Huet v. The Queen, 95 DTC 5008, [1995] 1 CTC 367 (FCTD)

Noel J.:-This is an appeal from assessments made against the plaintiff for his 1981, 1982, 1983, 1984 and 1985 taxation years. These assessments were initially appealed to the Tax Court of Canada, which rejected the appeal by judgment date February 12, 1990. The plaintiff is further asking this Court to reverse the judgment of the Tax Court of Canada.

I should indicate on this point that the appeal to this Court proceeds by way of trial de novo. Accordingly, the subject matter of the appeal is the assessments made against the plaintiff for the years in question, and not the judgment rendered in the case in question by the Tax Court of Canada. As did the Tax Court of Canada, this Court must again rule on the validity of the assessments in June.

The two related appeals by Antonin Giasson (T-835-90) and Nelson O’Connor (T-836-90) were heard at the same time, on common evidence. [1] A copy of the reasons herein will be filed as the reasons for judgment in each of these cases.

The parties agreed that excerpts from the transcript of the testimony given by Antonin Giasson, Nelson O’Connor and Charles-Émile Huet in the Tax Court of Canada would be entered in the record of this Court, along with Exhibits A-l to A-13 and 1-1 to 1-17, which were also part of the record of the Tax Court of Canada.

Judge Lamarre Proulx of the Tax Court of Canada summarized the facts as follows:

In January 1981 the appellants, who were fishermen in the Gaspé, sold their fishing boat to the Coopérative des pêcheurs unis du Québec. Their accountant recommended that they place the proceeds in term deposits and purchase an income-averaging annuity in February 1982 that would allow them to average out the sudden increase in their income resulting from the capital gain and the recapture of depreciation. With the help of their credit union they met a representative of the La Sauvegarde life insurance company in late February or early March 1981. They decided at that time to purchase such a contract from this company but decided to wait until early 1982 before signing the final agreement. On November 12, 1981 the notice of ways and means motion concerning the budget was tabled in the House of Commons. One of the tax changes in this budget was the repeal of the type of deduction contemplated by the appellants. In early February 1982 the appellants were nevertheless invited to attend at the office of a credit union in the area, where they met with one or more representatives of La Sauvegarde. He or they explained the proposed tax measure but also said that there was a 99.9 per cent chance that this measure would not be approved, that they could consequently purchase the annuity contract in question and deduct the purchase price and that, in any event, the changes were not yet in effect. Each of the appellants and La Sauvegarde then signed an income averaging annuity contract.

However, at the same time as the annuity contract was signed, La Sauvegarde had each of the appellants sign a letter absolving the credit union of all liability. Although these letters are not completely identical, they are very similar and I shall reproduce here the letter signed by one of the appellants, Mr. Giasson:

La Sauvegarde Life Insurance Co.

1 Complexe Desjardins

Montreal, Que

Further to our agreement concerning the purchase of an annuity in February 1982 at a minimum rate of 11 per cent, I understand that the latest federal budget jeopardizes the said agreement.

Nevertheless, I believe that I am entitled to this contract and request that it be issued as agreed. La Sauvegarde will not be liable in any way for cancellation thereof by the federal government and I believe that I have valid arguments at my disposal to defend my interests.

I also agree that the right to redeem the contract should be abrogated.

Yours sincerely,

Antonin Giasson

On November 29, 1985 the appellants received a letter from the Group Chief, Special Investigation, at the Department of National Revenue, informing them that the income-averaging annuity contract issued by La Sauvegarde was not deductible because it was not in accordance with the provisions of the Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1 (the "Act"). The appellants were later assessed accordingly.

The chronology of the legislation that led to abolition of the deduction of amounts paid for the purchase of an income-averaging annuity is as follows.

On the evening of November 12, 1981, the Minister of Finance, the Hon. Allan MacEachen, announced in the House:

Specifically, I am eliminating tax deferrals through income-averaging annuities and the capital gains reserves and also repealing general averaging. In their place I am introducing a new forward-averaging provision.

