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canadian tax journal / revue fiscale canadienne (2010) vol. 58, no 3, 609 - 30
609
Policy Forum: Impact of Retroactive Legislation on the Litigant
Simon Thang*
A B S T R A C T
Recent cases demonstrate that legislation designed not only to retroactively overturn a court decision but also to affect the particular litigant is a real and distinct possibility. This article reviews the relevant cases, the common law regarding the ability of legislatures to retroactively interfere with vested rights, and the impact of retroactive legislation on the litigant. While the general principles regarding the circumstances in which retroactive legislation may affect the vested rights of litigants are well accepted, the cases indicate that they are difficult to apply, and guidance from the courts and from legislators is needed.
KEYWORDS: LEGISLATION n RETROACTIVE n RIGHTS n AUTHORITY n COURTS n LITIGATION
* OfKPMG,Toronto(e-mail:[email protected]).
C O N T E N T S
Introduction 610Recent Examples of Retroactive Legislation 611
Procter & Gamble 611The Rule 14 Declaration 612The Retroactive Legislation 612The Rule 21 Motion 613
Kingstreet Investments 615The Decision 615The Retroactive Legislation 616
Confédération des Syndicats Nationaux 618The Decision 618The Retroactive Legislation 618
Context and Commentary 619Retroactivity and Vested Rights 619
Retroactivity in General 619The Concept of Vested Rights 620
Expression of Intent To Affect Vested Rights 623Language Sufficient To Interfere with Vested Rights 624Language Insufficient To Interfere with Vested Rights 626
610 n canadian tax journal / revue fiscale canadienne (2010) vol. 58, no 3
INTRO DUC TIO N[T]hereisnorequirementoflegislativeprospectivityembodiedintheruleoflaworinanyprovisionofourConstitution....
Theabsenceofageneralrequirementoflegislativeprospectivityexistsdespitethefactthatretrospectiveandretroactivelegislationcanoverturnsettledexpectationsandissometimesperceivedasunjust.1
AsindicatedbytheSupremeCourtofCanadainthepassageabove,itisfullywithinthepowerofParliamentandtheprovincialandterritoriallegislaturestoenactretro-activelegislation2—evenifitoverturnsthesettledexpectationsofthoseaffectedbythe law.3Retroactive tax legislation is in facta fairlycommonphenomenon,andtherehavebeennumerousexamplesovertheyears.4Severalrecentinstanceshaveturned the spotlight on the enactment of retroactive legislation in response tocourtdecisions,insomecasesnullifyingthelitigant’sclaim.Thefirstpartofthis
Impact on Litigant 626Litigant Affected by Retroactive Legislation 626Litigant Excluded from Retroactive Legislation 628
Conclusions 630
1 British Columbia v. Imperial Tobacco Canada Ltd.,2005SCC49,atparagraphs69and71,perMajorJ.
2 Forthepurposesofthisarticle,theterm“retroactivelegislation”isusedtorefertolegislationthat“appliestofactsthatwerealreadypastwhenthelegislationcameintoforce.Itchangesthelawapplicabletopastconductorevents;ineffect,itdeemsthelawtohavebeendifferentfromwhatitactuallywas.”RuthSullivan,Driedger on the Construction of Statutes,3ded.(Markham,ON:Butterworths,1994),513.Thetermisnotintendedtohaveanypejorativeconnotations.Notethatsomecourtsandcommentatorshaveattemptedtodistinguish“retroactive”from“retrospective”legislation.Thisdistinctionhasbeencriticized(ibid.,at511)andisnotadoptedhere.
Itshouldalsobenotedthatthisarticlefocusesoncertainlegalissuesthatarisewithrespecttoretroactivelegislation.Forathoroughdiscussionofpolicyissues,seeThomasE.McDonnell,“Retroactivity:PolicyandPractice,”inReport of Proceedings of the Fifty-Eighth Tax Conference,2006ConferenceReport(Toronto:CanadianTaxFoundation,2007),2:1-33.
3 Anexceptioniscriminallaw,theretroactivityofwhichislimitedbysection11(g)oftheCanadianCharterofRightsandFreedoms,partIoftheConstitutionAct,1982,beingscheduleBoftheCanadaAct1982(UK),1982,c.11(hereinreferredtoas“theCharter”).
4 Forexample,in1994theDepartmentofFinanceenactedsection141.01oftheExciseTaxAct,RSC1985,c.E-15,asamended(hereinreferredtoas“theETA”),retroactivetoDecember17,1990,thedateonwhichthegoodsandservicestax(GST)legislationreceivedroyalassent.Section141.01clarifiestherequirementtoapportionGSTpaidoninputsforregistrantswhomakebothtaxableandexemptsupplies,andthereforeexpresslyrestrictsinputtaxcredits(ITCs)forsuchinputsallocatedtotaxablesupplies.Anumberofotherexamplesarereferredtobelow.Priortotheenactment,sometaxpayers—notably,financialinstitutions—tookthepositionthatfullITCscouldbeclaimedinrespectofindirectinputsthatwereacquiredonlyinpartforuseintaxablesupplies.
impact of retroactive legislation on the litigant n 611
articlereviewsthedecisionofOntarioCourtofAppealinProcter & Gamble5andthelegislativeresponsestotheSupremeCourtofCanada’sdecisionsinKingstreet Invest-ments6andConfédération des syndicats nationaux.7Thesecondpartwillcontextualizethesedevelopmentsandprovidesomecommentaryfocusingonthefollowingaspects:(1)theconceptof“vestedrights”;(2)therequirementsforlegislationinterferingwithvestedrights;and(3)theimpactofretroactivelegislationonthelitigant.
RECENT E X A MPLE S O F RE TROAC TI V E LEGISL ATIO N
Procter & Gamble
ThedecisionoftheOntarioCourtofAppealinProcter & Gamble Inc. v. Ontario (Finance)8isthelatestdevelopmentinaprotractedsalestaxdisputebetweenProcter&Gamble(“P&G”)andtheOntarioMinistryofFinance.P&Gleasedwoodenpalletsfromathirdpartytopackageandtransportvariousconsumergoodsinthecourseof its business. P & G paid Ontario retail sales tax (RST) on the rental but laterclaimedrefundsonthebasisthattherentalwasexempt.9Theministerofrevenuedeniedtherefundsand,followingunsuccessfulobjections,P&GfiledappealstotheOntarioSuperiorCourtundersection27oftheRetailSalesTaxAct.10
Whiletheappealswerepending,P&Gtookthesomewhatunusualapproachofbringinganapplicationunderrule14oftheRulesofCivilProcedure,11foradeclar-ationthattheRSTthatithadpaidontherentalswasnotpayable.12P&Ghopedto
5 Infra,note8.
6 Infra,note36.
7 Infra,note44.
8 2010ONCA149;leavetoappealtotheSupremeCourtofCanadafiledApril30,2010,[2010]SCCAno.173.ForadditionalcommentaryontheOntarioCourtofAppeal’sdecision,seeRobertG.KreklewetzandJennySiu,“Procter&GambleAppeal”(2010)vol.18,no.5Canadian Tax Highlights5-6.
9 Thetechnicalpointatissueinthecasewilllikelynolongerberelevantundertheharmonizedsalestax(HST)thattookeffectinOntarioandBritishColumbiaonJuly1,2010.UndertheHST,companiesengagedincommercialactivitieswillgenerallybeabletorecoverGST/HSTpaidonitemssuchaspalletsusedinthecourseofsuchactivities.Therewill,however,betemporaryrestrictionsonITCsfortheprovincialHSTcomponentofcertainsuppliesacquiredby“largebusinesses”andcertainotherpersons.
10 RSO1990,c.R.31,asamended(hereinreferredtoas“theRSTA”).
11 RRO1990,Reg.194.
12 Rule14.05(3)(d)authorizesthecommencementofaproceedingbyapplicationwherethereliefclaimedis“thedeterminationofrightsthatdepend...ontheinterpretationofastatute,orderincouncil,regulationormunicipalby-laworresolution.”FollowingthedecisionoftheSuperiorCourtofJusticeontherule14application,thisavenuewasforeclosedforOntarioRSTdisputesbytheadditionofsection29.1totheRSTA,whichprecludesanyoneotherthantheministerfrombringinganapplicationunderrule14.05(3)“inrespectofanymatterarisingunderthisAct.”
612 n canadian tax journal / revue fiscale canadienne (2010) vol. 58, no 3
usethecourt’sdeclarationunderrule14asabindingfindingoflawinsupportofitspendingappealsontherefundsundertheRSTA.
