CITATION: Liquor Control Board of Ontario v. Vin De Garde Wine Club, 2015 ONSC 2537
DIVISIONAL COURT FILE NO.: 331/14
DATE: 20150504
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
J. Wilson, H. Sachs and Mesbur JJ.
BETWEEN:
LIQUOR CONTROL BOARD OF ONTARIO
Applicant
– and –
VIN DE GARDE WINE CLUB, HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO, as represented by the MINISTRY OF FINANCE and INFORMATION AND PRIVACY COMMISSIONER
Respondents
Jill Dougherty & Jordan Glick, for the Applicant
Ian A. Blue, Q.C. & Arnold B. Schwisberg, for the Respondent, Vin De Garde Wine Club
Judie Im, for the Respondent, Her Majesty the Queen in Right of Ontario
Lawren Murray, for the Respondent, Information and Privacy Commissioner of Ontario
HEARD at Toronto: March 26, 2015
H. SACHS J.:
Introduction
[1] The Liquor Control Board of Ontario (“LCBO”) seeks judicial review of the Reconsideration Order of the Information and Privacy Commissioner (“IPC”), dated June 25, 2014. The Reconsideration Order concerns the LCBO’s practice of collecting the names, addresses and products ordered by wine club members when clubs make special orders on behalf of their members through the LCBO’s private ordering system.
[2] In 2012, after investigating a privacy complaint by Vin de Garde Wine Club (“Vin de Garde”), the IPC found that the LCBO’s impugned collection practice contravened s. 38(2) of the Freedom of Information and Protection of Privacy Act, R.S.O. 1990, c. F.31 (“FIPPA”). The IPC ordered the LCBO to cease its collection practice and to destroy the information that it had collected in the past pursuant to this practice (the “2012 Order”). The only exception related to when members picked up their own products from the LCBO outlet.
[3] The 2012 Order was judicially reviewed, set aside on procedural grounds and sent back to the IPC for reconsideration. After reconsidering the matter, the IPC confirmed the decision it had made in the 2012 Order. It is this Reconsideration Order that the LCBO now seeks to review. The Ministry of Finance (the “Ministry”) supports the LCBO’s application.
Background
[4] The LCBO is a Crown agency and reports to the Ministry. The Liquor Control Act, R.S.O. 1990 c. L.18 (“LCA”), and the Liquor Licence Act, R.S.O. 1990, c. L.19 (“LLA”), charge the LCBO with regulating the import and sale of liquor in Ontario.
[5] The IPC is responsible for investigating government breaches of individual privacy and it aims to balance individual privacy rights with the need for the government to collect personal information. Section 38(2) of FIPPA prohibits government institutions from collecting personal information except in three circumstances: (i) the “collection is expressly authorized by statute”; (ii) the information is “used for the purposes of law enforcement”; or (iii) the information is “necessary to the proper administration of a lawfully authorized activity.”
[6] The LCBO has a private ordering system that allows customers to specially order liquor products that are not available in LCBO retail stores. Wine clubs can make special orders on behalf of their club members if they register with the LCBO. Once registered, the clubs are subject to certain guidelines. A club placing an order must provide the LCBO with the names and addresses of its members on behalf of whom the order is being made. The club must also provide a list of the products that each club member is ordering. There is no question that this information is “personal information” within the meaning of FIPPA.
[7] In 2004, Vin de Garde registered as a wine club with the LCBO. Vin de Garde says that from 2004 to 2012, the LCBO did not demand the impugned information when Vin de Garde submitted special orders on behalf of its members. Yet, in early 2012, the LCBO refused to process Vin de Garde’s special orders unless and until the club disclosed the personal information of its individual members.
[8] On July 5, 2012, Vin de Garde filed a privacy complaint with the IPC. The IPC launched an investigation. Both parties cooperated and made numerous submissions. The LCBO argued that its collection practice was necessary to process transactions, conduct product recalls, enable audits and deter illegal activity. In the language of s. 38(2) of FIPPA, the LCBO argued that the information was “used for the purpose of law enforcement” and that it was “necessary for the proper administration of a lawfully authorized activity.”
