Economic Growth through Constitutional Safeguards: The Canadian Experience

[No. 1

Economic Growth Through Constitutional Safeguards:

The Canadian Experience *

E. S. Binavince**

I. Introduction

This paper will examine the question of economic development
through constitutional safeguards from another perspective: the
perspective of federalism. Hopefully, Canadian experience in this
area will provide ample lessons which you may consider in your-
task of designing a constitutional regime that will encourage or
sustain economic development in your countries.

Canada’s constitution, The British North America Act of 1867,1
contains no explicit qualitative safeguards against the exercise of
governmental power that could serve as a framework for the
encouragement of economic growth. The sections of the Act that
establish the federal system in Canada, more than any other provi-
sion, have functioned as constitutional guarantees to economic
interest, thus aiding Canada’s development into an economically
advanced and industrialized country in today’s world standard. The
task of this paper is to chart the operation of some of these quan-
titative safeguards.

II. Historical Background

Unlike the organic laws of other countries, the Act was not
drafted along any neat and articulate ideological or political theories.
The Fathers of Confederation 2 were not persons armed with theoret-

* Paper presented at the 1970 Conference of the International Society for
the Study of Comparative Public Law, Nairobi, Kenya, August 4-6, 1970. While
this article was at the galley stage, the continuing Constitutional Conference
of Provincial Premiers and the Prime Minister-of-Canada announced the first
major accomplishment of the Conference with the conclusion of the so-called
Victoria Charter. This paper was slightly revised to take into account this
recent development.

** Professor, Faculty of Law, University of Ottawa. Faculty Editor of the

Ottawa Law Review.

130-31 Vict, c. 3 (U.K. 1867). For full text of the B.N.A. Act and subsequent

amendments, see 6 Can. Rev. Stat. Appendix 3, at pp. 6187-6428

21n Canada, little or no distinction is made between “Confederation” and

(1952).

“Federation”.

McGILL LAW JOURNAL

[Vol. 17

ical minds comparable to Jefferson or Hamilton. They were largely
practical men, educated no doubt, but not philosophers or theorists.
They, therefore, wrote the constitution in a style best known to
them: “The job was done after the manner of carpenters,…, not
after that of philosophers: Ship-carpenters, … who, taking a glance
at the hull before them, plane off a bit here and give an extra inch
to the swell of a rib there.” 3 Nonetheless, they were intensely aware
of their reasons for writing the constitution and of the objectives
of the Confederation to be created by that constitution. To them,
the American Civil War spelled danger to British North America;
this powerful country south of the border, they believed, would
sooner or later attempt to end their political and cultural identity.
To establish security for British North America, they created the
Confederation, a new political nationality.4 It would have adequate
means of survival: a national, largely self-sufficient economy., “It
was believed that the resources and industries of British North
America were diversified and complementary: it was argued that
integration of these various elements would provide the requisite
basis of a stable economic life.” 0 A transcontinental railway system
would forge these resources, industries and markets together.
Having abundant faith in their own strength, the Fathers of Confed-
eration gave no thought to the role of capital from other countries
in the economic develop-
–

then more feared than befriended –

3 A.R.M. Lower, Theories of Canadian Federalism – Yesterday and Today, in

Evolving Canadian Federalism 3, at p. 7 (1958).

4Bk. 1 Report of Royal Commission on Dominion-Provincial Relations

at pp. 29-30 (1940).

5 D. Creighton states:

The central economic ambition of the Fathers of Confederation was to
increase the production, to hasten expansion and to promote the prosperity
of the British North American provinces by the establishment of a new
national economy. The other economic hopes of Confederation were, in
the main, included within or dependent upon this major expectation; the
other economic decisions taken at Confederation were meant, on the whole,
to serve this major purpose. The creation of a national economy was the
economic counterpart of the establishment of a new political nationality.
In both designs then was the same element of grandeur; both equally
were novelties in the history of British North America, and both, it could
be argued, were made necessary by the exacting conditions of the time.
Thus, in the minds at its authors, the creation of the new national economy
occupied a place of central importance. It was an enterprise which was
consciously adopted and deliberatly put into execution.

British North America at Confederation 40 (Study prepared for the

Royal Commission on Dominion-Provincial Relations 1939).

6 Id.

[No. I

THE CANADIAN EXPERIENCE

ment of Canada. Rather, they intended to insulate Canada from
the effects of economic policies pursued by the United States and
Great Britain. 7

III. Divided Competence in Canada:

A Quantitative Guarantee

A. General Considerations

It is not necessary to discuss here the basic character of Canadian
federalism. It is enough to state that the powers of government in
Canada are divided between the federal Parliament and provincial
legislatures.” In very broad terms, the Fathers of Confederation
based the division of powers on the vague distinction between
matters of general or national importance and matters of purely
local or private nature. The former were assigned to Parliament;
the latter, to the provinces. Section 91 opens with a broad statement
of Parliament’s power –
to make laws for
the “Peace, Order and Good Government of Canada.” It then
provides twenty-nine subjects as illustrative instances of federal
competence. Section 92 defines provincial competence, naming
sixteen specific enumerations, of which clause 13, “Property and
Civil Rights in the Province,” is the most significant.

the residuary clause –

The obscure and somewhat unsystematic character of this
distribution of powers offers a wide range of quantitative safeguards
to economic interest. The strategy to invoke these safeguards is
amazingly simple: skilfully playing the power of one government
against the power of the other. The fact that the B.N.A. Act is simply
a British statute, thus subject to the usual rules of statutory inter-
pretation,9 makes it easy for business to play the game with

7Supra, note 4.
8 Sophisticated philosophical and historical discussion under

rubrics
“Compact Theory” and “Centralist Theory” abound in Canada. The first
argues for the dominance of provincial power, whereas the latter that of
federal power.

9 In Bank of Toronto v. Lambe, 12 App. Cas. 575 (P.C. 1887) Lord Hobhouse
rejected the rules of construction laid down for the United States Consti-
tution by Mrs. Chief Justice Marshall in Marbury v. Madison, 5 U.S. 137 (1803).
For details see Jennings, Constitutional Interpretation – The Experience of
Canada, 51 Harv. L. Rev. 1 (1937). Because the British North America Act
was passed by the Parliament of Great Britain, it did not provide for any
machinery for amendment, the assumption being that the Parliament of
Great Britain could amend the Act in the ordinary course of legislation.
This fact now haunts Canadians, and the search for an amending formula

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[Vol. 17

outstanding success. I will survey the operation of this strategy in
three main fields of power: the regulation of trade and commerce,
the tax power and the criminal-law power.

B. The Regulation of Trade and Commerce

Section 91(2) allocates to Parliament the broad power for “The
Regulation of Trade and Commerce.” 10 In writing this clause into
the Act, the Fathers of Confederation noted that the “weaknesses
or defects” of the United States constitution in this regard can be
blamed for the Civil War. To avoid these “errors,” they established
a strong federal government with ample power to regulate, not
only “interstate commerce,” but all trade and commerce. 1 If there
was any constitutional norm that could have forged British North
America into a nation along the design of the Fathers, this clause
offered the greatest potential. The less extensive interstate commerce
clause in the United States constitution built America into a nation;
the Canadian trade and commerce clause, broader in scope, there-
fore, had more promise. But the destiny of section 91(2) is an irony
of Hegelian dialectic; today, its ambit is even narrower than that
of the American interstate commerce clause.

Business’s search for a constitutional argument to avoid reg-
ulation was a major factor in this process of judicial confinement.
At first, the argument appeared innocent enough, but it laid the
foundation for provincial control over some aspects of commerce
through the property and civil rights clause. In Citizens Insurance
Co. v. Parsons,’2 the insurance companies, in attempting to evade
liability under policies issued by them, challenged the validity of
provincial legislation by invoking the federal trade and commerce
power. The Privy Council rejected their contention, making some

has been one of difficulties in our effort to reform Canada’s constitution.
For discussion, see, P. Gfan-LAioiE, Constitutional Amendment in Canada
(1950); G. FAVEAU, The Amendment of the Constitution of Canada (1965).
For a brief discussion, see E.R. ALEXANDER, A Constitutional Strait Jacket
for Canada, 43 Can. B. Rev. 262 (1965). The Victoria Chart provides for an
amending formula found acceptable by all parties, aside from a number of
significant constitutional reforms. The Charter, conceived as a package, was,
however, subsequently rejected by Quebec due to an “uncertainty of the
proposed rule” under 94 of the B.NA. Act.

10 For a detailed discussion, see A. SMITH, The Commerce Power in Canada

and the United States 1-181 (1963).

