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Reference by Attorney General of Alberta to Alberta

VIEWS: 55 PAGES: 183

									  Unofficial English Translation

Québec (Procureure générale) c. Canada (Procureure générale)   2011 QCCA 591
                            COURT OF APPEAL

CANADA
PROVINCE OF QUEBEC
REGISTRY OF QUEBEC

No.:      200-09-006746-090


DATE:     MARCH 31, 2011


CORAM: THE HONOURABLE J.J. MICHEL ROBERT, C.J.
                      ANDRÉ FORGET, J.A.
                      PIERRE J. DALPHOND, J.A.
                      MARIE-FRANCE BICH, J.A.
                      JEAN BOUCHARD, J.A.


ATTORNEY GENERAL OF QUEBEC
    APPLICANT
v.

ATTORNEY GENERAL OF CANADA
     RESPONDENT
and
ATTORNEY GENERAL OF ALBERTA
and
BARREAU DU QUÉBEC
and
CANADIAN BANKERS ASSOCIATION
     INTERVENERS


       REFERENCE RE: POWER OF PARLIAMENT TO REGULATE SECURITIES
No.: 200-09-006746-090                                                           PAGE: 2

[1]   The Government of Quebec, by Order in Council No. 720-2010, dated August 25,
2010, pursuant to section 1 of the Court of Appeal Reference Act, R.S.Q., c. R-23,
submitted the following constitutional question to this Court:
      [TRANSLATION]

      Are the provisions of the Proposed Canadian Securities Act, published by the
      Government of Canada on May 26, 2010, the essential purpose of which is to protect
      investors and regulate the securities industry, and the provisions to that effect in
      sections 295, 296, and 297 of the Budget Implementation Act, 2009, S.C. 2009, c. 2,
      ultra vires the Parliament of Canada under the Constitution Act, 1867?
[2]    Answer (Robert C.J.): Yes. Except for the criminal law provisions, the proposed
Act is ultra vires the legislative authority of the Parliament of Canada; however, sections
295, 296 and 297 of the Budget Implementation Act, 2009 are valid.

[3]    Answer (Forget, Bich and Bouchard JJ.A.): Yes. Except for the criminal law
provisions, which are valid pursuant to subsection 91(27) of the Constitution Act, 1867,
the proposed Act and section 297 of the Budget Implementation Act, 2009 are not within
the legislative authority of the Parliament of Canada pursuant to subsection 97(2) of the
Constitution Act, 1867.

[4]    Answer (Dalphond J.A.): No. The Parliament of Canada has jurisdiction under
subsection 91(2) of the Constitution Act, 1867 to enact the entire proposed Act; as
regards sections 295, 296 and 297 of the Budget Implementation Act, 2009, they are
valid.



                                             [s. J.J. Michel Robert]
                                             J.J. MICHEL ROBERT C.J.

                                             [s. André Forget]
                                             ANDRÉ FORGET J.A.

                                             [s. Pierre J. Dalphond]
                                             PIERRE J. DALPHOND, J.A.

                                             [s. Marie-France Bich]
                                             MARIE-FRANCE BICH J.A.

                                             [s. Jean Bouchard]
                                             JEAN BOUCHARD J.A.
No.: 200-09-006746-090                                                         PAGE: 3

Jean-Yves Bernard
Bernard, Roy
For the applicant

France Bonsaint
Hugo Jean
Direction générale des affaires juridiques et législatives (JUSTICE-QUÉBEC)
For the applicant

Claude Joyal
René Leblanc
Alexander Pless
Robert Frater
Joyal, Leblanc
For the respondent

D. Brian Foster, Q.C.
E. David D. Tavender, Q.C.
Jordan Milne
Fraser, Milner, Casgrain
For the intervener (counsel for the Attorney General of Alberta)

L. Christine Enns
(of the Ministry of Justice of Alberta, for the Attorney General of Alberta)

Raymond Doray
Mathieu Quenneville
Lavery, De Billy
For the intervener (Barreau du Québec)

Mahmud Jamal
Éric Préfontaine
Osler, Hoskin, Harcourt
For the intervener (Canadian Bankers Association)

Date of hearing:   January 17 to 20, 2011
No.: 200-09-006746-090                                                                                              PAGE: 1



                                     REASONS OF THE CHIEF JUSTICE



TABLE OF CONTENTS

I. PROCEDURAL BACKGROUND ................................................................................3
     1. Reference by Attorney General of Quebec to Court of Appeal of Quebec ............3
     2. Reference by Attorney General of Alberta to Alberta Court of Appeal ..................3
     3. Reference by Attorney General of Canada to Supreme Court of Canada .............3
     4. Motion to stay reference to Court of Appeal of Quebec ........................................4
II. QUESTION .................................................................................................................4
III. POSITIONS OF THE PARTIES .................................................................................6
     1. Attorney General of Quebec .................................................................................6
     2. Attorney General of Alberta ...................................................................................7
     3. Barreau du Québec ...............................................................................................7
     4. Attorney General of Canada .................................................................................9
     5. Canadian Bankers Association ...........................................................................10
IV. ANALYSIS ................................................................................................................11
     1. Method ................................................................................................................11
     2. Pith and substance analysis ................................................................................12
        a) Intrinsic evidence ...........................................................................................15
            i. The proposed Act .....................................................................................15
            ii. Sections of the Budget Implementation Act, 2009 ....................................22
        b) Extrinsic evidence ..........................................................................................23
            i. History of harmonization initiatives ...........................................................23
            ii. Parliamentary statements and debates ....................................................27
            iii. Expert reports ...........................................................................................28
            iv. Existing provincial legislation ....................................................................33
            v. Finding on pith and substance..................................................................37
     3. Provincial power over property and civil rights ....................................................40
        a) Historical origins ............................................................................................40
        b) Provincial residual clause ..............................................................................45
        c) Scope of power ..............................................................................................47
        d) Finding on property and civil rights power .....................................................52
     4. Federal jurisdiction over trade and commerce ....................................................53
        a) Interprovincial and international trade ............................................................55
        b) General jurisdiction ........................................................................................60
        c) Application to this case ..................................................................................63
            i. General scheme of regulation and supervision by a regulatory
                 organization ..............................................................................................64
            ii. Trade in general .......................................................................................64
No.: 200-09-006746-090                                                                                          PAGE: 2

         iii. Provincial inability .....................................................................................66
         iv. Requirement of unanimity.........................................................................72
         v. Finding on power over trade in general ....................................................73
   5. Sections from the Budget Implementation Act, 2009 ..........................................73
V. CONCLUSION .........................................................................................................74
         Introduction ......................................................................................................1
         Preliminary Comments ....................................................................................1
         Regulation of activities relating to securities is historically within the authority
              of two levels of government ........................................................................7
         Two major trends in conflict ...........................................................................24
         Authority of Parliament to enact the proposed Act .........................................27
      Comments on Parts 12 and 13 ...........................................................................50
      The Budget Implementation Act, 2009 ................................................................51
         Final remarks .................................................................................................52
         Conclusion .....................................................................................................54
No.: 200-09-006746-090                                                                            PAGE: 3




    I.   PROCEDURAL BACKGROUND

    1.   Reference by Attorney General of Quebec to Court of Appeal of Quebec
[5]    On July 8, 2009, the Government of Quebec, by Order in Council No. 869-2009,1
referred three constitutional questions to this Court for an opinion pursuant to the Court
of Appeal Reference Act.2 These questions concerned a federal government initiative to
establish a federal securities regulation commission.

[6]    On May 26, 2010, the Government of Canada published a proposed Securities
Act (hereafter ―proposed Act‖). In reaction, the Government of Quebec, by Order in
Council 720-2010, amended the questions referred to this Court, so that the reference
contained only one question.3

    2.   Reference by Attorney General of Alberta to Alberta Court of Appeal
[7]    On January 26, 2010, pursuant to the Judicature Act,4 the Lieutenant Governor in
Council of Alberta, by Order in Council No. 20-2010, referred two constitutional
questions to the Alberta Court of Appeal regarding the legislative authority of the
government of that province to enact a law that would oust the application of the
Securities Act5 in certain circumstances. In reaction to the publication of the proposed
Act, the Lieutenant Governor in Council amended the questions by Order in Council
No. 181-2010, dated June 9, 2010, to make reference to the proposed Act.



    3.   Reference by Attorney General of Canada to Supreme Court of Canada
[8]   On May 26, 2010, the day the proposed Act was published, the Government of
Canada referred to the Supreme Court of Canada, by Order in Council P.C. 2010-667,
the question of whether the proposed Act is within the legislative authority of the

1
     Government of Quebec Order in Council No. 869-2009 ―Concernant un renvoi à la Cour d'appel relatif
     à la compétence du Parlement du Canada en matière de valeurs mobilières‖ [concerning a reference
     to the Court of Appeal respecting the legislative authority of the Parliament of Canada over securities]
     dated July 8, 2009, A.G.Q., p. 1.
2
     Court of Appeal Reference Act, R.S.Q., c. R-23.
3
     Order in Council No. 720-2010 ―Concernant une modification au décret no 869-2009 du 8 juillet 2009
     concernant un renvoi à la Cour d‘appel relatif à la compétence du Parlement du Canada en matière
     de valeurs mobilières‖ [concerning an amendment to Order in Council No. 869-2009 dated July 8,
     2009, concerning a reference to the Court of Appeal respecting the legislative authority of the
     Parliament of Canada over securities], Factum of the AGQ, p. 71.
4
     Judicature Act, R.S.A. 2000, c. J-2, s. 26.
5
     Securities Act, R.S.A. 2000, c. S-4.
No.: 200-09-006746-090                                                                  PAGE: 4

Parliament of Canada and gave notice to all provinces and territories in accordance with
the Supreme Court Act.6 The attorneys general of the provinces of Ontario, Quebec,
Nova Scotia, New Brunswick, Manitoba, British Columbia, Saskatchewan, and Alberta
were granted intervener status in that proceeding, which is scheduled to be heard on
April 13 and 14, 2011.

    4.   Motion to stay reference to Court of Appeal of Quebec
[9]    On January 22, 2010, the Attorney General of Canada (hereafter ―AGC‖) asked
this Court to temporarily stay proceedings in this reference until June 20, 2010, a date
near the week marking the end of the session of Parliament. The AGC argued that the
reference was premature, interfered in the political and legislative processes,
threatened the judicial independence of the Court, and would be an unreasonable
burden on the Court‘s resources. A panel of this Court (Robert C.J. and Bich and Léger
JJ.A.) dismissed that motion in a judgment delivered from the Bench on March 26,
2010.7



     II. QUESTION
[10] The questions initially submitted by the Government of Quebec were the
following:

         [TRANSLATION]

         1. Do the provisions proposed in the Draft Securities Act annexed to the Final
         Report of the Expert Panel on Securities Regulation, January 2009, the essential
         purpose of which is to protect investors and regulate the securities industry, and
         the provisions pertaining thereto at sections 295, 296 and 297 of the Budget
         Implementation Act, 2009, S.C. 2009, c. 2, exceed the legislative authority of the
         Parliament of Canada pursuant to the Constitution Act, 1867?

         2. Does the Parliament of Canada have legislative authority pursuant to the
         Constitution Act, 1867 to enact legislation allowing issuers and registrants to
         voluntarily submit to a federal securities act to the exclusion of provincial
         legislation, as proposed in the Final Report of the Expert Panel on Securities
         Regulation, January 2009?

         3. Does the Parliament of Canada have legislative authority pursuant to the
         Constitution Act, 1867 to enact legislation stipulating that provincial securities


6
     Supreme Court Act, R.S.C., 1985, c. S-26, s. 53.
7
     Québec (Procureure générale) v. Canada (Procureure générale), 2010 QCCA 636.
No.: 200-09-006746-090                                                                 PAGE: 5

       acts are inapplicable, as proposed in the Final Report of the Expert Panel on
       Securities Regulation, January 2009?

[11] By a second order in council, the Government of Quebec replaced these
questions with a single question, as follows:

       [TRANSLATION]

       Are the provisions of the Proposed Canadian Securities Act, published by the
       Government of Canada on May 26, 2010, the essential purpose of which is to
       protect investors and regulate the securities industry, and the provisions to that
       effect in sections 295, 296 and 297 of the Budget Implementation Act, 2009,
       S.C. 2009, c. 2, ultra vires the Parliament of Canada under the Constitution Act,
       1867?

[12] In my view, this Court enjoys some discretion in answering this question. For
example, it should be noted that the question characterizes the purpose of the proposed
Act as being to protect investors and regulate the securities industry. This
characterization is by no means binding on us. Similarly, I think it would be acceptable
to conclude that some of the provisions of the proposed Act are within the jurisdiction of
Parliament while others are not, even though the question concerns the proposed Act
as a whole.

[13] This approach is consistent with this Court‘s discretion, pursuant to its appellate
jurisdiction, to rephrase questions of law raised by the parties. The Legislature intended
to transpose this discretion to our reference jurisdiction, under section 5 of the Court of
Appeal Reference Act:

       5. The court shall send to the Government for its information its opinion duly
       certified upon the questions so referred, giving its reasons in support thereof, in
       like manner as in the case of judgments rendered upon appeals brought before
       the said court. [Emphasis added.]

[14] This approach is also consistent with the fundamental role of the courts under the
distribution of powers, which role is to act as ―ultimate umpire of the federal system‖ and
requires, as Chief Justice Dickson noted in The Queen v. Beauregard, that it be
autonomous and completely independent of government.8 Finally, the Reference re
Secession of Quebec established that appellate courts have discretion to refuse to
answer reference questions if they are not directed to legal issues, or for pragmatic
reasons.9 The importance of the courts‘ autonomy and independence as umpires of
federalism and the discretion of appellate courts not to answer reference questions are
indicative of the need for this Court to exercise discretion in assessing a reference. This

8
    The Queen v. Beauregard, [1986] 2 S.C.R. 56 at para. 27.
9
    Reference re Secession of Quebec, [1998] 2 S.C.R. 217 at paras 27–31.
No.: 200-09-006746-090                                                                     PAGE: 6

discretion should, at the very least, allow the Court to define the questions on which its
opinion is sought as it sees fit, without being strictly bound by the terms of the question
submitted.



     III. POSITIONS OF THE PARTIES

     1.   Attorney General of Quebec
[15] The Attorney General of Quebec (hereafter ―AGQ‖) proposes that the pith and
substance of the proposed Act be characterized as the protection of investors in the
securities market through the supervision of intermediaries and the imposition on
issuers of duties to disclose. The AGQ argues that this sphere of activity has always
been recognized as being within the exclusive powers of the provinces in relation to
property and civil rights and matters of a merely local nature, pursuant to
subsections 92(13) and 92(16) of the Constitution Act, 1867.10 In the view of the AGQ,
the securities trade is still, generally speaking, a series of intraprovincial transactions,
despite the revolution in information technology and the globalization of stock
exchanges which occurred in recent decades.

[16] The AGQ also submits that the pith and substance of the proposed Act is not
within the federal trade and commerce power under subsection 91(2) of the Constitution
Act, 1867. The AGQ argues that the proposed Act does not meet three of the five
indicia established by the Supreme Court in General Motors of Canada Ltd. v. City
National Leasing11 and Kirkbi AG v. Gestions Ritvik Inc.12

[17] More specifically, the AGQ is of the opinion that the proposed Act does not concern
trade as a whole, but one industry in particular. In this sense, securities regulation is more
akin to the regulation of insurance, manufacturing, the oil industry, professional bodies or
consumer protection than to the regulation of business corporations or competition.
Further, the AGQ argues that the proposed Act is not of such nature that the provinces,
jointly or severally, would be constitutionally unable to enact it. In this regard, the AGQ
submits that the current system is considered to be one of the best in the world in terms
of regulation. The AGQ adds that the objective of reducing systemic risks to the
financial system cannot be used to otherwise characterize the pith and substance of the
proposed Act, since the pursuit of this objective is not its dominant characteristic.
Finally, the AGQ argues that the proposed Act‘s application will not be compromised by
the failure of one or more province or locality to opt in and notes that the proposed Act


10
      Constitution Act, 1867 (U.K.), 30 & 31 Vict., c. 3, reproduced in R.S.C. 1985, App. II, No. 5.
11
      General Motors of Canada Ltd. v. City National Leasing, [1989] 1 S.C.R. 641. (hereafter ―General
      Motors‖).
12
      Kirkbi AG v. Gestions Ritvik Inc., [2005] 3 S.C.R. 302, 2005 SCC 65 (hereafter ―Kirkbi‖).
No.: 200-09-006746-090                                                          PAGE: 7

itself contemplates the possibility that certain provinces may not take part in the
scheme.

[18] Finally, we note that the AGQ considers sections 295, 296 and 297 of the Budget
Implementation Act, 200913 to be invalid by their inseverability, since they are ancillary
to the proposed Act and share its pith and substance.

     2.   Attorney General of Alberta
[19] The Attorney General of Alberta (hereafter ―AGA‖) proposes a broader
characterization of the pith and substance of the proposed Act than does the AGQ. In
the AGA‘s view, the pith and substance of the proposed Act is to regulate the securities
trade to protect investors, ensure a fair market, prevent systemic risks, and foster
interprovincial and international cooperation among securities authorities.

[20] The AGA submits that such an act falls within the provinces‘ property and civil
rights power since it essentially deals with transactions of a local nature between
provincially registered intermediaries. The fact that some issuers or registrants are
located outside the province would only have an incidental effect on interprovincial or
international trade and would not change the pith and substance of the proposed Act.

[21] The AGA argues that the strictness of the evaluation of Parliament‘s ability to
enact the proposed Act pursuant to its general trade and commerce power must reflect
the magnitude of the possible intrusion into provincial jurisdiction. In the present case,
the AGA submits that recognizing a federal power in respect of this subject matter
would open the floodgates, draining the property and civil rights power of its content and
upsetting the balance of federalism by condemning other subject matters, such as
insurance, consumer protection, or the regulation of professionals, to the same fate.

[22] Finally, the AGA raises the three indicia set out in General Motors and Kirkbi.
The AGA argues that the proposed Act does not concern trade as a whole and that
case law and authors frequently make use of the expression ―securities industry‖.
Regarding the provincial inability indicium, the AGA submits that the provinces have
clearly demonstrated that under the Constitution, they may validly regulate this industry
by harmonizing their laws. The AGA argues that, on its face, the proposed Act fails the
unanimous participation indicium, since it provides for a voluntary opt-in mechanism.

     3.   Barreau du Québec
[23] The Barreau du Québec (hereafter ―Barreau‖) submits that it is intervening
because of the issues of legal and institutional consistency raised by this reference,
particularly with regard to Quebec civil law. The Barreau argues that the proposed Act


13
      Budget Implementation Act, 2009, S.C. 2009, c 2.
No.: 200-09-006746-090                                                                      PAGE: 8

threatens the unique nature of Quebec‘s economy and thus the principle of cooperative
federalism.

[24] The Barreau submits that the pith and substance of the proposed Act falls within
the provincial property and civil rights power. It argues that case law has systematically
treated the protection of the public as part of this power, as are the creation of property
rights, the characteristics of such rights, and their exchange by contract. Section 9 of
the proposed Act, entitled ―Purposes of Act‖, is more of a ploy to provide a constitutional
justification for Parliament‘s legislative action than it is a reflection of the Act‘s pith and
substance. The Barreau submits that the proposed Act pursues macroeconomic
regulation objectives through the same means as those currently used by the provinces.

[25] The Barreau adds that [TRANSLATION] ―the security of the financial system‖ is not
a subject matter under the Constitution because it was not explicitly assigned by the
Constitution Act, 1867 and lacks the required singleness to be assigned to Parliament
by default. It is alleged that recognizing such a power would allow the federal
government to regulate any supplier of financial goods and services, such as credit
unions and companies in the fields of insurance, credit, or real estate.

[26] For reasons similar to those of the AGQ and the AGA, the Barreau submits that
the proposed Act does not meet the last three indicia set out in Kirkbi for finding
legislation to be within Parliament‘s general trade and commerce power. It argues that
the securities industry shares a large number of similarities with the insurance industry,
which is recognized as being within provincial jurisdiction. It adds that Parliament does
not have the required authority to enact the proposed Act under the double aspect
doctrine or pursuant to its interprovincial and international trade power.

[27] Furthermore, the Barreau submits that a negative response to the reference
question would go against the principle of cooperative federalism developed by the
Supreme Court, the fundamental objectives of which are to reconcile unity with diversity,
promote democratic participation at the local and regional levels, and foster cooperation
among governments for the common good. The Barreau argues that the recognition of
federal jurisdiction to enact the proposed Act would represent a shift toward a centralist
form of federalism and go against predictability in the division of powers. It would also
allow the provinces to renounce their legislative powers and delegate them to the
federal government, contrary to the principles established in Attorney General of Nova
Scotia v. Attorney General of Canada.14

[28] Finally, the Barreau submits that the sections creating criminal offences and
those in the Budget Implementation Act, 2009 are ancillary to the proposed Act and
must also be declared invalid.



14
     Attorney General of Nova Scotia v. Attorney General of Canada, [1951] S.C.R. 31, 49.
No.: 200-09-006746-090                                                                       PAGE: 9

     4.   Attorney General of Canada
[29] The AGC submits that the determination of the pith and substance of the
proposed Act rests on a very general assessment of the objectives sought and the
desired effects. In this case, the AGC defines the pith and substance as the betterment
of the economic well-being of Canada as a whole through the introduction of a
comprehensive regulatory regime for capital markets. The AGC submits that the
proposed Act, although similar to provincial legislation, has a different pith and
substance, since it is more comprehensive and does not pursue the same purpose. The
AGC notes that the efficacy of the proposed measure is not a relevant factor.

[30] The AGC argues that the fact that the courts have recognized the provinces‘
jurisdiction in respect of various aspects of the securities trade, as was the case in
Multiple Access Ltd. v. McCutcheon15 and Global Securities Corp. v. British Columbia
(Securities Commission),16 does not oust the jurisdiction of the federal government. The
AGC states that the proposed Act falls within the general trade and commerce power
granted to Parliament by subsection 91(2) of the Constitution Act, 1867, and may be
enacted under the double aspect doctrine.

[31] The AGC analyzes the indicia set out by the Supreme Court in General Motors
and repeated in Kirkbi in respect of the scope of the trade and commerce power, noting
that these indicia are not exhaustive. As a preliminary remark, the AGC notes that a
presumption of constitutionality applies in this case and that meeting the standard of
proof consists in establishing a rational basis for the impugned statutory power, rather
than rigorously proving all the facts alleged.

[32] Regarding the first indicium, the AGC submits that the proposed Act would set up
a comprehensive regulatory system to discourage trade practices that are harmful to
Canada‘s economy. This would bring securities in line with the other essential
components of Canada‘s financial system—banks, interest and insolvency—which are
all primarily within federal jurisdiction. The AGC further argues that the Canadian
Securities Regulatory Authority (hereafter ―Authority‖) meets the second indicium.

[33] The AGC contends that the proposed Act, as its Preamble indicates, is
sufficiently national and general in nature to meet the third indicium, since capital
markets are a key element of economic infrastructure. Securities regulation, by
imposing standards on all publicly traded business corporations regardless of which
industry they operate in, is more than a particular industry.

[34] The AGC further submits that the provinces are constitutionally incapable of
enacting securities regulation legislation and gives various examples illustrating this

15
      Multiple Access Ltd. v. McCutcheon, [1982] 2 S.C.R. 161 (hereafter ―Multiple Access‖).
16
      Global Securities Corp. v. British Columbia (Securities Commission), [2000] 1 S.C.R. 494, 2000 SCC
      21 (hereafter ―Global Securities‖).
No.: 200-09-006746-090                                                         PAGE: 10

point. Many transactions are interprovincial or international in scope since sellers,
buyers, and intermediaries may be located in different provinces. The AGC argues that
the provinces‘ ancillary power to regulate securities is not without limits. The AGC adds
that the territoriality principle prevents provincial securities authorities from imposing
their decisions in another province, or investors from seeking redress in provinces other
than the one where the securities were issued. Furthermore, the AGC submits that a
provincial authority‘s jurisdiction over federally incorporated business corporations is
limited, making action by a federal authority necessary. The AGC argues that the
provinces do not have the required authority to enact criminal law provisions and that a
province cannot represent Canada and defend Canada‘s interests in international
forums, such as the International Organization of Securities Commissions (hereafter
―IOSCO‖). The AGC concludes its arguments regarding this indicium by submitting that
the passport system has a number of shortcomings demonstrating the inherent
limitations of provincial cooperation in securities regulation.

[35] Finally, the AGC submits that although all provinces need to opt into the
proposed system, their membership in it is not mandatory. A lack of unanimity could
lead to inconsistent rules, uncoordinated enforcement, and varying levels of investor
protection. According to the AGC, the proposed Act reflects a flexible cooperative
federalism and is intended to be implemented gradually. This indicium should be
assessed on the basis of the objective of unanimous participation, rather the resulting
efficacy if unanimity is not achieved.

 5.   Canadian Bankers Association
[36] The Canadian Bankers Association (hereafter ―CBA‖), which represents
51 banks, claims intervener status as one of the most important participants in capital
markets. It submits the securities regulation system in Canada is unable to carry out its
role in the face of the profound changes that the market has experienced.

[37] It proposes five interpretative principles to guide this Court in its deliberations.
First, it submits that the Constitution Act, 1867 must be interpreted in an evolutionary
manner, taking into account current commercial realities. Further, like the AGC, the
CBA submits that a presumption of constitutionality applies to the proposed Act, that the
burden of proof consists in showing a rational basis, and that the Court does not have to
consider the proposed Act‘s efficacy. Finally, it argues that, in accordance with the
principle of flexible federalism, this Court should favour the double aspect doctrine over
the interjurisdictional immunity doctrine.

[38] The CBA submits that the proposed Act falls within Parliament‘s general trade
and commerce power and meets the five indicia established in General Motors and
Kirkbi. Regarding the third indicium, it adds that although the case law uses the
expression ―securities industry‖, the proposed Act does not regulate a single industry,
but rather the raising of capital in all industries and sectors in Canada‘s economy.
No.: 200-09-006746-090                                                                          PAGE: 11

Turning to the fourth indicium, the CBA submits that the provinces cannot make laws in
relation to interprovincial or international trade or property and civil rights outside their
borders, establish a national regulatory body empowered to represent the country at the
international level, integrate securities regulation into the broader regulatory framework
for Canada‘s financial system, or enact criminal penalties. The CBA adds that the
efficacy of the federal system would be diminished if the proposed Act were limited to
the interprovincial and international aspects of the securities trade since securities
transactions would have unequal protection across the country, and the management of
urgent matters such as the prevention of systemic risks would be too slow. Finally, the
CBA submits that the voluntary participation of the provinces does not undermine
compliance with the fifth indicium. Parliament‘s intention is to create a single system,
and the validity of the proposed Act is not dependent on the whether the provinces
choose to opt in.


     IV. ANALYSIS

     1.   Method
[39] In the recent Reference re Assisted Human Reproduction Act, the Supreme
Court confirmed the two-step method for determining whether an act is within the
legislative authority of Parliament or that of the provincial legislatures. 17 First, the pith
and substance of the act must be established. Second, the act must be classified in
accordance with the subject matters listed in sections 91 and 92 of the Constitution Act,
1867. The question submitted by the AGQ will be answered in the negative if the
proposed Act could be validly enacted by Parliament.

[40] It is possible that a provision of a piece of legislation enacted by one level of
government could have ancillary effects on a field of jurisdiction of another. For this
reason, the interjurisdictional immunity doctrine must be interpreted as allowing a fair
amount of overlap.18 Long ago, the Privy Council recognized that the enumerated
classes of matters in the Constitution Act, 1867 are not watertight compartments.19
Where the constitutional validity of a particular provision is challenged, the courts must
determine whether that provision is sufficiently integrated into a validly enacted law to
be constitutional.20 As Chief Justice Dickson wrote in General Motors, this requires

17
      Reference re Assisted Human Reproduction Act, 2010 SCC 61 at para. 19. See also Peter Hogg,
      Constitutional Law of Canada, (Toronto: Carswell, 2009), 15-6 (hereafter ―Hogg‖) and Henri Brun,
      Guy Tremblay & Eugénie Brouillet, Droit constitutionnel, 5th ed., (Cowansville: Yvon Blais, 2008),
      448–449 (hereafter ―Brun, Tremblay and Brouillet‖).
18
      OPSEU v. Ontario (Attorney General), [1987] 2 S.C.R. 2 at para. 27.
19
      Citizens Insurance Co. of Canada v. Parsons (1881), 7 App. Cas. 96 (P.C.), 107–108. (hereafter
      ―Parsons‖). See also Reference re Employment Insurance Act (Can.), ss. 22 and 23, [2005] 2 S.C.R.
      669, 2005 SCC 56 at para. 8.
20
      Global Securities, supra, footnote 16 at para. 19, Kitkatla Band v. British Columbia (Minister of Small
      Business, Tourism and Culture), [2002] 2 S.C.R. 146, 2002 SCC 31 at para. 41 (hereafter ―Kitkatla
No.: 200-09-006746-090                                                                         PAGE: 12

considering the seriousness of the encroachment, with a considerable encroachment
requiring a stricter assessment of its degree of integration.21

[41] Finally, it is possible that two near-identical pieces of legislation could be validly
enacted by two levels of government, according to the double aspect doctrine. In such
cases, one same piece of legislation must pursue two different objectives connecting it
with two different matters. The Supreme Court, quoting Lederman, stated in Multiple
Access that this doctrine should be applied where the contrast between the relative
importance of the two aspects is not so sharp.22 To take a frequently cited example,
both Parliament and the legislatures have enacted laws against impaired driving. On the
one hand, provincial provisions are aimed at reducing accidents, injuries, and deaths
related to impaired driving; on the other hand, the purpose of the relevant Criminal Code
provisions is to punish offenders and curtail a social evil.

[42] The expression ―notwithstanding anything in this Act‖ in section 91 of the
Constitution Act, 1867 has been interpreted as meaning that, in cases of conflict, federal
law is of paramount authority23 and that a provincial law is invalid insofar as it is
incompatible with federal law.24 Thus, we may conclude that both the federal
government and provincial governments could validly enact the proposed Act, in which
case the reference question would have to be answered in the negative.

     2.   Pith and substance analysis
[43] Great care must be taken in identifying the pith and substance of an act, since
this will have a determinative effect on the ensuing classification. The parties propose
very different characterizations of the pith and substance of the proposed Act.
Detractors of the proposed Act give it a relatively narrow reading. In the AGQ‘s view, it
deals with the protection of investors in the securities market through the supervision of
intermediaries and the imposition on issuers of duties to disclose. In the AGA‘s view, it
deals with the regulation of the securities trade to protect investors and market fairness,
prevent systemic risks, and foster interprovincial and international cooperation among
securities authorities. In the Barreau‘s view, the proposed Act creates a comprehensive
regulatory regime for a provincial area of activity, the contracts related thereto, and all
participants therein.

[44] For the proposed Act‘s defenders, its pith and substance is more comprehensive.
In the AGC‘s view, the pith and substance here is the betterment of the economic well-
being of Canada as a whole through the introduction of a comprehensive regulatory

      Band‖), Kirkbi, supra, footnote 12 at para. 20, MacDonald et al. v. Vapor Canada Ltd., [1977] 2 S.C.R.
      134, 158–159 (hereafter ―Vapor Canada‖).
21
      General Motors, supra, footnote 11 at para. 47.
22
      Multiple Access, supra, footnote 15 at paras 181–182.
23
      Tennant v. Union Bank of Canada, [1894] A.C. 31, 45.
24
      Ontario Liquor License Case (Re), [1896] A.C. 348, 367.
No.: 200-09-006746-090                                                                       PAGE: 13

regime for capital markets. Finally, although this is more a statement of the proposed
Act‘s objective than of its pith and substance, the CBA submits that the proposed Act is
aimed at protecting and improving the integrity and competitiveness of capital markets,
which affects the prosperity and well-being of all Canadians.

[45] The synonyms used by Justice La Forest help to define the scope of the term
―pith and substance‖, which plays a key and determinative role in constitutional matters:

        There is, of course, no magic in the phrase. . . . It can be described as the
        "constitutional value represented by the challenged legislation", as "an abstract of
        the statute's content", and as "the true meaning of the challenged legislation" or
        the "leading feature" or "true nature and character" of the impugned law . . . .
        Whatever the phrase used, the idea remains the same: division of powers
        analysis commences with an identification of "the dominant or most important
        characteristic of the challenged law" . . . .25

[46] To assess the pith and substance of a law, case law asks us to examine both the
purpose of the enacting body and the legal effect of the law. 26 The AGC, citing Ward v.
Canada (Attorney General),27 submits that the purpose must be of prime importance in
the analysis of a law‘s pith and substance. Professors Patrick J. Monahan and André
Tremblay agree that the purpose of a law must take precedence over its effects. They
add, however, that the effects must still be considered and that, where the effects
depart markedly from the stated objective, it must be concluded that the law was
enacted for another purpose.28 In such cases where a government seeks to do indirectly
what it cannot do directly, by means of what is called ―colourability‖, the law will be
declared unconstitutional.29

[47] I am of the view that the purpose and effects of a law must be analyzed on an
equal footing to determine a law‘s pith and substance. It is possible that some essential
effects of a statute are not disclosed by the statement of its purpose or, conversely, that
some of the effects sought are not achieved. The three opinions given in the recent
Reference re Assisted Human Reproduction Act confirm this approach.30 That said, the
AGC and the CBA rightly argue that a law‘s efficacy in meeting its objectives is not a
valid consideration in the pith and substance analysis. Rather, such a consideration is
relevant to the political question of whether enacting the law was appropriate.31



25
     Whitbread v. Walley, [1990] 3 S.C.R. 1273, 1286.
26
     Reference re Firearms Act (Can.), [2000] 1 S.C.R. 783 at para. 16.
27
     Ward v. Canada (Attorney General), [2002] 1 S.C.R. 569, 2002 SCC 17, 580 (hereafter ―Ward‖).
28
     Patrick J. Monahan, Constitutional Law, 3d ed., (Toronto: Irwin Law Inc., 2006), 115. André Tremblay
     Droit constitutionnel, Principes, 2d ed., (Montréal: Thémis, 2000), 316.
29
     Reference re Upper Churchill Water Rights Reversion Act, [1984] 1 S.C.R. 297, 330–331.
30
     Reference re Assisted Human Reproduction Act, supra, footnote 17 at paras 22, 189, and 284.
31
     Reference re Firearms Act (Can.), [2000] 1 S.C.R. 783, 2000 SCC 31 at para. 57.
No.: 200-09-006746-090                                                                  PAGE: 14

[48] The AGC also argues that the pith and substance of the proposed Act must be
given a very general definition. Justices LeBel and Deschamps explicitly rejected this
approach in Reference re Assisted Human Reproduction Act, noting that an overly
general definition might result in connecting a law with two exclusive powers of a single
level of government and legitimizing the overflow of ancillary effects. They wrote:

        It is important to identify the pith and substance of the impugned provisions as
        precisely as possible. . . . If vague characterizations of the pith and substance of
        provisions were accepted, this could lead not only to the dilution of and confusion
        with respect to the constitutional doctrines that have been developed over the
        years, but also to an erosion of the scope of provincial powers as a result of the
        federal paramountcy doctrine.32

[49] The AGC and the CBA submit that the constitutionality of the proposed Act is
presumed. This presumption was stated in, among other cases, Re The Farm Products
Marketing Act, in which Justice Fauteux wrote the following:

        There is a presumptio juris as to the existence of the bona fide intention of a
        legislative body to confine itself to its own sphere and a presumption of similar
        nature that general words in a statute are not intended to extend its operation
        beyond the territorial authority of the Legislature.33

Without calling into question the good faith of the federal Minister of Finance, I find that
the presumption of constitutionality should not apply in this case, since the proposed Act
is not the product of a legislative body, but of the executive. Not only has it not received
Royal Sanction, a fundamental distinction, but it has also not been debated and passed
by members of the House of Commons and the Senate.

[50] As Professor Peter W. Hogg sums it up, in its assessment of the purpose and
effect of an act, a court may refer to intrinsic material (preamble, section stating the
purpose, other sections, etc.) and extrinsic material regarding the context in which the
act was drafted (reports of commissions of inquiry, white papers, scientific studies,
parliamentary commission report, parliamentary debates, and so on).34 Ward
established that identifying the problem that the government decided to address may be
relevant to identifying an act‘s pith and substance.35

[51] Before proceeding with such an analysis, it is important to identify the burden of
proof applicable to the considerable number of expert testimonies that were given
regarding the pith and substance of the proposed Act and its classification among the
enumerated subject matters. The AGC and the CBA submit that this Court should not
32
     Ibid. at para. 190.
33
     Re The Farm Products Marketing Act, [1957] S.C.R. 198, 255.
34
     RJR-MacDonald Inc. v. Canada (Attorney General), [1995] 3 S.C.R. 199 at para. 30; Global
     Securities, supra, footnote 16 at para. 25.
35
     Ward, supra, footnote 27 at paras 22–23.
No.: 200-09-006746-090                                                                        PAGE: 15

require strict evidence of the facts alleged in support of the proposed Act‘s validity, nor
should it rule on issues of social or economic policy. They add that, in accordance with
the words of Chief Justice Laskin in Re Anti-Inflation Act, the extrinsic material should
instead serve to establish a ―rational basis‖ connecting the proposed Act to the head of
power invoked.36 The CBA refers us to the following words of Hogg, who proposes that
this approach allows contradictory pieces of evidence to be considered without having
to rule on each of them and that, once a rational basis has been established, the act is
presumed to be constitutional:

         The rational basis test . . . erects a presumption of constitutionality that is
         exceedingly difficult for the challenger of legislation to overcome. The rational
         basis test enables a court to uphold the validity of legislation without the
         necessity for strict proof of the underlying facts. It enables a court to resolve
         conflicting evidence without the need to make a definitive ruling on the conflict.37

[52] The AGC and the CBA rightly state that the standards of proof used ―as a matter
of fact‖, in the words of Chief Justice Laskin,38 do no apply in this reference proceeding.
Since we have not heard the experts, we cannot assess their credibility, rule on
objections, or determine the truth of the facts alleged. A more generous reception and a
less strict assessment of the evidence are therefore appropriate.

[53] My analysis will not, however, endow the proposed Act with a presumption of
constitutionality. The rational basis test is appropriate for considering highly political
questions, such as when assessing a national crisis in the context of Parliament‘s
general residual power in respect of emergencies. Such is also the case where
impugned statutory provisions are connected with the principal legislative power
invoked in support of a law,39 and perhaps in other circumstances as well. However, the
indicia established by the case law on the general trade and commerce power call for
an assessment of complex factual evidence, not policy choices, which a presumption of
validity would make impossible. I would therefore require that the arguments made by
all of the parties in this case be considered on the balance of probabilities, in
accordance with the approach taken in Kitkatla Band.40

             a) Intrinsic evidence

                          i. The proposed Act
[54] I will begin the analysis of the intrinsic material relating to the proposed Act with
the elements stating the Act‘s purpose. The Preamble reads as follows:

36
     Re: Anti-Inflation Act, [1976] 2 S.C.R. 373, 423 (hereafter ―Re: Anti-Inflation Act‖).
37
     Hogg, supra, footnote 17 at 60-17.
38
     Re: Anti-Inflation Act, supra, footnote 36 at 423.
39
     Multiple Access, supra, footnote 15 at 183.
40
     Kitkatla Band, supra, footnote 20 at para. 46.
No.: 200-09-006746-090                                                               PAGE: 16

  Whereas:                                         Attendu :

   Capital markets affect the well-being           Que les marchés des capitaux touchent le
   and prosperity of all Canadians;                bien-être et la prospérité de tous les
                                                   Canadiens;

   Capital markets are increasingly                Que les marchés des capitaux prennent
   national and international in scope;            une ampleur nationale et internationale
                                                   accrue;

   Capital markets are rapidly evolving            Que les marchés des capitaux évoluent
   and include increasingly complex                rapidement et comportent des produits
   financial products and methods of               financiers et des méthodes de placement
   distribution and trading;                       et de négociation de plus en plus
                                                   complexes;

   It is important for Canada to have              Qu‘il est primordial pour le Canada d‘avoir
   competitive capital markets and a               des marchés des capitaux compétitifs et
   strengthened, comprehensive and                 assujettis à un régime de contrôle
   coordinated enforcement regime for              d‘application de la loi renforcé, complet et
   those markets;                                  coordonné;

   It is in the national interest to effectively   Qu‘il est dans l‘intérêt national de
   protect      and     promote      Canadian      protéger et de promouvoir efficacement
   interests      internationally,    including    les intérêts du Canada à l‘étranger,
   through the development of consistent           notamment par l‘élaboration d‘orientations
   regulatory policies for capital markets;        cohérentes en matière de réglementation
                                                   des marchés des capitaux;

   The integrity and stability of Canada‘s         Que la présence, au sein du régime
   financial system would be enhanced by           réglementaire canadien du secteur
   the presence of a single Canadian               financier, d‘un seul organisme canadien
   securities regulator as part of the             de réglementation des valeurs mobilières
   Canadian        financial      regulatory       rehausserait l‘intégrité et la stabilité du
   framework;                                      système financier du Canada;

   Parliament intends to create a single           Que le Parlement entend créer un tel
   Canadian       securities    regulator,         organisme, encadré par un régime
   supported    by    a     comprehensive          législatif et réglementaire complet qui
   statutory and regulatory regime that            s‘applique dans l‘ensemble du Canada;
   applies across Canada; and

   Parliament chooses to do so through a           Que le Parlement choisit de le faire au
   process under which the regime will apply       moyen d‘un processus au titre duquel le
   as willing provinces and territories opt in;    régime s‘appliquera au fur et à mesure
                                                   que les provinces et territoires intéressés
                                                   y adhéreront,
No.: 200-09-006746-090                                                             PAGE: 17

[55] The purposes of the proposed Act and the guiding principles for the Authority‘s
activities are defined as follows:

 Purposes of Act                                Objet de la loi

 9. The purposes of this Act are                 9. La présente loi a pour objet de :

 (a) to provide protection to investors          a) Protéger les investisseurs contre les
     from unfair, improper or fraudulent            pratiques déloyales, irrégulières ou
     practices;                                     frauduleuses;

 (b) to   foster    fair,  efficient and         b) Favoriser des marchés des capitaux
     competitive capital markets in which           justes, efficaces et compétitifs en
     the public has confidence; and                 lesquels le public a confiance;

 (c) to contribute, as part of the Canadian      c) Contribuer, dans le cadre du régime
     financial regulatory framework, to the         réglementaire des finances du Canada,
     integrity and stability of the financial       à l‘intégrité et à la stabilité du système
     system.                                        financier.

   Principles                                    Principes

   16. (1) In pursuing the purposes of this      16. (1) Dans la réalisation de l‘objet de la
     Act, the Authority must have regard to        présente loi, l‘Autorité tient compte des
     the following principles:                     principes suivants :

   (a) the administration of this Act should     a) l‘exécution de la présente loi devrait
      be open, efficient, flexible and             se faire de façon ouverte, efficiente et
      responsive;                                  souple;

   (b) the interests of investors and            b) les intérêts des investisseurs et
      businesses in all sectors and regions        entreprises des différents secteurs et
      across Canada should be taken into           régions du Canada devraient être pris
      account; and                                 en compte;

   (c) the cost of compliance with this Act      c) les coûts liés au respect de la
      should be commensurate with the              présente loi devraient être appropriés,
      regulatory outcomes sought to be             compte tenu de l‘importance des
      achieved.                                    résultats à atteindre en matière de
                                                   réglementation.
   Means
                                                 Moyens
   (2) The primary means for achieving the
      purposes of this Act include               (2) Les principaux moyens de réaliser
                                                    l‘objet de la présente loi sont
   (a) requirements for timely, accurate and        notamment :
      efficient disclosure of information;
                                                 a) des      exigences     concernant       la
No.: 200-09-006746-090                                                               PAGE: 18

     (b) prohibitions of unfair, improper or           communication de l‘information en
        fraudulent market practices;                   temps opportun et avec exactitude et
                                                       efficience;
     (c) standards for honest and responsible
        conduct by market participants;              b) des interdictions visant les pratiques
                                                       déloyales, irrégulières ou frauduleuses
     (d) the monitoring and evaluation of              du marché;
        issues or developments affecting the
        integrity or stability of capital markets;   c) des normes touchant le comportement
        and                                            honnête      et    responsable   des
                                                       participants du marché;
     (e) cooperation and coordination among
        financial authorities, in Canada and         d) la surveillance et l‘évaluation des
        elsewhere.                                     questions et faits nouveaux touchant
                                                       l‘intégrité ou la stabilité des marchés
                                                       des capitaux;

                                                     e) la coopération et la coordination entre
                                                       les autorités financières, au Canada et
                                                       à l‘étranger.



[56] The proposed regime may be described as follows. Part 1 proposes the creation
of a Council of Ministers, composed of the federal Minister of Finance and a member of
the executive council of each province, to facilitate the administration of the proposed
Act and the exchange of information on securities regulation. Part 2 establishes the
Authority, which has two divisions and is responsible for administering the proposed
Act. The Regulatory Division is led by the Chief Regulator, whose powers are described
further on. The second division is the Canadian Securities Tribunal (hereafter
―Tribunal‖). The Tribunal is independent of the Regulatory Division 41 and has the powers
of a superior court of record with respect to the attendance, swearing and examination
of witnesses, and the production and inspection of documents.42 The Chief Adjudicator
is responsible for the performance of the Tribunal‘s adjudicative functions and for its
direction and management.43

[57] Part 2 establishes the Regulatory Policy Forum, consisting of the chairperson of
the Authority‘s board of directors, the Chief Regulator, the Deputy Chief Regulators, the
Chief Adjudicator, the Associate Chief Adjudicators, and any other directors of the
Authority that are designated for that purpose by the chairperson. Its mandate is to
participate in the consideration and development of the Authority‘s regulations, policies,
practices, and activities; also, to obtain the views of participants in the capital market on
the Authority‘s regulations, policies, practices, and activities. The members of the

41
     Proposed Act, A.G.C., p. 1, s. 28.
42
     Ibid., s. 39.
43
     Ibid., s. 36.
No.: 200-09-006746-090                                                           PAGE: 19

Council of Ministers and a representative of the investor advisory panel must be invited
to at least three of its meetings.44 The investor advisory panel consists of persons with
experience with issues relevant to the securities market.45

[58] Under Part 3, the Chief Regulator of the Regulatory Division may make an order
recognizing a person as a self-regulatory organization, an exchange, a clearing agency,
or an auditor oversight organization.46 He or she may authorize a recognized self-
regulatory organization to exercise the powers or perform the duties over a dealer,
adviser, or investment fund manager.47 He or she may make any decision respecting a
recognized entity‘s by-laws, regulatory instruments, policies, procedures, or practices,
the manner in which it carries on business, its trading of securities, or its listing or
posting of securities on a recognized exchange.48

[59] Under Part 4, the Chief Regulator may make an order designating a person as a
credit rating organization, an investor compensation fund, a dispute resolution service,
an information processor, a trade repository, or any other entity that provides investors
or market participants with prescribed services.49

[60] Part 5 prohibits persons from acting as a dealer, adviser, or investment fund
manager unless they are registered with the Authority.50 The Chief Regulator may
suspend registration in the case of non-compliance with the proposed Act.51 Part 6
prohibits persons from distributing securities unless a prospectus has been filed with the
Chief Regulator. A prospectus must comply with the disclosure requirements for
securities issued or proposed to be distributed.52 In the case of non-compliance, the
Chief Regulator may order that trading activities cease.53 Part 7 prohibits persons from
trading in exchange-traded derivatives unless the exchange is recognized by the Chief
Regulator54 and the prescribed disclosure document has been accepted by the Chief
Regulator.55

[61] Part 8 imposes on reporting issuers the requirement to provide periodic and
timely disclosure of their business and affairs, including financial statements. 56 It also
requires insiders of reporting issuers to file reports disclosing their beneficial ownership


44
     Ibid., s. 50.
45
     Ibid., s. 51.
46
     Ibid., s. 64.
47
     Ibid., s. 67.
48
     Ibid., s. 71.
49
     Ibid., s. 73.
50
     Ibid., s. 76.
51
     Ibid., ss. 78–79.
52
     Ibid., s. 82.
53
     Ibid., ss. 86–87.
54
     Ibid., s. 89.
55
     Ibid., s. 90.
56
     Ibid., s. 93.
No.: 200-09-006746-090                                                             PAGE: 20

of securities of the issuer and their interest in any related financial instrument of a
security of the issuer.57

[62] Part 9 regulates take-over bids and issuer bids, including the offeror‘s obligation
to send to all relevant security holders a circular that sets out the terms of the bid. In the
case of non-compliance with the proposed Act, any interested person may apply to a
court for compensation for damages suffered, rescission of the transaction, or an order
to dispose of securities acquired.58

[63] Part 10 imposes record-keeping standards on market participants and prescribes
a duty to deal fairly, honestly, and in good faith. It prohibits insider trading and unfair
practice.59

[64] Part 11 authorizes the Chief Regulator to review the business and conduct of a
recognized entity or designated entity.60 This involves issuing orders summoning
persons to appear, compelling persons to give evidence on oath, compelling persons to
produce records,61 or authorizing designated persons to enter a place for the purpose of
the inquiry.62 It authorizes the Tribunal to order that a person comply with the proposed
Act, that trading and purchasing cease in respect of any security, that a director or
officer of an issuer resign, that a person be prohibited from becoming a registrant, or
that a market participant be enjoined from making changes to its practices,
disseminating or not disseminating information, or amending disseminated
information.63 In the case of non-compliance, the Tribunal may order a person to pay to
the Authority an administrative penalty of no more than $1 million for each
contravention.64 The Tribunal may also order that all trading in a security cease for a
period of not longer than 15 business days if the Tribunal considers that there are
unexplained and unusual fluctuations in the volume of trading in the security.65

[65] A certified copy of a decision made by the Tribunal may be filed with a court. 66
The Chief Regulator may apply to a court for a declaration that a person has not
complied with or is not complying with the proposed Act or for any order to rectify the
situation.67




57
     Ibid., s. 97.
58
     Ibid., s. 108.
59
     Ibid., ss. 117 and 121.
60
     Ibid., s. 133.
61
     Ibid., s. 134(3).
62
     Ibid., s. 134(7).
63
     Ibid., s. 139.
64
     Ibid., s. 140.
65
     Ibid., s. 144.
66
     Ibid., s. 145.
67
     Ibid., s. 146.
No.: 200-09-006746-090                                                           PAGE: 21

[66] The proposed Act authorizes a peace officer to make an ex parte application to a
judge or justice for an order that an entity disclose the names of all registrants that
purchased or traded a specified security, or that a registrant disclose the names of all
persons on whose behalf the registrant made such transactions, 68 as well as any
required record or information.69

[67] Part 11 creates offences on summary conviction and on proceedings by way of
indictment for contraventions of provisions of the proposed Act, which are punishable by
imprisonment for a term of not more than five years less a day or a fine of not more than
$5 million.70 It also creates a series of criminal offences with respect to misleading acts
relating to a security.71

[68] Part 12 governs civil liability. An issuer or a director of an issuer may be liable for
damages to a person who has purchased securities offered by a prospectus that
contains a misrepresentation.72 An offeror or the director of an offeror may be liable for
damages to a person to whom a take-over bid circular or issuer bid circular containing a
misrepresentation has been sent.73 An issuer or the director of an issuer may be liable
for damages to a person who has purchased securities offered by a prescribed offering
document that contains a misrepresentation.74 A purchaser of a security to whom a
prospectus or amendment was not sent, a person to whom a take-over bid circular,
issuer bid circular, or notice of change or variation to either of them was not sent, or a
purchaser of a security to whom a prescribed offering document was not sent has a
right of action for damages.75 In all such cases, the person bringing an action may also
apply to have the transaction rescinded.

