COURT OF APPEAL FOR BRITISH COLUMBIA
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Citation: |
British Columbia (Milk Marketing Board) v. Saputo Products Canada G.P. / Saputo Produits Laitiers Canada S.E.N.C. , |
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2017 BCCA 247 |
Date: 20170628
Docket: CA43840
Between:
British Columbia Milk Marketing Board
Respondent
(Petitioner)
And
Saputo Products Canada G.P. / Saputo Produits Laitiers Canada S.E.N.C.
Appellant
(Respondent)
And
Chilliwack Cattle Sales Ltd. and Cedarwal Farms Ltd.
Respondents
(Third Parties)
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Before: |
The Honourable Chief Justice Bauman The Honourable Mr. Justice Goepel The Honourable Madam Justice Fenlon |
On appeal from: An
order of the Supreme Court of British Columbia,
dated July 7, 2016 (British Columbia Milk Marketing Board v.
Saputo Products Canada G.P./Saputo Produits Laitiers Canada S.E.N.C.,
2016 BCSC 1366, Vancouver Registry Docket S154889).
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Counsel for the Appellant, |
H. Poulus, Q.C. A. Spraggs |
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Counsel for the Respondent, |
R.P. Hrabinsky |
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Counsel for the Respondent, |
D.B. Kirkham, Q.C. |
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Counsel for the Respondent, |
J.A. Doyle |
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Place and Date of Hearing: |
Vancouver, British Columbia April 28, 2017 |
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Place and Date of Judgment: |
Vancouver, British Columbia June 28, 2017 |
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Written Reasons by: |
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The Honourable Mr. Justice Goepel |
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Concurred in by: |
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The Honourable Chief Justice Bauman |
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The Honourable Madam Justice Fenlon |
Summary:
The British Columbia Milk Marketing Board administers the national milk supply management system in the province pursuant to the Natural Products Marketing (B.C.) Act [NPMA] and in accordance with terms it set out in the Consolidated Order. The Board commenced proceedings against Saputo by way of petition, claiming payments Saputo withheld for losses it allegedly suffered from purchasing bad milk. Saputo applied to convert the petition into an action and sought leave to file third party notices against the alleged producers of the bad milk. The chambers judge dismissed the application to convert the petition to an action. Saputo now appeals. Held: appeal allowed. The Board was permitted to bring its claim by petition pursuant to the NPMA and the Supreme Court Civil Rules. This Court is authorized pursuant to the Rules to convert the petition to a trial on the basis that there are bona fide triable issues concerning the quality of milk and the remedies available. The trial judge erred by failing to consider whether Saputo raised any bona fide triable issue. This Court would convert the proceeding into an action and order the Board to file a notice of civil claim.
Reasons for Judgment of the Honourable Mr. Justice Goepel:
[1] This litigation asks the court to consider private law sale of goods and tort remedies in the circumstances of products sold through a marketing board where there is no direct relationship between the buyer and seller. Against that backdrop, this appeal concerns the test that should be applied when a party seeks to convert a petition into an action.
[2] The respondent, British Columbia Milk Marketing Board (the “Board”), administers the national milk supply management system in British Columbia, under authority delegated in the Natural Products Marketing (B.C.) Act, R.S.B.C. 1996, c. 330 [NPMA]. This litigation arises out of two separate incidents of the alleged sale of “bad milk” to the appellant, Saputo Products Canada G.P. / Saputo Produits Laitiers Canada S.E.N.C. (“Saputo”). Saputo claims that it suffered certain losses as a result of its purchasing the “bad milk” and to recover those losses withheld payments otherwise due to the Board.
[3] The Board commenced these proceedings by way of a petition to compel Saputo to pay the monies it withheld. Saputo applied for the petition to be converted into an action and sought leave to file third party notices against the respondents, Chilliwack Cattle Sales Ltd. (“Chilliwack”) and Cedarwal Farms Ltd. (“Cedarwal”) who they allege were the producers of the “bad milk”.
[4] The chambers judge dismissed the application to convert the petition to an action, and consequently did not need to consider the application for leave to issue the third party notices. Saputo now appeals.
