



COURT OF APPEAL FOR ONTARIO

CITATION: Hughes v. Liquor Control Board of Ontario, 2019
    ONCA 305

DATE: 20190417

DOCKET: C65262 & M49666

Hoy A.C.J.O., Simmons and Pardu JJ.A.

BETWEEN

David Hughes and 631992 Ontario Inc.

Plaintiffs (Appellants)

and

Liquor Control
    Board of Ontario, Brewers Retail Inc. (carrying on
business as "The Beer Store"), Labatt Breweries of Canada LP,
Labatt Brewing Company Limited, Molson Coors Canada Inc.,
Molson Canada 2005
and Sleeman Breweries Ltd.

Defendants
    (
Respondents
)

Proceedings under the
Class
    Proceedings Act, 1992

Paul Bates, Linda Visser and Tyler Planeta, for the
    appellants

Kent Thomson, Matthew Milne-Smith and Michael Lubetsky,
    for the respondent Liquor Control Board of Ontario

Michael Eizenga, Ranjan Agarwal and Ilan Ishai, for the
    respondent Brewers Retail Inc.

Jeff Galway and Nicole Henderson, for the respondent Labatt
    Brewing Company Limited

Adam Ship, for the respondents Molson Coors Canada Inc.
    and Molson Canada 2005

Michael S. Dunn and Ravi Amarnath, for the intervener
    Attorney General of Ontario

Aaron Dantowitz and Justin Safayeni, for the Law
    Foundation of Ontario

Heard: January 28-29, 2019

On appeal from the order of Justice Paul M. Perell of the
    Superior Court of Justice, dated March 15, 2018, with reasons reported at 2018
    ONSC 1723, and from the costs order, dated August 14, 2018, with reasons
    reported at 2018 ONSC 4862.

Pardu J.A.:

A.

overview

[1]

Following summary judgment motions that were heard
    over four days, the motion judge dismissed the appellants proposed class
    action.

[2]

The appellants are an individual beer consumer
    and the licensed restaurant he operates. In their action, the appellants took issue
    firstly with a Framework Agreement between the respondents, the Liquor
    Control Board of Ontario (LCBO, the Board) and Brewers Retail Inc., signed
    on June 1, 2000, which they allege violated s. 45(1) of the
Competition
    Act
, R.S.C., 1985, c. C-34,
and secondly with a surcharge
    that Brewers Retail Inc. levied on licensees (essentially, persons such as
    restaurants and pubs licensed under the
Liquor Licence Act
, R.S.O 1990, c. L. 19 to sell beer), which they allege violated the
the
Liquor Control Act
,

R.S.O. 1990, c. L.18.

[3]

The appellants claim arising out of the
    Framework Agreement requires a consideration of what is known as the regulated
    conduct defence as it applies to a provincially regulated defendant.
Broadly
    speaking, in that context, the defence insulates the defendant from criminal
    liability if the legislation governing the regulated defendant (in this case,
    the
Liquor Control Act
) is constitutionally valid, it directs or
    authorizes the defendant to engage in the impugned conduct, and the law
    providing for criminal liability (in this case, the
Competition Act
)
    leaves room for the regulated activity to operate without being criminalized.
As the motion judge explained, the regulated conduct defence is
    fundamentally a principle of statutory interpretation.

[4]

In summary, the appellants advanced four claims:

1.

T
he respondents conspired to divide the beer market between
    them. The conspiracy is embodied in the Framework Agreement and continues to
    this day. This conduct violated s. 45(1) of the
Competition Act
, both
    as in effect in June 2000, and as amended effective March 2010, and entitled
    the appellants to sue for damages under s. 36(1) of the
Competition Act
.
    The appellants also pled the civil tort of conspiracy, relying on the same
    violation of the
Competition Act
.

2.

Brewers Retail
    Inc. charged licensees five percent more for beer than it charged consumers, in
    violation of the
Liquor Control Act
, which requires uniform prices for
    beer throughout Ontario, and the beer respondents
(
Labatt Breweries of Canada LP, Labatt Brewing Company
    Limited, Molson Coors Canada Inc. and Molson Canada 2005
, which in
    the aggregate owned 90% of Brewers Retail Inc. at the relevant time
[1]
)
    were unjustly enriched by this surcharge.

3.

The LCBOs
    conduct in entering into the Framework Agreement amounted to the novel tort of misconduct
    by a civil authority entitling the appellants to damages.

4.

Ontarios legislative
    efforts to retroactively authorize the Framework Agreement amount to an
    impermissible,
ultra vires
intrusion upon the federal criminal law and
    trade and commerce powers.

[5]

The respondents moved for summary judgment, dismissing
    the appellants action. The motion judge granted the respondents motions and dismissed
    the appellants action on the following grounds:

1.

