Supreme Court Judgments

Supreme Court of Canada

Caloil Inc. v. Attorney General of Canada, [1971] S.C.R. 543

Date: 1970-11-24

Caloil Inc. (Plaintiff) Appellant;

and

The Attorney General of Canada (Defendant) Respondent;

and

The National Energy Board Mis-en-Cause;

and

The Attorney General of Quebec and The Attorney General of Alberta Intervenants.

1970: November 23, 24; 1970: November 24.

Present: Fauteux C.J. and Abbott, Martland, Judson, Ritchie, Hall, Spence, Pigeon and Laskin JJ.

ON APPEAL FROM THE EXCHEQUER COURT OF CANADA

Constitutional law—Trade and Commerce—Importation of gasoline—Power of National Energy Board to regulate distribution for consumption—Extraprovincial marketing scheme—Judgment—Wording of formal pronouncement—National Energy Board Act, 1959 (Can.), c. 46, ss. 85, 87—National Energy Board Part VI Regulations, s. 20.

Section 20 of the National Energy Board Part VI Regulations was amended after the judgment of the Exchequer Court in Caloil Inc. v. Attorney General of Canada, [1970] Ex. C.R. 512. The amended regulation provided that the Board “may issue a licence to import oil for consumption in the area of Canada specified therein, in such quantities, at such times and at such points of entry into Canada as it may consider appropriate.” By way of a declaratory action in the Exchequer Court, the appellant, an importer and distributor of petroleum products, challenged the constitutionality of the regulation. The action was dismissed by the trial judge. Leave to appeal to this Court was granted. The Attorney General of Quebec intervened to support the attack and the Attorney General of Alberta, to support the judgment.

Held: The appeal should be dismissed.

Per Fauteux C.J. and Abbott, Ritchie, Hall, Spence and Pigeon JJ.: The existence and extent of pro-

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vincial regulatory authority over specific trades within the province is not the sole criterion to be considered in deciding whether a federal regulation affecting such a trade is invalid. On the contrary, it is no objection when the impugned enactment is an integral part of a scheme for the regulation of international or interprovincial trade, a purpose that is clearly outside provincial jurisdiction and within the exclusive federal field of action. The true character of the enactment in this case appears to be an incident in the administration of an extraprovincial marketing scheme. The policy intended to be implemented is a control of the imports of a given commodity to foster the development and utilization of Canadian oil resources. Under the circumstances, the interference with local trade cannot be termed an unwarranted invasion of provincial jurisdiction.

The trial judge was right in rejecting the contention that the regulation was not within the scope of s. 85 of the Act. Nothing shows that the terms and conditions of the licences that may be prescribed by Regulations are to end with the entry of the commodity into Canada and cannot be related to subsequent use.

Per Martland, Judson and Laskin JJ.: The admitted authority of Parliament to regulate importation of goods was validly exercised in this case in including as part of the regulatory scheme a provision restricting the area of distribution of the goods within Canada by their importer.

APPEAL from a judgment of Dumoulin J. of the Exchequer Court of Canada[1], dismissing an action challenging the constitutionality of s. 20 of the National Energy Board Part VI Regulations. Appeal dismissed.

Léopold Langlois, Q.C., Reynold Langlois and Guy Vaillancourt, for the plaintiff, appellant.

Rodrigue Bédard, Q.C., R. Olson, Q.C., and Paul Ollivier, Q.C., for the defendant, respondent.

Georges A. Pouliot, Q.C., and John K. Archambault, for the Attorney General of Quebec.

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B.A. Crane, for the Attorney General of Alberta.

The judgment of Fauteux C.J. and of Abbott, Ritchie, Hall, Spence and Pigeon JJ. was delivered by

PIGEON J.—The appellant is an importer and distributor of petroleum products. In May 1970, it contracted for some 126,000,000 gallons of gasoline to be delivered in Canadian ports from Algesiras, Spain, by tankers. This gasoline was intended to be distributed in Quebec and in Ontario.