[5] To put the issues on appeal in context, it is first necessary to review the legislative scheme pursuant to which milk products are bought and sold in British Columbia. I will next set out the circumstances which gave rise to the litigation. I will then turn to the proceedings in the court below and review the petition, the application to have the petition converted into an action, the application for leave to file third party notices and the reasons of the chambers judge.
[6] The Board is a marketing board continued pursuant to s. 3 of the British Columbia Milk Marketing Board Regulation, B.C. Reg. 167/94, as amended [Regulation] promulgated under the NPMA. Pursuant to s. 7(1) of the Regulation, the Board is vested with the authority to promote, regulate and control the production, transportation, packing, storage and marketing of milk, fluid milk or manufactured milk product in British Columbia, and is vested with all the powers necessary or useful in the exercise of those powers.
[7] Pursuant to s. 7(1.1) of the Regulation and s. 11(1)(k) of the NPMA, the Board is vested with authority to set the prices at which a regulated product or a grade or class of it may be bought or sold in British Columbia. Pursuant to s. 7(1.1) of the Regulation and s. 11(1)(q) of the NPMA, the Board has authority to make orders and rules that the Board considers necessary or advisable to promote, control and regulate effectively the marketing of a regulated product.
[8] In accordance with its authority, the Board made its consolidated order of September 2013 (the “Consolidated Order”). The Consolidated Order is the detailed mechanism pursuant to which the Board carries out its statutory mandate. The Consolidated Order is 110 pages long and contains 68 sections and six schedules.
[9] The Consolidated Order defines certain terms including:
“Processor” means any Person who operates a Dairy Plant and receives or utilizes milk for processing into fluid milk or manufactured milk products;
“Producer” means a Person who produces milk obtained from cows in British Columbia;
“Qualifying Milk” has the meaning as defined in the Milk Industry Act, R.S.B.C. 1996, c. 289;
“Vendor” means any Processor dealing in milk or manufactured milk products by purchase or sale, and includes a Producer Vendor, but does not include a Producer as such.
[10] The Milk Industry Act defines qualifying milk as follows:
“qualifying milk” meaning milk that:
(a) is produced on an approved fluid milk dairy farm certified as such, and
(b) meets the standards for such milk prescribed by regulation under this Act.
[11] The Consolidated Order provides the structure and requirements of the regulatory scheme. Pursuant to the scheme, the Board regulates the supply and price of milk products. The Board establishes quotas that limit the amount of milk that producers can sell. Vendors such as Saputo are required to purchase milk through the Board at prices the Board sets. Section 56 of the Consolidated Order prohibits producers from selling milk except through the Board. Section 57 of the Consolidated Order prohibits vendors from buying milk from a producer except through the Board.
[12] Sections 38 and 39 of the Consolidated Order set out how vendors are to pay for the milk they receive. The relevant portions of those sections read:
38. (1) On the last Business Day of each month, each Pool Participant Vendor who has received milk from Pool Participant Producers, through the Board, shall make an advance payment to the Board, on behalf of Pool Participant Producers, for litres of Qualifying Milk and butterfat content received from such Pool Participant Producers during the first 15 days of that month. The minimum advance payment shall be that which is set out in Schedule 4 to this Consolidated Order.
(2) Each Pool Participant Vendor shall pay to the Board interest, on any part of a minimum advance payment which is past due, at the rate of 24% per annum.
39. (4) Each month, the Board will charge to each Pool Participant Vendor, on behalf of Pool Participant Producers, the final monthly settlement due from that Pool Participant Vendor to the Board, on behalf of Pool Participant Producers, in accordance with subsection (3). The final monthly settlement for litres of Qualifying Milk and butterfat content received by a Pool Participant Vendor during a month is due on the 12th Business Day after the end of that month.
(5) Each Pool Participant Vendor shall pay to the Board interest, on any part of a final monthly settlement which is past due, at the rate of 24% per annum.
[13] Pursuant to those sections, vendors who receive milk from producers through the Board are required to make an advance payment to the Board on behalf of the producers for litres of qualifying milk and butterfat content received from the producers during the first 15 days of the month. At the end of each month, the vendors are required to report to the Board the quantity and nature of the milk received. The Board then uses this information to calculate a final monthly settlement due from the vendors to the Board on behalf of the producers.
