Jun 4, 2018

Did a New Brunswick Court Just End Barriers to Interprovincial Trade in Liquor? Don’t Count on it.

R v Comeau, 2016 NBPC 3 (CanLII)
On April 29, 2016, the New Brunswick Provincial Court struck down a fine issued to Gerard Comeau for possessing 15 cases of beer and 3 bottles of liquor that he had purchased in Quebec. The Court found that Section 134(b) of the New Brunswick Liquor Control Act, which made it illegal to possess liquor not purchased from the New Brunswick Liquor Commission, was unconstitutional because it did not allow goods of other provinces to be admitted free into New Brunswick contrary to Section 121 of the Constitution Act 1867. Section 121 requires that goods produced, grown or manufactured in any province be admitted free into every other province.


Because the Court found that this New Brunswick measure regulating possession of alcoholic beverages within the province was an unconstitutional non-tariff barrier, the decision arguably supports the position that all similar Provincial measures are also unconstitutional. If so, this decision could be a step on the road to eliminating barriers to interprovincial trade in alcoholic beverages and a range of other products. However, it is far from certain that this decision will result in any change to alcoholic beverage regulations.


First, the New Brunswick decision’s expansive reading of Section 121 contradicts the Supreme Court of Canada’s position that Section 121 only protects the movement of Canadian goods against customs duties and charges applied to goods at the provincial border. The Supreme Court has never held that Section 121 prohibits regulatory measures applied within a province. This interpretation has been applied for the past 95 years, but was not followed by the New Brunswick Court because it heard evidence that the Fathers of Confederation intended that Section 121 be applied broadly to ensure free trade among the provinces. Since it concluded that this evidence was never presented to the Supreme Court, the New Brunswick Court decided not to apply the Supreme Court’s interpretation and suggested that it be reconsidered. For the New Brunswick Court’s decision to be applied more broadly in Canada, other Courts will have to agree that the Supreme Court did not properly consider the issue and that the evidence presented to the New Brunswick Court requires an expansive reading of Section 121. It is possible that other Courts will follow New Brunswick, but these Courts will not easily reject Supreme Court of Canada precedent.


Second, by not following the Supreme Court of Canada’s precedent, the New Brunswick Court did not follow stare decisis; the rule requiring lower courts to follow the decision of higher courts. The New Brunswick Court instead relied on an exception to stare decisis which allows it to deviate from a higher court decision in cases where new evidence is available. The new evidence in this case being the evidence that the New Brunswick Court determined was not available to the Supreme Court. Exceptions to stare decisis can only be applied in exceptional circumstances. The evidence presented to the New Brunswick Court was clearly available when the Supreme Court issued its decisions over the years and could have been presented. Whether this is sufficient to allow the New Brunswick Court to refuse to follow the Supreme Court of Canada is not clear. More importantly, other Courts would have to come to the same conclusion to justify not following the Supreme Court.


Third, the New Brunswick Court recognized that an expansive reading of Section 121 will limit Provincial authority to regulate goods within the Province. The New Brunswick Court also recognized that this decision would unravel decades of regulatory measures applied to a broad range of products, but concluded that the intention of the Fathers of Confederation must take precedent regardless of the consequences. It will likely be difficult to convince other Courts to accept this expansive reading of Section 121 if it undermines Provincial authority to regulate goods within the province. This is particularly so because the New Brunswick Court does not appear to have considered the relationship between Section 121 and other Sections of the Constitution and it does not appear to have properly interpreted “admitted free into”, a key element of Section 121.


The Constitution must be interpreted in a manner that gives effect to all Sections of the Constitution, which means that Section 121 cannot be interpreted so broadly that it undermines the authority granted by other Sections, such as the areas of Provincial jurisdiction set out in Section 92. Section 92(16) of the Constitution gives the Provinces jurisdiction over all matters of a merely local or private nature in the province and is used by the Provinces to establish the provincial liquor monopolies. In discussing this authority in Air Canada v. Ontario, [1997] 2 S.C.R. 581 at 603 the Supreme Court of Canada held that even if the Provinces do not have the authority to prohibit the importation of liquor – an authority held by the Federal Government – a province may limit commerce in alcohol to carrying liquor through its territory by prohibiting storage on its territory or by making the right to store liquor contingent on holding a license. This case seems to be on point with the New Brunswick case where Mr. Comeau was stopped after he crossed the border into New Brunswick and was fined for possessing liquor in the Province that was not purchased from the Liquor Commission. An expansive reading of Section 121 would only limit Provincial authority to issue regulations that restrict trade in Canadian goods, but this would still result in a significant limitation on Provincial authority that would prohibit the Provincial Governments from prohibiting possession of liquor within the Province. It may be difficult to convince other Courts that Section 121 should be interpreted so broadly that it undermines other Provincial powers.


Furthermore, the New Brunswick Court’s interpretation is based on its interpretation of “admitted free into” as used in Section 121 as extending to measures applied within the Province. The ordinary meaning of “admitted free into” seems to limit Section 121 to measures applied at the Provincial border to restrict the admission of Canadian goods into the Province, such as the customs duties and charges that former Colonies could have applied before they joined Canada and became Provinces, and to not extend to regulatory measures applied by the Provinces after the goods crossed the border to enter the flow of commerce within the Province. By adopting this broader reading of “admitted free into”, the New Brunswick Court logically concluded that Section 121 was intended to have a broader application than simply prohibiting internal customs duties and charges. It will likely be difficult to convince other Courts to accept that “admitted free into” is broad enough to include any measure that restricts trade in goods, particularly as this interpretation is contrary to the consistent position taken by the Supreme Court of Canada.


Finally, the New Brunswick Court did not address the Importation of Intoxicating Liquors Act, the Federal legislation which still makes it an offence to carry liquor across provincial borders. Consequently, while the Provincial prohibition on possessing liquor not purchased from the Liquor Board has been struck down, the overarching Federal measure prohibiting the importation of liquor into any province that has not been consigned to the Liquor Boards as the import monopoly remains. The Provincial Government could appeal the New Brunswick Court decision, but even if it decides to let the decision lie, it would only apply to Section 134(b) of the Liquor Control Act. The Province could simply eliminate that provision and rely on the criminal penalties applied for importing liquor under the IILA the result would be the same.


Overall, for the New Brunswick decision to be followed other Courts would have to accept an expansive interpretation of Section 121 and ignore Supreme Court of Canada precedent, the admitted implications of this expansive reading on existing regulatory authority and the proposed change in the relationship between Section 121 and other Constitutional provisions. It will likely be difficult to convince Courts to go this far. Therefore, while it is possible that Canadian Courts make these findings and follow New Brunswick, if I were a betting man, I would bet that this won’t happen.

[First published by Gordon LaFortune of Woods, LaFortune LLP on May 6th, 2016]