[69] Part 12 also provides that a person who engages in insider trading may be liable
for damages to a person who purchases or trades a security of that issuer. 76 Finally, it
provides that various other contracts involving the purchase or trade of securities may
be rescinded in certain circumstances.77 Defences and limitation periods are provided
for the various actions that may be brought under this part.

[70] Part 13 governs civil liability for secondary market disclosure. An issuer or the
director of an issuer may be liable for damages to a person who acquires a security
offered in a document or public oral statement containing a misrepresentation.78 The

68
     Ibid., s. 149.
69
     Ibid., s. 150.
70
     Ibid., s. 153.
71
     Ibid., ss. 158 et seq.
72
     Ibid., s. 169.
73
     Ibid., s. 171.
74
     Ibid., s. 173.
75
     Ibid., s. 179.
76
     Ibid., s. 180.
77
     Ibid., ss. 187–190.
78
     Ibid., ss. 196–198.
No.: 200-09-006746-090                                                                       PAGE: 22

same is true for the acquisition of securities following a failure to disclose a material
change.79 Part 13 provides rules for the calculation of damages, rules of procedure, and
periods of limitation for such actions.

[71] Part 14 authorizes the Authority to make regulations for carrying out the
purposes and provisions of the proposed Act.80 The Authority may make a regulation
only with the consent of the Minister of Finance.81 The Governor in Council may make
an order requiring the Authority to make, amend, or repeal a regulation if it is of the
opinion that there is an urgent need for such a measure and that, without it, there is a
substantial risk of material harm to investors or to the integrity of capital markets.82 It
also authorizes a court to make orders relating to the taking of evidence from a witness
outside Canada.83

[72] Finally, Part 15 provides that, upon request, the Governor in Council may
designate a province as a participating province84 and make regulations respecting the
transition from the participating province‘s existing regime to the Canadian regime.85

                         ii. Sections of the Budget Implementation Act, 2009
[73] Section 295 of the Budget Implementation Act, 2009 authorizes the Minister of
Finance to make direct payments, in an aggregate amount not exceeding $150 million,
to the provinces and territories for matters relating to the establishment of a Canadian
securities regulation regime and a Canadian regulatory authority. Section 296
authorizes the Minister to enter into any agreement respecting securities regulation with
any province or territory. Section 297 enacts the Canadian Securities Regulation
Regime Transition Office Act (hereafter the ―Transition Office‖).86

[74] This statute establishes the Transition Office and, within it, an advisory
committee consisting of not more than 13 members recommended by the participating
provinces and territories.87 The Transition Office must develop a transition plan for a
national regime with respect to administrative and organizational matters, consult with
stakeholders, including Canadian capital market participants, and undertake any other
activity that the Minister may direct.88 Unless the Governor in Council sets a different



79
     Ibid., s. 199.
80
     Ibid., s. 227.
81
     Ibid., s. 230.
82
     Ibid., s. 232.
83
     Ibid., ss. 248–249.
84
     Ibid., s. 250.
85
     Ibid., s. 255.
86
     Canadian Securities Regulation Regime Transition Office Act, S.C. 2009, c. 2, s. 297.
87
     Ibid., s. 5.
88
     Ibid., s 11.
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date of dissolution, the Transition Office is dissolved three years after its
establishment.89

            b) Extrinsic evidence

                       i. History of harmonization initiatives
[75] The debate regarding the unification of Canadian securities regulation regimes is
not new. As the ACG noted in its factum, the idea of a national securities commission
was briefly raised in the 1935 Report of the Royal Commission on Price Spreads. In
1964, the Report of the Royal Commission on Banking and Finance concluded that
uniform regulation was desirable and recommended the creation of a federal
commission as an eleventh regulator, setting high standards that could be emulated by
the provinces. The Commission wrote the following:

        In time, the federal agency might open regional offices to facilitate its operations,
        especially if some of the provincial governments found it practical and desirable
        to delegate at least some of their responsibilities to the federal body. While our
        recommendation therefore requires the establishment of an eleventh regulatory
        body in the first instance, it is our hope that it will eventually lead to agreement
        and co-operation which will eliminate much of the existing duplication and lack of
        uniformity. This might be achieved quickly, especially if high federal standards
        lead provincial governments to clear automatically issues which have been
        federally registered. This would give the provincial administrators more time to
        deal with local matters such as the licensing of security dealers and their
        salesmen and the registration of issues to be offered only within their own
        province.90

[76] In 1967, the Ontario Securities Commission proposed the establishment of a
single national regulatory body exercising jurisdiction on the basis of delegated authority
from the provinces. This was justified on two bases: first, the cost of securities regimes
in some provinces is disproportionate to the volume of exchanges and second, the
interprovincial nature of the exchanges exceeds provincial jurisdiction.91

[77] A 1969 report by the Study Committee on Financial Institutions in Quebec noted
the flaws inherent in a fragmented regulatory system. It recommended the creation of
an agency similar to that proposed by the Ontario Securities Commission, in order to



89
     Ibid., s. 17.
90
     Report of the Royal Commission on Banking and Finance, Porter Report, Chapter 17 (1964), 396,
     A.G.C. at 479.
91
     Ontario Securities Commission, CANSEC Legal and Administrative Concepts, Bulletin 61, November
     1967, 63, A.G.C. at 491.
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[TRANSLATION] ―create a uniform adjudication process and centralize fraud detection
services while respecting provincial jurisdiction to oversee institutions.‖92

[78] In 1979, the federal Department of Consumer and Corporate Affairs produced a
study called Proposals for a Securities Markets Law for Canada93 and recommended
the creation of a national securities commission working in cooperation with provincial
commissions, with the provincial and national commissioners delegating powers to one
another.94

[79] In 1994, the premiers of New Brunswick, Nova Scotia, Prince Edward Island, and
Newfoundland proposed to the federal government a memorandum of agreement
regarding the establishment of a federal securities regulator.95 The objective set out in
the preamble was to increase the efficiency of capital markets by implementing a
uniform securities regime, without altering the division of powers between levels of
government. The federal statute would govern the extraprovincial aspects of the
securities industry. The Canadian Securities Commission thereby created would be
responsible for administering the act and exercising any authority delegated to it by
provincial legislation.96 This proposal was echoed in the 1996 Speech from the Throne,
in which the federal government stated that it was prepared to work with interested
provinces toward the development of a Canadian Securities Commission.97

[80] As the AGA has noted, the Canadian Securities Administrators (hereafter the
―CSA‖), a forum for the 10 provincial and 3 territorial administrators, have also
contributed to cooperation and harmonization efforts. In 1999, they established the
Mutual Reliance Review System, implemented by Canadian Policy Statements 12-201
(Mutual Reliance Review System for Exemptive Relief Applications) and 43-201 (Mutual
Reliance Review System for Prospectuses and Annual Information Forms). This
enables provincial and territorial administrators to rely on analyses and investigations
made by another administrator in respect of a market participant. The result of this
agreement is that, while each administrator continues to make decisions about
participants, the latter only have to deal with one of the administrators to have
documents approved, obtain exemptions, or register as an intermediary.98


92
     Report of the Study Committee on Financial Institutions Quebec, Government of Quebec, Parizeau
     Report, 1969, 156. A.G.C. at 1080.
93
     Proposals for a Securities Markets Law for Canada, A.G.C. at 508.
94
     A. Douglas Harris, A Symposium on Canadian Securities Regulation: Harmonization or
     Nationalization? University of Toronto Capital Markets Institute, 2002, AGC Book of Authorities,
     Vol. 5, 85–86.
95
     Ibid. at 91.
96
     Draft Memorandum of Understanding Regarding the Regulation of Securities in Canada (1994), s. 3,
     A.G.C. at 518.
97
     Debates of the House of Commons, Vol. 133, No. 001, 2nd session, 35th Parliament,
     February 27, 1996, 5.
98
     Affidavit of William S. Rice, A.G.C., Vol. I, 29–31 at paras 100–107. (―Rice‖)
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[81] Along the same lines as the Mutual Reliance Review System, the CSA, with the
exception of Ontario, signed the Provincial/Territorial Memorandum of Understanding
Regarding Securities Regulation in 2004, which led to the implementation of the
Multilateral Instrument 11-102 Passport System.99 The process is intended to simplify
procedures for filing documents and applying for exemptions or registration as an
intermediary between the various administrators. The decisions of a primary regulator,
which is the province in which the head office of an issuer or the office of an individual is
located, automatically apply to the other authorities. Ontario has retained its own
procedures, but the other CSA members recognize its decisions automatically.

[82] The Joint Forum of Financial Market Regulators was also founded in 1999 by the
CSA, the Canadian Council of Insurance Regulators and the Canadian Association of
Pension Supervisory Authorities. Its objective is to ensure the coordination of
information relating to these three financial sectors and the implementation of joint
regulatory and consumer protection projects.100

[83] In 2003, the ―Wise Persons‘ Committee‖, established by the Minister of Finance,
published a report entitled It’s Time.101 Breaking with earlier initiatives, it recommended
the creation of an exhaustive national securities regulator to be run by a single national
commission. According to the Committee, such an agency would be able to address the
following difficulties with a system of intergovernmental cooperation:

         The passport system‘s strengths are single regulator contact, local presence and
         relative ease of implementation. Despite these strengths, each of which is
         included in the recommended model, the passport system contains significant
         weaknesses. It does not constitute a sufficient improvement in enforcement.
         Policy development would continue to suffer from the need to forge a consensus
         among multiple regulators with differing priorities and approaches. It would do
         little to enhance Canada‘s international capital markets credibility. Needless
         duplication would continue to exist as the passport system would maintain the
         current multiplicity of regulators. Issuers would continue to pay fees in all
         jurisdictions even though only one would serve as the primary regulator. Finally,
         the passport system does not, by itself, improve accountability or governance.102

[84] In 2005, a panel commissioned by the Government of Ontario issued its report.
The Crawford Panel recommended that a single regulatory regime be established by
having each province adopt a single provincial statute by reference.103


99
      Memorandum of Understanding Regarding Securities Regulation (2004), A.G.C. at 146.
100
      Rice, supra, footnote 98, A.G.C., 37 at para. 113.
101
      Committee to Review the Structure of Securities Regulation in Canada (―Wise Persons‘ Committee‖),
      It’s Time, (2003), vii–xi, A.G.C at 578–582.
102
      Ibid., x, A.G.C. at 581.
103
      Crawford Panel on a Single Canadian Securities Regulator, Blueprint for a Canadian Securities
      Commission, (2006), 1–11, A.G.C. at 645–655.
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[85] In 2009, the Third-Party Expert Panel on Securities Regulation, formed by the
federal government, presented its report.104 The Hockin Report identified the following
flaws in the existing regime. The likelihood of successfully obtaining redress for fraud in
the form of compensation varies from province to province. 105 Ontario‘s refusal to
participate in the passport system accentuates this problem. Moreover, the system is
not very accessible given the large number of regulatory and self-regulatory agencies.
The existing system is slow and costly, and its decentralized nature does not provide
adequate protection against systemic risk.

[86] The Hockin Report recommends, among other things, that the reduction of
systemic risk be a guiding principle of the regulatory system, that a single, uniform
performance measurement system be developed for securities regulation in Canada,
that a more principles-based approach be developed with a view to reducing regulatory
uncertainty, that the securities regulator retain jurisdiction over certain discretionary
decisions, that a Capital Markets Oversight Office be established that would report to
the federal Minister of Finance, and that the regulation of exchange-traded derivatives
be prescribed in securities legislation.106

[87] The Hockin Report was accompanied by a draft Securities Act.107 It noted that, in
addition to implementing improvements, the draft legislation constituted a synthesis of
the existing provincial securities regulation statutes, particularly the Securities Act108 of
Alberta.109

[88] In 2009, the Transition Office was established with the coming into force of the
Canadian Securities Regulation Regime Transition Office Act on July 13, 2009.
According to the transition plan submitted on July 12, 2010, the proposed Act would be
enacted by December 2011, after the reference to the Supreme Court, and the Authority
would launch its operations on July 1, 2012.110

[89] This historical overview reveals a persistent desire to fight the redundancy and
lack of uniformity among the Canadian regimes in order to make the system as a whole
more efficient and fair. It also reveals a willingness to respect the geographic diversity of
Canadian institutions and provincial jurisdiction in these matters. In 2009, in the wake of
the global financial crisis precipitated by the reckless securitization of mortgages and
104
      Expert Panel on Securities Regulation, Final Report and Recommendations (―Hockin Report‖), 2009,
      A.G.C. at 746.
105
      Ibid. at 786.
106
      Ibid. at 842–845.
107
      Expert Panel on Securities Regulation, Draft Securities Act, Comments, P.P.G.Q. at 559. For the
      wording of the Act, see Draft Securities Act, http://www.expertpanel.ca/eng/reports/final-report/draft-
      securities-act.html.
108
      Securities Act, R.S.A. 2000, c. S-4.
109
      Expert Panel on Securities Regulation, Draft Securities Act, Comments, A.G.C. at 561.
110
      Transition Plan for the Canadian Securities Regulation Authority, Canadian Securities Transition
      Office, July 12, 2010,
      http://www.pdac.ca/pdac/advocacy/securities/1007-summary-transition-plan-csra.pdf.
No.: 200-09-006746-090                                                                    PAGE: 27

the non-bank asset-backed commercial paper crisis in Canada in 2007,111 a further
objective arose, that of tackling the systemic risk threatening the financial sector.

                        ii. Parliamentary statements and debates
[90] The proposed Act has not been debated in the House of Commons. However,
the following excerpt from a press release from the Minister of Finance sheds light on
the objectives pursued:

         Reflecting the Government‘s willingness to work collaboratively with provinces
         and territories, this is a voluntary regime, which enables provinces and territories
         to opt in at their choice. . . .

         ―Canadians, who rely on capital markets for their savings and retirement plans,
         deserve the protection of strong regulation that reaches all parts of our country,‖
         said the Honourable Jim Flaherty, Minister of Finance. ―The proposed Act we
         have released today brings us closer to the regime that markets demand and that
         Canadian investors need.‖

          As Canada‘s performance during the global financial crisis demonstrated, our
         financial regulatory regime is a sound model for other countries. However,
         Canada is the only major industrialized country that lacks a national securities
         regulator. Our financial system can be strengthened by the establishment of a
         national securities regulator to oversee Canada‘s capital markets. This step will
         strengthen the stability, integrity and effectiveness of the Canadian financial
         system. . . .

         The proposed Canadian Securities Act is built on provincial securities regulation
         and harmonizes existing legislation in the form of a single statute. It benefits from
         the work of the Expert Panel on Securities Regulation (the Hockin Panel) and
         other reform efforts, and reflects domestic and international best practices. It
         proposes significant improvements in terms of governance, adjudication, financial
         stability, and regulatory and criminal enforcement, and provides a wide scope of
         authority to regulate financial instruments and participants in capital markets.112
         [Emphasis added.]

[91] The following speech made by the Minister of Finance in the House of Commons
when the 2009 budget was passed highlights the objectives of reducing uncertainty and
increasing efficiency:


111
      Frank Milne, The Impact of Innovation and Evolution on the Regulation of Capital Markets,
      May 19, 2010, A.G.C. at 258–270. (―Milne‖)
112
      Government of Canada Moves to Protect Canadian Investors, Department of Finance Canada,
      Ottawa, May 26, 2010, 2010-051, http://www.fin.gc.ca/n10/10-051-eng.asp.
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         For all its strengths, Canada's financial system does have one glaring weakness.
         Our patchwork system of 13 securities regulators spread across the provinces
         and territories causes uncertainty for investors and unnecessary red tape. In
         Canada's economic action plan, our government is providing a solution.

         Following the recommendations of the expert panel, chaired by the hon. Tom
         Hockin, we will establish an office to manage the transition to a Canadian
         securities regulator.

         Later this year, we will table a federal securities act for Canada and the transition
         office will deliver an administrative plan within 12 months.

         We will respect constitutional jurisdiction and participation in the Canadian
         securities regulator will be voluntary. For those provinces, territories and
         companies that choose to participate, it will sharpen our competitive edge. It will
         put Canadians in a better position to seize new opportunities as the global
         economy begins to recover.113 [Emphasis added.]

                         iii. Expert reports
[92] The parties submitted ample expert evidence on securities industry regulation. It
should be noted that I refer to it here for the purpose of determining the objectives and
effects of the proposed Act rather than whether it should be adopted or not.

[93] The conclusions set out in Professor Frank Milne‘s report are essentially the
following: most Canadians are investors in securities markets, either by means of
shares purchases or indirectly through pooled investment funds; the securities market
has acquired national and international dimensions that call for international cooperation
on regulatory issues; the instruments traded on the securities markets are increasingly
complex; the distinction between the various traditional financial activities (banking,
insurance and stock market activities) has become blurred; improved coordination
between those activities is necessary; the traditional distinction between equity, debt,
and credit instruments has also been blurred by securitization, and; the financial crises
have illustrated deficiencies in existing securities regulations.114 On the national market
scale, he notes that, for example, in 2002, two thirds of some 7,600 reporting issuers in
Canada were regulated by more than one provincial authority and 31% of issuers
registered on the Toronto Stock Exchange or the TSX Venture Exchange were issuers
regulated by the 10 provincial authorities; approximately 80% of the companies in the
National Registration System Database are registered in more than one province or



113
      Hon. Jim Flaherty (Minister of Finance of Canada, House of Commons, 40th Parliament, 2nd session,
      Tuesday, January 27, 2009).
114
      Milne, supra, footnote 111, A.G.C. at 270.
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territory, and; in 2008, 193 Canadian issuers were listed on a stock exchange in the
United States.115

[94] Professor Michael J. Trebilcock summarizes as follows the limits of the
harmonization reached by the current passport system. His opinion is that, in such a
system, the provinces are unlikely to agree to delegate their regulatory functions to a
principal regulator; the consensus-based decision-making process is longer and
vulnerable at any moment to a province‘s withdrawal; standards are less harmonized
(particularly for derivatives and exempt markets); standards enforcement may vary from
one province to the next and create a situation of regulatory competition leading to a
race to the bottom; the fees to be paid are ―likely‖ to be higher because of the greater
number of regulators, and; the system does not deal with interprovincial enforcement
problems, fails to promote transparency and accountability, impedes Canada from
speaking with a single voice at international fora, and hinders coordination with other
financial system participants, such as the Bank of Canada, the Office of the
Superintendent of Financial Institutions, and the banks.116 He adds that a single
regulator ―will in all likelihood be more flexible and expeditious in developing new
policies to meet emerging challenges in capital markets‖ than the CSA.117 Although he
points out that the current system cannot be called a ―disaster‖,118 Trebilcock is of the
opinion that it fails to live up to its billing as a decentralized and flexible system.119

[95] Dr. Marion G. Wroebel filed a report on behalf of the CBA setting out two
principal theses.120 First, she argues that the Canadian economy has reached national
and international proportions, particularly on account of the national influence of
chartered banks and of the national scale of initial public offerings. In 2009, 61% of
investments were made by six bank-owned dealers, and by 2010, the banks‘ interest in
pooled investment funds had exceeded 40%.121 It follows that the fragmented securities
regulatory system is unable to effectively achieve its objectives of access to capital and
investor protection. For example, self-regulatory agencies and exempt market brokers
are subject to different rules.122 She contends that the International Monetary Fund and
the Organisation for Economic Co-operation and Development (OECD) have repeatedly
stated that a national Canadian system would be more efficient, which contradicts an
OECD discussion paper by ranking Canada second for its securities regulatory


115
      Ibid. at 234–236.
116
      Michael J. Trebilcock (National Securities Regulator Report), May 20, 2010, A.G.C. at 366–369.
      (―Trebilcock‖)
117
      Ibid., A.G.C. at 370–372.
118
      Michael J. Trebilcock (Report in reply to Quebec and Alberta Experts), August 23, 2010, A.G.C.
      at 413.
119
      Ibid. at 428.
120
      Marion G. Wrobel, Report of Canadian Bankers Association Regarding Parliament‘s Jurisdiction to
      Create a National Securities Regulator, August 26, 2010, C.B.A. at 9.
121
      Ibid. at 17.
122
      Ibid. at 19.
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system.123 Wroebel also notes that the globalization of markets increases the systemic
risk they face. This situation requires national and international uniformity, coordination,
and cooperation, which the ―Heads of Agencies‖, composed, among others, of the four
largest securities commissions, are unable to achieve.124 In her opinion, a single system
is necessary to give Canada a single coherent voice at international fora.

[96] Professor Stéphane Rousseau‘s opinion is that, although there is room for
improvement in the provincial framework, it has not been established that regulatory
centralization would yield better results. Over the past century, the CSA has developed
many practices to simplify procedures, reduce costs and facilitate participants‘ access to
information: the Mutual Reliance Review System, the System for Electronic Document
Analysis and Retrieval (better known as ―SEDAR‖), the System for Electronic Disclosure
by Insiders, the National Registration System Database, the National Registration
System and the passport system.125 Rousseau concluded that the current
pan-Canadian framework is highly harmonized, allows for costs to be reduced,
addresses local and regional particularities, permits experimentation and innovation, is
able to respond to contemporary issues and meets IOSCO‘s Objectives and Principles
of Securities Regulation.126

[97] Professors Jean-Marc Suret and Cécile Carpentier are of the opinion that the
Canadian securities regulatory system is structurally well adapted. In their view, the
Canadian market is particularly local, since over two thirds of Canadian issuers are
unable to be listed on United States exchanges because of their small capitalization.127
The authors state that the regulatory cost in Canada is lower than in Australia or the
United Kingdom when calculated by millions of dollars of capitalization, and lower than
in Australia, the United Kingdom, and the United States when calculated by company.
They add that it is not an attribute of our regulatory structure that Canadian companies
gain value when they become listed on a United States exchange, a phenomenon
designated as the ―Canada discount‖. Instead, this is the result of an increase in
demand for the security. A single system would result in a 50% increase in regulatory
costs.128 Suret and Carpentier acknowledge that systemic risk prevention is necessarily
a concern for securities regulatory authorities. However, they are of the opinion that the
Canadian system is not particularly vulnerable to systemic risk and that the recent
financial crises cannot be used to draw conclusions on the regulatory structure. 129 Last,
the authors warn against the greater risk of regulatory capture in a decentralized


123
      Ibid. at 21.
124
      Ibid. at 25.
125
      Stéphane Rousseau, L‘encadrement du secteur des valeurs mobilières par le Québec et le débat sur
      une commission nationale des valeurs mobilières [Quebec‘s regulation of the securities sector and
      the national securities commission debate], June 2010, A.G.Q. at 972–978. (―Rousseau‖)
126
      Ibid. at 1205–1209.
127
      Ibid. at 1239–1240.
128
      Ibid. at 1240–1241.
129
      Ibid. at 1243.
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system, particularly in light of the high concentration of banking, financial, and
self-regulated sectors.130

[98] Professor Stephen Choi‘s conclusions are the following. The Canadian system is
efficient, resilient, and allows for innovation, as shown by the low cost of access to
capital and Quebec‘s creation of the Bureau de décision et de révision en valeurs
mobilières, or securities decision and review office, (hereafter ―BDRVM‖) an
independent administrative tribunal for the regulatory authority from which the proposed
Act draws inspiration. The current system gives Canadian interests effective
international representation, as shown by the efforts of the United States Securities and
Exchange Commission (hereafter ―SEC‖) to reach agreements with Canada and the
June 2010 cooperation agreement between the SEC, the Autorité des marchés
financiers du Québec, or financial market authority, (hereafter ―AMF‖) and the Ontario
Securities Commission. Choi adds that systemic risks must be prevented through the
use of macro-economic instruments, such as the prudential frameworks developed by
the Bank of Canada and the Office of the Superintendent of Financial Institutions
Canada. Securities authorities also contribute to systemic risk protection by rigorously
carrying out their mandate to protect market participants (information disclosure,
licensing, credit ratings, etc.). Provincial authorities are in a better position than a
national commission to intervene in this way on a micro-economic scale and prevent
systemic risks. What is essential is the sharing of information between provincial
authorities and prudential regulators, which the CSA currently carries out. Choi is of the
opinion that a national commission would have diminished access to market feedback
and be at greater risk of errors, complacency and regulatory capture. To conclude, he
emphasizes that if only some provinces were to adhere to the proposed Act and the
passport system were not renewed, the Canadian system would face increased costs
and greater fragmentation of the underpinning law. 131

[99] Professor Jonathan Macey‘s view is that the centralization of the Canadian
system through some or all provinces‘ joining the regime under the proposed Act would
have a negative impact. He reaches the opposite conclusion: that it has not been
established that a decentralized system favours the race to the bottom. The United
States example does not show a tendency by market participants to opt for systems that
are less strict. The most recent financial crisis has shown that decentralized
organizations ensure more efficient securities regulation than do centralized agencies.
Time and again, the SEC neglected to investigate major frauds, and most of the
investigations in the United States were conducted at state level. Macey adds that the
conception of a national securities market is artificial. Local markets have two important
characteristics that national and global markets do not. First, even for a share sold
internationally, prices are determined at the local level because that is where
firm-specific information is gathered and processed. Next, because non-public
130
      Ibid. at 1244.
131
      Stephen Choi, The Benefits of Provincial Securities Regulation in Canada, June 2010, A.G.Q.
      at 1424–1429. (―Choi‖)
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information about a firm is generated locally, the greatest need for surveillance is at the
local level. Global markets complement local markets because they provide access to
foreign sources of capital. Conversely, the importance of national markets has not been
established, and nothing warrants regulation at this level rather than at the local level.
This reality is illustrated by the European Union, where regulation is conducted by
member states.132

[100] Andrea M. Corcoran is of the opinion that the Canadian and Quebec systems
comply with IOSCO‘s 30 principles and three general objectives of investor protection;
the establishment of fair, efficient, and transparent markets, and; systemic risk
reduction. New principles particular to this last objective were adopted in 2010. 133 Since
the AMF is an IOSCO member, these principles apply in Quebec. They do not prescribe
a particular regulatory structure and specifically recognize that establishing a single
regulator is not necessary.134 The principles infer that cooperation between many
participants is necessary to ensure the system‘s efficiency. Corcoran concludes by
emphasizing that both the International Monetary Fund and the World Bank considered
the Canadian regulatory system efficient.135

[101] Professor Thomas J. Courchene is of the opinion that Canada is the most
decentralized federation among all of the world‘s developed countries. He adds that
Canadian programs under decentralized management, such as securities regulation,
are more dynamic, efficient, and innovative than if they were centralized. Securities
regulation also involves a socio-political dimension. For Quebec, this involves
maintaining a model of community capitalism characterized by the French language,
Quebec culture, and the use of Quebec civil law. For Alberta, it involves retaining
control over the key aspects of its economy, including natural resources, despite its
limited political and electoral power within the country. Courchene concludes that it has
not been proven that a national commission would improve the securities industry‘s
performance, either nationally or internationally. It would be inappropriate for the federal
government to use the current enforcement problems under the current system to justify
its approach when it could address those problems in other ways. It is unlikely that a
national system would be more efficient since it would have to preserve the vast
majority of existing jobs. Courchene concludes that Canadians would be better served
by keeping the existing system in place.136

[102] Eric Spink, Q.C., is of the opinion that securities regulation is a component of
property and contract law. Its objectives are investor protection, the establishment of fair
132
      Jonathan Macey, An Analysis of the Canadian Federal Government‘s Initiative to Create a National
      Securities Regulator, June 2010, A.G.Q. at 1661–1666.
133
      Andrea Corcoran, International Standards Affecting Securities Regulators and Regulation as
      Applicable to Quebec, June 2010, A.G.Q. at 1684–1985. (―Corcoran‖)
134
      Ibid. at 1687.
135
      Ibid. at 1898.
136
      Thomas Courchene, A Single National Securities Regulator? Public Policy and Political Economy
      Perspectives, June 26, 2010, A.G.A. at 288–290.
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markets, and systemic risk reduction. Alberta‘s Securities Transfer Act codifies the rules
of contract law applicable to securities transactions. What is commonly called
interprovincial securities trade is in fact a series of contracts that do not involve the
displacement of property. Systemic risk reduction is achieved through the regulation of
involved intermediaries and the contract rules established by clearing agencies.137

                          iv. Existing provincial legislation
[103] The CBA is correct in arguing that the constitutionality of a federal statute must
be determined without heed to a nearly identical provincial statute. Redundancy is not
an indicator of invalidity since, as I mentioned, two statutes may be adopted to deal with
different aspects of the same thing. Chief Justice Dickson expressed that view in
General Motors,138 reiterating the statements he had previously made in Multiple
Access.139 However, the other existing enactments dealing with the same problem may
be relevant at the stage of identifying the statute‘s true character, or pith and substance,
since they provide clues as to the purpose of the proposed Act and its possible effects.
This section will therefore address the legislative framework applicable in Quebec in this
subject-matter.

[104] The AMF is established by the Act respecting the autorité des marchés
financiers.140 As set out under Title 1, the AMF‘s mission is to provide assistance to
consumers of financial products and services (hereafter in this section ―consumers‖),
ensure that the regulated entities of the financial sector comply with the solvency
standards ensuring consumer protection, administer eligibility to distribute financial
products and services on the stock market, supervise stock market activities, and
provide for consumer compensation.141 Its objectives are to foster public confidence in
financial institutions, promote the availability of high-quality products and services,
establish a regulatory framework fostering the development of the financial sector,
provide reliable information on the financial market, and protect consumers.142 Title II
provides for the establishment of a Conseil consultatif de régie administrative, or
advisory board, within the AMF, composed of seven members appointed by the Quebec
Minister of Finance and mandated to make recommendations to the AMF and the
Minister of Finance concerning the AMF‘s operations.143

[105] Under Title III, the AMF may recognize persons as self-regulatory organizations
for, among other things, supervising activities regulated by the Securities Act. The AMF
may delegate its powers to such organizations144 while still controlling their activities,
137
      Eric Spink, Q.C., Securities Regulation as Property Law, June 28, 2010, A.G.A. at 342. (―Spink‖)
138
      General Motors, supra, footnote 11 at para. 63.
139
      Multiple Access, supra, footnote 15 at 175.
140
      Act respecting the autorité des marchés financiers, R.S.Q. c. A-33.2.
141
      Ibid., s. 4. See also the Securities Act, R.S.Q. c. V-1.1, s. 276.
142
      Ibid., s. 8.
143
      Ibid., s. 57.
144
      Ibid., s. 61.
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which, for example, allows it to suspend the application of a by-law, amend by-laws, or
prescribe a particular course of action if public interest so requires. 145 Title IV creates
the BDRVM, whose functions include taking measures under the Securities Act,146 such
as suspending or imposing conditions on the rights created by registering as a dealer,
adviser, or investment fund manager,147 or prescribing a course of action required by
the public interest to an exchange or other body recognized by the AMF. 148

[106] Title II of the Securities Act provides that, unless exempted, every person
intending to make a distribution of securities in or outside Quebec must prepare a
prospectus that contains all material facts relating to the securities issued and is subject
to a receipt issued by the AMF.149 Title III provides that issuers have the obligation to
provide periodic disclosure about their business and internal affairs. 150 An insider of a
reporting issuer must file a report making various disclosures. 151 Title IV imposes
conditions on persons making a take-over or issuer bid.152

[107] Title V requires that any person wanting to act as a dealer, adviser, or investment
fund manager register as such with the AMF.153 Registration is allowed on the basis of
competence, integrity, and solvency requirements being met and may be conditional.154
The AMF may revoke, suspend, or impose conditions on a registration in the event,
among other things, of bankruptcy, offence, or incapacity.155 As previously stated, the
BDRVM may also revoke the rights granted by registration.156 Dealers, advisers, and
investment fund managers must keep records of certain information and disclose it to
the AMF upon request.157 They must also deal with their clients fairly, honestly, loyally,
and in good faith.158

[108] Title VI provides that no exchange, clearing house, information processor,
matching service utility, or regulation services provider may carry on securities activities
in Quebec unless it is recognized by the AMF as a self-regulatory organization.159 The
AMF establishes the rules applicable to those organizations and the BDRVM may
prescribe a course of action to them where public interest so requires.160 Title VII

145
      Ibid., ss. 76, 77 and 80.
146
      Ibid., ss. 93–94.
147
      Securities Act, s. 152.
148
      Ibid., s. 172.
149
      Ibid., ss. 11–13.
150
      Ibid., ss. 73–74.
151
      Ibid., s. 89.3.
152
      Ibid., s. 112.
153
      Ibid., s. 148.
154
      Ibid., s. 151.
155
      Ibid., s. 151.0.1.
156
      Ibid., s. 152.
157
      Ibid., s. 159.0.1.
158
      Ibid., ss. 160–160.1.
159
      Ibid., s. 169.
160
      Ibid., ss. 171.1.1–172.
No.: 200-09-006746-090                                                            PAGE: 35

establishes penal prohibitions and fines. It prohibits self-dealing, false representations to
the AMF, misrepresentation of qualifications, multiple transactions for an account
without justification, and selling a security short without first notifying the dealer
responsible.161 It also sets out specific offences such as engaging in unfair, improper, or
fraudulent practices,162 or making misrepresentations.163 Every person who contravenes
a provision of the Securities Act commits an offence and is liable to fines or to
imprisonment not exceeding five years less one day.164

[109] Title VIII sets out the applicable rules for civil actions in the event of transactions
effected without a prospectus or circular, misrepresentations made on the primary
market or secondary market, the use of privileged information, and irregular take-over
bids or issuer bids. These rules concern evidence, award of damages, rescinding of
transactions, price revision, apportionment of liability, prescription, and jurisdiction in
which proceedings are to be instituted.165 Title IX contains various enforcement
measures, particularly concerning the AMF‘s powers of investigation,166 the BDRVM‘s
power to make orders depriving a person of the profit realized as a result of non-
compliance with securities legislation,167 and exemptions from legislative
requirements.168 Among other things, the BDRVM may order a person to cease any
activity in respect of a securities transaction.169Title X provides that the government or
the AMF may enter into an agreement with another government or the securities
commission of a Canadian territory or province for mutual delegation of authority. 170 The
AMF or the BDRVM may call before it any matter that is before an extra-provincial
securities commission under a delegation of authority. The AMF may incorporate by
reference any provisions of extra-provincial securities legislation.171 The AMF, the
BDRVM, or a recognized self-regulatory organization may make a decision on the basis
of a similar decision by an extra-provincial securities commission.172 This title also
allows an agreement to be reached stipulating that decisions of an authority having
jurisdiction in one province or territory are recognized in the other province or territory
and that an exemption from obligations fulfilled in one province or territory is given in the
other province or territory.173 Last, Title XI gives the AMF the power to adopt the
regulations required to enforce the Act. All regulations must be approved by the Minister


161
      Ibid., ss. 187–194.
162
      Ibid., s. 195.2.
163
      Ibid., ss. 196–197.
164
      Ibid., ss. 202–213.
165
      Ibid., ss. 213.1–236.1.
166
      Ibid., s. 237.
167
      Ibid., s. 262.1.
168
      Ibid., s. 263.
169
      Ibid., s. 265.
170
      Ibid., s. 306.
171
      Ibid., s. 308.
172
      Ibid., s. 308.0.3.
173
      Ibid., s. 308.2.
No.: 200-09-006746-090                                                                       PAGE: 36

of Finance, who may also make regulations of his own initiative. 174 Finally, I note that
the Derivatives act175 and the Act respecting the transfer of securities and the
establishment of security entitlements176 round out the existing system in Quebec. The
first statute seeks to foster honest, fair, efficient, and transparent derivatives markets;
protect the public from unfair, improper, or fraudulent practices, and; ensure that the
public has access to adequate, true, and appropriately tailored information. 177 Title II
provides that regulated entities must be recognized by the AMF to carry on derivatives
activities178 and subjects such entities to a series of operating rules. The BDRVM may,
among other things, prescribe a course of conduct to a recognized regulated entity if it
is required by public interest.179 Title III requires that dealers and advisors be registered
with the AMF180 and subjects them to rules of conduct. Title IV requires that any person
first be qualified by the AMF before marketing a derivative.181 Title V deals with the
administration of the statute, gives the AMF investigation powers,182 and allows the
BDRVM to impose fines up to $2,000,000.183 Title X of the Securities Act allows for
inter-jurisdictional cooperation to apply to the Act respecting the transfer of securities
and the establishment of security entitlements. Title VII establishes specific prohibitions
and offences, such as engaging in unfair, improper, or fraudulent practices,184 and
making misrepresentations.185 Any person who commits an offence under this statute is
liable to fines or to imprisonment for a period not exceeding five years less one day. 186
Title IX gives the AMF the power to make regulations, a power which may also be
exercised by the government.187

[112] The Act respecting the transfer of securities and the establishment of security
entitlements has the purpose of establishing a legal framework for certain applicable
private law aspects as part of an effort by the Canadian provinces and territories to
harmonize their legislation on the matter.188 To that end, it sets out a series of
definitions: transfer, issuer, securities, financial assets, notice, delivery, endorsement,
warranties, and so forth. It states that the issuer is liable for the late or wrongful


174
      Ibid., s. 331.2.
175                                       176
      Derivatives act, R.S.Q. c. I-14.01.          An act respecting the transfer of securities and the
      establishment of security entitlements, R.S.Q. c. T-11.002.
176
      An act respecting the transfer of securities and the establishment of security entitlements, R.S.Q.
      c. T-11.002.
177
      Derivatives act, supra at note 175, s. 1.
178
      Ibid., s. 12.
179
      Ibid., s. 49.
180
      Ibid., s. 54.
181
      Ibid., s. 82.
182
      Ibid., s. 115.
183
      Ibid., s. 134.
184
      Ibid., s. 150.
185
      Ibid., ss. 152–153.
186
      Ibid., ss. 160–166.
187
      Ibid., ss. 174–176.
188
      Ibid., s. 1.
No.: 200-09-006746-090                                                                          PAGE: 37

registration of a securities transfer.189 This enactment also governs the exercise of
rights by holders of security entitlements.190 It places certain obligations on securities
intermediaries.191 As well, it establishes the priority rules that apply to purchasers for
value of rights in a security entitlement.192

[113] Last, let it be noted that not only does the Civil Code of Québec make various
references to securities, it devotes an entire subsection of Book Ten, Title Two, on
conflict of laws, to this subject-matter. The articles in this subsection provide, among
other things, that the validity of a movable security is governed by the law of the country
under which the issuer is constituted. With the exception of any other designated
legislation, issuer‘s rights and duties are also governed by the law of that country. In
addition, the law of the country in which a security certificate is located at the time of its
delivery governs the assertion of claims.193

[114] The other Canadian provinces and territories all have similar regulatory schemes
governing securities.194

                        v. Finding on pith and substance

[115] In light of the above, it is my view that the federal government‘s purpose in the
proposed Act is to make the Canadian securities regulatory regime more consistent,
more effective, and better equipped to prevent the systemic risks that can threaten the
financial system. I use the expression ―systemic risk‖ in the sense intended by
Trebilcock in the following definition:

          . . . the risk of default by one market participant will impact the ability of others to
          fulfil their legal obligations, setting off a chain of negative economic
          consequences that pervade an entire financial system.195



189
      Ibid., ss. 91–102.
190
      Ibid., ss. 107–115.
191
      Ibid., ss. 116–125.
192
      Ibid., ss. 129–130.
193
      C.C.Q., arts. 3108.1–3108.8.
194
      Securities Act, R.S.B.C. 1996, c. 418, Securities Transfer Act, S.B.C. 2007, c. 10 (British Columbia),
      Securities Act, R.S.A. 2000, c. S-4, Securities Transfer Act, S.A. 2006, c. S-4.5 (Alberta), Securities
      Act, 1988, S.S. 1988–89, c. S–42.2, Securities Transfer Act, S.S. 2007, c. S–42.3 (Saskatchewan),
      Securities Act, R.S.O. 1990, c. S.5, Securities Transfer Act, 2006, S.O. 2006, c. 8 (Ontario),
      Securities Act, S.N.B. 2004, c. S-5.5, Securities Transfer Act, S.N.B. 2008, c. S-5.8 (New Brunswick),
      Securities Act, R.S.N.S. 1989, c. 418, Securities Transfer Act, S.N.S. 2010, c. 8 (Nova Scotia),
      Securities Act, R.S.P.E.I. 1988, c. S-3.1 (Prince Edward Island), Securities Act, R.S.N.L. 1990,
      c. S-13, Securities Transfer Act, S.N.L. 2007, c. S-13.01 (Newfoundland and Labrador), Securities
      Act, S.Y. 2007, c. 16 (Yukon), Securities Act, S.N.W.T. 2008, c. 10, Securities Transfer Act, S.N.W.T.
      2009, c. 14 (Northwest Territories), Securities Act, S.Nu. 2008, c. 12, Securities Transfer Act, S Nu.
      2010, c. 15 (Nunavut).
195
      Trebilcock, supra, footnote 116, A.G.C. at 343.
No.: 200-09-006746-090                                                                         PAGE: 38

[116] Given the contradictory expert evidence before the Court and the applicable
standard of evidence, for the time being, it is enough to identify these problems as those
targeted by the government without having to comment on their existence. This
conclusion is also based on my historical review of the harmonization initiatives
undertaken since the early 20th century and the many reports published on those
occasions. Finally, the Preamble and sections 9 and 16 of the proposed Act confirm the
pursuit of these three main objectives.

[117] It is dangerous to assess the potential effects of legislation that has not yet been
enacted. It is necessary to do so, however, to ensure that the identification of the pith
and substance of the proposed Act is not limited to the dominant characteristic its
author wishes to attribute to it but provides the best possible description of reality. Doing
otherwise could result in the Court finding colourable legislation valid and legitimizing a
misuse of power. Indeed, Justice Rand of the Supreme Court provides an explicit
warning in the Margarine Reference:

          Ordinarily a preamble indicates the purpose of the statute and it may be a guide
          to the meaning and scope of the language where that is doubtful or ambiguous.
          But when the question is the real character of the legislation for the purposes of
          jurisdiction between two legislatures under a federal constitution, different
          considerations arise. A legislation cannot conclude the question by a declaration
          in a preamble: at most it is a fact to be taken into account, the weight to be given
          to it depending on all the circumstances . . . 196 [Emphasis added.]

[118] There is no doubt that the federal government is seeking to reduce costs and
prevent systemic risks. Harmonized legislation and its potential benefits are, however,
irrelevant when it comes to identifying the pith and substance of a statute since a
federal statute, by definition, can uniformly apply a mari usque ad mare, while a
provincial law is confined to the province concerned. Since any federal statute has
some harmonizing effect, examining such a purpose would be circuitous, and limiting
oneself to it would be refraining from identifying the matter to which the proposed Act
actually relates.

[119] Moreover, the limited importance of the few measures to which the purpose of
preventing systemic risks can be related satisfies me that this is not the pith and
substance of the proposed Act, despite the importance it is given in the Preamble and in
sections 9 and 16. In that respect, the proposed Act provides only for the following: in
Part 14, the power to intervene urgently on the part of the Governor in Council and in
parts 1 and 2, two structures dedicated to the exchange of information with respect to
regulation, namely the Council of Ministers and the Regulatory Policy Forum. These
measures are too few and too insignificant in terms of their likely effect for one to be
able to characterize them as being dominant. On the contrary, Choi and Spink convince
me that the proposed Act, through the regulation of the overall conduct by participants
196
      Reference re Validity of Section 5 (a) Dairy Industry Act, [1949] S.C.R. 1, pp. 47–48.
No.: 200-09-006746-090                                                                         PAGE: 39

in the securities market, indirectly addresses the prevention of systemic risks most
significantly.

[120] On that topic, Justice Beetz made a relevant distinction between the occasion on
which a statute is enacted and its pith and substance in his dissent to Re: Anti-Inflation
Act. A statute that is part of a general program aiming to achieving a purpose that is
also general does not necessary fall within the subject matter of that purpose:

          I have no reason to doubt that the Anti-Inflation Act is part of a more general
          program aimed at inflation and which may include fiscal and monetary measures
          and government expenditure policies. I am prepared to accept that inflation was
          the occasion or the reason for its enactment. But I do not agree that inflation is
          the subject matter of the Act. In order to characterize an enactment, one must
          look at its operation, at its effects and at the scale of its effects rather than at its
          ultimate purpose where the purpose is practically all embracing. . . . [t]he Anti-
          Inflation Act is, as its preamble states, clearly a law relating to the control of profit
          margins, prices, dividends and compensation, that is, with respect to the
          provincial private sector, a law relating to the regulation of local trade, to contract
          and to property and civil rights in the provinces, enacted as part of a program to
          combat inflation. Property and civil rights in the provinces are, for the greater
          part, the pith and substance or the subject matter of the Anti-Inflation Act. . . .197

[121] Moreover, the proposed Act has the classic attributes of a scheme regulating the
conduct of participants in the securities market. It governs issues on the primary market
and transactions on the secondary market through various requirements (requirement to
produce information and representations from issuers‘ insiders, recognition of
intermediaries, designation of persons able to provide market participants with services,
framework for take-over bids, prohibition of conduct intended to deceive the market,
etc.) and provides for the respect of these requirements through criminal penalties and
a series of civil remedies. I therefore conclude that the dominant characteristic, the main
thrust, the pith and substance of the proposed Act is the regulation of the securities
trade.

[122] I do not see a concurrent pith and substance, such as maintaining the integrity of
the financial system or keeping capital markets competitive, which would allow
Parliament to enact the Act under the double aspect doctrine. The other aspects that
have been argued by the AGC are excessively general and purely incidental to the
proposed Act. Indeed, the proposed Act distinguishes itself from the other matters that
can be subject to a double aspect, insofar as the federal regime is not being proposed
as a complementary framework to the provincial regimes, but as a substitute regime.
The proposed provisions are so similar to those of the provincial legislation currently in
effect that the latter are bound to be rendered of no force or effect because of their
inconsistency, unless they are outright removed.
197
      Re: Anti-Inflation Act, supra, footnote 36, pp. 452–453.
No.: 200-09-006746-090                                                                        PAGE: 40

[123] I will now assess which subject class under the Constitution Act, 1867, the pith
and substance of the proposed Act falls under. I will begin with the provincial power
over property and civil rights and continue with the federal power over trade and
commerce.