[14] Pursuant to s. 18 of the NPMA, it is an offence to fail to comply with a provision of the NPMA or a regulation, scheme, rule or requirement made under it, subject on conviction to a fine and/or imprisonment.
[15] There are two specific events which gave rise to the dispute in these proceedings. The first occurred on or about August 12, 2013 when milk collected from a producer was delivered to Saputo’s Burnaby plant. The milk was put into the production process. At the time the milk was delivered, Saputo was not informed and was not otherwise aware of the producer’s identity. Upon delivery, Saputo proceeded to use the milk in its production process assuming that the milk was qualifying milk and therefore fit for production.
[16] On August 13, 2013, subsequent to Saputo having used the milk in its production process, Saputo learned that the milk was contaminated. Prior to discovering the contamination, Saputo blended the contaminated milk with uncontaminated milk, which caused a total of 223,230 litres of milk and cream to be contaminated, which, in turn, caused damage to 111,921.12 litres of packaged product, allegedly causing damage to Saputo totalling $65,317.57.
[17] Saputo particularized its damages as follows:
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Milk lost in rework of packaged product (15,489.52 litres) |
$13,090.54 |
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Discarded packaging from reworked product |
$9,801.18 |
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Warehouse labour to segregate affected product |
$11,204.95 |
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Production labour to rework and repackage affected product |
$31,220.90 |
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TOTAL |
$65,317.57 |
[18] Pursuant to the Consolidated Order, Saputo paid the Board for the raw milk shortly after receiving it. On January 8, 2014 following various communications, Saputo requested that the Board reimburse it for the damages allegedly incurred as a result of the contaminated milk. The Board refused to do so and Saputo, in May 2014, withheld payment of $65,317.57 owed to the Board for a subsequent shipment of milk in compensation for the losses resulting from the contaminated milk.
[19] Saputo subsequently learned that Chilliwack was the producer of the milk delivered on August 12, 2013.
[20] The second incident giving rise to the present dispute occurred in February 2015. At some point in the days leading up to February 20, 2015, Saputo received a total of 120,028 litres of organic milk at its Burnaby and Abbotsford plants. The milk was produced at a dairy farm later identified as Cedarwal. Following delivery, the organic milk was co-mingled with milk already stored in silos at each plant.
[21] On February 20, 2015, the Canadian Food Inspection Agency (the “CFIA”) informed Saputo that it was conducting a safety inspection of the milk produced at Cedarwal. The CFIA’s inspection was the result of learning that the dairy cattle’s organic feed contained aflatoxin in amounts above permissible levels. On or around February 25, 2015, the CFIA told Saputo that the milk in question did not present any risk to human health. Given the interim delay, however, as well as the shelf life of certain affected products, Saputo was obliged to isolate and rework certain products affected by the suspect milk.
[22] Saputo claims as a result, it suffered damages which it particularized as follows:
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Milk lost in rework of fluid packaged product |
$9,586.20 |
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Discarded packaging from fluid reworked product |
$2,065.72 |
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Production labour to rework and repackage affected fluid product |
$5,536.43 |
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Disposal of fluid product |
$759.84 |
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Disposal of whey and loss of whey solids |
$8,355.45 |
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TOTAL |
$26,303.64 |
[23] Saputo again paid for the suspect milk as required under the Consolidated Order shortly after its delivery. In or about May 2015, Saputo withheld from a future shipment the sum of $26,303.64 to set off its damages.
