A-437-77
John Wight and Gloria Wight carrying on busi
ness as Wight's Produce (Applicants)
v.
Canadian Egg Marketing Agency (Respondent)
Court of Appeal, Heald and Urie JJ. and MacKay
D.J.—Toronto, November 23 and 25, 1977.
Judicial review — Licence renewal application denied — In
making decision Board reviewed business arrangement and
decided application not in good faith — Whether or not Board
entitled to consider the business arrangement, a matter
extraneous to the application — Whether or not the evidence
supported the conclusion that the application was not in good
faith — Canadian Egg Licensing Regulations, SOR/73-286, as
amended by SORl76-62, ss. 3, 8, 9, 10 — Federal Court Act,
R.S.C. 1970 (2nd Supp.), c. 10, s. 28.
This section 28 application is to review and set aside respond
ent's decision to refuse the applicants' application for a renewal
of their licence authorizing them to market eggs in interprovin-
cial and export trade on the grounds that it was not made in
good faith. Respondent considered a business arrangement
applicants concluded with another firm whose licence had been
revoked and decided that it was an attempt to circumvent the
Board's revocation order and its regulations. The issue is
whether or not respondent was entitled to consider the relation
ship between the applicants and another firm or individual in
relation to the marketing of eggs in' interprovincial trade on this
application for licence and whether or not the evidence support
ed the conclusion that the application was not made in good
faith.
Held, the application is dismissed. The agreement for sale
was not a bona fide sale of a business but was a colourable
attempt to avoid the obligations imposed on those proposing to
engage in the export and interprovincial marketing of eggs.
Applicants, by assisting in this attempt, did not act wholly in
good faith. The inquiry by the Agency to ascertain the appli
cants' bona fides did not involve an inquiry into extraneous
matters but was encompassed by the duty imposed on respond
ent in respect of the issuance of licences under the Canadian
Egg Licensing Regulations. There was ample, properly admis
sible evidence upon which the Agency could have concluded
that applicants' license ought not to have been renewed. There
has been no error of law demonstrated.
O'Connor v. Jackson [19431 O.W.N. 587, distinguished.
Re Forfar and Township of East Gwillimbury (1971) 20
D.L.R. (3d) 377, referred to.
APPLICATION.
COUNSEL:
R. B. Munroe for applicants.
J. F. Lemieux for respondent.
SOLICITORS:
Turkstra, Dore, Dolecki & Munroe, Hamil-
ton, for applicants.
Herridge, Tolmie, Ottawa, for respondent.
The following are the reasons for judgment
rendered in English by
URIE J.: This section 28 application is to review
and set aside a decision of the respondent refusing
the application of the applicants for a renewal of
their licence authorizing them to market eggs in
interprovincial and export trade. The refusal flows
directly from two decisions of this Court rendered
on November 3, 1976
(a) quashing a section 28 application brought
by L. H. Gray and Son, Ltd. on April 2, 1976,
to review and set aside the decision of the
respondent to revoke the licence of L. H. Gray
and Son, Ltd. to engage in interprovincial and
export trade in eggs, and;
(b) dismissing a section 28 application brought
by William H. Gray on February 16, 1976 to
review and set aside a decision of the respondent
refusing the application of William H. Gray to
engage in interprovincial and export trade in
eggs.
The applicants herein, who are engaged in the
business of egg producers and a grading station at
Rodney, Ontario were issued a licence under the
Canadian Egg Licensing Regulations on May 1,
1976 authorizing them to engage in the interpro-
vincial marketing of eggs. It was this licence which
the applicants sought to renew and it is the refusal
of the application to renew which is the subject
matter of this section 28 application.
In order to appreciate the basis of the respond
ent's refusal to renew, reference should be made to
certain other facts.
On June 5, 1976, while its section 28 application
was still pending, L. H. Gray and Son, Ltd. pur-
ported to sell to the applicants herein, the business
of that firm in the interprovincial buying and
selling of eggs between the provinces of Ontario
and Quebec in consideration of:
(a) the payment of the sum of $1,000 by the
applicants;
(b) the granting of an option to L. H. Gray and
Son, Ltd. to buy back the business before Sep-
tember 6, 1976 for the sum of $2,000;
(c) to use their best efforts to maintain the
goodwill attached to the business.
