Nanaimo Immigrant Settlement Society v. British Columbia

2001BCCA0075 Citation: Nanaimo Immigrant Settlement Society v. British Columbia Date: 20010206 2001 BCCA 75 Docket: V03577 Registry: Victoria

COURT OF APPEAL FOR BRITISH COLUMBIA BETWEEN:

NANAIMO IMMIGRANT SETTLEMENT SOCIETY AND

SOOKE MARINE RESCUE SOCIETY

PLAINTIFFS (RESPONDENTS) AND:

HER MAJESTY THE QUEEN IN THE RIGHT OF

THE PROVINCE OF BRITISH COLUMBIA

DEFENDANT (APPELLANT) Before: The Honourable Mr. Justice Cumming The Honourable Madam Justice Newbury The Honourable Mr. Justice Hall E.C. Chiasson, Q.C. and B.W. Dixon Counsel for the Appellant W.K. Branch and M.G. Underhill Counsel for the Respondents Place and Date of Hearing: Vancouver, British Columbia January 9, 2001 Place and Date of Judgment: Vancouver, British Columbia February 6, 2001 Written Reasons by: The Honourable Madam Justice Newbury Concurred in by: The Honourable Mr. Justice Cumming The Honourable Mr. Justice Hall Reasons for Judgment of the Honourable Madam Justice Newbury: [1] This is an appeal from a decision, dubbed "Bingo 3", of Mr. Justice Hutchison in Chambers delivered on December 8, 1999, and from one aspect of "Bingo 2", also delivered by him, on June 17, 1999. For a concise description of the events leading up to this litigation, reference may be made to the Reasons of Owen-Flood J. in Nanaimo Community Bingo Association v. British Columbia (Attorney General) (1998) 52 B.C.L.R. (3d) 284, which were delivered in January 1998. His order, as amended by a later order of this court, declared that the Gaming Proceeds Distribution Regulation (B.C. Reg. 362/97), passed pursuant to the Lottery Act, R.S.B.C. 1996, c. 278, was ultra vires the Lieutenant-Governor in Council and therefore invalid. His Reasons also stated that the Regulation was "inconsistent

with" s. 207(1)(b) of the Criminal Code and therefore invalid, but that finding was not reflected in the final order. [2] A few months later, the present action was begun on behalf of a group of charitable and religious organizations who at the relevant times conducted bingos and casinos in British Columbia. In very general terms, they seek declarations that the fees collected by the Province or the Gaming Commission in return for the issuance of their licences under the Lottery Act were ultra vires; and they seek the repayment of those fees, with interest, on the basis of unjust enrichment. In September 1998, they applied to have their action certified as a class action under the Class Proceedings Act, R.S.B.C. 1996, c. 50 (the "Act"). [3] As noted by Hutchison J. in "Bingo 1" (Victoria Registry No. 98 0873, dated January 19, 1999), the Province responded to the judgment of Owen-Flood J. by amending the Lottery Act in July 1998. The Miscellaneous Statutes Amendment Act (No. 3), S.B.C. 1998, c. 37, purported among other things to validate retroactively "every licence fee or purported licence fee in respect of a lottery scheme" imposed by the Province between May 27, 1986 and March 31, 1987, or by the Gaming Commission since the latter date. Such fees were "conclusively deemed to have been validly imposed by regulation" under the new s. 7(6) of the Lottery Act. Further, s. 42 of

the amending Act stated that "No action lies, and an action or other proceeding must not be brought or continued, against the government, the British Columbia Gaming Commission or any other person, for compensation, damages, or any other remedy" in relation to licences issued by the Province or the Gaming Commission in connection with the conduct of lottery schemes. [4] In Bingo 1, Hutchison J. dealt for the first time with the plaintiffs' application for certification. He directed that the certification hearing be divided into two parts, the first dealing with whether the plaintiffs had a cause of action and the second, with the question of "preferable procedure" and related matters. In Bingo 2, the Chambers judge ruled that the pleadings disclosed a cause of action notwithstanding the 1998 amendments. He found that Nanaimo Community Bingo Association, an association of charities which had been the "lead" plaintiff in this and the earlier action, had no cause of action itself but that the plaintiffs Nanaimo Immigrant Settlement Society and Sooke Marine Rescue Society did. Hence the change in the style of cause to the present one. [5] Following these preliminary rulings, the Province enacted further amendments to the Lottery Act by the Fee Statutes Amendment Act, S.B.C. 1999, c.