Both versions of
    s. 45 of the
Competition Act
leave leeway for activity regulated under
    the
Liquor Control Act
to operate without criminal liability:
Hughes
    v. Liquor Control Board of Ontario
, 2018 ONSC 1723, at paras. 221-30. Accordingly,
    the regulated conduct defence is available if the legislation governing the
    industry in question expressly or by necessary implication directs or
    authorizes the defendant to engage in the impugned conduct:
Hughes
, at
    para. 220. The alleged violation of the
Competition Act
was within the
    powers and rights conferred upon the LCBO and Brewers Retail Inc. under the
Liquor
    Control Act
:
Hughes
, at para. 240. In any event, s. 10(3) of the
Liquor
    Control Act
, as amended by the
Building Ontario Up Act (Budget
    Measures), 2015
, S.O. 2015, c. 20, Sched. 20, s. 8, enacted in August 2015,
    declared expressly with retroactive effect that the LCBO was deemed to have
    been directed and Brewers Retail Inc. was deemed to have been authorized to
    implement the Framework Agreement in 2000:
Hughes
, at para. 241. Accordingly,
    the regulated conduct defence insulated the respondents from liability for
    damages under the
Competition Act
:
Hughes
, at paras. 237-47.

2.

The
Liquor
    Control Act
authorized differential prices for licensees and consumers,
    thus providing a juristic reason for the differential pricing. In any event, s.
    3(1.1) of the
Liquor Control Act
,
    as amended by the
Building Ontario Up Act (Budget Measures), 2015
, s. 3(4),
provided that the powers of
    the LCBO are deemed always to have included the power to implement a price
    differential for licensees and consumers, provided that those prices are
    charged uniformly for each of the two distribution channels (i.e. a
    distribution channel for retail consumers and a distribution channel for
    licensees) across the province.

3.

The LCBO
    exercised its statutory authority in compliance with the authority given to it
    by the
Liquor Control Act
and in a reasonable manner, as a matter of
    administrative law. Therefore, even if the tort of misconduct by a civil
    authority existed in Ontario, the appellants would not have been entitled to
    damages under that tort.

4.

The retroactive
    legislation sanctioning the conduct complained of in the action was a lawful
    exercise of the provinces undoubted ability to regulate the sale of alcoholic
    beverages in the province.

[6]

The appellants challenge each of these findings.
    They also seek leave to appeal from the costs award in favour of the
    respondents.

[7]

I would dismiss the appeal and deny leave to
    appeal the costs award for the reasons that follow.

B.

ANALYSIS

(1)

Allocation of beer sales as between the LCBO and Brewers Retail
    Inc. pursuant to the Framework Agreement

[8]

The appellants argue that the regulated conduct
    defence requires identifying legislative authority that
specifically

permits the impugned
    conduct; in their view, the
Liquor Control Act
,
    as in effect in June 2000, did not specifically authorize the alleged market
    conspiracy. Further, they argue that, even if
intra vires
of Ontario, retroactive legislation cannot be considered in
    determining the application of the regulated conduct defence. Accordingly, they
    argue, the motion judge erred in dismissing their action based on the Framework
    Agreement.

[9]

I agree with the motion judge that the
Liquor
    Control Act
authorized the impugned conduct and that the
    regulated conduct defence insulated the respondents from liability under the
Competition
    Act
arising out of the Framework Agreement.

[10]

Below, I first provide some brief historical
    background about the arrangements between the LCBO and Brewers Retail Inc., and
    the Framework Agreement, and then set out the relevant portions of s. 45 of the
Competition Act
(as in effect in June 2000 and
    as amended effective March 2010). I will explain why the motion judge concluded
    that s. 45 provides leeway for the operation of the regulated conduct defence. Next,
    I consider the jurisprudence regarding the nature of the authorization or
    direction required for the regulated conduct defence to apply, set out the
    relevant portions of the
Liquor Control Act
in
    effect in June 2000, and consider those provisions in light of the applicable
    test. Finally, I address the appellants argument that retroactive legislation
    cannot be considered in determining the application of the regulated conduct
    defence.

(a)

Alcohol Distribution in Ontario and leeway in s. 45 of the
Competition
    Act


[11]

As the motion judge observed, the LCBO was
    established by the government of Ontario in 1927 after the repeal of prohibition.
    It is a Crown agency wholly owned by Ontario and is required to abide by policy
    decisions and directives of the government. The government has exercised tight
    control over the sale of alcoholic beverages. At the same time as the LCBO was
    established, the Ontario government, in consultation with the brewing industry,
    set up a single distribution system for beer manufactured in Ontario, through
    what is now Brewers Retail Inc., which was authorized to operate government
    stores for the sale of beer under the
Liquor Control Act
. The LCBO stores, in contrast, focused on wine and spirits.

[12]

It was common ground that prior to the Framework
    Agreement, the LCBO operated two types of stores: (i) Ordinary Stores, which
    operated in communities where Brewers Retail Inc. operated outlets and; (2)
    Combination Stores, which operated in smaller communities where Brewers
    Retail Inc. did not operate outlets. The Framework Agreement provided that, in
    its Ordinary Stores, the LCBO would not sell beer in packages greater than six
    containers and that the LCBO would not sell any beer product that was exclusively
    sold by Brewers Retail Inc. Even before the Framework Agreement was signed,
    government policy did not generally allow LCBO Ordinary Stores to sell beer in
    packages greater than six packs, and gave Brewers Retail Inc. the right to sell
    beer in 12-pack and 24-pack formats. Both before and after the Framework Agreement,
    the LCBO could not sell beer to licensees that was available for purchase at
    Brewers Retail Inc. The motion judge concluded, at para. 283, that the
    Framework Agreement did not materially change anything, but rather essentially
    continued market practices that had existed for decades.

