Honourable senators, I am speaking to you from Treaty 6 territory and the homeland of the Métis. In treaty territory, I can tell you the sun is shining, the grass is growing and the river is flowing, and that’s the way it should be.

I rise to speak in favour of the recommendation of the Senate Standing Senate Committee on Legal and Constitutional Affairs that the Senate adopt Motion No. 14. I would like to say that it made good sense for the Senate to send this to the committee. I appreciated the opportunity to attend meetings of the committee to hear witnesses.

The witness for CP Rail advised that the corporation launched the litigation in Saskatchewan with intent to eventually achieve a win-win result. By that, he meant investment or partnership between Canadian Pacific and the Saskatchewan government to develop rail-line infrastructure. My interpretation of that is this: CP is attempting to lever additional monetary subsidies for rail‑line maintenance.

The question of fairness has arisen in this debate. I ask my colleague senators these questions: Is it fair for a corporation to claim recovery of taxes it paid since 1905 based on a historic anomaly created 142 years ago? Is it fair for that same corporation to assert a claim to be exempt from taxes in perpetuity today? Is it fair to give one corporation a huge advantage in the marketplace — a place where other competitors must pay their fair share of taxes but not Canadian Pacific? Is it fair to force the taxpayers of Saskatchewan to provide an unjust, unfair enrichment to a corporation listed on the New York Stock Exchange that recorded a profit of $2.8 billion in 2021?

The answer to each question is a resounding no, in my opinion. It is absolutely patently unfair and unconscionable to foist that burden, that responsibility, on the citizens of Saskatchewan.

In my view, “CP Kansas City,” as its name will become, comes to court seeking fairness with “unclean hands,” and that should never be rewarded. To explain, CP was allowed to abandon passenger service in Canada. They were allowed to abandon branch rail lines throughout Canada, and particularly Western Canada. They obtained subsidies to their liking in 1966. They were described in 1966 by Minister of Transport John Pickersgill as a fine example of good corporate citizenship when they agreed to end the in-perpetuity tax exemption.

Today, I say to you that it is open to draw the opposite conclusion from CP’s current actions. In my opinion, if we balance the scales of justice today in the modern era, those scales weigh heavily in favour of the taxpayers of Saskatchewan and not Canadian Pacific Kansas City rail.

The question of retroactivity has arisen in this debate. Concern about questions related to retroactive application of law is valid. Legitimacy of retroactivity is always open to debate. It deserves examination. The courts and the public are well aware of the unfairness of the concept unless there is a legitimate reason. Retroactive application of tax law is legitimate in some narrow circumstances.

The Supreme Court of Canada dealt with this issue in 2007 in the Kingstreet case. The court specifically noted the possibility for Parliament or a legislature to enact valid taxes and apply them retroactively to limit the recovery of previously paid ultra vires taxes. The Supreme Court of Canada made it clear that retroactive application of tax law is possible, lawful and constitutional.

In some circumstances, that mechanism may provide an equitable remedy. In my opinion, it is a legitimate remedy to an obvious inequity in the situation we have before us.

The amendment sought by the people of Saskatchewan will not provide a blanket precedent that would allow a hypothetical rogue government to pass laws with retroactive application for some nefarious purpose. The case is far too narrow and very unique. Its wide application is extremely unlikely.

Retroactivity in this case is the only fair way to protect the innocent taxpayers of Saskatchewan from the heavy fiscal responsibilities created by historical anomalies and the fact that CP took up the cudgel of litigation.

I’d like to pause there for a second to consider this historical context. Sir John A. Macdonald did not want one thin dime of financing for the railway to come from the United States of America. He needed Canadians to form a consortium of investors. Canadians George Stephen, from the Bank of Montreal, and Donald Smith, from the Hudson’s Bay Company, stepped up. They sought investors from the United Kingdom, France, Germany and the Netherlands.

