The recent Supreme Court decision in Bank of Montreal v. Marcotte, 2014 SCC 55, is a helpful clarification of the applicability of consumer protection legislation and, more generally, the current principles regulating the separation of federal and provincial powers in Canada.
At issue in Marcotte were charges imposed on credit card customers for purchases in foreign currency. Such purchases are subject to a conversion charge, whereby a percentage of the converted amount is charged as a fee for the conversion service. Quebec’s Consumer Protection Act (“CPA”) imposes various rules on the content and disclosure of charges and fees in contracts extending variable credit. Marcotte, the representative plaintiff, filed a class action against a number of banks to seek repayment of the conversion charges imposed by the banks on credit card purchases made in foreign currencies on the basis that the conversion charges violated the CPA provisions. The banks argued, inter alia, that the CPA does not apply to it due to the Constitution Act, 1867, and that no repayment of the conversion charges was owed. The Supreme Court disagreed.
The Court rejected the banks’ argument that certain sections of the CPA did not apply to their conduct due to the constitutional doctrines of “interjurisdictional immunity” and “paramountcy.” The Court found that neither doctrine applied. The obligations imposed by the CPA did not impair the federal banking power. Nor could they be said to impair or undermine its purpose.
The Court reiterated that constitutional doctrine must foster “modern cooperative approach to federalism,” which favours, where possible, the application of statutes enacted by both levels of government.
The decision raises an interesting rule of law issue. On the one hand, cooperative federalism is an admirable goal, which permits both provincial and federal levels of government to participate in regulation of various economic activities without exceeding their jurisdiction. It avoids unnecessary conflict and court challenges. Moreover, where the goals of federal and provincial governments conflict, the doctrine of “paramountcy” retains its force to permit the federal government to override provincial legislation.
However, the decision is problematic for its inconsistency with prior caselaw. Interjurisdictional immunity is well-established doctrine, which arises out of the Constitution Act, 1867. As the Supreme Court has observed, the doctrine means that “classes of subjects” reserved by the Constitution for one level of government are immune from the application of legislation enacted by the other level of government. Immunity from such intrusion is “an integral and vital part of [Parliament’s] primary legislative authority over federal undertakings. If this power is exclusive, it is because the Constitution, which could have been different but is not, expressly specifies this to be the case; and it is because this power is exclusive that it preempts that of the legislatures both as to their legislation of general and specific application, in so far as such laws affect a vital part of a federal undertaking.” Bell Canada v. Quebec (Commission de la santé et de la sécurité du travail), at para. 255 (emphasis added).
However, in recent years, the doctrine has been seriously eroded. Thus, in Canadian Western Bank v. Alberta, the Supreme Court reversed its own precedent and found that federally chartered banks were, nevertheless, subject to provincial regulation in respect of insurance products they sold. In doing so, it offered a number of observations on the desirability of limited application of the doctrine of interjursidictional immunity, stating that it should be applied “with restraint.” The Marcotte decision represents another step in the erosion of the doctrine of “interjurisdictional immunity.”
Whether or not it is desirable for one level of government to possess spheres of competency that are “immune” from intrusion by the other is a question of political theory that is beyond the scope of this comment. It is a valid question, with which both the Founding Fathers of the American republic, and the politicians who stood at the foundation of the Canadian Confederation struggled. However, the Constitution Act, 1867 provides a particular model of federalism. The Act is not an aspirational set of generalized ideas. It is a technical legal document, and is meant to serve as the basis for practical jurisprudence. In the words of the Court, “it could have been different, but it is not.”
It is therefore not open to the judiciary, entrusted with interpreting but not amending the Constitution, to change the nature of the Constitution Act, 1867, and to introduce the concept of “cooperative federalism” into its interpretation, in response to the change in political conditions. Whatever the substantive merits of “cooperative federalism,” the Constitution Act, 1867 does not envisage and does not support this doctrine. Doctrinal flexibility demonstrated by the Canadian Western Bank and Marcotte decisions violates the division of powers, introduces uncertainty in the law and undermines the concept of stare decisis, which is central to our justice system.