[24] On June 12, 2015, the Board commenced these proceedings by way of petition, in which it sought the following orders:
(a) An interlocutory Order forbidding, restraining or enjoining the Respondent from failing to comply with sections 38 and 39 of the Petitioner’s Consolidated Order;
(b) A permanent Order forbidding, restraining or enjoining the Respondent from failing to comply with sections 38 and 39 of the Petitioner’s Consolidated Order;
(c) An interlocutory Order requiring the Respondent to forthwith comply with sections 38 and 39 of the Petitioner’s Consolidated Order by making payment to Petitioner, on behalf of Pool Participant Producers, of the sum of $65,317.57 together with interest thereon at the rate of 24% per annum from and after June 12, 2014 until the date of payment to the Petitioner;
(d) A permanent Order requiring the Respondent to forthwith comply with sections 38 and 39 of the Petitioner’s Consolidated Order by making payment to Petitioner, on behalf of Pool Participant Producers, of the sum of $65,317.57 together with interest thereon at the rate of 24% per annum from and after June 12, 2014 until the date of payment to the Petitioner;
(e) An interlocutory Order requiring the Respondent to forthwith comply with sections 38 and 39 of the Petitioner’s Consolidated Order by making payment to Petitioner, on behalf of Pool Participant Producers, of the sum of $26,303.64 together with interest thereon at the rate of 24% per annum from and after May 19, 2015 until the date of payment to the Petitioner;
(f) A permanent Order requiring the Respondent to forthwith comply with sections 38 and 39 of the Petitioner’s Consolidated Order by making payment to Petitioner, on behalf of Pool Participant Producers, of the sum of $26,303.64 together with interest thereon at the rate of 24% per annum from and after May 19, 2014 until the date of payment to the Petitioner; and
(g) Costs of this proceeding.
[25] The Board relied on provisions of the Consolidated Order as the legal basis of its claim.
[26] On April 1, 2016, in response to the petition, Saputo filed a notice of application seeking an order that the petition be converted into an action and that Saputo be granted leave to file and serve third party notices against Chilliwack and Cedarwal. Saputo indicated that the legal basis of its application were Rules 22-1(7)(d) and 16-1(18) of the Supreme Court Civil Rules [the “Rules”], which it submitted gave the court the power to convert a petition into an action if there was a bona fide triable issue that could not be determined by reference to the documents and would affect the outcome of the proceeding.
[27] In its amended notice of application Saputo submitted that the proceedings should have been brought by way of an action. It also raised several specific defences to the Board’s claim, which it submitted could only be assessed in the context of an action in which the proposed third parties were joined. The alleged defences included the following:
1. The Board cannot seek payment for amounts that are not owed to producers;
2. The Board can only charge Saputo for what is fairly owed less Saputo’s losses; and
3. Saputo is entitled to set-off its damages against the amount sought by the Board pursuant to the law of equitable set-off.
[28] In addition, Saputo sought leave to file third party notices against Chilliwack and Cedarwal. Its application pointed out that third party claims pursuant to Rule 3-5(1) may only be brought when relief is sought in an action. It submitted that it was in the interests of justice for Saputo’s claim against the proposed third parties to be resolved in the same proceedings.
[29] The Board opposed the application. It submitted that the proceedings were properly brought by petition in accordance with Rule 2-1(2)(b) which provides that a person must file a petition where “the proceeding is brought in respect of an application that is authorized by an enactment to be made to the court”. In this case the Board submitted the application is authorized under ss. 15 and 17 of the NPMA. While acknowledging that in the usual case the threshold for converting a petition into an action is relatively low, the Board submitted that conversion was not appropriate where the petitioner sought only statutory injunctive relief to compel compliance with a regulation.
[30] The Board argued that it does not engage in the production or marketing of milk but merely regulates certain aspects of the production and marketing. It points out that the Board does not benefit commercially from the sale and purchase of milk. The Board submitted that to allow Saputo to avoid its statutory obligation to make payments as called for under the Consolidated Order until it has resolved any civil claim against third parties would effectively rewrite the Regulations which the Board seeks to enforce. It submits that the matter of statutory compliance is appropriately addressed summarily in a petition proceeding.
[31] The proposed third parties both supported the Board’s position. Chilliwack additionally argued that it would be unfair to allow Saputo to now issue a third party notice against it because any claim Saputo may have had against it is now statute-barred.
[32] The chambers judge had some sympathy for the position in which Saputo found itself. In that regard, he noted:
[26] At one level it is not difficult to understand that Saputo is frustrated by the circumstances. It is bound by the marketing scheme. With respect to the first incident, it considers that it was provided with defective milk. It paid for that milk. The episode caused not insignificant loss and expense to Saputo. Now, when it seeks to have the situation made right, it is met by the Board’s denial of any responsibility and a demand that it be paid. In effect, the Board contends that it is without fault in the situation and, I suppose by way of what seems to be further insult, tells Saputo that it (Saputo) is probably, at least in part, responsible for the problem.
