2012 QCCA 655, 2012 QCCA 655

Imperial Tobacco Canada ltée c. Canada (Procureur général) 2012 QCCA 655 COUR D’APPEL CANADA PROVINCE DE QUÉBEC GREFFE DE MONTRÉAL N° : 500-09-022 500-128 (500-06-000070-983 et 500-06-000076-980) DATE : LE 11 AVRIL 2012 SOUS LA PRÉSIDENCE DE L'HONORABLE MARIE-FRANCE BICH, J.C.A. N o : 500-06-000070-983 IMPERIAL TOBACCO CANADA LTÉE REQUÉRANTE – Défenderesse/demanderesse en garantie c.

PROCUREUR GÉNÉRAL DU CANADA INTIMÉ – Défendeur en garantie et CÉCILIA LÉTOURNEAU MISE EN CAUSE – Demanderesse N o : 500-06-000076-980 IMPERIAL TOBACCO CANADA LTÉE REQUÉRANTE – Défenderesse/demanderesse en garantie c. et PROCUREUR GÉNÉRAL DU CANADA INTIMÉ – Défendeur en garantie et CONSEIL QUÉBÉCOIS SUR LE TABAC ET LA SANTÉ et JEAN-YVES BLAIS MIS EN CAUSE – Demandeurs JUGEMENT [ 1 ] Par jugement du 14 février 2012, la Cour supérieure, district de Montréal (l'honorable Brian Riordan), statue sur la requête d'Imperial Tobacco Canada Ltd. (ITCAN), qui souhaite amender ses requêtes introductives d'instance en garantie à l'encontre du procureur général du Canada, notamment en y ajoutant les paragraphes 149.1 à 149.13.

Sur ce dernier point, la requête pour amender d'ITCAN, accueillie par ailleurs, est rejetée. [ 2 ] Le juge conclut à ce propos que : [37] Dans cette optique, les ajouts proposés par les paragraphes 149.1 à 149.13 changeraient la nature des procédures.

Les permettre résulterait dans des appels en garantie nouveaux et sans rapport avec leurs prédécesseurs, du moins en ce qui concerne les paragraphes ajoutés. [ 3 ] Arguant de son droit à une défense pleine et entière et soulignant que les paragraphes 149.1 à 149.13 de sa requête introductive d'instance amendée ne font que préciser une thématique déjà présente dans la version précédente de sa requête introductive d'instance en garantie, ITCAN demande la permission d'appeler de ce refus. Elle allègue notamment ce qui suit aux paragraphes 22 et 23 de sa requête pour permission d'appeler : 22.

It was thus already alleged in the Actions in Warranty that the Federal Government has had a significant direct interest in tobacco

as a source of taxes and duties and that should not be ignored in the determination of its liability and share of any damages should be determined, inter alia , with regards to its financial interest in taxes and royalties. 23. ITCAN was well-founded in presenting further details regarding these allegations and developing on the effect that such benefits may have on the liability and apportionment of liability in dispute.

The Amendments complete, clarify and expose additional facts in support of the allegations and thus better assist the Court in its determination of the rights of the parties on the merits of the main action and the Actions in Warranty. * * [ 4 ] On trouve les allégations suivantes dans la requête introductive d'instance originale de l'action en garantie consécutive au recours collectif institué par les mis en cause Blais et Conseil québécois sur le tabac et la santé (des allégations équivalentes se trouvent dans l'action en garantie instituée consécutivement au recours collectif intenté par la mise en cause Létourneau) : 11.

This action in warranty is being brought to establish the liability of the federal government to ITCAN and to members of the class: (

a) for the acts, omissions, breach of duties and obligations and faults of: (

i) officials of Health Canada, successor to the Department of National Health and Welfare and of the Products Safety Branch of the former Department of Consumer and Corporate Affairs (hereinafter "Health Canada" ); (ii) officials in the Department of Agriculture and Agri-Food Canada (hereinafter "Agriculture Canada" ; (iii) the Ministers, Deputy Ministers, Assistant Deputy Ministers, Executive Directors, members of committees, administrative heads, scientists and other public servants of Health Canada and Agriculture Canada, (collectively referred to herein as the "Officials" , because to the extent that any manufacture, promotion or sale of ITCAN's Products resulted in the Diseases suffered by the Plaintiffs or members of the class, ITCAN states that the liability, if any, for damages and reparation resides with the federal government; (

