FINA Committee Meeting

37th PARLIAMENT, 2nd SESSION

Standing Committee on Finance

EVIDENCE

CONTENTS

Wednesday, April 30, 2003

¹

1530

The Chair (Mrs. Sue Barnes (London West, Lib.))

¹

1535

Mr. André Caron (President, Quebec School Boards Federation)

¹

1540

The Chair

Mr. Roger Tassé (Legal Counsel, Gowling, Lafleur and Henderson, As Individual)

¹

1545

¹

1550

¹

1555

º

1600

The Chair

Mr. Roger Tassé

The Chair

Mr. Roger Tassé

º

1605

The Chair

Mr. Rahim Jaffer (Edmonton—Strathcona, Canadian Alliance)

Mr. Roger Tassé

º

1610

Mr. Rahim Jaffer

Mr. Yves St-Cyr (Legal Counsel, Quebec School Boards Federation)

The Chair

Mr. Pierre Paquette (Joliette, BQ)

Mr. Yves St-Cyr

º

1615

Mr. Pierre Paquette

Mr. Yves St-Cyr

Mr. Pierre Paquette

Mr. Yves St-Cyr

Mr. Pierre Paquette

Mr. Yves St-Cyr

Mr. Pierre Paquette

Mr. Yves St-Cyr

Mr. Pierre Paquette

Mr. Yves St-Cyr

Mr. Pierre Paquette

Mr. Pierre Paquette

Mr. Roger Tassé

º

1620

Mr. Pierre Paquette

Mr. Roger Tassé

Mr. Pierre Paquette

Mr. Roger Tassé

Mr. Pierre Paquette

Mr. Pierre Paquette

Mr. Roger Tassé

Mr. Pierre Paquette

The Chair

Mr. Roger Tassé

The Chair

Mr. Roger Tassé

The Chair

Mr. Bryon Wilfert (Oak Ridges, Lib.)

Mr. Roger Tassé

Mr. Bryon Wilfert

º

1625

The Chair

Mr. Yves St-Cyr

º

1630

Mr. Roger Tassé

The Chair

Mr. Bryon Wilfert

º

1635

The Chair

Mr. Roger Tassé

The Chair

Mr. Pierre Paquette

The Chair

Mr. Roger Tassé

The Chair

Mr. Roy Cullen (Etobicoke North, Lib.)

º

1640

Mr. Roger Tassé

Mr. Roy Cullen

Mr. Roger Tassé

Mr. Roy Cullen

Mr. Roger Tassé

Mr. Roy Cullen

Mr. Roger Tassé

Mr. Roy Cullen

Mr. Yves St-Cyr

Mr. Roy Cullen

Mr. Roger Tassé

Mr. Roy Cullen

Mr. Roger Tassé

Mr. Roy Cullen

Mr. Roger Tassé

Mr. Roy Cullen

º

1645

Mr. Roger Tassé

Mr. Roy Cullen

Mr. Roger Tassé

Mr. Yves St-Cyr

Mr. Roger Tassé

Mr. Roy Cullen

Mr. Yves St-Cyr

Mr. Roy Cullen

Mr. Yves St-Cyr

Mr. Roy Cullen

Mr. Yves St-Cyr

Mr. Roy Cullen

Mr. Yves St-Cyr

The Chair

Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP)

Mr. Roger Tassé

Ms. Judy Wasylycia-Leis

Mr. Roger Tassé

Ms. Judy Wasylycia-Leis

Mr. Roger Tassé

Ms. Judy Wasylycia-Leis

º

1650

Mr. Roger Tassé

º

1655

Ms. Judy Wasylycia-Leis

Mr. Yves St-Cyr

Ms. Judy Wasylycia-Leis

The Chair

»

1700

Mr. Gary Pillitteri

The Chair

Mr. André Caron

»

1705

The Chair

Mr. Bryon Wilfert

Mr. Yves St-Cyr

Mr. Yves St-Cyr

Mr. Bryon Wilfert

Mr. Yves St-Cyr

Mr. Bryon Wilfert

Mr. Yves St-Cyr

Mr. Bryon Wilfert

Mr. Yves St-Cyr

Mr. Bryon Wilfert

Mr. Yves St-Cyr

Mr. Pierre Paquette

Mr. Roger Tassé

Mr. Bryon Wilfert

Mr. Roger Tassé

»

1710

Mr. Bryon Wilfert

The Chair

Mr. Yves St-Cyr

Mr. Pierre Paquette

The Chair

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CANADA

Standing Committee on Finance

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NUMBER 053

l

2nd SESSION

l

37th PARLIAMENT

---

EVIDENCE

Wednesday, April 30, 2003

[Recorded by Electronic Apparatus]

¹  (1530)  

[English]

    The Chair (Mrs. Sue Barnes (London West, Lib.)): Welcome everyone.

    The order of the day is Bill C-28, an act to implement certain provisions of the budget tabled in Parliament on February 18, 2003.

    We have two sets of witnesses with us today. From the Quebec School Boards Federation we have André Caron, president, and, as legal counsel, Yves St-Cyr. Welcome. As an individual, but a very qualified one, I must say, we have Mr. Roger Tassé, legal counsel from Gowling, Lafleur and Henderson. Welcome to you, sir.

    As agreed, we will commence hearing testimony from Mr. Caron.

¹  (1535)  

[Translation]

    Mr. André Caron (President, Quebec School Boards Federation): Thank you, Madam Chair.

    Members of Parliament, the Quebec School Boards Federation, which represents 61 francophone school boards, or all francophone school boards, feels it is its duty to draw your attention to a proposed legislative amendment to Bill C-28 that challenges a fundamental principle of social justice.

    On February 18th last, when the budget was tabled, the finance minister tabled a ways and means motion which contained, among other things, retroactive amendments to Part IX of the Excise Tax Act. These amendments would allow the Minister of National Revenue to claim a new tax from school boards for which final rulings were made by the courts after the 21st of December 2001 pertaining to that tax and any further ruling after the 21st of December 2001.

    In order for you to fully understand our position, I will summarize the facts. In 1996, the 29 first school boards filed with the Ministère du revenu du Québec claims for reimbursement of the ITC, or the Input Tax Credit, concerning the GST paid for school transportation. Those school boards were directly affected by the test- case of the Commission scolaire des Chênes v. the Queen. From 1997 to 2001, other GST claims were filed by the Quebec school boards. After the usual time frame, those claims were registered with the Canadian Tax Court. On October 17th, 2001, the Federal Court of Appeal unanimously ruled in favour of the first 29 Quebec school boards. Besides the 29 school boards judged along with the Commission scolaire des Chênes, one could have expected that the school boards whose cases were pending with the Tax Court of Canada would also be decided. But on December 21st, 2001, the Federal Tax authorities published their intention to change the act retroactively and to apply those changes even to pending cases. Such a retroactive measure is unusual and unfair, to say the least. Consequently, we encouraged our members to exercise their rights so that at least the school boards whose cases were pending before the Tax Court of Canada could be reimbursed.

    In the budget passed in 2002 there was no mention of the retroactive change, so we therefore thought the department would let justice run its course. The hearing date for the pending cases from Quebec was set for March 2003. In the meantime, on December 13th, 2002, the attorney for the justice department sent an offer of settlement to the school boards attorneys for the pending cases of the Quebec school boards. This offer was duly accepted by the Quebec school board attorneys. Consents to judgment for the Quebec school boards were brought before the Tax Court of Canada, and final judgment was rendered by that same Court on January 29th 2003, in favour of each of the school boards.

