Supreme Court of Canada
Central Canada Potash Co. Ltd. et al. v. Government of Saskatchewan, [1979] 1 S.C.R. 42
Date: 1978-10-03
Central Canada Potash Co. Limited and The Attorney General of Canada (Plaintiffs) Appellants;
and
The Government of Saskatchewan (Defendant) Respondent;
and
The Attorney General of Quebec, The Attorney General of New Brunswick, The Attorney General of Manitoba, The Attorney General of Alberta, The Attorney General of Newfoundland Interveners.
1977: December 6, 7, 8, 9; 1978: October 3.
Present: Laskin C.J. and Martland, Ritchie, Spence, Pigeon, Dickson and Pratte JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR SASKATCHEWAN
Constitutional law—Schemes for prorationing production of potash in Saskatchewan—Fixing of minimum selling price applicable to permitted production quotas—Regulations aimed at production for export market—Regulations, prorationing schemes and all orders, directives, notices and licences pursuant thereto ultra vires provincial legislative authority—The Mineral Resources Act, R.S.S. 1965, c. 50, as amended—The Potash Conservation Regulations, 1969, O.C. 1733/69, Sask. Reg. 287/69.
Intimidation—Potash Conservation Regulations prohibiting appellant from exceeding specified production—Letter from deputy minister calling on appellant to reduce its production or to face possibility of cancellation of its mineral lease—Regulations subsequently held to be ultra vires—Tort of intimidation not committed—Deputy minister seeking to induce conformity with prorationing plan which had been created by legislation which it was his duty to enforce—Legislation unchallenged at time threat made—No evidence deputy minister intended to injure appellant.
The litigation culminating in this appeal was initiated by the appellant company which sought a declaration of the invalidity of the prorationing scheme, established pursuant to The Mineral Resources Act, R.S.S. 1965, c. 50, as amended, and damages in tort. The trial judge gave the relief sought, fixing the damages at $1,500,000. On appeal by the Government of Saskatchewan and a
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claim by the appellant for a variation in the judgment to increase the amount of damages, the Court of Appeal set aside the judgment at trial in its entirety and, consequently, dismissed the notice to vary.
The Mineral Resources Act, through which the Potash Conservation Regulations, 1969, were promulgated, is skeleton legislation, giving very wide authority to the responsible Minister and wide regulation-making power to the Lieutenant-Governor in Council. The Act itself was not challenged. It was common ground that at the time the Regulations were passed almost all of Saskatchewan-produced potash was sold outside the Province and that the larger part of the production, about 64 per cent, was marketed in the United States. Saskatchewan production, moreover, represented almost half, about 48 per cent, of the United States potash market. The appellant company itself had about 34 per cent of the Saskatchewan share of the United States market.
The Government of Saskatchewan was aware of the course of certain dumping proceedings in the United States affecting Saskatchewan potash, and was concerned about the damaging effect that a tariff levy would have on exports from Saskatchewan. Equally, the authorities in the State of New Mexico, where potash is also produced, were concerned about loss of tax revenue from declining revenues and a federal tariff would not in itself be of any help to them. Both were concerned about overproduction and, in consequence, a drop in world price. There was no doubt that the Potash Conservation Regulations were the product of meetings held in 1969 between representatives of Saskatchewan and New Mexico and were prompted by the economic conditions then affecting the potash market. They were passed on November 17, 1969, under Order in Council 1733/69 and amended on March 8, 1970, under Order in Council 404/70.
The Regulations provided for a prorationing scheme to take effect on January 1, 1970. Under this scheme, known as the ABC scheme, each producer was allowed to produce and sell 40 per cent of its productive capacity. Only after every producer in the Province had produced and sold its quota could a producer apply for a supplementary licence to produce and sell an additional amount. As of July 1, 1972, the ABC prorationing scheme was replaced by a flat prorationing scheme, the so-called FP scheme. A floor price established under the ABC scheme as a licensing condition was retained under
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the FP scheme.
The appellant, having regard to its supply commitments to a Chicago-based co‑operative association, objected to the FP scheme which, based on productive capacities of the various producers and on allocation formulas involving market sharing, would prevent it from fulfilling its commitments unless it obtained supplementary licences. When its allocation for the 1972-73 fertilizer year was short of its contractual obligation, it sought an increase and, on being refused, brought mandamus proceedings to compel the issue of a licence for a production quota that would enable it to meet its contractual commitment. It failed in those proceedings at first instance, in the Saskatchewan Court of Appeal and in this Court. During those proceedings it was advised by a letter of September 20, 1972, from the Deputy Minister that its production schedule for the year commencing July 1, 1972, was out of line with governmental requirements and that it must reduce its monthly production to conform thereto. This the appellant did but on December 11, 1972, it instituted the action which gave rise to the appeal to this Court.
The letter of September 22, 1972, calling on the appellant to reduce its production or to face the possibility of a cancellation of its mineral lease, was the primary basis of the claim for damages for the tort of intimidation. The lease included a requirement that the appellant, as lessee, would observe, perform and abide by all obligations imposed upon holders of mineral leases by the Act or regulations thereunder in effect from time to time.
The Mineral Resources Act was amended by 1976 (Sask.), c. 36. The amending Act was passed after judgment had been rendered following the trial, but prior to the judgment of the Court of Appeal. The enactment of s. 11A removed any doubt as to the power of the Minister to cancel a production licence. The ratification and confirmation of the Potash Conservation Regulations removed doubt as to whether they had been validly enacted under the provisions of the Act. The amending Act also contained a schedule of production of various companies, including the appellant, fixing the limits of production of each such company from January 1, 1970, to June 30, 1976.
Held: The appeal should be allowed in part; the judgment of the Court of Appeal should be set aside on the constitutional issue but should be affirmed in dismissing the claim for damages. The judgment of the trial judge holding that (1) Orders in Council 1733/69
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and 404/70, (2) the Potash Conservation Regulations, 1969, (3) the ABC and FP schemes and (4) the directives and licences issued by the Minister and Deputy Minister for implementing the schemes are ultra vires, should be restored.
While it is true that production controls and conservation measures with respect to natural resources in a province are, ordinarily matters within provincial authority, the situation may be different, however, where a province establishes a marketing scheme with price fixing as its central feature. Indeed, it has been held that provincial legislative authority does not extend to the control or regulation of the marketing of provincial products, whether minerals or natural resources, in interprovincial or export trade: see In re Grain Marketing Act, 1931, [1931] 2 W.W.R. 146; Lawson v. Interior Tree Fruit & Vegetable Committee of Direction, [1931] S.C.R. 357; Re Sheep and Swine Marketing Scheme, [1941] 3 D.L.R. 569.
The present case reduced itself therefore to a consideration of “the true nature and character” of the prorationing and price stabilization schemes in question. This Court could not ignore the circumstances under which the Potash Conservation Regulations came into being, nor the market to which they were applied and in which they had their substantial operation. In Canadian Industrial Gas & Oil Ltd. v. Government of Saskatchewan, [1978] 2 S.C.R. 545, this Court, speaking in its majority judgment through Martland J., said that “provincial legislative authority does not extend to fixing the price to be charged or received in respect of the sale of goods in the export market”. It may properly be said here of potash as it was said there of oil that “the legislation is directly aimed at the production of potash destined for export, and it has the effect of regulating the export price since the producer is effectively compelled to obtain that price on the sale of his product”.
Contrary to the opinion of the Court below, the consequence of invalidating the provincial scheme in this case is not to move to the Parliament of Canada the power to control production of minerals in the Province and the price to be charged at the mine. There is no accretion at all to federal power in this case, which does not involve federal legislation, but simply a determination by this Court, in obedience to its duty, of a limitation on provincial legislative power. It is true that (with some exceptions, not relevant here) the British North America Act distributes all legislative power either to Parliament or to the provincial Legislatures, but it does not follow that legislation of a province held to be
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invalid may ipso facto be validly enacted by Parliament in its very terms. It is nothing new for this Court, or indeed, for any Court in this country seized of a constitutional issue, to go behind the words used by a Legislature and to see what it is that it is doing. It is especially important for Courts, called upon to interpret and apply a constitution which limits legislative power, to do so in a case where not only the authorizing legislation but regulations enacted pursuant thereto are themselves couched in generalities, and the bite of a scheme envisaged by the parent legislation and the delegated regulations is found in administrative directions.
Where governments in good faith, as in this case, invoke authority to realize desirable economic policies, they must know that they have no open-ended means of achieving their goals when there are constitutional limitations on the legislative power under which they purport to act. They are entitled to expect that the Courts, and especially this Court, will approach the task of appraisal of the constitutionality of social and economic programmes with sympathy and regard for the serious consequences of holding them ultra vires. Yet, if the appraisal results in a clash with the constitution, it is the latter which must govern. That was the situation here.
Attorney-General for Manitoba v. Manitoba Egg and Poultry Association, [1971] S.C.R. 689; Carnation Co. Ltd. v. Quebec Agricultural Marketing Board, [1968] S.C.R. 238; Shannon v. Lower Mainland Dairy Products Board, [1938] A.C. 708; Reference re The Farm Products Marketing Act (Ontario), [1957] S.C.R. 198; Reference re Agricultural Products Marketing Act (Canada), Farm Products Marketing Agencies Act (Canada) and The Farm Products Marketing Act (Ontario), [1978] 2 S.C.R. 1198, referred to.
As to the issue concerning the appellant’s claim for damages, the tort of intimidation is not committed if a party to a contract asserts what he reasonably considers to be his contractual right and the other party, rather than electing to contest that right, follows a course of conduct on the assumption that the assertion of right can be maintained. Also, if the course of conduct which the person making the threat seeks to induce is that which the person threatened is obligated to follow, the tort of intimidation does not arise. In the present case the Potash Conservation Regulations made under The Mineral Resources Act prohibited the appellant from
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exceeding a specified production of potash. By conforming to the requirements of the Regulations, the appellant would not suffer damage and, therefore, the claim for intimidation was not well founded.
A subsequent finding that the Regulations were ultra vires does not mean that there has been intimidation. The conduct of the Deputy Minister in relation to the tort of intimidation must be considered in relation to the circumstances existing at the time the alleged threat was made. The Deputy Minister was then seeking to induce conformity with the prorationing plan which had been created by legislation which it was his duty to enforce. At the time the threat was made, the legislation stood unchallenged. It would be unfortunate, in a federal state such as Canada, if it were to be held that a government official, charged with the enforcement of legislation, could be held to be guilty of intimidation because of his enforcement of the statute whenever a statute whose provisions he is under a duty to enforce is subsequently held to be ultra vires.
