Missing Blueprints

Last week, in a series of decisions headlined by Bank of Montreal v. Marcotte, 2014 SCC 55, the Supreme Court confirmed the commitment to making provincial and federal laws operate side by side, in the name of co-operative federalism, which has been a staple of its federalism jurisprudence in recent years. When the Court had last addressed the issues of interjurisdictional immunity and federal paramountcy, in  Marine Services International Ltd. v. Ryan Estate, 2013 SCC 44, I wrote that, in something of a departure from Lord Atkin’s famous dictum in the Labour Conventions Reference, “the Supreme Court now believes that ‘watertight compartments’ are not enough. Their operation must be complemented by allowing water ballast to flow from one side of the hull to another to keep the ship [of Canadian federalism] aright.” Yet the Court, I said, provided little if any guidance on the way this structure operated. Marcotte is of no assistance in this respect, however important it may prove in other ways.

The federalism issue in Marcotte was whether Québec’s Consumer Protection Act (CPA) applied to banks and, specifically, to the their credit-card operations. The plaintiffs argued that the respondent banks had failed to disclose certain fees and charges in their credit card contracts as the Act required them to do; the banks countered by claiming, among other things, that they either enjoyed an interjurisdictional immunity from the obligations imposed by the CPA, or that the CPA was inoperative with respect to their credit-card operations, because they were regulated by inconsistent federal legislation. In a unanimous judgment by Justices Rothstein and Wagner, the Supreme Court rejected these arguments. (There were other issues too, which I will not consider here, concerning standing in class actions, as well as the interpretation and the effects of the CPA.)

Interjurisdictional immunity prevents provincial laws from “impairing” federal regulation of the “protected core” of a federal jurisdiction. Banking is a federal jurisdiction pursuant to s. 92(15) of the Constitution Act, 1867, so the banks contended that the CPA’s disclosure requirements and provisions sanctioning non-compliance with these requirements could not apply to their credit-card issuing activities. The Court, however, pointed out that

[a] broad application of the doctrine is in tension with the modern cooperative approach to federalism which favours, where possible, the application of statutes enacted by both levels of government. (Par. 63)

Outside the areas covered by precedents concluding that inter-jurisdictional immunity exists, courts must be wary of finding that it applies. Here, without deciding whether credit card activities fall within the “core” of the federal power over “banking,” the Court concludes that, even if they do, the CPA does not “impair” federal regulation:

it cannot plausibly be said that a disclosure requirement for certain charges ancillary to one type of consumer credit “impairs” or “significantly trammels” the manner in which Parliament’s legislative jurisdiction over bank lending can be exercised. (Par. 66)

The banks still retain the ability “to dictate the terms” (par. 66) of their relationship with their customers, and Parliament will not need to legislate to counter the effects of the provincial law.

For its part, the federal paramountcy renders an otherwise valid provincial law inoperative when and to the extent that it conflicts with a valid federal law ― either because it is impossible to comply with both laws or because the provincial law “frustrates” a “federal purpose.” Here, there is no question of impossibility of complying with both federal and provincial law. But the banks invoked two federal purposes which the CPA’s disclosure requirements and sanctions, in their view, frustrated: setting out uniform national standards, and “to ensure that bank contracts are not nullified even if a bank breaches its disclosure obligations” (par. 73). The Court finds that, even assuming these to be the purposes of the federal regulatory framework applicable to banks, neither is frustrated by the CPA. Disclosure requirements are not “standards” for banking products or services, “but rather articulate a contractual norm in Quebec” (par. 79), in the same way as do other general rules of contract law, which the banks accept are applicable to them. Indeed, “the federal scheme is dependent on fundamental provincial rules such as the basic rules of contract” (par. 79). As for the non-nullification purpose, the Court finds that since the plaintiffs are not asking to be released from their contracts with the banks, but only for a restitution of undisclosed fees and damages, it is not engaged. More broadly,

[t]here are many provincial laws providing for a variety of civil causes of action that can potentially be raised against banks.  The silence of the [federal] Bank Act on civil remedies cannot be taken to mean that civil remedies are inconsistent with the Bank Act. (Par. 84)

As I said above, this is very much in keeping with the Supreme Court’s federalism jurisprudence. Yet I cannot get rid of a feeling that that the Court’s decision-making remains very impressionistic, especially on the question of interjurisdictional immunity.

