Simon's Megalomaniacal Legal Resources

Administrative - Administrative Penalties

The term 'administrative penalties' refers to a new and specific types of regulatory financial penalty which is largely replacing the offence provisions in most Ontario regulatory statutes. They are preferred by the government as they are cheaper and easier to administer than prosecutable offences heard in the Ontario Court of Justice, which are governed by the Provincial Offences Act. As well, as these 'administrative penalties' do not include the possibility of incarceration (however short) they are also attractive to regulators as they have no Charter s.7 ['life, liberty and security of the person'] defences.

. 1048547 Ontario Inc. v Dairy Farmers of Ontario

In 1048547 Ontario Inc. v Dairy Farmers of Ontario (Div Court, 2023) the Divisional Court allowed a Milk Act tribunal [the 'Agriculture, Food and Rural Affairs Appeal Tribunal' (AFRAAT)] to assess chargeable milk usage at it's highest rate (by default) where the JR applicant had not provided verifiable milk usage records. On JR the applicant argued unsuccessfully that this practice constituted an administrative penalty, which was unauthorized by the involved statute:

The penalty/surcharge issue

[26] The Tribunal also considered the Applicant’s argument that by charging the highest price for milk purchased during the audit period, the DFO created a surcharge that acts as a penalty on the Applicant, which is inconsistent with the Act and an impermissible reading in of words which were not intended. The Applicant pointed to s. 7(1)6 of the Milk Act, which grants 6 regulation-making powers to the Commission, including the use of penalties where there has been a contravention of the Act, regulations or order of the Commission. In addition, s. 7(3) of the Milk Act limits any penalty for non-producers of milk to no more than 10 per cent of the price payable to the producers for the product in the preceding twelve-month period.

[27] The Tribunal concluded that the deemed highest price levied on the Applicant was not a “penalty” used to deter non-compliance with the legislative scheme; rather it was part of the scheme for ensuring fair payment to milk producers. It preferred to refer to the increased amount owing as a “surcharge.” This seems quite appropriate, and reasonable; a surcharge, dictionaries tell us, is an additional charge or payment, or something added to the original cost or quoted price.

[28] On the other hand, the Applicant submits that any disadvantage imposed by a statute amounts to a penalty, relying on Regina v. Budget Car Rentals (Toronto) Ltd. (1981), 1981 CanLII 1751 (ON CA), 31 O.R. (2d) 161 (C.A.), in which the Court of Appeal for Ontario cited the Shorter Oxford English Dictionary definition of penalty: “a punishment imposed for breach of law, rule, or contract; a loss, disability, or disadvantage of some kind, either fixed by law for some offence, or agreed upon in case of violation of a contract”. The Applicant points to examples of other regulatory actions which have been found to constitute penalties, such as licence revocations, or milk quota reduction: see Dimi Meat Products v. Director, 2010 ONAFRAAT 8; Senn and Suter v. DFO, 2015 ONAFRAAT 2.

[29] These cases provide examples of regulatory disadvantages, which might also include fines, imposed in reaction to a breach of a law or rule. In contrast, s. 24(2) of the DFO Regulation is based on an expectation of accurate milk usage reporting. While there may be an economic disadvantage to being deemed to have purchased milk at the highest price, the information required to support a claim to lower pricing is wholly within the control of the processor, and the failure of the processor to support a lower price simply means it is charged the higher price. The provisions do not function as “punishment”, nor is the surcharge a fine; rather, the ability to increase the price is simply a mechanism to ensure, as the Tribunal noted (at para. 110), that dairy farmers receive “fair and proper compensation.”

[30] Further, if milk usage is later established by verified records, s. 24(3) allows for an adjustment downward. This is a pricing scheme that is subject to validation, for known pre-set price classifications, and it is up to the processors to support their claim for a lower price.