In the budget papers published the same day, the following statement appears at page 16:

Income-Averaging Annuity Contracts

The budget will end deductions for individuals for purchase of incomeaveraging annuity contracts (IAACs) starting with the 1992 taxation year. Deductions for IAACs will continue to be allowed for the 1981 taxation year but IAACs purchased after November 12, 1981 must have a term that does not extend beyond 1982. Amounts used to purchase IAACs after budget night will be deductible in 1981 but the full amount and any interest thereon will be required to be included in income and will be taxed in 1982. Interest on loans for the purchase of IAACs after November 12, 1981 will not be deductible.

By a press release issued on December 18, 1981, the Minister of Finance narrowed the scope of this part of his budget by announcing that he would permit the deduction of contracts for which written arrangements had been made before November 12, 1981.

On June 28, 1982, the Minister of Finance announced a number of other tax measures and tabled a Notice of Ways and Means Motion in the House relating to the budget of November 12, 1981. The legislation announced on the budget date and the transitional measure announced on December 18, 1981 were reflected therein in draft form.

On December 1, 1982, the Minister of State (Finance) tabled a new Notice of Ways and Means Motion in which the measures announced on November 12, 1981 and June 28, 1982 were merged. On December 7, 1982, Bill C-139 was tabled in the House. On December 13, 1982, the new Minister of Finance, the Honourable Marc Lalonde, gave it second reading and tabled a document entitled "Explanatory Notes to a Bill Amending the Income Tax Act". The following appears at page 57 of that document:

Section 61 of the Act provided a system of forward averaging for individuals through the purchase of an income-averaging annuity contract. This system is being replaced by a new method of forward averaging. In order to phase out the old system, paragraph 61(4)(b) of the Act, which contains the definition of income-averaging annuity contract, is amended so that, subject to a transitional rule, the only contract made by an individual after November 12, 1981 which will come within the definition is one under which all payments are made under the contract to the individual before 1983. Thus, it was possible to purchase an income-averaging annuity contract after November 12, 1981 and before March 2, 1982 and thereby transfer qualifying income from 1981 to 1982.

The transitional rule permits the old rules to apply to an income-averaging annuity contract where the payment for the contract was made on or after November 13, 1981 and either of two conditions were met: first, if the payment was made pursuant to an agreement in writing entered into before that date to make such a payment in respect of the 1981 taxation year, and second, if the payment was made pursuant to an arrangement in writing made before that date to have funds withheld before 1982 from the individual’s remuneration which is qualifying income earned or received before November 13, 1981 and paid by or on behalf of the individual.

On March 30, 1983, the Act to amend the statute law relating to income tax, S.C. 1980-81-82-83, c. 140, was enacted, section 30(1) of which amended subsection 61(4) of the Income Tax Act. As result of that amendment, subsection 61(4) read as follows:

61(4) In this section,

(a) “annual annuity amount" of an individual in respect of an incomeaveraging annuity contract means the aggregate of the equal payments described in subparagraph (b)(iii) that, under the contract, are receivable by the individual in the 12-months’ period commencing on the day that the first such payment under the contract becomes receivable by him;

(b) "income-averaging annuity contract" of an individual means a contract between the individual and a person licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada an annuities business or a corporation licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as trustee, under which

(i) in consideration of a qualifying payment as consideration under the contract, that person agrees to pay to the individual, commencing at a time not later than ten months after the individual has made the qualifying payment.

(A) an annuity to the individual for life, with or without a guaranteed term not exceeding the number of years that is the lesser of....

Parliament used the restrictive definition of the expression "qualifying payment" to give this provision the retrospective effect announced earlier:

61(4)(c) "qualifying payment" means a single payment made before November 13, 1981 (or made on or after November 13, 1981 pursuant to an agreement in writing entered into before that date to make such a payment in respect of his 1981 taxation year, or pursuant to an arrangement in writing made before that date to have funds withheld before 1982 from any of the individual’s remuneration described in paragraph (l)(b) earned or received before November 13, 1981 and paid by or on behalf of the individual).

