Policy Forum: Impact of Retroactive Legislation on the ... · impact of retroactive legislation on the litigant n 611 article reviews the decision of Ontario Court of Appeal in Procter

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.”


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).


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.


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.



29 Namely,R v. C & E Comrs, ex p Building Societies Ombudsman Co.,[2000]STC892(CA);andZadvorny,supranote19.


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.


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.


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


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.


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”).



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.


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.


53 Ibid.,atparagraph53.

54 SeeSullivan,supranote2,at528-32.


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.


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.


64 TherehavebeenanumberofproposedamendmentstotheETAinresponsetocourtcasesinfavourofthetaxpayer.SeeState Farm Mutual Auto Insurance Co. v. The Queen,2003CanLII


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.”


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.



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).


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


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.


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.


87 Ibid.


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).


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;


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.

Documents

Policy Forum: Impact of Retroactive Legislation on the ... · impact of retroactive legislation on the litigant n 611 article reviews the decision of Ontario Court of Appeal in Procter