Manitoba Fisheries Ltd. v R

Manitoba Fisheries Ltd. v R, [1979] 1 SCR 101

Problem: After the Protest

Ritchie J.:– #

This is an appeal from a judgment of the Federal Court of Appeal [1978] 1 F.C. 485, 78 D.L.R. (3d) 393, 17 N.R. 28 dismissing an appeal from a judgment rendered at trial by Collier J. [1977] 2F.C. 457, 72 D.L.R. (3d) 756 whereby he dismissed the action brought by the appellant for a declaration that it was entitled to compensation for the loss suffered by reason of the provisions of the Freshwater Fish Marketing Act,R.S.C. 1970, c. F-13 (hereinafter referred to as “the Act”).

The appellant company was incorporated in 1926 and was, from its earliest days until May 1969, engaged in the purchase of fish from fishermen in the various lakes in Manitoba and the processing and sale of these fish to customers in the United States and in other provinces in Canada. The learned trial judge found that this company and others like it had over the years built up individual clientele in what had become a highly competitive business. The following facts are admitted by the respondent:

  1. That prior to 1969 the Plaintiff owned and operated a business in the fish exporting industry in Manitoba and that the Plaintiff’s business consisted entirely of some or all of the activities described in Section 21(1) of the Freshwater FishMarketing Act (hereinafter called the ‘Act’).

  2. That the Act inter alia created the Freshwater Fish Marketing Corporation (hereinafter called the ‘corporation’) and gave to it the exclusive right to carry on the business of fish exporting from Manitoba and elsewhere in Canada fish that are fished for commercial purposes in a participating province as an agent of theDefendant and that the Corporation commenced its business on May 1, 1969.

  3. That the Act prohibited all firms in the said industry from carrying on their business offish exporting, fish that are fished for commercial purposes in a participating province, unless a license was issued by the Corporation or unless a firm was exempted from the prohibition by the Governor in Council, and that no such license has been issued nor has such an exemption been made in favour of thePlaintiff and that the Plaintiff accordingly ceased carrying on its said business on or about May 1, 1969.

  4. That the Act empowered the responsible Minister, with the approval of the Governor inCouncil and on behalf of the Government of Canada, to enter into an agreement with, inter alia , the Government of Manitoba, providing for, inter alia , the undertaking by the Province of arrangements for the payment to the owner of any plant or equipment used in storing, processing or otherwise preparing fish for market, for compensation for any such plant or equipment that would or might be rendered redundant by reason of any operations authorized to be carried out by the Corporation under Part 3 thereof.

  5. That in an agreement dated the 4th day of June 1969, the Government of Canada and the Government of Manitoba agreed, inter alia , as follows:

The Province undertakes to make any arrangements necessary with the owner of any plant or equipment in the Province of Manitoba used in storing, processing or otherwise preparing fish for market, for compensation for any such plant or equipment that will or may be rendered redundant by reason of any operations authorized to be carried out by the Corporation under the Act.

and that the Government of Manitoba has refused and continues to refuse to so compensate the Plaintiff, and that the Plaintiff is not a party to the said agreement . (The italics are mine.)

The defendant additionally admits as follows:

  1. Until the creation of the Corporation by the Act, persons wishing to purchase freshwater fish from Manitoba could purchase such fish from the Plaintiff or other firms in the industry. After the creation of the corporation such purchases could be made only from the Corporation or its agents.

  2. In servicing its customers immediately after the first day of May 1969, the Corporation continued to process, package and sell the fish in substantially the same manner as had been established and followed by the Plaintiff and the other firms in the industry up to the first day of May 1969.

  3. The customers of all the firms in the industry including the Plaintiff’s, immediately prior to the creation of the Corporation, and the Corporation’s customers immediately subsequent to the creation of the Corporation, were in substance the same, and the sales to those customers constituted all or nearly all of the Corporation’s sales in 1969.

The Freshwater Fish Marketing Corporation (hereinafter called the “corporation”) is an agent of Her Majesty in Right of Canada, and any property acquired by the corporation becomes the property of the federal Crown. Part III of the Act contains the following provisions outlining the rights and authorities vested in the corporation. Bys. 23 the corporation:

… has the exclusive right to market and trade in fish in interprovincial and export trade and shall exercise that right, either by itself or by its agents, with the object of

(a) marketing fish in an orderly manner;

(b) increasing returns to fishermen; and

(c) promoting international markets for, and increasing interprovincial and export trade in, fish.