While the evidence suggests that the plaintiff had clearly indicated to La Sauvegarde life insurance company that he intended to purchase an income-averaging annuity well before November 12, 1981, the plaintiff acknowledged that no written arrangements had been made for that purpose. Despite the budget announcements, the plaintiff purchased an annuity at the beginning of 1982 and deducted the purchase price in his 1981 taxation year. His income tax returns for the 1982, 1983, 1984 and 1985 taxation years were also filed on the assumption that he was entitled to deduct the purchase price of the income-averaging annuity.

On November 29, 1985, the applicant was notified by letter of the fact that the Minister of National Revenue was not allowing the deduction of the purchase price of the annuity in his 1981 taxation year. By reassessments made on May 14, 1986, the Minister disallowed the deduction of the purchase price of the annuity for the 1981 taxation year and adjusted the income reported by the plaintiff for his 1982, 1983 and 1984 taxation years accordingly. He did the same thing for the plaintiff’s 1985 taxation year by initial assessment made on June 20, 1986.

Notices of objection were filed against each of these assessments. The Minister subsequently confirmed these assessments and there followed the appeal to the Tax Court of Canada.

The plaintiff argued before me that the statute of March 30, 1983 and the assessments in issue infringe the right to liberty and security of the person protected by section 7 of the Charter in that he was deprived, by a measure that was retroactive to sixteen months before, of the right which he had to the deduction. He added that the assessments and the statutory authority under which they were issued infringed his right to enjoyment of property which is protected by section 1(a) of the Canadian Bill of Rights.

He also argued that the statute in question and the process which led to its enactment were in breach of the principle of the rule of law in that their practical effect was to create a legal vacuum and to compel him to comply with a ministerial announcement rather than with the law. He added on this point that it is a fundamental principle of Canadian constitutional law that a tax may only be imposed by law and not by the executive branch by means of a ministerial announcement.

The final ground of appeal, based on section 15 of the Charter, was abandoned at trial.

Analysis and decision

There would appear to be no doubt as to the power of the Parliament of Canada to impose retrospective fiscal measures. Before the Canadian Charter of Rights and Freedoms came into force, the only requirement imposed by the courts on such measures was that the intended retrospective effect had to be clear and unequivocal. On this point, Mr. Justice Dickson, writing for the Supreme Court of Canada in Gustavson Drilling (1964) Ltd. v. M.N.R., [1977] 1 S.C.R. 271, [1976] C.T.C. 1, 75 D.T.C. 545, at page 279 (C.T.C. 6, D.T.C. 5454), stated:

First, retrospectivity. The general rule is that statutes are not to be construed as having retrospective operation unless such a construction is expressly or by necessary implication required by the language of the Act. An amending enactment may provide that it shall be deemed to have come into force on a date prior to its enactment or it may provide that it is to be operative with respect to transactions occurring prior to its enactment. In those instances the statute operates retrospectively.

The same is true in England, as demonstrated by the decision of the Chancery Division in James v. LR.C., [1977] 2 All E.R. 897, where the following appears at page 901:

...[I]t is in my judgment clear that, as the constitutional law of England stands today, Parliament has the power to enact by stature any fiscal law, whether of a prospective or retrospective nature and whether or not it may be thought by some persons to cause injustice to individual citizens. If the wording of that legislation is clear, the court must give effect to it, even though it may have, or will have, a retrospective effect. It has no power ... to refuse to give effect to it on the ground that the protection of private citizens requires it. [2]

Since the decision in Gustavson, the Canadian courts have confirmed the legality of such measures on several occasions. Indeed, in Air Canada v. British Columbia, [1989] 1 S.C.R. 1161, 59 D.L.R. (4th) 161, the Supreme Court of Canada held that even if an Act imposing a tax was ultra vires, a subsequent amendment could retroactively impose the tax and authorize the retention of moneys unconstitutionally withheld before the amendment, in payment of taxes owing as a result of the amendment.

