Court File and Parties

COURT FILE NO.: 170/2001

DATE: 20020925

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

FARLEY, PARDU & McCOMBS JJ.

B E T W E E N:

CANADIAN RESTAURANT AND FOODSERVICES ASSOCIATION Applicant

• and -

CANADIAN DAIRY COMMISSION and CANADIAN MILK SUPPLY MANAGEMENT COMMITTEE Respondents

• and -

PRINCE EDWARD ISLAND MILK MARKETING BOARD, THE NEW BRUNSWICK MILK MARKETING BOARD, FEDERATION DES PRODUCTEURS DE LAIT DU QUEBEC, DAIRY FARMERS OF ONTARIO and MANITOBA MILK PRODUCERS Intervenors

COUNSEL: David W. Kent and Robert Wisner, for the Applicant Guy Pratte and Michelle Flaherty, for the Respondents David Wilson and David Elliott, for the Intervenors

HEARD: January 31 and February 1, 2002

Application under section 2 of the Judicial Review Procedure Act, R.S.O. 1990, c. J.1 as amended and Rule 68 of the Rules of Civil Procedure

THE COURT:

Application for Judicial Review

[1] The Canadian Restaurant and Foodservices Association ("Association") wants its members to have the same discounted price for cheese which is enjoyed by frozen pizza makers. It therefore applies to this Court for:

1. An order setting aside the decision of the respondent Canadian Milk Supply Management Committee ("Committee") dismissing the application of the Association (on behalf of Canadian restaurant and foodservice operators) for Special Milk Class Permits ("Permits") for cheese used in fresh pizza manufactured for consumption in the home (the "Decision"), which Decision was made on September 30, 1999 and formally communicated to the Association on October 4, 1999 without reasons.

2. An order setting aside the recommendation of the respondent Canadian Dairy Commission ("Commission") to the Committee, which recommendation was adopted in the Decision.

3. An order directing the Commission and the Committee to grant Permits for cheese used in fresh pizza manufactured for consumption in the home to Canadian restaurant and foodservice operators which manufacture and sell fresh pizza in Canada.

4. In the alternative, an order directing the Committee and the Commission to reconsider the Association's application (hereinafter referred to as "Request") and to determine it in accordance with the proper exercise of their jurisdiction and the rules of natural justice.

In this application for judicial review the Association represents its various members which are engaged in the production of fresh pizzas which may be consumed on premises or as takeouts/deliveries. Fresh pizzas may be contrasted with frozen pizzas which may be characterized as having a stable shelf life. Previously the Association had applied for judicial review to the Federal Court but on February 7, 2001 Tremblay-Lamer J. ruled that she had no jurisdiction as the Committee was not a "federal board, commission or other tribunal" as provided by s. 2(1) of the Federal Court Act.

The Structural and Legal Framework of Dairy Products Supply, Marketing and Pricing

[2] The Commission is a federal body established pursuant to the Canadian Dairy Commission Act, R.S.C. 1985, c. C-15; its objects are set out in s. 8 of that Act:

8. The objects of the Commission are to provide efficient producers of milk and cream with the opportunity of obtaining a fair return for their labour and investment and to provide consumers of dairy products with a continuous and adequate supply of dairy products of high quality.

In other words, the Commission is a milk and other dairy products supply and price management body whose activities are subject to public interest oversight. The Intervenors are five of the nine provincial milk marketing boards. These provincial boards are bodies constituted under the laws of their respective provinces for the purposes of promoting, controlling and regulating the production and marketing of milk and other dairy products. In other words, they are provincial milk and other dairy products supply and price management boards also subject to public interest oversight. The provincial boards are comprised of elected individual dairy producers (i.e. individual farmers licensed to produce and sell milk to processors).

[3] Both the federal and provincial governments exercise jurisdiction over the regime of milk supply and price management in Canada. Pursuant to the Constitution Act, provincial governments exercise powers to regulate the dairy industry (control over pricing) within their respective provinces and the federal government exercises power to regulate international and interprovincial trade in dairy products.

[4] In order to have a coordinated milk supply and price management scheme in Canada on an intraprovincial, interprovincial and international basis, the federal government (through the Commission) and the nine provincial governments and/or their provincial boards in the 1980s entered into a federal provincial agreement in respect of the establishment of a National Milk Marketing Plan as amended ("Plan"). The Plan as provided for in section C:

is an agreement of the signatories respecting the manner in which they shall exercise their authorities and responsibilities in certain respects relative to the objectives of the Plan and the manner in which they shall conduct their mutual affairs relative to its implementation.

The Plan was accompanied by a Memorandum of Agreement and an Appendix thereto which was to be the working framework for the operation of the Plan. Section H of the Plan provided for the establishment of the Committee:

H.1 There shall be a Canadian Milk Supply Management Committee which shall be responsible for supervision and policy determinations required of it by the provisions of this Plan and Memorandum of Agreement.

The Committee consists of representatives of the signatories. Thus each of the signatories (the Commission and the nine provincial boards) have a vote. While there are only 10 voting members of the Committee, meetings of the Committee may be attended by the Dairy Farmers of Canada, a national dairy organization and by an indeterminate number of invitees (or permittees). The Committee is to determine the role and function of each such attendee. Pursuant to the Memorandum of Agreement:

3. In all circumstances the Committee shall endeavour to make decisions by unanimous agreement, but on questions where unanimous agreement is not required and where voting procedures are not specified in the provisions of the Plan or of this Memorandum of Agreement, disagreement of the Committee shall be resolved by decisions of the Commission.

