Patrick J. Monahan

PART FOUR, THE COURTS AND CANADIAN FEDERALISM

CHAPTER 7, THE COURTS AND CANADIAN FEDERALISM: FROM WATERTIGHT COMPARTMENTS TO SHARED RESPONSIBILITY

1) A Promising Beginning: The Russell Case and the Pith and Substance Doctrine

Given the extremely restrictive approach that the JCPC eventually adopted in relation to federal authority, it is somewhat ironic that in the initial Canadian cases that came before the Board it seemed to favour a broad reading of federal legislative powers. The Privy Council's first opinion on the scope of the POGG power reflects this early (but short- lived) trend. In the Russell case, [Note 8: Russell v. R. (1882), 7 App. Cas. 829 (P.C.) [Russell].] the issue before the Board was the validity of the Canada Temperance Act, federal legislation permitting local areas to prohibit the sale of intoxicating liquor. An individual who had been charged with violating the Act argued that it was constitutionally invalid because it dealt with property and civil rights, a matter reserved to the provinces. The Privy Council rejected this argument, noting that the legislation was valid because it dealt with "an evil which is assumed to exist throughout the Dominion." The fact that liquor could be held as property did not prevent Parliament from restricting its use when this was deemed dangerous to public health or safety. According to Sir Montague Smith, Parliament could enact laws under the POGG power that incidentally affected property and civil rights as long as it did so for a valid purpose:

     The decision in Russell seemed to open the door to considerable overlapping of jurisdiction between Parliament and the provinces. The theory advanced by Montague Smith in his judgment was that, in assessing the validity of legislation, it is necessary to determine its "true nature and character." This true nature or character could only be ascertained by considering the underlying purpose or objective of the legislation. Because the true object of this particular legislation was the preservation of public health and safety, the law was valid notwithstanding the fact that it might incidentally touch upon or deal with matters of property or civil rights.

     Russell was significant because it represented the first attempt to articulate what would come to be known in later years as the "pith and substance" doctrine. Under this doctrine, the court determines the pith and substance of a law by ascertaining its main or dominant feature. If a federal law is in pith and substance in relation to a federal head of power (or a provincial law in pith and substance in relation to a provincial head of power), then the law may have incidental effects on other matters that fall within the jurisdiction of the other level of government without thereby being rendered invalid. The pith and substance doctrine focuses on the purposes of the legislation, rather than its incidental effects, in determining constitutional validity.

     The pith and substance doctrine opens the door to substantial overlap in jurisdiction precisely because it ignores the incidental effects of legislation in determining constitutional validity. In Russell, for example, the fact that the federal legislation also affected property rights did not mean that it was thereby rendered invalid. Indeed, as Montague Smith noted, if such incidental effects were to be regarded as the primary focus of the analysis, the federal POGG power would be rendered virtually nugatory since "[f]ew, if any, laws could be made by Parliament for the peace, order and good government of Canada which did not in some incidental way affect property and civil rights." Montague Smith argued that it could not have been intended that the POGG power should be stripped of all its significance or effect. The preferred approach was to permit Parliament to legislate on matters that were of national importance, even though such laws would also inevitably have incidental effects on property rights in the provinces.

2) The Hodge Case and the Aspect Doctrine

The Russell case did not suggest or decide that Parliament alone could provide for liquor regulation. In fact, a close reading of the judgment indicates that there was no reason why the fact that the Canada Temperance Act was valid should exclude the possibility of provincial laws on the same subject. In Hodge, [Note 9: Above note 6.] decided in 1883, the Privy Council made this point explicit, upholding an Ontario statute regulating the sale of liquor. This result was possible because, according to Sir Barnes Peacock, "subjects which in one aspect and for one purpose fall within sect. 92, may in another aspect and for another purpose fall within sect. 91." Thus, while it was true that Parliament could enact temperance legislation to deal with federal aspects of the problem, the provinces could enact legislation dealing with its local aspects. The provincial legislation in this case was "confined in its operation to municipalities in the province of Ontario, and is entirely local in its character and operation." Moreover, the provincial regulations did not in any way interfere with federal legislation on the same subject. It was therefore valid legislation in relation to the powers conferred on the provinces under sections 92(8), (13), and (16) of the 1867 Act.

     The aspect doctrine (like the related pith and substance doctrine) represents a powerful tool for upholding the validity of legislation passed by both levels of government. The aspect doctrine essentially asks whether Parliament or the provinces have a sufficient interest in a particular social or economic problem such that they should be permitted to regulate that problem. It will often be possible for both the federal and the provincial governments to argue that there are sufficiently important aspects or interests at stake for them each to be allowed to intervene. Most significant social and economic problems are multi- faceted and have both local and national impact.