In that case, the Supreme Court of Canada examined the effect of the 1981 enactment of a new section 25 of the Gasoline Tax Act, 1948, R.S.B.C. 1960, c. 162. The amendments that had been made to that Act were summarized by Mr. Justice La Forest as follows, at page 1192 (D.L.R. 186):

Substantially, subsections 25(1) to (4) purport to retroactively impose a tax on a person who, within the province, between August 1, 1974 and July 8, 1976, purchased gasoline for his own use or consumption. Subsection 25(5) then goes on to provide that where during that period moneys were collected as taxes, penalties or interest under the Act, such money "shall...be conclusively deemed to have been confiscated by the government without compensation".

In its judgment, the Supreme Court of Canada acknowledged, at pages 1192-93 (D.L.R. 185-86), that the Legislature could make a taxing statute that was ultra vires valid retroactively:

Finally, it was argued that the 1976 Act was invalid because the legislature could not by an amendment to an ultra vires statute make the statute intra vires. That proposition had, I think wisely, been virtually abandoned in the Court of Appeal. It is abundantly obvious from the words used in the 1976 Act that the legislature meant to give effect to the whole of the statute in its amended form from the date of its enactment....

I see no reason then why the airlines should be immune from the tax imposed under the 1976 statute, nor on the basis of these arguments, from the 1981 Act. The latter Act, however, raises difficulties of its own, and I shall now turn my attention to these.

None of the judges in the courts below casts any doubt on the legislative power of the province to impose a retroactive tax in the manner provided in subsections 25(1) to (4). What they really disagreed about was the effect of subsection 25(5) on those provisions. In common with these judges, I am unable to use any constitutional impediment to the province’s enacting subsections 25(1) to (4). On the reasoning regarding the 1976 Act, these provisions seem to be a proper exercise of its power to impose direct taxation in the province, the sole difference being that the 1981 provisions are given retroactive effect, a result that is not constitutionally barred.

The courts have faithfully followed the pronouncements of the Supreme Court in Gustavson and Air Canada, despite the coming into force of the Charter of Rights and Freedoms. In Swanick v. M.N.R., [1985] 2 C.T.C. 2352, 85 D.T.C. 630, Judge Bonner of the Tax Court of Canada held that the effect of the retrospective statute before us did not offend the principle of the rule of law, which is now recognized in the preamble to the Charter. In Beesley v. M.N.R., [1986] 2 C.T.C. 2018, 86 D.T.C. 1498, Chief Judge Couture reached a similar conclusion, also relying on the power of Parliament to enact retrospective statutes in the field of tax legislation.

More recently, in Storey Group Homes Ltd. v. M.N.R., [1992] 2 C.T.C. 2052, 92 D.T.C. 1295, Judge Bonner reiterated the principle that where the language was clear and unequivocal the courts had to give effect to retrospective provisions of tax legislation. [3]

Still more recently [4] , in Hokhold v. Canada, [1993] 2 C.T.C. 99, 93 D.T.C. 5339, Mr. Justice Rothstein of this Court stated, with respect to the argument that a retrospective taxing provision was contrary to section 7 of the Charter:

The short answer to the section 7 argument is that there is no connection between the facts in this case and the right to life, liberty and security of the person. This is an assessment under the Income Tax Act and no argument was formulated that even faintly supported any deprivation contemplated under section 7.

I note that in Air Canada the impugned statute had been enacted in 1981 and the Charter could therefore not have applied. [5] The same is true for Gustavson, supra. Neither the Supreme Court nor the Federal Court of Appeal has yet had occasion to rule as to the impact of the Charter, and particularly section 7 thereof, on retrospective taxing measures.

In a recent case that did not involve taxation, however, the Quebec Court of Appeal relied on the Air Canada decision to hold that section 7 of the Charter did not operate to prevent the National Assembly from enacting retrospective legislation. In Chambre des notaires du Québec et al. v. Haltrecht et al., [1992] R.J.Q. 947, the Court of Appeal stated, at page 960:

Section 7 of the Canadian Charter does not in itself guarantee a right to the permanence of a statute. As I stated earlier, the Canadian Constitution does not as a general rule prohibit a statute having retroactive effect: Air Canada v. British Columbia, supra. The respondent has not, in my opinion, established how his life, liberty or security of the person has been violated by the enactment of the 1982 Act.

