Domtar Inc. v. Canada, 2008 FC 1057

 

Date: 20080918

Docket: T-216-07

Citation: 2008 FC 1057

Vancouver, British Columbia, September 18, 2008

PRESENT:     The Honourable Madam Justice Heneghan

 

BETWEEN:

DOMTAR INC. and
DOMTAR INDUSTRIES INC.

 

Plaintiffs

and

 

HER MAJESTY THE QUEEN
IN RIGHT OF CANADA and
THE ATTORNEY GENERAL OF CANADA

 

Defendants

 

 

REASONS FOR ORDER AND ORDER

 

I.          Introduction

[1]               By a Statement of Claim issued on January 31, 2007, Domtar Inc. (“Domtar”) and Domtar Industries Inc. (“Domtar Industries”) (collectively “Domtar” or “the Plaintiffs”) challenge the constitutionality of section 18 of the Softwood Lumber Products Export Charge Act, 2006 S.C. 2006, c. 13 (the “SLPECA” or the “Act”). By an amended Statement of Claim, filed on February 13, 2007, the Plaintiffs added Her Majesty the Queen in Right of Canada as a Defendant, together with the Attorney General of Canada (collectively “the Defendants”).

[2]               The Defendants now move to strike out the action and in their Notice of Motion filed on March 27, 2007, they seek the following relief:

a)                  An Order striking out the Amended Statement of Claim herein (the “Claim”) without leave to amend and dismissing the action, in whole or in part;

 

b)                  In the alternative, an Order removing the Attorney General of Canada as Defendant;

 

c)                  In the further alternative, in the event that any of paragraphs 17, 18, 20, 21, 22, 40 and 43 of the Claim are not struck out, an Order requiring the Plaintiffs to provide further and better particulars thereof within 30 days of the Order;

 

d)                  If necessary, an Order extending the time for serving and filing the Statement of Defence to 30 days from the production of further and better particulars or the final disposition of this motion;

 

e)                  An Order for costs of this motion; and,

 

f)                    Further and additional relief as counsel may request and this Court may deem appropriate.

 

[3]               In this case, each party filed affidavits. The Defendants, the moving party, filed the Affidavits of Jacques Maheux and Elizabeth Macauley. The Plaintiffs filed the Affidavit of Patrick Belisle.

 

[4]               Mr. Maheux deposed to the fact that the records of the Canada Revenue Agency show that on January 31, 2007, the Plaintiffs filed a return reporting and remitting $37,769, 575.41 in duties and that the return noted that the payment was made “under protest”. Mr. Maheux further deposed that based upon his review of the file, the Plaintiffs had not filed an application for refund of the monies paid, pursuant to subsection 41(3) of the SLPECA.

[5]               Ms. Elizabeth Macauley, a paralegal with the Trade Law Bureau of the Department of Foreign Affairs and International Trade, Canada, also provided an affidavit. Attached as exhibits to her affidavit were the following documents:

(i)                  a true copy of the April 27, 2006 “Agreement in principle” entitled “Basic Terms of a Canada-United States Agreement on Softwood Lumber”, referred to in paragraph 14 of the Amended Statement of Claim;

(ii)                a true copy of the text of the SLA as executed by Canada and the United States on September 12, 2006;

(iii)               a true copy of a amendment to the SLA executed on October 12, 2006;

(iv)              a letter dated October 12, 2006, by the Department of Foreign Affairs and International Trade, Canada concerning the entry into force of the SLA pursuant to Article 11.1; and

(v)                a letter dated October 12, 2006, by the Ambassador of the United States of America to Canada concerning the entry into force of the SLA pursuant to Article 11.1.

 

[6]               In their responding motion record, the Plaintiffs filed the Affidavit of Patrick Belisle, Controller of Forest Products Division, Domtar Inc. He deposed that neither Domtar nor its wholly-owned subsidiary Domtar Industries had received an assessment under the SLPECA, but rather Domtar Inc. received a generic form from the Canada Revenue Agency. The form was to be completed by all companies who received refunds of duty deposits pursuant to the liability created by section 18 on the SLPECA. A copy of the form was attached as an exhibit. At paragraph 4 of his Affidavit, Mr. Belisle said the following:

As a result of the liability to pay imposed by section 18 of the SLPECA, Domtar Inc. paid to the Canadian government approximately 37 million (Cdn) based on the duty deposits received by Domtar Inc. and Domtar Industries Inc., in accordance with the formula set out in this form. The monies were not paid by mistake.

 

[7]               Mr. Belisle further deposed that Domtar Inc. paid approximately $37 million Cdn to the Canadian government and that the monies were not paid by mistake.

 

II.         Allegations in the Statement of Claim

[8]               Domtar is a producer of pulp and paper, lumber and other wood products. It is a publicly traded corporation operating in both Canada and the United States and has been exporting Canadian softwood lumber products into the U.S. for several decades. As a result of certain U.S. trade measures, Domtar’s exports of softwood lumber products to the U.S. were subject to approximately $160 million (U.S.) in anti-dumping (“AD”) and countervailing (“CV”) duties from 2002 to October 11, 2006.

 

[9]               At all relevant times, Domtar Industries was, and continues to be, the importer of record for U.S. customs purposes. Although the duties are payable by the importer of record, Domtar paid the duties to U.S. Customs and Border Protection for both itself and Domtar Industries Inc.

 

[10]           The circumstances giving rise to this imposition of the AD and CV duties was an international trade dispute between Canada and the United States. On April 2, 2001, the U.S. Coalition for Fair Lumber Imports, representing U.S. softwood lumber producers, filed AD and CV duty petitions with the U.S. Department of Commerce (the “DOC”) and the U.S. International Trade Commission (the “ITC”). As a result, AD and CV Orders were made. These Orders remained in effect until October 12, 2006, resulting in liability for AD and CV duties on softwood lumber products from Canada to the U.S. until October 12, 2006. During the period April 2001 until October 2006, approximately $5.4 billion (U.S.) was collected by the U.S. in AD and CV duties on Canadian softwood lumber imports.

 

[11]           Canadian lumber producers and associations challenged the U.S. AD and CV Orders before the U.S. Courts and before bi-national panels established pursuant to the North American Free Trade Agreement (“NAFTA”). Canadian producers and associations also supported the Government of Canada in its recourse to the World Trade Organization (“WTO”), and NAFTA challenges to the measures undertaken by the U.S.

 

[12]           As a result of the proceedings before the U.S. Courts, and the WTO and NAFTA dispute panels, the imposition of the AD and CV duties were found to be contrary to both American law and to international treaty obligations. In spite of these successful challenges, the U.S. government refused to act in accordance with these rulings.

 

[13]           In April 2006, the Canadian and American governments reached an agreement in principle to settle the continuing softwood lumber dispute. This agreement is known as the “Softwood Lumber Agreement” (the “SLA”). The SLA formally came into force on October 12, 2006, and terminated the U.S. Orders imposing the AD and CV duties on softwood lumber imports from Canada.

