Pong Marketing and Promotions Inc. v. Ontario Media Development Corporation
[Indexed as: Pong Marketing and Promotions Inc. v. Ontario Media Development Corp.]
Ontario Reports
Court of Appeal for Ontario
Laskin, B.W. Miller and Paciocco JJ.A.
June 15, 2018
142 O.R. (3d) 542 | 2018 ONCA 555
Case Summary
Statutes — Interpretation — Ontario tax credit available to developers for digital products whose "primary purpose is to educate, inform or entertain the user" — Applicant licensing its digital sweepstakes games to third parties who used games to promote sales of phone cards — Respondent finding that applicant was ineligible for tax credit as primary purpose of games was to promote sale of phone cards and not to educate, inform or entertain user — Divisional Court finding that respondent's decision was unreasonable as it wrongly focused on applicant's motivation for developing product rather than on user's purpose in playing game — Respondent's appeal allowed — Divisional Court erring in finding that respondent's interpretation was not reasonable — Divisional Court also erring in finding in alternative that residual presumption in favour of taxpayer applied if respondent's interpretation was reasonable.
The applicant licensed its digital sweepstakes games to third parties who used the games to promote the sale of phone cards. It applied for a certificate of eligibility for the Ontario Interactive Digital Media Tax Credit. Section 34 of O. Reg. 37/09 under the Taxation Act, 2007, S.O. 2007, c. 11, Sch. A defines "interactive digital media product" as "a combination of one or more application files and one or more data files, all in a digital format, that are integrated and that are intended to be operated together and that have the following characteristics when they are being operated: 1. Their primary purpose is to educate, inform or entertain the user . . . ". The respondent found that the applicant was not eligible for the tax credit as the primary purpose of the games was to promote the sale of phone cards, and not to educate, inform or entertain the user. The applicant's application for judicial review of that decision was allowed. The majority of the Divisional Court found that the respondent's interpretation was unreasonable because it wrongly equated the applicant's motivation for developing the products with the products' purpose, instead of the players' purpose in playing the games. It noted, in the alternative, that if the respondent's interpretation was reasonable, it would have applied a residual presumption in favour of the taxpayer. The respondent appealed.
Held, the appeal should be allowed.
Per B.W. Miller J.A.: The majority of the Divisional Court erred by concluding that the only reasonable interpretation available was the one it identified. It was reasonable for the respondent to have regard to what the intended purpose of the product was when it was being developed. The Regulation directs that the respondent ascertain the primary purpose of a product by determining what functions the digital files perform when they are being operated. Nothing in the text directs that the user's purposes in playing the games must take priority over any other purpose the products serve. The respondent's role is not only to determine the meaning and application of relatively open-ended criteria such as "educate, inform and entertain", but also to determine which of a product's potentially several purposes are primary. These are all qualitative assessments. They fall within the expertise of the respondent and are to be afforded deference. The respondent's interpretation was reasonable.
The majority of the Divisional Court also erred in finding, in the alternative, that the residual presumption in favour of the taxpayer would apply if the respondent's decision was reasonable. A rule that legislative indeterminacy must always be resolved by choosing the interpretation advanced by the taxpayer is inconsistent with the core function of administrative decision-makers of interpreting their home statutes in a manner that advances statutory objectives. Were the residual presumption to be applied in this case, it would eliminate much of the authority conferred on the respondent by statute, which would undermine the statutory scheme and be inconsistent with the rationale for and nature of a reasonableness standard of review.
Per Laskin J.A. (concurring): Miller J.A.'s conclusions on the reasonableness of the respondent's decision and the applicability of the residual presumption in favour of the taxpayer are appropriate, but the manner in which Miller J.A. arrived at his conclusion on the applicability of the presumption is not. It was unnecessary and unfair to have embarked on an analysis of legislative indeterminacy. It was unfair because that issue was not relied on by the Divisional Court or referred to by either party, and neither party was given an opportunity to address it. It was unnecessary because the applicability of the residual presumption could be dealt with quite simply. If there was only one reasonable interpretation of "primary purpose" -- that it must be considered from the perspective of the purpose of the product's developer -- then the residual presumption could not apply. If the Regulation gives rise to two reasonable interpretations -- the majority of the Divisional Court's interpretation and the respondent's interpretation -- to apply the residual presumption is incompatible with reasonableness review.
Per Paciocco J.A. (concurring): Miller J.A.'s reasons with respect to the reasonableness of the respondent's interpretation of s. 34 of the Regulation are agreed with, as is the conclusion that the Divisional Court erred in relying on the residual presumption in favour of the taxpayer. Applying the residual presumption to overcome a reasonable interpretation arrived at by an administrative decision-maker is inconsistent with the reasonableness standard of review. It was unnecessary for Miller J.A. to address the different types of indeterminacy in legislative language.
