Supreme Court of Canada
Reference re legislative jurisdiction of Parliament of
Canada to enact the Employment and Social
Insurance Act (1935, c. 48), [1936] S.C.R. 427
Date: 1936-06-17
In The Matter of a
Reference as to whether The Parliament of Canada Had Legislative Jurisdiction to
Enact The Employment and Social Insurance Act, Being Chapter 38 of The Statutes
of Canada, 1935.
1936: January 31; 1936: February 1, 3; 1936:
June 17.
Present: Duff C.J. and Rinfret, Cannon,
Crocket. Davis and Kerwin JJ.
Constitutional law—The Employment and Social
Insurance Act, 25-26 Geo. V, c. 38—Constitutional validity—Taxation—Property
and civil rights.
The Employment and Social Insurance Act provides
(Part I, sections 4 to 9 inclusive) for the administration of the Act by a
Commission consisting of three members to be called the Employment and Social
Insurance Commission, whose duties are defined in these sections. Part II
(sections 10 to 14 inclusive) of the Act provides for the organization and
administration by the Commission of an employment service for the Dominion of
Canada with regional divisions and a central employment office and employment
offices within each division. Part III (sections 15 to 38 inclusive) of the Act
provides for the establishment of an Unemployment Insurance Fund out of which
unemployment insurance benefits would be payable to all persons of the age of
sixteen years and upwards who are engaged in any of the insurable employments
specified in the Act. Such fund is to be derived partly from moneys provided by
Parliament and partly from compulsory contributions by employers and workers.
The statutory conditions governing the eligibility and ineligibility of insured
contributors for the receipt of benefits are defined in the Act. Penalties are
provided for fraudulently obtaining benefits or evading payment and for other
violations of the Act or the regulations under it. Part IV (sections 39 to 41
inclusive) of the Act, under the heading “National Health,” charges the
Commission with the duty of collecting information concerning any scheme,
actual or proposed, for providing medical, dental, surgical and hospital care,
and compensation for loss of earnings due to ill-health or accident. (Further
particulars of the Act are contained in the judgments reported).
Held, per
Rinfret, Cannon, Crocket and Kerwin JJ., that the Act is ultra vires of
the Parliament of Canada; Duff C.J. and Davis J. holding that the Act is intra
vires.
Per Rinfret,
Cannon, Crocket and Kerwin JJ.—The validity of the legislation cannot be
supported either as an exercise of the residuary power to make laws for the
peace, order and good government of Canada, or as an exercise of the power to
regulate trade and commerce.
The proposition that the Act could be
supported in virtue of the power of the Dominion Parliament concerning
statistics or criminal law need not retain our attention.
The legislation is not based on the Treaty of
Peace (1919) and, therefore, no reliance for its validity can be made on
section 132 of the B.N.A. Act.
Nor can it be supported under “the power to
raise money by any mode or system of taxation,” or “the power to appropriate
public money for any public purpose.” The statute, in its substance, is not an
[Page 428]
exercise of those powers. It clearly,
indicates that the Parliament of Canada intended primarily to legislate with
regard to employment service, to unemployment insurance and to health matters.
It is not concerned either with public debt and property or with the raising of
money by taxation. Its provisions for levying contributions for the creation of
the Unemployment Insurance Fund are nothing more than provisions to enable the
carrying out of the true and only purpose of the legislation. These
contributions (or taxes, if they are to be so called) are mere incidents of the
attempted regulation of employment service and unemployment insurance.
It being well understood, and in fact
conceded, that the subject-matters of the Act fall within the legislative
authority of the provinces, the Dominion Parliament may not, under pretext of
the exercise of the power to deal with its property or to raise money by
taxation, indirectly accomplish the ends sought for in this legislation.
The effect of the Act under submission is “to
attach statutory terms to contracts of employment” (Lord Haldane in Workmen’s
Compensation Board v. Canadian Pacific Railway, [1920] A.C. 184); and its
immediate result is to create civil rights as between employers and employees.
The Dominion Parliament cannot use its power of taxation to compel the
insertion of conditions of that character in ordinary employment contracts.
Per Duff C. J.
and Davis J. dissenting.—The aims stated in the preamble of the Act are
legitimate, provided, of course, that the enactments themselves are within the
ambit of the legislative powers possessed by Parliament. Reading subdivision 1
of section 91 and subdivision 3 of the B.N.A. Act together, the proper
conclusion is that Parliament has exclusive authority to raise money by any
mode or system of taxation for disposition by Parliament for any purpose for
which it is competent to Parliament to apply the assets of the Dominion in
virtue of subdivision 1. In effect, subdivision 1 endowes the High Court of
Parliament with full discretionary authority to dispose of the public assets of
the Dominion, and no other court is invested with jurisdiction to examine any
purported exercise of that authority with a view to pronouncing upon its
validity, subject only to the rule that the courts are always entitled to
determine whether, in truth, any given enactment of Parliament professing to be
an exercise of a given authority is not really an enactment of that character;
but one relating to a subject over which Parliament has no jurisdiction.
The provisions requiring compulsory
contributions by employers and employed possess the essential elements of
legislation respecting taxation. On their true, construction, they have that
character because, first, it would not be competent to a provincial legislature
to enact them in the context in which they stand, which demonstrates that the
contributions are exacted for the purpose of raising moneys for exclusive
disposition by Parliament; and, second, there is no adequate ground for holding
that they are, either in purpose or in immediate effect, outside the ambit of
the powers under subdivision 3.
So also as regards the enactments concerning
the disposition of the proceeds of the levies upon employers and employed and
of the contribution from the Dominion treasury. They are not enactments in
respect of property and civil rights in any one province or in all of the
provinces. They would not be competent as enactments by any or all of the
provincial legislatures, and there is no adequate ground for affirming that
these enactments are not legislation in relation to the subjects within the
scope of subdivision 1.
[Page 429]
Parliament can in the legitimate exercise of
its exclusive authority under subdivisions 1 and 3 of section 91 of the B.N.A.
Act, levy taxes for the purpose of raising money to constitute a fund to be
expended, in conformity with the directions of Parliament, in unemployment
benefits, and provide for a contribution to that fund from the Dominion
treasury, and in executing these exclusive powers, Parliament is not subject to
any control by the courts as to the form of the taxation or the incidence of it
or as touching the manner or conditions of the payment of benefits.
Complete discretionary authority respecting
the form and incidence of taxation under subdivision 3, and respecting the disposal
of all public assets under subdivision 1, are essential to enable Parliament to
discharge the responsibilities entrusted to it.
Legislation for raising money for disposition
by Parliament under subdivision 3 of section 91, and directing the disposition
of it under subdivision 1, is necessarily excluded from the jurisdiction of the
provinces by the concluding words of section 91; and there is no sufficient
ground for affirming that, in the enactments of this statute, Parliament is not
exercising its powers under these subdivisions, or, in other words, that under
the guise of doing so it is invading a provincial field from which it is
excluded, for the purpose of attaining a result which it has full power to
attain by legislating within fields in which it has exclusive authority.
REFERENCE by His Excellency the Governor
General in Council to the Supreme Court of Canada, in the exercise of the
powers conferred by section 55 of the Supreme Court Act (R.S.C. 1927, c.
35), of the following question: Is the Employment and Social Insurance Act, or
any of the provisions thereof and in what particular or particulars or to what
extent, ultra vires of the Parliament of Canada?
The Order in Council referring the question
to the Court reads as follows:
The Committee of the Privy Council have had
before them a report, dated 31st October, 1935, from the Minister of Justice,
referring to the Employment and Social Insurance Act, chapter 38 of the
statutes of Canada, 1935, which was passed for the purposes set out in the recitals
contained in the preamble of the said Act.
The Minister observes that doubts exist or
are entertained as to whether the Parliament of Canada had legislative
jurisdiction to enact the said Act, either in whole or in part, and that it is
expedient such question should be referred to the Supreme Court of Canada for
judicial determination.