The Rule 14 DeclarationP&Gsucceededinobtainingarule14declarationfromtheSuperiorCourtofJustice13totheeffectthatP&Gwas“exemptfromretailsalestax”undersection7(1)(41)oftheRSTAwhenitacquiredthepallets.Section7(1)(41)exemptstangiblepersonalproperty(TPP)purchasedforthepurposeofbeingprocessed,fabricated,ormanu-facturedinto,attachedto,orincorporatedintoTPPforthepurposeofsale,exceptforpurchasersof“returnablecontainers.”ThecourtconcludedthatthepalletswereacquiredforthepurposeofattachmentorincorporationintoTPPforsale,intheformof“palletized”goods.Further,thepalletswerenotexcludedfromtheexemp-tion as “returnable containers,” which—at the time—was defined narrowly (insection1(1)oftheRSTA)tomean“acontainerthatisintendedtobereturnedtoberefilledbyamanufacturer.”Inthecourt’sview,thepalletsdidnotmeetthisdefin-itionbecause theywerenotreturnedtoP&Gbutwerepickedupby the lessor.Theycouldalsonotbesaidtobe“refilled,”asabottleorothervesselwouldbe,andtheywerereusedbyavarietyofcustomersaswellasbymanufacturers.Thedeclara-tionwasupheldbytheOntarioCourtofAppeal.14TheministerinitiallyfiledbutlaterabandonedanapplicationforleavetoappealtotheSupremeCourtofCanada.15
The Retroactive LegislationInsteadofpursuinganappeal,theOntariogovernmentrespondedbyamendingtheRSTAtobroadenthedefinitionof“returnablecontainer”inordertocapturethere-useofpallets,therebyexcludingthemfromtheexemptioninsection7(1)(41).Theamendeddefinitionof“returnablecontainer”insection1(1)readsasfollows:
Acontainerorothertangiblepersonalproperty,(a) thatisusedinthepackaging,storageorshippingoftangiblepersonalproperty,and(b) thatisintendedtobereturned,directlyorindirectly,toapersonforreusein
thepackaging,storageorshippingoftangiblepersonalproperty.
Thisprovisionandarelatedamendment insection7wereenactedundertheBudgetMeasures and InterimAppropriationAct, 2008, assented toonMay14,2008,but“aredeemedtohavecomeintoforceonMay7,1997”16—thedateonwhichthedefinitionof“returnablecontainer”wasoriginallyenacted.
13 Procter & Gamble v. Ontario (Minister of Finance),2006CanLII29664(Ont.SCJ).
14 2007ONCA784.
15 [2008]SCCAno.7.
16 SO2008,c.7,scheduleR,sections1(2)and7(2).
impact of retroactive legislation on the litigant n 613
The Rule 21 MotionFollowingtheamendment,theCrownbroughtamotionunderrule21oftheRulesofCivilProceduretodeterminewhetherthechangesnullifiedP&G’sclaimforre-fundsundertheoutstandingappeals.17Itwasnotdisputedthatanamendmentisassumedtobeprospectiveandnotretroactiveunlessthereisclearlanguagetothecontrary.18However,P&Garguedthatitispresumedthatlegislationdoesnottakeaway“adjudicated rights”unless specific intent is expressed.19 P&Gargued thatwhiletheamendmentofthedefinitionof“returnablecontainer”indicatedaninten-tiontohaveretroactiveeffectingeneral, it lackedtherequiredspecificintenttoaffectrights thathadalreadybeenadjudicated inobtainingthedeclaration.Themotionsjudgedisagreed.Thejudgeconcludedthatinmakingtheretroactivityef-fectivetoMay7,1997,thelegislature“istakentobekeenlyawareoftheclaimofP&Gwhichdatesback to thatdate”20 (although,asdiscussedbelow, the judge’sstatementonthetimingoftheeffectivedatewasamisapprehension).Inthejudge’sview,intenttoaffectP&G’srightswasalsosupportedbydocumentsforthe2008Ontariobudget,whichnotedthattheamendmentsinquestionwereinresponsetoarecentcourtinterpretation.Thus,thejudgewassatisfiedthatthelegislaturehad“turneditsmindtotheeffectofretroactivityandexpresseditsintention.”21
OnappealtotheOntarioCourtofAppeal,theministeracknowledgedthatthemotionsjudgeerredinconnectingtheMay7,1997effectivedateoftheretroactiveamendmentwithP&G’srefundclaims,whichdatedbackonlytoDecember1,1999.(TheMay7,1997datewassignificantonlyinthatthiswasthedateonwhichthe“returnable container” definition was originally enacted.) Further, the ministerconcededthatthebudgetstatementreferredtobythemotionsjudgedidnotindi-catealegislativeintenttoapplytheamendmentsspecificallytoP&G.Theminister,however,arguedthatnoneofthismatteredsincetherule14declarationobtainedbyP&Gdidnotgiveita“vestedproperty”right22thatwouldremainunaffectedbysubsequentretroactivelegislation.Thedeclarationmerelyprovidedaninterpreta-tionofthelawasitexistedatthattime.Giventheretroactiveamendment,thelawtobeappliedisnowdifferent.
P&Garguedthateveniftheamendeddefinitionwerevalidretroactivelegisla-tionofgeneralapplication,therewasanexceptionfor“adjudicatedrights,”which
17 2009CanLII9475(Ont.SCJ).
18 ThecourtreferredtoImperial Tobacco,supranote1.
19 P&GcitedZadvorny v. Sask. Govt. Ins.(1985),11CCLI256(Sask.CA),andHornby Island Trust Committee v. Stormwell(1988),53DLR(4th)435(BCCA).
20 Supranote17,atparagraph14.
21 Ibid.,atparagraph18.ThecourtalsoconcludedthatP&Gcouldnotbeconsideredtohavehadsettledexpectationsregardingitsdeclarationofexemption,giventheministry’slongstandingpolicytotreattherentalofpalletsastaxable.
22 Theconceptofvestedrightsandtheapplicationofretroactivelegislationtheretoarediscussedinthesecondpartofthisarticle.
614 n canadian tax journal / revue fiscale canadienne (2010) vol. 58, no 3
P&Gpossessedbyvirtueoftherule14declaration.P&Gfurtherarguedthatthefactthatithadobtainedthedeclarationsetitapartfromothertaxpayersandgaveitthe right to have its appeals determined according to the repealed definition of“returnablecontainer,”sincetherewasnoindicationofclearlegislativeintentthattheretroactiveamendmentappliedspecificallytoP&G.
TheOntarioCourtofAppealreviewedanumberofthedecisionsreliedonbyP&G,includingtheSupremeCourtofCanada’sdecisioninThe Queen v. Canada Trustco Mortgage Co.23That case involved the interpretationof thegeneral anti-avoidancerule(GAAR)insection245oftheIncomeTaxAct.24ThetaxpayerhadobtainedafavourabledecisionfromtheTaxCourt,whichallowedtheappealandvacatedtheassessmentforthe1997taxyear,remittingthemattertotheministerfor reassessment.25 After losing an appeal to the Federal Court of Appeal,26 theministerappealedtotheSupremeCourtofCanada;however,beforethatappealwasheard,certainprovisionsofsection245wereamendedandgivenretroactiveappli-cation“withrespecttotransactionsenteredintoafterSeptember12,1988”(whichincludedthetransactionsatissue).InsettingouttheprovisionsoftheITAthatap-pliedinthecase,theSupremeCourtstatedthattheamendment
hasnoapplicationtothejudgmentsunderappeal.Althoughthisamendmentwasen-actedtoapplyretroactively,itcannotapplyatthisstageofappellatereview,afterthepartiesarguedtheircasesandtheTaxCourtjudgerenderedhisdecisiononthebasisoftheGAARasitreadpriortotheamendment.27
In considering the relevance of Canada Trustco, the Ontario Court of AppealdistinguishedtheProcter & Gamblecaseonthebasisthat,giventhatP&G’sappealswerepending,P&Ghadnotactuallyobtainedadecisionvacatingorsettingasidethetaxassessment.Itnotedthat,pursuanttosection18(8)oftheRSTA,theassess-ments remained valid and binding because they had not been varied or vacatedunder theobjectionorappealsprocessprovidedfor in theRSTA.ThecourtalsodownplayedthesignificanceoftheSupremeCourt’scommentsinCanada Trustcoasobiter:“IdonotthinkthattheSupremeCourtinthisdictum,whichisremotefromtheissuedecidedinthecase,introducedanewgeneralprincipletobeappliedinallcases.”28TheOntariocourtsimilarlydistinguishedseveralothercases29onthebasisthat theplaintiffs in thosecaseshadobtained judgmentsprior to theretroactivelegislationinquestion.
23 [2005]2SCR601.
24 RSC1985,c.1(5thSupp.),asamended(hereinreferredtoas“theITA”).
25 2003TCC215.
26 2004FCA67.