[5] In 1996 as a result of:

new considerations in the domestic market, coupled with broader changes brought about by the provisions of NAFTA and the WTO agreements, require substantial changes to the current marketing arrangements for milk across Canada,

the Commission and the nine provincial boards entered into (or adhered to in the case of Alberta and British Columbia) a Comprehensive Agreement on Special Class Pooling (the "P-9 Agreement"), dealing with respect to the pooling of revenues from sales of milk components in special classes of milk to service domestic and external markets. The P-9 Agreement included a Memorandum of Understanding ("MOU") on Special Class Pooling dated July 26, 1995 and agreed to unanimously by the Committee. As a further schedule to the P-9 Agreement, there was an addendum to the MOU:

that sets out the delegation and acceptance of authorities for the coordinated marketing of dairy products, and detailed administrative procedures for the operation of the Special Milk Class Permit System and the Pooling of Special Class Returns.

The MOU provided that the Committee was to be the supervisory body to oversee the implementation of the P-9 Agreement and that, except for matters provided for in s. 10 thereof (Dispute Settlement Procedure) regarding interpretation of the MOU and implementation of the P-9 Agreement, decisions were to be taken by unanimous agreement. Section 5 provided that among the special classes of milk for marketing activities were:

Activities that were under the Rebate Program for Further Processors and the Butterfat Utilization Program.

Further to the harmonization provisions of s. 9:

Beginning on August 1, 1995, provincial signatories,

(e) agree to establish prices for special classes at the [Committee] and that individual provinces will exercise their authority to set these prices within their jurisdiction; …

Pursuant to the Annex to the MOU, Class 5 (Special Milk Classes) had the following definition of subclass 5(a): "Cheese ingredients for further processing for the domestic and export markets." (It is as to this subclass 5(a) that the Association wishes to obtain Permits for its members.) The Dispute Settlement Procedure provided that:

1.3 The signatories undertake to resolve disputes in a conciliatory and harmonious manner, and will seek any means to avoid reference of disputes to an arbitration panel through consensus, consultation, conciliation or other methods to arrive at a mutually satisfactory resolution. (emphasis added)

While there is a provision in s. 3.5 for the panel to hear "all other interested persons", it is clear that a dispute can only be referred to the panel by a signatory province (or the Commission).

A further addendum ("Addendum") to the MOU provides in s. 2 that the Commission is to "act as agent in carrying-out administrative functions in the operation of the program". It goes on to provide:

3. Authority

The detailed procedures and the obligations of the Boards and of the Commission, related to the activities of the national pooling, shall be determined by the [Committee].

4. Subject to the approval of the Governor in Council, the Commission authorizes the [provincial] Boards insofar as is necessary to enable the Boards to fully carry out the program as set out in the MOU and its Annexes, to exercise all the powers of the Commission set out in paragraphs 9 (1)(f) to (i) of the Canadian Dairy Commission Act …

5. Permits

The signatories agree to develop a system, administered by the [Commission], whereby processors shall access milk, at the appropriate price levels in the provinces where they are carrying on business, for use in the special classes.

[6] Provincial legislation creates provincial milk marketing boards with statutory powers to regulate the trade of dairy products. In Ontario, the relevant supply management legislation is the Milk Act, R.S.O. 1990, c. M.12 as amended. The Milk Act expressly authorizes the Ontario marketing board (Dairy Farmers of Ontario), to enter into agreements for the coordinated marketing of milk products with the Commission, other provinces and other provincial milk marketing boards.

[7] Pursuant to the P-9 Agreement, the Commission administers the Permit Program and calculates prices for the special classes, under the supervision of the Committee. The Commission also acts as the agent and secretariat of the Committee. The Association's position is that with respect to the administration of the Permit Program the Committee's decisions are made pursuant to statutory powers delegated to it by provincial authorities and the Commission through the Plan and the P-9 Agreement and that therefore the exercise of such statutory powers of decision is subject to judicial review by this Court.

The Association's Request and its Reception

[8] The reason for referring to the Association having made a Request is that this process was not one of the established or standard variety whereby Permit application was being made under the existing guidelines, procedures and rules; rather it was recognized by all concerned, including the Association, that the Association was seeking to expand the scope of the established Permit system to include its members as beneficiaries thereunder. On February 4, 1999, the Association on behalf of its members applied to the Committee for Permits as to subclass 5(a) so as to obtain discounts on cheese purchases by such members. The Association contends that the Commission and the Committee failed to observe the principles of natural justice, procedural fairness and other procedures that they were required by law to observe and in particular:

(a) the Committee allowed members who had a direct adverse economic interest in the Association's Request to make or participate in making the Decision, thereby giving rise to a reasonable apprehension of bias;

(b) the voting members of the Committee heard only from the members of its Ingredients Committee ("IC") who were, in the majority, representatives of milk producers and / or competitors of Association members;

(c) the Committee failed to give the Association an opportunity to respond to the recommendation of the IC, such recommendation to the Committee being to dismiss the Association's Request; and

(d) the Committee did not provide the Association with an opportunity to know the case it had to meet and based its decision on revised guidelines that were significantly different from those originally provided to the Association for the purpose of its Request.

