Hughes and 631992 Ontario Inc. v. Liquor Control Board of Ontario et al.

The Ontario Court of Appeal dismisses a proposed class action against Brewers Retail and the LCBO on allegations of price-fixing.

On December 12, 2014, an action captioned David Hughes and 631992 Ontario Inc. v. Liquor Control Board of Ontario, Brewers Retail Inc., Labatt Breweries of Canada LP, Molson Coors Canada and Sleeman Breweries Ltd. No. CV-14-518059-00CP was commenced in Ontario.

Brewers Retail Inc. (operating as the Beer Store) and its then shareholders, as well as the Liquor Control Board of Ontario ("LCBO"), were named as defendants in the action. The plaintiffs (a beer consumer and the restaurant he owns) alleged Brewers Retail Inc. and the LCBO improperly entered into an agreement to fix prices and allocate markets for the sale and distribution of beer in Ontario to the detriment of licensees and consumers.

The plaintiffs further alleged that Brewers Retail Inc. and its brewer shareholders were unjustly enriched for breach of the Uniform Price Rule of the Liquor Control Act. The plaintiffs sought to have the claim certified as a class action on behalf of all Ontario beer consumers and licensees and, among other things, damages in the amount of $1.4 billion.

Brewers Retail Inc. operates according to the rules established by the Government of Ontario for the regulation, sale and distribution of beer in the province. Prices are independently set by each brewer and are approved by the LCBO, the Crown agency empowered by provincial legislation to control virtually every aspect of the sale and delivery of liquor in Ontario. As such, all of the defendants believed the claim was without merit.

Motions for summary judgment were heard in the Ontario Superior Court of Justice. On March 15, 2018, the plaintiffs’ motion for summary judgment was dismissed. The defendants’ motions for summary judgment were granted, and the action was entirely dismissed.

The plaintiffs appealed the dismissal order and, along with the Law Foundation of Ontario, sought leave to appeal the order to pay costs to the defendants of approximately $2.4 million in total.

Ontario appellate court decision

On April 17, 2019, the Court of Appeal for Ontario dismissed the appeal and upheld the summary dismissal of the proposed class action.

The Court of Appeal agreed with the motion judge that, pursuant to the regulated conduct defence, the plaintiffs’ various competition law claims were without merit – even before the Province enacted retroactive legislation that expressly authorized the LCBO and Brewers Retail Inc. to specifically enter into the 2000 framework that was the basis for the plaintiff’s claim.

In finding that the regulated conduct defence applied, the Court of Appeal rejected the plaintiffs’ argument that the regulated conduct defence is not available to defend civil claims under section 36 of the Competition Act. The Court of Appeal agreed with the motion judge and defendants that if the regulated conduct defence is available as a defence to a prosecution under s. 45(1) of the Competition Act, the defendant’s conduct is not contrary to the criminal conspiracy provisions and therefore cannot form the basis for a civil claim under the s. 36.

With respect to the plaintiffs’ unjust enrichment claim against the Beer Store and the brewers, the motion judge had agreed with the defendants that the law always permitted the charging of different beer prices between licensees and retail home consumers, which was a complete answer to that claim. To the extent there was any doubt about that, the legislature clarified the law in 2015 through a valid declaratory amendment to the Liquor Control Act.

The Court of Appeal upheld the motion judge’s decision, finding that the 2015 legislative amendments were valid, had retroactive effect, and removed any doubt that different prices for beer could be charged to licensees, as long as prices within each channel were uniform across the province.

The Court of Appeal also denied leave to appeal the summary judgment costs award. The Court reiterated that leave to appeal costs awards should be granted sparingly and only in obvious cases where there are strong grounds that the judge erred in exercising his or her discretion. The Court held that the motion judge did not fail to consider any relevant factor, that a reasonable litigant would expect the defendants to devote significant resources to respond to a $2 billion claim alleging a criminal conspiracy, and that this was therefore not a case that warranted granting leave to appeal.

Bennett Jones LLP was counsel to Brewers Retail Inc., with a team including Mike Eizenga, Randal Hughes, Ranjan Agarwal, Preet Bell, and Ilan Ishai.

Siskinds LLP was counsel to the plaintiffs, with a team that included Linda Visser, Tyler Planeta, and Paul Bates (Bates Barristers).

Stockwoods LLP was counsel to the Law Foundation of Ontario, with a team including Aaron Dantowitz and Justin Safayeni.

Counsel to the Liquor Control Board of Ontario was Davies Ward Phillips & Vineberg LLP, with a team including Kent E. Thomson, Matthew Milne-Smith, Michael H. Lubetsky, John Bodrug and Anthony M. C. Alexander.

Blakes, Cassels & Graydon LLP were counsel to Labatt Brewing Company Limited with a team that included Jeff Galway, Catherine Beagan Flood, and Nicole Henderson.

Counsel to Molson Coors Canada and Molson Canada 2005 was McCarthy Tétrault LLP, with a team including Paul Steep, Adam Ship, and Katherine Booth.

Counsel for the intervener Attorney General of Ontario was Michael S. Dunn and Ravi Amarnath.