Finally, the tort of intimidation is one of intention. There was no evidence here that the Deputy Minister intended to injure the appellant. The correspondence, and particularly the letter of September 20, 1972, made it clear that his purpose was to induce compliance with an existing scheme.
Rookes v. Barnard, [1964] A.C. 1129, distinguished; Hoffman-La Roche & Co. v. Secretary of State for Trade and Industry, [1975] A.C. 295, applied; Roman Corporation et al. v. Hudson’s Bay Oil & Gas Co. Ltd. et al., [1973] S.C.R. 820, referred to.
APPEAL from a judgment of the Court of Appeal for Saskatchewan[1], allowing an appeal from a judgment of Disbery J. wherein it was declared, inter alia, that the Potash Conservation Regulations, 1969, of Saskatchewan and amendments thereto are ultra vires, and wherein damages were awarded to the appellant. Judgment of the Court of Appeal set aside on the constitutional issue and affirmed in dismissing appellant’s claim for damages.
D.K. Laidlaw, Q.C., J.L. Robertson, Q.C., and A.J. Lenczner, for the appellant, Central Canada Potash Co. Limited.
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T.B. Smith, Q.C., and Barbara Reed, for the appellant, Attorney General of Canada.
G.J.D. Taylor, Q.C., and Gwen Randall, for the respondent.
For the interveners:
B. Flynn, for the Attorney General of Quebec.
A. Reid and B.A. Crane, for the Attorney General of New Brunswick.
M.S. Samphir and D.D. Blevins, for the Attorney General of Manitoba.
W. Henkel, Q.C., and S.G. Fowler, for the Attorney General of Alberta.
J.A. Nesbitt, Q.C., and Margaret Cameron, for the Attorney General of Newfoundland.
Martland, Ritchie, Spence, Pigeon, Dickson and Pratte JJ. concurred with the judgment delivered by
THE CHIEF JUSTICE—This appeal, which is here by leave of this Court, concerns (1) the validity of what I may compendiously refer to as a potash prorationing scheme, established pursuant to The Mineral Resources Act, R.S.S. 1965, c. 50, as amended, and (2) a claim by the appellants for damages against the Government of Saskatchewan for the tort of intimidation by reason of certain circumstances connected with the establishment of the prorationing scheme.
The litigation was initiated by the appellant, which sought a declaration of the invalidity of the prorationing scheme and damages in tort. Disbery J. gave the relief sought, fixing the damages at $1,500,000. On appeal by the Government of Saskatchewan and a claim by the appellant for a variation in the judgment to increase the amount of damages, the Saskatchewan Court of Appeal, in a unanimous judgment delivered by Culliton C.J.S., set aside the judgment at trial in its entirety and, consequently, dismissed the notice to vary.
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On leave being given to come here, an order was made for notice to be given of the following constitutional question and an associated evidentiary question:
1. Is the potash prorationing scheme constituted by the Province of Saskatchewan pursuant to the Potash Conservation Regulations 1969 numbered 287/69, and the Orders in Council O/C 1733/69 and O/C 404/70 enacting and amending them, and the Potash Allocation Formula effective January 1, 1970, and the Minister’s Directive PCD‑1, Potash Prorationing, effective July 1, 1972, enacted pursuant to the Mineral Resources Act, R.S.S., 1965, Chapter 50, and the various Notices, Directives, Ministerial Orders and Licenses issued from time to time by the Minister of Mineral Resources for Saskatchewan and his Deputy implementing the schemes, ultra vires the Province of Saskatchewan?
2. Is extrinsic evidence admissible in this case in relation to the constitutional issue and, if so, to what extent and of what kind?
The Attorneys-General of Quebec, New Brunswick, Manitoba, Alberta and Newfoundland intervened to support the judgment in appeal. The Attorney-General of Canada had become a co-plaintiff at the trial in respect of the constitutional question raised by the action and remained a party to the proceedings in the Saskatchewan Court of Appeal and in this Court.
The Mineral Resources Act, R.S.S. 1965, as amended, through which the Potash Conservation Regulations, 287/69, were promulgated, is skeleton legislation, giving very wide authority to the responsible Minister and wide regulation-making power to the Lieutenant‑Governor in Council. The Act itself is not challenged. It is common ground that at the time the 1969 Regulations were passed almost all of Saskatchewan-produced potash was sold outside the Province and that the larger part of the production, about 64 per cent, was marketed in the United States. Saskatchewan production, moreover, represented almost half, about 48 per cent, of the United States potash market. The appellant company itself had about 34 per cent of the Saskatchewan share of the United States market. So far as forecasts of future world con-
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sumption can be based on present knowledge and on scientific assessment of known or proven reserves, evidence was given that Saskatchewan could supply world demand for potash for almost 1,500 years or for even a longer period. The trial judge relied on this evidence for finding that the Potash Conservation Regulations could not be said to be a response to threatened shortages of the mineral or to conservation needs.
Potash is also produced in the State of New Mexico but production and quality, according to the evidence, did not match that of Saskatchewan and reserves were, apparently, minimal. There was concern about the penetration of Saskatchewan potash into the United States market, and a dumping inquiry was instituted in the United States not only in respect of Canadian exporters but as well in respect of French and West German exporters. A finding of dumping was made by the United States Bureau of Customs in August of 1969 and the matter was referred, as required by United States law, to the United States Tariff Commission, which fixed a hearing for October 7, 1969. Although the hearing commenced on that date and a determination was obligatory by the end of November 1969, in the events that happened the tariff inquiry did not prove damaging to Saskatchewan interests, although a determination of injury and the likelihood of continuing injury was made on November 21, 1969. The Government of Saskatchewan was aware of the course of proceedings in the United States affecting Saskatchewan potash, and was concerned about the damaging effect of a tariff levy on exports from Saskatchewan. Equally, the New Mexico authorities were concerned about loss of tax revenues from declining production and a federal tariff would not in itself be of any help to them. Both were concerned about overproduction and, in consequence, a drop in world price.
In the result, a meeting took place in Santa Fe, New Mexico, on October 6, 1969, between the then Governor of New Mexico and the then
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Premier of Saskatchewan and their respective associates, at which time a draft of proposed Saskatchewan potash regulations was produced and considered. A follow-up meeting took place in Regina, Saskatchewan, on October 17, 1969. There is no doubt that the Potash Conservation Regulations, 1969, were the product of the two meetings and were prompted by the economic conditions that I have described. They were passed on November 17, 1969, under Order in Council 1733/69 and amended on March 8, 1970, under Order in Council 404/70. I will consider the proration scheme established by the Regulations and the amendment thereof after I deal with the position of the appellant Central Canada Potash Co. Limited in respect of its involvement in the potash industry.
The appellant was born of an agreement between Noranda Mines Limited and Central Farmers Fertilizer Company, a Chicago-based co-operative association which supplied large quantities of fertilizer to numerous co-operative associations and thus to farmer members thereof. Noranda had done exploration work in Saskatchewan in respect of potash mining and proposed to establish a mine if it could find a secure market for the production. It had extensive mineral rights in Saskatchewan under freehold interests and under Crown lease and held options to buy additional mineral lands. Its agreement with Central Farmers, dated July 1, 1965, provided that it would establish a mine with ancillary facilities, with a production capability of not less than one million tons of muriate of potash annually. Central Farmers agreed to buy half a million tons annually over a period of twenty-years, with the right to increase its purchases to one and one-half million tons annually. The price fixed for the purchases was the prevailing commercial price less 15 per cent. Central Farmers was given the option of requiring that the mine and facilities be conveyed to a new company in which Noranda would have a controlling 51 per cent interest and Central Farmers the remaining 49 per cent. The option was exercised, and the appellant was incorporated and took a conveyance of the mine as a going concern at a price just short of $90,000,000. The Crown lease which Noranda held was assigned to the appellant on July 15,
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1970, with the consent of the Saskatchewan Government. The lease covered mineral rights under statutory road allowances and, overall, gave Noranda and later the appellant a continuous ore body running through and connected with its other holdings. I should add that the original agreement between Noranda and Central Farmers was amended on July 1, 1970, and on the same day a novation agreement was made between them and the appellant affirming the obligation to supply potash to Central Farmers and the latter’s obligation to buy. Supply under the agreement began in February 1970.
The provisions of The Mineral Resources Act, which were relied on to underpin the Potash Conservation Regulations and orders and directives made thereunder, were ss. 3, 9 and 10, reading as follows:
3. The purposes of this Act are:
(a) to promote and encourage the discovery, development, management, utilization and conservation of the mineral resources of Saskatchewan;
(b) to regulate the disposition of Crown mineral lands;
(c) to protect the correlative rights of the owners of surface rights and of mineral rights;
9. The minister may do such things as he deems necessary to discover, develop, manage, utilize and conserve the mineral resources of Saskatchewan and, without limiting the generality of the foregoing, the minister may:
(a) make geological or mineralogical surveys or examinations of Saskatchewan and carry on such operations as may be considered necessary in connection therewith;
(b) make and carry out investigations, examinations, experiments, tests and analyses of or pertaining to minerals for the purpose of determining their scientific and economic value;
(c) prepare and publish such reports, diagrams, drawings, maps and plans in connection with the mineral resources of Saskatchewan as he deems necessary;
(d) establish and operate facilities for instruction and training in the art of conserving, developing, exploring for or prospecting for minerals;
(e) grant assistance upon such terms and conditions as he deems advisable to promote exploration for,
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development, management, utilization and conservation of the mineral resources of Saskatchewan;
(f) prescribe the fees to be paid for any information or services and reports, maps and other documents furnished by the department to the public; and
(g) purchase and sell or otherwise dispose of or utilize any product of the mineral resources of Saskatchewan.
10. (1) The Lieutenant Governor in Council may make such regulations and orders not inconsistent with this Act as he may deem necessary for the purpose of carrying out its provisions according to their obvious intent or to meet cases that may arise and for which no provision is made therein and without limiting the generality of the foregoing may make regulations and orders:
…
(k) governing the issue of licences under this Act;
(l) prescribing, in cases not otherwise provided for, penalties for the breach of any regulations or orders made under this Act;
(m) prescribing forms to be used under this Act;
(n) requiring from the holders, owners, occupiers or operators of mines or mineral lands, reports and statements respecting the work and operations conducted at any time or on any mineral land;
…
(3) Every regulation and order made under this section shall be deemed to be a part of this Act.