“Severn v. The Queen, 2 S.C.R. 70 (1878); City of Fredericton v. The
Queen, 3 S.C.R. 505 (1880); In re Prohibitory Liquor Laws, 24 S.C.R. 170 (1895).

12 7 App. Cas. 96 (P.C. 1881).

[No. I

THE CANADIAN EXPERIENCE

casual statements that yielded in subsequent cases formidable
qualifications on Parliament’s power over trade and commerce.
To reach this result in subsequent cases, the courts followed a
number of techniques. First, they established the property and
civil rights clause as a limitation on the federal power over trade
and commerce. Federal competence is, thus, not “unlimited”; it
does not include the authority to legislate on contracts of business
or trade in a single province. Second, the rules of statutory interpre-
tation were found to be a handy device: a literal reading of section
91(2) allows only “regulation,” but not “prohibition” of trade.’ 3
Third, by interpreting its interpretation of the B.N.A. Act in Parsons:
section 91(2) is ineffective not only as to “contracts of a particular
business or trade” as held in Parsons, but also as to the “business
or trade itself.”‘ 4 A licensing regulation of trade or commerce
operating within a province is thus beyond the reach of section
91(2). 15 The justifications offered were technically and historically
implausible; they range from the physical location of the various
enumerations in sections 91 and 921- to a clich6 of provincial
sovereignty.17

The operation of these limitations on federal regulation had far
reaching effect in insurance business. Insurance business is now
virtually immune from federal standards respecting licensing of
companies, conditions of incorporation, terms and conditions of
insurance contracts, and supervision to secure the solvency of
insurers.’

In Attorney-General for Canada v. Attorney-General for Alberta,19
insurance companies actively supported provincial power over in-
surance. They charged before the Privy Council that sections 4
and 70 of the Dominion Insurance Act, 1910, encroached upon

3 Toronto v. Virgo, [1896] A.C. 88, at p. 93 (P.C. 1895); Attorney-General
1
for Ontario v. Attorney-General for Canada, [1896] A.C. 348, at pp. 362-63 (P.C.).
14 Attorney-General for Canada v. Attorney-General for Alberta, [19161 A.C.

588, at 596 (P.C.).

15 See also In re the Board of Commerce Act, 1919, [1922] 1 A.C. 191, at
p. 198 (P.C. 1921); Toronto Elec. Comm’rs v. Snider, [1925] A.C. 396, at pp.
409-10 (P.C.).

16 See authority in note 12 supra.
17 Montreal v. Montreal Street Ry., [1912] A.C. 333, at p. 344 (P.C.).
18 Bk. 2 Report of Royal Commission on Dominion-Provincial Relations
pp. 59-62 (1940); MacDonald, The Regulation of Insurance in Canada, 24
Can. B. Rev. 257 (1946).

1a [1916] 1 A.C. 588 (P.C.).

McGILL LAW JOURNAL

[Vol. 17

provincial competence over property and civil rights because this
legislation penalized the selling of insurance by life insurance com-
panies unless they possessed a federal license. The Board agreed:
neither the trade and commerce clause nor the residuary clause
provided authority for the legislation. Although the Board admitted
that “the business of insurance is a very important one, which has
attained to great dimensions in Canada,”
it refused to sustain
federal jurisdiction. Construing the enumerations under section 91,
not as mere illustrative instances of the scope of federal power,
it argued: “Where the British North America Act has taken such
forms of business out of provincial jurisdiction, as in the case
of banking, it has done so by express words.” 20 To the Board, this
would have been unnecessary had the federal claim on the ambit
of the trade and commerce clause been well founded.

Parliament’s attempt to achieve the same objective through its
criminal-law power under section 91(27) was also rejected in
Attorney-General for Ontario v. Reciprocal Insurers.21 The federal
Insurance Act, 1917, established a comprehensive
licensing sys-
tem for any insurance business operated by foreign, Canadian
and British companies or persons. To enforce the regulation, a
penalty provision was inserted in the Criminal Code. The American
reciprocal insurance association, licensed under an Ontario law,
urged that the conviction under the Criminal Code be reversed
because the licensing scheme and penalty provision were beyond
federal competence. The Privy Council held the two laws ultra vires,
finding them to be “complementary parts of a single legislative
plan” constituting an “attempt to produce by a different legislative
procedure the results arrived at by the authors of the Insurance
Act of 1910,, earlier pronounced ultra vires.22 It condemned the
penal provision as a colourable use of the criminal-law power to
intrude into provincial domain.23

The infirmity of federal power over insurance was later extended
to foreign insurance companies. In 1916, the Privy Council conceded
Parliament’s authority to require foreign companies, by properly
framed legislation, to take out a federal license even in cases
where their business was confined in a single province; federal
trade and commerce power and control over aliens under section

20d. at p. 597.
21 [1924] A.C. 328 (P.C.).
22 d. at p. 332.
23 Id. at pp. 33943.

[No. I

THE CANADIAN EXPERIENCE

91(25) provided ample authority 4 In Reciprocal Insurers, decided
eight years later, the Board’s attitude, though not an unequivocal
rejection, was ominously hostile to the federal claim. In In re The
Insurance Act of Canada,25 decided in 1931, the Board’s attitude
had turned full circle. The insurance companies teamed with a
number of provinces in urging the Privy Council to condemn the
contested Insurance Act and the Special War Revenue Act. The
Board obliged and held the federal arguments without merit; the
legislations were not “properly framed.” The alien clause was
inapplicable; the laws did not deal with aliens as such, but they
sought to intermeddle with the conduct of insurance under the guise
of legislation as to aliens.26 The immigration authority provided
no support; Parliament was merely attempting to saddle British
immigrants with a different law as to the conduct of insurance
the
business from that which has been held to be the law –
provincial law.2
7 The tax power was no shield; the tax was linked
with an object which was illegal to tax because it falls within
provincial domain.

The Board’s statement on the last point shows that the federal
struggle to regulate insurance was long lost since Parsons was
decided in 1881:

Section 16 clearly assumes that a Dominion license to prosecute insurance
business is a valid license all over Canada and carries with it the right
to transact insurance business. But it has been already decided that this
is not so; that a Dominion license so far as authorizing transactions of
insurance business in a Province is concerned, is an idle piece of paper
conferring no rights which the party transacting in accordance with
Provincial legislation has not already got, if he has complied with Pro-
vincial requirements. It is really the same old attempt in another way. 8
The courts have been incredibly able to read into many federal
legislations that invalidating poison of “colourable purpose”, a
presumptuous imputation of motive that the courts themselves
have always professed to reject. The true basis of Parliament’s
authority to regulate insurance is the trade and commerce clause,
but since it has suffered substantial strictures, Parliament’s resort
to other constitutional powers is understandable. But even this
avenue had been foreclosed: the effort of Parliament to write

24Attorey-General for Canada v. Attorney-General

for Alberta, [1916]

A.C. 588, at p. 597 (P.C.).

25 [19323 A.C. 41 (P.C. 1931).
261d. at p. 51.
271d. at p. 52.
281d. at pp. 52-53.

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[Vol. 17

a “properly framed” legislation to bring insurance within the ambit
of other powers had been a futile pursuit of a “shadow.” 20 The net
effect of these decisions was the establishment of “intra-provincial
trade and commerce” within provincial domain. Thus, federal trade
and commerce power includes only the following categories:
a)
interprovincial trade and commerce, b) international trade and
commerce, and
c) trade and commerce affecting “the whole
Dominion of Canada.” 30 The third category is a mystery whose
scope has not yet been defined by the courts.3 Business, however,
had successfully invoked it to neutralize the impact of provincial
regulation: John Deere Plow Co. v. Wharton.3 2 John Deere Plow
Company, a federally incorporated business authorized to deal with
agricultural implements throughout Canada, was sued by Wharton,
a shareholder in the company, to restrain the company from carrying
on business in British Columbia because it was not licensed or
registered under the province’s companies act. The company replied
that the provincial regulation was not justified by section 92(11)

29 See Editorial Note, Re Section 16 of the Special War Revenue Act, [1942]
4 D.L.R. 145, at p. 146 (Sup. Ct.). In Attorney-General for Canada v. Attorney-
General for Ontario, [1937] A.C. 355 (P.C.), the Privy Council invalidated
the federal Employment and Social Insurance Act, 1935, because it, “in pith
and substance,” affected civil rights of employers and employees in each
province. To remedy this, we needed a constitutional amendment in 1940,
B.N.A. Act 2A, added by B.N.A. Act, 1940, 3-4 Geo. VI, c. 36 (U.K.). In Re
Section 16 of the Special War Revenue Act, [1942] S.C.R. 429,
[1942] 4
D.L.R. 145, the Supreme Court struck down a taxing provision of a federal
law because it dealt with the business of insurance within a province.
Insurance business was, as a result, freed from federal deposit requirements
to be licensed to do business and from safeguards against insolvency. The
‘case, inspite of the tax angle raised, did not even discuss the federal taxing
power.