APPEAL
From the order of the Divisional Court (Marrocco A.C.J. and Nordheimer and Sachs JJ. dissenting) (2017), 136 O.R. (3d) 434, [2017] O.J. No. 348, 2017 ONSC 434 (Div. Ct.) allowing an application for judicial review of a decision of the Ontario Media Development Corporation dated December 11, 2015.
Counsel:
Lisa La Horey and Farzin Yousefian, for appellant.
Scott C. Hutchison and Kenneth Grad, for respondent.
REASONS FOR JUDGMENT
B.W. MILLER J.A.
A. Overview
[1] The Ontario Media Development Corporation ("OMDC") is an agency of Ontario's Ministry of Tourism, Culture and Sport. Its purpose is to promote innovation, investment and employment in the cultural media industry in Ontario. Further to that objective, it jointly administers, alongside the Canada Revenue Agency, the Ontario Interactive Digital Media Tax Credit ("DMTC"), a tax credit provided to developers for digital products whose primary purpose is to "educate, inform or entertain the user".
[2] Pong Marketing and Promotions Inc. applied to the OMDC for a certificate of eligibility for a DMTC of approximately $2 million for its development of 15 digital "sweepstakes" games, which it licensed to third party retailers. The OMDC denied Pong's application on the basis that the games were not developed for the primary purpose of educating, informing or entertaining the user, but rather were developed for promoting the sale of long-distance phone cards and related products and services.
[3] Pong's application for judicial review was successful. A majority of the Divisional Court agreed that the OMDC's decision was inconsistent with the plain meaning of the regulation governing eligibility for the DMTC, and was therefore unreasonable. It remitted the matter back to the OMDC for reconsideration.
[4] The OMDC appealed to this court. For the reasons that follow, I would allow the appeal and restore the original decision of the OMDC.
B. Legislative Scheme and Decision of the OMDC
[5] The OMDC is a Crown agency, and its objects are "to stimulate employment and investment in Ontario" by supporting the "cultural media industry", defined in s. 1 of Ontario Media Development Corporation, O. Reg. 672/00 (the "OMDC Regulation"), as an industry whose main business includes, inter alia,
. . . the development, production, distribution, marketing, sale or exhibition of audio-visual products with substantive cultural content, including film and television productions, sound recording products, and interactive digital media products.
(Emphasis added)
[6] One of the ways in which the OMDC is to support the cultural media industry, per s. 4(e) of the OMDC Regulation, is by administering provincial tax credits such as the DMTC. The nature of the DMTC is summarized in the majority reasons of the Divisional Court, at para. 8:
The Ontario Interactive Digital Media Tax Credit (DMTC) is a refundable tax credit, introduced in Ontario in 1998 and available to qualifying corporations for qualifying expenditures related to the creation, marketing and distribution of eligible interactive digital media products. The amount of the tax credit is based on a percentage of development labour expenditures and certain marketing and distribution costs incurred by a corporation that has developed an interactive digital media product for sale or license. The DMTC is not a grant. Qualifying corporations receive a payment in the amount of the tax credit after they have developed the interactive digital media product.
[7] Eligible interactive digital media products are defined under a different regulation, General, O. Reg. 37/09, under the Taxation Act, 2007, S.O. 2007, c. 11, Sch. A (the "Regulation"). This appeal largely turns on the interpretation of that definition, set out under s. 34(1) of the Regulation, which at the time of Pong's application read as follows:
34(1) In this section,
"interactive digital media product" means a combination of one or more application files and one or more data files, all in a digital format, that are integrated and are intended to be operated together and that have the following characteristics when they are being operated:
If a qualifying labour expenditure is incurred in respect of the product before April 24, 2015, their primary purpose is to educate, inform or entertain the user.
They achieve their primary purpose by presenting information in at least two of the following forms:
i. text,
ii. sound,
iii. images.
They are intended to be used by individuals.
By interacting with them, the user can choose what information is to be presented and the form and sequence in which it is to be presented.
(Emphasis added)
[8] The dispute over the eligibility of Pong's products centred on whether the products had the requisite characteristics when operated: specifically, that "their primary purpose is to educate, inform or entertain the user". The other criteria from s. 34(1) were not in dispute.
[9] Although Pong licenses a range of products throughout North America, the application to the OMDC relates to a particular suite of 15 products licensed to clients in Ontario. Pong characterizes these products as "sweepstakes" games. For the most part, they function as games of chance, like video slot machines. Some also incorporate a modest skill component, such as stopping an arrow indicator in the middle of a horizontal bar.
[10] Pong's business model with respect to these products is to generate revenue by licensing them to third party retailers (including owners of cafés, bars and restaurants), which use the games to promote sales of pre-paid long distance phone cards. Purchasers of the phone cards -- or of additional calling time on existing cards -- obtain points that can be used to play the games. Playing the games can generate additional sweepstake "win" points. And the "win" points can be redeemed for additional phone card credit. Pursuant to its licensing agreements with the retailers, Pong is paid a percentage from the sales of phone cards. Pong markets the products to retailers as a means for them to differentiate their phone card products from those of their competitors.