32. As Mr. Chiasson says, it appears the government was responding to the decision of the Supreme Court of Canada in Re Eurig Estate [1998] 2 S.C.R. 565, where the majority held that s. 53 of the Constitution Act, 1867 requires that any bill imposing a tax originate in Parliament or in the case of a province, in the Legislature. Accordingly, the Lieutenant-Governor in Council is not competent to impose a tax by regulation - i.e., without a direct vote of the Legislature. [6] The Fee Statutes Amendment Act contained a schedule of various "fees" (some of which were stated and levied as percentages of gross revenues from lottery schemes) collected prior to May 12, 1999. It established a new set of fees in amounts identical to those collected previously, and permitted the set-off of the latter against the former. This amendment also purported to validate the collection of licence fees retroactively. In words of the new s. 75: 75 (1) Any money paid to and accepted by the government before May 12, 1999 for and in respect of a matter referred to in the schedule to the Lottery Act, R.S.B.C. 1979, c. 249, as enacted and amended by this Act, or the schedule to the Lottery Act, R.S.B.C. 1996, c. 278, as enacted by this Act, whether or not that money was voluntarily paid, must be applied against the fee payable in respect of that matter under whichever of those Schedules was in effect at

the time of the payment, and, for that purpose, (a) is conclusively deemed to have been owing to the government under whichever of those Schedules was in effect at the time of the payment and to have been validly collected by the government, and (b) is conclusively deemed to be payment in full of the fee payable in respect of that matter under whichever of those Schedules was in effect at the time of the payment. (2) This section and every provision enacted or amended by any of sections 40 to 47 of this Act must be applied to and must be given effect in every action or proceeding, whether commenced before, on or after the date this Act receives Royal Assent. (3) This section and each provision enacted or amended by any of sections 40 to 47 of this Act must not be construed as lacking effect, whether retroactive or otherwise, in relation to any matter because of making no specific reference to that matter. [Emphasis added.] [7] In Bingo 3, Hutchison J. paraphrased the requirements that the plaintiffs must meet for certification under the Act as follows: (a) The pleadings must disclose a cause of action; (b) There is a class of two or more persons; (c) There is a suitable representative; (d) There are one or more common issues; and (e) A class action is the preferable procedure. [para. 4] He had already ruled on item (a) and was satisfied as to items (b), (c) and (d). This left item (e), whether a class action was the preferable procedure for the plaintiffs' case. He held that it was, and ordered that the common issues advanced by the plaintiffs should be formulated as follows: 1) Are the "licence fees" imposed by the Province on charitable gaming lawful or ultra vires the Lottery Act?

2) Are the "licence fees" in substance a tax and if so: (a) Indirect and outside the Province's power under s. 92(2) and (9) of the Constitution Act; (b) Direct and yet contrary to s. 207(1)(b) of the Criminal Code of Canada and, or otherwise, ultra vires or inoperative of the Province?