For its part, Gray agreed:
(a) to transfer to the applicants its customer
lists and trade mark, at least until the exercise
of the option;
(b) not to contact any of its former customers
for a period of 12 months;
(c) to assist the applicants in the transporting of
eggs to Quebec until September 5, 1976.
At the hearing before the Agency held on May
18, 1977 on the application to renew, at which the
applicants were represented by counsel who cross-
examined the respondent's witnesses, but who
elected not to lead any evidence on behalf of the
applicants, the following information was elicited:
(a) The applicants produce insufficient eggs
from their own operations to satisfy the needs of
the former Gray customers in Quebec, and, as a
result, purchased their requirements for that
business from L. H. Gray and Son, Ltd.;
(b) Most of the details of the transactions with
the Quebec customers were handled by William
Gray or his secretary which details included
taking orders, arranging delivery, preparing
invoices and settling claims and adjustments;
(c) Invoices for egg sales were prepared by the
staff of L. H. Gray and Son, Ltd. on the appli
cants' invoices. The applicants did not know the
sale prices;
(d) The Quebec customers remitted payment
for the eggs to Wight's Produce, (the applicants'
firm name) and the cheques were deposited in a
special operating account at the Royal Bank in
Rodney. This account was cleared from time to
time by cheques issued to L. H. Gray and Son,
Ltd.;
(e) The latter cheques represented the invoice
prices of the eggs sold to the Quebec customers
less a commission to the applicants of one-quar
ter of a cent per dozen.
On June 20, 1977, the chairman of the respond
ent dispatched a Telex to the applicants' solicitor
advising him of the Board's decision on the
respondent's application to renew its licence. The
relevant portions thereof for purposes of these
reasons, read as follows:
The members of the agency reserved decision on the application
and after considering the evidence and submission decides that
the application should be denied.
The members of the agency base their decision on the fact that
the application by Whytes' [sic] Produce, in all of the circum
stances, is not made in good faith but rather to enable L H
Gray & Son Ltd. or William Gray to continue to market eggs
in interprovincial trade [sic] persons who do not hold licences
issued by the agency (their licences either having been refused
or cancelled by the agency and those decisions were sustained
by the Federal Court of Appeal).
The members of the agency conclude that, notwithstanding the
fact that Whytes' [sic] produce appeared to comply with the
requirements of the licensing regulation, its relationship with L
H Gray & Son Ltd. and/or William Gray was so interwoven as
to constitute the application of Shytes' [sic] produce in effect
the application by persons not entitled to a licence namely L H
Gray & Son Ltd and/or William Gray.
The sole issue before this Court is, as stated in
the respondent's memorandum of fact and law:
The issue before this Court is whether the respondent was
entitled to consider the relationship between the applicants and
L. H. Gray and Son Ltd. and/or William Gray in relation to
the marketing of eggs in interprovincial trade on the applica
tion of the applicants for an interprovincial licence and whether
on the evidence before it, it was entitled to conclude that the
application of the applicants was not made in good faith, if
issued, such licence would only have been a device to enable L.
H. Gray and Son Ltd. and/or William Gray to circumvent
order and regulations of the respondent and particularly its
obligation to collect and remit levies sanctioned by the judg
ment of this Court in Burnbrae Farms Ltd. v. Canadian Egg
Marketing Agency [1976] 2 F.C. 217.
It is the applicants' contention that the respond
ent erred in law in taking into account extraneous
and irrelevant considerations in reaching its deci
sion and failed to consider the application for a
licence only in accordance with the specific
requirements of the Canadian Egg Licensing
Regulations SOR/73-286 as amended by SOR/
76-62. Sections 3, 8, 9 and 10 of the Regulations
in their view set the parameters for the respond
ent's powers and read as follows:
3. No person shall engage in the marketing of eggs in
interprovincial or export trade as a producer, grading station
operator, producer-vendor, or processor unless he holds the
appropriate licence set out in section 4 and pays to the Agency
annually the fee prescribed by that section for that licence.
