Canada: Toronto v. The Canna Clinics: A Legal Primer

Last week the City of Toronto squared off in court against a chain of illegal cannabis dispensaries operating within the City in a proceeding designed to shut the dispensaries down once and for all.

Raids against the dispensaries thus far have only had limited success, so the City sharpened another weapon in its legal arsenal, the injunction, and moved in for the kill.

In this article we'll provide what we hope is an easy to understand summary of the positions taken by the various parties and the legal basis that underlie those positions.  If you're looking for the long legalese version and want to curl up by the fire, we've attached full copies of the written legal arguments submitted by the parties at the end of this article.

Overview of the Players and the Nature of the Proceeding

The City of Toronto initiated the court proceeding and is known as the "Applicant".  Section 380 of the City of Toronto Act, 2006 allows the City to apply (hence the term "applicant") to the court to ask the court to restrain any conduct which contravenes a City by-law.  The procedure is known as an "Application".

The Respondents are the parties against whom the Application is brought.  In this case the Respondents comprise a number of corporations and individuals against whom the City asserts operate seven illegal cannabis dispensaries in the City under the banner "Canna Clinic".  The City notes in its written argument that the Respondents do not challenge the City's assertion that they are the entities responsible for running the Canna Clinic dispensaries.

The Attorney General of Canada appeared as Intervener, able to make submissions to the court as a result of a constitutional question being raised by the dispensaries (more on that in a moment).

How an Application Works

The City prepares, serves and files with the court a document called a "Notice of Application".  This document sets out the relief which the City seeks from the court and the basis on which the City states it is entitled to the relief.  The evidence put forward to support the City's argument is entered by way of one or more written, sworn, affidavits.  In this case the City filed 5 affidavits.

The Respondents respond to the City's evidence by submitting their own written affidavits.  In this case the Respondents filed 27 affidavits.

Once the affidavits have been exchanged, each side has the right to cross-examine the other side on the affidavits.  This is done out of court at a reporter's office where a transcript is made of the questions asked and answers provided.  The transcript is then filed by the parties and is available to the judge during the hearing.

After the exchange of affidavits and cross-examinations, each side puts together a brief which summarizes their argument in writing (we've attached links to those briefs at the end of this article).

The lawyers then appear before a judge to argue the Application based on the written materials (including the transcripts) that have been prepared and filed.

What Does the City Want?

The City seeks an injunction restraining the Canna Clinic dispensaries and their owners from, among other things, using the properties from which they operate to sell, store or distribute cannabis.

In this particular case the City relies on its zoning by-laws and asserts that the Canna Clinics operate in contravention of the by-laws due to the fact that using any property within the City as a "marijuana dispensary" is not a permitted use under the by-laws and that the Canna Clinics are therefore in breach.

As stated above, section 380 of the City of Toronto Act, 2006 allows the City to apply to the court to have the court restrain any conduct which contravenes a City by-law.

What Is the City Required to Establish

In order to obtain its injunction, the City is required to prove, on a balance of probabilities, that:

1. There is a serious question to be tried;
2. The City will suffer irreparable harm if the injunction is not granted; and
3. The balance of convenience favours the granting of the injunction.

The Arguments Advanced By Each Side on the City's Application

Serious Issue to Be Tried

The threshold for this part of the test is exceptionally low.  The court only has to be satisfied that "the claim is not frivolous or vexatious."  In fact, the threshold is so low that Canna Clinic conceded this point without argument.

Irreparable Harm

Irreparable harm refers to the nature of the harm suffered rather than its magnitude.  It is harm which either cannot be quantified in monetary terms or which cannot be cured.  In most injunction applications, irreparable harm is the highest hurdle for the Applicant to leap.

However, in this case the City gets a significant boost by virtue of the fact that it not a regular private litigant.  Courts have consistently held that if a municipality can demonstrate a violation of its by-laws it will necessarily suffer irreparable harm by virtue of its obligations to its citizens to enforce and maintain by-laws.  In this case the City argues that it can not be properly monetarily compensated for the violation of its by-laws and by its nature this constitutes irreparable harm.

Canna Clinic simply argues in response that the City has failed to demonstrate that it would suffer irreparable harm if its injunction request was denied.

Balance of Convenience

The City argues that the balance of convenience weighs heavily in favour of granting the injunction as it would establish compliance with laws enacted by the City and the Government of Canada, laws that are presumed and have been demonstrated to be in enacted in the public interest.

Canna Clinic's argument regarding balance of convenience ties in directly to the Application that it launched which was argued at the same time as the City's Application.

The Best Defence is a Good Offence: Canna Clinic's Defence

Two of the corporate respondents have brought their own Application at the same time as the City's for an injunction to restrain, suspend, exempt from, and stay enforcement of the by-law and the Controlled Drugs and Substances Act on the basis that these laws are unconstitutional.  Interestingly, these respondents only seek an exemption from these laws.  They do not seek to prevent the laws from being enforced against other cannabis dispensaries in the City, which according to these respondents, "may not operate with the same safeguards and may not restrict their sales to adult patients with legitimate medical needs."  Notwithstanding that only two of the respondents technically advanced the counter-application, I will continue to refer to them as Canna Clinic throughout this article.  The analysis for Canna Clinic's injunction follows the same three-part test discussed above.

The Arguments Advanced By Each Side on the Canna Clinic's Application

Serious Issue to Be Tried

On this point the Clinics argue that they have raised a serious issue as to the unconstitutionality of the City's bylaws and the federal criminal law.  For the purpose of the interlocutory injunction (an injunction that is to take effect until a full hearing of the Application can take place in the future) the Clinics rely on section 7 of the Charter, which provides that "Everyone has the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice."