The Potash Conservation Regulations, passed on November 17, 1969, provided for a prorationing scheme to take effect on January 1, 1970. Sections 2, 3, 4 and 5 of the Regulations, so far as relevant to these proceedings, were as follows:
2. (1) On and after January 1, 1970, the production of potash is prohibited unless a producing licence authorizing the production is granted by the minister which licence shall be in such form and subject to such conditions as the minister may determine.
(2) The minister may issue a producing licence to produce potash in compliance with these regulations in such form as the minister may determine and subject to such conditions as may be stated in the licence, or he may refuse to grant a producing licence.
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3. (1) On and after January 1, 1970, the disposal of potash is prohibited unless a licence authorizing the disposal is granted by the minister.
(2) The minister may issue a licence to dispose of potash in compliance with these regulations and subject to such conditions as may be stated in the licence, or he may refuse to grant a disposal licence.
4. (1) For the proper utilization and conservation of potash and for the protection of correlative rights of the owners of mineral rights the minister may, if he deems it advisable, order that a public inquiry may be held at such time and at such place as he may designate for the purpose of determining any or all of the following:
(a) a fair and reasonable price to the producer of potash, free on board at the potash plant gate in Saskatchewan, for all potash produced in the province;
(b) the productive capacity of each potash mining property;
(c) a proportionate share of production, if any, that may be allocated to each potash mining property required to meet the market demand for potash;
(d) the demand for potash or potash products for reasonable current requirements and current consumption or use within and outside the province, together with such amounts as are reasonably necessary for building up or maintaining reasonable storage reserves and working stocks of potash and potash products;
(e) any other matter that the minister deems advisable.
…
5. (1) Where the minister decides that it is advisable to limit the total amount of potash that may be produced in the province he shall allocate the allowable production among the potash mining properties introduction in the province and may, in determining such allocation, consider the following factors:
(a) basic allowables;
(b) definite and bona fide requirements for disposal;
(c) inventory requirements;
(d) any other matter that the minister deems advisable.
(2) The minister may amend, revise or vary the allowable production allocated to any or all potash mining properties in production, with or without an inquiry as he deems advisable, to meet changing conditions or circumstances.
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The requirement of a disposal licence was abandoned by an amending Regulation 64/70 of March 18, 1970, which repealed s. 3 and substituted a new s. 2 and a new s. 4(1)(a). These amendments were as follows:
2. (1) The production of potash is prohibited unless a producing licence authorizing the production is granted by the minister which licence may be issued on such basis and in such form and subject to such conditions as the minister may deem appropriate to each proposed production.
(2) Where the minister is satisfied that the production proposed by the applicant for a licence to produce is consistent with sound utilization and conservation principles relating to the potash resources of the province he may issue a producing licence, and where not so satisfied he may refuse to issue such licence.
4. (1) …
(a) the economic viability of the proposed production, including such things as cost of production, method of production, reserves for control of pollution, methods of mining, costs of transportation and sale price.
On November 25, 1969, shortly after the Potash Conservation Regulations were promulgated and pursuant thereto, the responsible Minister sent the following notice to Saskatchewan potash producers:
NOTICE UNDER THE POTASH CONSERVATION
REGULATIONS, 1969
To all potash producers in Saskatchewan:
Notice is hereby given that I, Alexander C. Cameron, Minister of Mineral Resources, do hereby declare that a fair and reasonable price to the producer of potash, free on board, at the potash plant in Saskatchewan, shall be not less than thirty-three and three‑quarters cents (33.750) Canadian per unit of potassium oxide equivalent for the purpose of:
(a) determining the demand for potash or potash products for reasonable current requirements, and current consumption or use within and without Saskatchewan on and after January 1, 1970; and
(b) prorationing the production and disposal of potash and potash products in Saskatchewan commencing January 1, 1970; and
(c) issuing producing licences and disposal licences in Saskatchewan.
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The minimum producer price was thus fixed, for the stated purposes, clause (a) of the notice referring to “current consumption or use within and without Saskatchewan”.
The foregoing notice was followed by a Ministerial directive of February 24, 1970, which elaborated on the minimum or floor price fixed by the notice. It sought to outlaw any device or arrangement that would reduce the established floor price. The directive is reproduced in full in the reasons of the Saskatchewan Court of Appeal, and I reproduce it here as well:
On November 25, 1969, the Minister of Mineral Resources issued a directive concerning the minimum selling price of thirty-three and three-quarter cents (33.75¢) per unit of potassium oxide equivalent, free on board, at the plant gate in Saskatchewan, effective January 1, 1970.
In order that there is a common understanding of the interpretation and meaning of ‘33.75¢ Canadian per unit K2O equivalent f.o.b. Saskatchewan plant’, the Department issues the following clarification:
1. MARKETING STRUCTURE—i.e.
(a) sales by producers with integrated operations for production, marketing, sales and distribution; and
(b) sales by producers through third party or independent brokers, distributors, wholesalers, dealers and other agents.
The established floor price is the minimum net selling price for potash f.o.b. Saskatchewan plant and no discount, commission or other consideration will be allowed out of the established floor price, whether the producer has an integrated operation or employs third party or independent contractors for its sales and distribution.
2. FREIGHT EQUALIZATION
The practice of absorbing freight costs by way of freight equalization is in effect a discount and if such practice reduces the established floor price, it will not be permitted.
3. NATURE OF DISCOUNT AGREEMENTS AND ARRANGEMENTS:
(a) for North American dealers;
(b) for offshore dealers.
No discounts that reduce the established floor price will be allowed in either case.
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4. DISCOUNTS ON CASH SALES
The established floor price shall not be reduced by discounts for cash. The floor price is based on cash sales or payment within 30 days of sale. No credit sales for over 30 days that in effect reduce the established floor price will be permitted.
5. ARRANGEMENTS BETWEEN PRODUCER AND PRODUCER TO MEET THE OVERALL PRORATED ALLOWABLES
Subject to prior application to, and approval of, the Minister of Mineral Resources, internal arrangements may be made by a Saskatchewan potash producing company to meet its market requirements from the allocated allowable of another Saskatchewan producer, without regard to the established floor price in so far as such transfer of allowable between one Saskatchewan producer to another Saskatchewan producer is concerned, provided that the sale price of potash so produced complies with the requirements of the established floor price when such potash moves out of Saskatchewan.
6. APPLICATION OF FLOOR PRICE TO ALL GRADES OF POTASH
The established floor price applies to potassium oxide equivalent content, regardless of grades of potash.
7. UNDERESTIMATED COSTS FOR FREIGHT, STORAGE, CONTAINER EXPENSES, ETC.
The department will not make any allowance for errors, miscalculation of unexpected increases in freight, storage and other costs on sales of potash, whether for present or future delivery. Sales contracts must so provide that the floor price for potash f.o.b. Saskatchewan plant will not be violated.
8. CONSIGNMENT SALES
All sales on consignment will be treated as the consignor’s (seller’s) inventory and must comply with the floor price requirement.
9. COST OF LEASING FREIGHT CARS, DEMURRAGE, UNLOADING, ETC.
The cost of leasing freight cars, demurrage, unloading, etc. cannot be charged against the established floor price but shall be over and above the floor price.
The prorationing scheme first introduced under the Regulations, and known as the ABC scheme, is
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described in the reasons of the trial judge, as follows:
The ingredients of the formula for prorationing production among the producers were: (1) the productive capacity of each mining property; (2) the estimated demand for Saskatchewan potash or potash products for reasonable current requirements and consumption or use within and outside the Province; and (3) the amounts of potash and potash products each producer reasonably required to keep in storage for working stock and for reserves. The ABC scheme allowed each producer to produce and sell 40% of its productive capacity and no more until every mine had produced and sold this basic quota. Producers holding orders in excess of this amount could purchase potash from mines that had not yet reached their 40% quota. After every producer in Saskatchewan had produced and sold its quota, then and only then, producers that still had unfilled orders could apply to the Minister for supplementary licences to produce and sell additional amounts. The Minister in his discretion could grant or refuse any such application. …The scheme allowed each producer additional production for storage and reserve purposes up to 55% of the producer’s storage capacity.
A similar description is found in the reasons of the Saskatchewan Court of Appeal.
Producing and disposal licences were granted to Noranda under date of December 12, 1969, to take effect from January 1, 1970, for a term of three months. The licences authorized the production of 77,440 short tons (K2O equivalent) of potash or potash products, and required reporting to the Minister of production of potash or potash products in accordance with the Potash Conservation Regulations and also required compliance with all applicable Acts, regulations, orders and directives governing, inter alia, production, conservation, processing, disposal, marketing, supplying, delivering and storage of potash and potash products. The disposal licence was in similar terms save that it referred to disposal rather than production.
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A second producing licence was granted to Noranda on February 24, 1970, for a four month term from March 1, 1970, and it provided for the production of 120,294 short tons. It was made a condition of the licence that the floor price (previously referred to herein) should be observed. A disposal licence on the same terms was granted in respect of 116,056 short tons of potash. Shortly thereafter, the Government dispensed with disposal licences. The trial judge in his reasons referred to a statement of the then responsible provincial Minister that this was done “in compliance with the request of the Department of Justice of the Federal Government”. The Minister advised producers of the elimination of disposal licences in a letter of March 24, 1970, which read in part as follows:
Essentially the amendments dispense with the provisions for disposal licences and prorationing and marketing will be maintained through the issuance of producing licences. Other than this change, the same rules and procedure that are now in effect will apply. The form of the producing licence may have to be changed to comply with the present procedure in order to permit production only for the purpose of fulfilling commitments for the sale of potash at not less than the established floor price.
The Department will be pleased to explain any questions arising from the amendments to The Potash Conservation Regulations, 1969.
On July 14, 1970, the appellant company, which had by then come into existence, was given a twelve-month producing licence effective from July 1, 1970, for the production of 362,242 short tons, subject to certain quarterly limitations on the scale of production. As before, the licence was conditioned on observance of the minimum price previously fixed. A producing licence for a further twelve-month period from July 1, 1972, was granted on June 20, 1972, authorizing the production of 442,647 short tons of K2O equivalent of potash or potash products. The licensee was required to submit a schedule of its planned production and the previous licence condition of observance of the floor price was replaced by another formula reading as follows:
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7. Other provisions: This production licence is valid solely upon the condition that the production of potash is only for the purpose of fulfilling commitments that are made for the sales of potash which are in the opinion of the Minister or to the satisfaction of the Minister at not less than the basic price established by the Minister, unless otherwise specifically authorized by the Minister.
