Background
Ghost Drops, an unlicensed cannabis marketing brand that supplies promotional material to licensed cannabis companies, sought judicial review of the Minister of Health’s March 6, 2025 decision. The decision confirmed two notices of violation arising from Ghost Drops’ activation area at the Haunting of Hexwood, a Halloween-themed event in Pickering, Ontario, and reduced the administrative monetary penalty for each notice from $250,000 to $125,000.
Health Canada inspectors attended on November 3, 2023. They recorded promotional displays containing colourful branding, cartoon characters, animals and desserts; a neon logo; a QR code linking to Ghost Drops’ website and online store; and military-style vehicles. They also reported that nobody checked identification at the activation area and that children entered it. Inspectors seized 623 pre-rolled cannabis joints from an unsecured, unsupervised area.
Health Canada issued the notices in March 2024 for contraventions of sections 17(1) and 21 of the Cannabis Act. On ministerial review, the delegate found promotion appealing to young persons, depictions of persons, characters or animals, lifestyle promotion, and sponsorship-related use of brand elements. Ghost Drops challenged the process, penalty assessment and treatment of its section 2(b) Charter submissions. Its amended application no longer sought constitutional invalidation of the legislation.
The Court’s Holding
Justice Azmudeh dismissed the application. Procedural fairness was assessed by asking whether Ghost Drops knew and could answer the case against it; whether the Charter was engaged was reviewed for correctness; and the penalty and balancing of Charter values were reviewed for reasonableness.
The Court found no procedural unfairness. The delegate relied only on disclosed evidentiary packages, and Ghost Drops made three sets of submissions totalling 33 pages. The public complaints prompted the inspection but did not supply the factual basis for the violations or penalties. The disclosed record detailed prior compliance concerns, and Ghost Drops acknowledged a history of non-compliance. Its own corrective measures were matters it could have addressed with evidence. The Court rejected speculative requests for further disclosure and held that the outstanding freedom-of-information request was irrelevant to this review.
The penalty assessment was reasonable. The delegate considered compliance history, the violations’ nature and scope, mitigation and likely competitive or economic benefit. Inspectors’ observations, photographs and the event’s age recommendation supported reasonable grounds to believe young persons could access the promotion; proof on a balance of probabilities or proof of actual youth harm was not required. Later corrective action did not erase earlier non-compliance, and inspectors—not Ghost Drops—closed the area by seizing materials. Each violation received a score of 10, corresponding to a policy range of $196,001–$306,000. The delegate nevertheless halved each penalty because the violations arose from one interconnected event and a lower penalty promoted compliance.
The Court agreed that section 116 did not authorize the delegate to invalidate the Cannabis Act. It rejected, however, the Minister’s broader submission that lacking authority to decide constitutional questions also prevented consideration of Charter values. The delegate had in fact considered section 2(b) values, acknowledged that the restrictions limited expression, and balanced that limitation against protecting young persons. Her reliance on the analogous tobacco-promotion framework and her reduction of the penalties made the balancing intelligible and proportionate. Ghost Drops was ordered to pay the agreed all-inclusive costs award of $5,000.
Key Takeaways
- Both $125,000 penalties survived judicial review; the application was dismissed with $5,000 in costs against Ghost Drops.
- Procedural-fairness complaints cannot rest merely on speculation that undisclosed material might have changed the administrative assessment.
- The ministerial reviewer applied a reasonable-grounds-to-believe threshold, not proof on a balance of probabilities or proof of actual harm to youth.
- Lacking jurisdiction to invalidate legislation does not excuse an administrative decision-maker from addressing properly raised Charter values.
Why It Matters
The decision illustrates how courts review cannabis-promotion penalties without reweighing the administrative evidence. It also separates two distinct questions: authority to declare legislation unconstitutional and the continuing obligation to consider Charter values when exercising statutory discretion.
For regulated businesses, subsequent corrective measures and withdrawal from future events do not necessarily erase prior non-compliance or mitigate the violations already committed. The penalty reduction here rested on the related character of the two violations and the statutory compliance objective, not on a general rule requiring penalties below the published policy range.