[11] In April 2014, Pong applied for a certificate of eligibility for the DMTC from the OMDC. The application was provisionally denied on July 29, 2015, on the basis that the OMDC determined that the primary purpose of the games was to promote the sale of phone cards, and not to educate, inform or entertain the user. Prior to issuing a formal letter of ineligibility, the OMDC invited Pong to file further documentation to support its claim that the primary purpose of the products was to entertain. Pong did so through submissions dated September 8, 2015 and September 24, 2015. On October 23, 2015, the OMDC advised that, having reviewed the supplementary submissions, it would not be changing its initial assessment. It provided Pong with a final opportunity to provide additional documentation to support its claim. It received further written arguments from Pong's counsel on November 3, 2015.
[12] The OMDC re-reviewed the application, but again its decision remained unchanged. In a letter dated November 30, 2015, it reiterated its initial conclusion: "the primary purpose of the products was promotional as the games are sweepstakes promotions for long distance phone cards, and as such are not eligible for support under [the DMTC]". The letter explained the OMDC's methodology in coming to this decision, as it had set out in earlier correspondence with the respondent: "OMDC looks at why and how a product was developed as a key factor in determining the product's primary purpose, what audience or target market was it developed for, and who was the product marketed to, by reviewing all of the product's development and marketing documentation".
[13] In support of its conclusion that the primary purpose of the products was promotional, the OMDC quoted extensively from Pong's website and from promotional literature and licensing agreements supplied by Pong. These marketed the games to prospective licensees as a means to promote phone card sales. For example, Pong's template licensing agreement defines the "sweepstakes games" as "[a] means of promotion to aid in the sale of long distance calling cards and other related products and services". The Pong website positioned Pong as being "in the business of delivering a promotional sweepstakes system to enhance the sale of its pre-paid long distance phone time". Its stated rationale for the sweepstakes games was, at the relevant time, "to create consumer involvement with a brand or product and thus encourage consumer consumption of the product".
[14] The OMDC issued a formal letter of ineligibility on December 11, 2015, which stated that "[b]ased on our review of the documentation and copies of the Products submitted, we find the primary purpose of the Products is to promote the sale of phonecards and other related products and services".
[15] Pong brought an application for judicial review.
[16] The majority of the Divisional Court allowed the application, concluding that the decision of the OMDC was "inconsistent with the plain meaning of the wording of the [Regulation]" and was therefore unreasonable. The majority held that the OMDC's interpretation was unreasonable because it wrongly equated Pong's motivation for developing the products with the products' purpose, instead of the players' purpose in playing the games. It also noted that, in the alternative, if the OMDC's interpretation was reasonable it would have nonetheless applied a residual presumption in favour of the interpretation of the taxpayer, Pong. It remitted the matter back to the OMDC for reconsideration. Sachs J. dissented, arguing that the OMDC's decision was based on a reasonable interpretation of the Regulation and that the application for judicial review should be dismissed.
C. Issues
[17] There are two main issues raised in this appeal.
(1) Did the majority of the Divisional Court err in its interpretation of s. 34(1) of the Regulation -- specifically, in failing to adequately defer to the OMDC's interpretation?
(2) Did the majority of the Division Court err in finding in the alternative that the residual presumption in favour of taxpayers would apply and work in favour of the interpretation advanced by the respondent?
D. Analysis
(1) Standard of review to be applied by the Divisional Court
[18] The Divisional Court correctly identified the reasonableness standard as the appropriate standard of review to be applied to its review of the OMDC decision. The question of whether the primary purpose of the products is to educate, inform or entertain concerns the OMDC's interpretation of its home legislation. It is at the core of the OMDC's function, and falls within its specialized expertise: Venngo Inc. v. Ontario Media Development Corp., [2013] O.J. No. 961, 2013 ONSC 1036 (Div. Ct.), at para. 1.
[19] On review, the reasonableness standard entails that a decision can only be judged to be unreasonable if "there is no line of analysis within the given reasons that could reasonably lead the [decision-maker] from the evidence before it to the conclusion at which it arrived": Ryan v. Law Society of New Brunswick, [2003] 1 S.C.R. 247, [2003] S.C.J. No. 17, 2003 SCC 20, at para. 55. Reasonableness review requires the reviewing court to assess the reasons for the OMDC's decision and substantive decision together, to see whether an acceptable and defensible outcome has been reached. Reasonableness review is conducted in the knowledge that decision-making authority belongs to the OMDC. The court's role is limited to ensuring that the decision the OMDC makes is within the range of possible, acceptable decisions it was entitled to make: Dunsmuir v. New Brunswick, [2008] 1 S.C.R. 190, [2008] S.C.J. No. 9, 2008 SCC 9, at para. 47. As this court has said in the context of assessing reasonableness under the Ontario Review Board scheme, a reviewing court is not to make its own judgment on the question before the decision maker, and then use that judgment as the benchmark for assessing the reasonableness of the tribunal's decision: Carrick (Re) (2015), 128 O.R. (3d) 209, [2015] O.J. No. 6524, 2015 ONCA 866, at para. 26.
