Majority
The judgment of Martland, Ritchie, Pigeon, Dickson, Beetz and McIntyre JJ. was delivered by
PIGEON J.
PIGEON J.—The appellants were charged by indictment on two counts for offences under the Combines Investigation Act, R.S.C. 1970, c. C-23, ss. 32(1)(b) and 32(1)(c) respectively between January 1, 1960 and May 31, 1973, as follows:
1. Conspiracy “to enhance unreasonably the price of” sugar;
2. Conspiracy “to prevent or lessen, unduly, competition in the production … or supply of” sugar.
After a protracted trial, the accused were acquitted on both counts by Mackay J. (1976, 26 C.P.R. (2d) 14). On appeal by the Attorney General of Canada the acquittal was affirmed on the first count but reversed on the second count and a verdict of guilty was entered on that count (1978, 3 B.L.R. 221, 41 C.C.C. (2d) 209). The appeal by
[Page 649]
the accused to this Court was taken as of a right under Cr. C s. 618(2)(a).
On the facts before him Mackay J. found no evidence of communication between the accused on the subject of price (at p. 96). Dealing with the allegation of price fixing as an element of the alleged conspiracy to prevent or lessen competition, he said (at p. 97):
In an oligopolistic situation where the product is homogeneous—as in sugar—the price of the product must inevitably be the same, for if one member priced his product higher than the others he would have no sales. If he posted a lower price he would soon be inundated with buyers, would realize his price was too low, perhaps unprofitable, and raise it. Thus by natural osmosis the price of an homogeneous product tends to reach the same level. But the process might be costly and is certainly inefficient. There are two ways to avoid it. Firstly, by the members of the industry conspiring to fix prices, which is illegal, or by the members of the industry making a conscious effort to parallel the prices of the leader.
After referring to the judgment of Lerner J. in R. v. Armco Ltd. and others[3], Mackay J. said (at p. 98):
With great respect, I am of opinion that while identical price lists might give rise to an inference of an arrangement to fix prices, such inference is unwarranted where it is shown that conformity of prices was not arrived at as a result of collusion.
Then, after quoting from several witnesses, he held against any inference of a price fixing arrangement, concluding his remarks on that point as follows (at pp. 100-101):
Since the Act does not prohibit a member of an industry from taking into account and following his competitors’ price changes, be they up or down, it follows that he is not prohibited from taking into account and following the system upon which these price changes are made.
[Page 650]
Moreover, although all Canadian refiners had identical price lists, there were, as Miller said, exceptions when the actual sales prices varies as a result of customers’ discounts, not including discounts for prompt payment.
Mr. T. Moorse, former Vice President of Neilson’s Lowneys testified:
“A. … That price list is for anybody and everybody. And if we were a big buyer, like any other big buyers, we would feel entitled to certain extra consideration for the volume.
Q. Mm-hmm. Discounts of some sort?
A. Yes.
Q. When you approached two or more of the refineries in the way you have just described. What sort of results did you get in the way of price levels? Did they vary or were they identical or what?
A. They varied. Of course they varied, because—they weren’t certainly all the same, because first of all I was dealing with different people”.
Testimony of the officers of other industrial sugar users, such as Loeb Ltd., Coca-Cola Ltd., Rowntree-MacIntosh, Fry-Cadbury and General Foods, was to the effect that the refiners’ quotes invariably differed appreciably.
Then dealing with the allegation of a market sharing agreement Mackay J. said (at pp. 101-103):
In virtue of Wartime Controls, quotas for the production of refined sugar in Eastern Canada had been allotted to the accused in the following proportions (ex. P-1-A):
Atlantic
35.5%
Redpath
43.0%
St. Lawrence
21.5%
Their shares of the refined sugar market until controls ended in 1949 were (ex. P-1-A):
Atlantic
35.6%
Redpath
42.7%
St. Lawrence
21.7%
During the next decade, the market shares varied slightly. But in 1958, Redpath having just opened its Toronto refinery and being anxious to increase sales and recoup some of the heavy expenses involved, surrepti-
[Page 651]
tiously began to cut prices in the Toronto area. Atlantic felt the loss of sales in that area and so began to cut its prices there, although this represented a serious expense, due to the absorption by Atlantic of the unsubsidized portion of the freight from the refinery in St. John to the nearest basing point which was now Toronto instead of Montreal as it had been before the new refinery was constructed. The price war spread to include St. Lawrence. There were two results—First: Redpath increased its market share at the expense of the others from 42.8% in 1957 to 46.6% in 1958. Second: it lost the price war against its two well-funded opponents, and having sustained serious financial losses it was ripe for a take-over by Tate and Lyle.
Thereafter, each of the accused settled down to a policy of maintaining their traditional market shares. Although each stressed that this was the result of an independent decision, one would be ingenuous not to be aware that there was and continues to be a tacit agreement to this effect.
But with respect, I do not think the competitive stratagems suggested by the Crown, apart from increasing discounts, that is price cutting, would have any effect on individual market shares. And the unhappy results of price cutting still remain fresh in the corporate memories …
On the evidence, I find that the maintenance of traditional market shares—which were adjusted but in the same proportion when Cartier came on steam—was the result of a tacit agreement between the accused. But in my opinion, it has not been shown that this agreement was arrived at with the intention of unduly preventing or lessening competiton. The reason for maintaining traditional market shares was to avoid a price war which would have resulted had the accused taken the only method of increasing them by price cutting through extensive discounts. Nor am I able to infer from the totality of the evidence on this point, including overt acts, that market shares were maintained for the purpose of stifling competition. On the contrary, Cartier was launched in 1964 and none of its initial difficulties were due to the maintenance of market shares. West‑cane was launched successfully in 1969. Austin attempted to launch Austin Sugar Refineries Limited in the Cornwall area with Government support in 1971 (ex. D-11 A and B). That this project was never realized was
[Page 652]
in no way due to the maintenance of market shares by the accused.
In passing, it is interesting to read in the prospectus for this last project that (ex. D-11-A):
“The purchase of raw sugar on the International markets for refining and the development of sales for refined sugar products, present no formidable obstacles in a market in which Robin Austin & Co. Ltd. has operated successfully for over twenty years”.