[33] The chambers judge found however that the issues raised by the petition were limited and could be neatly examined and adjudicated on the record with the possible exception of whether the milk in issue falls into the category of qualifying milk. While the chambers judge recognized that efficiency is often an important consideration and that the general rule of avoiding multiple proceedings by incorporating the issues into one package is a sensible and efficient approach, he concluded that such an approach should not be followed in this case. Dismissing Saputo’s application, he reasoned:
[37] I consider that there would be no inefficiency to having a necessary statutory determination made first. In fact, my sense of the matter is that process could be accomplished in a fairly summary manner. It could be set down for hearing in reasonably short order and would likely be heard in the matter of a day or maybe two. The Court would be able to make the essential determination of rights that are raised by the petition, taking into account the general nature of the issues raised by Saputo. That would alleviate the need for any involvement by the proposed third parties.
[38] Whether there will have to be a second proceeding to deal with the commercial aspects will be decided by the outcome of the petition.
[39] The essential purpose of the petition is to secure the Court’s determination of the parties’ legal rights and obligations as they arise from the legislation. It is not necessarily to deal with other issues. To permit Saputo to expand the proceedings to claim other downstream relief from parties who are not essential parties to the matter with which the petition is concerned, to expand the proceeding to accommodate Saputo’s problems at large, where that is neither necessary nor supported by a compelling reason to do so is, in my respectful view, quite markedly at odds with the notion of efficiency.
[40] In short, it is my view that the two aspects of this matter are sensibly considered separately, and that is the more efficient approach to be followed.
[34] In the result, he dismissed Saputo’s application that the petition be converted into an action. Given that result he did not need to consider the application to join Chilliwack and Cedarwal as third parties. He ordered that the costs of the application be costs in the cause except with respect to the proposed third parties who were awarded their costs payable forthwith.
[35] On appeal, Saputo argues the chambers judge erred in failing to recognize that the Board’s petition is improperly framed as an order for compliance with the Consolidated Order when the parties’ real dispute involves a claim in debt for a specific sum. Saputo submits that such a claim cannot be brought by way of petition. Alternatively, if the claim can be brought by way of petition, Saputo submits the chambers judge erred in failing to take into account the recognized test for when a matter should be converted into an action. It further submits that the chambers judge erred in failing to recognize that one of the central issues in dispute, namely whether the milk in question was qualifying milk, can only be resolved by reference to evidence. It also alleges that the chambers judge erred in failing to order that the proposed third parties be added to the action in light of the relevant legal principles, including the undesirability of multiple proceedings.
[36] The Board resists the appeal. It submits that the chambers judge made a discretionary decision to which this Court should defer. It submits that the existence of a bona fide triable issue is not by itself a sufficient basis to convert a petition into an action. It says its petition is not misconceived and if it is, Saputo can advance that position at the hearing of the petition as a means of defeating it.
[37] The third parties both support the Board’s position.
[38] Saputo’s first ground of appeal raises a question of law as to whether the Board’s claim can be brought by way of petition. The standard of review is correctness. While this issue was raised in Saputo’s amended notice of application, it does not appear to have been specifically raised in oral submissions before the chambers judge and the chambers judge did not consider the question in his reasons.
[39] The Rules dictate the correct form of proceeding. The following Rules must be considered:
Rule 1-1(1)
Definitions
(1) In these Supreme Court Civil Rules, unless the context otherwise requires:
“action” means a proceeding started by a notice of civil claim;
“proceeding” means an action, a petition proceeding and a requisition proceeding, and includes any other suit, cause, matter, stated case under Rule 18-2 or appeal;
Rule 1-2(4)
Petitions and applications
(4) If an enactment, other than these Supreme Court Civil Rules or the Supreme Court Family Rules, authorizes an application to the court or to a judge, the application must be
(a) by petition under Rule 16-1 or requisition under Rule 17-1, or
…
whether or not the enactment provides for the mode of application.