    Furthermore, a letter from the Justice department to the school boards attorneys dated December 16th, 2002, says the following:

The Minister of National Revenue plans to uphold the rulings made by the Tax Court of Canada and to act quickly to follow through on them.

    On February 18th, 2003, when the budget was tabled, the finance minister announced retroactive amendments to the act allowing the Minister of National Revenue to reassess the school boards and to claim reimbursements that had been paid by the Revenue department pursuant to any ruling that might have been made after December 21st, 2001, such as the final rulings made by the Tax Court of Canada on January 29th 2003.

    We believe the school boards are victims of a clearly unfair and immoral process. In fact, in Canada, a school board that had filed its claim with the Tax Court of Canada should have expected a reimbursement after the ruling in the Commission scolaire des Chênes case, but that was not done. In fact, quite the opposite occurred. Since these school boards had each received a ruling in their favour, the department, through its proposal, would thwart the effect of the rulings by reassessing them after the fact.

    Why is the finance department doing something to the Quebec school boards that it had never done to any other Canadian taxpayer in Canada's entire tax history, namely introducing a retroactive change to an act that would overturn final judgments?

    In closing, I would like to remind you that the amounts at stake are approximately $8 million for Quebec and $10 million at most for the other Canadian provinces.

    Thank you for your attention.

¹  (1540)  

[English]

    The Chair: Thank you very much.

    Now we will go to Mr. Tassé.

[Translation]

    Mr. Roger Tassé (Legal Counsel, Gowling, Lafleur and Henderson, As Individual): Thank you, Madam Chair.

    I would first like to say that I am extremely pleased, after a long absence, to find myself here before a parliamentary committee in Ottawa. I will cover some of the facts that Mr. Caron referred to, but I think it is important to repeat all of the essential details so that you can appreciate the importance of the case that Mr. Caron is defending.

    I must say that after reviewing the case given to me by Consultax, a tax consulting firm, I was stunned when I saw what the tax authorities were suggesting you approve. The relevant facts are rather complex, and I will try to stick to the essential elements required to give you a full understanding of the issue. Once the facts are understood, I think it will be up to you to draw your own conclusion, just as I had to, and that you will conclude that the amendment proposed by the Finance Minister must be changed. As you will see, the facts themselves are more important than a general discussion on the principles surrounding the question of retroactivity of a law.

    I would first like to say that I see three groups of school boards making claims. The first group is the one I will call the group des Chênes, whose cases were judged by the Federal Court of Appeal. The second group includes the school boards that started legal proceedings in due time—I will come back to that later—and who got a ruling after October 17, 2001, the date the Federal Court of Appeal ruled. The third group is made up of all the other school boards that did not start legal proceedings in time, which includes most of the school boards. I will come back to that later. The proposed amendment and the retroactivity would apply to those school boards. So there are three groups and I will speak to you about each of them.

    The first is the des Chênes group. Since 1991, or since the implementation of the GST, the school boards have received a partial reimbursement instead of a full reimbursement of the GST that they had paid. In 1996, as Mr. Caron said, 29 school boards filed claims for full reimbursement. The tax authorities refused those claims and the school boards appealed. In 1999, the 29 school boards found themselves before the Tax Court of Canada, or the TCC, since the tax authorities had not ruled within 180 days as prescribe by law. If the department does not rule on an appeal lodged by a taxpayer, after 180 days, the taxpayer can appeal to the Tax Court of Canada.

    It is important to note that each of the 29 school boards was involved in the procedures before the TCC and the Federal Court of Appeal, but the attorneys had agreed to present a test-case, the one in the Commission scolaire des Chênes case. The attorneys had agreed that the evidence and ruling in the des Chênes case would be applied to the 28 other cases that presented the same facts.

    In the year 2000, the TCC ruled in favour of the tax authorities. The first ruling that was made was in favour of the department. But the school boards all appealed to the Federal Court of Appeal which, in an unanimous decision, on October 17, 2001, overruled the decision made by the TCC, thereby ruling in favour of the Commission scolaire des Chênes and the 28 other school boards. So the 28 or 29 school boards, if you include des Chênes, would get full GST reimbursement.

    But the notice of motion in the 2003 budget makes an exception to the principle of retroactivity up until 1990. The act is retroactive, according to the amendment being proposed, but there is an exception for those 29 school boards.

¹  (1545)  

    In my view, the tax authorities acted correctly by suggesting an exception to the principle of retroactivity. They should be thanked. It was fair and reasonable to have that exception for the 29 school boards that had already won their cases at the Federal Court of Appeal. The exception to retroactivity rule that was put forward shows a great respect for the legal process, for court rulings, for the rights gained through court rulings. However, I will try to explain how this kind gesture on the part of the tax authorities did not go far enough in terms of what justice, fairness and respect of judgments require.

    That leads me to the second group. The first group poses no problem, nor does the third group. It is the second group that poses a problem.

    What about the second group of school boards? And what happened in their cases, while they were waiting for a ruling? Between 1997 and 2001, another group of school boards, including some that were also part of the first group and some were from other provinces, from Ontario in particular, filed claims for full reimbursement with the authorities for periods that were different from those for the first group and also for various periods. That is the situation with the second group.

    The tax authorities issued a notice of assessment refusing full reimbursement. The school boards filed notices of objection, the tax authorities did not respond to those notices of objection, 180 days went by, and each of the school boards appealed to the TCC. That was for the period from 1997 to 2001, so before the finance minister announced his intention to amend the act to overrule the Federal Court of Appeal ruling.

    The appeals from the second group of school boards to the TCC were put on hold while awaiting the ruling in the des Chênes case. At that time, the Federal Court of Appeal had not yet ruled in the des Chênes case. The Crown prosecutors, the government attorneys, agreed with the school board attorneys to keep the cases pending while waiting for the ruling in the des Chênes case.

    I would like to remind you that several, if not most of the Quebec school boards in this second group were also part of the first group. The facts and matters of law in the second group's cases are the same as those for the first group. The Crown prosecutors, in fact, admitted this fact before the TCC. Moreover, they admitted that there was no difference between the Quebec school boards and those from Ontario with regard to the facts and legal arguments.

    After the Federal Court of Appeal ruled in the des Chênes case on October 17th, the school boards in this group filed a claim with the TCC to have their case tried based on the ruling made in the des Chênes case, in October. The Crown prosecutors challenged that request on the grounds that new procedures could be invoked in those cases and that the Tax Court of Canada could not stop the hearing of those appeals. In other words, they said it was not enough to simply request a ruling based on what had been ruled in the des Chênes case and that the case had to go before the Tax Court of Canada because they expected to have new facts to present.

    Because of this argument by the Crown prosecutors, this motion for judgment tabled by the school boards was rejected by the TCC, but the school boards immediately appealed to the Federal Court of Appeal. I did say it was a little complicated, but it is important to know the facts about what exactly happened.

¹  (1550)  

It is important to be fully aware of the discussions and the deals which took place between the government attorneys and those of the school boards in order to fully understand what really happened.

    The date for the school board appeal hearing regarding the TCC's ruling, which stated that no judgment would be rendered on the basis of the des Chênes ruling, was set for the 19 of December 2002.

    The TCC, a highly efficient court which competently manages the many files before it—there are thousands of files relating to taxation matters —, set the hearing date for the pending cases, that is to say all of the Quebec and Ontario school board cases, for March 2003.