Therefore, after considering all the evidence, both of the prosecution and the defence, and the arguments of counsel, I have come to the conclusion that the prosecution has not satisfied me beyond a reasonable doubt that the accused, as charged in the second count of the indictment, unlawfully conspired, combined, agreed or arranged together and with one another and with certain named co-conspirators to prevent or lessen, unduly, competition in the production, manufacture, purchase, barter, sale, transportation or supply of raw or refined sugar. And as such it is my duty to give the accused the benefit of the doubt and to find them not guilty of that offence.
With respect I must point out that the reasons for judgment in the Court of Appeal fail to show on what basis competition should be held to have been agreed to be lessened “unduly”. Mayrand J.A., with whom Owen J.A. concurred, dealt with the case on a misconception of the evidence as to market shares saying (at p. 237):
[TRANSLATION] Following this costly commercial experience, the three refineries gave up their price war and simply divided the market as it was at that time. This division corresponded almost exactly to the following territorial division: Atlantic controlled the three maritime provinces, while Redpath had sole control of the Ontario market and divided the Quebec market with St. Lawrence (at first St. Lawrence Sugar Refineries Ltd., which was succeeded by S.L.S.R. Holdings Ltd., and is now Sucronel Ltd.). In 1973, these three respondents by themselves controlled some 74.09 per cent of the entire Canadian market.
Counsel for the Crown at the hearing in this Court admitted that there was no evidence of a territorial market division between the accused. His submission was that the “tacit agreement” for the maintenance of traditional market shares
[Page 653]
which was found by Mackay J. was undue in law. His contention was that an agreement to restrict competition so as not to alter relative market shares was the equivalent of an agreement not to compete at all, that it was totally destructive to competition and therefore undue in law. As to this I might point out immediately that the trial judge did find evidence which he accepted of actual competition and would refer to the passage quoted from his judgment at pp. 100-101 of the report. I fail to see how it can be said that the “tacit agreement” found by the trial judge meant the elimination of competition when it is a fact that competition did subsist and that it did subsist, not in violation of the “tacit agreement”, but as an integral part of the course of conduct from which the “tacit agreement” was inferred. To support his submission that the “tacit agreement” meant the practical destruction of competition not just a lessening which would not be unlawful unless found undue, counsel for the Crown referred to a memorandum dated September 16, 1966, which was prepared by the President of the Company then known as Canada and Dominion Sugar, now known as Redpath Industries Ltd., the largest concern in the field and the acknowledged price leader. This memo starts with a sales analysis for the first eight months of 1966 and the comment on those figures reads:
C & D share of market for period Jan./March was too high, therefore competitors started increased price cutting (in any of its forms). In fact our desire to hold our share of the market plus meet the Cartier situation must have hurt the others before the end of December 31st, 1965. The increased cutting of prices had a definite, compounding effect on our sales, i.e.
Jan.
34.34%
)
Feb.
32.88%
)
Mar.
32.14%
)
Apr.
31.13%
)
A general declining trend
May
28.73%
)
Jun.
28.52%
)
Jul.
28.88%
)
Aug.
27.67%
)
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What we failed to do was to start meeting cuts to stop the declining trend around July/August. We, in fact, did the opposite. We withdrew all cuts in order to restore price stability. This was reasonable attitude or position to take but in retrospect, we should have been the last to withdraw cuts, not the first, to flatten out the declining trend.
Then, after a statement of possible courses of action, there is the following comment:
If prices are equal, i.e. no price cutting, C & D will obtain gradually more than its share of the market because we are in a better position from a product and service view point to satisfy customer needs. Competitive reaction will be price cutting and unless this price cutting is limited in nature (time and volume) C & D will begin to lose out. It is at this point that timing is critical. Any price cutting by C & D to restore its share can prompt additional price cutting by competitors if they have failed to realize that their share of the market has been restored.
Ability to price cut. Because of the structure of the raw sugar market in recent months, a relatively high margin, profitable differentials on bulk/liquid, 5 and 10 lb. bags, all refiners are in a position to price cut without too much hesitation. Many price cuts have been directed towards those items. Large sophisticated buyers who keep a close watch on refining margin are aware that the real margin has increased substantially because refiners are not paying full forward premiums for future raw sugar deliveries. These buyers are demanding price cuts.
On page 8 of a memo to members of the Management Committee also dated September 1966 and entitled: “The Next Five Years’ Objectives and Strategy”, the conclusion is:
From the foregoing policy an explicit strategy arises which impinges on all our sugar operations. This is that we will look for extra profit in the immediate future from improving the efficiency of our operations and from concentrating on the more profitable products rather than from taking more margin or increasing
[Page 655]
volume above our historical market share. As our marketing operation gains in sophistication, we will from time to time review the appropriateness of this strategy.
Those statements substantiate the trial judge’s finding of a “tacit agreement” to maintain “historical market shares”. From that angle, the second passage quoted is specially important. When reaching the decision to start price cutting again so as to “restore” its market share, Redpath took it for granted that its competitors would not resort to additional price cutting so long as their own shares of the market would remain intact. It was also realized that time had to be allowed for the competitors to become aware of Redpath’s course of action. Thus, the meaning of the “tacit agreement” becomes clear: Redpath felt sure that its competitors would not resort to “increased price cutting” if their “historical market shares” were restored. On the other hand it did realize from the results of this course of action that if it renounced any form of price competition, it would not maintain its own “historical market share”. It therefore decided to make some price cutting again but to restrict this form of competition so as not to do more than restore its “historical market share”, feeling confident that its competitors, provided the timing was careful, would realize what was being done and would also be satisfied to keep their “historical market share”.
Counsel for St. Lawrence Sugar Ltd. has contended that such a “tacit agreement”, being merely the conscious adoption of a uniform course of action without any communication, assent or promise, did not amount to a conspiracy. He pointed out that there was no illegality in the independent adoption of such a policy of limited competition. A conspiracy requires agreement. Is a finding of a “tacit agreement “sufficient?
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It must be accepted that a conspiracy may be effected in any way and may be established by inference. In dealing with the refiners’ uniform prices, the trial judge felt that they raised an inference of collusion. However he accepted (at p. 98) that this was a result of independent decisions called “conscious parallelism” which is not illegal. The evidence was clear, however, that not only were its competitors immediately aware of Redpath’s list price the moment a new price was posted in its lobby, they also in time were able to discover Redpath’s pricing formula by a process of deduction from available data. Yet the trial judge held, correctly I think, that this did not constitute a conspiracy to maintain uniform prices according to Redpath’s formula but merely “conscious parallelism”. Could this not be just as accurately called “parallelism by tacit agreement”?