The Committee, accordingly, on the
recommendation of the Minister of Justice, advise that the following question
be referred to the Supreme Court of Canada, for hearing
[Page 430]
and consideration, pursuant to section 55 of
the Supreme Court Act,—
Is the Employment and Social Insurance
Act, or any of the provisions thereof and in what particular or particulars
or to what extent, ultra vires of the Parliament of Canada?
E. J. Lemaire,
Clerk of the Privy Council.
The judgment of Duff C.J. and Davis J. was delivered by
Duff C.J.—The preamble to the statute is as follows:—
WHEREAS the Dominion of Canada was a
signatory, as part of the British Empire, to the Treaty of Peace made between
the Allied and Associated Powers and Germany, signed at Versailles, on the 28th
day of June, 1919; and whereas the said Treaty of Peace was confirmed by the Treaties
of Peace Act 1919; and whereas, by article 23 of the said Treaty, each of the
signatories thereto agreed that they would endeavour to secure and maintain
fair and humane conditions of labour for men, women and children, both in their
own countries and in all countries to which their commercial and industrial
relations extend, and by article 427 of the said Treaty declared that the
well-being, physical, moral and intellectual, of industrial wage-earners is of
supreme international importance; and whereas it is desirable to discharge the
obligations to Canadian labour assumed under the provisions of the said Treaty;
and whereas it is essential for the peace, order and good government of Canada
to provide for a National Employment Service and Insurance against
unemployment, and for other forms of Social Insurance and for the purpose of
maintaining on equitable terms, interprovincial and international trade, and to
authorize the creation of a National Fund out of which benefits to unemployed
persons throughout Canada will be payable and to provide for levying
contributions from employers and workers for the maintaining of the said Fund
and for contributions thereto by the Dominion: Therefore His Majesty, by and
with the advice and consent of the Senate and House of Commons of Canada,
enacts as follows:—
No one of the aims stated in this preamble is
illegitimate as an ultimate aim of legislation by the Parliament of Canada. If
the subject matter of the enactment is within the ambit of the powers vested in
Parliament it is lawful for Parliament to exercise those powers for the
attainment of any or all of the objects set forth.
The immediate effect of the statute is to
provide, by the means prescribed, a system of unemployment insurance. The
essential elements of the scheme are the creation of the Fund—the Unemployment
Insurance Fund—which is provided in part from compulsory contributions by
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employers and employees in the insured
employments, and in part by contributions from the Dominion Treasury under the
authority of Parliament. The administration of the Fund is entrusted to a Board
and unemployment benefits are payable by the Board out of the Fund to
designated classes of unemployed persons under prescribed statutory conditions.
The exclusive legislative authority of
Parliament extends inter alia to the subject “The Public . . Property.” It
cannot be doubted, we think, that “property” here is used in its broadest
sense, and includes every kind of asset. This legislative authority is
exercisable “notwithstanding anything in this Act.” There is always, of course,
the qualification, and everything hereinafter said is subject to that
qualification, that Parliament is incapable of acquiring jurisdiction over
matters within the exclusive competence of the provinces by legislating upon
those matters under the pretence of exercising a power which does not embrace
within its ambit the real subject matter of the legislation. Subject to that
qualification, we know of no authority by which His Majesty’s Courts have
jurisdiction to examine, with a view to pronouncing upon its validity, legislation
by Parliament in relation to the disposition of the assets committed to its
control by section 91, B.N.A. Act.
Some reference was made on the argument to
sections 102 and 106 B.N.A. Act, but we cannot find anything in those sections
which in any way qualifies the authority bestowed by section 91. The phrase in
section 106 “shall be appropriated by the Parliament of Canada for the public
service” cannot, with propriety, be read, especially in view of the words
already mentioned “notwithstanding anything in this Act,” as restricting the
discretion of the High Court of Parliament to determine finally what objects
are and what objects are not within the scope of the words “for the public
service of Canada.”
It cannot, therefore, we think—and we do not
think this was disputed on the argument, although we do not desire to put what
we have to say upon any suggested admission—at all events, it cannot, we think,
be disputed, even with plausibility, that, in point of strict law, Parliament
has authority to make grants out of the public monies to individual inhabitants
of any of the provinces, for example,
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for relief of distress, for reward of merit, or
for any other object which Parliament in its wisdom may deem to be a desirable
one. The propriety of such grants, the wisdom of such grants, the convenience
or inconvenience of the practice of making such grants, are considerations for
Parliament alone, and have no relevency in any discussion before any other
Court concerning the competence of Parliament to authorize them.
We are satisfied, therefore, that, if
Parliament, out of public monies exclusively, were to constitute a fund for the
relief of unemployment and to give to unemployed persons a right to claim
unemployment benefits, to be paid out of that fund upon such conditions as
Parliament might see fit to prescribe, no plausible argument could be urged
against the validity of such legislation.
It seems equally clear that it is exclusively
within the discretion of Parliament to determine the manner in which the public
assets shall be appropriated and applied for such purposes. The proceeds of any
given tax, the sales tax, for example, might be validly appropriated for the
purposes of such a fund. The appropriation might be affected antecedently by a
direction that all or part of the proceeds of the tax should form such a fund
in the hands of the Minister of Finance, or of any agency that might be
designated for the purpose. The statute might take the form of requiring the
Minister of Finance to pay into the fund monies from time to time provided by
Parliament. True, the expectations of the authors of the scheme or of the
intended beneficiaries might in any such case be falsified. Future Parliaments
might find themselves in a state of financial embarrassment making it
impossible to carry out the plan, or, if you like, regardless of the consequent
disappointment and suffering, under altered views of policy or duty, abrogate
the scheme and discontinue the payment of the benefits. But such possibilities
and contingencies have no bearing upon the validity of such an enactment.
By section 35 (2) the statute now before us
enacts as follows:—
The Minister of Finance shall also deposit
in like manner from time to time out of moneys provided by Parliament an amount
equal to one-fifth of the aggregate deposits from time to time made as
aforesaid after deducting from the said aggregate deposits any refunds of
contributions from time to time made under the provisions of this Act from the
Fund.
[Page 433]
Some comment was made upon this provision; but
the gist of the comment was that the observance of the mandate laid upon the
Minister of Finance is necessarily contingent upon some further legislative act
making available “monies provided by Parliament.”
The enactment, nevertheless, is an enactment
dealing with the public assets of the Dominion; it gives an explicit direction
to the Minister of Finance as to the application of “monies provided by
Parliament” for the purposes of the statute. The circumstance that the fate of
the scheme may be dependent upon the action of future Parliaments is a
circumstance which is of no pertinence in a question of the authority of the
Parliament to give such a direction.
The real weight of the arguments against the
legislation is to be found in the contention that the provisions of the statute
are enactments on the subject of “property and civil rights” and not enactments
touching any subject falling within the enumerated heads or the introductory
words of section 91 B.N.A. Act. This argument has two branches. First of all,
it is said that, as regards compulsory contributions, the legislation creates a
compulsory contract between the persons liable to contribute and the Crown, or
the Minister of Finance, to whom, in effect, the contributions are payable.
Second, it is said, adapting the language of Lord Haldane in delivering the
judgment in Workmen’s Compensation Board v. C.P.R., that the statute attaches statutory terms
to contracts of employment; and that this is the real pith and substance of it.
The Dominion contends that the compulsory
contributions are contributions which Parliament is competent to exact under
the third subdivision of section 91, by which the exclusive legislative
authority of Canada extends to all matters within the subject “The raising of
money by any mode or system of taxation.” As introductory to an examination of
the argument on behalf of the Dominion, some brief general observations on this
third subdivision of section 91 will not be out of place.
The authority, it will be noticed, is an
authority to legislate in relation to the raising of money. There is no
[Page 434]
limitation in those words as respects the
purpose or purposes to which the money is to be applied. An enactment, the real
purpose of which is to raise “money by any mode or system of taxation,” is not
examinable by the courts as to its validity by a reference to the motives by
which Parliament is influenced, or the ultimate destination of the proceeds of
the tax. We speak, of course, subject to the qualification explained above
which we shall not restate. There is one express qualification in the B.N.A.