8. Every licence shall be issued subject to the following
conditions:
(a) the licensee shall provide to the Agency such reports and
information as the Agency may from time to time require;
(b) the licensee shall permit the Agency, its employees or
agents to inspect the licensee's premises and records;
(c) the licensee shall at all times during the term of the
licence comply with orders and regulations of the Council or
Agency; and
(d) the licensee shall engage in the marketing of eggs in
interprovincial or export trade only with persons who are
licensed by the Agency or by a board or agency authorized
under provincial law to issue licences in relation to the
marketing of eggs locally within the province.
9. The Agency may suspend, revoke or refuse to issue a
licence where the applicant or licensee is not qualified by
experience, financial responsibility or equipment to engage
properly in the business for which application is made or where
the applicant or licensee has failed to observe, perform or carry
out any condition of the licence.
10. Where the Agency intends to suspend or revoke a
licence, the Agency shall give to the licensee by registered mail
addressed to him at his address recorded in the books of the
Agency notice of its intention to suspend or revoke the licence,
as the case may be, and such notice shall fix a time of not less
than 14 days from the mailing thereof for the licensee to show
cause why the licence should not be suspended or revoked, as
the case may be.
Counsel for the respondent, on the other hand,
took the position that a court will not exercise its
powers in favour of an applicant if the effect of
what the court is asked to do would assist in
circumventing legal or statutory obligations. This
Court is, he said, being asked to do precisely that
by this section 28 application. Counsel for the
applicants agreed with the principle enunciated
but only if the proposed court order, by its own
operation, would have that effect. In this case, he
contended, the order would not have such a result
because setting aside the decision refusing to
renew the licence would not, on its face, enable the
L. H. Gray and Son, Ltd. and/or William H. Gray
to circumvent the judgments of this Court dismiss
ing their respective applications to set aside the
orders of the Agency refusing them licences to
trade interprovincially in eggs. The jurisprudence
to which he referred does not appear to support
this contention and, in my opinion, the submission
has no merit.
However, he relied on the following passage
from O'Connor v. Jackson [1943] O.W.N. 587 to
support his further contention that the respondent
in considering the applicants' dealings with the
Gray company and William H. Gray was consider
ing extraneous matters beyond the scope of other
powers of inquiry.
At pages 588 and 589 Urquhart J. had this to
say:
The sole question remaining is whether, mandamus being a
discretionary remedy, I should exercise my discretion and
refuse the mandamus because the installation of the plumbing
will facilitate the applicant in breaking the residential by-laws
of the city of Toronto.
There is no doubt that mandamus is a discretionary remedy. In
Reg. v. The Churchwardens of All Saints, Wigan et al., (1876),
1 App. Cas. 611 at 620, Lord Chelmsford, in the course of his
judgment, said as follows:
A writ of mandamus is a prerogative writ and not a writ of
right, and it is in this sense in the discretion of the court
whether it shall be granted or not. The court may refuse to
grant the writ not only upon the merits, but upon some delay,
or other matter, personal to the party applying for it; in this
the court exercises a discretion which cannot be questioned.
This statement appears, on the face of it, to be a very broad
statement, depending on the interpretation of the words "or
other matters personal to the party applying for it."
From the case of Rex v. The Board of Education, [1910] 2
K.B. 165, especially at p. 179, I infer that the discretion of the
Court is to be exercised bona fide, not influenced by extraneous
or irrelevant considerations, and not arbitrarily or illegally. The
above statement has been approved of by Middleton J. (as he
then was) in Re City of Ottawa and Provincial Board of
Health (1914), 33 O.L.R. 1, 20 D.L.R. 531, and by other
judges in other cases. An examination of the above andother
cases leads me to the conclusion that if I exercise my discretion,
that discretion must be exercised as a result of something
connected with the right itself, and not something extraneous
thereto.
