Federal Court Decisions

 

 

 

 

Date: 20061214

Docket: T-2277-03 and T-276-04

Citation: 2006 FC 1482

Ottawa, Ontario, December 14, 2006

PRESENT:     The Honourable Mr. Justice Shore

 

 

BETWEEN:

CANADIAN ASSOCIATION OF BROADCASTERS (THE PLAINTIFF ASSOCIATION),  GROUP TVA INC., CTV TELEVISION INC.,

THE SPORTS NETWORK INC., 2953285 INC. (o.b.a. DISCOVERY CHANNEL CANADA), LE RÉSEAU DES SPORTS (RDS) INC., THE COMEDY NETWORK INC., 1163031 ONTARIO INC., (o.b.a. OUT DOOR LIFE NETWORK), CANWEST MEDIAWORKS INC., GLOBAL TELEVISION NETWORK QUEBEC LIMITED PARTNERSHIP, PRIME TV, GENERAL PARTNERSHIP, CHUM LIMITED, CHUM OTTAWA INC., CHUM TELEVISION VANCOUVER INC., and PULSE24 GENERAL PARTNERSHIP (THE CORPORATE PLAINTIFFS)

 

Plaintiffs

and

 

HER MAJESTY THE QUEEN

Defendant

 

AND BETWEEN:

 

 

VIDÉOTRON LTÉE, VIDÉOTRON (RÉGIONAL) LTÉE,

and CF CABLE TV INC.

 

Plaintiffs

and

 

HER MAJESTY THE QUEEN

Defendant

TABLE OF CONTENTS

OVERVIEW... 4

INTRODUCTION.. 5

JUDICIAL PROCEDURES. 7

FACTS. 7

 

(a)        Part I Licence Fees. 8

(b)        Part II Licence Fees. 9

 

Industry Canada and The Broadcasting Spectrum.. 10

 

(a)        Industry Canada. 10

(b)        Use of Broadcasting Spectrum.. 11

 

Background to Part II Fees. 13

Principles to apply when Parliament empowers the Crown to charge Fees by regulation. 17

Fees and Taxes: The Distinction. 21

Compulsory and enforceable by law.. 28

Imposed under the authority of the legislature. 29

Levied by a public body. 30

Intended for a public purpose. 30

Challenge and Protest by the Plaintiffs. 31

 

ISSUES. 32

ANALYSIS. 32

THE REGIME ESTABLISHED BY THE REGULATIONS. 33

 

(a)        Part I Licence Fees. 35

(b)        Part II Licence Fees. 35

 

Part II Licence Fees are a tax. 37

 

(1)            Compulsory and enforceable by law.. 37

(2)            Imposed under the authority of the legislature. 38

(3)            Levied by a public body. 38

(4)            Intended for a public purpose. 39

 

(i)         Used to raise revenue for general purposes. 39

(ii)        Not a charge for service. 40

(iii)       Not used to finance a regulatory scheme. 40

 

(5)            No reasonable nexus. 42

 

Crown’s Justification for Part II Licence Fees Not Valid. 44

(1)            Not a payment for Industry Canada’s costs of managing spectrum.. 50

(2)            Not a payment for the “Privilege” of Using Spectrum.. 51

(3)            Not a Payment for the “Privilege” of Broadcasting for Commercial Benefit 54

(4)            There is no Evidence of Value. 57

(5)            The Economic Rent Argument 59

(6)            The Broadcasting Act Does Not Authorize CRTC to Charge for a “Privilege”. 60

 

The Crown’s Reliance on La Presse is Misplaced. 61

 

(a)        The Reasonable Nexus Requirement is Recognized in La Presse. 62

(b)        Inconsistent Legislative Regime. 63

 

Crown’s Reliance on 620 Connaught is Misplaced. 65

The Intention of 620 Connaught 65

Authority to Charge for a Privilege in Canada. 66

Reference to the Mount Cook case. 66

The Current Legislation -The Broadcasting Act and its Significance. 67

Canada’s Broadcasting Policy. 67

A Single Regulatory Scheme, Under a Single Authority. 69

Presumption of Validity –Declaration of Invalidity as a Condition Precedent 71

Fair & Full Notice Required. 74

Other Bars to Restitutionary Recovery. 74

Possible Significant Change to Applicable Law.. 75

 

CONCLUSION.. 77

JUDGMENT. 78

Obiter 79

 

REASONS FOR JUDGMENT AND JUDGMENT

 

OVERVIEW

[1]               In history, the respect for the separation of powers has been, and is, the very essence of democracy.

 

[2]               Whether a judgment is to endure or not remains in question but the separation of powers does not, if democracy is to endure.

 

[3]               Within the context of a democracy, in a departure from a constitutional provision, without avail from the relevant branch of government that would be responsible for its correction, a constitutional necessity may arise for specific and limited judicial action, not judicially-propelled activism; in such a context, all else would be an excuse for judicial usurpation, bearing its own responsibility and consequences.

 

[4]               It is for a Court to interpret the law, recognizing that it is for the constitution with its supremacy undiminished to delineate how far each jurisdiction extends; thus, the Court recognizes the powers of each branch of government, always, recalling the limits of its own jurisdiction and, thereby, its own responsibility to adhere to the restraints by which it must abide.

 

[5]               Therefore, it is for the appropriate branch of government to be given a reasonable time period to correct the situation in regard to the impugned Part II Regulation, judged ultra vires; and not for the Court to do so on its own.

INTRODUCTION

[6]               One of the most fundamental principles of Canadian law is that taxes must be levied only with the authority of Parliament. This principle was first enunciated in the Bill of Rights 1688 and is now enshrined in s. 53 of the Constitution Act, 1867. The imposition of taxes must be by a Ways and Means resolution. Fees on the other hand can be treated differently.

Levies upon an industry for purposes beneficial to that industry are regarded as not covered by the rules of financial procedure and so do not require authorization by Ways and Means resolution. The same applies to fees reasonably charged for the provision of services... Modern legislation, however, frequently makes provision for the imposition of other types of fees or payment which, although not taxes in a strict sense, have enough of the characteristics of taxation to require to be treated as ‘charges upon the people’ and therefore to be authorized by a Ways and Means resolution moved by a Minister... The following are examples of the circumstances in which a Ways and Means resolution will normally be required:

 

(1)        Where the primary, or a significant, purpose of imposing the payment is to raise revenue, over and above the cost of any service to which the payment is related, and in particular where no defined limit is set to the payment: for example, provision requiring the holders of broadcasting licences to make payments (of unspecified amounts) in respect of those licences.

 

... Footnote CJ (1989-90) 74.

 

(Erskine May’s Treatise on The Law, Privileges, Proceedings and Usage of Parliament, 23rd ed. By William McKay, ed. London: LexisNexis UK, 2004, at pp. 897 & 899)

 

[7]               If the Crown claims that a levy is a fee, and not a tax, it is incumbent on the Crown to lead some evidence in support of its position.  All of the evidence before this Court supports the conclusion that Part II Fees are a tax.  None of the evidence supports the conclusion that they are properly a fee.

 

[8]               These levies are not connected to activities related to the Canadian broadcasting system, but are in fact a “leakage” out of the regulatory scheme into government coffers for general public purposes.  If Part II Licence Fees were not collected, would the Canadian broadcasting regulatory scheme even be affected? No.

 

[9]               If the obligation to pay Part II Licence Fees was eliminated, all of the elements of public policy and the regulatory scheme would still be left in place – Part I Licence Fees, Canadian content requirements, contributions to Canadian Television Fund, independent funds and FACTOR, mandatory expenditures on Canadian programming and community programming, simultaneous substitution, transfer of ownership or control benefits payments, etc. (See e.g. CRTC Performance Report (March 31, 2001) at Exhibit B, Tab 35 (pp 18-20); Exhibit B Tab 15 (para. 10), Tab 15 (para. 11), Tab 20 (paras. 12-15). See also examples cited in Exhibit P-12 (Affidavit of Gerry W. Wall sworn August 31, 2006) as well as Testimony of John Traversy, November 21, 2006)

 

[10]           If the Part II Licence Fees obligation were removed, the migration of over $100 million/year out of the broadcasting system and into general government revenues would end. There is no reasonable nexus between the charges and the regulatory scheme. Part II Licence Fees are not a “regulatory charge”. They are a tax.

 

 

 

 

JUDICIAL PROCEDURES

[11]           The Canadian Association of Broadcasters et al. (CAB Plaintiffs) seek a Declaration that s. 11 of the Broadcasting Licence Fee Regulations, 1997 SOR/97-144 (Regulations), is ultra vires the authority conferred on the Canadian Radio-Television and Telecommunications Commission (CRTC) by s. 11 of the Broadcasting Act, S.C. 1991, c. 11, to establish schedules of “fees”. The position of the CAB Plaintiffs is that the charges imposed by section 11 of the Regulations are, in fact and in law, taxes and not fees.

 

[12]           If this Court finds that the charges are a tax, the Federal Court of Appeal has already ruled, on a preliminary question of law, that section 11 of the Regulations would be ultra vires the authority conferred by section 11 of the Broadcasting Act. (Canadian Association of Broadcasters et al. v. Her Majesty the Queen, 2006 FCA 208, [2006] F.C.J. No. 869 (QL))

 

[13]           Therefore, the threshold question to be decided by this Court, is whether these charges are taxes or fees.

 

[14]           The CAB Plaintiffs seek a further Declaration for the return of monies paid pursuant to section 11 of the Regulations.

 

FACTS

[15]           Paragraph 11(1)(a) of the Broadcasting Act states:

 

[16]           Pursuant to this authority, the CRTC has established the Regulations. Part I of the Regulations (ss. 7 to 10) provides for “Part I Licence Fees” (described below) and Part II of the Regulations (s. 11) provides for Part II Licence Fees. Both Part I and Part II Licence Fees are payable on an annual basis by broadcasting licensees that are not otherwise exempt.

 

            (a)        Part I Licence Fees

[17]           Part I Licence Fees are based on a formula which takes into consideration the estimated costs of the CRTC, as well as the revenues of broadcasters. Part I Licence Fees require broadcasting licensees to contribute to the CRTC’s regulatory costs on a pro-rated basis, which is calculated on the basis of their respective gross revenues less the applicable exemption.

 

[18]           The formula for the calculation of Part I Licence Fees is described in detail in paragraphs 32 to 40 of the Agreed Statement of Facts.

 

(b)        Part II Licence Fees

[19]           Part II Licence Fees are levied in addition to Part I Licence Fees. Broadcasters required to pay Part II Licence Fees must pay the CRTC an annual charge equivalent to 1.365% of the amount by which a broadcasting undertaking’s gross revenues from broadcasting activities exceed the applicable exemption level.

 

[20]           The formula for the calculation of Part II Licence Fees is described in detail in paragraphs 43-51 of the Agreed Statement of Facts.

 

[21]           Part II Licence Fees are entirely deposited into the Consolidated Revenue Fund (CRF), and Part II Licence Fees do not go into a specified purpose account within the CRF.

 

[22]           The following facts are agreed to by the Parties by way of the Agreed Statement of Facts.

 

[23]           The CRTC has collected the following amounts of Part II Licence Fees in each of the following years:

 

                                                               i.            $62.9 million in 1997-98; 

                                                             ii.            $69.7 million in 1998/99;

                                                            iii.            $75.1 million in 1999/2000;

                                                           iv.            $81.6 million in 2000/2001;

                                                             v.            $88 million in 2001/2002;

                                                           vi.            $92.6 million in 2002/2003;

                                                          vii.            $102.5 million in 2003/2004; and

                                                        viii.            $107.2 million in 2004/2005.

 

Industry Canada and The Broadcasting Spectrum

(a)        Industry Canada

[24]           Industry Canada is charged with the task of managing all radio spectrum, including spectrum allocated for broadcasting over the airwaves (Broadcasting Spectrum). Industry Canada issues broadcasting certificates that accompany the broadcasting licences issued by the CRTC where the use of Broadcasting Spectrum is required. No additional fee is charged to a broadcasting licensee by Industry Canada for the Broadcasting Certificate.

 

[25]           The costs incurred by Industry Canada with respect to its management of Broadcasting Spectrum are estimated as being:

                                                               i.            $13.0 million in 1998/1999;

                                                             ii.            $12.0 million in 1999/2000;

                                                            iii.            $12.0 million in 2000/2001;

                                                           iv.            $9.8 million in 2001/2002;

                                                             v.            $10.0 million in 2002/2003;

                                                           vi.            $10.3 million in 2003/2004; and

                                                          vii.            $10 million in 2004/2005.

 

[26]           Industry Canada's costs of managing Broadcasting Spectrum do not vary according to the gross revenues earned by broadcast licence holders.

 

(b)        Use of Broadcasting Spectrum

[27]           Not all broadcasting activities licensed by the CRTC use Broadcasting Spectrum. Only licensees, who’s broadcasting licence may be identified by reference to a specific call sign, for example “CJOH-TV”, utilize a transmitter operating in Broadcasting Spectrum as the primary means for signal distribution.

 

[28]           Traditional radio and television broadcasting undertakings transmit unencrypted digital or analog signals that may be received by the general public via consumer-level receiving devices, utilizing Broadcasting Spectrum.

