2021 FCA 86, 2021 FCA 86

A-312-19 2021 FCA 86 Attorney General of Canada ( Appellant ) v. Dr. David Kattenberg and Psagot Winery Ltd. ( Respondents ) Indexed as: Canada (Attorney General) v. Kattenburg Federal Court of Appeal, Noël C.J., Boivin and Rivoalen JJ.A.—By videoconference; Ottawa, May 5, 2021.

Food and Drugs — Labelling — Appeal from Federal Court decision setting aside decision of Canadian Food Inspection Agency, Complaints and Appeals Office (Agency) holding that “Product of Israel” labels on wines produced in West Bank complied with Canadian labelling legislation — Federal Court holding that labels false, misleading, deceptive — Agency interpreting, applying labelling requirements under Food and Drugs Act , Consumer Packaging and Labelling Act — Language in Canada-Israel Free Trade Agreement (CIFTA) not indicating that occupied territories part of Israel — Canada equating goods from territory where “Israel’s customs laws are applied” to goods originating in “Israel or another CIFTA beneficiary” — This distinction in line with Canada’s official position not to recognize occupied territories as part of Israel — Agency’s

interpretation not consistent with text, context, purpose of legislation — Not possible to determine how Agency construed its legislation in coming to conclusion that labels compliant, including how pivotal issues addressed — Matter remitted to Agency — Appeal dismissed.

Administrative Law — Judicial Review — Standard of Review —Federal Court setting aside decision of Canadian Food Inspection Agency, Complaints and Appeals Office (Agency) holding that “Product of Israel” labels on wines produced in West Bank complied with Canadian labelling legislation — Federal Court holding that labels false, misleading, deceptive — Decision rendered using standard of reasonableness before release of Canada (Minister of Citizenship and Immigration) v.

Vavilov (S.C.C.) — Whether Federal Court identified, properly applied appropriate standard of review — It needed to be determined if Federal Court properly applied standard of reasonableness based on law as it stands post-Vavilov — Agency’s

interpretation not consistent with text, context, purpose of legislation — Unclear how Agency construed its legislation in coming to conclusion that labels compliant — Vavilov clear that when confronted with absence of reasoned explanation, courts should refrain from determining proper outcome, providing required justification themselves — In post-Vavilov context, Federal Court should not have embarked on Agency’s task.

This was an appeal from a Federal Court decision setting aside the decision of the Complaints and Appeals Office of the Canadian Food Inspection Agency (Agency) holding that “Product of Israel” labels on wines produced in the West Bank complied with Canadian labelling legislation. The Federal Court held that the labels were false, misleading and deceptive. In its view, the decision of the Agency was not reasonable when measured against its analysis. The Federal Court quashed the decision on this basis and remitted the matter back to the Agency with instructions that it determine how the wines should be labelled.

The Federal Court rendered its decision using the standard of reasonableness before the Supreme Court released its decision in Canada (Minister of Citizenship and Immigration) v. Vavilov . At issue was whether the Federal Court identified the appropriate standard of review and applied it properly. Held , the appeal should be dismissed. Although the Federal Court applied the standard of reasonableness in a pre- Vavilov context, it needed to be determined if it properly applied this standard based on the law as it stands post- Vavilov .

The Supreme Court in Vavilov made it clear that in conducting a reasonableness review, the Court must focus on the decision made and the justification for it. In this case, the Agency had to interpret and apply the labelling requirements under the Food and Drugs Act ( FDA ) and the Consumer Packaging and Labelling Act ( CPLA ) and decide whether the labels in issue were false or misleading under subsection 5(1) of the FDA and

section 7 of the CPLA . The language in the Canada-Israel Free Trade Agreement (CIFTA) unequivocally covers Israel and the occupied territories, including the West Bank, but does not indicate that the occupied territories are part of Israel. In its domestic legislation, Canada equates goods that originate in the territory where “Israel’s customs laws are applied” to goods that originate in “Israel or another CIFTA beneficiary”.

This distinction between goods that originate in Israel and goods that originate in other CIFTA beneficiaries, for the purpose of determining entitlement for preferential tariff rates under CIFTA, accords with Canada’s official position, which does not recognize that the occupied territories are part of Israel. Where, as here, legislative

interpretation is in issue, the administrative decision maker must demonstrate that its

interpretation of the relevant provisions is consistent with their text, context and purpose. This demonstration was totally lacking in the present instance. It could not be determined how the Agency construed its legislation in coming to the conclusion that the labels are compliant, including how it addressed the pivotal issues. Vavilov makes it clear that when confronted with the absence of a reasoned explanation, courts should refrain from determining the proper outcome and providing the required justification themselves.