     Moreover, by framing the problem in this manner, the judiciary will most likely tend to defer to the judgment of the political branches. The judiciary is ill suited to make an assessment of whether a particular social or economic problem is one of national as opposed to local significance. By choosing to enact legislation, Parliament or the provinces are reflecting the view of the policy makers in government that a particular problem merits their attention. How are the judges to disagree with the judgment of the legislators on this issue? By what right or mandate can the judges require that their opinion as to whether a particular problem is local as opposed to national be substituted for that of elected politicians? Precisely because there is no legitimate or widely acceptable answer to such a question, the aspect doctrine is a device that will inexorably pull the judiciary in the direction of upholding the validity of legislation enacted by both Parliament and the provinces.

     The problem with the aspect doctrine, from the perspective of the JCPC, is that it seemed to involve the judges in political matters as opposed to legal ones. The aspect doctrine seemed to ask the judges to review the conclusion of Parliament or the provincial legislatures as to whether there were sufficiently important national or local aspects to a given social or economic problem. It is hardly surprising that the Privy Council subsequently backed away from its early endorsement of the aspect doctrine, arguing that the principle was to be applied only in the most exceptional circumstances. In its place, the JCPC began to develop formalistic, bright-line tests that would permit the judiciary to assess the validity of federal laws through reference to apparently objective legal criteria.

3) POGG as a Residual Power

Lord Watson's judgment in the Local Prohibition Reference in 1896 [Note 10: Ontario (A.G.) v. Canada (A.G.), [1896] A.C. 348 (P.C.) [Local Prohibition Reference].] was the first watershed in the attempt by the Privy Council to narrow the scope of federal POGG power. Up until this point, the precise relationship between POGG and the enumerated heads of power in section 91 had not been clearly settled. On one view, POGG constituted the general grant of power to Parliament, and the enumerated heads were illustrative only. (The Russell case seemed to support this broad reading of POGG.) But a competing, narrower interpretation gave primacy to the enumerated powers (in both sections 91 and 92) and relegated POGG to a purely residuary position. On this view, POGG was applicable in relation to matters that did not fall within any of the classes of powers in sections 91 or 92.

     In the Local Prohibition Reference Lord Watson clearly opted for the latter, narrower view. He made a clear distinction between POGG and the enumerated categories in section 91. Whereas Parliament's exercise of its enumerated powers could "occasionally and incidentally, involve legislation upon matters which are primâ facie committed exclusively to the provincial legislatures by s. 92," a different rule had to be applied in the case of POGG. In legislating under POGG, Parliament "has no authority to encroach upon any class of subjects which is exclusively assigned to provincial legislatures by s.92." Moreover, POGG ought to be "strictly confined to such matters as are unquestionably of Canadian interest and importance, and ought not to trench upon provincial legislation with respect to any of the classes of subjects enumerated in s. 92." Lord Watson acknowledged that it was possible that certain matters "in their origin local and provincial, might attain such dimensions as to affect the body politic of the Dominion," and in such instances Parliament could rely upon POGG. At the same time, he observed that "great caution" must be observed in applying this principle.

     The significance of this judgment lay not merely in the separation of the POGG power from the enumerated classes in section 91. Even more important was Watson's ruling that the pith and substance and aspect doctrines could not be applied to support legislation enacted under POGG. Although Watson did not make this conclusion explicit, this was the inevitable result of his observation that federal laws enacted under POGG could not "encroach upon" or "incidentally affect" matters under section 92. Only laws enacted under the enumerated classes in section 92 could have incidental effects on matters in section 92. We have already noted the fact that the Privy Council had interpreted the provincial power over property and civil rights in section 92(13) in extremely broad terms. Given this broad interpretation, virtually any law enacted under POGG would have some incidental effects on matters of property and civil rights in the province. The result was that, after the Local Prohibition case, there would be very few circumstances indeed in which POGG could be relied upon. Of course, this point had been made by Montague Smith in the Russell case, where he observed that "it could not have been intended, when assuring to the provinces exclusive legislative authority on the subjects of property and civil rights, to exclude the Parliament from the exercise of this general power." In the Local Prohibition Reference, Lord Watson was decidedly lukewarm towards the Russell case, noting that it had "relieved their Lordships from the difficult duty of considering whether the Canada Temperance Act of 1886 relates to the peace, order, and good government of Canada" and that Russell "must be accepted as an authority to the extent to which it goes" [Note 11: See ibid. at 362.]

