Date: 19990119 Docket: 98 0873 Registry: Victoria IN THE SUPREME COURT OF BRITISH COLUMBIA BETWEEN: THE NANAIMO COMMUNITY BINGO ASSOCIATION AND THE NANAIMO IMMIGRANT SETTLEMENT SOCIETY PLAINTIFFS AND: HER MAJESTY THE QUEEN IN RIGHT OF THE PROVINCE OF BRITISH COLUMBIA DEFENDANT REASONS FOR JUDGMENT OF THE HONOURABLE MR. JUSTICE HUTCHISON Counsel for the Plaintiff: M.G. Underhill Counsel for the Defendant: B.W. Dixon Place and Date of Hearing: Victoria, B.C. January 11, 1999 [1] The plaintiffs commenced this action March 5, 1998 on their own behalf and, under the Class Proceedings Act, R.S.B.C. 1996, c. 50 (the Act), on behalf of a class of charitable and religious organizations who manage and conduct charitable bingos and casinos in British Columbia. An amended statement of claim was filed May 26, 1998. After an informal pre- certification chamber hearing in August, a motion for certification was taken out under the Act returnable November 23, 1998. The certification motion could not be heard in November for a variety of reasons, not the least of which was plaintiffs' counsel, Joseph Arvay, being involved with what is commonly referred to as the APEC hearings. [2] The plaintiffs now apply for an order, prior to the hearing of the certification application, for leave to cross- examine the defendant's deponents on their affidavits filed under s. 5 of the Act in opposition to the action being certified under the Act. The application is opposed on the basis that there are no controverted facts in the affidavits nor any dispute over the facts. [3] The two affidavits in question are those of William Gary Hoskins, manager of the Commission Secretariat, of the British Columbia Gaming Commission (BCGC) and Kathy Chopik, manager of Assessing and Licensing of the BCGC. These affidavits mainly give the court the background of the development of gaming in the Province since 1969 when the Criminal Code of Canada was amended to permit licensing by the provinces of gaming activities and lotteries. [4] Much of the background and the rationale for this law suit is set forth in the judgment of Owen-Flood J., In the Matter of the Judicial Review Procedure Act; Nanaimo Community Bingo Association v. Attorney General of British Columbia (14 January, 1998), Victoria 97/4779. [5] Shortly after the Owen-Flood J. judgment was handed down, the Lottery Act, R.S.B.C. 1996, c. 278, was amended in an attempt to bring the licensing scheme into compliance with the Criminal Code. The amendments of the Lottery Act were part of Bill 50, Miscellaneous Statutes Amendment Act (No.3), 1998, S.B.C. 1998, c.37. Among the amendments is s. 42 (1) which reads as follows: 42 (1) No action lies, and an action or other proceeding must not be brought or continued, against the government, the British Columbia Gaming Commission or any other person, for compensation, damages or any other remedy, because of anything done or omitted, between May 27, 1986 and the coming into force of this subsection, in the exercise or performance or intended exercise or performance of a discretion, duty or function of the government or of the British Columbia Gaming Commission in relation to (a) a licence or purported license issued by the Provincial Secretary and Minister of Government Services, the Attorney General or the Public Gaming Control Branch, or by the British Columbia Gaming Commission, that authorizes, or purports to authorize, a person to conduct and manage a lottery scheme as defined in section 207 (4) of the Criminal Code, or (b) the imposition or purported imposition by the Provincial Secretary and Minister of Government Services, the Attorney General or the Public Gaming Control Branch, or by the British Columbia Gaming Commission of a licence fee in respect of or in relation to a lottery scheme as defined in section 207 (4) of the Criminal Code. [6] From the beginning of this action s. 42 has been a major issue to certification. S. 4 (a) of the Act reads in this way: 4 (1) The court must certify a proceeding as a class proceeding on an application under section 2 or 3 if all the following requirements are met: (a) the pleadings disclose a cause of action. [7] Clearly there is no need initially to argue the question posed by s. 4 (d) of the Act which provides an order for certification may be made if inter alia: (d) a class proceeding would be the preferable procedure for the fair and efficient resolution of the common issues. [8] The plaintiffs' argument for leave to cross-examine the two government