b) as a result of its civil liability, resulting from the conduct and omissions of Officials of Health Canada and Agriculture Canada in connection with ITCAN's production, sale and marketing of the Products, including risk disclosure or any failure to inform members of the class; (

c) as a result of its civil liability, resulting from the conduct and omissions of Officials of Agriculture Canada and Health Canada, in the design, licensing and manufacturing of new strains of tobacco purchased by ITCAN and used in the Products, and their promotion of the lower delivery Products to consumers; (

d) subsidiarily, for its proportionate liability and share of any award of damages made against ITCAN such share to be determined, inter alia , with regard to: (

i) the degree of participation and fault of Officials of the federal government in each of the matters alleged by the Plaintiffs against ITCAN; (ii) the representations, information and advice given by the federal government to smokers and potential smokers and to ITCAN; (iii) the requests, mandates, directions and requirements made to or imposed on ITCAN by the federal government in respect of the relevant matters pleaded in the Principal Action; and (iv) the extent of the federal government's financial interest, through the Minister of National Revenue and otherwise, in taxes on the proceeds of sale of the Products and in the royalties derived from the federal government's licensing of intellectual property rights in the strains of tobacco to farmers whose tobacco was purchased by ITCAN from Canadian tobacco marketing boards and uses in ITCAN's Products, as more fully set out below. […] 16.

At all relevant times in respect of matters pleaded in the Principal Action, the federal government and its Officials owed obligations not to cause injury and duties of care to ITCAN, and to the members of the class, when the federal government was designing, marketing and manufacturing the tobacco strains used in virtually all of the Principal Defendants' Products, including without limitation the lower tar and marginally-higher nicotine cigarettes (such as the "light" and "mild" cigarettes), that were purchased or used by members of the class in Québec.

The federal government is itself a manufacturer whose obligations and liability is governed by general civil law provisions, which are binding on the federal government. In particular: (

a) The federal government chose to enter the commercial chain of production of the Products by designing and licensing the tobacco strains used by the Principal Defendants in manufacturing their Products; […] (

e) The federal government charged licensing fees and royalties and earned commercial income from tobacco growers who used seeds of the new tobacco strains that the federal government had developed; (

f) The federal government was the leader in creating and promoting the "light" and "mild" cigarettes;

(

g) Agriculture Canada researched, developed, grew, marketed and distributed tobacco, for the benefit of itself and the tobacco farming and processing industry in Canada; (

h) As a result of the foregoing, the tobacco developed and marketed by the federal government became, by the 1980's, virtually the only tobacco available in Canada for the commercial production of cigarettes; and (

i) Through the Minister of National Revenue and fiscal legislation, the federal government has derived a significant portion of its annual revenues from the direct taxation of the Products and the indirect taxation of the agricultural, manufacturing and distribution operations involved in the production and sale of tobacco and tobacco Products; […] 75. The federal government licensed the use of their tobacco strains by farmers and received substantial commercial income, in the form of license fees and royalties, for those tobacco strains.

The federal government received seed royalties for its intellectual property rights in those new varieties of tobacco. […] 146. Ever since Confederation, the federal government has had a significant direct interest in tobacco as a source of taxes and duties. 147. The federal government has assiduously protected its financial interests derived from tobacco products and tobacco farming, even after Health Canada began providing, and then insisting upon ITCAN providing, information and warnings to smokers and potential smokers on its packaging and in advertisements (at times when advertising was permitted). 148.

At all times material to the Principal Action, the direct revenues of the Government of Canada from the manufacture and sale of ITCAN'S tobacco products were many times the profits derived by ITCAN from that same manufacture and sale. In particular: (

a) The federal government earned licensing fees on the sale of the genetically redesigned tobacco strains; (

b) The total revenue of the Government of Canada derived from tobacco products between 1950 and 1962 was in excess of $3,341,000,000; (

c) The federal government has repeatedly increased the rates of tax on tobacco products; and (

d) In 2004, the federal and provincial governments collected approximately $8,679,300,000 in taxes and duties from tobacco products. 149.

Because the federal government shares in the proceeds of all the sales for consumption in Canada of all tobacco Products sold by all the Principal Defendants, the federal government should share the liability, if any, to the Plaintiffs or to members of the class. [ 5 ] Les quelques amendements à ces paragraphes (et d'autres) n'ont pas été contestés [1] , mais les ajouts suivants l'ont été et le juge a donné raison sur ce point au procureur général du Canada : 149.1 The Plaintiffs have alleged that ITCAN’s products should effectively not have been placed into the stream of commerce, and that ITCAN’s manufacturing, marketing and sale of such products was wrongful and illegal.

