Court of Appeal for Ontario

Date: October 2, 2019 Docket: M50865 (M50864) Judge: Nordheimer J.A. (In Chambers)

Between

John Reynolds, Carl Ignatius, Ekrem Uzunova, Elbahlul Bara, Ilim Uzunova, Olga German, Pietro Greco, Ravino Junaev, Ronen Ackernan, Sofia Kuliev and Varant Kichian

Moving Parties

and

Registrar (Alcohol and Gaming Commission of Ontario)

Responding Party

Counsel

Michael Lacy and Scott Dallen, for the moving parties

Judie Im, Heather Burnett and Andi Jin, for the responding party

Gavin Finlayson, for 2707461 Ontario Inc.

Gregory Azeff, for Najila Guthrie

Robin Linley and Christopher DiMatteo, for Steven Cochrane, Gerrit Murray, 11522302 Canada Inc., Ralph Llacar and Michael Hassey

Whitney Abrams, for 22008292 Alberta Ltd.

Heard: October 1, 2019

Reasons for Decision

A. Background

[1] The moving parties bring this motion on an urgent basis seeking a stay of the order of the Divisional Court dated September 27, 2019 that lifted an earlier stay that had been granted by that court.[1]

[2] This matter involves the lottery process developed by the Government of Ontario to select a limited number of interested persons who may apply for a licence to operate retail cannabis stores. The moving parties are part of a group of 42 persons who were selected in the latest lottery, held on August 20, 2019, to be able to apply for licences to open such stores. After they were selected, the Registrar disqualified the moving parties on the basis that they did not provide an irrevocable letter of credit within five days of being notified of their selection. The Registrar then selected 11 new persons from the wait list to assume those available spots.

[3] The moving parties brought an application for judicial review of the Registrar's decision to disqualify them. On September 12, 2019, they sought and obtained an order for a stay of the Registrar's decision from a single judge of the Divisional Court pending the hearing of the application for judicial review. That order effectively froze the licencing process for all 42 persons. The hearing of the application for judicial review was expedited by the Divisional Court such that the judicial review was argued before that court on September 25, 2019. On September 27, 2019, the Divisional Court released an endorsement dismissing the application for judicial review and lifting the stay. The Divisional Court said that the reasons for their decision would be provided within ten days. Those reasons, of course, have not yet been received.

B. Submissions of the Parties

[4] The moving parties now seek a stay of the Divisional Court's decision, which would effectively reinstitute the earlier stay, pending their motion for leave to appeal being heard and determined by this court. The moving parties say that they can perfect their motion for leave to appeal within 24 hours of the receipt of the Divisional Court's reasons and that they would also seek to have the determination of their motion for leave to appeal expedited. The moving parties contend that any delay resulting from a stay in those circumstances will be limited.

[5] The responding party opposes any further stay and argues that the test for a stay is not met. The responding party argues that there should not be any further interference with the Government's mandated process for selecting persons who will be eligible to apply for licences. In that regard, the responding party points to the fact that a stay would not only interfere with the processing of the 11 new persons' requests for licences but also the processing of 29 additional persons' requests who were part of the lottery process and whose applications are also being held up pending the resolution of this matter.[2]

C. Analysis

[6] The test for a stay is well-established. It involves the same factors as are involved in the granting of an interlocutory injunction: RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311. Those factors are:

• There is a serious issue to be determined;
• The party seeking the stay will suffer irreparable harm if a stay is not granted;
• The balance of convenience favours the moving party.

(1) Serious Issue to be Determined

[7] In the somewhat unusual circumstances of this case, where I do not have the reasons for the decision of the court below, I am somewhat limited in determining the apparent merits of the proposed appeal. However, in light of those circumstances, I believe my approach to the first factor must be to take it that there is a serious issue to be determined. I draw that conclusion not only from the submissions that the parties have made regarding the underlying dispute and the issues that were raised on the judicial review application but also from the fact that the Divisional Court reserved its decision on this matter. While not a significant consideration, I believe that I am entitled to draw from that fact that the Divisional Court thought, at the very least, that the application raised issues that needed to be addressed. That said, I also recognize that, in the view of the Divisional Court, the position of the moving parties on those issues was found to be wanting.

[8] I am satisfied, on that basis, that there is a serious issue to be determined, particularly because this is a "low threshold" to meet: Tisi v. St. Amand, 2017 ONCA 539, at para. 5.

(2) Irreparable Harm

[9] In terms of irreparable harm, I start from the proposition that the moving parties are seeking the opportunity to pursue a commercial venture. In the usual course, a lost opportunity to pursue a commercial venture can be compensated for by way of damages. Further, if the moving parties are ultimately successful, and are able to obtain licences, the fact that they were precluded from being "first to market" can also be valued and made compensable in damages.