I’m inclined to agree with the court’s assertion that provincial disclosure requirements do not impair the exercise of federal jurisdiction ― but it still is an assertion, not a demonstration. Would a demonstration be possible? I’m not sure, but the Court hardly even tries. The only argument it musters is that Parliament would not need to legislate to oust provincial law, but I don’t think that’s right. Rather, it’s difficult to imagine Parliament wanting to legislate to remove disclosure requirements ― though even that is doubtful, since Parliament might, in theory anyway, replace the somewhat different provincial requirements by a uniform framework of its own. But if, for whatever reason, Parliament decides that provincial disclosure requirements are a problem, it seems to me that it will, in fact, have to legislate to solve it.

The Court is on more solid ground, I think, when it comes to paramountcy. In effect, it seems to suggest that complementary provincial requirements will not conflict with or frustrate the purpose of federal regulations, although parallel (and non-identical) provincial rules might do so. I think that this makes sense, and it is also a more easily applicable standard than what the Court has come up with on interjurisdictional immunity. Still, the Court doesn’t quite articulate this test. Its reasons do not openly go beyond the case before it. So even here, we can only infer the general rules.

Perhaps this is actually sound common law adjudication. We know the general values the law (as developed by the Supreme Court) serves in this area; we know ruling in specific cases; and it is up to us to figure out the general rules that mediate between general values and specific cases. But it’s not how the Court operates in other areas of constitutional law, so it cannot help but feel frustrating. We know what our constitutional structure looks like, but we’re missing the blueprints for it.

UPDATE: At the CBA National Magazine’s blog, Yves Faguy has compiled other posts on Marcotte.

Water Ballast

I am rather late on this, but I want to say something about a decision that the Supreme Court delivered ten days ago in a federalism case, Marine Services International Ltd. v. Ryan Estate, 2013 SCC 44. The constitutional issue which the Court had to resolve was whether the respondents, the estates of two fishermen whose ship had capsized, were able to bring an action in negligence against the ship’s builder and designer under (federal) maritime law, or whether their claim was barred by (provincial) worker-compensation law, pursuant to which the men’s families had been compensated.

(There was a statutory interpretation issue too, whether the worker-compensation scheme even applied to the estates’ claim which were, after all, directed not against the deceased’s employer, but against the builders of their ship. The Supreme Court concluded that it did, as the courts below had done. I have a hard time understanding that decision, but let’s put that down to my obtuseness, and move on to the constitutional issues.)

Provincial (as well as federal, as the Court points out) workers’ compensations schemes are all based on a trade-off: in exchange for compensation for workplace accidents (and illnesses) that does not depend on the employer’s fault, the worker is deprived of his or her right to pursue ordinary (fault-based) civil remedies against the employer. This means that compensation for a workplace injury is much more certain, but its amount is typically lower than what a court might have awarded in a negligence action if the worker prevailed. In the vast majority of cases, both the law of negligence and the workers compensation law are those of the same level of government (typically provincial, but federal in the case, notably, of federal civil servants), so a bar of negligence claims for workplace accidents operates relatively straightforwardly.

This case is unusual in that while the relevant workers compensation scheme is provincial, the applicable negligence is law part of maritime law, which is federal (pursuant to subs. 91(10) of the Constitution Act, 1867, which makes “navigation and shipping” a federal competence). This made it possible for the respondents to argue that unlike in the ordinary cases, the bar on negligence claims contained in the (provincial) workers compensation legislation did not foreclose their action.

Their first argument was based on the doctrine of inter-jurisdictional immunity, according to which an otherwise valid exercise of provincial legislative power cannot “impair” the exercise of a “protected core” of a federal power. The Supreme Court now considers the doctrine to be something of an anomaly in a constitutional structure that it has sought to shape to accept concurrent and co-operative exercises of federal and provincial powers, but it still applies in those areas where precedents so dictate. Maritime negligence law, including “the range of possible claimants in a maritime negligence action” (par. 59), is one such area, as the Court held in Ordon Estate v. Grail, [1998] 3 S.C.R. 437.

