On April 19, 2018, in R. v. Comeau, 2018 SCC 15,  the Supreme Court of Canada ruled that New Brunswick was within its rights to control the flow of beer across its provincial borders: unrestrained interprovincial free trade in Canada (at least for beer) is still a pipedream. But imbedded in the Court’s judgment were seeds that, properly fertilized and irrigated, may well grow into a more robust protection of economic union.

Mr. Comeau had decided that he wanted to bring some cheaper Quebec beer and other alcohol across the Québec/New Brunswick border. The police in New Brunswick were lying in wait for him and charged him with a violation of the New Brunswick Liquor Control Act. At trial, he challenged the constitutionality of s. 134(b) of the Liquor Control Act, arguing that it contravened s. 121 of the Constitution Act, 1867.

Section 121 provides:

All Articles of the Growth, Produce, or Manufacture of any one of the Provinces shall, from and after the Union, be admitted free into each of the other Provinces.

The Court dealt with a number of issues in its judgment. I will not discuss all of them but will highlight some of the more interesting points.

Vertical stare decisis – the requirement for lower courts to follow higher precedent

The trial judge in Comeau was faced with a long established and consistently followed decision of the Supreme Court of Canada: Gold Seal Ltd. v. Attorney General for the Province of Alberta (1921), 62 SCR 424. Gold Seal held that s. 121 only prohibited tariffs on interprovincial trade and, since s. 134(b) was in no way a tariff (it is a simply a limit on the amount of beer and other alcohol that one may bring into New Brunswick), s. 134(b) was not prohibited by the Gold Seal interpretation of s. 121. However, Mr. Comeau called an “expert” witness, a historian who testified that the Court got it wrong in and that the Fathers of Confederation had actually mean “free trade” when they said “admitted free” in s. 121.

The Court discussed the concept of stare decisis and specifically, the principle of “vertical stare decisis” [paras. 25-26]:

[25] For the stare decisis issue, we need not decide between these interpretations (although we address them later in these reasons). The trial judge’s reading of s. 121 — that it precludes any laws that impede goods crossing provincial boundaries — is incompatible with both interpretations.

[26] Common law courts are bound by authoritative precedent. This principle — stare decisis — is fundamental for guaranteeing certainty in the law. Subject to extraordinary exceptions, a lower court must apply the decisions of higher courts to the facts before it. This is called vertical stare decisis. Without this foundation, the law would be ever in flux — subject to shifting judicial whims or the introduction of new esoteric evidence by litigants dissatisfied by the status quo.

The Court noted that there is a narrow exception to this general rule of vertical stare decisis and that was when there are significant developments in the law or if there is a change in the evidence that shifts the parameters of the debate [paras. 29-32]:

[29] In Bedford, this Court held that a legal precedent “may be revisited if new legal issues are raised as a consequence of significant developments in the law, or if there is a change in the circumstances or evidence that fundamentally shifts the parameters of the debate”: para. 42. The trial judge, relying on the evidence-based exception identified in that excerpt from Bedford, held that the historical and opinion evidence he accepted “fundamentally shifts the parameters of the debate” over the correct interpretation of s. 121, referring to this Court’s treatment of the question in Gold Seal.

[30] The new evidence exception to vertical stare decisis is narrow: Bedford, at para. 44; Carter v. Canada (Attorney General), 2015 SCC 5, [2015] 1 S.C.R. 331, at para. 44. We noted in Bedford, at para. 44, that

a lower court is not entitled to ignore binding precedent, and the threshold for revisiting a matter is not an easy one to reach. . . . This balances the need for finality and stability with the recognition that when an appropriate case arises for revisiting precedent, a lower court must be able to perform its full role.

[31] Not only is the exception narrow — the evidence must “fundamentally shif[t] the parameters of the debate” — it is not a general invitation to reconsider binding authority on the basis of any type of evidence. As alluded to in Bedford and Carter, evidence of a significant evolution in the foundational legislative and social facts — “facts about society at large” — is one type of evidence that can fundamentally shift the parameters of the relevant legal debate: Bedford, at paras. 48-49; Carter, at para. 47. That is, the exception has been found to be engaged where the underlying social context that framed the original legal debate is profoundly altered.