 

[14]           As part of the SLA, the U.S. agreed to return the AD and CV duties that had been collected, in the amount of approximately $5.4 billion (U.S.). The Canadian government agreed that it would pay $1 billion (U.S.) of the $5.4 billion (U.S.) refunds to U.S. softwood lumber interests. The money would be allocated to members of the Coalition for Fair Lumber Imports in the amount of $500 million (U.S.), and $450 million (U.S.) would be spent on “meritorious initiatives”, to be determined by the Unites States, in consultation with Canada. The balance of $50 million (U.S.) would be payable to the bi-national industry council.

 

[15]           The SLA was given effect in Canadian law by the SLPECA, which received Royal Assent on December 14, 2006. The provisions relevant to this dispute were deemed to come into effect on October 12, 2006.

 

[16]           The preamble of the SLPECA states, among other things, that the purpose of the Act is to “impose a charge on the export of certain softwood lumber products to the United States and a charge on the refunds of certain duty deposits paid to the United States …”.

 

[17]           In order to implement these charges, two mechanisms were established under the Act: a voluntary duty refund mechanism and section 18 of the SLPECA. Under the voluntary duty refund mechanism, softwood lumber companies could assign their rights to duty deposit refunds to Export Development Canada (the “EDC”), a federal Crown Corporation. In return, the EDC would subsequently pay the producer 81.94% of the refund. The balance of 18.06% would be retained by the Government of Canada, through the EDC. The Canadian Government would pay the funds, amounting to 18.06%, to American softwood lumber interests. Those Canadian companies that did not assign their rights to the EDC in respect of the duty deposit refunds were subject to the section 18 charge.

 

[18]           Section 18 of the SLPECA creates a charge on the refunds of duty deposits paid by the American Government. According to the formula set out in subsection 18(1), the charge is applied at a rate of 18.06% of the duty deposit refunds. The charge applies to the “person that filed the documents and information required under the applicable United States law in respect of the importation of any softwood lumber product into the United States during the period beginning on May 22, 2002 and ending on October 11, 2006.” The charge applies to a “specified person” as defined in section 2 of the Act.

 

[19]           Pursuant to subsection 18(6) of the SLPECA, if a “specified person” sells or disposes of its rights to a duty deposit refund to a person other than Her Majesty the Queen in Right of Canada, that is if the specified person did not participate in the EDC mechanism, the specified person and the other person are “jointly and severally, or solidarily, liable” to pay the charge and any penalties and interest under the SLPECA relating to the charge.

 

[20]           Subsection 68(1) of the SLPECA imposes a fine up to a maximum of $25,000.00 or imprisonment of up to one year, or both, for any person who fails to file a return relating to a section 18 charge.

 

[21]           The Plaintiffs allege that the section 18 charge is unlawful on the grounds that it is ultra vires section 91 of the Constitution Act, 1867, (U.K.), 30 & 31 Vict., c. 3, reprinted in R.S.C. 1985, App. II, No. 5 (the “Constitution Act, 1867”). They claim that the charge represents an unconstitutional intrusion on provincial jurisdiction over property and civil rights within the provinces as authorized by subsection 92(13) of the Constitution Act, 1867. Further, they allege that the effect of section 18 is the unlawful interference with the management and sale of public lands belonging to the province of timber and wood pursuant to subsection 92(5) and generally, all matters of a merely local or private nature in the provinces pursuant to subsection 92(16) of the Constitution Act, 1867.

 

[22]           The Plaintiffs further claim that section 18 constitutes a tax in relation to forestry resources in the provinces, contrary to subsection 92A(4) of the Constitution Act, 1867.

 

[23]           The Plaintiffs claim that section 18 violates sections 102 and 106 of the Constitution Act, 1867 because the revenue raised is not for the Public Service of Canada. They allege that the provision violates the rights to enjoyment of property, due process of law and equality before the law as guaranteed by the Canadian Bill of Rights, S.C. 1960, c. 44, reprinted in R.S.C. 1985, App. III, (“Canadian Bill of Rights”). They submit that section 18 violates the Constitution and the law by being overbroad, disproportionate and arbitrary. The Plaintiffs also allege that the SLA and the SLPECA were motivated by political considerations.

 

[24]           In their response to the Defendants’ written submissions, the Plaintiffs consented to the removal of the Attorney General of Canada as a Defendant. They also stated they would not rely upon nor pursue the allegations respecting the Canadian Bill of Rights.

 

III.       Submissions

            i)          The Defendants’ Submissions

[25]           The Defendants raise two broad arguments. First, they argue that this Court lacks jurisdiction to entertain this action on the grounds that the statutory scheme set out in the Act, together with section 18.5 of the Federal Courts Act, R.S.C. 1985, c. F-7, as amended, means that the Tax Court of Canada possesses exclusive jurisdiction over the Plaintiffs’ claim.

 

[26]           Second, the Defendants submit that the Amended Statement of Claim discloses no reasonable cause of action. They argue that the Plaintiffs’ challenge to the constitutionality of section 18 of the SLPECA cannot succeed since that section represents a proper and lawful exercise of Parliament’s jurisdiction over international trade and commerce, pursuant to subsection 91(2) of the Constitution Act, 1867. According to the Defendants, the Plaintiffs’ claim relative to improper and unlawful intrusion by Parliament into the sphere of provincial jurisdiction is answered by the body of jurisprudence that deals with the division of powers between the federal and provincial governments, including the doctrine of incidental effect, the broad power of Parliament to legislate for the purposes of taxation including indirect taxation, and the federal authority to expend monies other than for public purposes.

 

[27]           As well, the Defendants submit that the Act, including section 18, represents the exercise by Parliament of its treaty-making power. Since such exercise is an aspect of the prerogative powers of Parliament and immune from review in any court, the Defendants argue the Plaintiffs’ claim in that regard are doomed to failure.

 

[28]           Further, in the alternative, the Defendants submit that the claims advanced in paragraphs 17, 18, 20, 21, 22, 40 and 43 are non-justiciable since they purport to challenge Parliament’s motivation or rationale in enacting the Act or section 18 of the Act and such motivation is beyond review.

 

[29]           With respect to the alleged lack of jurisdiction over the Plaintiffs’ claims, the Defendants rely on the scheme set out in the Act that addresses the recovery of money. The Defendants submit that in essence, the Plaintiffs’ action is for the recovery of the money that they paid to the Canadian government in the approximate amount of $37 million (Cdn), in satisfaction of the charge created by section 18.