However, although it is clear that the application here of the workers compensation legislation limits “the range of possible claimants” in maritime negligence actions, the Supreme Court holds that this limitation does not raise to the level of “impairment” of the federal power:

[t]he intrusion … is not significant or serious when one considers the breadth of the federal power over navigation and shipping, the absence of an impact on the uniformity of Canadian maritime law, and the historical application of workers’ compensation schemes in the maritime context. (Par. 64)

The respondents’ second argument invoked the doctrine of federal paramountcy, which holds that in the event of  a conflict between validly enacted federal and provincial statutes, the federal law prevails to the extent of the inconsistency. A conflict exists when it is impossible for a citizen to comply with both statutes, or “when the provincial law frustrates the purpose of the federal law” (par. 69). There is no conflict in this case, says the Supreme Court, however defined. The federal statute provides a cause of action in negligence to the dependants of the deceased “under circumstances that would have entitled the person, if not deceased, to recover damages.” Here, due to the operation of the bar on negligence claims, the respondents’ “death occurred ‘under circumstances’ that would have disentitled them from recovering damages” (par. 77; emphasis in the original). Furthermore, the finding that federal and provincial law do not conflict ensures for consistency of treatment of the persons covered by federal workers compensation legislation (who are clearly denied remedies in negligence) and those covered by provincial legislation. In addition, while the purpose of the federal law is to create a tort remedy, the provincial statute is intended to “ remove[] compensation for workplace injury from the tort system” (par. 83). The latter purpose does not frustrate the former; provincial law “simply provides for a different regime for compensation that is distinct and separate from tort” (par. 84). The respondents’ arguments fail.

For my part, I think that the Supreme Court’s reasoning is quite weak. On the issue of inter-jurisdictional immunity, it is probably consistent with the Court’s recent decisions, but still frustrating. The Court does not provide any real guidance on what counts as an “impairment” of a federal power, beyond saying that a law which “impairs” a federal power does more than merely “affect” it, though it need not “sterilize” it. Its decision may be right, but it seems more impressionistic than anything. As for the issue of federal paramountcy, the Court’s reasoning seems outright circular. The Court says there is no conflict because “circumstances” disentitle the respondents from recovering, but the circumstance in question is the operation of the provincial statute, which is precisely the point in issue. I also find it difficult to see how a statute that aims at removing cases from the tort system does not, to some extent, frustrate the purpose of another statute that aims at bringing such cases into that system. The Court’s points about consistency are better taken, but, on the whole, I am not persuaded that its decision is correct.

The decision does, however, fit in with the Court’s stated aim to foster “a flexible and pragmatic approach to federalism” (par. 50), where federal and provincial law are, as much as possible allowed to operate side by side. In the famous Labour Conventions decision, Lord Atkin, for the Judicial Committee of the Privy Council, stressed that “the ship of state … still retains the watertight compartments which are an essential part of her original structure.” The Supreme Court now believes that the “watertight compartments” are not enough. Their operation must be complemented by allowing water ballast to flow from one side of the hull to another to keep the ship aright. Let us hope that the tanks in which the water is kept are solid enough, and that the water will not spill.

GEEKY RANT UPDATE: There is another, inconsequential but annoying, flaw in the Supreme Court’s reasons. At par. 28, the Court mentions Sir William Ralph Meredith, the author of a report that led to the enactment of workers compensation legislation in all Canadian provinces, describing him as “former Chief Justice of Ontario.” But, at the time he wrote the report, in 1910, Sir William was the future, not the former Chief Justice ― he only was appointed to that post in 1913. And yes, it is Sir William, not “Sir Meredith,” as Justices Lebel and Karakatsanis describe him at par. 29.

Not in My Backyard

Radio-Canada reports that Québec’s Chief Electoral Officer (CEO) and the (federal) National Capital Commission (NCC) are fighting over the right of candidates in Québec’s election to post signs on Gatineau’s Rue Laurier. The NCC has taken down some signs, citing its policy prohibiting the posting of any signs the streets that form its “Confederation Boulevard,” a showpiece route on both the Ottawa and the Gatineau sides of the river, which includes Rue Laurier. The CEO says that the policy doesn’t apply to provincial elections. The NCC says its lawyers are on the case.

I think the CEO is right, but the case is not free from doubt. Living in a federation ain’t easy.