[13]

The appellants allege that the formalization of
    this arrangement, in the Framework Agreement, violated s. 45(1) of the
Competition
    Act
as in effect in June 2000, and as subsequently
    amended effective March 2010. In June 2000, the following version of s. 45(1)  was
    in effect:

45 (1) Every one who conspires, combines,
    agrees or arranges with another person

(a) to limit unduly the facilities for
    transporting, producing, manufacturing, supplying, storing or dealing in any
    product,

(b) to prevent, limit or lessen, unduly, the
    manufacture or production of a product or to enhance unreasonably the price
    thereof,

(c) to prevent or
lessen, unduly, competition in the
production, manufacture, purchase, barter,
sale
, storage, rental, transportation or supply
of a product
, or in the price of
    insurance on persons or property, or

(d) to otherwise restrain or injure
    competition unduly,

Is guilty of an
    indictable offence and liable to imprisonment for a term not exceeding five
    years or to a fine not exceeding ten million dollars or to both. [Emphasis
    added.]

[14]

The relevant portions of the present version of
    the
Competition Act,
as amended by the
Budget
    Implementation Act
,
2009,

S.C. 2009, c. 2, s. 410, provides as follows:

45 (1) Every person commits an offence who,
    with a competitor of that person with respect to a product, conspires, agrees
    or arranges

(a) to fix, maintain, increase or control the
    price for the supply of the product;

(b) to
allocate
sales, territories, customers or
markets
    for the
production or
supply
    of the product
; or

(c) to fix, maintain, control, prevent, lessen
    or eliminate the production or supply of the product.

(2) Every person who commits an offence under
    subsection (1) is guilty of an indictable offence and liable on conviction to
    imprisonment for a term not exceeding 14 years or to a fine not exceeding $25
    million, or to both.



(7)
The rules
    and principles of the common law that render a requirement or authorization by
    or under another Act of Parliament or the legislature of a province a defence
    to a prosecution under subsection 45(1) of this Act, as it read immediately
    before the coming into force of this section, continue in force and apply in
    respect of a prosecution under subsection (1).
[Emphasis added.]

[15]

Section
    36(1) of the
Competition Act
provides that [a]ny person who has
    suffered loss or damage as a result of (a) conduct that is contrary to any
    provision of Part VI may sue for and recover damages from the person who
    engaged in the conduct. The versions of s. 45(1) at issue are in Part VI of the
Competition Act
. Thus, the appellants rely on conduct that constitutes
    an indictable offence to ground their claim against the respondents for
    damages.

[16]

At
    least in the context of provincially regulated conduct
[2]
,
    for the regulated conduct defence to be available,
the law
    providing for criminal liability (in this case, s. 45(1) of the
Competition
    Act
) must leave room for the regulated activity to
    operate without being criminalized. The motion judge held that the version of
    s. 45(1) in effect until March 2010, signaled, through the use of the word
    unduly that the regulated conduct defence was available. As he explained,
    conduct authorized by valid provincial or federal legislation is deemed to be
    in the public interest and cannot constitute an undue limit on competition
    under the
Competition Act
:
Hughes
, at para. 221;
A.G. Can v. Law Society of B.C.
, [1982] 2 S.C.R. 307 [
Jabour
], at
    p. 354.

[17]

The motion judge also held that s. 45(7) of the
Competition
    Act
that came into effect in March 2010 preserved the
    regulated conduct defence:
Hughes
, at para.
    226. Finally, he found that the regulated conduct defence is available to
    defend civil claims under s. 36 of the
Competition Act
, as well as criminal proceedings under s. 45:
Hughes
, at paras. 222-30. The appellant does not seriously challenge these
    findings on appeal, and I agree with the motion judge that, as a matter of
    statutory interpretation, the regulated conduct defence is available to defend
    civil claims under s. 36 of the
Competition Act
arising out of conduct allegedly contrary to s. 45(1). If the
    regulated conduct defence is available to a defendant under s. 45(1), the
    defendants conduct is not contrary to s. 45(1).

[18]

With this background, I will now turn to the relevant
    jurisprudence regarding the nature of the authorization required for the
    application of the regulated conduct defence and consider the relevant portions
    of the
Liquor Control Act
that insulate the respondents from liability
    in the case at bar.

(b)

Authorization for the regulated conduct defence under the
Liquor
    Control Act

(i)

Jurisprudence on authorization and the
    regulated conduct defence

[19]


The Supreme Courts decision in
Jabour

is the controlling authority. In
Jabour
, the court reviewed a number of cases in which provincially
    authorized supply management systems for agricultural and other products have
    been exempted from the operation of a predecessor to the
Competition
    Act
, and concluded, at p. 354:

The courts
    in these cases have said in various ways that compliance with the edicts of a
    validly enacted provincial measure can hardly amount to something contrary to
    the public interest. Since all the cases examined above approach the CIA on the
    basis of a criminal charge, actually or potentially arising under it, the
    element of public interest was always present.
In
Can.
    Breweries,
the Court proceeded on the basis that the word
    unduly in s. 32 connotes substantially the same meaning as the more general
    words in the same statute operated or is likely to operate to the detriment or
    against the interest of the public. Even the 1975 amendments to s. 32, by the
    addition of subs. 1.1, did not remove unduly from the operative provision, s. 32(1).
So long as the CIA, or at least Part V, is styled
    as a criminal prohibition, proceedings in its implementation and enforcement will
    require a demonstration of some conduct contrary to the public interest. It is
    this element of the federal legislation that, these cases all conclude, can be
    negated by the authority extended by a valid provincial regulatory statute.
[Emphasis added.] [Citations omitted.]