[124] The following comments made by Justices Binnie and LeBel in Canadian
Western Bank v. Alberta will guide this characterization exercise:

          The division of powers in ss. 91 to 95 of the Constitution Act, 1867 form the
          bedrock of our federal system. They seek to preserve local diversity within the
          federal nation by conferring ―[b]road powers‖ on provincial legislatures, while at
          the same time ―reserving to Parliament powers better exercised in relation to the
          country as a whole‖[.]198

  3.      Provincial power over property and civil rights

              a) Historical origins
[125] The provincial power over property and civil rights can be traced back to early
European colonization. Following the clash of two empires, which the inhabitants of
North America had to witness at the time of the Conquest, George III, King of Great
Britain and Ireland, introduced English criminal and civil law in the Province of Quebec.
In his Royal Proclamation, 1763,199 he provided as follows:
      We have given Power under our Great                Nous avons donné aux gouverneurs de
       Seal to the Governors of our said                  Nos colonies sous Notre grand sceau,
       Colonies respectively to erect and                 le pouvoir de créer et d'établir, de l'avis
       constitute, with the Advice of our said            de Nosdits conseils, des tribunaux
       Councils respectively, Courts of                   civils et des cours de justice publique
       Judicature and public Justice within our           dans Nosdites colonies pour entendre
       Said Colonies for hearing and                      et juger toutes les causes aussi bien
       determining all Causes, as well                    criminelles que civiles, suivant la loi et
       Criminal as Civil, according to Law and            l'équité, conformément autant que
       Equity, and as near as may be                      possible aux lois anglaises; […](je
       agreeable to the Laws of England, . . .            souligne)
       [Emphasis added.]
[126] The Act for making more effectual Provision for the Government of the Province
of Quebec in North America, known as the Quebec Act, 1774,200 introduced a new
balance between English and French Canadians. In section VIII, the Act re-established
French private law for property and civil rights issues:

198
      Canadian Western Bank v. Alberta, [2007] 2 S.C.R. 3, 2007 SCC 22 at para. 22.
199
      Royal Proclamation, 1763 (U.K.), reproduced in R.S.C. 1985, Appendix II, No. 1, 3.
200
      Quebec Act, 1774, 14 George III, c. 83 (U.K.), Section VIII, reproduced in R.S.C. 1985, Appendix II,
      No. 2, p. 5.
No.: 200-09-006746-090                                                                      PAGE: 41

      And be it further enacted by the                  Il est aussi Établi par la susdite autorité,
       Authority aforesaid, That all his                  que tous les sujets Canadiens de Sa
       Majesty's Canadian Subjects within the             Majesté en ladite province de Québec;
       Province of Quebec . . . may also hold             […] pourront aussi tenir leurs
       and enjoy their Property and                       propriétés et possessions, et en jouir,
       Possessions, together with all Customs             ensemble de tous les usages et
       and Usages relative thereto, and all               coutumes qui les concernent, et de
       other their Civil Rights in as large,              tous leurs autres droits ce citoïens,
       ample, and beneficial Manner as if the             d'une manière aussi ample, aussi
       said    Proclamation,    Commissions,              étendue, et aussi avantageuse, que si
       Ordinances, and other Acts and                     les dites proclamation, commissions,
       Instruments had not been made, and                 ordonnances, et autres actes et
       as may consist with their Allegiance to            instruments, n'avoient point été faits,
       his Majesty, and Subjection to the                 en gardant à sa Majesté la foi et fidélité
       Crown and Parliament of Great Britain;             qu'ils lui doivent, et la soumission due
       and that in all Matters of Controversy,            à la couronne et au parlement de la
       relative to Property and Civil Rights,             Grande-Bretagne: et que dans toutes
       Resort shall be had to the Laws of                 affaires en litige, qui concerneront leurs
       Canada, as the Rule for the Decision               propriétés et leurs droits de citoïens, ils
       of the same . . . [Emphasis added.]                auront recours aux lois du Canada,
                                                          comme les maximes sur lesquelles
                                                          elles doivent être décidées […] (je
                                                          souligne)
[127] Professor Gil Rémillard notes that the constitutional documents that followed
were consistent with the Quebec Act, 1774. He emphasizes the importance of this
process for the preservation of legal traditions:

          [TRANSLATION]

          For the French Canadians of Lower Canada, the Act of 1867 first meant the end
          of the scheme of union, which was considered to be an injustice that had been
          imposed following the troubles of 1837–38. For them, the federal pact was thus a
          decisive step in the legal expression of their national identity. In that sense, the
          Act of 1867 was an extension of the Quebec Act, 1774, and the Constitutional
          Act, 1791, which allowed the community that was conquered in 1760 to
          rediscover its legal traditions and its national identity.201 [Emphasis added.]

[128] Tremblay shares this view:

          [TRANSLATION]



201
      Gil Rémillard, Le fédéralisme canadien [Canadian Federalism] (Montreal: Éditions Québec Amérique,
      1980) at 102. (hereafter ―Rémillard‖)
No.: 200-09-006746-090                                                                         PAGE: 42

          Subsection 92(13) of the British North America Act therefore seems to be
          intimately connected to the history of Canada, particularly to the preservation of
          French civil law in the province of Quebec. In the Quebec Act, 1774, the
          expression ―property and civil rights‖ is a legal guarantee for the preservation of
          French civil law; it guarantees the continuity of the French intellectual tradition in
          private law. It authorizes Canadians, in accordance with the principles of
          international law and the practice of nations, to regulate their private relationships
          according to a well-known legal system.202

[129] Justice L‘Heureux-Dubé made a similar observation in Laurentide Motels Ltd. v.
Beauport (City):

          The Quebec Act of 1774 sealed the fate of the two major legal systems that
          would govern the law applicable in Quebec: French civil law as it stood before
          1760 with its subsequent amendments in Quebec for everything relating to
          property and civil rights, and the common law as it stood in England at that time,
          and as subsequently amended, for what related to public law.203

[130] Section XXXIII of the Act to repeal certain Parts of an Act, passed in the
fourteenth Year of his Majesty’s Reign, intituled, An Act for making more effectual
Provision for the Government of the Province of Quebec, in North America; and to make
further Provision for the Government of the said Province204 provided for the
preservation of existing laws in the newly created Upper and Lower Canada:
      And be it further enacted by the                    Et il est de plus statué par la dite
       Authority aforesaid, That all Laws,                 Autorité, que toutes Loix, Statuts, et
       Statutes, and Ordinances, which shall               Ordonnances, qui seront en force le
       be in force on the Day to be fixed in the           jour qui sera fixé de la manière ci-
       Manner herein-after directed for the                après ordonne pour le commencement
       Commencement of this Act, within the                de cet Acte, dans les dites Provinces,
       said Provinces, or either of them, or in            ou l'une ou l'autre d'icelles, ou dans
       any Part thereof respectively, shall                aucune        de      leurs      parties
       remain and continue to be of the same               respectivement,        resteront      et
       Force, Authority, and Effect, in each of            continueront dans la même force,
       the said Provinces respectively, as if              autorité, et effet, dans chacune des
       this Act had not been made, and as if               dites     Provinces     respectivement,
       the said Province of Quebec had not                 comme si cet Acte n'eut pas été fait; et
       been divided; except in so far as the               comme si la dite Province de Québec;
       same are expressly repealed or varied               n'eut pas été divisée; excepte en
       by this Act, or in so far as the same               autant qu'elles ont été expressément

202
      André Tremblay, Les Compétences législatives au Canada et les pouvoirs provinciaux en matière de
      propriété et de droits civils (Ottawa: Éditions de l‘Université d‘Ottawa, 1967) at 126. (hereafter
      ―Tremblay‖)
203
      Laurentide Motels Ltd. v. Beauport (City), [1989] 1 S.C.R. 705, 735.
204
      Constitutional Act, 1791, 31 George III, c. 31 (U.K.), reproduced in R.S.C. 1985, Appendix II, No. 3.
No.: 200-09-006746-090                                                                           PAGE: 43

       shall or may hereafter, by virtue of and              rappelées ou variées par cet Acte, ou
       under the Authority of this Act, be                   en autant qu'elles seront ou pourront
       repealed or varied by his Majesty, his                ci-après, en vertu et sous l'autorité de
       Heirs or Successors, by and with the                  cet Acte, être rappellées ou variées par
       Advice and Consent of the Legislative                 sa    Majesté,     ses    Héritiers   ou
       Councils and Assemblies of the said                   Successeurs, par et de l'avis et
       Provinces respectively, . . . [Emphasis               consentement des Conseils Législatifs
       added.]                                               et des Assemblées des dites Provinces
                                                             respectivement, […] (je souligne)
[131] Section XLVI of the Union Act, 1840, or the Act to re-unite the Provinces of
Upper and Lower Canada, and for the Government of Canada, essentially reproduces
the same text.205 Lastly, the Constitution Act, 1867, uses the English expression
―Property and Civil Rights‖ as it stood in the list of enumerated provincial powers. It also
specified that all the laws in effect in Quebec at the time of union would continue to be
in effect until amended by Parliament, meaning that some laws are still in effect today
despite Confederation.
      92. In each Province the Legislature                 92. Dans chaque province la législature
       may exclusively make Laws in relation                pourra exclusivement faire des lois
       to Matters coming within the Classes of              relatives aux matières tombant dans
       Subjects next hereinafter enumerated;                les catégories de sujets ci-dessous
       that is to say, . . .                                énumérés, savoir : […]

      13. Property and Civil Rights in the                 13. La propriété et les droits civils dans
       Province. . . .                                      la province; […]

      129. Except as otherwise provided by                 129. Sauf toute disposition contraire
       this Act, all Laws in force in Canada,               prescrite par la présente loi, toutes les
       Nova Scotia, or New Brunswick at the                 lois en force en Canada, dans la
       Union, and all Courts of Civil and                   Nouvelle-Écosse ou le Nouveau-
       Criminal Jurisdiction, and all legal                 Brunswick, lors de l'union, tous les
       Commissions, Powers, and Authorities,                tribunaux de juridiction civile et
       and       all     Officers,     Judicial,            criminelle, toutes les commissions,
       Administrative, and Ministerial, existing            pouvoirs et autorités ayant force
       therein at the Union, shall continue in              légale, et tous les officiers judiciaires,
       Ontario, Quebec, Nova Scotia, and                    administratifs et ministériels, en
       New Brunswick respectively, as if the                existence dans ces provinces à
       Union had not been made; subject                     l'époque de l'union, continueront
       nevertheless (except with respect to                 d'exister dans les provinces d'Ontario,
       such as are enacted by or exist under                de Québec, de la Nouvelle-Écosse et
       Acts of the Parliament of Great Britain              du                  Nouveau-Brunswick
       or of the Parliament of the United                   respectivement, comme si l'union

205
      Union Act, 1840, 3-4 Victoria, c. 35 (U.K.), reproduced in R.S.C. 1985, Appendix II, No. 4, 4–5.
No.: 200-09-006746-090                                                                  PAGE: 44

      Kingdom of Great Britain and Ireland),            n'avait pas eu lieu; mais ils pourront,
      to be repealed, abolished, or altered by          néanmoins (sauf les cas prévus par
      the Parliament of Canada, or by the               des lois du parlement de la Grande-
      Legislature of the respective Province,           Bretagne ou du parlement du
      according to the Authority of the                 Royaume-Uni de la Grande-Bretagne
      Parliament or of that Legislature under           et d'Irlande), être révoqués, abolis ou
      this Act.                                         modifiés par le parlement du Canada,
                                                        ou par la législature de la province
                                                        respective, conformément à l'autorité
                                                        du parlement ou de cette législature en
                                                        vertu de la présente loi.


[132] Although the Fathers of Confederation have not commented much specifically on
the preservation of civil law as a provincial power, Tremblay remarks in his examination
of subsection 92(13) that this was undeniably one of the conditions of the compromise
that led to the union of the four founding provinces:

         [TRANSLATION]

         [T]he differences between the legal systems of Lower Canada and the other
         provinces were, even in Macdonald‘s view, one of the underlying causes of the
         failure to achieve legislative union; the requirement to maintain these differences
         therefore led to federation. Lower Canada would never have agreed to a system
         that would have deprived it of the benefits of the Quebec Act or that would have
         randomized the benefits of the codification of its civil laws.206

[133] The purpose of confederation is one of the principles applicable in constitutional
interpretation. In Re: Resolution to amend the Constitution207 the Supreme Court
considered the definition established by the Privy Council in Maritime Bank of Canada
(Liquidators of) v. New Brunswick (Receiver-General), which Lord Watson formulated
as follows:

         The object of the Act was neither to weld the provinces into one, nor to
         subordinate provincial governments to a central authority, but to create a federal
         government in which they should all be represented, entrusted with the exclusive
         administration of affairs in which they had a common interest, each province
         retaining its independence and autonomy.208 [Emphasis added.]

[134] This review of Canada‘s various constitutional documents reveals that the
expression ―Property and Civil Rights in the Province‖ reflects the evolution of the

206
      Tremblay, supra, footnote 202, at 43.
207
      Re: Resolution to amend the Constitution, [1981] 1 S.C.R. 753, 905.
208
      Maritime Bank of Canada (Liquidators of) v. New Brunswick (Receiver-General), [1892] A.C. 437,
      441–442
No.: 200-09-006746-090                                                                    PAGE: 45

protection of private law in Quebec since the fall of New France. It follows that the
meaning of this expression must take into account the historical and political context in
which it originated. The enactment of the Quebec Act, 1774, offered some protection to
the existence of French Canadians. The expression therefore refers to the entire body
of private law governing the interactions between persons in Quebec. The best-known
example of this power is, without contest, the enactment of the Civil Code of Lower
Canada in 1865, the precursor to the current Civil Code of Québec. Hogg comments as
follows:

          [S]ubject to the qualifications required by the new federal scheme, it is clear that
          the framers of the Constitution Act understood the familiar phrase [―Property and
          Civil Rights‖] in the same sense it obtained in 1792 and 1774, that is to say, as a
          compendious description of the entire body of private law which governs the
          relationships between subject and subject, as opposed to the law which governs
          the relationship between the subject and the institutions of government.209
          [Emphasis added.]

[135] Thus, if it were not for its historical origins, subsection 92(13) of the Constitution
Act, 1867, could simply be referred to as ―private law in the province‖. However, given
their profound importance, these origins cannot be ignored and must guide the Court‘s
analysis.

              b) Provincial residual clause
[136] In addition to forming the foundation of civil law in Canada, the provincial power
over property and civil rights contributes to the federal balance of powers byhaving
played, to some extent, the role of a provincial residual clause. Clearly, the real residual
power provided for by the Constitution Act, 1867, is vested in Parliament under the
introductory paragraph of section 91. However, the courts‘ association of this power with
subsection 92(16) suggests a residual function.

[137] Subsection 92(16) provides for a general provincial power over ―Generally all
Matters of a merely local or private Nature in the Province‖. Rémillard, however,
characterizes this as a [TRANSLATION] ―mini residual power‖ and notes that, given how
narrowly it has been interpreted, it is subsection 92(13) that has this function:

          [TRANSLATION]

          Contrary to the federal residual power at the beginning of section 91, that of the
          provinces is the last subject class enumerated at section 92 and has been
          applied in a highly restrictive manner. It seems that originally, subsection 92(16)
          was intended to be a compromise to counterbalance the federal power to
          legislate for the peace, order, and good government of the country, but it was a

209
      Hogg, supra, footnote 17 at 21-2.
No.: 200-09-006746-090                                                                          PAGE: 46

          very slight compromise that, overall, served more as camouflage than as an
          effective counterweight. Section 92, which grants the provinces their spheres of
          jurisdiction, was drafted in highly restrictive terms. Only the Judicial Committee of
          the Privy Council‘s liberal interpretation of subsection 92(13), which concerns
          property and civil rights, made it possible to broaden the scope of section 92 to
          establish a certain balance with the federal government.210 [Emphasis added.]

[138] Professor Gérald-A. Beaudoin notes the link made between the two sections, but
cautions that they have distinct meanings:

          [TRANSLATION]

          In practice, the courts often encompass subsection (16) in subsection (13); there
          is a distinction to be made, however. Subsection (16) is a residual power, which
          includes local public order . ...211

[139] In contrast, Professor Nicole Duplé is of the opinion that subsections 13 and 16
apply jointly to form the provincial residual power:

          [TRANSLATION]

          Subsection 16 therefore confers a power on the legislatures that complements
          the heads of power already enumerated in section 92, particularly subsection 13,
          which is, to some extent, also a provincial residual power because of the large
          number of matters likely to fall under it.

          . . . Despite [the removal of subject classes enumerated at section 91], the power
          under subsection 92(13) is sufficiently inclusive in scope, especially when it is
          examined in conjunction with subsection 16 of the same section, for many
          legislative matters to fall under it. The Civil Code of Québec and generally all
          legislation concerning the relationships between private persons in the province
          fall within subsection 92(13).212

[140] This approach was recently noted by the Chief Justice of the Supreme Court,
who noted the broad scope of the provincial power over property and civil rights in
Reference re Assisted Human Reproduction Act:

          In the present appeal, the ancillary provisions generally fall under the provincial
          powers over property and civil rights (s. 92(13)) and matters of a merely local or
          private nature (s. 92(16)). Both of these heads of power are very broad, and they

210
      Rémillard, supra, footnote 201 at 150.
211
      Gérald A.-Beaudoin, La Constitution du Canada [The Canadian Constitution], 3rd ed, with the
      collaboration of Pierre Thibault (Montreal: Wilson & Lafleur, 2004) at 415.
212
      Nicole Duplé, Droit constitutionnel: principes fondamentaux [Constitutional Law: Basic Principles], 4th
      ed (Montreal: Wilson & Lafleur, 2009) at 378.
No.: 200-09-006746-090                                                                   PAGE: 47

         are often seen as sources of residual jurisdiction: see Hogg, at pp. 17-2 and
         17-3.213 [Emphasis added.]

[141] What follows is the excerpt to which the Chief Justice is referring:

         In Canada, the provincial heads of power include one of great extent and
         importance. This is s. 92(13), ―property and civil rights in the province‖, a phrase
         which is apt to include most of the private law of property, contracts and torts and
         their many derivatives. Indeed, at the hands of the Privy Council, s. 92(13)
         became a kind of residuary power itself, and one which was much more
         important than the federal peace, order, and good government power. A second
         potentially sweeping head of provincial power is s. 92(16), ―generally all matter of
         a merely local or private nature in the province‖. Albert S. Abel used the
         existence of s. 92(16) as the basis for an argument that there is no residuary
         power in the Constitution Act, 1867 at all. He said that p.o.g.g. and s. 92(16)
         were two complementary grants of power which distributed the residue between
         the two levels of government. But, as Abel himself conceded, one might just as
         easily speak of two residuary clauses as none, and of the two s. 92(16) has in
         practice turned out to be quite unimportant, because its work has been done for it
         by s. 92(13).214 [Emphasis added.]

[142] It therefore seems possible that subsection 92(13) is a provincial quasi-residuary
clause that operates in conjunction with subsection 92(16) of the Constitution Act, 1867.
The frequent reference made to it suggests that it has the function of balancing the
constitutional division of powers between the two levels of government, a function that
might be worth taking into account when the subsection is interpreted.

             c) Scope of power

[143] The Judicial Committee of the Privy Council‘s decision in Citizens' Insurance
Company of Canada v. Parsons is the leading authority on defining the provincial power
over property and civil rights in the province. In Parsons, it was argued that an Ontarian
insurance act, the Act to secure uniform Conditions in Policies of Fire Insurance, was
ultra vires the provincial power because it came within the federal power over trade and
commerce. Sir Montague Smith wrote eloquently on the difficulty of interpreting the
expression ―trade and commerce‖ without it including what the Fathers of Confederation
had intended to fall within the power over ―property and civil rights‖:

         Notwithstanding this endeavour to give pre-eminence to the dominion parliament
         in cases of a conflict of powers, it is obvious that in some cases where this
         apparent conflict exists, the legislature could not have intended that the powers
         exclusively assigned to the provincial legislature should be absorbed in those

213
      Reference re Assisted Human Reproduction Act, supra, footnote 17 at para. 134.
214
      Hogg, supra, footnote 17 at 17-2 and 17-3.
No.: 200-09-006746-090                                                                    PAGE: 48

          given to the dominion parliament. . . . With regard to certain classes of subjects,
          therefore, generally described in sect. 91, legislative power may reside as to
          some matters falling within the general description of these subjects in the
          legislatures of the provinces. In these cases it is the duty of the Courts, however
          difficult it may be, to ascertain in what degree, and to what extent, authority to
          deal with matters falling within these classes of subjects exists in each
          legislature, and to define in the particular case before them the limits of their
          respective powers. It could not have been the intention that a conflict should
          exist; and, in order to prevent such a result, the two sections must be read
          together, and the language of one interpreted, and, where necessary, modified,
          by that of the other. In this way it may, in most cases, be found possible to arrive
          at a reasonable and practical construction of the language of the sections, so as
          to reconcile the respective powers they contain, and give effect to all of them. 215
          [Emphasis added.]

[144] He finally concluded that the act in question fell within the jurisdiction of the
provincial legislature since it was related to contracts and the rights arising from them.
His reasoning is based on an interpretation of subsection 92(13) of the Constitution
Act, 1867, as establishing a private law regime rooted in a civil tradition in Quebec:

          The province of Quebec is omitted from [section 94 of the British North America
          Act] for the obvious reason that the law which governs property and civil rights in
          Quebec is in the main the French law as it existed at the time of the cession of
          Canada, and not the English law which prevails in the other provinces. The
          words "property and civil rights" are, obviously, used in the same sense in this
          section as in No. 13 of sect. 92, and there seems no reason for presuming that
          contracts and the rights arising from them were not intended to be included in
          this provision for uniformity. If, however, the narrow construction of the words
          "civil rights," contended for by the appellants were to prevail, the dominion
          parliament could, under its general power, legislate in regard to contracts in all
          and each of the provinces and as a consequence of this the province of Quebec,
          though now governed by its own Civil Code, founded on the French law, as
          regards contracts and their incidents, would be subject to have its law on that
          subject altered by the dominion legislature, and brought into uniformity with the
          English law prevailing in the other three provinces, notwithstanding that Quebec
          has been carefully left out of the uniformity section of the Act.216

[145] In Lawson v. Interior Tree Fruit and Vegetable Committee of Direction, Justice
Duff provided the following explanation for the narrow interpretation of subsection 91(2)
of the Constitution Act, 1867, in favour of the provincial power over property and civil
rights:

215
      Parsons, supra, footnote 19, 109.
216
      Ibid., 110–111.
No.: 200-09-006746-090                                                                        PAGE: 49

          The scope which might be ascribed to head 2, s. 91 (if the natural meaning of the
          words, divorced from their context, were alone to be considered), has necessarily
          been limited, in order to preserve from serious curtailment, if not from virtual
          extinction, the degree of autonomy which, as appears from the scheme of the Act
          as a whole, the provinces were intended to possess.217

[146] In Lymburn c. Mayland,218 the Privy Council confirmed provincial power over
securities under subsection 91(13) of the Constitution Act, 1867. In Lymburn, it was
argued that, as in Reference re: The Sale of Shares Act, 1924 (Man.),219 Alberta‘s
Security Frauds Prevention Act interfered with the federal power over the incorporation
of companies by virtue of the peace, order, and good government power. Lord Atkin
was of the view that the purpose of the act was ―to secure that persons who, carry on
the business of dealing in securities shall be honest and of good repute, and in this way
to protect the public from being defrauded‖.220 He found that it was normal for
acompany to be subject to the laws of the province concerning the trading in securities
and that there was no reason to conclude that the activities of a federally incorporated
company were likely to be paralyzed by the provincial legislation.

[147] The year 1949 marked the abolition of appeals of Supreme Court of Canada
decisions before the Judicial Committee of the Privy Council. Attempting to uphold the
principle of federalism as Sir Montague Smith did, the Privy Council interpreted
provincial powers so as that they would not, within a few decades, be supplanted by the
federal residuary power to legislate for the peace, order, and good government of
Canada. Tremblay comments as follows:

          [TRANSLATION]

          It was up to the Privy Council to determine whether the constitution was federal
          or not. By deciding to adopt federalism as the basic doctrine of the 1867 union, it
          was from then on difficult for it not to make the logical amendments to the Act
          and to bring it slightly more in line with the fundamental principles. The federal
          powers were clearly too broad and those of the provinces too limited and, also,
          seriously jeopardized. The Privy Council first had to minimally secure the
          provinces‘ powers and restrict those of the Dominion. It is from that perspective
          that the Privy Council‘s constant concern to protect and expand provincial rights
          must be understood. Subsection 92(13) benefitted from this, but
          subsection 92(16) could have done more so.221




217
      Lawson v. Interior Tree Fruit and Vegetable Committee of Direction, [1931] S.C.R. 357, 366.
218
      Lymburn v. Mayland, [1932] A.C. 318. (hereafter ―Lymburn‖)
219
      Reference re: The Sale of Shares Act, 1924 (Man.), [1929] A.C. 260.
220
      Lymburn, supra, footnote 218 at para. 5.
221
      Tremblay, supra, footnote 202, 67–68.
No.: 200-09-006746-090                                                                       PAGE: 50

[148] Provincial jurisdiction in regulating securities was confirmed by the Supreme
Court in Smith v. The Queen,222 which deals with its interaction with the federal criminal
law power under subsection 91(27). The Securities Act of Ontario made it an offence to
make fraudulent misstatements in a prospectus required for the issue of securities. The
Act provided for a maximum fine of $2,000 for a person or $25,000 for a company and
imprisonment for a term of not more than one year. Chief Justice Kerwin confirmed that
the Act was constitutional as per Lymburn. He added that the purpose of the offences
was to ensure that issuers and securities were registered before the securities could
be distributed to the public and that this purpose could be validly pursued by both the
province and Parliament in relation to the criminal law subject class under the double
aspect doctrine.223

[149] In Gregory & Company Inc. v. Quebec Securities Commission 224 the Supreme
Court ruled on the territorial scope of the jurisdiction granted under subsection 92(13) of
the Constitution Act, 1867, which deals with property and civil rights ―in the province.‖ A
broker submitted that he was not subject to the Quebec act because he dealt with non-
residents. The securities in question were traded in the province and he received
payment at his Montreal office. Justice Fauteaux, then a puisne judge, stated that the
pith and substance of the law was similar to what was challenged in Lymburn, involving
the regulation of the conduct of traders on the securities market for the purposes of
protecting the public. On the issue of territoriality, he described the broker‘s activities as
―activities initiated in the province by persons therein carrying on such a business‖ and
concluded that they must be regulated under Quebec legislation.225

[150] In Vapor Canada, the Supreme Court studied the validity of a provision of the
Trade-marks Act which provided civil recourses against persons involved in unfair
competition. It was submitted that the Act was valid under federal criminal law
jurisdiction, the regulation of trade and commerce in general and patents and trade-
marks. Chief Justice Laskin ruled that the provision was ultra vires because it
encroached on provincial jurisdiction regarding civil recourses. 226 In the following
section we will examine the analysis conducted regarding subsection 91(2) of the
Constitution Act, 1867.

[151] The judgment in Canadian Indemnity Co. v. Attorney General of British
Columbia227 dealt with provincial jurisdiction over property and civil rights as opposed to
federal jurisdiction regarding interprovincial trade and commerce under subsection 91(2)
of the Constitution Act, 1867 and federally incorporated companies under the
jurisdiction granted by the preamble of that section. British Columbia had implemented a
compulsory and universal automobile insurance program, the constitutional validity of
222
      Smith v. The Queen, [1960] S.C.R. 776.
223
      Ibid. at 781.
224
      Gregory & Company Inc. v. Quebec Securities Commission, [1961] S.C.R. 584
225
      Ibid. at 588.
226
      Ibid. at 165
227
      Canadian Indemnity Co. v. Attorney General of British Columbia, [1977] 2 S.C.R. 504.
No.: 200-09-006746-090                                                                       PAGE: 51

which was challenged. After having noted the national expansion of the insurance
industry and the impact the new program would have on their activities, Justice
Martland concluded that the pith and substance of the Act was nevertheless the
regulation of the insurance industry within the province, which was of provincial
jurisdiction.228 Justice Martland also dismissed the second submission on the basis of
Parsons.229

[152] Multiple Access was also rendered along the same line of thought. It was alleged
that some sections of the Ontario Securities Act were ultra vires provincial jurisdiction
because of their impact on federally incorporated companies. Justice Dickson, then a
puisne judge, ruled that the impugned provisions were validly enacted. He ruled that the
pith and substance of the Securities Act was the regulation of the securities industry and
he noted that subject to provisions which would have the effect of paralysing the
operation of a federally incorporated company, such regulations were widely
acknowledged as being of provincial jurisdiction regarding property and civil rights:

          But federal incorporation does not render a company immune from securities
          regulation of general application in a province. Since the decision of the Privy
          Council in Lymburn v. Mayland, [1932] A.C. 318 the provisions of provincial
          securities acts have been given a wide constitutional recognition. . . .

          Subject to that exception, a federal company empowered to carry on a particular
          business in a province is subject to the competent legislation of the province as
          to that business. If it wishes to raise capital through the sale of securities there is
          no reason why it should not be subject to the laws of the province applicable to
          all those in the province who wish to raise capital through security sales, and
          subject thereafter to rules requiring honest dealings in securities, so that the
          public be not defrauded.230 [Emphasis added.]

[153] I will address the comments of Justices Dickson and Estey regarding the
interaction between provincial securities legislation and federal jurisdiction over
interprovincial and international trade further on in this judgment.

[154] The judgment in Global Securities dealt with the constitutionality of the British
Columbia Securities Act, which empowered the British Columbia Securities Commission
to require some information from market traders and to forward such to the SEC.
Similarly to the situation in Gregory, the Court was asked if the article which authorized
this cooperation was ultra vires the province‘s territorial scope of jurisdiction. Justice
Iacobucci concluded that the impugned provision was of provincial jurisdiction over
property and civil rights and that, accordingly, it was unecessary to rule on the overall


228
      Ibid. at 512.
229
      Ibid. at 519.
230
      Ibid. at 183–184.
No.: 200-09-006746-090                                                                   PAGE: 52

validity of the Act. He added that even if the provision itself was not of provincial
jurisdiction, it was a necessary incident to a valid legislative scheme.

[155] He described the pith and substance of the impugned provision as follows: ―…the
effective regulation of domestic securities, has long been recognized to fall within
provincial authority.‖231 Justice Iacobucci also underlined the fact that this jurisdiction ―is
not limited to purely intraprovincial matters.‖ He made an analogy with the professional
conduct of lawyers, a question of personal jurisdiction which may exceed boundaries
and the personal regulation of traders in securities. In both cases he concluded that
obtaining information about infringements that were committed abroad is part of the pith
and substance of legislation which purports to regulate a field of activity within a
province.232

[156] It therefore appears, as Hogg has written, that subject to heads of jurisdiction
specifically conferred on Parliament the regulation of a specific sector of the economy
must be seen from the point of view of contract relations and of provincial jurisdiction
rather than on the basis of national objectives which it may also pursue:

          The gaps in federal power [as it relates to business] are covered by the provincial
          power over property and civil rights. The double-aspect doctrine also ensures
          substantial areas of concurrency even when federal power exists. The point is
          that the regulation of an industry, or the more general regulation of prices or
          profits or combinations, has traditionally been regarded by the courts, not in
          terms of its ultimate, often nation-wide objectives, but in terms of its immediate
          impact upon freedom of contract and property rights. In these terms, of course,
          restraints on business fall into the category of property and civil rights in the
          province.233 [Emphasis added.]

              d) Finding on property and civil rights power

[157] This review of case law shows that the regulation of securities is of exclusive
provincial jurisdiction under the head of property and civil rights in the province. This
conclusion is consistent with the possibility that subsection 92(13) acquired the status
over time of a quasi-residuaryl clause of provincial jurisdiction. Enacted thereunder,
provincial legislation governing securities may also have incidental effects on matters of
federal jurisdiction. Accordingly, such legislation may impose obligations on federally
incorporated companies if it does not paralyze their activities. Such legislation may
create offences that are similar to what Parliament may create in criminal matters.
Finally, it may exceed strictly intraprovincial matters and deal with industries that have
interprovincial contracts or that require a certain portion of international cooperation.
This overlapping is then subject to a double aspect.

231
      Global Securities, supra, footnote 16 at para. 40.
232
      Ibid. at paras 41-42. See also paras 33–34.
233
      Hogg, supra, footnote 17 at 21–9.
No.: 200-09-006746-090                                                                PAGE: 53

[158] I am therefore of the opinion that except for the national structures and criminal
offences for which it provides, the proposed Act could be validly enacted by the
provinces under their jurisdiction over property and civil rights. In the following section, I
will determine if the same conclusion can be reached regarding federal jurisdiction over
trade and commerce.

 4.    Federal jurisdiction over trade and commerce
[159] Subsection 91(2) of the Constitution Act, 1867, provides the following:
  91. It shall be lawful for the Queen, by        91. Il sera loisible à la Reine, de l'avis et
   and with the Advice and Consent of the          du consentement du Sénat et de la
   Senate and House of Commons, to                 Chambre des Communes, de faire des
   make Laws for the Peace, Order, and             lois pour la paix, l'ordre et le bon
   good Government of Canada, in                   gouvernement             du        Canada,
   relation to all Matters not coming within       relativement à toutes les matières ne
   the Classes of Subjects by this Act             tombant pas dans les catégories de
   assigned        exclusively    to     the       sujets par la présente loi exclusivement
   Legislatures of the Provinces; and for          assignés       aux      législatures    des
   greater Certainty, but not so as to             provinces; mais, pour plus de garantie,
   restrict the Generality of the foregoing        sans toutefois restreindre la généralité
   Terms of this Section, it is hereby             des termes ci-haut employés dans le
   declared that (notwithstanding anything         présent article, il est par la présente
   in this Act) the exclusive Legislative          déclaré      que      (nonobstant     toute
   Authority of the Parliament of Canada           disposition contraire énoncée dans la
   extends to all Matters coming within            présente loi) l'autorité législative
   the Classes of Subjects next                    exclusive du parlement du Canada
   hereinafter enumerated; that is to say,         s'étend à toutes les matières tombant
   ...                                             dans les catégories de sujets ci-
                                                   dessous énumérés, savoir : […]
  2. The Regulation       of   Trade    and
   Commerce. . . .                                2. La réglementation du trafic et du
                                                   commerce. […]
  And any Matter coming within any of the
   Classes of Subjects enumerated in this         Et aucune des matières énoncées dans
   Section shall not be deemed to come             les catégories de sujets énumérés
   within the Class of Matters of a local or       dans le présent article ne sera réputée
   private Nature comprised in the                 tomber dans la catégorie des matières
   Enumeration of the Classes of                   d'une nature locale ou privée
   Subjects by this Act assigned                   comprises dans l'énumération des
   exclusively to the Legislatures of the          catégories de sujets exclusivement
   Provinces.(47)                                  assignés par la présente loi aux
                                                   législatures des provinces.
No.: 200-09-006746-090                                                                       PAGE: 54

[160] I will begin by noting that there is unfortunately no official French-language
version of the Constitution Act, 1867. Different translations of the expression ―Trade and
Commerce‖ are used. The Department of Justice of Canada suggests the French
translation of ―trafic et commerce‖ and in its most recent judgments the Supreme Court
used the expression ―échanges et commerce.‖ Lacking anything better, I will use the
second expression.

[161] Going back in our constitutional history, we note the use of the expression
―Regulation of Commerce‖ at section XLVI of the Constitution Act, 1791,234 which
provided that the Imperial Parliament would not collect any more income tax in the
colonies except for what was required for the regulation of interprovincial trade and the
amount of such income tax was to be spent in the colony where it was collected:
      That the King and Parliament of Great                Que le Roi et le Parlement de la Grande
       Britain will not impose any Duty, Tax,               Bretagne n'imposeront aucun Droit
       or Assessment whatever, payable in                   Taxe, ou Cottisation quelconque,
       any of his Majesty's Colonies,                       paiable dans aucune des Colonies,
       Provinces, and Plantations in North                  Provinces et Plantations de sa Majesté
       America or the West Indies, except                   dans l'Amérique du Nord ou dans les
       only such Duties as it may be                        Indes       Occidentales,        excepté
       expedient to impose for the Regulation               seulement tels Droits qu'il pourra être
       of Commerce, . . . nothing in this Act               convenable       d'imposer    pour     le
       contained shall extend, or be                        règlement du Commerce, […] rien
       construed to extend, to prevent or                   contenu dans cet Acte ne s'étendra, ou
       affect the Execution of any Law which                ne sera entendu s'étendre à empêcher
       hath been or shall at any Time be                    ou affecter l'exécution d'aucune Loi qui
       made by his Majesty, his Heirs or                    a été ou qui sera faite en aucun tems
       Successors, and the Parliament of                    par sa Majesté, ses Héritiers ou
       Great     Britain,   for   establishing              Successeurs, et le Parlement de la
       Regulations or Prohibitions, or for                  Grande Bretagne, pour établir des
       imposing, levying, or collecting Duties              Réglemens ou Prohibitions, ou pour
       for the Regulation of Navigation, or for             imposer, lever ou retirer des droits pour
       the Regulation of the Commerce to be                 le Règlement de la Navigation, ou pour
       carried on between the said two                      le Règlement du Commerce qui se fera
       Provinces, or between either of the                  entre les dites deux Provinces, ou
       said Provinces and any other Part of                 entre l'une ou l'autre des dites
       his Majesty's Dominions, or between                  Provinces, et aucune autre partie des
       either of the said Provinces and any                 Territoires de sa Majesté, ou entre
       foreign Country or State,           ...              l'une ou l'autre des dites Provinces et
       [Emphasis added.]                                    aucun Pais ou État Etranger […]
[162] The same clause appeared in section XLIII of the Act of Union, 1840. As far as
Tremblay was concerned, this was the interpretation which was to be given to

234
      Constitution Act, 1791, supra, footnote 204 at 22.
No.: 200-09-006746-090                                                                        PAGE: 55

subsection 92(2) of the Constitution Act, 1867, that is, trade involving at least two
provinces, to respect the intention of the constituents to confer on Parliament by this
[TRANSLATION] ―commercial clause,‖ jurisdiction over matters [TRANSLATION] ―of common
interest to all the provinces.‖235

[163] This interpretation was adopted by the Privy Council, subject to the openness it
showed for a broader interpretation. In Parsons, which I dealt with earlier, Sir Montague
Smith defined the content of this matter as follows:

         Construing therefore the words "regulation of trade and commerce" by the
         various aids to their interpretation above suggested, [TRANSLATION] [that is, the
         presence of other matters in section 91 which would have otherwise been
         necessary and the use of this expression in the Act of Union], they would include
         political arrangements in regard to trade requiring the sanction of parliament,
         regulation of trade in matters of inter-provincial concern, and it may be that they
         would include general regulation of trade affecting the whole dominion.236
         [Emphasis added.]

[164] Accordingly, two categories, which were to be developed by case law, were
created: the regulation of interprovincial and national trade and commerce, and the
general regulation of trade within the country. I will now conduct an in-depth analysis of
each of them.

             a) Interprovincial and international trade
[165] A series of Privy Council judgments reflects the decentralization tendency which
we have already mentioned. In the reference In Re The Insurance Act of Canada,
Alberta impugned the validity of the Insurance Act, 1910, which provided for the
regulation of insurance contracts by the federal government. Viscount Haldane ruled
that jurisdiction over interprovincial trade does not allow the regulation of an industry
that has interprovincial transactions, no matter how important it may be. He noted that
where the constituents wished to derogate from that rule, they did so explicitly:

         Their Lordships think that as the result of these decisions it must now be taken
         that the authority to legislate for the regulation of trade and commerce does not
         extend to the regulation by a licensing system of a particular trade in which
         Canadians would otherwise be free to engage in the provinces. . . . No doubt the
         business of insurance is a very important one, which has attained to great
         dimensions in Canada. But this is equally true of other highly important and
         extensive forms of business in Canada which are today freely transacted under
         provincial authority. Where the British North America Act has taken such forms of

235
      Tremblay, supra, footnote 202 at 135–137.
236
      Parsons, supra, footnote 19 at 113, translation from National Transportation, supra, footnote 217 at
      257.
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          business out of provincial jurisdiction, as in the case of banking, it has done so by
          express words which would have been unnecessary had the argument for the
          Dominion Government addressed to the Board from the Bar been well
          founded.237 [Emphasis added.]

[166] The Supreme Court adopted a similar position in The King v. Eastern Terminal
Elevator Co. regarding legislation regulating agricultural trade.238 Although most Canadian
cereals are consumed in provinces other than where they are produced, Justice Duff, then
a puisne judge, considered that the scheme of grain elevator permits and regulation under
the jurisdiction of the Board of Grain Commissioners for Canada dealt with work of a local
nature, which was subject to provincial jurisdiction under subsection 92(16) of the
Constitution Act, 1867. He added that a contrary approach would allow Parliament to
regulate almost all intraprovincial trade on the basis of the fact that part of it, no matter how
small, is destined to extra-provincial trade. He also dismissed the argument to the effect
that the implementation of such a federal scheme would be part of the federal residuary
jurisdiction, as the provinces, acting jointly, would not have the jurisdiction to obtain the
same result. According to him, the inability of Parliament or of a provincial legislature to
enact specific legislation must not necessarily be resolved by transferring jurisdiction from
one to the other:

          [I]n a system involving a division of powers such as that set up by the British
          North America Act, it may often be that subsidiary legislation by the provinces or
          by the Dominion is required to give full effect to some beneficial and necessary
          scheme of legislation not entirely within the powers of either.239

[167] The Privy Council rendered similar judgments in Reference re Natural Products
Marketing Act240 and Reference re Margarine.241 In the first judgment, Lord Atkin was of
the opinion that a natural products marketing scheme under the administration of a
Dominion Marketing Board was ultra vires Parliament‘s jurisdiction over interprovincial
trade because it encroached on provincial jurisdiction over property and civil rights. The
provisions specifically dealing with interprovincial trade and criminal penalties were also
ruled to be ultra vires because they were indistinguishably linked to the legislation in
question.242 In the second judgment, the section of the Dairy Industry Act which
prohibited the production of and trade in margarine to protect the dairy industry was
ruled to be ultra vires Parliament‘s jurisdiction over interprovincial trade and commerce.
Lord Morton of Henryton repeated the analysis in Reference re Natural Products
Marketing Act to dismiss the argument based on the regulation of trade and commerce.
237
      Attorney-General for Canada v. Attorney-General for Alberta (Insurance Reference), [1916] 1 A.C. 588,
      597.
238
      The King v. Eastern Terminal Elevator Co., [1925] S.C.R. 434. (hereafter ―Eastern Terminal Elevator”).
239
      Ibid., 448.
240
      Reference re Natural Products Marketing Act, [1937] A.C. 377.
241
      Reference re Validity of Section 5(a) of the Dairy Industry Act, [1951] A.C. 179. (hereafter ―Reference
      re Margarine”).
242
      Reference re Natural Products Marketing Act, supra, footnote 240 at 389.
No.: 200-09-006746-090                                                                      PAGE: 57

He also dismissed the argument based on federal jurisdiction over criminal law,
identifying the pith and substance of the Act as being ―the protection and
encouragement of the dairy industry in Canada.‖243 As Hogg noted, this judgment
should not, however, be interpreted as denying the existence of federal regulatory
power over imports under subsection 91(2) of the Constitution Act, 1867, which was
acknowledged by the Supreme Court in this case.244

[168] In Caloil Inc. v. Attorney General of Canada,245 the constitutionality of the
National Energy Board was challenged on the basis of the fact that it encroached on
provincial jurisdiction over the regulation of local trade. The Act prohibited transporting
imported gasoline farther east than a given point in Ontario. Justice Pigeon of the
Supreme Court ruled that the pith and substance of the legislation was the
administration of an extra-provincial marketing program regarding gasoline imports and
that it was valid in spite of its effects on the gasoline industry within a province.246

[169] In Reference re Agricultural Products Marketing247 and in Fédération des
producteurs de volailles du Québec v. Pelland,248 the Supreme Court ruled on the
validity of legislation enacted regarding plans implemented through a Grant of Authority
by both levels of government to an administrative organization. In the first case, the
federal egg marketing program, which allowed the Canadian Egg Marketing Agency to
establish quotas applicable to interprovincial as well as to intraprovincial trade,
regulating the possession of egg producing hens and establishing various levies, was
ruled to be intra vires by the Supreme Court. On the contrary, in the second judgment,
the Court ruled that the provincial Act could establish production quotas affecting goods
for interprovincial trade. In both cases, the Court took into consideration the fact that the
schemes were implemented following intergovernmental agreements and a delegation
of administrative powers before legitimizing jurisdictional encroachment in situations of
―cooperative federalism‖. Justice Abella underlined the special feature of this type of
situation as follows:

         In my view, the 1978 Federal-Provincial Agreement, like the scheme in the Egg
         Reference, both reflects and reifies Canadian federalism's constitutional creativity
         and cooperative flexibility.249

[170] In Dominion Stores Ltd. v. R.,250 the Court assessed the constitutionality of the
Canada Agricultural Standards Act, which imposed certain quality standards on
products bearing the ―Canada Extra Fancy‖ quality grade, even if they were to be sold

243
      Reference re Margarine, supra, footnote 241 at 192.
244
      Hogg, supra, footnote 17 at 20–5.
245
      Caloil Inc. v. Attorney General of Canada, [1971] S.C.R. 543.
246
      Ibid. at 551.
247
      Reference re Agricultural Products Marketing, [1978] 2 S.C.R. 1198.
248
      Fédération des producteurs de volailles du Québec v. Pelland, [2005] 1 S.C.R. 292, 2005 SCC 20.
249
      Ibid. at para. 15.
250
      Dominion Stores Ltd. v. R., [1980] 1 S.C.R. 844. (hereafter ―Dominion Stores”)
No.: 200-09-006746-090                                                                       PAGE: 58

locally. In referring to the Parsons and Eastern Terminal Elevator judgments, Justice
Estey concluded that the Act did not apply in this case. He ruled that federal jurisdiction
did not extend to goods in intraprovincial trade, which was of provincial jurisdiction
under subsections 92(13) and 92(16) of the Constitution Act, 1867. Even if he admitted
that the interaction between subsection 91(2) and provincial jurisdiction over local trade
could possibly change,251 he distinguished the conflict between the federal and the
provincial acts which was submitted to him from the preceding marketing cooperation
initiatives.252

[171] In Labatt Breweries Canada Ltd. v. Attorney General of Canada, the Court ruled
on the validity of federal regulations dealing with the labelling of light beer enacted
under the Food and Drugs Act. It was submitted that the regulations were valid under
the federal power over criminal matters, trade and commerce, and peace, order and
good government. Justice Estey reviewed the case law dealing with interprovincial trade
and commerce and ruled that it did not apply in this case as the interprovincial aspect of
the distribution of beer had not been established.253

[172] Finally, although Multiple Access dealt with federal jurisdiction over the
incorporation of business corporations, Justice Dickson, then a puisne judge, made the
following comment and suggested that it was not impossible to establish Parliament‘s
jurisdiction regarding the regulation of securities under its power of regulation of
interprovincial and international trade and commerce:

         Parliament has not yet enacted any comprehensive scheme of securities
         legislation. To date the Canadian experience has been that the provinces have
         taken control of the marketing of securities, differing in this respect from the
         United States where the Securities and Exchange Commission has regulated
         trading and primary distribution of securities. I should not wish by anything said in
         this case to affect prejudicially the constitutional right of Parliament to enact a
         general scheme of securities legislation pursuant to its power to make laws in
         relation to interprovincial and export trade and commerce. This is of particular
         significance considering the interprovincial and indeed international character of
         the securities industry.254 [Emphasis added.]

[173] Dissenting, Justice Estey, seems to take the same approach:

         Counsel for the Attorney General for Canada did not wish to found the validity of
         these sections upon an independent claim that, by reason of the potential extra-
         provincial nature of securities trading, they could be sustained by the authority of


251
      Ibid. at 866.
252
      Ibid. at 864.
253
      Labatt Breweries of Canada Ltd. v. Attorney General of Canada, [1980] 1 S.C.R. 914, 939. (hereafter
      ―Labatt Breweries”)
254
      Multiple Access, supra, footnote 15 at 173–174.
No.: 200-09-006746-090                                                                         PAGE: 59

          s. 91(2) alone. I venture to say that there will be more and more challenges in the
          future to the dominant position now occupied by the securities exchange
          authorities of the province in which the major stock exchange of the country is
          located. As the magnitude and number of multi-provincial security transactions
          increase the strain on the present unbalanced regulatory system will mount. It
          remains to be seen whether this will precipitate a change in the national
          appreciation of constitutional requirements and federal legislative policy. Until
          such a development occurs the disposition of this appeal must be found in the
          light of the positions herein taken by the parties. [Emphasis added.]

[174] An overview of case law shows that Parliament does not have the necessary
jurisdiction to implement a unique scheme regulating both intraprovincial and
interprovincial trading. Quite the contrary, the Supreme Court has shown that it is
favourable to cooperative arrangements between governments, following agreements
and delegation of powers for the purposes of a single scheme dealing with all aspects of
trade in a specific industry. The determining indicium, as it appears from the Dominion
Stores and Labatt Breweries judgments, is physical evidence of the local or
interprovincial dimension of the targeted trade.