As of July 1, 1972, however, the ABC prorationing scheme was replaced by the so-called FP scheme, described as a flat prorationing scheme. Plans for the replacement were indicated in a program review dated March 2, 1972, sent to each producer. A directive of June 30, 1972, set up an allocation formula in these words:
Each producer’s share of production to meet the market demand for Saskatchewan potash will be allocated according to a proration formula based solely on the productive capacity of each producing potash plant, except where the allocations are established by a production agreement approved by the Minister of Mineral Resources.
The allocation made thereunder of the productive capacity of each producer could be changed only with the approval of the responsible Minister. A control procedure was also set out. The control provisions included the following:
…
B2 A basic production allowable calculated according to the allocation formula and based on 95 per cent of the estimated market demand will be granted to each producer.
B3 Unless otherwise authorized, the inventory of each producer at year end shall not be less than inventory at the beginning of the year.
B4 After… a producing licence (has) issued to each producer, each producer will be required to submit a production schedule indicating how it proposes to fulfill the licence. Any reasonable production schedule that does not adversely affect employment will be approved.
B5 Since each producer’s production allocation for the purpose of meeting the estimated market demand for Saskatchewan potash will be limited to the same percentage of capacity that total market sales for the year are of total productive capacity (i.e. all producers
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operate at the same percentage of capacity), it is important that each producer be aware of the performance of the rest of the industry. Producers that may be short of allocation to meet their requirements will be expected to plan their purchases from, or share their markets with, other Saskatchewan producers early in the year to ensure that each producer will have some allocation remaining during the spring season and a reasonable degree of balance between producers is maintained throughout the year. It is important to understand that additional allocations will not be issued until the Department is convinced that each and every producer will be able to market its basic production allowable.
B7 After the end of the fertilizer year the allocation will be recalculated based on the proration formula and the actual market deliveries. Producers that exceed these allocations will be required to purchase potash from the producers that failed to meet their allocations. All producers will be brought into balance in this manner by the end of the second quarter of the next fertilizer year (December 31).
B8 Any infraction of the control procedures herein contained may result in a suspension or cancellation of a producing licence or a penalty by way of a reduced allowable at the discretion of the Minister in consultation with the Potash Conservation Board.
C. The Department is in favour of a strong export association, with membership by all producers, to handle all offshore sales of Saskatchewan potash and therefore supports the organization Canpotex Limited, now being reorganized with this goal in mind.
The Department will reduce the yearly production allocation of any producer that is not a member of Canpotex by the ratio of offshore sales to total sales of Saskatchewan produced potash in the last calendar year. The degree to which each member company of Canpotex participates in offshore sales will have no effect on its yearly allocation.
The reference to Canpotex was a reference to an unincorporated association of Saskatchewan potash producers which was incorporated on July 21, 1970, as Canpotex Limited. Evidence was given that the purpose of Canpotex was to develop overseas markets for Saskatchewan potash. The programme review of March 2, 1972, which contemplated the flat prorationing scheme, contained
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a reference to Canpotex under the heading “Export Association”, as follows:
Every effort will be made to have all Saskatchewan producers intending to participate in offshore markets become members of an export association now being reorganized under the name Canpotex Limited. In order for the new formula to work effectively it is imperative an export association be successful. Therefore all allocations for offshore markets will be through Canpotex.
Another directive related to the introduction of the FP scheme, entitled Potash Price Stabilization Directive, PCD-2, dated June 23, 1972, and also effective July 1, 1972, maintained the existing floor price as a licensing condition, in the following terms:
A. MINIMUM PRICE CONDITION
Potash producing licences will be valid solely upon the condition that the production of potash is only for the purpose of fulfilling commitments that are made for the sales of potash which are in the opinion of the Minister or to the satisfaction of the Minister, at not less than the minimum price established by the Minister, unless otherwise specifically authorized by the Minister.
The minimum net selling price shall be thirty-three and three-quarter cents (33.750) Canadian per unit of potassium oxide equivalent, free on board at the plant gate in Saskatchewan.
This directive was replaced in a few months by Directive PCD-3, dated August 21, 1972, and effective September 1, 1972. It prohibited all sales on consignment, on which there had formerly been regulatory rules.
The appellant company, having regard to its supply commitments to Central Farmers, objected to the FP scheme which, based on productive capacities of the various producers and on allocation formulas involving market sharing, would prevent it from fulfilling its commitments unless it obtained supplementary licences. When its allocation for the 1972‑1973 fertilizer year was short of its contractual obligation, it sought an increase and, on being refused, brought mandamus proceedings to compel the issue of a licence for a production quota that would enable it to meet its contractual commitment. It failed in those proceedings at first instance, in the Saskatchewan
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Court of Appeal and in this Court: see [1972] 6 W.W.R. 62; [1973] 1 W.W.R. 193; [1973] 2 W.W.R. 672. During those proceedings it was advised by a letter of September 20, 1972, from the Deputy Minister that its production schedule for the year commencing July 1, 1972, was out of line with governmental requirements and that it must reduce its monthly production to conform thereto. This the appellant did but on December 11, 1972, it instituted the action which gave rise to the appeal to this Court.
II
The trial judge came to the conclusion, upon his review of the evidence (and I should note here that he admitted a wide range of extrinsic evidence most of which the Court of Appeal held was inadmissible) and upon a lengthy examination of applicable case law (1) Orders in Council 1733/69 and 404/70, (2) the Potash Conservation Regulations, 1969, being Regulation 287/69, (3) the ABC and FP schemes, and (4) the directives and licences issued by the Minister and Deputy Minister for implementing the schemes were all ultra vires as an invasion of the exclusive federal power in relation to the regulation of trade and commerce. He also made a declaration that the Potash Conservation Regulations, 1969 and amendments thereto were not passed for any of the purposes authorized by ss. 3, 9 and 10 of The Mineral Resources Act and were ultra vires as going beyond the powers delegated by the Act.
This Court is not concerned in this appeal with the last-mentioned declaration, but I should point out that the Legislature of Saskatchewan amended The Mineral Resources Act a year after the declaration was made in order to rectify any deficiency in the statute to support the validity of the Potash Conservation Regulations, 1969: see 1976 (Sask.), c. 36. The amending Act was given retroactive force for this purpose, and counsel in the case were called back for re-argument in the Court of Appeal on its effect. Chief Justice Culliton took the following position on the amendment:
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In short, the effect of the amending legislation, whether necessary or not, was to limit any basis for suggesting that the Regulations, the Minister’s actions, the Minister’s and departmental directives, the ABC and FP schemes and the right to cancel either a producing licence or subsurface mineral lease were not authorized by The Mineral Resources Act.
In my opinion, unless it can be said the amendments are ultra vires, this end has been accomplished. Once the effect is given to the amendments, then it can be said, the only issue is whether or not in purporting to carry out schemes as authorized by the Statute such schemes were invalid in that in their true nature and character they were directed to the regulation of trade and commerce.
I can accept this assessment for the purpose of reaching the constitutional question in the present case. It must, however, be obvious that an authorizing statute which, in the generality of its terms, is not itself impeachable (because it is open to a construction which assures its validity), cannot sustain regulations or orders which, taken by themselves, are ultra vires under the British North America Act. Indeed, if the invalid regulations or orders are so intertwined with the authorizing statute as to stamp it with their character, the statute itself would be vulnerable. I do not find it necessary to enter into such an inquiry in the present case.
The declaration of unconstitutionality by the trial judge was founded upon the following considerations as expressed in his reasons:
A study of the regulations and a consideration of the extrinsic evidence relevant to the purposes for which they were passed establishes that the real aims and purposes of the [Executive] Council were as follows:
Firstly: to restrict and limit the export of Saskatchewan potash into the United States.
Secondly: to control and impede the flow of trade in potash between Saskatchewan producers and the residents of other provinces of Canada unless they paid such price and obeyed such conditions as the Minister of Mineral Resources saw fit to demand and impose from time to time. Thus the Regulations and the ABC scheme were, in fact, designed to interfere with and to impede the free flow of trade in potash within Canada and to
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curtail the right of Canadians in other Provinces to make their own contracts with Saskatchewan producers.
Thirdly: to control and impede the export trade in potash between Canada and other foreign nations in like manner.
The mass of evidence before me irresistibly points to the conclusion that these aims and purposes of the Council constituted an intentional and deliberate invasion into “the exclusive legislative authority of the Parliament of Canada” over “The regulation of trade and commerce” assigned to it by Section 91(2) of The British North America Act. It is completely beyond the competence of the provincial Legislature to legislate to impede or prohibit the export from Saskatchewan of products produced or manufactured in this Province:…
In the Court of Appeal, Culliton C.J.S. took a different view. I think that he correctly assessed the trial judge’s reasons on constitutionality as resting on the conclusion that what was before him was a marketing scheme. The learned Chief Justice was of another opinion, namely, that the scheme was directed to the conservation and orderly development of Saskatchewan’s potash reserves; or, to put it in more specific terms, related to the authorization of the scheme under The Mineral Resources Act, it was a scheme for the management, utilization and conservation of the potash industry. Chief Justice Culliton appreciated that this view of the ABC and FP schemes did not ipso facto determine validity, but he also considered that the aforementioned objectives encompassed “the promotion and adoption of economic policies to assure a healthy and sound industry”; and he agreed with the trial judge that “the purposes as disclosed in the Regulations are to control the production and sale of potash, to determine fair prices and to prorate production when advisable”.
Looking separately at the Regulations and at the directives issued thereunder, the Chief Justice had this to say about the Regulations:
…The Regulations, on their face, do not disclose any purpose or intent to interfere with the flow of interprovincial or international trade in potash. That being so, I
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am satisfied the Regulations are valid; they disclose neither an attempt to invade the field of trade and commerce nor are they inconsistent with the provisions of The Mineral Resources Act under which they were passed. Whether or not the ABC and FP schemes, purported to have been made in pursuance of such Regulations by ministerial orders and directives, are valid and constitutional, are entirely different matters. The validity or non-validity of these schemes are not the factors which determine the validity of the Regulations.
He asserted that the trial judge had taken too narrow a view of the empowering authority under The Mineral Resources Act to provide for the management, utilization and conservation of mineral resources. In his opinion, the trial judge had limited these matters to their physical connotation, and a more expansive view of them should be taken to embrace economic considerations, and this apart from the subsequent 1976 amendment of the Act. I readily agree with this broader approach, but it is one which does not in itself establish provincial legislative authority.