 

[29]           Pay and Specialty (P&S) undertakings are similar to conventional radio and television broadcasting stations except that they mostly do not distribute their programs freely to the general public, nor does the P&S licensee itself operate transmitters that distribute programs to consumer-level receiving devices utilizing Broadcasting Spectrum. Instead, these services route their programs to distribution undertakings, such as conventional cable or Direct-to-Home (DTH) satellite systems, which add them to the program line-ups they offer to paying subscribers.

[30]           The P&S undertaking’s programming undertaking licence is issued by the CRTC but no corresponding Broadcasting Certificate from Industry Canada is required.

 

[31]           In sending their programs to the distribution undertakings, P&S operators typically employ optical fibre cables, dedicated coaxial cables, fixed satellites or microwave links. Sending programs via fibre or coaxial cables does not utilize Broadcasting Spectrum (or any form of electromagnetic spectrum). Where microwave or fixed satellite links are employed for program routing, the spectrum used is not Broadcasting Spectrum and separate licence fees are paid to Industry Canada by the licensees of those systems.

 

[32]           Conventional cable undertakings provide multiple programming services to their subscribers for a fee. These undertakings distribute programs via a combination of optical fibre and coaxial cable; consequently, they do not use any Broadcasting Spectrum in regard to that portion of their distribution that is connected directly to subscribers. 

 

[33]           DTH undertakings provide multiple programming services to their subscribers for a fee. DTH undertakings distribute programs via satellite signals provided by a satellite operator, such as Telesat Canada. Such systems use “fixed-satellite” or “broadcasting-satellite” electromagnetic spectrum that is licensed to the satellite operator, not to the DTH licensees, not Broadcasting Spectrum.

 

[34]           Multi-Point Distribution System (MDS) undertakings provide multiple programming services to their subscribers for a fee. By transmitting encrypted digital signals containing up to 100 individual television and radio programming channels, which are received by authorized subscribers using proprietary receiving devices generally provided by the MDS licensees. 

 

[35]           MDS transmissions utilize Broadcasting Spectrum (electromagnetic spectrum that has been allocated for terrestrial broadcasting services by Industry Canada.) The distribution undertaking licence is issued by the CRTC. A corresponding Broadcasting Certificate, specifying the licensee’s authorized technical operating parameters, is issued by Industry Canada. No fees are charged for these Certificates. 

 

[36]           Network undertakings are operations where control over all or any of the programs or program schedules of one or more distribution undertaking or programming undertakings is delegated to other undertakings or persons, called “affiliates”.

 

[37]           Most network programs are delivered via fixed satellite or microwave links; however optical fibre cables and dedicated coaxial cables may also be employed. The latter two delivery means do not employ electromagnetic spectrum. Where microwave links or fixed satellite links, which do not utilize Broadcasting Spectrum, are employed for program delivery, spectrum licence fees are paid to Industry Canada by the licensees of those technical systems.

 

Background to Part II Fees

[38]           The Regulations establishing the Part I / Part II Licence Fee regime came into effect on April 1, 1997.

 

[39]           On November 22, 1996, the CRTC issued Public Notice CRTC 1996-149; on November 29, 1996, the CRTC issued Public Notice CRTC 1996-149-1; and on March 20, 1997 the CRTC issued Public Notice CRTC 1997-32.

 

[40]           Public Notice 1996-149 stated that effective 1 April 1996, the Treasury Board had granted the Commission vote-netting authority for the broadcasting activity, whereby Parliament authorized the CRTC to apply revenues towards costs directly incurred for specific activities. Under the revised fee structure, it was proposed that each licensee would pay to the Commission a Part I Licence Fee payable 30 days following the date of the invoice, and a Part II Licence Fee payable on or before November 30th annually.

 

[41]           Public Notice 1996-149 stated:

 

 

 

 

 

[42]           Public Notice 1997-32, which was issued with the draft regulations, stated:

 

 

[43]           After the initial proposal of the new fee structure in Public Notice CRTC 1996-149, the CRTC had received comments recommending that a cap be established to ensure that the sum of the Part I and Part II fees be no greater than the then-current rate of 1.8% of all revenues that exceed the exemption amount. The CRTC disregarded these comments.

 

[44]           In disregarding the comments raised at the time regarding a cap on the sum of the Part I and Part II fees, the CRTC specifically recognized that the Treasury Board had provided the CRTC with limited authority for exceeding authorized funding levels.

 

[45]           The CRTC has greatly exceeded this limited authority by collecting Part II fees which are greatly in excess of the costs which are themselves covered by the Part I fees. The CRTC has collected $25.8 million in Part I fees for 2004/2005 and an additional $107.2 million in Part II fees for the same 2004/2005 period. The Part II fees for 2004/2005 are 415% over and above of the Part I fees collected by the CRTC under the Treasury Board’s limited authority to exceed cost recovery. (Paragraphs 38 and 52 of Agreed Statement of Facts, tab 5, Trial Record)

 

[46]           The genuine purpose of the Part II fee is a revenue raising:

The importance of maintaining legal certainty and avoiding fiscal chaos for government coffers clearly requires “Notice” before a fund raising scheme such as the one at bar may be put in jeopardy.

 

(Defendant’s Table of Principle (sic) Cases & Authorities, November 10, 2006, summary for Air Canada v. British Columbia, [1989] 1 S.C.R. 1161, page 10, item ii)

 

Principles to apply when Parliament empowers the Crown to charge Fees by regulation

[47]           At trial, during the cross-examination of Mr. Dustin Chodorowicz on the Nordicity Group Ltd. report, Plaintiffs produced Exhibit P-11. The document comprises three documents originally provided to Plaintiffs by way of Defendant’s June 23, 2004 Affidavit of Documents filed in T-276-04.

 

[48]           The document, Exhibit P-11, was listed in Schedule I to the Affidavit of Documents of Mr. Ian Ironside who stated that:

a)      he had been authorized to make the affidavit on behalf of Defendant;

b)      he had made a diligent search of Defendant’s records and had made appropriate inquiries of others to inform himself in order to make the affidavit;

c)      the affidavit disclosed, to the full extent of his knowledge, information and belief, all of the documents relevant to any matter in issue in the action and that were, at that time, in Defendant’s possession, power or control and that were but are no longer in Defendant’s possession, power or control;

d)      he had listed and described in Schedule 1 all of the relevant documents, or bundles of relevant documents, that were, at that time, in Defendant’s possession, power or control and for which no privilege was claimed.

 

[49]           The last document listed in Schedule 1 to that affidavit of documents was described as “En liasse, note of Sept 29, 1993 to Anita Biguzs and documents from the 1998 Third Commonwealth Conference on delegated Legislation (appendix 6 entitled “Report of the Regulations Review Committee: Inquiry into the constitutional principles to apply when Parliament empowers the Crown to charge fees by regulation” and appendix 7 entitled “Fees and taxes: The distinction and its implications”)”

 

[50]           This document was presented to Mr. Chodorowicz on cross-examination on November 16, 2006 and produced as Exhibit P-11. Appendix 6 of the document was a New Zealand House of Representatives, 1989 document entitled “Report of the Regulations Review Committee: Inquiry into the constitutional principles to apply when Parliament empowers the Crown to charge fees by regulation”.

8.3 We think that the fee fixing in these circumstances can quickly become nothing more than a revenue gathering exercise which may bear little or no resemblance at all to the value of the service actually provided. The temptation to move to greater than cost recovery might well be hard to resist, especially when a cross subsidy situation presents itself. Some safeguards seem desirable.

 

8.4 We accept that there will be occasions when a substantial fee is entirely proper. Indeed, that fee could be far greater than cost recovery. If a privilege has been granted to one individual or group to the exclusion of others, then the issue is more of a commercial contractual matter. This was the rationale of the decision of the Court in the Mt Cook National Park Board v. Mt Cook Motels Ltd (1972) NZLR 481. But where there is greater than cost recovery there is, in our opinion, a greater obligation to inform the paying public.

 

...

 

8.6 We do not find it satisfactory that the public are generally unaware that they are paying greater than cost recovery.  We think that where this happens the public has a right to know and further to know why it is considered necessary.

 

 

[51]           The New Zealand Committee recommended that an explanatory note should accompany legislation to state whether the expected revenue will or will not exceed cost recovery.

9.4 We favour a certification procedure for both primary and subordinate legislation.  When any legislative instrument actually quantifies a fee then it should be accompanied by an explanatory note which should state whether the expected revenue for the following 12 month period will, or will not, exceed cost recovery.

 

9.5 In the rather unusual event that a bill introduced to the House itself quantifies fees, then the explanatory note to the Bill should contain this statement. When, as is more common, a regulation or Order in Council is promulgated which quantifies fees, then there should be a similar explanatory note which would provide the same information.

 

9.6 We have in mind that such a certificate would read as follows:

 

“Certified that the estimated revenue from the fees payable pursuant to clause (--) in the next twelve monthly period (will/will not) exceed cost recovery calculated using the relevant formula set out in the “Guidelines on Costing and Charging for Public Sector Goods and Services” issued by the Audit Office.”

 

9.7 In the event that the explanatory note indicates that the revenue will exceed cost recovery, then we believe that the certificate should then go on to provide:

 

a)      an explanation why that is thought necessary in that particular case and,

 

b)      an estimate of the excess over cost expressed as a percentage.

 

9.8 This certification procedure should be followed whether the fee is being imposed for the first time or an existing fee is being reviewed.

 

 

[52]           The Treasury Board of Canada had and has similar expectations. (Treasury Board of Canada’s February 1, 1989 Guide to the Costing of Outputs in the Government of Canada, Documents the Parties Agree Are Authentic and Relevant and May Be Entered Into Evidence Without Further Proof, volume 1, tab 8; Treasury Board of Canada’s August 12, 2003 External Charging Policy, Documents the Parties Agree Are Authentic and Relevant and May Be Entered Into Evidence Without Further Proof, volume 1, tab 18)

 

[53]           In similar fashion, the CRTC in Public Notice CRTC 1996-149 and Public Notice CRTC 1997-32 attempts to quantify the excess and to reassure those subject to the charges that the excess is limited in light of the limited grant of authority obtained from the Treasury Board. No explanation is provided in Public Notice CRTC 1996-149 or in Public Notice CRTC 1997-32 for the 415% fund raising scheme.

 

[54]           In addition to the certificate mentioned above, the New Zealand Committee recommended that Parliament retain control over the power to impose fees, effectively endorsing the ‘no taxation without representation’. The Committee recommended:

11.1 that the House reaffirm its right to require the Crown to seek the prior authority of Parliament to extract from the public any money for the purposes of the Crown where the extraction is compulsory, for public purposes, and is enforceable by law;

 

 

[55]           This echoes the September 9, 2005 Order of Justice James Hugessen, affirmed by the Federal Court of Appeal. (Canadian Association of Broadcasters et al. v. Her Majesty the Queen, 2005 FC 1566; affirmed on appeal Canadian Association of Broadcasters et al. v. Her Majesty the Queen, 2006 FCA 208, [2006] F.C.J. No. 869 (QL))

 

[56]           In so doing, the New Zealand Committee echoed the four criteria set out in Lawson v. Interior Tree Fruit and Vegetable Committee of Direction, [1931] S.C.R. 357. A fifth criterion – the need for a reasonable nexus between the quantum charged and the cost of the service provided - was recognized by the Supreme Court of Canada in Eurig Estate (Re), [1998] 2 S.C.R. 565. As such, the comments of the Committee should be regarded as relevant and authoritative in Canada. (see also Westbank First Nation v. British Columbia Hydro and Power Authority, [1999] 3 S.C.R. 134 at para. 22)

 

Fees and Taxes: The Distinction

[57]           The document, Exhibit P-11, also contained a November 1989 report prepared on behalf of the Canadian Standing Joint Committee for the Scrutiny of Regulations.

 

[58]           The document also echoes the criteria endorsed in Eurig, above and Lawson, above when introducing the topic of delegated authority to impose taxes.

It is a frequently stated general principle that there is a presumption against the conferring by Parliament of a power to impose taxation. In other word, if Parliament wishes to give the Executive or some administrative agency the power to raise a tax by means of delegated legislation, it must do so in specific and unequivocal language...

 

(Exhibit P-11, appendix 7 entitled “Fees and taxes: The distinction and its implications” page 9)

 

[59]           The Canadian Standing Joint Committee for the Scrutiny of Regulations discussed the distinction between fees and taxes. Those comments are worth excerpting in some detail:

Those charged with the parliamentary scrutiny or delegated legislation serve as important guardians of the exclusive power of the legislature to raise money through taxation. Statutes providing for licensing, the issuing of permits or the provision of government services typically authorize the fixing of fees by means of delegated legislation. Indeed, the granting of a power to license may be seen to include the power to exact a reasonable fee to defray the administrative costs entailed in issuing the permit or licence. It may be however, that this power is exercised in a manner such that the resulting fees are more properly characterized as being the nature of a tax. Such an exercise of power must then be seen to be ultra vires.

 

The law, in theory at least, clearly recognizes a distinction between “fees” and “taxes”. Generally, a tax is said to be a compulsory payment imposed to raise revenue for a public purpose. By way of contrast, a fee may be defined as a charge for the services of public officers or for the use of a privilege or exercise of a right under government control. Thus, the distinction between a “fee” and a “tax” would appear to relate to the purpose underlying the imposition of a particular charge. Where a charge is merely intended to cover the direct cost of issuing a licence or perhaps administering the licensing scheme it will constitute a fee. Where, however, the intent is primarily to produce revenue in excess of such costs, the charge will be regarded as a tax.