[9] On February 27, 2012, the IPC held that the LCBO had failed to establish that its impugned collection practice was used for the purpose of law enforcement or that it was necessary to the proper administration of the wine club program. The IPC ordered the LCBO to cease collecting club members’ personal information when special orders are made through wine clubs on members’ behalf, except when individual members intend to pick up the products that they ordered. The LCBO was also ordered to destroy all personal information that had previously been collected pursuant to that practice.
[10] In a decision, dated November 5, 2013, the Divisional Court allowed the LCBO’s application for judicial review on the basis that the IPC should have given the LCBO notice that it was considering a cease collection order under s. 59(b) of FIPPA. In its reasons, the Divisional Court also provided a series of “observations and comments” on the substance of the LCBO’s application.
[11] Both Vin de Garde and the IPC sought leave to appeal the Divisional Court’s decision. The Court of Appeal dismissed these motions for leave.
[12] The matter then went back to the IPC for reconsideration. The IPC received supplementary materials from the LCBO and the Ministry, but did not find it necessary to invite Vin de Garde to make additional submissions. In its Reconsideration Order, the IPC confirmed its earlier decision and ordered the same remedy as it had in its 2012 Order.
The IPC Reconsideration Order
[13] The IPC first examined the LCBO’s claim that the personal information being collected is used for the purpose of law enforcement. In particular, the LCBO submitted that it collects the information at issue to ensure that clubs do not stockpile and resell liquor, both of which would be contrary to the LLA and LCA. The IPC rejected the LCBO’s argument on the basis that for the law enforcement exception to apply, a specific investigation or inspection must be underway. In this case, there was no evidence of such an investigation or inspection.
[14] The IPC then went on to consider the LCBO’s submission that collecting the information was necessary to the proper administration of a lawfully-authorized activity. In doing so, the IPC found that “[t]o meet that test, the institution must show that the collection is more than merely helpful, and where the purpose can be accomplished another way, the institution is obliged to choose the other route” (Reconsideration Order p. 12).
[15] The IPC grouped the LCBO’s arguments into four general categories and examined each one of them in turn.
[16] First, it looked at the submission that the collection of the information is necessary for the “lawful sale of liquor by the LCBO to [club] members.” According to the LCBO, without the personal information, the club would be illegally reselling liquor to its members and club members would be illegally purchasing liquor from the club. The LCBO also argued that not collecting the personal information would have the effect of establishing a process that runs contrary to the statutory scheme established under the LCA and the LLA. A version of this argument was also raised before us.
[17] The IPC found that the LCBO had failed to point to a single provision under the relevant statutory regime pursuant to which the purchase of liquor by members through clubs is illegal unless the sale is documented as a sale to a specific member. Further, the IPC noted that when the LCBO corresponded with Vin de Garde before the filing of Vin de Garde’s complaint, the LCBO had never suggested that the transactions that had occurred between 2004 and 2012, where no personal information was provided, constituted illegal transactions.
[18] Before the IPC, the LCBO focused on s. 33.1 of the LLA, which prohibits the possession of liquor in excess of 180 litres. The LCBO submitted that it would be in breach of this section if it delivered liquor to the club without obtaining the personal information. The IPC rejected this submission, finding, among other things, that the LCBO’s submission overlooked the exception under s. 33.1(d), which allows for possession of liquor in excess of the prescribed quantity if the possession occurs under the authority of the LCBO.
[19] The IPC agreed that it was illegal to resell or stockpile liquor in Ontario. However, it noted that it was not illegal to purchase liquor from the LCBO through a wine club. It is also not illegal to purchase liquor through a club without providing personal information. According to the IPC, “[t]his type of event occurs countless times each day in LCBO retail stores” (Reconsideration Order p. 17).
[20] The LCBO submitted that unless club members provided the personal information, they would be able to do an “end run” around the system in place for permits and licences. The IPC found that this position “ignores the fact that the system of permits and licences established by the regulatory scheme does not apply to clubs and members” (Reconsideration Order p. 17).