Rule 2-1
Commencing proceedings by notice of civil claim
(1) Unless an enactment or these Supreme Court Civil Rules otherwise provide, every proceeding must be started by the filing of a notice of civil claim under Part 3.
(2) To start a proceeding in the following circumstances, a person must file a petition or, if Rule 17-1 applies, a requisition:
…
(b) the proceeding is brought in respect of an application that is authorized by an enactment to be made to the court; …
[40] Saputo submits that this is a debt action which must be started by filing a notice of civil claim. The Board argues otherwise. It submits that it is authorized to bring its claim by petition, pursuant to ss. 15 and 17 of the NPMA. Those sections read:
Enforcement of Act and regulations
15 (1) On application by the Provincial board, a marketing board or commission and on being satisfied that a provision of this Act or the regulations or a provision of a marketing scheme made by the Provincial board, marketing board or commission under this Act or an order, rule, determination or decision of the Provincial board, marketing board or commission made under this Act or made under powers exercisable, with the approval of the Lieutenant Governor in Council, under the federal Act, is not being complied with, the Supreme Court may
(a) order and require a person to do promptly or within or at the time specified in the order, an act or thing that the court considers necessary for the purpose of compelling that person to comply with this Act, the regulations, the marketing scheme or the order, rule, determination or decision of the Provincial board, marketing board or commission, and
(b) forbid, restrain or enjoin the doing or continuing of an act or thing that is contrary to this Act, the regulations, the marketing scheme or the order, rule, determination or decision of the Provincial board, marketing board or commission.
(2) If special circumstances require, on an application under subsection (1) made without notice to anyone, the court may make an interim order but the order must not be for a longer period of time than the court considers necessary for the purpose of enabling the matter to be heard and determined.
Enforcement
17 (1) An order, rule, determination or decision made by the Provincial board, a marketing board or commission or under this Act or made under a power exercisable under the federal Act, may be enforced, and the breach of an order, rule, determination or decision may be restrained, without proof of damage and whether or not a penalty is imposed for the breach, by action or proceeding in the Supreme Court.
(2) An action or proceeding under subsection (1) may be brought or taken by and in the name of the Provincial board or a marketing board or commission, and neither the government nor the Attorney General is a necessary party to the action or proceeding.
[41] I agree with the Board. The foundation for the Board’s claim is ss. 38 and 39 of the Consolidated Order. Sections 15 and 17 of the NPMA authorize the Board to enforce the Consolidated Order by way of application. Rule 1-2(4) and Rule 2-1(2)(b) are clear that an application authorized by an enactment must be brought by petition. I would not accede to Saputo’s submission that the claim had to be brought by notice of civil claim.
[42] The fact that a proceeding must be commenced by petition is not, however, determinative of how the matter should proceed. The Rules authorize the conversion of a proceeding commenced by a petition into an action by ordering a trial on the hearing of a matter in chambers:
Rule 22-1
Power of the court
(7) Without limiting subrule (4), on the hearing of a chambers proceeding, the court may
…
(d) order a trial of the chambers proceeding, either generally or on an issue, and order pleadings to be filed and, in that event, give directions for the conduct of the trial and of pre-trial proceedings and for the disposition of the chambers proceeding.
[43] This Court has long held that proceedings brought by petition should be referred to the trial list when there are disputes of fact or law, unless the party requesting the trial is bound to lose: Bank of British Columbia v. Pickering (1983), 62 B.C.L.R. 136 (C.A.) at 138; Montroyal Estates Ltd v. D.J.C.A. Investments Ltd. (1984), 55 B.C.L.R. 137 (C.A.) at 138–139; Douglas Lake Cattle Co. v. Smith (1991), 54 B.C.L.R. (2d) 52 (C.A.) at paras. 35–37; Dia-Kas Inc. v. Virani (1997), 88 B.C.A.C. 26 at para. 7; Dockside Brewing Co. Ltd. v. Strata Plan LMS 3837, 2007 BCCA 183 at para. 78; Wang v. British Columbia Medical Association, 2010 BCCA 43 at para. 67; Robertson v. Dhillon, 2015 BCCA 469 at paras. 55–56.