The basis for an inference of “tacit agreement” was in a way stronger for the uniform list price than for the maintenance of market shares. There was a feature which could be considered as the making of an offer, that is the publication of a list price which meant that it was immediately made known to the competitors by the brokers. Hence, I find that the trial judge quite properly on that point put the burden on the defence to disprove the evidence of collusion.
The situation was different in respect of the adoption by Redpath of a maintenance of traditional market share sales policy. There is no evidence that this policy was in any way made known to its competitors. Furthermore, it was not like the list price a perfectly defined policy. The method by which it was to be in force, the selective price cuts to big buyers, was left to the judgment of those who were to implement that policy. There is no suggestion that the extent of the price cutting was to be made known to the competitors. On the contrary the evidence is that, when there was competitive bidding, the quotations submitted dif-
[Page 657]
fered appreciably. On the other hand, just as the competitors would in time become aware of Red-path’s pricing formula, they would inevitably become aware of its marketing policy and Red-path’s president was conscious of this when adopting it.
When, as expected, the competitors did adopt a similar policy, did this mean that an agreement had been reached? In order to make an agreement by tacit acceptance of an offer there must not only be a course of conduct from which acceptance may be inferred, there must also be communication of this offer. In the case of the list price, this was apparent and did cast a burden on the defence. But there was no such communication of the marketing policy. In those circumstances, did the “tacit agreement” resulting from the expected adoption of a similar policy by the competitors amount to a conspiracy? I have great difficulty in agreeing that it did because the author of Redpath’s marketing policy was conscious that its competitors would inevitably after some time become aware of it in a general way and also expected them to adopt a similar policy which would also become apparent.
It appears to me that the Crown’s contention implies (and this is apparent from what the trial judge says at p. 101) that, in the situation of the sugar industry in Eastern Canada, each of the refiners was obliged to endeavour to increase its market share at the expense of the others, otherwise it was agreeing to lessen competition unduly. In my view, the trial judge was correct in rejecting this submission. None of the refiners was obliged to compete more strongly than it felt desirable in its own interest. Each refiner was entitled to decide not to seek to increase its market share as long as this was not done by collusion and, in my view, the trial judge was right in coming to the conclusion that what he called the “tacit agreement” to maintain market shares was not an agreement to lessen
[Page 658]
competition unduly.
As I have already indicated, I cannot agree with the submission that this “tacit agreement” to maintain market shares involved the elimination of competition. On the contrary, as we have just seen, the evidence is clear that it involved only a lessening of competition. When it discontinued the financially disastrous price cutting whereby it had increased its share of the market, Redpath realized that without any price cutting it was not only losing the excess but failing to maintain its former market share. The decision to strive for stability on the basis of maintaining “historical market share” was therefore not a decision to forego all price competition. On the contrary, it meant that some price concessions would be made to the big buyers but that this would be adjusted so as to maintain the “historical market share” as close as possible without any increase or diminution. That this involved a lessening of competition is apparent. However, it is equally clear that it did not involve a suppression of competition. The question is whether it meant that competition was intended to be “unduly” lessened.
Section 32(1)(c) of the Combines Investigation Act reads:
32. (1) Every one who conspires, combines, agrees or arranges with another person …
(c) to prevent, or lessen, unduly, competition in the production, manufacture, purchase, barter, sale, storage, rental, transportation or supply of an article, or in the price of insurance upon persons or property, or
…
is guilty of an indictable offence and is liable to imprisonment for two years.
I see no need to review the authorities on the meaning of “unduly” in this enactment. Together
[Page 659]
with the leading case of Howard Smith Paper Mills Ltd. et al. v. The Queen[4], they have recently been exhausively examined by Ritchie J. when writing the majority opinion in Aetna Insurance Co. and others v. The Queen[5]. At page 748 he quoted as an accurate assessment of the meaning of “unduly” the trial judge’s conclusion of this point as follows:
This review of the various statements on the meaning of “unduly” as it relates to the offence of lessening competition brings me to these conclusions. An agreement to prevent or lessen competition alone is not an offence. What is criminal is an agreement that is intended to lessen competition improperly, inordinately, excessively, oppressively or one intended to have the effect of virtually relieving the conspirators from the influence of free competition. There is no requirement for the Crown to prove the existence of a monopoly and it is a question of fact as to whether the agreement reaches the point of intending to lessen competition unduly and therefore becomes a criminal conspiracy.
I find it abundantly clear that, applying this test to the facts found by the trial judge, it is impossible to say that he erred in law when coming to the conclusion that the Crown had failed to prove an agreement to lessen competition unduly. I am unable to find in the reasons for judgment in the Court of Appeal any sound basis for concluding otherwise and, as I have already indicated, I am unable to find any valid reason for so concluding on the facts relied on by counsel for the Crown.
I must note, however, that it has correctly been pointed out that, in view of the decision of this Court in R. v. Cooper[6], Mackay J. was in error in his statement, when dealing with the law, (at p. 23) that “the law concerning circumstantial evidence must be applied and the rule in Hodge’s case followed”. In fairness to the trial judge, I will note that his judgment is dated December 19, 1975 and
[Page 660]
the decision of the Ontario Court of Appeal which quashed Cooper’s conviction by application of the rule in Hodge’s case and was later reversed in this Court, had been rendered March 24, 1975 (7 O.R. (2d) 429). This would not, of course, save the trial judge’s conclusion if it was actually based on this view of the law which must now be held erroneous. I am however satisfied that the trial judge’s conclusion on the point presently being considered was in no way reached by the application of that rule in this case. In considering whether he ought to make the inference of a “tacit agreement” to maintain market shares, he did not put the question whether this was the only possible conclusion consistent with the proven facts, he just said (at p. 102):
Although each stressed that this was the result of an independent decision, one would be ingenuous not to be aware that there was and continues to be a tacit agreement to this effect.
