Royal Demaria Wines Co. Ltd. v. Lieutenant Governor in Council et al.
[Indexed as: Royal Demaria Wines Co. v. Ontario (Lieutenant Governor in Council)]
Ontario Reports
Ontario Superior Court of Justice
Divisional Court, Platana, Sachs and Horkins JJ.
December 18, 2018
144 O.R. (3d) 616 | 2018 ONSC 7525
Case Summary
Constitutional law — Paramountcy — Applicant obtaining trade-mark "Canada's Icewine Specialist" — Applicant not permitted to use term "icewine" when it failed to obtain approval for its wine under provincial Vintners Quality Alliance Act — No operational conflict existing between Trade-Marks Act and provincial Act or between Canada Agricultural Products Act and provincial Act — Canada Agricultural Products Act, R.S.C. 1985, c. 20 — Trade-Marks Act, R.S.C. 1985, c. T-13 — Vintners Quality Alliance Act, 1999, S.O. 1999, c. 3.
Corporations — By-laws — Respondent not-for-profit corporation operating as designated wine authority under Vintners Quality Alliance Act for purposes of administering Act and regulations — By-law which required winemakers to obtain one new approval for wine during any consecutive 18-month period connected to purpose of Act and reasonable exercise of respondent's jurisdiction — Vintners Quality Alliance Act, 1999, S.O. 1999, c. 3.
Statutes — Regulations — Respondent operating as designated wine authority under Vintners Quality Alliance Act for purposes of administering Act and regulations — Lieutenant Governor in Council passing regulation that allowed respondent to revoke approval for previously approved wines if wine manufacturer was no longer member of respondent — Regulation not irrelevant, extraneous or completely unrelated to purposes of Act — Regulation not ultra vires — Vintners Quality Alliance Act, 1999, S.O. 1999, c. 3.
The respondent VQAO was a not-for-profit corporation that operated as the designated wine authority under the Vintners Quality Alliance Act, 1999 (the "Act"). The core of the Act prohibits the use of certain terms, descriptions and designations without VQAO approval. One of those terms is "icewine". In order to obtain the right to use a regulated term such as "icewine", a winemaker must be a member of the VQAO and the wine in question must have received approval from the VQAO. In order to receive approval, a wine must pass a taste test by a tasting panel. The applicant was a producer of icewine in Ontario. Over an 18-month period, the wines that it submitted did not receive approval as they failed the taste test. The VQAO's by-law provides that if a winemaker fails to obtain VQAO approval for any one if its wines over an 18-month period, the winemaker's VQAO membership is subject to termination. The applicant's membership was terminated. The Lieutenant Governor in Council subsequently passed a regulation (the "new Regulation") allowing it to suspend or revoke approval for previously approved wines if the manufacturer ceased to be a member of the VQAO. Acting under the new regulation, the VQAO revoked its approval of the applicant's two previously-approved icewines. The applicant brought an application alleging that the VQAO rule providing for a taste test, the by-law requiring a winemaker to obtain one new approval within an 18-month period and the new regulation were [page617] ultra vires. The applicant had obtained the trademark "Canada's Icewine Specialists". It argued that there is an operational conflict between the Act and the Trade-marks Act, that the doctrine of paramountcy applies, and that the Act and regulations were inoperable to the extent that they did not allow the applicant to use its trade-mark. It made the same paramountcy argument with respect to the Canada Agricultural Products Act (the "CAP Act"), under which, it submitted, it was entitled to use the term "icewine" in relation to its products. The applicant sought declaratory relief.
Held, the application should be dismissed.
The taste test rule was properly enacted under s. 5(1) (d) of the Act as it served as a quality assurance process. It did not require ministerial approval. It could not be said that the rule was one that no reasonable and informed body in the shoes of the VQAO would have enacted; nor could it be said that taste tests are incapable of furthering the purpose of the Act, which is to "establish an appellation of origin system . . . that will allow customers to identify such wines on the basis of the areas where the grapes are grown and the methods used in making the wine". The taste test rule is not ultra vires the VQAO's authority.
The by-law that requires a winemaker to obtain one new approval within a consecutive 18-month period is not ultra vires. If a winery is not producing quality wines capable of meeting the standards set out in the regulatory scheme under the Act, it is reasonable to exclude that winery from the scheme until it is capable of producing wines that meet the standard.
The new Regulation is not irrelevant, extraneous or completely unrelated to the purposes of the Act. it is not ultra vires the authority of the Lieutenant Governor in Council.
There is no operational conflict between the Trade-Mark Act and the Act. The Trade-Mark Act does not provide a positive right to use a trade-mark. The fact that a trade-mark user is required to use a trade-mark to maintain its registration does not mean that the holder has a positive right to use the trade-mark in the face of other legislation that would prohibit its use. If a manufacturer chooses to register a term under the Trade-Marks Act that is also subject to quality control standards under a provincial Act, it is possible to comply with both schemes by adhering to the provincial quality control standards. Nothing in the Trade-Marks Act suggests that winemakers should be free from the requirement to comply with provincial quality control standards simply because they choose to register a term under the Trade-Marks Act that is also subject to provincial regulation.
There is also no operational conflict between the Act and the CAP Act. The CAP Act's purpose of providing for "national standards and grades of agricultural products" is harmonious with the Act's consumer protection purposes. The CAP Act sets out a minimum standard, which specifically contemplates the involvement of a provincial authority such as the VQAO.