While conceding that the Agency, in granting a
licence, did so in the exercise of a discretion and
that it was entitled to examine the bona fides of an
applicant as part of the exercise of that discretion,
applicants' counsel argued that this did not entitle
the Agency to take into account extraneous mat
ters in the determination of the bona fides. As I
understood him, the relationship of the applicants
herein to L. H. Gray and Son, Ltd. and William
H. Gray was, in his view, an extraneous matter
which ought not to have been considered by the
Board in reaching its decision not to renew the
applicants' interprovincial egg trading licence.
I cannot agree. In my view, the sale by L. H.
Gray and Son, Ltd. of that part of its business
related to its trade interprovincially in eggs was
plainly a colourable device to circumvent the fact
that the vendor company was unable to obtain a
licence for that kind of trade. The agreement, the
option to buy back, the methods of selling, invoic
ing and transporting of eggs produced by the
vendor and the timing of the sale of the business,
to all of which I have previously referred, amply
support the inferences drawn by the Agency which
formed the basis of their refusal to renew the
applicants' licence, namely, that the relationships
of all the parties were so interwoven as to consti
tute the application by the Wights in effect an
application by the Grays who were not entitled to
a licence.
These were not extraneous matters. They
showed a course of conduct in which the applicants
played an integral part, which had existed from at
least June 1976 to the date of the hearing in May
1977. It enabled the Gray company and Gray to
do indirectly what they could not do directly. It
was a course of conduct which would undoubtedly
continue if the licence were renewed. If it was not
to continue, the applicants could have so stated at
the hearing. They did not do so. It must be expect
ed then that nothing in the arrangement would
change and that arrangement clearly enabled the
Gray company and William H. Gray to elude the
Canadian Egg Licensing Regulations by using the
applicants as a shield.
Put another way, the agreement of sale was not
a bona fide sale of a business but was a colourable
attempt to avoid the obligations imposed on those
proposing to engage in the export and interprovin-
cial marketing of eggs. Thus, the applicants, by
assisting in this attempt, did not act wholly in good
faith. The inquiry by the Agency to ascertain the
applicants' bona fides did not involve an inquiry
into extraneous matters but was encompassed by
the duty imposed on the respondent in respect of
the issuance of licences under the Canadian Egg
Licensing Regulations.
The words of Schroeder J.A. dealing with an
application for mandamus in Re Forfar and
Township of East Gwillimbury (1971) 20 D.L.R.
(3d) 377 at p. 384,' also relating to different
legislation and, of course, different facts are pecu
liarly apposite to this application under section 28
of the Federal Court Act.
The artificial series of transactions entered into by the respond
ent in concert with her husband were clearly designed to
circumvent the provisions of the Planning Act. I am unable to
accept the submission of counsel for the respondent that the
subdivision of the lands contrary to the provisions of the by-law
and of s. 26 of the Act is a consideration extraneous and
irrelevant to the application for a building permit. It is a matter
most material for consideration by the Court of an application
for a mandamus to compel the issuance of such a permit.
There was, in my view, ample, properly admis
sible evidence upon which the Agency could have
concluded that the applicants' licence ought not to
have been renewed for the reasons given by its
chairman in his telex. There has, thus, been no
error of law demonstrated and I would dismiss the
section 28 application.
Costs are not awarded in section 28 applications
unless the Court, in its discretion, for special rea
sons, so orders (Rule 1408). The respondent seeks
costs of $500 in this case because, counsel said, the
applicants sought to circumvent the judgments in
the two Gray cases. The Canadian Egg Licensing
Regulations are not models of clarity in the deter
mination of how the Board's discretion may be
exercised so that, I do not think that, properly, it
could clearly be said that the applicants' applica-
' Also see Seabee Homes Ltd. v. Corporation of Town of
Georgetown (1962) 31 D.L.R. (2d) 705, aff d. (1962) 33
D.L.R. (2d) 278 (Ont. C.A.).
tion was so frivolous and vexatious as to warrant
this Court ordering costs to be paid by the unsuc
cessful applicants.
* * *
HEALD J.: I concur.
* * *
MAcKAY D.J.: I concur.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.