Act. That is contained in section 125 and precludes the taxation of the public
property of the Dominion or of the provinces. Reading the words of subdivisions
1 and 3 together, we have no doubt that the words of subdivision 3 necessarily
mean that Parliament is empowered to raise money, for the exclusive disposition
of Parliament, by any mode or system of taxation.
In passing, it will not be out of place to observe
that, reading the words of head no. 3 in this way helps to remove the
difficulty which has been suggested in reconciling the language of head no. 3
of section 91 with head no. 2 of section 92, “direct taxation for provincial
purposes within the province.” If you read head no. 2 of section 92 with
section 126, and by the light of the observations of Lord Watson in St.
Catherine Milling Co. v. The Queen
there is, we think, solid ground for the conclusion that the words “for
provincial purposes” mean neither more nor less than this: the taxing power of
the legislatures is given to them for raising money for the exclusive
disposition of the legislature. In this view, the subdivision of section 91
which deals with taxation, and section 92 which deals with the same subject,
are on different planes and cannot come into conflict.
Even if to the words “for provincial purposes”
in head no. 2 of section 92 there be ascribed a more restrictive operation, it
seems clear enough that the power to legislate for taxation under that head,
which is concerned with taxation for the purpose of raising monies for the
exclusive disposition of the local legislature (even assuming, as we say, that
in such disposition the provincial legislature is subject to some additional limitation
imposed by the phrase
[Page 435]
“provincial purposes”) there is nothing in this
head which can conflict with the exclusive authority given by the third head of
section 91 “notwithstanding anything in this Act” to raise money by any mode or
system of taxation for the exclusive disposition of Parliament. The two
enactments are still on different planes. The one is concerned with raising
money to be appropriated by the provincial legislatures exclusively, the other
is concerned with raising money to be appropriated by Parliament exclusively
for those purposes to which it thinks it advisable to devote the public assets
of the Dominion.
At all events, it seems to be abundantly clear
that there is nothing in either section 91 or section 92 which precludes the
Dominion from raising money by any mode or system of taxation to be expended in
the relief of distress among the inhabitants of any one or more provinces by
direct application for the benefit of the inhabitants as individuals, still
less for raising money to be expended for the relief of the inhabitants of the
Dominion, almost all of whom are necessarily inhabitants of the provinces. The
inhabitants of the provinces are taxable by the Dominion in order to raise
moneys for any purpose in the furtherance of which it is competent to the
Dominion to expend such moneys in exercise of its exclusive and plenary control
over the public assets.
It is not improper here, we think, to advert to
the character of the legislative powers of Parliament. We have had occasion to
observe in connection with one of the other references that certain negative
provisions of the Statute of Westminster emphasize in the most significant way
the scope and character of these powers. First, there are the Recitals that
* * * it is meet and proper to set out by
way of preamble to this Act that, inasmuch as the Crown is the symbol of the
free association of the members of the British Commonwealth of Nations, and as
they are united by a common allegiance to the Crown, it would be in accord with
the established constitutional position of all the members of the Commonwealth
in relation to one another that any alteration in the law touching the
Succession to the Throne or the Royal Style and Titles shall hereafter require
the assent as well of the Parliaments of all the Dominions as of the Parliament
of the United Kingdom:
and that,
* * * it is in accord with the established
constitutional position that no law hereafter made by the Parliament of the
United Kingdom shall extend to any of the said Dominions as part of the law of
that Dominion otherwise than at the request and with the consent of that
Dominion:
[Page 436]
Then, there is the enactment, section 7 (1),
which, in categorical terms, provides that nothing in the Act shall be deemed
to apply to the repeal, amendment or alteration of the British North America
Acts, 1867 to 1930, or any order, rule or regulation made thereunder.
Subject to the restrictions in the Statute of
Westminster and the British North America Act, and to whatever restrictions
may be implied in the status of the Dominion, as owing a common allegiance to
the Crown with the other members of the British Commonwealth, the Parliament of
Canada is invested with plenary authority to legislate for the peace, order and
good government of Canada over the whole field of legislative action, saving
only those fields which, by the enactments of the British North America Act,
have been withdrawn from it and assigned exclusively to the provincial
legislatures.
This authority is not a delegated authority, as,
for example, that of the legislative bodies of the United States. It is an
authority which exists in virtue of the supreme law of the state and is of the
same order, subject, of course, to the restrictions mentioned, as the legislative
authority of the Imperial Parliament.
The language of subdivision 3 could hardly be
broader. “Any mode or system of taxation” leaves in Parliament unlimited
discretion so long as the essentials of taxation are present.
By section 17 of the statute now before us, the
employed and employer are “liable” to pay contributions in accordance with the
provisions of the second schedule of the Act which prescribes the rate of
contribution. The payments are to be made by means of revenue stamps and
section 18 authorizes the Governor in Council by regulation to provide for the
payment of contributions
by means of revenue stamps affixed to or
impressed upon books or cards * * * and such stamps and the devices for
impressing the same shall be prepared and issued in such manner as may be
prescribed by such regulation.
By subsection 2,
* * * the Commission may make regulations
providing for any matters relating to the payment and collection of
contributions payable under this Act, and in particular for—
(a) regulating the manner, times and
conditions, in, at and under which payments are to be made;
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(b) the entry in or upon
unemployment books or cards of particulars of contributions and benefits paid
in respect of the persons to whom the unemployment books or cards relate;
(c) the issue, sale, custody, production
and delivery up of unemployment books or cards and the replacement of
unemployment books or cards which have been lost, destroyed or defaced; and
(d) the offering of reward for the return
of an unemployment book or card which has been lost and for the recovery from
the person responsible for the custody of the book or card at the time of its
loss of any reward paid for the return thereof.
By section 31, the failure to pay any
contribution which an employer or an employee is liable to pay under the Act is
constituted an offence punishable by fine or imprisonment or both. By section
35 (1) it is provided:
The Minister of Finance shall from time to
time deposit in the Bank of Canada, to the credit of the Commission, in an
account to be called “The Unemployment Insurance Fund” (hereinafter referred to
as “The Fund”), all revenue received from the sale of unemployment insurance
stamps and all contributions, if any, paid otherwise than by means of such
stamps (including contributions recovered by process of law) under the
provisions of this part of this Act.
The Governor General in Council, by section 18
(1) is authorized to make regulations touching the payment and collection of
contributions payable under the Act. This section (35 (1)) which in unqualified
terms lays upon the Minister of Finance the duty to pay into the Fund “all
revenue received from the sale of unemployment insurance stamps and all
contributions and all contributions (if any) paid otherwise than by means of
such stamps (including those recovered by process of law)” manifests very
clearly the intention that the compulsory contributions shall be paid to the
government and shall be recoverable by process of law; although it is left to
the Governor General in Council to make specific provision by regulation for
the collection and payment of such contributions.
Now let it be observed, in the first place, that
on the hypothesis on which we are proceeding, if the monies raised by these
compulsory contributions are monies raised “by any mode or system of taxation,”
these enactments are within the powers of Parliament, but, if the attack upon
the legislation is well founded, Parliament has no authority to obtain money in
this way. It would appear that, having regard to the nature of the legislative
authority vested in Parliament, and to the wide discretion reposed in
Parliament touching the manner in which monies are to be raised under
subdivision 3, a court ought to observe
[Page 438]
a high degree of caution in pronouncing upon the
invalidity of an enactment, by which monies become by compulsion of law payable
by individuals to the Dominion Treasury for a public purpose, on the ground
that, in truth, it does not possess its prima facie character, that of a
taxing statute, but is legislation intending to do what Parliament has
otherwise no manner of authority to do. We are disposed to think that something
approaching a demonstration ought to be required to lead one to such a
conclusion.
