DISTRIBUTION G.V.A. INC. Applicant v. ATTORNEY GENERAL OF CANADA, 2017 FC 205

Date: 20170221 Docket: T-683-16 Citation: 2017 FC 205 [ENGLISH TRANSLATION] Ottawa, Ontario, February 21, 2017 PRESENT: The Honourable Justice Martineau BETWEEN: DISTRIBUTION G.V.A. INC. Applicant and ATTORNEY GENERAL OF CANADA Respondent JUDGMENT AND REASONS [ 1 ] This application for judicial review concerns the applicability of

section 1.1 of the

schedule to the Tobacco Act , S.C. 1997, c. 13 [Act], to the cognac and icewine flavouring additives found in cigars marketed and sold in Canada by the applicant and its retailers under the names “Neos Al’s Cognac Selection,” “Al’s Cognac Collection” and “Honey T Spiral Ice Wine” [disputed products]. [ 2 ] The general purpose of the Act is to serve public health. This can be fulfilled only by regulating the manufacture, labelling and sale of tobacco products so as to protect Canadians, particularly young persons, from inducements to use tobacco products (

section 4 of the Act). As such, the use of an additive set out in column 1 of the

schedule to the Act in the manufacture of a tobacco product set out in column 2 is prohibited (

section 5.1 of the Act). It is also prohibited to sell a tobacco product set out in column 2 of the

schedule that contains an additive set out in column 1 (

section 5.2 of the Act). Lastly, it is prohibited to package – or to sell – a tobacco product set out in column 2 of the

schedule to the Act in a manner that suggests, including through illustrations, that it contains an additive set out in column 1 (

section 23.1 of the Act). [ 3 ] However,

section 1.1 of the

schedule to the Act [exception] provides an exception for the following items set out in column 1 (Additive) and column 2 (Tobacco Product): " Column 1 " " 1.1 The prohibited additives referred to in item 1, excluding those that impart a flavour that is generally attributed to port, wine, rum or whisky " " " " Column 2 " " 1.1 Cigars that have a wrapper fitted in spiral form and that weigh more than 1.4 g but not more than 6 g, excluding the weight of any mouthpiece or tip, other than those referred to in item 1 " " " " Colonne 1 " " 1.1 Additifs interdits visés à l’article 1, sauf s’ils confèrent un arôme communément attribué au porto, au vin, au rhum ou au whisky " " " " Colonne 2 " " 1.1 Cigares qui sont munis d’une cape apposée en hélice et pèsent plus de 1,4 g mais au plus 6 g, sans le poids des embouts, sauf ceux visés à l’article 1 " [ 4 ] The applicant specializes in the import, distribution and sale of tobacco products in Canada, the United States and Mexico.

Among other products, it sells icewine (“Honey T Spiral Ice Wine”) and cognac (“Neos Al’s Cognac Selection” and “Al’s Cognac Collection”) flavoured cigars in packages of 10 or 12 units. The applicant is seeking declaratory relief allowing it to market and distribute the disputed products in Canada on the grounds that they are covered by the exception and consequently comply with

section 23.1 of the Act . The respondent, meanwhile, maintains to the Court that the disputed products are not covered by the exception and consequently do not comply with the Act. [ 5 ] The pertinent facts are not in dispute. [ 6 ] In 2009, Parliament amended the Act to limit the manufacture, marketing and sale of certain flavoured tobacco products (with the exception of menthol-flavoured products), notably cigarettes, little cigars and blunt wraps ( Cracking Down on Tobacco Marketing Aimed at Youth Act , S.C. 2009, c. 27, sections 2, 4 , 5 , 12 and 17 [2009 amendments]), while stating that the Governor in Council may, by order, amend the

schedule by adding, amending or deleting the name or description of an additive or tobacco product (section 9 of the 2009 amendments). [ 7 ] Subsequent to the 2009 amendments, tobacco manufacturers and importers introduced new types of cigars onto the Canadian market that were slightly larger than little cigars (

section 2 of the Act ) and contained various flavouring additives. The government responded in 2015 by adopting the Order Amending the

Schedule to the Tobacco Act [Order], which reinforces the general prohibition found in

section 1 of the

schedule by amending column 2 to add cigars with a wrapper not fitted in spiral form and cigars with tipping paper. [8] In January 2016, claiming to be acting under the authority of the Act, inspectors from Health Canada [federal office] demanded thata retailer in British Columbia remove disputed products from its shelves. The applicant submitted formal notice to the federal office tocease putting any form of pressure on its retailers. The federal office announced that it would review the applicant’s claims and that nomeasures would be taken in the interim.