27 Supranote23,atparagraph7.
28 Supranote8,atparagraph42.
29 Namely,R v. C & E Comrs, ex p Building Societies Ombudsman Co.,[2000]STC892(CA);andZadvorny,supranote19.
impact of retroactive legislation on the litigant n 615
Inthecourt’sview,thecaselawdidnotsupportP&G’sargumentthat“adjudicatedrights”arealwaysexemptedfromthegeneralapplicationofretroactivelegislationunlessthereisaclearlegislativeintenttoapplyspecificallytothem.30Therewasnoreasontodepartfromthetraditionalconceptof“vestedrights.”Whilethecourtdidnotelaborateuponwhatconstitutes“vestedrights,”itnotedthatP&G’sdeclarationdidnotgiveitanyvestedrightstothetaxrefunds.Anyrighttoarefundcouldariseonlythroughanordervacatingtheassessmentsandrequiringtheministertopaytheclaimedrefunds.Therefore,itwasevidentthatthedeclarationdidnotgiveriseto“animmediateandenforceablerighttopaymentoftheclaimedrefunds.”31ThedeclarationmerelygaveP&Gtherighttohavetheapplicationjudge’sinterpreta-tionof“returnablecontainer”appliedintheassessmentappeals.
WhilenotingthatadeclarationofthecourtinterpretingtheRSTAwouldnormallybindthepartiesonanassessmentappeal,theOntarioCourtofAppealconcludedthat that interpretationwasno longer relevant,given the subsequent retroactivechangetothedefinition.ReferringtoGustavson Drilling,32thecourtnotedthatnoonehasavestedrighttothecontinuanceofthelawasitstoodinthepast:“Themererightexistinginthemembersofthecommunityoranyclassofthematthedateoftherepealofastatutetotakeadvantageoftherepealedstatuteisnotarightaccrued.”33
Thecourtconcludedthattheamendeddefinitionof“returnablecontainer”isdeemedtoapplyretroactivelytothedeterminationoftaxespayablebyP&GsinceDecember1,1999,whenitbeganpayingRSTonthepallets.Whentheproperinter-pretationofthedefinitionarisesinP&G’sappeals,theapplicationjudge’sdeclarationontheformermeaning“willbeofnoconsequence”becausetheamendeddefinition“nowappliesintheassessmentappeals.”34
Kingstreet Investments
The DecisionTheamendmentstotheNewBrunswickLiquorControlAct35followingtheSupremeCourtofCanada’sdecisioninKingstreet Investments Ltd. v. New Brunswick (Finance)36
30 Supranote8,atparagraph50.ThecourtalsonotedanumberofconceptualdifficultieswithP&G’sposition.Theconceptofadjudicatedrightsis“amorphous”;manydifferentkindsofrightscanbesaidtobeadjudicated.Therewasnosoundbasisfordifferentiatingpersonswhohaveacquiredaninterestbyadjudicationandpersonswhohaveacquiredanidenticalinterestotherwisethanbyadjudication.Furthermore,thetemporalscopeofexemptionfromtheretroactivelegislationclaimedbyP&Glackedlogicaldemarcation.P&Gdidnotlimititsclaimedexemptiontotheonerefundforwhichithadfiledanappealatthetimethedeclarationwasgrantedbutalsoclaimedtheexemptionwithrespecttothreeappealsfiledsubsequently.Supranote8,atparagraphs50-52.
31 Supranote8,atparagraph53. 32 Gustavson Drilling (1964) Ltd. v. MNR,[1977]1SCR271. 33 Supranote8,atparagraph54,quotingfromGustavson Drilling,supranote32,at283. 34 Supranote8,atparagraph57. 35 RSNB1973,c.L-10,asamended(hereinreferredtoas“theLCA”). 36 [2007]1SCR3.
616 n canadian tax journal / revue fiscale canadienne (2010) vol. 58, no 3
areanotherexampleofretroactivelegislation.Briefly,inthedecisionsofthelowercourts,boththeNewBrunswickCourtofQueen’sBenchandtheNewBrunswickCourtofAppealheldthataprovincialuserchargeleviedonalcohollicenseesundertheLCAandtherelatedregulationswasanindirecttaxandthereforeultravirestheprovince(sincetheprovincesarelimitedto“direct”taxationundersubsection92(2)oftheConstitutionAct,1867);37however,bothcourtsdeniedthetaxpayerfullre-coveryoftheillegallypaidtaxonthebasisofvariousdefences,whichwereheldtobar recovery.38Onappeal, theSupremeCourtnoted thatwhen thegovernmentcollectsandretainsultravirestaxes,itunderminestheruleoflaw.Topermitthegovernmenttoretainanultravirestaxwouldcondoneabreachofthisfundamentalconstitutionalprinciple.Therefore,thecourtheldthat“acitizenwhohasmadeapaymentpursuanttoultra vireslegislationhasarighttorestitution.”39Itrejectedthevariousdefencestorecoveryandheldthatthetaxpayerwasentitledtorecovertheillegalcharges.Notably,however,thecourtindicatedthatpolicyconcernsregard-ing“fiscalinefficiencyandfiscalchaos”couldbeaddressedthroughmeanssuchassuspendingadeclarationofinvalidityandretroactivelyenactingvalidtaxes.40
The Retroactive LegislationThegovernmentofNewBrunswicksubsequentlyamendedtheLCAtoretroactivelyimposea“direct”taxonthepurchaserofalcoholinanamountequaltotheindirecttaxpreviouslyimposedonlicensees.41Thelegislationdeemsthepurchasertohave
37 30&31Vict.,c.3(UK).Foradetaileddiscussionoftheconstitutionalrequirementsfortaxation,seeSimonThang,“ConstitutionalLawAspectsofCommodityTax,”paperpresentedatthe29thAnnualCanadianInstituteofCharteredAccountantsCommodityTaxSymposiumheldinOttawaonSeptember20-22,2009.
38 Thetrialjudgedeniedrestitutiononthebasisofthe“passing-on”defence(whichisbasedonunjustenrichmentprinciples)andthepolicythatpublicauthoritiesshouldbenotberequiredtorepayultravirestaxesinordertoprevent“fiscalchaos”:2004NBQB84,atparagraphs58-60.TheCourtofAppealwasnotpreparedto“immunize”theprovincefromrepayinganultravirestaxasamatterofpolicy.However,thecourtfeltthatthepassing-ondefencepreventeditfromallowingfullrestitution.Intheresult,itpermittedrecoveryonlyofuserchargespaidafterthecommencementoflegalproceedings,sincethosechargeswerepaidunder“protestandcompulsion”:2005NBCA56,atparagraph6.
39 Supranote36,atparagraph15.
40 Ibid.,atparagraph25.Preservationofthestabilityofthegovernment’srevenuebaseisoneofthefactorstobeconsideredunderthefederalgovernment’sguidelinesforwhenretroactivelegislationwillbeproposed.SeeCanada,DepartmentofFinance,Comprehensive Response of the Government of Canada to the Seventh Report of the Standing Committee on Public Accounts(Ottawa:DepartmentofFinance,September1995).Theseguidelinesaresummarizedbelow(infranote96)andarereviewedinMcDonnell,supranote2.
41 SeeNewBrunswick,PublicSafetyDepartment,CommunicationsandPublicAwarenessBranch,“GovernmentToAmendLiquorControlAct,”News Releaseno.159,February7,2007,quotingthePublicSafetyministerasfollows:“Afterathoroughreviewofthedecision,governmenthasdecidedthatitisinthebestinterestofNewBrunswicktopasslegislationto
impact of retroactive legislation on the litigant n 617
paid the“new”taxat the timeheorshepurchasedalcohol froma licensee,anddeemsthelicenseetohavecollectedthetaxasagentandtohaveremittedittotheprovince:
131.3(2) EverypurchasershallpaytotheProvinceforthepurposeofraisingrev-enueforProvincialpurposesataxinrespectoftheuseorconsumptionofallliquorpurchasedbyhimorherinthelicensedpremisesofalicenseeorpermitteeatanytimeafterFebruary28,1998,andbeforeFebruary27,2004,computedattherateof5%ofthepurchaseprice....
131.3(4) Apurchasershallbedeemedtohavepaidthetaxatthetimeheorshepurchasedtheliquor.
131.3(5) AtanytimeafterFebruary28,1998,andbeforeFebruary27,2004,alicen-seeorpermitteeshallbedeemedtohavebeenanagentoftheProvinceforthepurposeofcollectingthetaxandshallbedeemedtohavecollectedthetaxfromthepurchaserat thetimethepurchaserpurchasedthe liquorandtohaveremittedthetax to theProvince.