Let it not be overlooked that we are not here
dealing with an attempt on the part of Parliament to do something it has no
power to do. We have not before us an attempt under the guise of taxation to
regulate insurance contracts, or an attempt under the guise of criminal legislation
to regulate insurance contracts, or an attempt under the guise of legislation
for the regulation of mines to regulate in relation to aliens. The statute
before us has nothing of that character. If we are right in what we have
already said, it is entirely competent to Parliament to resort, as sources for
the provision of the unemployment fund, to taxes levied on employers and
employees and to taxes levied “by any mode or system” which Parliament in its
discretion may adopt.
We ask ourselves then, What are the indicia in
this statute which compel us to conclude that Parliament, instead of resorting
to taxation which it had authority to do, has resorted to legislation in regard
to civil rights which it had no authority to enact?
The essentials of taxation are present. The
contributions are levied by Parliament directly. That the contributions are to
be paid by revenue stamps is prescribed by Parliament; but the Governor General
in Council is to regulate payment and collection. Payment is compulsory. Contributions
are recoverable by process of law and failure to pay is an offence punishable
by fine and imprisonment. The contributions are payable into the public
treasury of the Dominion, and are to be paid by the Minister of Finance into a
fund which is to be applied as directed by Parliament.
[Page 439]
In Lower Mainland v. Crystal Dairy Lord Thankerton, speaking for the Judicial
Committee of the Privy Council, said:—
In the opinion of their Lordships, the
adjustment levies are taxes. They are compulsorily imposed by a statutory
Committee consisting of three members, one of whom is appointed by the
Lieutenant-Governor in Council, the other two being appointed by the dairy
farmers within the district under s. 6 of the Act. They are enforceable by law,
and a certificate in writing under the hand of the chairman of the Committee is
to be prima facie evidence in all Courts that such amount is due by the
dairy farmer (s. 11). A dairy farmer who fails to comply with every
determination, order or regulation made by Committee under the Act is to be
guilty of an offence against the Act (s. 13) and to be liable to a fine under
s. 19. Compulsion is an essential feature of taxation: City of Halifax v.
Nova Scotia Car Works, Ltd.. Their
Lordships are of opinion that the Committee is a public authority, and that the
imposition of these levies is for public purposes. Under s. 22 the
Lieutenant-Governor in Council has power to suspend the functions of a
Committee, if its operations are adversely affecting the interests of consumers
of milk or manufactured products, and the Committee is to report annually to
the Minister and to send him every three months the auditor’s report on their
accounts (s. 12, subs. 2, and s. 8A).
The fact that the moneys so recovered are distributed as a bonus among the
traders in the manufactured products market does not, in their Lordships’
opinion, affect the taxing character of the levies made.
The judgment of the majority of this Court in Lawson
v. Interior Tree, Fruit and Vegetable Committee of Direction is to the same effect,
In Workmen’s Compensation Board v. C.P.R., assessments upon employers, for the
purpose of providing an accident fund out of which compensation was payable by
the Compensation Board to persons injured by accident in the course of their
employment and to dependents in case of death, were held to fall within the
denomination “direct taxation” within the meaning of section 92 (2) of the British North America
Act.
Subsection 3 of section 17 and subsection 1 of
section 33 require notice in this connection. As to the first of these
enactments, the subject does not appear to admit of extended argument, but we
ourselves are unable to perceive any valid reason for holding that the
authority to make laws in relation to the “raising of money by any mode or
system of taxation” does not embrace the authority to require “A” to pay in the
first instance a tax in
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respect of which “B” is liable, and to give “A”
a right to reimbursement from “B” out of “B’s” monies in “A’s” hands, or otherwise.
As to section 33, we are disposed to think that
the provision in question, although unusual, is not beyond the power of
Parliament to enact as an additional means for insuring the payment of
contributions by employers and the satisfactory working of the scheme. However
that may be, that provision is plainly severable. It is not a necessary part of
the legislative scheme. Assuming it to be ultra vires and to afford some
evidence of an intention on the part of Parliament to legislate for regulating
the relations between employer and employee, such evidence is not sufficiently
powerful to deprive the legislation of its prima facie character, which,
as we have said, is that of an enactment in respect of the subject matter of
head no. 3 of section 91.
There remains the broad contention that the
provisions of the statute viewed as a whole disclose a scheme under which a
statutory contract arises imposing upon employers and employees a contractual
duty to contribute to an insurance fund and conferring upon insured persons
contractual rights to be paid unemployment benefits out of that fund when the
statutory prerequisites are observed.
In Workmen’s Compensation Board v. C.P.R., it was held, as we have seen, that the
assessments levied upon employers in order to provide an accident fund out of
which compensation was to be paid to employees injured by accident were in the
nature of taxes.
Their Lordships’ Board in that case had to
consider a section of the Compensation Act under which, where the accident
happened on a ship or a railway outside the province, and the workman was a
resident of the province, and the nature of the employment was such that the
work or service performed by the workman had to be performed both within and
without the province, the workman or his dependents should be entitled to
recover compensation if the circumstances were such that he would have
possessed such a right had the accident happened within the province. It was
held that it was competent to the provincial legislature
[Page 441]
to give such a right of recovery in such
circumstances, as a statutory condition of the contract of employment made with
a workman resident within the province.
This right, it was said, arises, not out of
tort, but out of the workman’s statutory contract, and, it was added, their
Lordships think it is a legitimate provincial object to secure that every
workman resident within the province who so contracts should possess it as a
benefit conferred on himself as a subject of the province.
The statute also provides that in any case where
compensation was payable in respect of an accident happening elsewhere than in
the province, if the employer had not contributed fully to the accident fund in
respect of his workmen engaged in the service in which the accident happened,
the employer should pay to the Board the full amount of the compensation
payable in respect of the accident, and that the payment of this sum should be
enforceable in the same manner as an assessment. As regards this provision,
their Lordships observed:
* * * it also appears to them to be within
the power of the province to enact that, if the employer does not fully
contribute to the accident fund out of which the payment is normally to be
made, the employer should make good to that fund the amount required for giving
effect to the title to compensation which the workman acquired for himself and
his dependents.
The question before their Lordships concerned
the competence of the provincial legislature under the powers vested in it by
section 92 to enact this legislation. A ship, the property of the C.P.R. Co.,
had been lost at sea outside Canadian territorial waters, and it was argued, on
behalf of the respondent company, that the right the legislature professed to
give the workman in such circumstances, and the liability the legislation
professed to impose upon the owner of the ship, was necessarily a right and a
liability having a situs outside the province, and consequently not within the
authority of the province to create, in exercise of its jurisdiction concerning
“property and civil rights” within the province. This argument was based
mainly, if not exclusively, upon the decision of the Judicial Committee in Royal
Bank v. The King.
The judgment does not in terms state that the
liability of the ship owner, where he has not fully contributed to the accident
fund in respect of the employees engaged in
[Page 442]
the service in which the accident occurred, to
make good such contribution in the manner mentioned was a liability arising out
of the statutory term attached to the contract. The liability to pay
assessments in the first instance is treated as a liability to pay a tax. As to
the special duty arising from the failure to keep up his contributions, there
seems to be no reason to think it was placed upon any other footing. At p. 192 their Lordships point out that the
fundamental question was whether or not
a contract of employment made with persons
within the province has given a title to a civil right within the province to
compensation.
Their Lordships proceed,
The compensation, moreover, is to be paid
by the Board and not by the individual employer concerned.
Then their Lordships observe that the C.P.R.
Co., carrying on business in the province of British Columbia, is subject to
the jurisdiction of the provincial legislature to enact laws within certain
limits imposing civil duties upon it. There is no suggestion that the liability
under this special provision is of a character different from the civil duty in
respect of assessments made for the purpose of providing compensation for
employees whose duties are confined to the province.
It will be observed that the real effect of the
decision is that these matters—the matter of constituting an accident fund by
compulsory contributions from employers carrying on business by the province
and employees resident in the province, and by an optional contribution from
the provincial government, for the purpose of providing accident benefits for
workmen resident in the province injured in the course of their employment—that
these matters may, in their provincial aspects and for the purpose of
establishing such a scheme of insurance, fall within the legislative authority
of the province in relation to taxation, to property and civil rights, and, it
may be, in relation to matters merely local and private within the province.