    On the 13 of December 2002, six days before the scheduled date for the appeal hearing pertaining to the so-called new facts submitted by the school boards to the Federal Court of Appeal, government attorneys made an offer to settle regarding the Quebec school board cases which were, at that time, pending before the TCC. However, the department reserved its position on the Ontario cases because, before deciding to approach the Ontario school board cases in the same way that it had approached those from Quebec, it wished to first examine the Ontario Education Act.

    What was the nature of the offer made by the department's attorneys? The government indicated, through its legal counsel—and when legal counsel speak, they do so on behalf of a given party; in this instance, they spoke on behalf of the government, in other words on behalf of Her Majesty and the entire federal government—, that it was prepared to consent to judgment on all school board cases, except for school boards which were registered charities, in terms of the Appeal Court's ruling in the des Chênes school board case. An exception was made for those school boards which were charitable organizations, the school boards did not oppose this aspect of the offer to settle.

    In return, the government attorneys requested that the school boards abandon their appeal before the Court of Appeal regarding the issue of the new facts that I mentioned earlier. This offer to settle was accepted by the school boards. Therefore, consents to judgment were made before the TCC and judgments for each of the school boards were rendered on the 29 of January 2003, in other words, before the budget was tabled.

    So, consent judgments were rendered on an offer made by the department. Through these consents to judgment, Her Majesty, through her authorized attorneys, accepted that the school boards were entitled to having the GST paid to private transport companies fully reimbursed. It was also accepted that the tax claimed by the school boards be reimbursed. The TCC confirmed these consents to judgment, thus rendering them final judgments.

    In January 2003, during a pre-hearing conference before the Chief Justice of the Tax Court of Canada, Her Majesty's attorneys confirmed that in light of these consents to judgment, no hearing for the Quebec school board cases would be required.

    As for the Ontario cases—which were part of the second group and whose hearings were scheduled, as I said, for March 2003—, government attorneys indicated that they would be dealt with in the same fashion as those from Quebec, as long as there were no major difference between the Quebec cases and the Ontario cases. They would be treated in the same way as the des Chênes case on which the Federal Court of Appeal ruled.

¹  (1555)  

    Indeed, on February 26, 2003, the attorneys for the department consented to judgment and on April 17, the CTC made its final determination on 17 cases, thereby granting the claims and the right to a full refund for the time periods sought by certain Ontario school boards. I should mention that 12 other Ontario school board cases have yet to be examined to establish whether or not they should be included in the agreement in principle reached by the attorneys.

    What was this agreement in principle all about? Under the agreement, the pending cases were to be resolved in the same fashion as the des Chênes school board commission case and the 28 others. But we had to establish the facts of each case, because in some instances, we had to establish whether or not the school board was a charitable organization.

    Adjustments could be made depending on whether or not this was partially or totally the case. The principle was to fulfil the commitment and to recognize that, for these school boards, if the facts were the same as in the des Chênes case, a decision would be rendered. This question has yet to be examined in 17 cases.

º  (1600)  

[English]

    The Chair: I want to make sure we have enough time for members to question you, so how many more minutes will you need?

    Mr. Roger Tassé: About five minutes.

    The Chair: Okay, fine.

    Mr. Roger Tassé: Thank you.

[Translation]

    The 12 Ontario school boards need to be reviewed to determine which ones are covered by this agreement in principle.

    In the budget speech, the Minister of Finance announced that there would be an exception to the retroactivity rule for the 29 cases. That's not exactly what he said, but he did say that the decision in the des Chênes school board case would be applied to the 29 school boards. He therefore agreed to an exception to the retroactivity rule for these cases, but not for the second group.

    Given all of the ups and downs, procedures and events, I would like to call your attention to three points. Firstly, the attorneys agreed to suspend the review of the cases. The second group of school boards, from 1997 to 2001, raised exactly the same points of fact and points of law as the first group did. In terms of additional claims, most already belong to the first group. The Crown attorneys agreed to put their cases before the CTC in abeyance until a decision was reached in the des Chênes school board case. The only reason that they were waiting for the final decision in the des Chênes school board case was because they wanted to apply these cases to the Federal Court of Appeal decision. Moreover, this is what the Crown attorneys did.

    The second point is that this did not constitute a windfall either. At the appropriate time, the second group of school boards challenged the interpretation or the operation of the law by the tax officials. These school boards initiated their court action before the Department of Finance announced its intention to amend the law in order to circumvent the decision in the des Chênes school board case. So we cannot talk about a windfall in their case. We cannot say that the school boards rushed in, once the Appeal Court decision was rendered, in order to get back significant amounts of money. The department decided to fill in the gap. They did not intervene after the minister had indicated that; they intervened before this decision was announced.

    The third point pertains to the settlement offered by the government attorneys. Through their lawyer, the tax authorities offered a settlement to the second group along the lines of what had been decided by the Federal Court in the des Chênes school board case. With their consent, court decisions were obtained. The tax officials contributed to the start of a decision on the basis of their consent. Why did they produce the settlement if they had no intention to follow up on it? What does this say about keeping one's word?

    When the attorneys stated in court that they were prepared to settle the second group cases, they had committed the authority they were representing. Why, under such circumstances, would they refuse to deal with the cases in the second group in the same way that they did with the cases in the first group? I am wondering why, and so are the school boards. In my opinion, it makes no sense whatsoever that the amendment before you does not deal with the second group of cases in the same way as the first group. The authorities did the right and fair thing with respect to the first group. Why did they not go all the way, why did they not remain consistent and treat the second group as they did the first? That was the equitable and fair solution, one which was in compliance with the vested rights and decisions of the legal authorities.

    With all due respect, if Parliament were to refuse to amend this proposal, it would be disregarding the word given by the government's own attorneys, as well as the vested rights through judicial decisions, which, in my opinion, would be a very unfortunate decision, a serious breach of the principle of rule of law and a flagrant disregard for court decisions. When you really understand what occurred with the second group, you can only draw one conclusion, in my opinion: the second group must be treated like the first and exempted from the retroactivity of the law.

    Since, in the future, the amended law will apply to these school boards, regardless of whether they are part of the first or second group, I see no problems in this law applying retroactively, because the legislation will come into effect later on. But any attempt to crush the CTC decisions under the circumstances that I have just related is, in my opinion, odious and dangerous.

    I had prepared a few words with respect to the third group, but the third group does not pose any problems. So I will stop now. Thank you.

º  (1605)  

[English]

    The Chair: Thank you very much for a very detailed explanation from your point of view.

    We now have Mr. Jaffer for up to 10 minutes.

[Translation]

    Mr. Rahim Jaffer (Edmonton—Strathcona, Canadian Alliance): Thank you, Madam Chair. I also want to thank all the witnesses today for their presentations. I am sorry that I missed the first witnesses, by after the first round of questions I will try to find out about their presentations.

[English]

    The issue was just brought forward recently, and I'm still trying to get a better grasp. What should be our intervention? It seems to me the case is a very legitimate one, the claiming back of the GST for school boards, and from the presentations I heard, obviously, the school boards are getting the short end of the stick when it comes to the changes. Mr. Tassé talked about how it's been implemented. What can our committee do in the implementation of the recent budget? What do you see us doing in streamlining this process so that the school boards are not losing out on the claim of GST, which is currently the case? What sort of direct advice would you give us here?

    Mr. Roger Tassé: I think that's an important question, and I've given some thought to it. I'm not an expert on exactly how it could be drafted to be included in the text you have before you, but I will address the issue in reference to the principles involved.

    To me, the principles involved would call for an amendment that would ensure that in all cases that have already been judged, this is respected, as the case of des Chênes is respected, and the 29 school board claims are respected. I believe the amendment should ensure that judgments rendered by the Tax Court of Canada are respected.