[9] The Association further contended that the Commission and the Committee failed to properly exercise their respective jurisdictions in respect of the Association's Request for the Permits and the Decision was wrong, unreasonable or patently unreasonable in that:

(a) the Committee made an arbitrary and capricious distinction between manufacturers of frozen pizza and manufacturers of fresh pizza eaten in the home;

(b) the Committee made an arbitrary and capricious distinction between manufacturers who sell goods to retailers / restaurants and those who sell directly to consumers; and

(c) the Committee ignored evidence that the Association’s members had sustained injury due to the regular cost of required dairy ingredients being charged them (instead of the discount requested by the Permit route), which injury justified the granting of the Permits.

[10] The Association further alleged that based on information provided it by the Commission, it understood that the Association had to establish in order to obtain Permits for its members that these members were:

(a) “further processors” who manufacture finished goods sold in the Canadian market;

(b) competed against imported finished goods; and

(c) had sustained injury from import competition as a result of their lack of access to competitively priced dairy products.

[11] The IC is chaired by a Commissioner of the Commission and its membership consists of two representatives from each of the following organizations:

(a) The Dairy Farmers of Canada;

(b) The Food and Consumer Products Manufacturers of Canada (“FCPMC”);

(c) The Baking Association of Canada;

(d) The Confectionery Manufacturers’ Association of Canada; and

(e) The National Dairy Council of Canada.

The FCPMC is the industry association of prepared food processors. Its membership include two major frozen pizza manufacturers. A representative of one of these two major manufacturers sits on the IC. The Association was of the view that only The National Dairy Council of Canada was disinterested as to the question of expansion of the Permits to Association members.

[12] The Committee and the Intervenors contend that the Decision declining the Permits requested by the Association ought to be characterized as being in essence a “policy” decision for which no duty of fairness is owed. The Association in response to this assertion countered by contending that its members were merely seeking to qualify under the existing scheme of Permit Allocation whereby any further processors of cheese ingredients could qualify if they met the objectives of the program by demonstrating injury from import competition; the issue of whether its members met these criteria was posited as a purely administrative one.

[13] Although the Association was concerned with the composition of the IC, it understood that the Committee’s procedures only provided for a recommendation by the IC and that the Association would have the right to reply to any such recommendation before the final decision of the Committee. The Association then proceeded to apply directly to the IC. The IC met on February 4, 1999 to consider the Association’s Request. Prior to that meeting, the Association submitted a detailed written Request. The Commission had published certain Guidelines. The Association was aware that the Guidelines excluded products not sold to retailers or restaurants, but the Association was of the belief that the Guidelines were merely a guide to decision making which did not require rigid adherence to requirements, particularly as to those requirements the Association was of the view were unrelated to the objectives of the Permit program. The Association was apparently unaware that the Guidelines had been revised to exclude fresh products.

[14] The IC struck a Technical Committee ("TC") to consider the Association’s Request. On March 18, 1999, the Commission sent the Association a letter on behalf of the TC outlining its request for 17 different categories of information. While the Association did not view much of the requested information as being relevant to its Request, it provided answers to the extent it considered possible by April 27, 1999.

[15] The National Dairy Council of Canada recommended approving the Association’s Request. However, the Dairy Farmers of Canada circulated its rebuttal report (“DFC Report”) recommending the rejection of the Association’s Request. The DFC Report was submitted to the TC on May 21, 1999. Although it appears that the DFC Report was the basis for the IC's negative recommendation to the Committee, the DFC Report was not disclosed to the Association until September 15, 1999 – and then, only in edited form. On May 28, 1999 the TC decided by a majority vote to recommend that the Association’s Request be turned down, saying that the DFC Report had been reviewed and that while “they recognized that the program rules could be changed, from a technical perspective, a majority of the members of the [TC] were of the view that the [Request] did not meet the program guidelines”.

[16] On June 17, 1999 the Commission informed the Association that certain members of the IC, in particular the Dairy Farmers of Canada, were preparing responses to the Association’s Request. However the DFC Report was not then disclosed, nor was the fact that the TC had made its recommendation to the IC. The Commission advised the Association that it would have an opportunity to respond to the recommendations of the IC before it was forwarded to the Committee.

[17] During the week of June 21, 1999, the Commission informed the Association that the TC had decided to recommend against the Association’s Request and that the IC would be meeting on June 29^th to formally adopt this recommendation for presentation to the Committee. The Association requested the opportunity to meet with the IC before it made that recommendation, but the Association was told that such a meeting could not be arranged. In response to the Association’s protest, the Commission replied that the Association would be provided with the details of the IC recommendation after it was rendered but before it was considered by the Committee.

[18] On July 6, 1999, the Association protested the IC’s failure to provide any reasons in support of its recommendation; the Association also asked for the documentation that the IC relied on in making its recommendation. On July 9^th, the Commission undertook to give a detailed survey of the argument which underlay the IC’s decision as well as two studies comparing U.S. and Canadian market trends.

[19] At the July 13-14, 1999 meeting of the Committee, the Committee was advised that the IC had recommended, by majority vote, not to approve the Association’s Request. No reasons were given to the Committee. However the Committee was advised that the IC had agreed:

to provide the [Association] with a summary of the documentation on which it based its decision; to delay the discussion of the recommendation until the [Association] had an opportunity to respond; and to present the [IC's] recommendation and the [Association’s] response at the [Committee’s] September meeting.