[21] Next, the IPC examined the LCBO’s argument that the collection of the personal information was necessary to detect and deter fraud, including the illegal selling and stockpiling of liquor. In this regard, the IPC started its analysis by noting that the LCBO had not provided even one example of a case where fraud was suspected or found to have been committed by a wine club since the inception of the wine club program over 35 years ago. According to the IPC, “the LCBO’s representations on this issue amount to no more than a claim that there is an opportunity for clubs to commit the types of fraud committed by other intermediaries or agents, such as manufacturers’ representatives” (Reconsideration Order p. 19). This was in stark contrast to the evidence before it in a previous complaint. In that complaint, there was evidence that the personal information at issue had played a critical role in identifying fraud relating to returned products, which was estimated to occur in 8 to 10 percent of returns.
[22] Subsequently, the IPC dealt with the Divisional Court’s concern that it had failed to address the argument that a reasonable inference could be drawn that the LCBO’s very practice of collecting personal information is the reason fraud has not been a problem with wine clubs. The IPC found that if there was merit to this argument, the fraud that was occurring with manufacturers’ representatives (where the same type of information is collected pursuant to an express statutory provision allowing its collection) would not have occurred. The evidence showed that the collection of personal information had not impacted the incidence of fraud in those cases, whereas spot audits had. The LCBO filed no specific information before the IPC about its audit practices in respect of wine clubs.
[23] Finally, the IPC noted that opportunities for fraud exist when a retail customer purchases liquor at a LCBO outlet and, yet, the LCBO does not collect personal information from all of its retail customers.
[24] The IPC found that the impact on tax revenues if personal information was not collected would be minimal. Sales through clubs that pick up orders on their members’ behalf amount to $500,000 per year. If 10 percent of those sales were affected by fraud, that would only total $50,000 per year, the tax revenues of which would be 52 percent or just over $25,000 – a negligible amount.
[25] The IPC also rejected the LCBO’s submission that collecting the impugned information was necessary for the effective enforcement of the regulatory scheme. In particular, it looked at the Divisional Court’s concern that prohibiting the LCBO from collecting the personal information would result in a delegation of the LCBO’s responsibility to keep records in relation to liquor sales to “unlicensed wine clubs it does not necessarily trust.” The IPC found that although the LCBO had a wide range of responsibilities under the LLA and LCA, it did not have the responsibility or authority to collect the personal information at issue. In this regard, the IPC noted that, unlike manufacturers’ representatives, wine clubs do not have the authority to do anything other than make purchases on behalf of their members. In this way, they are no different than individuals “who purchase products through the retail outlets, including for family, friends and colleagues” (Reconsideration Order p. 24). These individuals do not have to provide personal information.
[26] The IPC addressed the Divisional Court’s concern about the possible inconsistency of prohibiting the collection of personal information when wine clubs are having the wine delivered to their premises and yet allowing the collection of personal information when wine club members pick up their own orders. In doing so, the IPC found that “it would not be possible for the LCBO to process the [individual wine club members’] order[s] without the information” (Reconsideration Decision p. 14). To process an order, the LCBO would need to know the name of the customer who was coming to pick up the order and the product that that customer was going to pick up. Thus, the collection of the information was more than merely helpful and was necessary to the lawful administration of the LCBO’s activity. As put by the IPC, at p. 14 of the Reconsideration Decision:
A finding that the collection of personal information is more than merely helpful in one circumstance does not preclude a finding that the LCBO does not meet the necessity test in other, differing circumstances. In my view, in exceptional and limited cases, it is necessary for the LCBO to collect the personal information only because it is necessary for staff to verify that they are providing the correct products to the correct individual who chooses to appear in person for the pickup. This is a matter of basic customer service, at its core, to ensure that the right person gets the right product. And one should note that these individuals have opted-in to this process, having given their positive consent to be named.
[27] The IPC also found that the relevant statutes give the LCBO broad authority to conduct investigations into wine clubs. There are other alternative and effective measures open to the LCBO to investigate potential fraud by wine clubs or their members.