Cases referred to
Alberta (Attorney General) v. Moloney, [2015] 3 S.C.R. 327, [2015] S.C.J. No. 51, 2015 SCC 51, 476 N.R. 318, 85 M.V.R. (6th) 37, 2015EXP-3202, J.E. 2015-1777, EYB 2015-258559, [2015] 12 W.W.R. 1, 29 C.B.R. (6th) 173, 22 Alta. L.R. (6th) 287, 391 D.L.R. (4th) 189, 606 A.R. 123, 259 A.C.W.S. (3d) 20; Benson & Hedges (Canada) Ltd. v. British Columbia (Attorney General), [1972] B.C.J. No. 417, 27 D.L.R. (3d) 257, [1972] 5 W.W.R. 32, 6 C.P.R. (2d) 182 (S.C.); Canadian Western Bank v. Alberta, [2007] 2 S.C.R. 3, [2007] S.C.J. No. 22, 2007 SCC 22, 281 D.L.R. (4th) 125, 362 N.R. 111, [2007] 8 W.W.R. 1, J.E. 2007-1068, 75 Alta. L.R. (4th) 1, 409 A.R. 207, [page618] [2007] RRA 241, 49 C.C.L.I. (4th) 1, [2007] I.L.R. I-4622, 157 A.C.W.S. (3d) 299, EYB 2007-120167; Cardinal v. Rogers Communications Inc., [2017] O.H.R.T.D. No. 574, 2017 HRTO 570; Green v. Law Society of Manitoba, [2017] 1 S.C.R. 360, [2017] S.C.J. No. 20, 2017 SCC 20, 6 C.P.C. (8th) 225, [2017] 5 W.W.R. 1, 407 D.L.R. (4th) 573, 18 Admin. L.R. (6th) 107, 2017EXP-1007, EYB 2017-277812, 276 A.C.W.S. (3d) 728; Katz Group Canada Inc v. Ontario (Health and Long-Term Care), [2013] 3 S.C.R. 810, [2013] S.C.J. No. 64, 2013 SCC 64, 366 D.L.R. (4th) 62, 451 N.R. 80, J.E. 2013-2036, 312 O.A.C. 169, EYB 2013-229518, 2013 CCLG Â25-455, 2013EXP-3752, 58 Admin. L.R. (5th) 173, 235 A.C.W.S. (3d) 547; OPSEU v. Ontario (Attorney General), [1987] 2 S.C.R. 2, [1987] S.C.J. No. 48, 41 D.L.R. (4th) 1, 77 N.R. 321, 23 O.A.C. 161, 28 Admin. L.R. 141, 87 CLLC Â14,037 at 12258, 5 A.C.W.S. (3d) 164; Reference re: Constitution Act, 1867, ss, 91, 92, [1991] M.J. No. 190, 80 D.L.R. (4th) 431, [1991] 4 W.W.R. 193, 73 Man. R. (2d) 81, 35 C.P.R. (3d) 289, 27 A.C.W.S. (3d) 29 (C.A.); Rothmans, Benson & Hedges Inc. v. Saskatchewan, [2005] 1 S.C.R. 188, [2005] S.C.J. No. 1, 2005 SCC 13, 250 D.L.R. (4th) 411, 331 N.R. 116, [2005] 9 W.W.R. 403, J.E. 2005-572, 257 Sask. R. 171, 137 A.C.W.S. (3d) 933; West Fraser Mills Ltd. v. British Columbia (Workers' Compensation Appeal Tribunal), [2018] 1 S.C.R. 635, [2018] S.C.J. No. 22, 2018 SCC 22, 421 D.L.R. (4th) 191, [2018] 6 W.W.R. 211, 9 B.C.L.R. (6th) 1, 2018 CLLC Â210-040, EYB 2018-294347, 2018 CSHG Â96,203, 2018EXP-1418, 2018EXPT-1031, 33 Admin. L.R. (6th) 209, 291 A.C.W.S. (3d) 456
Statutes referred to
Canada Agricultural Products Act, R.S.C. 1985, c. 20 (4th Supp.) [rep.]
Corporations Act, R.S.O. 1990, c. C.38, s. 129(1) (a)
Trade-marks Act, R.S.C. 1985, c. T-13, ss. 19 [as am.], 45(3)
Vintners Quality Alliance Act, 1999, S.O. 1999, c. 3, ss. 1, 5 [as am.], (1), (a), (b), (c), (d), 6 [as am.], (2), (4)
Rules and regulations referred to
Designation of Wine Authority, O. Reg. 403/00
General, O. Reg. 405/00, ss. 6(1)(b), 7(1) [as am.], (d), 8
Icewine Regulations, SOR/2014-10 [rep.]
Rules of Vintners Quality Alliance Ontario Relating to Terms for VQA Wine, O. Reg. 406/00
APPLICATION for declaratory relief.
Alexandra V. Mayevski and Philip E. Bender, for applicant.
Padraic Ryan, for Lieutenant Governor in Council and the Minister of Government and Consumer Services.
Paul-Erik Veel and Margaret Robbins, for Vintners Quality Alliance Ontario.
The judgment of the court was delivered by
SACHS J.: —
Introduction
[1] The Applicant is a producer of icewine in Ontario. It was a member of the Vintners Quality Alliance of Ontario (the "VQAO"). [page619] The VQAO is a not-for-profit corporation without share capital operating as the designated wine authority under the Vintners Quality Alliance Act, 1999, S.O. 1999, c. 3(the "Act") for the purposes of administering the Act and the associated regulations. It does so within its authority under the Act, the associated regulations and the framework set out in its administrative agreement with the Minister of Government and Consumer Services (the "Ministry").
[2] As a not-for-profit corporation without share capital, the VQAO is subject to the provisions of the Corporations Act,R.S.O. 1990, c. C.38. Pursuant to the Corporations Act, the VQAO has passed by-laws governing issues such as membership.
[3] The Act provides that the VQAO has the power to make certain rules. Some rules require ministerial approval and some do not. The core of the Act prohibits the use of certain established terms, descriptions and designations without VQAO approval. One of those terms is "icewine". In order to obtain the right to use a regulated term such as "icewine", a winemaker must be a member of the VQAO and the wine in question must have received approval from the VQAO. To receive approval the wine must go through a number of steps, including being subject to a taste test by a tasting panel. The taste test requirement is contained in a VQAO rule that did not receive ministerial approval.
[4] The Applicant was a member of the VQAO and as a member submitted certain of its wines for approval. Approval was granted for two of those wines. However, over an 18-month period it submitted wines and none were approved, as they failed the taste test. The VQAO's By-Law provides that if a winemaker fails to obtain VQAO approval for any one of its wines over an 18-month period, the winemaker's VQAO membership is subject to termination. The Applicant's membership was terminated due to this rule.
[5] When the VQAO advised the Applicant that its membership had lapsed, the VQAO further advised that it would be permitted to sell its remaining inventory labelled with regulated terms, descriptions and designations (including "icewine") for a period of one year from the date of the lapse.
[6] After the 12-month period had expired, the Applicant continued to sell its previously approved wines using VQAO designations. The Applicant was prosecuted and acquitted on the basis of a finding that the VQAO had no statutory or regulatory authority to revoke the approval of pre-approved wines on the basis of a lapse of membership.