The sensitivity of the provincial Government to economic factors, in so far as they might reveal an invasion of exclusive federal power in relation to the regulation of trade and commerce, is shown (as Chief Justice Culliton himself observed) by the rescission of the provision in the Regulations for a disposal licence. The obvious question is whether the removal of the requirement for such a licence makes any difference in the constitutional appraisal of the scheme. In short, assuming the scheme would have fallen if the provision for a disposal or sale licence would have remained, is it saved because the only licence requirement is for production? To put the matter another way, is the character of the scheme any different by reason of the limitation to a production licence with price control as a condition thereof? In this case, I think not, and I shall come to my reasons in due course.
I may note, however, at this point that for Culliton C.J.S. the fact that “The prorationing and price fixing were directed only to potash produced in Saskatchewan” (to use his very words) distinguished the scheme in this case from that
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involved in the Manitoba Egg Reference, Attorney-General for Manitoba v. Manitoba Egg and Poultry Association[2]. This latter case involved, of course, a marketing scheme, and I am mindful of Chief Justice Culliton’s rejection of such a characterization of the prorationing and price stabilization scheme in issue here. Nonetheless, he found comfort in another marketing case, Carnation Company Ltd. v. Quebec Agricultural Marketing Board[3], where a marketing and price control plan for the sale of milk by Quebec producers to a processor in Quebec was sustained and held applicable to the appellant processor, notwithstanding that it sold most of its purchased milk, after processing, outside the Province. In upholding the Quebec legislation and the scheme under it, as directed to marketing in intraprovincial trade, Martland J., speaking for this Court, referred to the Shannon case (Shannon v. Lower Mainland Dairy Products Board[4]) as expressing the general principle that a provincial statute regulating intraprovincial transactions is at least prima facie valid, and he went on to say this (at pp. 253‑4) after considering also the various reasons for judgment of this Court in Reference re The Farm Products Marketing Act (Ontario)[5]:
The view of the four judges in the Ontario Reference was that the fact that a transaction took place wholly within a province did not necessarily mean that it was thereby subject solely to provincial control. The regulation of some such transactions relating to products destined for interprovincial trade could constitute a regulation of interprovincial trade and be beyond provincial control.
While I agree with the view of the four judges in the Ontario Reference that a trade transaction, completed in a province, is not necessarily, by that fact alone, subject only to provincial control, I also hold the view that the fact that such a transaction incidentally has some effect
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upon a company engaged in interprovincial trade does not necessarily prevent its being subject to such control.
I agree with the view of Abbott J., in the Ontario Reference, that each transaction and each regulation must be examined in relation to its own facts. In the present case, the orders under question were not, in my opinion, directed at the regulation of interprovincial trade. They did not purport directly to control or to restrict such trade. There was no evidence that, in fact, they did control or restrict it. The most that can be said of them is that they had some effect upon the cost of doing business in Quebec of a company engaged in interprovincial trade, and that, by itself, is not sufficient to make them invalid.
Culliton C.J.S. was of the view that the same considerations which supported the validity of the provincial scheme in the Carnation case operated here. He concluded as follows:
Applying the same reasoning in determining the validity of the ABC and FP plans, I think it can properly be said that they were not directed to the regulation of trade and commerce. They did not purport directly to control or restrict trade in potash. There was no evidence that, in fact, the plans did control and restrict the potash. There was no evidence that the international demand for Saskatchewan potash was not fully met. The most that can be said is that the plans may have had some incidental effect on the international market but that was a result and not a purpose. The true purpose of the schemes as in the attainment of objects of The Mineral Resources Act to manage, utilize and conserve the mineral so as to protect and maintain the potash industry as a viable economic industry within the province. That, in my opinion, was the true subject matter of the schemes and consequently within the legislative competence of the Province within the powers assigned to a provincial Legislature under Section 92(10), (13) and (16) of the British North America Act. While the schemes may have had some ultimate economic results in the market of potash it is the subject matter of the schemes, and not their results, which determine their true nature and character.
It is true that under the FP scheme Central Canada Potash was unable to supply CF Industries Limited with the quantity of potash it had agreed to sell and CF Industries had agreed to buy. As a matter of fact, it is
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apparent, that the only real complaint of Central Canada Potash respecting the FP program was because of the loss of profits it suffered from its inability, under the control program, to perform its contractual commitments with CF Industries. It had no real complaint respecting the ABC program, as when that program was in effect, it was given supplementary licences which enabled it to produce virtually to its full capacity. However, notwithstanding the inability of Central Canada Potash to fulfill its contractual commitments to CF Industries under the FP program there was no evidence that the schemes prevented CF Industries from acquiring elsewhere in Saskatchewan its requirements of the Saskatchewan production.
He arrived at this result without finding it necessary to rely on the 1976 amendment of The Mineral Resources Act.
III
In coming to his conclusion, the Chief Justice rejected as inadmissible a good deal of the extrinsic evidence which the trial judge found relevant and admissible. He felt that the constitutional problems in the case “are so readily determinable from the impugned regulations, licences and directives that most of the extrinsic evidence which was admitted was inadmissible and unnecessary”. What was admissible was summarized by the Chief Justice in these words:
Evidence as to the circumstances leading up to the adoption of the Regulations and evidence relating to the potash resources of the Province, the history of the industry, its productive capacity, the demand for its production, the state of the market and the economic problems which it faced, were all properly admissible. Such evidence gave “the underpinning for the issues” as Laskin, J. (as he then was), stated in Attorney General for Manitoba v. Manitoba Egg and Poultry Association, et al, [1971] S.C.R. 689. Too, such evidence sets out the evil sought to be remedied.
However, he went on to say that there was no need for extrinsic evidence since “…the true nature and character of the Regulations as well as that of the programs of prorationing and price stabilization and the effects resulting therefrom can be ascertained from a study of the Regulations and of the directives from time to time issued by the Minister and his departmental officials…”.
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Nonetheless, he did refer to and quote some remarks of the then Premier of Saskatchewan, made on the day the Regulations were adopted, as showing the need for the Regulations under the prevailing circumstances; and he added that the Premier had correctly stated “the direct objectives of the Regulations, licences and schemes [to be] for the conservation and orderly development of Saskatchewan’s potash reserves… through a licensing scheme or schemes to provide for controlled production and a minimum price, free on board, the mine”.
It was the appellant who introduced the wide range of extrinsic evidence which was canvassed in the reasons of the trial judge. In its factum in this Court, this evidence was classified by it as (1) circumstantial and (2) direct, a classification which the respondent Government of Saskatchewan did not accept. The arguments of the parties in this Court did not, however, produce any division between them on whether or not it was necessary to go beyond what Chief Justice Culliton considered to be admissible.
Counsel for the appellant contended that it was not at all clear what was the evidence upon which the Court of Appeal acted. The Court did not detail it, but it did make findings upon which the constitutional question fell to be determined and, at the risk of some repetition of what has gone before in these reasons, I wish to reproduce those findings in the exact words of Chief Justice Culliton, and as well his prefatory remarks, as follows:
While I admire the industry of the learned trial Judge in his thorough and exhaustive review of virtually every piece of evidence, I do not think there is any real dispute as to the factual situation, in so far as it relates to the problems of constitutionality, validity and applicability. I think it can properly be said that the following statements of fact are fully and completely substantiated by the admissible evidence, and by the inferences which must necessarily be drawn from the schemes as established by ministerial and departmental directives and set out in the potash producing licences:
(1) that in 1969, for all practical purposes, the entire potash production of Saskatchewan was sold and disposed of outside of the province: at that time
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64% of the production was sold in the United States and the remainder in other parts of the world; Saskatchewan producers had captured 48% of the potash market in the United States;
(2) that prior to the adoption of The Potash Conservation Regulations, 1969, as set out in Order in Council 1737/69 and amended by Order in Council 404/70, the potash industry of Saskatchewan was facing difficult economic conditions due to over-production and depressed market prices; conditions that were accentuated by the imposition of dumping duties by the United States Tariff Commission and by the threat of legislative action by the United States Congress to further protect the American potash industry by the imposition of import quotas and tariffs;
(3) that the potash industry of the United States was situated primarily in the State of New Mexico, and that the industry was suffering the same economic problems as was the industry in Saskatchewan as a result of discussions between representatives of the Government of Saskatchewan and those of the State of New Mexico, it was agreed that each would do what it could to protect and conserve the potash industry, in their respective jurisdictions;
(4) that The Potash Conservation Regulations were adopted for the purpose of conserving and maintaining the industry in Saskatchewan as a viable industry through a program of controlled production and price stabilization;
(5) that both the ABC scheme and the FP scheme provided for strict prorationing of production as well as the establishment of a fixed minimum price, free on board at the mine; a price that could not be affected or reduced by discounts, commissions or other considerations or by loading costs incurred after loading at the plant gate—the licences were valid only as long as the producer complied with the price requirement;
(6) that the prorationing and price stabilization schemes would result in a reduction of potash available on the international market but there was no evidence that at any time there was insufficient potash available to meet the market requirements;
(7) that the prorationing and price stabilization schemes did result in benefit to the industry, both in New Mexico and in Saskatchewan; did forestall the imposition of import quotas and tariffs by the United States Congress; did stabilize pro-
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duction and assist in the establishment of an economic price, and these schemes were supported by every potash producer in Saskatchewan except Central Canada Potash.
I am content to proceed on the basis of these findings and on an examination of the Regulations, directives and licences involved in the prorationing and price fixing scheme, without any further regard for any of the other extrinsic evidence adduced before the trial judge.
IV
What is evident from the circumstances under which the Potash Conservation Regulations were promulgated, and from the terms of the directives and licences through which the ABC and FP schemes were instituted and administered, is that the Government of Saskatchewan had in view the regulation of the marketing of potash through the fixing of a minimum selling price applicable to the permitted production quotas. The only market for which the schemes had any significance was the export market. There could be no suggestion that the schemes had any relation to the marketing of potash within the Province of Saskatchewan when there was hardly any Saskatchewan market for the mineral. There was no question here of any concluded transactions of sale and purchase in the Province, as was the situation in the Carnation case. Out of Province and offshore sales were the principal objects of the licences and directives.
The documentary evidence leaves no doubt about this. The first directive fixing the minimum floor price for potash to the producer, f.o.b. the potash plant, dated November 25, 1969, was stated to be for the purpose of determining the demand for it “for reasonable current requirements and current consumption or use within or without Saskatchewan”. The first producing licence to Noranda, dated December 12, 1969, required the licensee to comply with “all applicable Acts, regulations, orders and directions governing production, conservation, processing, disposal, marketing, transporting…”. The second producing licence conditioned its validity on
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observance of the minimum selling price, f.o.b. the producer’s plant in Saskatchewan. Subsequent producing licences did not indicate any change of focus, although they fortified ministerial control.