 

[30]           The Defendants argue that sections 39 through 44 address the process to be followed in seeking the refund of money paid under the Act. Section 39 of the Act provides as follows:

 

[31]           Section 41 of the Act also deals with refunds and provides as follows:

 

[32]           The Defendants argue that, similar to the statutory scheme provided under the Excise Tax Act, R.S.C. 1985, c. E-15, the Act provides the opportunity for a person seeking a refund of money to follow a process of filing an objection, then pursuing an appeal, ultimately before the Tax Court of Canada. The Defendants note that the jurisdiction of the Tax Court of Canada, in relation to matters arising under the Act, was expressly addressed in an amendment to the Tax Court of Canada Act, R.S.C. 1985, c. T-2, following the coming into force of the Act. Subsection 12(1) of the Tax Court of Canada Act provides as follows:

 

[33]           The Defendants refers to decisions made pursuant to the Excise Tax Act, including the decisions in Riverside Concrete Ltd. v. Canada, [1995] 2 F.C. 309 (T.D.), Federated Co‑operatives Ltd. v. Canada, [1999] F.C.J. No. 1028, 165 F.T.R. 135 (F.C.T.D.) and Scott Paper Ltd. v. Canada (2006), 355 N.R. 378 (F.C.A.); leave to appeal denied (2008), 370 N.R. 400 in support of their contention that Canadian courts have recognized that the Excise Tax Act provides a procedural code for the recovery of monies paid under that legislation, with a right of appeal lying to the Tax Court. They argue that, by analogy, the SLPECA provides a similar process and again, that jurisdiction in respect of a claim for recovery of money falls within the exclusive jurisdiction of the Tax Court of Canada, at first instance.

 

[34]           Relying on this foundation, the Defendants submit that pursuant to section 18.5 of the Federal Courts Act, this Court is without jurisdiction to adjudicate the Plaintiffs’ claim. Section 18.5 of the Federal Courts Act provides as follows:

 

[35]           The Defendants argue that, having regard to the true nature of the Plaintiffs’ claim, that is the recovery of money paid under the SLPECA, the combined effect of the specialized process set out in that legislation and the exclusionary effect of section 18.5 of the Federal Courts Act, it is “plain and obvious” that this Court lacks jurisdiction over the within action and that the action should be struck out. In this regard, the Defendants rely on the decision in Roitman v. Canada (2006), 353 N.R. 75.

 

[36]           The second substantive ground upon which the Defendants base their motion to strike the Statement of Claim herein is that the Plaintiffs’ claim regarding the alleged unconstitutionality of section 18 of the Federal Courts Act is without merit since it is plain and obvious that that statutory provision relates to the regulation of international trade, a subject clearly within the legislative competence of Parliament pursuant to subsection 91(2) of the Constitution Act, 1867.

 

[37]           Subsection 91(2) of the Constitution Act, 1867 provides as follows:

 

[38]           Section 18 of the SLPECA provides as follows:

 

[39]           The Defendants refer and rely upon the decision of the Supreme Court of Canada in Ward v. Canada (Attorney General), [2002] 1 S.C.R. 569, where the Supreme Court identified the first step in addressing the “pith and substance” analysis of legislation when its constitutional validity is challenged. At para. 17, the Supreme Court said the following:

17.       The first task in the pith and substance analysis is to determine the pith and substance or essential character of the law. What is the true meaning or dominant feature of the impugned legislation? This is resolved by looking at the purpose and the legal effect of the regulation or law: see Reference re Firearms Act, supra, at para. 16. The purpose refers to what the legislature wanted to accomplish. Purpose is relevant to determine whether, in this case, Parliament was regulating the fishery, or venturing into the provincial area of property and civil rights. The legal effect refers to how the law will affect rights and liabilities, and is also helpful in illuminating the core meaning of the law: see Reference re Firearms Act, supra, at paras. 17-18; Morgentaler, supra, at pp. 482-83. The effects can also reveal whether a law is "colourable", i.e. does the law in form appear to address something within the legislature's jurisdiction, but in substance deal with a matter outside that jurisdiction?: see Morgentaler, supra, at p. 496. In oral argument, Ward expressly made clear that he is not challenging the law on the basis of colourability.

 

 

[40]           The Defendants submit that having regard to the core of section 18 of the SLPECA, it is plain and obvious that that provision is related to the regulation of international trade. The Act is intended to implement some of Canada’s obligations under the SLA, an agreement that ended the softwood lumber dispute with the United States. According to the Defendants, section 18 is important for the purpose of that Agreement since the provision deals with the raising of money to pay the amount of $1 billion (U.S.) from the customs duties returned to Canada’s exporters.

 

[41]           The Defendants argue that a charge will be considered as part of a regulatory scheme if it is “necessarily incidental” to such scheme. In this regard, they rely on the decisions in Reference Re: Proposed Federal Tax on Exported Natural Gas, [1982] 1 S.C.R. 1004 and Westbank First Nation v. British Columbia Hydro and Power Authority, [1999] 3 S.C.R. 134.

 

[42]           The Defendants concede that section 18 has incidental effects on property and civil rights but submit that such incidental impact does not impair its constitutional validity. They rely upon the decision of the Supreme Court of Canada in Fédération des producteurs de volailles du Québec v. Pelland, [2005] 1 S.C.R. 292 at paragraph 31 when the Court said the following:

This analysis underlies the concern expressed by Laskin C.J. in the Egg Reference, and it arises whenever there is overlapping jurisdiction. Laws enacted under the jurisdiction of one level of government often overflow into or have incidental impact on the jurisdiction of the other governmental level. That is why a reviewing court is required to focus on the core character of the impugned legislation, as this Court did in Carnation; Attorney-General for Manitoba v. Manitoba Egg and Poultry Assn., [1971] S.C.R. 689; the Egg Reference; Canadian Industrial Gas & Oil Ltd. v. Government of Saskatchewan, [1978] 2 S.C.R. 545; and Central Canada Potash Co. v. Government of Saskatchewan, [1979] 1 S.C.R. 42.

 

[43]           The Defendants also rely on the decision in Murphy v. Canadian Pacific Railway Company, [1958] S.C.R. 626 where Locke J. found that some impact on property and civil rights is inevitable, saying the following at pp. 631-632:

… it appears to me to be too clear for argument that the Canadian Wheat Board Act in so far as its provisions relate to the export of grain from the province for the purpose of sale is an Act in relation to the regulation of trade and commerce within the meaning of that expression in s. 91. As pointed out by the learned Chief Justice of Manitoba, it has been long since decided that the provinces cannot regulate or restrict the export of natural products such as grain beyond their borders. …

 

This being so, in my opinion the fact that of necessity it interferes with property and civil rights in the province of the nature referred to in head 13 of s. 92 is immaterial. For reasons which have been stated in a great number of cases decided in the Judicial Committee as well as in this Court, it has been decided that if a given subject-matter falls within any class of subjects enumerated in s. 91 it cannot be treated as covered by any of those in s. 92 … It is, of course, obvious that it would be impossible for parliament to fully exercise the exclusive jurisdiction assigned to it by head 2 and many others of the heads of s. 91 without interfering with property and civil rights in some or all of the provinces.

 

 

[44]           The Defendants argue that paragraphs 37 and 38 of the Amended Statement of Claim should be struck since they purport to challenge the wisdom of the SLA.

 

[45]           Paragraphs 37 and 38 of Amended Statement of Claim say the following:

Section 18 of the SLPECA is ultra vires section 91 of the Constitution Act, 1867, as it deals with matters assigned solely to provincial jurisdiction. More specifically, the section 18 charge does not involve “the raising of Money by any Mode or System of Taxation”, as assigned to the Federal Government under subsection 91(3). Rather, the section 18 charge is a regulatory charge applied to monies owed by a foreign government to Canadian companies, to be collected for the sole purpose of re-distributing those monies to foreign interests.