 

 

(Exhibit P-11, appendix 7 entitled “Fees and taxes: The distinction and its implications” page 9)

 

[60]           The latter excerpt footnotes La Compagnie de Publication La Presse Limitée v. Attorney General of Canada, [1964] Ex.C.R. 627, 63 D.T.C. 1335 (Ex.C.), 66 D.T.C. 5492 (S.C.C.), at pp. 635-637, as an illustration of fees limited to cost recovery. The facts adduced in La Presse at trial in the Exchequer Court specifically demonstrated that the fees recovered were commensurate with the rising costs of regulating broadcasting at that time and therefore had a reasonable nexus.

 

[61]           As admitted by Defendant and as appears from Public Notice CRTC 1996-149 and Public Notice CRTC 1997-32, the Part I Licence Fees perform the cost-recovery function. To that end, the application of La Presse to the present case is thereby exhausted and does not address or excuse the Part II fees which Defendant now seeks to retain and to keep collecting.

 

[62]           The Canadian Standing Joint Committee for the Scrutiny of Regulations continued:

The mere fact that the fee demanded produces excess revenue is not sufficient in and of itself to support a conclusion that a given charge constitutes a tax. As noted by Lord Atkin in Shannon v. Lower Mainland Dairy Products Board “(I)t cannot... be an objection to a licence fee that it is directed both to the regulation of trade and to the provision of revenue”. It would therefore appear that a fee may even be intended to raise revenue, provided that this is not the primary intent.

 

This is not to say that the amount imposed is not an important factor in determining whether a particular charge is a fee or a tax for revenue purposes. Obviously, where the amounts collected do not exceed the costs of administration it will be extremely difficult to argue that the purpose of the charge was to raise a net revenue. On the other hand, the greater the net excess, the stronger the inference that the charge was intended as a revenue producing mechanism.

 

...

 

Determining the purpose behind the fixing of the amount of a fee may be extremely difficult, and will often be a matter of inference. Explanatory materials and other extrinsic aids must be relied on by scrutiny committees when reviewing fees fixed by delegated legislation. This of course assumes both that explanatory materials are provided and that they have been adequately prepared. In Canada, the Special Committee on Statutory instruments recommended in its Third Report that where the power to charge fees fixed by regulation is conferred, the purpose for which the fees are charged should be clearly expressed. The Royal Commission of Inquiry into Civil Rights in Ontario also made such a recommendation. This would clearly aid in assessing the validity of a particular fee.

 

It was stated above that the charge levied on an ongoing basis may amount to a tax on the carrying on of a business. This introduces a third element into the equation. Keeping in mind that a licence charge may be either a fee or a tax, a distinction has also been made in law between a licence charge and a business tax. It is generally stated that a licence charge is a condition precedent, while a business tax is a condition subsequent. In other words, a licence charge may be required before a certain business or occupation can be carried on. A business tax is a charge on the occupation or business in which the license authorizes one to engage.

 

...

 

The distinction between a condition precedent and a condition subsequent is extremely useful. Where the amount of the charge cannot be determined at the time of the issuing of a licence, but rather is dependent upon future circumstances, the charge in question may properly be characterized as a tax upon the activity to be carried out under the authority of the licence.

 

...

 

Fees greatly in excess of what can be regarded as a small token amount, or which have no defined limit, such as where only a formula for their calculation is provided, will require a Ways and Means resolution. Presumably the rationale here is that such charges may well result in net revenues and amount in taxation...

 

...

 

Modern examples of the Canadian Parliament dealing with these issues are extremely rare. Given that most fees, levies and other charges are today fixed by means of delegated legislation, this is hardly surprising. What is before Parliament will simply be a bill providing the enabling authority for the making of regulations establishing, or for the establishment of, fees. There may or may not be an indication as to whether fees are to be calculated on a cost recovery basis.  In such circumstances it can only be concluded that, as noted by one Speaker in the British Parliament, “presumably the word “fees” means a comparatively small fee. If it were a large fee imposed, it would have to have some other name.”

 

A great deal of uncertainty surrounds the principles to be applied in distinguishing a fee from a tax. Much of the blame for this can be placed on the courts’ reluctance to invalidate fees, even where they are clearly intended to be revenue-producing. While admittedly it will often be difficult for those challenging a fee to adduce direct evidence to this effect, it is difficult to conceive of how a court could, for example, escape the clear implication of the imposition of a fee in an amount which that court itself described as “astounding”.

 

(Exhibit P-11, en liasse, appendix 7 entitled “Fees and taxes: The distinction and its implications” pp. 9, 10, 11, 12, 14)

 

[63]           The Canadian Standing Joint Committee for the Scrutiny of Regulations’ comments are contained in a document found in Defendant’s possession at least as of September 29, 1993, before the CRTC’s proposal of the new fees structure in Public Notice CRTC 1996-149.

 

[64]           The Canadian Standing Joint Committee for the Scrutiny of Regulations’ comments were made by those Parliamentary members experienced in and charged with reviewing delegated legislation and arguably reflect legitimate expectations of those within Parliament as to:

a)      the meaning and use of the word “fee” in legislation;

 

b)      the explanatory notes accompanying the CRTC’s introduction of the proposed and actual Regulations in, respectively, Public Notice CRTC 1996-149 and Public Notice CRTC 1997-32;

 

c)      the effect of those fees once collected.

 

[65]           The comments and expectations are all the more valid given the acknowledgement that the Treasury Board had given the CRTC only limited authority for vote-netting.

 

[66]           The Canadian Standing Joint Committee for the Scrutiny of Regulations’ comments conclude with the following recommendations:

What then are the principles which ought to be applied when seeking to characterize a charge as either a fee or a tax? It is submitted that the following guidelines are appropriate:

 

1. The determining factor in distinguishing between a fee and a tax is the purpose underlying the particular charge in question. As traditionally stated, fees are charged to cover the administrative costs of providing a service, issuing a permit or licence or conferring some other privilege, while a tax is imposed for a broader, more “public purpose”.

 

...

 

2. While it is acceptable to merely provide a formula for the calculation of fees, the application of such a formula should directly relate to the varying cost of providing a service, issuing a permit or licence, or conferring a privilege. Often charges said to be fees vary greatly from individual to individual, while administrative costs are relatively constant. For example, charges may be calculated on the basis of a corporate applicant’s net assets, or in relation to the value of property in respect of which a service is to be performed. Such charges should always be viewed as taxes, since the result is that one party will be subsidizing a service provided to another. Unfortunately, this point has largely been ignored by the Canadian courts. In one recent Australian case, however, it was stated by the High Court that one of the indicia to be looked to in seeking to categorize a charge as either a fee or a tax was whether the amount of the charge had a “discernable relationship with the value of what is acquired.” It is submitted that this is the preferable view.

 

3. The notion that a licence is a condition precedent while the imposition of a business tax is a condition subsequent is extremely useful, and may be applied in situations involving the regulation of an activity. Where the amount of the charge is not determined at the time of the issuing of a licence but rather depends on some future event involving the licensed activity, for instance the quantity of a product produced or marketed, such a levy should always be viewed as being in the nature of taxation. Moreover, it is submitted that such situation should be viewed as special cases in which intent, and by extension the amount of the charge and the existence of net revenues, is wholly irrelevant.

 

4. It has been suggested on occasion that a charge may be severed into a fee component and a tax component.  In that such an approach would have the effect of empowering the courts to fix fees in place of the authority empowered by statute to do so, it appears preferable to take the view that where a charge is found to constitute a tax, the entire charge must be seen to be ultra vires.

 

...

 

5. adherence to these principles would provide the best guarantee of parliamentary control over the connection of revenues. The trend, however, is likely to continue in the opposite direction, as governments find it increasingly attractive to implement user-pay, cost-recovery schemes as an alternative to adding to the general tax burden imposed upon a citizenry that already perceives itself as being fiscally beleaguered by the cost of government...

 

At the very least, delegated legislation prescribing fees should be accompanied by explanatory materials detailing the basis on which the amount of the fee, or the formula for its calculation, has been determined and whether fees are based on the principle of cost recovery. If a net revenue is anticipated, the expected amount thereof should be indicated. In all cases, the total anticipated amount of the fees to be collected should also be given. In Canada, this information should be contained in the Regulatory Impact Analysis Statement which is published with each regulation in the Canada Gazette. The purpose of which fees may be charged should be clearly expressed in the enabling legislation. Finally, enabling legislation should neither be drafted nor interpreted so as to authorize the imposition or calculation of fees on an “administrative” basis.

 

(Exhibit P-11, en liasse, appendix 7 entitled “Fees and taxes: The distinction and its implications” pp. 9, 10, 11, 12, 14)

 

[67]           The Part II Licence Fees do not respect any of the Canadian Standing Joint Committee for the Scrutiny of Regulations’ recommendations outlined above. Those recommendations dovetail the criteria set out in Eurig, above. These recommendations were in the possession of the CRTC and were joined with the note to Ms. Anita Biguzs dated September 29, 1993 with the mention that “You might find the attached of interest. It’s going to be interesting tackling this issue”.

 

[68]           At trial, Plaintiffs also presented Defendant’s witness Mr. Chodorowicz with a copy of the November 19, 1947 document discussing the introduction of the fees. The document had been omitted from Defendant’s expert’s report but admitted at trial as it was contemporaneous to the other 1947-1948 documents footnoted at footnotes 6, 7 and 8 of Nordicity Group Ltd. June 30, 1996 report. (February 26, 1947 internal memo of A.D. Dunton, C.B.C. chairman, September 28, 1948 letter of TJ Allard, October 14, 1998 internal memo of H. Palmer, October 21, 1948 letter of C.P. Edwards, November 5, 1948 reply of A.D. Dunton - Nordicity Group Ltd. June 30, 1996 report, paras. 10-11, p. 3; Cross-examination of Mr. Dustin Chodorowicz, page 856 Trial transcript)

 

[69]           As noted at trial, Exhibit P-10 acknowledges the concern that the proposed fee structure would be “an invasion of the income tax field”.  Defendant’s expert witness had knowledge of and possession of this letter prior to writing his report but excluded it as being irrelevant to the issues. (Exhibit P-10, November 19, 1947, para. 2, cross-examination of Mr. Dustin Chodorowicz, p. 856 Trial transcript)

 

[70]           Based on all the above, the Part II Licence Fees do qualify as taxes in fact and in law. As demonstrated on the evidence admitted by Defendant prior to trial and on the evidence adduced at trial in the case at bar, Part II Licence Fees exhibit the five hallmarks of a tax, as more fully set out hereinafter.

 

Compulsory and enforceable by law

[71]           A fee or a charge will be deemed to be compulsory and therefore enforceable by law each time the payer is under the practical compulsion to pay in order to comply with his or her legal obligations. (Eurig, above at para. 17)

 

[72]           At trial, Defendant’s expert, Mr. Ronald Pittman’s attention was brought to Décision de radiodiffusion CRTC 2003-550, Vidéotron ltée’s licence for Sherbrooke, Québec given that it was a Vidéotron ltée licence for a UID within the time period he analysed for his report. The licence, like the others, links the validity of the licence with the payment of the annual licence fees.

This licence shall remain in force from 1 December 2003 until 31 August 2010 on payment of the prescribed annual licence fees.

 

(Décision de radiodiffusion CRTC 2003-550, Vidéotron ltée licence for Sherbrooke, Québec, Agreed Statement of Facts Volume of the Joint Book of Documents, volume III, tab 12)

 

[73]           With respect to this notion of “practical compulsion”, the Nova Scotia Supreme Court expressed itself in the following terms in the matter of Pleau v. Nova Scotia (Supreme Court, Prothonotary), [1998] N.S.J. No. 526:

[22]      In respect to the criteria, and notwithstanding the respondent's assertion there is no compulsion to access the court, it is clear there is the "practical compulsion" referred to by Justice Majors. Citizens wronged, or believing themselves to have been wronged, or denied, or believing themselves to have been denied rights to which they are entitled, and whether the alleged transgressor is another citizen or the state itself, apart from self help remedies, will see little alternative than to seek to have the judicial component of our Constitution affirm their rights. Self help remedies are unacceptable, and therefore there is the practical compulsion to seek redress in the courts.

 

[74]           In Lawson, above, levies imposed under the Produce Marketing Act of British Columbia (1926-27), c. 54, for the purpose of controlling and regulating the marketing of all trees, fruits, and vegetables grown in the portion of the province contained in the Act were considered to be enforceable by law for the following reasons:

...Under s. 13 they can be sued for, and a certificate under the hand of the chairman of the Committee is prima facie evidence that the amount stated is due; and the failure of a shipper to comply with an order to pay such a levy would appear to be an offence under the Act by s. 15...

 

(Lawson, above; Westbank, above at para. 35)

 

[75]           Applying similar reasoning in the present instance, it is clear that Part II Licence Fees are compulsory and enforceable by law, insofar as section 11(4) of the Broadcasting Act provides that:

 

Imposed under the authority of the legislature

[76]           In the case at bar, Part II Licence Fees are imposed under the authority of the legislature, pursuant to Section 11 of the Broadcasting Act and Section 11 of the Regulations.

Levied by a public body

[77]           The criterion that the fee be levied by a public body created by statute is also satisfied in the present instance as Part II Licence Fees are levied by the CRTC.