However, in March 2016, inspectors went to the applicant’s warehouse and seized multipleproducts on the grounds that they did not comply with the Act. Additional seizures were carried out at other retailers of the applicantduring the following weeks. In April 2016, the applicant initiated civil proceedings to challenge the seizures and recover the seizedproducts.

It is not necessary to rule on the legality or reasonableness of the federal office’s decisions, for the parties came to anagreement under which the federal office allowed the release of the seized products and granted the applicant a grace period duringwhich to sell the seized products. At the same time, the applicant agreed to cease packaging and distributing any additional productsbearing the description “icewine” or “cognac” until a final judgment binding the parties could be rendered by the Federal Court pursuantto

section 18 of the Federal Courts Act, RSC 1985, c. F-7, hence the filing of this application for declaratory relief by the applicant. [9] This Court must therefore judicially determine the scope of the exception provided in

section 1.1 of the

schedule to the Act. It isnoted that this exception applies to "“additives [that] impart a flavour that is generally attributed to port, wine, rum or whisky”"(column 1) in relation to "“[c]igars that have a wrapper fitted in spiral form and that weigh more than 1.4 g but not more than 6 g,excluding the weight of any mouthpiece or tip”" (column 2). It is noted further that the respondent does not challenge the fact that theapplicant’s products are as set out in column 2, but challenges that they are covered by column 1 of

section 1.1 of the

schedule to the Act. [10] The applicant maintains that, following logical and grammatical

interpretation of the text used in column 1, icewine and cognacflavouring additives are also excepted in that both are commonly associated with wine or (in the case of cognac), by extension, whisky.An important exception must be noted in this regard in

section 1.1 of the

schedule with an aim to "“limit the impact of the Order on adultchoice”" (Regulatory Impact Analysis Statement [RIAS] at page 1639). The applicant argues further that

section 23.1 of the Act does notstate that the packaging must specifically include the words “port, wine, rum or whisky,” but rather that the prohibited additives must notbe implied on the packaging. The disputed products comply with the Act in this regard. [11] For its part, the respondent argues that the choice of the four alcohol flavours specifically targeted by the exception (port, wine, rumand whisky) is the result of a compromise, such that the scope of the exception may not be extended to other alcohol flavours such asicewine or cognac.

On one hand, whisky and cognac are two different types of spirits with distinct flavours. On the other, if the word“wine” were meant to include any type of wine, there would have been no need to except “port,” which is a fortified and sweetened wine.The word “wine” must therefore be interpreted according to its most common meaning, this being table wine. [12] The applicant’s application for declaratory relief is allowed in part.

Having analyzed the arguments submitted by the parties in lightof the text of the exception and of the general purpose of the Act and the Order, the Court rules that cognac flavour is not covered by theexception in

section 1.1 of the

schedule to the Act, whereas a wine flavour, including icewine, is excepted. A certain number of generalobservations must be made concerning the Act and the exception. [13] First, the Court endorses the modern method of interpreting laws in the sense that the words of

an Act are to be read in their entirecontext and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention ofParliament (Rizzo & Rizzo Shoes Ltd. (Re), (SCC), [1998] 1 SCR 27 at para 21; Bell ExpressVu Limited Partnership v.Rex, 2002 SCC 42, [2002] 2 SCR 559 at para 26 [Bell ExpressVu]). Where the words of a provision are clear, their ordinary meaningprevails (Celgene Corp v. Canada (Attorney General), 2011 SCC 1, [2011] 1 SCR 3 at para 21 referring to Canada Trustco MortgageCo. v. Canada, 2005 SCC 54, [2005] 2 SCR 601 at para 10).

However, in the event of ambiguity in the legislation – when there are"“two or more plausible readings, each equally in accordance with the intentions of the statute”" – the courts need to resort to externalinterpretive aids (Bell ExpressVu at paras 29-30). [14] Second, the general purpose of the Order is to "“remove the ability of the tobacco industry to market most flavoured cigars that areappealing to youth in Canada,”" while one of the main objectives of the Act is to protect young persons. This favours a restrictiveinterpretation of the exception (see, by analogy, R. v.