[32] In Carter, for example, new evidence about the harms associated with prohibiting assisted death, public attitudes toward assisted death, and measures that can be put in place to limit risk was relevant. This evidence was unknowable or not pertinent, given the existing legal framework, when Rodriguez v. British Columbia (Attorney General), [1993] 3 S.C.R. 519, was decided. These new legislative and social facts did not simply provide an alternate answer to the question posed in Rodriguez. Instead, the new evidence fundamentally shifted how the Court could assess the nature of the competing interests at issue.

The Court held that the “high threshold” for challenging vertical stare decisis was not met in this case [para. 35]. They held that the historical evidence accepted by the trial judge was not evidence of changing legislative or social facts. Accordingly, Gold Seal remained applicable and good law [para. 37]:

[37] Because the historical evidence accepted by the trial judge is not evidence of changing legislative and social facts or some other fundamental change, it cannot justify departing from vertical stare decisis. Differing interpretations of history do not fundamentally shift the parameters of the legal debate in this case. While one’s particular collection of historical facts or one’s view of that historical evidence may push in favour of a statutory interpretation different from that in a prior decision, the mere existence of that evidence does not permit the judge to depart from binding precedent.

The proper interpretation of s. 121

The Court considered competing interpretations of s. 121. Mr. Comeau submitted that s. 121 was intended to create “free trade” between the provinces. The Crown submitted that “’admitted free’ in s. 121 should be read as prohibiting laws that, like tariffs, place burdens on the price of goods crossing interprovincial boundaries” [para. 48] [emphasis in original].

The Court noted that the text of s. 121 was ambiguous and therefore resort to historical and legislative factors and other principles of statutory interpretation was necessary. The Court reviewed the historical backdrop to the drafting of s. 121 and concluded as follows [para. 67]:

[67] We conclude that the historical context supports the view that, at a minimum, s. 121 prohibits the imposition of charges on goods crossing provincial boundaries — tariffs and tariff-like measures. At the same time, the historical evidence nowhere suggests that provinces, for example, would lose their power to legislate under s. 92 of the Constitution Act, 1867 for the benefit of their constituents even if that might have impacts on interprovincial trade. The historical evidence, at best, provides only limited support for the view that “admitted free” in s. 121 was meant as an absolute guarantee of trade free of all barriers.

The legislative analysis was also not supportive of Mr. Comeau’s interpretation but rather one where s. 121 was designed to prevent the imposition of higher costs on goods as they cross a provincial border [para. 73]:

[73] We conclude that the legislative context of s. 121 indicates that it was part of a scheme that enabled the shifting of customs, excise, and similar levies from the former colonies to the Dominion; that it should be interpreted as applying to measures that increase the price of goods when they cross a provincial border; and that it should not be read so expansively that it would impinge on legislative powers under ss. 91 and 92 of the Constitution Act, 1867.

The Court then discussed “foundational principles” and, in particular, honed in on the “federalism” principle. After considering the arguments of Mr. Comeau and the Attorneys General, the Court held that it could accept either set of arguments on the federalism principle. The language used by the Court in para. 88 in rejecting both sets of arguments will serve as fodder for many interprovincial trade issues to come…. [para. 88]:

[88] We cannot therefore accept either the arguments of Mr. Comeau or the Crown on the principle of federalism. This does not mean, however, that the principle is unhelpful to the interpretation of s. 121. The need to maintain balance embodied in the federalism principle supports an interpretation of s. 121 that prohibits laws directed at curtailing the passage of goods over interprovincial borders, but allows legislatures to pass laws to achieve other goals within their powers, even though the laws may have the incidental effect of impeding the passage of goods over interprovincial borders.

[My emphasis]

The Court considered the jurisprudence on s. 121 and ultimately concluded that s. 121 “prohibits laws that in essence and purpose restrict trade across provincial boundaries [paras. 106-109]:

[106] We conclude that a purposive approach to s. 121 leads to the following conclusion: s. 121 prohibits laws that in essence and purpose restrict trade across provincial boundaries. Laws that only have the incidental effect of restricting trade across provincial boundaries because they are part of broader schemes not aimed at impeding trade do not offend s. 121 because the purpose of such laws is to support the relevant scheme, not to restrict interprovincial trade. While Gold Seal did not undertake a purposive analysis of s. 121 and hence did not describe the ambit of s. 121 precisely in these terms, it is entirely consistent with it. The earlier jurisprudence of this Court on s. 121 and the broader articulation adopted by Rand J. stand as different moments on a progressive jurisprudential continuum, all consistent with the text of s. 121, its historical and legislative contexts, and the principle of federalism.