Such a scheme it is within the authority of any province to establish. It does
not follow that it is within the authority of any province, or all the
provinces combined, validly to enact the legislation or, indeed, any part of
the legislation necessary to give effect to the system set up by the statute
before us.
[Page 443]
It seems to me to be impossible to escape the
conclusion that those parts of the enactment which concern the compulsory
contributions are provisions relating to the subject of taxation. As pointed
out in the Crystal Dairy case, and
as appears from Workmen’s Compensation Board v. C.P.R., the circumstance that the fund is to be
distributed for the benefit of private individuals does not militate against
the view that these contributions have the character of taxes. As already
observed, the essentials of taxation are indubitably present. Moreover, a
provincial enactment providing for such contributions to be paid by revenue
stamps to the Dominion Government, and to be collected according to regulations
prescribed by the Governor in Council, and to be applied by the Minister of
Finance in a manner provided by the statute, would plainly be ultra vires. A
province has, obviously, no power to pass such an enactment. The Dominion
has the power if it is an enactment in relation to taxation.
It is of supreme importance at this point to
keep in mind the fundamental principle governing the construction of the British
North America Act: matters which in one aspect and for one purpose may, as
subjects of legislation, fall within subdivisions of s. 92 may, in another
aspect, and for another purpose, fall within section 91. A provincial
legislature may require such compulsory contributions for the purpose of some
scheme of unemployment insurance set up by itself in the exercise of powers of
legislation which it possesses. In such a case, it would appear, from, the
decisions in the Workmen’s Compensation Board v. C.P.R., in
the Crystal Dairy case and in Lawson’s case, that such contributions have the
character of taxes; and legislation with regard to them would not, therefore,
fall within the category of legislation respecting civil rights within the
meaning of section 92. But, even assuming that such legislation by a province
could be regarded as legislation in relation to civil rights, as adding a
statutory term to contracts of employment, it would appear to be extremely
difficult to classify the enactments requiring the payment of the contributions
now in question as belonging to the category of legislation in relation to
civil rights
[Page 444]
within a province, especially in view of the
provisions of the statute, already mentioned, under which the Dominion
Government is the payee, and the Governor in Council possesses the power to
regulate payment and collection of all contributions, and all such
contributions are to be applied by the Finance Minister in the manner
prescribed by the statute.
We find ourselves unable to conclude that,
reading these provisions as a whole, these enactments requiring compulsory
payments can be considered as enactments on the subject of property and civil
rights within any province or within all the provinces.
Turning now to the provisions of the statute dealing
with unemployment benefits. These provisions, again, if found in a scheme of
unemployment insurance set up by a province, might be regarded, as similar
provisions in Workmen’s Compensation Board v. C.P.R. were regarded by the Judicial Committee,
as having the effect of annexing a statutory term to contracts of employment.
But one thing seems to be clear,—no single province, nor all the provinces
combined, could enact this legislation in the exercise of their powers in
regard to civil rights within the respective provinces. The enactments
constitute directions for the application of a fund constituted by
contributions out of the public funds of the Dominion and no province possesses
any authority to legislate in relation to the application of such a fund.
Our conclusion, therefore, is, first, that in
its main provisions this statute ought on its true construction to be sustained
as a valid exercise of the powers of the Dominion Parliament under subdivisions
1 and 3 of section 91. Second, that as to many of its provisions, they are
plainly outside any authority possessed by any province or all the provinces
under section 92 and, in so far as they do not fall within the ambit of the
subdivisions mentioned, must be embraced within the general authority of the
Dominion to make laws for the peace, order and good government of Canada.
We should add that we are unable to agree with
Mr. Rowell’s contention that this legislation can be supported
[Page 445]
as legislation under head no. 2 of section 91,
or that, in its entirety, it falls within the ambit of the residuary clause as
interpreted and applied in recent decisions which are binding upon us.
To summarize:—
The aims stated in the preamble are legitimate,
provided, of course, that the enactments themselves are within the ambit of the
legislative powers possessed by Parliament. Reading subdivision 1 of section 91
and subdivision 3 together, the proper conclusion is that Parliament has
exclusive authority to raise money by any mode or system of taxation for disposition
by Parliament for any purpose for which it is competent to Parliament to apply
the assets of the Dominion in virtue of subdivision 1. In effect, subdivision 1
endows the High Court of Parliament with full discretionary authority to
dispose of the public assets of the Dominion, and no other court is invested
with jurisdiction to examine any purported exercise of that authority with a
view to pronouncing upon its validity, subject only to the rule that the courts
are always entitled to determine whether, in truth, any given enactment of
Parliament professing to be an exercise of a given authority is not really an
enactment of that character; but one relating to a subject over which
Parliament has no jurisdiction.
The provisions requiring compulsory contributions
by employers and employed possess the essential elements of legislation
respecting taxation. On their true construction, they have that character
because, first, it would not be competent to a provincial legislature to enact
them in the context in which they stand, which demonstrates that the
contributions are exacted for the purpose of raising monies for exclusive
disposition by Parliament; and, second, there is no adequate ground for holding
that they are, either in purpose or in immediate effect, outside the ambit of
the powers under subdivision 3.
So also as regards the enactments concerning the
disposition of the proceeds of the levies upon employers and employed and of
the contribution from the Dominion treasury. They are not enactments in respect
of property and civil rights in any one province or in all of the provinces.
They would not be competent as enactments by
[Page 446]
any or all of the provincial legislatures, and
there is no adequate ground for affirming that these enactments are not
legislation in relation to the subjects within the scope of subdivision 1.
It is hardly susceptible of dispute that
Parliament could, in the legitimate exercise of its exclusive authority under
subdivisions 1 and 3 of section 91, levy taxes for the purpose of raising money
to constitute a fund to be expended in conformity with the directions of
Parliament, in unemployment benefits, and provide for a contribution to that
fund from the Dominion treasury, or to maintain that, in executing these
exclusive powers, Parliament is subject to any control by the courts as to the
form of the taxation or the incidence of it or as touching the manner or
conditions of the payment of benefits.
It is, perhaps, not too much to say that
complete discretionary authority respecting the form and incidence of taxation
under subdivision 3, and respecting the disposal of all public assets under
subdivision 1, are essential to enable Parliament to discharge the
responsibilities entrusted to it.
In a word, legislation for raising money for
disposition by Parliament under subdivision 3 of section 91, and directing the
disposition of it under subdivision 1, is necessarily excluded from the
jurisdiction of the provinces by the concluding words of section 91; and there
is no sufficient ground for affirming that, in the enactments of this statute,
Parliament is not exercising its powers under these subdivisions, or, in other
words, that under the guise of doing so it is invading a provincial field from
which it is excluded, for the purpose of attaining a result which it has full
power to attain by legislating within fields in which it has exclusive
authority.
The statue is, therefore, intra vires.
Rinfret J. (Cannon and Kerwin JJ. concurring)—The constitutionality of the Employment
and Social Insurance Act (see ch. 38 of the statutes of Canada, 25-26 Geo.
V, assented to 28th June, 1935) was referred by the Governor
[Page 447]
in Council to the Supreme Court of Canada under sec. 55 of the Supreme
Court Act.
The statute is entitled “An Act to establish an
Employment and Social Insurance Commission, to provide for a National
Employment Service, for Insurance against Unemployment, for aid to Unemployed
Persons, and for other forms of Social Insurance and Security, and for purposes
related thereto.” The preamble refers to the Treaty of Peace made between the
Allied and Associated Powers and Germany, signed at Versailles on the 28th day
of June, 1919. It states that it is desirable to discharge the obligations to
Canadian Labour flowing from articles 23 and 427 of the Treaty, and that it is
essential for the peace, order and good government of Canada to adopt such an
Act for the purpose of maintaining on equitable terms interprovincial and
international trade, to authorize the creation of a National Fund out of which
benefits to unemployed persons throughout Canada will be payable and to provide
for the levying of contributions from employers and workers for the maintaining
of the said fund and for contributions thereto by the Dominion.