[44] In Robertson, the Court set out the test to determine whether a petition should be converted to a trial:
[55] On the hearing of a petition, a judge must be satisfied that there is no dispute as to the facts or law which raises a reasonable doubt or which suggests that there is a defence that deserves to be tried: Douglas Lake Cattle Co. v. Smith (1991), 54 B.C.L.R. (2d) 52 (C.A.) at 59. If such a dispute exists, the judge may refer the matter to the trial list, pursuant to R. 22-1(7) (former R. 52(11)(d)).
[56] The test is not that used to determine a summary trial. Rather it is akin to that on an application for summary judgment under R. 9-6. Mr. Justice Lambert summarized the task in Montroyal Estates Ltd. v. D.J.C.A. Investments Ltd. (1984), 55 B.C.L.R. 137 (C.A.) at 138-39:
We were referred by counsel for T & A Holdings Ltd. to the judgment of Esson J. (as he then was) in Progressive Const. Ltd. v. Newton, 25 B.C.L.R. 330, [1981] 2 W.W.R. 741, 117 D.L.R. (3d) 591 (S.C.), and particularly at p. 334. There Esson J. summarizes, in my opinion, accurately, the law in relation to establishing a defence on an application for summary judgment in these words [pp. 334-35]:
The cases do not establish an invariable rule as to what steps must be taken to resist a R. 18 application for summary judgment. On all such applications the issue is whether, on the relevant facts and applicable law, there is a bona fide triable issue. The onus of establishing that there is not such an issue rests upon the applicant, and must be carried to the point of making it “manifestly clear”, which I take to mean much the same as beyond a reasonable doubt. If the judge hearing the application is left in doubt as to whether there is a triable issue, the application should be dismissed.
In essence, if the defendant is bound to lose, the application should be granted, but if he is not bound to lose, then the application should be dismissed.
[Emphasis added.]
[45] In recent years, the trial court appears to have adopted a multifactorial test to determine whether a petition should be converted to a trial: Haagsman v. British Columbia (Minister of Forests) (1998), 64 B.C.L.R. (3d) 180 (S.C.); Terasen Gas Inc. v. Surrey (City), 2009 BCSC 627 [Terasen]; Boffo Developments (Jewel 2) Ltd. v. Pinnacle International (Wilson) Plaza Inc., 2009 BCSC 1701 [Boffo]. In Boffo, a case cited by the chambers judge in this proceeding, Ballance J. suggested that the mere existence of a bona fide triable issue may not in itself warrant conversion to the trial list. In that regard she said:
[48] The dominant principle is that the Court should exercise its discretion under the rule to convert a petition into trial where there is a bona fide triable issue that cannot be determined by reference to the documents, and would affect the outcome of the proceeding. A bona fide triable issue arises where on the evidence before the Court there is a dispute as to facts or law which raises a reasonable doubt or suggests there is a defence that deserves to be tried: Douglas Lake Cattle Co. v. Smith, [1991] B.C.J. No. 484 (C.A.). The threshold is, appropriately, a relatively low one.
[49] The authorities indicate a tendency of the Court to convert a summary process to a full trial where serious and disputed questions of fact or law are raised. However, the mere existence of a bona fide triable issue may not, of itself, be enough to warrant conversion to the trial list. If lesser measures will suffice, such as ordering cross-examination on affidavits, or even more broadly, and allowing some document disclosure, then the Court may decide against exercising its discretion to order conversion even where a bona fide triable issue is present: Woodward’s Ltd. v. Montreal Trust Co., [1992] B.C.J. No. 1263, 69 B.C.L.R. (2d) 348 (S.C.); Canada Trust Co. v. Ringrose, [2008] B.C.J. No. 1790, 2008 BCSC 1268. That would be especially likely where practical considerations such as costs and timeliness militate against ordering a conventional trial.
[51] In Terasen Gas Inc. v. Surrey (City), 2009 BCSC 627, Dardi J. surveyed the leading authorities, including Haagsman, and conveniently summarized the well-settled factors the Court is to consider in determining whether to order conversion to an action. They are:
(a) the undesirability of multiple proceedings;
(b) the desirability of avoiding unnecessary costs and delay;
(c) whether the particular issues involved require an assessment of the credibility of witnesses; and
(d) the need for the Court to have a full grasp of all the evidence; and
(e) whether it is in the interests of justice that there be pleadings and discovery in the usual way to resolve the dispute.