3) Do the amendments to the Lottery Act of 1998 and 1999 or the common law deprive either class, or some of the members of either class, from recovering "licence fees" paid to the province? [para. 23] [8] For ease of analysis, however, I propose to refer to the original questions formulated by the plaintiffs in the court below at the start of Bingo 3, since they clearly distinguish between what counsel categorized as the administrative law questions (items 1 and 7 below); the constitutional law questions (items 2-6); and issues relating to the availability of restitution in this case (items 8 and 9). The common questions originally proposed were these: (1) Are the "licence fees" imposed by the Province on charitable gaming without lawful authority and, accordingly, ultra vires the Lottery Act? (2) Are the "licence fees" a tax on charitable gaming? (3) If the "licence fees" do amount to a tax, is the tax lawful having regard for sections 53 and 90 of the Constitution Act, 1867 (U.K.), 30 & 31 Vict., c. 3.? (4) Are the "licence fees" an indirect tax on charitable gaming? (5) If the "licence fees" are an indirect tax, is the tax lawful having regard for sections 92(9) and 92(2) of the Constitution Act, 1867? (6) Do the "licence fees" imposed by the Province on Charitable Gaming amount to a direct tax and allow the Province to receive the proceeds of gaming that is managed and

conducted by charitable and religious organizations contrary to section 207(1)(b) of the Criminal Code, R.S.C. 1985, c. C-46, and are they therefore ultra vires or inoperative the Province? (7) Do the amendments to the Lottery Act imposed through the Miscellaneous Statutes Amendment Act (No. 3), 1998, S.B.C. 1998, c. 37 or the Fee Statutes Amendment Act, 1999, S.B.C. 1999, c. 32 prevent recovery by the Class? (8) Are Class Members entitled to recover the licence fees paid? (9) Is the retention of the "licence fees" by the Province unjust, oppressive or an abuse of process?

ON APPEAL [9] In general terms, the Province argued in this court that items 1 and 7 have been resolved in the Province's favour by the 1998 and 1999 amendments to the Lottery Act and that accordingly, the plaintiffs no longer have an arguable case on those points. In the Province's submission, the constitutional questions certified by the Chambers judge need not and should not be dealt with by means of a class action for reasons recognized by the Supreme Court of Canada in Guimond v. Quebec (Attorney General) [1996] 3 S.C.R.

347. If that is correct, it is said all the remaining issues (i.e., items 8 and 9) have either been decided effectively in favour of the Province by the Supreme Court of Canada (most notably in Air Canada v. The Queen [1989] 1 S.C.R. 1161), or are not common questions suitable for certification. Thus the Province submits the Chambers judge erred in certifying any of the questions he did for purposes of a class action. The Plaintiffs' Cause(s) of Action and the Retroactive Legislation [10] The analysis of this aspect of the appeal is complicated somewhat by the fact that when the Chambers judge held (in Bingo 2) that the plaintiffs' pleadings disclosed a cause of action, he did not expressly distinguish between the administrative law and constitutional law questions raised by the plaintiffs. As well, he did not, and could not, deal with the 1999 statutory amendments, which did not come into force until after Bingo 2. The Chambers judge in Bingo 2 did note, however, the Province's reliance on Woodward Estate v. Minister of Finance [1973] S.C.R.

120. There the Court upheld an amendment to the Succession Duty Act of British Columbia which retroactively permitted the Minister in his absolute discretion to determine whether any organization was a charitable organization, without any right of appeal by the person(s) affected. Martland J. for the majority reasoned that the wording of the amendment was limited to ministerial determinations made under the relevant section and could not operate to validate an ultra vires provision. Assuming the law lay within provincial power, however, the Court held that "An administrative decision which has received statutory confirmation cannot be reviewed on certiorari." (at 129.) The Province contends that as in Woodward Estate, the 1999 amendments have given the Lottery Act scheme statutory confirmation and that it cannot now be reviewed except on a 'division of powers' argument. [11] It may be said that the legislation at issue in Woodward Estate was unusual - the Supreme Court itself noted that the latter part of the impugned section was "unlike any other which has previously been considered by the Courts" - and that it represented a high watermark of political expediency, if not cynicism. Almost three decades have passed since then and the law has evolved, even apart from the Canadian Charter of Rights and Freedoms. Mr. Underhill for the plaintiffs in the case at bar stated that he