 

The section 18 regulatory charge relates to “Property and Civil Rights in the Province”, as assigned to provincial jurisdiction under subsection 92(13). In addition or in the alternative, the charge relates to

(a)                “the Management and Sale of the Public Lands belonging to the Province and of the Timber and Wood thereon”, as assigned to provincial jurisdiction under subsection 92(5); and/or

(b)               “Generally all Matters of a merely local or private Nature in the Province”, as assigned to provincial jurisdiction under subsection 92(16); and /or

(c)                “the raising of money by any mode or system of taxation in respect of …forestry resources in the province and the primary production therefrom”, as assigned to provincial jurisdiction under subsection 92A(4).

 

[46]           The Defendants submit that the wisdom or benefits of the SLA per se cannot be the subject of litigation. The allegations made in paragraphs 37 and 38 do not “detract from the self-evident trade-related character” of the SLA and related legislation. The Defendants refer to the decision in Reference Re:  Firearms Act (Can), [2000] 1 S.C.R. 783 at paragraph 18 where the Supreme Court said the following:

Determining the legal effects of a law involves considering how the law will operate and how it will affect Canadians. The Attorney General of Alberta states that the law will not actually achieve its purpose. Where the legislative scheme is relevant to a criminal law purpose, he says, it will be ineffective (e.g., criminals will not register their guns); where it is effective it will not advance the fight against crime (e.g., burdening rural farmers with pointless red tape). These are concerns that were properly directed to and considered by Parliament. Within its constitutional sphere, Parliament is the judge of whether a measure is likely to achieve its intended purposes; efficaciousness is not relevant to the Court’s division of powers analysis: Morgentaler, supra, at pp. 487-88, and Reference re Anti-Inflation Act, [1976] 2 S.C.R. 373. Rather, the inquiry is directed to how the law sets out to achieve its purpose in order to better understand its “total meaning”: W. R. Lederman, Continuing Canadian Constitutional Dilemmas (1981), at pp. 239-40. In some cases, the effects of the law may suggest a purpose other than that which is stated in the law: see Morgentaler, supra, at pp. 482-83; Attorney-General for Alberta v. Attorney-General for Canada, [1939] A.C. 117 (P.C.) (Alberta Bank Taxation Reference); and Texada Mines Ltd. v. Attorney-General of British Columbia, [1960] S.C.R. 713; see generally P. W. Hogg, Constitutional Law of Canada (loose-leaf ed.), at pp. 15-14 to 15-16. In other words, a law may say that it intends to do one thing and actually do something else. Where the effects of the law diverge substantially from the stated aim, it is sometimes said to be “colourable”.

 

 

[47]           Alternatively, the Defendants argue that section 18 is a valid exercise of Parliament’s jurisdiction pursuant to subsection 91(3) of the Constitution Act, 1867 which provides as follows:

POWERS OF THE PARLIAMENT Legislative Authority of Parliament of Canada   91. It shall be lawful for the Queen, by and with the Advice and Consent of the Senate and House of Commons, to make Laws for the Peace, Order, and good Government of Canada, in relation to all Matters not coming within the Classes of Subjects by this Act assigned exclusively to the Legislatures of the Provinces; and for greater Certainty, but not so as to restrict the Generality of the foregoing Terms of this Section, it is hereby declared that (notwithstanding anything in this Act) the exclusive Legislative Authority of the Parliament of Canada extends to all Matters coming within the Classes of Subjects next hereinafter enumerated; that is to say,   […]   3. The raising of Money by any Mode or System of Taxation.

POUVOIRS DU PARLEMENT   Autorité législative du parlement du Canada   91. Il sera loisible à la Reine, de l'avis et du consentement du Sénat et de la Chambre des Communes, de faire des lois pour la paix, l'ordre et le bon gouvernement du Canada, relativement à toutes les matières ne tombant pas dans les catégories de sujets par la présente loi exclusivement assignés aux législatures des provinces; mais, pour plus de garantie, sans toutefois restreindre la généralité des termes ci-haut employés dans le présent article, il est par la présente déclaré que (nonobstant toute disposition contraire énoncée dans la présente loi) l'autorité législative exclusive du parlement du Canada s'étend à toutes les matières tombant dans les catégories de sujets ci-dessous énumérés, savoir :   […]   3. Le prélèvement de deniers par tous modes ou systèmes de taxation.

[48]           The Defendants refer to the decision of the Supreme Court of Canada in Westbank First Nation, where the Court set out the factors to be considered in determining whether or not a charge is a tax, saying the following at paragraphs 21 and 22:

The natural starting point for characterizing a governmental levy is this Court’s decision in Lawson v. Interior Tree Fruit and Vegetable Committee of Direction, [1931] S.C.R. 357, at pp. 362-63. In that case, Duff J., as he then was, explained that the impugned charges in that case were taxes because they were: (1) enforceable by law, (2) imposed under the authority of the legislature, (3) imposed by a public body, and (4) intended for a public purpose. Duff J. also noted that the charges there were compulsory, and affected a large number of people.

 

These indicia of “taxation” were recently adopted by this Court in Eurig Estate, supra, at para. 15. Major J., writing for the majority of this Court, added another possible factor to consider when characterizing a governmental levy, stating at para. 21 that “[a]nother factor that generally distinguishes a fee from a tax is that a nexus must exist between the quantum charged and the cost of the service provided”. This was a useful development, as it helps to distinguish between taxes and user fees, a subset of “regulatory charges”.

 

 

[49]           The Defendants submit that the section 18 charge “bears all the hallmarks of taxation” since it is enforceable by law; failure to file or return or pay the charge can lead to penalties under the Act. The charge is imposed by Parliament which is a “public body”. The charge is intended for a “further purpose” that is to reimburse the public treasury for the amount of $1 billion (U.S.) paid by Canada in order to give effect to the SLA.

 

[50]           The Defendants argue that incidental effects upon provincial jurisdiction, pursuant to the exercise of valid federal taxation jurisdiction, does not create a constitutional problem and relies upon the decision in Reference re:  Goods and Services Tax Act, [1992] 2 S.C.R. 445 at 469, in this regard.

 

[51]           The Defendants submit that section 18 is not contrary to section 102 of the Constitution Act, 1867 as alleged in paragraph 39 of the Amended Statement of Claim as follows:

In addition or in the alternative, section 18 of the SLPECA is contrary to sections 102 and 106 of the Constitution Act, 1867, as the monies raised are to be paid to, and for the benefit of, U.S. softwood lumber interests and are not “for the Public Service of Canada”.

 

 

[52]           Section 102 of the Constitution Act, 1867 provides as follows:

VIII. REVENUES; DEBTS; ASSETS; TAXATION   Creation of Consolidated Revenue Fund   102. All Duties and Revenues over which the respective Legislatures of Canada, Nova Scotia, and New Brunswick before and at the Union had and have Power of Appropriation, except such Portions thereof as are by this Act reserved to the respective Legislatures of the Provinces, or are raised by them in accordance with the special Powers conferred on them by this Act, shall form One Consolidated Revenue Fund, to be appropriated for the Public Service of Canada in the Manner and subject to the Charges in this Act provided.