     While the Local Prohibition Reference significantly limited the scope of the federal general power, Lord Watson did hold out the possibility of its application in cases that were "unquestionably of Canadian interest and importance." But how was the identification of matters of national importance a workable legal test for a court to apply? Moreover, if Parliament came to the view that a matter was "unquestionably of Canadian interest and importance," on what basis were the law lords in England to arrive at a contrary conclusion? Thus, even as Lord Watson had reduced POGG to a purely residual power that would almost never come into operation, a test based on the importance of a subject was certain to make the strict constructionists in the Privy Council rather uncomfortable.

4) POGG as an Emergency Power

In a series of now-infamous cases decided in the 1920s, Lord Haldane picked up where Lord Watson had left off and sought to narrow the scope of POGG even further. [Note 12: See Reference Re Board of Commerce Act, 1919 (Canada), [1922] 1 A.C. 191 (P.C.)[Board of Commerce]; Toronto Electric Commissioners v. Snider, [1925] A.C. 396 (P.C.) [Snider].] In the Board of Commerce case in 1922, Haldane suggested that POGG might come into operation in "special circumstances, such as those of a great war" ; however, in normal circumstances, the provinces have "quasi-sovereign authority" with respect to "the regulation and restriction of . . . civil rights." He also attempted to restrict the application of the aspect doctrine, noting that "[t]his is a principle which, although recognized in earlier decisions, such as that of Russell v. The Queen . . . has always been applied with reluctance, and its recognition as relevant can be justified only after scrutiny sufficient to render it clear that the circumstances are abnormal." Haldane is in effect attempting to marginalize the aspect doctrine so that, like the POGG power itself, it cannot be used to uphold federal legislation in "normal circumstances."

     In the 1925 Snider case, Haldane developed this emergency theory of POGG further, arguing that the federal general power might be relied upon in "cases arising out of some extraordinary peril to the national life of Canada, as a whole, such as the cases arising out of a war, where legislation is required of an order that passes beyond the heads of exclusive Provincial competency." Haldane even sought to argue that the Russell case was consistent with his wholly novel theory of the scope of POGG. The Board in Russell must have assumed, Haldane asserted, that "the evil of intemperance at that time amounted in Canada to one so great and so general that at least for the period it was a menace to the national life of Canada so serious and pressing that the National Parliament was called on to intervene to protect the nation from disaster."

     Before 1914, the Canadian legal establishment had evinced an extremely deferential attitude to the pronouncements emanating from Whitehall. But the patently unreasonable interpretations of federal powers that were advanced by Lord Haldane in the 1920s provoked a torrent of criticism from previously docile Canadian jurists. [Note 13: For example, H.E. Smith, commenting on the Snider case, argued that "I do not think it is going too far to say that this result is the precise opposite of that which our fathers hoped and endeavoured to attain." See "The Residue of Power in Canada" (1926) 4 Can. Bar Rev. 432 at 434.] From the Privy Council's vantage point, however, the emergency interpretation of POGG had at least one large attraction. It constituted a clear bright line that made the task of delineating the scope of POGG a relatively straightforward matter. In effect, apart from altogether exceptional circumstances such as war or famine, POGG was a dead letter and could simply be ignored. The division of powers between federal and provincial levels of government could be determined through reference to the enumerated heads of power in sections 91 and 92 alone.

     The emergency theory of POGG set the stage for a series of important decisions that struck down much of the Canadian "new deal" legislation [Note 14: The "new deal" terminology, although not used by Canadian prime minister R.B. Bennett at the time, has since been applied to the package he proposed in 1934, since his reforms were broadly similar to U.S. president Roosevelt's "new deal" legislation.] enacted by the Conservative government of R.B. Bennett in 1934-35 in response to the Depression. Bennett's government put forward a significant legislative package, including legislation regulating hours of work, [Note 15: The Limitation of Hours of Work Act, S.C. 1935, c. 63.] providing administrative arrangements for specifying a minimum wage, [Note 16: The Minimum Wages Act, S.C. 1935, c. 44.] establishing unemployment insurance for industrial workers, [Note 17: The Employment and Social Insurance Act, S.C. 1935, c. 38.] protecting farmers from their creditors, [Note 18: The Farmers' Creditors Arrangements Act, 1934, S.C. 1934, c. 53.] and regulating the marketing of agricultural products. [Note 19: The Natural Products Marketing Act, 1934, S.C. 1934, c. 57.] After Bennett's Conservatives were defeated by the Liberals under Mackenzie King in the 1935 general election, King referred the constitutional validity of these statutes to the Supreme Court of Canada. The Supreme Court was fairly evenly divided; while a number of the statutes were ruled unconstitutional (including The Natural Products Marketing Act, 1934), others were upheld (including The Farmers' Creditors Arrangements Act, 1934) and the Court divided three to three on the validity of the statutes regulating hours of work and dealing with the minimum wage.

