Air Canada et al. v. Liquor Control Board (Ont.) et al., (1997) 214 N.R. 1 (SCC)

• Judge: Gonthier, Cory, McLachlin and Iacobucci, JJ.
• Court: Supreme Court (Canada)
• Case Date: June 26, 1997
• Jurisdiction: Canada (Federal)
• Citations: (1997), 214 N.R. 1 (SCC);148 DLR (4th) 193;72 ACWS (3d) 188;[1997] 2 SCR 581;[1997] SCJ No 66 (QL);33 OR (3d) 479;214 NR 1;1997 CanLII 361 (SCC)

Air Can. v. Liquor Control Bd. (1997), 214 N.R. 1 (SCC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [1997] N.R. TBEd. JN.023

Air Canada (appellant) v. The Liquor Control Board of Ontario, The Attorney General of Canada, The Liquor Licence Board of Ontario and The Attorney General for Ontario (respondents) and The Attorney General of Quebec, The Attorney General of Nova Scotia, The Attorney General of Manitoba, The Attorney General for Alberta and the Société des Alcools du Québec (interveners)

Canadian Airlines International Ltd. (appellant) v. Liquor Control Board of Ontario, The Attorney General of Canada, The Liquor Licence Board of Ontario, and the Attorney General for Ontario (respondents) and The Attorney General of Quebec, The Attorney General of Nova Scotia, The Attorney General of Manitoba, The Attorney General for Alberta, and the Société des Alcools du Québec (interveners)

(24851)

Indexed As: Air Canada et al. v. Liquor Control Board (Ont.) et al.

Supreme Court of Canada

La Forest, L'Heureux-Dubé, Sopinka,

Gonthier, Cory, McLachlin

and Iacobucci, JJ.

June 26, 1997.

Summary:

Air Canada and Canadian Airlines imported liquor into Ontario for in-flight consumption. The liquor was stored in a bonded warehouse with the approval of the Liquor Control Board of Ontario (LCBO), in accordance with the Customs Act. When the liquor for domestic flights was removed from the bonded warehouse, the airlines paid duties to Canada Customs and the LCBO. Section 3(1) of the Importation of Intoxicating Liquors Act (IILA) required that all liquor brought into Ontario had to be purchased by or on behalf of, and con­signed to, the LCBO. The airlines paid markup fees on the liquor. The airlines held a liquor sales licence under s. 5(1) of the Liquor Licence Act and paid gallonage fees under s. 103 of the Regulations. In 1984 the LCBO reached an agreement with Wardair whereby Wardair did not require a liquor sales licence and did not have to pay gallonage fees or markups. The airlines claimed that they were not obliged to pay the LCBO markups or the gallonage fees.

The Ontario Court of Justice, General Division, held that the airlines did not require a licence to acquire or handle liquor for in-flight consumption and were not liable for gallonage fees. The court held that the IILA did not apply to this liquor because no licence was required. The court held that the airlines did not have to pay markups or Ontario retail sales tax. The court ordered that the LCBO repay all gallonage fees and markups paid since January 1, 1984. The LCBO, the Liquor Licence Board of Ontario and the Ontario and Federal Crowns appealed. The airlines cross-appealed on various issues.

The Ontario Court of Appeal, in a decision reported 82 O.A.C. 81 (with supplementary reasons reported 86 O.A.C. 70), allowed the appeal in part. The court held that the air­lines were not required to hold licences and were not required to pay gallonage fees. The court held that the IILA applied to the im­portation of liquor into Ontario for the pur­pose of in-flight consumption and the air­lines were required to pay markups. The court affirmed that the airlines were to be reimbursed for gallonage fees paid since January 1, 1984. The court set aside the declaration relating to the Ontario Retail Sales Tax. The court dismissed the cross-appeals. The airlines appealed.

The Supreme Court of Canada allowed the appeal in part. The court ordered that the airlines be reimbursed in full for the gallonage fees they had paid.

Aeronautics - Topic 2601

Regulation - General - The Liquor Con­trol Board of Ontario required two airlines to pay markups on liquor used for in-flight consumption - The airlines claimed that the in-flight provision of liquor was an integral aspect of their aeronautics undertaking and that any attempt by a province to exercise regulatory authority over liquor sold aboard aircraft was beyond its jurisdictional competence - The Supreme Court of Canada affirmed that serving alcohol aboard flights was not an integral part of the airlines' aeronautics undertaking - The court affirmed that in obtaining and storing liquor the airlines had to function within the provincial legislative environment - See paragraphs 70 to 76.