[20] Administrative law recognizes that an administrative decision-maker will often be confronted with multiple possible solutions or choices, all of which will be consistent with the applicable law that guides and limits the exercise of discretion. These types of choices are legally underdetermined, in that the law does not identify a single alternative. The ultimate choice, from among the permissible alternatives, rests with the decision-maker.
[21] That said, not every question of law faced by administrative decision-makers, even those questions to be reviewed on a reasonableness standard, will admit of multiple permissible options; sometimes, only one answer will be reasonable. This is particularly the case with comparatively technical questions of statutory interpretation. As the Supreme Court explained in McLean v. British Columbia (Securities Commission), [2013] 3 S.C.R. 895, [2013] S.C.J. No. 67, 2013 SCC 67, at para. 38:
It will not always be the case that a particular provision permits multiple reasonable interpretations. Where the ordinary tools of statutory interpretation lead to a single reasonable interpretation and the administrative decision maker adopts a different interpretation, its interpretation will necessarily be unreasonable -- no degree of deference can justify its acceptance; see, e.g., Dunsmuir, at para. 75; Mowat, at para. 34. In those cases, the "range of reasonable outcomes" (Canada (Citizenship and Immigration) v. Khosa, 2009 SCC 12, [2009] 1 S.C.R. 339, at para. 4) will necessarily be limited to a single reasonable interpretation -- and the administrative decision maker must adopt it.
[22] The presence of vague language in legislation often creates room for multiple reasonable interpretations. Sometimes statutes employ vague terms or standards with the intention that the meaning be fleshed out on a case-by-case basis by a specialized decision maker that has been given the authority to choose an interpretation that, in its discretion, best furthers its statutory mandate. As McLean directs, at para. 40, where the legislature charges an administrative decision maker with administering and applying its home statute "it is the decision maker, first and foremost, that has the discretion to resolve [any indeterminacy] by adopting any interpretation that the statutory language can reasonably bear. Judicial deference in such instances is itself a principle of modern statutory interpretation."
[23] It is important to emphasize the consequences of this approach. As the Supreme Court explained in McLean, at para. 40, "under reasonableness review, we defer to any reasonable interpretation adopted by an administrative decision maker, even if other reasonable interpretations may exist" (emphasis in original). It is not enough for a party seeking judicial review of a decision to establish that a competing interpretation is reasonable; the applicant's burden is to establish that the interpretation adopted by the administrative decision maker is unreasonable: McLean, at para. 41.
(2) The OMDC's interpretation of s. 34(1)
[24] Did the majority of the Divisional Court err, as the OMDC contends on appeal, in its application of the reasonableness standard, by concluding that the only reasonable interpretation available was the one it identified? In my view, it did.
[25] This court owes no deference to a decision of the Divisional Court on judicial review: Law Society of Upper Canada v. Abbott (2017), 139 O.R. (3d) 290, [2017] O.J. No. 3311, 2017 ONCA 525, 414 D.L.R. (4th) 545. On appeal, this court effectively steps into the shoes of the Divisional Court to determine whether the court identified the appropriate standard of review and applied it properly: Ottawa (City) Police Services v. Diafwila, [2016] O.J. No. 4331, 2016 ONCA 627, 352 O.A.C. 310, at para. 50.
[26] For the OMDC to succeed on this appeal, it does not need to establish that the majority's interpretation is unreasonable. Neither does it need to establish that the majority's interpretation is less compelling than its own. It merely needs to demonstrate that its own interpretation, and its own decision, were reasonable.
[27] The majority held that the OMDC's interpretation of s. 34 of the Regulation was not consistent with the text and was therefore unreasonable. The source of the error, the majority held, was that the OMDC considered Pong's reasons (or "motivation") for developing the games as the requisite "primary purpose", rather than the purpose of the users when playing the games. The majority drew a distinction between the purpose of the digital files themselves, which it said must be assessed from the perspective of the user (that is, the reason that the user sits down to play the games), and the purpose of the developer in creating the digital files, which might be a matter of selling phone cards or otherwise generating revenue.
[28] The majority argued that the priority of the users' intention in playing the games was compelled by the text of s. 34. It understood the phrase "while they are being operated" as requiring the purpose of the files to be assessed "when the user is playing it; not the moment when it is created or licensed". From this premise, the majority concluded that "[t]he definition requires the [OMDC] to look at the primary purpose of the game from the perspective of the player".
[29] The majority concluded that Pong's marketing material and licence agreement templates did not shed any light on the users' purpose in playing the games, but only evidenced Pong's motivation for developing the products. The OMDC therefore erred in considering these materials.