Section 21(1) further provides:

21. (1) Except in accordance with the terms and conditions set forth in any licence that may be issued by the Corporation in that behalf, no person other than the Corporation or an agent of the Corporation shall

(a) export fish from Canada;

(b) send,convey or carry fish from a participating province or to any other province;

(c) in a participating province, receive fish for conveyance or carriage to a destination outside the province; or

(d) sell or buy, or agree to sell or buy fish situated in a participating province for delivery in another participating province or any other province, or outsideCanada.

The basic contention of the appellant is that this legislation has resulted in depriving it of its business, and indeed it is conceded both in the judgments at trial and on appeal that the implementation of the legislation had the effect of putting the appellant out of business. This loss has been sustained without any compensation from the federal authority which undoubtedly brought it about. The position taken by the respondent and sustained in both courts below is that while the effect of the legislation is to extinguish the appellant’s goodwill, it was nevertheless not taken away by the federal Crown or the corporation.

The reasons for judgment rendered in theCourt of Appeal by Urie J. are now reported, and in the concluding portion of that judgment, at pp. 400-401, he has this to say about the effect of the legislation:

Unfortunately, implementation of the legislation had the effect of putting the appellant out of business but that result did not occur due to any deprivation of property of the appellant by the respondent. As earlier stated, the Crown did not acquire,possess or use any property of the appellant, either tangible or intangible,unless it could be said that the fishermen who supplied the appellant with their fish or the customers to whom the appellant sold its fish and fish products had become their property. Obviously that could not be so because either the fishermen or the customers could, if they so desired, do business with anyone they wished. They were not the exclusive property of the appellant or anyone else, as the admittedly highly competitive nature of the business indicates. What the appellant lost was not property but was its right to carryon the business in which it had been engaged, without a licence. If that loss included whatever goodwill the appellant had, it was not taken by the Corporation.

I have great difficulty in following this reasoning because it is clear from the record that a very substantial group of customers had been doing business with the appellant over a period of many years and they continued to do so until the legislation effectively deprived them of their source of supply and left them in a position where they no longer had a free choice as to where their business was to be placed and were indeed compelled to do business only with the corporation. It will be seen that the learned trial judge and the Court of Appeal proceeded on the basis that prior to 1st May 1969, when the corporation came into existence, the appellant and companies like it had substantial goodwill attaching to their businesses and that they lost this goodwill as a result of the creation of the corporation by the federal government. In this regard, Urie J., in reviewing the facts at the opening of his judgment, had this to say, at p. 394:

The appellant,since at least 1926 or 1927, marketed freshwater fish. The fish were purchased from independent fishermen at various points in Manitoba and were processed in various ways, at plants owned by the appellant. The processed product was sold principally to buyers in the United States. It was, apparently, a highly competitive business. However, the learned Trial Judge found as a fact that the appellant, and other firms like it, had built up individual clienteles and competitive positions in the industry. He further held (at p. 46) that, on the evidence, ‘there was goodwill, in the legal and business sense, attaching to the Plaintiff’s operation’ the value of which it was not necessary for him to fix since the parties agreed that any compensation payable in respect thereof would be the subject of agreement between them or, failing that, determined bya Judge of the Trial Division. Whether or not the learned Trial Judge erred in his determination as to the existence or non-existence of goodwill in the appellant’s business need not, it seems to me, be explored in these reasons since, for the purpose thereof, I will assume that he was correct in making this finding.

In my view the appellant’s suppliers and customers, whom it had acquired and cultivated over the years, constituted oneof its most valuable assets as of 30th April 1969, and on the following day that asset was completely extinguished and the suppliers and customers were left with no choice but to do business with the Freshwater Fish MarketingCorporation, which was created as of that date by the federal authority for the express purpose of enjoying a monopoly of the market in which the appellant had formerly prospered. The kind of goodwill lost to the appellant by reason of theAct is, in my view, best described by Lord Macnaghten in Trego v. Hunt,[1896] A.C. 7 at 24 (H.L.) , where he said:

Often it happens that the goodwill is the very sap and life of the business without which the business would yield little or no fruit. It is the whole advantage, whatever it may be, of the reputation and connection of the firm which may have been built up by years of honest work or gained by lavish expenditure of money.