[20] On June 21, 1999 the Commission provided the Association with a list of arguments put forward in opposition to the Association’s Request without specifying which had been relied on. The promised U.S. studies were not provided. It was indicated that the Association did not supply sufficient data (however the Association considers this an unfair comment since it is of the view that it had provided all relevant information). The DFC Report was not provided because its members “don’t necessarily wish to be identified with respect to their views”. The Association apparently began preparing a response to the summarized arguments but it claimed that its ability to do so was hampered by the IC’s failure to identify the basis of its decision and to provide the material the Association had requested. The Association suspended its work on the response and indeed no response of any sort was ever made to the Committee.

[21] On September 2, 1999 the Association wrote the Commission to reiterate its concern that it be granted a right of reply to the recommendation of the IC at the upcoming September 29^th meeting of the Committee and to repeat its request for additional information about the arguments made in opposition to the Association’s Request. On September 8^th the Association representatives met with the Chairman of the Commission to discuss the Association’s Request and other issues. During this meeting the Chairman of the Commission offered to provide a copy of the DFC Report. On September 15^th, the Association received the 26 page text of the DFC Report but none of the statistical appendices thereto. The Association claims that it did not have sufficient time to respond to the DFC Report with only 2 weeks left before the meeting to prepare and edit such a response.

[22] On September 22, 1999, the Association wrote the Commission and confirmed its understanding that it would have an opportunity to respond to the IC’s recommendation and the DFC Report and requested that the Association’s Request be removed from the agenda of the Committee’s September 29^th meeting. On September 24^th, the Commission advised the Association that the IC opposed such an adjournment but that the request would be put before the Committee on September 29^th, indicating that the Committee would only consider the Association’s Request if the adjournment were not then granted. On September 28^th the Association repeated its request for an adjournment.

[23] On September 29-30, 1999, the Committee met. It did not have copies of the Association’s Request or ancillary material. What it did have was:

(a) the IC’s recommendation (without reasons) to decline the Request;

(b) the July 21, 1999 letter from the Commission to the Association outlining the arguments at the IC (the Association considered this letter as being one sided given that it contained only a one paragraph summary of only one of the reasons for the Association’s request but 3 pages to provide a summary of the Dairy Farmers of Canada arguments against the Request); and

(c) two letters from the Association requesting an adjournment but not the September 2^nd letter seeking information.

[24] The Committee rejected the Association’s request for an adjournment and its Request for Permits for its members. On October 4, 1999 the Association received a letter from the Commission indicating that result, without any reasons.

The Opposing Positions to the Association's Request

[25] The Association contends that the DFC Report did not challenge the evidence provided by the Association demonstrating that fresh pizza makers compete directly with frozen pizza makers; instead it contends that the DFC Report argued that the Association’s members should be excluded from the Permit program on the basis of technical restrictions on applicant eligibility in the Guidelines and due to inaccurate claims that fresh pizza makers have not suffered any injury. The DFC Report objected that only applicants which produce finished goods intended for sale to retailers or restaurants were eligible but the Association contends that this restriction in the Guidelines is unrelated to the objective of the Permit program which it states is to allow processors of dairy products to remain competitive. Additionally the DFC Report objected on the basis that fresh products were ineligible but the Association further contends that there is no rationale for that. Finally contrary to the assertion in the DFC Report that the Association members were not “further processors”, the Association asserts that they fit the definition of being “a company using Canadian dairy ingredients to manufacture a finished food product in Canada which is not subject to a Tariff Rate Quota …”. The Association also states that the DFC Report and the July 21^st letter contain groundless objections to the adequacy of sales data in the Association’s Request and further that there was a misinterpretation of that data and inappropriate conclusions thereon. The Association objects to the conclusion as to the degree of injury required, pointing out that frozen pizza makers obtained Permits without any evidence of a serious threat to the viability of their businesses.

[26] In the Federal Court proceedings, the Committee, the Commission and the Intervenors took the position that the Federal Court lacked jurisdiction and that the jurisdiction to review the Committee’s decision belonged to a provincial court of superior jurisdiction. The Federal Court decided that it lacked jurisdiction.

[27] The Committee maintains that it is not a creature of statute nor an administrative tribunal; rather its functions derive from the foregoing federal/provincial agreements which its various members were authorized to enter into.

[28] The Committee takes the position that its purpose does not include the protection of any particular segment of other industries which may use milk products; rather its mandate is to develop policies in respect of the dairy industry in Canada. However the Committee has recognized that the continued health of the dairy production industry may, in certain circumstances, require that pricing adjustments be made for specific end uses. It was posited that the raison d'être of the P-9 Agreement was the creation of special classes for milk products which are priced at lower levels to meet competitive forces, either from imports of similar milk products or, in the case of butter, from substitutes for milk products. From the point of view of the Committee, it has the right to make concessions to users (further processors) of milk products which it will do as a matter of policy but these users (as represented here in these circumstances by the Association) have no right to any such adjustment in pricing. The Respondents and the Intervenors take the position that any decision of the Committee is a purely discretionary matter evolving from the Committee's policy-making functions.

[29] At the time of the Association's Request, the Committee was of the view that, with the exception of butter products which were deemed vulnerable to competition from milk product substitutes, fresh products were to be excluded from the discount list, essentially because these fresh products were not deemed to be sufficiently vulnerable to import competition, as opposed to shelf-stable products. The Committee had granted a price concession to domestic frozen pizza producers as it was felt that that shelf-stable product was vulnerable to import competition. The Commission had published the Guidelines which indicated that "Fresh Products are not eligible under this section" with the result that fresh pizza was not covered in the categories set out in the P-9 Agreement. The Association had included these Guidelines in its Request to the Committee.