[30] The majority accordingly found the OMDC's decision to be inconsistent with "the plain meaning of the wording of the [Regulation]", which required "primary purpose" to be assessed as the purpose of a person playing the games. This plain meaning, according to the majority, directed a particular answer: the purpose of a person playing the games was to be entertained, therefore the purpose of the games was to entertain. In support of this conclusion, it further held that because "the legislature intended to use the tax credit to assist high-technology, knowledge-based industries", the OMDC's focus on the purpose of the developer in creating the games "undermines legislative intent".
[31] In dissent, Sachs J. argued that the OMDC's decision was based on a reasonable interpretation of the Regulation. It was reasonable, in her view, for the OMDC "to have regard to what the intended purpose of the product was when it was being developed. After all, it is the product's primary purpose that governs the analysis and it is reasonable to assume that a successfully developed product, when it is being operated, will fulfill the primary purpose for which it was developed." As the OMDC's "task was to determine the primary purpose of the product", it was entitled to deference in its determination that the primary purpose of the products while being operated was "to encourage users to buy phone cards, not to entertain".
[32] I agree, substantially for the reasons given by Sachs J., that the majority erred and the OMDC's interpretation of the Regulation was reasonable. In my view, the majority erred in finding that the text of s. 34(1) mandated the result it reached, to the exclusion of any other.
[33] The OMDC took the position, in common with Pong, that the "primary purpose" with which the Regulation is concerned is the primary purpose of the products themselves. The dispute is therefore over whether that purpose is better understood by reference to the designer's intention for the products, or by the users' intention in using them.
[34] An interactive digital media product is defined in the Regulation by reference to both its attributes ("a combination of one or more application files and one or more data files, all in a digital format, that are integrated and are intended to be operated together" (emphasis added)) and its functions ("and that have the following characteristics when they are being operated: . . . [t]heir primary purpose is to educate, inform or entertain the user").
[35] To satisfy the definition of interactive digital media product, the Regulation requires that the digital files be of the sort that are integrated and are "intended to be operated together" (emphasis added). To whose intention could this refer? Not the user's. The user knows nothing of data files and application files and whether or how they are to be combined and to what purpose. The user would have no reason to have any thoughts about the matter whatsoever. It is the developer that intends that the files will be combined and operated together. So when the text carries on, in the very next clause, to address the characteristics of the files that are manifest "when [the files] are being operated", it is not an irresistible conclusion that the perspective should suddenly shift in mid-sentence -- as the majority would have it -- from the perspective of the developer to the perspective of the user. The majority's reasoning that the phrase "when [the files] are being operated" can only mean that the relevant purpose is the user's purpose is thus, at the least, questionable.
[36] As the OMDC points out, all the Regulation directs is that the OMDC ascertain the primary purpose of a product by determining what functions the digital files perform when they are being operated. Nothing in this text directs that the user's purposes in playing the games must take priority over any other purpose the products serve.
[37] In assessing what it is the digital files do when they are being operated, the OMDC considered the documentation that it received from the respondent, including promotional materials and licensing agreements. These provided some evidence of the purposes of the digital files by providing evidence of what the developer intended for them to do, and how they were to do it, when they were being operated. As these materials clearly stated, the games were marketed to retailers not for the purpose of entertaining users as an end in itself, but to be used, when operated, as a means to a further, more ultimate end of inducing users to purchase phone cards from the retailers.
[38] Additionally, as part of its review, the OMDC viewed videos of the games in operation. It was not able to conclude from watching the games in operation that their purpose was to entertain, as that term was used in the context of a tax credit operated as part of a regulatory scheme intended to promote products with "substantive cultural content".
[39] As Sachs J. noted, the OMDC's role is not only to determine the meaning and application of relatively open-ended criteria such as "educate, inform, [and] entertain", but also to determine which of a product's potentially several purposes are primary. These are all qualitative assessments. They fall within the expertise of the OMDC, and are to be afforded deference.
[40] As stated above, to succeed on this appeal the OMDC does not need to establish that its interpretation of the Regulation is more plausible than the one identified by the majority. All it needs to do is establish that its interpretation was reasonable, and that its decision flowed from the evidence before it. It has done that, in my view. The majority of the Divisional Court erred in overturning the OMDC's decision and allowing Pong's application for judicial review.
(3) The residual presumption
[41] In the alternative, the majority held that even if it was wrong, and the Regulation was capable of more than one interpretation, it would have relied on an interpretive presumption that where there is more than one interpretation of a taxation statute that is reasonably available, the decision maker is required to adopt the interpretation most favourable to the taxpayer: see Québec (Communauté urbaine) v. Corp. Notre-Dame de Bon-Secours, [1994] 3 S.C.R. 3, [1994] S.C.J. No. 78, at pp. 14-16 S.C.R.; Placer Dome Canada Ltd. v. Ontario (Minister of Finance), [2006] 1 S.C.R. 715, [2006] S.C.J. No. 20, 2006 SCC 20.