A directive of August 24, 1971, to all producers fixed the minimum price f.o.b. vessel, Vancouver. On August 27, 1971, a letter to producers from the Deputy Minister advised of approval given, on certain conditions, to an agreement for delivery of potash to a business organization in France. One of the conditions required that “all potash delivered to Europe from Saskatchewan pursuant to the agreement shall be for consumption in Europe”. The new allocation formula prescribed by the directive of June 30, 1972, from which I have already quoted, was concerned with the sharing of production “to meet the market demand”. The purpose of Canpotex, to which I have also referred above, was to make it the instrument for offshore sales of Saskatchewan potash.
In all of the foregoing, the Government of Saskatchewan, and its responsible Ministers and their Deputies, were acting not under proprietary right but in pursuance of legislative and statutory authority directed to the proprietary rights of others, including the appellant. It was strenuously contended by the respondent Government (and in this they were supported by the intervening Provinces) that the natural resources, the mineral wealth of the Province was subject to provincial regulatory control alone, and that production controls or quotas were peculiarly matters within exclusive provincial legislative authority. Chief Justice Culliton gave force to this point in two concluding paragraphs of his reasons, which he prefaced by saying that “courts must approach constitutional problems with a sense of realism and practicality”. The two paragraphs read as follows:
It was admitted by all parties that the potash industry of Saskatchewan was facing difficult problems—problems which, if not solved, would have a most detrimental
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effect on the industry and on the Province. In these circumstances, the potash industry had a right to seek assistance from whatever Government had the power to grant that assistance. Natural resources, being exclusively within the provincial jurisdiction, the industry turned to the Province. The Province, to protect and conserve the potash industry, implemented controlled production and established minimum prices in the Province. These programs did assist the industry, but at the same time, had some effect on areas within Federal jurisdiction. However, in pith and substance, they were programs directed to a matter within Provincial jurisdiction and thus were valid notwithstanding such ultimate effects.
If I am not right in this conclusion, then it must be said the right to control production of potash within the Province, and to establish a minimum price at the mine, rests with the Parliament of Canada, for the right to do so must rest somewhere. Clearly, in my opinion, the Parliament of Canada does not have the power to control the production of potash within the Province, or to set a minimum price at the mine. Thus, in my opinion, to hold that the prorationing and price stabilization programs are ultra vires the Province, is to determine their validity by the ultimate effects of such programs and not by their true nature and character.
It is, of course, true, that production controls and conservation measures with respect to natural resources in a Province are, ordinarily, matters within provincial legislative authority. This Court’s reasons in its recent judgment in the Ontario Egg Reference (Reference re Agricultural Products Marketing Act (Canada), Farm Products Marketing Agencies Act (Canada) and The Farm Products Marketing Act (Ontario)[6]), judgment delivered January 19, 1978, and as yet unreported, supports that view. The situation may be different, however, where a province establishes a marketing scheme with price fixing as its central feature. Indeed, it has been held that provincial legislative authority does not extend to the control or regulation of the marketing of provincial products, whether minerals or natural resources, in interprovincial or export trade. The Saskatchewan Courts recognized this almost fifty years ago in the judg-
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ment in In re Grain Marketing Act, 1931[7]. Legislation with this thrust in other Provinces has likewise been struck down: see Lawson v. Interior Tree Fruit & Vegetable Committee of Direction[8], Re Sheep and Swine Marketing Scheme (P.E.I.)[9].
The present case reduces itself therefore to a consideration of “the true nature and character” of the prorationing and price stabilization schemes which are before us. This Court cannot ignore the circumstances under which the Potash Conservation Regulations came into being, nor the market to which they were applied and in which they had their substantial operation. In Canadian Industrial Gas & Oil Ltd. v. Government of Saskatchewan[10], this Court, speaking in its majority judgment through Martland J., said (at p. 568) that “provincial legislative authority does not extend to fixing the price to be charged or received in respect of the sale of goods in the export market”. It may properly be said here of potash as it was said there of oil that “the legislation is directly aimed at the production of potash destined for export, and it has the effect of regulating the export price since the producer is effectively compelled to obtain that price on the sale of his product” (at p. 569).
I do not agree with Chief Justice Culliton that the consequence of invalidating the provincial scheme in this case is to move to the Parliament of Canada the power to control production of minerals in the Province and the price to be charged at the mine. There is no accretion at all to federal power in this case, which does not involve federal legislation, but simply a determination by this Court, in obedience to its duty, of a limitation on provincial legislative power. It is true, as he says that (with some exceptions, not relevant here) the British North America Act distributes all legislative power either to Parliament or to the provincial Legislatures, but it does not follow that legislation of a Province held to be invalid may ipso facto be
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validly enacted by Parliament in its very terms. It is nothing new for this Court, or indeed, for any Court in this country seized of a constitutional issue, to go behind the words used by a Legislature and to see what it is that it is doing. It is especially important for Courts, called upon to interpret and apply a constitution which limits legislative power, to do so in a case where not only the authorizing legislation but regulations enacted pursuant thereto are themselves couched in generalities, and the bite of a scheme envisaged by the parent legislation and the delegated regulations is found in administrative directions.
Where governments in good faith, as in this case, invoke authority to realize desirable economic policies, they must know that they have no open-ended means of achieving their goals when there are constitutional limitations on the legislative power under which they purport to act. They are entitled to expect that the Courts, and especially this Court, will approach the task of appraisal of the constitutionality of social and economic programmes with sympathy and regard for the serious consequences of holding them ultra vires. Yet, if the appraisal results in a clash with the Constitution, it is the latter which must govern. That is the situation here.
In my opinion, the judgment of the Saskatchewan Court of Appeal on the constitutional question posed for this Court should be set aside and the declaration of invalidity by the trial judge should be restored.
V
On the second main issue in this case, namely, the claim for damages by the appellant against the respondent for the tort of intimidation, I am in agreement with the reasons of my brother Martland and would therefore dismiss the appellant’s appeal on this issue.
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VI
Success being divided, there will be no order as to costs as between the parties either in this Court or in the Courts below. Further, there will be no order as to costs either to or against the Attorney-General of Canada or any of the intervenants.
The Chief Justice and Ritchie, Spence, Pigeon, Dickson and Pratte JJ. concurred with the judgment delivered by
MARTLAND J.—The appellant claimed damages against the respondent for intimidation. At trial damages were awarded in the amount of $1,500,000. This judgment was reversed on appeal by the Court of Appeal.
The circumstances which gave rise to the claim that the respondent had committed the tort of intimidation are as follows.
Pursuant to the Potash Conservation Regulations, the relevant portions of which are set out in the judgment of the Chief Justice, the Minister of Natural Resources, hereinafter referred to as “the Minister”, evolved and implemented what was known as the “ABC” scheme for prorationing the production of potash in Saskatchewan. In that scheme the formula for prorationing was founded upon:
(1) the productive capacity of each mine;
(2) the estimated demand for Saskatchewan potash;
(3) the amount of potash required for working stock and reserve.
Under the scheme, each producer was allowed to produce and sell 40 per cent of its productive capacity. Only after every producer in Saskatchewan had produced and sold its quota could a producer apply for a supplementary licence to produce and sell an additional amount.
The appellant obtained production licences from the Minister authorizing the production, between January 1 and June 30, 1970, of 197,734 short tons K2O equivalent, between July 1, 1970, and
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June 30, 1971, of 410,642 tons, and between July 1, 1971, and June 30, 1972, of 632,096 tons.
In December 1971, the Minister advised all producers of potash that a new method of proration would take effect for the year July 1, 1972, to June 30, 1973. The new method, which was adopted, was that the producing licence to be issued to each producer would be in accordance with a prorationing formula based solely upon the productive capacity of each mine.
The appellant took objection to the application of this formula to its production. Mr. Schmitt, the president of the appellant, wrote to the Minister on May 29, 1972, requesting a licence for the 1972-73 year to authorize production of 805,500 tons of K2O equivalent of which, he said, 744,500 tons would be required to meet the appellant’s supply commitment to C.F. Industries Inc. Subsequently, on June 19, 1972, Mr. Row, the executive vice-president of the appellant, met with the Minister, Mr. Thorson.
On June 22, 1972, the Minister wrote a letter to Mr. Row, referring to Mr. Schmitt’s letter, and to the meeting of June 19. He advised Mr. Row that:
…upon careful consideration, it is not deemed to be in the public interest to make an exception to a producer or to the method of allocation which is to come into effect on July 1, 1972.
He went on to add:
While it is recognized that the allocation to Central Canada Potash under the revised proration rules may not be sufficient to meet all the requirements of C.F. Industries, Inc., an exception could not be tolerated or justified without upsetting the whole potash prorationing program. Moreover, such exception would be tantamount to giving Central Canada Potash an undue advantage by government regulation.
Central Canada Potash and other Saskatchewan producers have benefited from the prorationing program and they will continue to share those benefits under the revised prorationing formula. The sharing of markets is a basic and essential principle of any prorationing scheme.
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A licence was issued to the appellant authorizing production of 442,647 tons.
The appellant commenced proceedings for a writ of mandamus to compel the Minister to issue to the appellant a producing licence for the twelvemonth period commencing July 1, 1972:
…according to law and upon relevant considerations, and not upon irrelevant considerations or improper purposes including regulation of the extra-provincial marketing and price of potash.
This application was dismissed on August 17, 1972, ([1972] 6 W.W.R. 62). An appeal from this judgment was dismissed by the Court of Appeal on November 6, 1972, ([1973] 1 W.W.R. 193). A further appeal to this Court was dismissed on February 5, 1973, ([1973] 2 W.W.R. 672).
On August 3, 1972, the Deputy Minister of Mineral Resources, Mr. Wotherspoon, wrote to the appellant’s manager at Colonsay, Saskatchewan, as follows:
Please be advised that the production schedule for 750,000 K2O tons for the twelve month period is unacceptable as it is based on a larger volume of production than is currently authorized by Central Canada’s Potash Producing Licence. Therefore, please submit, as soon as possible, a planned production schedule for the 442,647 K2O tons of production now authorized by Producing Licence No. P72-C-1.