Seaway Gas & Fuel Ltd., (ON CA), [2000] OJ No. 226 atpara 33 concerning the Smoke-Free Ontario Act.) In this sense, protecting young persons supersedes freedom of manufacturers andimporters in the tobacco industry. Additionally, the exception in

section 1.1 of the

schedule to the Act must be read in conjunction withthe prohibition in

section 1 applicable to all additives not otherwise excepted and having flavouring properties or that enhance flavour inthe case of a tobacco product set out in column 2 of the schedule. [15] Third, the word “flavour” is not defined in either the Act or the Order. In general, what is prohibited is any "“[a]dditives that haveflavouring properties or that enhance flavour”" (section 1, column 1) – which, evidently, includes any chemical or natural compound thatcreates a perception of the taste and smell that a consumer might associate with an alcoholic beverage or other product while smoking acigarette or cigar. However, the use in

section 1.1 of the

schedule to the Act of the terms “generally attributed” leaves a certain degree ofdiscretion. The words “a flavour” are not limiting and may include multiple flavours – as long as it is a flavour generally attributed toport, wine, rum or whisky, which are very different types of alcoholic beverages. [16] Fourth, the choice to except the flavours generally associated with alcoholic beverages set out in

section 1.1 of the

schedule to theAct is not a coincidence. In fact, the government proposed to prohibit all types of flavoured cigars, including the larger, more expensive,premium cigars. However, this proposal was deemed too broad and ruled out. The government wanted to minimize the impact of aprohibition on the conventional cigar market and avoid unduly limiting choice for adults, who are the most likely to appreciate port-,wine-, rum- and whisky-flavoured cigars that have a wrapper fitted in spiral form and that weigh more than 1.4 g but not more than 6 g(RIAS at pages 1628-1629). [17] Fifth, in the absence of any apparent ambiguity, the Court must refrain from rewording the exception in

section 1.1 of the scheduleto the Act to limit the usual scope of the words “port, wine, rum or whisky” listed in column 1. In this case, the words “whisky” and“wine” are clear on their own. Their use in column 1 does not raise any ambiguity when read in conjunction with the words "“a flavourthat is generally attributed to port, wine, rum or whisky.”" The words “whisky” and “wine” are therefore to be interpreted and applied

according to their usual and ordinary meaning. Moreover, counsel for the respondent stated at the hearing that the term “whisky” was notlimiting and could include any type of “whisky.” In fact, the word “whisky” is a generic noun used to designate a spirit manufacturedfrom distilled malted or unmalted grain. This includes scotch whisky, American whiskey (bourbon) and Canadian whisky (rye whisky).Curiously, the respondent proposes to limit the general scope of the meaning of the word “wine” under the pretext that port is also a typeof wine.

It follows that according to the respondent, the word “wine” may not include dessert wines, whether Sauternes, icewine or othertypes of sweet wine. [18] The Court cannot accept the restrictive

interpretation proposed by the respondent. The word “wine” is a generic and inclusive termthat cannot be limited to “table wine” as the respondent wrongly claims. It is to be noted that, based on its usual definition, wine is afermented beverage prepared from grapes or fresh grape juice. Wines may be dry, medium-dry or sweet. They may be red, white or rosé.Wines come in a great number and variety of flavours. They may be classified by their origin (variety), flavour family (fruity, floral,woody, etc.) or chemical similarity (fermentation process).

Icewine, meanwhile, is essentially a fermented beverage made from grapesthat have been frozen while still on the vine. Additionally, the reference to the word “port” in

section 1.1 of the

schedule to the Act isinsufficient to create any ambiguity or restrict the general scope of the word “wine.” Icewine does not contain added alcohol. It is not afortified wine like port. [19] In fact, if the Court accepted the

interpretation proposed by the respondent, it would be required to amend the text of

section 1.1 ofschedule 1 to the Act. In Rubin v. Canada (Minister of Transport) (CA), (FCA), [1998] 2 FC 430, the Courtinterpreted the scope of the exceptions found in the Access to Information Act, RSC 1985, c. A-1. The Federal Court of Appeal stated inthis regard at paragraph 24: [24] It is important to emphasize that this does not mean that the Court is to redraft the exemptions found in the Act in orderto create more narrow exemptions. A court must always work within the language it has been given. If the meaning is plain,it is not for this Court, or any other court, to alter it. Where, however, there is ambiguity within a section, that is, it is open totwo