The Canadian consortium needed the kind of incentive Macdonald provided — a tax exemption in perpetuity. In February 1885, George Stephen wrote to Macdonald that he and Smith would be considered fools by every businessperson in Canada for taking on such a high-risk venture. Why? Because they did not know the exact cost to build a rail line north of Lake Superior and through the Rocky Mountains. They did not know with any real certainty when revenue would flow to repay that debt. In fact, at one point, Stephen left Parliament Hill in Ottawa — he was an MP — to go home to Montreal, believing that he was about to go bankrupt; he was disillusioned and despondent. But that story changed miraculously.

Stephen and Smith became billionaires in today’s meaning. They retired in the United Kingdom and were appointed to the House of Lords: Stephen as Lord Mount Stephen and Smith as Lord Strathcona.

Historical context is very important. I want to remind you of this historical fact. When government surveyors came to the west to survey the land for the railway and the newcomers, they were turned back peacefully by the First Nations people. They were told they were not welcome on the land. That act accelerated the making of treaty with the First Nations in order to fulfill the national dream of a coast-to-coast railway.

As Senator Pate has mentioned in debate, and as Senator Clement raised in the committee and in public, there is much unfinished treaty business in this country. There is a lot of history to examine. The good intentions of the treaty parties were replaced by the paternalistic policies inherent in the Indian Act just a few weeks after Treaty 6 was created.

Now back to the CPR. I do not believe one can find a government in the last 200 years in the Western world that has given a corporate tax exemption to a single corporation in perpetuity and, in addition, incorporated the exemption in the Constitution of the said country. The clause in question is extremely rare and is probably the only example of its kind. The Legal and Constitutional Affairs Committee heard expert opinions of three constitutional law experts. I can say, in my opinion, it is extremely rare for Canadian constitutional law experts to be able to agree on one idea concisely and congruently. They found motion 14 is wholly constitutional.

In addition, the Senate has four constitutional experts, not all lawyers, in our midst: Senator Gold, Senator Harder, Senator Cotter and Senator Dalphond. I believe the first three senators have all commented favourably on the constitutional legitimacy of motion 14.

I have a caution. I believe there is one precedent the Senate should be loath to set. That precedent is the Senate rejecting the report of the Standing Senate Committee on Legal and Constitutional Affairs and, in effect, thwarting the will of the elected members of the Legislative Assembly of Saskatchewan and the will of the elected members in the other place. That will cause major public opprobrium in Manitoba, Saskatchewan, Alberta and, I believe, elsewhere in Canada. I ask any senator thinking about voting against the motion to give due consideration to that precedent-setting consequence. Thank you.

Honourable senators, when I hear the words “constitutional amendment,” I believe the matter being considered to be a serious one. We have heard that there have been constitutional amendments in the past, such as when the name of the province of Newfoundland was changed to Newfoundland and Labrador. We also heard other amendments being referenced by honourable colleagues during earlier debates, and we have heard that some of these amendments have been legally challenged after the adoption of the amendment.

The amendment now under consideration has been approved by the Saskatchewan legislature and the lower chamber without debate or committee consideration, including witness input. Only the Senate of Canada has really spent time studying the bill with the involvement of witnesses.

I have two issues that I think we as senators need to reflect upon. First is the retroactivity consideration contained in the bill and the fact that we have the issue before the courts in Saskatchewan. The question of retroactivity for me is a question of fairness. We have heard that there have been numerous occasions over the past decades when a constitutional amendment could have been initiated but was not. Now we’re being asked to make the amendment while, at the same time, a court case could be influenced by such an action.

When witnesses at our committee were asked if they felt the current court case could be influenced if this amendment were passed before the conclusion of the court case, there was, I would propose, some belief that the amendment could in fact have an impact on the case. I questioned the Attorney General of Saskatchewan. I asked if he believed, given the primacy of the Constitution, that the amendment of the Constitution could in fact have an impact. His response was:

It would be our position, senator, that it would have some effect on the litigation, but we’re not sure what effect it is going to have.