    But there's another group as well. There are a number of other cases where there has been an undertaking given by the lawyers representing Her Majesty that they will consent to judgment, but after they have made the kind of examination I referred to. They say they just want to make sure the facts in the claims that have not yet gone to judgment are the same as in des Chênes. There are a few cases of that kind that have been discussed in the last few weeks. There have been all kinds of delays, and we're wondering why. I'm not going to speculate about what the reason might be, but it might not be nice if we were identify why it is that it takes so long to get results, to get the department to agree to what counsel have proposed, that there be judgments on consent for certain cases if they meet the test the Federal Court of Appeal had provided in des Chênes.

    So if you were able to cast an amendment that would capture these two types of cases, I think justice would have been done. And you will have excluded all the other school board commissions that for whatever reason, chose not to file, and there are quite a lot that have not filed. All of those who didn't do anything could not now say, oh, by the way, we should file, because there is this decision of des Chênes. So these should be excluded. I would say your committee should try to capture those cases where judgments have been rendered or are about to be rendered in accordance with the undertakings given by the lawyers for the Crown.

º  (1610)  

    Mr. Rahim Jaffer: I just have one last follow-up question to whoever feels they can answer it. I realized from some of your comments that it's something Ontario has faced as well as Quebec, but is this something that is happening in other school boards, to your knowledge, across the country? Are there other school boards facing the same problems now?

[Translation]

    Mr. Yves St-Cyr (Legal Counsel, Quebec School Boards Federation): There are other school boards that have made claims concerning either reimbursement or a notice of objection. Some of those cases may be at the appeal stage, but there have been no court ruling to date. [Editor's Note: Technical difficulty]... avoid and respect.

    The retroactive amendment principle being proposed by the department would ensure protection for the cases of the des Chênes school board and the 28 other school boards whose cases were decided by the Federal Court of Appeal. Its seems to me that this is essential in a democracy.

    We are asking you to make sure that the Tax Court of Canada rulings, handed down in January 2003 for the Quebec School Boards and April 17, 2003, for the Ontario School Boards, which are final decisions that cannot be appealed to another court, would be protected in the same way as the final decisions regarding the des Chênes school board and the 28 other cases. That is basically what we are calling for today.

    I would just like to clarify something said by my colleague, Roger Tassé. These were Ontario School Boards. Rulings were made on April 17 following the consent to judgment from the Crown attorneys.

    There are still 12 cases for which Crown attorneys have given their consent but where it remains to be determined whether, during the period of the claims, the school board in question became a registered charity because of a subsequent merger. We have been waiting since March 9 for the Justice Department and its client, the Minister of Revenue, to get back to us with those details. It has taken them more than two months to tell us whether 12 school boards are charitable organizations or not. Once that issue is decided, the judge will be ready to sign the consent to judgment in accordance with the instructions from the Justice Canada attorneys.

    The Chair: Mr. Paquette, you have 10 minutes.

    Mr. Pierre Paquette (Joliette, BQ): Thank you, Madam Chair.

    I want to come back to this aspect because it is new to me. In late January, an agreement was reached between the federal government attorneys and those representing the second group of school boards.

    Mr. Yves St-Cyr: In December 2002.

º  (1615)  

    Mr. Pierre Paquette: So there was an offer, but it was put into a court ruling.

    Mr. Yves St-Cyr: The rulings were signed on January 29, 2003, for all the Quebec School Boards in the second group.

    Mr. Pierre Paquette: Which aspects and school boards were covered by the April 2003 decision?

    Mr. Yves St-Cyr: It dealt with the Ontario Boards, which are part of the second group, as Mr. Tassé mentioned earlier; the first group was the des Chênes school board and the 28 others that won on appeal. They are already protected, which is specified in the news release.

    Mr. Pierre Paquette: So you want us to amend the budget implementation legislation to ensure that the second group, whose cases have now been ruled on, is also protected under the law.

    Mr. Yves St-Cyr: I would like to remind you that the consents to judgment were given by the government attorneys before the budget was tabled in the House.

    Mr. Pierre Paquette: Of course, although this might be speculation to some extend, what explains the fact that the government attorneys reached the settlement with the school boards three weeks before the budget but yet the Minister of Finance did not take that into account in his budget? Is there a lack of communication between departmental officials and the attorneys? Have they given any explanations to you?

    Mr. Yves St-Cyr: No, but we have had discussions. In fact, I was surprised that the department gave consent to judgment. Since they wanted to avoid court proceedings, they went that route. The Justice Department, on behalf of the government, indicates in its settlement letter that the Minister of National Revenue intends to act quickly in accordance with the settlement that was reached. I cannot tell you anymore. You would probably have to ask the attorneys from Justice.

    Mr. Pierre Paquette: When Mr. Wilfert appeared before the committee, I asked questions, but even the officials did not seem to be at all aware of this aspect of the budget.

    Mr. Yves St-Cyr: We were even more surprised.

    Mr. Pierre Paquette: I would first like to ask you to correct something you said. Be careful. There is a certain decorum that has to be followed, even in French.

    Mr. Pierre Paquette: You know that the committee decided not to hear representatives from the Canadian Bar Association or the Quebec Bar. I would like to read you a paragraph and ask whether you share this opinion, Mr. Tassé.

    Mr. Leduc, the Head of the Quebec Bar Association, wrote this to Mr. Cauchon and Mr. Manley:

The notice of ways and means motion tabled on February 18 completely flouts these rulings and commitments. Thereby, in our opinion, gravely compromising the principle, the authority of res judicata and the proper administration of justice. Legislating in this way discredits the judicial process and jeopardizes taxpayers confidence in the courts.

    I would like to know whether you agree.

    Mr. Roger Tassé: I have no trouble supporting this comment. I think the major problem we have here is precisely that court judgments were obtained in the way I described, and, subsequently, the government put forward a bill that would nullify these judgments. I think this is a fairly significant attack on our institutions.

    I am well aware that Parliament is able to enact legislation, even retroactively. This is being done mainly on tax matters, but it has been done in other areas as well. However, when this is done for cases that have been heard by the courts, on which there was consent given by the Crown attorneys, and then an attempt is made to wipe out these judgments, that runs counter to basic principles such as the separation of powers and respect that institutions should have for each other, for example the respect that Parliament must have for final judgments and for the other matters as well.

    As I said, I would have no problem if Parliament were to decide to make the act retroactive to prevent windfalls, to prevent people who were not vigilant but who think they can do well by putting forward their arguments, because the situation is not fair and equitable. However, I have difficulty understanding this attempt to cancel judgments that have been handed down by the courts, even through the budgetary process. I think this is a dangerous precedent.

º  (1620)  

    Mr. Pierre Paquette: You think this is a precedent.

    Mr. Roger Tassé: Yes, it is a precedent. To my knowledge, this is the first time that things have been done in this way. This may not be the first time that this has been done, but it is the first time it has been done in this way. I think this would make it possible to do many other things. Even if consent has been given and judgments obtained, the government, the executive, could introduce legislation to cancel out what it had decided to do.

    I think this is dangerous, because others could come along later and say that there was a precedent in 2003, in which Parliament, which had approved Mr. Manley's budget that year, did a particular thing which had a particular result, and thus it could be done again. It is a precedent, and it would be a very unfortunate and dangerous one.