I must also point out that while, as was stressed in Aetna, the offence lies in the agreement made with the intention to lessen competition unduly, not in the actual result of the agreement, no such distinction has to be made when, as here, the only evidence of the agreement is found in the course of conduct from which it is inferred. In the present case, the “tacit agreement” which the trial judge found was obviously to lessen competition as it was in fact lessened in the manner above described. Whether this was a criminal offence depends exclusively on whether competition was thus lessened “unduly”. While the offence charged is truly criminal in nature and therefore requires mens rea, this does not mean that, assuming the “tacit agreement” was illegal, the accused, or rather their officials who are their directing minds, had to be conscious of its illegality. If it had been intended to lessen competition “unduly” it would have been no defence that the accused mistakenly thought that the intended lessening of competition would not be “undue”. It is always for the Court to decide on the facts whether an agreement to lessen competition means that competition is to be lessened “unduly” and the views of the accused on that are
[Page 661]
irrelevant.
I would allow the appeals, set aside the convictions entered by the Court of Appeal and restore the acquittals.
The following are the reasons delivered by
ESTEY J. (dissenting)
ESTEY J. (dissenting)—This appeal from a conviction entered by the Court of Appeal of Quebec after an acquittal by the Superior Court raises a number of issues of importance, the examination of which requires a consideration at the outset of the principal facts, and the law applied to those facts in each of the Courts below.
The three appellants were charged by a bill of indictment containing two counts, both relating to the period January 1, 1960 to May 31, 1973. In count 1 the charge is that the appellants conspired to enhance unreasonably the price of sugar in eastern Canada (that is to say, in the provinces of Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland); and in count 2 the appellants are charged with conspiracy to prevent or lessen unduly competition in the production, transportation, sale and supply of sugar in eastern Canada, contrary to s. 32(1)(c) of the Combines Investigation Act, R.S.C. 1970, c. C‑23.
The evidence indicates that each of the appellants operated sugar refineries in which imported sugar was refined for marketing in the region extending from the Atlantic to the western boundary of Ontario. During World War II, the marketing of sugar was regulated by the Wartime Prices and Trade Board, a federal agency, and the appellants, then the only sugar refiners in business were allotted shares of the market in eastern Canada by that agency. When the controls ended in 1949 the appellants had the following shares of the market:
[Page 662]
Atlantic
35.6 per cent with refinery at St. John, N.B.
Redpath
42.7 per cent with refineries at Chatham, Ont. and Montreal
St. Lawrence
21.7 per cent with refinery at Montreal
This proportional participation in the market continued without interruption until 1958 when Redpath (formerly known as Canada and Dominion Sugar Company Limited) set about to increase its market share by reducing its prices, and its share of the eastern Canada market rose from 42.8 per cent in 1957 to 46.6 per cent in 1958. As a result of this price-cutting program the appellant Red-path suffered a severe financial drain and was taken over by Tate & Lyle Limited, “the world’s largest integrated sugar company”, as the trial judge described it.
At trial the appellants were found not guilty on both counts. The Court of Appeal of Quebec dismissed the appeal of the Crown with respect to count 1 but found all the appellants guilty on count 2 with which we are now solely concerned and which reads as follows:
2. THAT at Montreal, district of Montreal, Province of Quebec, and in divers places throughout Canada, between January 1st, 1960, and May 31st, 1973, both inclusive, ATLANTIC SUGAR REFINERIES CO. LIMITED, REDPATH INDUSTRIES LIMITED (formerly known as Canada and Dominion Sugar Company Limited, ST. LAWRENCE SUGAR LIMITED, and S.L.S.R. HOLDINGS LIMITED (formerly known as St. Lawrence Sugar Refineries Limited), did unlawfully conspire, combine, agree or arrange together and with one another and with Czarnikow (Canada) Limited, Czarnikow-Rionda Company of New York City, State of New York, U.S.A., Czarnikow Limited of London, England, Hodgson (East India) Ltd., Man-sugar Ltd., M. Golodetz & Co. of New York City, State of New York, U.S.A., Indian Sugar Mills Association of India and South African Sugar Association of South Africa, M. Golodetz of London, England, State Trading Corporation of India and other persons unknown or with some of them or with one of them, to prevent or lessen, unduly, competition in the production, manufacture, purchase, barter, sale, transportation or supply of an article or commodity that may be the subject of trade or commerce, to wit: sugar, raw or refined, in divers places throughout the provinces of
[Page 663]
Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and did thereby commit an indictable offence contrary to Section 32(1)(c) of the Combines Investigation Act, R.S.C. 1970, Chapter C-23.
The appeal by the Crown to the Court of Appeal was made pursuant to s. 605 (1)(a) of the Criminal Code. The appellants contend that the Court of Appeal had no jurisdiction to hear the appeal because no error of law had been committed by the learned trial judge. If that be so, then this Court is without jurisdiction as well and therefore the primary question to be answered is whether the Court of Appeal did indeed entertain an appeal in which the issue was properly classified as raising a question “of law alone” and not one of mixed fact and law.
The Court of Appeal concluded that the learned trial judge misdirected himself in the law and concluded that had the proper law been applied, the appellants ought to have been convicted on count 2. The appellate court interpreted the reasons at trial to mean that in the view of the trial judge, the law imposed a duty or burden on the Crown to prove not only an intent on the part of the appellants to enter into an agreement to maintain their respective shares of the sugar market but also that in doing so, they intended thereby to lessen competition unduly. The Court of Appeal was of the view that the Crown need only prove beyond a reasonable doubt an intent to agree to maintain market shares, and the trier of fact, upon finding such an agreement to have been reached by the accused, must thereupon determine as a question of fact whether as a consequence thereof competition was unduly lessened.
In my view the judgment at trial and the disposition of count 2 there made, raise on appeal to the Court of Appeal a question of law alone. Therefore the Court of Appeal had jurisdiction under s. 605(1)(a) to entertain the appeal and I will revert to this matter at the conclusion of these reasons.
It is convenient first to assemble and examine the law which the learned trial judge found to be applicable to the findings he has made; and thereafter to examine the conclusions he reached, lim-
[Page 664]
ited of course to count 2. All references to the judgment at trial will be to (1976), 26 C.P.R. (2d) 14.
With reference to the onus on the Crown in proving its case, Mackay J. stated at p. 23:
I cannot agree with the Crown’s statement (legal authorities, p. 51) that “The Crown is only required to prove that there was a conspiracy which, if carried out, would unreasonably enhance the price of the article … It is submitted that it is not necessary to show that the accused intended to unreasonably enhance the price of sugar any more than that they intended to unduly lessen or prevent competition.” Surely, the conspirators must have the intention of entering into an agreement and in fact do enter into an agreement which, if carried out, would have the result of unreasonably enhancing the price of an article. It need not be shown that if the agreement was put into effect, that prices were enhanced, but simply the agreement must have been intended to have that effect.