VIII. REVENUS; DETTES; ACTIFS; TAXE   Création d'un fonds consolidé de revenu   Tous les droits et revenus que les législatures respectives du Canada, de la Nouvelle-Écosse et du Nouveau-Brunswick, avant et à l'époque de l'union, avaient le pouvoir d'approprier, sauf ceux réservés par la présente loi aux législatures respectives des provinces, ou qui seront perçus par elles conformément aux pouvoirs spéciaux qui leur sont conférés par la présente loi, formeront un fonds consolidé de revenu pour être approprié au service public du Canada de la manière et soumis aux charges prévues par la présente loi.

 

[53]           The Defendants submit that section 102 is not intended to limit Parliament’s jurisdiction pursuant to section 91 of the Constitution Act, 1867 and relies, in that regard, upon the decision of the Privy Council in Attorney General of British Columbia v. Attorney General of Canada and Attorney General of Ontario, [1923] 4 D.L.R. 669 (P.C.) at pp. 670-71 as follows:

It is to be found in a series of sections which, beginning with s. 102, distribute as between the Dominion and the Province certain distinct classes of property, and confer control upon the Province with regard to the part allocated to them. But this does not exclude the operation of Dominion laws made in exercise of the authority conferred by s. 91. The Dominion have the power to regulate trade and commerce throughout the Dominion, and, to the extent to which this power applies, there is no partiality in its operation. Sect. 125 must, therefore, be so considered as to prevent the paramount purpose thus declared from being defeated.

 

[54]           Further, the Defendants argue that the Plaintiffs’ claim that section 18 offends the rule of law is not a reasonable claim. First, they submit that the Plaintiffs have failed to plead sufficient facts to support their claim. Further, they argue that if the Plaintiffs are relying upon section 7 of the Charter of Rights and Freedoms to support this claim, then such reliance is misplaced since it is well-established that corporations such as the Plaintiffs cannot rely upon the protection of that provision; see Irwin Toy Ltd. v. Québec (Attorney General), [1989] 1 S.C.R. 927 at paragraph 96.

 

[55]           The Defendants also take issue with the Plaintiffs’ claim in paragraph 43 of the Amended Statement of Claim, that section 18 effectively expropriates the Plaintiffs’ property “for no legitimate public purpose”. The Defendants argue that there is no Constitutional protection against expropriation and accordingly, paragraph 43 discloses no reasonable cause of action.

 

[56]           Finally, the Defendants submit that in the event the action as a whole is not struck out, then paragraphs 17, 18, 20, 21, 22, 40 and 43 should be struck out on the grounds that they make allegations that are irrelevant and immaterial, scandalous, frivolous and vexatious, and/or disclose no reasonable cause of action. In any event, the Defendants argue that the issues raised in these paragraphs are non-justiciable.

 

[57]           According to the Defendants, the Plaintiffs are challenging the wisdom of the SLA in paragraphs 17 and 18. The Defendants take issue with paragraphs 20 through 22 on the grounds that the Plaintiffs are challenging the motivation of Parliament in enacting the SLA and enacting the SLPECA.

 

[58]           Finally, with reference to paragraph 43 of the Amended Statement of Claim, the Defendants submit that the Plaintiffs’ claim that section 18 of the Act is contrary to the rule of law is not a reasonable cause of action.

 

            ii)         The Plaintiffs’ Submissions

[59]           For their part, the Plaintiffs argue that the Defendants have failed to establish either that this Court lacks jurisdiction over their claim or that the Amended Statement of Claim fails to disclose a reasonable cause of action. They further submit that the Defendants failed to set out, in their written memorandum, their submissions that certain paragraphs in the Amended Statement of Claim are scandalous, frivolous or vexatious or otherwise an abuse of process, and that this Court should not address that issue.

 

[60]           The Plaintiffs argue that the Defendants have failed to show that it is plain and obvious that the Court lacks jurisdiction to adjudicate their claim. They submit that their claim is based upon a challenge to the constitutional validity of section 18 of the Act; they are not seeking a refund of money paid under the Act in accordance with the scheme set out in that regard. The Plaintiffs say that the money was not paid in error but pursuant to the liability created under the Act and to avoid the substantiated penalties that could apply in the event of non-compliance.

 

[61]           Relying on the decisions in British Columbia Native Women’s Society v. Canada, [2001] 4 F.C. 191 (T.D.) and R. v. Amway of Canada Ltd., [1986] 2 F.C. 312 (T.D.), varied on other grounds [1987] 2 F.C. 524 (C.A.), the Plaintiffs argue that serious questions of law are not to be determined on a summary basis.

 

[62]           The Plaintiffs submit that jurisprudence pertaining to the Excise Tax Act is irrelevant. They argue that the objection and appeal processes of the Act, which may lead to an appeal before the Tax Court of Canada, are not engaged by the subject matter of their claim. Relying on the decision in Thorson v. Attorney General of Canada, [1975] 1 S.C.R. 138, they argue that the constitutional validity of legislation has always been justiciable.

 

[63]           Furthermore, the Plaintiffs submit that section 18.5 of the Federal Courts Act does not preclude this action. The action is brought pursuant to section 17 of the Federal Courts Act. Section 18.5 of the Federal Courts Act does not apply since the Plaintiffs are not challenging a decision or order of a federal board.

 

[64]           The Plaintiffs argue that the decision in Roitman, relied on by the Defendants, is not applicable. In that case, the Federal Court of Appeal referred to section 18.5 as one way of limiting jurisdiction over challenges to the Income Tax Act, R.S.C. 1985, c. 1 (5^th Supp.) before the Tax Court.

 

[65]           As well, the Plaintiffs submit that the appeal process contained in the SLPECA applies to “assessments” made under the Act, not to the special charge created by section 18.

 

[66]           The Defendants argue that the section 18 charge relates, in pith and substance, to this regulation of international trade and commerce pursuant to subsection 91(2) of the Constitution Act, 1867 or alternatively, to the federal taxation power pursuant to subsection 91(3). In response, the Plaintiffs submit that this assertion by the Defendants raise complex questions of fact and law that cannot be disposed of summarily. They rely, in this regard, on the decision in Reference Re Alberta Bills, [1938] 4 D.L.R. 433 (P.C.).

 

[67]           The Plaintiffs acknowledge that the doctrine of inter-jurisdictional immunity may be invoked to protect the powers of one level of government against intrusion, including incidental ones, by another level of government, relying on their decision in Canadian Western Bank v. Alberta, [2007] 2 S.C.R. 3. An enactment that is found to be, in pith and substance, ultra vires Parliament’s authority and not “necessarily incidental” to the proper exercise of powers may be severed from its surrounding legislation; see Peel (Regional Municipality v. MacKenzie, [1982] 2 S.C.R. 9.

[68]           The Plaintiffs submit that section 18, in its pith and substance is a regulatory charge and not a tax. Further, they say that the Defendants acknowledge this characterization in their written submissions.