[46] The factors referenced in Haagsman, Terasen and Boffo are similar to those often applied in the trial court in determining whether a matter is suitable for summary trial under Rule 9-7. However, as noted in Robertson, the test for determining whether a matter should be converted into an action is not that used to determine suitability for a summary trial, but rather is akin to that on application for summary judgment under Rule 9-6. The suggestion in Boffo that the mere existence of a bona fide triable issue is not in itself sufficient to warrant conversion to the trial list is, with respect, contrary to the test for converting a matter to an action established in this Court.
[47] I would note the fact that a matter is converted to an action does not necessarily mean that a full trial will be required. It still remains open to the parties to bring a summary trial application under Rule 9-7.
[48] Given the authorities in this Court, it is not open to this division to adopt the Boffo approach. A five-justice division would be necessary as it would require overruling previous decisions of this Court: Bell v. Cessna Aircraft Co., (1983) 46 B.C.L.R. 145 (C.A.). I should also note that although Haagsman, Terasen and Boffo all suggest a different test, in each of those cases the petition was converted into an action.
[49] In this case, the chambers judge purported to apply the Boffo criteria. He concluded that the issues raised by the petition were limited and it would be markedly at odds with the notion of efficiency to convert the matter to a trial. While recognizing that a potential issue existed as to whether or not the milk delivered to Saputo was qualifying milk, he appeared to believe that that issue could likely be dealt with by way of a stipulation.
[50] With respect, I find that the trial judge erred in principle in resolving the matter in the manner he did. He did not consider whether Saputo raised a bona fide triable issue and the implications that would flow from such a determination. He did not find that Saputo was bound to lose.
[51] In my respectful view, on the material before us, Saputo has raised bona fide triable issues concerning the quality of the milk it purchased, and the remedies available to it at common law and under the Sale of Goods Act, R.S.B.C. 1996 c. 410 in the circumstances of a product sold through a marketing board.
[52] In the result, I would order that the petition be converted into an action. The Board should file a notice of civil claim and the proceedings can then continue. I would reiterate that converting the petition into an action does not prevent either party from seeking to have the matter ultimately determined summarily pursuant to Rule 9-7.
[53] Third party proceedings are governed by Rule 3-5. Third party claims can only be brought in an action: Rule 3-5(1). Pursuant to Rule 3-5(4), a party may file a third party notice at any time with leave of the court or without leave of the court, within 42 days of being served with the notice of civil claim. At any time, on application, the court may set aside a third party notice: Rule 3-5(8).
[54] At the hearing of the appeal, we asked counsel whether Saputo, if it was successful on the appeal in having the petition converted to an action, would require leave to issue the third party notice. This issue requires determining whether the 42-day grace period in which a third party notice can be delivered without leave runs from the delivery of the initial petition or alternatively, from the delivery of a notice of civil claim ordered as a result of the proceedings being converted into an action. Before us, counsel was not fully prepared to argue that question.
[55] I am of the view that it would not be appropriate for this Court to grant leave to issue the third party notice. Rather, that issue should be determined in the first instance by the trial court if Saputo renews its application to seek leave to issue the third party notices. If Saputo issues a third party notice without leave, it will then be for the third parties to determine whether they should apply to set the third party notices aside on the ground that leave is required.
[56] In the result therefore, I would allow the appeal, convert the proceeding into an action and order the Board to file a notice of civil claim. Any issues concerning the proposed third party claim should be determined in the trial court.
[57] Saputo is entitled against the Board to the costs of the appeal. The costs of the application before the chambers judge as between Saputo and the Board will be costs in the cause. In regard to costs as between Saputo and the proposed third parties, each should pay their own costs both in this Court and below.
“The Honourable Mr. Justice Goepel”
I AGREE:
“The Honourable Chief Justice Bauman”
I AGREE:
“The Honourable Madam Justice Fenlon”