[20]

In
Jabour
, the
    Law Society disciplined a lawyer for advertising, characterizing that action as
    conduct unbecoming a member of the Society contrary to the
Legal
    Professions Act
, R.S.B.C. 1960, c. 214. Although the Law
    Societys enabling legislation did not specifically authorize it to prohibit
    advertising by lawyers, the general power it had to govern the legal profession
    in the public interest and decide what was conduct unbecoming a lawyer was sufficient
    to constitute authority extended by a valid provincial regulatory statute (
Jabour
, at p. 354) and insulate its activities from the reach of the
    predecessor to the
Competition Act
:
Jabour
, at p. 341.

[21]

Similarly, in
Industrial Milk
    Producers Assn. v. British Columbia (Milk Board
), [1989]
    1 F.C. 463, at pp. 478-79, the court held that provincial authority for the regulatory
    regime, which would permit the operation of the regulated conduct defence,
    could be express or implied. The court found that the Milk Boards
    authorization to allocate quotas and control the marketing of milk was much
    more specific than the broad authority provided to the Law Society in
Jabour
to govern the legal profession in the public
    interest:
Milk Board
, at p. 478.
Milk
    Board
described the authority granted to the Law Society
    in
Jabour

as a very open ended and general
    grant of statutory authority that could benefit from the leeway extended by the
    federal legislation and enable the regulated conduct defence to operate:
Milk
    Board,
at p. 478.

[22]

In support of their argument that the regulated
    conduct defence has no application unless the impugned conduct is specifically
    authorized by the legislative regime, the appellants rely on
Fournier
    v. Mercedes-Benz Canada
,
2012 ONSC 2752. At para. 58, the court indicated, [i]n order for
    the regulated conduct exception or defence to apply, the actions in question
    must have been directed or authorized by the statute or regulation. In the
    absence of any
express
provision
or
    necessary implication
in the regulatory regime
    that would authorize or direct them to engage in the conduct complained of,
    the respondents were unable to rely on the regulated conduct defence:
Fournier,
at para. 58 (emphasis added). I understand the appellants to argue
    that the word express indicates that specificity is required.

[23]

In my view,
Fournier
does not articulate a more restrictive test than
Jabour
. Rather, it clarifies that the authority required can be express
    or can be found in a statute by necessary implication. That authority may be
    articulated in general terms, as in
Jabour
, or
    in very specific terms, as in the present case, provided that that authority is
    expressed or given by necessary implication. The level of specificity that the
    appellants argue
Fournier

suggests is needed is
    more restrictive than the test described in
Jabour
, which, as I have said, is the controlling authority.
Jabour
did not require the same level of specificity that the appellants
    suggest is needed to invoke the regulated conduct defence. In
Jabour
, the Supreme Court rejected the argument of the Attorney General of
    Canada that the absence of a specific statutory provision authorizing the Law
    Society to regulate advertising by lawyers deprived the Law Society of the
    regulated conduct defence; further, the court did not agree with the conclusion
    of the trial judge that the absence of a specific implicit authorization in the
Legal Professions Act
meant that there was no
    scope for the application of the regulated conduct defence:
Jabour
, at pp. 331, 341, 354. In
Jabour
the legislation in issue gave Benchers the
express
power to determine what amounted to conduct unbecoming a member of
    the Law Society, that is to say any matter, conduct, or thing that is deemed
    in the judgment of the Benchers to be contrary to the best interest of the
    public or of the legal profession, or that tends to harm the standing of the
    legal profession:
Legal Professions Act,
s. 1.
    This provision did not specifically give the Benchers the power to control
    advertising by lawyers.

[24]

I do note that
Jabour
considered whether the conduct of a regulator was authorized.
    Arguably, more specific authority might be required to provide immunity where
    only the conduct of a regulatee (a person regulated by the regulator) and not
    also the regulator is at issue. But that is an issue for another day. Here, the
    impugned conduct involves an arrangement between the regulator, the LCBO, and a
    regulatee, Brewers Retail Inc.

[25]

While the appellants rely on
Fournier
to argue that the direction or authorization must be specific, they
    take issue with
Fournier
s holding, adopted by
    the motion judge, that the direction or authorization may be by necessary
    implication, and need not be express. I agree with the motion judge that the
    direction or authorization may be by necessary implication. The purpose of the
    regulated conduct defence and the leeway granted under the
Competition
    Act
is to allow room for implementation of provincial
    public policy expressed in legislative form. Both an express grant of authority
    and a grant of authority by necessary implication advance those provincial legislative
    interests and I see no reason to distinguish between them for the purposes of
    the regulated conduct defence. It is not a difference of substance from an
    express grant of authority where, as a matter of statutory interpretation, it
    must necessarily be implied that the legislature gave a regulatory body
    authority to engage in the impugned conduct in order to advance legislative
    goals.