In the course of his reasons for judgment in the Trial Division, Collier J. had this to say at p. 759:

The evidence satisfies me there was goodwill, in the legal and business sense, attaching to the plaintiff’s operation. The economic or pecuniary value, for purposes of damages or compensation, may ultimately be small. The parties, in this case,stipulated the amount of compensation would be agreed on by the parties or,failing accord, determined by a judge of this Court. On that basis, the plaintiff did not call any evidence to calculate or establish a dollar-and-cent value.

In so finding Collier J. [at p. 759]relied on the following passage from the reasons for judgment of Lord MacDermott L.C.J. in Ulser Tpt. Authority v. James Brown & Sons Ltd.,[1953] N.I. 79 at 109-10:

Goodwill, in my view, must be here looked at in the commercial sense. That includes the approach of the practical businessman and not merely the mathematical dollar-and-cent approach of the chartered accountant. I rely on the following comments of Lord MacDermott L.C.J. in Ulster Tpt. Authority v. James Brown& Sons Ltd. :

”Goodwill” is a word sometimes used to indicate a ready formed connection of customers whose custom is of value because it is likely to continue. But in its commercial sense the word may connote much more than this. It is, as Lord Macnaghten observed in Inland Revenue Commrs. v. Muller & Co.’s Margarine Ltd.,[1901] A.C. 217 at 224 (H.L.) , “the attractive force which brings in custom”,and it may reside, not only in trade connections, but in many other quarters,such as particular premises, long experience in some specialised sphere, or the good repute associated with a name or mark. It is something generated by effort that adds to the value of the business. When the make-up of a well-established,profitable enterprise providing a special service (such as the respondents’furniture removing service) is examined I think it well-nigh impossible to disentangle the business that has been built up from its goodwill or to give the latter a single or precise meaning. I therefore approach the question under consideration on the basis that here the relevant loss is really a loss of goodwill in the commercial sense and as described by Lord Macnaghten in Muller& Co.’s case.

In my opinion, viewed in this light,goodwill, although intangible in character, is a part of the property of a business just as much as the premises, machinery and equipment employed in the production of the product whose quality engenders that goodwill.

That the judgment of the Court ofAppeal proceeded on the basis that goodwill is “property” is apparent from the following passage to be found in the reasons for judgment of Urie J. at p. 396:

Assuming, however,that goodwill is property, did the Corporation take that property from the appellant? If that question is answered in the affirmative, then, as appears from the jurisprudence, there must be found a clear legislative intent to do so without compensation.

The trial Judge found, on consideration of the whole statute, that it did not purport to takeany property in any of the participating Provinces from anyone, with or withoutcompensation. It is a conclusion with which I must agree.

It is thus apparent that the courts below based their conclusion on the premise that, although the appellant had lost its business and the legislation created a monopoly in that business in the corporation, the effect could not be regarded as a taking or acquiring of the business by the corporation. In this regard it is well to remember that the respondent expressly admitted the fact that:

  1. Until the creation of the Corporation by the Act, persons wishing to purchase freshwater fish from Manitoba could purchase such fish from the Plaintiff or other firms in the industry. After the creation of the Corporation such purchases could be made only from the Corporation or its agents.

There is no express language in the Act providing for the payment of compensation by the federal Crown, but the appellant relies upon the long established rule which is succinctly stated byLord Atkinson in A.G. v. De Keyser’s Royal Hotel Ltd., [1920] A.C. 508at 542 (H.L.) , where he said:

The recognized rule for the construction of statutes is that, unless the words of the statute clearly so demand, a statute is not to be construed so as to take away the property of a subject without compensation.

The rule of construction is more amply stated in Maxwell on Interpretation of Statutes, 11th ed., pp. 275-77, in language which was approved by Wilson J.A. in the British Columbia Court ofAppeal in B.C. Power Corpn. Ltd. v. A.G.B.C. (1962), 38 W.W.R. 657, 34D.L.R. (2d) 25 at 44 , which is set out at length in the judgment of Collier J.at p. 760, where reference is also made to the approach adopted by LordRadcliffe in Belfast Corpn. v. O.D. Cars Ltd., [1960] A.C. 490 at 523,[1960] 1 All E.R. 65 (H.L.) . In considering whether a particular piece of legislation contemplates taking without compensation, Lord Radcliffe theres aid:

On the one hand,there would be the general principle, accepted by the legislature and scrupulously defended by the courts, that the title to property or the enjoyment of its possession was not to be compulsorily acquired from a subject unless full compensation was afforded in its place. Acquisition of title or possession was ‘taking.’ Aspects of this principle are found in the rules of statutory interpretation devised by the courts, which required the presence of the most explicit words before an acquisition could be held to be sanctioned by an act of Parliament without full compensation being provided, or imported an intention to give compensation and machinery for assessing it into any Act ofParliament that did not positively exclude it. This vigilance to see that the subject’s rights to property were protected, so far as was consistent with the requirements of expropriation of what was previously enjoyed in specie, was regarded as an important guarantee of individual liberty. It would be a mistake to look on it as representing any conflict between the legislature and the courts. The principle was, generally speaking, common to both.