In a post- Vavilov context, the Federal Court should not have embarked on the Agency’s task. The matter was remitted to the Agency for reconsideration and redetermination. STATUTES AND REGULATIONS CITED

Canadian Charter of Rights and Freedoms, being

Part I of the Constitution Act, 1982,

Schedule B, Canada Act 1982, 1982, c. 11 (U.K.)[R.S.C., 1985, Appendix II, No. 44]. Consumer Packaging and Labelling Act, R.S.C., 1985, c. C-38, s. 7. Customs Tariff, S.C. 1997, c. 36, s. 50(1). Food and Drug Regulations, C.R.C., c. 870, s. B.02.108. Food and Drugs Act, R.S.C., 1985, c. F-27, s. 5. Regulations Defining Certain Expressions for the Purposes of the Customs Tariff, SOR/97-62, s. 1 “Israel or another CIFTAbeneficiary”. TREATIES AND OTHER INSTRUMENTS CITED Free Trade Agreement Between the Government of Canada and the Government of the State of Israel, July 31, 1996, [1997] Can.

T.S.No. 49, Art. 1.4.1(b). CASES CITED APPLIED: Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, [2019] 4 S.C.R. 653. REFERRED TO: Entertainment Software Association v. Society of Composers, Authors and Music Publishers of Canada, 2020 FCA 100, [2021] 1 F.C.R.374; Canada (Attorney General) v. Redman, 2020 FCA 209; Manitoba Government and General Employees’ Union v. The Minister ofFinance for the Government, 2021 MBCA 36 .

AUTHORS CITED Government of Canada. “Canadian policy on key issues in the Israeli-Palestinian conflict” (19 March, 2019), online:<https://www.international.gc.ca/world-monde/international_relations-relations_internationales/mena-moan/israeli-palistinian_policy-politique_israelo-palestinien.aspx?lang=eng>. APPEAL from a Federal Court decision (2009 CF 1003, [2019] 4 F.C.R. 747) setting aside the decision of the Complaints and AppealsOffice of the Canadian Food Inspection Agency holding that “Product of Israel” labels on wines produced in the West Bank compliedwith Canadian labelling legislation. Appeal dismissed.

APPEARANCES Gail Sinclair, Negar Hashemi and Jennifer Caruso for appellant. A. Dimitri Lascaris for respondent Dr. David Kattenburg. David Elmaleh for respondent Psagot Winery Ltd. SOLICITORS OF RECORD Deputy Attorney General of Canada for appellant. A. Dimitri Lascaris, Montréal, for respondent Dr. David Kattenburg. RE-LAW LLP, Vaughan, Ontario, for respondent Psagot Winery Ltd.

The following are the reasons for judgment of the Court rendered in English by [1] Noël C.J.: This is an appeal from a judgment of the Federal Court (per Mactavish J. as she then was), setting aside the decision ofthe Complaints and Appeals Office of the Canadian Food Inspection Agency (the Agency) holding that “‘Product of Israel’” labels onwines produced in the West Bank complied with Canadian labelling legislation (2019 FC 1003, [2019] 4 F.C.R. 747). [2] The Federal Court Judge held that the labels were false, misleading and deceptive.

She came to this view based on her ownanalysis of the evidence and the labelling legislation (the relevant provisions as they read at the time of the decision of the Agency areset out in Annex 1). In her view, the decision of the Agency was not reasonable when measured against her analysis. She quashed thedecision on this basis and remitted the matter back to the Agency with instructions that it determine how the wines should be labelled. [3] The issue to be addressed is whether in coming to this conclusion, the Federal Court judge identified the appropriate standard ofreview and applied it properly.

Standard of Review [4] After the Federal Court Judge rendered her decision in this case, the Supreme Court released its landmark decision in Canada(Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, [2019] 4 S.C.R. 653 (Vavilov). Given the importance of this

decision, the parties were asked by order of this Court dated October 6, 2020, to provide written submissions on the impact that it might have on this appeal. [ 5 ] In his memorandum of fact and law, Dr. Kattenburg maintained, as he did before the Federal Court Judge, that reasonableness was not the applicable standard of review. He argued that the

interpretation of the relevant legislation in a manner that reflects international law gives rise to an issue of “ central importance to the legal system as a whole ”, with the result that correctness was the applicable standard of review (memorandum of Dr. Kattenburg, at paragraph 46). [ 6 ] During the hearing, Dr. Kattenburg conceded that reasonableness is the applicable standard, and rightly so. If anything, Vavilov has reinforced reasonableness as the presumptive standard applicable in this case ( Vavilov , at paragraphs 59 – 61 ).