[175] Finally, I underline the fact that in its interprovincial and international aspects
only, trading in securities is possibly of federal jurisdiction over trade. Professor Leclair,
like Professors Henri Brun, Guy Tremblay, and Eugénie Brouillet255 underline the fact
that such a [TRANSLATION] ―complementary‖ scheme may be considered and be justified
under the principle of subsidiarity. He paraphrased the proposal made by Cédric
Sabbah, attorney:

          Provinces would remain competent as regards the protection of investors and
          public protection, while Parliament would be endowed with the power to regulate
          matters having crossborder, i.e., extraprovincial aspects. That category would
          comprise matters such as the regulation of stock exchanges, hub of all sorts of
          interprovincial and international transactions. Representation of Canada in
          international forums and authority to negotiate international agreements would
          also fall in the federal lap. Finally, Sabbah argues for a federal power to establish
          minimal standards that provinces would have to integrate to their own sets of
          rules so as to prevent the dreaded ―race to the bottom‖ and also, more
          importantly, because Ottawa is the only level of government that can legitimately
          claim a right to determine where the national public interest lies — the public
          interest being the guiding principle of all 13 securities regulators.256

[176] The AGC does not submit that the proposed Act may be validly enacted under
this first branch of subsection 92(13) of the Constitution Act, 1867. In any event, this

255
      Brun, Tremblay & Brouillet, supra, footnote 17 at 514.
256
      Jean Leclair, ―‘Please, Draw Me a Field of Jurisdiction‘: Regulating Securities, Securing Federalism,‖
      (2010) 51 S.C.L.R. (2d) 556 at 565–566. (―Leclair‖)
No.: 200-09-006746-090                                                                    PAGE: 60

could not have been the necessary basis for the enactment of the proposed Act,
considering that in its pith and substance, its scope goes far beyond the limits of this
power.

             b) General jurisdiction

[177] One of the examples of federal jurisdiction over trade and commerce in general,
which is acknowledged by case law, is the regulation of business corporations. In the
Privy Council judgment of John Deere Plow Co. v. Wharton, Viscount Haldane stated
that if the power to incorporate business corporations was granted to Parliament, the
way in which their activities was to be exercised would become a matter of general
interest for the whole Dominion:

         …the power to regulate trade and commerce at all events enables the Parliament
         of Canada to prescribe to what extent the powers of companies the objects of
         which extend to the entire Dominion should be exercisable, and what limitations
         should be placed on such powers. For if it be established that the Dominion
         Parliament can create such companies, then it becomes a question of general
         interest throughout the Dominion in what fashion they should be permitted to
         trade.257 [Emphasis added.]

[178] In Vapor Canada, discussed above, Chief Justice Laskin ruled on the content of
the second branch of jurisdiction over trade and commerce established in Parsons. In
the following paragraph, he established the basis of the indicia that case law
subsequently used:

         One looks in vain for any regulatory scheme in s. 7, let alone s. 7(e). Its
         enforcement is left to the chance of private redress without public monitoring by
         the continuing oversight of a regulatory agency which would at least lend some
         colour to the alleged national or Canada-wide sweep of s. 7(e). The provision is
         not directed to trade but to the ethical conduct of persons engaged in trade or in
         business, and, in my view, such a detached provision cannot survive alone
         unconnected to a general regulatory scheme to govern trading relations going
         beyond merely local concern. Even on the footing of being concerned with
         practices in the conduct of trade, its private enforcement by civil action gives it a
         local cast because it is as applicable in its terms to local or intraprovincial
         competitors as it is to competitors in interprovincial trade.258

[179]  The Chief Justice restated these indicia in Re Anti Inflation Act shortly
thereafter259 and would have been ready to acknowledge jurisdiction over trade in

257
      John Deere Plow Co. v. Wharton, [1915] A.C. 330, 340. ( ―John Deere Plow”) excerpt taken from
      Labatt Breweries, supra, footnote 253 at 940.
258
      Vapor Canada, supra, footnote 20 at para. 165.
259
      Reference re: Anti-Inflation Act, supra, footnote 36 at 426–427.
No.: 200-09-006746-090                                                                   PAGE: 61

general in his dissenting reasons in Labatt Breweries.260 In this same judgment, Justice
Estey also dealt with the regulation of trade and commerce in general and affirmed that
the guiding indicium was still the one stated in John Deere Plow, that is, ―a question of
general interest throughout the Dominion‖.261 He noted that ―neither national ownership
of a trade or undertaking or even national advertising of its products will alone suffice to
authorize the imposition of federal trade and commerce regulation‖.262 He added on the
basis of Justice Duff‘s dissent in Reference re Board of Commerce Act,263 that this
matter does not confer jurisdiction on Parliament to regulate a large number of ―the
contracts of a trade in one commodity‖ if it does not have jurisdiction over such trading
taken individually.264

[180] In National Transportation, the Supreme Court studied a section of the Combines
Investigation Act which empowered the Attorney General of Canada to undertake
prosecutions for conduct that hindered competition. It was submitted that this section
encroached on provincial jurisdiction over the administration of justice granted under
subsection 92(14) of the Constitution Act, 1867. Justice Dickson, then a puisne judge,
was of the opinion that the section in question could be enacted by Parliament under its
jurisdiction over criminal law as well as over the regulation of trade and commerce in
general. As far as this last matter was concerned, Justice Dickson began by affirming
that ―the limits of s. 91(2) are not fixed, and that questions of constitutional balance play
a crucial role in determining its extent in any given case at any given time.‖ 265 After a
detailed review of case law, he made the following distinction between the regulation of
local trade and general trade:

         The reason why the regulation of a single trade or business in the province
         cannot be a question of general interest throughout the Dominion, is that it lies at
         the very heart of the local autonomy envisaged in the Constitution Act, 1867.
         That a federal enactment purports to carry out such regulation in the same way in
         all the provinces or in association with other regulatory codes dealing with other
         trades or businesses does not change the fact that what is being created is an
         exact overlapping and hence a nullification of a jurisdiction conceded to the
         provinces by the Constitution. A different situation obtains, however, when what
         is at issue is general legislation aimed at the economy as a single integrated
         national unit rather than as a collection of separate local enterprises. Such legis-
         lation is qualitatively different from anything that could practically or
         constitutionally be enacted by the individual provinces either separately or in
         combination. The focus of such legislation is on the general, though its results
         will obviously be manifested in particular local effects any one of which may

260
      Labatt Breweries, supra, footnote 253 at 919.
261
      Ibid. at 940.
262
      Ibid. at 941.
263
      Reference re Board of Commerce Act, (1920), 60 S.C.R. 456.
264
      Labatt Breweries, supra, footnote 253 at 942.
265
      Ibid. at 259.
No.: 200-09-006746-090                                                                     PAGE: 62

         touch upon "Property and Civil Rights in the Province". Nevertheless, in pith and
         substance such legislation will be addressed to questions of general interest
         throughout the Dominion. The line of demarcation is clear between measures
         validly directed at a general regulation of the national economy and those merely
         aimed at centralized control over a large number of local economic entities.266
         [Emphasis added.]

[181] Justice Dickson suggested adding two other ―even surer‖ indicia to the three
identified by Justice Laskin in Vapor Canada, that is, the constitutional inability to enact
such legislation, jointly or separately, and the fact that not including even one province
would compromise the application of the law.267

[182] In General Motors, Chief Justice Dickson, writing for a unanimous bench, confirmed
the five indicia regarding general federal jurisdiction over trade and commerce which he
had proposed in National Transportation.268 City National Leasing alleged that General
Motors of Canada had infringed the Combines Investigation Act by offering its competitors
preferred interest rates and it intended to undertake a civil recourse that was provided
under that Act. It was alleged in answer that the Act in general and the section providing
the recourse were ultra vires Parliament‘s jurisdiction because the sale and financing
contracts were executed in one province. On the contrary, the judge concluded that the
federal government has the jurisdiction required to establish rules which also apply to
intraprovincial trade to the extent necessary to establish a federal competition scheme.
After having specified that the five indicia were not exhaustive and that they must not
necessarily all be present, he summarized his analysis as follows:

         In sum, the Combines Investigation Act is a complex scheme of competition
         regulation aimed at improving the economic welfare of the nation as a whole. It
         operates under a regulatory agency. It is designed to control an aspect of the
         economy that must be regulated nationally if it is to be successfully regulated at
         all.269

[183] Finally, in Kirkbi, Justice LeBel applied the indicia established in General Motors
to the constitutional validity of civil recourse to claim an unregistered trade-mark provided
under the Trade-Marks Act. It was submitted that this was ultra vires Parliament‘s
jurisdiction. Justice LeBel concluded that the provision could be validly enacted under
federal jurisdiction over trade and commerce in general. He wrote the following
restatement of the non-exhaustive list of applicable indicia:



266
      Ibid. at 267.
267
      Ibid. at 268.
268
      See also Quebec Ready Mix Inc. v. Rocois Construction Inc., [1989] 1 S.C.R. 695, rendered for the
      same reasons as General Motors.
269
      General Motors, supra, footnote 11 at para. 65.
No.: 200-09-006746-090                                                                    PAGE: 63

          i) the impugned legislation must be part of a regulatory scheme; (ii) the scheme
          must be monitored by the continuing oversight of a regulatory agency; (iii) the
          legislation must be concerned with trade as a whole rather than with a particular
          industry; (iv) the legislation should be of a nature that provinces jointly or
          severally would be constitutionally incapable of enacting; and (v) the failure to
          include one or more provinces or localities in a legislative scheme would
          jeopardize the successful operation of the scheme in other parts of the
          country…270

[184] Without conducting an individual analysis of the five indicia, Justice LeBel
concluded that the applicability of the Trade-marks Act would be compromised by the
existence of a provincial recourse which is not harmonized with the rest of the Act,
thereby making the implementation of a federal scheme necessary:

          The protection of unregistered trade-marks is integral to the legitimacy, legal
          standards and efficacy of registered trade-marks. The Trade-marks Act is clearly
          concerned with trade as a whole, as opposed to within a particular industry.
          There is no question that trade-marks apply across and between industries in
          different provinces. Divided provincial and federal jurisdiction could mean that the
          provincial law could be changed by each provincial legislature. This could result
          in unregistered trade-marks that were more strongly protected than registered
          trade-marks, undermining the efficacy and integrity of the federal Parliament's
          Trade-marks Act. The lack of a civil remedy integrated into the scheme of the
          Act, applicable to all marks, registered or unregistered, might also lead to
          duplicative or conflicting and hence inefficient enforcement procedures. . . .271
          [Emphasis added.]

[185] On the basis of the above, I conclude that the application of the second branch of
federal jurisdiction over trade and commerce cannot be separated from the quest for a
constitutional balance. Considering the possibility of encroachment on fields of
jurisdiction specifically granted to the provincial legislatures, the main indicium is the
regulation of a matter of general interest to the whole country. Regarding economic
issues, the statute should use a national and integrated approach rather than target a
series of local and distinct enterprises. To this must be added the five indicia applied in
Kirkbi, which are basically used to determine if Parliament‘s intervention in this matter is
necessary. In the following section, I will analyze the proposed Act on the basis of these
five indicia.

              c) Application to this case




270
      Ibid. at para. 17.
271
      Ibid. at para. 29.
No.: 200-09-006746-090                                                                       PAGE: 64

                         i. General scheme of regulation and supervision by a
                            regulatory organization
[186] The parties do not contest the fact that the proposed Act meets the first two
Kirkbi indicia and I will therefore deal with them briefly. The proposed Act
encompasses all actors in the securities market and applies rules of conduct to them.
The rules are developed and enforced by one organization, the Authority. It is therefore
a general and complete regulatory system, similar to the securities legislation in force in
the other provinces and territories of the country. The Hocking Report in fact underlines
that the appended draft bill, which is the subject of the first constitutional question
submitted to this Court, is [TRANSLATION] ―substantially influenced‖ by this legislation.272
The proposed Act is very similar.

                         ii. Trade in general
[187] The characterization of the securities regulatory scheme in the proposed Act as
being part of trade in general or of a specific sector, is a question of fact. In this section,
I reach the conclusion that the latter better corresponds to reality.

[188] The expression ―general regulation of trade‖ used in Parsons by Sir Montague
Smith is abstract. More than merely imposing taxes on foreign trade as was
contemplated in the Act of Union, 1840, case law has broadened its application to trade
involving all sectors of activity of the various provinces rather than to one specific
industry.273 This indicium could also be re-worded by affirming that the law must apply
to the economy as a single integrated national unit.274 I will however deal with the
national scope indicium during the analysis of the fourth indicium, that is, provincial
inability to establish a similar scheme.

[189] The Office québécois de la langue française [the Quebec French Language
Regulatory Body] defines the expression [TRANSLATION] ―area of activity‖ as follows:

         [TRANSLATION] All enterprises of a similar nature, which produce similar goods or
         supply similar services which are part of the same category.275

[190] The Translation Bureau of Canada provides the following definition under the
French entry for ―industry:‖

         [TRANSLATION] All enterprises which produce a given category of goods or
         services, for example, steel mills, textiles, petroleum industry and insurance.276

272
      Hockin Report, supra, footnote 104, A.G.Q. at 561.
273
      Kirkbi., supra, footnote 12 at para. 29.
274
      National Transport, supra, footnote 217 at 267 and General Motors, supra, footnote 11 at para. 65.
275
      The Grand dictionnaire terminologique, Office québécois de la langue française, ―area of activity.‖
276
      Termium Plus, Translation Bureau of Canada, Public Works and Government Services Canada
      ―industry‖
No.: 200-09-006746-090                                                                  PAGE: 65

[191] Trading in securities is a special industry. The persons targeted by the proposed
Act offer goods and services which are all part of the same category. Accordingly, issuers
of securities, intermediaries, (including brokers, self-regulatory bodies, stock markets), and
other actors (including rating organizations, investor compensation funds) are subject to
regulatory requirements and to standards of conduct that have the same main objective:
ensuring the protection of investors in the securities market. Issuers of securities obviously
do business in various areas but all the other targeted persons deal only in the securities
market. Conversely, it cannot be said that the persons targeted by competition and trade-
marks do business in the ―field of competition‖ or in the ―field of trade-marks.‖

[192] In Labatt Beweries, Justice Estey cited with approval the reasons given by
Justice Duff in his dissent in Reference re Board of Commerce Act. As far as he was
concerned, the regulation of contracts is part of general trade if they concern a series of
products that, if taken and regulated individually, are not part of trade in general:

         I cannot discover any principle consistent with [the Parsons Case], upon which
         an enactment delegating to a commission the authority to regulate the terms of
         particular contracts of individual traders in a specified commodity . . ., can be
         sustained as an exercise of that power; and if such legislation could not be
         supported when the subject dealt with is a single commodity, or the trade in a
         single commodity, or a single group of commodities, how can jurisdiction be
         acquired so to legislate by extending the scope of the legislation and bringing a
         large number of specified trades or commodities within its sweep? Every
         consideration which can be invoked in support of the view that the authority to
         regulate by general regulations of uniform application the contracts of a trade in
         one commodity, does not fall within section 91-(2), can properly be brought to
         bear with I think increased force in impeaching legislation of the character now in
         question.277 [Emphasis added.]

[193] This reasoning is applicable to the present case. Contracts for security
entitlements, contracts for the services of intermediaries, rules established by
acknowledged and designated organizations, rules of conduct that apply to
intermediaries, rules governing takeover and issuer bids, and so on, are all individually
subject to provincial jurisdiction under subsection 92(13) of the Constitution Act, 1867.
Merely grouping them under the proposed Act does not suffice to make them valid.

[194]  Accordingly, although they have an impact on the economy as a whole, I find that
the regulation of securities does not concern trade in general but transactions which are
specific to a given industry and that the third indicium developed by case law has not been
complied with.




277
      Reference re Board of Commerce Act, 503–504.
No.: 200-09-006746-090                                                                     PAGE: 66

                         iii. Provincial inability
[195] The forth indicium developed by case law provides that the law is such that the
provinces are jointly or separately constitutionally unable to enact it. It applies the
principle according to which, in order to be valid, a law must target the economy as a
single national integrated unit278 and improve the economic welfare of the nation as a
whole.279 Justice Dickson, then a puisne judge, issued a warning against initiatives, the
purpose of which is to centralize local economic entities under the pretext of
encompassing the national economy:

         The line of demarcation is clear between measures validly directed at a general
         regulation of the national economy and those merely aimed at centralized control
         over a large number of local economic entities.280

[196] I add that we must be careful to distinguish the issue of the provinces‘ inability to
effectively regulate the securities industry from the issue of the efficiency of their action.
I am of the opinion that the proposed Act also fails on this indicium, which I will assess
on four different bases.

      A) Lack of harmonization

[197] The experts for the ABC and the AGA submitted that the current securities
regulatory scheme is not sufficiently harmonized and it accordingly entails additional
costs, irregular enforcement, and levelling down of regulation.

[198] It is undeniable that the information technology revolution has led to the
nationalization and internationalization of the securities market. Justice Iacobucci clearly
noted it in Global Securities281 and the recent initiatives for the amalgamation of the
stock markets of Australia and Singapore, of London and Toronto, or of New York and
Frankfurt are additional examples.282 On the Canadian scene, Milne noted that a
significant number of issuers had been registered in more than one province or with
foreign stock markets. Wroebel added that a small number of banks are now major
players in the brokerage field and in the participation in mutual investments funds
throughout the country. Gregory dealt with the application of Quebec law to a broker
dealing with customers outside of the province and in Multiple Access, Justices Dickson
and Estey underlined the fact that the interprovincial aspect of trading in securities could
possibly justify federal jurisdiction in this area.


278
      National Transportation, supra, footnote 217 at 267.
279
      General Motors, supra, footnote 11 at para. 65.
280
      National Transportation, supra, footnote 217 at 267.
281
      Global Securities, supra, footnote 16 at para. 28.
282
      Éric Desrosiers, Mouvement de fusions des Bourses dans le monde - Francfort et New York
      négocient à leur tour, Le Devoir, February 10, 2011, http://www.ledevoir.com/economie/actualites-
      economiques/316462/mouvement-de-fusions-des-bourses-dans-le-monde-francfort-et-new-york-.
No.: 200-09-006746-090                                                                     PAGE: 67

[199] As far as competition and trade-marks are concerned, the Supreme Court has
ruled that our economic system could not tolerate a legal discrepancy from one province
to another. The situation is exactly the contrary as far as securities are concerned.

[200] As Spink noted, our system is based on an indirect holding system under which
rights to securities are created and extinguished without the property thereto having to be
exchanged. According to the theory developed by the economist R.H. Coase, the objective
is to reduce the number of securities transactions, to transfer the cost of execution and
risks to intermediaries, and, ultimately, to reduce transaction costs.283 Accordingly, large
clearing agencies such as the Canadian Depository for Securities Limited hold the vast
majority of securities using nominees, such as CDS Clearing and Depository Services
Inc. Clearing houses create intermediary title to securities for the benefit of a reduced
number of direct participants (banks, trust companies, and securities brokers), who in
turn create intermediary title for the benefit of their clients.

[201] When a client ―purchases‖ a share from his broker located in another province
and when this share comes from an issuer located in a third province, the share in
question does not change hands. A clearing house becomes the owner of the share in
question, creates an intermediary title for the benefit of the intermediary, who creates
one for the client‘s benefit. This chain of contract relationships may be interprovincial in
some cases but it is quite properly regulated under the private law of the various
provinces. In fact, intermediary title of ownership of a share is generally enforceable
against the sole intermediary with whom its holder transacted, thereby avoiding conflict
of laws and better assessing the risks:

          This characteristic makes the security entitlement particularly competent in
          dealing with cross-border transactions involving multiple intermediaries. It
          compartmentalizes the obligations between particular entitlement holders and
          their securities intermediary, using privity to separate the obligations at each tier
          of the indirect holding system. Privity is a triad linking involving two parties (the
          securities intermediary and entitlement holder) and a system of law. With clear
          and certain conflict of law rules, each security entitlement can be isolated and
          precisely assessed for risk management purposes.284 [Emphasis added.]

[202] Even in transactions between the United States and Canada, clearing houses
prefer to create and cancel intermediate title between themselves rather than transfer
ownership to each other. This has two consequences. First, this method of structuring
transactions means that a significant portion of trading in securities is intraprovincial,
even if those transactions are part of the tendency to invest at a national level.
Provincial private law is certainly able to regulate these transactions. Finally, according
to Spink‘s analysis, this method does not create any problems of efficiency or cost
because it enables to precisely determine which law applies.
283
      Spink, supra, footnote 137, A.G.A. at 352.
284
      Ibid. at 363.
No.: 200-09-006746-090                                                            PAGE: 68

[203] Finally, I cannot do otherwise but deal with the passport scheme established
following an agreement in principle which dates from 2004. This agreement, which was
entered into freely by all the provinces and territories, except for Ontario, allows
standardizing numerous procedures and automatically acknowledging the decisions
made by what is called a primary regulator in the other provinces. Rousseau is of the
opinion that even if the provincial framework remains to be perfected, it is not
established that regulatory centralization would be better.285 Rice is of the opinion that it
is one of the most efficient in the world and is highly harmonized because of the work
accomplished by the CSA.286 Trebilcock admitted that a single scheme would not
compensate for all the current shortcomings, but he considered that it would be an
improvement.287

[204] It is obvious that the experts are divided on the issue as to what type of scheme,
centralized or decentralized, allows for an optimum regulation of the securities market. It
has not been established, however, that the absence of harmonization of the current
scheme is such that it makes the provinces unable to attain the three main objectives
stated by the IOSCO in 1998,288 that is, the protection of investors, the establishment of
fair, efficient and transparent markets, and the reduction of systemic risks. I will deal
with this third objective in detail in the next section. Though the harmonization of the
current scheme established by the provinces may well be one of the objectives of the
proposed Act, its present condition does not allow me to conclude that the provinces are
unable in this area.

      B) Prevention of systemic risks

[205] Advocates of the proposed Act claim that the prevention of systemic risks
justifies its enactment under federal jurisdiction over trade and commerce in general.
They consider that a fragmented system cannot rapidly deal with a crisis or even with a
change in policy of a foreign securities regulatory body. Trebilcock affirmed that a single
national securities regulator ―will in all likelihood be more flexible and expeditious in
developing new policies to meet emerging challenges in capital markets‖ and would
―facilitate coordination with other Canadian financial sector regulators.‖289 Milne is also
of the opinion that the current system has shortcomings in connection with market
complexity and requires better coordination.290

[206] Two reasons convince me to dismiss this position. First, the prevention of
systemic risks is above all part of prudential regulation, which is ensured by the Bank of
Canada and the Office of the Superintendant of Financial Institutions Canada. The

285
      Rousseau, supra, footnote 125, A.G.Q. at 1208.
286
      Rice, supra, footnote 98, A.G.Q. at 37–38.
287
      Trebilcock, supra, footnote 116, A.G.C. at 413.
288
      Corcoran, supra, footnote 133, A.G.Q. at 1684–1985.
289
      Trebilcock, supra, footnote 116, A.G.C. at 370 to 372.
290
      Milne, supra, footnote 111, A.G.C. at 271.
No.: 200-09-006746-090                                                                    PAGE: 69

Translation Bureau of Canada suggests the following definition for the notion of
―prudential regulation:‖

         [TRANSLATION] These rules are applied by monetary and government authorities,
         the purpose of which is to reinforce the security of financial systems and to
         equalize the conditions for the conduct of economic activities. Among others,
         they include a code of ethics and new standards of capital adequacy.291

[207] These organizations have the specific duty of supervising financial institutions
and private retirement plans and the contribution which may be made by a securities
regulator, even a national one, is relatively limited.292 On the other hand, a committee
called Heads of Agencies already exists to foster information exchange and the
coordination of provincial securities regulators and these two organizations. The
Governor of the Bank of Canada, the Superintendant of Financial Institutions of
Canada., the Minister of Finance of Canada, and the securities commissions of Quebec,
Ontario, Alberta, and British Columbia sit on this committee, which meets four times per
year.293

[208] Then, as Choi has noted, the objective of the prevention of systemic risks by the
securities regulators is only indirectly attained by fulfilling their traditional mandate of
regulating specific transactions:

         Many aspects of reducing systemic risk, however, do not require that securities
         regulators take a macro-level view of the economy but instead require securities
         regulators to take a more vigorous approach to fulfill their traditional mandate of
         the protection of investors and the integrity, efficiency, and transparency of the
         capital markets. Regulators focused on the transaction and capital market
         participant-level task of protecting investors and requiring disclosure and
         transparency for specific transactions will have the effect of reducing systemic
         risk. Micro-level activities—such as ensuring full disclosure for investors, the
         clearance and settlement of transactions (ensuring finality), the appropriate level
         of credit rating for securities sold in transactions, the transparency of derivatives
         market transactions, and the registration and disclosure of hedge funds involved
         in important market transactions—do not require regulators to take a national (or
         indeed international) perspective on aggregate systemic risk levels. . . . By simply
         ensuring that a specific investor in a specific transaction has adequate
         information on the risks associated with the transaction, securities regulators
         taking a micro-level focus will result in better pricing and investment decisions
         without having to take a nationwide perspective on systemic risk.


291
      Termium Plus, Translation Bureau of Canada, Public Works and Government Services Canada,
      ―prudential regulation‖.
292
      Choi, supra, footnote 131, A.G.Q. at 1523.
293
      Rice, supra, footnote 98, A.G.A. at 33.
No.: 200-09-006746-090                                                                    PAGE: 70

         A national securities regulator would enjoy no particular advantage in taking a
         micro-level focus compared with provincial regulators.294 [Emphasis added,
         emphasis in the original.]

[209] Spink is of the same opinion when he affirms:

         These mechanisms for reducing systemic and other risk are essentially the same
         as those used by stock exchanges in the 1800s: limiting participation to
         creditworthy members; setting limits on participants‘ exposure; requiring
         participants to post collateral to cover exposures; and default procedures.295

[210] Therefore, without settling the debate between experts who examine if a
centralized scheme is better than a decentralized one to avoid financial crises or not, I
conclude that it has not been established that the current scheme implemented by the
provinces is unable to reasonably prevent systemic risks.

      C) International representation

[211] The AGC and the CBA also submitted that the provinces are unable to efficiently
regulate the securities market because they are incompetent to represent Canada
internationally. I do not believe that this argument in itself may justify the proposed Act,
as international representation seems to me to be quite accessory to its real purpose.

[212] In fact, I note that the current scheme did not prevent the CSA from implementing
the Multi-Jurisdictional Disclosure System with the SEC and of being a member of
numerous international associations and both the AMF and the Ontario Securities
Commission participate in the IOSCO as voting members and the securities regulators
of Alberta and British Columbia participate as associate members.296

[213] Above all, it is in the very nature of a federalist and dualist State such as ours,
that one level of government cannot bind another level internationally. This principle
was clearly established by Lord Atkin in re Weekly Rest in Industrial Undertakings Act:

         In a unitary State whose Legislature possesses unlimited powers the problem is
         simple. Parliament will either fulfil or not treaty obligations imposed upon the
         State by its executive. The nature of the obligations does not affect the complete
         authority of the Legislature to make them law if it so chooses. But in a State
         where the Legislature does not possess absolute authority, in a federal State
         where legislative authority is limited by a constitutional document, or is divided up
         between different Legislatures in accordance with the classes of subject-matter
         submitted for legislation, the problem is complex. The obligations imposed by


294
      Choi, supra, footnote 131, A.G.Q. at 1526–1527.
295
      Spink, supra, footnote 137, A.G.A. at 369.
296
      Rice, supra, note 98, A.G.A. at 38-43.
No.: 200-09-006746-090                                                                        PAGE: 71

          treaty may have to be performed, if at all, by several Legislatures; and the
          executive have the task of obtaining the legislative assent not of the one
          Parliament to whom they may be responsible, but possibly of several Parliaments
          to whom they stand in no direct relation. The question is not how is the obligation
          formed, that is the function of the executive; but how is the obligation to be
          performed, and that depends upon the authority of the competent Legislature or
          Legislatures.297 [Emphasis added.]

[214] Accordingly, the fact that the Government of Canada or a commission that it
would create would be unable to impose international commitments on the provinces
cannot be used as a justification for the Government of Canada to appropriate the
legislative jurisdiction at stake.

      D) Criminal penalties

[215] Under subsection 92(27) of the Constitution Act, 1867, Parliament has exclusive
jurisdiction over criminal law.298 We underline the fact that the Criminal Code already
provides for several general offences that apply to the field of securities: fraud,299 fraud
by affecting the public market,300 fraudulent manipulation of stock exchange
transactions,301 prohibited insider trading,302 gaming in stocks,303 broker reducing stock
by selling for his own account,304 forgery,305 use of forged document,306 or false
prospectus.307

[216] Sections 158 to 166 of the proposed Act provide for new criminal offences and
sentencing rules. They are based on a valid criminal law objective and the provinces
have no jurisdiction to enact them. Existing provincial legislation only provides for
offences that have been created under subsection 92(15) of the Constitution Act,
1867.308


297
      Attorney-General for Canada v. Attorney-General for Ontario (re Weekly Rest in Industrial
      Undertakings Act), [1937] A.C. 326, 348.
298
      R. v. Hydro-Québec, [1997] 3 S.C.R. 213, at p. 244; RJR-MacDonald Inc. v. Canada (Attorney
      General), [1995] 3 S.C.R.199; Scowby v. Glendinning, [1986] 2 S.C.R. 226.
299
      S. 380 (1) Cr. C.
300
      S. 380 (2) Cr. C.
301
      S. 382 Cr. C.
302
      S. 382.1 Cr. C.
303
      S. 383 Cr. C.
304
      S. 384 Cr. C.
305
      Ss. 366–367 Cr. C.
306
      S. 368 Cr. C.
307
      S. 400 Cr. C.
308
      See, for example: Securities Act, R.S.Q. V-1.1, ss. 202 to 208.1 (Quebec); Securities Act, R.S.O., c.
      S.5, ss. 122 to 126.2 (Ontario); Securities Act, R.S.A. 2000, c. S-4, ss. 194 to 202 (Alberta);
      Securities Act, 1988, ss. 1988-89, c. S-42.2, ss. 131 to 136 (Saskatchewan); Securities Act, R.S.B.C.
      1996, c. 418, ss. 155 to 165 (British Columbia).
No.: 200-09-006746-090                                                            PAGE: 72

[217] The criminal provisions provided in the proposed Act are accessory to its pith and
substance, which is the regulation of the conduct of traders in the securities market.
Accordingly, in spite of the inability of the provinces to enact such provisions, it cannot
be concluded that they are constitutionally unable to enact a regime which is identical to
what is provided in the proposed Act.

[218] Finally, as submitted by Leclair, the refusal of the provinces to implement one
federal securities regulatory commission over the last century must not be confused
with their inability to do so.309 After reading all the evidence which was submitted to us, I
reach the conclusion that except for a central authority and the criminal penalties
provided, it has not been shown that the provinces were constitutionally unable to adopt
the scheme proposed by the federal government.

                          iv. Requirement of unanimity
[219] The fifth and last indicium consists in assessing whether the omission to include
only one or several provinces in the proposed scheme would compromise its application
in other parts of the country. Although the Hockin Report recommended the automatic
repeal of provincial legislation within a period of two years,310 the proposed Act provides
for the voluntary participation of the provinces. These provisions would replace
provincial legislation of the provinces participating in the proposed Act only after receipt
of the written consent of the Lieutenant Governor in Council of the province in
question.311

[220] The AGC affirmed that the government chose a voluntary participation procedure
to respect the spirit of cooperative federalism but that the unanimous participation of the
provinces was its ultimate goal. It is difficult to see in this mechanism anything other
than an admission to the effect that the scheme could function without the participation
of all the provinces or in spite of the withdrawal of a province that had participated for a
certain period of time. This admission is even more obvious considering that it appeared
to be quite probable when the proposed Act was published, that provinces such as
Quebec and Alberta would prefer to remain on the sidelines of a national Canadian
scheme.

[221] In addition, contrarily to the schemes regarding competition or trade-marks,
cohabitation of the proposed Act with the legislation of the provinces which decided not
to participate can be easily considered. The regulatory aspect of the country would
considerably resemble what currently exists, as the proposed Act would apply within the
participating provinces and the other provinces would continue to be governed by their
own legislation. It cannot therefore be said that the unanimous participation of the
provinces is required to attain the targeted objectives under the proposed Act.

309
      Leclair, supra, footnote 256 at 591.
310
      Hockin Report, supra, footnote 104, A.G.C. at 813.
311
      Proposed Act, supra, footnote 41, s. 250.
No.: 200-09-006746-090                                                          PAGE: 73

                      v. Finding on power over trade in general
[222] On the basis of the preceding analysis, I reach the conclusion that the proposed
Act is not of federal jurisdiction over the regulation of trade and commerce in general.
Because it cannot be validly enacted under either of the two branches of subsection
91(2) of the Constitution Act, 1867, I therefore conclude that the proposed Act in
general is ultra vires Parliament‘s jurisdiction.

 5.   Sections from the Budget Implementation Act, 2009
[223] The sections of the Budget Implementation Act, 2009 which involve the question
submitted by the Government of Quebec read as follows:
  Maximum payment of $150,000,000               Paiement maximal de 150 000 000 $

  295. (1) The Minister of Finance may          295. (1) Le ministre des Finances peut
   make direct payments, in an aggregate         faire des paiements directs, jusqu‘à
   amount not exceeding $150,000,000,            concurrence de cent cinquante millions
   to provinces and territories for matters      de dollars, à des provinces et à des
   relating to the establishment of a            territoires au titre de mesures liées à
   Canadian securities regulation regime         l‘établissement d‘un régime canadien
   and a Canadian regulatory authority.          de      réglementation    des   valeurs
                                                 mobilières et à la constitution d‘une
  Payments out of C.R.F.                         autorité administrative canadienne.

  (2) Any amount payable under this             Paiements sur le Trésor
   section may be paid out of the
   Consolidated Revenue Fund, on the            (2) À la demande du ministre des
   requisition of the Minister of Finance, at    Finances, les sommes à verser au titre
   the times and in the manner, and on           du présent article sont payées sur le
   any terms and conditions, that the            Trésor, selon les conditions et
   Minister     of    Finance      considers     modalités — de temps et autres — qu‘il
   appropriate.                                  estime indiquées.

  Agreements                                    Accords

  296. The Minister of Finance may enter        296. Le ministre des Finances peut
   into     any   agreement     respecting       conclure avec les provinces et les
   securities regulation with any province       territoires des accords relatifs à la
   or territory.                                 réglementation des valeurs mobilières.

  Canadian   Securities     Regulation          Loi sur le Bureau de transition vers
   Regime Transition Office Act                  un      régime    canadien       de
                                                 réglementation     des      valeurs
  Enactment of Act                               mobilières

  297.   The    Canadian     Securities         Édiction de la loi
   Regulation Regime Transition Office
No.: 200-09-006746-090                                                                  PAGE: 74

       Act is enacted as follows:                       297. Est édictée la Loi sur le Bureau de
                                                         transition vers un régime canadien de
      [See Canadian Securities Regulation                réglementation des valeurs mobilières,
       Regime Transition Office Act]                     dont le texte suit :

                                                        [Voir la Loi sur le Bureau de transition
                                                         vers    un    régime    canadien     de
                                                         réglementation des valeurs mobilières]

[224] The general rule regarding severance of laws and the separability of two
enactments as stated by Justice Sopinka in R. v. Morgentaler is that severance is
available where the remaining good part of the law can survive independently. 312 A
reading of sections 295 and 296 does not show that they will become invalid following this
judgment. The Minister of Finance will remain empowered to make payments to the
provinces and to enter into agreements with them for ―the establishment of a Canadian
securities regulation regime and a Canadian regulatory authority.‖ A new regime could not
however have the same form as the scheme contained in the proposed Act.

[225] As far as section 297 is concerned, it must be understood on reading section 10 of
the Canadian Securities Regulation Regime Transition Office Act which provides:
      Purpose                                           Mission

      10. The purpose of the Transition Office          10. Le Bureau de transition a pour
       is to assist in the establishment of a            mission de concourir à l‘établissement
       Canadian securities regulation regime             d‘un     régime       canadien      de
       and a Canadian regulatory authority.              réglementation des valeurs mobilières
                                                         et à la constitution d‘une autorité
                                                         administrative canadienne.
[226] Once again, I reach the conclusion that section 297 and the Canadian Securities
Regulation Regime Transition Office Act as a whole may survive independently from the
proposed Act to the extent that they seek to implement ―a Canadian securities regulation
regime and a Canadian regulatory authority,‖ that differs from a single Canadian regulatory
authority such as the one contained in the proposed Act. I will therefore refrain from
declaring them to be ultra vires Parliament‘s jurisdiction and invalid.


      V. CONCLUSION
[227] For all these reasons, I answer the question submitted to our Court by the
Government of Quebec affirmatively, subject to my remarks pertaining to the Budget
Implementation Act, 2009 and the Canadian Securities Regulation Regime Transition
Office Act, and to Parliament‘s jurisdiction to adopt the provisions of the proposed Act
which are of criminal nature.

312
      R. v. Morgentaler, [1993] 3 S.C.R. 463, p. 480.
No.: 200-09-006746-090                                                       PAGE: 75

[228] The proposed Act‘s centralised approach regarding regulation of trading in
securities may validly be pursued by the governments of this country if they so desire.
Possible avenues include an act of Parliament that would complement provincial
regimes and that would regulate interprovincial, international, and criminal aspects of
trading in securities, a cooperative federal-provincial agreement, or a constitutional
amendment.

[229] On the contrary, the jurisprudence interpreting paragraph 91(2) of the
Constitution Act, 1867 does not sustain implementing this endeavour without the
consent of the provinces in cases where Parliament has not established their incapacity
to regulate the part of the economic activity in question. To do so would hinder the
federal compromise at the origin our country‘s creation. It would also threaten the
balance of powers between the two levels of government, the continued existence of
Quebec civil law and the durability of diversified common law in the other provinces and
territories.




                                            J.J. MICHEL ROBERT, C.J. Q.
No.: 200-09-006746-090                                                                        PAGE: 1



                  REASONS OF FORGET, BICH AND BOUCHARD JJ.A.




[230] Under the circumstances described by Robert C.J. and Dalphond J.A. in their
reasons for judgment, the Government of Quebec has referred the following question to
our Court, which should be answered for the reasons given by our colleagues:

        [TRANSLATION]

        Are the provisions of the Proposed Canadian Securities Act, published by the
        Government of Canada on May 26, 2010, the essential purpose of which is to
        protect investors and regulate the securities industry, and the provisions to that
        effect set out in sections 295, 296 and 297 of the Budget Implementation Act
        2009, S.C. 2009, c. 2, ultra vires the Parliament of Canada under the
        Constitution Act, 1867?1

[231] The Minister of Finance of Canada intends to propose that Parliament enact a
federal statute entitled the Securities Act, which would establish a complete securities
regulation regime under a national Authority. The regime would apply throughout
Canada, albeit as a result of a gradual opting in process by the provinces. The intention
appears serious; sections 295 and 296 of the Budget Implementation Act 20092 already
allow the Minister to make direct payments to provinces and territories for matters
related to the establishment of the regime and to enter into agreements regarding
securities regulation. Section 297 of the same Act3 enacts the Canadian Securities
Regulation Regime Transition Office Act, whose mandate is to ―assist in the
establishment of a Canadian securities regulation regime and a Canadian regulatory
authority.‖4

[232] In essence, the Attorney General of Quebec, with the support of his Alberta
counterpart and the Barreau du Québec, submits that Parliament cannot validly enact
the proposed regulatory regime which, overall, contains measures that clearly come
within the powers granted to the provinces under section 92(13) of the Constitution Act,
1867. By way of exception, the Attorneys General of Quebec and Alberta concede that
sections 158 to 168 of the Proposed Canadian Securities Act (―the proposed Act‖)
would be valid under the federal criminal law jurisdiction. The Barreau du Québec


1
  Order in Council 720-2010, August 25, 2010 (French only.)
2
  S.C. 2009, c. 2. In the absence of any special provision, sections 295 and 296 of this Act came into
   force on March 12, 2009, when the Act was assented to.
3
  Section 297 came into force on July 13, 2009, pursuant to the Order fixing July 13, 2009 as the date of
   the coming into force of section 297 of the Act (2009) 143 C. Gaz. II (July 8, 2009).
4
  Section 10 of the Canadian Securities Regulation Regime Transition Office Act, S.C. 2009. c. 2, s. 297.
No.: 200-09-006746-090                                                                       PAGE: 2

disputes this position, however, on the basis that they are simply ancillary to an
otherwise unconstitutional regime.

[233] The Attorney General of Canada, with the support of the Canadian Bankers
Association, disagrees. He submits that the proposed Act is valid under section 91(2) of
the Constitution Act, 1867, specifically with regards to the power over general trade and
commerce. Further, he submits that sections 158 to 168 are valid under the federal
criminal law jurisdiction according to section 91(27) of the Constitution Act, 1867.

[234] Thus, the debate is quite clear. As we have seen, it essentially pits the
jurisdiction granted by section 91(2) of the Constitution Act, 1867, against the
jurisdiction granted by section 92(13) of the Constitution Act, 1867.
I.        Analysis
1.        Preliminary remarks on the analytical approach
[235] The analytical approach suitable in a case like this has frequently been reiterated
by the Supreme Court of Canada. As Binnie J. succinctly explained in Chatterjee v.
Ontario (Attorney General):5

          16      The first step in a constitutional challenge is to determine ―the matter‖
          (to track the language of the Constitution Act, 1867) in relation to which the
          impugned law is enacted. What is the essence of what the law does and how
          does it do it? ―[T]wo aspects of the law must be examined: the purpose of the
          enacting body, and the legal effect of the law‖ (Reference re Firearms Act, at
          para. 16). This exercise is traditionally known as determining the law‘s ―pith and
          substance‖. It may include not only the impugned Act but also external material
          surrounding its passage, including Hansard. In principle this assessment should
          be made without regard to the head(s) of legislative competence, which are to be
          looked at only once the ―pith and substance‖ of the impugned law is determined.
          Unless the two steps are kept distinct there is a danger that the whole exercise
          will become blurred and overly oriented towards results.6
          ...
          24      Once the ―pith and substance‖ is ascertained, it is necessary to classify
          that essential character of the law by reference to the provincial and federal
          ―classes of subjects‖ listed in ss. 91 and 92 (or, in an appropriate case, ss. 93,
          94A and 95) to determine if the law comes within the jurisdiction of the enacting
          legislature.



5
    [2009] 1 S.C.R. 624. We have quoted the English version of Binnie J.‘s remarks because the French
      translation does not appear to be entirely accurate.
6
    To the same effect, see Reference re Assisted Human Reproduction Act, 2010 SCC 61, per Chief
      Justice McLachlin, at par. 19. This is also the approach adopted by LeBel and Deschamps JJ. (under
      the headings A. Pith and Substance of the Impugned Provisions and B. Connecting the Pith and
      Substance of the Provisions with Heads of Power, and by Cromwell J.(paras. 284 and 287 of his
      reasons for judgment).
No.: 200-09-006746-090                                                              PAGE: 3

[236] In the present case, unlike the Reference re Assisted Human Reproduction Act,7
there is no need for us to ask whether the ―pith and substance‖ analysis should begin
with an examination of certain specific provisions of the proposed Act before we
examine it in its entirety, or whether we should proceed in the reverse order. Indeed, the
proposed Act as well as all its provisions, subject to the reservations set out above, are
being challenged as well. Thus, subject to the exceptions that we will discuss later, it will
not be necessary to examine them individually. In fact, the parties agree that the
proposed Act envisages a complete securities regulation regime, which will either pass
or fail the constitutional test.

[237] Accordingly, we must begin by determining the pith and substance of the
proposed Act, that is, its nature and its purpose. Thus, as Binnie J. notes in Chatterjee,
supra, we must ask: ―What is the essence of what the law does and how does it do it?‖

[238] Only afterward must we connect the ―matter‖ of the proposed Act with either one
of the heads of power in the constitution, or perhaps more than one. Indeed, it is
possible for some subjects or matters, depending on their aspects, to come within both
federal and provincial jurisdiction at the same time. This is known as the double aspect
doctrine, to which we will return to later. Moreover, it is possible for a matter that comes
within the jurisdiction of one level of legislative authority to encroach on the other level‘s
authority in a manner that is nonetheless valid by virtue of the ancillary powers doctrine,
which requires the meticulous analysis laid out in detail by LeBel and Deschamps JJ. in
the Reference re Assisted Human Reproduction Act.8

[239] Lastly, as LeBel and Deschamps JJ. note, ―care must be taken to maintain the
constitutional balance of powers at all stages of the constitutional analysis‖, 9 i.e., in the
determination of the pith and substance, and its connection to a head of power.

[240] On another subject, for the purposes of the analysis we intend to make limited
use of the parties‘ extrinsic evidence, which largely deals with the efficiency and
suitability of the proposed regime, notably from an economic perspective. We attempt to
demonstrate, on one side, the practical advantages of a centralized and uniform regime
that applies throughout Canada (such advantages undoubtedly exist) and, on the other
side, the practical advantages of the current system, which is based on various
provincial laws and a principle of inter-jurisdictional cooperation. Both perspectives can
be defended, but it is understood that they are of limited assistance with regard to the
distribution of powers. Nonetheless, this evidence has shown a certain number of
specific and indisputable facts, which stand at the intersection of the parties‘ positions.
We will allude to these facts at the appropriate time.
2.      The pith and substance of the law: What is the essence of what the law
        does and how does it do it?

7
  Supra note 6.
8
  Ibid. at paras. 187-189.
9
  Ibid. at par. 196.
No.: 200-09-006746-090                                                                     PAGE: 4

[241] In their respective reasons, Robert C.J. and Dalphond J.A. describe the
proposed Act in depth and examine its provisions with care. Their conclusions regarding
the pith and substance of the Act are as follows:

      Reasons of Robert C.J.

      [TRANSLATION]

      [115] In light of the above, it is my view that the federal government‘s purpose
      in the proposed Act is to make the Canadian securities regulatory regime more
      consistent, more effective, and better equipped to prevent the systemic risks that
      can threaten the financial system. I use the expression ―systemic risk‖ in the
      sense intended by Trebilcock in the following definition::
             . . . the risk of default by one market participant will impact the ability
             of others to fulfil their legal obligations, setting off a chain of
             negative economic consequences that pervade an entire financial
             system. [Citation omitted.]
      …

      [121] Moreover, the proposed Act has the classic attributes of a
      schemeregulating the conduct of participants in the securities market. It governs
      issues on the primary market and transactions on the secondary market through
      various requirements (requirement to produce information and representations
      from issuers‘ insiders, recognition of intermediaries, designation of persons able
      to provide market participants with services, framework for take-over bids,
      prohibition of conduct intended to deceive the market, etc.) and provides for the
      respect of these requirements through criminal penalties and a series of civil
      remedies. I therefore conclude that the dominant characteristic, the main thrust,
      the pith and substance of the proposed Act is the regulation of the securities
      trade.



      Reasons of Dalphond J.A.

      [TRANSLATION]

      [473] Plainly, the proposed Act is a general scheme of securities legislation,
      within the meaning of Multiple Access. In light of the foregoing, I find that its pith
      and substance is the regulation of all the participants of what is to become a
      single, integrated Canada-wide market, characterized by essentially
      interprovincial and international transactions. I therefore agree with the Alberta
      Court of Appeal, per Slatter J.A., which stated the following at para. 14:
               [14] … The parties agree that the pith and substance of the proposed
               legislation is the regulation of the participants in the public capital
               markets in Canada, and transactions relating to the raising of capital.
No.: 200-09-006746-090                                                                PAGE: 5

      [474] The desired effects of the proposed Act, if it becomes law, are diverse:
      protection of investors (sporadic and ongoing information, prevention of fraud,
      competence of intermediaries, civil remedies), transparency in the securities
      market, standardization of rules, facilitation of access to capital, improvement of
      sanctions and minimization of systemic risks.

      [475] In reality, investor confidence is an important and even essential element in
      achieving the purpose of the proposed Act, preserving a vigorous capital market
      in Canada, which is needed to ensure that thousands of Canadian enterprises
      have access to financing other than bank financing so they will continue to
      contribute to the prosperity of the country and its population. ... If the proposed
      Act is passed by Parliament, the Government of Canada will have a significant
      tool for managing Canada‘s monetary and economic policy and will be able to
      ensure the stability of the capital market otherwise than by informal cooperation
      meetings with the existing provincial commissions.

      [476] To summarize, the proposed Act is part of an economic policy designed to
      preserve the capital market in Canada, a market that is now an integrated, single,
      cross-Canada market characterized by essentially extraprovincial transactions,
      by regulating market participants and transactions. That is its pith and substance,
      and we must avoid confusing that with the methods chosen for achieving it,
      which in fact cannot help but resemble the methods used by the provinces and
      elsewhere in the world.



