Federalism: The distribution of legislative powers
Citizens Insurance Company v. Parsons (1881-82), 7 App. Cas. 96 (CP Vol. 2 p.54)
Jurisdiction
Ontario
Facts
· P: William Parsons; Def: Citizens Insurance Company of Canada
· Two insurance companies refused Parsons’s claim due to contractual terms which violated an Ontario statute (39 Vict. C 24)
· The insurers argued that the legislation was ultra vires, violating s.91, No.2 of the 1867 BNA, which limits the regulation of trade and commerce to federal parliament exclusively
· The validity if the Ontario statute rests on the right of the provincial legislature to make laws that govern property and civil rights in the province (s.92, No.13)
· Parsons (and Ontario) won at the trial level and the appeal court
Issues
Was insurance regulation part of “regulation of trade and commerce” (s.91) or “property and civil rights” and “matters of a merely local and private nature” (s.92)?
Holding
SCC: s.92; JCPC: s.92
Policies of insurance should be bound by the Ontario Act
Ratio
· At the SCC, the majority (expressed by Ritchie CJC) upheld the legislation, based on “property and civil rights” and “matters of a merely local and private nature.”
Gwynne J, dissenting, argued that it fell under “regulation of trade and commerce,” and gave a policy argument (floodgates, basically) about the risks of allowing the provinces to encroach on such areas. Neither majority nor dissent justified its decision through any particular interpretive technique
· At the JCPC, Sir Montague Smith set up a test for provincial legislation: Step 1: See if the provincial legislation falls within any of the enumerated classes of s.92. If it doesn’t it is invalid. If it does, go to Step 2: See whether the legislation does not also fall within one of the enumerated subjects in s.91, in which case it is invalid
· S.91 applies to all regulations of trade and commerce which do not affect civil rights
· Smith then based his decision on the consistency of the BNA Act as a whole
· Civil rights is an expression broad enough to include contracts and rights arising from contracts, which is not part of s.91.
This interpretation of rights is found in s.94, which lays down the distinction between Quebec and the common law provinces when it comes to civil and property rights.
· Smith narrowed “regulation of trade and commerce” to mean only international or interprovincial trade or general trade affecting the whole dominion, but not the regulation of specific businesses or trades
· In the case against the Queen Insurance Company, Parsons interim note (which he held when the fire occurred) did not constitute a policy of insurance, and as such would then be bound by the Ontario Act
Comments
· This is the leading case on the “trade and commerce” power
· Key elements: difference between trade and commerce and civil rights; mutual modification of ss. 91 and 92
· Sir Montague Smith’s two-step test makes it clear that the federal powers are residual, because the courts looked at s.92 first
Russell v. The Queen (1881-82), 7 App. Cas. 829 (CP Vol. 2 p.70)
Jurisdiction
New Brunswick
Facts
· App: Russell, Resp: the Queen
· Russell was a tavern owner who was prosecuted for unlawfully selling liquor, contrary to the terms of the Canada Temperance Act, 1878
· Russell argued that this Act was ultra vires given that the Parliament of Canada was not competent to pass such an act in question
· SCC affirmed the validity of this act
Issues
Did the regulation of liquor fall under any of the enumerated sections of s.92?
Holding
No
Ratio
· Sir Montague Smith used the 2-part test he had set out in Parsons.
· The Act does not fall within any of the classes in s. 92 (no need to see if it falls under any category of s.91)
o Not No. 9 (license-granting for raising revenue) because the Act in question is not about raising revenues
o Not No. 13 (property and civil rights) because restrictions on the sale of alcohol is a matter of public safety, not property; the “true nature and character” of the legislation was Peace, Order and Good Government of Canada (POGG) and that effects on property and civil rights were incidental.
o Not No. 16 as this is concerns a matter which is not merely local or provincial; prohibiting sale of liquor might be a local matter, but this act is about merely
CC relied on “trade and commerce,” and also used historical/framers’ intents as arguments
· The Temperance Act conferred upon every municipal council to pass a law of prohibition if the majority of electors in that city or municipality were to vote for it
· In the JCPC, Lord Watson found that the provincial legislation fell under “property and civil rights” and “local or private nature.” Watson separated POGG from the enumerated s.91 powers and used the last lines of s.91 to narrow POGG. He ruled that POGG could only be used for matters “unquestionably of a Canadian interest and importance,” and could not encroach upon or incidentally affect enumerated s.92 powers. This effectively meant that the “pith and substance” and “aspects” doctrines could not be used to support POGG.
· Interestingly, Watson also articulated the “paramountcy” doctrine, that if there is “repugnancy,” “provincial must yield to Dominion legislation.” However, he did not find conflict since it was possible to comply with both laws by complying with the stricter of the two.
Comments
· The JCPC’s judgment directly contradicted Russell. This case represents a major turn toward provincial rights. Watson’s use of s.92(16) “local or private nature” elevates it almost to the same status as POGG. This case used a text-based legal formalism which is not altogether convincing
· Key elements: double aspect doctrine; paramountcy doctrine
· The corollary to the paramountcy doctrine is that neither the federal or provincial law can repeal the other’s law; However, if there is a federal law that is in conflict with a provincial one, then the latter will become dormant (inoperable); whether the whole law falls or just part of it depends on the “severability” of the statute or law (whether it can stand without the clause or not)