[26]

The appellants also argue that the use of the
    word authorization in s. 45(7) imports a requirement that the conduct
    prohibited by the
Competition Act
be
    specifically authorized by the regulatory legislation.

[27]

I do not accept this argument. Section 45(7) of
    the
Competition Act
provides that the rules
    and principles of common law that render a requirement or authorization by or
    under an Act of a provincial legislature a defence to a prosecution under the
    Act continue in force.
Jabour
was decided
    before s. 45(7) was enacted. As I have indicated earlier,
Jabour
demonstrates that a general authority such as that given to a law
    society to regulate the conduct of its members may enable the regulated conduct
    defence to operate. There is nothing in the language of s. 45(7) that suggests
    a legislative intention to change the common law interpretation of authority,
    rather, the expressed intention is to preserve the common law. As indicated in
Jabour
, at p. 354 culpability under the federal
    legislation can be negated by the authority extended by a valid provincial
    regulatory statute. There is no basis to conclude that s. 45(7) was intended
    to narrow the scope of the meaning of authority or authorization.

[28]

This legislative expression of the regulated conduct defence earlier
    articulated in
Jabour
did not alter the degree
    of specificity of the legislative authorization required to allow the defence
    to operate.

[29]

I
    turn then to an examination of the authority granted to the LCBO under the
Liquor
    Control Act
at the time of the Framework Agreement.

(ii)

The
    authority granted under the
Liquor Control Act

[30]

As
    previously indicated, I agree with the motion judge that the
Liquor Control
    Act
at the time of the Framework Agreement authorized the respondents to
    engage in the impugned conduct.

[31]

Historically,
    Ontario legislation governing the sale of alcohol has granted very wide
    authority to the LCBO. In
R. v. Can Breweries Ltd
.,
    [1960] O.R. 601 (S.C.), at p. 614, the Supreme Court recognized that the
Liquor
    Control Act
then in force gave the LCBO very wide and
    comprehensive control over every phase of the production and sale of beer in
    Ontario.

[32]

The
Liquor Control Act,
as it appeared in June 2000, sets out the relevant
    powers and purposes of the Board in ss. 3(1) (a)-(j) and in (n):

(a) to buy, import and have in its possession for sale, and to
    sell, liquor and other products containing alcohol and non-alcoholic beverages;

(b) to control the sale, transportation and delivery of liquor;

(c) to make provision for the maintenance of warehouses for liquor
    and to control the keeping in and delivery from any such warehouses;

(d) to establish government stores for the sale of liquor to
    the public;

(e) to authorize manufacturers of beer and spirits and wineries
    that manufacture Ontario wine to sell their beer, spirits or Ontario wine in
    stores owned and operated by the manufacturer or the winery and to authorize
    Brewers Retail Inc. to operate stores for the sale of beer to the public;

(f) to control and supervise the marketing methods and
    procedures of manufacturers and of wineries that manufacture Ontario wine
    including the operation of government stores by persons authorized under clause
    (e);

(g) subject to the
Liquor Licence Act
, to determine
    the municipalities within which government stores shall be established or
    authorized and the location of such stores in such municipalities;

(h) to determine the classes, varieties and brands of liquor to
    be kept for sale at government stores and maintain standards therefor;

(i) to fix the prices at which the various classes, varieties
    and brands of liquor are to be sold and, except in the case of liquor sold
    through an outlet designated by the Minister of National Revenue under the
Excise
    Act

(Canada)
as a duty free sales outlet, such prices shall be
    the same at all government stores;

(j) to determine the nature, form and capacity of all packages
    to be used for containing liquor to be kept or sold;



(n) to do all things necessary for
    the management and operation of the Board in the conduct of its business.

[33]

Government store means a store established or authorized under
    the
Liquor Control Act
by the LCBO for the sale of sprits, beer or
    wine and includes both LCBO stores and Brewers Retail Inc. stores:
Liquor
    Control Act
, s. 1. Liquor in the
Liquor Control Act
means
    spirits, wine and beer or any combination thereof:
Liquor Control Act
,
    s. 1;
Liquor Licence Act
, s. 1.

[34]

Section
    3(1) of the
Liquor Control Act
expressly allows the LCBO to approve
    government stores for the sale of liquor, including beer, in LCBO stores and
    approve Brewers Retail Inc. outlets for the sale of beer. The Board is
    expressly given the power in s. 3(1)(h) to determine the classes, varieties and
    brands of liquor to be kept for sale at government stores. This express
    authority enables the Board to decide which products will be sold at LCBO
    stores and which products will be sold at Brewers Retail Inc. outlets. It
    enables the LCBO to decide that Brewers Retail Inc. outlets will sell 12 and 24-packs
    of beer, and that the LCBO will not sell beer to licensees which is also sold
    by Brewers Retail Inc. Subsection 3(1)(j) allows the Board to determine the
    capacity of all packages to be used for containing liquor. Given the near total
    control exercised by the LCBO over the sale of all liquor in the province,
    there is nothing to suggest a legislative intent to allow meaningful
    competition between Brewers Retail Inc., a corporation historically controlled
    by three large brewing corporations to whom the profits flow from the sale of
    beer, and the LCBO, whose profits flow to the government of Ontario. These
    provisions authorize the LCBO to allocate sales of beer as between LCBO stores
    and Brewers Retail Inc. outlets.