3OThe third category was recognized as early as Parsons and affirmed
in subsequent cases. See, e.g., Russell v. The Queen, 7 App. Cas. 829 (P.C.
1882); Hodge v. The Queen, 9 App. Cas. 117 (P.C. 1883); Bank of Toronto
v. Lambe, 12 App. Cas. 575
(P.C. 1887); and Toronto Elec. Comm’rs v.
Snider, [1925] A.C. 396 (P.C.).

31 A. SmiTH, supra, note 10, at p. 77.
32 [1915] A.C. 330 (P.C. 1914). Before John Deere came before the Privy
Council, the power of Parliament to incorporate companies with objects
other than provincial was recognizied as one falling under the residuary
clause. These companies, however, are subject, not only to federal regulation
on the conduct of their business, but also to provincial regulation. Citizens
Insurance Co. of Canada v. Parsons, 7 App. Cas. 96 (P.C. 1881); Colonial
Bldg. & Inv. Ass’n v. Attorney-General of Quebec, 9 App. Cas. 157 (P.C.
1883). For an affirmation after John Deere, see Great West Saddlery Co. v.
The King, [1921] 2 A.C. 91 (P.C.).

[No. I

THE CANADIAN EXPERIENCE

or 92(13); further, it violated federal power over trade and com-
merce, or at least, the residuary clause. The Privy Council agreed
with John Deere Plow Company. The residuary clause grants to
Parliament the power to incorporate companies whose objects are
other than provincial; Parliament’s power to regulate trade and
commerce affecting the whole Dominion of Canada supported
Parliament’s grant to such companies of the usual corporate
powers.33

The scope given to the residuary clause in John Deere is some-
what surprising. In later cases, this clause, thought by many to
be the spring from which all governmental powers flow, had also
fallen victim to the expansion of provincial power through the
property and civil rights clause and was reduced to a simple
statement of federal emergency power.3 4 There are good reasons
to charge that the residuary clause, in the hands of the courts,
had been assimilated by the property and civil rights clause. The
assertion of the residuary clause in this case is, however, under-
standable at that time. The main economic activity at the time
John Deere was decided affected the whole Dominion. From 1896
until some years after World War I, Canada enjoyed prosperity in

33 [1915] A.C. 330, where at p. 340 Lord Haldane said:

[T]he power to regulate trade and commerce at all events enables
the Parliament of Canada to prescribe to what extent the powers of
companies the objects of which extend to the entire Dominion should
be exercisable, and what limitations should be placed on such powers.
For if it be established that the Dominion Parliament can create such
companies, then it becomes a question of general interest throughout
the Dominion in what fashion they should be permitted to trade. Their
Lordships are therefore of the opinion that the Parliament of Canada
had power to enact the sections relied on in this case in the Dominion
Companies Act and the Interpretation Act.

He qualified, however, that the power to regulate trade and commerce cannot
be exercised, with respect to these companies, to encroach on provincial
jurisdiction on civil rights. The holding is thus limited:

It is enough for present purposes to say that the Province cannot
legislate so as to deprive a Dominion company of its status and powers.
This does not mean that these powers can be exercised in contravention
of the laws of the Province restricting the rights of the public in the
Province generally. What it does mean is that the status and powers
of a Dominion company as such cannot be destroyed by provincial
legislation.

Id. at p. 341.

34 The “emergency doctrine” was advanced in 1921, In re The Board of

Commerce Act, 1919, [1922] 1 A.C. 191 (P.C. 1921).

For a recent re-interpretation of the scope of the residuary clause, see

National Capital Commission v. Munro, [1966] S.C.R. 663.

McGILL LAW JOURNAL

[Vol. 17

the agricultural economy, especially in wheat farming. The opening
of the West, where agricultural prosperity was most remarkable,
was largely due to federal initiative in capital investment, transpor-
tation, immigration and export. “The development of the West was
a national achievement and the participation of all areas in a
common effort fostered a new sense of nationhood.”35 At that
time, even the problems of provincial adjustment, regional interest,
local and cultural diversities were either solved or overshadowed
by the Western expansion under the leadership of the federal
government.

To the courts, however, John Deere seems now too remote in
the past and too exceptional in its historical setting to inspire
the development of new grounds for the assertion of federal power
over trade and commerce. As late as 1955, Mr. Justice Rand was
forced to admit that the third category of trade and commerce
was as yet “undefined.” 36

Even federal authority over interprovincial and international
trade and commerce did not escape judicial confinement. The courts
have never disputed the existence of federal power over these two
categories of commerce.3 7 But its confinement was all the more
disturbing because the area carved out by the courts was not
open to the provinces. The reason can be traced to their static
conception of the division of legislative competence: the conception
that federal and provincial competence are contained in watertight
compartments conceptually incapable of interacting and supplement-
ing each other. For business, this meant an unregulated paradise
in certain areas of commerce. The Supreme Court, then only a
“captive court” that saw its task, not in interpreting the constitution
but in interpreting what the Privy Council said the constitution
meant, 8 can claim credit for introducing this naive conception into
the stream of business life. The time when this unregulated paradise
was created made its impact doubly disastrous. When The King v.
Eastern Terminal Elevator Co.39 was decided, the spectre of the

35 Bk. 1 Report of Royal Commission on Dominion-Provincial Relations 66.
For detailed discussion, see W. MACKINTOSH, The Economic Background of
Dominion-Provincial Relations ch. 4 (1964).

3
6 Re Validity of the Industrial Relations and Disputes Investigations Act,

[1955] S.C.R. 529, p. 551.

37 See Attorney-General of British Columbia v. Attorney-General of Canada,
38 Laskin, The Supreme Court of Canada: A Final Court of and for Canadians,

[1924] A.C. 222 (P.C. 1923).

29 Can. B. Rev. 1038, at p. 1069 (1951).

39 [1925] S.C.R. 434.

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THE CANADIAN EXPERIENCE

great depression which began with the crisis of 1929 was emerging
on the horizon. 40 Canada’s export of agricultural products from
the West, the chief factor in Canadian economic growth in previous
years, was on the decline, gaining crisis proportion as the depression
gathered strength. Parliament and the provinces attempted
to
alleviate the severity of the crisis by providing for an orderly
marketing system of agricultural products. The various marketing
systems established by the governments were challenged in the
courts.

Eastern Terminal Elevator Co. involved a federal scheme to
regulate marketing, grading and shipping of Canadian grain. Al-
though the scheme was primarily directed to the regulation of
interprovincial and international trade, the Court condemned it
because it also incidentally affected grain destined for intra-pro-
vincial trade. The ancillary effect of the scheme on provincial trade
was thus found fatal. On the other hand, the Court also invalidated
a provincial marketing system: Lawson v. Interior Tree Fruit and
Vegetable Committee of Direction.41 It argued that the British
Columbia legislation was ultra vires because it did not only affect
local trade but also interprovincial trade.

Lawson, in spite of Eastern Terminal Elevator, sounded like an
invitation to Parliament to re-enter the field. It then passed The
Natural Products Marketing Act, 1934, with the view of cooperating
with the provinces. But in Re The Natural Products Marketing
Act, 1934,42 both the Supreme Court and the Privy Council told
Parliament that it was wrong in reading Lawson as an invitation
to re-enter the field. In declaring the legislation invalid, they insisted
that the incidental effect of the legislation upon provincial trade
is a jurisdictional defect sufficient in itself to render the whole
legislation ultra vires.

To stamp a jurisdictional label on each grain of wheat is, of
course, impossible. Besides, grading and marketing efficiency, not
to say conventional business wisdom, shows that to implement
what the courts are demanding is a commercial folly. What is
true with respect to a grain of wheat applies to most agricultural
products. Faced with this reality, governmental
regulation of
agricultural products destined both to local and interprovincial or
export market is unthinkable: “The courts,… have [thus] created

40 W. MACKINTosH, supra, note 35, at ch. 6.
41 [1931] S.C.R. 357.
42 [1937] A.C. 377 (P.C.).

McGILL LAW JOURNAL

[Vol. 17

a no man’s land in the constitution.143 The eventual introduction
of governmental presence in this area of commerce required not
only the cooperation of the governments;
it also required an
ingenious way of rendering the courts an obsolete institution in
the solution of other jurisdictional problems.4

C. The Exercise of the Tax Power

To draw an adequate picture of the constitutional limitations
on the exercise of the tax power in Canada, I must preface my
discussion of details. Tax measures today are utilized for a variety
of reasons. To raise revenue to finance governmental operation, of
course, remains prominent, but tax laws are also often invoked
to regulate the economy in general or a line of business in particular.
These two purposes are particularly relevant in Canada because
the power to tax a certain object may come within the competence
of one level of government but the power to regulate it may not, or
vice versa. Further, taxation is usually sensitive to political climate.
The national impact of the exercise of provincial tax powers may,
therefore, be uneven or conflicting. As a result, the federal power
over foreign trade, banking, and fiscal matters may be undermined
by the exercise of the tax power by the provinces. With respect
to confiscatory taxation, two points are worthwhile to note. First,
as a practical matter, governments will seldom kill the goose
that lays the golden egg; what they often do is to take the goose,
thus resorting to expropriation rather than taxation. In Canada,
these powers have separate constitutional sources, and the limitation
that applies to one may not necessarily apply to the other. The
second point stems from the concurrent powers of taxation. The
determination of the confiscatory nature of a tax burden is thus
somewhat more complex: a number of taxes, minimal in themselves,
imposed by several governments may become confiscatory in their
cumulative effect.