[30] The Association was on record orally and in writing that it sought an expansion of the classes of uses for which a Permit would be granted. The Committee viewed the activities of the Association as being in essence that of lobbying for a policy change. This would be consistent with the Association making the Request as opposed to having one of the Association's members apply for a Permit under the existing program (an option offered to the Association, but rejected). The Association was advised that if one of its members had applied, it would be refused a Permit by the Commission but that this decision could be appealed to the Committee with a request to expand the list of eligible further processors.

[31] While there is an established procedure for the application for a Permit where an individual further processor meets all the eligibility criteria, as set out in the Information Guide, there is no set procedure for seeking a policy change. The Committee maintains that the Association was cognizant of those circumstances, that the Association proceeded to lobby for such a policy change and that in doing so, the Association was afforded a full opportunity to advance its position with submissions, argument and evidence. However in the end result, because the dairy producers would ultimately bear the cost of granting the requested discounts, it would be up to the Committee members (the Provincial Boards) to determine as a policy matter where to strike the balance between appropriate price levels and sales volumes - for the benefit of the dairy industry both directly and indirectly. The Committee could decide to grant a concession of whatever magnitude it felt appropriate. That decision may, as was the case here, be that no concession be granted. The Committee submits that its Decision challenged by the Association was in pith and substance a policy one which was not made pursuant to any statutory power of decision conferred upon it as such, but was rather made by its provincial members which conjointly exercise powers conferred upon them pursuant to distinct provincial and federal statutes. The Committee maintains that its decision is therefore not reviewable by this Court, the Divisional Court, pursuant to the Judicial Review Procedure Act.

[32] The Permit program was developed through the two schedules to the P-9 Agreement - the MOU and the Addendum thereto. The Addendum establishes and operates the Permit program. Section 6 of the Addendum makes it clear that any changes to the system of awarding Permits must receive the approval of the Committee (with its constituent Provincial Member Boards).

[33] While the Permit program contemplates that a further processor must satisfy the Committee that it is suffering injury as a result of import competition or product substitution in order to obtain a Permit, injury is merely a necessary condition of eligibility; injury by itself is not the sufficient condition in the sense that it is determinative of eligibility.

[34] The Association's Request was not one of the nature customarily entertained whereby a particular further processor not using fresh products would apply for an individual Permit to cover its specific operations. The Permit number would allow tracing of product use. Rather the Association's Request was to expand the category which could be eligible for the grant of a Permit. The Permit program did not envisage a blanket Permit to cover multiple users.

[35] The Committee asserted that the Association was fully cognizant of the fact that it was lobbying for a change in policy and in support of that proposition it noted the following:

(i) as early as 1997 individual members of the Association asked for the assistance of the Association as the affidavit of its Director of Government Affairs stated "in expanding the access of Fresh Pizza Makers to the Class 5 Permit system. … The [Association] was informed that while the [Commission] administered the Class 5 Permit Program, policy decisions respecting the [Permit Program] were made by the [Committee] after consideration of recommendations of the [IC]."

(ii) the Association's letter of August 31, 1998 stated that it would be "formally requesting that the Special Class program be expanded to include fresh food service pizzas."

(iii) the Association sent its proposal to the policy section of the Commission as opposed to sending an application for a Permit to an intake officer at the Commission in the usual course.

(iv) the Association's Director of Government Affairs in a presentation to the IC on February 4, 1999 indicated that she was presenting a proposal to expand the Permit program to include fresh pizza as an eligible category.

(v) the Association even made representations to the Commission for membership by it on the IC as it was felt that such membership would give it the opportunity to lobby and make "additional" representations on behalf of its members.

(vi) the Association had lobbied individual member organizations of the IC as well as Ministers of the Crown and members of Parliament with respect to eligibility for the Permits.

[36] While there was no established procedure to deal with requests to extend the range of products eligible for a Permit, the Association was advised of the process which would be followed in dealing with its proposal. The Association also knew the role and makeup of the IC and that a decision would be made by the Committee after it received a recommendation from the IC. The Association never objected to the composition or role of either the Committee or of the IC until after the Decision in question was made.

[37] On May 28, 1999, the TC agreed by a majority not to recommend the Association's Request to the Committee. On June 29, 1999, the IC recommended by a majority vote that the Committee reject the Association's Request to extend product eligibility criteria. The Association requested and received an adjournment of the Committee's consideration of the IC's recommendation from its July 13-14, 1999 meeting to its September 29-30 meeting. In the interim the Association requested and received a summary of the basis of the recommendation of the IC (by letter of July 21, 1999) and a copy of the DFC Report without appendices (by letter of September 15, 1999). The July 21, 1999 letter stated that the most important reason for not acting on the Request was the absence of proof of injury. There is some question as to whether the Association's September 2, 1999 letter response was sent; but in any event the file copy generally indicates that the Association intended to provide a response to the IC's recommendations, but does not give any substantive information concerning the Request. Rather than making further submissions to the Committee, the Association merely asked for another adjournment beyond the September 29-30, 1999 meeting. The Committee refused to grant a second adjournment but rather adopted the IC's recommendation.