Once it is accepted that the loss of the goodwill of the appellant’s business which was brought about by the Act and by the setting up of the corporation was a loss of property and that the same goodwill was by statutory compulsion acquired by the federal authority, it seems to me to follow that the appellant was deprived of property which was acquired by the Crown.

In support of the contention that in creating a monopoly for the corporation Parliament had in fact not taken anything from the appellant, some reliance is placed on a short paragraph from the reasons for judgment of Lord MacDermott L.C.J. in Ulster Tpt. Authorityv. James Brown & Sons Ltd. , supra, where he said, at p. 111:

The next question is whether the effect of the relevant prohibition is ‘to take’ the property thus lost. This verb was the subject of much argument, most of it referable totwo submissions advanced on behalf of the appellants as follows: (1) ‘to take’means to acquire or take over and thus signifies a transfer or passing of property from one to another, in contra-distinction to a taking away without acquisition, as by dissipation or destruction; and (2) a mere prohibition is not a taking whatever else ‘to take’ may connote.

This passage is merely a recital of the arguments advanced on behalf of the Transport Authority. In the result LordMacDermott L.C.J. found that there had been a taking away when the legislature,by enacting the Transport Act of Northern Island, 1948, repealed the statutory exemption which had allowed the Brown Company and others like it to operate incompetition with the government board in respect of furniture moving, and replaced it by a provision which so seriously impaired the scope of the business of such companies as to prompt Lord MacDermott L.C.J. to observe, atp. 113:

I think, therefore,that the legislation and the nature of its subject matter justify the answer that the intention was to enable the appellants to capture the prohibited business, and to do so without expense. I can find no other intention which offers a more likely explanation of the provisions in question; and counsel for the appellants, when invited to suggest some other view which would fit the circumstances as well or better, were unable to advance an alternative.

Later in the same judgment, LordMacDermott L.C.J. observed, at p. 116:

We are not dealing here with a ‘mere’ prohibition or with a prohibition which is essentially regulatory in character. We are dealing with what I have held to be, according to the intention of the Legislature, a device for diverting a definite part of the business of furniture removers and storers from the respondents and others to the appellants. If that is right, the result must be the same whether section 5(1) of the Act of 1920 sounds in pith and substance or in effect or partly in one and partly in the other. Wherever else a prohibition directed to other ends might lead, the relevant prohibition cannot but constitute a taking if my views as to its effect and underlying intention are correct.

For these reasons, I am of the opinion that there has been a taking of property within the meaning of section 5(1).

When read as a whole, there can belittle doubt that the Ulster Tpt. Authority case strongly supports the appellant’s contention in the present case.

[…]

It will be seen that, in my opinion, the Freshwater Fish Marketing Act and the corporation, created thereunder, had the effect of depriving the appellant of its goodwill as a going concern and consequently rendering its physical assets virtually useless, and that the goodwill so taken away constitutes property of the appellant for the loss of which no compensation whatever has been paid. There is nothing in the Act providing for the taking of such property by the government without compensation and I find that there was such a taking, it follows, in my view, that it was unauthorized, having regard to the recognized rule that “unless the words of the statute clearly so demand, a statute is not to be construed so as to take away the property of a subject without compensation”: per Lord Atkinson in A.G. v. De Keyser’s Royal Hotel, supra.

For all these reasons I would allow this appeal, set aside the judgment of the Court of Appeal and direct that judgment be entered providing for a declaration that the appellant is entitled to compensation in an amount equal to the fair market value of its business as a going concern as at 1st May 1969, minus the residual value of its remaining assets as of that date, together with a declaration that the said fair market value is to be agreed to by the paries and, failing agreement within a reasonable time, that either party may apply to a judge of the Federal Court to have that value determined.

Appeal allowed