Around these considerations numberless constitutional issues

can arise; I will discuss only some of these issues.

The B.NA. Act, consistent with its design of strong central
government and extensive federal responsibility, grants to Parlia-
ment a broad tax power and the use of main revenue sources.

43 Scott, The Privy Council and Mr. Bennett’s “New Deal” Legislation, 3

Can. J. Eco. & Pol. Sc. 234, at p. 240 (1937).

44 The cooperative scheme established by the Agricultural Products Marketing
Act, 1949, Can. Rev. Stat. c. 6 (1952), was sustained in P.E.I. Potatoe
Marketing Board v. H.B. Willis, Inc., [1952] 2 S.C.R. 392.

[No. I

THE CANADIAN EXPERIENCE

Parliament has the power of “The raising of Money by any Mode
or System of Taxation,” 45 and the exclusive use of customs and
excise taxes. 4 To challenge, therefore, a federal tax measure on
an alleged absence of the power to tax the burdened object is
virtually precluded. The favoured strategy is to play up the regu-
latory effect of the tax measure, thus inviting the application of
some of the limitations discussed under the trade and commerce
clause. A classic example of the use of this strategy is In re The
Insurance Act of Canada,47 where the insurance companies were
able to dodge the tax imposed by the Special War Revenue Act.
The Privy Council held that since a federal license for insurance
companies doing business in a province was unnecessary, the tax
must fall. The Board stressed the licensing feature of the act over
an object which was held to be beyond the reach of federal com-
petence.48

The Privy Council affirmed the vitality of this strategy when
it struck down the Employment and Social Insurance Act of 1935.49
The act provided for a comprehensive system of compulsory in-
surance in Canada to alleviate the difficulties resulting from
unemployment brought about by the depression. The Board refused
to accept the argument that the obligation imposed by the act
upon employers and employees was a mode of taxation, although
it evaded expressing an opinion on whether the act was a tax
measure or not. Nonetheless, it considered the legislation a regu-
latory measure which imposed a statutory obligation to pay in-
surance premiums to the state or to an insurance company.

Other avenues to contest the constitutionality of a federal tax
measure have not yet been conclusively determined. The courts,
however, have suggested that they are willing to yield to some of
these approaches. Foremost is the suggestion in In re The Insurance
Act of Canada that “if the tax as imposed is linked with an object
which is illegal the tax for that purpose must fall.” For instance,
a tax measure that is inseparably linked with an illegal spending
programme would fall along with the spending programme. The
Privy Council added credibility to this approach when it condemned
the Employment and Social Insurance Act of 1935. It stated that
even if the tax measure, as such, were valid, the legislation that
disposes of the revenue collected may not be. If the tax feature is

4 B.N.A. Act 91(3).
40Id. at 122.
47 [1932] A.C. 41 (P.C. 1931).
48 Id at p. 52.
49 Attorney-General for Canada v. Attorney-General for Ontario,

A.C. 355 (P.C.).

[1937]

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not severable from the spending feature of the legislation, the
tax must fall. Another approach was suggested in Caron v. The
King:50 the federal government may not validly impose a tax for
provincial purposes. Both limitations have never been clarified by
the courts; I have the feeling that these are judicial conjectures
uttered at unguarded moments and without adequate reflection.
The provinces have a restricted power of “Direct Taxation within
the Province in order to the raising of a Revenue for Provincial
Purposes”; 51 they may also charge license fees on certain forms of
business.50 Provincial tax power has various limitations: 1) the
province can only impose a direct tax; 2) a regulatory tax measure
cannot intrude into federal domain; 3) the tax must be “within
the Province”; 4) it must be for “Provincial Purposes”;
5) it
must not impede the free admission of goods from one province
to another. 53

Business has not been successful in urging the “direct tax”
restriction as a shield against provincial tax measures. In Bank
of Toronto v. Lambe,54 a number of leading banks contended that
the tax imposed on commercial corporations operating in Quebec
was invalid on the ground, among others, that it was not a direct
tax. The Privy Council adopted John Stuart Mill’s definition of
direct tax as “one which is demanded from the very person who it
is intended or desired should pay it.” Tested by this definition,
the tax was found to be direct. A sales tax imposed on producers,
however, is indirect because the producer could shift the tax to
the consumer;55 it would meet the “directness” criterion if it is
demanded from the consumer. 6 Thus, in Atlantic Smoke Shops
Ltd. v. Conlon and Others,5 7 the Privy Council sanctioned the validity
of the sales tax imposed on the purchaser or importer of tobacco
for consumption in New Brunswick. Since then, no serious challenge
on the basis of the “direct tax” limitation has been leveled against
provincial tax measures. 58

50 [1924] A.C. 999 (P.C.).
51 B.NA. Act 92(2).
52B.N.A. Act 92(9).
53B.N.A. Act 121.
5412 App. Cas. 535 (P.C. 1887).
55 The King v. Caledonian Collieries Ltd., [1928] A.C. 358 (P.C.).
56 Attorney-General for British Columbia v. Kingcome Navigation Co., [1934]

A.C. 45 (P.C. 1933).

57 [1943] A.C. 550 (P.C.).
58n Cairns Constr. Ltd. v. Government of Saskatchewan, [1960] S.C.R. 619,
the Supreme Court leaned on Atlantic Smoke Shops to sustain a Saskatchewan
tax measure.

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THE CANADIAN EXPERIENCE

The other limitations can be treated briefly. The second limitation
is the converse of the limitation applied to the federal tax power.
Based on this restriction, it has been held that a provincial tax
imposed on banks having the effect of preventing banks to operate
within a province is regulatory, and, because it encroached upon
federal competence over banking, ultra vires-9 The third limitation
requires the provinces to have an adequate factual connection to
the object being taxed. It has not been difficult for provinces to
find a defensible factual basis for the exercise of the tax power.
The fourth limitation has doubtful application. As in the case of
the federal tax power, it is difficult to imagine a situation where
a valid provincial purpose cannot be demonstrated. The fifth
limitation was thought by the Fathers of Confederation to create
a free trade area in Canada. Atlantic Smoke Shops Ltd., however,
permitted the provinces to create customs barriers when it sanctioned
a tax on goods imported into a province6 How far the courts will
permit the erection of further impediments to interprovincial trade
in the fact of this limitation is not possible to predict.

Qualitative safeguards against confiscatory taxation are difficult
to support in Canada; the doctrine of legislative supremacy seems
to bar such safeguards. In the late thirties, however, a case which
can be interpreted as an embryonic venture to establish qualitative
safeguards was decided: Attorney-General for Alberta v. Attorney-
General for Canada.6 1 At that time, the western farmers were
bitterly dissatisfied with the lending practices of banking institutions
– mostly controlled from the urban centres of the East. Farmers’
distrust of eastern money and. fear of exploitation by commercial
banks sparked a demand for “soft money” and abundant credit
for farmers6
In Alberta, this was translated into a political force
that immediately legislated social credit philosophy in banking
business. Alberta’s “Act respecting the Taxation of Banks” was
intended to prevent the operation of banking institutions in the
province by imposing a prohibitive tax on their paid-up capital and
reserve fund wherever located. The Chartered Banks of Canada
and the federal government succeeded in persuading the Supreme
Court and the Privy Council to declare the act ultra vires. On the
point of excessive taxation, the Board said:

It does not seem to be necessary to set out the undisputed tables of figures
showing the particulars of this gigantic increase in the taxation of banks

117 (P.C.).

59 Attorney-General for Alberta v. Attorney-General for Canada, [1939] A.C.

GoScott, Note, 12 Can. Bar Rev. 303 (1934).
61 [1939] A.C. 117 (P.C.).
62W. Easterbrook & H. Aitken, Canadian Economic History 506-13 (1956).