[38] The Association claims that it did not have sufficient time to make any response to the IC's recommendation because it only received the DFC Report two weeks before the September 29-30 meeting. However the Association had the IC's detailed reasons for over 2 months. The DFC Report was an internal document which was voluntarily provided to the Association (but this Report did not contain any substantive points not previously given to the Association in the July 21, 1999 letter). The appendices to the DFC Report were not vital to any understanding of that Report. Rather the Association never requested that it be provided but only raised that as an impropriety in the context of its application for judicial review to the Federal Court; but the Association does not allege that it was prejudiced by the appendices not being sent. Notwithstanding that the Association suggested the Commission purchase two U.S. studies regarding U.S. frozen pizza imports (which the Commission did and which the IC reviewed), the Association did not review these studies even though they were made available to it.

[39] The IC's recommendation along with a copy of the July 21, 1999 letter was given to the Committee. Any response of the Association was to have been given to it as well, but the Association did not give any response but merely asked for a further adjournment. Many members of the Committee were also members of the IC. The members of the Committee were familiar with the change requested by the Association. In essence, the Respondents and the Intervenors were of the view that the Committee was being asked to make a policy change decision and that the Committee (which was fully conversant with the various positions and arguments for and against such a change) declined to do so.

Is the Committee's Decision Reviewable by the (Ontario) Divisional Court?

[40] It appears to us that the Commission and the provincial signatories to the federal provincial agreement have not delegated any statutory duties to the Committee in respect of the Permit program. The Committee is not a creature of statute but rather it derives its milk pricing mandate from a federal-provincial agreement, the P-9 Agreement. The provincial signatories each retain their individual pricing authority while contractually agreeing to act jointly through unanimous decisions of the Committee. The P-9 Agreement explicitly states that "individual provinces will exercise their authority to set these [Special Class] Prices within their jurisdiction."

[41] The Association however points out that it does not contend that this Court has jurisdiction over the Provincial Boards outside Ontario but rather it asserts that this Court does have jurisdiction over the Committee which maintains its secretariat within the Province of Ontario. The Association's position is that this Court has clear jurisdiction over the Ontario Marketing Board, the Dairy Farmers of Ontario (citing Re Abel et al. and Advisory Review Board (1980), 31 O.R. (2d) 520 (C.A.) at pp. 532-3. The Association asserts as well that this Court has jurisdiction to set aside the decision of the Committee even if we were to accept the argument that the Committee does not exercise statutory powers and that the grant of a Permit merely operates as a "recommendation" to the provincial boards that they supply the cheese milk product at the special price. The nature of the Committee's "recommendation" is such that it necessarily affects the exercise of statutory powers by the Provincial Boards and thereby affects the interests of the Association's members.

[42] The Association distinguishes this situation from that prevailing in Re Anaskan and The Queen (1977), 15 O.R. (2d) 515 (C.A.) where an Ontario Court was being asked to review the exercise of a power by a person outside of Ontario pursuant to a non-Ontario statute. Instead this Court is being asked to review the decision of the Committee which has its headquarters in Ontario. In the earlier proceedings before the Federal Court, it appears that the Respondents and Intervenors here urged upon Tremblay-Lamer J. that the Federal Court had no jurisdiction, but rather that relief had to be sought by the Association in the provincial courts. We are of the view that this Court, the Ontario Divisional Court, has jurisdiction to hear this case and that under the circumstances it was reasonable and appropriate for the Association to seek relief in this Court, whether or not further proceedings would be required in other provinces.

[43] The substantive question in this litigation is whether the decision of the Committee was in the nature of a legislative decision involving policy considerations, as opposed to an administrative one.

[44] Dickson J. in Martineau v. Matsqui Institution Disciplinary Board, [1980] 1 S.C.R. 602 at pp. 628-9 observed:

2. A purely ministerial decision, on broad grounds of public policy, will typically afford the individual no procedural protection, and any attack upon such a decision will have to be founded upon abuse of discretion. Similarly, public bodies exercising legislative functions may not be amenable to judicial supervision. On the other hand, a function that approaches the judicial end of the spectrum will entail substantial procedural safeguards. Between the judicial decisions and those which are discretionary and policy-oriented will be found a myriad decision-making processes with a flexible gradation of procedural fairness through the administrative spectrum. That is what emerges from the decision of this Court in Nicholson. In these cases, an applicant may obtain certiorari to enforce a breach of the duty of procedural fairness.

The Association agrees that this mode of analysis must be applied to the decision making authority of the Respondents.

[45] The Association relies on British Columbia (Milk Marketing Board) v. Aquilini (1998), 9 Admin. L.R. (3d) 1 (B.C.C.A.) where Braidwood J.A. for that court stated at p. 12:

In considering the respective roles of the CDC [Commission], the CMSMC [Committee], and the Board, the trial judge wrote as follows at paragraph 117:

Under the provisions of sections 4, 5 and 6 of the Dairy Products Marketing Regulations, the CDC, the CMSMC and the Board are not given any legislative functions, rather, they perform administrative functions and sufficient direction has been provided in those sections as to how they are to perform those functions.

The learned trial judge considered that the actions of the CDC, the CMSMC, and the Board which were carried out under the DPM Regs were based on an analysis of the "particular facts in place at the time" or the basic characteristics of making administrative decisions within this intricate system. In the result, I respectfully agree with the learned trial judge when he wrote in paragraph 128 of his lengthy reasons:

I agree with the submission of Counsel for the Attorney General of Canada that this scheme has sufficient definition that the functions of the CDC, CMSMC and the Board are to administrate, not legislate, and I so find. Accordingly, I also find the subdelegation of federal authority to be intra vires.