[7] After this decision, the Lieutenant Governor in Council passed a new regulation allowing the VQAO to suspend or revoke [page620] approval for a wine if the manufacturer ceased to be a member of the VQAO. After the passage of this regulation, the VQAO revoked its approval of the Applicant's two previously approved icewines. As a result of these actions, the Applicant commenced this application.
[8] On this application the Applicant seeks declaratory relief to the following effect:
(a) The VQAO rule providing for a taste test is ultra vires the authority granted to the VQAO both because VQAO did not receive ministerial approval for the rule and because taste tastes are incapable of meeting the purposes of the legislation. As such, the VQAO unreasonably exercised its authority when it enacted a rule requiring the passing of a taste test.
(b) The VQAO By-law providing that in order for a wine manufacturer to maintain its membership, it must obtain one new approval, including passing a taste test, during any consecutive 18-month period does not further the policy and objectives of the Act. As such, it is ultra vires the authority granted to the VQAO.
(c) The new regulation providing that VQAO may revoke its approval for previously approved wines if a manufacturer is no longer a member of VQAO is irrelevant, extraneous or completely unrelated to the purpose of the Act. As such, it is ultra vires the authority granted to the Lieutenant Governor in Council.
(d) The Applicant applied for and obtained the trademark "Canada's Icewine Specialists". According to the Applicant, VQAO's position that it can only use its trademark on VQAO approved wines conflicts with federal legislation, namely, the Trade-marks Act,R.S.C. 1985, c. T-13. Pursuant to the doctrine of paramountcy, the Applicant must still be able to use its trade-mark, which includes the term "icewine". To the extent that the Act and the associated regulations provide otherwise, they are inoperable.
(e) The federal government has also regulated the use of the term "icewine" through the passage of the Canada Agricultural Products Act, R.S.C. 1985, c. 20 (4th Supp.) ("CAP Act") and its associated regulations. The Applicant submits that under the terms of the CAP Act it is entitled to use the term "icewine" in relation to its products. Pursuant to the doctrine of paramountcy, to the extent that the Act and its [page621] associated regulations prohibit the Applicant from using the term "icewine", they must be declared inoperable.
[9] For the reasons that follow I would dismiss the application in its entirety. In particular, I find that the taste test rule is not a rule that required ministerial approval; that the VQAO's choice to use taste tests to further the purposes of the Act was a reasonable one; that the by-law requiring members to obtain one new approval during an 18-month period is connected to the purpose of the Act and as such was a reasonable exercise of the VQAO's jurisdiction; that the new regulation is not irrelevant, extraneous or completely unrelated to the purpose of the Act; and that there is no conflict between the Trade-marks Act or the CAP Act that would necessitate the application of the doctrine of paramountcy.
[10] VQAO began as a voluntary industry association in 1997, created by a small group of winemakers at a time when Canadian wines were considered pariahs in the global wine community. There were no meaningful quality assurance standards or government authorities who regulated the quality of wines in Ontario. Consumers and importers had no way of distinguishing high quality wines from other wines.
[11] The voluntary association sought to distinguish wines made by its members for the benefit of both the industry and consumers. It instituted minimum production standards and an appellation of origin system, which tells consumers where the grapes for a wine are grown and ensures that a specified standard of quality is met in the wine made from those grapes.
[12] As a voluntary association, the VQAO had limited means of enforcing its production and quality standards. As well, since Canadian wineries could not export to Europe without a government-sanctioned, legislative wine quality regime, the VQAO requested provincial regulation of the wine industry. The Government of Ontario responded to that request by enacting the Act in 1999. In 2000, VQAO was designated as the wine authority charged with administering the Act.
The Purpose of the Act
[13] The primary goal of the Act and its regulatory regime was to establish an appellation system, similar to the well-established appellation systems in Europe. This is made clear in s. 1 of the Act, which provides as follows:
- The purpose of this Act is to establish and maintain an appellation of origin system for Vintners Quality Alliance wine that will allow consumers to [page622] identify such wines on the basis of the areas where the grapes are grown and the methods used in making the wine.
[14] The unchallenged expert evidence from Dr. Barker on this application is that "appellation of origin" is a widely used term that denotes the name of or indicates a place of origin for wine whose use is subject to certain regulatory controls, linking the origin and the characteristics of the product. Thus, while appellation of origin denotes a geographical place, it also conveys additional information, including the nature of the product's origin and its quality, reputation and other characteristics associated with that origin over time.
[15] The appellation of origin system was designed to help improve the reputation of Ontario as a wine-growing region and, within Ontario, to improve the reputation of particular viticultural areas. It was also designed to protect consumers. Consumers can rely on label claims because wines bearing the VQAO label are regulated through a certification and audit process and are used only to describe wines that qualify to use the specific term. For example, with respect to the term "icewine", which is a designated term, its regulated use on a wine bottle assures consumers that the wine is made to specified standards.
[16] The Act imposes no obligations on wineries unless they seek approval to market and sell their wines using the reserved terms, descriptions and designations under the Act's regime.
The Regulatory Scheme
[17] Designation of Wine Authority, O. Reg. 403/00 designates the VQAO as the wine authority for the purposes of the Act. The Ministry has executed an administrative agreement with the VQAO setting out each party's rights and responsibilities in relation to the VQAO's administration of the regime and the Ministry's oversight role. The VQAO has approximately 168 member wineries and a board of directors consisting of people elected by VQAO members and individuals appointed by other stakeholders.
[18] Section 6 is the core of the Act. It provides as follows:
6(1) A manufacturer shall not use the terms, descriptions and designations established by the wine authority without its approval.
(2) A manufacturer may only apply to the wine authority for an approval to use the terms, descriptions and designations if the manufacturer is a member of the wine authority.
(3) A manufacturer who applies for an approval to use the terms, descriptions and designations is entitled to the approval if the manufacturer is otherwise in compliance with the wine authority's rules, including those establishing quality standards and meets all other requirements for an approval. [page623]
(4) If the wine authority refuses to grant an approval or suspends, revokes or refuses to renew an approval, the manufacturer may require that the tribunal hold a hearing on the matter in accordance with the regulations.
[19] The Act does not set out specific terms, descriptions and designations, or associated quality standards. Those are left to be defined in the associated regulations and rules. Thus, the VQAO has established quality standards and conditions that must be met before a winery can use the reserved terms on its wine bottles. Non-VQAO wines are not subject to the production, testing and labelling requirements of VQAO designated wines, but they may not use any of the terms, descriptions and designations reserved by the VQAO under the Act.
