Ontario Court Of Appeal Summaries (September 4-September 8)

Following are the summaries for this week's civil decisions of the Court of Appeal for Ontario.

In Daniel v Miller, Canfield, a partner of a law firm sued her old firm for wrongful dismissal after the firm was dissolved. She relied on the Supreme Court's Human Rights Code decision in McCormick v. Fasken Martineau DuMoulin LLP, 2014 SCC 39 to argue that she was really an employee. She was unsuccessful at trial and in a fairly brief endorsement, her appeal was dismissed, much to the relief of law firms nationwide, I'm sure.

In an insurance coverage decision in National Gallery of Canada v Lafleur de la Capitale Inc., the Court allowed the appeal solely on the basis that the application judge's reasons for decision did not allow for meaningful appellate review. The case was remitted to the Superior Court for a new hearing in front of a different judge.

Other topics covered this week included a division of powers/constitutional law decision in the taxation/aboriginal law context, malicious prosecution and security for costs.


Grand River Enterprises Six Nations Ltd. v. Ontario (Finance), 2017 ONCA 680

[Strathy, Cronk and Pepall JJA]


Brian Duxbury and Ben A. Jetten, for the appellant

Lise G. Favreau, Michael S. Dunn and Padraic Ryan, for the respondent

Keywords: Constitutional Law, Division of Powers, , Constitution Act, 1867, ss. 91 and 92, Pith and Substance, Canadian Western Bank v. Alberta, 2007 SCC 22, Double Aspect Doctrine, Canada Post Corp. v. Hamilton (City), 2016 ONCA 767, Taxation, Tobacco Tax Act, R.S.O. 1990, c. T.10, s. 12(2)(f. 1), Guindon v. Canada, 2015 SCC 41, Indian Act, R.S.C. 1985, c. I-5, ss. 87(1) and (2), Statutory Interpretation, Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27


The appellant is the largest Canadian exporter of tobacco. It manufactures tobacco on the Six Nations of the Grand Reserve Territory in Ontario. It produces tobacco for export and tobacco products for sale to "Indians" and "bands" on "reserves", within the meaning of the Indian Act. It does not sell tobacco to retailers outside reserves and does not sell to consumers who are required to pay taxes under the Tobacco Tax Act (the "TTA").

The TTA regulates the manufacture, distribution and retail sale of tobacco products in order to collect tax. It imposes a tax on consumers of tobacco products, with the exception of tobacco products sold to "Indians" on a "reserve" for use by "Indians" which are not subject to tax. As part of the regulatory system established by the TTA, each party in the distribution chain is required to obtain a permit or registration certificate and to account for its tobacco supplies. This includes entities whose tobacco is not subject to taxable sale in Ontario because it is intended for export or sale on reserves.

Section 12(2)(f.1) of the TTA requires the Minister of Finance (the "Minister") to demand security from parties, like the appellant, who manufacture and sell tobacco intended for export or for sale on First Nations reserves. In December 2013, the Minister issued two permits to the appellant. One authorized the possession, storage and sale of unmarked fine cut tobacco ("UFCT") for export. The other authorized the sale of UFCT to First Nations retailers. The Minister subsequently informed the appellant that he would be seeking security in relation to the issued permits.

The appellant took the position that the Minister's demand for security was unlawful because no tax was payable on tobacco produced for export or for sale on reserves.

The Divisional Court dismissed the application. This court granted the appellant leave to appeal.


(1) Is the Minister's demand for security unreasonable and arbitrary?

(2) Is s. 12(2)(f.1) of the Tobacco Tax Act constitutionally valid or applicable to tobacco destined for export or for sale on a reserve?

Holding: Appeal dismissed.


(1) No. The Minister's interpretation of the provision was reasonable and is entitled to deference.

The appellant's interpretation of the statute is illogical. It submits that the definition of UFCT, when read with the definition of "marked fine cut tobacco", means that UFCT must be in a "box, tin or other container" used for retail sale. The appellant argues that since its export tobacco is not packaged in this manner, it is not UFCT.

However, the modern approach to statutory interpretation requires that the words of an act are read within its entire context and in harmony with its scheme, its object and the intention of Parliament (Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27). "Marked fine cut tobacco" is defined under s. 1(1) as "fine cut tobacco in a package that is marked or stamped with an indicium as required under the regulations". This refers to fine cut tobacco that has a mark or stamp on its packing to indicate that taxes have been paid. UFCT is defined as "fine cut tobacco" that is not tobacco falling within the definition of "marked fine cut tobacco." "Fine cut tobacco" is not defined in the TTA. It is, however, defined in the Regulation as "loose tobacco product that has been refined to the point where it could be formed into a cigarette". The court found that since the appellant's tobacco is "fine cut tobacco" and is not "marked fine cut tobacco" it clearly falls within the definition of UFCT.

The appellant never objected to the issuance of the permits to purchase and sell UFCT. The words of s. 12(2) are mandatory and therefore require the Minister to demand security.

The appellant's submission that its product is "partially manufactured tobacco" and not "fine cut tobacco" is contradicted by the evidence of its own witness.

(2) Yes. Section 12(2)(f.1) is constitutionally valid because it is incidental to a scheme of direct taxation within the province.

The pith and substance analysis (Canadian Western Bank v. Alberta, 2007 SCC 22) supports the constitutionality of s. 12(2)(f.1). The provision cannot be divorced from its context. The appellant acknowledges that the direct tax imposed by the TTA is constitutionally valid. The collection of the tax from wholesalers rather than retailers does not transform it into an ultra vires indirect tax. Nor does the enforcement process for the collection of the tax have the effect of taxing parties who are part of the collection process. The pith and substance of the TTA is plainly the imposition of a tax on the consumption of tobacco. This is direct taxation within the province and falls squarely within provincial jurisdiction under s. 92(2). The purpose and effect of the legislation is to elaborate the marking regime, the registration and permitting system and the collection machinery designed to serve this end. Section 12(2)(f.1) is in pith and substance a provision in furtherance of the legislative scheme to ensure the integrity of the machinery for collection of the tax.

The double aspect doctrine (Canada Post Corp. v. Hamilton (City), 2016 ONCA 767) further permits both levels of government to legislate in relation to different aspects of the regulation of the same commodity. The purpose of the provision is not to...

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