SCC Rules That Provinces Can't Restrict or Limit Interprovincial Flow of Goods

The Supreme Court of Canada recently released its judgment in R. v. Comeau, 2018 SCC 15.  The decision confirmed that the Province of New Brunswick has the power to enact laws which prevent its residents from bringing large quantities of cheap alcohol into the province from Quebec.  The Court held that the primary purpose of the New Brunswick regulatory scheme is not to restrict trade across a provincial boundary but to enable public supervision of the production, movement, sale and use of alcohol within New Brunswick.  However, more importantly, the Court held that the Constitution Act, prohibited laws whose primary purpose was to restrict or limit the free flow of goods across the country.

The judgment was delivered by the court.

The court began by giving a history lesson.  It noted that when Canada was formed in 1867, the British North America Act, 1867 (UK) (“BNA”), united individual British colonies into the new country.  Prior to this, each colony had its own power to impose tariffs at its borders.  Part VIII of the BNA, now called the Constitution Act, 1867 (“Constitution Act”), contains provisions for transferring this power to levy tariffs to the federal government.  Section 121, at the heart of  Part VIII, was at issue in this appeal:  “All Articles of the Growth Produce or Manufacture of any one of the Provinces shall, from and after the Union, be admitted free into each of the other Provinces”.

The respondent, Gerard Comeau, contended that section 121 is essentially a free-trade provision.  In his view, that section ensured that no barriers could be erected to impede the passage of goods across provincial boundaries.  However, the appellant, The Province of New Brunswick, argued that section 121 was intended only to take away the power to impose tariffs or tariff-like charges at provincial boundaries.  The trial judge agreed with Mr. Comeau.  The matter eventually came before the Supreme Court of Canada which posed the question this way:  “What does it mean for articles to be “admitted free” as provided for in section 121?” 

The Supreme Court mused: if to be “admitted free” is understood as a constitutional guarantee of free trade, the potential reach of section 121 is vast.  Agricultural supply management schemes, public health-driven prohibitions, environmental controls and comparable regulatory measures that incidentally impede the passage of goods crossing provincial borders may be invalid.

The dispute arose out of Mr. Comeau’s assertion that section 121 of the Constitution Act, prevents the province of New Brunswick from legislating that New Brunswick residents cannot stock alcohol from another province.  The applicable section of the Liquor Control Act of New Brunswick (“NB Liquor Act”), provides that:  “Except as provided by this Act or the regulations, no person, within the Province, by himself, his clerk, employee, servant or agent shall… (b) have or keep   liquor, not purchased from the Corporation”.

The facts of the case are straight forward.  Mr. Comeau was a resident of the Tracadie-Sheila region on the Acadian Peninsula in northeastern New Brunswick.  He drove to Campbellton, in the northwest of the province, crossed the Restigouche River and entered Quebec.  He did what many Canadians who live close to cheaper alcohol prices across provincial boundaries do.  He visited three different liquor stores and stocked up.  However, the Campbellton RCMP had become concerned with the frequency by which New Brunswick residents were sourcing large quantities of alcohol in Quebec in contravention of the law.  The RCMP started monitoring New Brunswick visitors who commonly frequented liquor stores on the Quebec side of the border.  Mr. Comeau was one of these visitors. 

Returning from Quebec to New Brunswick, Mr. Comeau was stopped by the RCMP and charged under the section 134(b) of the NB Liquor Act that prohibited buying alcohol outside the province.  He was charged under  and fined $240 plus administrative fees. 

At trial, the New Brunswick provincial court agreed with Mr. Comeau that the NB Liquor Act infringed section 121 of the Constitution Act.  The trial judge found section 134(b) to be of no force and effect against Mr. Comeau and dismissed the charge.  In doing so, the trial judge found that a 1921 Alberta Court of Appeal decision was wrongly decided and should not be applied. 

However, the Supreme Court of Canada disagreed.  It held that section 134(b) of the NB Liquor Act does not infringe section 121 of the Constitution Act. 

The court held that common law courts are bound by authoritative precedent.  Subject to extraordinary exceptions, a lower court, such as the New Brunswick trial court, must apply the decisions of higher courts to the facts before it.  For a binding precedent from a higher court to be cast aside, the new evidence must fundamentally shift how judges understand the legal question in issue.  This high threshold was not met in this case.  The trial judge relied on evidence presented by a historian who he accepted as an expert.  The trial judge accepted the expert’s description of the drafters’ motivations for including section 121 in the Constitution Act and how those motivations drive how section 121 is to be interpreted.  The SCC held that reliance on the expert’s opinion was erroneous.  A trial judge should not depart from precedent on the basis of such opinion evidence because it abdicates the judge’s primary responsibility to determine the applicable law.

The court  then considered how section 121 should be interpreted.  It held that the moderate approach to statutory interpretation provides a guide for determining how “admitted free” in section 121 should be interpreted.  The text of the provision must be read in conjunction with the context and purpose of the statute.  Constitutional texts must be interpreted in a broad and purposive manner and in a manner that is sensitive to evolving circumstances.   Applying this framework to section 121, the text, historical context, legislative context and underlying constitutional principles  support a flexible purpose of section 121, one that respects an appropriate balance between federal and provincial powers. 

The Court held that the phrase “admitted free” is ambiguous and falls to be interpreted on the basis of historical, legislative and constitutional context.  In order to achieve economic union, the drafters of the constitution agreed that the individual provinces needed to relinquish their tariff powers.  The historical context supports the view that section 121 prohibits imposition of charges on goods crossing provincial boundaries, i.e. tariffs and tariff-like measures.    However, the evidence does not suggest that the provinces would lose their power to legislate under section 92 of the Constitution Act for the benefit of their constituents even if that might have impact on inter-provincial trade.

The Supreme Court held that the legislative context of section 121 indicates that it was part of a scheme that enabled shifting of customs, excise and similar levies from the former colonies to the “Dominion”, it should be interpreted as applying to measures that increase the price of goods when they cross the provincial border, and should not be read so expansively that it would impinge on legislative powers under sections 91 and 92 of the Constitution Act. 

The purpose of section 121 is to prohibit laws that in essence restrict or limit the free flow of goods across the country.  Second, laws that pose only incidental effects on trade as part of broader regulatory trade schemes not aimed at impeding trade do not have the purpose of restricting inter-provincial trade and do not violate section 121.  Therefore, section 121 does not catch burdens on goods crossing provincial borders that are merely incidental effects of a law or scheme aimed at some other purpose. 

A claimant alleging that a law violates section 121 must establish that the law in essence and purpose restricts trade across a provincial border.   The claimant must establish that the law imposes an additional burden on goods by virtue of them coming in from outside the province and, restriction of cross-border trade must be the primary purpose of the law thereby excluding laws enacted for other purposes. 

In this case, section 134(b) of the NB Liquor Act impedes liquor purchases originating outside of New Brunswick.  In essence, it functions like a tariff even though it may have other purely internal effects.  However, the text and effects are aligned and suggest that the primary purpose of section 134(b) is not to impede trade but rather to restrict access to any non-corporation liquor, not just liquor brought in from another province.  The scheme serves New Brunswick’s choice to control the supply use of liquor within the province.  The primary purpose of section 134(b) is to prohibit holding excessive quantities of liquor from supplies not managed by the province.  While one effect of that section is to impede inter-provincial trade this effect is only incidental in light of the objective of the provincial scheme in general.  Therefore, while section 134(b) in essence impedes cross-border trade, this is not its primary purpose.  The court held that as a result, section 134(b) does not infringe section 121 of the Constitution Act. 

Regards,

Blair