[20] Section 5 of the Act provides the VQAO with the power to make its own rules, which includes the power to set rules establishing the terms, descriptions and designations that may appear on VQAO wine labels; rules setting quality standards; rules establishing conditions for the use of the terms, descriptions and designations; and rules governing applications for approval for the use of the terms, descriptions and designations.
[21] The VQAO's board of directors promulgates rules. Any rules setting quality standards and conditions for the use of regulated terms, descriptions and designations must be approved by the Minister. Once they are, they are deemed to be regulations. Rules respecting applications for approval for the use of terms, descriptions and designations do not require ministerial approval.
Are the Taste Testing Rules Ultra Vires the VQAO's Authority?
Did VQAO require ministerial approval of the taste test rule?
[22] Section 5(1) of the Act reads as follows:
5(1) The designated wine authority may make rules,
(a) establishing and defining terms, descriptions and designations to appear on labels of Vintners Quality Alliance wines, including varietal labelling, vintage dating, viticultural areas, geographic indications and vineyard and estate-bottled declarations;
(b) setting quality standards and other requirements that must be met before the terms, descriptions and designations may be used by a manufacturer;
(c) establishing conditions respecting the use of the terms, descriptions and designations;
(d) governing applications for approval and issuance of approvals for the use of the terms, descriptions and designations; and
(e) requiring manufacturers applying to use or using the terms, descriptions and designations to furnish the wine authority with [page624] such returns, information and other things respecting the manufacture and sale of wine as are specified under clause 11(1)(c).
[23] Pursuant to its authority under s. 5(1)(a), (b) and (c), the VQAO passed rules setting out the terms, descriptions and designations that it regulates, as well as setting out the quality standards and other requirements for using those terms, descriptions and designations (the "Quality Rules"). The Quality Rules were approved by the Minister and are known as Rules of Vintners Quality Alliance Ontario Relating to Terms for VQA Wine, O Reg. 406/00 ("Regulation 406").
[24] The VQAO passed "Rules made pursuant to clauses 5(1) (d) and (e) of the Act for approval of the use of Terms, Descriptions and Designations" (the "Approval Rules"). It is these rules that include the requirement for a taste test. In particular, s. 3(1) of the Approval Rules states:
3(1) VQA Ontario shall issue an approval to a manufacturer to use the terms, descriptions and designations set out in the rules referred to in O.Reg 406/00 (Rules) for a wine for which the approval relates if VQA Ontario is satisfied that the manufacturer meets all the requirements of O.Reg. 406/00 (Rules) based on,
(a) Passing a review conducted by VQA Ontario of the labeling and container of the wine for which the approval relates to ensure compliance with O.Reg. 406/ 00 (Rules);
(b) Passing a taste test of the wine conducted by a VQA Ontario Tasting Panel on a ready-to-bottle tank sample or a finished bottle sample of the wine; and
(c) Passing a laboratory analysis of the wine conducted by the designated person to determine if the wine is in compliance with O.Reg. 406/00 (Rules) and the LCBO's guidelines for Chemical Analysis, as amended from time to time.
[25] The Applicant submits that by imposing a taste test the VQAO is imposing quality standards, which were not incorporated into the Quality Rules. According to the Applicant, the VQAO's ability to pass Approval Rules (which do not require ministerial approval) is limited to purely administrative or procedural matters (such as what forms must be filled out) and cannot operate as a means of imposing quality standards that the Minister has not approved. Since the taste test requirement did not receive ministerial approval it cannot stand.
[26] The VQAO and the Ministry submit that the taste test does not impose new quality standards; it, like the laboratory test, is a means of ensuring compliance with the quality standards set out in the Quality Rules, or Regulation 406. As such, the requirement was properly enacted under s. 5(1) (d) and did not need ministerial approval. [page625]
[27] In my view, the Applicant's submission on this point ignores the text of s. 5(1)(d) and the structure of the regulatory scheme as a whole.
[28] First, there is nothing in the text of s. 5(1)(d) that states that the rules enacted pursuant to this section must be limited to being merely "administrative" or "procedural". The subsection provides, in broad terms, that the VQAO may enact rules relating to the issuance of approvals.
[29] Second, the broader regulatory scheme under the Act (which has received ministerial approval) specifically contemplates that the VQAO "may refuse to issue an approval to a manufacturer for the use of terms, descriptions and designations set out in Ontario Reg. 406/00 for a wine if . . . the wine fails to successfully pass the processes described in the rules made pursuant to clause 5(1)(d) of the Act" (clause 6(1) (b) of O. Reg. 405/00). The fact that O. Reg. 405/00 speaks of wine passing "processes" supports the respondents' position that the Approval Rules were meant to contain substantive processes to ensure that the requirements of Regulation 406 were met.
[30] Third, a reading of Regulation 406 and the Approval Rules makes it clear that the two work together to perform different functions. For example, with respect to icewine, Regulation 406 sets out that this is a regulated term and sets out a number of requirements that must be met before a wine can be labelled as "icewine". These requirements are ultimately designed to ensure that any bottle labelled as "icewine" was made according to the processes usually associated with the production of that wine and has the distinctive taste that consumers associate with "icewine". The Approval Rules provide two different processes that are designed to ensure that the requirements of Regulation 406 have been met -- a laboratory analysis and a sensory evaluation through a taste test. The taste test, as part of the overall approval process, serves not as a quality standard, but as a quality assurance process. As such it was properly enacted under s. 5(1)(d) of the Act and did not require ministerial approval.
[31] Fourth, the Applicant submits that the Approval Rules are outside the jurisdiction of s. (5)(1)(d) of the Act because taste tests evaluate wines for flaws and whether they are representative of a wine category, despite the fact that neither of these terms are explicitly defined in the Quality Rules. However, this is an issue that goes to the heart of the VQAO's expertise as a regulator of Ontario's appellation of origin system. The VQAO is best placed to determine whether the terms, descriptions and designations set out in the Quality Rules reflect implicit standards or conditions as they are regularly used in the wine industry. Since [page626] the beginning of the VQAO system in Ontario in 2000, the VQAO has been of the view that it does and has accordingly considered wines for approval against those implicit shared standards.