[242] Despite appearances, these two findings are not inconsistent. They simply
examine things from two different angles, or, more accurately, different degrees of
generalization. Each finding acknowledges that the matter of the legislation is reflected
in a regulation governing the conduct of securities market participants (or actors) and
imposing a duty of honesty and transparency on everyone in order to promote investor
protection and the maintenance of fair, effective and competitive markets through
prevention and management of systemic risk. Robert C.J. considers the foregoing
characteristics to be the pith and substance of the proposed Act and finds that they are
[TRANSLATION] the classic attributes of a scheme regulating the conduct of participants in
the securities market.‖ In Dalphond J.A.‘s opinion, the proposed legislation is, in pith
and substance, [TRANSLATION] ―the regulation of all the participants of what is to become
a single, integrated Canada-wide market‖ and it goes about achieving this in order to
[TRANSLATION] ―ensure the stability of capital markets.‖

[243] With respect, we must state from the outset that Dalphond J.A.‘s characterization
of the legislation strikes us as overly general and expresses an economic (or even
macroeconomic) vision and goal rather than the true pith and substance of the
proposed Act, thus disregarding the implementation measures. The remarks of Beetz J.,
No.: 200-09-006746-090                                                                         PAGE: 6

writing for the majority of the Supreme Court with regard to the national dimensions
doctrine in Re: Anti-Inflation Act,10 remain highly relevant today:

          I have no reason to doubt that the Anti-Inflation Act is part of a more general
          program aimed at inflation and which may include fiscal and monetary measures
          and government expenditure policies. I am prepared to accept that inflation was
          the occasion or the reason for its enactment. But I do not agree that inflation is
          the subject matter of the Act. In order to characterize an enactment, one must
          look at its operation, at its effects and at the scale of its effects rather than at its
          ultimate purpose where the purpose is practically all embracing.11

[244] This overinclusive characterization cannot be redeemed by drawing a distinction
between trading/dealing in securities (commerce des valeurs mobilières), which would
purportedly be the matter to which provincial securities legislation is connected, and the
securities or capital market (marché des valeurs mobilières ou des capitaux), which
would purportedly be the matter to which the proposed Act is connected. In paragraphs
406, 407 and 410 of his reasons, Dalphond J.A. explains that the former focuses on the
purchase and sale of securities and that the latter pertains to a broader economic
reality, which includes, by way of example, phenomena like the issue and offering of
securities, the rating of securities, the trading of securities on exchanges, the auditing of
issuers‘ financial statements, the regulation of intermediaries, as well as investigations,
rules for the operation of clearing houses, etc.

[245] We are not convinced that such a distinction is appropriate or correct. On the
one hand, in our opinion, characterizing securities trading merely as the juridical act of
purchasing and selling is not only very reductionist, it is also decontextualizing. On the
other hand, market is precisely what trading/dealing in securities consists in: the full
range of transactions in which property is offered and circulated between sellers
(including issuers) and potential purchasers. Lastly, however appropriate it may be to
distinguish between securities trading or dealing and securities or capital markets,
the extrinsic evidence shows that the competent authorities in Britain, the United States,
France and other jurisdictions are not content with the distinction, and that they regulate
far more than merely purchasing and selling. In any event, trading/dealing and markets
are inextricably linked: the most common way to establish a framework for the securities
market is to regulate securities trading in a broad sense.

[246] Even if a distinction between the regulating of trading/dealing in securities, and
securities market regulation, should be recognized, the legislative (or in this instance
proto-legislative) reality would still have to be ascertained.

[247] What is that reality in the present case? As LeBel and Deschamps JJ. wrote in
Reference re Assisted Human Reproduction Act, it must be identified ―as precisely as

10
      [1976] 2 S.C.R. 373.
11
     Ibid. at 452. A similar warning is made in Reference Re Assisted Human Reproduction Act, supra note
      6 at para. 190, per LeBel and Deschamps JJ.
No.: 200-09-006746-090                                                                       PAGE: 7

possible.‖12 A general and therefore very likely pleonastic and self-referential
characterization would not be adequate. For example, asserting that the [ TRANSLATION]
―pith and substance of [the proposed Act] is to institute a complete regulatory regime for
Canadian capital markets‖13 as the Attorney General of Canada has done, or that it
[TRANSLATION] ―deals with a question of national economic importance: the need to
ensure the integrity and competitiveness of Canadian capital markets and for a
complete and coordinated enforcement scheme‖, as the Canadian Bankers Association
has done,14 is not sufficient.

[248] We do not disagree with Robert C.J. when he writes that, concretely, the Minister
of Finance‘s proposed Act is mainly geared toward regulating the conduct of securities
market participants (issuers, intermediaries, advisors, rating agencies, exchanges, self-
governing entities, etc.) and that this is the hallmark of securities regulation throughout
the world, as shown by the extrinsic evidence adduced by the parties. We believe,
however, that it would be helpful to add to this perspective, which will require us to
examine the proposed Act as well.

[249] Following a preamble and some definitional and interpretive provisions, section 9
of the proposed Act sets out the legislation‘s ostensible purpose:

        9. The purposes of this Act are                  9. La présente loi a pour objet de :

        (a) to provide protection to investors           a) protéger les investisseurs contre les
        from unfair, improper or fraudulent              pratiques déloyales, irrégulières ou
        practices;                                       frauduleuses;

        (b) to foster fair, efficient and                b) favoriser des marchés des capitaux
        competitive capital markets in which the         justes, efficaces et compétitifs en
        public has confidence; and                       lesquels le public a confiance;

          (c) to contribute, as part of the                 c) contribuer, dans le cadre du régime
        Canadian          financial   regulatory         réglementaire des finances du Canada,
        framework, to the integrity and stability        à l'intégrité et à la stabilité du système
        of the financial system.                         financier.

[250] Section 10 states that the Act is binding on Her Majesty in right of Canada.

[251] Part 1 (ss. 11 to 13) establishes a Council of Ministers whose mandate is to
facilitate consultations and the exchange of information with respect to the
administration of the Act and securities regulation policy in general, to review the annual


12
    Supra note 6 at par. 190. This is the analytical approach used by Justice Dickson in
    Multiple Access Ltd. v. McCutcheon, [1982] 2 S.C.R. 161 at 172-173, a case involving the examination
    of specific statutory provisions, not an entire statute.
13
   Factum of the Attorney General of Canada (in French) at para. 76.
14
   Factum of the Canadian Bankers Association (in French) at para.52.
No.: 200-09-006746-090                                                           PAGE: 8

report of the Canadian Securities Regulatory Authority created by Part 2 of the Act, and
to make recommendations to the Minister on appointments.

[252] Part 2 (ss. 14 to 63) implements the administrative structures responsible for
enforcing the Act. It has thus created a Canadian Securities Regulatory Authority,
managed by a board of directors whose members are appointed by the Governor
General in Council on the recommendation of the Minister of Finance. The Authority has
a Regulatory Division, headed by a Chief Regulator appointed by the board, and
assisted by regional Deputy Chief Regulators who are also appointed by the board. It
also has a second division called the Canadian Securities Tribunal, presided and
managed by a Chief Adjudicator, who is assisted by an Associate Chief Adjudicator.
The Tribunal is not subject to the control of the Authority‘s board of directors, at least
with respect to its judicial functions. Its decisions can be appealed to provincial Courts
of Appeal. Lastly, the Act establishes a Regulatory Policy Forum and an Investor
Advisory Panel.

[253] Under the heading ―Recognized Entities‖, Part 3 (ss. 64 to 72) permits the
recognition of self-regulatory organizations, as well as exchanges, clearing agencies
and auditor oversight organizations. The first two entities are delegated the power to
regulate the operations, standards of practice and business conduct of its members or
participants and their representatives (this includes disciplinary matters). The auditor
oversight organizations have a similar mission in relation to their participants, with
regard to the audit or review of the financial statements that must be filed under the Act.
All of these recognized entities report to the Chief Regulator, who may in turn make
certain decisions concerning them.

[254] Under the hearing ―Designated Entities‖, Part 4 (ss. 73 to 75) permits the
recognition of credit rating organizations, investor compensation funds, dispute
resolution services, information processors, trade repositories, and ―any other entity that
provides investors or market participants with prescribed services‖ (s. 73(1)(f)). Upon
request, these designated entities must provide the Chief Regulator with any
information or record in their possession that relates to the administration of the Act.
Section 75 expressly provides that the Chief Regulator cannot regulate the substance of
credit ratings or the procedures and methodologies by which a credit rating organization
determines credit rating.

[255] Part 5 (sections 76 to 79) establishes a registration system for all persons acting
as dealers, advisers or investment fund managers. The Chief Regulator has the power
to suspend the registration of a person who has not complied with the Act, is not
suitable for registration, or is subject to an objection. He also has certain powers to
temporarily suspend registration or temporarily subject it to certain conditions.

[256] Until now, it can be seen that the proposed Act merely sets up the chessboard,
as it were. The substantive regulatory provisions of the proposed regulatory scheme
No.: 200-09-006746-090                                                             PAGE: 9

begin in Part 6. It is these provisions that are most helpful in determining the pith and
substance of the proposed Act.

[257] Part 6 (sections 80 to 88) makes the distribution of securities contingent on
fulfilling the prior obligation to file a prospectus with the Chief Regulator, unless an
exemption applies. It also sets out the requirements for these prospectuses. Section 82
is at the heart of Part 6 in that it articulates the principle underlying the measures that
are contained therein. The provision states:

  82. A prospectus must provide full, true     82. Le prospectus donne complètement,
  and plain disclosure of all material         fidèlement et clairement tous les faits
  facts relating to the securities issues or   importants se rapportant aux valeurs
  proposed to be distributed and must          mobilières émises ou dont le placement est
  comply       with      the     prescribed    envisagé et satisfait     aux exigences
  requirements.                                réglementaires.

[258] Part 7 (ss. 89 to 92) concerns derivatives. Section 89 prohibits trading in
exchange-traded derivatives unless the exchange is accepted by the Chief Regulator.
Section 90 prohibits any person from trading in designated derivatives ―…unless a
prescribed disclosure document in respect of the derivative has been filed … and
accepted by the Chief Regulator and has been delivered in accordance with the
regulations.‖ Section 91 exempts exchange-traded derivatives or designated derivatives
from the requirements of Part 6 (prospectus). Section 92 concerns a particular case of
derivatives.

[259] Part 8 (ss. 93 to 100), entitled ―Disclosure and Proxies‖, requires issuers to
disclose all information about their business and affairs, including financial statements,
and any other disclosure required by the regulations. Issuers must also update this
information immediately in the event of a material change. Insiders with a reporting
issuer other than a mutual fund are required to disclose all information relative to the
securities that they own or control. When requested by the Chief Regulator, an issuer‘s
director, officer, promoter or control person shall provide the required
information (s. 98). Finally, the proposed Act provides that an issuer that calls a meeting
of holders of its securities must provide them with notice and send them a form of proxy
in the prescribed form. The solicitation of proxies is subject to the obligation to send out
an information circular.

[260] Part 9 (ss. 101 to 108) covers take-over bids and issuer bids that are subject to
various formalities intended to guarantee adequate distribution of all information needed
by the holders of the targeted securities and also an orderly execution of the
transactions carried out under these bids. Some of the terms and conditions of the
mechanics of an offer are also governed by these provisions (e.g. deposits, delivery,
availability of funds, etc.).

[261] Part 10 (ss. 109 to 130), entitled ―Market Conduct‖, sets out various requirements
relating to the behaviour of market participants, registrants, fund managers, offerors,
No.: 200-09-006746-090                                                                PAGE: 10

offerees and issuers. Certain practices are expressly prohibited (promising to
repurchase a security or to refund the purchase price, providing a guarantee as to the
future value of a security, putting unreasonable pressure on another person to
purchase, hold or sell a security, carrying out a transaction with a person who does not
have the legal capacity using the name of another registrant, concealing information,
etc.). Conflicts of interest must be revealed and managed. Insider transactions are
prohibited in the following terms:

      117. (1) A person must not purchase or         117. (1) Il est interdit à toute personne
      trade a security of a reporting issuer or of   d'effectuer une opération sur l'une des
      an issuer whose securities are publicly        valeurs mobilières d'un émetteur
      traded, or enter into a transaction            assujetti ou d'un émetteur dont les
      involving a related financial instrument, if   valeurs mobilières sont négociées sur
      the person is in a special relationship with   un marché, d'en acheter une ou
      the issuer and knows of a material             d'effectuer une transaction concernant
      change with respect to the issuer, or a        un instrument financier connexe, si
      material act with respect to securities of     elle a des rapports particuliers avec
      the issuer, that has not been generally        l'émetteur et connaît un changement
      disclosed.                                     important le concernant ou un fait
                                                     important concernant ses valeurs
                                                     mobilières, qui n'a pas été rendu
                                                     public.



      (2) An issuer described in subsection (1)      (2) Il est interdit à l'émetteur visé au
      or a person in a special relationship with     paragraphe (1), de même qu'à toute
      such an issuer must not inform another         personne       ayant     des     rapports
      person of a material change with respect       particuliers avec lui, d'informer une
      to the issuer or a material fact with          autre personne d'un changement
      respect to securities of the issuer, unless    important le concernant ou d'un fait
      that change or fact has been generally         important concernant ses valeurs
      disclosed or unless informing that other       mobilières, sauf s'il a déjà été rendu
      person is in the necessary course of           public ou si cela est nécessaire dans le
      business of the issuer or person in the        cours de ses affaires ou de celles de la
      special relationship.                          personne       ayant     des     rapports
                                                     particuliers avec lui.



      (3) A person that proposes to do one or        (3) La personne qui a l'intention de
      more of the actions set out in paragraphs      prendre l'une ou l'autre des mesures ci-
      (a) to (c) must not inform another person      après ne peut informer une autre
      of a material change with respect to an        personne d'un changement important
      issuer described in subsection (1) or a        concernant        l'émetteur   visé     au
      material fact with respect to securities of    paragraphe (1) ou d'un fait important
      that issuer, unless that change or fact        concernant ses valeurs mobilières que
      has been generally disclosed or unless         s'il a déjà été rendu public ou si cela est
No.: 200-09-006746-090                                                                    PAGE: 11

          informing that other person is necessary       nécessaire pour la prise de la mesure:
          to effect the proposed action:
                                                         a) présenter une offre publique d'achat
          (a) make a take-over bid for securities of     à l'égard de valeurs mobilières de
          the issuer;                                    l'émetteur;

          (b) become a party to a reorganization,        b) participer à une réorganisation, une
          amalgamation, merger, arrangement or           fusion, un arrangement ou un
          similar business combination with the          regroupement similaire d'entreprises
          issuer; or                                     avec l'émetteur;

          (c) acquire a substantial portion of the       c) acquérir une portion importante
          issuer's property.                             des biens de l'émetteur.

          (4) If a material change with respect to an    (4) À moins que le changement
          issuer described in subsection (1) or a        important concernant l'émetteur visé
          material fact with respect to securities of    au paragraphe (1) ou le fait important
          that issuer has not been generally             concernant ses valeurs mobilières n'ait
          disclosed, the issuer, or a person that has    été rendu public, il est interdit à cet
          knowledge of the change or fact and that       émetteur - de même qu'à toute
          either is in a special relationship with the   personne qui a connaissance du
          issuer or proposes to do one or more of        changement ou du fait et qui a des
          the actions set out in paragraphs (3)(a) to    rapports particuliers avec lui ou a
          (e), must not recommend or encourage           l'intention d'effectuer l'une ou plusieurs
          another person to purchase or trade a          des mesures mentionnées aux alinéas
          security of the issuer or to enter into a      (3)a) à e) - de recommander à une
          transaction involving a related financial      autre     personne      d'effectuer    une
          instrument.                                    opération sur l'une des valeurs
                                                         mobilières de l'émetteur, d'en acheter
                                                         une ou d'effectuer une transaction
                                                         concernant un instrument financier
                                                         connexe, ou de l'y inciter.

[262] These standards and requirements are all based on the obligations of honesty,
integrity, good faith and diligence, as well as an ongoing duty of information and
transparency that is expressed in various ways (obligation to keep records, obligation
for accuracy in disclosing facts, etc.).

[263] Part 11 (ss. 131 to 168) contains administration and enforcement provisions
(reviews and inquiries, and all types of orders, including orders for the production of
information, which are covered in a separate division.)15 This part also sets out
provisions regarding general offences (ss. 153 to 156) and criminal offences (ss. 158 to
167), many of which cover offences that are currently in the Criminal Code.

[264] Parts 12 (general provisions – ss. 169 to 193) and 13 (which covers secondary
market disclosure – ss. 194 to 219) involve civil sanctions of the proposed Act by

15
     Division 4, sections 148–152.
No.: 200-09-006746-090                                                           PAGE: 12

establishing a complete regime of civil liability (from misconduct to the calculation of
damages, through the rules of court actions, including the defences).

[265] Finally, Part 14 of the proposed Act (ss. 220 to 249) includes provisions on
records and information (including those that are made available to the public) and other
topics. It gives the Authority important regulatory powers (including the power to impose
restrictions on the ownership and control of stock exchanges) and attributes certain
specific powers to the Chief Regulator (including cease-trade orders in cases of non-
compliant trading activities).

[266] Part 15 (ss. 250 to 254) sets out a transitional regime to which we will return
later, that provides for the progressive implementation of the proposed Act throughout
Canada.

[267] Part 16 provides for consequential amendments to various acts.

[268] The examination of the proposed Act in its entirety and of each of its provisions
demonstrates that the planned regulatory scheme centres around two major axes – (1)
the enforcement imposition upon market players of behavioural standards (participants
– issuers, intermediaries, fund managers, offerors, offerees, officers, and insiders),
including the monitoring of certain transactions, such as in the case of take-over bids or
issuer bids; and (2) information and the disclosure of information. The former is the
expression of an ethical normativity, which is implemented by means of a series of
control mechanisms. The latter involves ensuring the integrity and transparency of the
information, again by means of various supervisory mechanisms.

[269] We shall not dwell on the first axis, which is discussed at length in the reasons of
Robert C.J. and those of Dalphond J.A. A few words on the subject of information,
however, are in order.

[270] If there is a recurrent and dominant theme in this proposed Act, it is that of
information and its disclosure. Whether it involves the matter of prospectuses,
derivatives, or take-over and issuer bids, the theme of information occupies centre
stage. The interest in credit-rating agencies is relative to information. Part 8 (Disclosure
and Proxies) is almost exclusively devoted to it. Part 13 establishes a full regime of civil
liability in connection with the information requirements relating to the secondary
market. Throughout, the Act affirms and governs the duty of information and the
disclosure of information; it requires that the information be produced, accurate, up-to-
date and flowing. Even offences by insiders (insiders who themselves are required to
disclose information as to their situation) are ―offences of information‖, committed by
those who are attempting to secure benefits for themselves by taking advantage of
privileged information that is known only to them alone or to a small number of
individuals. A large portion of the enforcement mechanisms is focused on this duty of
information and all its facets.
No.: 200-09-006746-090                                                                      PAGE: 13

[271] This is a fundamental and crucial dimension of the proposed Act. As the
Supreme Court, per Binnie J., writes in Kerr v. Danier Leather Inc.,16 ―disclosure lies at
the heart of an effective securities regime,‖ although ―the extent of the disclosure is a
matter of legislative policy.‖ Economic analysis teaches us that information is key to
markets and that only accurate, reliable, public, freely available information is a
guarantee of fair and efficient markets in general and fair and efficient transactions and
operations in particular, because it enables stakeholders to act knowingly and to make
informed choices.

[272] That said, the proposed Act, at least in its defining aspects, does not really
regulate the securities market or even the overall trade in securities, at least not directly
(and barring exceptions), to use the dichotomy suggested by Dalphond J. 17 Rather, it
regulates the transactional environment by ensuring that all the stakeholders meet strict
standards of conduct and are subject to an equally strict duty to provide information,
whether engaging in major stock transactions or individual purchases. In other words,
the proposed Act regulates the conditions that must be in place so that securities
transactions can be conducted. This is not to say that it has no impact on the market or
trade, but the proposed Act does not directly regulate either the market or trade per se.
Rather, it focuses on the market and trade in relation to its purposes and intended
impact, and the measures set out in the proposed Act are naturally designed not to
impede, but to foster optimal market and trade conditions.

[273] In summary, regulating stakeholders‘ conduct and regulating information are the
two main pillars of the proposed Act, whose intent and intended impact – it is almost
trite to say, because this is so much a part of regular securities legislation 18 – is to
protect investors against unfair, improper or fraudulent practices and to maintain a fair,
efficient, competitive securities market in which integrity, stability and transparency are
preserved. This, in other words, is the purpose of the law as defined in section 9 of the
proposed Act (supra, para. [249]). All the rest, whether it be the administrative
structures put in place to enforce the law or the system of criminal and civil penalties, is
organized around that. It is thus this particular combination of purposes, effects
(anticipated in this case, because the law has not yet been passed), means and
mechanisms that constitutes the pith and substance of the proposed Act and gives it its
pith and substance.

[274] The preamble to the proposed Act is certainly more ambitious and appears to
allow for regulating capital markets themselves, stating that it is important for Canada to
have a strengthened, comprehensive and coordinated enforcement regime for those
markets, in order to protect the integrity and stability of Canada‘s financial system. But
beyond the rhetoric (which is fairly commonplace in legislative preambles, this particular
16
   [2007] 3 S.C.R. 331 at para. 5.
17
    In contrast, agriculture offers an example of true market regulation that goes beyond regulating
    stakeholders to include quotas to control production, product inspection and classification, quality
    control, control over distribution and trade flow, price control, and so on.
18
   As shown by the evidence and the review of various relevant statutes.
No.: 200-09-006746-090                                                              PAGE: 14

subgenre of legal literature), the means set out in the proposed Act are more modest,
as we have just seen and as is reflected in subsection 16(2), which summarizes them in
a few words:

      16. …                                         16. …

      (2) The primary means for achieving the         (2) Les principaux moyens de réaliser
      purposes of this Act include                    l‘objet de la présente loi sont
                                                      notamment :

      (a) requirements for timely, accurate and    a) des exigences concernant la
      efficient disclosure of information;         communication de l‘information en
                                                   temps opportun et avec exactitude et
                                                   efficience;

      (b) prohibitions of unfair, improper or      b) des interdictions visant les pratiques
      fraudulent market practices;                 déloyales, irrégulières ou frauduleuses
                                                   du marché;

      (c) standards for honest and responsible     c)    des     normes     touchant le
      conduct by market participants;              comportement honnête et responsable
                                                   des participants du marché;

      (d) the monitoring and evaluation of         d) la surveillance et l‘évaluation des
      issues or developments affecting the         questions et faits nouveaux touchant
      integrity or stability of capital markets;   l‘intégrité ou la stabilité des marchés des
      and                                          capitaux;

      (e) cooperation and coordination among       e) la coopération et la coordination entre
      financial authorities, in Canada and         les autorités financières, au Canada et à
      elsewhere.                                   l‘étranger.

[275] Paragraph (d) above uses the expression ―capital markets,‖ but the monitoring
and evaluation of issues affecting the integrity of these markets are certainly not the
dominant characteristic of the proposed Act, which does not go into much detail in this
regard.

[276] In short, this examination of the essence of what the proposed Act does and how
it does it reveals that it is about regulating the conduct of participants and stakeholders
in order to protect investors against unfair, improper or fraudulent practices (which is the
dominant purpose, considering that the proposed Act goes into minute detail about
regulating civil remedies) and to maintain a fair, efficient, competitive securities market
in which integrity, stability and transparency are preserved. The proposed Act is not
about all the aspects of the securities market, but focuses on regulating the supply of
goods and services (brokerage, operating an exchange, initial public offering, etc.).
No.: 200-09-006746-090                                                                            PAGE: 15

[277] Finally, a few observations to clarify and conclude our analysis of the pith and
substance of the proposed Act.

[278] First, there is the question of systemic risk.

[279] In Reference re Securities Act (Canada)19, Slatter J.A. writes:

           [7]      The Government of Canada suggests that the proposed federal securities
           legislation will also address ―systemic risk‖. By ―systemic risk‖ is meant
           widespread undesirable investment practices that might lead to wholesale
           disruptions of the capital markets. However, not being a ―merit system‖, the
           legislation does not address the types of irresponsible investment practices that
           might create such risks, nor does it limit the types of investments that can be
           sold. The focus of the proposed federal securities legislation (like the provincial
           legislation) is the integrity of market participants, protection of public investors,
           and ensuring ethical practices in the capital markets.

[280] We could agree with Slatter J.A. that the proposed Act does not address the only
means that would enable it to effectively prevent and manage systemic risk. With all due
respect, however, we are of the opinion that, while this is not the element that defines its
pith and substance, the proposed Act nevertheless intends to address the issue of
systemic risk.

[281] Prevention and management of systemic risk is one of the main themes of the
argument put forward by the Attorney General of Canada and the Canadian Bankers
Association. The proposed Act itself does not use the term ―systemic risk,‖ 20 but that is
what it is referring to when it talks about the stability and integrity of the financial system
or capital markets or financial markets (there is some variation in the terminology). The
sixth point in the preamble and paragraphs 9(c) and 16(2) (d) make protecting and
fostering the stability and integrity of the system and the market a guiding principle. It
therefore appears that preventing and managing systemic risk – or rather, protecting
and fostering the stability and integrity of the system or the market – are part of the
purpose of the proposed Act.

[282] We must not stop there, however. We must look at how this principle is applied.
The proposed Act fosters stability and integrity primarily by regulating the conduct of
market participants and requiring them to be transparent and to provide information at
all times, as well as by providing for general oversight by the regulatory authority. In
other words, the proposed Act would control (or try to control) systemic risk by
controlling participants whose conduct could be risky and by controlling information. The
prevention and reduction of systemic risk are the consequences and intended effects of
controlling participants and information.
19
     2011 ABCA 77.
20
     In stark contrast to the Payment Clearing and Settlement Act, S.C. 1996, c. 6, which refers specifically
      to systemic risk and defines the concept (s. 2). Moreover, we wonder whether systemic risk,
      regardless of where in the financial system it originates, can be regulated by means of this legislation.
No.: 200-09-006746-090                                                                 PAGE: 16

[283] The proposed Act also contains the following provisions, which support this
analysis:

       109. …                                        109. [...]

       (3) On request by the Chief Regulator,        (3) Sur demande du régulateur en chef,
       a market participant must provide the         le participant du marché lui fournit
       Chief Regulator with the information          l‘information pouvant être exigée en vue
       that may be required for the purpose of       de la contribution à l‘intégrité et à la
       contributing to the integrity and stability   stabilité des marchés financiers ou de
       of financial markets or conducting            l‘analyse en matière d‘orientations
       policy analysis       related    to the       concernant l‘exécution de la présente
       administration of this Act or to              loi ou la réglementation des valeurs
       securities regulation in general.             mobilières en général.

       163. (1) Without limiting the generality      163. (1) Sans que soit limitée la portée
       of section 718.2 of the Criminal Code,        générale de l‘article 718.2 du Code
       a court that is imposing a sentence for       criminel, lorsque le tribunal détermine la
       an offence referred to in any of              peine à infliger à l‘égard d‘une infraction
       sections 158 to 162 must consider the         prévue à l‘un des articles 158 à 162, les
       following         as        aggravating       faits     ci-après      constituent    des
       circumstances:                                circonstances aggravantes :

       …                                             [...]

       (b) the offence adversely affected, or        b) l‘infraction a nui — ou pouvait nuire —
       had the potential to adversely affect,        à l‘intégrité ou à la stabilité de l‘économie
       the integrity or stability of the Canadian    canadienne, du système financier
       economy or financial system or any            canadien ou des marchés financiers au
       financial market in Canada or investor        Canada ou à la confiance des
       confidence in such a financial market;        investisseurs dans un marché financier
                                                     au Canada;
       …
                                                     [...]

       224. (1) The Chief Regulator may, if he       224. (1) S‘il estime que cela ne serait pas
       or she considers that it would not be         préjudiciable à l‘intérêt public, le
       prejudicial to the public interest to do      régulateur en chef peut communiquer à
       so, disclose any information obtained         une autre agence réglementant les
       under this Act, to another securities or      valeurs mobilières ou le secteur financier,
       financial regulatory authority, an            à une bourse, à un organisme
       exchange,         a       self-regulatory     d‘autoréglementation ou à une autorité
       organization or another governmental          administrative, situés au Canada ou à
       or regulatory authority, in Canada or         l‘étranger, tout renseignement obtenu
       elsewhere, if the disclosure is for the       sous le régime de la présente loi s‘il le
       purpose of the administration of this         fait pour l‘exécution de celle-ci —
       Act, including contributing to the            notamment pour contribuer à l‘intégrité et
       integrity and stability of the financial      à la stabilité du système financier —, ou
       system, or of assisting in the                pour appuyer l‘exécution de la législation
No.: 200-09-006746-090                                                                 PAGE: 17

       administration of securities or financial     en matière financière ou de valeurs
       legislation in Canada or elsewhere.           mobilières, au Canada ou à l‘étranger.

       …                                             [...]

       228. (1) The Authority must publish a         228. (1) L‘Autorité publie un avis de tout
       notice of every regulation that it            règlement qu‘elle se propose de prendre.
       proposes to make.
                                                     [...]
       …

       (4) Despite subsection (1), a notice is       (4) Malgré le paragraphe (1), la
       not required to be published in the           publication d‘un avis n‘est pas exigée
       following circumstances:                      dans les cas suivants :

       (c) the Authority considers that there is     c) d‘une part, l‘Autorité est d‘avis que le
       an urgent need for the proposed               projet de règlement répond à un besoin
       regulation and that, without it, there is a   urgent et que, sans celui-ci, les
       substantial risk of material harm to          investisseurs ou l‘intégrité ou la stabilité
       investors or to the integrity or stability    des marchés des capitaux risqueraient
       of capital markets, and the Authority         fortement de subir un préjudice important
       has the Minister‘s consent to make the        et, d‘autre part, elle a obtenu l‘agrément
       regulation and to not publish a notice.       du ministre quant à la prise du règlement
                                                     et à la non publication de l‘avis.
       …
                                                     [...]

       232. (1) The Governor in Council may          232. (1) Le gouverneur en conseil peut,
       make an order requiring the Authority         par décret, ordonner à l‘Autorité la prise,
       to make, amend or repeal a regulation         la modification ou l‘abrogation, dès que
       under section 227, as provided in the         possible et de la façon précisée au
       order, as soon as practicable, if the         décret, d‘un règlement au titre de l‘article
       Governor in Council is of the opinion         227 s‘il est d‘avis que la mesure répond à
       that there is an urgent need for such a       un besoin urgent et que sans elle les
       measure and that, without it, there is a      investisseurs ou l‘intégrité ou la stabilité
       substantial risk of material harm to          des marchés des capitaux risqueraient
       investors or to the integrity or stability    fortement de subir un préjudice
       of capital markets.                           important.

       …                                             [...]

       [Emphasis added.]                             [Soulignements ajoutés.]

[284] The two important measures in this regard are those set out in subsections
228(4) and 232(1), which give the regulatory authority or the Governor in Council
emergency power in the event that there is imminent risk of harm to the stability or
integrity of capital markets. In order to emphasize the importance of these measures,
there was a great deal of talk at the hearing, as well as in some of the documents
submitted as evidence, about global recession and the risk of a collapse of the global
No.: 200-09-006746-090                                                                        PAGE: 18

financial market, which is something we have seen a striking example of in recent
years. It is far from certain, however, that this crisis, which was largely caused by
financial products that had no real value or were outrageously speculative and by a real
estate bubble, could have been prevented by a law that does not address the quality of
the investments brought on the market, as Slatter J.A.21 points out (this observation is
not a criticism, as regulation proceeds everywhere more or less according to the same
basic model, which is more or less stringent, depending on the jurisdiction).

[285] Nevertheless, regardless of whether the means chosen are theoretical or not,
effective or not, possible or not, the question of market stability and integrity, and
therefore systemic risk, is an integral part of the pith and substance of the proposed Act
and its true character. As we can see, however, and this is crucial to the
characterization process, it is not the dominant characteristic of the legislation
(regardless of what the preamble states).

[286] Moreover, two additional issues need to be addressed: the first concerns the
interprovincial and even international scope of the securities market; the second has to
do with what we will call the dematerialization of operations and securities.

[287] If there is one thing that is clear from the evidence, it is that the securities market
is national and international in scope, as the Supreme Court has had occasion to note:
Multiple Access Ltd. v. McCutcheon22 at 173 in fine and 174; Global Securities Corp. v.
British Columbia (Securities Commission)23 at para. 28.

[288] If the securities market or trade in Canada was ever purely local (after all, in the
19th century,24 shares in certain major Canadian companies were already being traded
on the London and New York stock exchanges), it has not been so for a long time. 25
Today, shares issued by a company can be traded nationally or internationally;
investors who buy on the Canadian market (or the market in each province) may come
from countries around the world and, conversely, Canadians can buy securities outside
Canada; many brokerage firms are able to operate in more than one jurisdiction and
can serve a national and international clientele; the same rating agencies are found

21
   Reference re Securities Act (Canada), supra note 19.
22
   Supra note 12.
23
   [2000] 1 S.C.R. 494.
24
    A time when accessing public money through securities was not necessarily Canadian companies‘
     preferred method of raising capital.
25
    In the evidence, the only report that offers some information about the history of the Canadian
     securities market, its international aspects and its regulation is the report by Stéphane Rousseau
     entitled L’encadrement du secteur des valeurs mobilières par le Québec et le débat sur une
     commission nationale des valeurs mobilières, June 22, 2010, 251 pp. at 26 et seq., evidence of the
     Attorney General of Quebec, Vol. IV at 984 et seq. For a brief but accurate description of the
     international nature of the securities market since the 18th century, in Europe and elsewhere, see The
     Palgrave Dictionary of Transnational History, Akira Iriye & Pierre-Yves Saunier, eds. (Basingstoke,
     England/New York: Palgrave Macmillan, 2009) at 408 et seq. (―Financial markets,‖ the term used for
     both the primary and secondary securities market).
No.: 200-09-006746-090                                                                 PAGE: 19

everywhere; and stock exchanges are places where stocks are traded locally, nationally
and internationally. The integration of economies on a North American and global scale
has clearly affected the securities market, which is one component of a huge global
network, just as it has affected all other markets. This globalization is facilitated and no
doubt intensified by the technology we have now, especially computer and Internet
technology.

[289] Nevertheless, the fact that both market and trade (to use that distinction) are
interprovincial and international in scope does not change the pith and substance of the
proposed Act. It would have done so had the pith and substance of the proposed Act
been the regulation of the interprovincial and international aspects of the securities
market or trade, because that would have been relevant for the purposes of the first
branch of the power conferred on the federal government by subs. 91(2) of the
Constitution Act, 1867, but that is not what the proposed Act does or intends to do. The
Attorney General of Canada acknowledges this. What the proposed Act would regulate,
primarily, is the so-called ―national‖ transactional environment, which, because of
Canadian geopolitics, is inevitably intraprovincial.

[290] This aspect of things is relevant only when it comes to determining which power
the proposed Act comes under, which is the second step in the constitutional analysis,
and that is when we will discuss it again.

[291] In the same way, we believe that the phenomenon of the dematerialization of
securities and exchanges themselves, again through technology, does not affect the
pith and substance of the proposed Act. Dematerialization is not something new to the
legal world. An asset is not less of an asset because it is not tangible. For a long time
now, it is no longer required that parties meet together in the same location in order to
sign a contract. The advent of new information technologies simply gives parties new
ways of doing business from a distance. Payments can be made without exchanging
any banknotes. You can hold a deed without literally having it in your hands. Whether
investors invest in dematerialized products, that cannot be found in a safe (although
they still have a juridical locus), or whether all types of transactions, exchanges and
operations, regardless of their nature, are done from a distance through computer
networks and structures, which also have the advantage of being instantaneous, is not
relevant to determining the pith and substance of the proposed Act.26

[292] In short, and to conclude on this point, let us repeat that the pith and substance
of the proposed Act is about regulating the conduct of participants and stakeholders in
order to protect investors against unfair, improper or fraudulent practices and to
maintain a fair, efficient, competitive securities market whose integrity, stability and


26
    See Bennett v. British Columbia (Securities Commission) (1991), 82 D.L.R. (4th) 129 (B.C.S.C.),
affirmed (1992), 94 D.L.R. (4th) 339 (B.C.CA), application for leave to appeal to the Supreme Court
dismissed on August 27, 1992, 23105, [1992] 2 S.C.R. v.
No.: 200-09-006746-090                                                                              PAGE: 20

transparency are preserved and upheld. That is the pith and substance of the proposed
Act (see paragraph [276], supra).

[293] That being the case, pith and substance of the proposed Act is clearly no
different from that of the provincial legislation, particularly the laws of Quebec27 and
Alberta, which have essentially, if not exactly, the same objectives and the same effects
and use the same means and mechanisms, including those pertaining to interprovincial
and international cooperation, a subject covered under paragraph 16(2)(e) of the
proposed Act. In fact, they are so similar that the heart of the proposed Act and its
regulatory provisions follow the model of the provinces‘ legislation, particularly that of
Alberta upon which it is based.28

[294] These similarities are apparent in the laws themselves and are confirmed by the
evidence. Here and there, the emphasis may be put on one element rather than another
as a result of legislative choice. It is clear that, although provincial legislators may have
first entered the field of securities regulation to protect investors, they are now, and
have been for a long time, albeit to varying degrees, concerned with maintaining and
promoting a fair, efficient and competitive securities market, whose stability, integrity
and transparency29 must be assured. The provinces also chose the regulation of
participants, stakeholders and information as a preferred means of achieving these
objectives; that is the path that the proposed Act, which is clearly based on provincial
methods, is taking.

[295] Slatter J.A. of the Court of Appeal of Alberta had the following to say about the
similarity between the model used in the proposed Act and the provincial models:

           [4] None of the provinces presently operates what is known as a ―merit
           jurisdiction‖. Provincial security regulators do not pass on the merits of any
           particular investment; they do not attempt to pick winners or losers. Issuers are
           allowed to sell high risk investments. The focus of the present provincial (and
           proposed federal) securities regulation is on ensuring "full, plain and true" initial
           and continuous disclosure, leaving the investment decision up to the investor; it
           is the issuers and intermediaries who are the regulated participants, not the

27
     For a thorough analysis of the Quebec securities regulatory regime (made up of several laws), please
      see the following study, which was submitted as evidence by the Attorney General of Quebec:
      Stéphane Rousseau, op. cit., note 25, evidence of the Attorney General of Quebec, vol. IV, p. 959 ff.
28
      Let us note in passing that the news release issued by the Minister of Finance to announce the
      proposed Act explains that ―[t]he proposed Canadian Securities Act is built on provincial securities
      regulation and harmonizes existing legislation in the form of a single statute‖, which is true to the point
      that it actually copies some of that legislation. See News Release 2010-051, May 26, 2010,
      http://www.fin.gc.ca/n10/10-051-eng.asp (Tab 81 of the Quebec Attorney General‘s book of
      authorities).
29
     In this regard, let us note that it is not because provincial laws do not explicitly address ―systemic risk‖
      (any more than the proposed Act does) that they are not concerned about it. It is implicit in the laws in
      question that prevention and management of systemic risk are part of both the purpose and effects of
      these laws, which seek to preserve the stability and integrity of the market in order to guarantee the
      protection of investors.
No.: 200-09-006746-090                                                                         PAGE: 21

          investors. After compliance with the regulatory thresholds, the trading in
          securities is a free market capitalist system where investors are entitled to make
          such investments as they see fit. The primary focus of the statutes is on the
          selling of securities; there are only a few provisions (such as Alberta's s. 93 on
          market manipulation) that regulate the buying of securities.

          ...

          [6] As the questions on this Reference reveal, the federal government now
          proposes, for the first time, to enact comprehensive legislation regulating the
          securities industry at the national level. The proposed federal legislation mirrors,
          from a functional point of view, the existing provincial securities regulation
          regimes: see proposed ss. 9 and 16. Occasional different policy choices in the
          content do not change the nature of the proposed legislation for constitutional
          purposes. It will license and regulate the conduct of participants in the securities
          industry. It will regulate the raising of money from the public in much the same
          way as the provincial legislation does, and will contain similar provisions for
          continuous disclosure. The federal legislation will also regulate extraordinary
          transactions, and provide for investigation, enforcement, and civil liability. . . 30

[296] We do not use the exact same words as Slatter J.A., but we concur with his
statement, which clearly illustrates, in essence, the pith and substance of the proposed
Act and of the provincial laws.

3.        Classification of power

[297] Under which constitutional power should the proposed Act fall? As we saw
earlier, according to the Attorney General of Quebec, the Attorney General of Alberta
and the Barreau du Québec, this type of regulation should fall entirely and exclusively
under provincial power pursuant to subsection 92(13) of the Constitution Act, 1867.
According to the Attorney General of Canada and the Canadian Bankers Association
(the ambiguity of whose arguments will be discussed shortly), the proposed Act should
fall under the general branch of the federal trade and commerce power, pursuant to
subsection 91(2) of the Constitution Act, 1867. Furthermore, some provisions of the
proposed Act clearly pertain to criminal law and fall under subsection 91(27) of the
Constitution Act, 1867. In this regard, it is important to note that the Attorney General of
Canada is not claiming that the proposed Act in its entirety should be an expression and
demonstration of Parliament‘s power to make criminal laws. 31 He is also not invoking
the first branch of federal trade and commerce power (that is to say, federal power over
international and interprovincial aspects of trade and commerce).

a.        Preliminary remarks on the double aspect



30
     Reference re Securities Act (Canada), supra note 19.
31
     Contrary to what he said in Reference re Assisted Human Reproduction Act, supra note 6.
No.: 200-09-006746-090                                                                        PAGE: 22

[298] According to the Attorney General of Canada, this situation is a classic example
of the double aspect doctrine since the regulation of capital markets has a ―trade and
commerce‖ aspect and a ―property and civil rights‖ aspect. The Canadian Bankers
Association made the same argument in its submission.

[299] If such is the case, then, in theory at least, the proposed Act and the provincial
securities laws could eventually coexist. In the event of conflict, the federal law would
prevail under the doctrine of paramountcy of federal legislation.

[300] This assertion, however, presents some challenges.

[301] First, despite the fact that they are saying that this case involves the double
aspect doctrine, under which it is assumed that federal and provincial legislation can
coexist, the Attorney General of Canada and the Canadian Bankers Association have
forcefully argued that the securities market needs to have a single, consistent regulatory
system. A single system would allow for centralized and flexible management of this
essential component of Canada‘s financial system, which is, in fact, one of the system‘s
four pillars,32 in a way that would take into account both regional and national interests.
Moreover, only a single system would allow Canada to be heard at the international
level, to effectively promote Canadian interests internationally and to participate in the
development of consistent regulatory policies for capital markets (see the fifth
―Whereas‖ in the Preamble of the proposed Act).

[302] We do not see how this argument fits with the idea that Canada could have, in
addition to a single, consistent and complete system, ten provincial systems that deal
with the same subject in the same way. Rather than being convincing, the argument
militates in favor of Parliament‘s exclusive power over securities, a concept that is
difficult to reconcile with the double aspect doctrine. Yet, the Attorney General of
Canada and the Canadian Bankers Association seem to be advocating for both these
things, which makes their constitutional position ambiguous.

[303] Moreover, the ambiguity of their arguments is even more obvious when we
consider the transitional regime set out in the proposed Act, and, particularly, s. 250:



           250. (1) Subject to sections 251 and          250. (1) Sous réserve des articles
           252, sections 1 to 10 and Parts 1 to 14       251 et 252, les articles 1 à 10 et les
           do not apply in a province unless it is       parties 1 à 14 ne s‘appliquent pas
           designated under subsection (2).              dans une province à moins qu‘elle
                                                         n‘ait été désignée au titre du
                                                         paragraphe (2).

           (2) After receiving the written consent       (2) Après          réception         du

32
     The others are the banking system, the insurance market, and the trust company market.
No.: 200-09-006746-090                                                                PAGE: 23

      of the Lieutenant Governor in Council        consentement écrit du lieutenant-
      of    a     province    and   on   the       gouverneur en conseil de la province
      recommendation of the Minister, the          et sur recommandation du ministre,
      Governor in Council may, by order,           le gouverneur en conseil peut, par
      designate      the   province   as   a       décret, désigner la province à titre de
      participating province.                      province participante.

      (3) Before making his or her                 (3) Le ministre ne peut faire sa
      recommendation, the Minister must be         recommandation      que    s‘il   est
      satisfied that the single securities         convaincu que le régime unique de
      regulatory regime that is established by     réglementation      des       valeurs
      this Act, and that is applicable             mobilières qui est établi par la
      throughout all of the participating          présente loi et applicable dans
      provinces, will apply in the province to     l‘ensemble       des       provinces
      be designated.                               participantes s‘appliquera dans la
                                                   province en cause.

      251. The following provisions apply to       251. Les     dispositions ci-après
      the whole of Canada:                         s‘appliquent dans l‘ensemble du
                                                   Canada :

      (a) the definitions “issuer”, “material      a) les définitions de « changement
      change”,          “material       fact”,     important », « émetteur », « fait
      “misrepresentation”,           “related      important », « instrument financier
      financial instrument”, “security”,           connexe »,       « offre     publique
      “take-over bid” and “trade”                  d’achat »,              « operation »,
                                                   « présentation inexacte des faits »
                                                   et « valeur mobilière »

      (b) in section 2;                            b) à l‘article 2;

      (c) section 8;                               c) l‘article 8;

      and sections 158 to 167.                     les articles 158 à 167.

      252. (1) Sections 148 to 152 apply in        252. (1) Les articles 148 à 152
      a province that is not designated under      s‘appliquent, sous réserve des
      subsection 250(2), subject to the            dispositions  ci-après,  dans     la
      following:                                   province qui n‘a pas été désignée
                                                   comme province participante au titre
                                                   du paragraphe 250(2) :

       (a) a reference to ―recognized entity‖ is   a) la mention de « une entité
       to be read as a reference to ―self-         reconnue » et celle de « l‘entité
       regulatory organization, exchange,          reconnue » valent respectivement
       clearing agency or auditor oversight        mention     de    « un   organisme
       organization‖;                              d‘autoréglementation, une bourse,
                                                   une agence de compensation ou un
No.: 200-09-006746-090                                                               PAGE: 24

                                                 organisme de surveillance des
                                                 vérificateurs » et de « l‘organisme
                                                 d‘autoréglementation, la bourse,
                                                 l‘agence     de   compensation   ou
                                                 l‘organisme de surveillance des
                                                 vérificateurs »;
       (b) references to ―registrant‖ and
       ―registrants‖ are to be read as           b) les mentions de « à un inscrit », de
       references to ―dealer, underwriter,       « l‘inscrit », de « tout inscrit » et de
       adviser or investment fund manager‖       « des inscrits » valent respectivement
       and ―dealers, underwriters, advisers      mention de « à un courtier, un
       and investment fund managers‖,            souscripteur à forfait, un conseiller ou
       respectively; and                         un       gestionnaire      de      fonds
                                                 d‘investissement », de « le courtier,
                                                 le souscripteur à forfait, le conseiller
                                                 ou le gestionnaire de fonds
                                                 d‘investissement », de « tout courtier,
                                                 souscripteur à forfait, conseiller ou
                                                 gestionnaire           de          fonds
                                                 d‘investissement » et de « des
                                                 courtiers, souscripteurs à forfait,
                                                 conseillers et gestionnaires de fonds
                                                 d‘investissement »;
      (c) a reference, in paragraph 149(2)(a)
      or 150(2)(a), to ―an offence under this    c) la mention de « infraction à la
      Act‖ is to be read as a reference to ―an   présente loi » vaut, aux alinéas
      offence under sections 158 to 162‖.        149(2)a) et 150(2)a), mention de
                                                 « infraction à l‘un des articles 158 à
      (2) Section 168 applies in a province      162 ».
      that is not designated under subsection
      250(2), subject to the following:          (2) L‘article 168 s‘applique, sous
                                                 réserve des dispositions ci-après,
                                                 dans la province qui n‘a pas été
                                                 désignée au titre du paragraphe
                                                 250(2) :
      (a) the reference to ―to the Chief
      Regulator, to a person acting under the    a) la mention de « au régulateur en
      Chief Regulator‘s authority or to a        chef, à une personne agissant sous
      peace officer‖ is to be read as a          son autorité ou à un agent de la
      reference to ―to a peace officer‖;         paix » vaut mention de « à un agent
                                                 de la paix »;
      (b) the reference to ―a peace officer
      who is investigating an offence under      b) la mention de « infraction à la
      this Act, a designated person who is       présente loi ou d‘une personne
      conducting a review under section 133      désignée ou autorisée par le
      or an authorized person who is             régulateur en chef pour mener un
      inquiring into a matter under section      examen ou une enquête aux termes
      134‖ is to be read as a reference to ―a    des articles 133 ou 134, selon le
      peace officer who is investigating an      cas » vaut mention de « infraction à
No.: 200-09-006746-090                                                             PAGE: 25

      offence under sections 158 to 162‖;        l‘un des articles 158 à 162 »;
      and

      (c) a reference to ―an offence or a
      contravention under this Act‖ is to be     c) la mention de « liés à une
      read as a reference to ―an offence         infraction ou à une contravention à la
      under sections 158 to 162‖.                présente loi » vaut mention de « liés
                                                 à une infraction à l‘un des articles
                                                 158 à 162 ».
      253. (1) The definition ―release‖ in
      section 194 includes filing a document     253. (1) Le terme « publication », à
      with the securities regulatory authority   l‘article 194, vise notamment le dépôt
      of a province that is not designated       d‘un document auprès d‘une agence
      under subsection 250(2).                   de réglementation des valeurs
                                                 mobilières d‘une province qui n‘a pas
                                                 été désignée au titre du paragraphe
                                                 250(2).
      (2) The aggregate of all damages
      assessed after appeals that is referred    (2) Le total des dommages-intérêts
      to in the description of B in paragraph    — évalués après les appels — qui
      212(1)(b) must include all damages         est visé à l‘élément B de l‘alinéa
      assessed after appeals, if any, against    212(1)b) comprend les dommages
      the person in all actions brought under    évalués — après les appels
      legislation, comparable to any of          éventuels — auxquels le défendeur a
      sections 196 to 199, of provinces that     été condamné dans les actions
      are not designated under subsection        intentées en vertu de toute
      250(2).                                    disposition — comparable à l‘un des
                                                 articles 196 à 199— de la législation
                                                 de toute province qui n‘a pas été
                                                 désignée        comme       province
                                                 participante au titre du paragraphe
                                                 250(2).
      (3) In determining whether to approve
      the settlement of an action referred to    (3) Pour décider s‘il approuve ou
      in subsection 215(1) and in addition to    non le règlement de l‘action visée
      the    considerations   set    out   in    au paragraphe 215(1), le tribunal
      subsection 215(2), the court must          tient compte, en plus des facteurs
      consider whether there are any actions     visés au paragraphe 215(2), des
      outstanding brought under legislation,     actions pendantes intentées en
      comparable to any of sections 196 to       vertu de toute disposition —
      199, of provinces that are not             comparable à l‘un des articles 196 à
      designated under subsection 250(2).        199— de la législation de toute
                                                 province qui n‘a pas été désignée
                                                 au titre du paragraphe 250(2).
      254. Sections 250 to 253 cease to
      have effect on the day that may be         254. Les articles 250 à 253 cessent
      fixed in an order of the Governor in       d‘avoir effet à la date que le
      Council on the recommendation of the       gouverneur en conseil peut préciser
      Minister, but the Governor in Council      par décret sur recommandation du
No.: 200-09-006746-090                                                              PAGE: 26

        may make the order only if all of the    ministre; il ne peut prendre le décret
        provinces have been designated under     qu‘une fois que toutes les provinces
        subsection 250(2).                       ont été désignées en vertu du
                                                 paragraphe 250(2).
        [Emphasis added.]
                                                 [Soulignements ajoutés.]