In conclusion, honourable senators, why would we put the Senate in the position of agreeing with the proposed amendment when even the Attorney General of the Province of Saskatchewan is certain there will be some effect on the court case, but to what extent he’s unsure?

After all of these decades, the urgency of this bill on the eve of a court decision seems to be a way to make a change today that could influence tomorrow. Why would we not simply allow the court case to come to a conclusion over the next few weeks, after which the appropriate amendment could be introduced to allow for the request of a constitutional amendment?

Colleagues, I rise today to express my reservations about the motion before us. These concerns are based on the testimony heard over four hours at the Standing Senate Committee on Legal and Constitutional Affairs and a review of the legal proceedings initiated in Saskatchewan, debates in the legislature of that province and in the House of Commons, relevant laws, and the 313-page ruling that the Federal Court of Canada handed down on September 29 in Canadian Pacific Railway Company v. Canada.

I will begin by giving an overview of the context and then explaining my reservations.

In 1880, unable to deliver on the promise to B.C. to be linked to the rest of Canada by a railway, the federal government signed a contract with a group of entrepreneurs, who would become the founders of the Canadian Pacific Railway Company.

In consideration for constructing the railway and operating it in perpetuity, the contract provided, among other things, for the grant of $25 million to the company; the transfer of 25 million acres of what was considered Crown land to be sold to settlers brought to the West by the company; and a tax exemption in perpetuity in connection with certain property.

Commenting on the contract, Justice Nesbitt of the Supreme Court of Canada wrote, in 1905, in Canadian Pacific Ry. Co. v. James Bay Ry. Co.:

. . . the undertaking was thought to be so hazardous that exceptional privileges were deemed necessary to induce the contractors to enter upon the undertaking . . .

Today, we are dealing with the tax exemption found at clause 16 of the contract, which reads as follows:

The Canadian Pacific Railway, and all stations and station grounds, work shops, buildings, yards and other property, rolling stock and appurtenances required and used for the construction and working thereof, and the capital stock of the Company shall be forever free from taxation by the Dominion, or by any Province hereafter to be established or by any Municipal Corporation therein . . .

In other words, the agreed upon exemption in connection with certain property was to include federal and municipal taxes as well as provincial taxes should provinces be established.

In 1905, Parliament created the province of Saskatchewan from what was once more considered federal Crown land. Mindful of the government obligation to continue the tax exemption, Parliament included, at section 24 of the Saskatchewan Act, a restriction preventing the use of provincial taxation powers in a way that infringes clause 16 of the contract.

It is not disputed that, since 1905, the company has paid all the provincial taxes imposed from time to time by Saskatchewan, and until 2008, the company did not argue that portions of these taxes could be related to property covered by the tax exemption found in the contract.

However, the company changed its position further to an important 2007 judgment by the Supreme Court of Canada in Kingstreet Investments Ltd. In that decision, the court concluded that amounts paid pursuant to a tax later found unconstitutional may be reclaimed without statutory time limits. In other words, a government can never benefit from collecting an unconstitutional tax.

Being of the view that the tax exemption included in the 1880 contract enjoys constitutional protection, thus making ultra vires any tax collected contrary to it, the company initiated legal proceedings to recover certain amounts paid to Revenue Canada and to Saskatchewan, Alberta and Manitoba. In the Court of Queen’s Bench for Saskatchewan, the company stated that if it were to prevail, it could be entitled to a refund as of December 31, 2020, of about $341 million. This estimate breaks down as follows: fuel taxes $248 million, sales taxes $49 million, income taxes $14 million and corporation capital tax $4 million.

The purpose of the constitutional amendment before us is clear: to remove from Saskatchewan’s internal constitution the obligation to honour the tax exemption found at clause 16 of the contract, retroactive to 1966.

I will now express my concerns. My first concern, which I share with Senator Simons and Senator Tannas, is that the motion would repeal Saskatchewan’s obligation back to 1966. Before the committee, the constitutional experts concurred that the Legislative Assembly of Saskatchewan, the House of Commons and the Senate have the authority together to amend section 24 of the Saskatchewan Act by resorting to section 43 of the Constitution Act, 1982, called the bilateral amendment procedure.