[32] In West Fraser Mills Ltd. v. British Columbia (Workers' Compensation Appeal Tribunal), [2018] 1 S.C.R. 635, [2018] S.C.J. No. 22, 2018 SCC 22, at para. 9, McLachlin C.J.C. (writing for the majority) cautions that deference is owed when a court is reviewing the decisions of a subordinate authority that has been given large discretion under its enabling statute to craft an appropriate regulatory regime. As confirmed by her, that deference appropriately "recognizes the reality that, in many instances, those working day to day in the implementation of frequently complex administrative schemes have or will develop a considerable expertise or field sensitivity to the imperatives or nuances of the legislative regime" (citation omitted for the quote). Thus, the VQAO's view that there are shared implicit standards that cannot be fully articulated in the Quality Rules, but that can be measured through a sensory evaluation is one that is entitled to deference from this court.
[33] Section 3(4) of the Quality Rules (which did receive Ministerial approval) contains a general prohibition that "[n]o person shall use a term, description or designation or name on a label or container of wine that may mislead the consumer as to the quality, content or origin of the wine". Taste is the medium by which consumers experience wine. Therefore, it is reasonable for the VQAO to use a means for deciding whether a particular wine should get approved that ensures that there is an accurate link between the reserved terms and taste, even when the accuracy is based on implicit shared understanding of the meaning of the reserved terms in the wine industry, instead of being subject to codification in regulations.
Is the taste test requirement ultra vires the VQAO's authority?
[34] This challenge is a broader challenge to the taste test requirement than the one I have just dealt with. The point that I have just made about deference continues to apply.
[35] In its factum, the Applicant took the position that the taste test requirement was not necessary to accomplish the objectives of the Act and that it involved a process that was unduly subjective. As such it could result in consequences that were unfair and potentially antithetical to the purposes of the Act. In oral submissions, this argument was reframed and the Applicant submitted that the taste test was incapable of furthering the objectives of the Act. [page627]
[36] As noted above, in West Fraser the Supreme Court of Canada recently confirmed that reasonableness is the standard of review when considering a challenge asserting that the regulation or rule in question was beyond the scope of the regulator's delegated authority under its enabling statute. Based on this standard, the taste testing rule can only be set aside by this court if it "is one no reasonable body informed by [the relevant] factors could have [enacted]" (Green v. Law Society of Manitoba, [2017] 1 S.C.R. 360, [2017] S.C.J. No. 20, 2017 SCC 20, at para. 20 (citations omitted)).
[37] The Applicant relies on the evidence of John Szabo in support of its argument that the taste test or sensory evaluation is incapable of furthering the objectives of the Act. Mr. Szabo was the first Canadian to pass the final examination of the Court of Master Sommeliers. He is also a wine writer, author, wine industry consultant, wine educator, speaker and professional wine judge. According to the Applicant, Mr. Szabo's evidence establishes the following:
(1) A sensory evaluation is not required to meet the standards set out in the Quality Rules.
(2) There is no universally accepted, standard analytical definition of winemaking flaws.
(3) Minimal quality standards can be assessed more reliably and accurately by chemical analysis than by sensory evaluation. There cannot yet be any defined characteristics "typically associated" with a young wine region like Ontario, especially one that permits such a wide variety of grapes.
(4) Tasting panels are not capable of measuring the potentially noxious and harmful substances that occasionally find their way into wine, which are a sub-threshold of sensory perception.
(5) Tasters who are trained to screen for quality or character are still operating from a subjective platform as sensory evaluation hinges on interpretation of an expected type or character. There are no published definitions of what is the appropriate "character" of a permitted grape and wine type in each of the growing regions and sub-regions and it is unreasonable to expect a wine producer to aim for a standard that does not exist.
(6) The term "quality" is impossible to define and is necessarily subjective. Even wine judges do not always agree on quality, even when trained to evaluate the same quality standards. "Quality is in the eye of the beholder." [page628]
[38] The Applicant also argues the sensory evaluation requirement interferes with the VQAO's mandate. Specifically, the VQAO wants wines with distinct geographic origins, yet it penalizes those that taste of local soils, preventing innovation and evolution. Furthermore, lack of approval by a tasting panel can affect the viability of a wine manufacturer's business. The Applicant is a case in point. Its ability to sell its wine has been limited by the fact that some of its wine passed the laboratory analysis, but none of it passed a taste test within a consecutive 18-month period.
[39] Mr. Szabo was cross-examined on his affidavit. In his cross-examination Mr. Szabo agreed that he had to identify wine by taste in order to be granted his credential as a Master Sommelier and that the Court of Master Sommeliers has a tasting method that is recognized as an authoritative method for tasting wine. He also agreed that a skilled taster, given the right pre-conditions and enough experience, should be able to reach consistent conclusions fairly regularly on the question of whether a wine is faulty or not. Similarly, he acknowledged that properly trained tasters like himself have had success in identifying the grape varietals in a wine and what methods were used to produce the wine. He agreed that there were a family of characteristics associated with icewine that on tasting would lead a skilled taster to believe that it had been manufactured in the way that icewines are manufactured. He agreed that there is a set of objective factors in wine that a large sample of experts agree upon to define quality and that "the high degree of difficulty of tasting with objectivity, accuracy and consistency doesn't mean that it can't be done, but rather that most people can't do it". He stated that he does not quarrel with the methodology used to conduct the taste tests and he acknowledged that he had previously written that "abolishing the tasting panel would open the door for 'poor quality' wines to reach the market under the VQA seal".
[40] When Mr. Szabo was cross-examined on his opinion that a chemical analysis would be superior to a taste test for determining the quality of wines, he agreed that "chemical analysis might lead to a failure of a wine that a broad range of experts would say is an excellent wine" due to the presence of "compounds that can't be tasted or smelled". He further agreed that "at least for certain things, wine tasters can do a better job than a chemical analysis". While he expressed a concern about consistency, he acknowledged that "a well-trained taster will get there most of the time". When Mr. Szabo was retained by an insurance company as an expert to authenticate damaged wine in relation to a claim, he did not conduct any chemical analysis before giving his opinion. [page629]
[41] The Approval Rules describe how the VQAO evaluates an application to use a reserved term for a wine. These include passing a taste test. Under the Rules, taste tests are conducted by a Tasting Panel composed of five persons who have passed a written and practical test conducted by the Liquor Control Board of Ontario ("LCBO"). The VQAO does not administer its own Tasting Panel. Instead it contracts with the LCBO to do so. All members of the Tasting Panel sample the wine without any knowledge of the brand or the manufacturer. The conditions of tasting are always uniform to ensure consistency of results. The grading system used is based on the International Organization of Vine and Wine standards and includes considerations of appearance, colour, aroma and bouquet, taste and harmony of the wine. The tasting panel also detects common faults in the samples. If a wine fails the initial tasting panel, a second bottle is opened. It is only if the second bottle also fails that the wine will be deemed to fail the tasting panel. If that occurs, an applicant may resubmit the wine for evaluation by a tasting panel, where the wine is tasted again (twice if necessary). Resubmission is permitted twice. If the wine fails three times, the applicant may request a tasting before an independent appeal panel. Thus, a manufacturer will have up to seven chances to pass a tasting panel. If the wine passes the tasting panel on any one of those instances, the wine will be deemed to pass.