[42] The OMDC, echoing the dissent of Sachs J., argues that this alternative argument is in error. It argues this approach cannot account for the deference that is to be accorded to the decisions of administrative decision makers. It argues that a rule that legislative indeterminacy must always be resolved by choosing the interpretation advanced by the taxpayer would be inconsistent with the core function of administrative decision-makers of interpreting their home statutes in a manner that advances statutory objectives.
[43] I agree with the OMDC's argument. To explain why, however, requires a brief account of different types of indeterminacy in legislative language, and how the presumption identified by the majority interacts differently with each.
Forms of indeterminacy
[44] Legislation is indeterminate (or more precisely, underdeterminate) to the extent that its meaning and application are not clear. It is a very common phenomenon: "In all fields of experience, not only that of rules, there is a limit, inherent in the nature of language, to the guidance which general language can provide.": H.L.A. Hart, The Concept of Law, 2nd ed. (Oxford: Oxford University Press, 1994), at p. 126. The most common forms of indeterminacy are ambiguity, vagueness, and generality, although lawyers and judges commonly refer to any instance of indeterminacy as "ambiguity": Stéphane Beaulac, Handbook on Statutory Interpretation -- General Methodology, Canadian Charter and International Law (Markham, Ont.: LexisNexis, 2008), at pp. 24-26. This assimilation of all indeterminacy to ambiguity is often harmless, but in some cases can be an impediment to sound legal reasoning. This appeal is one such case.
[45] Ambiguity can result from the use of words that have more than one meaning, or from unclear sentence structure. Where a word or a sentence is ambiguous, it unintentionally gives rise to (usually) two rival interpretations. For example, a requirement that a form be filed by 5:00 may mean 5:00 a.m. or 5:00 p.m. The interpretive problem is to ascertain, if possible, which of the two meanings is the one actually intended by the legislature. It is an either-or choice between two different pre-established alternatives. Ambiguity in this strict sense is resolved either by context (in easy cases) or by resort to principles of statutory interpretation: see Ralf Poscher, "Ambiguity and Vagueness in Legal Interpretation" in L.M. Solan and P.M. Tiersma, eds., Oxford Handbook of Language and Law (Oxford: Oxford University Press, 2012), at pp. 129-33; Lawrence Solum, "Vagueness and Ambiguity", Legal Theory Lexicon (June 28, 2015), online: http://solu.typepad.com/legaltheory/2015/06/legal-theory-lexicon-vagueness-ambiguity.html. Where it is still not possible to say with any confidence which meaning is the one intended, it makes sense to have a residual rule of statutory interpretation, such as the presumption at issue here, to resolve the ambiguity where other means are exhausted.
[46] Ambiguity in the strict sense -- with a stark choice between given interpretations -- is comparatively rare in legislative drafting. Although courts are often presented by the parties with a stark choice between rival interpretations, the cause of the disagreement between them is not necessarily ambiguity. The interpretive disagreement could stem from another cause, such as vagueness.
[47] Vagueness is a much more common type of legislative indeterminacy. A vague concept may have a settled core of meaning, but also admits borderline cases that may be difficult to classify. The difficulty with vague concepts is in deciding whether some apparent instance at the margins is inside or outside of the concept. The classic example: does the rule "no vehicles in the park" prohibit ambulances? An ambulance is a vehicle in the ordinary sense, but it might not be a vehicle in the sense given by this particular legal rule: H.L.A. Hart, "Positivism and the Separation of Law and Morals" (1958), 71 Harvard L. Rev. 593, at pp. 606-15 (1958); see, also, Fred Schauer, "A Critical Guide to Vehicles in the Park" (2008), 83 N.Y.U. L. Rev. 1109. A decision maker given statutory authority to determine the meaning of "vehicle" on a case-by-case basis is tasked with taking the given rule and making it more specific and concrete.
Administrative law and vagueness
[48] Concretizing vague criteria is a creative yet bounded role. It is different in kind from the task of resolving legislative ambiguity, which presents a closed choice between given alternatives. A decision maker that is required to interpret the vague criteria of a statute is required to make a decision that renders the statute more specific. The decision maker is constrained by the text of the statute and by the requirement that the interpretation further the objectives of the statute and be consistent with the rest of the law as a whole. In administrative law, legislation is often deliberately worded vaguely, the intention being that vaguely worded standards will be made more concrete by the decisions of specialized administrative actors, who are best placed to develop the relevant policies. These interpretive decisions will sometimes be of a nature that different decisions could reasonably have been made -- decisions equally consistent with the guidance and constraints provided by existing law.
[49] It is readily apparent that the residual presumption employed by the majority of the Divisional Court fits more easily with resolution of ambiguity than with specifications of vague criteria, particularly in the context of the policy-advancing function of an administrative body like the OMDC. Where an ambiguity cannot be resolved, it cannot be determined what the legislature intended. But where there is generality and vagueness in the context of an administrative scheme, the intention is for the decision maker to supply a specification.