Theamendmentsfurtherdeemanymoniespaidonaccountofthepriorinvalidtaxtohavebeencollectedandretainedbytheprovinceaspaymentforthenewtax,“notwithstandinganyjudgmentobtainedbyanypersonforrecoveryofanyofthemoney,whetherthejudgmentisobtainedbefore,onoraftertheenactment”oftheamendments:
131.3(7) Where, at any time afterFebruary28, 1998, andbeforeFebruary27,2004,moneywascollectedorpurportedtohavebeencollectedasuserchargespursu-ant to New Brunswick Regulation 89-167 under this Act, the money shall by thissectionbeconclusivelydeemedtohavebeencollectedandretainedbytheProvince,withoutcompensation,aspaymentforthetaxnotwithstandinganyjudgmentobtainedbyanypersonforrecoveryofanyofthemoney,whetherthejudgmentisobtainedbefore,onoraftertheenactmentofthissection.
TheamendmentsaredeemedtohavecomeintoforceonMarch1,1998andare“retroactivetotheextentnecessarytogiveiteffectonandafterthatdate.”42Theneteffectoftheseenactmentsisessentiallytoallowthegovernmenttoretainthemoniespaidonaccountoftheinvalidfeeimposedonthelicenseesunderthepriorlegislationandtooffsetthoseamountsagainstthepurchaser’sliabilityforthenewtaxundertheamendedprovision,whichthelicenseeisdeemedtohavecollected.Since the new tax is in the same amount as the prior fee and the purchaser isdeemedtohavepaidthetax,noadditionalliabilityarises.Theenactments,however,
retroactivelyestablishataxbetween1998and2004inlinewiththeSupremeCourtdecisionintheappealofKingstreetInvestmentsforrepayment.”Thenewsreleasenotedthatreimbursementofthefeetoallliquorlicenseesintheprovincewouldcost$12million.
42 SNB2007,c.23,s.3.
618 n canadian tax journal / revue fiscale canadienne (2010) vol. 58, no 3
effectivelyprecluderecoveryofthepriorfeebythelicenseesnotwithstandinganyjudgmentobtainedatanytimefortherecoveryofthefee.43
Confédération des Syndicats Nationaux
The DecisionIn Confédération des syndicats nationaux v. Canada (Attorney General),44 a group oftaxpayerschallengedtheconstitutionalvalidityofthepremium-settingmechanismunderthefederalemploymentinsurance(EI)system.Numerouspremium-settingmechanismshavebeenusedsincethesystem’sinception.Effective1996,ratesweresetbytheEmploymentInsuranceCommissionpursuanttosection66oftheEmploy-mentInsuranceAct,45whichmandatedarelativelystablerateinordertoaccumulateadequatereserves. In2002,2003,and2005, thegovernor incouncil set therateunderanewpremium-settingmechanisminsections66.1and66.3,whichomittedlegislativecriteriatoguidethesettingofrates.
TheSupremeCourtofCanadafoundthatthisnewpremium-settingmechanismlackedsufficientconnectionwiththeregulatory frameworkof theEIsystemandthatitthereforeimposedataxratherthanaregulatorychargeduringtheapplicableyears.Theauthoritytoimposeataxhadnotbeendelegatedexpresslyandunambigu-ouslytothegovernorincouncilandthereforeviolatedsection53oftheConstitutionAct,1867.Accordingly,theSupremeCourtdeclaredsections66.1and66.3oftheEIAasapplicablein2002,2003,and2005tobeinvalid,anditheldthattheemploy-mentinsurancepremiumsinthoseyears“werecollectedunlawfully.”(Incontrast,thepremiumsimposedin2004werevalidbecausetheratewasspecifiedintheEIAitself.)TheSupremeCourt,however,suspendedthedeclarationofinvalidityfor12months“toallowtheconsequencesofthatinvaliditytoberectified.”46
The Retroactive LegislationNot surprisingly,given thefiscal impactof thealternative (namely, refundingEIpremiums for the years at issue), the federal government accepted the SupremeCourt’sinvitationtorectifythelaw.Thiswasdonebyenactingretroactiveprovisions
43 Theadditionalstepofoffsettingapriorinvalidtaxagainstliabilityforthenewtaxhasbeenadoptedinanumberofcasestojustifyretentionofataxheldtobeunconstitutional.Itappearstobeaimedataddressingtheconcernthatpermittinggovernmentstoretainmoniescollectedunderanultravirestaxwouldbeoffensivetoconstitutionalprinciplesandtantamounttoallowingthegovernmenttodoindirectlywhatitcannotdodirectly(seeAmax Potash Ltd. etc.,[1977]2SCR576).Courtshaveaffirmed,however,thegovernment’sabilitytoretainandapplyamountscollectedonaccountoftheultravirestaxagainstliabilityforanew,validtax:seeAir Canada v. British Columbia,[1989]1SCR1161;andCanadian Bar Assn. v. British Columbia(Attorney General),[1994]BCJno.1013(SC).
44 2008SCC68.
45 SC1996,c.23(hereinreferredtoas“theEIA”).
46 Supranote44,atparagraph94.
impact of retroactive legislation on the litigant n 619
inthe2009budgetimplementationlegislation.47Pursuanttothatstatute,sections66.1and66.3oftheEIAaredeemedtohavesetoutthesameratespreviouslysetbythegovernorincouncilfor2002,2003,and2005:
227. Section 66.1 of the Employment Insurance Act, as enacted by section 9 ofchapter5oftheStatutesofCanada,2001,isdeemedtohavereadasfollows:
66.1 Notwithstandingsection66, thepremiumrates for theyears2002and2003are2.2%and2.1%,respectively.228. Section 66.3 of the Employment Insurance Act, as enacted by section 25 of
chapter22oftheStatutesofCanada,2004,isdeemedtohavereadasfollows:66.3 Notwithstandingsection66,thepremiumratefortheyear2005is1.95%.
Sincethepremiumrateissetoutinthelegislation,thetaxingauthorityiscon-sideredtobeexercisedbyParliamentitself.Thisapproach(whichisidenticaltotheapproachtakenfor2004,whichwasheldtobevalid)presumablydoesnotinvolvedelegationofauthoritytothegovernorincouncilasunderthepriorlegislation.
CO NTE X T A ND COMMENTA RY
ThedecisionoftheOntarioCourtofAppealinProcter & GambleandthelegislativeresponsestoKingstreet InvestmentsandConfédération des syndicats nationauxreviewedaboveraiseanumberoflegalissuesregardingretroactivelegislation.Thefollowingcommentarywill attempt tocontextualize thesedevelopments focusingon threemainaspects:(1)theconceptof“vestedrights”;(2)therequirementsforlegislationinterferingwithvestedrights;and(3)theimpactofretroactivelegislationonthelitigant.
Retroactivity and Vested Rights
Thetwoprimarycommon-lawrulesgoverningthetemporalapplicationoflegisla-tioncanbesummarizedasfollows:48
1. Itispresumedthatlegislationisnotintendedtohavearetroactiveapplication. 2. Itispresumedthatlegislationisnotintendedtointerferewithvestedorac-
cruedrights.
Bothpresumptionsmayberebuttedwithevidenceofsufficientlyclearexpressionofintenttothecontrary.
Retroactivity in GeneralWithrespecttothefirstrule,astheSupremeCourtofCanadanotedinImperial Tobacco,neithertheruleoflawnorCanada’sconstitutionembodiesarequirement
47 SC2009,c.2,sections227and228.
48 Sullivan,supranote2,at508.SeealsoGustavson Drilling,supranote32,at279and282.
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of legislative prospectivity, even though retrospective and retroactive legislationmayoverturnsettledexpectationsandmaybeperceivedasunjust.49Accordingly,whilethereisapresumptionofstatutoryinterpretationthatastatuteshouldnotbegiven retroactive effect, such effect may be given if it is clearly expressed. ThispremisewasacceptedbytheOntarioCourtofAppealandtheOntarioSuperiorCourtinProcter & Gamble.Bothcourtswereoftheviewthatthelanguagedeemingtheamendeddefinitionof“returnablecontainer”tohavecomeintoforceonMay7,1997(thatis,priortothetransactionsatissue)wassufficientlycleartorebutthepresumptionagainstretroactiveapplication.50
The Concept of Vested RightsThemainpointofcontentioninProcter & Gambleconcernedthesecondruleandwhetherthepresumptionagainstinterferencewithvestedrightscouldbeexpandedto“adjudicatedrights”acquiredpriortotheenactmentoftheretroactivelegisla-tion.P&G’spositionwasthatthelegislationlackedthespecificintentrequiredtointerferewithitsrights.ThisissimilartothepositiontakenbythetaxpayerinC.I. Mutual Funds Inc. v. Canada(discussedbelow)that,while
theremustbesomeretroactiveapplicationofthislegislation,...Parliament’suseofblandandinconclusivelanguage...shouldnotacttointerferewiththerightsofliti-gantswhoseappealswereinprogressandspecificallyknowntothegovernmentatthetimethelegislationwasdrafted.51
InProcter & Gamble,theOntarioCourtofAppealeschewedrecognitionof“ac-crued rights,” inpartbecause it considered theconcept tobe“amorphous.”52 Itacknowledgedthe“traditionalconceptofvestedrights”butdidnotelaborateorcommentonwhatconstitutesa“vestedright,”otherthantonotethatP&Gdidnothavean“immediateandenforceableright”totherefunds.53
Ithasbeennotedthattheconceptof“vestedrights”isitselfsomewhatvague.54Whilecertaincategoriesofvestedrightshavebeenrecognized(examplesareproperty
49 Seesupranote1andtheaccompanyingtext.Asnotedabove,however,retroactivecriminallegislationislimitedbysection11(g)oftheCharter.OtherrightsembodiedintheCharterhavealsobeenraisedaspotentiallimitstoretroactivelegislation.SeeClitheroe,infranote83andtheaccompanyingcommentary.