interpretations (as paragraph 16(1)(

c) is here), then this Court must, given the presence of

section 2, choose theinterpretation that infringes on the public’s stated right to access to information contained in

section 4 of the Act the least. [Emphasis added.] [20] On the other hand, wine is not a spirit, and its production process is different from that for distilled alcohol such that no analogymay be made by the applicant in relation to cognac. The Court also does not see how the applicant can claim that cognac can be groupedwith whisky. Both are certainly spirits (beverages with a high alcohol content), but the analogy ends there.

Whisky is made by distillingmalted or unmalted grain, whereas cognac is a spirit made by doubly distilling grape juice (must) and ageing it in oak barrels first tocreate a "“vin de chaudière”" (first distillation) and then to transform the vin de chaudière into cognac (with high alcohol content –second distillation). [21] It is also important to note that, at the time of the consultation process, various stakeholders proposed broadening the range ofpermitted flavours to include other popular alcohol flavours such as amaretto, Kahlúa and cognac.

Some companies proposed providing ageneral exception for "“additives that impart ’generally recognized adult alcoholic beverages.’”" Some went so far as to proposeincluding coffee flavour on the basis that coffee is deemed to be an adult-oriented beverage. However, Health Canada, the federal entityresponsible for making recommendations to the Governor General, ultimately decided not to incorporate these suggestions into the finalOrder (RIAS tab 2, pages 1639 and 1642). Had the government wanted to add cognac to the list of excepted flavours under

section 1.1 ofthe

schedule to the Act, it would have indicated this clearly. This is not the case here. [22] In final analysis, the Court concludes that it was the government’s intention not to include cognac in the exception in

section 1.1 ofthe

schedule despite any analogies that may be made in terms of colour or alcohol content with whisky or even with wine, since cognac ismade from grapes. Insofar as cognac is not an alcohol flavour listed in

section 1.1 of the

schedule to the Act, the applicant may notmarket or sell the two tobacco products known as “Neos Al’s Cognac Selection” and “Al’s Cognac Collection,” which are packaged tosuggest, whether through their name or illustration, that they contain an additive prohibited under the Act (subsection 23.1(2) of the Act). [23] In conclusion, the Court finds that the cigars marketed and sold in Canada by the applicant and its retailers under the name “HoneyT Spiral Ice Wine” are covered by the exception provided in

section 1.1 of the

schedule to the Act and comply with

section 23.1 of theAct. However, the cigars marketed and sold in Canada by the applicant and its retailers under the names “Neos Al’s Cognac Selection”and “Al’s Cognac Collection” are not covered by the exception provided in

section 1.1 of the

schedule to the Act and do not comply withsection 23.1 of the Act. [24] In view of the divided outcome, no costs are awarded. JUDGMENT THE COURT ALLOWS in part the applicant’s application for judicial review. THE COURT FINDS that the cigars marketed and sold in Canada by the applicant and its retailers under the name “Honey T Spiral IceWine” are covered by the exception provided in

section 1.1 of the

schedule to the Tobacco Act, S.C. 1997, c. 13 [Act] and comply withsection 23.1 of the Act. However, the cigars marketed and sold in Canada by the applicant and its retailers under the names “Neos Al’sCognac Selection” and “Al’s Cognac Collection” are not covered by the exception provided in

section 1.1 of the

schedule to the Act anddo not comply with

section 23.1 of the Act. WITHOUT COSTS. “Luc Martineau”

Judge FEDERAL COURT SOLICITORS OF RECORD DOCKET: T-683-16 STYLE OF CAUSE: DISTRIBUTION G.V.A. INC. v. ATTORNEY GENERAL OF CANADA PLACE OF HEARING: Montréal, Quebec DATE OF HEARING: January 23, 2017 JUDGMENT AND REASONS: MARTINEAU J. DATED: February 21, 2017 APPEARANCES : James Cocciardi Mark J. Paci For the applicant Lisa Morency Marc Ribeiro For the respondent SOLICITORS OF RECORD : Pateras & Iezzoni Inc. Lawyers Montréal, Quebec For the applicant William F. Pentney Deputy Attorney General of Canada Montréal, Quebec For the respondent