[50] In this latter circumstance, there will often be no uniquely right answer to a question: only determinations, chosen from among equally acceptable alternatives, which could conceivably have been made differently. Where these determinations are reasonable, courts are not permitted to intervene.
[51] In this case, the Regulation requires the OMDC to determine a product's "primary purpose" as well as whether that purpose is to "educate, inform or entertain the user". As discussed above, these criteria require evaluations of what is primary, and specifications of what it means to educate, inform or entertain.
[52] Were the residual presumption to be applied in the manner suggested by Pong, it would eliminate much of the authority conveyed on the OMDC by statute. This would undermine the statutory scheme and be inconsistent with the rationale for and nature of a reasonableness standard of review. The majority of the Divisional Court accordingly erred in its conclusion that this presumption applied to support the interpretation advanced by Pong.
E. Disposition
[53] I would allow the appeal and reinstate the decision of the OMDC. I would award costs of the appeal to the OMDC in the agreed upon amount of $10,000, inclusive of taxes and disbursements. I would also reverse the costs award from the Divisional Court.
LASKIN J.A. (CONCURRING)
[54] Pong Marketing and Promotions Inc. applied to Ontario Media Development Corporation ("OMDC") for a tax credit for its 15 digital sweepstakes games under s. 34 of O. Reg. 37/09. Section 34 allows corporations to claim a tax credit for eligible products, which are defined by subsection (1) as those with a "primary purpose" that serves "to educate, inform or entertain the user". Eligibility for the tax credit is determined by OMDC.
[55] OMDC reviewed the material Pong had submitted concerning its games, and applied the Regulation to it. OMDC told Pong that it was of the preliminary view that the games did not qualify for the tax credit, but it offered Pong the opportunity to file further materials and submissions. Pong did so. After considering these additional materials and submissions, OMDC denied the tax credit. It held that the primary purpose of the games was to promote the sale of long distance calling cards, not to educate, inform or entertain users.
[56] Pong applied for judicial review to the Divisional Court. Everyone agrees that OMDC's decision is reviewable on a standard of reasonableness. The narrow debate in the Divisional Court was over the interpretation of the Regulation: specifically, whether the "primary purpose" of the games should be assessed by looking at Pong's purpose or motivation in developing the games, or by looking at the users' or players' purpose in playing the games.
[57] OMDC had decided that the primary purpose had to be looked at from Pong's perspective. The majority of the Divisional Court disagreed and held that OMDC's decision was unreasonable because, in the majority's view, the primary purpose of the games had to be assessed from the players' perspective. The majority remitted the matter to the OMDC to determine whether, from the players' perspective and not Pong's, the primary purpose of Pong's products is to entertain the user. Justice Sachs dissented, holding that OMDC's decision to look at Pong's purpose in developing its products was reasonable.
[58] The majority of the Divisional Court also considered Pong's submission that, where more than one interpretation of a taxation provision is available, a residual presumption dictates that the interpretation most favourable to the tax payer should be adopted. The majority found it unnecessary to resort to this residual presumption because OMDC's interpretation was not reasonable. However, the majority added that, if it was wrong and, in fact, there were two reasonable interpretations of the Regulation -- theirs and OMDC's -- then the residual presumption would apply to give Pong the tax credit it sought. Again, Sachs J. dissented. She noted, correctly, that a residual presumption in favour of the tax payer has only a limited role in interpreting tax legislation. In this case, she held that the presumption did not apply.
[59] My colleague, Miller J.A., has written reasons, which I have had an opportunity to read, in which he would overturn the decision of the Divisional Court and restore the decision of OMDC. On the main issue he concludes that OMDC's decision was reasonable. On the secondary issue he concludes that even if there is more than one reasonable interpretation of s. 34(1), the residual presumption in favour of the tax payer does not apply.
[60] I agree with my colleague's conclusions on both issues. I also entirely agree with his excellent analysis of the first and main issue, the reasonableness of OMDC's decision. But, though I agree with my colleague's conclusion on the secondary issue of the presumption, I do not agree with the way he has arrived at his conclusion.
[61] To reach his conclusion that the presumption does not apply, my colleague, on his own initiative, has embarked on an entirely new analysis of the inapplicability of the presumption. His analysis focuses on the topic of legislative indeterminacy, draws a distinction between legislation that is ambiguous and legislation that is vague, and relies on six authorities, which are all either texts or scholarly articles.
[62] Justice Miller's analysis of legislative indeterminacy and the distinction he draws between ambiguity and vagueness were not relied on by the Divisional Court, and were not referred to by either party before this court or the Divisional Court. None of the six authorities my colleague relies on were cited in the Divisional Court's reasons or by the parties to this appeal. Neither party has been given an opportunity to address my colleague's analysis of legislative indeterminacy, to consider the authorities he relies, or to put forward their own authorities in response. Speaking for myself, without full argument on the issue, I am unable to decide whether I agree or disagree with my colleague's analysis.