[10] The moving parties attempt to avoid that result by raising an issue as to whether the Registrar, or the Government of Ontario itself, can be held liable in damages in these circumstances. They point, in particular, to s. 11 of the Crown Liability and Proceedings Act, 2019, S.O. 2019, c. 7, Sched. 17, specifically s. 11(2) which reads:

No cause of action arises against the Crown or an officer, employee or agent of the Crown in respect of a regulatory decision made in good faith, where,

(a) a person suffers any form of harm or loss as a result of an act or omission of a person who is the subject of the regulatory decision; and

(b) the person who suffered the harm or loss claims that the harm or loss resulted from any negligence or failure to take reasonable care in the making of the regulatory decision.

[11] I am not satisfied that this provision would exclude Crown liability, if the moving parties can establish that the Registrar did not act in good faith in reaching the regulatory decision that he did. On that point, it appears to be implicit in the moving parties' position, that the Registrar knew that the email notifications had not been received by the moving parties, that the moving parties are contending that the Registrar acted in bad faith in disqualifying them in those circumstances.

[12] I should add that, on this point, I am assuming that the disqualification decision constitutes a regulatory decision as defined in the Act, although that may be the subject of some debate in the future. I would also note the relevant and significant fact that counsel for the Registrar accepts that while the Registrar may not be personally liable for damages, because of s. 48(1) of the Cannabis Licence Act, 2018, S.O. 2018, c. 12, Sched. 2, the Crown is still liable pursuant to s. 48(2) if the moving parties can eventually prove their claim.

[13] There is another reality in this case and that is that as of July 2020 any person will be able to apply for a licence to operate a retail cannabis store: General, O. Reg. 468/18, s. 8.3(3). The lottery process will be eliminated. Consequently, it is not clear that the moving parties, even if they wind up being denied a licence through this current process, will not be able to obtain a licence in the future. If that should transpire, then the moving parties' losses will be limited to the delay in entering the market which, I have already pointed out, can be compensated by way of damages.

[14] I would also not rule out the possibility that, if the moving parties are ultimately successful in obtaining leave to appeal and are successful on the appeal, they may have a remedy by which they could compel the responding party to grant them the opportunity to apply for licences. That possibility also militates against any finding that the damages involved here are irreparable.

(3) Balance of Convenience

[15] In terms of the balance of convenience, in my view, this factor strongly favours the responding party for at least three reasons. First, the Registrar has stipulated the process for awarding the opportunity to apply for a limited number of licences in this new market. Courts should be loath to interfere with that process, both because the process reflects policy choices made by the government, and also because there are ramifications for others who have legitimate interests under that process. Many of these other persons were not before the Divisional Court nor are they before this court.

[16] Second, there is a public interest component to this analysis. There has been a decision made to permit persons to legally purchase cannabis. Members of the public, who wish to exercise that opportunity, have a very limited scope to do so at the present time given the limits on the retail stores that are open. The purpose of this most recent lottery was to increase the catalogue of stores that can supply the product and therefore the ability of the public to make their purchases. A stay would impede the public's ability to do so.

[17] Third, as I mentioned earlier, the moving parties' position has already been reviewed by a court and it failed. In those circumstances, the moving parties do not proceed from a position of strength in seeking to hold matters in abeyance while they seek a further review.

D. Conclusion

[18] The three factors against which the granting of a stay is to be evaluated should not be considered in isolation, nor are they to be weighed on a mathematical basis as to whether more factors fall on one side of the decision or the other. The three requirements "are not to be considered as separate hurdles but as interrelated considerations" and the "strength respecting one criterion may compensate for the weakness of another": see Longley v. Canada (Attorney General), 2007 ONCA 149, 223 O.A.C. 102, at para. 15.

[19] Neither the first or second factors weigh strongly in favour of a stay. The balance of convenience weighs heavily against a stay. Considering the factors as a whole, the balance favours denying the stay. The process that the government has decided on should be permitted to proceed. If the moving parties are ultimately successful, they may have a remedy, at the very least, in damages.

E. Disposition

[20] The motion is dismissed. In the circumstances, I would not make any order as to costs.

I.V.B. Nordheimer J.A.

Footnotes

[1] Counsel appeared on this motion on behalf of various persons who had been granted intervener status before the Divisional Court. That status expired with the conclusion of the Divisional Court proceedings. While those parties have yet to seek and obtain intervener status in this court (which arguably has to await the moving parties obtaining leave to appeal), given the urgency of this motion, and without objection from the parties, I allowed counsel for those persons to make brief submissions.

[2] These 29 persons are part of the total of 42 persons selected in the lottery.