Seize That Contraband Tobacco

Tobacco is a heavily regulated product. It is regulated under the Tobacco Tax Act to reduce the flow of untaxed products into the contraband market, and this is achieved through requiring a registration certificate for production and sale.

The Applicant in Sobczyk v. Ontario recently asked the Divisional Court to review the decision of the Ontario Ministry of Finance to refuse to issue a registration certificate for the 2021 calendar year. The Application for Judicial Review was dismissed, as the decision was found to be reasonable.

The Applicant is a tobacco farmer who was issued certificates from 2013-2020 on an annual basis to produce and sell tobacco.

This history was not without difficulties, and in 2014 the Applicant was partially successful in an appeal to the Agriculture, Food and Rural Affairs Appeal Tribunal of a decision denying his license to produce tobacco. The inspectors had found 70 bales that were not properly labelled, but the Applicant indicated he was new to the industry and acknowledged he made several mistakes in compliance with the regulations. The Tribunal granted him a license, but required that he designate an individual to be responsible for affixing labels to the tobacco bales.

The relationship with inspectors though did not improve as the Applicant gained more history in the industry. He was noted to be intimidating, aggressive and obstructionist toward inspectors, which required calling the policy on at least two occasions. In 2020, he was charged under s. 23(6.1) of the Act for hindering or interfering with an audit or examination, and for denying access to a barn.

Based on this history, the Ministry advised on Jan. 25, 2021 that his application would be refused,

Based on your conduct and the conduct of your employees during the interactions with Ministry Inspectors in 2020, in the context of disruptive behaviour in previous years and numerous meetings with Ministry Inspection staff educating you on inspection authorities under the Act, there were reasonable grounds to believe that you will not comply with the Act in 2021.

At the subsequent hearing to show cause for why the certificates should not be refused, the Applicant filed no documents in support of his position and did not question any representatives of the Ministry. The Chairperson concluded there were reasonable grounds to believe the Applicant would not comply with the Act. Section 6(2)1 of O. Reg 247/14 lays out the criteria for the issuance of a certificate and states,

…the Minister is not authorized to issue the registration certificate to the applicant if any of the following circumstances exist:

1. There are reasonable grounds to believe that the applicant will not comply with the Act and the regulations, based on information provided to the Minister and based on the past conduct of the applicant or a related party.

2. The information provided in support of the applicant’s application is false or misleading.

This standard was described in Mugesera v. Canada (Minister of Citizenship and Immigration at para 114 as “something more than mere suspicion, but less than the standard applicable in civil matters of proof on the balance of probabilities” and “where there is an objective basis for the belief which is based on compelling and credible information.”

The Divisional Court concluded that this decision was reasonable, because the onus was on the Applicant to demonstrate that there was not reasonable grounds to believe he would comply,

[34] …The decision maker was entitled to rely on the evidence contained in the reports filed with her. Those reports revealed the Applicant’s long and largely uncontradicted history of disruptive and sometimes intimidating behaviour towards Ministry inspectors, previous contraventions of the regulations, Ministry personnel’s various attempts at educating the Applicant, and the circumstances surrounding the Applicant’s two charges of Interference with Inspections contrary to ss. 23(6.1) of the Act in 2020. She considered the submissions of the Applicant but determined, in all of the circumstances, that there remained reasonable grounds to believe he would not comply with the Act and the regulations. Whether one agrees or disagrees with her conclusion it certainly falls within the range of possible acceptable outcomes that are defensible in respect of the facts and law.

The Ministry was also at liberty to destroy any seized tobacco, meaning that the evidence in the matter, like the Applicant’s judicial review, has gone up in smoke.

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