Friday, February 10, 2006

Christie v. British Columbia: Round Three

In round one of lawyer Dugald Christie's suit against the Provincial Government of British Columbia, Madam Justice Koenigsberg granted a declaration that the provincial sales tax on legal fees is unconstitutional "to the extent that it applies to legal services provided for low income persons." Her reasons can be found here.

I wrote a post about round two here. The British Columbia Court of Appeal by a three to two majority granted "a declaration that to the extent that the Act purports to tax legal services related to the determination of rights and obligations by courts of law or independent administrative tribunals, it is unconstitutional as offending the principle of access to justice, one of the elements of the rule of law." This decision can be found here.

Round three concluded this morning, with the majority judges in the Court of Appeal decision giving supplementary reasons dealing with the form of the order, and with the Government's request to suspend the order for some months.

Mr. Christie's lawyer, Darrell Roberts QC, argued that the Social Services Tax Amendment Act (No. 2), S.B.C. 1993, c. 24, which is the legislation extending sales tax to legal services, should be declared unconstitutional in its entirety. He argued that it was inappropriate to read down this legislation. He further argued that the language of the form of the order proposed by the government tracking the language from the reasons for judgment of the majority of the Court of Appeal quoted above is "not language capable of enforcing the rights and obligations of the parties." Clearer language is needed. The proposed wording creates uncertainties.

The Court of Appeal rejected these arguments. Mr. Justice Donald reasoned that the court should go no further in interfering with legislation than is necessary to protect constitutional rights. Thus reading down is appropriate.

With respect to Mr. Roberts' other arguments Donald J. wrote:

No effort was made by the Law Society to intervene or to adduce evidence as to the uncertainties referred to by counsel. But although it is regrettable that our judgment has apparently created difficulties for the profession, Schachter among other cases makes it clear that the court should not involve itself in attempting to draft an order that would effectively serve as a new statutory provision or regulation on behalf of the Province. This is one of those cases in which, to quote again from Schachter, drafting more detailed rules "would be a difficult and complex endeavor that [does] not flow with precision from the requirements" of the Constitution. (Para. 55) At the same time, we are bound to respect the principle of minimal impairment and the role of the Legislature. For that reason, it would not in our view be appropriate to attempt a more detailed formulation of the intended scope of invalidity on the one hand, or to strike down the entire Act on the other.

The Court of Appeal rejected the Province's request to suspend the application of the judgment.

You can read this decision here.

My own view is that the Court of Appeal by reading down the legislation did in effect re-write it. Unfortunately, the Court did not re-write it in the clear manner that a taxing statute requires. It would have been preferable for the Court of Appeal to strike the legislation down, and let the Provincial Legislature pass new legislation--if it can--that meets the Court's delineation of the constitutional principles.

As things stand, every lawyer in British Columbia has to decide on each bill whether the tax applies. In my first post on this issue, I had tentatively suggested that we would still have to charge "the tax on legal fees for such services as giving estate planning advice, drafting wills and advising and assisting executors with probate and estate administration," but not on services involving a lawsuit or potential lawsuit. After further thought, my earlier view was too simplistic. Even a straightforward uncontested probate application involves the "determination of rights and obligations by courts of law." If I am giving advice on estate planning, I am often advising my clients of the rights that others may have to make claims in court to their estates.

Until these issues are resolved, lawyers may collect the tax on their legal bills, and hold the sales tax they collect in trust until we get some clearer direction. This is not entirely satisfactory. If the tax when collected by the government restricts access to justice, how is access to justice enhanced if the same money sits in a law firm's trust account? The lawyer's client is still out of pocket, and does not know if he or she will get the money back.

Nor am I confident that the application of the tax is going to be clarified soon. The Court of Appeal declined to do it. The Law Society of British Columbia has not given an opinion on when the tax applies. The Government seems more focused on fighting this case, than on finding a satisfactory resolution.

Round Four will likely by in the Supreme Court of Canada.

Round Five may be at the ballot box when the party that opposed the sales tax on legal services when in opposition, but has gone one full term without abolishing it, faces re-election.

[Since I wrote this post, the Supreme Court of Canada has released its decision holding that the sales tax on legal fees is constitutional. You can read about it here.]

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