They also agreed that this authority should include the ability to make an amendment that applies retroactively, adding that the motion, if adopted, will be the first constitutional amendment with retroactive effect, the first in Canadian history.

However, these experts, especially Professor Benoît Pelletier, to whom Senator Tannas just referred, expressed concerns about how the retroactive application of a constitutional amendment may impact taxpayers’ settled expectations, as well as legal principles such as vested rights, including private rights, and finally, the integrity of the rule of law.

My second concern is that the Saskatchewan government has designed this constitutional amendment to affect the outcome of ongoing litigation before that province’s court. I share the concerns of Senator Quinn. Essentially, Saskatchewan seeks to extinguish the company’s right to argue that it is entitled, pursuant to section 24 of the Saskatchewan Act, to claim a refund in connection with some taxes.

Today, we are asked to adopt this motion without further delay because the trial in Saskatchewan is set to resume soon. I am disheartened to see a province using the constitutional amendment process to interfere with the outcome in a pending legal proceeding.

My third concern is the lack of need for a constitutional amendment.

Colleagues, you may not be aware of it, but the scope of the tax exemption was the subject of the recent Federal Court judgment I referred to at the beginning of my speech. This judgment rejected the company’s arguments that it was entitled to a refund of some federal taxes. In fact, the judge adopted the federal government’s arguments and concluded that the tax exemption, as drafted, was not intended by the parties to cover income tax, fuel tax and what is often called carbon tax.

The judge concluded that the exemption could apply only to the federal tax on capital stock of the company, a tax repealed in 2006 and refunded by the Canada Revenue Agency to the company before the Federal Court trial, rendering that point moot.

Of course, if the scope of the exemption does not include federal income tax or federal fuel tax, it cannot include Saskatchewan income tax or fuel tax. Moreover, it cannot logically include Saskatchewan sales tax, because excise taxes are exempted. In fact, the exemption could only apply to Saskatchewan’s capital tax on large corporations, a tax reduced to zero in Saskatchewan in 2008.

In other words, if the interpretation of the contract made by the Federal Court is adopted by the Saskatchewan courts, the amount at stake is not $341 million, but a mere $4 million.

Some will reply that this judgment has been appealed by the company and is now pending before the Federal Court of Appeal, and thus not final. This is true. But why not wait for that decision and possibly that of the Supreme Court of Canada before resorting to the ultimate tool, a retroactive constitutional amendment?

The answer seems to be that the Saskatchewan government prefers to impose an outcome in the provincial courts. However, judicial proceedings will continue at the federal level. Thus, if the Federal Court judgment is confirmed in appeal regarding the scope of the contractual tax exemption, the amendment’s sole impact will be to have prevented a refund of $4 million to the company by Saskatchewan. Is that worth a constitutional amendment, one that is precedent-setting on retroactivity? I believe not.

Unfortunately, the Federal Court judgment was not mentioned in the other place or in the Saskatchewan legislature. Incidentally, in both places, as Senator Harder said, the motion was adopted without any witnesses being called, including experts, of course.

My fourth concern is about another reason advanced by the Saskatchewan government to justify the motion. The preamble of the motion states, “Whereas on August 29, 1966 . . . [the] Company had no objection to constitutional amendments to eliminate the tax exemption . . . .”

Colleagues, that assertion has been rejected by the Federal Court. Based on days of evidence and arguments, the trial judge concluded that in 1966 the company renounced only the exemption in connection with municipal taxes. In other words, the court found that the company did not agree to a constitutional amendment to eliminate the tax exemption in connection with federal and provincial taxes as alleged in the motion. Moreover, that conclusion of the Federal Court is accepted by the federal government that agrees that the contract is still binding, including clause 16.

An assertion to the contrary in the motion is even more surprising when made by the Saskatchewan government, considering that it elected to intervene in Federal Court proceedings. How could it ignore the judgment?