 

Intended for a public purpose

[78]           The importance of identifying the “pith and substance” of the impugned legislation was affirmed by the Supreme Court of Canada in Westbank, above:

[30]      ...Although in today's regulatory environment, many charges will have elements of taxation and elements of regulation, the central task for the court is to determine whether the levy's primary purpose is, in pith and substance: (1) to tax, i.e., to raise revenue for general purposes; (2) to finance or constitute a regulatory scheme, i.e., to be a regulatory charge or to be ancillary or adhesive to a regulatory scheme; or (3) to charge for services directly rendered, i.e., to be a user fee.

 

[79]           These criteria of the Supreme Court of Canada give rise to the following analysis with a view to ascertaining the true legislative purpose behind Part II Licence Fees.

 

[80]           The Crown has admitted that:

a)      the stated intent for the Part I/Part II Licence Fee structure as stated in Public Notices CRTC 1996-149 and 1997-32 was to create a system that would result in approximately the same amount of fees payable on an industry-wide basis as had been collected by the Previous Fee, over a period of three years;

b)      when Part II Licence were introduced, the CRTC had not conducted any studies to determine what the market value of the privilege of holding a broadcasting licence might be;

c)      when Part II Licence Fees were introduced, the CRTC had not conducted any studies to determine what the market value of the privilege of using Broadcasting Spectrum might be.

d)      Neither the CRTC nor any other department or agency of the Defendant conducted studies which would establish a definitive method to calculate the value to be attributed to either of these privileges.

(Trial Record, Tabs 3 and 4)

 

[81]           The CRTC 1997-98 Estimates (Expenditure Plan), which is a report to Parliament to indicate how the resources voted by Parliament have or will be spent, did not indicate to Parliament that any portion of the new Part II Licence Fees was to be allocated to the privilege of holding a Broadcasting Licence. (Documents The Parties Agree Are Authentic and Relevant and May Be Entered Into Evidence Without Further Proof, Volume 1, Tab 26)

 

Challenge and Protest by the Plaintiffs

[82]           By a submission to the Treasury Board under cover of a letter dated January 24, 2002, the CAB protested the payment of the Part II Licence Fees on behalf of all of its members.

 

[83]           The Corporate Plaintiffs paid Part II Licence Fees under protest for the years 2001 to 2005, which protests were stated in letters sent by the respective Corporate Plaintiffs to the CRTC.

 

[84]           Many other members of the CAB who were required to pay Part II Licence Fees paid them under protest for the years 2001 to 2005, which protests were stated in letters sent by those members of the CAB to the CRTC. (Agreed Statement of Facts, paras. 114-118, Trial Record, Tab 5)

 

ISSUES

[85]           (1) The threshold question to be decided by this Court, is whether these charges are taxes or fees?

(2) If they are taxes, the CAB Plaintiffs seek a Declaration for the return of monies paid pursuant to s.11 of the Regulations. Are they entitled to these monies?

 

ANALYSIS

(1) The threshold question to be decided by this Court, is whether these charges are taxes or fees?

 

[86]           The Regulations establishing the Part I / Part II Licence Fee regime came into effect on April 1, 1997. Prior to the implementation of the Part I/II Licence Fee Structure, the CRTC charged broadcasters who were not otherwise exempt one fee (Old Fee Regime). The charge under the Old Fee Regime was generally assessed as a $25 basic licence fee plus 1.8% of the broadcasting-related revenue above the exemption limit. (Trial Record, Tabs 3 & 4)

 

[87]           On November 22, 1996, the CRTC issued Public Notice CRTC 1996-149; on November 29, 1996, the CRTC issued Public Notice CRTC 1996-149¬-1; and on March 20, 1997 the CRTC issued Public Notice CRTC 1997-32. (Agreed Statement of Facts, Trial Record, Tab 5, para. 63; Ex. A, Agreed Statement of Facts Volume of JBD, Volume III, Tab 13-15; Ex. C, Discovery of James Stefanik, Tab K)

 

[88]           The publicly stated intent for the Part I/Part II Licence Fee structure was to create a system that would result in approximately the same amount of fees payable on an industry-wide basis as had been collected by the existing fee structure, over a period of three years. (Exhibit A, Volume III, Tab 13; Exhibit C, Tab K (p. 4))

 

THE REGIME ESTABLISHED BY THE REGULATIONS

[89]           Section 11 of the Broadcasting Act states:

 

(a)        Part I Licence Fees

[90]           Part I Licence Fees are based on a formula which takes into consideration the estimated costs of the CRTC, as well as the revenues of broadcasters. Part I Licence Fees require broadcasting licensees to contribute to the CRTC’s regulatory costs on a pro-rated basis, which is calculated on the basis of their respective gross revenues less the applicable exemption. The purpose of Part I Licence Fees is to recover the regulatory and administrative costs of the CRTC with respect to broadcasting, and the Crown has admitted that they do in fact fully recover such costs. (Exhibit C, Tab 2, Evidence of Diane Roy, November 21, 2006)

 

(b)        Part II Licence Fees

[91]           Part II Licence Fees are also imposed pursuant to the Licence Fee Regulations, and are collected by the CRTC.

 

[92]           Part II Licence Fees are levied in addition to Part I Licence Fees, are not intended to cover the CRTC’s costs of regulating the broadcasting industry, and are not calculated on the basis of what it costs to operate the CRTC.

 

[93]           Broadcasters required to pay Part II Licence Fees must pay the CRTC an annual charge equivalent to 1.365% of the amount by which a broadcasting undertaking’s gross revenues from broadcasting activities exceed the applicable exemption level.

 

[94]           Part II Licence Fees are entirely deposited into the Consolidated Revenue Fund (CRF). They do not go into a specified purpose account within the CRF and are not earmarked for the CRTC, Industry Canada, or any particular project. Revenues in the CRF are used for the general purposes of the Government of Canada. (Exhibit C, Tab 3)

 

[95]           As was noted by the Plaintiffs’ expert Gerry Wall, Part II Licence Fees effectively are a “leakage” from the broadcasting scheme in Canada.  The Crown’s witness John Traversy admitted that the broadcaster that pays Part II Licence Fees cannot take the money and contribute it towards Canadian content, Canadian programming, development of Canadian talent or any similar activities. (Evidence of Gerry Wall, November 24, 2006 at pp. 1074-1075; Evidence of John Traversy, November 21, 2006 at pp. 525-26)

 

[96]           The CRTC has collected Part II Licence Fees ranging from $62.9 million in 1997-98 to $107.2 million in 2004-05. (Agreed Statement of Facts, para. 53)

 

[97]           The Corporate Plaintiffs pay Part II Licence Fees. The amounts of Part II Licence Fees paid by a particular Corporate Plaintiff in a given year are reflected in the Licence Fee Returns filed as part of Exhibit C-1. Some, but not all, of the members of the CAB, paid Part II Licence Fees, depending on their particular circumstances, in a given year. (            Agreed Statement of Facts, paras. 26-29 & 54-56; Exhibit C-1, Confidential Annex to the Joint Book of Documents, Volumes I & II)

 

Part II Licence Fees are a tax

[98]           The framework that the Supreme Court of Canada has said should be used to identify whether a levy is a tax is whether it is: 1) compulsory and enforceable by law; 2) imposed under the authority of the legislature; 3) levied by a public body; 4) intended for a public purpose, and has 5) no reasonable nexus between the quantum charged and the cost of the service provided or the regulatory scheme it is intended to support. (Lawson, above; Eurig, above at paras. 15 & 21; Westbank, above at para. 22)

 

[99]           A consideration of each of the Lawson/Eurig/Westbank factors leads to the inevitable conclusion that the Part II Licence Fee is a tax.

 

            (1)        Compulsory and enforceable by law

[100]       This requirement may be fulfilled if there is a legal or practical compulsion or necessity to pay the charge to comply with one’s legal obligations. A charge may be compulsory and enforceable by law even where it is only paid by persons who voluntarily engage in the regulated activity or business. Charges may be enforceable by law if to remain in a business, a company is compelled to pay an annual levy if the failure to comply with the levy can result in all services provided by the government entity being cancelled, if the charge can form a lien on property, and/or if the charge can be recovered by distress or by court action. (Eurig, above at para. 17; Pleau, above at para. 22; Air Canada, above (Justice Bertha Wilson’s dissent); Westbank, above at para. 35; Urban Outdoor Trans Ad v. Scarborough (City) (2001), 196 D.L.R. (4^th) 304 at para. 30 (Ont. C.A.))

 

[101]       To lawfully broadcast, a broadcaster who is not exempt must obtain a licence from the CRTC. One of the requirements is to pay the CRTC fees, including Part II Licence Fees. Section 11(4) of the Broadcasting Act, provides that: “Fees payable by a licensee under this section and any interest thereon constitute a debt due to Her Majesty in right of Canada and may be recovered as such in any court of competent jurisdiction.” If a Broadcasting Undertaking has revenues in excess of the exemption levels and owes Part II Licence Fees, the CRTC takes steps to ensure the payment of fees that are due and payable. (Agreed Statement of Facts, paras. 49 & 51; Evidence of Diane Roy, November 21, 2006)

 

(2)        Imposed under the authority of the legislature

[102]       Charges are imposed under the authority of the legislature if they are imposed pursuant to a statutory power. Part II Licence Fees are imposed and collected in accordance with the Regulations purportedly enacted pursuant to s.11 of the Broadcasting Act. (Westbank, above at para. 36; R. v. Breault, [2001] N.B.J. No. 64 (N.B. C.A.) (QL) at para. 51)

 

(3)        Levied by a public body

[103]       A government body created by statute is a public body. The CRTC is a public authority constituted under the Canadian Radio-television and Telecommunications Commission Act, R.S.C. 1985, c. C-22, as amended. (St. Francis Xavier University (Re) (1999), 7 M.P.L.R. (3d) 165 (N.S. S.C.), [1999] N.S.J. No. 450 (QL) at paras. 21-23 (N.S. S.C.)

(4)        Intended for a public purpose

[104]       If the primary purpose of the levy is to raise revenue for general purposes, it is a tax. In considering this factor, courts will characterize a levy as a tax where its primary purpose is, in pith and substance to raise revenue for general purposes; and not to charge for a service; or finance a regulatory scheme. (Westbank, above at paras. 30 & 31; Breault, above at paras. 64-68; Surdell-Kennedy Taxi Ltd. v. Surrey (City), 2001 BCSC 1265 at para. 42 (S.C.), citing Urban Outdoor at paras. 32-36)

 

[105]       A charge which has the characteristics outlined in Lawson/Eurig/Westbank will be characterized as a tax unless it is imposed “primarily for regulatory purposes, or as necessarily incidental to a broader regulatory scheme”. (Reference re Proposed Federal Tax on exported Natural Gas, [1982] 1 S.C.R. 1004 at 1070).

 

(i)         Used to raise revenue for general purposes

[106]       Part II Licence Fees are collected by the CRTC and deposited into the CRF to be used for general revenue purposes.  There is no specific allocation of the monies to the CRTC, to Industry Canada or to any specific department or agency or purpose.

 

[107]       The Court heard testimony from Mr. John Traversy that when a reduction of Part II Licence Fees was proposed as a possible incentive to encourage and reward the production of more English-language Canadian television drama, the CRTC did not adopt the proposal. The associated Public Notice stated that any proposal to provide lower fees if licensees fulfill certain programming objectives would “require a change to Commission regulations and approval by Treasury Board.” This is an acknowledgement that Part II Licence Fees are collected solely for “general revenue purposes”. (Evidence of John Traversy, November 21, 2006 at pp. 524-527; Exhibit P-6, Broadcasting Public Notice CRTC 2004-32 dated May 6, 2004, paras. 12 & 62-64)

 

(ii)        Not a charge for service

[108]       A user fee is charged with regard to a specific service, and the money charged is to be spent solely on providing that service. Part II Licence Fees clearly do not fall into this category of fee. (However, it is noteworthy that in the August 1999 letter of invitation to broadcasters regarding the CRTC’s cost recovery roundtable, the CRTC stated that CRTC “user fees” would be the subject of discussion – see Exhibit C, Tab C) The Crown has not identified them as a user charge. Part I Licence Fees are used to cover the CRTC’s costs of regulating broadcasting. Part II Licence Fees generate significantly greater revenue than is required to manage the Broadcast Spectrum. They are not earmarked for return to the CRTC or to Industry Canada for the cost of administering the general regulation of broadcasting or any component thereof. As is discussed below, Part II Licence Fees are collected from licensees whose operations do not make use of the Broadcasting Spectrum and the amount of the fee collected does not vary by the amount of the Broadcasting Spectrum used. The Part II Licence Fee clearly does not constitute a user fee.

 

(iii)       Not used to finance a regulatory scheme

[109]       For a charge to be adhesive to a regulatory scheme there must be a relationship between the charge and the scheme itself.  In contrast to this principle, Part II Licence Fees clearly are charged to raise revenue for general purposes.

 

[110]       It is the position of the Crown that the regulatory scheme is the Canadian broadcasting system, and that it is “manifest” that the costs of this scheme outweigh Part II Fees. However, the Crown has not provided the Court with any evidence of what these costs are. On the other hand, the evidence is that Part I Licence Fees recover the CRTC’s costs related to broadcasting activities. The only other evidence of any costs relating to any regulatory scheme pertains to the costs incurred by Industry Canada for Broadcasting Spectrum management. 