(c)

Retroactive
    legislation and the regulated conduct defence

[35]

Lest
    there be any doubt that the allocation of beer sales as between the LCBO and
    Brewers Retail Inc. was directed and authorized by the government of Ontario, in
    August 2015 the Ontario Legislature enacted s. 10(3) of the
Liquor Control Act
,
    as amended by the
Building Ontario Up Act (Budget Measures), 2015
,  s.
    8, in direct response to this litigation:

The Board is deemed to have been directed, and Brewers Retail
    Inc. is deemed to have been authorized, to enter into the June 2000 framework
    in relation to the Crowns or a Crown agents regulation and control of the
    sale of beer in Ontario.

[36]

This
    legislation is expressly indicated to have retroactive effect. It operates back
    in time to when the Framework Agreement was signed, with the effect that the
    legislation in question is deemed to have always included this provision:
Régie
    des rentes du Québec v. Canada Bread Company Ltd
., 2013 SCC 46, [2013] 3 S.C.R.
    125, at para. 28.


[37]

In
Régie des rentes du Québec,
the court described the operation of
    retroactive legislation, at paras. 26-28:

[26] It is settled law in Canada that it is within the
    prerogative of the legislature to enter the domain of the courts and offer a
    binding interpretation of its own law by enacting declaratory legislation: L.-P.
    Pigeon,
Drafting and Interpreting Legislation
(1988), at pp. 81-82. As
    this Court acknowledged in
Western Minerals Ltd. v. Gaumont
,
[1953] 1 S.C.R. 345, such forays are usually made where the
    legislature wishes to correct judicial interpretations that it perceives to be
    erroneous.

[27] In enacting declaratory legislation, the legislature
    assumes the role of a court and dictates the interpretation of its own law:
    P.-A. Côté, in collaboration with S. Beaulac and M. Devinat,
The
    Interpretation of Legislation in Canada
(4th ed. 2011), at p. 562. As a
    result
, declaratory provisions operate less as legislation and
    more as jurisprudence. They are akin to binding precedents, such as the
    decision of a court: P. Roubier,
Le droit transitoire: conflits des
    lois dans le temps
(2nd ed. 1993), at p. 248.
Such
    legislation may overrule a court decision in the same way that a decision of
    this Court would take precedence over a previous line of lower court judgments
    on a given question of law.

[28] It is also
settled
law that declaratory provisions have an immediate effect on pending
    cases, and are therefore an exception to the general rule that legislation is
    prospective. The interpretation imposed by a declaratory provision
stretches
    back in time to the date when the legislation it purports to interpret first
    came into force, with the effect that the legislation in question is deemed to
    have always included this provision. Thus, the interpretation so declared is
    taken to have always been the law: R. Sullivan,
Sullivan on the
    Construction of Statutes
(5th ed. 2008), at pp. 682-83. [Citations in
    original.]

[38]

The
    appellants argue that the respondents should not be able to take advantage of
    the regulated conduct defence when the conduct in issue is retroactively
    sanctioned. I do not agree. The purpose of extending that defence in the
    context of the
Competition Act
is to avoid criminalizing conduct that
    a province deems to be in the public interest. That same provincial public
    interest should be recognized whether it is expressed in legislation in force
    at the time of the impugned acts, or expressed in retroactive legislation. Further,
    there is no logical basis to treat Brewers Retail Inc. differently from the
    LCBO with respect to the market allocation agreement. They are opposite sides
    of the same transaction which benefits from the regulated conduct defence.

(2)

The price
    differential for beer sales to consumers and licensees

[39]

As
    I have indicated above, the appellants allege that the five percent surcharge
    Brewers Retail Inc. levied on licensees, as compared to consumers, violated the
Liquor Control Act
, as it appeared on June 2000. They claim that the beer
    respondents, which owned 90% of Brewers Retail Inc. at the time, were unjustly enriched
    by the collection of this surcharge.

[40]


The appellants argue that the motion judge erred in his
    interpretation of the
Liquor Control Act
, as
    it appeared on June 2000, and that, correctly interpreted, the surcharge
    violated that Act. Further, they argue that, even if constitutional,
    retroactive legislation cannot be considered when determining whether there was
    a juristic reason for a defendants enrichment. In their view, only legislation
    in effect at the time of the enrichment can provide a juristic reason.

[41]

The
    relevant statutory provision of the
Liquor Control Act
reads as
    follows:

Power and purposes of Board

3.(1) The purposes of the Board are, and it
    has power,



(i) to fix the
    prices at which the various classes, varieties and brands of liquor are to be
    sold and, except in the case of liquor sold through an outlet designated by the
    Minister of National Revenue under the
Excise Act
(Canada)
as a duty free sales outlet,
such prices
    shall be the same at all government stores.

[Emphasis
    added.]