Unfortunately, many speeches in the other place have referred to this rejected assertion to justify supporting the motion, unaware of the Federal Court’s rejection of it. In my view, a government relying on a fact that has been proven false is showing the utmost disregard for the courts of this country and their mission to determine disputed facts.

My fifth and last concern is about the likely consequence of the adoption of the motion to the federal treasury.

Before the committee, the federal Justice Department acknowledged that the contract still binds the federal government and that the scope of the tax exemption clause will not be affected by Saskatchewan’s constitutional amendment.

Thus, if the adoption of the constitutional amendment results in a loss for the company of some provincial tax exemption in Saskatchewan, the company could sue the federal government for breach of contract and seek compensation.

Interestingly, no one in the House of Commons mentioned this possibility. In fact, many speakers claimed that the constitutional amendment is necessary to prevent a refund of $341 million to the company. The logic of this argument means, since the contract remains in force, that this substantial amount may accrue to the federal government. Surprisingly, the risk that the federal treasury would be left holding the bag seems to be of no concern to the motion’s supporters.

On the other hand, if the federal government prevails again in appeal, then this unprecedented retroactive constitutional amendment would be proven to have prevented a refund of a mere $4 million by Saskatchewan, most likely to be compensated by the federal government as it did for the federal tax on capital.

In conclusion, colleagues, I will vote no to this motion, which I consider to set a dangerous precedent. I don’t have to decide if some people may argue that it is illegal or an abuse of the constitutional amending process, but I think the legitimacy of the motion has been proven to be non-existent. Thank you.

Senator Richards wishes to ask a question. You only have about 1 minute and 10 seconds left, Senator Dalphond. Do you wish to take a question?

Yes.

Senator Dalphond, will this concern other industries across the country? Will this set a precedent that will open up a litigation can of worms?

In my view, this country is based on the principle that a contract is the law of the parties, and the contract should be respected until amended. It was amended in 1966 to remove the tax exemptions for municipal taxes, but it was not amended to remove the other taxes, provincial and federal. Therefore, the rule of law shall apply and leave the courts to decide what is the scope of the exemptions and trust the court to make the right decisions and come to the right conclusions.

The Federal Court said that the federal Crown was right in the definition of the scope of the contract, and I don’t see why Saskatchewan is not ready to let its own courts decide if the scope of the contract is the scope that has been defined by the Federal Court.

Honourable senators, I wish to speak briefly in support of motion 14, which will adopt a resolution to amend The Saskatchewan Act.

The Legal and Constitutional Affairs Committee heard and reported that the proposed constitutional amendment is legal, including its retroactive aspect, and has recommended its adoption.

My remarks will focus on two process points and two points on the policy dimensions of the issue, which I will call the equities process.

First, our process. I want to thank Senator Tannas for his determination in seeing this motion referred to the Standing Senate Committee on Legal and Constitutional Affairs for consideration. As others have said, the Senate appears to have taken this important question more seriously than others, and this does honour to this chamber.

We learned a good deal about the motion from the parties significantly affected by it, giving them a hearing in a sense, and from experts. All of us from the committee came away better informed, more able to advise the Senate as a whole and more able to make the best possible decision with respect to this motion.

Thank you, Senator Tannas.

A second process point related to the substance of the issue itself. A multi-province approach to this historical anomaly, as Senator Simons suggested two days ago in her very fine speech, is or would be good policy but not an immediate option for a couple of reasons.

First, as Senator Dalphond has noted, this is a bilateral constitutional amendment, a Canada one-province amendment, and any motion and resolution therefore needs to be province specific. They have to be individual motions.

Second, the one before us is specific to Saskatchewan. Even if we would like to form a common front on this issue, despite efforts, none has been developed, and we have little choice but to deal with the amendment before us.

With respect to the equities, in one aspect of this, I hope to answer Senator Quinn’s concerns and, quite frankly, some of Senator Dalphond’s suggestions.