This was followed by a letter dated September 20, 1972, from Mr. Wotherspoon to Mr. Schmitt. As this letter constitutes the primary basis of the appellant’s claim for damages, based on intimidation. I will set it out in full:
Mr. D.E.G. Schmitt,
President,
Central Canada Potash Co. Limited,
Suite 1700,
44 King Street West,
Toronto 105, Ontario.
Dear Mr. Schmitt:
Re: Potash Production Schedule for 1972-73 Fertilizer Season
[Page 80]
Upon issue of the 1972-73 potash producing licence, dated June 20, 1972, Central Canada Potash Co. Limited was requested to submit its potash production schedule for the 1972-73 fertilizer year commencing July 1, 1972.
On July 26, 1972, you submitted a production schedule totally out of line with the Department’s guideline of a monthly production not exceeding 10% of the allocated annual production authorized by your producing licence.
We informed you by letter on August 3, 1972, that your production schedule was unacceptable to the Department and that you must revise your schedule so that your monthly production will be in accordance with the guideline as a percentage of the allocated production. To date we have not received your revised production schedule.
Furthermore, according to the production reports your company produced in the month of July, 1972, 109,395 tons of muriate or 66,428 tons of K2O equivalent, and in August, 1972, your company produced 101,448 tons of muriate or 61,720 tons of K2O equivalent. Moreover, all indications show that your company is producing similar tonnage in September, 1972. Under these circumstances your company will produce in the first three months of the 1972-73 fertilizer year about 190,000 tons of K2O equivalent or about 57,400 tons of K2O equivalent over and above the production guideline which is applicable to all other potash producers in Saskatchewan.
Your company is required, therefore, to reduce the monthly production of potash in Saskatchewan to not more than 30,000 short tons of K2O equivalent in each month for the balance of the 1972-73 fertilizer year until your allocated production has been produced, unless otherwise authorized, by the Minister of Mineral Resources. Failure to comply with the above requirement will necessitate drastic action of serious consequence and the Minister will have no choice but to cancel your potash producing licence P72-C-1. In addition, the Department will recommend the cancellation of your Subsurface Mineral Lease No. KL108 pursuant to Paragraph 1 and Section 13 of the lease.
In order to avoid any misunderstanding or delay your written assurance of compliance with the production schedule as set forth by the Department above is requested not later than September 27, 1972.
Yours truly,
(sgd.) J. Wotherspoon
J.G. Wotherspoon.
[Page 81]
After the receipt of this letter by the appellant, a meeting took place which was attended by Mr. Schmitt, Mr. Thorson, Mr. Wotherspoon and others at which Mr. Schmitt sought to persuade Mr. Thorson to issue a production licence for the appellant’s production requirements. Mr. Schmitt’s representations were unsuccessful. As a result, the appellant reduced its production to the level required by the Minister. Mr. Schmitt says that this reduction was effected because of the threat of the appellant’s losing its sub-surface mineral lease. Thereafter the appellant kept its production within the limits set by its producing licence.
The present action attacking the constitutional validity of the regulations in question here was commenced on December 11, 1972.
The appellant’s case is that its production of potash was reduced in consequence of the threats contained in the letter of September 20, 1972, that the demanded reduction in its production was not lawful, and that the appellant has suffered loss by reason of its being unable to effect sales of potash which, otherwise, it could have made, with a consequent loss of profits.
The tort of intimidation is defined in Clerk & Lindsell on Torts (14th ed.) para. 802, p. 414, as follows:
A commits a tort if he delivers a threat to B that he will commit an act or use means unlawful as against B, as a result of which B does or refrains from doing some act which he is entitled to do, thereby causing damage either to himself or to C. The tort is one of intention and the plaintiff, whether it be B or C, must be a person whom A intended to injure.
The very existence of the tort of intimidation was questioned in argument before the House of Lords by Gerald Gardiner, Q.C., (as he then was) in the leading case of Rookes v. Barnard[11]. The House of Lords confirmed the existence of the tort as had the Court of Appeal in the same case, [1963] 1 Q.B. 623. The difference of opinion between the two Courts was that the Court of Appeal held that intimidation was restricted to
[Page 82]
acts of violence or threats of a tortious or criminal nature and could not be extended to cover a threat to break a contract, while the House of Lords took the view that a threat to break a contract could be a foundation for the tort.
The facts of that case were these. The plaintiff, an employee of B.O.A.C., resigned from his trade union which had an oral understanding, which was not legally binding, with B.O.A.C. that when a section or unit of B.O.A.C.’s employees were all union members it would not thereafter recruit non-union staff for that section. Of the three defendants, B and F were lay officials of the union employed by B.O.A.C. and S was a full-time official employed by the union. These three, in accordance with the terms of a resolution passed at a meeting of union members, threatened B.O.A.C. that a strike of all the employees would take place within three days if the plaintiff non-unionist were not removed. In consequence, B.O.A.C. suspended and later (lawfully and with due notice) dismissed the plaintiff. Under a collective agreement between the union B.O.A.C. the union agreed that employees would not strike. The strike would have been a breach of contract by employees as against B.O.A.C.
It will be noted that the threats which were made were not made to the plaintiff. They were made to his employer, B.O.A.C., which lawfully dismissed the plaintiff. The threatened strike would have been a clear breach of the collective agreement between the union and B.O.A.C. His only recourse, if it existed, and the House of Lords found that it did, was against those persons whose threat to B.O.A.C. resulted in its dismissal of the plaintiff from its employment.
The judgment of the House of Lords has been the subject of criticism. A good example of this is to be found in the article written by Professor K.W. Wedderburn published in (1964) 27 Modern Law Review 257. There are substantial arguments in favour of the opinion expressed by the Court of Appeal in the Rookes case. The question has not come up for consideration in Canada. As the trial judge pointed out in the present case, that decision
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has been mentioned in a number of Canadian cases, but, so far, only in relation to what it decided in respect of the awarding of exemplary damages. I do not, however, consider it is necessary presently to determine that issue, because it is my view that for other reasons the appellant is not entitled to succeed.
In reaching that conclusion, the following matters have to be considered.
At the time the letter of September 20, 1972, was written and prior thereto the Potash Conservation Regulations, 1969, made pursuant to The Mineral Resources Act were in existence. Section 2 of those regulations expressly prohibited the production of potash unless a producing licence authorizing the production had been granted by the Minister in such form as he might determine.
At that time the appellant had a potash producing licence, dated June 20, 1972, for a period of twelve months commencing July 1, 1972, authorizing the production of 442,647 short tons (K2O equivalent) of potash. This licence required the appellant, within thirty days of its receipt, to submit a schedule showing the planned production for each month of the total production authorized. It also provided that the Minister might amend, revise or vary the production authorized if, in his opinion, conditions had changed or if he deemed an adjustment necessary, or in the public interest.
The appellant had sought unsuccessfully to persuade the Minister to authorize production of a larger quantity, in order to meet its business requirements. At the time the letter was written, judgment had been given dismissing the appellant’s application for mandamus to compel the Minister to grant a licence for a larger quantity.
The appellant has been requested, upon the issue of its licence, to submit its production schedule for the twelve-month period. The production schedule submitted was not in line with the departmental guideline of a monthly production not exceeding 10 per cent of allocated annual production. The appellant’s production reports showed production in July 1972 of 66,428 tons of K2O equivalent and
[Page 84]
in August of 61,720 tons of K2O equivalent. Indications were that there would be similar tonnage produced in September.
The appellant was directed in the letter to reduce production to 30,000 short tons of K2O equivalent in each month for the balance of the period until the allocated production had been produced, unless otherwise authorized by the Minister.
In the event of failure to comply with the requirement, Mr. Wotherspoon, the Deputy Minister, said that the Minister would have no choice but to cancel the licence and that the Department would recommend cancellation of the appellant’s subsurface mineral lease. Mr. Schmitt said in evidence that the appellant reduced production because of the threat of losing this lease.
The lease in question, which was dated June 23, 1967, was for a term of 21 years, subject to renewal. Paragraph 1 of the lease stated that it was granted “subject to The Mineral Resources Act, 1959, the Subsurface Mineral Regulations, 1960… and any other applicable regulations under the Act, as the Act or the said regulations or any of them may be amended, revised or substituted from time to time”.
Clause 13 of the lease provided that:
13. The Lessee shall observe, perform and abide by all the obligations and conditions imposed upon the holders of subsurface mineral leases by the Act or regulations thereunder in effect from time to time.
Clause 16 provided that in the event of any default, breach, non-observance or non‑performance on the part of the lessee of the covenants, obligations, conditions, restrictions or stipulations contained in the lease, the Minister, after having given to the lessee sixty days’ written notice of intention to cancel and specifying the default, might cancel the lease if the default had not been remedied or was not being remedied to the satisfaction of the Minister within the sixty-day period.
Mr. Wotherspoon in his letter of September 20, 1972, referred to paragraph 1 and to clause 13 of the lease as a basis for cancellation.
[Page 85]
The Mineral Resources Act was amended on May 7, 1976, by c. 36 of the Statutes of Saskatchewan, 1976. Among other things, a new s. 11A was enacted which enables the Minister to cancel a production licence if the holder contravenes or fails to comply with any term or condition of the licence and if such contravention or failure continues for more than thirty days after being brought to the holder’s attention. This section was declared to be deemed to have always been contained in the Act.
In addition, the Potash Conservation Regulations and amendments thereto were ratified and confirmed retroactively to their respective dates of enactment.
The amending Act was passed after judgment had been rendered following the trial, but prior to the judgment of the Court of Appeal. The enactment of s. 11A removed any doubt as to the power of the Minister to cancel a production licence. The ratification and confirmation of the Potash Conservation Regulations removed doubt as to whether they had been validly enacted under the provisions of the Act.
The amending Act also contained a schedule of production of various companies, including the appellant, fixing the limits of production of each such company from January 1, 1970, to June 30, 1976. It was stated that no such company was entitled to produce amounts of potash in excess of the fixed amounts. This provision was deemed to be in force from January 1, 1970. The amount fixed, in respect of the appellant, for the period July 1, 1972, to June 30, 1973, was 469,703 short tons K2O equivalent. The amounts fixed for the next succeeding three twelve-month periods were 660,005, 900,000 and 900,000 tons, respectively.
To summarize, the situation in the present case is this. Pursuant to The Mineral Resources Act a scheme for the control of production of potash in Saskatchewan had been put into effect. The appellant, as a potash producer, was prohibited from producing potash in excess of the amounts prescribed by the licences issued to it. It was required after receiving a licence to submit a production
[Page 86]
schedule, showing monthly production during the twelve-month term of the licence not exceeding the total production authorized.
