RJR-MacDonald Inc v. Canada (Attorney General) (Applications for Interlocutory Relief)

The applicants, two tobacco companies in Canada, sought a stay in the form of interlocutory relief from compliance with the Tobacco Products Control Regulations, amendment until the Supreme Court renders its decision on the validity of the Tobacco Products Control Act (“the Act”).

The Act came into force on January 1, 1989 with the purpose of regulating the advertisement of tobacco products and the health warnings that must be placed on them. The applicants challenged the constitutional validity of the Act, arguing that it violated section 2(b) of the Canadian Charter of Rights and Freedoms (“the Charter”), which protects freedom of expression. In July 1991, the Quebec Superior Court held in favour of the applicants. The Attorney General of Canada appealed to the Quebec Court of Appeal, who allowed the appeal in January 1993, finding that although the Act infringed s. 2(b), it was justified under section 1 of the Charter (as a reasonable limit prescribed by law and demonstrably justified in a free and democratic society). The applicants then sought leave to appeal to the Supreme Court.

In August 1993, amendments were made to the Act that required larger, more prominent health warnings on all tobacco products. The amendments stipulate that the packing changes must be in effect within one year. The applicants claim that the new regulations would cost the tobacco industry about 30 million dollars to redesign all of its packaging.

The applicants requested a stay in the form of interlocutory relief from the amendment’s new packaging obligations for a period of 12 months from the disposition of the main actions. They argued that a stay is necessary to prevent substantial irrecoverable expenses that the new regulations would require even though the Supreme Court may eventually find the legislation to be constitutionally valid.

The Court held against providing a stay to the applicants due to the strong public interest in favor of the amendments. The Court used the interlocutory relief three-part test laid down in Manitoba (Attorney General) v. Metropolitan Stores (MTS) Ltd. [1987] 1 S.C.R.110. First, there must be a serious constitutional issue to be determined. Second, it must be established that compliance with the new regulations will cause irreparable harm. Finally, the balance of inconvenience, taking into account the public interest, must favor retaining the status quo until the court has disposed of the legal issues.

The Court held that there was a serious question to be tried. This stage of the test is determined on the basis of common sense, and the motions judge should only review the case on the merits in exceptional cases. The applicants contended that the case at hand raised serious issues about the application of the rational connection and minimal impairment tests in order to justify the Act’s infringement of freedom of expression. The Court agreed with the Quebec Court of Appeal, which observed that this case raised “serious constitutional issues.”

The Court held that the expenditures that the tobacco companies must spend for the new regulations imposes irreparable harm if the Act is found to be constitutionally invalid. The Court also noted that it will be more difficult for the applicants to obtain monetary redress if the Attorney General of Canada is the unsuccessful party in the constitutional claim. Since there was no clear rule at the time the decision was rendered on whether financial loss can be considered irreparable harm, the Court accepted the applicants’ argument that the significant monetary loss constituted irreparable harm.

The Court, however, held that the balance of inconvenience weighs in favor of the Attorney General of Canada. While the losses that the applicants would suffer are significant, they each have annual earnings over $50 million and have the capacity to absorb the financial loss. In addition, they could pass some of this loss to consumers with price increases. Further, since there are only three tobacco producing companies in Canada, by granting relief to two of these companies, it would in effect impact the entire tobacco industry. As a result, the public interest carries greater weight. The new regulations were intended to protect public health and further public good. Studies have shown that health warnings can increase public awareness of the dangers and reduce the incidence of smoking. Therefore, the applicants’ request for a stay fails the three-part test for interlocutory relief.

“The third branch of the test, requiring an assessment of the balance of inconvenience, will often determine the result in applications involving Charter rights. In addition to the damage each party alleges it will suffer, the interest of the public must be taken into account. The effect a decision on the application will have upon the public interest may be relied upon by either party. These public interest considerations will carry less weight in exemption cases than in suspension cases. When the nature and declared purpose of legislation is to promote the public interest, a motions court should not be concerned whether the legislation actually has such an effect. It must be assumed to do so. In order to overcome the assumed benefit to the public interest arising from the continued application of the legislation, the applicant who relies on the public interest must demonstrate that the suspension of the legislation would itself provide a public benefit.” (p. 19)

“These are clear indications that the government passed the regulations with the intention of protecting public health and thereby furthering the public good. Further, both parties agree that past studies have shown that health warnings on tobacco product packages do have some effects in terms of increasing public awareness of the dangers of smoking and in reducing the overall incidence of smoking in our society. The applicants, however, argued strenuously that the government has not shown and cannot show that the specific requirements imposed by the impugned regulations have any positive public benefits. We do not think that such an argument assists the applicants at this interlocutory stage.” (p. 22)

“When the government declares that it is passing legislation in order to protect and promote public health and it is shown that the restraints which it seeks to place upon an industry are of the same nature as those which in the past have had positive public benefits, it is not for a court on an interlocutory motion to assess the actual benefits which will result from the specific terms of the legislation. That is particularly so in this case, where this very matter is one of the main issues to be resolved in the appeal. Rather, it is for the applicants to offset these public interest considerations by demonstrating a more compelling public interest in suspending the application of the legislation.” (p. 22)