[42]

The
    appellants argument is that the plain meaning of this provision requires that
    the same price be charged to all beer purchasers and that differential prices
    to licensees are not permitted. The respondents argument is that this
    provision was intended to require that no differential price be imposed
    according to the geographic location of the buyer and to eliminate higher costs
    for beer in Northern Ontario. In the respondents view, this provision does not
    prohibit differential pricing among classes, varieties and brands as long as
    the price for each is the same at all government stores (subject to the
    exception). Accordingly, just as the price for six packs of beer and 12-packs,
    for example, can diverge so long as the price for each is the same at all
    government stores, so can the price of liquor (which includes beer) intended
    for sale to each channel of consumer and licensee purchasers diverge. The respondents
    argue that this interpretation is consistent with decades of LCBO and Brewers
    Retail Inc. practice. They therefore submit that s. 3(1)(i) permits the LCBO to
    differentiate as to price between consumers and licensees.

[43]

The
    motion judge favoured the interpretation advanced by the respondents, and, at
    paras. 257-59, of his reasons stated:

[257] The approach to interpretation is
    teleological or purposeful and to interpret a statute, the words of the statute
    are to be read in their entire context and in their grammatical and ordinary
    sense harmoniously with the scheme of the statute, the object of the statute,
    and the intention of the legislator.


[
258
]
Following this
    purposefully approach to interpretation, I favour the interpretation advanced
    by the Defendants. Their interpretation is supported by: (a) the legislative
    history; (b) a proper contextual and purposeful reading of s. 3(1)(i); and (c)
    how the section has been interpreted and applied for decades by the parties
    subject to it, including the LCBO which is the regulator under the legislative
    scheme.

[
259
]  When
    interpreting a specialized public law statute, the public statements of the
    regulator about the scope of its home statute
and the
    administrative practice and interpretation adopted by the regulator, while not
    determinative, are important factors to be weighed in interpreting the statute.
    [Footnotes omitted.]

[44]

I
    need not resolve this issue of statutory interpretation as the government of
    Ontario enacted s. 3(1.1) of the
Liquor Control Act
, as amended by
Building Ontario Up
    Act (Budget Measures), 2015
,  s. 3(4),
in 2015, which retroactively authorized the price differential in issue here:

3(1.1) The Boards
    purposes and powers also include, and are deemed always to have included, the
    purpose and power to fix the prices at which the various classes, varieties and
    brands of liquor are to be sold, and
such prices shall be
    the same at all government stores except
,

(a) liquor sold
    through an outlet designated by the Minister of National Revenue under the
Excise Act
(Canada)
as a duty free sales outlet; and

(b)
liquor sold to holders of a licence under the
Liquor Licence Act
, which may be sold
    at a price that is different from the price at which it is sold to the general
    public.
[Emphasis
    added.]

[45]

As
    indicated above, in relation to retroactive authorization of beer market
    allocation, this retroactive legislation declares what the law was. It deems
    that the law always included the right to price differentiate between licensee
    purchasers and members of the public.

[46]

I
    reject the appellants argument that juristic reason cannot be provided by
    retroactive legislation. This deeming provision supplies the juristic reason
    for the enrichment and puts an end to the appellants action for damages for
    unjust enrichment:
Garland v. Consumers Gas Co
., at para. 49. There
    is no doubt that retroactive legislation can defeat financial expectations
    based on the law in place before the retroactive amendment.

(3)

Misconduct by a civil
    authority

[47]

The
    appellants rely on
Paradis Honey Ltd. v. Canada (Ministry of Agriculture
    and Agri-Food),
2015 FCA 89, [2016] 1 F.C.R. 446, leave to appeal refused,
    [2015] S.C.C.A. No. 227, at paras. 132-40, in which Stratas J.A. proposed that
    in claims for damages for misconduct by a civil authority, courts could grant
    relief where the civil authority acted unacceptably or indefensibly according
    to public law principles, and where the court decided in its discretion that an
    award of damages was appropriate. Even if this basis for liability were adopted
    in Ontario, relief would be unavailable to the appellants here because of the
    conclusions already expressed. The Framework Agreement allocating the beer
    market was authorized by statute, both the current and retroactive versions. The
    price differential was also authorized, at least by retroactive legislation. The
    conduct of the LCBO was reasonable in the public law sense, and there is no
    basis to say that it acted unacceptably or indefensibly. Indeed, the appellants
    acknowledge that if they are unsuccessful on their arguments regarding the
    allocation of beer sales under the Framework Agreement and the differential
    pricing, this ground of appeal cannot succeed.

(4)

Is the retroactive
    legislation
ultra vires
?

[48]

The
    appellants argue that s. 10(3) of the
Liquor Control Act
is outside
    the legislative competence of the government of Ontario, and that it amounts to
    an impermissible intrusion into the trade and commerce and criminal law powers
    exclusively reserved to the federal government. Further, the appellants submit
    in their factum that Ontario cannot dabble in legislation that has the express
    purpose of altering the competitive landscape of industry.

[49]

For
    ease of reference, I repeat, s. 10(3) of the
Liquor Control Act
, which
    reads as follows:

The Board is deemed
    to have been directed, and Brewers Retail Inc. is deemed to have been
    authorized, to enter into the June 2000 framework in relation to the Crowns or
    a Crown agents regulation and control of the sale of beer in Ontario.

