of the
    matter. It is not for the reviewing court to look around to see if another
    reasonable interpretation more favourable to the tax payer exists, and then
    apply that other reasonable interpretation. To do so would entirely defeat the
    principles and objectives of reasonableness review.

[70]

OMDCs
    decision denying Pong a tax credit was reasonable. The residual presumption in
    favor of a tax payer in taxation statutes does not apply. Like Miller J.A., I
    would allow OMDCs appeal and reinstate its decision with the costs that he has
    prescribed.

John Laskin J.A.


Paciocco J.A. (Concurring):

[71]

I
    have read the reasons provided by both of my colleagues, Laskin and Miller
    JJ.A. I accept their recitals of the material facts.

[72]

I,
    too, agree with Miller J.A.s reasons with respect to the reasonableness of the
    Ontario Media Development Corporations (OMDC) interpretation of s. 34 of O.
    Reg. 37/09. The Divisional Court was wrong to find otherwise.

[73]

I
    also agree with my colleagues that the Divisional Court erred in relying on the
    residual presumption in favour of the tax payer. I agree with Laskin J.A., that
    where a reviewing court concludes that the administrative decision-makers
    interpretation is reasonable [] that is the end of the matter. It is not for
    the reviewing court to look around to see if another reasonable interpretation
    more favourable to the tax payer exists, and then apply that other reasonable
    interpretation. Applying the residual presumption to overcome a reasonable
    interpretation arrived at by an administrative decision-maker is inconsistent
    with the reasonableness standard of review that must be applied by a reviewing
    court.

[74]

In
    my view, it was therefore unnecessary for Miller J.A. to address the different
    types of indeterminacy in legislative language. Without the benefit of argument
    on this issue, I cannot endorse that part of Miller J.A.s analysis. Nor is it
    necessary, in this case, to address the bounds of proper judicial analysis. My
    views on this matter may be more nuanced than those expressed by my colleague,
    Laskin J.A. I therefore do not concur with Laskin J.A.s reasons in that
    respect.

[75]

However,
    in the end result, I too would allow OMDCs appeal and reinstate its decision
    with the costs that Miller J.A. prescribes.

David M. Paciocco
    J.A.

Released: BWM JUN 15 2018





[1]

Section 34(1) was amended effective March 2017. The nature of
    the amendments is not relevant for the purposes of this appeal, as both parties
    agree that the earlier version of the provision, reproduced above, is the
    applicable provision.