ITCAN denies such claims. Moreover, as detailed above, ITCAN further pleads that the federal government and/or its agents (the “Defendant-in-Warranty”) prescribed the standard of disclosure and applicable warnings, as well as the governing manufacturing, marketing and sale requirements, at all material times. ITCAN complied with these standards.

Accordingly, ITCAN states that the Defendant-in-Warranty is implicated – directly or indirectly – in any civil “wrongs” that are alleged to have been committed by ITCAN. 149.2 Having been involved in virtually all aspects of the manufacturing, marketing and sale of ITCAN’s tobacco products, the Defendant-in-Warranty also directly profited from such products by imposing significant taxes on the manufacturing and sale thereof.

In so doing, the Defendant-in-Warranty generated billions of dollars in tax revenues over the relevant periods from the lawful manufacturing and the lawful sale of tobacco in the Province of Quebec. In this regard, the Defendant-in-Warranty has historically been involved in a de facto commercial joint venture with ITCAN. 149.3 Since 1950, the federal and provincial governments have collectively received close to $145 billion in tax revenues from the sale of tobacco.

Since 2000, the federal government alone has collected in excess of $27 billion in taxes and duties from tobacco products, excluding general sales taxes.

Accordingly, Defendant-in-Warranty has unequivocally received moneys and has been enriched – directly and significantly – by virtue of the manufacturing and sale of ITCAN’s products. 149.4 At all material times, the Defendant-in-Warranty’s collection and receipt of revenues from the manufacturing and sale of tobacco products was derived from two discrete sources, over and above applicable sales and consumer taxes and its commercial income from sales and licensing of tobacco.

In particular, Revenue Canada has historically imposed “duties” on all tobacco products manufactured in Canada at the point of “packaging” (“ Tobacco Duties ”), which obligate ITCAN to remit millions of dollars annually to the federal government.

More specifically, as “manufacturers” of tobacco product that is distributed, sold or stored in Canada, ITCAN is obligated to hold a valid license under the federal Excise Act , 2001, S.C. 2002, c. 22 (the “ Excise Act, 2001 ”), pursuant to which ITCAN is subject to federal excise duties on all of its domestically manufactured tobacco product. 149.5 In addition, ITCAN and other Canadian tobacco manufacturers are also subject to a targeted surtax on their corporate profits, pursuant to sections 182 and 183 of the Income Tax Act , R.S.C., 1985, c. 1 (the “ Tobacco Manufacturers Surtax ”).

The surtax is levied at a rate of 50 percent of the corporate income tax levied on the manufacturing profits of tobacco companies. Since 2000, Defendant-in- Warranty has generated revenues of approximately $450 million from the imposition of the Tobacco Manufacturers Surtax. Notably, such revenues are exclusive of the tax revenues derived from the corporate income tax imposed on the tobacco manufacturers. In this

regard, the Tobacco Manufacturers Surtax is unique to the tobacco industry – there is no equivalent tax on any other industry in Canada. 149.6 Since 2000, ITCL has remitted to Revenue Canada in excess of $13 billion in Tobacco Duties. Moreover, ITCL has remitted an additional $293 million to the Revenue Canada during this same period in respect of the Tobacco Manufacturers Surtax.

Of these amounts, approximately $2.8 billion and $64 million, respectively, were attributable to ITCL tobacco products sold in the Province of Quebec. 149.7 As noted above, both the Tobacco Duties and the Tobacco Manufacturers Surtax are imposed by Defendant-in-Warranty on the manufacturing and sale of the very tobacco products that it regulates.

Accordingly, having prescribed the applicable manufacturing and distribution processes for tobacco products, as well as the warnings and disclosure standards, Defendant-in-Warranty is directly involved and directly profits from the manufacturing and sale of such regulated products. ITCAN pleads that this revenue structure is unique to the tobacco industry for the following reasons (among others): (

i) As described above, Defendant-in-Warranty has historically been directly involved in the manufacturing and regulation of tobacco products. Accordingly, it has a direct role in the production of the very good that is ultimately taxed. No similar claim can be made in respect of any other product in Canada; (ii) The sources of tax revenue are themselves unique to the industry in that they are “product-specific” duties. They amount to a form of “industry tax”, which is separate and apart from the various corporate and consumer taxes that are otherwise imposed in respect of other products or other corporate actors.