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within the Province. Their Lordships do not disagree with the Chief Justice
and Davis J. [of the Supreme Court] that the facts are sufficient (1) “to
show that such a rate of taxation must be prohibitive in fact and must
be known to the Alberta Legislature to be prohibitive” … It must be
remembered in this connection that the tax proposed is based on the
paid-up capitals and on the reserve funds of banks wherever situate. 3
The Board ignored the suggestion that it should not apply
qualitative standards on the legislation by examining the wisdom
of the legislation or the character of the tax as excessive. This
argument, said the Board, should not prevail in a case where
taxation in a practical business sense is prohibitive. 4

In Texada Mines Ltd. v. Attorney-General for British Columbia,5
the Supreme Court confirmed that prohibitive taxation may not
have constitutional sanction. It struck down a tax of ten per cent
of the value of minerals produced in the province on a showing
that the mining costs plus the tax would make substantial loss
in iron mining operations.

The difficulty of construing these decisions as recognition of
qualitative safeguards stems from the fact that the regulatory
aspect of the contested legislations was stressed by the courts.
In the former case, prohibitive taxation was considered an attempt
to regulate banking; in the latter, the legislation was viewed as
an attempt to regulate exports. Both subjects are beyond provincial
competence. Whether a prohibitive tax, admittedly not regulatory
or regulatory only of provincial matters, is invalid or not, was
not squarely decided.

A confiscatory tax resulting from cumulative taxation by the
various governments presents a different question. If excessive
taxation results from federal and provincial legislations, the doctrine
of paramountcy will apply in the event of conflict: the federal tax
will prevail. In the absence of conflict, both tax legislations will
stand. The doctrine of paramountcy will invalidate the provincial
tax only if a demonstrable conflict exists. As stated in Forbes
v. Attorney-General for Manitoba:6 “the doctrine of ‘occupied field’
applies only where there is a clash between Dominion legislation
and provincial legislation within an area common to both. Here,
there is no conflict. Both income taxes may co-exist and be enforced
without clashing. The Dominion reaps part of the field of the
Manitoba citizen’s income. The Province reaps another part of it.167

63 [1939] A.C. 131 (P.C.).
64 Id.
65 [1960] S.C.R. 713, 24 D.L.R. 2d 81.
66 [1937] A.C. 260 (P.C. 1936).
67 Id. at 274.

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THE CANADIAN EXPERIENCE

Presumably, the conflict would arise only if the total tax is over
100 per cent. 8

No solution has as yet been devised if the excessive taxation
arises from a number of otherwise validly enacted provincial
legislations. Three options are available. First, all the provincial
legislations can be invalidated on the argument that excessive
taxation is created by the combined effect of all legislations. Since
excessive taxation is essentially regulatory in effect in that it would
prohibit business operations, none of the legislations can stand.
This solution is open to the objection that the doctrine of invalid
regulatory taxation only applies if the subject matter regulated
is itself beyond the taxing government’s competence. The second
option is to reduce proportionately all taxes so as to allow the
operation of the burdened object. The difficulty here is to find
authority for the courts to order the reduction. The third option
is to invalidate some of the tax measures allowing others to stand.
Aside from being politically risky, this option stands on slender
ground: a priority can only be grounded on preferential juris-
dictional connection or on time of enactment. The first ground is
obviously untenable, the second is dubious. As stated in Alberta
Banks Case:

[TJhe magnitude of the tax proposed for Alberta was such that, if it were
applied by each of the other Provinces, it would have the effect of pre-
venting banks from carrying on their business. It would be strange if
each of the Provinces were successively to tax banks and the result on
the question of ultra vires were to be that Acts of those Provinces who
were earliest in the field were valid, whilst the Acts of those who came
a little later were to be held ultra vires.69
This problem demonstrates the difficulty of finding solutions
to prohibitive taxation in the absence of qualitative standards for
the exercise of tax powers in a federal system. Hopefully, the
Supreme Court will find the courage to fortify its doctrine in
Texada Mines Ltd. to the extent of developing a qualitative standard
that would enable it to insist on the first option.

D. The Exercise of the Criminal-Law Power

The B.N.A. Act, section 91(27), accords to Parliament competence
in matters of criminal law including criminal procedure, whereas
the provinces have, under section 92(15), the power “to impose
punishment by fine, penalty, or imprisonment for enforcing any

68 B. LASKIN, Constitutional Law 670 (3d rev. ed. 1969).
69 [1939] A.C. 132 (P.C.).

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law of the province made in relation to matters” falling under
section 92. Parliament’s power over criminal law is plenary and
broad; that of the provinces, limited and subordinate. Federal
criminal legislation, however, can be attacked by showing that it is
not, in pith and substance, a criminal measure, but rather an
attempt to regulate property and civil rights. On the other hand,
Parliament’s criminal-law power can be used to invalidate a pro-
vincial criminal legislation.

The first argument was utilized to challenge federal combines
and marketing legislations. The first combines investigation legis-
lations passed by Parliament were struck down by the Privy Council
on the strength of this argument.7 The Board argued that these
legislations
interfered with property and civil rights and can
neither be justified on the residuary clause, since this applies only
in “special circumstances,’ 1 nor on the criminal-law power, since
these legislations were merely attempts to interfere with matters
within provincial competence justified by making an ancillary penal
provision. 72

This decision is too sweeping in scope and too vague

in
phraseology. The Board failed to realize that criminal sanction
is simply an enforcement technique for the protection of substantive
interest. Thus, the thrust of this ruling can constitutionally wipe
out more than half of the penal provisions of the Canadian Criminal
Code. On its face, all traditional crimes against persons and
property are beyond federal competence. The fact is the Board
was again too swift to impute motive without considering the under-
lying policy of these legislations. This ruling, therefore, could not
remain unqualified. In Proprietary Articles Trade Association v.
Attorney-General for Canada,3 the Privy Council made a considerable
retreat. In this case, the association urged the invalidation of the
Combines Investigation Act, 1927, and section 498 of the Criminal
Code, 1927. In spite of Parliament’s caution to avoid the criticisms
in the earlier case in passing these laws, the association contended,
these laws were invalid because they did not come within the
traditional domain of criminal law, indeed they punished acts which
were not necessarily civilly unlawful;
thus, they intrude into
provincial jurisdiction on property and civil rights. The Board
replied:

7 0 1n re Board of Commerce Act, 1919, [1922] 1 A.C. 191 (P.C.).
71Id. at 197-98.
72Id. at 199.
73 [1931] A.C. 310 (P.C.).

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THE CANADIAN EXPERIENCE

If then the legislation in question is authorized under one or other of
the heads specifically enumerated in s. 91, it is not to the purpose to say
that it affects property and civil rights in the Provinces. Most of the
specific subjects in s. 91 do affect property and civil rights but so far
as the legislation of Parliament in pith and substance is operating within
the enumerated powers there is constitutional authority to interfere with
property and civil rights.74
Since Proprietary Articles Trade Association, federal power over
criminal law has shown a vitality that business found hard to
overcome. In the Matter of References as to whether the Parliament
of Canada had Legislative Jurisdiction to enact section 498A of
the Criminal Code, being chapter 56 of the Statutes of Canada, 1935,75
Mr. Justice Duff warned business:

Whatever doubt may have previously existed, none can remain since…
Proprietary Articles Trade Association v. Attorney-General for Canada…
that, in enacting laws in relation to matters falling within the subject
of criminal law,…, Parliament is not restricted by any rule limiting the
acts declared to be criminal acts to such as would appear to a court of
law to be ‘in their own nature’ criminal. The jurisdiction in relation to
the criminal law is plenary; and enactments passed within the scope of
that jurisdiction are not subject to review by the courts.70

Business was thus told that federal restraints on trade to prevent
discrimination between competitors and resort to low prices to
lessen competition is intra vires.

In Goodyear Tire & Rubber Co. of Canada v. The Queen,7 7
business also discovered that a prohibition order following a
conviction for illegal combination is justified by the criminal-law
power. The giant rubber companies contended that a prohibition
order enjoining them from continuing or repeating any illegal
combinations was invalid because the criminal-law power refers
only to punishment of crimes. The Supreme Court declared that
the fact that these acts are also punishable in the Criminal Code
does not exhaust Parliament’s power over criminal law; this power
extends to legislation designed for the prevention of crime as well
as to punishing crimes. 78

74Id. at 326-27.
75 [1936] S.C.R. 363.
7Gld. -at 366. But see, Reference re Dominion Trade and Industry Com-
mission Act, 1935, [19361 S.C.R. 379; Attorney-General for British Columbia
v. Attorney-General for Canada, [1936] S.C.R. 398.

