The Division of Powers, Before and After Consolidated Fastfrate v Western Canada Council

(Editor’s Note: The author, Richard Butler, is a constitutional lawyer with the B.C. Ministry of Attorney General. The views expressed are those of the author, and not his employer.)

Introduction

A profound change of thinking on constitutional design is evident in the Supreme Court’s recent jurisprudence –  a change made manifest in the Court’s evolving approach to the doctrines used to determine division of powers cases.

Rather than using paramountcy to protect occupied federal fields through negative implication or engaging in the fiction of partially-occupied fields, the courts have come to reject “virtual federal paramountcy” altogether.  Examples of these three alternatives can be found in Robinson v Countrywide Factors Ltd, [1978] 1 SCR 753, as per Laskin C.J.C. dissenting, Spence J., and Beetz J., respectively.  Indeed, courts have chosen to address actual repugnancies, operational conflicts (Multiple Access v McCutcheon, [1982] 2 SCR 161 [Multiple Access]), and the frustration of constitutionally-valid purposes of Parliament (Rothmans, Benson & Hedges Inc v Saskatchewan, [2005] 1 SCR 188).

Further, instead of using interjurisdictional immunity to defend a nebulous “core” of federal powers in Canadian Western Bank v Alberta, [2007] 2 SCR 3 [Canadian Western Bank], and British Columbia (Attorney General) v Lafarge Canada Inc, [2007] 2 SCR 86 [Lafarge], the courts decided to use this doctrine only to protect such aspects of legislative powers as are vital or essential to a legislature’s jurisdiction over any person, thing or activity.

The Supreme Court of Canada (“SCC”) has underlined the importance of avoiding regulatory vacuums and achieving, wherever possible, of the policy objectives of both levels of government. In other words, to expand upon the language of Ontario (Attorney General) v Chatterjee, 2009 SCC 19: administrative cooperative federalism. The purpose of this posting is two-fold: to reflect further on the Court’s decision in Consolidated Fastfrate Inc v Western Canada Council of Teamsters, 2009 SCC 53 [Consolidated Fastfrate], commented on here, with that evolution in mind; and, to muse about what may happen next as the Court deliberates on the division of powers in other contexts.

The Decision in Consolidated Fastfrate

Neither the majority nor minority opinion in Consolidated Fastfrate breaks new constitutional ground; indeed, the case seems to reflect a hiatus in the development of new approaches to the division of powers. The Court primary concern appears to be simply reconcile conflicting authorities on interprovincial freight-forwarding. The division of the Court in the result, however, may yet signal a split in fundamental constitutional thinking going forward: Justices Binnie and LeBel, who jointly authored the pivotal decisions in Canadian Western Bank and Lafarge, appear to have parted company.

The simple difference between the majority and minority decisions in Consolidated Fastfrate lies in how each defined the company’s “undertaking” for purposes of section 92(10)(a) of the Constitution Act, 1867.

The majority, per Rothstein J. for himself and five others, defined the undertaking by reference to the “services” Fastfrate provides – i.e. freight-forwarding, or the consolodation and de-consolidation of freight (at para 2). Those services were provided entirely within the province from which freight is shipped or in which freight is received.

The majority specifically rejected a shift in focus “from the nature of the operations of the undertaking to the nature of the contractual service it provides” (para 59). The majority noted that “the ‘dominant purpose test’ in DHL – measured in terms of the contractual service offered rather than the actual operations of the undertaking – has the potential to sweep under federal jurisdiction many enterprises that heretofore have been understood as being subject to provincial jurisdiction based on their actual operations” (para 62).

The minority, per Binnie J. for himself, McLachlin C.J.C. and Fish J., defined the undertaking by reference to the “service” Fastfrate provided (para 82). Whatever the modalities used, that service was “to move freight from the hands of a customer in one part of the country to the hands of a customer in another part of the country” (para 118) – i.e., freight pick-up and delivery.

In support of its approach, the minority quoted from Public Service Board et al v Dionne et al, [1978] 2 SCR 191, that, “[i]n all these cases, the inquiry must be as to the service that is provided and not simply as to the means through which it is carried on”, and suggested that the test proposed by the majority in the current case “stands [that] proposition on its head …” (para 107). On that basis, the minority would have found that Fastfrate was engaged in an undertaking connecting with other provinces and/or extending beyond the limits of a province, even though Fastfrate did not perform interprovincial carriage itself.

At various points in its reasons, the majority sought to express a principled basis for its narrower approach to section 92(10)(a) and to distinguish prior case law. For its part, the minority was quick to criticize much of that reasoning and some of its criticisms may appear penetrating. However, even as the majority struggled to articulate why an undertaking should be defined by reference to what a company actually does, the minority never really met that point but instead sought to rebut a test based on how the company does it. The minority’s failure to do so makes its criticisms of the majority seem rather pedantic.

The majority reasons express a touchstone for determining which is the better approach to characterization of an undertaking for purposes of section 92(10(a). In the constitutional characterization process, courts appropriately consider the reason why certain local undertakings require federal regulation.