However, Aquilini was focussed on the issue of subdelegation and not on procedural fairness. The context of the legislative vs. administrative distinction in that case was quite different from that which we have in this one. In Aquilini the distinction was addressed to situations in which a body having a power to make regulations (i.e. literally a "legislative power") simply repeats the enabling words in the regulation and this "turns a legislative process into an administrative one": Brant Dairy Co. Ltd. et al. v. Milk Commission of Ontario et al., [1973] S.C.R. 131 at p. 146. As Aquilini made clear, an administrative function in the sense that that term was employed in that case "includes the adoption of a policy." Additionally, Aquilini arose in the context of the exercise of a quota allocation function specifically delegated to the Committee under the federal Dairy Products Marketing Regulations, SOR/94-466. However in the subject case, the pricing powers which provide the foundation for the Permit system have been delegated to the provincial boards and not to the Committee.

[46] The Respondents assert that there is no valid basis for the Association's procedural attacks, since the policy-making function at issue does not attract a duty of procedural fairness. With justification in our view, they point out that the Association cannot credibly claim (as it did in its factum) that the process here was essentially one of "fact finding … closer to the judicial end of the spectrum than to the legislative end" after it vigorously and repeatedly lobbied ministers, members of parliament, the Commission and stakeholders to support the expansion of the Permit system to include cheese products for fresh pizzas.

[47] In Attorney-General of Canada v. Inuit Tapirisat of Canada Ltd., [1980] 2 S.C.R. 735, Estey J. for the Court set out at pp. 753-8 a number of factors which supported the conclusion that policy-oriented functions were not subject to a duty of fairness. These factors which have a considerable identification with the factors present here were as follows as set out in the factum of the Intervenors:

• while the CRTC must operate within a certain framework when rendering its decisions, the Governor in Council was not burdened "with any standards or guidelines in the exercise of its rate review function" (p. 753);

• "neither were procedural standards imposed or even implied" (p. 753);

• there is no obligation to give reasons or hold any kind of hearing (p. 757);

• by their office, members of the Council are "concerned with the policy issues … whether those policies be economic, political, commercial or of some other nature" (p. 753);

• the Governor in Council was able to act of his own motion to vary or rescind a CRTC decision, which is "legislative action in its purest form" (p. 754);

• it is impractical to give notice to all the ratepayers affected by Council's supervisory decisions (p. 754);

• it is apparently the judgment of Parliament that this is an area inordinately sensitive to changing public policies and hence reserved for executive supervision (p. 756);

• the "res or subject matter" before the Council was "not an individual concern or right unique to the petitioner" and hence the situation could not be compared to where a body was considering "something akin to a lis" or performing an investigating function (p. 758).

We are of the view that the Permit program as run and coordinated by the Committee here would be governed by the same considerations as outlined by Estey J. in Inuit Tapirisat discussed above.

[48] Inuit Tapirisat was applied in Thorne's Hardware Ltd. et al. v. The Queen et al., [1983] 1 S.C.R. 106 when Dickson J. speaking for the Court at pp. 111-5 noted:

Decisions made by the Governor in Council in matters of public convenience and general policy are final and not reviewable in legal proceedings. Although, as I have indicated, the possibility of striking down an order in council on jurisdictional or other compelling grounds remains open, it would take an egregious case to warrant such action. This is not such a case. (p. 111)…

It is neither our duty nor our right to investigate the motives which impelled the federal Cabinet to pass the Order in Council. (p. 112)…

Governments do not publish reasons for their decisions; governments may be moved by any number of political, economic, social or partisan considerations. (pp. 112-113)…

I have referred to these several pieces of evidence, not for the purpose of canvassing the considerations which may have motivated the Governor in Council in passing the Order in Council but to show that the issue of harbour extension was one of economic policy and politics; and not one of jurisdiction or jurisprudence (p. 115). [emphasis added]

[49] Other cases which have followed this doctrine include: Wells v. Newfoundland, [1999] 3 S.C.R. 199 at p. 223; Martineau, supra, at p. 628; Carpenter Fishing Corp. v. Canada, [1998] 2 F.C. 548 (C.A.) at pp. 561-3; leave to appeal dismissed [1999] S.C.C.A. No. 349 (Q.L.); Pharmaceutical Manufacturers Association of Canada v. British Columbia (A.G.) (1997), 149 D.L.R. (4^th) 613 (B.C.C.A.) at pp. 637-8.

[50] D.J.M. Brown and J.M. Evans, Judicial Review of Administrative Action in Canada (Canvasback: Toronto; 1998), at p. 7-23 identified the characteristics of a legislative or policy decision as:

… The first is the element of generality, that is, that the power is of general application and when exercised will not be directed at a particular person. The second indicium of a legislative power is that its exercise is based essentially on broad considerations of public policy, rather than on facts pertaining to individuals or their conduct. Decisions of a legislative nature, it is said, create norms or policy, whereas those of an administrative nature merely apply such norms to particular situations. [Emphasis added.]

[51] It appears to us that the Committee's decision not to expand the Permit system to the new class of products advocated by the Association was a legislative or policy decision. That power as exercised by the Committee was of general application and not directed at any specific person. The Association in its Request was not applying for a right or benefit for itself, but rather it was requesting a decision of such broader implications (that the Permit system be extended from several dozen further processors at present to include products of some thousands of the members of the Association). The Committee's decision did not affect any existing right or benefit of the Association (or of any of its members). If the Association had been successful, then an entirely new category of eligible products would have been created and the implications of such a decision would have had very significant implications not only for fresh pizza makers but for other dairy processors and the overall dairy production industry. In the instant case, the question was not whether a specific individual applicant was entitled to obtain a Permit that would allow it to purchase cheese from a provincial board at a discount, but rather the broad issue of whether to extend the range of eligibility of the Permit system beyond the classes recognized in the P-9 Agreement, which would invoke overall consideration of somewhat complex market and supply factors.