intends to make an argument challenging the effect, including the retroactivity, of the amendments to the Lottery Act, notwithstanding the authority of Woodward Estate. His argument, he said, is one that has not been advanced before in British Columbia, and is based on the rule of law (which of course is confirmed in the preamble to the Charter), judicial independence, and unwritten constitutional principles. The fact such principles can give rise to substantive legal obligations was, he says, recently shown by the Reference re Secession of Quebec [1998] 2 S.C.R. 217. [12] I agree that there may be arguments of principle open to the plaintiffs on this branch of the case such that it cannot be described as "bound to fail". Thus I see no error in the Chambers judge's conclusion that the plaintiffs have an arguable case, and therefore a cause of action, on the administrative law questions posed above. The Province did not attempt to argue that the constitutional questions raised by the plaintiffs failed to disclose a cause of action. Constitutional Questions and "Preferable Procedure" [13] The appropriateness of a class proceeding as a vehicle for a constitutional challenge to legislation was the main focus of the Province's argument. Mr. Chiasson agreed that the constitutional issues are common to the plaintiffs but submitted that a class proceeding is simply not necessary for

their fair and efficient resolution. He relied in particular on an obiter dictum of Gonthier J., speaking for the unanimous court in Guimond, supra. In that case, the plaintiff had been sentenced to imprisonment for failing to pay fines under a law which he challenged on the basis of the Charter and the Quebec Charter of Human Rights and Freedoms. He sought both a declaration of constitutional invalidity and "compensatory and moral damages" under the Code of Civil Procedure of Quebec. The case was dismissed in the lower court on a basis somewhat analogous to our R. 19(24) of our Supreme Court Rules. The Court of Appeal of Quebec reversed that judgment, but on further appeal, the Supreme Court of Canada restored the earlier ruling that the plaintiff had failed to meet the threshold of showing his case had a "serious colour of right" for judicial determination. [14] The Court went on, however, to discuss questions of procedure that arise when damages are sought under s. 24(1) of the Charter. Gonthier J. observed: Although it cannot be said that damages can never be obtained following a declaration of constitutional invalidity, it is true, as a general rule, that an action for damages under s. 24(1) of the Charter cannot be coupled with a declaratory action for invalidity under s. 52 of the Constitution Act, 1982. The respondent based his claim for damages under s. 24(1) on a bare

allegation of unconstitutionality. The facts did not warrant a departure from the general rule. Pelletier J.'s conclusion that the case failed to meet the threshold under art. 1003(b) of "une apparence sérieuse de droit" was, therefore, a reasonable exercise of the discretion afforded to him under that article and accordingly, ought not to have been interfered with. It follows that the appeal should be allowed with costs throughout. [para. 19] Then, in the penultimate paragraph of his reasons, Gonthier J. added: Having decided that [the trial judge] had a discretion . . . to deny authorization and that he exercised it reasonably, it is not necessary to consider the other paragraphs of art.

1003. Furthermore, while it is true that it is not necessary to pursue a class action to obtain a declaration of constitutional invalidity and therefore, that it is generally undesirable to do so, it is not necessary, in this case, to canvass whether or not there resides a residual discretion to deny authorization should the constituent criteria of art. 1003 be met. [para. 20; emphasis added.] [15] There can be little doubt that obiter dicta of the Supreme Court of Canada are entitled to a great deal of deference: see Scarff v. Wilson (1998) 55 D.L.R. (4th) 247 (B.C.C.A.), at 258; and Allied Air Conditioning v. British Columbia (1994) 87 B.C.L.R. (2d) 207 (B.C.C.A.), at 217. It may be argued, however, that Gonthier J.'s obiter comment is largely inapplicable in the context of British Columbia's Class Proceedings Act. The rule with which the Court was concerned in Guimond was Article 1003 of the Code of Civil Procedure. It provided in part: The court authorizes the bringing of the class action and ascribes the status of representative to the member it designates if of opinion that: (a) the recourses of the members raise identical, similar or related questions of law or fact; (b) the facts alleged seem to justify the conclusions sought; (c) the composition of the group makes the application of article 59 or 67 [rules relating to joinder of causes of action] difficult or