[42] Tasting panels have been a feature of the VQAO system since the time it was a voluntary organization. The VQAO's unchallenged expert evidence is that many wine producing countries use a tasting panel to determine the right to use geographic indicators. These include the European Union, New Zealand and South Africa.
[43] In the face of this evidence, it cannot be said that the VQAO rule requiring that a wine pass a taste test in order to be approved to use a VQAO reserved term is a rule that no reasonable and informed body in the shoes of the VQAO would have enacted. Nor can it be said that taste tests are incapable of furthering the purpose of the Act, which is to "establish an appellation of origin system . . . that will allow consumers to identify such wines on the basis of the areas where the grapes are grown and the methods used in making the wine". The use of tasting panels ensures that the wines using an appellation's terms display the sensory characteristics associated with that appellation. With respect to icewine, the uncontradicted evidence from the respondents is that it is only through tasting panels that one can detect if the traditional methods the Quality Rules require have been used to produce that wine. It is possible to manufacture [page630] a product with a similar chemical profile to authentic icewine using other methods. These products would pass a chemical analysis test, but would not have the distinctive sensory profile of wines made according to the traditional method.
[44] Thus, I reject the submission that the taste test component of the Approval Rule is ultra vires the VQAO's authority.
The By-Law Provision Respecting Membership
[45] Section 6(2) of the Act provides that a wine authority may only apply to the VQAO for approval to use the terms, descriptions and designations if the manufacturer is a member of VQAO. The Act does not define who may be a member, but does require that the "wine authority" as defined in the Act be "a not-for-profit corporation without share capital incorporated under the laws of Ontario or Canada that operates in Ontario". VQAO was incorporated under the Corporations Act, s. 129(1)(a).
[46] Pursuant to its authority under the Corporations Act, the VQAO passed General By-Law No. 1, s. 7.4.6 of which provides as follows:
7.4.6 Lapse of Membership A membership in VQA Ontario shall be terminated if the member has not obtained an authorization to use the terms, descriptions or designations for VQA wines during any consecutive period of 18 months.
[47] Section 7.7(b) of the same by-law provides that a member whose membership has lapsed pursuant to s. 7.4.6 may reapply for membership after paying the fees for the lapsed period. If that member does not obtain an authorization to use the designated terms for its wines within 60 days of reinstatement its membership shall lapse again.
[48] According to the Applicant, the VQAO exceeded its authority under the Act when it enacted s. 7.4.6 of the by-law. This section does not further the policy and objectives of the Act, and is therefore ultra vires the authority granted to the VQAO under the Act.
[49] The respondents submit that since the by-law was made under the Corporations Act,it cannot be challenged by way of judicial review. If the by-law can be challenged by way of judicial review, the standard of review that this court must apply is reasonableness. Applying this standard, the by-law is within the range of reasonable options that a specialized regulator may choose to further the purposes of the Act.
[50] I do not propose to deal with the jurisdictional argument since I accept that the appropriate standard of review is reasonableness and the by-law was a reasonable exercise of the VQAO's authority. [page631]
[51] A primary object of the Act is to ensure that consumers associate the VQAO terms, descriptions and designations with quality. If a winery is not producing quality wines capable of meeting the standards set out in the regulatory scheme under the Act, it is reasonable to exclude that winery from the scheme until it is capable of producing wines that meet that standard.
[52] With respect to the period chosen for determining whether a winery is still capable of producing quality wines, 18 months is within the range of reasonable options available to a specialized expert regulator such as the VQAO.
The New Regulation
[53] On July 1, 2015, after the Applicant's acquittal in the Ontario Court of Justice, s. 7(1) of O. Reg. 405/00 (which sets out when the VQAO can exercise its discretion to suspend or revoke an approval for wine) was amended to add clause (d) (the "New Regulation"). The New Regulation reads as follows:
7(1) The wine authority may suspend or revoke an approval for a wine if,
(d) the manufacturer to whom the approval has been issued ceases to be a member of the wine authority.
[54] The Applicant submits that the New Regulation is ultra vires theauthority of the Lieutenant Governor in Council because, when one looks to the purposes of the Act, which are to establish and maintain an appellation of origin system and to allow consumers to identify wines that have been approved under the system, the New Regulation is irrelevant, extraneous or completely unrelated to those purposes. The purpose of the Act and the regulatory scheme is to focus on wine, not on the manufacturer. The New Regulation is clearly not about wine, or even the quality of wine, since it affects wines that have already been approved by the VQAO. According to the Applicant, the New Regulation was simply the VQAO's response to the Ontario Court decision and, as such, its sole aim was to thwart that decision.
[55] The Applicant also takes issue with the way that VQAO chose to exercise its discretion under the New Regulation. The New Regulation is discretionary, not mandatory. When the VQAO advised the Applicant that its approvals would be revoked, it told the Applicant those revocations would take effect unless the Applicant could satisfy the VQAO that "compelling reasons" existed to support the maintenance of the approvals. When the Applicant failed to provide such reasons the VQAO revoked the approvals. According to the Applicant, this was an unreasonable [page632] exercise of discretion since nothing in the New Regulation requires a manufacturer to provide "compelling reasons" to support the maintenance of VQAO wine approvals.
[56] To the extent that the Applicant is alleging that the VQAO improperly exercised its discretion under the New Regulation, it is not an issue it can raise on this judicial review. Section 6(4) of the Act provides a manufacturer with the right to a hearing; s. 8 of O. Reg. 405/00 designates the Licence Appeal Tribunal (the "LAT") as the tribunal to hold the hearing. The Applicant did not exercise its right to appeal to the LAT and, having failed to do so, cannot now seek judicial review of the VQAO's previously unchallenged exercise of its discretion.