deponents, as I understood it, was to explore the issues relating to s. 4 (d) of the Act. Before determining whether it would be convenient to dispose of the common issues between the government and the charities, it would appear necessary to determine if s. 42 means that the plaintiffs are no longer afforded a cause of action. [9] Section 12 of the Act provides the court with power to "make any order it considers appropriate respecting the conduct of a class proceeding to ensure its fair and expeditious determination and, for that purpose, may impose on one or more of the parties the terms it considers appropriate." [10] I can see no reason why a certification hearing cannot be divided into two segments. The court can, in the same way as it does after certification, divide the issues to be argued. Further, as the judgments of K.J. Smith J. in Endean v. Canadian Red Cross Society (6 February 1997), Vancouver C965349 and E.R.A. Edwards J. in Matthews v. Servier Canada Inc. et al (5 February 1998), Vancouver C973178, make clear, preliminary matters should be heard prior to expensive discovery proceedings. Thus, it seems in keeping with those cases to divide the certification hearing into two parts. Accordingly, I direct the first hearing will be to determine whether the plaintiffs have a cause of action. If they do then the next issue will be whether a class proceeding would be the preferable procedure and whether the plaintiffs should represent the hundreds of other charities who have carried on gaming under the Lottery Act. Until the first issue is determined there is no need to cross-examine Mr. Hoskins or Ms. Chopik. If this becomes necessary after a cause of action has been ruled on, sufficient time will be given to achieve that object. [11] In making this ruling I am comforted by the words of Cumming J.A. in Campbell v. Flexwatt Corp. (1997), 44 B.C.L.R. (3rd) 343 (C.A.) where at page 353 he says: Trial court judges must be free to make the new procedure for plaintiffs and defendants. Many of the arguments made by counsel for the appellants, focused on fairness to the defendants and third parties, can be made to the Chamber Judge charged with managing the action as it proceeds. In considering those arguments, I will be keeping in mind the ability of the Chambers Judge to vary his order from time to time as the action proceeds and the need arises, whether from concern about fairness or efficiency; he may even decertify the proceeding. [12] I keep in mind the plaintiffs have given notice that they are once again going to amend their statement of claim to bring into focus the recent decision of the Supreme Court of Canada in Re Eurig Estate (1998), 165 D.L.R. (4th) 1, which held that Ontario's scheme of an ad valorem levy on grants of letters probate, or probate fees, was a direct tax and thus ultra vires the regulations passed by government since direct taxation cannot be delegated away from the Legislature under the guise of levying fees to cover the costs of administration. The case may well have a bearing on the issue of whether the plaintiffs have a cause of action since it may be argued that s. 42 of Bill 50, and the other amendments to the Lottery Act for the reasons in Eurig (supra), among others, are ultra vires. [13] When the necessary amendments to the statement of claim are made and the defendant has filed an amended statement of defence, the certification hearing may proceed on issue number one, namely whether the plaintiffs have a good cause of action in light of s. 42 of Bill 50. As well another issue for decision, is whether, despite Bill 50, the plaintiffs may sue the Crown for the return of funds which they argue should have gone to the charities in the class. The final issue may be whether the Lottery Act imposes a direct tax on charities by regulation through Order in Council rather than by the Legislature. Issues under s. 4 (1) (d) of the Act may await another hearing date. [14] The plaintiffs' application to cross-examine the defendant's deponents is adjourned. As was said by Sinclair Prowse J. in University of British Columbia V. James A. Rice Ltd. (1995), 1 B.C.L.R. (3rd) 262 at 266 (S.C.): In this application, UBC is seeking to cross- examine all of the deponents on all of the affidavits tendered by the applicants. However, it has failed to show that the matters on which it seeks to cross- examine are relevant to the issues that must be decided in this hearing. "R.B. Hutchison, J." THE HONOURABLE MR.JUSTICE HUTCHISON