It will be observed that the second last sentence requires only the single intention of entering into an agreement that when carried out would result in unduly lessening competition (adapting it to the words of the second count). The last sentence, however, imports the double intent requirement, the first being the intent to enter the agreement, and the second being the intent to lessen competition unduly.
However at p. 27, the trial court described the onus upon the Crown as follows:
The Crown is only required to prove that the accused intended to and did enter into an agreement which they intended to put into effect and if put into effect, would have resulted in the unreasonable enhancement of the price of the article. [R. v. Eddy Match Co. Ltd. et al. (1951), 13 C.R. 217 (affirmed at 18 C.R. 357)]
At p. 31, however, the Court returns to the question of onus upon the Crown:
In brief, then the Crown, if it is to succeed in a prosecution under the Combines Investigation Act, must establish …
[Page 665]
As to the second count:
(a) That the accused entered into an agreement at any time between January 1, 1960 and May 31, 1973, with one another and/or with others named in the indictment;
(b) that the object of the agreement was to lessen competition in the production and sale of raw or refined sugar in eastern Canada;
(c) that the intended lessening of competition was undue.
As to the rule in Hodge’s[7] case, the trial judge, after setting out the rule, continues at p. 23:
Proof of intent, like proof of an agreement, is seldom susceptible of being made by direct evidence in combines cases and is generally established by inferences drawn from the evidence and having a cumulative effect. This being so, the law concerning circumstantial evidence must be applied and the rule in Hodge’s case, supra, followed.
I will return to the application of the rule in Hodge’s case later in this judgment.
Thereafter the Court proceeded to draw certain conclusions of law beginning with the meaning of the term ‘unduly’ as it appears in s. 32(1)(c) of the Combines Investigation Act, supra.
In the light of these cases, it has been suggested by Mr. Richard Gosse in an annotation “How Much May Competition be Lessened?”, 36 C.R. 28 at p. 29, that “to obtain a conviction under s. 32(1)(c) it must be shown that the accused entered into an agreement to suppress competition in their particular sector of trade”.
In the view of the foregoing I am of the opinion that, in the case at bar at least, Mr. Gosse’s interpretation of “unduly” is the correct one to adopt. Where the accused at the beginning of the period controlled 99.8 p. 100 of the eastern Canadian market, an agreement to lessen competition would be tantamount to extinction, and so would be undue. The extinction of competition would in those circumstances require the combined action of all the accused to be effective, for if one decided to allot a portion of its market share to a newly arrived competitor, whatever the other two planned would be for nought. (at p. 30)
[Page 666]
Much later in his reasons the learned trial judge makes this finding with reference to an agreement between the accused:
On the evidence, I find that the maintenance of traditional market shares—which were adjusted but in the same proportion when Cartier came on stream—was the result of a tacit agreement between the accused. But in my opinion, it has not been shown that this agreement was arrived at with the intention of unduly preventing or lessening competition. The reason for maintaining traditional market shares was to avoid a price war which would have resulted had the accused taken the only method of increasing them by price cutting through extensive discounts. Nor am I able to infer from the totality of the evidence on this point, including overt acts, that market shares were maintained for the purpose of stifling competition. On the contrary, Cartier was launched in 1964 and none of its initial difficulties were due to the maintenance of market shares. West-cane was launched successfully in 1969. Austin attempted to launch Austin Sugar Refineries Limited in the Cornwall area with Government support in 1971 (ex. D-11A and B). That this project was never realized was in no way due to the maintenance of market shares by the accused, (at p. 103)
It will be observed that the Court finds that there was a tacit agreement which resulted in the maintenance of fixed proportions of the eastern Canada sugar market between the accused but that such agreement was not reached for the purpose of stifling competition but rather to avoid a price war. It should be noted that the Westcane operation mentioned in the above excerpt commenced not in 1969 but in 1974 after the period of the charges herein.
Earlier the learned trial judge on this point stated:
Thereafter, each of the accused settled down to a policy of maintaining their traditional market shares. Although each stressed that this was the result of an independent decision, one would be ingenuous not to be aware that there was and continues to be a tacit agreement to this effect. (at p. 102)
[Page 667]
There is, it must be noted, an express finding “that there was no evidence of any communication between [the accused]”. (at p. 96)
The Court was faced with two opposing explanations of the strange sight of the three accused sharing virtually all the eastern Canada sugar market in constant proportions for eleven years and thereafter sharing ninety per cent of the market in the same proportions for another fourteen years. (The ten per cent reduction in the total share of the three accused of the eastern Canada market went to Cartier Sugar Limited, incorporated in 1969, which is a vertically integrated facet of the Steinberg Limited food marketing enterprise which in turn accounted for about 50 per cent of Carder’s sales.) These contending theories were summarized as follows:
The theory of the Crown with regard to the accused’s maintenance of their traditional market shares is that:
There existed a market sharing agreement which was maintained by the accused for many years despite changing circumstances and the fact that any one of the accused could readily have obtained a greater share of the market by, inter alia:
(a) giving greater discounts to customers,
(b) more vigorous advertising,
(c) better packaging,
(d) abolishing the basing point pricing and freight absorption system of marketing,
(e) using maximum plant capacity,
and the agreement had the effect of lessening competition.
The theory of the defence may be simply put. The only way to increase sales of an homogeneous product in an oligopoly is to reduce prices, the result of which is either a depletion of supplies and depressed earnings by the firm lowering its prices or a price war. Since the results in either case are disastrous, the only alternative is for each member of the oligopoly to seek to maintain its traditional market share. (at p. 101)
The judgment concludes with the acceptance by the Court of the “good motive” explanation advanced by the accused and embodied in the quotation from p. 103 of the trial judgment, supra. I reproduce the key sentence for convenience:
[Page 668]
The reason for maintaining traditional market shares was to avoid a parice war which would have resulted had the accused taken the only method of increasing them by price cutting through extensive discounts.
In the Court of Appeal Mr. Justice Mayrand, with whom Owen J.A. concurred, found that the trial judge erred in law in determining that the Crown was required to prove that the defendant intended to prevent or lessen competition unduly; and that in view of his finding of fact the learned trial judge would have convicted the accused on the second count but for the foregoing error in law. After reciting the elements of the second count (quoted, supra, from 26 C.P.R. at p. 31 and p. 103, supra) Mayrand J.A. concludes:
In our case, the Judge formulates an erroneous rule of law not by inadvertence but when he wishes to be more precise and when he declares in distinct paragraphs the three elements of proof which are incumbent upon the Crown. We are, therefore, faced not with a wrong formulation, but rather with a false conception of the rule of law. As a result, the appellant is right in saying that on this point there has been an error of law.