[57] With respect to its submission that the New Regulation is ultra vires, all parties agree that the Supreme Court of Canada's decision in Katz Group Canada Inc. v. Ontario (Health and Long-Term Care), [2013] 3 S.C.R. 810, [2013] S.C.J. No. 64, 2013 SCC 64 sets out the principles that must govern a judicial review on this basis. In particular:
(a) A successful challenge to the vires of a regulation requires that it be shown to be inconsistent with the objective of the enabling statute or the scope of the statutory mandate.
(b) The regulation must be "irrelevant""extraneous" or "completely unrelated" to the statutory purpose to be found to be ultra vires on the basis of inconsistency with statutory purpose.
(c) The regulation is presumed to be valid and the onus is on the Applicant to demonstrate that it is not.
(d) This presumption of validity favours an interpretive approach that reconciles the regulation with its enabling statute so that, where possible, the regulation is construed in a manner which renders it intra vires.
(e) Both the challenged regulation and the enabling statute should be interpreted using a "broad and purposive approach".
(f) Neither the policy merits of the regulation, nor the question of whether it will actually succeed at achieving the statutory objectives are relevant considerations.
(g) The motives for enacting the regulation are irrelevant. Cabinet need not justify its reasoning.
[58] One of the bases upon which the Applicant is attacking the New Regulation amounts to an attack on Cabinet's motive for [page633] enacting the regulation. Even if the New Regulation was enacted in response to the Ontario Court decision acquitting the Applicant, there is nothing improper about Cabinet responding to judicial decisions interpreting existing law. More importantly, as already noted, Katz,at para. 27, has reiterated that the motive behind the New Regulation is an irrelevant consideration.
[59] The Applicant's suggestion that the New Regulation is "irrelevant""extraneous" or "completely unrelated" to the purpose of the Act because the Act and the regulatory scheme are directed at wine, not wine manufacturers, ignores one of the fundamental components of the scheme, which is set out at s. 6(2) of the Act. Section 6(2) provides that only a member may apply for a wine approval. In the absence of the New Regulation, a winery would be required to be a member in order to apply to use the regulated terms, but would not have to remain a member to actually use the terms.
[60] Membership plays an important part in allowing the VQAO to fulfill its function. Members pay fees that fund the VQAO's operations. If a member refuses to cooperate with the VQAO when it seeks to inspect or audit, the VQAO has a powerful administrative sanction available: revoke their membership. This sanction becomes less compelling if non-members may continue to sell preapproved wines using VQAO designations.
[61] The VQAO retains the ability to obtain a search warrant to enforce its inspection powers against non-members and the ability to prosecute a non-member if it fails to co-operate with an inspection, but these remedies are considerably more costly and time-consuming than the administrative sanction of membership revocation.
[62] Non-members who are allowed to use VQAO reserved terms are benefiting from the reputation of a scheme that they do not subsidize. This is unfair to other members. It could also mislead consumers into believing that there is an association between the VQAO and the wine manufacturer who is, in fact, no longer a member of the VQAO.
[63] In the face of these considerations, which are all reasonable, the Applicant cannot discharge the burden that it has to show that the New Regulation is "irrelevant""extraneous" or "completely unrelated" to the purpose of the Act.
[64] The Applicant complains that it still has VQAO approved wine that it has not sold. The Applicant is still entitled to sell this wine; it just cannot continue to do so using any of the VQAO regulated terms. Furthermore, under the By-Law that resulted in the Applicant's termination, the Applicant had a total of 30 months to sell its approved VQAO inventory after it stopped [page634] producing VQAO quality wine. The By-Law allows a winery to remain a member for 18 months in the absence of new wine approvals and allows a winery to continue to use the regulated terms to sell an approved wine for up to one year after its membership is terminated.
The Doctrine of Paramountcy
[65] The Applicant asked this court to grant certain relief based on the doctrine of paramountcy -- a doctrine that recognizes that where federal and provincial laws come into conflict, the federal law prevails.
[66] Conflicts triggering the federal paramountcy doctrine will arise in one of two situations:
(a) there is an operational conflict that arises because it is impossible to comply with both laws; or
(b) although it is possible to comply with both laws, the operation of the provincial law frustrates the purpose of the federal enactment (Alberta (Attorney General) v. Moloney, [2015] 3 S.C.R. 327, [2015] S.C.J. No. 51, 2015 SCC 51, at para. 18).
[67] There are several principles that a court must keep in mind when considering an argument based on the doctrine of paramountcy:
(i) the burden of proof to establish a conflict between federal and provincial legislation rests on the party alleging such a conflict. Discharging that burden is not an easy task (ibid., at para. 27);
(ii) the approach of the courts is to embrace cooperative federalism and recognize concurrent federal and provincial jurisdiction in their respective domains. Paramountcy is to be applied with restraint, under the presumption that Parliament intends its laws to co-exist with provincial law (ibid.);
(iii) the federal Parliament legislating in respect of a matter does not lead to a presumption that it intended to rule out provincial legislation in respect of the same subject (Canadian Western Bank v. Alberta,[2007] 2 S.C.R. 3, [2007] S.C.J. No. 22, 2007 SCC 22, at para. 74).
[68] Unless there is a genuine inconsistency, the court will favour an interpretation of the federal legislation that allows the concurrent operation of both laws (Moloney, at para. 27). Where [page635] the court can interpret a federal statute so as not to interfere with a provincial statute that interpretation is to be preferred (Western Bank, at para. 75).
[69] For the reasons that follow, I find that the Applicant's submissions regarding the doctrine of paramountcy have no merit.
The Trade-Marks Act
[70] In September of 2002, the Applicant applied for the trade-mark "royal demaria 'canada's icewine specialists' & design" (the "Trademark"). Initially, the VQAO opposed the application. However, in 2005 it withdrew its opposition and advised the Applicant in writing that it would continue to enforce its regulatory scheme regarding the use of regulated terms regardless of whether the Applicant was granted the Trademark. In particular, the Applicant would be permitted to use the Trademark on VQAO approved icewines, but not on any other wines it manufactured. On May 24, 2005, the Trademark was granted to the Applicant.
[71] Since the Applicant is no longer a member of the VQAO and all the approvals on its wines have been revoked, it can no longer use its Trademark.
[72] The Applicant submits that the VQAO's position on this issue is untenable, as it directly conflicts with two pieces of federal legislation -- the Trade-marks Act and the CAP Act.
