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

Provincial Workers' Compensation Scheme Bars Federal Statutory Cause of Action

Two brothers, Joseph and David Ryan, were Newfoundlanders who, like many others in that province earned their living by fishing the North Atlantic.  On September 19, 2004, the Ryan brothers died when their ship, The Ryan's Commander capsized while returning from a fishing trip off the coast of Newfoundland.  Joseph and David's widows and children (the "Ryan Estates") applied for and received compensation under Newfoundland and Labrador's  Workplace Health, Safety and Compensation Act ("WHSCA").

 

Then, proceeding under the federal Maritime Liability Act ("MLA") the Ryan Estates commenced an action against the builders of The Ryan's Commander, Universal Marine Limited, Marine Services International Limited ("Marine Services") and an employee of Marine Services, alleging negligence in the design and construction of the boat.  The Ryan Estates also sued the Attorney General of Canada alleging negligence in the inspection of the boat by Transport Canada. 

 

Marine Services and its employee applied to the Workplace Health, Safety and Compensation Commission ("Commission") of Newfoundland and Labrador for a determination of whether the action was prohibited by virtue of section 44 of the WHSCA.  That section provides: "the right to compensation under the Act is instead of the rights of action, statutory or otherwise, to which a worker or his dependents are entitled against an employer because of a injury in which compensation is payable or which arises in the course of the worker's employment".   The Commission held that the action was statute barred by section 44.  

 

The Ryan Estates applied to the Newfoundland and Labrador's Supreme Court to judicially review the Commission's findings.  On review, the court overturned the decision of the Commission holding that the doctrines of "interjurisdictional immunity" and "federal paramountcy" applied and therefore the action should be allowed to proceed.  The majority of the Newfoundland and Labrador Court of Appeal upheld the trial court's decision.  

 

Marine Services further appealed to the Supreme Court of Canada.  The SCC allowed the appeal and held that section 44 of the WHSCA was constitutionally applicable and operative and therefore the action started by the Ryan Estates was statute barred.  The Supreme Court held that the statutory bar of section 44 applied on the facts of this case.  The WHSCA did not only benefit an "employer" in a direct employment relationship with an injured worker.  Any employer that contributed to the compensation scheme and any worker of such an employer benefited from the statutory bar as long as the worker was injured in the course of his employment and the injury occurred in the conduct of operations usual in or incidental to the industry carried on by the employer. 

 

In this case, the Commission found that the injury that led to the death of the Ryan brothers occurred "in the conduct of the operations usual in or incidental to" the industry carried on by Marine Services.  Such a finding was entitled to deference.  It was a question of mixed fact and law that the Commission answered by assessing the evidence and interpreting its home statute.  Moreover, the WHSCA contains a privative clause. In light of these factors, the standard of reasonableness applied.  

 

In respect of the constitutional issues involving the division of powers between the federal government and the province of Newfoundland and Labrador raised by the Courts of Newfoundland, the Supreme Court held a two prong test must be met to trigger the application of interjurisdictional immunity.  The first step is to determine whether the impugned legislation trenches on the core head of power listed in sections 91 or 92 of the Constitution Act, 1867.  Then, if the impugned legislation trenches on the core head of such a power, the second step is to determine whether the encroachment is sufficiently serious. 

 

The Supreme Court held that interjurisdictional immunity did not apply in this case.  The first prong of the test was met but not the second.  A provincial statute of general application such as the WHSCA, cannot have the effect of indirectly regulating an issue of maritime negligence law which is at the core of the federal power over navigation and shipping.  

 

Section 6(2) of the MLA provided that:  if a person dies by the fault or neglect of another under circumstances that would have entitled the person, if not deceased, to recover damages, the dependents of the deceased person may maintain an action in a court of competent jurisdiction for their loss resulting from the death against the person from whom the deceased person would have been entitled to recover. 

 

Section 44 of the WHSCA alters the range of claimants who may make use of the statutory maritime negligence action provided by section 6(2) of the MLA and therefore trenches on the core of the federal power over navigation and shipping.  However, section 44 of the WHSCA does not impair the exercise of the federal power over navigation and shipping.  The intrusion of section 44 is not significant or serious when one considers the breadth of the federal power over navigation and shipping, the absence of impact on the uniformity of Canadian Maritime law, and the historical application of worker's compensation schemes in the Maritime context.