[28] The IPC then dealt with the LCBO’s submission that the collection of the impugned information was consistent with industry standards, particularly the practices of the liquor boards and commissions of other provinces and territories that have a club program and do not have a privatized model for the sale of alcohol. The IPC reviewed all of these programs and found that the only liquor board that required personal information when an order was not picked up at a retail outlet was Newfoundland. Notably, Newfoundland’s liquor board’s practices had not been the subject of an investigation or review by that province’s Information and Privacy Commissioner.
[29] The IPC also rejected the LCBO’s argument that the legislative scheme that applies to manufacturers’ representatives is evidence of what is necessary for the effective and proper administration of the wine club program. In doing so, the IPC pointed out the differences between wine clubs and manufacturers’ representatives and recognized that in the case of manufacturers’ representatives, the legislature chose to give express legislative authority to collect the personal information in question. If the legislature had wished to do the same in the case of wine clubs, it could have done so in the over 35 years that the wine club program had been operating.
Standard of Review
[30] The LCBO and the Ministry submit that the IPC’s decision concerns a question of law that turns on the interpretation of liquor legislation, is of significant importance to the legal system as a whole and is outside of the IPC’s expertise. Therefore, the applicable standard of review is correctness.
[31] A similar submission in relation to a different outside statute was made to the Supreme Court of Canada, in Ontario (Community Safety and Correctional Services) v. Ontario (Information and Privacy Commissioner), 2014 SCC 31, [2014] 1 S.C.R. 674. The Supreme Court rejected the submission as follows, at paras. 26-27:
Both this Court and the Ontario courts have held that a reasonableness standard of judicial review generally applies to decisions by the Commissioner interpreting and applying disclosure exemptions under FIPPA. Moreover, the Court has repeatedly said that the reasonableness standard will generally apply to a tribunal interpreting its home statute or statutes closely connected to its function. The Ministry concedes this general point, but argues that because the Commissioner also interpreted Christopher’s Law, which is not her home statute, the standard of correctness should apply.
We do not agree. The Commissioner was required to interpret Christopher’s Law in the course of applying FIPPA. She had to interpret Christopher’s Law for the narrow purpose of determining whether, as set out in s. 67 of FIPPA, it contained a ‘confidentiality provision’ that ‘specifically provides’ that it prevails over FIPPA. This task was intimately connected to her core functions under FIPPA relating to access to information and privacy and involved interpreting provisions in Christopher’s Law closely connected to her functions. The reasonableness standard applies.
[All citations omitted.]
[32] Similarly, in this case, the IPC was only required to interpret liquor legislation in order to determine whether the LCBO met the threshold for the collection of personal information under s. 38(2) of FIPPA. Its task concerned one of its core functions under FIPPA, its home statute. As such, it is the reasonableness standard that applies.
[33] This case is distinguishable from the decision of the Alberta Court of Appeal in Imperial Oil Ltd. v. Calgary (City), 2014 ABCA 231, 580 A.R. 125. That case, the Court found, was one that engaged the jurisdictional boundaries of various tribunals, which is one of the areas in which decisions are reviewed on a standard of correctness. In the case at bar, there is no competing interpretation by another tribunal.
Issues Raised on this Application
[34] The LCBO and the Ministry argue that the IPC’s Reconsideration Order is unreasonable for two reasons:
(1) It requires the LCBO to sell liquor to wine clubs as opposed to individuals, which puts the LCBO in the position of not being in compliance with its own governing legislation.
(2) The IPC unreasonably interpreted the “necessity” requirement set out at s. 38(2) of FIPPA.
Did the Reconsideration Order Unreasonably Place the LCBO in the Position of Being in Non-Compliance with Relevant Liquor Laws?
[35] The LCBO’s submission in this regard centres on the wording of s. 5 of the LLA, which reads, as follows:
- (1) No person shall keep for sale, offer for sale or sell liquor except under the authority of a licence or permit to sell liquor or under the authority of a manufacturer’s licence.
(2) No person shall canvass for, receive or solicit orders for the sale of liquor unless the person is the holder of a licence or permit to sell liquor or unless the person is the holder of a licence to represent a manufacturer.
(3) No person shall deliver liquor for a fee except under the authority of a licence to deliver liquor.