[107] It follows that a party alleging that a law violates s. 121 must establish that the law in essence and purpose restricts trade across a provincial border. “Essence” refers to the nature of the measure — “‘what a thing is’; . . . [its] character”: The Oxford English Dictionary (2^nd ed. 1989), at p. 400. “Purpose” focuses on the object, or primary purpose, of the measure.

[108] The first question is whether the essence or character of the law is to restrict or prohibit trade across a provincial border, like a tariff. Tariffs, broadly defined, are “customs duties and charges of any kind imposed on or in connection with importation or exportation”: General Agreement on Tariffs and Trade (World Trade Organization), Can. T.S. 1948 No. 31, Part I, Article I. The claimant must therefore establish that the law imposes an additional cost on goods by virtue of them coming in from outside the province. Put another way, a claimant must establish that the law distinguishes goods in a manner “related to a provincial boundary” that subjects goods from outside the province to additional costs: Murphy, at p. 642, per Rand J. A prohibition on goods crossing the border is an extreme example of such a distinction.

[109] The additional cost need not be a charge physically levied at the border, nor must it take the form of an actual surcharge; all that is required is that the law impose a cost burden on goods crossing a provincial border.

The laws that have the incidental effect of limiting trade between provinces but have otherwise legitimate purposes within a proper scope of provincial jurisdiction do not have the effect of running afoul of s. 121. It is only laws that are designed to limit or impede interprovincial trade in goods per se that are affected by s. 121 [paras. 112-114]:

[112] Stand-alone laws that have the effect of restricting trade across provincial boundaries will not violate s. 121 if their primary purpose is not to impede trade, but some other purpose. Thus a law that prohibits liquor crossing a provincial boundary for the primary purpose of protecting the health and welfare of the people in the province would not violate s. 121. More commonly, however, the primary purpose requirement of s. 121 fails because the law’s restriction on trade is merely an incidental effect of its role in a scheme with a different purpose. The primary purpose of such a law is not to restrict trade across a provincial boundary, but to achieve the goals of the regulatory scheme.

[113] However, a law that in essence and purpose impedes cross-border trade cannot be rendered constitutional under s. 121 solely by inserting it into a broader regulatory scheme. If the primary purpose of the broader scheme is to impede trade, or if the impugned law is not connected in a rational way to the scheme’s objective, the law will violate s. 121. A rational connection between the impugned measure and the broader objective of the regulatory scheme exists where, as a matter of reason or logic, the former can be said to serve the latter: see, e.g., RJR-MacDonald Inc. v. Canada (Attorney General), [1995] 3 S.C.R. 199, at para. 153, per McLachlin J. (as she then was), and at para. 184, per Iacobucci J. The scheme may be purely provincial, or a mixed federal-provincial scheme: Gold Seal; see also Reference re Agricultural Products Marketing Act.

[114] In summary, two things are required for s. 121 to be violated. The law must impact the interprovincial movement of goods like a tariff, which, in the extreme, could be an outright prohibition. And, restriction of cross-border trade must be the primary purpose of the law, thereby excluding laws enacted for other purposes, such as laws that form rational parts of broader legislative schemes with purposes unrelated to impeding interprovincial trade.

The Court held that s. 134(b) of the Liquor Control Act was primarily intended to control the evils of unlimited access to liquor. This is an appropriate purpose within provincial jurisdiction and thus, despite having an effect on interprovincial trade in liquor, it did not contravene s. 121.

Concluding Comments

The Court was undoubtedly aware of the debate over the Trans Mountain pipeline expansion project raging within Canada and, in particular, between the British Columbian government on one hand and the Albertan, Saskatchewan, and federal governments on the other. Its language, always chosen quite carefully and deliberately, seems to be a warning to the Albertan and Saskatchewan governments that are threatening to enact laws designed to cut off oil products to British Columbia if the latter continues to consider environmental regulations designed to limit the increased delivery of diluted bitumen to the Pacific coast. It would seem that s. 121 could be used to negate not just inter-provincial tariffs but also laws with the primary purpose of restricting cross-border trade And that, it would seem, is exactly what Alberta and Saskatchewan are contemplating doing.

Whether we ever will see a freer flow of liquor across provincial borders remains to be seen. Would it not be a somewhat of an amusing result if s. 121 frees up the flow of oil instead of beer?

I remain

Constitutionally yours

Arthur Grant