impracticable; and (d) the member to whom the court intends to ascribe the status of representative is in a position to represent the members adequately. [Emphasis added.] From this it appears that in Quebec, a class action is to be used only when necessary because of the 'difficulty' or 'impracticability' of the alternatives. This approach is quite different from the British Columbia Class Proceedings Act, s. 4 of which requires certification where a class proceeding would be the preferable procedure; and s. 7 of which instructs the court not to refuse certification merely by reason of the factors listed. [16] As Hutchison J. noted in the case at bar, Guimond was distinguished by Reed J. in Pawar v. Canada (1997) 137 F.T.R. 231 (Fed. Ct), who stated: The comments at p. 361 of the Guimond decision referred to a provision of the Quebec Civil Code of Procedure. It differs in content from the Rule 1711 [of the Federal Court Rules]. More importantly, however, those comments are obiter and leave open the question of when a class action is an appropriate vehicle for pursuing a challenge to the constitutionality of a legislative provision. For the reasons given by the prothonotary, the circumstances in this case are of such a type to make it appropriate to allow the litigation to be pursued by way of a class action. [at 234] [17] A similar course was taken in Howard Estate v. British

Columbia (1999) 66 B.C.L.R. (3d) 199 (B.C.S.C.), where the Court certified a claim brought to recover probate fees paid pursuant to an allegedly invalid regulation. Pitfield J. found that the common issues of constitutional validity would predominate over issues which would be of concern only to individual plaintiffs, and that the objectives of the Class Proceedings Act militated in favour of certification notwithstanding that the plaintiffs' claim included a constitutional challenge. He also emphasized the "practical reality" that without certification, ". . . the issues in this case may go unresolved because of the relatively insignificant quantum of any individual claim. That result would be unfair and should not be encouraged when the claims, in aggregate, are substantial." (at 209.) Finally, the Court noted that certification would "move the litigation along" - one of the touchstones referred to by this court in Campbell v. Flexwatt Corp. (1997) 44 B.C.L.R. (3d) 343 at para. 53, and many cases following it. [18] The Chambers judge in the case at bar held that even if he disagreed with the Court in Howard, which he did not, he was bound to follow it on the authority of Re Hansard Spruce Mills Ltd. [1954] 4 D.L.R. 590 (B.C.S.C.). As well, he noted, if the action were not certified, it would be more difficult for either party to take an appeal from a judgment on common issues

prior to the trial of the entire case. This was a reference to s. 36 of the Act, which allows a party to take an appeal from a judgment on common issues, presumably without leave as is normally required for the appeal of an interlocutory order. [19] The Province submits that a class action is unnecessary for the resolution of the constitutional questions and others which can be resolved by a declaratory judgment. Such a judgment would "bind the world", unlike a judgment on the common issues in a class proceeding, which under s. 26 of the Act binds only those members of the class who do not opt out. Once the declaratory judgment has been pronounced, the Province argues, all that will be left will (or may) be the plaintiffs' individual restitutionary claims, which are not "common" and can be brought at a later time if necessary. [20] But as Mr. Branch responded, the question is not whether the class action is necessary - i.e., whether there are other alternatives - but whether it is the "preferable procedure" for resolving the plaintiffs' claims. Section 4(2) of the Act states that that question involves a consideration of "all relevant matters" - a phrase that includes the practical realities of this method of resolving the claims in comparison to other methods. In the plaintiffs' submission, what makes a class action preferable in this case are the practical advantages provided