The Clinics argue that the bylaws and the ACMPRs violate the section 7 rights to liberty and security of the person belonging to the patients who purchase medical cannabis from the Clinics.

The Clinics argue that by prohibiting dispensaries, the bylaws and the ACMPRs restrict access to medical care and therefore infringe the right to liberty.  They further argue that the prohibition on dispensaries impedes access to cannabis by those who need it for medical reasons and therefore violates their security of the person.

The City argues in response that the Clinics have no legal standing to raise the Charter arguments because the rights that the Clinics assert have been infringed belong not to the Clinics, nor any of the other Respondents, but rather to those who seek to use medical cannabis for medical purposes generally.  The City asserts that the Clinics do not come before the court out of a public interest, but rather to preserve their private interests, and in particular their monthly revenues which are estimated to be north of $3.5 million.  Additionally, section 7 rights belong only to human beings and not corporations and the City argues that on this basis the Clinics also have no standing to raise section 7 Charter arguments.

The City also argues that, irrespective of the lack of standing, the Clinics have also failed to raise a serious issue to be tried in terms of their criticism of the ACMPR.  The City states that the facts put forward by the City demonstrate that there is "absolutely no merit" to the Clinic's assertions that:

• licensed producers are more expensive than dispensaries (the City's evidence demonstrates the opposite to be true);
• licensed producers do not provide an adequate variety of strains (the City's evidence is that LPs make over 220 strains available); or
• there are no options for those who have no credit card or are without a fixed address (the City illustrates viable options from licensed producers in both instances).

Irreparable Harm

The Clinics argue that if the injunctive relief sought by the Clinics is not granted irreparable harm will be caused to those who rely on the clinics for reasonable access to medical cannabis.  The Clinics argue that the existing ACMPR regime is "highly problematic" and renders "medical cannabis inaccessible for many."  The Clinics highlight what they say are major problems with the ACMPR system:

• patients are unable to access cannabis on demand;
• those who cannot use mail order are excluded from the system;
• barriers are imposed to finding the right Licensed Producer;
• medical cannabis is unaffordable for many as a result of shipping charges and minimum purchase requirements;
• there is a failure to guarantee quality and variety; and
• there is limited availability of derivative products.

The Clinics argue that collectively these problems amount to a substantial interference with an individual's Charter right to access medicine.

In addition to the irreparable harm to the users, the Clinics also argue that they will suffer their own irreparable harm directly.  In particular, the Clinics cite monetary loss and market loss if they were shut down on a temporary basis only to be allowed to open again later (as a result of being successful at the ultimate hearing).  The Clinics also state that their employees would have be laid off, they would default on their leases and would have to terminate their financial relationships with various third parties.

In response, the City notes that the Clinics claim to be not-for-profit enterprises and assert that the Clinics should not be permitted to both claim not-for-profit status and simultaneously suggest that their economic interest will suffer irreparable harm if they are forced to close.

In terms of the Clinics' assertion that closing would put them in breach of their leases, the City notes that the owners of the properties are named as Respondents and did not oppose the City's Application.  The City further notes that the owners for a number of the properties have sought to terminate the leases indicating that they wish to end the illegal use of their properties.

The City also argues that the irreparable harm must be to the Respondents, not to medical cannabis users who are not parties to the proceeding.  As such, any argument that the closing of the Clinics would negatively impact customers is an irrelevant consideration, in addition to being factually unsupported.

Balance of Convenience

The Clinics argue that the existing presumption that enacted legislation is made in the public interest is rebuttable where it can be shown that the injunctive relief being sought "would serve a public interest greater than that served by maintaining the challenged legislation."

The Clinics argue that the relief they are seeking is narrow in scope.  "The Clinics do not seek relief that will impact dispensaries at large.  They ask, rather, for an exemption to the Bylaws and the CDSA, applicable to only their seven locations."

The Clinics also argue that the relief they seek is limited in duration, arguing that the existing legislative scheme is scheduled to change when the federal government legalizes recreational use cannabis on July 1, 2018.

Lastly, the Clinics argue that they have a track record of operating safely, in accordance with good business practices and stringent safety standards.

In response, the City emphasizes that the Clinics have "knowingly, deliberately and continuously carried on their operations in Toronto in breach of the City's Zoning By-law and in violation of the CDSA and the Federal Access Regime.  They acknowledge in their own code of conduct that their activities are illegal."  The City points out that it was open to the Clinics to challenge the constitutionality of the laws before opening their business and that they decided not to do so.  The City urged the court to "not reward parties who choose to operate illegally to further their own private commercial interests."

The City went on to point out that there are a number of significant concerns and risks to the public that arise from the Clinics' request to be permitted to continue to operate.  The City notes that the Clinics do not require any medical documentation in order to verify that a customer requires cannabis for medical purposes and that the Clinics have refused to provide any information about the source of their cannabis which raises concerns as to the safety of consuming cannabis that is purchased at the Clinics and also concerns about funneling what is estimated to be $3.5 million in monthly revenues to criminal organizations.

The City argues that suspending the CDSA prohibition on trafficking in cannabis would cause chaos across Canada and allow an unregulated market to be exploited by criminal interests.  The City notes that exempting just the Clinics from the legislation, as requested by the Clinics, is not any more palatable, as it would in effect grant the Clinics with an exclusive license to be the only lawful storefront dispensary in Canada, rewarding the Clinic's illegal activities.

Decision

The Application judge reserved her decision, meaning that she wishes to take time to consider the arguments and draft her reasons for decision.  A reserve decision is to be expected in a case of this complexity, and with this much at stake.  Determining when a decision may actually be released is difficult as it depends on the judge's workload, personal schedule and desire to push the decision out.  However, given the high profile nature of the case, one can likely expect a decision sooner than later.

Originally published on Canada Cannabis Legal by Matt Maurer on October 3, 2017.