On May 7, 1970, by proclamation of the Governor in council under s. 87 of the National Energy Board Act (“the Act”), Part VI thereof was extended to “oil”. Also, on May 5, 1970, the National Energy Board Part VI Regulations (“the Regulations”) were amended. The effect of the amendments was

(a) to limit the extension of Part VI of the Act to the importation of “motor gasoline”;

(b) to make all licences for the importation of “motor gasoline” subject to the condition that the importer shall not, without the consent of the National Energy Board, transport or caused to be transported, any “motor gasoline” from a point east of a line running partly through Ontario and partly along the Ontario-Quebec border, to a point west of that line and shall not, without the Board’s consent, sell or deliver to a third party any “motor gasoline” except on the condition that it is sold or delivered for consumption east of that line.

The appellant did not comply with the conditions of licences issued in accordance with the amended regulations and was refused a further licence. Thereupon, it sought relief in the Exchequer Court by declaratory proceedings against the Attorney General of Canada on the basis that the regulatory scheme was unconstitutional. In view of the urgency, the proceedings were expedited and on August 1, 1970, the President of the Exchequer Court rendered judgment[2] in the following terms:

IT IS DECLARED that the legislative scheme consisting of PART VI of the National Energy Board

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Act and of Section 20 of the National Energy Board Part VI Regulations is unconstitutional and that, insofar as that scheme is concerned, the Plaintiff is entitled to import motor gasoline without any restriction as to how it is marketed after it has been imported.

In his reasons, the learned President said:

… section 20 of the Regulations under Part VI could not be supported even if it were a proper part of … a scheme for Parliament to regulate the movement of imported goods as such. Section 20 does not purport to confer authority on the National Energy Board to regulate the movement of imported gasoline. What it does purport to do is to authorize the imposition of a prohibition on a licencee, as a condition of getting a licence, against transporting, without the consent of the Board, “any motor gasoline” from East of the aforesaid line into the balance of Ontario. In other words, this term operates on any motor gasoline in the hands of the licencee even if it is produced in Canada. This certainly is not a law that purports to regulate imported goods.

Once it becomes clear that the regulation of the movement of gasoline effected by the condition authorized by section 20(4) is not an integral part of a law regulating international or interprovincial trade as such, the attempt to regulate such movement must fail on the authority of CANADIAN FEDERATION OF AGRICULTURE v. ATTORNEY-GENERAL FOR QUEBEC AND OTHERS (1951 A.C. 179).

No appeal was instituted against this judgment but promptly, on August 12, 1970, the Regulations were amended so that s. 20 now reads as follows:

20. (1) In this section and section 21 “consumption” means the placing of oil in tanks connected to an internal combustion engine for purposes of operating such engine.

(2) Where the Board is of the opinion that importation of oil that is the subject of an application for a licence to import into Canada will be consistent with the development and utilization of Canadian indigenous oil resources, it may issue a licence to import oil for consumption in the area of Canada

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specified therein, in such quantities, at such times and at such points of entry into Canada as it may consider appropriate.

(3) Any licence issued by the Board pursuant to subsection (2) may be issued on the condition that the oil to be imported will be consumed in the area of Canada specified in the licence.

(4) Where the Board is not reasonably satisfied that the consumption of oil to be imported will be in the area of Canada specified in the application for a licence and that the terms of the licence to be issued will be complied with, it shall not issue a licence.

Under the amended regulations, the National Energy Board refused applications to import gasoline into some areas in Ontario and it also refused to issue licences for importation into other areas without a declaration specifying that the gasoline to be so imported would, in actual fact, be consumed in those areas. Thereupon, proceedings were again instituted in the Exchequer Court by way of a declaratory action against the Attorney General of Canada as defendant and the National Energy Board as mis-en-cause.

This action was heard by Dumoulin J. and dismissed by judgment[3] dated September 16, 1970, the order reading as follows:

The declaratory action for avoidance brought by the plaintiff is dismissed; the Court, further declaring that the legislative scheme in question is intra vires of Parliament and of the Governor in Council, orders the said plaintiff to pay all costs.

An appeal was taken to this Court by special leave granted on October 6, 1970. Notice of the constitutional question was duly given. The Attorney General of Quebec intervened to support the attack against the regulatory scheme and the Attorney General of Alberta, to support the judgment. In view of the urgency of a matter involving an interference with important business operations, special directions were given so that the appeal was heard on November 23 and 24, 1970. At the conclusion of the hearing, the decision of the Court was announced by the Chief Justice as follows:

We are all of the opinion that the appeal should be dismissed with costs; the operative part of the

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judgment of the Exchequer Court should however be amended to read as follows: “The declaratory action for avoidance brought by the plaintiff is dismissed with costs”. No award is made as to costs where the intervenants are concerned.