 

[69]           The Plaintiffs refer to the decisions in Lawson v. Interior Tree Fruit and Vegetable Committee of Direction, [1931] S.C.R. 357 and Eurig Estate (Re), [1998] 2 S.C.R. 565 where the Supreme Court of Canada identified five criteria for characterizing a government levy, as follows:

1.                  Is the levy enforceable by law;

2.                  Is the levy imposed under this legislature’s authority;

3.                  Is the levy imposed by a public body;

4.                  Is the levy intended for a public purpose; and

5.                  Is the levy unconnected to any form of a regulatory scheme.

 

 

[70]           The Plaintiffs submit that the fifth criteria is most important in the present action having regard to the two substantive objectives of the Act that are identified in its preamble, which provides as follows:

to introduce an Act to impose a charge on the export of certain softwood lumber products to the Unites States and a charge on refunds of certain duty deposits paid to the United States, to authorize certain payments, to amend the Export and Import Permits Act and to amend other Acts as a consequence.

 

 

[71]           The Plaintiffs argue that section 18 creates a detailed regulatory code relative to debts owed by the Government of the United States to Canadian softwood lumber exporters and that section 18 is designed to extinguish part of that debt by the expropriation of certain monies by the Government of Canada for the benefit of American softwood lumber interests.

 

[72]           Further, the Plaintiffs submit that the cost of the regulatory scheme is defined in the formula set out in section 18. The amount, that is 18.06% of the duty refunds to be paid to Canadian softwood lumber exporters, will yield U.S. $1 billion. The Plaintiffs submit that this amount provides a nexus with the cost of the regulation. In the absence of section 18, the Plaintiffs would be able to pursue collection of the full amount of the duty refund, being a debt owed to them by the United States government, as they would pursue collection of any other debt.

 

[73]           The Plaintiffs argue that if section 18 is a regulatory charge, then it is ultra vires Parliament’s authority pursuant to subsection 91(2) of the Constitution Act, 1867. They submit that the section 18 charge does not regulate trade but is rather designed to regulate debt in a particular sector or industry. Insofar as the Act purports to achieve two purposes, that is, to impose a charge on exports of softwood lumber and to impose a charge on duty deposit refunds, the Plaintiffs argue that it is appropriate to sever the section 18 scheme from the balance of the Act.

 

[74]           Alternatively, the Plaintiffs argue that the section 18 charge is sui generis and even if the surrounding regulatory scheme is intra vires the Federal government’s authority, section 18 is not necessarily incidental to the proper exercise of that power.

 

[75]           In short, the Plaintiffs argue that the section 18 charge falls within provincial powers pursuant to subsection 92(13) of the Constitution Act, 1867 that is power over property and civil rights, including the creation and extinction of debts. The Plaintiffs rely in this regard upon the decision in Ladore v. Bennett, [1939] A.C. 468 (P.C.). In the further alternative, the Plaintiffs submit that section 18 falls within provincial powers pursuant to subsection 92(16) of the Constitution Act, 1867 that is matters of a merely local or private nature within the province, which has been found to include debts and the regulation of the creditor-debtor relationship; see Ontario (Attorney General) v. Scott, [1956] S.C.R. 137.

 

[76]           In the further alternative, the Plaintiffs argue that the section 18 charge is within provincial powers pursuant to subsection 92(5) of the Constitution Act, 1867 that is the power to legislate in relation to the management and sale of public lands belonging to the province and of the timber thereon. The Plaintiffs submit that the debt that is the subject of the section 18 charge is integrally related to the provinces’ power under subsection 92(5) since the debt is a result of the sale of timber grown on the lands belonging to the provinces. They argue that the section 18 charge may properly be classified under subsection 92(5).

 

[77]           Again, in the alternative the Plaintiffs submit that if the section 18 charge is a tax, then it is not plain and obvious that section 18 is ultra vires the provinces’ authority pursuant to subsection 92(4) of the Constitution Act, 1867. Under that subsection provinces are authorized to raise money by any system of taxation relative to forestry resources in the province and the primary production from those resources. They say that it is arguable that the section 18 charge falls within provincial taxing authority under subsection 92A(4).

 

[78]           The Plaintiffs also submit that it is not plain and obvious that section 18 is consistent with sections 102 and 106 of the Constitution Act, 1867. Section 102 creates the Consolidated Revenue Fund, that is, the aggregate of all monies belonging to Canada. Sections 103 through 105 of the Constitution Act provide for specific appropriation of funds without the necessity of annual Parliamentary votes. Section 106 provides for appropriation by Parliament for three purposes not addressed in sections 103 through 105, as long as the purpose of the appropriation is for the “Public Service of Canada”.

 

[79]           The Plaintiffs argue that the question of whether sections 102 and 106 of the Constitution Act, 1867 impose limits on Parliament’s spending authority has not been conclusively adjudicated. They submit that it is a question of statutory interpretation and factual analysis to determine if payment of the amount of US$1 billion to American softwood lumber interests is contrary to sections 102 and 106 of the Constitution Act, 1867. Accordingly, the Plaintiffs submit that it is not plain and obvious that their challenge to section 18, upon the bases of sections 102 and 106, is doomed to fail.

 

[80]           The Plaintiffs further argue that it is not plain and obvious that section 18 is consistent with the rule of law. They acknowledge that invocation of the rule of law to invalidate legislation is controversial; however, they rely on the decision in Shubenacadie Indian Band v. Canada (Attorney General et al.) (2001), 202 F.T.R. 30 (T.D.), aff’d (2002), 228 F.T.R., 317 (note) where this Court held that a statement of claim should not be struck on the ground that the state of the law is evolving or uncertain if there is a “glimmer of a cause of action, even though vaguely or imperfectly stated”.

 

[81]           The Plaintiffs also refer to and rely on the decision in Babcock v. Canada (Attorney General), [2002] 3 S.C.R. 3 and British Columbia v. Imperial Tobacco Canada Ltd., [2005], 2 S.C.R. 473 in support of their claim based upon the rule of law.

 

[82]           The principles of the rule of law were also addressed by the Supreme Court of Canada in British Columbia (Attorney General) v. Christie, [2007] 1 S.C.R. 873. Relying on this decision, the Plaintiffs argue that the Supreme Court has acknowledged that the principle of the rule of law, as the basis for a constitutional challenge to legislation, is still developing.

 

[83]           The Plaintiffs argue that their reliance on the principles of overbreadth, proportionality and arbitrariness in support of their rule of law claim is appropriate given that the issue of the capability of the rule of law to challenge and limit government authority is not settled. They submit that it is not plain and obvious that this cause of action will fail.

 

[84]           The Plaintiffs’ response to the Defendants’ claim that paragraphs 17, 18, 20, 21, 22, 40 and 43 of the Amended Statement of Claim are not justiciable is that the Defendants have failed to show that it is plain and obvious that these claims will not succeed. Relying on the decision in Chiasson v. Canada (2001), 215 F.T.R. 293, the Plaintiffs submit that this Court has already decided that a question of justiciability should not be disposed of in a summary way upon a motion to strike, but should be determined by a trial judge upon a complete hearing on the merits.

 

[85]           Further, the Plaintiffs argue that a Court should not refuse to decide an issue on the basis of its policy context, relying in this regard upon the decision in Operation Dismantle v. Canada, [1985] 1 S.C.R. 441.