[304] From these provisions, only a few of which will be implemented immediately
across the country, it appears that the regime set out in the proposed Act is designed to
apply to the entire country, but through an opt-in by the individual provinces. Thus, at
first glance, the regime is optional. Each province that wants to adhere to the system
can make a request, which, as we can see from the proposed Act and the explanations
provided by the Attorney General of Canada, would involve the province abandoning its
own legislation. The Governor in Council will not designate a province unless he or she
is convinced that the single securities regulatory regime will apply in that province. That
means that, throughout each participating province, the only securities regulatory
regime will be the federal regime (section 250). In the provinces that do not wish to
participate, only the provincial securities regulatory regime will apply, subject to a few of
the provisions of the federal regime (see sections 251 and 252 above).

[305] This transitional regime is certainly creative and perhaps it is a new and original
example of cooperative federalism (politico-strategically, at least). It is perhaps not
contrary to the principle according to which a federal law can apply to only one part of
the country. That being said, it has little, if anything, to do with the double aspect theory,
at least as we have traditionally understood it.

[306] This theory is concerned with the simultaneous co-existence of federal and
provincial legislative provisions in the same jurisdiction. It is not concerned with the co-
existence of regimes that are mutually exclusive that would exist in different
jurisdictions. In this case, the federal authorities do not anticipate that the proposed Act
will be applied in conjunction with or parallel to provincial legislation, each covering a
particular aspect of securities regulation. Rather, it is expected that where federal
legislation comes into force through provincial opt-in, it will be the only applicable
legislation. Once again, and at the risk of repeating ourselves, this is not an example of
the double aspect theory, but rather, a variation on the theme of exclusive powers.

[307] There is only one explanation for this approach to implementing the legislation:
the co-existence of the federal regulatory system and a provincial system within the
same jurisdiction is impossible because both systems claim to be comprehensive and
because both essentially deal in a similar way with what we will interchangeably refer to
as commerce, the market or the securities industry. In short, they have the same ―pith
and substance‖.
No.: 200-09-006746-090                                                                          PAGE: 27

[308] We agree that convergence or even duplication of provincial and federal
provisions is the ultimate in harmony, to reiterate the expression advanced by Dickson
J. in Multiple Access Ltd.,33 but what can be clearly accepted when simply dealing with
individual legislative provisions34 can become problematic, even impossible, when
dealing with complete regulatory systems pursuing the same objectives by similar
means, as is the case here.

[309] In Bell Canada v. Quebec (Commission de la santé et de la sécurité du travail),35
Beetz J. described the true nature of the double aspect theory:

        It follows from this theory that two relatively similar rules or sets of rules may
        validly be found, one in legislation within exclusive federal jurisdiction, and the
        other in legislation within exclusive provincial jurisdiction, because they are
        enacted for different purposes and in different legislative contexts which give
        them distinct constitutional characterizations.

        Thus the prohibition from driving a motor vehicle imposed following a conviction
        for driving while intoxicated may be the penalty for a criminal offence, validly
        enacted by Parliament, just as the suspension of a driving licence may be validly
        prescribed by a province for highway safety reasons: Provincial Secretary of
        Prince Edward Island v. Egan, 1941, S.C.R. 396.

        Similarly, false prospectuses may be the subject of valid federal legislation from
        the criminal law standpoint, as well as of equally valid provincial legislation from
        the standpoint of regulating securities trading: Smith v. The Queen, 1960, S.C.R.
        776.

        Similarly, rules regarding ―insider trading‖ may be regarded as belonging to
        corporate law within exclusive federal jurisdiction in the case of federally-
        incorporated companies and as regulation of trade in securities within exclusive
        provincial jurisdiction, applicable to federally-incorporated companies, provided
        the latter are not singled out and their essential powers are not impaired: Multiple
        Access Ltd. v. McCutcheon, 1982, 2 S.C.R. 161.

        So too public nudity may be prohibited by Parliament in a criminal law context,
        and also be the subject of provincial regulation of entertainment in public houses


33
   Supra note 12 at 190.
34
   As was the case in Multiple Access Ltd., in which it was held that the virtually identical provisions of
    sections 113 and 114 of the Ontario Securities Act and ss. 100.4 and 100.5 of the Canada
    Corporations Act could coexist. According to the Supreme Court, these provisions dealt with all
    companies‘ insider trading with respect to their securities. Sections 113 and 114 were considered to
    be valid under constitutional jurisdiction of the provinces, while ss. 100.4 and 100.5 were considered to
    fall under the federal jurisdiction of business corporations (corporate law), because they are narrowly
    associated to the material particulars in federally-incorporated companies. Given that the provisions
    are consistent and devoid of any contradictions, the Court concluded that they could co-exist, without
    invoking the doctrine of paramountcy.
35
   [1988] 1 S.C.R. 749.
No.: 200-09-006746-090                                                                      PAGE: 28

        operated under a provincial licence: Rio Hotel Ltd. v. New Brunswick (Liquor
        Licencing Board), 1987, 2 S.C.R. 59.

        However, in Attorney-General for Canada v. Attorney-General for Alberta, 1916,
        1 AC 588, Viscount Haldane issued a warning about the double aspect theory. This is
        what he said about this theory, at p. 596:

              ...[it] is now well established, but none the less ought to be applied only
              with great caution...

        The reason for this caution is the extremely broad wording of the exclusive
        legislative powers listed in ss. 91 and 92 of the Constitution Act, 1867 and the
        risk that these two fields of exclusive powers will be combined into a single more
        or less concurrent field of powers governed solely by the rule of paramountcy of
        federal legislation. Nothing could be more directly contrary to the principle of
        federalism underlying the Canadian Constitution: see Laskin’s Canadian
        Constitutional Law (5th ed. 1986), vol. 1, at p. 525.

        The double aspect theory is neither an exception nor even a qualification to the
        rule of exclusive legislative jurisdiction. Its effect must not be to create concurrent
        fields of jurisdiction, such as agriculture, immigration and old age pensions and
        supplementary benefits, in which Parliament and the legislatures may legislate
        on the same aspect. On the contrary, the double aspect theory can only be
        invoked when it gives effect to the rule of exclusive fields of jurisdiction. As its
        name indicates, it can only be applied in clear cases where the multiplicity of
        aspects is real and not merely nominal.36

        [Emphasis in original]

[310] Further, noting that the legislative schemes in question, Quebec‘s Act respecting
occupational health and safety37 and what was then the Canada Labour Code Part IV38
pursue the same objectives by similar means, Beetz J. concluded that:

        I think it is wrong to speak of double aspect in another way. An examination of
        the preventive scheme of the Act and the preventive scheme created by the
        federal legislator in Part IV of the Canada Labour Code demonstrates that both
        legislators are pursuing exactly the same objective by similar techniques and
        means. A comparison of the statement of principle in each statute leaves no
        doubt as to the similarity of their purposes:

        ...

        The exact correspondence of these two objectives indicates that there are not
        two aspects and two purposes depending on whether the legislation is federal or
        provincial. In my opinion, the two legislators have legislated for the same purpose

36
   Ibid. at 765 and 766.
37
   R.S.Q., c. S-2.1.
38
   R.S.C. 1970, c. L-1 (mod.1977-78, c. 27).
No.: 200-09-006746-090                                                                           PAGE: 29

        and in the same aspect. Yet they do not have concurrent legislative jurisdiction in
        the case at bar, but mutually exclusive jurisdictions. In this regard the Attorney
        General of Quebec argued that the provisions of Part IV of the Canada Labour
        Code were adopted by Parliament not pursuant to its exclusive jurisdiction over
        federal undertakings but under its ancillary jurisdiction, analogous to that which it
        might perhaps exercise if it were to create a workmen's compensation scheme
        for federal undertakings. I have already had occasion to discuss this. As they
        deal with the labour relations and the management of federal undertakings, the
        provisions of Part IV of the Canada Labour Code in my opinion fall within the
        exclusive jurisdiction of Parliament which, as we saw earlier, would otherwise be
        stripped of any distinct or meaningful content. [emphasis in original]39

[311] This passage can be entirely applied to the case at bar: an examination of the
regulatory scheme referred to in the proposed Act and the existing scheme under
provincial legislation, particularly those of Quebec and Alberta, demonstrates that
legislators are pursuing exactly the same objective by similar techniques and means.
The identity of the regimes demonstrates that there are not two aspects or two purposes
depending on whether the legislation is federal or provincial. If the proposed Act were
enacted by Parliament, all legislators would have legislated for the same purposes and
under the same aspect. In the present case, however, they do not have a joint
legislative jurisdiction over securities and there is no need to create one by means of
the double aspects doctrine.

[312] In our opinion, this theory cannot be applied in this case. Rather, it is through the
lens of exclusive powers (with the qualification of the ancillary power doctrine, if
necessary) that we should be examining the debate, which involves subsections 91(2)
and 92(13) of the Constitution Act, 1867. On this point, therefore, we also agree with the
Court of Appeal of Alberta.40
b.      Securities and subsection 92(13) of the Constitution Act, 1867
[313] Provincial jurisdiction over securities regulation and its connection to
subsection 92(13) of the Constitution Act, 1867, have been repeatedly recognized in
Judicial Committee of the Privy Council reports and by the Supreme Court of Canada.
Examples include: Lymburn v. Mayland,41 Smith v. The Queen,42 Gregory and Co. Inc.
v. Quebec Securities Commission,43 Multiple Access Ltd. v. McCutcheon44 and Global




39
   Bell Canada v. Quebec (Commission de la santé et de la sécurité du travail), supra note 35 at 852–853.
40
   Reference re Securities Act (Canada), supra note 19 at paras. 45 and 46.
41
   1932, A.C. 318. Litigation regarding registration requirement.
42
   [1960] S.C.R. 776. Litigation regarding validity of prospectuses under provincial law.
43
    [1961] S.C.R. 584 Litigation regarding the application of the Quebec law regulating securities in
     transactions between a Quebec broker and his clients outside the Province.
44
   Supra note 12. Litigation regarding the validity of some sections of a provincial law on securities as they
     would apply to the directors of a national private corporation.
No.: 200-09-006746-090                                                                                  PAGE: 30

Securities Corp. v. British Columbia (Securities Commission).45 In the latter decision,
Iacobucci J. wrote the following, on behalf of the Supreme Court:

          40       I conclude that the ―pith and substance‖ of s. 141(1)(b), as described
          above, falls within the scope of s. 92(13) of the Constitution Act, 1867, ―Property
          and Civil Rights in the Province‖. Section 141(1)(b)‘s dominant purpose is the
          effective regulation of domestic securities, a task that has long been recognized
          to fall within provincial authority: see Multiple Access Ltd. v. McCutcheon, 1982
          CanLII 1266 (S.C.C.), [1982] 2 S.C.R. 161, at pp. 183-85; Smith, supra;
          Lymburn, supra.

          41      Moreover, it is well established that the provinces‘ authority over
          securities regulation is not limited to purely intraprovincial matters. In Gregory,
          supra, the Quebec-based broker in question was prosecuted solely for
          transactions outside the province. This Court nonetheless held that Quebec had
          a legitimate interest in those transactions. Conversely, in R. v. W. McKenzie
          Securities Ltd. (1966), 56 D.L.R. (2d) 56, the Manitoba Court of Appeal held that
          a province can regulate a broker located outside the province if that broker
          transacts with clients within the province.

[314] This passage is particularly interesting in that Iacobucci J. does not simply
recognize that, in this case, paragraph 141(1)(b) of the contentious provincial act is a
matter that falls within property and civil rights and, consequently under
subsection 92(13) of the Constitution Act, 1867. Iacobucci J. goes on to recognize
explicitly that, by virtue of this provision, ―effective regulation of domestic securities‖ in
the province falls under provincial jurisdiction (as recognized for investor protection: see
Gregory & Co. Inc. v. Quebec Securities Commission46). Furthermore, it must be noted
that Iacobucci J.‘s ruling was made in a context where the legislation at issue was a
modern statute that already encompassed the previously defined attributes.47 Thus,
45
   Supra note 23. Litigation regarding legislation in British Columbia allowing the securities commission to
    ―gather information for securities regulators in other jurisdictions‖ (para. 1).
46
   Supra note 43 at 590 (Fauteux J., for the majority):
    Nor is this conclusion affected by the decisions rendered in a group of cases referred to by counsel for
    the appellant, where the incidence of export trade of farm products on the validity of certain provincial
    marketing acts was considered; ... The Act Respecting Securities, 3-4 Elizabeth II, c. 11, is not
    marketing legislation within the meaning attending the legislation considered in these cases. In order
    to protect the public against fraud, it provides for the establishment and operation of a control and
    supervision over the conduct, in the Province of Quebec, of persons engaged, therein, in carrying on
    the business of trading in securities or acting as investment counsel.
    The object of the Act, as shown by its provisions, is similar to that of the Securities Fraud Prevention
    Act, 1930, of Alberta, which was considered Lymburn and another v. Mayland and Others and where
    Lord Atkin, with reference to Part I entitled ―Registration of brokers and salesmen‖, said at p. 324:
     There is no reason to doubt that the main object sought to be secured in this part of the Act is to secure that
     persons who carry on the business of dealing in securities shall be honest and of good repute, and in this way to
     protect the public from being defrauded.
47
     Securities Act, R.S.B.C., 1996, c. 418, whose general structure and topics already resemble those of
     the proposed Act, as can be judged by the title of certain sections: Part 1 – Interpretation; Part 2 – The
     Commission; Part 4 – Self Regulatory Bodies and Exchanges; Part 5 – Registration; Part 6 –
     Exemption from Registration Requirements; Part 7 – Trading in Securities Generally (where certain
No.: 200-09-006746-090                                                                          PAGE: 31

Iacobucci J. is of the opinion that securities regulation in all its areas (standards of
conduct for participants and market stakeholders, information, etc.), falls under
subsection 92(13) of the Constitution Act, 1867. Iacobucci J. is also of the opinion that
provincial jurisdiction in this matter is not strictly limited to intraprovincial matters, but
that it can also have a bearing on interprovincial (or international) matters.

[315] That securities regulation would fall under property and civil rights, as interpreted
by subsection 92(13) (in private law rights48) is not surprising, since the securities
market (or trade) operates on a contractual basis (like all markets, may we add 49). It is a
question of buying, selling or trading property – in this case, securities issued by a
corporation in order to finance its activities – directly or through an intermediary, on the
primary or secondary market.50Although it is true that issuing securities is not a
contractual transaction in and of itself, the existing regulation, which focuses on the
requirements for the prospectus so that anyone who acquires or buys securities – be it
a corporate body or an individual person, a broker, or an investment fund, etc. – does
so with full knowledge, as previously mentioned. From a judicial point of view, the legal
obligations regarding the prospectus can be seen as an expression of the general
responsibility to provide information that rests with any contracting party in any field, be
it in civil or common law,51 to varying extents and with the adaptations required by the
property in question here.

[316] Imposing standards of conduct for market stakeholders and monitoring them are
similarly components in the regulation of what we referred to as the transactional
environment, which also has a nexus to private law in the province. Overall, the

    practices are forbidden); Part 9 – Prospectus; Part 10 – Exemption from Prospectus Requirements;
    Part 11 – Circulation of Materials; Part 12 – Continuous Disclosure; Part 13 – Take Over Bids and
    Issuer Bids; Part 14 – Proxies; Part 16 – Civil Liability; Part 17 – Investigations and Audits; Part 18 –
    Enforcement.
48
    See reasons of Robert C.J.A. at paras. 121 – 130. See also Peter W. Hogg,. Constitutional Law of
    Canada, loose-leaf ed.(Toronto: Carswell, 2007)at 21 – 2 and 21 – 3.
49
   It should be noted that in common language, the notion of a ―market‖ in all its permutations is based on
    a contract (including the definitions that refer to the place where commercial transactions are made
    and where all kinds of goods and services are exchanged). In a financial context, see the following
    definition:
    [TRANSLATION]
    Commercial and financial operations dealing with a category of goods in a specific geographical area;
    this area; the people who perform commercial transactions... Economically speaking, the term ‗market‘
    refers to a geographical area, or a group of people who are in a business relationship to sell or buy a
    product in conditions such as transactions...tend to be conducted at the same time and at the same
    price... ‗market‘ also refers to the mass of offers and requests that come together (in these business
    centres).
                  Reboud & Guitton, Précis d’économie politique, t.l., at 377
    (Le Grand Robert de la langue française, 2d ed., electronic version, ed. Alain Rey (Paris: Le
    Robert, 2001), ―marché‖).
50
   For a partial analysis of the contractual relationship between market stakeholders, see: Julie Biron &
    Stéphane Rousseau, ―Pérégrinations civilistes autour de la relation entre l’intermédiaire de marché et
    l’investisseur” (2010), 44 R.J.T. 261.
51
   S.M. Waddams, The Law of Contracts, 6th ed. (Toronto: Canada Law Book, 2010) at 8, para. 9.
No.: 200-09-006746-090                                                                           PAGE: 32

conditions under which these securities are traded and the manner in which they are
traded must be regulated by monitoring the activities of stakeholders (many of whom
are often also contracting parties), as they can have an impact on the data that the
investor needs in order to transact properly.

[317] It goes without saying that civil liability in these matters (under general law rules
or a special regime52) falls within the purview of subsection 92(13) of the Constitution
Act, 1867, and nothing more will be said on that matter.

[318] By virtue of their subject matter, as much as their objectives (investor protection
and effective regulation of the securities market) provincial laws deal with property and
civil rights and are therefore indeed valid under subsection 92(13) of the Constitution
Act, 1867.

[319] Some will perhaps protest that the interprovincialization and internationalization
of the securities market impedes our ability to refer to ―Property and Civil Rights in the
Province‖. We are of the opinion that such is not the case. Dealing with the behaviour of
stakeholders who are in a province – even if these stakeholders are dealing with
contracting parties from outside the province – is a provincial matter (as recognized by
the case law in, for example, Gregory53). To require an issuing corporation to conform to
existing provincial regulations regarding prospectuses in the province where the
corporation is headquartered, operates or where it sells its shares remains a provincial
matter (even if the shares issued can be purchased out of province or if the corporation
has to comply with requirements in force, under similar circumstances, in other
provinces where the shares could be distributed). A contract is still concluded in a
province even if the contracting party is outside the province (subject to the rules of
private international law, which also falls under provincial jurisdiction as per
subsection 92(13) of the Constitution Act, 1867).54 As a further example, a stock
exchange (a ―market‖ in the strictest sense of the term, that is to say a place where

52
   This is now the case in Quebec and in other provinces: see ss. 213.1 et seq. of the Securities Act,
    R.S.Q., c. V-1.1.
53
   Supra note 43.
54
   There is value in referring to the Supreme Court decision in Committee for the Equal Treatment of
    Asbestos Minority Shareholders v. Ontario (Ontario Securities Commission), [2001] 2 S.C.R. 132,
    where, in a context other than the division of constitutional jurisdiction, the securities industry falls
    under many concurrent regulatory jurisdictions, (para. 62). Nevertheless, the Supreme Court is of the
    opinion that the Ontario Securities Commission handed down a reasonable decision by concluding
    that it did not need to intervene in the absence of a sufficient transactional connection between the
    operation put forward for its attention (the purchase offer from the Société des actions de la Société
    Asbestos by the Société nationale de l'Amiante) and Ontario. Iacobucci J., writing on behalf of the
    Supreme Court, concluded that ―Thus, the OSC‘s insistence on a more clear and direct connection
    with Ontario in this case reflects a sound and responsible approach to long-arm regulation and the
    potential for conflict amongst the different regulatory regimes that govern the capital markets in the
    global economy.‖ (par. 62). The approach thus embodied, which in some ways harks back to the
    doctrine of forum non conveniens, confirms that international private law has its place in regulating
    interprovincial and international transactions and also confirms that it is not unfathomable that a single
    transaction could be simultaneously subject to concurrent jurisdictions, geographically speaking.
No.: 200-09-006746-090                                                                       PAGE: 33

goods are exchanged commercially) is still considered local even though people from
jurisdictions outside the province interact, either virtually or in person. The decision in
Global Securities Corp.55 established that provinces can initiate cooperation agreements
in the area of securities with other provincial or international jurisdictions without
undermining their jurisdiction. Canadian provinces actively pursue these agreements,
particularly in regards to the passport system established among them (with the
exception of Ontario).56

[320] This is to say that the interprovincialization or internationalization of the market,
in the economic sense of the term, does not signify that the transactions will not be
conducted in a province, or that the province cannot regulate the conduct and the
obligations of the stakeholders who, for one reason or another, are in its territory or
doing business in it.

[321] The decision rendered by the Supreme Court in Consolidated Fastfrate Inc. v.
Western Canada Council for Teamsters57 reinforces this opinion. In that decision, the
question was asked whether the appellant‘s labour relations should be regulated by the
Canadian Labour Code or by the Alberta law. To answer that question, it was necessary
to characterize the employer‘s undertaking, in constitutional terms, which required that
paragraph 92(10)(a) of the Constitution Act, 1867 be considered: Were the operations
of the appellant, who operated a freight forwarding service, subject to this provision? If
that had been the case, the company would have fallen under federal jurisdiction and,
consequently, the labour relations within them. Rothstein J., for the majority, described
Fastfrate‘s operations as follows:

        [2]     This appeal concerns freight forwarding – an industry in which companies
        consolidate and deconsolidate freight and contract for its shipment with third-
        party rail and truck carriers, including interprovincial ones. Fastfrate provides
        consolidation and deconsolidation and pickup and delivery services to its
        customers across Canada. It typically acts as the consignor and consignee for
        the third-party carrier such that customers receive a single bill of lading. The
        question in this case is whether Fastfrate‘s provision of such services qualifies it
        as an interprovincial undertaking even though it does not itself perform any
        interprovincial carriage of goods.

[322] By analyzing paragraph 92(10)(a), Rothstein J. concluded that this provision
does not apply to the operations at issue, which remain provincial. He explains that:

        [72]    The difficulty with this argument is that the text of s. 92(10)(a) and the
        jurisprudence interpreting it do not contemplate that a mere contractual

55
   Supra note 23.
56
   For a presentation on the agreements in this matter, see: Stéphane Rousseau, op. cit., note 25 at 90 to
115, Evidence of the Attorney General of Quebec, Vol. IV, at 1048 – 1073. This type of agreement also
    exists in other areas, including supplemental pension plans: see Boucher v. Stelco Inc. [ 2005] 3
    S.C.R. 279 (it does not deal with the division of powers but discusses international private law).
57
   [2009] 3 S.C.R. 407.
No.: 200-09-006746-090                                                                    PAGE: 34

      relationship between a shipper and an interprovincial carrier would qualify
      Fastfrate as an undertaking connecting the provinces or extending beyond the
      limits of the province. Rather, it is the carriers that physically transport the freight
      interprovincially that constitute federal transportation works and undertakings.
      There is no indication that contracting alone can make intraprovincial
      undertakings subject to federal jurisdiction. I am not persuaded that there is a
      justifiable basis for expanding the scope of s. 92(10)(a) in the manner proposed
      by the Teamsters. [Emphasis added]

[323] And further on:

      [76]     There has also been discussion in the lower courts of the fact that
      Fastfrate is an integrated national company with branches across Canada. The
      case law has consistently held that corporate structure is not determinative of the
      jurisdictional analysis under s. 92(10)(a). As this Court affirmed in Northern
      Telecom, at p. 133, ―the judgment is a functional, practical one about the factual
      character of the ongoing undertaking and does not turn on technical, legal
      niceties of the corporate structure or the employment relationship‖. In my view,
      the functional analysis must centre on what operations the undertaking actually
      performs.

[324] That is to say that even if it has contractual relations with persons located outside
the province, and even if this constitutes the bulk of its services, such an undertaking
remains provincial. Neither the operational reality (national) nor the organizational
structure (also national) of Fastfrate were therefore found to be sufficient to make this
undertaking something other than a provincial undertaking, and more specifically an
intraprovincial undertaking that cannot be regulated by Parliament under
paragraph 92(10)(a) of the Constitution Act, 1867.

[325] In our opinion, and even if the constitutional context of that case differs from ours
because the federal powers at play were those of paragraph 92(10)(a), this way of
seeing things can be adapted to securities regulations. We can compare the operations
of shipping brokers (who offer carrier services) to those of brokers or even stock
exchanges (that offer property, that is, securities). We do not see why the second ones
would be less ―provincial‖ (that is, intraprovincial) than the first. Neither the
extraprovincial contractual relations nor the national dimension of the operations suffice
to cause an undertaking to no longer conduct its operations in a province, and the same
goes for securities as well.

[326] Rothstein J. added the following in the same case:

      [73]   Even where a recognized federal undertaking exists, not every part of its
      enterprise will necessarily be subject to federal jurisdiction. Distinct local works or
      undertakings may remain subject to provincial jurisdiction. In the Empress Hotel
      case (Canadian Pacific Railway Co. v. Attorney-General for British Columbia,
      [1950] A.C. 122 (P.C.)), the issue was whether the employees of a hotel owned
      and operated by the CPR were subject to federal regulation. The appellants in
No.: 200-09-006746-090                                                                     PAGE: 35

      that case argued that the hotel‘s employees were subject to federal regulation
      because the hotels were part of an integrated national transportation system.
      They maintained that th[e] unified system [of rail and hotel services] is a national
      [transportation] undertaking which cannot reasonably be viewed as a
      conglomeration of local works and undertakings.... The Empress Hotel [as the
      material in the record shows] is an integral part of this unified system. [p. 127]

      [74]   The Privy Council rejected this argument. Lord Reid said, at p. 140:
             [T]heir Lordships can find neither principle nor authority to support the
             competence of the Parliament of Canada to legislate on a matter which
             clearly falls within the enumerated heads in s. 92 and cannot be brought
             within any of the enumerated heads in s. 91 merely because the activities
             of one of the parties concerned in the matter have created a unified system
             which is widespread and important in the Dominion. [Emphasis added.]
      Lord Reid distinguished between CPR‘s operation of a national transportation
      undertaking and the Empress Hotel‘s local role within that system. In other
      words, the common ownership of complementary interprovincial and
      intraprovincial works or undertakings will not mean that the otherwise local
      enterprise is subject to federal regulation, unless it forms an integral or essential
      part of the interprovincial work or undertaking. This is true even where, as Lord
      Reid says, the commonly owned undertakings create a ―unified system‖. In the
      case of Fastfrate, which conducts only local operations, I am not persuaded that
      its contractual relations with third-party carriers should attract federal jurisdiction
      any more than the Empress Hotel‘s operational and corporate relationship with
      the CPR did.

      [75]     The operational reality of Fastfrate is that it depends on third-party
      interprovincial carriers to conduct its business. It is in precisely the inverse
      situation of those undertakings that have been found to be subject to derivative
      federal jurisdiction because they are integral to a recognized interprovincial work
      or undertaking. As Professor Hogg observes, ―[t]he relationship of dependency
      that will bring a local undertaking into federal jurisdiction is the dependency of the
      interprovincial undertaking on the local undertaking, not the other way around‖ (p.
      654). This accords with the Federal Court of Appeal‘s observation in Cannet that
      ―the only interprovincial undertaking involved...is that of the CNR and that a
      shipper on that railway from one province to another does not, by such activity,
      become the operator of an interprovincial undertaking‖: p. 182 (per Heald J.,
      agreeing with Jackett C.J.‘s comments at p. 178). I share the view that Fastfrate
      remains a shipper. Its presence at both the originating and terminating ends may
      mean that it can provide a comprehensive service to its customers, but this does
      not change the fact that it is still only a shipper using an interprovincial railway or
      trucking company.

[327] In our opinion, that disposes, by analogy, of the claim that a certain importance
must be accorded in view of the fact that the major Canadian brokerage firms are now
the property of banks, which would indicate an integration such that it would make it
difficult to consider that the operations of such firms would still be conducted in the
province, under subsection 92(13) of the Constitution Act, 1867, having become a
No.: 200-09-006746-090                                                                         PAGE: 36

component of the banking system. The Supreme Court stated that banks that enter into
the insurance field are no less subject to the provincial laws in the matter, 58 which
comes under subsection 92(13),59 and it would be no different if they decided
themselves to enter into securities trading. That they instead chose to do it indirectly by
acquiring brokerage firms is no more significant, constitutionally speaking.

[328] Lastly, in Fastfrate, Rothstein J. also wrote the following on the importance that
must be accorded to jurisprudence in terms of sharing constitutional authority.

        [47]    In the present case, there is an existing body of freight-forwarding
        jurisprudence that has been cited approvingly by our Court. Where no convincing
        reason has been shown as to why we should depart from this jurisprudence,
        parties should be able to rely on it and organize their affairs accordingly.

[329] As we know, this is also the case with securities, and there is no need to depart
from the jurisprudence unless there is a compelling reason to do so. It must also be
compelling in order to avoid constitutional instability. Not to exclude that the scope of
the constitutional powers can never be reinterpreted and, as Laskin C.J. wrote in R. v.
Zelensky,60 ―[n]ew appreciations thrown up by new social conditions, or reassessments
of old appreciations which new or altered social conditions induce make it appropriate
for this Court to re-examine courses of decision on the scope of legislative power when
fresh issues are presented to it, always remembering, of course, that it is entrusted with
a very delicate role in maintaining the integrity of the constitutional limits imposed by the
British North America Act‖.61 This is indeed a delicate role and only a compelling reason
can justify altering an established constitutional balance, especially when the question,
which in this case concerns securities, is not new.

[330] Thus, this compelling reason, as the Attorney General of Canada and the
Canadian Bankers Association submitted, can be found in the general branch of
subsection 91(2) of The Constitution Act, 1867. This is what we will now examine.
c.      Securities and subsection 91(2) of the Constitution Act, 1867
[331] Some preliminary observations are in order.

[332] It should first be noted, but without repeating what Dalphond J.A. expressed
(paragraphs 418 et seq.), that Parliament has already made some notable incursions in
securities regulations, owing to its statutory powers in other areas, such as criminal law,
corporate law and banking.62 See: Multiple Access Ltd. v. McCutcheon,63 Bell Canada v.
Quebec (Commission de la santé et de la sécurité du travail).64 A chapter on securities
58
   Canadian Western Bank v. Alberta, [2007] 2 S.C.R. 3.
59
   Jurisdiction since Citizens Insurance Co. of Canada v. Parsons (1881), 7 App. Cas. 96.
60
   [1978] 2. S.C.R. 940 at 951. See aslo: R. v. Big M Drug Mart, [1985] 1 S.C.R. 295 at 335.
61
   See also: Canadian Western Bank v. Alberta, supra note 58 at para. 23.
62
   Generally, see: Peter W. Hogg, op. cit., note 48 at 21–25.
63
   Supra note 12.
64
   Supra note 35 at 765 and 766.
No.: 200-09-006746-090                                                                           PAGE: 37

firms was recently added to the Bankruptcy and Insolvency Act.65 The Payment
Clearing and Settlement Act also deals with some aspects of the securities market.66
We also learned in the news recently that the federal government has reviewed the
London Stock Exchange‘s purchase of the Toronto Stock Exchange, under the
Investment Canada Act67 (under the first branch of the federal trade and commerce
power).

[333] The question here, however, is not whether, incidental to its power over another
subject matter under section 91 or subsection 92(10), Parliament may regulate certain
aspects of trade or of the securities market. Rather, it is whether, as contemplated in the
proposed Act, it may enact a general and comprehensive securities regulatory scheme
across Canada. As Professor Hogg wrote:

        ... The hard question is whether the trade and commerce power could cover even
        transactions which, regarded individually, begin and end in one province, on the
        basis that the securities industry serves a capital market which is interprovincial
        and indeed international.68

[334] Subsection 91(2) of the Constitution Act, 1867 confers on Parliament a power
with two distinct branches: (1) power over international and interprovincial trade; and
(2) general power over trade and commerce.69 Under this second branch, the federal
power encompasses aspects of intraprovincial trade. In the present case, the Attorney
General of Canada is relying on this second branch of subsection 91(2). Parliament
could undoubtedly legislate on the strictly international and interprovincial aspects of the
securities market or trade, but this is not what it has chosen to do with the proposed Act
and we do not consider it necessary to ask how and in what way it could have done so.

[335] Furthermore, it must be recalled that competition, as such, between the general
federal power emanating from subsection 91(2) and the provincial power emanating
from subsection 92(13) requires a particular interpretation, which means that neither
one of these provisions voids the other of its meaning or neutralizes it. As Dickson J.
wrote in General Motors of Canada Ltd. v. City National Leasing,70 ―[t]he true balance
between property and civil rights and the regulation of trade and commerce must lie
somewhere between an all pervasive interpretation of s. 91(2) and an interpretation that
renders the general trade and commerce power to all intents vapid and meaningless‖. 71
In the same vein, but in other words, MacLachlin C.J. in Reference re Assisted Human

65
   R.S.C. (1985), c. B-3, Part XII (Securities Firm Bankruptcies).
66
   Supra note 20, which expressly includes the clearing of and payments for securities (s. 2, ―clearing and
    settlement scheme‖). We are not ruling on the constitutionality of this act.
67
   R.S.C. (1985) c. 28 (1st suppl.)
68
   Peter W. Hogg, op. cit., note 48 at 21–25.
69
   See: General Motors of Canada Ltd. v. City National Leasing, [1989] 1 S.C.R. 641. See also: Peter W.
    Hogg, op. cit., note 48 at 20–2.
70
   Supra note 69.
71
   Ibid. at 660. See also the dissent of Dickson J. in A.G. (Can.) v. Can. Nat. Transportation, Ltd., [1983] 2
    S.C.R. 206 at 265, in fine at 267
No.: 200-09-006746-090                                                                           PAGE: 38

Reproduction Act,72 stated that ―extensions that have the potential to undermine the
constitutional division of powers should be rejected‖. This comment pertains to criminal
law, but it also applies to the general branch of the power conferred on Parliament by
subsection 91(2), which has the same expansive potential.

[336] In addition, a certain number of rules must be considered when interpreting the
Parliament‘s general trade and commerce power, which form its context.

[337] First, the economy in itself is not a head of power under the Canadian
constitution: Re: Anti-Inflation Act.73 As Beetz J. stated in that case, economy is only an
aggregate74 of several subjects, some of which fall within federal jurisdiction and others
within provincial jurisdiction.75 Thus, section 91 of the Constitution Act, 1867 conferred
on Parliament the ability to legislate on a series of defined sectors, which are essentially
economic, and on certain national economic policy instruments: currency and coinage
(subsection 14), banking and the issue of paper money (subsection 15), savings banks
(subsection 16), bills of exchange (subsection 18), interest (subsection 19), and
bankruptcy (subsection 21). From the beginning, it has been suggested that the
provincial jurisdiction be removed, which would seem essential for such a national
economic policy. Subsection 92(13) covers private law, which includes, needless to say,
everything having to do with contracts, which themselves suggest all business, all trade
and all markets. The dividing line between the powers, however, as can be seen, is not
the economy as such. Consequently, without calling for a petty interpretation of
subsection 91(2), care should be taken not to give a purely economical interpretation
that is so broad that, in practice, it renders the other particular heads of federal power
useless, or supersedes subsection 92(13).

[338] In the same way, it is not because a subject is of interest to all Canadians or
pertains to their general well-being that it inevitably becomes a federal power. In our
opinion, Re: Anti-Inflation Act put an end to this kind of reasoning. R. v. Crown
Zellerbach Canada Ltd.76 confirms this by reducing the theory of national interest or
national dimensions to the idea that the subject-matter of the law must have a
―singleness, distinctiveness and indivisibility that clearly distinguishes it from matters of
provincial concern‖.77 This is definitely not the case with a matter as broad as the
―economy‖ or the ―national economy‖. Nor can we infer from the fact that Canada is
(among other things) an economic union, the constitutional consequence that its
72
   Supra note 6 at par. 43.
73
   Supra note 10.
74
   Ibid. at 458
75
   Incidentally, this is also what the majority, per Iacobucci and Basatarche, recognize in Canadian Egg
     Marketing Agency v. Richardson, [1998] 3 S.C.R. 157 at para. 61.
76
   [1988] 1 S.C.R. 401.
77
    Ibid. at 432. See also: Re: Anti-Inflation Act, supra note 10 at 458 (reasons of Beetz J.) See also:
     Friends of the Oldman River Society v. Canada (Minister of Transport), [1992] 1 S.C.R. 3 at 64, in
     which, citing Crown Zellerbach Canada Ltd., the environment is described as a ―diffuse subject‖ and
     an ―abstruse matter‖ with respect to the division of constitutional powers, descriptives which also apply
     well to the economy.
No.: 200-09-006746-090                                                                  PAGE: 39

economy, in all of its facets, must be regulated in a unified way, and thus by the federal
legislator. In this sense, one can speak of the market, instead of economy, but the same
idea of such a national (or international) market, which is nothing more, legally
speaking, than a ―bundle of rights‖, does not have the required singleness,
distinctiveness, and indivisibility.

[339] Finally, apart from undertakings referred to in paragraphs 92(10)(a) and (b) of the
Constitution Act, 1867, which are inherently and in some way physically interprovincial
or international (the territorial dimension being part of their constitutional definition), it is
not because a person engages in an undertaking with a pan-Canadian or
extraprovincial dimension that that undertaking automatically falls under federal
jurisdiction.78

[340] This must be kept in mind when examining the scope of subsection 91(2) of the
Constitution Act, 1867, with regard to the general branch of the federal jurisdiction, in
order to interpret this provision in a manner that is in keeping with the recognized
precepts and does not sterilize them. It was after taking into account all of these factors,
with an intrinsic concern for constitutional balance, that the Supreme Court gradually
developed the test for examining whether a matter falls under Parliament‘s general
trade and commerce power.

[341] First suggested by Laskin J.A. in MacDonald v. Vapor Canada Ltd.79 and then
refined by Dickson J. in A.G. (Can.) v. Can. Nat. Transportation Ltd.80 and General
Motors of Canada Ltd. v. City National Leasing,81 this test was most recently expressed
in Kirkbi AG v. Ritvik Holdings Inc.,82 written by LeBel J.

       15       ... Pursuant to s. 91(2), the federal government has exclusive jurisdiction
       in relation to trade and commerce. In Citizens Insurance Co. of Canada v.
       Parsons (1881), 7 App. Cas. 96, the Judicial Committee of the Privy Council
       distinguished two branches of federal power under s. 91(2): (1) the power over
       international and interprovincial trade and commerce, and (2) the power over
       general trade and commerce affecting Canada as a whole (―general trade and
       commerce‖). This interpretation of s. 91(2), which limits the scope of the federal
       trade and commerce power to these two branches, is intended to ensure a
       proper constitutional balance between the otherwise overlapping federal power
       over trade and commerce (s. 91(2)) and the provincial power over property and
       civil rights in the province (s. 92(13)): see A. K. Gill and R. S. Jolliffe, Fox on
       Canadian Law of Trade-marks and Unfair Competition (4th ed. (loose-leaf)), at p.
       2-4.



78
   Consolidated Fastfrate Inc. v. Western Canada Council of Teamsters, supra note 57.
79
   [1977] 2 S.C.R. 134.
80
   Supra note 71.
81
   Supra note 69.
82
   [2005] 3 S.C.R. 302.
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      16       The ―general trade and commerce‖ category requires an assessment of
      the relative importance of an activity to the national economy as well as an
      inquiry into whether an activity should be regulated by Parliament as opposed to
      the provinces. To determine whether a particular issue requires national rather
      than local regulation, this Court has set out five criteria to be considered. These
      criteria are integrated into an assessment of whether federal legislation can be
      supported on the basis of Parliament‘s authority over general trade and
      commerce. They reflect principles which help distinguish the federal trade and
      commerce power from the provincial property and civil rights power. In two
      comprehensive decisions dealing with the second branch of s. 91(2) (Attorney
      General of Canada v. Canadian National Transportation, Ltd., [1983] 2 S.C.R.
      206; General Motors of Canada Ltd. v. City National Leasing, [1989] 1 S.C.R.
      641), Dickson C.J. adopted and extended the three indicia initially set out by
      Laskin C.J. in MacDonald v. Vapor Canada Ltd., [1977] 2 S.C.R. 134. These
      requirements ―serve to ensure that federal legislation does not upset the balance
      of power between federal and provincial governments‖ (City National Leasing, at
      p. 662).

      17       The jurisprudence of our Court now recognizes that the following factors
      are hallmarks of a valid exercise of Parliament‘s general trade and commerce
      power: (i) the impugned legislation must be part of a regulatory scheme; (ii) the
      scheme must be monitored by the continuing oversight of a regulatory agency;
      (iii) the legislation must be concerned with trade as a whole rather than with a
      particular industry; (iv) the legislation should be of a nature that provinces jointly
      or severally would be constitutionally incapable of enacting; and (v) the failure to
      include one or more provinces or localities in a legislative scheme would
      jeopardize the successful operation of the scheme in other parts of the country
      (City National Leasing, at pp. 662-63). These factors are not exhaustive and, to
      be valid, it is not necessary for federal legislation to satisfy all five criteria:
         In total, the five factors provide a preliminary check-list of characteristics, the
         presence of which in legislation is an indication of validity under the trade and
         commerce power. These indicia do not, however, represent an exhaustive list of traits
         that will tend to characterize general trade and commerce legislation. Nor is the
         presence or absence of any of these five criteria necessarily determinative. As noted
         in Canadian National Transportation, supra, at p. 268:
                   The above does not purport to be an exhaustive list, nor is the presence
                   of any or all of these indicia necessarily decisive. The proper approach
                   to the characterization is still the one suggested in Parsons, a careful
                   case by case assessment. Nevertheless, the presence of such factors
                   does at least make it far more probable that what is being addressed in
                   a federal enactment is genuinely a national economic concern and not
                   just a collection of local ones.
           On any occasion where the general trade and commerce power is advanced as a
           ground of constitutional validity, a careful case by case analysis remains
           appropriate. The five factors articulated in Canadian National Transportation merely
           represent a principled way to begin the difficult task of distinguishing between
           matters relating to trade and commerce and those of a more local nature.
         (City National Leasing, at pp. 662-63)
No.: 200-09-006746-090                                                                     PAGE: 41

[342] This test was developed in the context of a challenge to the validity of a provision
or of specific legislative provisions. Usually, the first question is whether the provision in
question infringes on a provincial power. If this is not the case, the examination ends
there. If it encroaches upon a provincial jurisdiction, we then move on to the above
analysis: is the provision part of a scheme that satisfies the five criteria – which are
actually indicia – recognized by the case law? If so, the scheme being validated under
the general branch of subsection 91(2) of the Constitution Act, 1867, it must still be
asked whether the impugned provision is sufficiently integrated into this scheme to be
valid.83

[343] In this case, it is not a particular legislative provision that is at issue (or even
simply several provisions), but rather an entire Act, which, at first glance, encroaches –
this is a poor word choice since the contemplated legislation purports to replace
provincial legislation (eventually) on the matter – on a provincial power that has been
recognized, heretofore, to legislate on securities. In fact, what is being suggested here,
even if it has not been said so bluntly, is that because of the interprovincialization and
internationalization of the securities business (or market) and its importance in the
national economy, it should from now on be solely a federal power.

[344] That being said, the five criteria set out by the Supreme Court are still what need
to be considered in order to determine whether or not this proposed Act falls under the
general branch of the federal trade and commerce power.84

[345] How, then, do these criteria apply in this case?

[346] It should be pointed out that, in our opinion, this exercise is not limited to finding a
―rational connection‖ between the matter of the law, that is to say, its purpose and its
pith and substance, and subsection 91(2) of the Constitution Act, 1867. The expression
―rational connection‖ is scattered throughout the case law relating to the separation of
constitutional powers. In Re: Anti-Inflation Act,85 it is considered in order to determine
whether there was a rational connection between the impugned legislative measure (an
act controlling profit margins, prices, dividends and salaries) and the purpose
purportedly being sought by Parliament in enacting it (waging war on inflation, which
jeopardizes the Canadian economy). General Motors of Canada Ltd. v. City National
Leasing,86 in which the question was reviewed, featured a consideration of the rational
connection between the federal legislative provision encroaching upon the provincial
power (and which would otherwise be ultra vires) and the valid federal legislation into

83
   For an explanation and thorough analysis of this method, see: General Motors of Canada Ltd. v. City
    National Leasing, supra note 69 at 671 et seq.
84
   Some authors have been critical of these criteria. See for example: Noura Karazivan & Jean-François
    Gaudreault Desbiens, ―On Polyphony and Paradoxes in the Regulation of Securities within the
    Canadian Federation,‖ (2010) 49 Can. Business L.J. 1; Jean Leclair, ―‗Please, Draw Me a Field of
    Jurisdiction‘: Regulating Securities, Securing Federalism,‖ (2010) S.C.L.R. (2d) 555 at 589 et seq.
85
   Supra note 10 at 423, 425 and 470.
86
   Supra note 69 at 670-671and 683.
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which it was integrated, giving it the sense of ―necessarily incidental‖87 or that of a
provision that ―may take on a valid constitutional cast by the context and association in
which it is fixed as a complementary provision‖.88 More recently, in Quebec (Attorney
General) v. Lacombe,89 McLachlin C.J., for the majority, associated this ―rational
connection‖ to the ancillary powers doctrine and concluded, after another review of the
question, that:

       [45] Under the rational functional test used by Laskin J.A. in Papp, and
       repeatedly reaffirmed in the jurisprudence of this Court, ancillary powers will only
       save a provision that is rationally and functionally connected to the purpose of
       the legislative scheme that it purportedly furthers. It is not enough that the
       measure supplement the legislative scheme; it must actively further it.

[347] In this case, we do not apply the ancillary powers doctrine, as it is not relevant.

[348] On the contrary, the consideration of the validity of the impugned regime in light
of the criteria, or more accurately the indicia, which define the general branch of the
federal powers in trade and commerce, demands a thorough analysis, as required by
General Motors. Let us now see how this applies here.
i.     The impugned legislation must be part of a general regulatory scheme
[349] The parties barely discussed the first two conditions, undoubtedly because they
are purely formal and are easy to satisfy, but also because the proposed Act appears to
satisfy them, at least at first glance: it is part of a general securities regulatory scheme –
in fact, it calls for the implementation of such a scheme – that will be monitored by the
continuing oversight of a national regulatory agency, the Canadian Securities
Regulatory Authority.90

[350] Upon reflection, because of the transitional regime envisaged in section 250 et
seq., it is perhaps appropriate to consider whether the proposed Act does indeed
constitute a general regime, within the meaning that is to be given to the first criterion,
which incorporates the idea of a national vocation.91As seen earlier, however, this
transitional regime allows for one or several provinces to fall outside the scope of the
Act. The Attorney General of Canada responded that, ultimately, for obvious policy and
economic reasons, all provinces would fall within the scope of the Act, which will confirm
the national and general character of the scheme, which is indeed its vocation. The
Canadian Bankers Association submitted that it was deemed preferable to convince the

87
   Ibid.at 671, by reference to Northern Telecom Ltd. v. Communications Workers of Canada, [1980] 1
    S.C.R. 115.
88
   Ibid., by reference to Vapor Canada, supra note 79.
89
   [2010] 2 S.C.R. 453.
90
   This is what the Attorney General of Quebec seems to recognize at para. 75 of its factum, as does the
    Attorney General of Alberta at par. 111 of its factum, and the Barreau du Québec at para. 58 of its
    factum.
91
   This is what appears to emerge from MacDonald v. Vapor Canada Ltd., supra note 79 at 161, in fine —
    164, and A.G. (Can.) v. National Transportation of Canada, Ltd., supra note 71 at 267 et seq.
No.: 200-09-006746-090                                                                    PAGE: 43

provinces to join the scheme rather than force them to do so. Legally, however, the
result of the chosen method is the following: for an indeterminate and even permanent
(at least theoretically) period of time, there could be a federal securities regime in some
provinces and a provincial regime in each of the others. We are not certain that this
corresponds to a general regulatory scheme within the meaning intended in Vapor
Canada Ltd., General Motors and Kirkbi.