[73] The Applicant submits that s. 19 of the Trade-Marks Act grants it the exclusive right to use its registered trade-mark throughout Canada, including the use of the term "icewine". Further, s. 45(3) of the Trade-Marks Act provides that if a trade-mark is not used over a specified period of time, the registration of the trade-mark can be expunged. On the other hand, the VQAO, under the authority it has been granted under the Act, prohibits the Applicant from using its trade-mark. According to the Applicant, this creates an operational conflict between the two Acts. The federal Act grants it a right, which it must use or lose; the provincial legislation prohibits it from exercising that right.
[74] The Applicant also argues that the VQAO's actions under the provincial VQAO scheme frustrate the purpose of the federal Trade-Marks Act -- namely, to protect the rights acquired through trade-mark registration and to ensure that those rights are used on a continuing basis.
[75] In OPSEU v. Ontario (Attorney General), [1987] 2 S.C.R. 2, [1987] S.C.J. No. 48, at paras. 19-20, the Supreme Court of Canada confirmed that the Trade-Marks Act serves two purposes: (i) to protect consumers; and (ii) to facilitate the effective branding of goods. Accomplishing these two purposes does not require [page636] that the trade-mark owner have the right to use the trade-mark in any context without any constraint.
[76] As recently explained by the Human Rights Tribunal in Cardinal v. Rogers Communications Inc., [2017] O.H.R.T.D. No. 574, 2017 HRTO 570, the Trade-Marks Act does not provide a positive right to use a trade-mark. The fact that a trade-mark user is required to use a trade-mark to maintain its registration does not mean that the holder has a positive right to use the trade-mark in the face of other legislation that would prohibit that use. The Trade-Marks Act grants exclusivity of use, not the right to use itself.
[77] A similar approach was taken by the British Columbia Supreme Court in Benson & Hedges (Canada) Ltd. v. British Columbia (Attorney General), [1972] B.C.J. No. 417, 27 D.L.R. (3d) 257 (S.C.), where it considered provincial legislation restricting the advertising of liquor. One of the arguments made was that the legislation improperly restricted Benson and Hedges' use of its registered trade-marks. The argument was rejected, with the court concluding that the rights arising from a trade-mark cannot be used in contravention of validly enacted provincial laws that imposes restrictions on the public in general.
[78] The only authority produced by the Applicant to the contrary is a dissenting opinion in the Manitoba Court of Appeal where the dissenting judge makes passing comments on paramountcy when considering the Trade-Marks Act and provincial legislation regulating business names (Reference re: Constitution Act, 1867, ss. 91,92, [1991] M.J. No. 190, 80 D.L.R. (4th) 431 (C.A.)).
[79] There is no operational conflict between the federal and provincial laws in this matter. It is possible to comply both with the VQAO legislative and regulatory scheme and with the Trade-Marks Act. If a manufacturer chooses to register a term under the Trade-Marks Act that is also subject to quality control standards under the Quality Rules, it is possible to comply with both schemes by adhering to the quality control standards under the Act. Further, nothing in the Trade-Marks Act suggests that wine manufacturers should be free from the requirement to comply with provincial quality control standards simply because they choose to register a term under that act that is also subject to provincial regulation.
[80] Both the Act and the Trade-Marks Act have consumer protection purposes that are consistent and compatible with each other. The Act furthers the consumer protection purpose of the Trade-Marks Act by ensuring that when wine manufacturers use certain terms that are also subject to provincial regulation, they [page637] are meeting quality standards. This complements, rather than frustrates, the purpose of the federal legislation.
The [Canada Agricultural Products Act](https://www.canlii.org/en/ca/laws/stat/rsc-1985-c-20-4th-supp/latest/rsc-1985-c-20-4th-supp.html)
[81] The CAP Act regulates the marketing and possession of an agricultural product for import, export or interprovincial trade. Under the Icewine Regulations, SOR/2014-10 (the "CAP Reg"), there are several provisions that are relevant to icewine. They include the following:
Only wine that is made exclusively from grapes naturally frozen on the vine is icewine, ice wine or ice-wine.
It is prohibited for any person to label a product in Canada with the designation icewine, ice wine or ice-wine unless the product meets the standard set out in section 2 and an entity acting under the authority of the law of the province in which the product was made has determined that the product is wine that was made exclusively from grapes naturally frozen on the vine.
[82] The Applicant argues that the VQAO's prohibition against it using the term "icewine" on its labels frustrates the purpose of the CAP Act. It conceded that there was not an operational conflict between the CAP Act and the Act.
[83] There is no merit to the Applicant's submission. The CAP Act's purpose of "provid[ing] for national standards and grades of agricultural products" is harmonious with the Act's consumer protection purposes. The CAP Act sets out a minimum standard, which specifically contemplates the involvement of a provincial authority such as the VQAO.
[84] The Applicant's argument on this point is the same as the one that the Supreme Court rejected in Rothmans, Benson & Hedges Inc. v. Saskatchewan, [2005] 1 S.C.R. 188, [2005] S.C.J. No. 1, 2005 SCC 13. In Rothmans,a tobacco company argued that a provincial tobacco labelling law frustrated the purpose of a federal tobacco labelling law, by imposing additional requirements. The Supreme Court disagreed, finding that the federal and provincial laws served the same purpose: public health. The same is true for the Act and the CAP Act. They both serve the same purpose: consumer protection.
[85] The Applicant also submitted in oral argument that the VQAO's actions in regulating the Applicant's use of reserved terms such as "icewine" was unconstitutional because it was not limited to the intra-provincial use of these terms. According to the Applicant, the VQAO also purported to control labelling in the inter-provincial context and in the context of importing and exporting. The respondent VQAO made it clear that it did not have and did not seek to exercise jurisdiction beyond the intra-provincial context. Sometimes manufacturers were unable to sell [page638] their wines in other countries using VQAO reserved terms, but that was because other countries have imposed requirements restricting the use of these terms subject to the approval of the wine authority in which the wine is produced. Thus, any extra-provincial requirements for Ontario winemakers to comply with the VQAO are pursuant to the authority of the other countries and not at the behest of the VQAO, which remains within its jurisdiction.
Conclusion
[86] For these reasons the application is dismissed. The parties may make written submissions on the question of costs. The Applicant shall file its submissions by January 10, 2019 and the respondents shall file their responses ten days after receiving the Applicant's submissions.
Application dismissed.
End of Document