 

[86]           As well, the Plaintiffs rely on the decision of the Ontario Court of Appeal in Black v. Canada (Prime Minister) (2001), 54 O.R. (3d) 215 (C.A.) in response to the Defendants’ submissions about the non-justiciability of the claim made in the above-referenced paragraphs. The Plaintiffs argue that the exercise of prorogation power is justiciable as long as the subject matter of that power is “amenable to the judicial process”.

 

[87]           Finally, the Plaintiffs argue that if there are deficiencies in their Amended Statement of Claim, such flaws are capable of rehabilitation either by the provision of particulars or by amendment. They submit that leave to amend must be granted where there is a “scintilla” of a true cause of action, in spite of any vagueness in the pleading.

 

IV. Discussion and Disposition

[88]           The Defendants’ motion is based upon Rule 221(1) of the Rules which provides as follows:

Motion to strike 221. (1) On motion, the Court may, at any time, order that a pleading, or anything contained therein, be struck out, with or without leave to amend, on the ground that it (a) discloses no reasonable cause of action or defence, as the case may be, (b) is immaterial or redundant, (c) is scandalous, frivolous or vexatious, (d) may prejudice or delay the fair trial of the action, (e) constitutes a departure from a previous pleading, or (f) is otherwise an abuse of the process of the Court, and may order the action be dismissed or judgment entered accordingly.

Requête en radiation 221. (1) À tout moment, la Cour peut, sur requête, ordonner la radiation de tout ou partie d’un acte de procédure, avec ou sans autorisation de le modifier, au motif, selon le cas : a) qu’il ne révèle aucune cause d’action ou de défense valable; b) qu’il n’est pas pertinent ou qu’il est redondant; c) qu’il est scandaleux, frivole ou vexatoire; d) qu’il risque de nuire à l’instruction équitable de l’action ou de la retarder; e) qu’il diverge d’un acte de procédure antérieur; f) qu’il constitue autrement un abus de procédure. Elle peut aussi ordonner que l’action soit rejetée ou qu’un jugement soit enregistré en conséquence.

 

[89]           The threshold for striking a pleading is high and the burden upon the moving party is a heavy one, since it must be shown that it is beyond doubt that the case cannot possibly succeed at trial.

 

[90]           The decision in Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959 has been adopted in setting out the test upon a motion to strike a pleading. At page 980, the Supreme Court said the following:

Most recently, in Dumont v. Canada (Attorney General), [1990] 1 S.C.R. 279, I made clear at p. 280 that it was my view that the test set out in Inuit Tapirisat was the correct test.  The test remained whether the outcome of the case was “plain and obvious” or “beyond reasonable doubt”.

 

Thus, the test in Canada governing the application of provisions like Rule 19(24)(a) of the British Columbia Rules of Court is the same as the one that governs an application under R.S.C. O. 18, r. 19:  assuming that the facts as stated in the statement of claim can be proved, is it “plain and obvious” that the plaintiff’s statement of claim discloses no reasonable cause of action?  As in England, if there is a chance that the plaintiff might succeed, then the plaintiff should not be “driven from the judgment seat”.  Neither the length and complexity of the issues, the novelty of the cause of action, nor the potential for the defendant to present a strong defence should prevent the plaintiff from proceeding with his or her case.  Only if the action is certain to fail because it contains a radical defect ranking with the others listed in Rule 19(24) of the British Columbia Rules of Court should the relevant portions of a plaintiff’s statement of claim be struck out under Rule 19(24(a).

 

 

 

[91]           The “plain and obvious” test also applies when a party brings a motion to strike upon a lack of jurisdiction. In this regard, I refer to the decision in Hodgson et al. v. Ermineskin Indian Band et al. (2000), 267 N.R. 143 (C.A.), aff’g (2000), 180 F.T.R. 285 (T.D.) where the Federal Court of Appeal said the following at paragraph 5:

While we are by no means confident that this Court has jurisdiction over the Plaintiffs' claims against the Ermineskin Defendants under section 17 of the Federal Court Act, we are not prepared to say that the Court's lack of jurisdiction is plain and obvious and beyond doubt. This is a case involving claims against an Indian band and band council as well as the Crown. While the Court clearly has jurisdiction in respect of judicial reviews of decisions of Indian band councils, jurisdiction in the case of actions against bands is far less clear. Insofar as the breach of fiduciary duty claim is concerned, the Band's argument that it has no fiduciary duty to non-members, while seemingly obvious at first blush, rests upon the Plaintiffs never having been members or being entitled to membership. It is not plain and obvious that, if the Plaintiffs or their ancestors were wrongly deleted or not added as members, there may not be some fiduciary duty owed to them.

 

[92]           In respect of a motion to strike on the basis of a lack of jurisdiction, evidence may be advanced for the purpose of establishing jurisdictional facts; see Mil Davie Inc. where the Federal Court of Appeal said the following at p. 374:

[…] all refer to specific facts either material to the jurisdictional facts necessary under ss. 36 and 45 of the Competition Act to establish the jurisdiction of the Trial Division or tending to show a reasonable cause of action.

 

 

[93]           The affidavits filed by the parties, that is the affidavits of Ms. Macauley, Mr. Maheux and Mr. Belisle speak to the basic facts underlying this action, that is the existence of a liability under section 18 of the Act to pay a charge and to the payment of that liability by the Plaintiffs. The claim set out by the Plaintiffs is that the provision creating the section 18 charge is unconstitutional. The issue arising on this motion is whether the Defendants have shown that it is “plain and obvious” that the Plaintiffs action is either beyond the jurisdiction of the Court or whether the claim fails to disclose a reasonable cause of action.

 

[94]           I am satisfied that the Defendants have failed to discharge their burden.

 

[95]           First, with respect to the question of jurisdiction it is not “plain and obvious” that the subject matter of the Plaintiffs’ claim falls within the exclusive jurisdiction of the Tax Court. It is not plain and obvious that the assessment, objection and appeal processes provided under the SLPECA are engaged. In my view, in describing the Plaintiffs’ action as one for the recovery of money, the Defendants are mischaracterizing the claim set out in the Amended Statement of Claim.

 

[96]           The Plaintiffs are challenging the constitutionality of section 18 of the Act. If successful, it would appear that the monies paid under protest could be returned. However, the Plaintiffs are not basing this action on a claim for the return of money paid, per se.

 

[97]           The submissions made for the Defendants concerning the exclusive jurisdiction of the Tax Court, to the exclusion of the jurisdiction of this Court, demonstrate that complex questions of fact and statutory interpretation are involved. Repeatedly, this Court and the Federal Court of Appeal have said that questions of statutory interpretation should not be decided on a summary basis. A recent statement in that regard was made by the Federal Court of Appeal in Laboratoires Servier et al. v. Apotex et al. (2007), 370 N.R. 200.

 

[98]           The next question is whether it is “plain and obvious” that the Amended Statement of Claim fails to disclose a reasonable cause of action. Again, I observe that the Defendants have adopted a very narrow perspective on the nature of the claim raised. The Plaintiffs are challenging the constitutionality of section 18 on basic grounds relative to the division of powers, principally by reference to subsection 91(2) and subsection 91(3) of the Constitution Act, 1867 respecting regulation of international trade and commerce and federal taxation power, respectively.