The appellant, being understandably unhappy with the quota allotted to it, endeavoured to persuade the Minister to increase its allocation, but without success. It sought to compel such an increase by mandamus, again without success. It failed to submit a proper production schedule within thirty days of the receipt of its licence for the 1972-1973 year. It continued its production upon a scale beyond that which was contemplated by its licence.
This was the situation in which the Deputy Minister wrote the letter of September 20, 1972, calling on the appellant to reduce its production or to face the possibility of a cancellation of its mineral lease. That lease, as has been noted, included a requirement that the appellant, as lessee, would observe, perform and abide by all obligations imposed upon holders of mineral leases by the Act or regulations thereunder in effect from time to time.
In the present case, the threat by the Deputy Minister was the possible exercise by the Minister of powers which he had reasonable grounds for believing the Minister possessed. In the Rookes case the threat was to pursue a course of action which the defendants knew would be a breach of the collective agreement between the union and B.O.A.C.
In the present case, the Deputy Minister sought to induce the appellant to limit the amount of its production to conform with the prorationing scheme which had been established. In the Rookes case, the object of the threat was to compel B.O.A.C. to discharge the plaintiff, an action which, except for the pressure, it did not wish to take and which it was under no legal obligation to take.
In the Rookes case, the threat was not made to the plaintiff. It was made to a third party, B.O.A.C., with a view to compel it to take a course of action detrimental to the plaintiff. In the present case, the threat was made directly to the appellant and no third party was involved.
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I will deal with this distinction now, and will revert to the other distinctions later. It is significant because the plaintiff, in the Rookes case, was not in a position to claim a breach of contract by his employer when he was dismissed. The only recourse he could seek was against the defendants who had threatened a breach of the collective agreement between the union and the employer as a means to compel the employer to discharge Rookes. Here the appellant is a party to the contract which it says was threatened to be breached, i.e. the lease, and would have been entitled to pursue its contractual remedies had that contract been illegally breached.
On this point, I am in agreement with the view expressed by the author of Winfield and Jolowicz on Tort (10th ed.) p. 458, as follows:
It is submitted, therefore, that the two-party situation is properly distinguishable from the three-party situation and that it does not necessarily follow from Rookes v. Barnard that whenever A threatens B with an unlawful act, including a breach of his contract with B, he thereby commits the tort of intimidation. In fact the balance of advantage seems to lie in holding that where A threatens B with a breach of his contract with B, B should be restricted to his contractual remedies. The law should not encourage B to yield to the threat but should seek to persuade him to resist it. If he suffers damage in consequence he will be adequately compensated by his remedy in damages for breach of contract, as his damage can scarcely be other than financial. Where, however, what is threatened is a tort, and especially if the threat is of violence, it is both unrealistic to insist that proceedings for a quia timet injunction afford him adequate protection against the consequences of resistance and unreasonable to insist that if violence is actually inflicted upon him he is adequately compensated by an award of damages thereafter. The view is preferred, therefore, that although A commits the tort of intimidation against B where he threatens B with violence or perhaps with any other tort, no independent tort is committed when all that is threatened is a breach of contract.
In my opinion the tort of intimidation is not committed if a party to a contract asserts what he reasonably considers to be his contractual right and the other party, rather than electing to contest that right, follows a course of conduct on the
[Page 88]
assumption that the assertion of right can be maintained.
I am also of the view that if the course of conduct which the person making the threat seeks to induce is that which the person threatened is obligated to follow, the tort of intimidation does not arise. If, in the Rookes case, the collective agreement between the union and B.O.A.C. had contained a closed shop provision so as to require B.O.A.C. to discharge the plaintiff upon his ceasing to be a member of the union, the plaintiff could not have succeeded in his suit because of the threat of a strike, even though the agreement provided that there should be no strikes.
In the present case the Potash Conservation Regulations made under The Mineral Resources Act prohibited the appellant from exceeding a specified production of potash. By conforming to the requirements of the Regulations, the appellant would not suffer damage and, therefore, the claim for intimidation is not well founded.
What, then, is the position if, subsequently, it is found that the Regulations were ultra vires? Does that finding then mean that there has been intimidation?
In my opinion it does not. The conduct of the Deputy Minister in relation to the tort of intimidation must be considered in relation to the circumstances existing at the time the alleged threat was made. The Deputy Minister was then seeking to induce conformity with the prorationing plan which had been created by legislation which it was his duty to enforce. At the time the threat was made, the legislation stood unchallenged.
On this question the judgment of the House of Lords in Hoffman-La Roche & Co. v. Secretary of State for Trade and Industry[12] is of assistance. In that case a statutory order had been made requiring the company to reduce the prices of certain drugs. The company contested the validity of the order and took proceedings to have the order declared to be ultra vires. The company advised
[Page 89]
the Secretary of State that it would not obey the order, but offered to pay the difference between its prices and those set by the order into a special bank account pending a decision as to the validity of the order. The Secretary of State then issued a writ seeking an injunction to restrain the company from charging prices in excess of the prices fixed by the order. He applied for an interim injunction to this effect but stated he was not prepared to give an undertaking as to damages.
The House of Lords, with one dissent, held that the Secretary of State was entitled to the order. It was decided that where the Crown sought an injunction for the purpose of enforcing the law in the manner prescribed by the statute, it was for the person against whom the injunction was sought to show special reason why justice required that it should only be granted on terms.
At p. 341, Lord Reid said:
It must be borne in mind that an order made under statutory authority is as much the law of the land as an Act of Parliament unless and until it has been found to be ultra vires.
Lord Morris of Borth-y-Gest said at p. 350:
The order had effectively the full force of law unless and until it could be shown to be ultra vires. It is in the public interest that the law should be obeyed. It is in the public interest that resistance to it should be suppressed. Unless some very good reason could be shown a court would, therefore, accede to an application to enforce the law and to enforce it in the way in which Parliament had prescribed as the appropriate way. So in the present case the question which, in my view, arises is whether there was any valid and sufficient reason why an injunction should not have been granted.
Lord Diplock, at p. 367, said:
So in this type of law enforcement action if the only defence is an attack on the validity of the statutory instrument sought to be enforced the ordinary position of the parties as respects the grant of interim injunctions is reversed. The duty of the Crown to see that the law declared by the statutory instrument is obeyed is not suspended by the commencement of proceedings in which the validity of the instrument is challenged. Prima facie the Crown is entitled as of right to an interim injunction to enforce obedience to it. To displace this right or to fetter it by the imposition of conditions it is
[Page 90]
for the defendant to show a strong prima facie case that the statutory instrument is ultra vires.
It appears, from this reasoning, that the Minister was properly entitled to seek to enforce the Regulations unless and until they were found to be ultra vires. This being his duty, it cannot constitute intimidation to seek to enforce them.
In my opinion it would be unfortunate, in a federal state such as Canada, if it were to be held that a government official, charged with the enforcement of legislation, could be held to be guilty of intimidation because of his enforcement of the statute whenever a statute whose provisions he is under a duty to enforce is subsequently held to be ultra vires.
This brings me to the latter portion of the definition of intimidation from Clerk & Lindsell which I have adopted. “The tort is one of intention and the plaintiff, whether it be B or C, must be a person whom A intended to injure.” The authority for this statement is found by the authors in the judgments of Lord Devlin and Lord Evershed in the Rookes case, and I am in agreement with it. There is no evidence that the Deputy Minister intended to injure the appellant. The correspondence, and particularly the letter of September 20, 1972, make it clear that his purpose was to induce compliance with an existing legislative scheme.
So far as I am aware, there has only been one case before this Court in which a claim was founded on intimidation, Roman Corporation et al. v. Hudson’s Bay Oil & Gas Company Limited et al.[13] That case involved an oral agreement for the sale of shares in Denison Mines Limited by the appellants to the respondent company. The sale involved about 38 per cent of the shares of Denison which operated a mine at Elliot Lake for the production of uranium oxide. The respondent company was controlled by an American corporation. Shortly after the agreement was made, the Prime Minister announced in the House of Commons that the Government was concerned about the passing of a substantial ownership interest in Deni-
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son into non-Canadian hands and that, if necessary, legislation to amend the Atomic Energy Control Act would be introduced to prevent the transaction. Later, the Minister of Energy, Mines and Resources announced that the Government would pass regulations restricting foreign ownership of any uranium property or plant in Canada.
As a result of the announcements, the appellants and the respondent company did not complete their agreement.
The appellants claimed damages against the two Ministers, inter alia, on the basis that their announcement constituted a threat which had intimidated the appellants causing them to abandon a valuable contract.
Up to the date of issuance of the statement of claim, there had been no amendment to the Atomic Energy Control Act and no regulation had been enacted. Two months prior to the issuance of the statement of claim, Denison had issued a writ of summons against the Attorney-General of Canada claiming a declaration that the Atomic Energy Control Act was ultra vires.
The respondent Ministers moved to strike out the statement claim as disclosing no reasonable cause of action. The action against the Ministers was dismissed as were appeals to the Court of Appeal and this Court. In this Court, on the issue of intimidation, it was said, at p. 829:
The appellants also make a claim in tort for intimidation. In order to succeed under this head, the facts relied upon by the appellants would have to disclose that they had sustained damage by reason of a threat, made by the respondents, of an unlawful act. In my opinion, it cannot be said that a declaration made in good faith by a Minister of the Crown as to Government policy and the intent to implement that policy by appropriate legislation is a threat of an unlawful act. On the contrary, it is part of a Minister’s duty to the public to disclose that policy from time to time.
I would dismiss the appellant’s claims for damages.
Appeal allowed in part.
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Solicitors for the plaintiff, appellant, Central Canada Potash Co. Ltd.: McCarthy & McCarthy, Toronto.
Solicitors for the Attorney General of Canada: Gauley, Dierker & Dahlem, Saskatoon.
Solicitors for the defendant, respondent: Goldenberg, Taylor & Tallis, Saskatoon.
[1] [1977] 1 W.W.R. 487, 79 D.L.R. (3d) 203.
[2] [1971] S.C.R. 689.
[3] [1968] S.C.R. 238.
[4] [1938] A.C. 708.
[5] [1957] S.C.R. 198.
[6] Since reported [1978] 2 S.C.R. 1198.
[7] [1931] 2 W.W.R. 146.
[8] [1931] S.C.R. 357.
[9] [1941] 3 D.L.R. 569.
[10] [1978] 2 S.C.R. 545.
[11] [1964] A.C. 1129.
[12] [1975] A.C. 295.
[13] [1973] S.C.R. 820.