(41 C.P.R.(2d) 5 at p. 16 from which all excerpts hereafter made from the Court of Appeal judgments will be taken.[8])
[Page 669]
As to the facts required to be proven by the Crown, Mayrand J.A. states:
Three essential facts must be proven by the Crown:
(a) an agreement in which the respondents have participated:
(b) the object of this agreement was the lessening of competition;
(c) the carrying out of this agreement had to result in an undue lessening of competition.
I consider that these three essential facts have been established if one abides by the conclusions that the Judge drew from the evidence. (at p. 16)
Bélanger J.A. concurred in the result and emphasized that the error in the court below lay in requiring the Crown to prove “that the lessening of competition was intended to be undue”. (at p. 8)
I have come to the conclusion, with all respect to those who hold a contrary view, that the learned trial judge erroneously determined that the Crown had a greater burden of proof than that imposed by the law and that given the findings of fact the learned trial judge has made, he would have convicted all the accused on the second count had he correctly directed himself on the law.
[Page 670]
The burden lying upon the Crown in this case is to establish beyond a reasonable doubt first, that the respondents intended to enter into a conspiracy, combination, agreement or arrangement and, secondly, that that conspiracy, combination, agreement or arrangement if it were carried into effect would prevent or lessen competition unduly. These are questions of fact and the only question of law to which this appeal can be said to give rise is the meaning of unduly in the context of s. 32(1)(c). (at p. 748)
To the same effect, Kerwin J., as he then was, in Container Materials, Ltd. et al. v. The King[10], at p. 158, stated:
It was argued that it was not sufficient for the Crown to show an agreement or arrangement, the effect of which would be unduly to prevent or lessen competition, but that the agreement or arrangement must have been intended by the accused to have that effect. This is not the meaning of the enactment upon which the count was based. Mens rea is undoubtedly necessary, but that requirement was met in these prosecutions when it was shown that the appellants intended to enter, and did enter, into the very arrangement found to exist.
Houlden J.A. accepted this to be the law in R. v. Anthes Business Forms Limited et al.[11], when he said at p. 373:
If the Court could find on the evidence that the purpose or intention of the parties was to prevent or lessen competition unduly, undoubtedly this would be sufficient for a conviction. But the Crown was not required to prove such a purpose or intention. On the basis of the Container Materials judgment, it was only necessary for the Crown to prove that the effect of the agreement, if it was put into operation, would be to prevent or lessen competition unduly.
McRuer C.J.H.C. said the question had been “set at rest” by the Container Materials judgment in R. v. Northern Electric Co. Ltd. et al.[12] at p. 263.
The purpose behind the Combines Investigation Act was discussed by Duff C.J. in Container Materials, Ltd., supra, where he said at p. 152:
[Page 671]
The enactment before us, I have no doubt, was passed for the protection of the specific public interest in free competition. That, in effect, I think, is the view expressed in Weidman v. Shragge (1912), 2 D.L.R. 734, 46 S.C.R. 1, in the judgments of the learned Chief Justice, of Mr. Justice Idington and Mr. Justice Anglin, as well as by myself. This protection is afforded by stamping with illegality agreements which, when carried into effect, prevent or lessen competition unduly and making such agreements punishable offences; and, as the enactment is aimed at protecting the public interest in free competition, it is from that point of view that the question must be considered whether or not the prevention or lessening agreed upon will be undue ….
Cartwright J., in Howard Smith Paper Mills, Ltd. et al. v. The Queen[13], carried the discussion on to the interpretation of ‘undue’ as it applies to the consequences of the agreement amongst the conspirators:
In essence the decisions referred to appear to me to hold that an agreement to prevent or lessen competition in commercial activities of the sort described in the section becomes criminal when the prevention or lessening agreed upon reaches the point at which the participants in the agreement become free to carry on those activities virtually unaffected by the influence of competition, which influence Parliament is taken to regard as an indispensable protection of the public interest; that it is the arrogation to the members of the combination of the power to carry on their activities without competition which is rendered unlawful; that the question whether the power so obtained is in fact misused is treated as irrelevant; and that the Court, except I suppose on the question of sentence, is neither required nor permitted to inquire whether in the particular case the intended and actual results of the agreement have in fact benefited or harmed the public.
In other words, once it is established that there is an agreement to carry the prevention or lessening of competiton to the point mentioned, injury to the public interest is conclusively presumed, and the parties to the agreement are liable to be convicted of the offence described in s. 498(1)(d) [now s. 32(1)(c)]. The relevant question thus becomes the extent to which the prevention and limitation of competition are agreed to be carried and not the economic effect of the carrying out of the agreement. In each case which arises under the section the question whether the point described has been reached becomes one of fact. (at pp. 426-7)
[Page 672]
I turn back to the conclusions of law and findings of fact at trial. The learned trial judge in enumerating the three elements of proof required of the Crown, supra, stated the third element in language which is at least ambiguous and which I repeat for convenience:
(c) that the intended lessening of competition was undue.
Later in his reasons the statement is amplified:
But in my opinion, it has not been shown that this agreement was arrived at with the intention of unduly preventing or lessening competition. (at p. 103)
In my respectful view, the combination of these two statements reveals an error in law and opens up the avenue of appeal to the Court of Appeal by way of s. 605(1)(a) of the Criminal Code.
It becomes clear that the trial judge, having found a tacit agreement affecting competition in a way which “would be undue,” did not take the next step in the logical sequence and convict the accused on count 2 because the Crown had, in the learned justice’s view, not demonstrated the requirement added by the trial judge in his summary of the law that the accused must be shown to have intended to lessen competition unduly when they entered into the agreement. The appellants contended that, notwithstanding this sequence of statements and findings by the trial court, they could not be convicted under s. 32(1)(c) on the basis of a ‘tacit agreement’. It was said, in reliance partly on the Ontario Court of Appeal in R. v. Armco Canada Ltd. et al.[14], that to constitute an agreement within the meaning of s. 32(1)(c) there must be some communication between the parties as a result of which an expectation is aroused in each that he will act in a certain way. Furthermore, the four verbs in subs. (1) of s. 32 in any case amount to “the act of agreeing”.