    Mr. Pierre Paquette: I must also tell the committee that Mr. Marc Lalonde, a former Liberal minister, has also written to Mr. Manley and Mr. Cauchon to express the same opinion. He wrote:

... the measure you are proposing regarding school boards has no precedent in the history of the Canadian parliamentary system, and if it were passed by Parliament, it would be an extremely serious blow to the rule of law and to the authority of a final judgment in our constitutional system.

    I therefore insist that the committee review this situation seriously.

    In conclusion, I would like you to suggest, as you mentioned, how to correct the proposed amendment to cover the second group. I would like to hear your comments on this subject once again.

    Mr. Roger Tassé: Do you want me to develop further what I said earlier in response a question asked by your colleague?

    Mr. Pierre Paquette: Perhaps you could repeat your answer and be more specific. I do not know whether you have had an opportunity to review the notice, because we are going to have to look at an amendment to the Budget Implementation Act 2003, with the assistance of the law clerk.

    Mr. Pierre Paquette: Would you be able to send us a suggested amendment within the next few days that would meet your concerns, and avoid the precedent that the two Bars and the Honourable Marc Lalonde have spoken against?

    Mr. Roger Tassé: Certainly. I would be pleased to respond to your invitation and send the chair an option to consider in order to amend what I see as a flaw; it could be integrated into the amendment you have before you.

    Mr. Pierre Paquette: Thank you.

[English]

    The Chair: You can deal directly with members, because they have access to the legislative counsel, as was announced to them prior to the break about three weeks ago, so they could be working on these amendments.

    Mr. Roger Tassé: I shall do.

    The Chair: Okay.

    Mr. Roger Tassé: Thank you.

    The Chair: Now I will go to Mr. Wilfert.

    Mr. Bryon Wilfert (Oak Ridges, Lib.): Thank you, Madam Chairman.

    I thank the witnesses for coming. Basically, you are suggesting that the government is undermining the judicial process and the principle of the rule of law in proposing retroactive GST amendments affecting school boards, which would give the authority, effectively, to reverse the court decisions. Would that be a fair statement?

    Mr. Roger Tassé: In what the government proposes to do in these circumstances, having itself accepted that there should be an exception to the principle of retroactivity so far as the des Chênes case is concerned, I think it would be undermining the principle of the rule of law and recognition that should be given to judges.

    Mr. Bryon Wilfert: I have before me a copy of the December 21, 2001, press release by the government through the finance department. I won't read it all to you, but I will certainly make it available for the record.

Finance Minister Paul Martin today announced a proposed amendment to the Excise Tax Act relating to the treatment under the goods and services tax/harmonized sales tax (GST/HST) of school authorities and their provision of student transportation services.

The proposed amendment does not affect the users of school bus services. It is intended to ensure that the provision of these services by school authorities continues to be treated as an exempt activity under the GST/HST. In a recent decision, the Federal Court of Appeal held that, under certain provincial funding arrangements, the supply of student transportation services by school authorities could be subject to the GST/HST rules applicable to taxable activities, instead of the rules applicable to exempt activities.

Accordingly, it is proposed that an amendment be made to ensure that the service of transporting elementary or secondary school students to or from a school operated by a school authoritiy is treated as an exempt service where it is supplied by a school authority to a person other than another school authority.

To ensure consistent exempt treatment regardless of how these services may have been funded, the amendment is proposed to be effective from the date of the introduction of the GST. However, the proposed amendment will not affect any case that has already been decided by the Federal Court.

So the 29 cases already heard are not affected by this amendment.

    This is dated December 21, 2001. I would point out to you that because this announcement was made, the government made clear its intention to bring in an amendment to the legislation. Bill C-28 follows through on that announcement of December 21. In January and February of this year a number of boards in Quebec and Ontario decided to pursue the GST appeals on the basis of the existing law, which is their right, but they clearly were well aware of the government's position, which was to change the law. The Federal Court had already rendered an interpretation under the existing law, and since there were no substantive differences, the Department of Justice consented to the judgment in the new cases based on the existing law. However, no one should be, and no one was, I am sure, under any illusion that these consents to judgment affect Parliament's authority to amend the law retroactively in a manner that would apply to these cases. Again, the 29 we've talked about before did not apply in this case.

    I would point out that in 1995 the public accounts committee declared the appropriateness, and indeed the imperative nature, of the use of retroactivity in certain circumstances and called upon the Department of Finance to develop the criteria to determine when retroactive amendments to the law were justified. What we have here are proposed amendments taking into account the government's established criteria for making retroactive amendments. This is a long-standing practice, of which I am sure my colleagues are well aware. The legitimacy of amending the tax laws in accordance with and as prescribed by a ministerial announcement, which we have here, preceding the enactment of the amending legislation is one that is well established in Canadian parliamentary tradition.

    I would argue that the proposed measure is legal. It is not contrary to the constitutional rule of law. The Supreme Court of Canada has, in fact, recognized Parliament's authority to enact retroactive legislation, and the fact that court judgments are issued does not change Parliament's legal authority to act in this case. I would also point out, in response to a similar risk to the Quebec sales tax, that the Government of Quebec announced a fully retroactive amendment to its legislation before the Government of Canada's announcement of December 2001. In its case, of course, Quebec did not have to reverse any QST decisions, as none had been handed down.

    What I want to make very clear, Madam Chair, is that we have on the record on December 21, 2001, the intention of the government to amend the legislation, not affecting the original 29, we accepted that. What we are saying, however, is that anyone who decided to go to the courts after December 2001 did so with the full and clear knowledge that the Government of Canada would amend the legislation. I invite any response, but in my view, there was no surprise, since the intent was clear, it was in writing, and everyone knew this was coming down. What Bill C-28 does is simply follow through on that commitment.

º  (1625)  

    The Chair: Monsieur St-Cyr.

[Translation]

    Mr. Yves St-Cyr: I would like to answer Mr. Wilfert. I agree with him on a number of points that he raised during his short speech, including the fact that the cases he is talking about were indeed already before the courts. I acknowledge that. Those cases should have been treated the same way as those in the first group, if that is what Mr. Wilfert said, and it is at least what I heard him to say. They should have gone to court before December 21, 2001; in fact, they were already before the courts at that time.

    Second, we all agree that retroactive tax changes are made all the time. Neither Mr. Tassé nor I have any objection to that. But that is not the issue here today.

    It was pointed out that the Quebec Revenue Department had proposed the same type of amendment and went ahead with it. Of course, but that was about a year ago, so why has the federal department waited so long? Someone needed to think about the possibility that there would not be an amendment. Will a proposed amendment necessarily be passed? Should we refrain from going to court just because an amendment has been proposed?

    If the government were to fall, would the amendment go ahead? It might, but it probably would not; there is no way of knowing.

    The state of law, at the time the cases were called to be heard by the Tax Court of Canada, was the judgment in the des Chênes case. The Canadian government's situation was not known with respect to the amendment proposed in the 2001 press release.

º  (1630)  

    Mr. Roger Tassé: I simply wanted to add, Madam Chair, that I see no objection to acting retroactively in cases where it is justified by certain principles, and these cases are submitted to the government and discussed with the auditor general.

    The facts are very important here. In this case, the consents to judgment were given before the announcement was made. The cases were pending before that. Why would they not be dealt with? From an administration of justice standpoint, there were dozens of cases like this. The attorney for the school boards could have insisted that each case be dealt with separately rather than having just the des Chênes case heard. That would have imposed an impossible burden on the court. It was their right to say that in the interest of good administration of justice and to reduce everyone costs, only one case would be heard; that is often done in the courts. The des Chênes case would be heard and once the decision was handed down, it would apply equally to the other cases. We are now being told that the retroactive law will apply to those cases. If they were not heard and ruled on at the same time as the des Chênes case—we are talking here about the 29 cases and the others—it is for reasons related to the administration of justice.