     On further appeal to the Privy Council, the Board ruled that all the above-noted statutes were unconstitutional. The Board's discussion of the POGG power in each instance was brief and almost perfunctory. The Privy Council relied on the emergency doctrine as propounded by Haldane, and argued that the economic crisis posed by the Depression fell far short of the "exceptional conditions" that would be necessary in order to "override the normal distribution of powers." [Note 20: Canada, above note 4 at 353, Lord Atkin. ] Certain important social and economic circumstances - including the fact that 33 percent of non-agricultural workers were unemployed, that national output had fallen 30 percent, that personal incomes had fallen almost 50 percent, and that prices had fallen 18 percent - were not mentioned in any of the Privy Council's judgments. "It is only necessary," said Lord Atkin in one case, "to call attention to the phrases in the various cases . . . [which] it is to be hoped, form the locus classicus of the law on this point, and preclude further disputes." [Note 21: Ibid.]

     The Privy Council's new deal decisions exacerbated the fiscal crisis facing the Canadian state in the 1930s. The Depression had caused a steep drop in the revenue base of all governments, but the impact on the provinces and municipalities was particularly severe. In fact, many municipalities across the country were facing bankruptcy as a result of the collapse in real estate prices and the resulting shrinkage of the property tax base. Now the Privy Council had decreed that the only level of government with the fiscal resources to mount some sort of effective response - the government of Canada - was constitutionally barred from intervening directly. The insistence that these matters fell within the exclusive jurisdiction of the provinces placed the entire country in a constitutional straightjacket, since the provinces lacked the fiscal resources needed to take effective action.

     It was obvious to all political leaders in Canada that fundamental changes were urgently required in the fiscal and constitutional framework of the country if the Canadian state was to be able to respond to the challenges posed by the Depression. In 1938 the federal government initiated discussions with the provinces over a constitutional amendment transferring exclusive jurisdiction over legislation on unemployment insurance from the provinces to Parliament. The provinces unanimously agreed to the transfer, although Quebec had been initially reluctant, and the amendment to the BNA Act was enacted by Westminster in 1940. But piecemeal reforms were clearly insufficient to deal with the crisis facing the Canadian state. In 1937 the federal government appointed the Rowell-Sirois Commission to undertake "a re-examination of the economic and financial basis of Confederation and of the distribution of legislative powers in the light of the economic and social developments of the last seventy years." [Note 22: Canada, Report of the Royal Commission on Dominion-Provincial Relations, Book 1 (Ottawa: King's Printer, 1940) at 9. ] Its 1940 report was to prove highly influential in pointing governments towards a new paradigm for federal-provincial relations, a paradigm that remains dominant even to the present day.

     The formalistic and dysfunctional Privy Council decisions on the new deal legislation strengthened the resolve of those Canadians who had been pressing for the abolition of civil appeals to the Privy Council. Ironically, just prior to the abolition of appeals in 1949, the Privy Council seemed to evince second thoughts as to the wisdom of its previous jurisprudence on POGG. In the Ontario (A.G.) v. Canada Temperance Federation case, [Note 23: [1946] A.C. 193 (P.C.).] Viscount Simon expressly disapproved of the emergency doctrine that had been propounded by Lord Haldane in the 1920s. Viscount Simon stated that the "true test" in respect of POGG is whether federal legislation deals with a matter that "goes beyond local or provincial concern or interests and must from its inherent nature be the concern of the Dominion as a whole." Simon also attempted to revive the application of the aspect doctrine in respect of POGG, noting that federal legislation in relation to a matter of inherent national concern could be valid even if "it may in another aspect touch on matters specially reserved to the provincial legislatures."

     As we will see in chapter 8, Viscount Simon's national concern doctrine would feature prominently in the subsequent jurisprudence of the Supreme Court of Canada after 1949. But this doctrine represented a partial retreat only, one that failed to resolve the constitutional imbalance that the restrictive jurisprudence of the previous seventy-five years had created. The remedy would be found not in formal constitutional change or in decisions of the courts, but in new intergovernmental arrangements and mechanisms that would permit the federal and provincial governments to achieve joint and coordinated action to deal with multifaceted societal problems.