Consipracy at common law was classically defined by Willes J. in Mulcahy v. The Queen[15], at p. 317:
[Page 673]
A conspiracy consists not merely in the intention of two or more, but in the agreement of two or more to do an unlawful act, or to do a lawful act by unlawful means. So long as such a decision rests in intention only, it is not indictable. When two agree to carry it into effect, the very plot is an act in itself, and the act of each of the parties, promise against promise, actus contra actum, capable of being enforced if lawful, punishable if for a criminal object or for the use of criminal means.
This statement of the law was adopted in this Court in R. v. O’Brien[16], at p. 674.
We are not, of course, here confined to authorities such as Mulcahy which were not concerned with the precise wording employed by Parliament in this section of the Combines Investigation Act, supra. As was said by Laidlaw J.A. in R. v. Electrical Contractors Association of Ontario and Dent[17], at pp. 276-7:
The scope of the section is not confined to conspiracy. It extends to and includes the wrong committed by a person who “combines”, “agrees” or “arranges” with another person. Two or more persons may wrongfully combine by joining together their acts and activities to accomplish a result or by co-operating one with the other for the desired end. Each of them may take steps to put matters in such order as will lead to a common objective and thus arrange it. Without attempting to define the scope of the class of persons falling within the section it would appear to me sufficient to say that it is not limited to persons who agree one with the other but it includes also persons who combine or arrange to do what is prohibited by the section.
See also R. v. Armco Canada Ltd. et al., supra, per Houlden J.A. at pp. 41-2; R. v. Cominco Ltd.—Cominco Ltée et al.[18]
The argument of the appellant that a tacit agreement cannot support a conviction under s. 32(1)(c) carries by implication the notion that s. 32 somehow imports the doctrines of the law of contracts into the criminal law. “Agreement” with
[Page 674]
nothing more perhaps would connote parties competent at law, the presence of an animus contrahendi, consideration flowing between the parties, and the rules of contract law as to form and perhaps even proof. Here, however, we have a section that refers to “conspires, combines or agrees or arranges”. Each word adds meaning to the sentence. The agreement clearly need not be enforceable for axiomatically it is not. The parties to the transaction must be deemed to know that it is unenforceable as being illegal. They have by their conduct indeed foresaken the ordinary recourse to the civil law. The agreement may be proven, in the sense of being made capable of discernment by the finder of fact from all the surrounding facts and circumstances, including the conduct of the parties. Rinfret J., as he then was, in Paradis v. The King[19], said at p. 168 that:
[c]onspiracy, like all other crimes, may be established by inference from the conduct of the parties. No doubt the agreement between them is the gist of the offence, but only in very rare cases will it be possible to prove it by direct evidence. Ordinarily the evidence must proceed by steps. The actual agreement must be gathered from “several isolated doings”, (Kenny—”Outlines of Criminal Law”, p. 294) having possibly little or no value taken by themselves, but the bearing of which one upon the other must be interpreted; and their cumulative effect, properly estimated in the light of all surrounding circumstances, may raise a presumption of concerted purpose entitling the jury to find the existence of the unlawful agreement.
The trial judge here has expressly found a tacit agreement to limit market shares. There is ample evidence, in my view, for a jury properly charged to so find. The trial judge then went on to find that in the circumstances an agreement to lessen competition would be undue. Again this finding rests on evidence capable of supporting it. The law applicable in such circumstances is either that pronounced by Duff C.J. in Container Materials, Ltd., supra, at p. 152, or by Cartwright J. as he then was in Howard Smith Paper Mills, Ltd., supra, at p. 425; the finding having been so made
[Page 675]
and supported by evidence it matters not upon which basis in law it is founded.
In count 1 the Court responded to submissions on the defence of conscious parallelism falling short by axiom of a conscious agreement to enhance prices unduly. In count 2 the undue lessening of competition has been alleged to have been brought about by the consistent practice on the part of the accused of proportional market sharing. It might be in some commercial circumstances that the defence, or at least the consideration, of conscious parallelism would be a valid element in the legal position of an accused under s. 32. It should be borne in mind, however, that the tribunal here was not concerned with a market shared by a wide range of suppliers in which a pattern of ‘conscious parallelism’ arose. There were three principal suppliers serving ninety-eight per cent of the market for some years during the period of charge and thereafter serving ninety per cent of the market. For almost a quarter of a century they remained in almost arithmetically perfect formation. Different considerations might come into play in a shifting market region or area supplied by a large number of participants each disporting itself according to its own interpretation of the doctrine of economic survival of which conscious parallelism apparently forms a part. I do no more than observe that this defence does not appear to have been advanced under count 2 and certainly forms no part of the judgments below.
It has been said that the section describes a relationship founded on “the act of agreeing” (R. v. Gage[20], per Perdue J.A. at p. 220). The “act of agreeing” is but another way of describing a meeting of the minds of the persons charged. How those minds meet or how the act of agreeing
[Page 676]
occurs is not limited to the rules and practices of contract law. The four words describe ‘agreement’ in the broad sense accorded to that word in the language and not the narrow term of art from a specialized branch of the law. The tacit agreement as found was to maintain the proportion of the sugar trade historically enjoyed by each of the accused. This relationship necessarily involved the curbing of free competition where it would upset this balance of trade shares. It matters not that these reins on free competition are imposed for good motives on the part of the accused: see R. v. Burrows et al.[21], at p. 135; Howard Smith Paper Mills, Ltd., supra, at pp. 406-7. The tacit agreement axiomatically entails a restraint on competition and that restraint produced a lessening which the learned trial judge has found in all the circumstances of this case to be undue.
In my view, the wording of the section of the statute embraces the situation or relationship here described by the learned trial judge as a “tacit agreement”.
The direction in Hodge’s case did not add to or subtract from the requirement that proof of guilt in a criminal case must be beyond a reasonable doubt. It provided a formula to assist in applying the accepted standard of proof in relation to the first only of the two essential elements in a crime; i.e., the commission of the act as distinct from the intent which accompanied that act. The first element, assuming every circumstance could be established by evidence, would be capable of proof to a demonstration. The latter element, save perhaps out of the mouth of the accused himself, could never be so proved. The circumstances which establish the former
[Page 677]
not only can be, but must be consistent with each other, as otherwise a reasonable doubt on the issue arises.