After making provision for the short title and
the interpretation clauses, the Act is divided into five parts. Part 1 relates
to the Employment and Social Insurance Commission, which is thereby brought
into existence. Part II relates to Employment service. Part III relates to
Unemployment Insurance. Part IV relates to National Health. Part V contains
general provisions concerning regulations; the annual report to be submitted by
the Commission; all other reports, recommendations and submissions required to
be made to the Governor in Council; the disposition of fines; repeal, audit and
the coming into force of the Act.
It is followed by three schedules, the first of
which defines employment within the meaning of Part III of the Act and
enumerates the “excepted employments.” The second schedule fixes the weekly
rates of contribution and establishes the rules as to payment and recovery of
compulsory payments by employers on behalf of unemployed persons. The third
schedule fixes the rates of unemployment benefits.
Under Part I, the Act is to be administered by a
Commission consisting of three members to be called the Employment
[Page 448]
and Insurance Commission, with wide powers of
investigation for assisting unemployed persons and for providing to them
physical and industrial training and instruction.
Under Part II, the Commision is to organize an
Employment Service for the Dominion of Canada. The Act provides for the
constitution and management of such Employment service on a very large scale.
Regional divisions are established. There is to be in each such division a
central employment office and as many employment offices as the Commission will
deem expedient and desirable for the purposes of the Act. The Commission is to
have the direction, maintenance and control of all employment offices so
established. The Commission may make regulations authorizing advances by way of
loans towards meeting the expenses of workers travelling to places where
employment has been found for them through an employment office.
Part III of the Act provides for Unemployment
Insurance. The persons to be insured against unemployment are defined. The Act
regulates the manner in which the funds required shall be collected partly from
monies provided by Parliament, partly from contributions by employed persons
and by the employers of those persons. But the employer shall, in the first
instance, be liable to pay both the contribution payable by himself and also,
on behalf of the employed person, the contribution payable by that person,
subject to the right to recover by deduction from the wages or otherwise. The
payment of contributions is to be made by means of revenue stamps affixed to or
impressed upon books or cards specially prescribed for that purpose. There
follows statutory conditions for the receipt of unemployment benefits. One of
them is that the person insured shall not be entitled to the benefit until
contributions on his behalf have been made for not less than forty full weeks.
The manner in which and the conditions under which the contributions are to be
paid are defined in numerous sections and subsections.
All questions concerning the rights of persons
under the Act are to be determined by the Commission. The Commission may employ
insurance officers in each regional division; and the Governor in Council is
further authorized to designate such number of persons as are necessary
[Page 449]
in each such division to act as umpires,
deputy-umpires, courts of referees, chairmen of those courts, etc., for the
purpose of examining and determining all claims for benefit, with elaborate
provisions for appeal.
Then follow a number of sections dealing with
penalties, legal proceedings, civil proceedings by the employee against the
employer for neglect to comply with the Act, including the authorization for
the Commission to institute proceedings on behalf of the employed person, or for the recovery as civil debts of sums due to the
Unemployed Insurance Fund established under the Act.
Inspectors are to be appointed for the purpose
of the execution of the Act with power to do all or any of several things,
including the right to enter premises other than private dwellings, to make
examinations and inquiries, to examine persons and to exercise such other
powers as may be necessary to carry the Act into effect.
Then come the financial provisions. The revenue
from the sale of the stamps and from all contributions are to be deposited from
time to time in the Bank of Canada, by the Minister of Finance, to the credit
of the Commission, in an account to be called “The Unemployment Insurance Fund.”
And in a similar way are to be deposited the monies provided by Parliament; and
there is to be an Investment Committee of three members consisting of one
member nominated by the Government, one by the Minister of Finance, and one by
the Governor of the Bank of Canada, to look after the investment of such sums
standing to the credit of the Fund as are not required to meet current
expenditures.
In addition to all the above officials, there
will be appointed an Advisory Committee, the duties of which are to give advice
and assistance to the Commission in relation to the discharge of its functions
under the Act and to make reports on the financial condition of the Fund. This
Committee shall consist of a Chairman and not less than four, nor more than
six, other members. Further, the Commission is given authority to make
regulations relating to persons working under the same employer partly in
insurable employment and partly in other occupations; also for prescribing the
evidence to be required as to the fulfilment of the conditions for receiving
unemployment benefits; for
[Page 450]
prescribing the manner in which claims for
unemployment benefit may be made, the proceedings to be followed in the
consideration and examination of claims; and also regulations with respect to
the references to the central or local committees, and to persons employed on
night work and to penalties for the violation of any regulation.
Under Part IV, the duties and powers of the
Commission are defined with respect to its co-operation in matters of health
and health insurance. It may undertake special investigations in regard
thereto, subject to the approval of the Governor in Council.
The weekly rates of contribution provided for
under the second schedule are graduated according to the class and the wages of
the employed person. The weekly contributions are made payable for each
calendar week during the whole or any part of which an employed person has been
employed by an employer. The payment of contributions both by the employer and
by the employee is compulsory. All conditions prescribed for the payment of
these contributions including the right of the employer to recover from the
employed person the amount of any contributions paid by him on behalf of the employed
person are made essential and necessary conditions of the contract of
engagement between the employer and the employee. In fact, Part II of the
second schedule contains any number of these conditions and provides for
further regulations which may be made by the Commission in connection
therewith.
The Court is asked to give its opinion upon the
question whether the Act, or any of the provisions thereof, is ultra vires of
the Parliament of Canada.
The written submission of the Attorney-General
of Canada was that the Act in its entirety was within the legislative power of
the Parliament of Canada in virtue of
(1) its residuary power to make laws for the
peace, order and good government of Canada, and
(2) its exclusive power (a) to regulate
trade and commerce, (b) to raise money by any mode or system of
taxation, (c) to appropriate public money for any public purposes, (d)
to provide for the collection of statistics; and, incidentally, (e) to
enact criminal laws.
It is unnecessary for me to add anything to what
has already been said—and so well been said—by my Lord
[Page 451]
the Chief Justice in connection with the other
References made to the Court at the same time as the present one (more
particularly those concerning the Natural Products Marketing Act, 1934
(p. 403), and the Dominion Trade and Industry Commission Act, 1935 (p.
381), to indicate the reasons why I think that the validity of this legislation
cannot be supported as an exercise of the residuary power to make laws for the
peace, order and good government of Canada, or as an exercise of the power to
regulate trade and commerce.
Insurance of all sorts, including insurance
against unemployment and health insurances, have always been recognized as
being exclusively provincial matters under the head “Property and Civil Rights,”
or under the head “Matters of a merely local or private nature in the Province.”
By force of the British North America Act, the power to make laws for
the peace, order and good government of Canada is given to the Dominion Parliament
only “in relation to all matters not coming within the classes of subjects by
this Act assigned exclusively to the legislatures of the provinces.”
The exercise of legislative power by the
Parliament of Canada in regard to all matters not enumerated in section 91 was,
by more than one pronouncement of the Judicial Committee of the Privy Council,
declared to be “strictly confined to such matters as are unquestionably of
Canadian interest and importance” (Attorney General for Ontario v. Attorney
General for Canada); it
will be recognized by the Courts “only after scrutiny sufficient to render it
clear that circumstances are abnormal … such as cases of war or famine”; and “instances of these cases … are
highly exceptional”.
In this particular matter, there is no evidence
of an emergency amounting to national peril; but, moreover and still more
important, the statute is not meant to provide for an emergency. It is not, on
its face, intended to cope with a temporary national peril; it is a permanent statute
dealing with normal conditions of employment. There was accordingly here no
occasion, nor foundation, for the exercise of the residuary power.
[Page 452]
Nor is this legislation for the regulation of
trade and commerce. It is not trade and commerce as defined by the Privy
Council in its numerous decisions upon the subject. It deals with a great many
matters which are trade and commerce in no sense of the word, such as the
contract of employment, employment service, unemployment insurance and benefit,
and health.