by the Act for the actual litigation process. Some of these advantages accrue only to the plaintiffs: as Mr. Branch noted, if the claims are aggregated, contingency fee arrangements are likely to be available for the plaintiffs. The claims can be pursued by one counsel or a few counsel rather than by many. A formal notification procedure is available. Generally, it is more likely that those charities that have paid provincial licence fees in connection with bingo and casino games can pursue the matter to completion - something very few individual charities could do on their own. Other advantages arising under the Act are beneficial to both parties - the assignment to the action of one case-management judge, and the attendant elimination of lengthy Chambers proceedings before different judges. From the Province's point of view, none of these considerations prejudices its ability to defend the action fully, except to the extent that financial constraints on the plaintiffs are eased. Those constraints are not an "advantage" the Province should wish to preserve. [21] In my view, these factors militate strongly in favour of certification, and are obviously consistent with the stated objectives of the Act. The fact that the threshold questions include matters of constitutional law that could be resolved in a shorter declaratory action should not, in my view, overshadow these

realities. As Mr. Branch said, the obtaining of a declaration is not the plaintiffs' primary objective; the repayment of their fees is. Nor should the fact that restitution is being sought by individual plaintiffs outweigh the fact that a class action will move the proceedings forward to a considerable extent. The Restitutionary Claims [22] This brings one to the restitutionary claims themselves. At least on appeal, Mr. Chiasson did not take the position that the plaintiffs do not have an arguable case in this regard. In my view, he was correct not to do so, notwithstanding the clear authority of Air Canada, supra, to the effect that there are "sound public policy reasons" to deny a general right of recovery of moneys "voluntarily" paid to the state as taxes under an invalid statute. As Mr. Branch pointed out, Madam Justice Wilson delivered a powerful dissent in Air Canada; in England, the House of Lords in a majority judgment delivered by Lord Goff has since reversed the common law rule against recovery (see Woolwich Building Society v. Inland Revenue Commissioners (No. 2) [1992] 3 All E.R. 737); and in 1992, two justices of the Supreme Court expressly refrained from expressing a view on the issue. (See the judgment of McLachlin J. (now C.J.C.) for the Court in Peel (Regional Municipality) v. Canada [1992] 3 S.C.R. 762, at 805, concurred in by Lamer C.J.C.) [23] The Province

does contend that as the law now stands, the plaintiffs have no right to recover taxes paid under statutory compulsion. Even if a wholesale change in the law in Canada took place, it would still be necessary for each plaintiff, in a separate trial, to prove its right to recovery and to defend against arguments that it had not "carried the burden" of that tax and had passed it on to others. Thus the Province says the question of recovery will not be addressed until the end of the trial process, if at all, and the individual issues of fact surrounding the claims would predominate the proceedings until that point. [24] I am not persuaded, however, that these individual issues predominate over the common issues so as to make a class action unwieldy or counter-productive. Indeed, as I have already observed, determination of the common issues - those of administrative and constitutional law, and the question of whether restitution is even available in theory - will move the litigation along very considerably, and they arise at the outset rather than at or near the end of the proceedings as Mr. Chiasson suggested. The individual issues, on the other hand, are fairly simply stated and do not, at least at this stage, seem likely to break down into multiple sub-issues. It would be a fairly easy matter for the holders of the classes of bingo and casino licences to prove what fees they

paid and when; and the definition of those classes are essentially matters of statute. Thus the case compares favourably with Harrington v. Dow Corning Corp. 2000 BCCA 605, or R. (L.) v. British Columbia (1999) 180 D.L.R. (4th) 639, where each individual plaintiff's claim involved numerous and extremely complex factual questions. Yet in both cases, class actions were certified. [25] In summary, I believe a class action provides the preferable way of proceeding in this case, and that the Chambers judge did not err in so ruling. If a class action were not employed, the practical difficulties that would accompany a declaratory action, followed (if the plaintiffs were successful) by many individual actions centering on the restitution claims, would make the actions so unwieldy and expensive as to threaten the plaintiffs' access to the courts. [26] I would dismiss the appeal, with thanks to all counsel for their excellent arguments. "The Honourable Madam Justice Newbury" I AGREE: "The Honourable Mr. Justice Cumming" I AGREE: "The Honourable Mr. Justice Hall"