 

[99]           The Plaintiffs’ allegation relative to these provisions relate to subsidiary allegations involving subsections 92(16), 92(5) and 92A(4) of the Constitution Act, 1867 respecting provisional power over matters of a purely local or private nature within the province, the power to legislate with respect to the management and sale of public lands belonging to the province and the timber on the lands, and the power of a province to tax relative to forestry resources in the provinces and the primary production from their lands, respectively.

 

[100]       As argued by the Plaintiffs, the constitutionality of legislation has always been justiciable. I refer to the judgment of the Supreme Court of Canada in Thorson where Mr. Justice Laskin (as he then was) said the following at page 145:

… The substantive issue raised by the plaintiff’s action is a justiciable one; and, prima facie, it would be strange and, indeed, alarming, if there was no way in which a question of alleged excess of legislative power, a matter traditionally within the scope of the judicial process, could be made the subject of adjudication.

 

[101]       In my opinion, the Plaintiffs have identified various alternate claims to challenge the constitutional validity of section 18. It is not “plain and obvious” that these claims are doomed to fail. It is not appropriate that any of these claims be struck out, at this stage.

 

[102]       The Defendants argue that the Plaintiffs’ reliance upon the rule of law, as a challenge to the validity of section 18, fails to disclose a reasonable cause of action. I disagree.

 

[103]       In Christie, at para. 20-21, the Supreme Court of Canada discussed the rule of law and its decision in Imperial Tobacco, relied upon by the Plaintiffs as follows:

The rule of law embraces at least three principles. […]

 

It is clear from a review of these principles that general access to legal services is not a currently recognized aspect of the rule of law. However, in Imperial Tobacco, this Court left open the possibility that the rule of law may include additional principles. It is therefore necessary to determine whether general access to legal services in relation to court and tribunal proceedings dealing with rights and obligations is a fundamental aspect of the rule of law.

 

[104]       I agree with the submissions of the Plaintiffs that it is not “plain and obvious” that their plea respecting the rule of law cannot succeed. This plea is made by the Plaintiffs as an aspect of their challenge to the constitutional validity of section 18 and should be determined by a Court upon a full record.

 

[105]       I reject the arguments of the Defendants that the matters raised in paragraphs 17, 18, 20, 21, 22, 40 and 43 of the Amended Statement of Claim are not justiciable. In Chiasson this Court said the following at para. 12:

12        Without commenting on the strength of the respondent's case, or indeed that of the appellant, having heard the parties and upon review of the materials, I am not convinced that it is plain and obvious that the respondent's claim will fail. In my view the claim is not so futile or bereft of any possibility of success as to warrant striking. I am in agreement with the conclusion reached by Prothonotary Aronovitch. The principle issue raised in this claim calls for a determination of the scope of the Committee's power by reference to the Letters Patent and the Regulations. The respondent argues that this issue is justiciable. It is not plain and obvious to me that it is not. The matter should be disposed of by a judge who has the benefit of a full and complete hearing on the merits.

 

 

[106]       Paragraphs 17, 18, 20 and 22 may be regarded as setting forth a factual context for the background to the passage of the Act, including section 18. It will remain for the trier of fact to decide the consequences of these allegations.

 

[107]       No submissions were made by the Defendants relative to the claim in paragraphs 17, 18, 20, 21, 22 and 43 pursuant to Rule 221(1)(c), that is on the grounds that the allegations in these paragraphs are scandalous, frivolous or vexatious. The paragraphs will remain because I am not satisfied that the Defendants have otherwise shown that it is “plain and obvious” that no reasonable cause of action is disclosed.

 

[108]       Paragraph 40 of the Amended Statement of Claim raises a plea concerning the Canadian Bill of Rights. The Plaintiffs have agreed to withdraw this claim and nothing further need be said in that regard.

 

[109]       The Plaintiffs have also agreed to an Order removing the Attorney General of Canada as a Defendant. The sole Defendant will be Her Majesty the Queen in Right of Canada.

 

[110]       In the event that they were unsuccessful in their motion to have paragraphs 17, 18, 20, 21, 22, 40 and 43 of the Amended Statement of Claim struck out, the Defendants requested an extension of time, that is, 30 days for the production of better particulars before filing their Statement of Defence.

 

[111]       The Defendants have produced no evidence to show that they do not understand the nature of the claims raised in paragraphs 17, 18, 20, 21, 22 and 43. In light of the Plaintiffs’ agreement to abandon any claim with respect to the Canadian Bill of Rights, no more need be said about paragraph 40.

[112]       I am not persuaded that further particulars are required from the Plaintiffs and no order for particulars will be made.

 

[113]       However, the Defendants are granted an extension of time to serve and file their Statement of Defence, that is, a period of 30 days after receipt of a further Amended Statement of Claim from the Plaintiffs.

 

[114]       In the result, the Defendants’ motion is dismissed. The Plaintiffs are granted leave to file a further amended Statement of Claim to show that the Attorney General is no longer a party and to withdraw their claims relative to the Canadian Bill of Rights. That further Amended Statement of Claim is to be served and filed within 30 days of receipt of this Order.

 

[115]       The Plaintiffs shall have their costs to be taxed.

 

 

ORDER

 

THIS COURT ORDERS that:

                        1)         The Defendants’ motion to strike is dismissed.

2)         The Plaintiffs are granted leave to file a further Amended Statement of Claim to show that the Attorney General of Canada is no longer a party and to withdraw their claims relative to the Canadian Bill of Rights as now set out in paragraph 40.

3)                  The Defendants’ request for particulars relative to paragraphs 17, 18,

20, 21, 22 and 43 is denied.

4)                  The Plaintiffs shall serve and file their further Amended Statement of Claim within 30 days of receipt of this Order.

5)                  The Defendants are granted an extension of time, that is, 30 days from receipt of the Plaintiffs’ further Amended Statement of Claim, to serve and file their Statement of Defence.

6)                  The Plaintiffs shall have their taxed costs.

 

 

“E. Heneghan”

FEDERAL COURT

 

SOLICITORS OF RECORD

 

 

DOCKET:                                          T-216-07

 

STYLE OF CAUSE:                          DOMTAR INC. and DOMTAR INDUSTRIES

                                                            v. HER MAJESTY THE QUEEN IN RIGHT OF CANADA and THE ATTORNEY GENERAL OF CANADA

 

 

PLACE OF HEARING:                    Ottawa, Ontario

 

DATE OF HEARING:                      September 11 and 12, 2007

 

 

REASONS FOR ORDER

AND ORDER:                                   HENEGHAN J.

 

 

DATED:                                             September 18, 2008

 

 

APPEARANCES:

 

Gregory Somers Benjamin Bedard Alison Fitzgerald	FOR THE PLAINTIFFS
John Tyhurst David Jacyk	FOR THE DEFENDANTS

 

SOLICITORS OF RECORD:

 

Ogilvy Renault LLP Ottawa, Ontario	FOR THE PLAINTIFFS
John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Ontario	FOR THE DEFENDANTS