 

[111]       Even if it were assumed (and the Plaintiffs do not concede this) that the CRTC has the authority to collect money to offset Industry Canada costs of managing the Broadcasting Spectrum, the revenues generated by Part II Licence Fees are grossly out of proportion to the actual or properly estimated costs.  In the past 7 years, Part II Licence Fees have exceeded the ostensible Industry Canada cost of managing the Broadcast Spectrum by $539.6 million or an average of $77.1 million annually. In 2004/05 alone, the amount collected by the CRTC as Part II Licence Fees exceeded Industry Canada Broadcasting Spectrum management costs by $97.2 million. In any event, the monies are not transferred to Industry Canada, even on a notional basis, for that purpose.  They accordingly cannot be regarded as a charge to cover the cost of Broadcasting Spectrum management.

 

[112]       This is in contrast to cases relied on by the Crown such as Ontario Homebuilders Association, 620 Connaught, and Mount Cook. In each of those cases, the levy was found to be a fee because 1) the levy was either less than the overall regulatory costs of the regime to which it related or was limited to actual costs; and 2) the monies were deposited to accounts that directly defrayed the costs of that regime. (Ontario Homebuilders’ Association v. York Region Board of Education, [1996] 2 S.C.R. 929, para. 9, p.11 and paras. 55-56, p. 37; Mount Cook National Park Board v. Mount Cook Motels Ltd., [1972] NZLR 481 (NZ CA), p. 491; 620 Connaught Ltd. v. Canada (Attorney General), 2006 FCA 252, paras. 9, 44 & 58)

 

(5)        No reasonable nexus

[113]       Regulatory schemes usually involve the collection and expenditure of funds for costs properly estimated. While courts will not require that the amounts collected correspond precisely with the cost of the scheme, there must be a demonstrable and reasonable connection between them.  If there is an insufficiently close relationship between the amount of the licence fee and the cost of the administering the corresponding regulatory scheme, then the charge constitutes a form of taxation. (Eurig, above at paras. 15 & 21-22)

 

[114]       Part II Licence Fees are calculated as a percentage of gross revenue from broadcasting activities, not on Broadcasting Spectrum usage. The cost of regulating licensee use of Broadcasting Spectrum does not vary according to a licensee’s revenues. There is no demonstrable connection between the quantum of Part II Licence fees collected and any associated regulatory scheme.

 

[115]       The fee structure is intended to raise revenue well in excess of any reasonable regulatory need or purpose. All monies collected as Part II Licence Fees are deposited directly into the general CRF.  None of the monies are retained by the CRTC or designated for any Industry Canada regulatory costs.

 

[116]       The lack of a reasonable connection between the Part II levy and its claimed purpose is also significant in the context of the Federal Court of Appeal’s decision in 620 Connaught, above at para. 35. According to Justice John Maxwell Evans, a fee for a product, right or privilege, such as a business licence fee, must equate reasonably with the cost of operating the broader regulatory framework that allows the affected party to operate as it does.

 

[117]       Similarly, in Nanaimo Immigrant Settlement Society v. British Columbia, (2004) 242 D.L.R (4th) 394 (B.C. C.A.) at para. 35, the British Columbia Court of Appeal cited three factors as evidence that the levy in that case was a tax, not a fee: the quantum collected (a) grossly exceeded the regulatory costs of the scheme; (b) there was no serious attempt to match the amount collected with the cost of the scheme; and (c) the revenues collected were deposited in the consolidated revenue fund. The facts in the case at hand can be similarly characterized, which is further evidence that the Part II Licence Fees are a tax.

 

[118]       This Court should look to the judgment of the Supreme Court of Canada in the Re Exported Natural Gas Tax, above at p. 1077, in which it was held that because “Every major aspect of the industry is already subject to licensing, prohibitions, orders...”, the proposed tax added “nothing to the existing structure of regulation, save revenue” and could therefore not be characterized as a facet of the broader regulatory scheme. The primary purpose of the Part II Fee is similarly to generate revenue for the general purposes of the government as a whole. It adds nothing to the regulatory structure – not even revenue.

 

 

Crown’s Justification for Part II Licence Fees Not Valid

[119]       The Crown’s first witness, Ms. Diane Roy, provided a table comparing the monies that would hypothetically have been collected by the CRTC if the Old Fee Regime of 1.8% of gross revenues had been left in place. The CAB Plaintiffs state that this evidence is irrelevant to the question of whether Part II Licence Fees are a tax. It is evident that by 1996 (the year prior to the enactment of the Regulations), the revenues generated by the Old Fee Regime at 1.8% were well in excess of the CRTC’s costs related to broadcasting activity and Industry Canada Broadcasting Spectrum management. In 1996-97, Broadcast licence fees were $77.9 million, while total CRTC operating costs appeared to be approximately $34.1 million. (CRTC documents indicate that in 1996, the CRTC’s costs related to broadcasting activity were approximately $20 million - see e.g. Exhibit C, Tab A, page 1 and chart entitled “CRTC Resource Levels ($000)”; see also Exhibit C, Tab B (“4. Resource Plans and Financial Tables”, “5. Comparative Financial Plans by Business Line”, “3. Comparative Financial Performance by Business Line”, “1.3 Resource Requirements by Branch and Business Line/Activity ($000)”; A chart in the June 2003 Report of the Standing Committee on Canadian Heritage graphically illustrates how the “nexus” between CRTC costs and broadcasting licence fees that existed in 1983-84 ($21.8 million in broadcast licence fees vs. $23.6 million in total CRTC operating costs, presumably attributable to both broadcasting and telecommunications regulatory activity) was lost in subsequent years). This witness provided no evidence to assist the Court in support of the Crown’s position. (Exhibit C, Tab G (p. 300 – Figure 8.25 “Trends in CRTC licence fees paid by the private broadcasting sector and the telecommunications sector, 1983-2001”)

 

[120]       After the fact, the CRTC has attempted to justify Part II Licence Fees by referring to a “three-fold rationale”, which now forms part of the Crown’s defence of the levy.  The rationale for Part II Licence Fees that is presently stated in the CRTC’s Estimates is that the charges are:

a)      to earn a fair return for the Canadian public for access to, or exploitation of, a publicly owned or controlled resource (i.e. broadcasters’ use of the broadcasting spectrum);

 

b)      to recover Industry Canada costs associated with the management of the broadcasting spectrum; and

 

c)      to represent the privilege of holding a broadcasting licence for commercial benefit.

 

(CRTC 2005-2006 Estimates (Part III – Report on Plans and Priorities), Exhibit B, Tab 34 (p. 50).  See also Exhibit B, Tab 33, p. 43)

 

[121]       However, the evidentiary record before the Court does not establish that when the Regulations were enacted in 1997 the intent of Part II Licence Fees was to impose charges for the “three-fold rationale” stated above. In the CRTC Public Notice announcing the proposed new broadcasting licence fee regulations, only the costs of regulating the Broadcasting Spectrum was referenced.  An internal CRTC document prepared in 1996 indicates that the key rationale for the new fee structure was to streamline the process and to ensure that the Part I fees and Part II fees would in total approximate the amount collected under the old fee structure. (  Exhibit A, Tab 13: Public Notice CRTC 1996-149 (p. 5); Exhibit C, Tab 4 & Tab A “CRTC Proposed Changes to the Broadcasting Licence Fee Regulations: Briefing Notes”)

 

[122]       The publicly stated intention for the enactment of the Regulations reiterates a focus upon maintaining revenues and does not articulate a justification of the charges based on some notion of imposing a charge for a “privilege”:

(a)        Public Notice 1996-149-1 (November 29, 1996) stated:

 

 

 

(b)        Public Notice 1997-32 (March 20, 1997), which was issued with the draft regulations, stated:

 

 

(Exhibit A, Volume 3, Tab 14 (PN CRTC 1996-149-1) and Tab 15 (PN CRTC 1997-32, p. 1-2); Agreed Statement of Facts, para. 66)

 

[123]       The CRTC’s Estimates are an annual report to Parliament. The CRTC’s Estimates tabled immediately before and after enactment of the Regulations did not state that Part II Licence Fees were intended to recover monies for the “three-fold” rationale that the CRTC currently relies upon:

a)      In the CRTC’s 1997-98 Estimates (tabled before the Regulations were enacted), it is simply stated that:

 

 

b)      In the CRTC’s 1998-99 Estimates, it is stated that:

 

 

 

 

c)      In the CRTC’s 1999-2000 Estimates, the CRTC stated it would be setting up formal consultative committees with “fee paying” clients to “ensure full compliance with the Government’s Cost Recovery and Charging Policy”. However, the CRTC again did not mention the “fair return for access to spectrum” or “privilege of holding a broadcasting licence” rationale for Part II Licence Fees in this document.

d)      In the letter of invitation sent to broadcasters for the CRTC’s cost-recovery roundtable in August 1999, the CRTC indicated the discussion would pertain to “CRTC cost recovery and related user fees”.

e)      In the 2000-2001 Estimates (i.e., the first CRTC Estimates tabled in Parliament after the August 1999 “CRTC round table consultation” with broadcasters), (See Exhibit C, Tab 8 and Tab C.  The Estimates for a particular fiscal year are tabled in Parliament in the March prior to the start of the fiscal year - see Exhibit C, Tab 6) there is no mention of the “three-fold rationale”, or indeed any specific reference to Part II Licence Fees at all.

(Exhibit B, Documents the Parties Agree are Authentic and Relevant, Tab 26 (p. 39), Tab 27 (p. 22), Tab 28 (p. 20 & 34), Tab 29; Exhibit C, Tab 6 and Tab C)

 

[124]       The CRTC’s Estimates tabled in Parliament in 2001 indicated, for the first time, that the fee was assessed to “address three major issues”, which were similar to - but not exactly the same as -the “three-fold rationale” above. This is the first time Parliament was informed of the rationale that is presently relied upon for Part II Licence Fees as representing:

i)    costs incurred by Industry Canada to manage the broadcasting spectrum;

 

ii)   the privilege of using the broadcasting spectrum; and

 

iii)   the privilege of holding a broadcasting licence for commercial benefit.

 

(Exhibit B, Tab 30, p. 30)

 

[125]       Only in 2002 (5 years after the Regulations came into force), did the CRTC’s Performance Report and Estimates include a reference to the “three-fold rationale” as currently articulated. (Exhibit B, Tabs 36, p. 45, 31, p. 34)

 

[126]       It is noteworthy that neither of the Crown’s factual witnesses, (Ms. Roy and Mr. Traversy), testified as to the intent of the Part II Licence Fee regime when the Regulations were enacted in 1997. Ms. Roy testified that she had nothing to do at all with the development of the new fee structure. Mr. Traversy could not recall the process or what his role was but stated that his role in it, if anything, was “small.” The Crown led no evidence of internal CRTC discussions or of discussions with Treasury Board to support its contention regarding the “three-fold rationale”. The Court is left with the evidence that the “three-fold rationale” for Part II Licence Fees was only developed well after the Regulations had been enacted in 1997. The inference is that it was developed to respond to this legal action. (Evidence of Diane Roy and John Traversy, November 21, 2006)

 

(1)        Not a payment for Industry Canada’s costs of managing spectrum

[127]       Even if one of the rationales for the CRTC’s collection of Part II Licence Fees was to recover Industry Canada costs associated with the management of the Broadcasting Spectrum, there is no mention in the Broadcasting Act of any authority given to the CRTC to collect money on behalf of Industry Canada. Furthermore, it has been admitted by the Crown that Part II Licence Fees are not actually allocated to Industry Canada or for any other specified purpose within the Consolidated Revenue Fund. 

 

[128]       Industry Canada has its own separate regulatory scheme under which it manages and licenses the use of radio frequency spectrum under the Radiocommunication Act, including spectrum allocated for broadcasting over the airwaves. (Agreed Statement of Facts, para. 57)

 

[129]       Presently no fee is charged to a broadcasting licensee by Industry Canada for the Broadcasting Certificate that it issues if Broadcasting Spectrum is required by the licensee. It has chosen not to do so. Industry Canada does establish fees for usage of the other radio frequency spectrum allocations. (Agreed Statement of Facts, para. 57; Request to Admit, para. 63; Response to Request to Admit, para. 2(xvi);  Evidence of Wayne Stacey, November 20, 2006; Industry Canada, “Guide for Calculating Radio Licence Fees”, Exhibit B Tab 17; Radiocommunication Act, s. 6(l), Exhibit D, Tab 6; Radiocommunication Regulations, Exhibit D, Tab 7)

 

[130]       The costs incurred by Industry Canada with respect to its management of Broadcasting Spectrum have been estimated as falling from $13.0 million in 1998/1999 to $10 million in 2004/2005.  Industry Canada's costs of managing Broadcasting Spectrum do not vary according to the gross revenues earned by broadcast licence holders. There is accordingly no reasonable connection between Industry Canada’s costs of managing Broadcasting Spectrum and either the amounts of Part II Licence Fees or the methodology by which they are collected. (Agreed Statement of Facts, paras. 59-60)

 

(2)        Not a payment for the “Privilege” of Using Spectrum

[131]       The second justification advanced in the Crown’s “thee-fold rationale” for Part II Licence Fees is that they are collected to earn a “fair return” for the Canadian public for broadcasters’ use of the Broadcasting Spectrum. This rationale also does not hold up to scrutiny.