50 Thisviewisconsistentwithpriorcaselaw.Forananalysisoftheretroactiveeffectofthephrase“deemedtohavecomeintoforce,”seeC.I. Mutual Funds Inc.,[1997]GSTC84(TCC),discussedinthetextbelowatnote75andfollowing.Inappealofthisdecision,theFederalCourtofAppealnotedthatanumberofdifferentwaysofexpressingretroactiveintenthavebeenacceptedbythecourts:[1999]2FC613,atparagraph11(FCA).
51 Ibid.(FCA),atparagraph9.
52 Supranote8,atparagraph50.
53 Ibid.,atparagraph53.
54 SeeSullivan,supranote2,at528-32.
impact of retroactive legislation on the litigant n 621
rights,contractualrights,andrightstodamagesorothercommon-lawremedies),itisoftendifficulttopredictwhetherotherinterestsorexpectationswillberecog-nizedasa“vestedright”:
Outsidethesetraditionalcategoriesitisdifficulttopredictwhenagiveninterestorexpectationwillberecognizedasavestedoraccruedright.Thereisavastrangeofclaimsthatmaybemadepursuanttoastatuteforbenefits,authorizations,exemptions,remedies,ordersandthelike.Themethodsofestablishingandenforcingthoseclaimsfollownofixedpattern.In each case the court must decide whether at the moment of repeal the individual’s statutory claim was sufficiently defined and developed, and sufficiently in his or her possession, to count as a vested right.55
Inthecontextoftaxdisputes,thequestionoftenarisesofpreciselywhenvestedrightscanbesaidtoexist.OnthebasisofthecaselawreviewedbytheCourtofAppealinProcter & Gamble,itappearsthatvestedrightsthatbenefitfromthepre-sumptionagainst interferenceby retroactive legislationhavebeen recognized toarisewherethelitiganthasobtainedanactualcourtdecisiononthedispositionofthesubstantivematterpriortotheamendmentatissue.56Therefore,hadP&Gfol-lowedthestatutoryprocessforappealsundertheRSTAandobtainedajudgmentforrefund,presumablysomeformofvestedrighttotherefundwouldhavearisen.
Thedecisionisnot,however,entirelyclearonthispoint,andthereremainanumberofimportantuncertainties.Forexample,arewetounderstandtheCourtofAppealassuggestingthatan“immediateandenforceableright”isanecessaryhall-markofavestedright?Mustallrelevantappealperiodsexpirebeforeajudgmentcangiveriseto“vestedrights”?57Canavestedrightarisewherethedispositionofanappealisnotanorderforareturnofmoniesorpropertybut,forinstance,thevacatingofanassessment?58Dovestedrightsariseiftheorderistoremitthematter
55 Ibid.,at531(emphasisadded).
56 Thecourtcitedthefollowingcases.C & E Comrs,supranote29:thetaxtribunalhadallowedthetaxpayer’sapplicationforrefund,whichwasactuallypaidtothetaxpayer,priortotheenactmentsatissue;Canada Trustco,supranote23:theTaxCourthadallowedthetaxpayer’sappealoftheassessment,vacatedtheassessment,andremittedthematterbacktotheministerforreassessment,priortotheenactmentsatissue;Zadvorny,supranote19:theplaintiffhadobtainedrecoveryattrialpriortotheenactmentatissue;Hornby Island Trust,supranote19:thelowercourthaddismissedtheactionagainsttherespondentpriortotheenactmentsatissue;andCanada v. Gibson,2005FCA180andC.H.S. v. Alberta (Director of Child Welfare),2008ABQB513,bothofwhichinvolvedcourtdecisionsrenderedpriortotheamendmentsatissue.
57 ThemotionsjudgeinProcter & Gamble,supranote17,atparagraph17,forexample,statedthatthe“accruedrightsofP&Gcouldonlyhavebeenconsideredsettledbetweenthetimeofthe decision of the Court of AppealinNovember2007andthechangetotheStatuteinMay2008”(emphasisadded).Asnotedabove,theministerbeganbutsubsequentlyabandonedafurtherappealtotheSupremeCourtofCanada.
58 Taxappealsmaynotnecessarilyinvolvetherefundofmonies—forexample,anappealofanassessmentforfailuretocollectGSTundertheETA.
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backtotheministerforreassessment?Canvestedrightsarisesimplythroughthefilingofanoticeofobjectionorappeal?
TheCanadianInternationalTradeTribunalconsideredthislastscenarioinJostens Canada Ltd. v. Minister of National Revenue,59acasethatinvolvedanappealoftheminister’srejectionofapplicationsforrebatesforthefederalsalestax(FST)inventoryrebateundersection120oftheExciseTaxAct.60OnJune10,1993,shortlyafterthehearingandprior to the tribunal’sdecision, thedefinitionof“inventory” insec-tion120wasamendedanddeemedtohavecomeintoforceonDecember17,1990.Thenewprovision,ifapplicable,hadtheeffectofprecludingtherebatesfortheFSTinrespectofcertaingoodsthatcouldnotbesaidtohavebeenheld“separately”forsale.61Thetribunalheldthattheamendeddefinitionwasclearinitsretroactiveeffectandappliedtothecaseunderconsideration:
TheTribunalisoftheopinionthat,sincetheamendmentsareclearastotheirretro-activeeffecttoDecember17,1990,theymustbeapplied.It is a long-standing principle of Canadian law that legislation enacted after a case is commenced is to apply to such a case where it is clear from the language of that legislation that it is to have retroactive effect when it is adopted.62
In Kingstreet Investments, it appears that the litigant would have possessed avestedrighttorecoveryoftheamountspaidonaccountoftheultravirestaxuponthe Supreme Court’s decision. The Supreme Court overruled the lower courts,whichhaddeniedrecoveryonvariousgrounds,andheldthat“theappellantsareentitledtorecoveralluserchargespaidonorafterMay25,1995.”63
Incontrast,itappearsthatnovestedrightstorecoveryarosewiththeSupremeCourt’s decision in favour of the litigant in Confédération des syndicats nationaux(overturning the lowercourts),given that thecourt suspended itsdeclarationofinvalidityandthegovernmentsubsequentlyenactedremediallegislation.
Allinall,itremainsdifficulttogleanmuchmorebeyondgeneralprinciplesthatcanbeappliedtothevariousscenariosinwhichretroactivelegislationmayarise.64
59 Appealno.AP-92-195.SeealsoIBM Canada Ltd. v. Canada,2001FCT1175(FC);aff ’d.2002FCA420.TheFederalCourtproceededonthebasisthattheretroactiveamendmentstosubsection120(2.1)oftheETAappliedanddismissedthetaxpayer’sappealnotwithstandingthattherebateclaimsandnoticeofobjectionwerefiledpriortotheenactmentoftheamendments.
60 Supranote4.SeealsoGruenberg v. Minister of National Revenue,Appealno.AP-92-252.
61 Theamendmenttothedefinitionof“inventory”addedtherequirementthatthetax-paidgoodsbeheldforsale,lease,orrentalseparately,whichwouldexcludegoodsincorporatedintoothergoods.
62 Jostens Canada,supranote59,at3(emphasisadded).OneofthecasesthatthetribunalreferredtowasWestern Minerals,infranote68,discussedintheaccompanyingtext.