(4) Subsections (1), (2) and (3) do not apply to the sale or delivery of liquor by or under the authority of the Liquor Control Board under the Liquor Control Act, R.S.O. c. L. 19, s. 5.
[36] In s. 1(1) of the LLA, “sell” is defined as follows:
“sell” means to supply for remuneration, directly or indirectly, in any manner by which the cost is recovered from the person supplied, alone or in combination with others, and “sale” has a corresponding meaning.
[37] According to the LCBO, the effect of these provisions is to make it unlawful to purchase alcohol on behalf of someone else, if the individual making the purchase then gets reimbursed for that purchase. In the case of wine clubs, the Reconsideration Order puts the LCBO in the position of selling to the wine clubs, who, in turn, get reimbursed by their members for the purchases that they have made. This puts the wine clubs in contravention of the law and puts the LCBO in the position of facilitating that contravention.
[38] In making this submission, the LCBO acknowledges that individuals can come into retail outlets, purchase liquor on behalf of someone else, and subsequently get reimbursed by that person. The LCBO does not require individuals to provide personal information of the type that wine clubs are required to provide. The LCBO submits, however, that even if the actions of these individual purchasers may also be unlawful, the LCBO is entitled to act on the presumption that the liquor it sells to individuals at its retail outlets will actually be consumed by the person making the purchase. In the case of wine clubs, no such assumption can be made. In fact, the LCBO knows that the liquor is not being sold to the person who will actually consume the wine. Therefore, unless the LCBO has the names of the actual customers who will be consuming the wine and the particulars of what product each of these customers will be consuming, the LCBO is knowingly setting up a situation where the wine club will be “selling” wine to its members in contravention of s. 5 of the LLA.
[39] There are several problems with this submission. First, there is a real concern that the LCBO’s interpretation of its own laws renders the actions of many Ontarians who go into liquor stores every day to buy alcohol on behalf of their friends, family members or colleagues illegal. If the LCBO is right, thousands of citizens in Ontario could potentially be exposed to regulatory charges resulting in fines of up to $100,000 and/or imprisonment for up to one year.
[40] Second, and more importantly, the argument ignores the fact that the wine club program is conducted under the authority of the LCBO and that any activity that is conducted under the authority of the LCBO is not subject to the provisions of s. 5(1), (2) and (3) of the LLA. As the IPC noted, there is nothing in the LCBO’s governing legislation that makes it illegal for the LCBO to sell to wine clubs without collecting the personal information at issue. The only provisions that the LCBO relies on in support of its argument about illegality are the provisions in s. 5 detailed above. These provisions are subject to the exception in s. 5(4) – an exception that gives the LCBO total authority to ensure that what it does is not illegal. It cannot use a section that contains such an exception to demand personal information that it otherwise cannot justify under FIPPA.
[41] In this regard, it is important to note two other things. First, as part of the wine program, the LCBO receives a list of wine club members. It knows that the wine it sells to the wine club will be consumed by one of those members. Second, if the LCBO insists on obtaining the personal information at issue, it can ask the legislature for a provision allowing it to obtain the information. The LCBO exercised this remedy to obtain a provision requiring that manufacturers’ representatives provide personal information.
Did the IPC unreasonably interpret the “necessity” requirement set out at s. 38(2) of FIPPA?
[42] According to the LCBO, the IPC applied the wrong test when it decided whether or not the collection of the personal information was necessary. In effect, the LCBO argues, the IPC set the bar too high, requiring the LCBO to demonstrate that the collection of the information was absolutely necessary. Instead, it should have only required the LCBO to show that the collection of the information was reasonably necessary.
[43] All parties agree that the leading authority on the proper interpretation of s. 38(2) of FIPPA is the Court of Appeal’s decision in Cash Converters Canada Inc. v. Oshawa (City), 2007 ONCA 502, 86 O.R. (3d) 401. In that case, at para. 40, the Court of Appeal had the following to say about the institution’s onus under the “necessity” requirement:
…the institution must show that each item or class of personal information that is to be collected is necessary to properly administer the lawfully authorized activity. Consequently, where the personal information would be merely helpful to the activity, it is not ‘necessary’ within the meaning of the Act. Similarly, where the purpose can be accomplished in another way, the institution is obliged to choose the other route.