Accordingly, the Defendant-in-Warranty’s collection of tax moneys and enrichment is derived from the very existence of the lawful tobacco industry in which the Defendant-in-Warranty itself is directly involved. The reason and/or justification for this collection and resulting enrichment is ITCAN’s lawful manufacturing, marketing and sale of tobacco products.

Absent ITCAN’s ability to lawfully manufacture, market and sell tobacco products in the Canadian marketplace, there is a total absence of reason and/or justification for the corresponding tax payments received by the Defendant-in-Warranty. 149.8 Moreover, to the extent that the manufacture, marketing and sale of tobacco products in accordance with the dictates of the Defendant-in-Warranty is found to be unlawful or otherwise improper and damages are awarded to Plaintiffs, ITCAN pleads that any amount of tax collected and received by Defendant-in-Warranty further to such unlawful manufacturing and sale of tobacco products have to be disgorged and/or contributed to the payment of any damages awarded to the Plaintiffs, if any, up to the total amount of ITCL’s historical remittance of Tobacco Manufacturers Surtax. 149.9 ITCAN further pleads that the Defendant-in-Warranty’s collection and reception of taxes is only justifiable if and to the extent that the governing tax regime is valid, including the “object and purpose” of the tax regime (i.e., the lawful sale of tobacco products in Canada).

In this regard, the legislative regime establishing both the Tobacco Duties and the Tobacco Manufacturers Surtax is wholly premised upon the lawful manufacturing and sale of tobacco products in Canada. Moreover, ITCAN’s very commercial existence is contingent upon this lawful commercial activity, and any taxes paid to the Revenue Canada were remitted solely on this basis.

If the tobacco products regulated and directed by the Defendant-in-Warranty are found not to have been properly placed into the Quebec stream of commerce by ITCAN (and others) – as alleged in the Plaintiffs’ various claims – ITCAN pleads that the very framework of the governing tax regime necessarily collapses, as does the framework for ITCAN’s commercial existence. 149.10 Accordingly, if ITCAN is found to have acted improperly by manufacturing, marketing and selling tobacco in Quebec in accordance with the dictates of the Defendant-in-warranty and its agents, ITCAN pleads that the Defendant-in-Warranty can assert no legitimate basis for the retention of any tax revenues derived from such commercial activity.

More specifically, to the extent that ITCAN’s manufacturing, marketing and sale of tobacco products is found to be in violation of the Civil Code or other provincial statutes, there is no reason and/or justification and no legal basis for the Defendant-in-Warranty’s collection and reception of taxes resulting from the manufacturing and sale of such products in the Province of Quebec. 149.11 ITCAN further claims that to the extent that ITCAN's manufacturing and sale of tobacco products is found to be in violation of the Civil Code or other provincial statutes, there was necessarily an absence of reason and/or justification for the historical taxes paid by ITCAN to the Defendant-in-Warranty.. 149.12 Accordingly, ITCAN claims that to the extent that its sales of tobacco products in Quebec are found to be illegal or unlawful and constitute civil wrongs – as alleged by the Plaintiffs – the Defendant-in-Warranty has received moneys it was not entitled to collect and receive and has been unjustly enriched by the value of any tax revenues derived from such sales (as set out above), and/or is otherwise improperly in receipt of tax monies for which there is no valid reason and/or justification.

ITCAN therefore seeks disgorgement of all such “gains” . 149.13 ITCAN further claims that, by virtue of the de facto joint venture entered into between the Defendant-in-Warranty and ITCAN with respect to the manufacturing, marketing and sale of tobacco products in the Province of Quebec, the Defendant-in-Warranty is liable for any amounts owed by ITCAN as a result of the Plaintiffs’ claims, up to the total value of the taxes historically received from ITCAN’s manufacturing and sale of the offending tobacco products . [Je souligne.] [ 6 ] Comme on peut le constater, en ce qui concerne les paragraphes 149.1 à 149.7 (à l'exclusion, peut-être, de la dernière phrase du paragraphe 149.7), les ajouts envisagés ne font que préciser les allégations antérieures d'ITCAN à l'endroit du procureur général du Canada.