63 Supranote36,atparagraph62.
64 TherehavebeenanumberofproposedamendmentstotheETAinresponsetocourtcasesinfavourofthetaxpayer.SeeState Farm Mutual Auto Insurance Co. v. The Queen,2003CanLII
impact of retroactive legislation on the litigant n 623
PerhapsthebestapproachistoheedtheOntarioCourtofAppeal’sstatementinProcter & Gamblethateachsituationistobeaddressedonanindividualbasis,takingintoaccounttheparticularstatutoryandfactualcontext:“Itmakesbettersensetotreatrightsandinterestsaccordingtotheircontentandthespecifictermsoftheretroactivelegislationatissueinanycase.”65Ithasbeensuggestedthattheultimatequestioniswhethertheparticular interestorexpectationforwhichprotectionissoughtissufficientlyimportanttoberecognizedasarightandsufficientlydefinedandinthecontroloftheclaimanttoberecognizedasvestedoraccrued.66
Expression of Intent To Affect Vested Rights
Asnotedabove,evenwherevestedrightsareconsideredtoarise,theymaybeover-turnedwherethelegislativeintentissufficientlyclear.Thisraisesthequestionofthelanguagethatwouldbesufficienttoevidenceaclearlegislativeintenttoover-turnvestedrights.67Thereareinstances(reviewedbelow)wherelegislatureshaveusedveryclearandexplicitlanguagetoexpressnotonlyretroactiveeffectbutalsotheintenttointerferewithvestedrights.Buttherearealsoinstanceswheremoregenericlanguagehasnonethelessbeendeterminedtobesufficient.
691(TCC)andtheNovember17,2005proposedchangestosection220,whichwouldberetroactivetotheintroductionoftheGSTonDecember17,1990.Seealsothechangestothedefinitionof“financialservice”undersubsection123(1)oftheETAmadeintherecentfederalbudgetimplementationlegislation(SC2010,c.12,section55).ThesechangesaredeemedtohavecomeintoforceonDecember17,1990,subjecttocertainexceptions.AlthoughtheCRA’s“ProposedChangestotheDefinitionofFinancialService,”GST/HST Noticeno.250,June2010,statesthatthechangeswouldnotaffectanycasesubjecttoafinaldeterminationbythecourtsbeforeDecember14,2009(theannouncementdateofthechanges),thereisnoreferencetothisresultinthelegislation.ThecourtdecisionsthatapparentlyledtotheseamendmentsareCanadian Medical Protective Assn. v. R,[2009]GSTC65(FCA);Promotions D.N.D. Inc. v. R,[2007]GSTC79(TCC);andCostco Wholesale Canada Ltd. v. R,[2009]GSTC38(TCC).SeeGST Times,SupplementtoDavidM.Sherman,Canada GST Service,releaseno.242C,January2010(Toronto:Carswell)(looseleaf ).
65 Supranote8,atparagraph51.Forexample,oneimportantstatutoryfactorintheProcter & Gamblecaseappearstobetheeffectofsection18(8)oftheRSTA,whichdeemsanassessmenttobevalidandbindingunlessvariedorvacatedonobjectionorappeal.TheOntarioCourtofAppealcitedthisprovisioninsupportofitsconclusionthattherule14declarationdidnotconferanyvestedrighttotherefundssoughtbyP&G.AnotherstatutoryfactorthatmayberelevantinsomecasesistheeffectofanyapplicablelegislationundertheInterpretationAct,RSC1985,c.I-21,whichtypicallyaddressestheeffectoftherepealoflaws.
66 Sullivan,supranote2,at530.
67 Inthisregard,Sullivanstates,ibid.,at539,“Thepresumptionagainstinterferingwithvestedrightsisrebuttedbyanyadequateindicationthatthelegislatureintendeditslegislationtohaveimmediateandgeneralapplicationdespiteitsprejudicialimpact.Thisintentionissometimesstatedexpresslyintheformoftransitionalprovisions.ThesesetoutrulesspecifyingthetemporalapplicationofthelegislationbeingrepealedorenactedbyaparticularAct.SuchrulesprevailoveranycontrarycommonlaworInterpretationActrules.”
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Language Sufficient To Interfere with Vested RightsInWestern Minerals Ltd. v. Gaumont,68thelegislationinquestionwasenactedfol-lowingajudgmentfortheplaintiffattrialbutbeforethehearingoftheappeal.Theplaintiffwastheregisteredownerofthesubsurfacerightstothelandsinquestionwhilethedefendantwastheregisteredownerofthesurfacerights.Theplaintiffinitiallyobtainedajudgmentinitsfavourattrial,awardingittheownershipofsandandgravelextractedfromtheland.69Thedefendantappealed,andsubsequenttothehearingoftheappeal,theretroactivelegislationinquestionwasenacted.Thelegislationreferredexplicitlytothetrialjudgmentanddeclaredthattheownerofthesurfaceoftheland“isandshallbedeemedtobeandatalltimestohavebeentheowner”ofandentitledtoallsandandgravelrecoveredbysurfaceoperations.70TheAlbertaCourtofAppealheldthatthelegislationappliedretroactivelytothepartiesand allowed the appeal, dismissing the plaintiff ’s action.71 This was affirmed onfurtherappealtotheSupremeCourtofCanada.LockeJconcludedthatthelanguagewasadeclarationofwhatthelawhasalwaysbeen,andthatthisrebuttedthepre-sumptionagainstretroactiveconstructionofastatute.72
TheamendmentsmadetotheNewBrunswickLCAfollowingKingstreet Invest-ments,whichpreclude reimbursementof the illegal tax, also appear to express aclearintentiontoaffectvestedrights,giventhattheamendmentsarestatedtoapply“notwithstandinganyjudgmentobtainedbyanypersonforrecoveryofanyofthemoney,whetherthejudgmentisobtainedbefore,onorafter”73theirenactment.Moreover,giventhattheSupremeCourtofCanadahadruledthatthelitigantwasentitledto“recoveralluserchargespaid,”74itisarguablethatsuchexpresslanguage
68 [1953]1SCR345.
69 (1951),1WWR(NS)369(Alta.SC).
70 ThepreambleoftheSandandGravelAct,SA1951,c.77stated,“WhereasinanactionintheSupremeCourtofAlbertabetweenWesternMineralsLimitedandWesternLeaseholdsLimited,Plaintiffs,andJosephAlbertGaumont,Defendant...itwasadjudgedthattheplaintiffswhoweretheownersofmineralswereentitledtosandandgravelandthatthedefendantswhoweretheownersofthesurfaceoflandwerenotentitledtothesaidsandandgravel.”
71 (1951),3WWR(NS)434.
72 Supranote68,at365.Canada v. Gibson,supranote56,referredtobytheOntarioCourtofAppealinProcter & Gamble,isanotherexampleofexplicitintenttoaffectvestedrights.TheFederalCourtofAppealheldthatsubsection222(10)oftheITAappliedtoaJune4,2004judgmentandretroactivelyextendedthelimitationperiodforassessmentbydeemingthetaxdebttohavebecomepayableonMarch4,2004.Subsection222(10)providesasfollows:“NotwithstandinganyorderorjudgmentmadeafterMarch3,2004thatdeclaresataxdebtnottobepayablebyataxpayer,orthatorderstheMinistertoreimbursetoataxpayerataxdebtcollectedbytheMinister,becausealimitationperiodthatappliedtothecollectionofthetaxdebtendedbeforeroyalassenttoanymeasuregivingeffecttothissection,thetaxdebtisdeemedtohavebecomepayableonMarch4,2004.”
73 Section131.3(7)oftheLCA.
74 Supranote36,atparagraph62.
impact of retroactive legislation on the litigant n 625
wouldhavebeenrequirediftheintentionwastointerferewiththelitigant’srighttorecovery.Incontrast,theamendmentstotheEIAthatfollowedtheSupremeCourt’sdecision inConfédération des syndicats nationauxwererelativelygeneric.However,sincetheSupremeCourtsuspendeditsdeclarationofinvalidity,novestedrightsappear tohavearisen,andanexpress intentionto interferewithsuchrightswasarguablyunnecessary.
AstheOntarioCourtofAppealnotedinProcter & Gamble,whileanexplicitindi-cationthatretroactivelegislationappliestopriorcourtdecisionsiscertainlysufficienttoovercomethepresumptionagainstinterferencewithvestedrights,itisnotalwaysnecessary.InC.I. Mutual Funds,theTaxCourtofCanadaacceptedthatthesimplephrase“isdeemedtotakeeffect”(onaspecifieddate)wouldhavebeensufficientinthecircumstancestoevidencetheintentiontointerferewithvestedrights.75Thecaseinvolvedamendmentsmadetothedefinitionof“financialservices”undersub-section123(1)oftheETA,whichexplicitlyidentifiedcertaininvestmentmanagementservicesastaxablesuppliesforthepurposesofthegoodsandservicestax(GST).Theamendments were enacted after the taxpayer’s appeal was commenced but weredeemedtohavecome into forceonDecember17,1990.ThecourtcitedCôté’ssuggestionthatlegislaturesmayinsomeinstancesbegrantedbroadleewayinex-pressinganintentiontoaffectvestedrights:
The Courts are not particularly demanding with regard to expression of intent to affect vested rights.Onnumerousoccasions,theyhavesimplynotedthatthewordingofthestatuteseemstoapplyindiscriminatelytoalllegalsituations,whetherconstitutedbeforeorafter the commencement of the statute. The literal method tends to assign to thelegislatortheintentiontoaffectvestedrightswheneverthestatutefailstodistinguishbetweenlegalsituationsconstitutedbeforeoraftercommencementofthenewstatute:sinceParliamenthasfailedtodrawadistinction,thejudgewouldhavenorighttodosoeither.76
Withrespecttothelegislationatissue,theevidenceindicatedthattheamend-mentsweremadeinorderto“clarify”thelegislationandtoreflectthegovernment’sintentiontotaxadministrativeandmanagementservicesprovidedtomutualfunds.Theydidnotrepresentanintentiontoimplementanewregimetotaxpreviouslyexemptservices.Inthecircumstances,thecourtwaswillingtoinferthattherewassufficientintentiononParliament’sbehalftoaffectanyrightthatmayhaveaccrued.Thecourtspecificallynotedthatthelegislatorneednotreferspecificallytopendingactions inorder forretroactive legislationtoaffect therightsof litigants. Inanyevent,thecourtalsoconcludedthatthetaxpayerhadnotacquiredanyvestedrights
75 Supranote50(TCC),atparagraph51.Asnotedabove,theFederalCourtofAppealupheldtheTaxCourt’sconclusionsonthesepoints(ibid.(FCA),atparagraph10).