Constitutional Law - Topic 6121

Federal jurisdiction - Aeronautics - [See Aeronautics - Topic 2601 ].

Constitutional Law - Topic 7291

Provincial jurisdiction - Property and civil rights - Regulatory statutes - Liquor con­trol - [See Aeronautics - Topic 2601 ].

Customs - Topic 6502

Imports - Importation - What constitutes - Two airlines imported liquor into Ontario for in-flight consumption - The liquor was placed in bonded warehouses until it was moved to special areas for domestic or international flights and it was accounted for to Canada Customs and the Liquor Control Board of Ontario - The airlines claimed that s. 3(1) of the Impor­tation of Intoxicating Liquors Act did not apply to them because they were not im­porting liquor "into any province" because it was never in the province in a "jurisdic­tional sense" - The Supreme Court of Canada affirmed that the words "into any province" in s. 3(1) referred to physical presence within the boundaries of a prov­ince - The court held that the liquor was imported for the purposes of the Act - See paragraphs 50 to 66.

Damages - Topic 1297

Exemplary or punitive damages - Con­ditions precedent - When awarded - The Provincial Crown and two airlines mis­takenly believed that the airlines required liquor sales licenses - The airlines paid gallonage fees under the licenses - In January 1984 the Crown agreed that a third airline that challenged the licence requirement would not be required to hold the licence or pay the fees - The Crown did not inform the first two airlines - The Crown conceded that the airlines did not require the licences - The Supreme Court of Canada ordered that the airlines be reimbursed for fees paid - The court held that punitive damages and compound interest could have been ordered where the Crown had acted improperly by continuing to collect fees under a regime that they knew was inapplicable to the airlines - However, the court refused to interfere with the trial judge's discretion not to award punitive damages or compound interest - See paragraphs 77 to 86.

Damages - Topic 1332.1

Exemplary or punitive damages - Liability of Crown - [See Damages - Topic 1297 ].

Interest - Topic 5004

Interest as damages - Prejudgment interest - Discretion of judge - [See Damages - Topic 1297 ].

Interest - Topic 5008

Interest as damages - Prejudgment interest - Entitlement - [See Damages - Topic 1297 ].

Interest - Topic 5010

Interest as damages - Prejudgment interest - Calculation of interest - Simple or compound - [See Damages - Topic 1297 ].

Liquor Control - Topic 5

Definitions - Intoxicating liquor - Two airlines imported liquor for in-flight con­sumption - The airlines claimed that the Importation of Intoxicating Liquors Act did not apply to them because the liquor that they imported was not intoxicating liquor as defined by the Act - The Act defined "intoxicating liquor" as "any liquor that is, by the law of the province ... deemed to be intoxicating liquor and that it is unlawful to sell or have in possession without a permit or other authority of the government of the province" - The Supreme Court of Canada held that the definition of intoxicating liquor specified those kinds of liquor that could only be sold or possessed within a province with a licence regardless of whether it was intended that the liquor actually be sold within the province - The Act was trig­gered by the simple hypothesis or pos­sibility of sale - See paragraphs 39 to 49.

Liquor Control - Topic 504

Legislation - Interpretation - [See Cus­toms - Topic 6502 , Liquor Control - Topic 5 and Liquor Control - Topic 509 ].

Liquor Control - Topic 509

Legislation - General - Markup legis­lation - Two airlines imported liquor for in-flight consumption - The liquor was stored in bonded warehouses - Section 3(1) of the Importation of Intoxicating Liquors Act (the IILA) required that all liquor brought into Ontario had to be purchased on the behalf of and consigned to the Liquor Control Board of Ontario (LCBO) - The LCBO required the airlines to pay markups on the liquor - The Supreme Court of Canada held that the LCBO could charge the markup under the IILA, the Liquor Control Act and the Liquor Licence Act - See paragraphs 1, 2, 88.