… it will be apparent that I consider [the factual issue] to turn on a pure question of “intention” to which the Hodge’s rule does not apply,…
At page 881, after referring to the Mitchell case and the others mentioned above, he added that Spence J.’s statement, supra,
must, I think, be taken to have been accepted as confining the application of the Hodge’s case formula in the manner there stated. This is not to say that, even where the issue is one of identification, the exact words used by Baron Alderson must necessarily be incorporated in a judge’s charge. It is enough if it is made plain to the members of the jury that before basing a verdict of guilty on circumstantial evidence they must be satisfied beyond a reasonable doubt that the guilt of the accused is the only reasonable inference to be drawn from the proven facts. In this regard it will be seen that I agree with the Chief Justice in his rejection of the Hodge formula as an inexorable rule of law in Canada.
The Chief Justice, writing in dissent, stated with reference to the rule in Hodge’s case with which, as we have seen, Ritchie J. agreed, at pp. 865-6:
The time has come to reject the formula in Hodge’s case as an inexorable rule of law in Canada. Without being dogmatic against any use of the formula of the charge in Hodge’s case I would leave the matter to the good sense of the trial judge (as was said in McGreevy), with the reminder that a charge in terms of the traditional formula of required proof beyond a reasonable doubt is the safest as well as the simplest way to bring a lay jury to the appreciation of the burden of proof resting on the Crown in a criminal case.
[Page 678]
Here the learned trial judge directed himself to the effect that proof of intent may be made by circumstantial evidence and accordingly the principle in Hodge’s case must be applied. This is contrary to the principle enunciated in Mitchell and Cooper, supra, and must, with respect, be said to be an error in law. The error is, of course, against the interest of the respondent and not the appellant and in the result does not affect the disposition I propose to make of this appeal.
I therefore would dismiss these appeals:
Appeals dismissed, ESTEY J. dissenting.
Solicitors for the appellant Atlantic Sugar Refineries Co. Ltd.: L. Yves Fortier and Pierre Hébert, Montreal
Solicitors for the appellant Redpath Industries Limited: Colin K. Irving and Peter S. Martin, Montreal.
Solicitors for the appellants St. Lawrence Sugar Limited and S.L.S.R. Holdings Ltd.: Courtois, Clarkson, Parsons & Tétrault, Montreal.
Solicitor for the respondent: Bruno C. Pateras, Montreal.
Footnotes
- [1] (1978), 3 B.L.R. 221, 41 C.C.C. (2d) 209, 41 C.P.R. (2d) 5, [1978] C.A. 25.
- [2] (1976), 26 C.P.R. (2d) 14, [1976] C.S. 42.
- [3] (1975), 6 O.R. (2d) 521.
- [4] [1957] S.C.R. 403.
- [5] [1978] 1 S.C.R. 731.
- [6] [1978] 1 S.C.R. 860.
- [7] (1838), 2 Lewin 227, 168 E.R. 1136.
- [8] The judgments of Bélanger and Mayrand JJ.A. were delivered in French and it should be noted that the English translation which appears in the C.P.R. is unofficial and must be approached with caution. There are at least 2 blatant errors, one at p. 10 where the last sentence of Bélanger J.A.’s opinion is translated as: If the said conclusion is based upon this error in law, which is the case in point, relative to the second count of the indictment, but not with respect to the first count it does not have the consequence that my colleague has mentioned. when in the original French version it reads: [S]i ladite conclusion est basée sur cette erreur de droit, ce qui est le cas dans l’espèce, relativement au second chef d’accusation, non pas quant au premier chef sur lequel elle n’a pas de portée tel que l’a mentionné mon collègue. A better translation would be: If the said conclusion is based upon this error in law, which is the case here, it is relative to the second count of the indictment but has no bearing on the first count, as my colleague has mentioned. The difference is crucial, as the C.P.R. version indicates that Bélanger J.A. is dissenting on this point, when he is actually supporting Mayrand J.A. Another clear error can be found on p. 17, where Mayrand J.A.’s statement that Westcane Sugar Ltd. d’Oshawa en Ontario … ne produisait pas encore en mai 1973 has been rendered Westcane Sugar Ltd. of Oshawa, Ontario … was no longer producing in May, 1973. (Emphasis added) “No longer” should of course read “not yet”. The translation at 41 C.C.C. (2d) 209 appears to be identical to the C.P.R. version. [Editorial note—The original French version is reported at C.A. [1978] 25.]
- [9] [1978] 1 S.C.R. 731.
- [10] [1942] S.C.R. 147.
- [11] (1976), 26 C.C.C. (2d) 349.
- [12] (1955), 111 C.C.C. 241.
- [13] [1957] S.C.R. 403.
- [14] (1976), 13 O.R. 2(d) 32.
- [15] (1868), L.R. 3 H.L. 306.
- [16] [1954] S.C.R. 666.
- [17] [1961] O.R. 265.
- [18] [1980] 2 W.W.R. 693.
- [19] [1934] S.C.R. 165.
- [20] (1908), 18 Man. R. 175.
- [21] (1966), 54 C.P.R. 95.
- [22] [1973] 1 All E.R. 503.
- [23] [1964] S.C.R. 471.
- [24] [1971] S.C.R. 781.
- [25] [1972] S.C.R. 2.
- [26] (1975), 27 C.C.C. (2d) 1.
- [27] [1978] 1 S.C.R. 860.
Cases cited
- R. v. Eddy Match Co. Ltd. et al. 13 C.R. 217 p. 152, p. 425, pp. 406-7
- Hodge’s Hodge’s case, supra
- Combines Investigation Act Combines Investigation Act, supra
- 103 103, supra
- Weidman v. Shragge 2 D.L.R. 734
- Crown Crown, supra
- of the Combines Investigation Act of the Combines Investigation Act, supra
- R. v. Armco Canada Ltd. et al. R. v. Armco Canada Ltd. et al., supra
- Spence J.’s Spence J.’s statement, supra
- Mitchell and Cooper Mitchell and Cooper, supra
Statutes and regulations cited
-
- s. 605
- s. 605(1)(a)
- s. 32(1)(c)
- s. 32
- s. 498(1)(d)
-
Unresolved citations
- ss. 32(1)(b)
- 32(1)(c)
- s. 618(2)(a)
- Section 32(1)(c)
- s. 32(1)(c)
- subs. (1)