[Translation.]

Moreover, since the decision in A.G. (Quebec) v. Irwin Toy Ltd., [1989] 1 S.C.R. 927, 32 D.L.R. (4th) 641, it has been clearly established that section 7 does not protect the economic rights generally covered by the concept of property. Prima facie, it is those rights that are in issue in tax matters. While a measure that affects economic rights so severely that it jeopardizes security of the person [6] could, at least in theory, give rise to the protection of section 7, no evidence such as would establish this sort of impact has been adduced. I therefore cannot accept the plaintiff’s arguments on this point.

The argument based on section 1(a) of the Canadian Bill of Rights must also be rejected. That section lays down, inter alia, the individual’s right to the enjoyment of property and the right not to be deprived thereof except by due process of law. Despite the fact that this section has been part of Canadian statute law for nearly 35 years, I know of no case in which a Court has taken that right as authority for refusing to apply a retrospective taxing provision where its efforts are clear and precise. In light of the cases decided by the Supreme Court in this area, it seems to be settled, in principle at least, that a retrospective taxing statute does not give rise to a breach of due process of law, within the meaning, a contrario, of section 1(a) of the Bill of Rights.

It is also important on this point to specify the type of retrospectivity that lies at the root of this case. In his very useful article dealing with retrospectivity of taxing legislation, Douglas Sherbaniuk [7] identifies two categories of retrospective measures used by legislators in this area. At page 728, he writes:

Retrospectivity can conveniently be divided into two time- reference categories. The first relates to legislation that is made effective as of a date that precedes any announcement that the applicable law is to be changed. It reaches back and attaches new legal rights and duties to transactions completed before any notice of the proposed change. The second category is concerned with legislation that is made effective as of the date of an announcement of the change, usually in a budget speech, which serves to put the general public on notice that they can no longer rely on the existing rules.* It attaches new consequences to transactions consummated between the date of the announcement of the change and the date of enactment. This type of retrospectivity is frequently encountered in countries having a parliamentary system of government.

* Notice may be given in various other ways — for example, in an economic statement by the Minister of Finance, a ministerial declaration (in Quebec), draft legislation, or even a press release.

The provision that concerns us falls into the second category. It may be distinguished from the first type by the fact that its retrospectivity is announced and made known as of the moment when it is to become effective. The fundamentally unfair aspect [8] that is inherent in legislation of the first type does not exist. The effect of such legislation is known to the persons concerned from the point in time when it is likely to take effect. [9]

In my view, even if it could be said that a retroactive statute affecting property rights is inherently in breach of the due process of law, it would be difficult for anyone to maintain that they have thereby been unduly deprived of their property right in contravention of section 1(a) of the Bill of Rights in circumstances where he or she was aware of the retroactive application of the statute from the exact moment when it was likely to affect him or her. In this case, the disarray in which the plaintiff finds himself is largely explained by his own or his advisers’ recklessness. The harm complained of does not result so much from the process by which the law is applied, as from the plaintiff’s decision to purchase and deduct the purchase price of his annuity, irrespective of the fact that according to the ministerial announcement, his right to do so was to be retroactively abolished.

The argument based on the rule of law requires greater attention. This principle goes to the heart of our democratic traditions. It involves, inter alia, the concept that laws are the guarantors of rights and freedoms and that they must at all times determine everyone’s rights and obligations. While this principle has always been part of our law, it was reinvigorated, so to speak, by being laid down in the preamble to the Charter. Indeed, the Supreme Court gave this principle a direct constitutional impact in Reference re Manitoba Language Rights, [1985] 1 S.C.R. 721, 19 D.L.R.

(4th) 1. In that case, basing itself on the aspect of this principle which holds that legal order must be maintained at all times, the Court declared certain laws of Manitoba, which it had first held to be void and of no force or effect, to be temporarily valid and effective. If the courts have the power to keep in force laws which are otherwise inoperative by virtue of the necessity to maintain the rule of law, they must also have the power to invalidate laws when the effect of their application in time is to suspend the rule of law.