77 [1956] S.C.R. 303.
7SId. at 308. In a perceptive concurring opinion, Mr. Justice Rand said:
It is accepted that head 27 of s. 91 of the Confederation statute is to be
interpreted in the widest sense, but that breadth of scope contemplates
neither a static catalogue of offences nor order of sanctions. The evolving

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The courts, however, have not supported federal criminal-law
power in cases involving marketing legislations. As discussed under
trade and commerce, the courts insist that the regulatory effect
of the legislation on property and civil rights is decisive. The irony
is that business found that even legislation designed for its pro-
tection can be invalidated by this doctrine. Thus, in Canadian
Federation of Agriculture v. Attorney-General for Quebec,9
the
Privy Council struck down legislation passed to give trade pro-
tection to the dairy industry by prohibiting the manufacture, import
or sale of dairy product substitute. The federation supported the
validity of the legislation, but the Board stated that this protective
legislation directly affected civil rights of individuals in relation
to trade within a province. 0

A province’s authority to penalize certain acts or omissions can
be supported under its limited criminal-law power in section 92(15)
and its control over property and civil rights under section 92(13).
In a number of cases, however, the courts have nullified provincial
penal laws on the ground that the subject matter of these laws
lies within federal jurisdiction. Puzzled by the concept of concurrent
competence in a federal system, they constructed conceptual slots
into which the powers of government can be conveniently assigned.
As a result, some cases have held that criminal law is within the
exclusive competence of Parliament, and the power granted to the
provinces under section 92(15)
to impose punishment is not, in
constitutional terms, a criminal-law power. This denial of provincial

and transforming types and patterns of social and economic activities
are constantly calling for new penal controls and limitations and that
new modes of enforcement and punishment adapted to the changing
conditions are not to be taken as being equally within the ambit of
parliamentary power is, in my opinion, not seriously argueable.

What has called for the device of injunction and punishment for
its contravention is undoubtedly the experience in dealing with these
offences. The burden of proving the combination and its operation
is, for obvious reasons, complicated and
time consuming and the
procedure of enforcement by conviction and fine has tended to exhibit
a course of things bearing a close likeness to periodic licensing of
illegality. That sanctions cannot be made more effective, that an offence
by its nature continuing cannot be dealt with as criminal law by an
enjoining decree that will facilitate enforcement, might go far towards
enabling self-confessed lawlessness
to set the will of Parliament at
defiance.
Id. at 311-12.

79 [1951] A.C. 179 (P.C. 1950).
so Id. at 196.

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THE CANADIAN EXPERIENCE

penal power is unjustified and wholly unfounded; its only limitation,
in fact, is the doctrine of paramountcy. Unable to deny categorically
that the provinces may punish crimes, they awkwardly attached
the provincial power to punish on clause 13, property and civil
rights. The contest was thus reduced to its traditional form: the
confrontation between Parliament’s plenary competence over crimi-
nal law and provincial competence over property and civil rights.
As a constitutional strategy, therefore, business had to emphasize
the criminal nature of the legislation to frustrate the provincial
legislation.

Provincial securities legislation yields appropriate examples of
the use of this strategy. In Lymburn v. Mayland,81 a number of
corporations sought to enjoin the Attorney-General of Alberta from
investigating certain fraudulent securities transactions, claiming that
his authority was derived from an invalid legislation. They contended
that since the act penalized certain transactions not punishable
by the Criminal Code, it encroached upon Parliament’s exclusive
criminal-law power. The Privy Council, however, upheld the act,
noting that it was not a colourable attempt to encroach upon
Parliament’s power on criminal law and it can be supported on
the province’s jurisdiction over property and civil rights.’ In 1960,
the Securities Act of Ontario was attacked, again on the ground,
among others, of federal criminal competence: Smith v. The Queen.as
The accused, charged under the Ontario act with giving out false
information in a prospectus, urged acquittal because the province
cannot create this offence since the Criminal Code punishes a
similar act. The Supreme Court ruled that the penalty provision
was merely incidental to the main purpose of the act which is to
insure the registration of persons and companies before they are
permitted to trade in securities and the registration of securities
before they are traded. Showing more perception of the nature
of shared competence in a federal system than the Privy Council,
the Court held that a prospectus may be, in one aspect and for
one purpose, the subject of a valid provincial legislation, and in
and for another purpose, the subject of federal
another aspect
legislation. In view of the differing aspects and purposes of the
Ontario act and the Criminal Code, both legislations can co-exist

81 [1932] A.C. 318 (P.C.).
821d. at 327.
83 25 D.L.R. 2d 225.
84For the “aspect” doctrine, see Provincial Secretary of P.E.L v. Egan,

(1941) 3 D.L.R. 305.

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and the Ontario law cannot be invalidated by the doctrine of
paramountcy.85

IV. The Canadian Bill of Rights: A Source of

Qualitative Safeguards?

The doctrine of legislative supremacy in Canada’s constitutional
regime is founded on the people’s faith in the wisdom of govern-
ments and on the practical consideration that governments remain
in power only as long as they are sensitive to the people’s wishes
and reflect these wishes in the affairs of government. The main
protections to economic interest are, therefore, expected to be
settled in the political arena. To date, we are convinced of the
effectiveness of this machinery. For this reason, no significant
popular movement has emerged demanding an entrenchment of
qualitative guarantees against the abuse of governmental power.
The governments are ahead of the people in this regard. The
reason, perhaps, is that their conscience is heavily burdened by
the strictures they hastily imposed upon the Japanese-Canadians
during World War II and upon the people at the height of com-
munist hysteria. In Canada, therefore, the guarantees that one
usually finds in the constitution of other countries are found in
legislations. The most important of these legislations is the Canadian
Bill of Rights.”

The Bill provides that it is recognized and declared that the
freedom not to be deprived of life, liberty, security of person and
enjoyment of property except by due process of law exists without
discrimination. 7 The reach and effect of this ringing recognition
and declaration are inherently limited due to two primary con-
siderations: 1) The Bill is a federal statute, not a constitutional
instrument. It can, therefore, be repealed, or exception to its oper-
ation created, by Parliament. In this regard, one can take some
comfort from the Court’s insistence that the exception to the Bill’s
operation must be expressly created. The Supreme Court, upsetting
the traditional view that the Bill is simply a canon of construction,8

85 See also Regina v. W. McKenzie Sec. Ltd., (1966) 56 D.L.R. 2d 56, where
the invocation of federal trade and commerce power to evade the application
of provincial securities legislation was rejected.

86 Can. Stat. 1960 c. 44.
871d. at 1(a).
88 Regina v. Gonzales, 37 W.W.R. 257, (1962) 32 D.L.R. 2d 290, 132 Can. Crim.
Cas. Ann. 237 (B.C.); and the dissenting opinions of Cartwright, CJ.C., Abbott J.
and Pigeon J., in Regina v. Drybones, (1969), 9 D.L.R. 3d 473, at 474, 477, and
487, respectively.

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THE CANADIAN EXPERIENCE

has recently ruled that the courts have the authority to declare a
statute inoperative unless Parliament expressly excepted the statute
from the ambit of the Bill of Rights. 9 2) The Bill is effective only
in matters within federal competence;
it is ineffective against
provincial action.

Because of the above limitations, the impact of the Bill of Rights
upon the expropriation of property by the federal government is
debatable. Some authors believe that the Bill’s “due process” clause
may render invalid a taking authorized by law if the law flagrantly
violates reasonable standards of fair process and compensation.90
Some lower courts deny to the Bill this far reaching effect: “due
process” means simply “in accordance with law.” A taking author-
ized by law thus satisfies the “due process” clause,91 for the due
process required is only a procedural concept.

The core of this controversy revolves around the juridical status
of the “due process” clause. The doctrine of legislative supremacy
implies the power of all governments to take property with or
without compensation, effected through a judicial proceeding or
not. The B.N.A. Act contains a number of provisions from which
this power, without qualitative or procedural limitation, can be
derived.92 Those who insist that reasonable standards must be
observed by the statute itself are, in effect, elevating the due
process into a constitutional norm, a long accepted American
doctrine. Thus, Mr. Justice Rand, after his retirement from the
Supreme Court, was actually constitutionalizing the due process
when he argued:

‘Due process’ is thus seen to be interpreted as a limitation on law which
to a degree of unreasonableness affects personal liberties or property.
Confining that limitation to the broadest sense of procedure is incom-
patible with the provisions of the Bill of Rights. Section 2 deals with
specific matters of that nature in such detail as virtually to exhaust the
items of importance…

89 Regina v. Drybones, [1970] S.C.R. 282, 9 D.L.R. 3d 473, at 477 (per Ritchie,
J.) and at 486 (per Hall, J.); Robertson v. The Queen, [1963] S.C.R. 651, 41
D.L.R. 2d 485, [19641 1 Can. Crim. Cas. 1 (1963) was distinguished in the
majority decision.