Liquor Control - Topic 4110

Licensing - Grant of licence - Licensing fees - The Provincial Crown and two airlines mistakenly believed that the air­lines required liquor sales licenses - The airlines paid gallonage fees under the licenses - In January 1984 the Crown agreed that a third airline that challenged the licence requirement would not be required to hold the licence or pay the fees - The Crown did not inform the first two airlines - The Crown conceded that the airlines did not require the licences - The trial judge ordered that the airlines be reimbursed for fees paid after January 1, 1984 - The Supreme Court of Canada held that the airlines should be reimbursed for all gallonage fees - The court stated that the showing of bad faith was not a precondition to the recovery of moneys collected by a governmental agency under an inapplicable law - Further, the Crown was responsible for ensuring the ap­plicability of the law - See paragraphs 77 to 82.

Mistake - Topic 1714

Recovery of money paid under mistake - Mistake of law - Money paid to public authorities - [See Liquor Control - Topic 4110 ].

Statutes - Topic 5855

Operation and effect - Enforcement - Responsibility for establishing if law ap­plicable - The Supreme Court of Canada stated that "if the question is which of two parties should be responsible for guaran­teeing the applicability of a law, and the choice is between the governmental agency charged with administering that law and the citizen who is subject to that law, surely the better choice is the gov­ernmental agency. I cannot see that it matters how sophisticated an actor the citizen is. The responsibility for taking care that the law is legal and applicable must rest with the party that makes and administers the law. ... to make the ap­portionment of responsibility depend on the sophistication of the actors would be to introduce a vague idea into an area of law that is otherwise clear." - See para­graph 81.

Statutes - Topic 5855

Operation and effect - Enforcement - Responsibility for establishing if law ap­plicable - [See Liquor Control - Topic 4110 ].

Words and Phrases

Intoxicating liquor - The Supreme Court of Canada discussed the meaning of the phrase "intoxicating liquor" as defined in s. 2 of the Importation of Intoxicating Liquors Act, R.S.C. 1985, c. I-3 - See paragraphs 39 to 49.

Cases Noticed:

Air Canada and Pacific Western Airlines Ltd. v. British Columbia, [1989] 1 S.C.R. 1161; 95 N.R. 1, refd to. [para. 34].

Subilomar Properties (Dundas) Ltd. v. Cloverdale Shopping Centre Ltd., [1973] S.C.R. 596, refd to. [para. 53].

Manitoba (Attorney General) v. Manitoba Licence Holders' Association, [1902] A.C. 73 (P.C.), refd to. [para. 54].

Ontario (Attorney General) v. Canada (Attorney General), [1896] A.C. 348 (P.C.), refd to. [para. 55].

R. v. Gautreau (1978), 21 N.B.R.(2d) 701; 37 A.P.R. 701; 88 D.L.R.(3d) 718 (C.A.), refd to. [para. 55].

Manitoba v. Air Canada and Canada (At­torney General) et al., [1980] 2 S.C.R. 303; 32 N.R. 244; 4 Man.R.(2d) 278, refd to. [para. 59].

Bell Canada v. Commission de la santé et de la securité du travail (Qué.) and Bilodeau et al., [1988] 1 S.C.R. 749; 85 N.R. 295; 15 Q.A.C. 217, refd to. [para. 70].

Irwin Toy Ltd. v. Québec (Procureur général), [1989] 1 S.C.R. 927; 94 N.R. 167; 24 Q.A.C. 2; 58 D.L.R.(4th) 577; 25 C.P.R.(3d) 417, refd to. [para. 70].

Johannesson v. West St. Paul (Rural Mu­nicipality), [1952] S.C.R. 292, refd to. [para. 72].

Hill (Murray) Limousine Service Ltd. v. Baston, [1965] B.R. 778 (Que. Q.B.), refd to. [para. 72].

Reference Re Application of Hours of Work Act (B.C.) to Employees of the Canadian Pacific Railway in Empress Hotel, Victoria (City), [1950] A.C. 122 (P.C.), refd to. [para. 73].

Canada Pacific Railway Co. v. British Columbia (Attorney General) - see Reference Re Application of Hours of Work Act (B.C.) to Employees of the Canadian Pacific Railway in Empress Hotel, Victoria (City).

Montcalm Construction Inc. v. Minimum Wage Commission et al., [1979] 1 S.C.R. 754; 25 N.R. 1, refd to. [para. 74].