76 Supranote50(TCC),atparagraph50,quotingfromPierre-AndréCôté,The Interpretation of Legislation in Canada,2ded.(Cowansville,QC:Y.BlaisÉditions,1991),152(emphasisadded).
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priortothetablingoftheretroactivelegislationbecausetheservicesatissueweretaxableunderthepriorlegislation.
Language Insufficient To Interfere with Vested RightsOntheotherhand,thereareinstanceswherecourtshavedeclinedtoapplyretro-activelegislationthatwouldinterferewiththelitigant’svestedrights.OneexampleistheSupremeCourtofCanada’sdecisioninCanada Trustco,referredtoabove.Thecourt’sbriefcommentthattheGAARamendmentsdidnotapply“afterthepartiesarguedtheircasesandtheTaxCourtjudgerenderedhisdecisiononthebasisoftheGAARasitreadpriortotheamendment”77isintriguing,althoughitwasnotthefocusofthejudgment.GiventhattheSupremeCourtdidnotelaborateontheissue,it issomewhatdifficulttodiscernexactlywhatthecourtmeant—and, indeed, inProcter & GambletheOntarioCourtofAppealdownplayedthesignificanceofthedictum.Itmaybenoted,however,thattheamendmentstoGAARwereenactedafterthetaxpayerhadobtainedajudgmentinitsfavourfromtheTaxCourt.Totheextentthatthetrialjudgmentcouldbesaidtohavegiventhetaxpayervestedrights,clearlegislativeintenttointerferewiththoserightswouldhavebeenrequired.Perhapsthe Supreme Court declined to apply the amended provisions because, takingeverythingintoconsideration,thegenericstatement“applieswithrespecttotrans-actionsenteredintoafter”78(thespecifieddate)wasnotsufficientlyclear.
Anotherexampleofaninstancewherethecourthasdeclinedtoapplyasubse-quentretroactiveenactmenttotheappealofacourtdecisionisHornby Island Trust Committee v. Stormwell.79Thetrialjudgehadconcludedthattheparticularbylawatissuewasinvalid.Anenactmentmadebeforetheappealstatedthataninvalidbylawisnonetheless“conclusivelydeemedtohavebeenvalidlymadeatthetimeitwasmade.”80Onappeal,theBritishColumbiaCourtofAppealdeclinedtoapplytheenactment,inpartonthebasisthatitdidnotclearlyexpresstheintentiontode-privethelitigantsofthetrialjudgment.81
Impact on Litigant
Litigant Affected by Retroactive LegislationAnotheraspectoftheProcter & Gambledecisionthatisinterestingtonoteisthatthelitigantwasdirectlyaffected(ifnottargeted)bytheretroactivelegislationinissue.Similarly,itappearsthatthelitigantinKingstreet Investmentswasdirectlyaffectedby
77 Supranote23,atparagraph7.
78 SC2005,c.19,section52(amendingsection245oftheITA).
79 Hornby Island Trust,supranote19.
80 MunicipalAmendmentAct(No.2)1987,SBC1987,c.38,section23.
81 Hornby Island Trust,supranote19,perLambertJ(HutcheonJconcurring).MacDonaldJ’sseparatereasonsfornotapplyingtheenactmentfocusedonwhetheritwas“retroactive”or“retrospective,”adistinctionthat,asnotedabove,hasbeenquestioned.
impact of retroactive legislation on the litigant n 627
the subsequent retroactive amendments to the LCA, at least on the face of thelegislation.82
Thetargetingorsinglingoutofaparticulartaxpayerorcourtdecisionunderretroactivelegislationdoesnotappeartoprovideabasisforobjectioninandofit-self.83InAir Canada v. British Columbia,84theSupremeCourtofCanadaconcludedthat retroactive amendmentsmadeby thegovernment to theGasolineTaxAct,194885inordertopreventtheplaintiffairlinesfromclaimingrefundsoftaxpaidunderthepriorlegislation(whichhadbeenheldtobeunconstitutional)werevalidandeffective.CommentingonthiscaseinImperial Tobacco,theSupremeCourtnotedthattheamendments“weremeantstrictlytodefeatthreecompanies’claims”86forreimbursementofanultravires tax.Nonetheless, theamendmentswereupheld,despitethefactthattheywere,inadditiontobeingretroactive,“forthebenefitoftheCrown,aimedataparticular industrywithreadily identifiablemembersandtotallydestructiveofthatindustry’sabilitytopursuesuccessfullytheirclaimsfiledayearearlier.”87
82 Asnotedearlier,section131.3(7)oftheLCAdeemsamountscollectedunderthepriorlegislationtohavebeencollectedandretainedbytheprovince,withoutcompensation,onaccountofthenewtax“notwithstandinganyjudgmentobtainedbyanypersonforrecoveryofanyofthemoney,whetherthejudgmentisobtainedbefore,onoraftertheenactmentofthissection.”Onthebasisofthegovernment’snewsreleaseregardingtheamendments(supranote41),itappearsthatthegovernmentintendedtoreimbursethelitigant:“TheministernotedthatKingstreetInvestments,atgreatexpensetoitself,presentedthecasetothecourts,whichidentifiedthefeeasanillegalindirecttax,andhesaidgovernmentwouldreimbursetheappellantinlinewiththecourtdecision.”Itisnotentirelyclear,however,whetherthisisareferencetocosts(whichtheSupremeCourtawardedtothelitigant)ortosomeformofreimbursementfortheillegaltax.Totheextentthatthereimbursementwouldbeofthemoniespaidonaccountoftheillegaltax,itappearsthatthismatterwouldfalloutsidethelegislation,giventhe“notwithstanding”clauseinsection131.3(7).
83 Thereissomesuggestion,however,thatahigherstandardfortheexpressionoflegislativeintentmayberequiredwheretheprovisionssingleoutaparticularperson.Forexample,theOntarioSuperiorCourtofJusticestatedinClitheroe v. Hydro One Inc.,2009CanLII33029,atparagraph44:“[I]fastatute’sprovisionsareclearlyaimedatoneperson,thelegislature’sobligationtomaketheprovisionsspecificandunambiguousmustbescrupulouslyfollowed.AstheSupremeCourtsaidinWells,‘theuseoflegislationtostripaspecificindividualofalegalrighttocompensation...isaharshandextraordinaryuseofgovernmentalauthoritywhich,becauseitshouldnotbedonelightly,requiresspecificandunambiguouslanguage.’ ”OneofthegroundsraisedbytheplaintiffintheClitheroecasewasthatthelegislationeliminatingherpensionbenefitsinfringedherrighttolibertyundersection7oftheCharter.Althoughthecourtdismissedtheargumentonthebasisthatthepensionbenefitswereapurelyeconomicrightandnotprotectedbysection7,thecaseprovidesanexampleofonepotentiallimitonretroactivelegislation.ThedecisioninClitheroewasappealedtotheOntarioCourtofAppealonJune15,2010;adecisionhasnotyetbeenrenderedasofthedateofwriting.