The appellant did not challenge federal authority over imports as such. The attack was exclusively directed against the regulation of trade in the imported commodity at the level of distribution for consumption. On this, I would first quote the following from what Duff J. (as he then was) said in the Lawson case[4]:

The scope which might be ascribed to head 2, s. 91 (if the natural meaning of the words, divorced from their context, were alone to be considered), has necessarily been limited, in order to preserve from serious curtailment, if not from virtual extinction, the degree of autonomy which, as appears from the scheme of the Act as a whole, the provinces were intended to possess. Therefore, it has been found necessary to say that this head does not comprise the regulation, by a system of licences, of a particular business within any one or within all of the provinces. But there is no lack of authority for the proposition that regulations governing external trade, that is, trade between Canada and foreign countries, as well as regulations in matters affected with an interprovincial interest, or regulations which are necessary as auxiliary to some Dominion measure relating to trade generally throughout the Dominion, and dealing with matters not falling within s. 92, such as, for example, the incorporation of Dominion companies, are within the purview of that head.

Appellant has laid great stress on the following parts of the learned President’s reasons in the first case:

Neither Part VI (of the Act), the regulation, nor the two together, purport to be a regulation by Parliament of inter-provincial trade as such and they cannot be supported on that head of Parliament’s legislative power as were certain parts of the Canadian Wheat Board Act in STEPHEN FRANCIS MURPHY v. CANADIAN PACIFIC RAILWAY COMPANY (1958 S.C.R. 626).

* * *

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In SHANNON v. LOWER MAINLAND DAIRY PRODUCTS BOARD (1938 A.C. 708), after holding that the provincial marketing scheme there under attack did not encroach on section 91(2) of the British North America Act because the legislation was “confined to regulating transactions that take place wholly within the province, and are therefore within the sovereign powers granted to the legislature”, Lord Atkin said, at pp. 718-9:

… Their Lordships do not accept the view that natural products as defined in the Act are confined to natural products produced in British Columbia…. But the Act is clearly confined to dealings with such products as are situate within the Province.

In HOME OIL DISTRIBUTORS LTD. v. ATTORNEY-GENERAL OF BRITISH COLUMBIA (1940 S.C.R. 444), a provincial scheme for regulating and controlling the coal and petroleum industries within British Columbia and which expressly authorized a Board to fix the prices of coal or petroleum products at wholesale or retail, was held to be good, by its application of the SHANNON (supra) case, although the attack had been made on it that it was a provincial attempt to interfere with international trade in petroleum products and there can be no doubt that at least part, if not all, of the regulated product under consideration was imported.

I reach the conclusion then that, on the authorities to which my attention has been drawn, once goods are imported into Canada, they ordinarily fall, from the point of view of trade regulation, into the same category as goods produced in Canada and, fall to be regulated, from the trade point of view, by Parliament or the legislatures depending on whether they find their way into paths leading to destinations in or outside the province where they are situate.

It is to be noted that the Shannon and Home Oil cases both dealt with the validity of provincial regulation of local trades. They hold that provincial authority over transactions taking place wholly within the province is, as a rule, applicable to products imported from another country, or brought in from another province, as well as to local products. However, it must be borne in mind that the division of constitutional authority under the Canadian Constitution often results in

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overlapping legislation. As noted by Dumoulin J. Lord Tomlin’s fourth proposition in the Fish Canneries case[5] is:

(4.) There can be a domain in which provincial and Dominion legislation may overlap, in which case neither legislation will be ultra vires if the field is clear, but if the field is not clear and the two legislations meet the Dominion legislation must prevail: …

This principle was recently applied by this Court in such cases as Smith v. The Queen[6], O’Grady v. Sparling[7] and Stephens v. The Queen[8]. It is clear, therefore, that the existence and extent of provincial regulatory authority over specific trades within the province is not the sole criterion to be considered in deciding whether a federal regulation affecting such a trade is invalid. On the contrary, it is no objection when the impugned enactment is an integral part of a scheme for the regulation of international or interprovincial trade, a purpose that is clearly outside provincial jurisdiction and within the exclusive federal field of action. The rule must be the same as with respect to criminal law concerning which Duff J. (as he then was) said in Gold Seal Ltd. v. Attorney General of Alberta[9]:

Most legislation of a repressive character does incidentally or consequentially affect civil rights. But if in its true character it is not legislation “in relation to” the subject matter of “property and civil rights” within the provinces, within the meaning of section 92 of the British North America Act, then that is no objection …

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In the present case, subs. 2 of s. 20 of the Regulations clearly shows that the policy intended to be implemented by the impugned enactment is a control of the imports of a given commodity to foster the development and utilization of Canadian oil resources. The restriction on the distribution of the imported product to a defined area is intended to reserve the market in other areas for the benefit of products from other provinces of Canada. Therefore, the true character of the enactment appears to be an incident in the administration of an extraprovincial marketing scheme as in Murphy v. C.P.R.[10]. Under the circumstances, the interference with local trade restricted as it is to an imported commodity, is an integral part of the control of imports in the furtherance of an extraprovincial trade policy and cannot be termed “an unwarranted invasion of provincial jurisdiction”.

The appellant has raised the contention that the President’s conclusions in the first case were res judicata laying great stress on the form of his judgment as well as on the part of his reasons from which I have already quoted and that ends as follows:

In my view, therefore, it is not a proper part of the sort of international trade regulation law that Part VI typifies to confer on a board power to govern the movements within a particular province of imported goods after they have been imported.

As already noted, the learned President’s ultimate conclusion did not rest on that ground because he immediately went on to point out, in a passage already quoted that s. 20 of the Regulations was not “a law that purports to regulate imported goods” because it then applied to “any motor gasoline”. As this was sufficient to justify his conclusion as to the invalidity of the regulation, the other ground cannot be said to be inseparable from such conclusion. It is, therefore, unnecessary to consider to what extent such a judgment could

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be res judicata on a question of law other than the validity of the enactment challenged on constitutional grounds.

In this connection, I feel bound to say, with great deference, that the wording of the formal judgment in both the first case and the present case appears open to objections. Of course, in pronouncing on the validity of enactments, the legislative scheme must be considered. However, the conclusion to be reached should only be as to the validity or invalidity of the enactment under consideration. A formal pronouncement on the validity or invalidity of the scheme underlying it brings in an element of indefiniteness that ought to be avoided. For this reason, it was found necessary in affirming the judgment of the Court below to strike out from the pronouncement in the instant case the formal declaration of the validity of the legislative scheme under consideration. As Locke J. said, speaking for the majority in Murphy v. C.P.R.[11]:

… in performing the difficult duty of deciding questions arising as to the construction of ss. 91 and 92 of the British North America Act it is a wise course to decide each case which arises without entering more largely upon the interpretation of the statute than is necessary for the decision of the particular question in hand.

The trial judge did not find it necessary to deal explicitly with the contention that, due to the definition of “import” in para. (g) of s. 2 of the Act, s. 20 of the Regulations was not within the scope of s. 85 of the Act. He was clearly right in rejecting it. Nothing shows that the terms and conditions of the licences that may be prescribed by Regulations are to end with the entry of the commodity into Canada and cannot be related to subsequent use. On the contrary, provisions related to the end use of some products have long been a feature of Customs Tariff Acts.

The judgment of Martland, Judson and Laskin JJ. was delivered by

LASKIN J.—I support the dismissal of the appeal, as announced by the Chief Justice at the con-

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clusion of the hearing, and do so on the ground taken by my brother Pigeon that the admitted authority of Parliament to regulate importation of goods from foreign countries was validly exercised in this case in including as part of the regulatory scheme a provision restricting the area of distribution of the goods within Canada by their importer.

Appeal dismissed with costs.

Solicitors for the plaintiff, appellant: Langlois, Laflamme & Gaudreau, Quebec.

Solicitor for the defendant, respondent: R. Bédard, Ottawa.

Solicitors for the Attorney General of Quebec: Pouliot, Mercure, Lebel & Prud’homme, Montreal.

Solicitors for the Attorney General of Alberta: Gowling & Henderson, Ottawa.