The first question to consider is whether one of the two regulations at issue here is unconstitutional. As the Supreme Court held in Munro v. National Capital Commission, [1966] S.C.R. 663, the federal government has the competence, under the “national concern” branch of the “peace, order, and good government” power, which I discussed in some detail here, to legislate and make regulations for “the development, conservation and improvement of the National Capital Region in accordance with a coherent plan in order that the nature and character of the seat of the Government of Canada may be in accordance with its national significance.” (671) I would think that includes the power to regulate the appearance of the landmarks of the National Capital Region, for example by prohibiting the posting of signs. The province, of course, has the power to legislate with respect to the use of property, as well as to provincial elections. So both the NCC’s regulation and the provincial law authorizing the display of election posters on public property (section 259.2 and, more generally, Chapter IV.1 of Title IV of the Election Act, R.S.Q. c. E-3.3) are valid exercises of the respective powers of the two levels of government.

The next question is whether the provincial law, although generally valid, is inapplicable in this case pursuant to the doctrine of inter-jurisdictional immunity. As the Supreme Court explained in Canada (Attorney General) v. PHS Community Services Society, 2011 SCC 44, [2011] 3 S.C.R. 134, at par. 58, this doctrine

is premised on the idea that there is a “basic, minimum and unassailable content” to the heads of powers in ss. 91 and 92 of the Constitution Act, 1867 that must be protected from impairment by the other level of government. … In cases where interjurisdictional immunity is found to apply, the law enacted by the other level of government remains valid, but has no application with regard to the identified “core.”

The Supreme Court stated the test for the application of the doctrine in Quebec (Attorney General) v. Canadian Owners and Pilots Association [COPA], 2010 SCC 39, [2010] 2 S.C.R. 536, at par. 27.

The first step is to determine whether the provincial law — s. 26 of the Act —  trenches on the protected “core” of a federal competence.  If it does, the second step is to determine whether the provincial law’s effect on the exercise of the protected federal power is sufficiently serious to invoke the doctrine of interjurisdictional immunity.

The “core of a federal competence” consists of the powers necessary to realize the purpose of the federal power (COPA, par. 35). It’s a rather vague definition, not least because the purposes of legislative powers are not well defined. Is it necessary for the purpose of ensuring “that the nature and character of the seat of the Government of Canada may be in accordance with its national significance” to be able to prohibit the posting on signs on municipal lamp posts? I’m not sure. But let’s assume that it is. I think that the second branch of the test is more clearly favourable to the CEO.

The second branch of the test requires a court to assess the seriousness of the provincial law’s interference with the federal power. It is not enough that the provincial law “affect” the federal power; in order to be inapplicable pursuant to the doctrine of inter-jurisdictional immunity, it must “impair” that power; that is, it must “seriously or significantly trammel[] the federal power” (COPA, par. 45). Although again this is a somewhat uncertain measure, I rather doubt that this test is met here. Even assuming that, as a general matter, it is important for the NCC to control the appearance of key streets in the National Capital Region, it is difficult to believe that the presence of election posters (which, annoying though they might be, tend to be neither especially big nor especially tasteless) for five weeks every fours years is a “significant” impairment with the NCC’s power to do so. The temporary presence of election posters does not prevent the NCC from keeping up “the nature and character of the seat of the Government of Canada.” It is hardly more than a very minor inconvenience.

The final question to consider, as in all cases where two valid and applicable federal and provincial laws seem to compel different outcomes, is whether the conflict between them is such as to trigger the doctrine of federal paramountcy, which makes the provincial law inoperative to the extent of its inconsistency with the federal one. As the Supreme Court explained in COPA, at par. 64, paramountcy applies either if it is impossible for the subject to comply simultaneously with federal and provincial law, or when compliance with the provincial law, although not actually a violation of the federal one, would frustrate its purpose. Here, it is obviously possible to comply with both laws, since nobody is required to put up election posters on Rue Laurier. But can it be said the the provincial law frustrates the purpose of the federal regulation? As the Supreme Court says in COPA, at par. 66, “the standard for invalidating provincial legislation on the basis of frustration of federal purpose is high,” and – essentially for the reasons I have given in the previous paragraph – I don’t think it is met here. The interference with the purpose of the federal regulation is minor and temporary. I don’t think it amounts to frustration.

So, that’s my two cents. But the applicable tests are vague, and the opposite case is certainly an arguable one. As a taxpayer, I hope the CEO and the NCC don’t waste my money on what it is, after all, a trivial disagreement. But as constitutional law junkie, I think it might make for an interesting case.