84 Air Canada,supranote43.
85 RSBC1960,c.162.
86 Supranote1,atparagraph74.
87 Ibid.
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Litigant Excluded from Retroactive LegislationInotherinstances,thelitiganthasbeensparedfromtheeffectofpost-judgmentretroactivelegislation.Forexample,inEurig Estate (Re),88awell-knowncase,thesuccessfullitigantwasexpresslyexcludedfromsubsequentretroactivelegislation.ThecaseinvolvedaprovincialprobatefeethatwasheldbytheSupremeCourtofCanadatobeultravirestheprovince(Ontario)becauseitwasinsubstanceataximposed by the lieutenant governor in council without proper authority of thelegislature.89Inresponse,Ontariopassednewlegislation(theEstateAdministrationAct,1998)thatproperlyauthorizedthelieutenantgovernorincounciltoimposetheprobatefeeandmadethelegislationretroactivebynearly50years(to1950,whentheprobatefeewasfirstimposed),effectivelyoffsettingamountscollectedonaccountoftheoldfeeagainstthenewlyreimposedfee.However,thelegislationex-presslyexcludedtheestateofthelitigant,stating,“TheestateofDonaldValentineEurig,whodiedonoraboutOctober14,1993,isexemptfromtaxunderthisAct.”90
InCommission Scolaire des Chênes v. Canada,91thesuccessful litigantswerealsopartially excluded from the effect of subsequent retroactive law. The taxpayersclaimedinputtaxcredits(ITCs)representingthedifferencebetweentheGSTthattheypaidtoschoolbusprovidersandtherebatesthattheyreceivedaspublicsectorbodiesundersection259oftheETA.Theyweredeniedbytheministerofnationalrevenueonthebasisthattheysuppliedexempttransportationservices“toelementaryorsecondaryschoolstudents”undersection5ofpartIIIofscheduleVoftheETA.TheTaxCourtdismissedtheappeal,92buttheFederalCourtofAppealconcludedthattherecipientofthesupplywasinthefacttheprovinceofQuebec,since,underafundingagreement,subsidieswerepaidbytheprovincialMinistryofTransporta-tionandthosesubsidiesconstitutedconsiderationforthesupply.Thesupplydidnot,therefore,constituteanexemptsupplyoftransportationservicesprovidedtostudents,andthetaxpayerswereeligibleforITCs.TheCourtofAppeal’sjudgmentwasrenderedonOctober17,2001.
TheDepartmentofFinancesubsequentlyamendedthelegislationtoexpandtheexemptioninsection5ofpartIIIofscheduleVoftheETAtoincludesuppliesofstudenttransportationservicesto“apersonotherthananotherschoolauthority.”93ThechangesweregivenretroactiveeffecttoDecember17,1990.Furthermore,theamendmentspermittedtheministertoreassessundertheamendedprovisionsoutside
88 [1998]2SCR565.
89 Thecourtconcludedthattheprobatefeewasinsubstanceatax.Thetaxwasunconstitutionalbecausethelegislationauthorizingthelieutenantgovernorincounciltoimposethefeedidnotconstituteanexpressdelegationoftheprovince’staxingauthority,inviolationofsection53oftheconstitution.
90 SO1998,c.34,schedule,section7(2).
91 2001FCA264.
92 2000CanLII439(TCC).
93 SC2003,c.15,section64(1).
impact of retroactive legislation on the litigant n 629
thenormalfour-yearlimitationperiodundersection298,despiteanycourtdecisionrenderedafterDecember21,2001(theannouncementdateoftheamendments):
[T]heMinistermayreassessthenettaxoranamountpayablebytheauthorityundersection230.1oftheAct...onorbeforethelaterofthedaythatisoneyearafterthedayonwhichthisActisassentedtoandthelastdayoftheperiodotherwiseallowedundersection298oftheAct formakingthereassessment,despitethatsectionanddespiteanydecisionofacourtinrespectofthatreportingperiodoftheauthoritythatisrenderedafterDecember21,2001.94
Giventhatthecourt’sdecisioninCommission Scolaire des ChêneswasrenderedpriortoDecember21,2001,itappearsthatthelitigantsinthatcasewereshieldedfromreassessmentundertheamendedlaw,atleastinrespectofthereportingperiodsthatweresuccessfullyappealed.95
AlthoughtheDepartmentofFinancehasissuedguidelinesoutliningfactorsthatitwillconsiderindecidingwhethertoenactretroactive“clarifyingamendments,”96includingsituationswherelitigationisinprocess,theyaregeneralinnatureanddo
94 Ibid.,section64(3).
95 SeeCanada,DepartmentofFinance,“ProposedGST/HSTAmendmentAffectingSchoolAuthorities,”Releaseno.2001-126,December21,2001,whichstates,“Toensureconsistentexempttreatmentregardlessofhowtheseservicesmayhavebeenfunded,theamendmentisproposedtobeeffectivefromthedateofintroductionoftheGST.However,theproposedamendmentwillnotaffectanycasethathasalreadybeendecidedbytheFederalCourt.”OtherlitigantswhoobtainedadecisionintheirfavourafterDecember21,2001weresubjecttoassessmentundertheretroactivelegislation,althoughitappearsthatreliefwasofferedviaremissionorder;seeCertainSchoolAuthorities(GST/HST)RemissionOrder,PC2007-1634SI/2007-98(2007)vol.141,no.23Canada Gazette Part II,October25,2007.The2007budgetannouncingtheremissionorderstatesthatcertainschoolauthoritieswerereassessed“pursuanttoameasurethatwasannouncedin2001andenactedin2003,despitethefactthattheTaxCourtofCanadahadrendereddecisionsintheirfavourafterthemeasurewasannounced.Theproposedremissionaddressestheseexceptionalcircumstances.”Canada,DepartmentofFinance,2007Budget,BudgetPlan,March17,2007,435.ItisinterestingtocomparethisstatementwiththeDecember14,2009proposedamendmentstothedefinitionof“financialservice”referredtoabove.TheDepartmentofFinanceBackgrounderaccompanyingtheDecember14,2009newsrelease,supranote64,states,“[T]heproposedamendmentswouldnotaffectanycasethathasbeensubjecttoafinaldeterminationbythecourtsbefore[December14,2009].”Thecourtdecisionsthattheamendmentsappeartoaddresswerealldeterminedpriortothatdate.However,exclusionofthesuccessfullitigantsinthosedecisionsdoesnotappeartobeevidentonthefaceoftheNoticeofWaysandMeansMotionToAmendtheExciseTaxActtabledwiththe2010budget.
96 SeeDepartmentofFinance,supranote40,at17-18.Insummary,theguidelinesareasfollows:
Itmaybeappropriatetoadoptretroactiveclarifyingchangeswhere:a) theamendmentsreflectalong-standingwell-knowninterpretationofthelawby
theDepartmentofNationalRevenue;b) theamendmentsreflectapolicythatisclearfromtherelevantprovisions[and]
thatiswell-knownandunderstoodbytaxpayers;c) theamendmentsareintendedtopreventawindfallbenefittocertaintaxpayers;
630 n canadian tax journal / revue fiscale canadienne (2010) vol. 58, no 3
notappeartospecificallyaddresswhetheraparticularlitigantwillbegrandfatheredorwillbeaffectedbytheamendments.
CO NCLUSIO NS
Thecasesreviewedaboveindicatethattheenactmentofretroactivelegislationtooverturnacourtjudgmentandadverselyaffectthelitigantistoberecognizedasarealanddistinctpossibility.Therehavebeenanumberofexamplesinavarietyoftax contexts, including instances such as Procter & Gamble where the legislationdefeats the claim of the hitherto successful litigant. The cases also indicate thatwhileitisasimplemattertorecitethewell-acceptedpresumptionsagainstretro-activityandinterferencewithvestedrights,theapplicationoftheseconceptstoanygivencaseisfraughtwithuncertainty.Inthisregard,additionalguidanceisneededfromthecourts in termsofwhen“vestedrights”maybesaid toariseandwhenretroactivelegislationwillbeappliedtooverturnsuchrights.TheSupremeCourtofCanadawouldhaveagoodopportunitytoprovidesuchguidanceshoulditgrantP&G’sleavetoappeal.Taxpayerswouldalsobenefitfromadditionalguidancefromthefederalandprovincialgovernmentsastothecircumstancesinwhichretroactivelegislationwillbedraftedtoaffecttheparticularlitigantinacourtdecisionandthecircumstancesinwhichalitigantwillbegrandfathered.
d) theamendmentsarenecessarytopreservethestabilityoftheGovernment’srevenuebase;and
e) theamendmentsarecorrectionsofambiguousordeficientprovisionsthatwerenotinaccordancewiththeobjectoftheAct.
Wherelitigationisunderway,thefollowingfactorsshallbetakenintoaccountforthepurposesofdeterminingwhetherclarifyingchangesshouldberecommended:
a) therelationshipbetweenthebenefitsofanimmediateprospectivereductionofriskstothetaxbaseandthepotentialcostsrepresentedbytheresultingincreaseintheriskswithrespecttocasesunderlitigation;
b) theamountoftaxrevenueatriskintheobjectionandappealprocess;c) thestageofthejudicialprocessthathasbeenreachedbyatestcasedealingwith
theissuetobedealtwithbythechange;d) whetheritispossibletomakeadeclaratoryamendmentortoofficiallyrecognize
theclarifyingnatureofthechange.