    As my colleague said, a news release was issued on December 21, 2001, in which the department said that it was going to proceed. There were discussions on the 2002 budget and no one talked about this issue. The year went by and it is now 2003, and all at once here we have the budget.

    What was not possible to do for administrative reasons involving the administration of justice was done before the budget. A consent to judgment was given for those cases. In my opinion, things could have been done more quickly. Perhaps someone had an interest in seeing that the judgments were not made to quickly.

[English]

    The Chair: Mr. Wilfert.

    Mr. Bryon Wilfert: I would again say, with the decision of the Federal Court of October 17, those 29 cases, we don't disagree. We agree on that. We even agree that maybe it could have been done faster, but intent is intent. After the government made clear its intent on December 21, 2001, there was no change in that intent, no notification that the intent had changed. I would have liked it a little faster as well, but the fact is that the boards that were waiting did so on the basis that they knew this announcement had been made, the intent was there, and we would go forward. What you gentlemen are asking us to do is, in the face of this announcement of December 2001 and in the face of a policy that has been in place since 1990, a well-established policy, somehow cast that aside in order to accommodate those boards who went ahead knowing this situation existed. Now the legislation is before us, clearly, it is to implement what the minister's intent was on the December 21, 2001. There is some view now that the fact that these court cases were pending should be entertained under an amendment to the legislation. That I don't agree with.

º  (1635)  

    The Chair: Thank you very much.

    Mr. Roger Tassé: If I may, on an important question--

    The Chair: Very briefly. Then I would like to go to Mr. Cullen.

[Translation]

    Mr. Pierre Paquette: [Editor's Note: Inaudible]

[English]

    The Chair: Go ahead, Mr. Tassé. We're a bit over time, but I'm going to allow this.

    Mr. Roger Tassé: The honourable member talks about the policy. Yes, it may have been the intent and the policy, what now is being proposed to you, but it is not okay because the government or an official in the government says, oh, that's the government policy. We say, read the section. Oh, that's the government policy, forget about reading the section. The fact is that the matter went to the Court of Appeal, and the court has said Parliament in 1990 didn't do what it thought it was doing. In other words, it's not the policy that should govern a case when the court has said that's the way it should be read. That's where I have difficulty with saying, the policy goes back to 1990, and everybody in the department thought this was the way it should be interpreted. They can think it should be interpreted that way, but what did the court say? The court said it should not be read that way, it should be read another way.

    These matters were before the Federal Court of Appeal, they were pending before the Tax Court, they were there. They were not proceeding for the reason I mentioned. Counsel for the government had said, when des Chênes is decided, we will apply des Chênes in the same way to these cases, This is not nothing. These are cases that were before the court and could have been decided in accordance with des Chênes by the consent of the parties. I make a distinction for these cases.

    The Chair: Thank you.

    Mr. Cullen, 10 minutes.

[Translation]

    Mr. Roy Cullen (Etobicoke North, Lib.): Thank you very much, Madam Chair. I would also like to thank Mr. Caron, Mr. St-Cyr and Mr. Tassé for their testimony. I apologize for speaking English, but since the discussion deals with some rather complex matters, I do prefer to speak English.

[English]

    I'd like to divide this into two particular issues. It may not fit that easily, but please bear with me.

    There's a question of tax retroactivity, which you've all said in principle you understand the need for. If I hear you correctly, you have difficulty with the way the tax retroactivity was applied in these particular circumstances. I'd like to come back to that in a moment.

    The other issue that pops up in my mind is the school boards where there was consent to suspend, based on an agreement among lawyers that the cases should be decided, and then they would follow the results of the des Chênes case. That, to me, is a separate issue, and I'd like to come back to that.

    On tax retroactivity, couldn't one argue that because the government has said the 29 school boards where the cases were already decided by the Federal Court will be excused from the tax retroactivity, this is a way of respecting the operation of the courts in this particular case? Are you saying you understand that, but you think the retroactivity should go beyond the 29 cases?

º  (1640)  

    Mr. Roger Tassé: Yes.

    Mr. Roy Cullen: Okay.

    Mr. Roger Tassé: And I explained the reasons.

    Mr. Roy Cullen: Yes, I understand that, but I'm not, frankly, convinced by the argument. You're saying government policy should not supersede the decision of the courts, but the government, as my colleague has pointed out, had clearly instated its intent, and that's the way tax retroactive policy is normally implemented: the government announces that this was the spirit and the intent of the tax policy, and they plan to take whatever actions are necessary, so there will not be an abuse for some technical reasons.

    I'd like to come back to the other issue, the consent to suspend. It's one that troubles me somewhat more. We had a number of school boards that had, as I understand it, the same facts. Mr. Tassé, I think you're acknowledging that in some cases the facts were not exactly point-to-point, and you're saying you could be more relaxed about some of those.

    Mr. Roger Tassé: Yes.

    Mr. Roy Cullen: Where the facts were point-on-point, you're saying the lawyers for the Crown and the lawyers for the school boards made an agreement. I don't know if it was in writing or was an agreement sanctioned by the court. I'm not a lawyer.

[Translation]

    I' m a chartered accountant, not a lawyer.

[English]

So there was an agreement among lawyers that the others would hold back. In a purely economic sense, it seems to me to be a good idea, it's saving the taxpayers money. Then the decision came down, and somewhere along the way the government decided, if I understand it correctly, to ignore this agreement among lawyers. Is that correct?

    Mr. Roger Tassé: It was more than just an agreement. Judgments were obtained on the consent of the parties.

    Mr. Roy Cullen: So that agreement was a judgment of the court. I'm talking about the consent to suspend.

[Translation]

    Mr. Yves St-Cyr: Yes, there was a consent to suspend when the cases were heard in the Federal Court of Appeal. We were waiting for the results to determine how...

[English]

    Mr. Roy Cullen: So the consent to suspend was an agreement among lawyers.

    I have a more general question, not being a lawyer, on the capacity of a crown attorney to commit the Government and the Parliament of Canada to actions we may know nothing about. Maybe you could comment on that. I'd just like some observations on that particular point.

    Mr. Roger Tassé: If you have a number of cases that are before the court, and there's one case where, for all kinds of good administrative reasons, they say they will proceed, as with des Chênes, there's nothing unusual about the lawyers for the Crown saying, okay, when that judgment is made, we will apply it to the other similar cases. If there's a major difference between the cases, obviously, they will attend to these differences and see whether they cannot extract themselves from that judgment.

    Mr. Roy Cullen: I'm trying to think of the context and the environment. Would there have been any reason for lawyers for the school boards to be concerned about the ability of the crown attorneys to deliver on that commitment? Was there any discussion then about the government's concern on this alleged abuse of the spirit of the tax policy? Was that floating around at the time?

    Mr. Roger Tassé: When you say abuse of tax policy, I shiver, because the question had been raised before the court in a valid, legitimate way.

    Mr. Roy Cullen: You'll have to think in my terminology. When I use that terminology, if the government feels individuals or organizations are misapplying the spirit and intent of the tax policy and the tax legislation, I'm calling that, perhaps very loosely, an abuse of tax policy. That's what I'm referring to.

    Mr. Roger Tassé: Okay. Thank you, I'm reassured.

    Mr. Roy Cullen: So my question was.... This was a crown attorney for the revenue agency or Justice?