Principles of international law, should they bear on the issue to be decided (see e.g. Entertainment Software Association v. Society of Composers, Authors and Music Publishers of Canada , 2020 FCA 100 , [2021] 1 F.C.R. 374 , at paragraphs 76 – 92), are merely part of the context that can inform the

interpretation of Canada’s labelling legislation ( Vavilov , at paragraph 114 ). Application of the Reasonableness Standard [ 7 ] We now turn to the question whether the standard of reasonableness was properly applied to the matter before us. Although the Federal Court Judge applied this standard in a pre- Vavilov context, this Court must stand in the shoes of the Federal Court Judge and determine whether she properly applied this standard based on the law as it stands post- Vavilov . [ 8 ] Vavilov provides fundamental guidance both on the reasonableness standard itself and its proper application.

In providing this guidance, the Supreme Court recognized that its decision departs in some key aspects from prior jurisprudence but recognized that certainty in the law had to be measured against the cost of continuing to follow a flawed approach. [ 9 ] Perhaps the most significant development in Vavilov is the recognition that when Parliament has created an administrative decision maker for the specific purpose of administering a legislative scheme, it must be accepted that Parliament also intended that the decision maker fulfills its mandate and interprets the law applicable to all issues that come before it ( Vavilov , at paragraph 24 ).

This recognition of the legitimacy and authority of administrative decision makers brings with it the corresponding requirement that administrative decision makers adopt a “culture of justification” and provide a reasoned explanation for the decisions that they make in discharging their statutory mandate ( Vavilov , at paragraph 14 ). [ 10 ] In so stating, the Supreme Court made it clear that in conducting a reasonableness review, the Court must focus on the decision made and the justification for it ( Vavilov , at paragraph 83 ).

If the reasons read in conjunction with the record do not make it possible to understand the decision maker’s reasoning on a critical point, the decision fails to meet the standard of reasonableness on that account alone ( Vavilov , at paragraph 103 ). [ 11 ] This is precisely what we are faced with in this case. The Agency had to interpret and apply the labelling requirements under the Food and Drugs Act , R.S.C., 1985, c. F-27 ( FDA ) and the Consumer Packaging and Labelling Act , R.S.C., 1985, c. C-38 ( CPLA ) and decide whether the labels in issue were false or misleading under subsection 5(1) of the FDA and

section 7 of the CPLA . [ 12 ] We know from the record that the position expressed by Global Affairs Canada with respect to the Canada-Israel Free Trade Agreement [ Free Trade Agreement Between the Government of Canada and the Government of the State of Israel , July 31, 1996], [1997] Can. T.S. No. 49 (CIFTA) played a determinative role in the decision that was reached (the relevant CIFTA legislation as it read at the time of the decision of the Agency is set out in Annex 2).

While CIFTA can be informative, we do not know why the Agency concluded that it was determinative of the issue that it was required to decide under its labelling legislation. [ 13 ] In its advice to the Agency, Global Affairs Canada states that the West Bank territory is included under CIFTA because it is a “territory where Israel’s customs laws are applied” (affidavit of Eric Jeaurond, appeal book, Vol. 3, page 491, paragraph 34, referring to

Article 1.4.1(

b) of CIFTA). This language unequivocally covers Israel and the occupied territories, including the West Bank, but does not indicate that the occupied territories are part of Israel. Indeed, in its domestic legislation, Canada equates goods that originate in the territory where “Israel’s customs laws are applied” to goods that originate in “Israel or another CIFTA beneficiary” (our emphasis) ( subsection 50(1) of the Customs Tariff , S.C. 1997, c. 36 ; see also the definition of “ Israel or another CIFTA beneficiary” [at

section 1 ] in the Regulations Defining Certain Expressions for the Purposes of the Customs Tariff , SOR/97-62 ).

This distinction between goods that originate in Israel and goods that originate in other CIFTA beneficiaries, for the purpose of determining entitlement for preferential tariff rates under CIFTA, accords with Canada’s official position, which does not recognize that the occupied territories are part of Israel (Government of Canada, “Canadian policy on key issues in the Israeli-Palestinian conflict” (last modified 19 March 2019), online: <https://www.international.gc.ca/world-monde/international_relations-relations_internationales/mena-moan/israeli-palistinian_policy- politique_israelo-palestinien.aspx?lang=eng>). [ 14 ] Needless to say,

section B.02.108 of the Food and Drug Regulations , C.R.C., c. 870 , insofar as it contemplates that the origin of wine products be identified by reference to their “country of origin”, cannot be applied literally when dealing with products that do not originate in a recognized country. [ 15 ] As the Supreme Court explains in Vavilov the process of justification, which binds administrative decision makers, does not necessarily require exhaustive or lengthy reasons and any reasons are to be reviewed in light of the record and submissions made by the parties. But whatever form this takes, where, as here, legislative

interpretation is in issue, the administrative decision maker must demonstrate that its

interpretation of the relevant provisions is consistent with their text, context and purpose ( Vavilov , at paragraph 120 as applied in Canada (Attorney General) v. Redman , 2020 FCA 209 , at paragraphs 20 – 21 ). Here this demonstration is totally lacking. [ 16 ] While there may be cases where reviewing courts can discern how an administrative decision maker construed the relevant legislation even though the matter was not explicitly addressed ( Vavilov , at paragraph 123 ), this is not such a case.

