26 LEXPERT MAGAZINE
|
JUNE 2018
BIG SUITS
HUGHES AND 631992 ONTARIO INC.
V. LIQUOR CONTROL BOARD
OF ONTARIO ET AL.
DECISION DATE: MARCH 15, 2018
On December 12, 2014, a notice of action
captioned David Hughes and 631992 On-
tario Inc. v. Liquor Control Board of Ontario,
Brewers Retail Inc., Labatt Breweries of Can-
ada 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. e plaintiffs (a beer consumer and
the restaurant he owns) alleged Brewers Re-
tail 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. e plaintiffs further alleged that
Brewers Retail Inc. and its brewer sharehold-
ers were unjustly enriched for breach of the
Uniform Price Rule of the Liquor Control Act.
e plaintiffs sought to have the claim certi-
fied as a class action on behalf of all Ontario
beer consumers and licensees and, among
other things, sought 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 dis-
tribution of beer in the province. Prices are
independently set by each brewer and are ap-
proved by the LCBO, the Crown agency em-
powered by provincial legislation to control
virtually every aspect of the sale and delivery
of liquor in Ontario. As such, all of the defen-
dants believed the claim was without merit.
Motions for summary judgment were
heard in the Ontario Superior Court of Jus-
tice in February of 2018.
On March 15, 2018, the plaintiffs' mo-
tion for summary judgment was dismissed.
e defendants' motions for summary
judgment were granted, and the action was
entirely dismissed.
e Ontario Superior Court held 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 plain-
tiff 's claim. e Court found that "there was
no illegal civil conspiracy associated with the
2000 Beer Framework."
In reaching this finding, the Court rejected
the plaintiffs' argument "that there was some
absence of formality to the authorization of
the 2000 Beer Framework." e Court held
that "the defendants were operating under a
regulated provincial regime governing com-
merce in alcohol" and that entering into the
framework was authorized conduct within
the scope of the regulated conduct defence.
Further, the Court made clear that, despite
the plaintiffs' assertion to the contrary, the
regulated conduct defence is not limited to
defending criminal proceedings, but is also
available to defend civil claims under the
Competition Act.
With respect to the plaintiffs' unjust en-
richment claim, the Court determined that
the claim must fail for a number of reasons:
"(a) as a matter of interpretation there never
was a breach of the Uniform Price Rule; (b) if
there was a breach, then it was erased or cured
by the 2015 amendment to the Liquor Con-
trol Act, … (c) if there was an uncured breach
of the Uniform Price Rule, then, neverthe-
less, the Defendants have a juristic reason for
being enriched …"
Brewers Retail Inc. was led by Vice-Pres-
ident of Legal, Jeff Zabalet. Bennett Jones
LLP was external counsel to Brewers Retail
Inc., with a team including Mike Eizenga,
Randal Hughes, Ranjan Agarwal, Preet
Bell, Adam Kalbfleisch, Art Peltomaa and
Ilan Ishai.
Siskinds LLP was counsel to the plain-
tiffs, with a team that included Linda Visser,
Ronald Podolny, Tyler Planeta, and Paul
Bates Barrister.
Counsel to the Liquor Control Board of
Ontario was Davies Ward Phillips & Vine-
berg LLP, with a team including Kent E.
omson, Matthew Milne-Smith, Michael
H. Lubetsky, John Bodrug and Anthony M.
C. Alexander.
Blake, Cassels & Graydon LLP were
counsel to Labatt Brewing Company
Limited with a team that included Jeff
Galway, Catherine Beagan Flood and Ni-
cole Henderson.
Counsel to Molson Coors Canada and
Molson Canada 2005 was McCarthy Té-
trault LLP, with a team including Paul
Steep, Adam Ship and Katherine Booth.
Dentons Canada LLP represented Slee-
man Breweries Ltd. with a team that includ-
ed Marina Sampson and Ara Basmadjian.
SFC LITIGATION TRUST
(TRUSTEE OF) V. CHAN
DECISION DATE: MARCH 14, 2018
On March 14, 2018, the Honourable Jus-
tice Michael Penny of the Ontario Superior
Court of Justice released a decision granting a
US$2.6 billion judgment to the SFC Litiga-
tion Trust for fraud and breach of fiduciary
duty in its action against Allen Chan, the for-
mer CEO of Sino-Forest Corporation.
e Sino-Forest Success Story
Sino-Forest was a publicly traded company
listed on the Toronto Stock Exchange with
a market capitalization of approximately $6
billion at its peak. Its principal businesses
included the ownership and management of
forest plantations, the buying and selling of
standing timber, wood logs and wood prod-
ucts, and the complementary manufacturing
of downstream wood products.
By all accounts, Sino-Forest seemed like a
remarkable success story. Between the 2003
and 2010 financial year ends, Sino-Forest's
revenue grew from $265.7 million to $1.9 bil-
lion (an approximately 625% increase) and its
assets from grew from $418 million to $5.7
billion (an approximately 1,270% increase).
Between August 2004 and October 2010,
A LOOK AT THREE ONTARIO SUITS: A RESTAURATEUR TAKES BREWERS RETAIL TO COURT OVER CHARGES OF PRICE FIXING;
THE SFC LITIGATION TRUST RECEIVES A JUDGMENT FOR FRAUD AND BREACH OF DUTY IN THE SINO-FOREST CASE; AND IN RAIBEX,
THE APPELLATE COURT PROVIDES CLARITY ON THE PRE-CONTRACTUAL DISCLOSURE OBLIGATIONS IMPOSED ON FRANCHISORS