º  (1645)  

    Mr. Roger Tassé: The Department of Justice represents the agency.

    Mr. Roy Cullen: Normally, attorneys for the people at the school boards would have every reaon to believe the undertaking of the crown attorneys could be delivered. There'd be no reason to doubt it.

    Mr. Roger Tassé: In the situation of the kind I am describing and we're faced with, that is--

[Translation]

    Mr. Yves St-Cyr: No. We did not think the agreement on the suspension of the hearings could cause any problem whatsoever.

[English]

    Mr. Roger Tassé: There was no reason to suspect that the lawyer didn't have the authority. There are similar cases. It's just administrative constraints that prevent them from proceeding with the other cases before the court.

    Mr. Roy Cullen: Has it ever been explained to you or the school boards why the government, through the revenue agency, through the Justice attorneys, decided not to adhere to that agreement among lawyers?

[Translation]

    Mr. Yves St-Cyr: No, absolutely not. There was an agreement to suspend with the lawyers and even with the court subsequently. We were waiting for the des Chênes ruling and the other 28, and then we got the decision. The press release was issued and subsequently we continued with the proceedings before the court. That is all.

[English]

    Mr. Roy Cullen: You're working under the assumption, then, that whatever happened in des Chênes would be applied to these other cases where there had been agreement to suspend.

[Translation]

    Mr. Yves St-Cyr: Exactly.

[English]

These files were already in appeal at the Tax Court of Canada at the same time. That's what we thought at that time.

    Mr. Roy Cullen: But has anyone ever asked why the department is not adhering to that agreement among lawyers? I'm curious as to what their answer would be--we don't care, it doesn't apply, the facts are different.

    Mr. Yves St-Cyr: We made some statements in court, and I can remember it being said that the facts were the same and the questions of law were the same too. Everybody knows these were the same facts and the same questions of law.

    Mr. Roy Cullen: It would be just conjecture, I guess, but do you think the government, in not adopting that agreement of consent to suspend, was just, in effect, trying to contain costs or its exposure?

    Mr. Yves St-Cyr: I think at first it was because of that. When they produced this press release in December 21, 2001, they thought there was about $1 billion in question, and they were not well informed. We have only $18 million, so it's very different. I think all these things come from that.

    The Chair: Thank you, Mr. Cullen.

    Ms. Wasylycia-Leis.

[Translation]

    Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP): Thank you, Madam Chair.

    I would like to join with my colleagues in thanking the witnesses. Because of the complexity of the subject, I will be speaking English.

[English]

    We are talking about clause 64 of Bill C-28, the proposed Budget Implementation Act. That clause is what has come to be known as the des Chênes amendment. Is that correct?

    Mr. Roger Tassé: Yes.

    Ms. Judy Wasylycia-Leis: We have received copies of a letter from the Canadian Bar Association that went to Mr. Manley and Mr. Cauchon on this very matter, I believe. Have you seen that presentation, are you familiar with it?

    Mr. Roger Tassé: Yes, I have seen the letter.

    Ms. Judy Wasylycia-Leis: Do you agree with the general thrust of that presentation?

    Mr. Roger Tassé: Yes.

    Ms. Judy Wasylycia-Leis: It would seem to me, on the basis of what you've said here today and on the basis of the Canadian Bar Association's letter, we're dealing with a fairly complex issue that is not as cut and dried as originally appeared to be the case. I think, as a committee, we ought to get some more answers to the issues being raised.

    It would seem, particularly from the letter from Simon Potter, that we're dealing not with the impact on some specific school boards, but with a broader principle in taxation policy and the rule of law. In that letter Mr. Potter argues--and I think you're doing the same today--that this particular amendment is inappropriate for several reasons. He says it interferes with vested rights: “Interfering with vested rights is only justifiable in the rarest of circumstances.” “Second, the des Chênes amendment is troubling because of its origins”; it “would require taxpayers to speculate about whether other, specifically tailored, retroactive amendments will be introduced for other goods and services that also are government funded.” He says this “would be an unjustified intrusion of the Rule of Law, and would attack the very foundations on which taxpayers file millions and millions of tax returns in good faith.” Third, the amendment “violates a fundamental principle of taxation, tax certainty.”

    It would seem, on the basis of those three points and what you've said today, we're dealing with a broader principle. We should be pursuing seriously the idea of deleting either the whole of clause 64 or subsection (2), simply deleting the provision that deals with retroactivity in order to meet concerns of a general nature. I'm putting that on the table. I'm trying to get my head around this. If we are talking about something that is far-reaching and has ramifications into other areas, I think we need to take what you're saying very seriously today.

º  (1650)  

    Mr. Roger Tassé: Thank you. I might offer some comments.

    I said before the principle of retroactivity does not bother me if it's applied correctly. Clause 64 amends section 5 of part III of schedule V. That clarifies the original intent if it is agreed that the Federal Court of Appeal in des Chênes didn't have it right in respect of the policy here. This suggests that the current section 5 should be replaced by what is in the amendment you have before you. I don't think we can object to that. In the next paragraph it says that it should be retroactive to December 17, 1990. I don't think that is objectionable, except, as the government itself has recognized, where there is a decision of the Federal Court of Appeal, des Chênes and the 29 cases. As I said before, this is to be applauded. The retroactivity to 1990 is constrained and will not apply to these cases.

    We have been saying there are other cases where it should not apply as well, consistently with what the government itself had decided, that they will make an exception to the principle of retroactivity for the des Chênes cases. I have tried to persuade you that there are other cases in Quebec and other provinces where the government should have applied the same principle and made an exception, where there is a judgment that has been rendered and where there is a judgment about to be rendered. There are very specific cases that were before the court before the announcement was made in 2001, and for these cases there should also be an exception.

    That's my main argument. In other words, the government itself has shown the way by providing for an exception for des Chênes and the 29 other cases. I say that's not enough. I'm thinking of what your colleague here said, that there is no constitutional principle that prevents us from doing this and that and having these in active law, and there's nothing in the law that prevents us from doing it. I'm saying there are values, and the Supreme Court has recognized that there are, that underlie our regime, the rule of law, respect for the judiciary. If Parliament wants to act in accordance with these values, to be inspired by these values, it will pay respect to judgments of the courts. Here it's the Tax Court.

    My argument is perhaps more limited in scope than what has been argued, but I can't disagree with what Simon Potter has said. He could have come here before you and explained what he meant by that. I've constructed my analysis inspired by what he says generally about Canadian values in his letter, I've looked at the facts, and I think the facts in this case speak for themselves. They say it would be wrong to do this. That's my argument.

º  (1655)  

    Ms. Judy Wasylycia-Leis: Do you have anything to add?

[Translation]

    Mr. Yves St-Cyr: I would just like to add that we have no objection to the actual principle of retroactivity. However, we do object to the way in which the government is proceeding in this case. The lawyers from the Department of Justice, on behalf of Her Majesty, agreed to a judgment and made certain legal commitments before the courts, which were sanctioned. A judgment was handed down that supported the school boards. It would be a violation of our democratic system if the principle we have been discussing were to be approved by Parliament. I would even add that supporting Mr. Wilfert's comments would be an admission of the fact that the government, or Parliament, can legislate without introducing a law. If this amendment, which was an intention in December 2001, had never received any follow-up in the next four years... This would mean that the government can treat taxpayers however it likes, without having to introduce any legislation. That is extraordinary.

[English]

    Ms. Judy Wasylycia-Leis: Thank you.