[52] The legislative function doctrine has been applied repeatedly to other bodies engaged in policy-making, including numerous uses involving the establishment or modification of price classification and quota policies in the agricultural and fisheries sectors. See for example R. v. Ontario Milk Marketing Board et al., [1969] 1 O.R. 309 (H.C.J.) affirmed 1969 307 (ON CA), [1969] 2 O.R. 121 (C.A.); Re Bedesky et al. and Farm Products Marketing Board of Ontario et al. (1975), 8 O.R. (2d) 516 (Div. Ct.), affirmed (1975), 10 O.R. (2d) 105 (C.A.); Canadian Association of Regulated Importers v. Canada (Attorney General), [1994] 2 F.C. 247 (C.A.).

[53] In Carpenter, supra, Décary J.A. for the Court stated at pp. 561-2:

The imposition of a quota policy (as opposed to the granting of a specific licence) is a discretionary decision in the nature of policy or legislative action. Policy guidelines outlining the general requirements for the granting of licences are not regulations; nor do they have the force of law. It flows from the decision of the Supreme Court of Canada in Maple Lodge Farms Ltd. v. Government of Canada and from the decision of this Court in Canadian Assn. of Regulated Importers v. Canada (Attorney General), that the Minister, provided he does not fetter his discretion to grant a licence by treating the guidelines as binding upon him, may validly and properly indicate the kind of considerations by which he will be guided as a general rule when allocating quotas. These discretionary policy guidelines are not subject to judicial review, save according to the three exceptions set out in Maple Lodge Farms: bad faith, non-conformity with the principles of natural justice where their application is required by statute and reliance placed upon considerations that are irrelevant or extraneous to the statutory purpose.

… When examining an attack on an administrative action—the granting of the licence—a component of which is a legislative action—the establishment of a quota policy—reviewing courts should be careful not to apply to the legislative component the standard of review applicable to administrative functions. The line may be a fine one to draw but whenever an indirect attack on a quota policy is made through a direct attack on the granting of a licence, courts should isolate the former and apply to it the standards applicable to the review of legislative action as defined in Maple Lodge Farms.

[54] We are therefore of the view that in the circumstances of this case, the Committee did not owe the Association a duty of procedural fairness, and certainly not a duty of procedural fairness beyond allowing the Association to make its views known to the Committee, including the opportunity to respond to recommendations of the IC.

[55] In seriously contemplating that the Association proceed to ask that it become a member of the IC, the Association recognized that this was a body which contained members who were greatly self-interested, we therefore see no valid substance to the claim of bias.

[56] As L'Heureux-Dubé J. stated at p. 669 of Knight v. Indian Head School Division No. 19, [1990] 1 S.C.R. 653:

The existence of a general duty to act fairly will depend on the consideration of three factors: (i) the nature of the decision to be made by the administrative body; (ii) the relationship existing between that body and the individual; and (iii) the effect of that decision on the individual's rights.

As discussed above, (i) the matter before the Committee was one of a policy nature and not adjudication, (ii) the decision did not operate at an individual level but was the pronouncement on the policy underlying the P-9 Agreement as applied to a large segment of dairy product users represented by the Association and if the Association's Request had been granted, then there would have been considerable impact upon the dairy producers and holders of Permits, especially those holding Permits for cheese for further processing in frozen pizzas; and (iii) individual rights were not affected since the Association was requesting a discretionary benefit based on policy considerations (and as a trade association, the Association did not have a direct financial stake in the outcome of its Request). It should also be recognized that paragraph 15 of the Plan is mandatory as to the participation of the national dairy organizations including the Dairy Farmers of Canada but paragraph 16 is permissive as to the attendance and participation of others such as the Association.

[57] By its nature, a discretionary decision about whether to award a grant or benefit for which an applicant must qualify, does not affect that applicant's rights. In such a situation a much lower standard of procedural fairness applies: see Toronto Independent Dance Enterprise v. Canada Council, [1989] 3 F.C. 516 (T.D.) at pp. 527-9.

[58] We do not see that there was any breach of procedural fairness in these circumstances by the refusal of the Committee to grant a further adjournment to the Association in circumstances where the Association chose not to make reply submissions against the recommendation of the IC to the Committee nor in the Committee's decision to dismiss or reject the Association's Request. The Association had been well aware of the hurdles that it would have to overcome in changing the policy embodied in the Permit system as it then existed under the P-9 Agreement and the opposition that it was encountering at the IC level, not only as to the general thrust of that opposition but also rather detailed specifics. There was ample time after the July 21, 1999 letter to prepare and make submissions to counteract the IC's recommendation. We do not see that the Association was truly disadvantaged or hampered in any material and relevant way by not obtaining that further requested adjournment.

Result

[59] In the end result, the application for judicial review is dismissed. As per the agreement of the Association and the Respondents, there are to be no costs. The Intervenors were permitted originally to participate provided that they were not entitled to costs.

J.M. FARLEY

G. PARDU

D. McCOMBS

Released: September 25, 2002