 

[132]       It is important to note that this rationale could only apply to the usage of Broadcasting Spectrum, as Industry Canada already collects fees from entities transmitting signals over other allocations of the electromagnetic spectrum. For example, the right to transmit over “broadcasting satellite” spectrum or “fixed-satellite” spectrum is paid for separately by a satellite company licensed to use such spectrum by Industry Canada. To the extent that such spectrum is utilized to transmit the signals of a licensee, the licensee pays a fee to the satellite company, Industry Canada would have received payment for the use and the spectrum resource from the satellite company. The “privilege” of utilizing spectrum in these cases is already paid for. (Agreed Statement of Facts, paras. 85, 91; Evidence of Wayne Stacey, November 20, 2006)

 

[133]       The Court heard evidence that broadcasting reception does not require special authorization from Industry Canada, and that not all broadcasting activities licensed by the CRTC transmit over Broadcasting Spectrum. Only licensees, who’s broadcasting licence may be identified by reference to a specific call sign, for example “CJOH-TV”, utilize a transmitter operating in Broadcasting Spectrum as the primary means for signal distribution. (Evidence of Wayne Stacey, November 20, 2006; Agreed Statement of Facts, paras. 74 & 93)

 

[134]       P&S Undertakings do not operate transmitters that distribute programs to consumer-level receiving devices utilizing Broadcasting Spectrum, and do not require a Broadcasting Certificate from Industry Canada after receiving a CRTC licence. Rather, they route their programs to distribution undertakings like conventional cable or DTH satellite systems to be distributed to subscribers. To route the programming to distribution undertakings, P&S operators either employ optical fibre or coaxial cable (which does not use Broadcasting Spectrum), or fixed satellite or microwave links (for which separate licence fees are paid to Industry Canada to transmit over such spectrum allocations). (Agreed Statement of Facts, paras. 96 & 98-99; Evidence of Wayne Stacey, November 20, 2006)

 

[135]       Conventional cable undertakings transmit programs via a combination of optical fibre and coaxial cable, and do not use any Broadcasting Spectrum in that portion of their distribution plant that is connected directly to subscribers. (Agreed Statement of Facts, para. 100; Evidence of Wayne Stacey, November 20, 2006)

 

[136]       DTH undertakings distribute programs via satellite signals provided by a satellite operator, such as Telesat Canada. Such systems use “fixed-satellite” or “broadcasting-satellite” electromagnetic spectrum that is licensed to the satellite operator and not to the DTH licensees.  Where microwave links or satellite links are employed for program collection by the DTH undertaking, separate licence fees are paid to Industry Canada by the licensees of those systems, so the “privilege” of utilizing spectrum is already paid for. (Agreed Statement of Facts, paras. 103-104 & 107;  Evidence of Wayne Stacey, November 20, 2006)

 

[137]       Most network programs are delivered via fixed satellite or microwave links; however optical fibre cables and dedicated coaxial cables may also be employed. The latter two delivery means do not employ electromagnetic spectrum. Where microwave links or fixed satellite links, which do not utilize Broadcasting Spectrum, are employed for program delivery, spectrum licence fees are paid to Industry Canada by the licensees of those technical systems. (            Agreed Statement of Facts, para. 113; Evidence of Wayne Stacey, November 20, 2006)

 

[138]       The Crown’s attempt to justify Part II Licence Fees as being for the “privilege” of utilizing Broadcasting Spectrum accordingly does not even apply in most instances, and, based on current trends, the rationale becomes even more strained. The Court heard evidence from Mr. Traversy that “a fairly high percentage” of households receive their television through Broadcasting Distribution Undertakings rather than through “over the air” reception through the use of Broadcasting Spectrum. Mr. Traversy also testified that in future years revenues from specialty and pay services (who do not use Broadcasting Spectrum to transmit their signals) are likely to surpass that of private conventional television (who do use Broadcasting Spectrum to transmit their signals). Accordingly, the second element of the Crown’s “three-fold rationale” is equally untenable. (Evidence of John Traversy, November 21, 2006 at pp. 517-518; Exhibit P-5, Canadian Press article dated June 29, 2005)

 

[139]       In any event, there is no evidence as to the value of this alleged privilege or how 1.365% of gross revenues represents the “fair return” rationale which the Crown asserts.

 

(3)        Not a Payment for the “Privilege” of Broadcasting for Commercial Benefit

[140]       In spite of the suggestion by the Crown that Part II Licence Fees represent a charge for the privilege of broadcasting for commercial benefit, it is clear that many broadcasters carry on business for commercial benefit without being required to pay Part II Licence Fees. There is once again no reasonable connection between Part II Licence Fees and the alleged “privilege” of broadcasting for commercial benefit:

a)      The Old Fee Regime required that each licensee pay a minimum licence fee, plus a percentage of revenues which exceeded applicable exemption levels.   However, the Regulations eliminated a basic licence fee for all undertakings, and now only undertakings with revenues in excess of specified exemption file a licence fee return and pay the applicable licence fee amount. As a result, over 2,000 broadcasters’ undertakings were not required to pay licence fees for the “privilege” of operating for commercial benefit.

b)      As a result of Public Notice CRTC 2001-121, the CRTC revoked the licence requirement for over 1,300 broadcasting distribution undertakings who had fewer than 2,000 subscribers, such that they are no longer required to pay Part II Licence Fees.  Similarly,  Broadcasting Public Notice CRTC 2004-39 exempted cable broadcasting distribution undertakings that serve between 2,000 and 6,000 subscribers, with numerous other undertakings now able to carry on business for commercial benefit without being obliged to pay Part II Licence Fees.  Many of these undertakings would have otherwise had to pay Part II Fees.

 

(Exhibit A, Tab 13 (PN CRTC 1996-149, p. 2-3); Exhibit A, Tab 15 (PN CRTC 1997-32, p. 2);  Exhibit A, Tab 12 (PN CRTC 2001-121 and Broadcasting PN CRTC 2004-39); Exhibit P-4 (Letter from Jim Stefanik (CRTC) dated October 3, 2003); Evidence of John Traversy, November 21, 2006)

 

[141]       Furthermore, there is no mention in the Regulations, or any other document prepared before the Regulations were enacted, of an intent to impose a fee for the “privilege” of holding a broadcasting licence. (Exhibit C, Tab 22)

 

[142]       When Part II Licence Fees were introduced, neither the CRTC nor any other department or agency, had conducted any studies, either to determine what the market value of the “privilege” of holding a broadcasting licence might be, or what the “privilege” of using Broadcasting Spectrum might be. (Exhibit C, Tab 5)

 

[143]       In 1997, the Treasury Board’s Cost Recovery and Charging Policy stated that:

 

 

[144]       As late as in its Response to the Request to Admit dated March 24, 2005, the Crown admitted that no reviews of the relationship between the Part II Licence Fee revenues and the value that may be attributed by broadcasters for that licence exist.

 

[145]       It was not until March 11, 2005 (well after the present action was commenced in December 2003) that, in response to the commitment made to the Committee of Canadian Heritage that the Department of Canadian Heritage issued a “Request for Proposals” in an attempt to “determine the different methodologies that could be used to assess the economic value of broadcasting licences held for commercial benefit.” (Exhibit C, Tab 15 and Tabs I & J)

 

(4)        There is no Evidence of Value

[146]       The Crown states that Part II Licence Fees represent a “fair return” for the alleged value of the “privilege”. However, the concept of a “fair return” assumes the Crown has quantified that value and assessed it is reasonable.  When the Regulations were enacted, there were no studies upon which the CRTC based the imposition of a 1.365% charge upon gross revenues, so it is clear that the Crown cannot demonstrate that the CRTC assessed the charge in order to establish a reasonable nexus between the Part II Licence Fees and the value of the alleged privilege. Even as late as 2006, the government is still trying to determine what the value of this “privilege” might be.

 

[147]       The Crown’s expert witnesses did not provide a quantifiable value of the privilege which would assist the Court in determining whether there is a reasonable nexus between this value and the amounts collected as Part II Licence Fees.  Mr. Lyman made this clear:

One thing that I must say at the outset is that we at no place calculated an explicit value of the Licences. The task was to determine whether they had value, rather than to quantify that value.

 

There are some quantifications which are useful to point out and demonstrate, but we are not pretending to have done a calculation of the total value of any set of Licences.

 

(Evidence of Peter Lyman, November 22, 2006 at p. 612, l. 15-23)

 

Q.        I take it, then, that you are not opining today that 1.365 per cent of gross revenues is a fair return for the value of that Broadcasting Licence.

 

A.        As I said, our Report addressed matters of the economic value of holding a Licence and the benefits derived from within.

 

(Evidence of Peter Lyman, November 22, 2006 at p. 682, l. 6-12)

 

[148]       In fact, counsel for the Crown made the following statement:

MR. COUTO:  The submissions that were done in the Opening Statement, and here, is that we say that we can charge for something that has value.

 

JUSTICE SHORE:  Indeed.

 

MR. COUTO:  The debate before you is not whether the rate of 1.365 is an accurate one. 

 

That is where the quantification, in my submission, becomes important:  Is 1.365 the right one, given the value that these Licences have? 

 

But that has not been the issue.  The issue that you have before you is:  Is this a tax?

 

(Evidence of Peter Lyman, November 22, 2006 at p. 638, l. 9-19)

 

[149]       In contrast to the Crown’s vague assertions about the value of the “privilege” of holding a broadcasting licence, the Court was provided with extensive evidence that any such “privilege” has already been paid for by a broadcaster in numerous ways apart from Part II Licence Fees. For example, the CRTC may impose conditions of licence on a Broadcasting Undertaking:

a)      to broadcast a minimum amount of Canadian content;

 

b)      to make contributions to funds for the production of Canadian content; and

 

c)      to make contributions to funds for other projects.

 

(Evidence of John Traversy, November 21, 2006)

 

[150]       The Crown’s witness Mr. Traversy acknowledged that such commitments will cause a Broadcasting Programming Undertaking to incur a cost.  He stated that:

Canadian drama programming is very expensive to produce, and traditionally it has been a genre of programming that has been unable to recover its costs within the Canadian Broadcasting system. 

 

(Evidence of John Traversy, November 21, 2006 at p. 521, l. 15-18)

 

[151]       The Court also heard testimony from Traversy that the CRTC examines applications for licences with respect to how the proposed licensee would fulfill the objectives of the Broadcasting Act. The Application procedure is often a “competitive process”. The CRTC considers the Canadian content conditions being put forward, what contributions a proposed licensee would put forward in developing Canadian talent, what they will do to serve the local community, and what initiatives there will be to ensure that there is a newscast and provide relevant information. The CRTC will also look at the profitability of an undertaking, the market situation of the station, and economic potential of a licensee when assessing what percentage of Canadian programming requirements to impose by way of conditions of licence. (Evidence of John Traversy, November 21, 2006)

 

(5)        The Economic Rent Argument

[152]       The Crown’s assertion, through its expert Mr. Dustin Chodorowicz, is that Part II fees are a way for the Crown to extract economic rent for the “privilege” of holding a broadcasting licence and/or using Broadcasting Spectrum. However, it is not clear how this evidence establishes that the fees are not a tax.

 

[153]       Mr. Chodorowicz, acknowledged that economic rent attributable to a “privilege” is often extracted by governments through taxes. (Evidence of Dustin Chodorowicz, November 22 & 23, 2006)

 

[154]       The Crown urges the Court to look to other jurisdictions, but the evidence is that other countries like New Zealand and Australia recover economic rent associated with a broadcasting licence by way of a tax. (Evidence of Dustin Chodorowicz, November 22-23, 2006)

 

[155]       The Plaintiffs’ expert, Dr. Gerry Wall, testified that it would be difficult to establish a quantifiable value for a broadcasting licence. (Evidence of Gerry Wall, November 24, 2006, p. 1046, l. 23-26, p. 1047, l. 1-12)

 

[156]       Dr. Wall also testified that the CRTC actually extracts much of the value that might be attributed to a licence through other means. (Exhibit P12, paras. 12-29, Expert Report of Gerry Wall)

 

(6)        The Broadcasting Act Does Not Authorize CRTC to Charge for a “Privilege”

[157]       In any event, the CRTC has not been authorized by the Broadcasting Act to impose a fee for a privilege or to extract economic rent. 

 

[158]       Section 11 of the Broadcasting Act does not contain any language that would allow the CRTC to charge for a privilege. Characterizing Part II Licence Fees as being a charge for products, rights or privilege, would also result in s. 11 of the Regulations being ultra vires the authority granted to the CRTC by s. 11 of the Broadcasting Act to charge regulatory fees.

 

[159]       The statutory provision considered by the Federal Court of Appeal in 620 Connaught, above, (section 24 of the Parks Canada Agency Act, S.C., 2000, c. 32) provided that Parks Canada may fix fees in respect to “products, rights or privileges.” As is evident from the statutory provision at issue in 620 Connaught as well as numerous other statutes, when Parliament intends to provide authority to collect a fee in respect of a privilege, it does so. For example: Canadian Food Inspection Agency Act, S.C. 1997, c. 6, s. 25; Department of Health Act, S.C. 1996, c. 8, s. 7; Department of Social Development Act, S.C. 2005, c. 35, s. 20; Department of Industry Act, S.C. 1995, c. 1, s. 19; Oceans Act, S.C. 1996, c. 31, s. 48.