The proposition that the Act could be supported
in virtue of the powers of the Dominion Parliament derived from Head 6
(Statistics), or Head 27 (Criminal Law) of section 91 need not retain our
attention and it was not pressed at the argument.
It may be stated further that the legislation is
not based on the Treaty of Peace, although it is referred to in the preamble.
In fact, counsel for the Attorney General of Canada positively stated at bar
that he was not relying on any treaty or on section 132 of the British North
America Act.
There remains, therefore, in the submission made
on behalf of the Dominion Government, only two heads that have to be considered
in support of the legislation; and they are: “the power to raise money by any
mode or system of taxation” (91-3), and “the power to appropriate public moneys
for any public purpose.”
In truth, these powers were only faintly
advanced by counsel for the Dominion in favour of the legislation Nevertheless,
they were referred to, and more particularly as I understand that they were
accepted in support of the validity of the Act by my Lord the Chief Justice, I
realize that my reasons for holding a different view must be explained as
fully, though as concisely, as possible.
The critical question is whether or not the
statute is, in its substance, an exercise of those powers to raise money by
taxation and to make laws for the disposal of the public property.
At the outset, let us remember the remark of
Lord Coke (4 Inst. 330) that the preamble of a statute is “the key to open the
minds of the makers of the Act and
the mischiefs which they intended to remedy.”
The recitals of the preamble have already been
referred to. They mention the Treaty of Versailles and the promise of the
signatories to endeavour to secure and maintain
[Page 453]
fair and humane conditions of labour for
industrial wage earners. They indicate the desirability of discharging certain
obligations to Canadian Labour. They invoke the importance for the peace, order
and good government of Canada to provide for a National employment service, for
insurance against unemployment and for other forms of social insurance. They
allege the necessity of maintaining on equitable terms interprovincial and
international trade. They mention the purpose of creating a national fund, out
of which benefits to unemployed persons throughout Canada will be payable, and
of providing for the levy of contributions from employers and workers for the
maintaining of this fund and for contribution thereto by the Dominion.
With deference, it seems to me that these
recitals clearly indicate that the Parliament of Canada intended primarily to
legislate with regard to employment service, to unemployment insurance, and to
health matters; that it was not concerned with the public debt and property or
with the raising of money by taxation; and that the provisions for levying
contributions for the creation of the national fund were nothing more than
provisions to enable the carrying out of the true and only purposes of the legislation.
The Act is one dealing with and regulating employment service and unemployment
insurance. The contributions (or the taxes, if we are to call them so) are mere
incidents of the regulation.
It is hardly necessary to repeat that, when
investigating whether an Act was competently passed by Parliament, the courts
must ascertain the “true nature and character” of the enactment, its “pith and
substance,” and the legislation must be “scrutinized in its entirety” for the
purpose of determining within which of the categories of subject-matters
mentioned in sections 91 and 92 the legislation falls (Citizens Insurance
Co. v. Parsons; Union
Colliery Company v. Bryden; Great
West Saddlery Company v. The King;
Reciprocal Insurers case; Toronto
Electric Commissioners v. Snider.
[Page 454]
In my humble view, the subject-matter of the Act
is employment service and social insurance, not public debt and property or
taxation. The object of the Act, the end sought to be accomplished by it is a
scheme for employment service and unemployment insurance; the contributions
levied from the employers and employees are only incidents of the proposed
scheme, and, in fact, merely means of carrying it into effect. The Act does not
possess the character of a taxing statute, but it is legislation intending to
do precisely what the title says: to establish an employment insurance
commission, to provide for a national employment service, for insurance against
unemployment, for aid to unemployed persons, or other forms of social insurance
and security and for purposes related thereto.
It being well understood and, in fact, conceded
that these are subject-matters falling within the legislative authority of the
provinces, the Dominion Parliament may not, under pretext of the exercise of the
power to deal with its property, or to raise money by taxation, indirectly
accomplish the ends sought for in this legislation. If it were otherwise, the
Dominion Parliament, under colour of the taxing power, would be permitted to
invade almost any of the fields exclusively reserved by the Constitution to the
legislatures in each province.
One of the effects of the Act under submission
is, in the language of Lord Haldane, in Workmen’s Compensation Board v. C.P.R., “to attach statutory terms to contracts of
employment,” and to impose contractual duties as between employers and
employees. In its immediate result, the Act creates civil rights as between the
former and the latter.
I doubt whether the contribution received from
the employee can properly be described as a tax. In fact, it would seem to me
to partake more of the nature of an insurance premium or of a payment for
services and individual benefits which are to be returned to the employee in
proportion to his payments. Be that as it may under all circumstances, the
benefits conferred on the employees by the Act are not gifts with conditions
attached, which
[Page 455]
the employees are free to accept or not; the
conditions attached to the benefits are made compulsory terms of all contracts
in the specified employments, and I deprecate the idea that the Dominion
Parliament may use its power of taxation to compel the insertion of conditions
of that character in ordinary contracts between employers and employees.
It may be that some of the provisions of the Act
are not open to objection. But I fail to see how they can be severed from the
general scheme organized under the Act or from the powers conferred on the
Commission; and the legislation as it stands must undoubtedly fall as a whole.
In the premises, the Act submitted to the Court
is not a mere encroachment on the provincial fields through the exercise of
powers allegedly ancillary or incidental to one of the enumerated powers of
section 91; in its pith and
substance, it is a direct and unwarranted appropriation of the powers
attributed to the legislatures by force of Section 92 of the Constitution.
For these reasons, and also for the reasons
given by my brother Kerwin, with whom I entirely concur, I have come to the
conclusion that the Employment and Social Insurance Act (chapter 38 of
the statutes of Canada, 25-26 Geo.
V) is wholly ultra vires of the Parliament of Canada.
Crocket, J.—For the reasons given by my brother Rinfret, I agree that the above
statute is wholly ultra vires of the Parliament of Canada.
Kerwin J. (Rinfret and Cannon JJ. concurring)—The
Governor General in Council has referred to this Court for hearing and
consideration pursuant to section 55 of
the Supreme Court Act the following question: “Is the Employment and
Social Insurance Act, or any of the provisions thereof and in what
particular or particulars or to what extent, ultra vires of the
Parliament of Canada?”
Section 1
of the Act merely gives its short title; section 2 is the interpretation section, while section 3 provides that the remainder of the
Act may be referred to as follows:
[Page 456]
Part I, sections four to nine inclusive, relating to the Employment and
Social Insurance Commission;
Part II, sections ten to fourteen inclusive relating to Employment
Service;
Part III, sections fifteen to thirty-eight inclusive relating to
Unemployment Insurance;
Part IV, sections thirty-nine to forty-one inclusive relating to National
Health;
Part V, sections forty-two to forty-eight inclusive, General.
The sections included in Part II provide that
The Employment and Social Insurance Commission constituted under Part I shall
organize an employment service for the Dominion of Canada, and contain
supplementary provisions for the collection of information, advances to workers
seeking employment, etc.
The sections included in Part IV enact that the
duties and powers of the Commission under that Part shall be exercised so far
as may be found practicable and expedient in co-operation with any department
or departments of the Government of Canada, with the Dominion Council of
Health, with any province or any number of provinces collectively, or with any
municipality or any number of municipalities collectively, or with associations
or corporations, and provide that it shall be the duty of the Commission to
assemble reports, publications, etc, concerning certain schemes or plans for
medicinal, dental or surgical care, including medicines, drugs or
hospitalization, or compensation for loss of earnings arising out of
ill-health, accident or disease.
By themselves the provisions of Part II and of
certain portions of Parts IV and V might be unobjectionable but in my opinion
they are so inextricably interwoven with the powers of the Commission set up
under Part I and with the scheme of unemployment insurance referred to in Part
III that they must stand or fall according to the validity or otherwise of
sections 15 to 38 inclusive which form Part III.