However, I must note that a retroactive statute does not have this effect. The former statute applies for so long as it is in force, and the new statute does not strip it of effects until the point in time when it is promulgated. Legal order is maintained at all times and there is certainty at all times as to the applicable law. Rather, it is the budgetary process that creates uncertainty as to what the applicable law is. In the article cited supra, Douglas Sherbaniuk describes the problem as follows (supra, footnote 7, at page 755):

In practice, however, this tradition gives rise to a serious problem of uncertainty as to the state of the law during the gestation period between budget day and the date of enactment. For a considerable time, the taxpayer may not know what law will apply to a particular transaction. He is on notice that he can no longer rely on existing law, but he cannot be sure that the law will be changed or, if it is, that it will not undergo important revisions by the time of the final version. Such uncertainty severely inhibits or completely paralyses decision-making with respect to transactions or events that would be affected by the amendments, to the detriment of the economy. In the state of limbo that exists between budget day and the date of enactment, the only transactions that can be carried out safely are those that do not have adverse income tax consequences under either set of rules.

The longer the period between the ministerial announcement and the enactment of the statute giving it effect, the more the process is likely to undermine the rule of law through the uncertainty which it creates. The existing law is de facto said to be abolished, although there is no certainty on this point and the future law, assuming that it will eventually be promulgated, is only known in broad undefined terms. It is apparent that this process, as necessary as it may be, has the practical effect of creating a legal vacuum and can seriously undermine the rule of law, particularly when it is accompanied by a long waiting period. [10]

However, even if this was the situation in the case at bar, I doubt that the Charter allows the courts to interfere in the budgetary process. In Turner v. Canada (No. 2) (1993), 149 N.R. 218, 93 D.L.R. (4th) 628, the Federal Court of Appeal decided that even if the budget process was tainted by irregularity, it could not support a challenge under the Charter or the Bill of Rights. In that case, the plaintiff argued that Parliament had been prompted by false representations to enact a retroactive statute which prejudiced the plaintiff. At page 219 (D.L.R. 629), the Court of Appeal stated:

Both the Canadian Bill of Rights and the Charter of Rights and Freedoms are pleaded. In our opinion, while those undoubtedly affect the validity and construction of legislation, they do not bear on the process of legislating. [11]

Prima facie, if the budget process tends to undermine the principle of the rule of law, it is Parliament which is responsible for minimizing the legislative uncertainty which the process engenders. [12] What the budgetary process involves is government action which takes the form of a statement of intent to which no legal sanction is attached. [13] As the Supreme Court said in S.D.G.M.R. v. Dolphin Delivery Ltd., [1986] 2 S.C.R. 573, 33

D.L.R. (4th) 174, at page 599 (D.L.R. 195):

It would seem that legislation is the only way in which a legislature may infringe a guaranteed right or freedom.

This is different from government action taken otherwise than by a statute but which nonetheless has the force of law, such as Cabinet decisions in extradition cases (Canada v. Schmidt, [1987] 1 S.C.R. 500, 39 D.L.R. (4th) 18), or in respect of access to Canadian territory by a foreign government for military testing (Operation Dismantle v. The Queen, [1955] 1 S.C.R. 441, 18 D.L.R. (4th) 481. In those cases, the government action is coupled with a legal sanction or has a legally binding effect on the persons affected. To the extent that this type of government action infringes a fundamental right or freedom, the Charter may be invoked to counter it. Here, while the government action in issue has a practical impact, it is coupled with no legal sanction of any sort.

Although the budgetary process has no legal effect in terms of the measures announced, I note that it has nonetheless a basis in law. This basis is found in the preamble to the Constitution Act, 1867. That preamble expresses the intention of establishing in Canada "a Constitution similar in Principle to that of the United Kingdom". The preamble is a constitutional guarantee that parliamentary government will be preserved. Among the parliamentary privileges that flow from that guarantee is the privilege holding that Parliament alone has the authority to determine its internal procedure. [14] This necessarily includes the procedure according to which statutes are announced, tabled and enacted. As early as 1906, the English Court of Appeal recognized the budgetary process used in respect of taxation as convenient, necessary and universally followed in countries with the British parliamentary tradition (Colonial Sugar Refining Company, supra, footnote 2). The budget process and the manner in which it unfolds in Parliament therefore falls within the framework of parliamentary privileges.