 

The Crown’s Reliance on La Presse is Misplaced

[160]       The Crown relies heavily on the Supreme Court of Canada’s decision in Canada (Attorney General) v. Cie de Publication La Presse, 63 D.L.R. (2d) 396, [1967] S.C.R. 60.

 

[161]       It is predominantly featured in its argument and counsel for the Defendant has stated that the present case “was conclusively decided by the Supreme Court of Canada forty years ago in the La Presse case.” (Transcript of November 21, 2006, p. 396, l. 7)

 

[162]       The Defendant has misread La Presse with regards to the Courts’ interpretation of the facts and the legislation in place at the time.

 

(a)        The Reasonable Nexus Requirement is Recognized in La Presse

[163]       First, it must be noted that La Presse essentially deals with an objection to the retroactive effect of an Order in Council. However, to the extent that the case did deal with the characterization of a charge, the majority of the Supreme Court of Canada articulated the following:

The learned trial judge held to be unfounded respondent's contentions that s. 5 of the Radio Regulations as enacted by the Order in Council was invalid because (1) it imposed a tax and not a licence fee and (2) was unjust and discriminatory. I am in agreement with that view and have little to add to what the learned trial judge has said on these two points.

 

 

[164]       The Exchequer Court’s view, shared by the Supreme Court of Canada, was that the regulatory body in that case “require[d] a substantial income in order to provide the proper carrying out of its multiple tasks, income which must increase at the same rate as the increasing necessities of operation.” There was a specific finding in La Presse by the Exchequer Court of Canada that the costs of regulating broadcasting at that time were increasing and that the revenues generated by the licensing fees were reasonable when compared to those costs. As found by the trial judge, “the total cost of administration, control, supervision, assistance, protection, licensing, etc. of all radio transmitting stations and units under the jurisdiction of the Department of Transport” for the relevant years were:

 

Year	1956-57	1957-58	1958-59	1959-60	1960-61
Total Costs	$1,683,185	$2,061,772	$2,235-236	$2403,875	$2,731,534

 

(La Presse of the Exchequer Court Report [1964], at p. 636)

 

[165]       What the Court was effectively saying is succinctly summarized in the head note of the decision at page 628 of the Exchequer Court Report [1964]:

Pour distinguer une licence d’avec une taxe il faut s’enquérir si le prix exigé par l’État pour le privilège d’exploiter une entreprise n’excède pas et a pour objet seulement de rencontrer le coût actuel de la licence ainsi que de la surveillance et du contrôle de cette entreprise, auquel cas il s’agirait d’une licence et non d’une taxe. Dans le cas contraire, ce serait l’inverse...

 

[166]       The Exchequer Court in La Presse was looking for nexus between the charge and the costs of the regulated activity and the Supreme Court of Canada agreed with Justice Lawrence Arthur Dumoulin Cannon with regards to his tax versus fee analysis.

 

[167]       Hence, the reasoning in La Presse with regards to the characterization of a charge is precisely the reasoning the Plaintiffs are asking this Court to apply. Part II Licence Fees are not intended to cover the costs of regulating the Broadcast system. The amounts collected as Part II Licence Fees grossly exceed the cost of that regulatory scheme. The sums collected are deposited in the Consolidated Revenue Fund and are intended to raise revenue for general public purpose. Had these factors been present in 1967, La Presse would have been decided very differently.

 

(b)        Inconsistent Legislative Regime

[168]       Not only was La Presse rendered under a regulatory regime that did not include the specific allocation of monies to a self contained system such as sums collected as Part I Licence Fees, but the English and French versions of the regulation at issue were inconsistent. This has served in further confusing the issue.

 

[169]       Section 3(1)(a) of the Radio Act, R.S.C. 1952, c. 233, empowered the Govenor in Council to prescribe a tariff of fees to be paid for licences for private commercial radio broadcasting stations. In October, 1960, an Order in Council was adopted amending the General Radio Regulations then in effect and replacing s. 5 thereof with a new section. 5. It is appropriate to reproduce the relevant legislation examined in La Presse.

            Radio Act, R.S.C. 1952, c. 233, section 3:

 

General Radio Regulations, section 5:

 

 

 

[170]       The Exchequer Court’s decision was written in French. With respect, the legislation in this case is ambiguous at best. It simply cannot be said that the present case “was conclusively decided by the Supreme Court of Canada forty years ago in the La Presse case.”

 

Crown’s Reliance on 620 Connaught is Misplaced

[171]       The Crown relies on 620 Connaught, above, in support of its arguments.

 

[172]       During its opening statement, the Crown cited Justice Evans stating “that the unique benefit enjoyed by the fee payer establishes the connection to the regulatory scheme.” Counsel added “[a]nd that is exactly the situation we have here.” Therefore, a second proposition for which the Crown has cited 620 Connaught is that licence holders may be charged a fee because they benefit from the privilege of holding a broadcasting licence. (Opening Statement of Crown Counsel, Volume 2, p. 410, l. 17)

 

[173]       That is not the proposition which 620 Connaught stands for.

 

The Intention of 620 Connaught

[174]       The essence of 620 Connaught, above at paras. 35, 66 and 67, is that where a regulatory body is given the legislative authority to charge for a privilege, the benefit derived from the regulated commercial activity may enter into the equation to establish a nexus between the fee and the regulatory scheme.

 

[175]       620 Connaught does not stand for the proposition that one may charge for a privilege simply when commercial benefit is present. Rather, the 620 Connaught case creates a bridge between the charge and the benefit when the legislation provides that a fee may be charged for a privilege.

 

 

Authority to Charge for a Privilege in Canada

[176]       In Canada, the authority for a government entity to charge for a privilege stems from the legislation. It must be explicitly bestowed by Parliament, as it was in the 620 Connaught case where the Parks Canada Agency Act, S.C. 1998, c. 31, provided for the fixing of licence fees as follows:

 

 

[177]       In addition, as pointed out above, the fees charged in this case went directly back to the Jasper Park budget.

 

Reference to the Mount Cook case

[178]       As a supplementary reference in support of the same argument – benefit authorizes a charge for a privilege – the Crown has cited the Mount Cook case, above. However, the Crown has failed to mention that the fee levied in that case stayed within the system to which it adhered. Justice North in Mount Cook, at p. 487, expressly referred to the closed system of the regime when he wrote:

I see no reason at all then, why the Board should not charge a licence fee for this privilege which will return to it a profit to add to its general revenue.

 

 

[179]       Furthermore, a large basis for the ruling in Mount Cook, above, was that the Court was of the view that the Board was “entitled to charge a reasonable fee [...]”.  In the present case, the Crown has not quantified what a reasonable fee would be.

(2) If they are taxes, the CAB Plaintiffs seek a Declaration for the return of monies paid pursuant to s.11 of the Regulations. Are they entitled to these monies?

 

The Current Legislation -The Broadcasting Act and its Significance

[180]       Of particular importance in the present case are the following provisions of the Act.

a)      section 2, which sets out definitions;

b)      section 3, which articulates Canada’s broadcasting policy, setting out the objectives of the regulatory scheme and establishing that the broadcasting system is a single integrated system; and

c)      section 11, which:

                                                               i.            explicitly specifies that the fees may be calculated by reference to any criteria that the CRTC deems appropriate, including the revenues of the licensees, and

                                                             ii.            does not (in contrast to other similar legislation) specify that the fees are limited to the costs of any service.

 

Canada’s Broadcasting Policy

[181]       In the 20 paragraphs of subsection 3(1) of the Broadcasting Act, Parliament has established an important, comprehensive, complex, and ambitious "broadcasting policy for Canada".

 

[182]       In the very first paragraph, Parliament has declared that "the Canadian broadcasting system shall be effectively owned and controlled by Canadians".  In the second paragraph, Parliament has established that the Canadian broadcasting system "makes use of radio frequencies that are public property" and that it provides "a public service essential to the maintenance and enhancement of national identity and cultural sovereignty".

 

[183]       Remaining provisions of subsection 3(1) establish a number of significant and unique objectives for Canada’s broadcasting system. (Indeed, the legislative record shows that for many decades, Canada’s broadcasting policy has been directed to the public interest, with an emphasis on the Canadian identity). For example, the Canadian broadcasting system should:

a)      “...safeguard, enrich and strengthen the cultural, political, social and economic fabric of Canada,”

b)      reflect "...Canadian attitudes, opinions, ideas, values and artistic creativity", and

c)      "...serve the needs and interests, and reflect the circumstances and aspirations, of Canadian men, women and children...".

 

[184]       The Supreme Court of Canada has recently summarized Canada’s comprehensive broadcasting policy. Writing for the full Court in Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42, Justice Frank Iacobucci stated as follows.

[47]      Canada's broadcasting policy has a number of distinguishing features, and evinces a decidedly cultural orientation. It declares that the radio frequencies in Canada are public property, that Canadian ownership and control of the broadcasting system should be a base premise, and that the programming offered through the broadcasting system is "a public service essential to the maintenance and enhancement of national identity and cultural sovereignty"...

 

 

 

 

 

A Single Regulatory Scheme, Under a Single Authority

[185]       That the broadcasting system is one single integrated system, governed under a single regulatory scheme, is established in subsection 3(2).

 

 

[186]       In the context of this provision, the Supreme Court of Canada has firmly recognized that Canada’s broadcasting system, even where legislation other than the Broadcasting Act is tied in, is governed under a single regulatory scheme. Again in Bell ExpressVu, Justice Iacobucci stated at para. 46:

...I agree with the following passage from the judgment of LeGrandeur Prov. Ct. J. in Knibb, supra, at paras. 38-39, which was adopted by Gibson J. in the Federal Court, Trial Division decision in Norsat, supra, at para. 35:

 

The Broadcasting Act and the Radiocommunication Act must be seen as operating together as part of a single regulatory scheme...

 

 

[187]       In that regard, the provisions of section 2 emphasize that the broadcasting system is fully integrated. They plainly show, in the various definitions, that broadcasters who do not use the radio frequency spectrum, such as cable-TV companies, are just as much a part of the broadcasting system as are over-the-air broadcasters. For example, "broadcasting" means "any transmission of programs, whether or not encrypted, by radio waves or other means of telecommunication...". (See also the definitions of "broadcasting undertaking", "distribution undertaking", "programming undertaking", and "other means of telecommunication")

 

[188]       The manner in which these statutory provisions work together - particularly in the context of the issuance of broadcasting licences - and the proper attitude of the Court toward them, was recently summarized by the Federal Court of Appeal in Genex Communications Inc., [2005] FCA 283. For the full Court, Justice Gilles Létourneau wrote as follows.

[29]      In the first place, the power to issue, revoke or renew a licence has been expressly and exclusively given by Parliament to the CRTC, the only independent public authority to which Parliament has entrusted the regulation and supervision of the Canadian broadcasting system: see subsection 3(2) of the Act. We cannot appropriate that power to ourselves.

 

[30]      Secondly, the exercise of this jurisdiction requires expertise and a knowledge of the communications environment and programming and broadcasting policies that this Court does not possess. In Canadian Broadcasting Corporation v. Métromédia CMR Montréal Inc. et al. (1999), 254 N.R. 266, this Court notes in paragraph 6 that an application for a licence, which is tantamount to an application for renewal, "involves economic and cultural policy considerations which come within the CRTC's expertise and for which the agency has discretion".

 

[31]      Thirdly, this exercise must take into account the public interest, which is reflected in the numerous objectives of the Act and of Canadian broadcasting policy. Again, the definition of the public interest and the protection that Parliament wishes to give to it necessitate specialized knowledge in the area of communications and broadcasting policy. In this regard, the Court writes at paragraph 5 of the Canadian Broadcasting Corporation case:

 

... the Act (s. 3) identifies about forty sometimes conflicting objectives which must guide the CRTC in exercising its powers. This leads to a polycentric adjudication process, involving numerous participants with opposing interests, with a view to implementing the broadcasting policy set out in the Act.

 

[32]      Fourthly, the renewal or refusal to renew a licence is the end result of the exercise of a discretionary power. The legal rule in such matters is unequivocal: the Court does not have the power to substitute its own discretion for that of the authority whose decision is being reviewed. I will return later and in greater detail to the legal standard of review of a discretionary decision.

 

 

Presumption of Validity –Declaration of Invalidity as a Condition Precedent

 

[189]       A distinction must be drawn between declaring an Act to be invalid and determining the practical and legal consequences arising therefrom. (Air Canada, above at pp. 1195-1209)

 

[190]       This Action must be considered having regard to its context. What is at issue here, as it was in the Air Canada case, is far different from any individual private dispute. Indeed, the context in which these challenges arise does not find its equivalent in private law. What is required in this case is a balancing between one group of taxpayers and another. As a matter of precedent, the revenues of the Crown are protected from retroactive and uncertain depletion. (Air Canada, above)

 

[191]       The application of purely restitutionary principles alone – a private law concept – has, so far, no place in broad, social and policy oriented matters involving the vires of legislation as in the case at bar involving a regulation made by the CRTC, with  Treasury Board Approval. (Air Canada, above at pp. 1201 & 1203; Broadcasting Act, s. 11)

 

[192]       Money paid to Her Majesty The Queen in accordance under legislation later found to be invalid is not recoverable by a fee-payer. Unless and until a Court declares a relevant legislative scheme to be invalid, its effect remains in force.