[31] The Applicant submitted that the Tribunal did not discuss or consider the effect of s. 24(3) of the DFO Regulation, arguing that it was not available to it once the word “verifiable” was read into s. 24(2). However, in para. 109 of its decision, the Tribunal addressed s. 24(3), stating the Applicant’s position that “since [the Applicant] can never provide a verifiable MUV declaration, the savings clause becomes a penalty clause.” Although the Tribunal did not respond directly to this point, as we have already stated, the Applicant’s inability to support an adjustment to a lower price does not make being charged the higher price a penalty; it is, as the Tribunal said, simply a mechanism to ensure that dairy farmers receive “fair and proper compensation.”

[32] The Tribunal also observed that the penalty provisions referenced in s. 7 of the Milk Act, as well as the limits on penalties, relate to penalties that flow following a hearing to determine whether an applicant “has failed to comply with or has contravened… any provision of this Act, regulations, any plan, order or direction of the Commission or marketing board.” That is a different regulatory response and procedure than is found in the operation of the price provisions in s. 24(2) of the DFO Regulation.

[33] The practical impact of the Applicant’s position would allow processors to avoid the implications of s. 24(2) and thereby create an incentive, flowing from the 10 per cent limit on penalties, to engage in large scale deceptive record-keeping practices in order to take advantage of the price classification system as a cost of doing business. This would be at odds with the goal of fairly compensating milk producers based on the use of their product.

[34] In our view, therefore, the Tribunal made a reasonable decision in finding that the operation of s. 24 does not give rise to a “penalty” at all, let alone one which is subject to the limiting provision in s. 7(3) of the Milk Act.

....

[37] The evidence before the Tribunal, summarized by it at paras. 58 – 64 of the decision, was that the Applicant’s records were incomplete. There were discrepancies in reported production and sales numbers, inconsistencies between production and manufacturing records, and material differences in volumes of milk used for certain products and total purchases. Numerous records were requested but not provided.

. 2099065 Ontario Inc. v Ontario (Health and Long-term Care)

In 2099065 Ontario Inc. v Ontario (Health and Long-term Care) (Div Ct, 2021) the Divisional Court commented on administrative penalties:

[61] It is well established that in order to overturn a penalty imposed by an administrative decision maker, it must be shown that the decision maker made an error in principle or that the penalty was “clearly unfit.” The courts have used a variety of expressions to describe a penalty that reaches this threshold, including “demonstrably unfit”, “clearly unreasonable”, “clearly or manifestly excessive”, “clearly excessive or inadequate” or representing a “substantial and marked departure” from penalties in similar cases. To be clearly unfit, the penalty must be disproportionate or fall outside the range of penalties for similar offences in similar circumstances. A fit penalty is guided by an assessment of the facts of the particular case and the penalties imposed in other cases involving similar infractions and circumstances, College of Physicians and Surgeons of Ontario v. Peirovy, 2018 ONCA 420 at para. 56.

[62] In my view, the Executive Officer’s decision on remedy is reasonable and is one to which the court ought to defer in light of the Executive Officer’s particular expertise with this complicated system: AS169988 Consultants Inc. v. Her Majesty the Queen (in the right of the Province of Ontario), Ministry of Health and Long-Term Care (Ontario), 2019 ONSC 2967 (Div. Ct.) (Warden Pharmacy), para. 48.

[63] I would adopt the words of Myers J. in Warden Pharmacy when he wrote, in para. 45, that “having decided to make an honour system available to registered professionals so as to minimize enforcement costs and thereby to maximize the availability of funds for needy beneficiaries, it is not at all surprising that termination would be the usual remedy for significant abuse of the honour system. The applicant’s position would require the Ministry to incur ongoing enforcement costs monitoring the pharmacy.” So it is here.

[64] Although it is true that rehabilitation is an important objective in the penalty process, so is the preservation of the public purse and general deterrence. This is especially true in the context of a large, province-wide benefit program operated on the honour system. The potential for abuse is high, as is the harm to the public given that drug benefit resources are not unlimited.