We simply have no idea how the Agency construed its legislation in coming to the conclusion that the labels are compliant, including how it addressed the pivotal issues: false and misleading as to what and from whose eyes and from which perspective is the question whether the labels are false or misleading to be assessed?

[17] Vavilov makes it clear that when confronted with the absence of a reasoned explanation, courts should refrain from determiningthe proper outcome and providing the required justification themselves (Vavilov, at paragraph 96). This merely recognizes Parliament’sinstitutional design choice in conferring on administrative decision makers the task of construing the legislation that they are called uponto apply and applying it to the facts of their case, exercises that call for deference on the part of reviewing courts.

It follows that in apost-Vavilov context, the Federal Court Judge should not have embarked on the Agency’s task. [18] The appropriate remedy is to send the matter back to the Agency so that it can determine the matter for itself. This is not the typeof case where this step can be bypassed because the outcome is self-evident (compare Manitoba Government and General Employees’Union v. The Minister of Finance for the Government, 2021 MBCA 36 , at paragraphs 104–108). In the course of itsreconsideration of the matter, the Agency will want to receive submissions from the affected parties.

This would include the complainantDr. Kattenburg as well as Psagot Winery Ltd. since its labels are in issue. It will also be open to the Agency to receive submissions anddetermine whether Charter [Canadian Charter of Rights and Freedoms] rights and freedoms are relevant to its decision-making, againensuring that there is a reasoned explanation for its decision. [19] To be clear, the Agency is not bound by the Federal Court Judge’s reasons. It will be open to the Agency as the decider of themerits of the labelling issue to come to whatever outcome it thinks appropriate, provided that its

interpretation and application of therelevant provisions to the facts in issue can be seen to be reasonable. Disposition [20] The appeal will therefore be dismissed and the matter will be remitted to the Agency for reconsideration and redetermination inconformity with these reasons. As no costs were sought, none are awarded. Boivin, J.A.: I agree. Rivoalen, J.A.: I agree. APPENDIX 1 Consumer Packaging and Labelling Act, R.S.C., 1985, c. C-38. Representations relating to prepackaged products 7

(1) No dealer shall apply to any prepackaged product or sell, import into Canada or advertise any prepackaged product that has appliedto it a label containing any false or misleading representation that relates to or may reasonably be regarded as relating to that product. Definition of false or misleading representation

(2) For the purposes of this section, false or misleading representation includes … (

c) any description or illustration of the … origin … that may reasonably be regarded as likely to deceive a consumer with respect to thematter so described or illustrated. Food and Drug Regulations, C.R.C., c. 870. B.02.108 A clear indication of the country of origin shall be shown on the principal display panel of a wine. Food and Drugs Act, R.S.C., 1985, c. F-27. Deception, etc., regarding food 5

(1) No person shall label, package, treat, process, sell or advertise any food in a manner that is false, misleading or deceptive or is likelyto create an erroneous impression regarding its character, value, quantity, composition, merit or safety. Food labelled or packaged in contravention of regulations

(2) An

article of food that is not labelled or packaged as required by, or is labelled or packaged contrary to, the regulations shall bedeemed to be labelled or packaged contrary to subsection (1). APPENDIX 2 Customs Tariff, S.C. 1997, c. 36. Canada–Israel Agreement Tariff Application of CIAT 50 (1) … goods that originate in Israel or another CIFTA beneficiary are entitled to the Canada–Israel Agreement Tariff rates of customsduty. Free Trade Agreement Between the Government of Canada and the Government of the State of Israel, July 31, 1996, [1997] Can. T.S. No. 49.

CHAPTER ONE Objectives …

Article 1.2 : Objective 1. The objective of this Agreement, as elaborated more specifically in its provisions, is to eliminate barriers to trade in, and facilitate the movement of, goods between the territories of the Parties, and thereby to promote conditions of fair competition and increase substantially investment opportunities in the free trade area. …

Article 1.4 :

Definitions of General Application 1. For the purposes of this Agreement, unless otherwise specified: … (

b) with respect to Israel the territory where its customs laws are applied; Regulations Defining Certain Expressions for the Purposes of the Customs Tariff , SOR/97-62 . Expressions Defined 1 For the purposes of the Customs Tariff , the following expressions are defined. … Israel or another CIFTA beneficiary means the territory where the customs laws of Israel are applied and includes the territory where those laws are applied in accordance with

Article III of the Protocol on Economic Relations set out in Annex V of the Israeli-Palestinian Interim Agreement on the West Bank and the Gaza Strip, dated September 28, 1995, as that Protocol is amended from time to time. ( Israël ou autre bénéficiaire de l’ALÉCI )