[50]

The
    first step in a division of powers analysis is to determine the pith and
    substance or the true character of the law:
Canada Post Corporation v.
    Hamilton (City)
, 2016 ONCA 767, 134 O.R. (3d) 502, at para. 32. Here, the
    essence of both the overall regulatory regime embodied in the
Liquor Control
    Act
and s. 10(3) itself is the regulation and control of the sale of
    liquor in the province. I agree with the motion judge that this matter is
    unquestionably within a provinces jurisdiction under the
Constitution Act
,
1867
, s. 92(13), property and civil rights, and s. 92(16), matters of
    a local or private nature. As observed in
General Motors of Canada Ltd. v.
    City National

Leasing
, [1989] 1 S.C.R. 641, at p. 682:

[C]ompetition is not a single
    matter, any more than inflation or pollution. The provinces too, may deal with
    competition in the exercise of their legislative powers in such fields as
    consumer protection, labour relations, marketing and the like. The point is,
    however, that Parliament also has the constitutional power to regulate
    intraprovincial aspects of competition.

[51]

Here,
    there is no conflict between valid provincial legislation and the federal
Competition
    Act
, as the federal legislation accords leeway to provinces to implement
    legislation to advance their public interest, without running afoul of s. 45 of
    the
Competition Act
. That in essence, is the regulated conduct defence.
    Whether the provincial legislation is retroactive or not is beside the point in
    a non-criminal context.

[52]

I agree with the motion judges conclusion that s. 10(3) is
    constitutionally valid legislation, enacted within the matters allocated to a
    province by s. 92 of the
Constitution Act, 1867.

(5)

Leave to appeal
    costs

[53]

The
    motion judge awarded costs to the then defendants as follows:

LCBO: $753,321.90

Brewers Retail Inc.: $724,250.00

Molson: $502,145.00

Labatt: $394,780.23

Total: $2,374,497.13

[54]

These
    amounts represented a substantial discount from the actual costs incurred and
    from the partial indemnity costs ordinarily expected.

[55]

The
    Law Foundation of Ontario and the appellants seek leave to appeal and allege
    that the motion judge made many errors in his assessment of costs. They submit
    that he failed to consider the impact upon access to justice of a cost order of
    this magnitude. Further, they submit that under an analysis of s. 31(1) of the
Class
    Proceedings Act, 1992
, S.O. 1992, c. 6, the motion judge erred in his
    assessment of the complexity of the case, the extent to which the case raised a
    matter of public interest, the degree of novelty of the issues raised and erred
    in his assessment of what amount constituted a fair and reasonable costs award.

[56]

This
    court has held that leave to appeal costs awards should be granted sparingly
    and only in obvious cases where the party seeking leave convinces the court
    there are strong grounds upon which the appellate court could find that the
    judge erred in exercising his discretion:
Brad-Jay Investments Ltd. v.
    Szijiarto
(2006), 218 O.A.C. 315 (C.A.), leave to appeal refused, [2007]
    S.C.C.A. No. 92, at para. 21. Here, the motion judge largely considered all the
    arguments made by the appellants; he did not fail to consider a relevant factor.
    The appellants in effect ask this court to re-weigh the arguments made before
    the motion judge.

[57]

The
    appellants sued for close to two billion dollars, and alleged that the
    respondents had engaged in a criminal conspiracy. A reasonable litigant would
    expect that the respondents would each devote significant resources to responding
    to this claim.

[58]

This
    is not a case in which this court should grant leave to appeal costs.

C.

DISPOSITION

[59]

I
    would dismiss the appeal, and dismiss the request for leave to appeal costs.

[60]

The
    respondents may make brief written submissions as to the costs of the appeal,
    to be served and filed within 30 days after the date of the release of these
    reasons. The appellants may file their submissions as to the costs of the
    appeal within 20 days thereafter.

Released: April 17, 2019

AH

G. Pardu J.A.

I agree Alexandra Hoy A.C.J.O.

I agree Janet Simmons J.A.





[1]

The defendant Sleeman Breweries Ltd. owned the remaining 10%
    of Brewers Retail Inc. The appellants do not appeal the dismissal of their
    action against Sleeman Breweries Ltd.



[2]
In
Garland v. Consumers Gas Co.
, 2004 SCC 25, [2004] 1 S.C.R. 629, the
    court discussed the need for leeway language in a federal criminal statute to
    create room for a valid
provincial
regulatory scheme to operate,
    giving rise to a regulated conduct defence: at para. 77 (emphasis added). There
    is some suggestion by scholars, practitioners and the Competition Bureau that
    the exercise in statutory interpretation giving rise to the defence may be
    different when it is raised by a conflicting federal regulatory scheme: Robert
    Mysicka, The Regulated Conduct Doctrine (2011) 24:1 Can. Competition L. Rev.
    18 at p. 25; Michael Trebilcock, Regulated Conduct and the Competition Act
    (2004) 41 Can. Bus. LJ 492 at pp. 497-498; Brian A. Facey & Dany H. Assaf,
Competition
    and Antitrust Law: Canada and the United States
, 4th ed. (Toronto:
    LexisNexis, 2014) at paras. 11.30, 11.39-11.40. Whether leeway language would
    be required in such a case is an issue for another day.