As to Part III serious questions arise. In
addition to the arguments of counsel, I have had the advantage of reading the
opinion of My Lord the Chief Justice but with deference I find myself unable to
agree with the conclusions
[Page 457]
expressed therein that this Part of the Act may
be justified as an exercise by Parliament of its powers under Head 1 “The Public
Debt and Property” and Head 2 “The Raising of money by any mode or system of
taxation” of section 91 of the British North America Act, 1867. It is
quite true that Parliament, by properly framed legislation may raise money by
taxation and dispose of its public property in any manner that it sees fit. As
to the latter point, it is evident that the Dominion may grant sums of money to
individuals or organizations and that the gift may be accomplished
by such restrictions and conditions as Parliament may
see fit to enact. It would then be open to the proposed recipient to decline
the gift or to accept it subject to such conditions. As to the first point, it
is also undoubted, I conceive, that Parliament, by properly framed legislation
may raise money by taxation, and this may be done either generally or for the
specific purpose of providing the funds wherewith to make grants either before
or after the conferring of the benefit.
But in my view, after a careful consideration of
all the sections in Part III of the Act, in substance Parliament does not
purport to do either of these things. Section 15 provides that the designated
persons, referred to as “unemployed persons” shall be insured against
unemployment in the manner provided for by the Act. Section 17 enacts that the
funds required for providing “unemployment benefit” and for making any other
payments which are to be made out of the Unemployment Insurance Fund
established later under Part III shall be derived partly from moneys provided
by Parliament, partly from contributions from employed persons and partly from
contributions from employers of those persons, which contributions shall be
paid by means of revenue stamps or otherwise as may be prescribed by the
Commission. Rates of contribution are set forth in the second schedule to the
Act, and by ss. 3 of s. 17 except where regulations under the Act otherwise
prescribe, the employer shall in the first instance be liable to pay both the
contribution payable by himself and also the contribution payable by the employed
person with power to the employer, subject to regulations, to recover from the
employed persons to the amount of the contributions so paid on behalf of the
latter by the employer. By
[Page 458]
section 19 every unemployed insured person who
complies with prescribed “statutory conditions” is entitled to receive what is
known as an “unemployment benefit.” There is a provision by which certain
employed persons may be exempted from the provisions of the Act, but subject to
that, the individuals covered by this Part are obliged to become insured by
means of a statutory condition attached to the contract of employment.
While there are numerous other provisions, I
believe I have correctly set forth the marrow of Part III of the Act and I am
unable to ascertain in what maner they
may be termed an exercise of the power conferred upon Parliament to tax. It
occurs to me that if it were otherwise the Parliament of Canada might in
connection with any matter whatsoever, by the mere imposition of a tax, confer
upon itself authority to legislate upon matters over which the legislature of
each province would ordinarily have jurisdiction. This must be understood, of
course, as not referring to any power in the legislatures of the various
provinces to originate or assist its local scheme by indirect taxation.
That, with this qualification, the subject
matter of Part III would ordinarily fall within the ambit of the powers of the
provinces within their respective boundaries was not, I think seriously
disputed. It deals with contracts of employment and attaches thereto a
statutory condition. It interferes with property and civil rights. A reference
particularly to section 15 and to the recitals in the Act indicates that the
very pith and substance of this part of the Act deals with unemployment
insurance.
In re The Insurance Act of Canada
was an appeal from the judgment of the Court of King’s Bench (Appeal Side) for
the Province of Quebec in answer to the following questions
referred to that Court by the Lieutenant-Governor in Council of the Province:
1. Is a foreign or British insurer who
holds a licence under the Quebec Insurance Act to carry on business within the
Province obliged to observe and subject to ss. 11, 12, 65 and 66 of the
Insurance Act of Canada, or are these sections unconstitutional as regards such
insurer?
2. Are ss. 16, 20 and 21 of the Special War
Revenue Act within the legislative competence of the Parliament of Canada?
Would there be any difference between the case of an insurer who has obtained
or is bound
[Page 459]
to obtain under the Provincial law a
licence to carry on business in the Province and any other case?
In delivering the judgment of their Lordships,
Viscount Dunedin after referring to Attorney-General for Canada v. Attorney-General
for Alberta, and
stating that that decision conclusively and finally settled that regulations as
to the carrying on of insurance business were a provincial and not a Dominion
matter, concluded: “It really only carried to their logical conclusion the two
cases already cited”; the two cases being Citizens Insurance Company v. Parsons and John Deere Plow Company’s case. He
then discussed the Reciprocal Insurers case, pointing out that the Board had there
decided that section 508C of the Criminal Code was not a genuine amendment of
the criminal law, but was really an attempt by a soi-disant amendment of the
criminal law to subject insurance business in the Province to the control of
the Dominion—that which had exactly been determined to be ultra vires the
Dominion by the judgment of 1916. Their Lordships therefore in the 1931 case
decided that the first part of question 1 should be answered in the negative.
They then proceeded to the second question and quoted the only section of the Special
War Revenue Act that in their opinion needed to be considered. That section
was as follows:
16. Every person resident in Canada, who
insures his property situate in Canada, or any property situate in Canada in
which he has an insurable interest, other than that of an insurer of such
property, against risks other than marine risks: (a) with any British or foreign company or British or
foreign underwriter or underwriters, not licensed under the provisions of the
Insurance Act, to transact business in Canada; or (b) with any
association of persons formed for the purpose of exchanging reciprocal
contracts of indemnity upon the plan known as inter-insurance and not licensed
under the provisions of the Insurance Act, the chief place of business of which
association or of its principal attorney-in-fact is situate outside of Canada;
shall on or before the thirty-first day of December in each year pay to the
Minister, in addition to any other tax payable under any existing law or
statute a tax of five per centum of the total net cost to such person of all
such insurance for the preceding calendar year.
The judgment continues:
Now as to the power of the Dominion
Parliament to impose taxation there is no doubt. But if the tax as
imposed is linked up with an object which is illegal the tax for that purpose
must fall.
On page 53 Viscount Dunedin quoted the following
extract from the judgment of the Board in the Reciprocal Insurers’ case:
In accordance with the principle inherent
in these decisions their Lordships think it is no longer open to dispute that
the Parliament of
[Page 460]
Canada cannot, by purporting to create
penal sections under s. 91, head 27, appropriate to itself exclusively a field
of jurisdiction in which, apart from such a procedure, it could exert no legal
authority, and that if, when examined as a whole, legislation in form criminal
is found, in aspects and for purposes exclusively within the Provincial sphere,
to deal with matters committed to the Provinces, it cannot be upheld as valid.
He then continued:—
If instead of the words “create penal
sanctions under s. 91, head 27” you substitute the words “exercise taxation
powers under s. 91, head 3,” and for the word “criminal” substitute “taxing,”
the sentence expresses precisely their Lordships’ views.
If this be the case where the Court decides that
Parliament has colourably invaded the field of provincial jurisdiction, how
much more cogent is the reasoning if one comes to the conclusion that the
legislation in question does not even purport to be a taxing Act.
In the present reference that is the conclusion
to which I am impelled and it follows that in my view Part III may not be
justified under either of the heads of section 91 of the British North
America Act to which I have referred. For the reasons already given the
remainder of the Act is in the same position.
Elsewhere in his consideration of other Acts
referred at this time to this Court, my Lord the Chief Justice has dealt
exhaustively with the powers of Parliament under the residuary clause of s. 91
of the British North America Act and also with the powers of the
Dominion under head 2, “The Regulation of Trade and Commerce,” of that section.
It is unnecessary, therefore, for me to refer to the decisions and I content
myself with expressing the opinion that even if the object aimed at by Part III
of the present Act may be praiseworthy and if the desired result might better
be obtained by the Dominion than all or some of the provinces acting within
their constitutional limitations might accomplish, the matter is not translated
from the jurisdiction of the provincial legislature to that of Parliament. In the same way I am unable to see how,
in view of the summary of the powers of the Dominion with reference to trade
and commerce also given elsewhere by the learned Chief Justice, the matter
could be considered as falling within that head of section 91.
For these reasons, and for the reasons given by
my brother Rinfret which I have had the opportunity of perusing, I have come to
the conclusion that the Act in toto is ultra vires of the Parliament of Canada.
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