The majority observed that, originally, the defining character of such undertakings was to further the general interest of the country (para 33) and be of sufficient national importance to the development and continued flourishing of the Canadian nation (para 36) such that, without federal regulation, the achievement of national goals would be stymied (see para. 37). The minority sought to diminish the force of the majority’s reasoning by terming it “originalism” (at para. 89). Hearing in that term an echo of ‘creationism’, one may wonder whether this is to be seen as a rebuke of the first-principles approach taken in Canadian Western Bank.

Justice Binnie also utilized a new metaphor for Canadian constitutional development: the constitutional “coat”. Even while impugning “originalism”, however, he rightly conceded that the coat remains “of the same design” even though now a different size. While business realities and modalities have indeed changed since 1867, the question of whether an undertaking can be said to connect or extend beyond the limits of a province should still be determined by reference to the original design of the Constitution and the rationale for its division of powers. The constitutional “coat” metaphor therefore supports the majority’s approach, including its reliance on history, rather than the other way around.

As Professor Hogg has noted,

the distribution of legislative powers in a federal system necessarily involves a substantial subordination of the value of uniformity to that of provincial autonomy even where there is no objective necessity for regional variations. In legislative fields which are entrusted to the provinces, it is for the provinces to decide whether or not they desire uniformity: they can achieve it whenever they wish through the enactment of uniform laws. (Peter W. Hogg, Constitutional Law in Canada (5th suppl.), p. 17-13 and 17-16).

Uniformity is not a constitutional imperative. In any division of powers case, the advantages of uniformity and efficiency are properly weighed against the deeper and more substantive sets of values that underlie Canadian federalism. Those values include ideas of community and democratic theory recognized by the Supreme Court of Canada in the Reference re Secession of Quebec, [1998] 2 SCR 217, and again in Canadian Western Bank.

In particular, as in Consolidated Fastfrate, the constitutional question is not determined by whether a company’s own unified, cross-Canada business objectives would be stymied without single regulation by the federal government. The test is whether the reasons for making interprovincial transportation constitutionally federal would be frustrated by the operation of provincial legislation in the particular case. That approach was affirmed by the Privy Council decision in the Empress Hotel case (Canadian Pacific Railway Co v Attorney General for British Columbia, [1950] AC 122).

The point is, neither wished-for business goals nor more advantageous labour relations outcomes (see, for instance, Ontario Hydro v Ontario (Labour Relations Board), [1993] 3 SCR 327) properly determine constitutional characterization. Constitutional first principles, as expressed in Canadian Western Bank, favour the majority’s more narrow and specific approach to the exceptions in section 92(10)(a) – an approach based on the work actually done in the course of an undertaking – rather than the minority’s more pragmatic ‘top-down’ approach based on what is intended to be accomplished by the business entities involved. Cooperative federalism encourages inter-governmental cooperation, but not the abandonment of interjurisdictional lines whenever there may be perceived economic or social advantages to the nation as a whole.

What Happens Next?

In October, 2009, the Court heard argument in Attorney General of Quebec v Laferriere and Attorney General of Quebec v Lacombe, a pair of cases involving the federal power to legislate with respect to aeronautics and the effect of that power on provincial laws regulating the location of local unregistered aerodromes in the province of Quebec. Judgment was reserved.

Those cases have already been the subject of a prior posting on this site: “An Invitation to Revisit Interjurisdictional Immunity”, The Court, October 19, 2009. Both to avoid repetition and to comply with site policy against counsel re-arguing their own cases, there will be no further substantive comment on my part. We will all just have to wait and see. In the meantime, if you view the video of oral argument in those cases (webcast archived on the Supreme Court website: Lacombe and Laferriere), I think you will see the same apparent division in the constitutional thinking of the Court as was reflected in the result in Consolidated Fastfrate.

Justices LeBel, Deschamps and Charron seemed to ask questions from the point of view of sustaining and advancing the thinking in Canadian Western Bank, even to the point of wondering whether counsel was suggesting that the Court resile from that decision and its premises. On the other hand, Justice Binnie and Chief Justice McLachlin asked questions suggesting a strong predisposition toward single, all-embracing federal regulation of aeronautics, including small private aerodromes, perhaps more out of practical necessity, common sense and national advantage (as per the minority in Consolidated Fastfrate) than because they have an interprovincial, national or international dimension. It was more difficult to gauge the first principles behind the questions of Justices Abella and Rothstein, while Justices Fish and Cromwell remained silent.

As an ending to this article, one other comment from Justice Binnie is particularly noteworthy. He observed that, in considering federal paramountcy, courts may appropriately look for the federal purpose not only in the enactments of Parliament but also in federal ministry policies, directives, recommendations, and the like, which can comprise an overall scheme to carry out an intentention that ought not to be frustrated by provincial laws.

Perhaps that fits with administrative cooperative federalism. But the paramountcy doctrine has, at least since Multiple Access, required an operational conflict between federal and provincial enactments. Expanding the search parameters with respect to Parliament’s purpose carries the risk of giving new life to the old discredited theory of a federally-occupied field. That, with respect, would be a step in the wrong direction in our new constitutional thinking.