DOW. TARNOPOLSKY, The Canadian Bill of Rights 156 (1966); Rand, Except

by Due Process of Law, 2 Osgoode Hall L.J. 171 (1961).

91Regina v. Jenson, (1962), 39 W.W.R. 321, 38 Crim R. 234 (B.C. Mag. Ct.);

Regina v. Martin, (1961), 35 W.W.R. 385 (Alta.).

–

92 See, e.g., B.N.A. Act 92(10) (a), 91(2), for sources of federal power,
and 92(10), (13), (16), for sources of provincial power. For a brief discussion,
see Strayer, Constitutional Aspects of Nationalization of Industry, 7 Can. B.J.
226 (1964).

McGILL LAW JOURNAL

[Vol. 17

What, on its face, is indicated by the Act is the setting up for all law
infringing rights, privileges and liberties, a standard of rational accepta-
bility in the regulation of human conduct and relations.9 3
Although I consider it desirable to constitutionalize the due
process, as well as other guarantees against legislative abuse, I
cannot share the view that the Bill of Rights has constitutionalized
the due process clause. To hold this view is to deny the fact that
the Bill is simply a federal statute. The proposal of the federal
government to include a Charter of Human Rights in the future
constitution of Canada is an unmistakable evidence that the Bill
cannot be construed as a constitutional instrument. The due process,
however, is more than a mere procedural concept; it may, on the
authority of Drybones, render inoperative a federal law that offends
reasonable standards unless Parliament expressly exempts the law
from the operation of the Bill of Rights.

V. The Effect of the B.N.A. Act Upon the

Canadian Economy

In the main, the constitutional regime under the B.N.A. Act
as interpreted by the courts had, until toward the beginning of
World War II, encouraged economic growth. Divided competence,
with all the jurisdictional barriers that the courts created, permitted
business to develop virtually free from serious legal restraints in
major areas of the economy. At a time pervaded by economic
individualism, challenge against the imposition of national regulation
was naturally abundant. Foreign investment, ignored by the Fathers
as a positive factor, discharged a major role in the growth of the
Canadian economy.

But the demand of economic development has drastically
changed. Particularly in the last twenty years, the economic regime
under the Act has proven itself stale and grossly inadequate. Since
economic growth cannot be left in a legal vacuum, frustration of
federal regulation invited the provinces to enter the field, bringing
with it regionalism. With the infirmity of the trade and commerce
clause to forge the country into a united economic regime, the
fragmentation of the country emerged. Some provinces were even
inclined to exaggerate: they exhorted their residents to buy products
of their respective provinces and initiated governmental policies
that discriminated against the goods and services from other

93 Rand supra, note 90, at 187.

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THE CANADIAN EXPERIENCE

provinces. 93a On the other hand, business realized that inter-
dependence and nationwide expansion are the logic of modern
economic events. The initial rejection of the broad and orderly
economic field offered by federalism thus proved to be a barrier

93a Attorney General for Manitoba v. Manitoba Egg and Poultry Ass’n (Judg-
ment pronounced June 28, 1971, as yet unreported), the Supreme Court sounded
an unmistakable rejection of the provincial policy of discrimination against
goods and services from other provinces. The case involved the ever escalating
“chicken and egg war” between the provinces by establishing provincial boards
that regulate marketing of poultry products. Mr. Justice Martland, speaking
for the Chief Justice, Justices Abbott, Judson, Ritchie and Spence, anchored
his decision on the commerce clause (B.N.A. Act 91(2)):

It is my opinion that the Plan now in issue not only affects inter-provincial
trade in eggs, but that it alms at the regulation of such trade. It is an
essential part of this scheme, the purpose of which is to obtain for Mani-
toba producers the most advantageous marketing conditions for eggs,
specifically to control and regulate the sale in Manitoba of imported eggs.
It is designed to restrict or limit the free flow of trade between provinces
as such. Because of that, it constitutes an invasion of the exclusive legis-
lature authority of the Parliament of Canada over the matter of the
regulation of trade and commerce.

Martland judgment at p. 14.

Mr. Justice Laskin, concurred in by Mr. Justice Hall, conceded that provinces
may validly enact legislation to control the marketing of various products,
as previous cases have held. He found, however, that the Manitoba plan is
too broad in scope, holding it ultra vires on the basis of B.N.A. Act 91(2):
Assuming such controls to be open to a province, the scheme before this
court is not so limited. It embraces products which are in the current of
interprovincial trade and, … , it embraces them in whatever degree they
seek to enter the provincial market. …. I do not reach the question of
discriminatory standards applied to out-of-province producers or dis-
tributors (that is, the question of a possibly illegal administration of the
scheme as bearing on its validity) because I am of opinion that the
scheme is on its face an invasion of federal power in relation to s. 91(2).
There are several grounds upon which I base this conclusion. The
proposed scheme has as a direct object the regulation of the importation
of eggs, and it is not saved by the fact that the local market is under the
same regime. Anglin J. said in Gold Seal Ltd. v. Dominion Express Co.
(1921), 62 S.C.R. 424, at p. 465, that “it is common ground that the prohibi-
tion of importation is beyond the legislative jurisdiction of the province”.
Conversely, the general limitation upon provincial authority to exercise
of its powers within or in the province precludes it from intercepting
either goods moving into the province or goods moving out, subject to
possible exceptions, as in the case of danger to life or health. Again, the
Manitoba scheme cannot be considered in isolation from similar schemes
in other provinces; and to permit each province to seek its own advantage,
so to speak, through a figurative sealing of its borders to entry of goods
from others would be to deny one of the objects of Confederation, evi-

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[Vol. 17

to business’s present ambition for national expansion. Business was
comdpelled to re-assess its position:

The men who control [business] are compelled to think in nationwide,
if not national, terms. They do not want laissez faire, or the free
fluctuating market, or the uncoordinated tinkering of many… provincial
governments. Instead, they want stability in prices, in labour relations,
in monetary, fiscal and other governmental policies, so that they can
engage in longrange planning for their industry. They want the economy
to be manageable and, within limits, to be managed with a foresight
which takes their nationwide concerns into account. Because foresight
on the scale that they want implicates the national government and its
powers at many points, they want to be able to bring a persuasive
influence to bear upon the national government.9 4
In the last twenty years, business had ceased to mount a serious
assault on federal legislations. 95 Even the insurance companies,
major parties to the confinement process of the federal trade and
commerce power, shifted their strategy. They were vehement in
urging federal action to stabilize public finance and to restore
confidence and credit. Undoubtedly, the social credit adventure in
Alberta was a factor in this shift.”6

Even some of the provinces seemed to have changed their atti-
tudes. They were not sure whether to mourn or to rejoice over
the expanded powers that the courts had granted them. The courts
were unaware that expanded powers mean heavier financial re-
sponsibility. Fortunately enough, the formula that brought about
an expansion of provincial power was also applicable to the con-
struction of provincial tax power, and the courts stumbled in the
right direction. Had they stumbled elsewhere, the provinces would
have been doomed to bankruptcy. But in spite of this expansion
of provincial tax power by the judicial interpretation of “direct
taxation,” provincial revenue remains inadequate; they continue to

denced by the catalogue of federal powers and by s. 121, namely, to form
an economic unit of the whole of Canada: see the Lawson case [1931]
S.C.R. 357, at p. 373. The existence of egg marketing schemes in more than
one province, with objectives similar to the proposed Manitoba scheme,
makes it clear that interprovincial trade in eggs is being struck at by the
provincial barriers to this movement into various provincial markets. If
it be thought necessary or desirable to arrest such movement at any
provincial border then the aid of the Parliament of Canada must be sought,
as was done through Part V of the Canada Temperance Act, R.S.C. 1952,
c. 30 in respect of provincial regulation of intoxicating liquor.

94 Corry, Constitutional Trends and Federalism, in Evolving Canadian

Federalism 111 (1958).

95Id. at 112.
96Id. at 112-13.