 

Secondly, the Supreme Court held that the doctrine of federal paramountcy did not apply in this case under a proper interpretation of the MLA.  Accordingly to this doctrine, when the operational effects of provincial legislation are incompatible with the federal legislation, the federal legislation must prevail and the provincial legislation is rendered inoperative to the extent of the incompatibility.  Federal paramountcy applies where there is an inconsistency between a valid federal legislative enactment (section 6(2) of the MLA) and a valid provincial legislative enactment (section 44 of the WHSCA) but not between a common law rule and a valid provincial law.  The inconsistency can arise from two different forms of conflict - the operational conflict, when compliance with one statute means a violation of the other statute, and the frustration of the federal purpose.  The standard for invalidating provincial legislation on the basis of frustration of federal purpose is high.  

 

The Supreme Court held that section 6(2) of the MLA which provides a cause of action to the Ryan Estates makes room for the operation of provincial workers compensation schemes.  The WHSCA and the MLA can operate side by side without conflict.  The language of section 6(2) of the MLA which provides that a dependent may bring a claim "under circumstances that would have entitled the person, if not deceased, to recover damages", suggests that there are situations where a dependent is not allowed to bring an action pursuant to that section.  Such a situation occurs where a statutory provision such as section 44 of the WHSCA prohibits litigation because compensation has already been awarded under a workers' compensation scheme.  The statutory bar in section 44 of the WHSCA removes compensation for workplace injury from the tort system, of which the MLA is a part.

 

The WHSCA which establishes a no-fault regime to compensate for workplace related injury does not frustrate the purpose of section 6(2) of the MLA which was enacted to expand the range of claimants who could start an action in Maritime negligence law.  The WHSCA simply provides for a different regime for compensation that is distinct and separate from tort. 

 

Regards,

 

Blair

Manitoba Metis win Land Dispute Case against Government of Canada

Today the Supreme Court of Canada ruled that the federal government had failed to act diligently in fulfilling its obligation to the Métis settlers of the Red River territory.

A legal challenge by the Manitoba Métis Federation sought recognition for the treatment of its people after the 1870 government land deal that ended in the famous Red River Rebellion lead by Louis Riel.

The decision of the court allowed an appeal from the Manitoba Court of Appeal.

After Confederation, the first government of Canada embarked on a policy aimed at bringing the western territories into Canada. However, the French-speaking, Roman Catholic Métis, who were the dominant demographic group in the Red River Settlement resisted Canada's annexation. After some negotiation with Canada, the Red River settlers agreed to become part of Canada and Canada agreed to grant 1.4 million acres of land to the Métis children and to recognize existing land holdings.  These obligations were subsequently set out in the provisions of the Manitoba Act (the "Act").

However, in the following years, the Canadian government made several mistakes, including determining who had a right to share in the land, distributing the land randomly, and underestimating the number of eligible Métis children.

The Métis sought a declaration that:

1. the Canadian government breached its fiduciary obligations owed to the Métis in implementing the Act;

2. the Canadian government failed to implement the Act in a manner consistent with the honour of the Crown; and

3. certain legislation passed by Manitoba effecting the implementation of the Act was ultra vires.

A trial judge and the Manitoba Court of Appeal dismissed the claim of the Métis.

The Supreme Court of Canada allowed the appeal in part in finding that the government had failed to implement the land grant provisions established in 1870 in accordance with "the honour of the Crown".

The majority of the court (6 judges) held that the statutory obligations under the Act did not impose a fiduciary duty on the Canadian government. Although the Crown undertook discretionary control of the administration of the land grants, the Métis are Aboriginal and they had an interest in the land. The Act simply confirmed the continuance of different categories of land holdings in existence shortly before or at the creation of the new province of Manitoba. It did not constitute an undertaking on the part of the Crown to act as a fiduciary in settling the titles of the Métis land holders.

However, the majority found that the Métis were entitled to a declaration that the government of Canada had failed to act with diligence in implementing the land grant provision of the Act in accordance with the honour of the Crown.

The Court held that the ultimate purpose of the honour of the Crown is the reconciliation of pre-existing Aboriginal societies with the assertion of Canadian sovereignty. Where this is at stake, it requires the Crown to act honourable in its dealings with the Aboriginal peoples in question. This requirement flows from the guarantee of Aboriginal rights in the Canadian Constitution Act. The Constitution is not a mere statute; it is the very document by which the Crown asserted its sovereignty in the face of prior Aboriginal occupation. An explicit obligation to an Aboriginal group in the Constitution engages the honour of the Crown.

In the context of the implementation of a constitutional obligation to an Aboriginal people, the honour of the Crown requires that the Crown:

1. take a broad purposive approach to the interpretation of the promise; and

2. acted diligently to fulfill it.

In this case, a persistent pattern of errors and indifference substantially frustrated the purpose of a solemn promise and amount to betrayal of the Crown's duty to act honourable in fulfilling its promise.

Regards,

Blair