[351] That being said, from a practical standpoint, it is not necessary to give a good
deal of consideration to the question, since, ex hypothesi, it would be easy to remedy
the problem, if there was one, by eliminating this transitional regime and by enacting a
provision that imposes the envisaged scheme across Canada.

[352] Let us now move on to the second criterion.
ii.    The scheme must be monitored by the continuing oversight of a regulatory
       agency
[353] The proposed Act satisfies this second criterion, which is not being challenged.
iii.   The legislation must bear upon trade as a whole rather than a particular
       industry
[354] This criterion has been the subject of vigorous debate: does the proposed Act
concern trade as a whole or a particular industry? Does the proposed Act have the
essence of legislation whose validity has been recognized under the general branch of
the federal trade and commerce power (Competition Act and Trade-marks Act), or does
it cover only one particular industry?

[355] In his reasons, Robert C.J. concluded that:

       [191] Trading in securities is a special industry. The persons targeted by the
       proposed Act offer goods and services which are all part of the same category.
       Accordingly, issuers of securities, intermediaries, (including brokers, self-regulatory
       bodies, stock markets), and other actors (including rating organizations, investor
       compensation funds) are subject to regulatory requirements and to standards of
       conduct that have the same main objective: ensuring the protection of investors in
       the securities market. Issuers of securities obviously do business in various areas
       but all the other targeted persons deal only in the securities market. Conversely, it
       cannot be said that the persons targeted by competition and trade-marks do
       business in the ―field of competition‖ or in the ―field of trade-marks.‖

       …

       [193] This reasoning is applicable to the present case. Contracts for security
       entitlements, contracts for the services of intermediaries, rules established by
       acknowledged and designated organizations, rules of conduct that apply to
       intermediaries, rules governing takeover and issuer bids, and so on, are all
       individually subject to provincial jurisdiction under subsection 92(13) of the
No.: 200-09-006746-090                                                                  PAGE: 44

        Constitution Act, 1867. Merely grouping them under the proposed Act does not
        suffice to make them valid.



        [194] Accordingly, although they have an impact on the economy as a whole, I find
        that the regulation of securities does not concern trade in general but transactions
        which are specific to a given industry and that the third indicium developed by case
        law has not been complied with.

[356] We share that point of view.

[357] While it is true that the proposed Act declares that it seeks to protect and foster
the access of Canadians and of Canadian businesses to capital markets, which is
indeed very important for the Canadian economy, it does this not by regulating trade or
the market92 in general or an aspect of trade or the market in general, but by regulating
only a specific sector of economic activity, namely securities (which are far from the only
kind of capital present in the market). Moreover, it does this under much-defined
aspects only, which are those that have already been discussed.

[358] Undeniably, the proposed Act does not have the degree of generality that the
Competition Act or the Trade-marks Act have, but that does not mean that only this type
of legislation may be validated under the general branch of federal trade and commerce
power. It is just as certain that the proposed Act has a higher degree of generality than
the regulatory provisions that were at issue, for example, in Labatt v. Attorney General
of Canada,93 which concerned the regulation of the beer industry. In short, the proposed
Act lies between these two.

[359] Nevertheless, although it covers ―securities in general‖, regardless of the sector
of activity of the corporation that initially issued them, it does this in a way that basically
targets the actors (or the participants and the interveners), that is, those who produce,
distribute and circulate this particular product, namely securities.

[360] In this perspective, it can thus be considered that it does not involve the
regulation of trade in general but a particular segment, as would be the case if a statute
sought to regulate the insurance94 or food industries.

[361] The Attorney General of Canada and the Canadian Bankers Association
submitted that this analogy does not hold because of the securities industry‘s
importance in the Canadian economy and its purportedly unique and integrated nature.
This point of view is shared by a number of authors, such as Robert Leckey and Eric
Ward, who wrote the following:

92
   To summarize this distinction, if there is one, between the two terms.
93
   [1980] 1 S.C.R. 914.
94
   Citizens Insurance Company of Canada v. Parsons, supra note 59.
No.: 200-09-006746-090                                                                            PAGE: 45

        We suggest that analysis of the Canadian securities market as simply a co-
        existence of separate local industries is myopic. Such analysis focuses on
        individual transactions, not on the effect of the collective activity of securities
        market participants. Despite the popular term ―securities industry‖, ensuring the
        integrity of the markets and the availability of capital to businesses and of
        investment opportunities to individuals is much more than a single industry. It is
        not merely that many people and businesses across Canada participate in their
        local securities markets. Many products, including light beer, are consumed
        widely across the country, but fail to surpass their particularity to be classified as
        ―general‖. Rather, the securities markets form an integral part of the infrastructure
        of the Canadian economy. The provision of capital is more central to the broad
        spectrum of businesses than are other suppliers. Even if most companies
        purchase insurance of various kinds, insurance is not their lifeblood the way
        capital is. Hogg wrote that the capacity to raise capital is an essential attribute of
        corporate status; we suggest that it is an essential part of the Canadian
        economy.95
        [Citations omitted.]
[362] The argument is a serious one. It could, however, be said that it ignores the fact
that securities do not represent the whole of the capital market; 96 it could also be said
that it neglects the fact that it is not only the securities market that has ―surpassed its
particularity‖, but all markets: the maple syrup market or even the pharmaceutical
products market, which are now international and highly integrated.97 But above all, its
main disadvantage, considering the established balance of federal-provincial relations,
is that it implicitly proposes that, because it concerns the ―national‖ economy and a vital
sector of that economy, federal jurisdiction should ensue. If that is the case, it changes
the constitutional paradigm. The doctrine of national dimensions suddenly gains in
importance, singularly under the pretext of the general jurisdiction under

95
    Robert Leckey & Eric Ward, ―Taking Stock: Securities Markets and the Division of Powers,‖ (1999)
     22 Dalhousie L.J. 250 at 272. See also: Noura Karazivan & Jean-François Gaudreault-Desbiens, loc.
     cit. note 84 at 15, in fine, and 16.
96                                                                     3d
    According to the Oxford Dictionary of Finance and Banking,            ed. (Oxford University Press, 2005),
     which gives the following definition of a ―capital market‖, of which the securities market represents only
     one segment:
     A market in which long-term capital is raised by industry and commerce, the government, and local
     authorities. The money comes from private investors, insurance companies, pension funds, and banks
     and is usually arranged by issuing houses and merchant banks. Stock exchanges are also part of the
     capital market in that they provide a market for the shares and loan stocks that represent the capital
     once it has been raised.
The Dictionnaire de l’Économie, coll. Encyclopaedia Universalis (Paris: Albin Michel, 2007) at 851 et seq.,
refers instead to a grouping made up of the money market, the financial market, the foreign exchange
market, and the derivatives market.
It is true, however, that the term ―capital market‖ (or ―markets‖), or ―marché des capitaux,‖ is also used as
a synonym for the securities market, and more specifically the issuers and investors market. See
Mokhtar Lakehal, Dictionnaire d’économie contemporaine et des principaux faits politiques et sociaux,
  d
3 ed. (Paris : Vuibert, 2002), ―Marché des capitaux‖.
97
    We could refer here to the stereotype of the ―global village,‖ which can be seen most strongly in the
     area of trade.
No.: 200-09-006746-090                                                                         PAGE: 46

subsection 91(2) of the Constitution Act, 1867. We are not persuaded that that is
―reconcilable with the fundamental distribution of legislative power under the
Constitution‖ (to use a phrase from R. v. Crown Zellerbach Canada Ltd.).98

[363] This being the case, it seems to us that we must conclude that the proposed Act,
as it is formulated, targets a particular industry, which has been recognized for almost
80 years as falling under subsection 92(13) of the Constitution Act, 1867, and not trade
in general.
iv.     The legislation should be of a nature that provinces jointly or severally
        would be constitutionally incapable of enacting
[364] The fact that, by definition, the provinces cannot enact their respective legislation
at the national level is obviously irrelevant – otherwise, this fourth condition would be
pointless, and indeed meaningless, given that only Parliament may enact legislation
nationwide. As Slatter J.A. writes in Reference re Securities Act (Canada):99

        [40] …

        (b) … The test is not whether any or all of the provinces could enact a national
        securities act; the test is whether the industry can be successfully regulated at
        the provincial level. It is a given that the provinces cannot enact legislation
        outside their borders; merely because the proposed federal statute applies all
        across the country is not sufficient: General Motors v. City National Leasing at
        pp. 659–60. …

[365] If we rely only on the wording of the condition as worded by Dickson J.,100 what
we must examine here is not the provinces‘ practical capacity or incapacity, but rather
their constitutional capacity or incapacity. We note, however, that in General Motors of
Canada Ltd. v. City National Leasing, the question of practical effectiveness formed part
of the analysis. Therefore, the test seems to be two-pronged. In other words, the
criterion requires both an examination of the provinces‘ legal capacity (do they have the
constitutional capacity or not?) and an examination of the practical extent of this
capacity (do they have the capacity to act effectively or not?).

[366] The proposed Act fails both prongs of this test.

[367] The reality is that, not only do the provinces have the constitutional capacity
under subsection 92(13) of the Constitution Act, 1867, to regulate the securities market,
but the extrinsic evidence unequivocally confirms that they have the capacity to do what
the proposed Act sets out. They have been doing so for decades; their practices are, on
the whole, consistent with industry benchmarks. In accordance with the applicable

98
   Supra note 76 at 432.
99
   Supra note 19.
100
    ―The legislation should be of a nature that the provinces jointly or severally would be constitutionally
    incapable of enacting‖, General Motors of Canada Ltd. v. City National Leasing, supra note 69 at 662;
    Kirkbi AG v. Gestions Ritvik inc., supra note 82 at para. 17.
No.: 200-09-006746-090                                                                         PAGE: 47

constitutional framework, they have implemented cooperation agreements that
maximize their efficiency. Jointly and severally, they regulate the securities market, and
they do this so well that the proposed Act merely borrows from the model they have
developed.

[368] Unlike competition, which Dickson J. stated ―cannot be effectively regulated
unless it is regulated nationally,‖101 or trademarks, which would not have adequate
protection if they were regulated provincially, it is entirely possible to regulate securities
provincially. They have been regulated provincially for a long time now and in a manner
that has put the Canadian system among the leaders in this field, including in the area
of systemic risk prevention or management – in many cases, ahead of the United States
(a federation endowed with a national, unified system of securities regulation).

[369] The arguments put forward by the Attorney General of Canada and the Canadian
Bankers Association regarding the fragmentation of the system, the duplication and
complexity of procedures, the high system costs and the general inability of the
provinces to manage the systemic risk are contradicted by this reality.

[370] It is not within the scope of this fourth criterion, and therefore unnecessary here,
to determine whether a unified system would be preferable to the current system, or to
determine whether the federal government could do a better job than the provinces, or
vice versa.

[371] On the one hand, the experts do not agree on the matter, and it is not for us to
rule on the question, except to state that the provinces, both jointly and severally, are
accomplishing what the proposed Act intends to accomplish, and in approximately the
same manner, as we have seen.

[372] On the other hand, the mere fact that users of the current system (i.e., the
interveners who are subject to it), or some users at least, may prefer to deal with a
single regulator or feel that this would be more convenient for them (at least in theory),
particularly in terms of costs, is not sufficient. The criterion is the capacity or incapacity
of the provinces, not the desire of those who are subject to the system.

[373] Finally, the very nature of the Canadian federation and the federal context by
definition preclude us from making an absolute determination as to whether a unified
system would be better than a non-unified system. That is not the question. The only
question is whether or not the proposed Act is ―of a nature that provinces jointly or
101
       General Motors of Canada Ltd. v. City National Leasing, supra note 69 at 680. As observed by
      Karazivan and Gaudreault-Desbiens, loc. cit. note 84 at 16, Dickson J. does not pursue the analysis
      very far beyond that statement. This is in part because of the extremely general nature of the act at
      issue, which is undoubtedly the standard example of the second prong of federal jurisdiction on trade
      and commerce; it is also because of the fact that the provinces had not enacted legislation dealing
      specifically with competition and introducing a control and oversight regime, relying instead on the
      common law. Therefore, Dickson J. was not required to pursue the comparison in more detail. The
      situation in the case at bar is entirely different.
No.: 200-09-006746-090                                                                 PAGE: 48

severally would be constitutionally incapable of enacting.‖ Moreover, we know that this
nature is, in substance, one of provincial legislation that legislatures are constitutionally
empowered to enact under their property and civil rights jurisdiction.

[374] In light of the Hockin report,102 which inspired the proposed Act, the Attorney
General of Canada and the Canadian Bankers Association allege the systemic
inefficiency resulting from variations among provincial securities laws. This is another
way of advocating the intrinsic benefits of uniformity. If we were to agree with such a
suggestion, not much would be left of the provinces‘ jurisdiction over property and civil
rights.

[375] The Attorney General of Canada also argues that the proposed Act would give
Canada a single voice on the international stage, which would be an improvement
compared to the current scheme in which Canada‘s interests are represented by
provincial spokespersons.

[376] This argument is specious.

[377] Federal jurisdiction over international matters is well known and guided by the
Constitution. Equally well known is the mechanism by which Canada, through the
federal government as its international representative, enters into those international
agreements it deems necessary, which are implemented in accordance with the
protocol established by the Privy Council in Attorney-General for Canada v.
Attorney-General for Ontario (Labour Conventions Case).103 This judgment, despite
Laskin J.'s invitation in MacDonald v. Vapor Canada Ltd.,104 has never been questioned
by the Supreme Court (see, for example, Schneider v. The Queen,105 Operation
Dismantle v. The Queen106).107

[378] It is true that this approach has a degree of complexity and requires, in particular,
political agreement and collaboration between the federal and provincial governments;
otherwise, Canada‘s international obligations in matters falling under provincial
jurisdiction might not be fulfilled. This is, however, another example of the cooperative
federalism the Supreme Court has often recognized as beneficial and necessary.

[379] Canada is therefore not without an international voice and may choose to use
this voice, regardless of the type of securities regulation scheme in place.

[380] In any event, this in no way justifies Parliament acting on its own to resolve this
alleged problem by enacting securities legislation to replace provincial legislation.
102
    Expert Panel on Securities Regulation, Final Report and Recommendations, January 2009, evidence
    of the Attorney General of Canada, vol. II at 746 et seq.
103
    [1937] A.C. 326.
104
    Supra note 79 at 168–169.
105
    [1982] 2 S.C.R. 112 at 134–135.
106
    [1985] 1 S.C.R. 441 at 483–484 (Wilson J.).
107
    On this subject, see: Peter W. Hogg, op. cit., note 48, chapter 11 (―Treaties‖).
No.: 200-09-006746-090                                                                        PAGE: 49

v.        The failure to include one or more provinces or localities in a legislative
          scheme would jeopardize the successful operation of the scheme in other
          parts of the country
[381] There is little to say about this final condition, except to note once again the
paradox of the proposed Act in this respect. Its preamble makes much of the need for
standard, unified securities regulation at the federal level, to support the national
interest and the well-being of Canadians, but its transitional regime allows provinces, at
least in theory, to permanently opt out of the proposed regime. We can therefore infer
from this that the failure to include one or more provinces would not jeopardize the
successful operation of the scheme in the other parts of the country.

[382] The lawyers from the Attorney General of Canada argued that the government
cannot be criticized for practicing cooperative federalism rather than coercive
federalism. Needless to say, this argument raised the ire of the Attorneys General of
Quebec and Alberta, who view this more as a way for the federal government to take
over a regulatory sector which falls under provincial jurisdiction.

[383] We have no opinion on this approach, except to note that the proposed Act, as it
has been presented, would allow the provinces to opt out of the federal regime and thus
would enable them to maintain their own legislation, which seems to contradict the fifth
condition.

[384] Would this condition be met if the federal government chose to propose coercive
legislation instead? There is no need to answer this question, since the proposed Act
fails to meet the third and fourth conditions. Indeed, the question is meaningless unless
the other conditions are fulfilled. We observe, nevertheless, that the current reality of the
securities regulation industry undermines the arguments in favour of the proposed Act,
as the present scheme is obviously viable, legally and otherwise, and the failure to
include a given province does not jeopardize the successful operation of the legislation
in the other provinces. Moreover, the phenomenon of migration toward more lenient
jurisdictions, which has been denounced by the Attorney General of Canada and the
Canadian Bankers Association and which only a federal legislative scheme could
prevent, does not appear crucial. Insofar as provincial legislation – on any subject
matter – is variable, this phenomenon and its associated risks will inevitably exist.
Accepting this argument as part of the constitutional analysis would amount to denying
the federal nature of our political organization on the grounds that diversity is
inconvenient.108
vi.       Other considerations

[385] These conditions, which are the indicia of general federal jurisdiction under the
trade and commerce power, are neither exhaustive nor restrictive. Is there another

108
      See in this regard: Canadian Western Bank v. Alberta, supra note 58, in particular paras. 21, 22 and
      24.
No.: 200-09-006746-090                                                                        PAGE: 50

element to support the conclusion that, although the proposed Act does not fulfill some
of the conditions, it should nevertheless fall under federal jurisdiction, by reason of its
subject matter? No other arguments have been presented in this vein. Consequently,
since the third and fourth conditions of the test – certainly the most important – are not
met, and the fifth is likely not either, the proposed Act cannot be validated under the
general provision of subsection 91(2) of the Constitution Act, 1867.
II.     CONCLUSION
[386] For the above reasons, we are of the view that the proposed Act does not validly
fall under subsection 91(2) of the Constitution Act, 1867.

[387] In Central Canada Potash, etc.109 the Supreme Court stated the following at
page 76:

        Where governments in good faith, as in this case, invoke authority to realize
        desirable economic policies, they must know that they have no open-ended
        means of achieving their goals when there are constitutional limitations on the
        legislative power under which they purport to act. They are entitled to expect that
        the Courts, and especially this Court, will approach the task of appraisal of the
        constitutionality of social and economic programmes with sympathy and regard
        for the serious consequences of holding them ultra vires. Yet, if the appraisal
        results in a clash with the constitution, it is the latter which must govern. That was
        the situation here.

[388] We cannot phrase it better. These words describe precisely the situation in the
case at bar, as the proposed Act seeks to impugn securities regulation through means
that come under provincial jurisdiction.110

[389] We find, however, that there is an exception to this general finding.

[390] Sections 158 to 168 of the proposed Act are valid under Parliament‘s jurisdiction
under subsection 91(27) of the Constitution Act, 1867. Most of these provisions concern
offences already covered by the Criminal Code and clearly fall under federal jurisdiction
in this area.111 The same is true of sections 148 to 152, insofar as these provisions
pertain to orders for the production of information in connection with criminal offences.

[391] Sections 295 and 296 of the Budget Implementation Act, 2009 are also valid
under the federal spending power, although events may dictate that federal policy in this
respect should be revised.



109
    [1979] 1 S.C.R. 42.
110
    Re: Anti-Inflation Act, supra note 10 at 453 (reasons of Beetz J.).
111
     Although there may be certain other constitutional pitfalls with respect to sections 148 to 152,
    concerning orders for the production of information, which are provided for in those sections and which
    allow for the gathering of evidence.
No.: 200-09-006746-090                                                              PAGE: 51

[392] The validity of section 297 of the Act, which enacts the Canadian Securities
Regulation Regime Transition Office Act, is tied to that of the proposed Act.

[393] Finally, it must be noted that another type of federal intervention may meet the
constitutional requirements, particularly in terms of collaboration with the provinces, in
accordance with the model of cooperative federalism upheld by the Supreme Court in
Reference re Agricultural Products Marketing112 or in Fédération des producteurs de
volailles du Québec v. Pelland.113 In the absence of any statute or even a draft statute,
however, it is not for us to rule on the possible characteristics of such a regime, as it
could apply to securities.
                                               * *
[394] We respond as follows to the question asked by the Attorney General of Quebec:

          With the exception of the criminal provisions, which are valid under
          subsection 91(27) of the Constitution Act, 1867, the Proposed Canadian
          Securities Act, released by the Government of Canada on May 26, 2010, and
          section 297 of the Budget Implementation Act, 2009, S.C. 2009, c. 2, are not
          within the legislative authority of the Parliament of Canada and do not comply
          with subsection 91(2) of the Constitution Act, 1867.




                                                 ANDRÉ FORGET J.A.


                                                 MARIE-FRANCE BICH J.A.


                                                 JEAN BOUCHARD J.A.




112
      [1978] 2 S.C.R. 1198.
113
      [2005] 1 S.C.R. 292.
No.: 200-09-006746-090                                                                          PAGE: 1




                        REASONS OF DALPHOND J.A. (DISSENTING)



                                             Introduction



[395] On July 8, 2009, the Lieutenant-Governor in Council adopted Order in Council
No. 869-2209 submitting three constitutional questions to the Court relating to the
authority of the Parliament of Canada to enact a complete legislative scheme governing
securities (Reference). On August 25, 2010, after the federal government published a
proposal entitled Securities Act (―proposed Act‖), the Order in Council was amended by
Order in Council No. 720-2010, to submit the following single question to the Court:
        [TRANSLATION]

        Are the provisions proposed in the Proposed Canadian Securities Act, published
        by the Government of Canada on May 26, 2010, the essential purpose of which
        is to protect investors and regulate the securities industry, and the provisions to
        that effect set out in sections 295, 296 and 297 of the Budget Implementation
        Act, 2009, S.C. 2009, c. 2, ultra vires the Parliament of Canada under the
        Constitution Act, 1867?

[396] For the reasons that follow, I am of the opinion that Parliament may enact the
proposed Act by virtue of its power under subsection 91(2) of the Constitution Act, 1867
(Constitution Act) relating to the regulation of trade and commerce.1 Sections 295, 296
and 297 of the Budget Implementation Act, 2009 are valid under the federal
government‘s spending power. Accordingly, my answer to the question submitted is
―no‖.

                                      Preliminary Comments




1
    The new French version of the Constitution Act, 1867 translates the expression ―the regulation of trade
    and commerce‖ as follows: ―la réglementation du trafic et du commerce‖. For the purposes of these
    reasons, the expression ―échanges et commerce‖ is used, as it is the expression generally used in the
    decisions of the Supreme Court of Canada, rather than ―trafic et commerce‖. [TRANSLATOR‘S NOTE: These
    reasons were originally drafted in French. This note has no consequence on the English translation,
    which uses the express ―the regulation of trade and commerce‖
No.: 200-09-006746-090                                                                  PAGE: 2

[397] An initial comment regarding the wording of the question is necessary. Strangely,
it contains a characterization of the purpose of the proposed Act, even though the
opinion sought calls for a determination of the pith and substance of the proposed Act
and of the head of power to which it could be attached under the Constitution Act. This
attempt to colour the exercise the Court has been invited to carry out is regrettable,
given the role of the courts as apolitical institutions that act as neutral arbitrators in
disputes between two or more individuals, institutions, entities or governments.

[398] The Government of Alberta also seems to me to have given in to the temptation
to try to influence the process. Its Order in Council, adopted in January 2010, reads in
part as follows:

      WHEREAS a Canadian securities regulation regime and a Canadian securities
      regulator will usurp provincial jurisdiction over property and civil rights and upset
      the balance of federalism affecting financial-sector and consumer-protection
      regulation in Canada;

      THEREFORE the Lieutenant Governor in Council refers the following questions
      to the Court of Appeal of Alberta for hearing and consideration:

         1   Does the Parliament of Canada have the legislative authority under the
             Constitution Act, 1867:

                (a) to pass sections 295, 296, and 297 of the Budget
                Implementation Act, 2009, S.C. 2009, c. 2,

                (b) to pass legislation that is co-extensive in substance with
                the Alberta Securities Act and similar to the draft Securities Act
                appended to the Final Report and Recommendations of the
                Expert Panel on Securities Regulation, and

                (c) to pass legislation that is the same as or similar to the
                Proposed Canadian Securities Act – Sessional Paper No. 8525-
                403-10?

              ... [Emphasis added.]

[399] On the same day as it released the proposed Act, the federal government
adopted Order in Council P.C. 2010-667, asking the Supreme Court of Canada, the
court of last resort in constitutional cases, to give its opinion as to the validity of the
proposed Act, putting a neutral question to that Court:

      Is the annexed Proposed Canadian Securities Act within the legislative
      authority of the Parliament of Canada?
No.: 200-09-006746-090                                                                   PAGE: 3

[400] Given the context, I consider a second comment to be necessary. How is it
appropriate for this Court, and in fact for the Alberta Court of Appeal, to answer the
question submitted to us, when in a few weeks the Supreme Court is going to answer
the question in its own turn? Is this being done to allow the parties to rehearse before
the only performance that will count, the one in April in Ottawa? To try to score points
with public opinion? To try to influence the Supreme Court? That being said, I am
prepared to assume that the governments of Quebec and Alberta are seeking a
contribution from this Court and the Alberta Court2 to the legal debate that will take
place in the Supreme Court. Otherwise, I would be of the opinion that this is a case in
which an appellate court has the residual discretion to decline to answer a question
(see, for example, Reference re Canada Assistance Plan (B.C.), [1991] 2 S.C.R. 525 at
545; Re: Objection by Quebec to a Resolution to amend the Constitution, [1982] 2
S.C.R. 793 at 806; Reference re Secession of Quebec, [1998] 2 S.C.R. 217 at
paras. 26-30; Reference re Same-Sex Marriage, [2004] 3 S.C.R. 698, 2004 SCC 79 at
para. 10).

[401] The third comment is that the reference by the Government of Quebec is part of
a strategy to deter Parliament from adopting a statute governing the securities market
on the ground that this would be contrary to Quebec‘s interests and in particular to the
role played by Montreal in the financial markets. The Government of Alberta shares that
view in terms of the possible effects of a single statute on the economy of its province,
particularly in terms of financing for new enterprises in the energy sector. However, it is
not up to judges to decide whether a federal securities law is desirable for this country
from an economic, cultural, political or other point of view (Reference re Firearms Act
(Can.), [2000] 1 S.C.R. 783, 2000 SCC 31). Certainly, placing the capital market under
the authority of a single agency, freely or by force, with its seat in Toronto, could
weaken other economic or decision-making centres in Canada, such as Montreal or
Calgary, but those considerations are irrelevant factors in the legal debate before us.

[402] The fourth comment is on the effectiveness of the single model. There are some
who argue that a single national agency would be in a better position to ensure the
efficiency of the capital market and better protection for investors. Others assert the
contrary with the same conviction. Both sides cite studies, experts‘ reports or
commentaries from international organizations to prove the merits of their case. Like
Professor Ian B. Lee, ―Balancing and its Alternatives: Jurisprudential Choice, Federal
Securities Legislation and the Trade and Commerce Power‖ (2011), 50 Canadian
Business Law Journal, 72, I am of the opinion that the arguments regarding
effectiveness are irrelevant to the determination of the constitutional powers of
Parliament, a legal issue. Moreover, one thing is certain: a court is not a forum that is
qualified to resolve the issue of the economic efficiency of one regulatory model as


2
    The Alberta Court of Appeal released its decision on March 8, 2011: Reference re Securities Act
    (Canada), 2011 ABCA 77.
No.: 200-09-006746-090                                                                      PAGE: 4

compared to another. We must deal solely with the question of the authority of
Parliament under the Constitution Act to enact the proposed Act, in whole or in part.3

[403] The fifth comment is on the nature of the document that is the subject of the
Reference. Contrary to what the Canadian Bankers Association asserts, there is no
presumption of constitutionality here, since this is not a challenge to a statute enacted
by Parliament or a legislature, after three readings and debate, possibly including the
testimony of experts in the law before a parliamentary committee; this is simply a
request for a legal opinion concerning a document drafted by the federal government.
Our opinion and the final opinion of the Supreme Court actually deal with the authority
of Parliament to enact a statute similar to the proposed Act, regardless of how the
questions submitted are framed. That means that based on the comments and opinions
received, the federal government may, if it still wishes, introduce a bill. If the bill reflects
the opinions, the statute enacted may easily enjoy a presumption of validity under the
Constitution Act and the Government of Quebec may act accordingly.

[404] The sixth comment is that duplication of an existing, valid statute by a new
statute does not result in a presumption that the first or the second is unconstitutional. It
is open to Parliament and the legislatures to enact legislation that ultimately governs the
same matter, by virtue of their respective powers in relation to various aspects of that
matter, ―that is, depending on the various ‗aspects‘ of the ‗matter‘ in question‖
(Canadian Western Bank v. Alberta, [2007] 2 S.C.R. 3, 2007 SCC 22 at para. 30). That
principle has previously been recognized by the Supreme Court, in particular in Multiple
Access Ltd. v. McCutcheon, [1982] 2 S.C.R. 161 at 181, and much earlier by the Privy
Council in Hodge v. The Queen, (1883) 9 A.C. 117: ―subjects which in one aspect and
for one purpose fall within sect. 92, may in another aspect and for another purpose fall
within sect. 91‖. In that case we refer to the dual aspect of a subject or matter: Bell
Canada v. Quebec (CSST), [1988] 1 S.C.R. 749. The result may be very similar
sections in both statutes, one federal and the other provincial, a phenomenon described
by the Supreme Court as ―the ultimate in harmony‖ in Multiple Access at 190.
Otherwise, the federal statute is paramount (Multiple Access atp. 191). In no case does
such duplication affect the validity of the statutes in issue, contrary to what counsel for
Alberta and Quebec seem to be arguing. On the contrary, the validity of the proposed
Act must be determined without regard to the existing provincial statutes (General
Motors of Canada Ltd. v. City National Leasing, [1989] 1 S.C.R. 641, p. 682; Multiple
Access, p. 175).

[405] The seventh comment is that confusion must be avoided between (i) the ―pith
and substance‖ (―caractère véritable‖ or ―caractéristique dominante‖) of a statute, (ii) the
purposes (―objet‖) of a statute, (iii) the effects, anticipated or real, of the statute, and
(iv) the methods used to achieve the purposes of the statute. Two statutes may have a
different pith and substance while having similar effects and using identical methods.
3
    For the information of the Government of Quebec, the Court may give an opinion on the legality of a
    statute that would incorporate the proposed Act only in part.
No.: 200-09-006746-090                                                                            PAGE: 5

Accordingly, provisions that prohibit driving with a blood alcohol level above a certain
point may be enacted by Parliament if their pith and substance is criminal law, that is,
prohibiting a public evil (―mal social‖), while similar provisions may be enacted by the
legislatures if their pith and substance is the regulation of highway traffic in the province
or conditions associated with the issuance of licences. In both cases, the objective is to
reduce the damage, injuries and deaths associated with impaired driving, using the
same methods: intercepting drivers and determining their blood alcohol level, and
imposing sanctions. Another example is the regulation of tobacco, where both
Parliament and the National Assembly of Quebec have legislated, the former in 1997
with the Tobacco Act, S.C. 1997, c. 13, and the latter in 1998 with the Tobacco Act,
R.S.Q., c. T-0.01.4 Nonetheless, both the federal and provincial statutes are
constitutionally valid (Provincial Secretary of Prince Edward Island v. Egan, [1941]
S.C.R. 396) since their pith and substance is different.

[406] The eighth and final comment concerns the danger of using expressions like
―capital markets‖ (―marches des capitaux‖), ―securities market‖ (―marché des valeurs
mobilières‖), ―trading/dealing in securities‖ (―commerce des valeurs mobilières‖) and
―securities industry‖ (―industrie/secteur des valeurs mobilières‖) as synonyms. Some
people use them interchangeably, and then read more into decisions of the Privy
Council, formerly the highest constitutional court in the land, or the Supreme Court of
Canada, than they said. For the purposes of these reasons, I will mainly use the
expressions ―capital market‖ (―marché des capitaux‖) and ―trading/dealing in securities‖
(―commerce des valeurs mobilières‖), keeping in mind that they correspond to different
fact situations.

[407] Trading in securities involves the buying and selling of securities,5 activities that
comprise the core activities of brokers and dealers (entreprises en valeurs mobilières).
The securities industry is the economic sector consisting of brokerage houses or other
institutions that purchase/acquire all new issues and resell them to investors or that act
as intermediaries in transactions on the secondary market. The Investment Industry
Association of Canada (IIAC), a national association with offices in Toronto, Montreal
and Vancouver, is composed of 183 of these firms, which carry out 99 percent of
transactions on the primary and secondary markets in Canada. This is an industry in
which most oversight of individual brokers is provided by a self-regulatory body
supervised by the securities commissions, the Investment Industry Regulatory

4
    The federal statute, enacted by virtue of Parliament‘s power in relation to health, focuses on the
    manufacture of the product, labelling standards and marketing of the product. The provincial statute,
    enacted by virtue of the power in relation to local contracts, focuses more on the sale, display and
    marketing of the product. The purpose of both statutes is to protect the public and attempt to reduce
    smoking, using methods that are the same, supplement each other or overlap. The pith and
    substance of the federal statute is the regulation of a product that is hazardous to health; the ptih and
    substance of the provincial statute is the regulation of the sale of a product.
5
    At para. 26 of the factum filed by the Attorney General of British Columbia in the Supreme Court of
    Canada, he defines ―trading in securities‖ as ―selling or performing acts in furtherance of a sale of
    securities‖.
No.: 200-09-006746-090                                                                     PAGE: 6

Organization of Canada / Organisme canadien de réglementation du commerce des
valeurs mobilières.

[408] The IIAC website6 offers the following definition of the Canadian securities
industry:

       Three categories of firms make up the Canadian securities industry: integrated
       firms, institutional firms and retail firms.

       Integrated firms offer the broadest range of products and services, covering all
       aspects of the industry, including full participation in both the institutional and the
       retail markets. There are 11 integrated firms providing retail and institutional
       business to clients.

       In 2009, 72 foreign and domestic institutional firms served institutional clients
       almost exclusively. Foreign firms account for about 30 per cent of total
       institutional firms and include affiliates of many of the major U.S. and European
       securities dealers.

       117 retail firms account for the remainder of the industry. Retail firms include full
       service firms and discount brokers. Full service retail firms offer a wide variety of
       products and services for the retail investor. Discount brokers execute trades
       over the telephone and over the internet for clients at reduced rates but do not
       provide advice. Discount brokers are more popular with those investors who are
       willing to research individual companies themselves in exchange for lower
       commission rates.

[409] The securities industry cannot be considered as including securities issuers, such
as the banks, mining companies, communications enterprises, oil companies,
pharmaceutical companies, and so on, which are all separate industries that it could not
seriously be argued are doing business in the securities industry or are part of that
industry when they issue securities that are then in public. Similarly, when those
enterprises borrow from the banks, it could not seriously be argued that they are doing
business in the banking industry or are part of that industry. In both cases, those
enterprises are merely using financing methods that are offered by two different pillars
of the economy.

[410] The capital market (marché des capitaux) is defined as follows in the Oxford
Dictionary of Finance and Banking, 3rd ed. (Oxford University Press, 2005):

       A market in which long-term capital is raised by industry and commerce, the
       government, and local authorities. The money comes from private investors,

6
    http://www.iiac.ca/welcome-to-iiac/about-us/who-we-are, accessed on March 25, 2011. There is no
    French version to date.
No.: 200-09-006746-090                                                                              PAGE: 7

          insurance companies, pension funds, and banks and is usually arranged by
          issuing houses and merchant banks. Stock exchanges are also part of the capital
          market in that they provide a market for the shares and loan stocks that
          represent the capital once it has been raised.

It corresponds to an economic fact situation that is expressed in a range of activities:
issuance of new shares by an issuer, underwriting agreements and bought deals by
intermediaries, marketing of securities (road shows, advertising, purchase
recommendations, etc.), assessment of the value of the securities by third parties
(rating), exchanges of securities on the secondary market via a stock exchange, audits
of issuers‘ financial statements, regulation of intermediaries, credit facility made
available to the investor by the broker, investigations, rules governing the operation of
clearing houses, and so on. The Attorney General of Canada and counsel for the
Canadian Bankers Association, and a number of experts, consider the expressions
―securities market (―marché des valeurs mobilières‖) and ―capital market (―marché des
capitaux‖) to be synonyms; this does not concern me, and seems to reflect the usage in
the industry.7

    Regulation of activities relating to securities is historically within the authority of
                                  two levels of government

[411] The principle of exhaustiveness, an essential characteristic of the federal
distribution of powers, ensures that the whole of legislative power, whether exercised or
merely potential, is distributed as between Parliament and the legislatures: Attorney-
General for Ontario v. Attorney-General for Canada, [1912] A.C. 571 (P.C.) at 581;
Attorney-General for Canada v. Attorney-General for Ontario, [1937] A.C. 326 (P.C.);
Reference re Same-Sex Marriage at para. 34. That means there is no topic that cannot
be legislated upon, though the particulars of such legislation may be limited by, for
instance, the Charter. The question of jurisdiction to enact any law is therefore limited to
determining to which head of power under the Constitution Act the law
relates. Regulation of the various aspects of the capital market must therefore be vested
in either Parliament or the legislatures, or in both, as is the case for the environment
(Friends of the Oldman River Society v. Canada (Minister of Transport), [1992] 1 S.C.R.
3).

[412] With respect to ―securities‖ (valeurs mobilières), it must be acknowledged at the
outset that this is not a subject matter enumerated in sections 91 and 92 of the
Constitution Act, unlike currency, the issue of paper money and bills of exchange. 8
7
      As well, it seems that both the singular and the plural are used to refer to these markets.
8
      In the United States, securities regulation is not mentioned in the 1787 Constitution or in subsequent
      amendments. The United States Congress relied on its power in relation to interstate trade and
      commerce when it enacted the Securities Act of 1933 and the Securities And Exchange Act of 1934
      after the financial crisis of 1929 and the Great Depression that followed. In Australia, the Constitution,
      An Act to Constitute the Commonwealth of Australia, 63 & 64 Vict., c. 12 (U.K.), adopted on July 9,
      1900, is also silent on this point. Because the High Court of Australia had concluded that the federal
No.: 200-09-006746-090                                                                      PAGE: 8

However, securities (in the form of bonds, debentures and stocks) existed in 1867, the
era when the London Stock Exchange, founded in 1801, was the exchange for the
British Empire. The stock market had already experienced major scandals, one of
which, involving the South Sea Company, resulted in intervention by the British
Parliament in 1720 when it enacted the Bubble Act (An Act for Better Securing Certain
Powers and Priviledges Intended to be Granted by His Majesty by Two Charters for
Assurance of Ships and Merchandise at Sea, 6 Geo. I, c. 18), which was repealed in
1825.

[413] The Fathers of Confederation did not really devote time to this subject, and
devoted even less to the question of the level to which it should be assigned. 9 As a
result, it should come as no surprise that their proposals to the Imperial government did
not address it. That is undoubtedly explained by the fact that the capital market was in
its infancy in Canada at that time. As R.C. Michie wrote in ―The Canadian Securities
Market 1850-1914‖ (1988), 62 Business History Review 35, at p. 49:

       The ready availability of funds from Britain inhibited the growth of a
       comprehensive securities market in Canada. Both government and the railways
       could raise capital more easily and cheaply in London than in either Toronto or
       Montreal and, as the British investors‘ knowledge of Canada continued to
       improve, so could increasingly smaller concerns.

[414] Confirmation that the capital market was only an emerging one at the time in
Canada is found in the fact that it was not until 1848 that the first Board of Brokers was
established in Montreal, comprising brokers dealing not only in securities but also in
goods, and it was 1874 when a non-profit organization charter was granted to the
Montreal Exchange by special Act: An Act to incorporate the Montreal Stock Exchange,
S.Q. 1874, c. 54. The same phenomenon occurred in Toronto, where a group of
businessmen formed the Association of Brokers in 1852 and the Toronto Stock
Exchange in 1861, which was incorporated by statute in 1878 (An Act to Incorporate the
Toronto Stock Exchange, S.O. 1878, c. 65). The capital markets for enterprises and
governments were actually located elsewhere. For example, the shares of the first
major Canadian enterprises, such as the Royal Bank of Canada and Canadian Pacific
and the Grand Trunk Railway, were traded on the London and New York exchanges.


    Parliament could not rely on its power over existing corporations as authority to enact legislation
    authorizing the creation of new companies and the issuance by them of securities, the Australian
    states delegated that power to it in the early years of this century. The Australian Securities and
    Investments Commission Act 2001 (Cth.) was enacted in 2001; it provides for the creation of the
    Australian Securities and Investments Commission.
9
    The parliamentary debates of the Parliament of the Province of Canada for 1865 concerning
    Confederation of the provinces of British North America refer several times to the London Stock
    Exchange and the fact that bonds issued by the Province of Canada (borrowing instruments referred
    to as ―securities‖ in the debates) had dropped significantly on the London market since rumours
    began of a new war with the United States.
No.: 200-09-006746-090                                                                    PAGE: 9

[415] J. Peter Williamson, Securities Regulation in Canada, University of Toronto
Press, 1960, p. 3, writes that oversight of the securities market began in England in
1285, with the licensing of brokers. The British model for a long time thereafter involved
adding provisions to corporate law requiring that certain information be provided to
investors, through a prospectus, and then to shareholders (annual meeting, financial
reports, annual prospectus, etc.) (Williamson, pp. 4-8).

[416] Oversight of the Canadian capital market was influenced not only by the Imperial
model, involving adding provisions to corporate law to ensure a degree of transparency,
but also by the American model, which had, since the beginning of the 20th century,
involved specific statutes requiring authorizations before issuing or selling securities
(Williamson at 9-28; David Johnston and Kathleen Doyle Rockwell, Canadian Securities
Regulation, 4th ed. (LexisNexis Butterworths, 2006) at 19-30).

[417] I will begin with oversight at the federal level of various aspects of the capital
markets, and then describe provincial oversight, with particular attention to the Quebec
experience.

[418] Parliament has acted by enacting criminal provisions10 by virtue of its power
under subsection 91(27) of the Constitution Act, to prohibit certain practices relating to
securities:

         - false prospectus (section 400 Cr. C.), enacted in 1869, part of the Act
         respecting Larceny and other similar offences, S.C. 1869-1870, c. 21, section 85
         (Smith v. The Queen, [1960] S.C.R. 776);

         - gaming in stocks (l'agiotage sur les actions) (section 383 Cr. C.), formerly
         known as ―bucket-shop‖, enacted in 1888 by the Act concerning Gaming in
         Stocks and Merchandise, S.C. 1888, c. 42. The purpose of that Act was to
         eradicate gambling and betting on the rise and fall of stocks and merchandise by
         contracts or transactions without delivery, causing values to fluctuate on foreign
         markets. It was thought that gaming houses were causing significant harm to
         Canadians, by ruining them;

         - fraud by affecting the public market (section 380(2) Cr. C.), forgery (ss. 366 and
         367 Cr. C.) and use of a forged document (section 368 Cr. C.), enacted in 1892;

         - broker reducing stock by selling for his own account (section 384 Cr. C.),
         enacted in 1930 at the request of the provincial attorneys general11 to prevent
         brokers from selling the shares they hold in order to reduce the number in the




10
     A Criminal Code was enacted in 1892.
11
     Except for Quebec, which was not represented at the interprovincial conference.
No.: 200-09-006746-090                                                                        PAGE: 10

         ordinary course of business below the number of shares they should carry for all
         clients;12

         - fraudulent manipulation of stock exchange transactions (section 382 Cr. C.),
         enacted at the request of the Ontario government in 1948 to prevent the
         manipulation13 of stock exchange transactions and criminalize sham sales;

         - prohibited insider trading (section 382.1 Cr. C.), enacted in 2004 by the Act to
         amend the Criminal Code (Capital Markets Fraud and Evidence-Gathering).14
         Although that offence already existed in provincial securities legislation and the
         Canada Business Corporations Act, R.S. 1985, c. C-44 (CBCA), Parliament
         wanted to create a criminal offence for cases that deserved more severe
         punishment.

[419] Inspired by legislative developments in London, Parliament regulated other
aspects of the securities market, including the sale of shares on the primary market, by
virtue of its power to enact corporate law (introductory paragraph of section 91 of the
Constitution Act15). For example, in 1869, Parliament enacted two statutes, the first
concerning the content of special Acts creating companies16 (The Canada Joint Stock
Companies Clauses Act, (1869) 32-33 Vict., c. 12) and the second governing the
incorporation and operation of companies created by letters patent (An Act respecting
Joint Stock Companies incorporated by Letters Patent, (1869) 32-33 Vict., c. 13), which
replaced pre-Confederation corporate law. These statutes contain provisions regarding
authorized share capital, payment for shares (calls), the shareholders register and
access to that register by all shareholders, share transfers, election of directors by
shareholders and the qualifications for those positions, notices of meetings (including a
notice in the local newspapers), directors‘ liability for unpaid wages, and the prohibition
on loans to shareholders.

[420] In 1877, the second statute was replaced by a new one that contained twice as
many sections: The Canada Joint Stock Companies' Act, 1877, (1877) 40-41 Vict.,
c. 43. Among the major amendments included, I note the following, the purpose of
which was plainly to ensure that the company was serious and to protect investors:


12
     Canada, Debates of the House of Commons of Canada, 1930, Vol. III, at p. 2698, by the Hon. Ernest
     Lapointe.
13
     The speech by Mr. Ilsley refers to manipulation (Debates of the House of Commons of Canada, 1948,
     Vol. V, at p. 5335).
14
     In his speech in the House concerning the bill, the parliamentary secretary to the Minister of Justice
     and Attorney General of Canada, Paul Harold Macklin, stated that investor confidence is essential to
     the existence of Canadian financial markets and the Canadian economy.
15
     The provinces may incorporate companies with provincial objects (section 92(11)) and Parliament
     may incorporate companies for objects other than provincial objects (preamble to section 91; Citizens
     Insurance Company of Canada v. Parsons, (1881) 7 A.C. 96 at 117).
16
     ―Sociétés par actions‖, in the new French terminology.
No.: 200-09-006746-090                                                                  PAGE: 11

       - new pre-incorporation requirements: notice in the Canada Gazette, money on
       deposit in the bank and verification of the truth of the facts alleged by an official
       (ss. 4-6);

       - requirement that shareholders‘ consent be obtained to amend the objects of the
       company (section 14), the number of directors (section 18), subdivision of
       shares, and amendment of the authorized capital (section 22);

       - payment for shares in cash (section 83);

       - content of prospectus or invitation to subscribe for shares (section 84);

       - annual report to shareholders by directors (section 87).

[421] The current federal corporations statute, the Canada Business Corporations Act,
R.S.C. (1985), c. C-44 (CBCA), also contains numerous provisions that are applicable
to public corporations, dealing with insider trading, solicitation of proxies, presentation of
financial information, going private and squeeze-out transactions, forced redemption of
dissidents, takeovers and other matters. They are plainly designed to protect
shareholders/investors.

[422] In Multiple Access, above, the Supreme Court recognized the constitutional
validity of the insider trading provisions in the CBCA‘s forebear, when the contrary had
been argued, the assertion being that they constituted regulation of securities, a matter
that fell within the exclusive jurisdiction of Ontario over securities. The validity of those
provisions was recognized as flowing from Parliament‘s power under the introductory
paragraph of section 91 of the Constitution Act to incorporate extraprovincial companies
and regulate their operation, even though this may affect ―trading in securities‖ (―le
commerce des valeurs mobilères‖ in the French version of the reasons). In other words,
the pith and substance of those provisions falls under federal corporate law (Maurice
Martel and Paul Martel, La compagnie au Québec: les aspects juridiques, 2010,
Montreal, Wilson & Lafleur at 3-8 and 3-9). Dickson J., writing for the majority, said, at
p. 176:

   With respect, I do not agree. Sections            Avec égards, je ne partage pas cet avis.
   100.4 and 100.5 put teeth into s. 100 of          Les articles 100.4 et 100.5 renforcent
   the Act. Viewed in isolation it can no            l‘art. 100 de la Loi. On peut certes faire
   doubt be argued that their matter is the          valoir que, pris isolément, ils visent le
   trading in securities. Viewed in context,         commerce des valeurs mobilières.
   however, they are, in my opinion,                 Toutefois, si on les situe dans leur
   company law. They fit properly and                contexte, ils constituent, à mon avis, du
   comfortably into Part I of the Canada             droit corporatif. Ils s‘insèrent bien dans la
   Corporations Act. The provisions deal             partie I de la Loi sur les corporations
   with obligations attached to the                  canadiennes. Ces dispositions traitent
   ownership of shares in a federal                  des obligations liées à la propriété des
No.: 200-09-006746-090                                                              PAGE: 12

   company, which extend to shareholders,        actions des compagnies fédérales, qui
   officers and employees of such                s‘appliquent aux actionnaires, aux
   companies, a subject matter that is not       administrateurs et aux employés de ces
   within the exclusive jurisdiction of          compagnies, un sujet qui ne relève pas
   provincial legislatures. The provisions       de la compétence exclusive des
   are also directed to the relationship         provinces. Ces dispositions visent
   between management and shareholders           également les rapports entre la direction
   of federal companies. Their enactment         et les actionnaires des compagnies
   by Parliament is in the discharge of its      fédérales. Leur adoption          par le
   company law power. [Emphasis added.]          Parlement constitue un exercice de son
                                                 pouvoir en matière de droit corporatif.