The first point is legal. CP gave up its provincial tax exemption in 1905. By that time, CP was doing just fine, thank you very much, and its initial investors, according to Pierre Berton and others, had become immensely wealthy and quite distinguished as a result of the transcontinental railway.

CP has paid provincial taxes uninterrupted for over a century. As Senator Arnot noted, it was lauded as a good corporate citizen by then Minister Pickersgill for additionally giving up the municipal tax exemption in the other place in 1966, having already given up the provincial tax exemption.

I want to suggest to you that any other understanding of provincial taxes is not plausible. How likely is it, for example, that Tommy Douglas, a provincial-rights premier and notoriously careful about his government’s finances, would only have lobbied Ottawa, as he did, for an end to CP’s municipal tax exemption if, at the same time, CP was still claiming an exemption for provincial taxes? Not a chance.

CP abandoned this provincial tax exemption long ago. Let me just say, as a matter of contract law — which you have just heard Senator Dalphond speaking to — if this was just a contract, the fact that CP abandoned its tax exemption would be today held against it. In any other context than constitutional law, legal doctrines of estoppel would prohibit CP from now coming forward and claiming this exemption.

The concept of estoppel, simply put, is that you are estopped from asserting a right that you have abandoned, which CP did, and that someone else has relied upon, which the Province of Saskatchewan has done. Unfortunately, estoppel is recognized everywhere except with respect to constitutional rights. With the CP tax exemption, long abandoned, embedded in the Constitution, CP has been able to get around this estoppel problem and raised, a century later, something that in any other context it could not do.

As Senator Dalphond has noted, the Supreme Court of Canada decision in Kingstreet enabled taxpayers to go after present and back taxes that are found to be ultra vires. CP combined these fortuitous developments to reassert its long-abandoned exception from provincial taxes and now seeks to pocket in its claim up to $340 million from the Government of Saskatchewan, but essentially from the taxpayers of Saskatchewan.

Perhaps it is what corporations, or at least the Canadian Pacific and Kansas City Southern Railway, think they should be doing on behalf of their shareholders, but it is unprincipled. If the idea of making the constitutional amendment retroactive sticks in your craw, this corporate manœuvre should stick in your craw even more — we have the authority to prevent it from happening.

My second policy or equities point is this: Only Saskatchewan, Alberta and Manitoba are exposed to this vulnerability. No one, for example, exempted the headquarters of CP from tax — wherever it might have been — in 1881. This has exposed these three provinces, since 1905 and 1881 respectively, to a vulnerability that is unacceptable in principle.

If nothing turned on it, we might have just left this to be a curious relic of Canada’s peculiar constitutional history, as, in fact, we have done since 1905, but something does turn on it. When a company revives this relic of history to try to assert a claim it has long since abandoned, this is nothing less than an attempt to exploit an unintended loophole to avoid paying taxes that, like other taxpayers, it has actually been paying for a very long time. What turns on it is a financial risk to three provinces that should never have been imposed on them in the first place.

Senator Dalphond argues that it’s a small financial risk. As a matter of principle, that’s irrelevant. The basis on which he makes that argument is an interpretation by a trial judge in another case that has no binding effect at all on Saskatchewan or the people of Saskatchewan.

In public finance terms, what turns on this is a potential burden of hundreds of millions of taxpayer dollars, a responsibility they should never have been asked to shoulder in the first place.

Your vote on this issue is significant, in part on the basis of what you will be saying to the people of Saskatchewan and what you will be saying about tax fairness to three provinces that Ottawa burdened unfairly over a century ago.

If you are inclined to vote against this motion because of its retroactivity, I ask to you keep in mind these two things: first, the unfairness of this burden from the get-go; and second, the opportunism pursued by CP in this venture. Thank you. Hiy hiy.

Is it your pleasure, honourable senators, to adopt the motion?

Some Hon. Senators: Agreed.

An Hon. Senator: On division.

(Motion agreed to, on division, and report adopted.)