    I don't have any more questions for the witnesses, but I want to ask you, Madam Chair, if there's a way we can further explore this issue, simply on the basis of that broader concern and the questions the witnesses have raised today, as well as the Bar Association, about the principle at stake here and the fact that this amendment “signals that every time the tax-border is successfully challenged by a taxpayer, we will be subject to the possibility of a retroactive amendment that would destroy vested rights. If poor drafting or unintended and unforeseen tax consequences are to be neutralized through the use of retroactive amendments, the principle of tax certainty can no longer be relied upon by taxpayers.” That's a strong statement from Mr. Potter. I don't want to move to delete the idea of retroactivity if it means benefits to those who rely on school buses and school boards everywhere, but there is a broader issue here I think we need to be aware of.

    The Chair: Okay.

    I will just remind everyone around the table that all members have had access to legal counsel and knew this was a point well before the break. They know the timetable, that next week we'll be going into clause-by-clause. So I'll encourage those members who so wish to avail themselves of the legal counsel.

    We'll go over to Mr. Pillitteri, who I understand is giving a minute of his time to Mr. Wilfert, and that will be the end of our questioning.

»  (1700)  

    Mr. Gary Pillitteri: Thank you.

    I felt almost as if you were making a presentation to the Supreme Court of Canada. For a farmer, it sometimes leaves a lot to understand. You are challenging us to take sides and render a sentence, while the best we could do is try to challenge you.

    Let me say to you what I understood from this. The tax department or the minister don't try to circumvent or challenge the courts, but accept the 29 cases. They say they're going to make this retroactive to December 1990. As I understand that, knowing the law was flawed coming in, they wanted to make sure they caught everything in between. Therefore, the intent was there. I question the fact that it took so long to bring legislation forward, but they were specific in saying they intended to amend the law.

    With all due respect, and I'm not a lawyer, I don't think any crown prosecutor has the right to make a commitment on behalf of anyone, a client, or even the government, that future cases should be treated the same. He or she could only assume that will be a set precedent.

    As you try to convince me on this issue, I don't know which side I would be on. You are challenging me and everyone on this panel to be judge and jury. I can't see that, unless you have some other way of trying to bring this forward. I will say to you that the minister was clear in his statement when he said, retroactive to December 1990, knowing the law was flawed and therefore had to cover anything in the foreseeable future.

    Thank you. Those are the comments I have to make.

    The Chair: Thank you.

    Mr. Caron, would you like to say a word, then I will give the floor back to Mr. Wilfert.

[Translation]

    Mr. André Caron: I would like to say that I am not a lawyer either; so we can understand each other well.

    This is what happened. The Department of Justice continued to hear cases, and then made offers to the school boards, which they accepted. Some judgments were handed down. The Department of Justice is at issue here; it is the department that makes these decisions. You have just said that the Department of Justice should not have heard us and handed down certain judgments.

    The judgments have been handed down and the decisions made, but the government wants to change the decisions made by the Department of Justice. Thus, at any time, it could decide that a judgment that has been handed down is not correct, that it must be set aside and everything started over. You have just heard the opinion of someone who is not a lawyer.

»  (1705)  

[English]

    The Chair: Mr. Wilfert, you have about two and a half minutes.

    Mr. Bryon Wilfert: Thank you, Madam Chair.

    I need clarification from our witnesses. You referred to the des Chênes case and said it is your understanding that it would apply to future cases. Was there a written agreement between the Crown and the lawyers for the board? If there is a written agreement, I'd certainly appreciate seeing it, because I heard on two occasions the words “under assumption” with regard to that case; you were under the assumption that it would apply or thought it would apply. So if there was an agreement with the Crown in writing that this would be applied, I certainly would like to see it.

[Translation]

    Mr. Yves St-Cyr: Would that change anything regarding the decision?

[English]

    Mr. Yves St-Cyr: Are you talking about the suspension of hearing of the other cases pending the des Chênes case?

    Mr. Bryon Wilfert: Presumably there was something, but I don't want to misrepresent it.

    Mr. Yves St-Cyr: I have a written engagement from the department when they consented to judgment and they made the offer. Is that what you are talking about?

    Mr. Bryon Wilfert: What we are saying here is that the cases that were entertained, to which the justice department consented, were based on the existing legislation, but not withstanding that, it is clear that it didn't affect the ability of Parliament, and you gentlemen agreed, I believe, to amend the law retroactively, and that was the intent of the December 21, 2001, announcement by the minister. But if there is some kind of an agreement of which I am not cognizant, please let me know.

[Translation]

    Mr. Yves St-Cyr: I'm not sure what he really wants; it seems ambiguous to me. Sorry.

    From what I understand, you would like to know whether there is a written agreement stating that the proceedings would be suspended until a decision in the des Chênes case was made. And that, moreover, the judgment would apply one way or the other to all the other cases. Is that correct?

[English]

    Mr. Bryon Wilfert: Yes.

[Translation]

    Mr. Yves St-Cyr: I do have a written agreement which states that the Department consented to judgment in the case of all school boards in Quebec and Ontario.

[English]

    Mr. Bryon Wilfert: And they would apply it in future cases?

    Mr. Yves St-Cyr: The cases that are in front of you right now.

[Translation]

    Mr. Pierre Paquette: He does not understand.

[English]

    Mr. Roger Tassé: I think I described it very clearly. Some of these cases are so complex.

    Mr. Bryon Wilfert: I am very clear. I just wanted to see if there was that agreement.

    Mr. Roger Tassé: It's your characterization of the future cases that I'm not sure I understand. There were cases from 1997 to 2001, before the announcement of the minister, where proceedings were initiated in the court, and the question was raised by the lawyers what they were to do with these cases. They had tens of cases. The lawyers for the school boards and the lawyers for the government said they would put the cases in abeyance. Why? Because there was another case that was going to the Federal Court of Appeal, and the decision made on it would guide them if the point of law were the same. That would be easy. That is why I've come to the conclusion that if there is to be an exception for des Chênes, there should be an exception for these cases. I am just trying to make sure we understand each other. I'm not talking of future cases, I am just talking of the cases from 1997 to 2001, cases that were before the courts.

»  (1710)  

    Mr. Bryon Wilfert: Again, the government's position has been very clear, that with the 29 cases prior to the announcement by the minister, there is no contention. We accept that, there is no issue. We both agree on that. Parliament has the ability to bring in the legislation. This is a principle that has existed for many years, and judgments being issued between the time of a government's announcement and its proposed tabling of legislation has happened in the past, continues to happen, and in this case I don't see any difference.

    It may be a point of debate, but I've presented the case for the minister, my colleagues across the way have presented their arguments, and it'll be up to the committee to make its decision. Again, I respect and appreciate the presentations we've heard from these three gentlemen today.

    The Chair: Mr. St-Cyr.

[Translation]

    Mr. Yves St-Cyr: I would like to comment, perhaps not as a lawyer, but as a Canadian taxpayer. You have been saying for some time, Mr. Wilfert, that this position was known to the Government of Canada since December 2001. I cannot understand why Justice Canada would make a consent to judgment proposal if the position of its government is that well known.

    Mr. Pierre Paquette: Three weeks before the budget, as well; it is quite extraordinary.

[English]

    The Chair: I want to thank all three of you. I think you've done an excellent job of presenting the facts for us today from your perspective. We enjoyed having you as witnesses. You've given all of us around the table something to digest. I would encourage those who wish to to work quickly, because clause-by-clause is next week, probably Tuesday. They've got the counsel to work with.

    We are adjourned till tomorrow morning at 11 o'clock in this room.