In New Brunswick Broadcasting Co. v. Nova Scotia (Speaker of the House of Assembly), [1993] 1 S.C.R. 319, 100 D.L.R. (4th) 212, the Supreme Court decided, in a split decision, that the Charter did not apply to the members of the Nova Scotia House of Assembly when they exercise their inherent privileges, since these privileges enjoy constitutional status. More specifically, the majority judges held that the right of the Nova Scotia House of Assembly to exclude strangers [15] enjoyed constitutional status, and accordingly could not be abrogated by another part of the Constitution, in that case the guarantee of freedom of expression entrenched in section 2(b) of the Charter.

However, the majority decision does not have the effect of giving legislative assemblies or Parliament total immunity in the exercise of parliamentary prerogatives. Although it was held that the courts have no power to examine whether a particular decision made in the exercise of a privilege is good or bad, it was also held that the courts were empowered to inquire into the necessity of the privilege claimed. According to that decision, a parliamentary privilege has constitutional status only where it is necessary for the proper functioning of Parliament. Accordingly, when a parliamentary privilege is not founded on necessity and when its use infringes a fundamental right or freedom, it could be subject to the Charter. Parliamentary privileges are grounded in the Constitution only where they are necessary for Parliament to carry out its activities.

In view of the principle of the rule of law, therefore, Parliament could not create uncertainty in relation to the application of its own statutes and bring about the resulting legal vacuum, unless that action fell within the framework of a parliamentary privilege that is considered to be necessary for the proper functioning of the House. On this point, counsel for the plaintiff recognized, in principle, the necessity of the budgetary process, and specifically of the practice of making statutes applicable as of the date of the ministerial announcement.

On the other hand, he argued vigorously against the extent of the delay between the budget statement and the enactment of the legislation giving it effect. In the case at bar, that delay was sixteen months. According to the plaintiff, this time is excessive on its face and goes well beyond the time needed for the proper functioning of the House. [16]

Unfortunately, even if this were the case, and assuming that this is a serious infringement of the principle of the rule of law, I do not believe that it could give the courts authority to interfere in the parliamentary process. I say unfortunately, because if Parliament is in fact unduly delaying the enactment of its own legislation, without concern for the principle of the rule of law, it should be possible for the courts to intervene. However, in its majority decision, the Supreme Court laid down the limits of parliamentary privilege and of the power of the courts to interfere therein as follows, at page 384 (D.L.R. 269):

As noted above, Stockdale v. Hansard (1839), 9 Ad. 2 E. 1, 112 E.R. 1112, is the leading case. The court there rejected the argument that the courts will take cognizance of questions involving privilege only where the question was "incidentally" rather than "directly" before them. It was held that the courts were bound to decide an issue of privilege, however it arose, but that this decision must be subject to the recognition of an exclusive parliamentary jurisdiction. The parameters of this jurisdiction are set by what is necessary to the legislative body’s capacity to function. So defined, the principle of necessity will encompass not only certain claimed privileges, but also the power to determine, adjudicate upon and apply those privileges. Were the Courts to examine the content of particular exercises of valid privilege, and hold some of these exercises invalid, they would trump the exclusive jurisdiction of the legislative body, after having admitted that the privilege in issue falls within the exclusive jurisdiction of the legislative body. The only area for court review is at the initial jurisdictional level: is the privilege claimed one of those privileges necessary to the capacity of the legislature to function? A particular exercise of a necessary privilege cannot then be reviewed....

[Emphasis added.]

The necessity of the budgetary process in taxation matters, as it has been established over the years, is beyond question (supra, footnote 9). It derives from parliamentary privilege and, as such, it is not open to intervention by the courts. What is in issue here is the mode of specific exercise of a valid privilege which, according to the majority decision of the Supreme Court, is beyond judicial review

For these reasons, the appeal is dismissed, with costs.

Appeal dismissed.