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THE CANADIAN EXPERIENCE

accumulate debts and operate on a deficit. The poorer provinces
must rely on federal financial assistance; all provinces desire a
renegotiation of the allocation of revenue sources to enable them
to discharge their heavy responsibility. T

To the people of Canada, the economic regime under the B.N.A.
Act is even less satisfactory. The effectiveness of stabilization policies
of the federal government has gradually weakened, and cyclical
downturns are becoming increasingly difficult to overcome.98 Even
the federal government’s control over monetary policy cannot fully
realize desirable national objectives due to the rigidity of divided
competence and the growth of the provinces as independent eco-
nomic units0 9 To mention just one harmful consequence, Canadians
in different parts of the country do not share equally the price of
fighting inflation. Our problems are further complicated by the
fact that Canada’s freedom to implement her economic policies
independently of the United States is far more limited than of
other nations. With respect to economic growth, the ability of the
national government to pursue suitable economic policies is just
as limited. More serious, the growth we have achieved is grossly
unfair: it is so alarmingly pregnant with regional disparities that
we seem to be moving to the future along Darwin’s doctrine of
natural selection.100 Central Canada, favoured by a number of
factors, has achieved prosperity that can only be considered a dream
in other regions. Necessarily, provincial standards of essential
services to the people differ vastly from region to region. It this
is bad enough to some Canadians, it is disastrous to Canadian
Eskimos and Indians. In fine, therefore, Canadians do not share
equally in the costs and gains of economic growth under the
B.N.A. Act.

Foreign investment, which abundantly flowed into Canada, now
raises a difficult political problem. Not that we can no longer
attract foreign capital, as Lester Pearson’s Commission on Inter-
national Development found to be the case in emerging nations. 10′

97 See the summary of the proposals submitted by provincial governments
respecting the tax power in Government of Canada, The Taxing Power and
the Constitution of Canada 60-63 (1969).

98 See Parizeau, Prospects for Economic Policy in a Federal Canada, in

Canadian Federalism 48-51.

99 See Hood, Economic Policy in our Federal State, in id. at 59.
100 For a detailed study of this disparity, see S. CHERNICK, Interregional
Disparities in Income (Study No. 14 prepared for the Economic Council of
Canada 1966).

10 Partners in Development (1969).

McGILL LAW JOURNAL

[Vol. 17

Our problem rather is how to circumscribe foreign ownership and
control of Canadian industries within manageable limits and to
inspire in foreign companies a sense of layalty to Canada. The
Watkins Commission Report, Foreign Ownership of Canadian
Industry,, 2 estimates that at the end of 1963, foreign ownership
in most of the economy except agriculture and service industries
totalled thirty-five per cent and the corresponding figure for foreign
control was thirty-four per cent. These rates are considerably higher
than those in any developed country in Western Europe, and Japan
and Australia. 03 Due partly to our federal system as developed by
the courts, Canadian policy toward foreign investment has been
piecemeal, gradual, 4 and unnecessarily uncoordinated. We have
never committed ourselves to the slogan of narrow-minded nation-
alism, but we cannot help asking ourselves whether foreign owner-
ship and control of Canadian industries in such high proportion
will not mean ultimately the disappearance of the political nationality
and economic independence that the Fathers of Confederation
established in British North America.

From the host of political, economic, cultural and other problems
that seem insoluble under the regime of the B.N.A. Act came the
realization that the courts’ ability to play a creative role in our
development is sadly limited. Although occasionally the courts
have vehemently acknowledged that it is a constitution they were
interpreting, they have not demonstrated that they are adequately
equipped with any coherent and profound philosophy of politics,
of economics, and –
even of life to
enable them to transform the B.N.A. Act into a flexible legal frame-
work that will allow Canadians to attain a just and viable cultural,
political and economic life. Many were, therefore, relieved that,0 3
as a political response, appeal to the Privy Council was abolished
in 1949,100 thereby repatriating the final forum of constitutional
litigation. We can still dimly hope that our Supreme Court can
reverse the errors of the Privy Council and reshape our constitution.
Judicial process, however, is a slow machinery for reform and,
in Canada, is still under the shadow of the doctrine of the finality

one would like to add –

102 Report of the Task Force on the Structure of Canadian Industry (1968).
103 1d. at 391-92.
104 Id.
1o5 Laskin, The Supreme Court of Canada: A Final Court of Appeal of

and for Canadians, 29 Can. Bar Rev. 1038 (1951).

106 See B.N.A. Act 101 and Supreme Court Act, Rev. Stat. Can. c. 259, 54
(1952). For a detailed discussion preceding the abolition of appeal to the
Privy Council, see Abolition of Appeals to the Privy Council – A Symposium,
25 Can. B. Rev. 557 (1947).

[No. I

THE CANADIAN EXPERIENCE

of errors. Besides, it is so vastly fortuitous as to be unreliable to
deal in a comprehensive manner with the doctrines of the past.
Long before the installation of the Supreme Court as the highest
court of the country, the governments had already initiated a
machinery that may retire the courts from the constitutional
arena: 107 negotiated federalism. The allocation of governmental
power is becoming less and less a legal question and more and
more a matter of political negotiation. The courts, in other words,
are being replaced as arbiters of power by some sort of a “Con-
tinuing Constitutional Convention” between the federal and pro-
vincial governments.

To circumvent the constitutional strictures

imposed by the
courts upon the B.N.A. Act, the governments have resorted also
to a number of devices. They have nullified decisions by the
conventional method of constitutional amendment in the case of
unemployment insurance””‘ and old age pension. 0 9 To avoid the
static conception of powers as watertight parcels, a number of
techniques have been adopted since the 1930’s: the delegation of
power of one level of government to subordinate agencies of another
level of government, referential incorporation of legislation of
another government, and conditional legislation. To achieve co-
ordination in the tax system, the federal government and provincial
governments have concluded a series of tax agreements. In spite
of the doubt on certain aspects of the federal spending power,
the federal government has established with the cooperation of
the provinces a number of programmes.” 0 Through negotiated
federalism, the governments have achieved progress in various
fields in spite of the B.N.A. Act.

Negotiated federalism, however, is slow and cumbersome. The
will to reach an agreement on broad criteria is often short, some-
times altogether wanting. Thus, it is psychologically agonizing to
Canadians that we seem to put the destiny of our country at stake
every time a controversial matter is negotiated. The negotiation
of the Canada Pension Plan, to mention one example, shows the
need for an almost godly patience, ingenuity and statemanship.
But if the will to reach an agreement is generous, the danger of

107 Corry, supra, note 94, at 115-18.
108 B.N.A. Act 91(2a), added by B.N.A. Act, 1940, 3-4 Geo. VI, c. 36 (U.K.).
109 B.N.A. Act 94A, added by B.NA. Act, 1964, 12-13 Eliz. II, c. 73 (U.K.),

originally enacted by B.N.A. Act, 1951, 14-15 Geo. VI, c. 32 (U.K.).

11oSee Federal-Provincial Grants and the Spending Power of Government
(Government of Canada Working Paper on the Constitution 1969), Income
Security and Social Services (Government of Canada Working Paper on the
Constitution 1969).

McGILL LAW JOURNAL

[Vol. 17

producing unsuitable compromises rather than workable program-
mes at the negotiating table is all too real.

The writing of a new constitution appears, therefore, imperative.
Besides, having canadianized the judicial forum for constitutional
dispute, it is simply logical to canadianize the constitution itself.
Many times in the past, we have toyed with the idea of bringing
home the constitution. But earnest work toward the preparation
of a truly Canadian constitution only began in February, 1968.
Unfortunately, I am skeptical of the suitability of the machinery
adopted to write the new constitution: The Continuing Constitutional’
Conference of Provincial Premiers and the Prime Minister of Canada.
These officials, have amply shown on the conference table that
they are at heart mere politicians, not statesmen. Their overwhelm-
ing interest in the game of power is the major pillar of their con-
stitutional positions, thus dooming the Conference to a futile, but
expensive, exercise.:” We will soon realize, I am sure, that some
other machinery, perhaps a constitutional convention of delegates
directly elected by the people, is more suitable than the Confer-
ence. The fate of the Victoria Charter seems to affirm this con-
tention. In spite of the urgency of constitutional reform posed by
the fact that Canada’s prospect of remaining a united country
seems slowly to be slipping out of reach as a particular activist
political minority in Quebec gains respect and a consolidated phi-
losophy, the three years work of the conference has gone no far-
ther than “square one”. Unless the people of Canada themselves
soon assume the task of writing the constitution, the battle for a
united Canada, I despair will be lost by default. As events that
followed the demise of the Charter indicate. The crux of the con-
stitutional issue is the division of powers. Unlike the politicians,
who seem to be so certain, I am not sure that the people of Canada
regard the division of powers as more important than a united
country. In any event, the provincial politicians have no unequivo-
cal mandate to represent their constitutional positions as that of
their provincial citizens. Provincial elections have never been fought
squarely on constitutional issues, and the people have always spoken
with a great amount of ambivalence: voting to power a provincial
party with a constitutional programme and a federal party with
an almost opposing constitutional programme.

113 For a summary of the issues on Canadian constitutional reform, see
Federalism for the Future (Government of Canada Working Paper on the
Constitution), and The Constitution and the People of Canada (1969).