[63] More important, respectfully, in my view, my colleague is wrong to embark on this new analysis. Doing so is both unfair and unnecessary.
[64] It is unfair to these parties, especially the losing party, Pong, to decide the issue of the inapplicability of the residual presumption on an analysis that they have not relied on, have not seen before, and have not had an opportunity to make submissions on. Under our adversarial system, we rely on the parties to a dispute to frame the issues and their analysis of those issues. When a judge goes beyond the issues and analyses framed by the parties, without giving those parties an opportunity to meet the judge's analysis, the adversarial process is subverted. A judge may, in a rare case, be entitled to do so, but only if interests of justice require it. This is not one of those rare cases.
[65] The inapplicability of the residual presumption can be dealt with quite simply on either of two bases. One basis is that there is only one reasonable interpretation of "primary purpose" under the Regulation: it must be considered from the perspective of the purpose of the product's developer. That was the perspective OMDC adopted.
[66] I incline to the view that OMDC's interpretation is the only reasonable interpretation. Indeed, my colleague's reasons, at paras. 35 and 36, strongly suggest that the majority of the Divisional Court's alternative interpretation is unreasonable. Neither my colleague nor the parties have suggested any other interpretation that might be reasonable. Of course, if the OMDC's interpretation is the only reasonable interpretation, then the residual presumption unquestionably cannot apply: see McLean v. British Columbia (Securities Commission), [2013] 3 S.C.R. 895, [2013] S.C.J. No. 67, 2013 SCC 67, at para. 38.
[67] The other basis on which I would still find the residual presumption inapplicable is on the assumption that the Regulation gives rise to two reasonable interpretations: the majority of the Divisional Court's interpretation and OMDC's interpretation. Even on that assumption, the residual presumption cannot apply. To apply it would be incompatible with reasonableness review.
[68] In the two Supreme Court of Canada cases referred to by counsel, the residual presumption in favour of the tax payer is said to apply "in the exceptional case where application of the ordinary principles of interpretation does not resolve the issue": Québec (Communauté urbaine) v. Corp. Notre-Dame de Bon-Secours, [1994] 3 S.C.R. 3, [1994] S.C.J. No. 78, at p. 19 S.C.R.; and Placer Dome Canada Ltd. v. Ontario (Minister of Finance), [2006] 1 S.C.R. 715, [2006] S.C.J. No. 20, 2006 SCC 20, at para. 24. In both cases, courts were interpreting taxation statutes. In neither case was the Supreme Court looking at the interpretation of a statute by an administrative decision maker, which is reviewable on a deferential standard of reasonableness.
[69] It seems to me that if reasonableness review applies, as it does here, and if a reviewing court concludes that the administrative decision-maker's interpretation is reasonable, as Miller J.A. does, that is the end of the matter. It is not for the reviewing court to look around to see if another reasonable interpretation more favourable to the tax payer exists, and then apply that other reasonable interpretation. To do so would entirely defeat the principles and objectives of reasonableness review.
[70] OMDC's decision denying Pong a tax credit was reasonable. The residual presumption in favor of a tax payer in taxation statutes does not apply. Like Miller J.A., I would allow OMDC's appeal and reinstate its decision with the costs that he has prescribed.
PACIOCCO J.A. (CONCURRING)
[71] I have read the reasons provided by both of my colleagues, Laskin and Miller JJ.A. I accept their recitals of the material facts.
[72] I, too, agree with Miller J.A.'s reasons with respect to the reasonableness of the Ontario Media Development Corporation's ("OMDC") interpretation of s. 34 of O. Reg. 37/09. The Divisional Court was wrong to find otherwise.
[73] I also agree with my colleagues that the Divisional Court erred in relying on the residual presumption in favour of the tax payer. I agree with Laskin J.A., that where a reviewing court concludes that "the administrative decision-maker's interpretation is reasonable . . . that is the end of the matter. It is not for the reviewing court to look around to see if another reasonable interpretation more favourable to the tax payer exists, and then apply that other reasonable interpretation." Applying the residual presumption to overcome a reasonable interpretation arrived at by an administrative decision-maker is inconsistent with the reasonableness standard of review that must be applied by a reviewing court.
[74] In my view, it was therefore unnecessary for Miller J.A. to address the different types of indeterminacy in legislative language. Without the benefit of argument on this issue, I cannot endorse that part of Miller J.A.'s analysis. Nor is it necessary, in this case, to address the bounds of proper judicial analysis. My views on this matter may be more nuanced than those expressed by my colleague, Laskin J.A. I therefore do not concur with Laskin J.A.'s reasons in that respect.
[75] However, in the end result, I too would allow OMDC's appeal and reinstate its decision with the costs that Miller J.A. prescribes.
Appeal allowed.
Notes
1 Section 34(1) was amended effective March 2017. The nature of the amendments is not relevant for the purposes of this appeal, as both parties agree that the earlier version of the provision, reproduced above, is the applicable provision.
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