Le paragraphe 149.1 est une réitération de la thèse générale qui sous-tend l'action en garantie d'ITCAN; quant aux paragraphes 149.2 à 149.7, ils détaillent les allégations qu'on trouve notamment aux sous-paragraphes 16e) et i), ainsi qu'aux paragraphes 146 à 149 de la version antérieure de la requête introductive d'instance en garantie. En ce sens, les ajouts en question, sans être complètement inutiles, sans doute, n'étaient pas nécessaires et auraient pu, pour ce motif, être refusés sans que cela affecte le droit d'ITCAN d'en faire la preuve au procès.

[ 7 ] On connaît en effet la règle ordinairement applicable aux allégations d'une requête introductive d'instance, fut-elle en garantie (art. 76, 77 et 111 C.p.c. ) : elles doivent être suffisamment détaillées pour permettre à la

partie adverse de s'en défendre en toute connaissance de cause, ce qui ne veut pas dire que tous les détails doivent figurer dans la procédure écrite. La preuve de ces détails ne pourra par ailleurs pas être empêchée au procès dans la mesure où ils se rattachent de façon suffisante aux allégations plus générales de même nature. C'est le cas en l'espèce. [ 8 ] Il est vrai que ce n'est pas là la raison pour laquelle le juge de première instance a refusé l'inclusion des paragraphes 149.1 à 149.7, qu'il a plutôt considérés comme faisant un tout avec les autres paragraphes dont ITCAN souhaite l'ajout.

Il a peut-être eu tort, encore que ces paragraphes aient aussi pour fonction de servir d'introduction aux paragraphes qui suivent, mais, quoi qu'il en soit. je ne vois pas comment cela pourrait faire obstacle à ce qu'ITCAN en fasse la preuve au procès, au moment opportun. [ 9 ] Dans ces circonstances, un appel sur le sujet paraît superflu, n'étant du reste pas de nature à affecter, sur ce point, le dispositif du jugement, et il ne servirait pas les fins de la justice. [ 10 ] De leur côté, la dernière phrase du paragraphe 149.7 ainsi que les paragraphes 149.8 à 149.13 vont à première vue plus loin que les allégations de la requête introductive précédente, et ce, en faisant valoir l'illégalité potentielle de la perception par le gouvernement fédéral de taxes et droits de même qu'une sorte d'enrichissement sans cause dont il serait potentiellement redevable (voir en particulier les paragraphes 149.12 et 149.13).

On doit convenir avec le juge de première instance qu'il s'agit là de questions qui ont peu à voir avec l'action en garantie telle qu'intentée originalement, et moins encore avec l'action principale.

Sans doute le débat qui pourrait en naître dérive-t-il de l'action principale et de l'action en garantie, mais il repose sur des assises tout autres, constituant une nouvelle cause d'action, et il peut aisément en être scindé. [ 11 ] Conclure autrement aurait assurément l'effet d'encombrer davantage des instances qui sont déjà suffisamment lourdes : il n'est pas nécessaire qu'on les plombe encore de questions peut-être intéressantes, mais qui seraient surtout de nature à en détourner l'objet véritable et le cours, au détriment de toutes les parties (y compris ITCAN). [ 12 ] En ce sens, on ne peut pas reprocher au juge d'avoir conclu comme il l'a fait. [ 13 ] En outre, ainsi que l'a remarqué l'avocat du procureur général du Canada, aucune conclusion de la requête introductive d'instance en garantie amendée ne correspond aux réclamations sous-jacentes aux paragraphes 149.7 in fine à 149.13, ce qui semblerait démontrer de surcroît leur inutilité. [ 14 ] Tout cela étant, le pourvoi me paraît donc voué à l'échec et, dans ces circonstances, l'intérêt de la justice, au sens de l'article 511 C.p.c. , milite clairement en faveur du rejet de la requête pour permission d'appeler. [ 15 ] P our CES MOTIFS , la requête est rejetée , avec dépens.

MARIE-FRANCE BICH, J.C.A. Me Suzanne Côté Me Thomas Craig Lockwood Osler Hoskin & Harcourt Pour la requérante Me Maurice Régnier Gilbert Simard Tremblay Pour l'intimé Procureur général du Canada Me Marc Beauchemin De Grandpré Chait et Me André Lespérance Lauzon Bélanger Lespérance inc. Pour les mis en cause Conseil québécois sur le tabac et la santé, Jean-Yves Blais et Cécilia Létourneau Date d’audience : Le 27 mars 2012