Eadie v. Brantford (Township), [1967] S.C.R. 573, refd to. [para. 80].

LaPointe et al. v. Canada (Minister of Fisheries and Oceans) et al. (1992), 51 F.T.R. 161; 4 Admin. L.R.(2d) 298 (T.D.), refd to. [para. 84].

Brock v. Cole (1983), 40 O.R.(2d) 97 (C.A.), refd to. [para. 85].

Wallersteiner v. Moir (No. 2), [1975] 1 All E.R. 849 (C.A.), refd to. [para. 85].

Vorvis v. Insurance Corp. of British Columbia, [1989] 1 S.C.R. 1085; 94 N.R. 321; 58 D.L.R.(4th) 193; [1989] 4 W.W.R. 218; 36 B.C.L.R.(2d) 273; 90 C.L.L.C. 14,035; 25 C.C.E.L. 81, refd to. [para. 86].

Elsom v. Elsom, [1989] 1 S.C.R. 1367; 96 N.R. 165, refd to. [para. 86].

Statutes Noticed:

Constitution Act, 1867, sect. 92(16) [para. 54].

Customs Act Regulations (Can.), Customs Bonded Warehouses Regulations, SOR/86-1063, sect. 13 [para. 17].

Importation of Intoxicating Liquors Act, R.S.C. 1985, c. I-3, sect. 2, sect. 3(1), sect. 3(2)(a) [para. 16].

Liquor Control Act, R.S.O. 1990, c. L-18, sect. 3 [para. 14].

Liquor Licence Act, R.S.O. 1990, c. L-19, sect. 1, sect. 5(1), sect. 27 [para. 15].

Authors and Works Noticed:

Canada, Hansard, House of Commons Debates, 2nd Sess., 16th Parliament, April 27, 1928, p. 2482 [para. 44].

Côté, Pierre-André, The Interpretation of Legislation in Canada (2nd Ed. 1991), pp. 223, 234 [para. 53].

Hansard - see Canada, Hansard, House of Commons Debates.

Hogg, Peter W., Constitutional Law of Canada (3rd Ed. 1992)(Looseleaf Supp.), vol. 1, pp. 15 to 27 [para. 70].

Counsel:

Neil Finkelstein, Q.C., and Jeffrey Galway, for the appellants;

Tom Marshall, Q.C., Peter Landmann and Michel Lapierre, for the respondents, the Liquor Control Board of Ontario, the Liquor Licence Board of Ontario and the Attorney General for Ontario;

Roslyn J. Levine, Q.C., and Charles D. Johnston, for the respondent, the At­torney General of Canada;

Monique Rousseau, for the intervener, the Attorney General of Quebec;

Shawn Greenberg, for the intervener, the Attorney General of Manitoba;

Alison W. Scott and Brian Seaman, for the intervener, the Attorney General for Nova Scotia (written submissions only);

Margaret Unsworth and J.A. Bowron, for the intervener, the Attorney General for Alberta;

Gérard Tremblay and Madeleine Renaud, for the intervener, the Société des al­cools du Québec.

Solicitors of Record:

Blake, Cassels & Graydon, Toronto, Ontario, for the appellants;

The Ministry of the Attorney General, Toronto, Ontario, for the respondents, the Liquor Control Board of Ontario, the Liquor Licence Board of Ontario and the Attorney General for Ontario;

George Thomson, Deputy Attorney General of Canada, Toronto, Ontario, for the Attorney General of Canada;

Monique Rousseau, Sainte-Foy, Quebec, for the intervener, the Attorney General of Quebec;

Department of Justice, Halifax, Nova Scotia, for the intervener, the Attorney General of Nova Scotia;

Department of Justice, Winnipeg, Mani­toba, for the intervener, the Attorney General of Manitoba;

Margaret Unsworth, Edmonton, Alberta, for the intervener, the Attorney General for Alberta;

McCarthy Tétrault, Montréal, Quebec, for the intervener, the Société des alcools du Québec.

This appeal was heard on February 17, 1997, by La Forest, L'Heureux-Dubé, Sopinka, Gonthier, Cory, McLachlin and Iacobucci, JJ., of the Supreme Court of Canada.

On June 26, 1997, Iacobucci, J., delivered the following judgment for the court in both official languages.