[44] The LCBO claimed that the IPC interpreted Cash Converters as requiring it to demonstrate that the collection of the personal information at issue was “absolutely” necessary. However, reading the IPC’s decision shows the LCBO’s argument to be unsubstantiated. First, at no point does the IPC do more than advert to the test as set out by the Court of Appeal. Second, if the IPC had been applying such a standard, it would not have been necessary for it to consider the LCBO’s evidence on the fraud issue. There can be no argument that the collection of the impugned information is absolutely essential or necessary to the completion of an order from a wine club. In addressing the fraud question, what the IPC examined was whether there was evidence of a problem with fraud in the wine club program that would be solved by the collection of the personal information. If there had been sufficient evidence, the IPC would have found that collecting the information was justified under s. 38(2). However, the LCBO’s submissions on the fraud issue were rejected. This was not because the IPC unreasonably applied the wrong test, but because the LCBO’s evidence was insufficient to demonstrate any problem with fraud in the wine club program. Similarly, the LCBO’s evidence was found insufficient to demonstrate that if such a problem did exist, the only way to solve it was to collect the impugned information.
[45] The LCBO relies upon Cash Converters to support its submission that the IPC erred in not interpreting “necessary” as meaning “reasonably necessary.” However, Cash Converters does not interpret “necessary” in this way. In fact, it suggests the opposite. Arguably, something that is “helpful” to an activity could be “reasonably necessary” to that activity. Yet, the Court of Appeal makes it clear that “helpful” is not sufficient.
[46] Further the interpretation of the word “necessary” in the manner suggested by the LCBO would be contrary to both the wording and the intent of FIPPA. As the Supreme Court of Canada recently explained, in Alberta (Information and Privacy Commissioner) v. United Foods and Commercial Workers, Local 401, 2013 SCC 62, [2013] 3 S.C.R. 733, at para. 19:
The ability of individuals to control their personal information is intimately connected to their individual autonomy, dignity and privacy. These are fundamental values that lie at the heart of a democracy. As this Court has previously recognized, legislation which aims to protect control over personal information should be characterized as ‘quasi-constitutional’ because of the fundamental role privacy plays in the preservation of a free and democratic society.
[47] In support of its submission on this point, the LCBO relies on an earlier investigation report wherein the IPC found that the LCBO’s practice of collecting personal information for product returns complied with s. 38(2). According to the LCBO, the IPC applied a “reasonably necessary” standard in that investigation.
[48] Nowhere in its previous investigation report did the IPC use the phrase “reasonably necessary.” Further, as noted by the IPC in its Reconsideration Decision, the evidence in the previous case disclosed a problem with fraud (in 8 to 10 percent of cases where returns to the LCBO were made) and supported the contention that the only way to identify (and thereby eliminate) the problem would be to collect the personal information at issue.
[49] In its Reconsideration Decision, the IPC specifically addressed and rejected the LCBO’s claim that “necessary” means “reasonably necessary.” In doing so, it reasonably found: “that approach is not consistent with the direction provided by the Court of Appeal” (Reconsideration Decision p. 15).
Conclusion
[50] For these reasons, the application is dismissed. The only party who requested costs was Vin de Garde, in the amount of $22,000. We find that a more appropriate award, given the extent of Vin de Garde’s contribution to the application, is $7,500. The LCBO shall pay this amount to Vin de Garde.
H. SACHS J.
J. WILSON J.
MESBUR J.
Released: 20150504
CITATION: Liquor Control Board of Ontario v.Vin De Garde Wine Club, 2015 ONSC 2537
DIVISIONAL COURT FILE NO.: 331/14
DATE: 20150504
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
J. Wilson, H. Sachs and Mesbur JJ.
BETWEEN:
LIQUOR CONTROL BOARD OF ONTARIO
Applicant
– and –
VIN DE GARDE WINE CLUB, HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO, as represented by the MINISTRY OF FINANCE and INFORMATION AND PRIVACY COMMISSIONER
Respondents
REASONS FOR JUDGMENT
H. SACHS J.
Released: 20150504