 

[193]       The rationale for this may be found in a more generic discussion of the operation of  a judgment in relation to the judicial review of administrative action. This topic was discussed most recently in Grenier v. Canada, 2005 FCA 348 where the Court stressed the importance of maintaining the lawful effect of law, albeit in a damages action, unless and until impugned actions under the law are declared invalid:

[19]      In short, a decision of a federal agency, such as the one by the institutional head in this case, retains its legal force and authority, and remains juridically operative and legally effective as long as it has not been invalidated.

 

 

[194]       The application of the principles underlying the Grenier-type issue was recently discussed in the learned article “From Now On: Temporal Issues In Constitutional Adjudication”, National Journal of Constitutional Law. (See Lovell, John, “From Now On: Temporal Issues In Constitutional Adjudication”, (2005) 18 National Journal of Constitutional Law [N.J. C.L.]. at pp. 27-30; see also National Westminster Bank plc  v. Spectrum Plus Limited et al., [2005] UKHL 41 at pp. 4-11, 39-40 & 124-125)

 

[195]       In Air Canada, at pp. 1206-1207, the Court clearly considered and accounted for the historical position regarding money paid under mistake of law – i.e., that it was not recoverable. This was because certainty in the protection of the treasury was a paramount consideration in avoiding “fiscal chaos”. This concept was reflected in the Court’s concern in Air Canada:

[77]      All in all, I have become persuaded that the rule should be against recovery of ultra vires taxes, at least in the case of unconstitutional statutes...

 

[78]      This rule against the recovery of unconstitutional and ultra vires levies is an exceptional rule, and should not be construed more widely than is necessary to fulfil the values which support it. Chief among these are the protection of the treasury, and a recognition of the reality that if the tax were refunded, modern government would be driven to the inefficient course of reimposing it either on the same, or on a new generation of taxpayers, to finance the operations of government...

 

(See also Télébec ltée c. Québec (Régie des télécommunications), [1999] J.Q. No. 756 (Quebec Court of Appeal) (QL))

 

[196]       Further, in Peel (Regional Municipality ) v. Canada, [1992] 3 S.C.R. 762, Chief Justice Antonio Lamer noted, in his concurring decision, that  even restitutionary principles did  not dictate the return of monies paid before a scheme is adjudged invalid:

[11]      Finally, Peel supported its claim for restitution as a constitutional remedy with the submission that:

 

Restitutionary recovery may be the only practical relief available to litigants faced with an invalid provision requiring payments to be made; denying that practical relief will discourage future litigants from testing the constitutionality of such provisions and will in effect immunize certain provisions from the possibility of constitutional challenge.

 

The answer may be made that the prospect of terminating the compelled payments should be sufficient incentive for future litigants in Peel's position. It certainly was for Peel when it brought the series of challenges culminating in Peel v. MacKenzie.

 

 

[197]       Public considerations also play a role in denying the recovery of any money paid prior to a declaration that the fees are an ultra vires tax. The reasonable expectations of the parties, and more importantly, the Canadian taxpayer is that the burden of a mistake as to the viability of the intended legislative scheme not be simply shifted from one group of taxpayers to another. (Garland v. Consumer’s Gas Co., [2004] 1 S.C.R 629 at pp. 54-61; see also Lovell, John, “From Now On: Temporal Issues In Constitutional Adjudication”, (2005) 18 National Journal of Constitutional Law [N.J. C.L.] at p. 41)

 

[198]       This would not be an equitable distribution of the burden of the impugned fees in this matter. The better course would simply be to ensure that in regard to impugned struck provisions, in the future, no further fees be charged and collected thereby ensuring that neither the plaintiffs nor the taxpayer bear any burden. (See for example: Fridman, Restitution (2d ed) Carswell: Scarborough, Ont. 1992) at pp.39-41 regarding “distributive Justice”.

 

Fair & Full Notice Required

[199]       In any event and in the alternative, the importance of maintaining legal certainty and avoiding fiscal chaos for government coffers  clearly requires “Notice” before a fund raising scheme such as the one at bar may be put in jeopardy. Fair notice to the Crown of a direct challenge to government coffers is to ensure that the Crown, itself, does make contingency plans to deal with possible future losses of money currently validly collected. (Garland, above at pars 57-59; Air Canada, above, at pp. 1203 & 1209; Télébec, above; Fridman, Restitution (2d ed) Carswell: Scarborough, Ont. 1992) at pp. 94-95 & 99)

 

Other Bars to Restitutionary Recovery

[200]       Additionally, if the plaintiffs are correct and the impugned provisions are ultra vires, they are still not entitled to a return of the money paid thereunder on the basis of common and civil law acceptable defences to any restitution claims. 

 

[201]       Recognizing the de facto doctrine, the point is that the money was paid under then valid and subsisting legislation. (Garland, above at paras. 38-47, 48-53 & 80-84)

 

Possible Significant Change to Applicable Law

[202]       The Supreme Court of Canada recently heard (and took under reserve) Kingstreet Investments Ltd. et al. v. Province of New Brunswick (Dept of Finance) (CFN: # 31057); a case on Appeal from the New Brunswick Court of Appeal which raises issues  involving the circumstances when and if a party can recover fees paid under ultra vires legislation.

 

[203]       The decision in Kingstreet will likely have a direct bearing upon this issue. Indeed, it may render one or both sides’ arguments irrelevant. Currently, however, the New Brunswick Court of Appeal’s decision is an anomaly to existing jurisprudence.

 

[204]       In matters of such great importance as this case, Courts have traditionally provided the Crown an opportunity to assess and react to the ramifications of a decision striking down legislation where the effects would have a significant impact upon the Treasury or the rule of law.  For example, in Eurig, above, the Supreme Court of Canada stated as follows:

[44]      An immediate declaration of invalidity would deprive the province of the revenue derived from probate fees, with no opportunity to remedy the legislation or find alternative sources of funding. Probate fees have a lengthy history in Ontario, and the revenue derived therefrom is substantial. For example, the evidence presented to this Court indicated that in 1993 and 1994, probate fees collected in Ontario totalled $51.8 million and $52.6 million, respectively. This revenue is used to defray the costs of court administration in the province. An immediate deprivation of this source of revenue would likely have harmful consequences for the administration of justice in the province. The declaration of invalidity is therefore suspended for a period of six months to enable the province to address the issue.

 

[205]       The importance of the Court’s need to consider suspending the effect of a wide-reaching and significant ruling as a matter of course was also discussed by the Supreme Court of Canada in Corbiere v. Canada (Minister of Indian and Northern Affairs), [1999] 2 S.C.R. 203:

[110]    In determining the appropriate remedy, the Court must be guided by the principles of respect for the purposes and values of the Charter, and respect for the role of the legislature: Schachter v. Canada, [1992] 2 S.C.R. 679, at pp. 700-701; Vriend, supra, at para. 148. The first principle was well expressed by Sopinka J. in Osborne v. Canada (Treasury Board), [1991] 2 S.C.R. 69, at p. 104:

 

In selecting an appropriate remedy under the Charter the primary concern of the court must be to apply the measures that will best vindicate the values expressed in the Charter and to provide the form of remedy to those whose rights have been violated that best achieves that objective. This flows from the court's role as guardian of the rights and freedoms which are entrenched as part of the supreme law of Canada.

...

 

[118]    The above principles suggest, in my view, that the appropriate remedy is a declaration that the words "and is ordinarily resident on the reserve" in s. 77(1) are invalid, and that the effect of this declaration of invalidity be suspended for 18 months. The suspension is longer than the period that would normally be allotted in order to give legislators the time necessary to carry out extensive consultations and respond to the needs of the different groups affected. It will also allow Parliament, if it wishes, to modify s. 77(2) at the same time, which contains the same residency requirement for bands whose councillors are elected in electoral sections, and which, given the values espoused in this decision, will also require revision to conform with s. 15(1). Severing the offending words from the rest of the statute will ensure that, should Parliament choose not to act, all non-residents will be included as voters under s. 77(1), but the nature of band governance and the requirements for voting will otherwise remain the same.

 

[119]    I recognize that suspending the effect of the declaration, combined with the extension of the suspension for such a long period is, in the words of the Chief Justice in Schachter, supra, at p. 716, "a serious matter from the point of view of the Charter. A delayed declaration allows a state of affairs which has been found to violate standards embodied in the Charter to persist for a time despite the violation". However, this best embodies the principles of respect for Charter rights and respect for democracy that should guide remedial considerations. Should Parliament decide to change the scheme, it will have an extended period of time in which to consult with those affected by the legislation and balance the affected interests in a manner that respects Aboriginal rights and all band members' equality interests. Should Parliament not change the scheme, off-reserve band members will gain voting rights within the existing scheme.

 

 

(See also Kingstreet, above at para. 32)

 

 

[206]       The Courts have in this type of context been willing to suspend the effect of an adverse Order for a period of at least 6 months. The suspension is provided as a matter of knowledge of the potential effects upon Government and the resources of the Crown and not as a result of any formal motion for a stay of such an Order. (Eurig, above; Corbiere, above; R. v. Guignard, [2002] 1 S.C.R. 472 at paras. 32 – 34)

 

CONCLUSION

[207]       Given the above, it would be unfair and unrealistic to expect the Crown to immediately consider, fully digest and react to the nuances and levels of reasoning that might be expected to accompany this decision in this matter at any time sooner than 6 months.

 

JUDGMENT

 

THIS COURT DECLARES that

(1)        Part II Licence Fees prescribed by section 11 of the Regulations are a tax. Section 11 of the Regulations is ultra vires the authority conferred on the CRTC by section 11 of the Broadcasting Act to establish schedules of fees; this declaration in respect of the Part II Licence Fees prescribed by section 11 of the Regulations is suspended for a maximum of nine(9) months (prior to the next November fee date) to allow the appropriate branch of government to react and to put into effect this first part of the judgment;

 

THIS COURT ORDERS that

(2)        Corporate Plaintiffs and the Fee Paying Members of the CAB are not entitled to the return of monies paid pursuant to section 11 of the Regulations for the years described in the Plaintiffs ’ pleadings;

 

(3)        Plaintiffs’ costs be paid on a solicitor and client basis.

 

 

 

 

 

 

 

Obiter

Recognizing democratic and constitutional principles, based on the separation of powers, it is for the appropriate branch of government, not the Court, to decide on an alternate policy, further to this judgment, by which to regulate on the matter; nor is it for this Court to bring the matter any further (or substitute itself) in respect of the issue of recovery; however, in addition, it would seem incumbent from a moral standpoint, if not, as decided by this Court, a legal one, that negotiations should begin with the parties to return what is feasibly, through discussions, equitably concluded. This obiter is in recognition of this decision and of where it is considered that the law presently stands as based on former Supreme Court of Canada judgments prior to a decision in Kingstreet which is awaited from the Supreme Court of Canada further to its deliberation.[1]

 

In the final analysis, what precedent will be given to this and future generations? Thus, in regard to fees for services or when specified, the “privilege” of a service, what indication will be given as to how public coffers are filled? Under what alleged reasons and for what purposes are funds dispersed? What and where is the final accounting? Under the separation of powers, that is for each branch of government to answer for itself according to its jurisdiction. The respective answers or silences will resonate.

 

 

 

 

“Michel M.J. Shore”

 

FEDERAL COURT

 

SOLICITORS OF RECORD

 

 

 

DOCKET:                                           T-2277-03 and T-276-04

 

STYLE OF CAUSE:                          CANADIAN ASSOCIATION OF BROADCASTERS (THE PLAINTIFF ASSOCIATION), GROUP TVA INC., CTV TELEVISION INC., THE SPORTS NETWORK INC., 2953285 INC. (o.b.a. DISCOVERY CHANNEL CANADA), LE RÉSEAU DES SPORTS (RDS) INC., THE COMEDY NETWORK INC., 1163031 ONTARIO INC., (o.b.a. OUT DOOR LIFE NETWORK), CANWEST MEDIAWORKS INC., GLOBAL TELEVISION NETWORK QUEBEC LIMITED PARTNERSHIP, PRIME TV, GENERAL PARTNERSHIP, CHUM LIMITED, CHUM OTTAWA INC., CHUM TELEVISION VANCOUVER INC., and PULSE24 GENERAL PARTNERSHIP (THE CORPORATE PLAINTIFFS)

 

and

 

HER MAJESTY THE QUEEN

 

and

 

VIDÉOTRON LTÉE, VIDÉOTRON (RÉGIONAL) LTÉE, and CF CABLE TV INC.

 

and

 

HER MAJESTY THE QUEEN

 

 

PLACE OF HEARING:                    Ottawa, Ontario

 

DATE OF HEARING:                      November 20 to 28, 2006

 

REASONS FOR JUDGMENT

AND JUDGMENT:                           SHORE J.

 

DATED:                                             December 14, 2006

 

APPEARANCES:

 

Ms. Barbara A. McIsaac Mr. R. Benjamin Mills Mr. Howard R. Fohr	FOR THE PLAINTIFFS
Mr. F. B. (Rick) Woyiwada Mr. R. Jeff Anderson Mr. Francisco Couto Mr. Alexander Pless	FOR THE DEFENDANT

 

SOLICITORS OF RECORD:

 

McCarthy Tétrault LLP Ottawa, Ontario	FOR THE PLAINTIFFS
JOHN H. SIMS, Q.C. Deputy Attorney General of Canada	FOR THE DEFENDANTS