He added, at 181:



  As Professor        Ziegel has stated          Comme l‘a dit le professeur Ziegel,
  ―[s]ecurities legislation clearly has a        [TRADUCTION] ―[i]l est évident que les
  double character (―Constitutional Aspects      lois sur les valeurs mobilières ont un
  of Canadian Companies‖ in Canadian             caractère      double‖      (―Constitutional
  Company Law (1967), chapter 5, at              Aspects of Canadian Companies‖ dans
  p. 167) and, ―there is no simple               Canadian      Company       Law     (1967),
  dichotomy between legislation of a             chapitre 5, at p. 167) et [TRADUCTION]
  company law character and legislation          ―il n‘y a pas de dichotomie simple entre
  affecting property and civil rights in the     une loi qui participe de la nature du droit
  province. Viewed in its proper social and      corporatif et une loi concernant la
  economic context the legislation may well      propriété et les droits civils dans la
  have a double character‖ (at pp. 192-93).      province. Considérée dans son contexte
                                                 social et économique approprié, la loi
                                                 peut certes posséder un caractère
                                                 double‖ (aux pp. 192 et 193).



[423] Commenting on that decision, Beetz J., writing for a unanimous court in Bell
Canada, above, at pages 765 and 766, said:

  Similarly, rules regarding "insider trading"   De même, des dispositions concernant les
  may be regarded as belonging to                ―opérations des dirigeants‖ (―insider
  corporate law within exclusive federal         trading‖) peuvent être considérées comme
  jurisdiction in the case of federally-         du droit corporatif de compétence fédérale
  incorporated companies and as regulation       exclusive lorsqu'il s'agit de compagnies à
  of trade in securities within exclusive        charte     fédérale,    et    comme    une
  provincial jurisdiction, applicable to         réglementation du commerce des valeurs
  federally-incorporated          companies,     mobilières, de compétence provinciale
No.: 200-09-006746-090                                                             PAGE: 13

  provided the latter are not singled out and    exclusive, applicable aux compagnies à
  their essential powers are not impaired:       charte fédérale, pourvu que celles-ci ne
  Multiple Access Ltd. v. McCutcheon,            soient pas traitées de façon discriminatoire
  [1982] 2 S.C.R. 161. [emphasis added]          et que leurs pouvoirs essentiels soient
                                                 respectés: Multiple Access Ltd. c.
                                                 McCutcheon, [1982] 2 S.C.R. 161.

[424] In 2000, in Global Securities Corp. v. British Columbia (Securities Commission),
[2000] 1 S.C.R. 494, 2000 SCC 21, writing for the unanimous Court, Iacobucci J. cited
Multiple Access as confirming the validity of ―aspects of federal securities regulation‖
under the ―‘double aspect‘ theory‖ (para. 46).

[425] The courts have also recognized provisions concerning the forced redemption of
dissident shareholders (Rathie v. Montreal Trust Co (1952), 6 W.W.R. (N.S.) 652, cited
with approval by the Supreme Court in Multiple Access), directors‘ liability for payment
of dividends (Reference re constitutional validity of s. 110 of the Dominion Companies
Act, [1934] S.C.R. 653) and redemption of minority shareholders after a takeover (Esso
Standard (Inter-America) Inc. v. J.W. Entreprises Inc., [1963] S.C.R. 144) as being
federal company legislation that is valid as a result of the pith and substance of the
provisions.

[426] Parliament also regulates securities in relation to enterprises that fall within its
jurisdiction. For example, the Bank Act, S.C. 1991, c. C-46, contains 506 sections,
including the issue, holding and exchange of shares, limits on voting rights, proxy
solicitation, issue of subordinate indebtedness, insider trading, prospectuses,
information to be disclosed, mergers, share redemption, takeovers, and so on. It sets
out a complete code governing bank securities. An obvious indication that these
provisions deal with the same subjects as provincial securities legislation is that the
Superintendent of Financial Institutions is authorized to grant exemptions where
compliance with provincial laws satisfies him that the objectives and restrictions in the
Bank Act have been met (section 274 of the Bank Act). In addition, more than
20 percent of the shares of a bank may not be held by a single person or by a group.
There are also restrictions on the holding of shares of telecommunications undertakings
(Telecommunications Act, S.C. 1993, c. 38, s. 76(1)).

[427] In other words, there has long been federal regulation of securities in relation to
companies regulated by Parliament, and this has been held to be valid by the courts.
Parliament has recently added the Payment Clearing and Settlement Act, S.C. 1996,
c. 6, s. 19 of which deals with payment for securities.

[428] Lastly, takeovers of enterprises, whether federal or not, may be blocked in certain
cases under the Investment Canada Act, R.S.C. 1985, c. 28 (1st Supp.)) or under the
Competition Act, R.S.C. 1985, c. C-34. It is not contested that Parliament could enact
the former by virtue of its jurisdiction over the regulation of international trade (section
91(2)); the validity of the latter was challenged, and the Supreme Court concluded, in
No.: 200-09-006746-090                                                           PAGE: 14

General Motors, above, that it is a valid exercise of the same power to regulate general
trade and commerce. The purchase of the TSX Group, a company that owns the three
Canadian stock exchanges, by the London Stock Exchange is in fact being reviewed
under the Investment Canada Act at the time of writing of these reasons.

[429] I will now move on to the regulation of securities by the provinces.

[430] Over 100 years ago, inspired by the British model, Quebec required that brokers
hold a licence to operate (S.Q. 1900, c. 12, as amended by par S.Q. 1906, c. 9, s. 50).
For the rest, such as stock exchanges, everything came down to self-regulation.

[431] It was not until May 1924 that companies that wanted to issue shares, bonds and
other securities in Quebec, other than those listed on an exchange incorporated in
Canada or on the stock exchange in Paris, London or New York, were first required to
file a prospectus, audited financial statements and a copy of the charter and bylaws with
the provincial Secretary, failing which a purchaser may seek cancelation, the company
may not bring action for calls, and a penalty may be imposed (An Act respecting the
issue and sale of shares, bonds and other securities, R.S.Q. 1925, c. 228).

[432] In 1930, drawing on the legislation enacted by Ontario two years earlier, The
Security Frauds Prevention Act, S.O. 1928, c. 34 (replaced in 1930, S.O. 1930, c. 39),
the Legislature of Quebec enacted the An Act for the prevention of fraud in connection
with securities, S.Q. 1930, c. 88, which became chapter 228A of the Revised Statutes of
1925. That Act contained a total of 25 sections. It centred on the registration of brokers
and vendors of securities in a public register, the provision of security by them, audits of
their books by accountants approved by a stock exchange, and the obligation to provide
a client with written confirmation of any securities transaction in their name (number and
value of shares, name of purchasers and vendors, time of the transaction). It included
an issuer of securities in the definition of broker. It prohibited misrepresentations, which
it defined as fraudulent acts, and the sale of securities of companies in which brokers
had an interest. It also gave the Attorney General or his representative investigative
powers. In 1933, brokers were prohibited from doing trading in securities issued by an
issuer that had not filed a prospectus with the provincial registrar. In 1935, the 1930 Act
became the Securities Act. In 1938, it became mandatory for brokers to provide
purchasers of newly issued securities (primary market) with a copy of the prospectus
containing the information determined by the Lieutenant Governor in Council.

[433] In Alberta, 1930 was also when The Alberta Security Frauds Prevention Act, S.A.
1930, c. 8, was enacted; in 1916, it had enacted The Sale of Shares Act, S.A. 1916,
c. 8, a law modeled on American legislation.

[434] Commissions were created in 1932 in Ontario (Security Frauds Prevention
Board, the forebear of the present Ontario Securities Commission (OSC)) and in 1955
in Alberta and Quebec (Securities Act, S.Q. 1954-55, c. 11, s. 2, creating the Quebec
No.: 200-09-006746-090                                                                   PAGE: 15

Securities Commission (QSC), now incorporated into the Autorité des marchés
financiers (AMF)).

[435] Shortly after the provincial securities statutes were enacted, they were
challenged and the challenges were rejected by the Privy Council. Their Lordships
concluded that the pith and substance of those statutes was the regulation of dealing in
securities in the province, in order to protect investors in the province, and that this fell
easily within the jurisdiction of the legislatures over property and civil rights in the
province and matters of a local or private nature in the province (sections 92(13) and
(16)) of the Constitution Act). In Lymburn v. Mayland, [1932] A.C. 318, their Lordships
stated, at 324:

     There is no reason to doubt that the              [TRANSLATION17] Il n‘y a pas de raison de
     main object sought to be secured in this          douter du fait que cette partie de la loi a
     part of the Act is to secure that persons         pour objet principal d‘assurer que ceux
     who carry on the business of dealing in           qui se livrent au négoce des valeurs
     securities shall be honest and of good            mobilières sont honnêtes et de bonne
     repute, and in this way to protect the            réputation et de protéger ainsi le public
     public from being defrauded. Incidentally         contre la fraude. Soit dit en passant, le
     the net has been drawn so wide as to              filet a été suffisamment déployé pour
     cover the issue of shares by a public             recouvrir jusqu‘à l‘émission d‘actions par
     company, with the result that a company           une compagnie publique, de sorte
     cannot issue its shares to the public             qu‘une compagnie ne peut offrir une
     unless for that purpose it employs a              émission d‘actions au public sans
     registered broker or salesman, or unless          employer à cette fin un courtier ou un
     the company itself is registered. It is           vendeur enregistré ou sans l‘être elle-
     said that these provisions so far as they         même. On affirme que ces dispositions,
     affect Dominion companies are ultra               dans la mesure où elles s‘appliquent aux
     vires according to the principles adopted         compagnies fédérales, sont ultra vires
     by this Board in John Deere Plow Co. v.           en raison des principes énoncés par la
     Wharton, [1915] A.C. 330; Great West              présente chambre dans les arrêts John
     Saddlery Co. v. The King, [1921] 2 A.C.           Deere Plow Co. c. Wharton, [1915] A.C.
     91; and Att.-Gen. for Manitoba v. Att.-           330; Great West Saddlery Co c. Le Roi,
     Gen. for Canada, [1929] A.C. 260. In              [1921] 2. A.C. 91, et Le Procureur
     those cases there was a general                   général du Manitoba c. Le Procureur
     prohibition to companies either to trade          général du Canada, [1929] A.C. 260.
     at all or to issue their capital unless the       Ces affaires portaient sur l‘interdiction
     company was registered. The legislation           générale faite à des compagnies soit de
     was held ultra vires because the                  vendre quoi que ce soit soit d‘émettre
     legislative powers of the Province are            leur    capital   sans     être    d‘abord
     restricted so that "the status and powers         enregistrées. La Législation a été

17
     The French version is taken from the book by Professor Herbert Marx (as he then was), Les grands
     arrêts de la jurisprudence constitutionnelle au Canada (Les Presses de l'Université de Montreal,
     1974) at 391-392.
No.: 200-09-006746-090                                                               PAGE: 16

   of a Dominion company as such cannot           déclarée ultra vires, parce que les
   be destroyed" (John Deere Plow Co.             pouvoirs législatifs de la province sont
   case, [1915] A.C. 330) and legislation         limités de telle façon que ―le statut des
   will be invalid if a Dominion company is       pouvoirs d‘une compagnie fédérale ne
   "sterilized in all its functions and           peuvent être ainsi anéantis‖ (voir l‘arrêt
   activities" or "its status and essential       John Deere Plow Co.) et une loi sera
   capacities are impaired in a substantial       invalide si une compagnie fédérale est
   degree" (Great West Saddlery Co. case,         ―paralysée dans ses fonctions et dans
   [1921] 2 A.C. 91). It appears to their         son activité‖ ou si ―son statut et ses
   Lordships impossible to bring this             pouvoirs essentiels sont radicalement
   legislation within such a principle. A         amoindris‖ (voir l‘arrêt Great West
   Dominion company constituted with              Saddlery Co.). Il semble impossible à
   powers to carry on a particular business       leurs Seigneuries d‘appliquer un tel
   is subject to the competent legislation of     principe à la présente législation. Une
   the Province as to that business and           compagnie fédérale, constituée dans le
   may find its special activities completely     but      d‘exploiter     une     entreprises
   paralysed, as by legislation against drink     particulière, est assujettie à la loi valide
   traffic or by the laws as to holding land.     de la province concernant ce type
   If it is formed to trade in securities there   d‘entreprise et elle peut trouver son
   appears no reason why it should not be         activité     spécifique       complètement
   subject to the competent laws of the           paralysée, par exemple par la législation
   Province as to the business of all             réprimant le trafic des alcools ou par des
   persons who trade in securities. As to         lois relatives à la propriété foncière. Si
   the issue of capital there is no complete      elle est constituée pour pratiquer le
   prohibition, as in the Manitoba case,          négoce des valeurs mobilières, il ne
   [1929] A.C. 260 in 1929; and no reason         semble y avoir aucune raison pour
   to suppose that any honest company             qu‘elle ne soit pas assujettie aux lois
   would have any difficulty in finding           valides de la province concernant
   registered persons in the Province             l‘entreprise de tous ceux qui se livrent à
   through whom it could lawfully issue its       ce négoce. Quant à l‘émission du
   capital. There is no material upon which       capital-actions, il n‘y a pas d‘interdiction
   their Lordships could find that the            complète comme dans l‘affaire Manitoba
   functions and activities of a company          de 1929, et il n‘y a pas lieu de supposer
   were sterilized or its status and essential    qu‘une compagnie de bonne foi aurait de
   capacities impaired in a substantial           la peine à trouver dans la province des
   degree. [Emphasis added.]                      personnes            enregistrées        par
                                                  l‘intermédiaire desquelles elle pourrait
                                                  validement émettre son capital-actions. Il
                                                  n‘y a aucun élément de preuve qui
                                                  permette à leurs Seigneuries de
                                                  conclure que les fonctions et l‘activité
                                                  d‘une compagnie ont été paralysées ou
                                                  que son statut et ses pouvoirs essentiels
No.: 200-09-006746-090                                                             PAGE: 17

                                                 ont été radicalement amoindris.



In short, the purpose of these laws, which involve registration of persons who carry on
the business of dealing in securities and verification of their qualifications, is to ensure
that those persons are honest and reliable, plainly in order to protect investors. That
approach, which involves regulating the trading in securities industry in the province,
was adopted by the Supreme Court, which in 1949 became the court of last resort for all
cases, in Smith v. The Queen, [1960] S.C.R. 776 at 780; Gregory & Co. Inc. v. Quebec
Securities Commission et al., [1961] S.C.R. 584 at 588; Brosseau v. Alberta Securities
Commission, [1989] 1 S.C.R. 301 at 314; Multiple Access, supra at 183-184; and Global
Securities, supra at para. 33.

[436] With time, the provincial laws have come to regulate not only the securities
industry, but also stock exchanges and other persons involved in both the primary and
secondary markets. In addition, the provincial legislation covers the operation of
enterprises whose securities are held by the public: ongoing information, proxy
solicitation, prohibition on insider trading, audit committee, takeovers, share exchanges,
privatization of the company, and so on. They therefore affect the fundamental aspects
of the corporate life of companies that issue securities.

[437] These extensions of provincial oversight in reality affect the internal operation of
public companies and are, in truth, corporate law. Jacob Ziegel, Studies in Canadian
Company Law (1967), wrote, in vol. 1 at 170:

   Prima facie the regulation of proxies and    [TRANSLATION] À première vue, la
   insider trading belong exclusively to the    réglementation des procurations et des
   domain of company law because they           opérations     des      dirigeants    relève
   affect the relationship between the          exclusivement du domaine du droit
   directors of a company and its               corporatif parce qu‘elle concerne le rapport
   shareholders and the solicitation of         entre les administrateurs d‘une compagnie
   voting powers at meetings of the             et ses actionnaires et la sollicitation des
   company.                                     droits de vote aux assemblées de la
                                                compagnie.


[438] In the case of companies incorporated under a federal statute, the provincial
legislation encroaches on the exclusive jurisdiction of Parliament over federal corporate
law, but nonetheless valid in so far as that encroachment is incidental to the valid
exercise of a provincial power under the double aspect theory, provided that it does not
neutralize or contradict a federal provision; otherwise, the federal provision will be
paramount (Multiple Access, above).
No.: 200-09-006746-090                                                              PAGE: 18

[439] Today, some provincial bodies are even involved in oversight of participants
located outside their province (e.g., the TSVX (venture capital) exchange is supervised
jointly by the British Columbia and Alberta commissions). That extraprovincial aspect of
the activities of the provincial commissions is also valid as incidental to the jurisdiction in
relation to securities in the province, even if it is plainly an encroachment on federal
jurisdiction in relation to interprovincial commerce (see, by analogy, Multiple Access and
Global Securities, supra).

[440] With globalization of markets, the provincial commissions have been given the
power to collaborate in investigations outside their province. In Global Securities, above,
the Supreme Court saw this as measures that are included in achieving the primary
objective, that is, to protect local investors by overseeing the honesty of a broker or
issuer doing business in the province, even if they incidentally involve an extraprovincial
aspect.

[441] Quebec‘s present Securities Act contains no fewer than 350 sections, an
undeniable indication that it has branched out from the 1930 Act, which had 25, and the
1955 Act, which created the QSC and revised the entire securities regulatory scheme,
and which had 97 sections. The present Alberta statute, the source from which much of
the proposed Act is drawn, contains about 250 sections.

[442] The modern provincial statutes are no longer limited to protecting investors when
they purchase securities on the primary or secondary market. They are also intended to
promote access to capital for certain categories of enterprises. For example, to
encourage local industries for the benefit of the economy of the province concerned,
exemptions from filing prospectuses have been granted, and other formalities made
more flexible. The Attorney General of Quebec wrote, at para. 40 of his factum:

       [TRANSLATION]

       These interprovincial coordination efforts have ensured a high degree of
       harmonization of the regulatory schemes between the various provinces ..., and
       at the same time have respected the need to preserve regulatory measures of an
       original nature that meet the specific needs of each province …, such as the
       predominance of the mining industry in British Columbia and the oil and gas
       industry in Alberta and the existence of the derivatives sector in Quebec.

In his factum, the Attorney General of Alberta made similar comments and was
concerned about the possible loss of this ability if there were to be a single agency and
a single law for all of Canada. At para. 65, he quotes the following comments by the
Alberta Minister of Finance:

       Yet it is better than a federal system because provincial securities regulators
       better understand the unique regional needs of their market - such as those of
       junior oil and gas producers in Alberta. A federal regulator headquartered in
No.: 200-09-006746-090                                                                        PAGE: 19

         Toronto could make it harder for these and other Alberta businesses to raise
         funds for growth and development.

[443] Provincial securities legislation and oversight can thus become instruments for
accomplishing provincial economic objectives.18 In other words, the Attorneys General
of Quebec and Alberta recognize that securities regulation can be used as an
instrument in carrying out local or regional economic policies that promote access to
capital for particular enterprises. Of course, this calls for a delicate balancing act
between the primary objective, protecting investors, and the objective of
accommodating the desire of certain local enterprises to operate with less stringent
oversight or the government‘s desire to encourage risk capital in certain sectors.

[444] The provincial authorities also recognize that the capital market is now exposed
to extraprovincial influences, as a result of global convergence and the integration of
economies. We now talk about systemic risk, a phenomenon described in Alberta‘s
factum as follows:

         58. ―Systemic risk in the capital markets‖ has been defined by the CSA (Rice, GA
         Exhibits, vol. I, p. 69, para. 229) as:



             … the risk of a shock (i) affecting a significant number of market
             participants contemporaneously and (ii) which may directly or indirectly
             result in (A) a broad decrease in the availability, or a significant increase
             in the cost, of capital for issuers and individuals and/or (B) a significant
             erosion of investor confidence in the fairness and efficiency of the capital
             markets.

The International Organization of Securities Commissions (IOSCO) has in fact formed a
committee on systemic risk, co-chaired by the Presidents of the AMF and the OSC. In
other words, the present provincial regulators recognize that the capital market is now
exposed to global risks.

[445] Nonetheless, the Attorney General of Quebec wrote, at para. 23 of his factum,
that the purpose of the provincial securities regulatory schemes is today, as it was in the
past, [TRANSLATION] ―for the protection of the investor but also for capital market
efficiency and ensuring public confidence in the system‖, and added that the main
purpose is to protect investors because of their vulnerability (see also paras. 53 and
54). If that is still true, a question I need not answer, he can argue that the ―pith and
substance‖ (―caractère véritable‖ or ―caractéristique dominante‖) of the provincial
18
     A former CEO of the Montreal Stock Exchange, Pierre Lortie, said in a recent speech that the AMF
     has helped to ensure the survival of the Montreal Stock Exchange (François Desjardins, ―Pierre Lortie
     devant l'Ordre des comptables agréés du Quebec - L'AMF a contribué à assurer la survie de la
     Bourse de Montreal‖, Le Devoir (September 29, 2010)).
No.: 200-09-006746-090                                                                   PAGE: 20

statutes is still to regulate ―le commerce des valeurs mobilières dans la province‖, which
I translate as ―trading/dealing in securities in the province‖: [TRANSLATION] ―contractual
transactions of a local nature‖ (para. 42 of the factum) which clearly falls within the
jurisdiction of the legislatures, even if that regulation may have extraprovincial effects.
The same is true, in his submission, for the Derivatives Act, R.S.Q., c. I-14.01 and the
Act respecting the transfer of securities and the establishment of security entitlements,
S.Q. 2008, c. 20 (hypothec of dematerialized securities).

[446] Lastly, a recent characteristic of provincial legislation and operational policies
applied by provincial commissions must be noted: harmonization (Stéphane Rousseau,
L’encadrement du secteur des valeurs mobilières par le Québec et le débat sur une
commission nationale des valeurs mobilières, June 2010, document produced by the
Attorney General of Quebec). The provinces are aware that the Canadian capital
market comprises a single interrelated and interdependent and thus integrated whole,
and have agreed to implement a largely standardized regulatory scheme to prevent
local practices that could interfere with the efficiency of the market and even cause
harmful distortions, such as investors shopping for the jurisdiction that is least stringent
or that offers the least protection for investors.19 Quebec cannot avoid this necessary
standardization, which is demanded by market forces. When the bill that was to become
the Act to amend the Securities Act and other legislative provisions, S.Q. 2007, c. 15,
received approval in principle, Monique Jérôme-Forget, then the Quebec Minister of
Finance, stated the following:20

         [TRANSLATION]

         The benefits offered to investors do not exist under the general civil liability
         regime set out in the Civil Code of Québec. For that reason, we must consider
         the civil liability remedy on the secondary market to be a particular regime that is
         intended to supplement the general regime. Because the burden of proof the
         investor must meet is significantly lower, the remedy provides, in exchange, a set
         of defences that defendants may assert and a set of circumstances in which they
         cannot be held liable.

         …

         Mr. Speaker, it must be noted, on this point, that all the other provinces and
         territories have already adopted this remedy or are preparing to do so and it will
         therefore be the same across Canada. The remedy proposed is therefore similar
         to the Ontario regime, which has also drawn heavily from the other provinces and
         territories. Only the necessary adaptations have been adopted to reflect the civil

19
     In those reasons, the Chief Justice gave examples of the standardization movement headed by the
      CSA.
20
     Journal des débats de l'Assemblée nationale du Quebec, Bill 19, Thursday, October 18, 2007 -
      Vol. 40, No. 28.
No.: 200-09-006746-090                                                               PAGE: 21

       law concepts and terminology and to ensure that it can be harmoniously
       incorporated into Quebec‘s legislative corpus, including the Securities Act, into
       which it will be incorporated. [Emphasis added.]

                                           *****

[447] In short, because the Constitution Act is silent on the subject of ―securities‖,
various aspects of the capital market may be regulated under a power assigned either
to Parliament (criminal law, federal corporate law, trade and commerce) or to the
legislatures (property and civil rights, provincial corporate law, matters of a purely local
or private nature). As the Supreme Court of Canada said in Committee for the Equal
Treatment of Asbestos Minority Shareholders v. Ontario (Securities Commission),
[2001] 2 S.C.R. 132, 2001 SCC 37, at para. 62:

   There are a myriad of overlapping               Il existe une myriade de compétences
   regulatory     jurisdictions governing          concurrentes      en    matière   de
   securities transactions.                        réglementation des opérations sur
                                                   valeurs mobilières.


[448] In fact, since 1867, the regulation of securities has resulted in action taken by
both Parliament and the legislatures. In most cases, the purpose of that action has been
to protect shareholders/investors. It would therefore be wrong to argue that since 1867
protection of investors has been within the exclusive jurisdiction of the provinces.

[449] As well, there has been no decision of the Privy Council or the Supreme Court
that has held that the regulation of capital markets is a matter within provincial
jurisdiction. What those decisions have in fact recognized is that the regulation of
trading/dealing in securities in the province falls within the exclusive jurisdiction of the
legislatures under section 92 of the Constitution Act. As the Alberta Court of Appeal
wrote, the Alberta Securities Act regulates the securities industry, that is, primarily
brokers and other intermediaries, as it has done in respect of lawyers and other
professionals (paras. 3, 15, 18 and 48 of the decision). Similarly, the Attorney General
of British Columbia wrote in his factum in the Supreme Court: ‖Regulation of the sale of
securities and regulation of persons and entities involved in the trading of securities is
within the exclusive jurisdiction of the province under section 92 of the Constitution Act,
1867‖.

[450] To conclude on this aspect, I adopt the following summary of the current law
stated by Dickson J. in Multiple Access at pages 183 to 185, which still applies:

  It is well established that the provinces        Il est bien établi que les provinces ont le
  have the power, as a matter of property          pouvoir, en matière de propriété et de
  and civil rights, to regulate the trade in       droits civils, de réglementer le
  corporate securities in the province,            commerce des actions des compagnies
No.: 200-09-006746-090                                                              PAGE: 22

  provided the statute does not single out      dans la province, pourvu que la loi ne
  federal companies for special treatment       distingue     pas      les     compagnies
  or discriminate against them in any way.      constituées en vertu d‘une loi fédérale
  There must be no impairment of status or      en prévoyant à leur égard des mesures
  of the essential power to raise capital for   particulières ou discriminatoires. On ne
  corporate      purpose.      But   federal    doit pas porter atteinte au statut de la
  incorporation does not render a company       compagnie ni au pouvoir essentiel de
  immune from securities regulation of          réunir des fonds aux fins de la
  general application in a province. Since      compagnie. Mais la constitution d‘une
  the decision of the Privy Council in          compagnie en vertu de la loi fédérale
  Lymburn v. Mayland, [1932] A.C. 318 the       n‘immunise pas la compagnie contre les
  provisions of provincial securities acts      règlements provinciaux d‘application
  have been given a wide constitutional         générale relatifs aux valeurs mobilières.
  recognition. Anisman and Hogg in              Depuis l‘arrêt du Conseil privé Lymburn
  Proposals for a Securities Market Law of      v. Mayland, [1932] A.C. 318, les
  Canada, at p. 144 speak of ―[j]udicial        dispositions des lois provinciales
  sympathy      for    provincial  securities   relatives aux valeurs mobilières ont été
  legislation‖ adding, at p. 145:               largement reconnues sur le plan
                                                constitutionnel.   Dans      l‘Avant-projet
                                                d’une loi canadienne sur le marché des
                                                valeurs mobilières, at p. 160, Anisman
                                                et Hogg parlent de [TRADUCTION]
                                                ―sympathie des tribunaux vis-à-vis des
                                                législations provinciales sur les valeurs
                                                mobilières‖, ajoutant, à la même page:

    The reluctance of the courts to strike        Il     est      vraisemblable      que
    down provincial securities legislation        l‘hésitation des cours lorsqu‘il
    likely stems in part from the fact that       s‘agit      de      s‘attaquer     aux
    there is no federal securities law so         législations provinciales sur les
    that a declaration of the invalidity of       valeurs mobilières vient en partie
    a provincial act or any of its                du fait qu‘il n‘existe pas de loi
    provisions would create a potential           fédérale       sur      les    valeurs
    gap in the existing regulatory                mobilières, de sorte que le fait de
    scheme that might be exploited by             prononcer l‘invalidité d‘une loi
    the unscrupulous.                             provinciale ou de l‘une de ses
                                                  dispositions créerait un vide dans
                                                  la     législation     existante    qui
                                                  laisserait le champ libre aux
                                                  personnes peu scrupuleuses.

  … As Mr. Justice Fauteux, as he then          … Comme l‘a dit le juge Fauteux, alors
  was, stated in Gregory & Company Inc. v.      juge puîné, dans l‘arrêt Gregory &
  Quebec Securities Commission, [1961]          Company Inc. c. Quebec Securities
No.: 200-09-006746-090                                                          PAGE: 23

  S.C.R. 584 (at p. 588):                      Commission, [1961] S.C.R. 584 (at
                                               p. 588):

    The paramount object of the Act is to         [TRADUCTION]                L‘objet
    ensure that persons who, in the               prépondérant de la loi est
    province, carry on the business of            d‘assurer que les personnes qui,
    trading in securities or acting as            dans la province, exercent le
    investment counsel, shall be honest           commerce des valeurs mobilières
    and of good repute and, in this way,          ou     qui     agissent    comme
    to protect the public, in the province        conseillers en placements, sont
    or elsewhere, from being defrauded            honnêtes et de bonne réputation
    as a result of certain activities             et, ainsi, de protéger le public,
    initiated in the province by persons          dans la province ou ailleurs,
    therein carrying on such a business.          contre toute fraude consécutive à
                                                  certaines activités amorcées dans
                                                  la province par des personnes qui
                                                  y exercent ce commerce.

  In Smith v. The Queen Mr. Justice            Dans l‘arrêt Smith c. The Queen, le juge
  Martland stated (at p. 797):                 Martland affirme (at p. 797):

    The Securities Act exists to regulate         [TRADUCTION] The Securities
    the securities business. This is              Act existe pour réglementer le
    achieved through two main forms of            commerce des valeurs mobilières.
    control, the first of which is directed       À cette fin, elle prévoit deux
    towards the persons or companies              formes principales de contrôle,
    selling the securities and the second         dont la première vise les
    of which is directed to the securities        personnes ou les compagnies qui
    being sold.                                   vendent des valeurs et dont la
                                                  deuxième vise les valeurs offertes
                                                  en vente.

  And later (at p. 798):                      Et plus loin (à la p. 798):

    Thus control is exercised through            [TRADUCTION] Ainsi le contrôle
    the registration of persons and              s‘exerce par l‘enregistrement des
    companies before they are permitted          personnes et des compagnies avant
    to trade in securities coupled with          qu‘elles soient autorisées à faire le
    what is essentially the registration of      commerce des valeurs mobilières
    the securities themselves before the         ainsi que par ce qui constitue
    securities may be traded in the              essentiellement l‘enregistrement des
    course of a primary distribution to          valeurs elles-mêmes avant qu‘elles
    the public. [emphasis added]                 puissent être offertes en vente dans
                                                 le cadre d‘une distribution primaire
No.: 200-09-006746-090                                                            PAGE: 24

                                                    au public.




                              Two major trends in conflict

[451] As noted earlier, the provincial legislation first focused on the persons involved in
trading in securities in the province (requirement that brokers hold a licence), and then,
where needed, on protecting investors (prospectuses, customer‘s right to cancel and
information to be given by the broker, etc.), which are matters under provincial heads of
jurisdiction. The legislation then branched out to prescribing ongoing information,
regulating insider trading, auditing issuers‘ accounting and financial activities, regulating
proxy solicitation, voting rights and takeovers. Today, the provincial legislation even
deals with extraprovincial aspects such as collaboration with investigations outside
Canada. In spite of the necessary encroachment on Parliament‘s exclusive jurisdiction
in relation to federal corporate law and the regulation of extraprovincial commerce,
those extensions have been held to be valid by the Supreme Court, which has
associated them with the primary purpose of the legislation, regulation of trading in
securities in the province, and which has found there to be no conflict with federal
legislation on the same subjects, because they are similar or nonexistent.

[452] It is clear from the legislative evolution of the provincial securities laws that the
legislatures have undertaken to regulate as many aspects of the capital market as
possible, and not just trading in securities in the province. Does that fact mean that they
now have, constitutionally, a vested right to the exclusive authority to regulate all
aspects of the securities market? With due respect for my colleagues, I do not think so.
There is no due diligence or estoppel theory in constitutional law in relation to the
constitutional division of powers.

[453] For its part, Parliament has followed a similar trajectory. Starting with one of its
heads of jurisdiction, like banks or federal corporate law, it has increasingly enacted
legislation relating to shareholders‘ rights, the obligations of directors, changes in
corporate control, share transfers, etc. In other words, it is gradually developing a
federal securities regulatory regime, a number of aspects of which have been found to
be valid, as noted earlier.

[454] The proposed Act is the ultimate conclusion of the federal trajectory. With its
266 sections, it contains provisions that govern the activities of all capital market
participants, in relation to both the primary and secondary aspects of that market, and of
issuers and investors, taking in all intermediaries and even the experts who come into
their orbit (accountants, rating agencies, etc.). It even creates civil remedies for
investors in the provincial courts, the damages for which are quantified according to the
formulas prescribed.
No.: 200-09-006746-090                                                               PAGE: 25

[455] The possibility that Parliament could enact general legislation in relation to
securities has never been ruled out. On the contrary, the Supreme Court has left the
door open:

      In Multiple Access, above, at 173 and 174, Dickson C.J. writes:

  Parliament has not yet enacted any              Le Parlement n‘a pas encore adopté un
  comprehensive scheme of securities              système       complet     de    législation
  legislation. To date the Canadian               concernant les valeurs mobilière. Jusqu‘à
  experience has been that the provinces          ce jour au Canada, ce sont les provinces
  have taken control of the marketing of          qui réglementent le marché des valeurs
  securities, differing in this respect from      mobilières, différant à cet égard des
  the United States where the Securities          États-Unis où la Securities and Exchange
  and      Exchange      Commission        has    Commission réglemente le commerce et
  regulated      trading     and      primary     la distribution primaire des valeurs
  distribution of securities. I should not        mobilières. Je ne veux pas, par mes
  wish by anything said in this case to           propos en l‘espèce, préjudicier au pouvoir
  affect prejudicially the constitutional right   constitutionnel du Parlement d‘adopter
  of Parliament to enact a general scheme         une législation générale concernant les
  of securities legislation pursuant to its       valeurs mobilières conformément à son
  power to make laws in relation to               pouvoir de faire des lois relatives aux
  interprovincial and export trade and            échanges        et     au       commerce
  commerce. This is of particular                 interprovinciaux et internationaux. Cela
  significance         considering          the   revêt une importance particulière compte
  interprovincial and indeed international        tenu du caractère interprovincial et, à
  character of the securities industry.           vrai dire, international du secteur des
  [Emphasis added.]                               valeurs mobilières.



      Estey J., dissenting, writes the following, at 225:

   Counsel for the Attorney General for            Le substitut du procureur général du
   Canada did not wish to found the validity       Canada n‘a pas voulu fonder la validité
   of these sections upon an independent           de ces articles sur un argument
   claim that, by reason of the potential          indépendant portant que, en raison de
   extraprovincial nature of securities            l‘aspect extraprovincial possible du
   trading, they could be sustained by the         commerce des valeurs mobilières, ils
   authority of s. 91(2) alone. I venture to       peuvent s‘appuyer uniquement sur le
   say that there will be more and more            par. 91(2). Je me permets de dire qu‘on
   challenges in the future to the dominant        contestera de plus en plus à l‘avenir la
   position now occupied by the securities         position dominante qu‘occupe maintenant
   exchange authorities of the province in         l‘organisme    de   réglementation   du
   which the major stock exchange of the           commerce des valeurs mobilières de la
   country is located. As the magnitude            province où se trouve la Bourse la plus
No.: 200-09-006746-090                                                            PAGE: 26

   and number of multi-provincial security      importante du pays. À mesure que
   transactions increase the strain on the      s‘accroîtront le nombre et l‘importance
   present unbalanced regulatory system         des       opérations     multi-provinciales
   will mount. It remains to be seen            relatives aux valeurs mobilières, il en
   whether this will precipitate a change in    sera de même de la pression qui s‘exerce
   the       national     appreciation     of   sur le système de réglementation
   constitutional requirements and federal      actuellement déséquilibré. Il reste à voir
   legislative    policy.  Until    such    a   si cela précipitera une modification de
   development occurs the disposition of        l‘évaluation, au niveau national, des
   this appeal must be found in the light of    exigences constitutionnelles et de la
   the positions herein taken by the parties.   politique    législative   fédérale.    En
   These reasons therefore reflect only the     attendant, la décision en l‘espèce doit
   record as advanced by the proponents         être fonction des positions adoptées par
   and opponents of the traditional             les parties. Par conséquent, les motifs en
   arguments on the constitutional nature       l'espèce reflètent uniquement le litige tel
   of corporate and securities legislation.     qu'il a été exposé par les partisans et les
   [Emphasis added.]                            adversaires des arguments traditionnels
                                                sur l'aspect constitutionnel des lois
                                                relatives aux sociétés et aux valeurs
                                                mobilières.



      In Global Securities, above, Iacobucci J. writes, at para. 46:

  Since the central question presented by       Comme la question centrale que soulève
  this appeal is the power of the province to   le présent pourvoi concerne le pouvoir de
  enact s. 141(1)(b), I decline to comment      la province d‘adopter l‘al. 141(1)b), je
  on the constitutionality of hypothetical      m‘abstiens de faire des remarques sur la
  overlapping federal legislation. I would      constitutionnalité d‘une hypothétique loi
  note, however, that this Court has already    fédérale chevauchante à cet égard. Je
  upheld aspects of federal securities          tiens cependant à souligner que notre
  regulation, in another context, in Multiple   Cour a déjà invoqué, dans l‘arrêt Multiple
  Access, supra, under the ―double aspect‖      Access, supra, la règle du ―double
  theory. The Court‘s decision in the           aspect‖ pour confirmer la validité de
  present appeal should not be taken in         certains aspects de la réglementation
  any way to question the holding of that       fédérale des valeurs mobilières dans un
  case. [Emphasis added.]                       autre contexte. L‘arrêt de notre Cour en
                                                l‘espèce ne doit nullement être interprété
                                                comme mettant en doute l‘arrêt Multiple
                                                Access.
No.: 200-09-006746-090                                                              PAGE: 27

[456] The day has now come to settle this. This Court‘s answer may be characterized
as preliminary since it will be followed by the final answer from the Supreme Court in a
few months.

                  Authority of Parliament to enact the proposed Act


[457] It is now settled law that determining the constitutional validity of a statute
involves two steps, consisting of, first, characterizing the law in relation to its ―pith and
substance‖ (in French, ―caractère véritable‖ or ―caractéristique dominante‖), and
second, determining the head of jurisdiction enumerated in sections 91 and 92 of the
Constitution Act to which it relates: R. v. Hydro-Québec, [1997] 3 S.C.R. 213 at
para. 23, Lamer C.J. and Iacobucci J. (dissenting but not on this point); Reference re
Same-Sex Marriage, supra at para. 13; Ward v. Canada (Attorney General), [2002] 1
S.C.R. 569, 2002 SCC 17 at para. 16.

First step

[458] Determining the pith and substance of a statute is a complex exercise and will
often be conclusive as to its validity. The exercise focuses on the purpose and effects of
the impugned law (Ward at para. 17; Kirkbi AG v. Ritvik Holdings Inc., [2005] 3 S.C.R.
302, 2005 SCC 65 at para. 23; Canadian Western Bank, supra at para. 27; Quebec
(Attorney General) v. Canadian Owners and Pilots Association, 2010 SCC 39 at
para. 18).

[459] The exercise is summarized as follows by the Supreme Court in Ward, at
paras. 17 to 20:


  (1) The Essential Character of the Law          (1) Le caractère essentiel de la loi

  [17] The first task in the pith and             [17] La première étape de l‘analyse du
  substance analysis is to determine the pith     caractère véritable consiste à déterminer le
  and substance or essential character of         caractère véritable ou essentiel de la loi.
  the law. What is the true meaning or            Quel est le sens véritable ou la
  dominant feature of the impugned                caractéristique dominante de la mesure
  legislation? This is resolved by looking at     législative attaquée? Pour répondre à cette
  the purpose and the legal effect of the         question, il faut examiner l‘objet et l‘effet
  regulation or law: see Reference re             juridique du règlement ou de la loi en
  Firearms Act, supra, at para. 16. The           cause: voir le Renvoi relatif à la Loi sur les
  purpose refers to what the legislature          armes à feu, supra, par. 16. L‘objet désigne
  wanted to accomplish. Purpose is relevant       ce que le législateur a voulu accomplir. Il
  to determine whether, in this case,             est pertinent pour déterminer si, en
  Parliament was regulating the fishery, or       l‘espèce, le Parlement réglementait les
  venturing into the provincial area of           pêcheries ou s‘il s‘aventurait dans le
No.: 200-09-006746-090                                                                 PAGE: 28

  property and civil rights. The legal effect        domaine de compétence provinciale de la
  refers to how the law will affect rights and       propriété et des droits civils. L‘effet
  liabilities, and is also helpful in illuminating   juridique désigne la façon dont la loi influe
  the core meaning of the law: see                   sur des droits et des obligations, et il est
  Reference re Firearms Act, supra, at               également utile pour comprendre le sens
  paras. 17-18; Morgentaler, supra, at pp.           premier de la loi: voir le Renvoi relatif à la
  482-83. The effects can also reveal                Loi sur les armes à feu, supra, par. 17-18,
  whether a law is ―colourable‖, i.e. does the       et l‘arrêt Morgentaler, supra, p. 482-483.
  law in form appear to address something            Les effets peuvent également indiquer si
  within the legislature‘s jurisdiction, but in      une loi comporte un ―motif déguisé‖, c‘est-
  substance deal with a matter outside that          à-dire montrer que même si, de par sa
  jurisdiction?: see Morgentaler, supra, at          forme, la loi paraît porter sur un sujet
  p. 496. In oral argument, Ward expressly           relevant de la compétence du législateur,
  made clear that he is not challenging the          elle porte, au fond, sur un sujet qui ne
  law on the basis of colourability.                 relève pas de cette compétence: voir l‘arrêt
                                                     Morgentaler, supra, p. 496. Dans sa
                                                     plaidoirie, M. Ward a précisé clairement
                                                     que sa contestation de la loi n‘était pas
                                                     fondée sur l‘existence d‘un motif déguisé.

  [18] The pith and substance analysis is            [18] L‘analyse du caractère véritable n‘est
  not technical or formalistic: see P. W.            ni technique, ni formaliste: voir p. W. Hogg,
  Hogg, Constitutional Law of Canada                 Constitutional Law of Canada (éd. feuilles
  (loose-leaf ed.), vol. 1, at p. 15-12. It is       mobiles), vol. 1, p. 15-12. Il s‘agit
  essentially a matter of interpretation. The        essentiellement         d‘une         question
  court looks at the words used in the               d‘interprétation. Les tribunaux examinent
  impugned legislation as well as the                les termes employés dans la mesure
  background         and       circumstances         législative attaquée, de même que le
  surrounding      its    enactment:      see        contexte et les circonstances dans lesquels
  Morgentaler, supra, at p. 483 ; Reference          cette mesure a été adoptée: voir l‘arrêt
  re Firearms Act, supra, at para. 17. In            Morgentaler, supra, p. 483, et le Renvoi
  conducting this analysis, the court should         relatif à la Loi sur les armes à feu, supra,
  not be concerned with the efficacy of the          par. 17. Lorsqu‘il procède à cette analyse,
  law or whether it achieves the legislature‘s       le tribunal ne devrait pas se préoccuper de
  goals: see RJR-MacDonald Inc. v.                   l‘efficacité de la loi ou de la question de
  Canada (Attorney General), [1995] 3                savoir si elle permet de réaliser les
  S.C.R. 199, at para. 44, per La Forest J.;         objectifs       du       législateur:     voir
  Reference re Firearms Act, supra, at para.         RJR-MacDonald Inc. c. Canada (Procureur
  18.                                                général), [1995] 3 S.C.R. 199, par. 44, le
                                                     juge La Forest; Renvoi relatif à la Loi sur
                                                     les armes à feu, supra, par. 18.

   [19] Section 27 of the Regulations, read          [19] L‘article 27 du Règlement, pris
   alone, is simply a prohibition of sale,           isolément, ne fait qu‘interdire la vente,
No.: 200-09-006746-090                                                              PAGE: 29

   trade or barter, suggesting it might fall      l‘échange ou le troc, ce qui pourrait porter à
   within the provincial rather than federal      croire qu‘il relève de la compétence des
   domain. However, we cannot stop at             provinces et non pas de la compétence
   this point. We must go further. What is        fédérale. Cependant, nous ne pouvons pas
   the purpose of s. 27, and what is its          nous arrêter là. Il nous faut aller plus loin.
   effect? How does it fit into the regulatory    Quel est l‘objet de l‘art. 27 et quel en est
   scheme as a whole? The question is not         l‘effet? Quel rôle joue-t-il dans l‘ensemble
   whether the Regulations prohibit the           du régime de réglementation? La question
   sale so much as why it is prohibited.          n‘est pas tant de savoir si le Règlement
   [Emphasis added.]                              interdit la vente que de savoir pourquoi
                                                  celle-ci est interdite.


[460] The pith and substance of the proposed Act can be determined by examining
both intrinsic evidence, such as the provisions in which its general purposes are stated
and its general structure, and extrinsic evidence, such as the reports that led to it being
enacted (Canadian Owners and Pilots Association, supra at para. 18).

[461] As shown by the recent decision of the Supreme Court in Reference re Assisted
Human Reproduction Act, 2010 SCC 61, the exercise can be perilous and may lead to
very different characterizations of a single text. This case is another example of this, as
shown by the characterization adopted by my colleagues in comparison to mine, which,
and I say this with the greatest respect, obscures critical elements of the extrinsic
evidence.

[462] I will start with a summary of that evidence. After receiving a number of reports
from experts recommending a single national regulatory scheme for capital markets
(Wise Persons‘ Committee (2003), Crawford Panel report (2006), Hockin Panel report
(2009)), and following on a serious global crisis that affected those markets, the federal
government announced that it wanted to submit the proposed Act to Parliament once
the opinion of the Supreme Court had been received.

[463] Those reports, which comprise admissible extrinsic evidence, show that at
present:

      - Regulation of various aspects of the capital markets is accomplished by a range
      of legislation, both provincial and federal, and by self-regulation by the stock
      exchanges and associations of intermediaries;

      - The present Canadian capital market is complex and eclectic. New instruments
      are emerging, such as derivatives and synthetic securities, and are sometimes
      not understood even by sophisticated investors (e.g., commercial paper);

      - 80 percent of transactions in derivatives involve a party who is not in Canada.
      Clearly, derivatives transactions are largely international;
No.: 200-09-006746-090                                                                         PAGE: 30

         - Securities are dematerialized and traded instantaneously on the Internet, often
         without any real service being provided by a broker or other intermediary. Even
         access to foreign stock exchanges is possible on line, by opening an account
         with a Canadian broker who in fact provides no advice. The need to ensure the
         broker‘s integrity in these cases is less pressing than it was over 100 years ago
         when a broker was absolutely essential, in relation to a materialized security;

         - A large proportion of the securities of the largest Canadian corporations, such
         as BCE or Canadian Pacific, are held outside Canada and traded on the New
         York or London stock exchanges, where they are subject to various foreign laws.
         Clearly, issues of securities by large Canadian enterprises and the secondary
         market in those securities have extraprovincial and even international aspects;

         - Canadian issuers mobilize more capital per issue of debt security at the
         international level than at the national level.21 In fact, for some companies, we
         can even talk about a North American capital market. Clearly, for a number of
         Canadian enterprises, financing activities using securities are largely
         international activities;

         - Between 1990 and 2006, the volume of initial share offerings rose by
         396 percent in Canada, while the increase was only 128 percent in the United
         States, 163 percent in the United Kingdom and 220 percent in Australia. A larger
         proportion of new Canadian firms needing capital therefore make public offerings
         in Canada than elsewhere. In other words, the availability of an effective and
         competitive capital market is more critical in Canada than elsewhere;

         - In 2009, the market capitalization of companies listed on the TSX and TSXV
         rose by 55 percent, compared to 28.5 percent on the NYSE and 44 percent on
         the NASDAQ. There are currently over 3,800 companies listed on the TSX and
         the TSXV, compared to 5,100 in the United States, where the population is
         10 times higher. Clearly, regulating securities means more than regulating an
         industry; it means regulating the main source of capital for nearly 4,000 Canadian
         companies operating in all sectors of the Canadian economy;

         - Capitalization of listed companies in Canada is much lower than in the United
         States; in fact, 64 percent of companies listed in Canada would be unable to list
         in the United States. The Canadian securities market therefore includes a large
         element of penny stock or risk capital companies;

         - The experts add that 16.15 percent of small public securities issues involve four
         or more provincial jurisdictions and that 83.85 percent of them involve three
         jurisdictions or fewer. In fact, a miniscule portion, only five percent, of initial public


21
     Report of the Wise Persons‘ Committee at 7.
No.: 200-09-006746-090                                                                        PAGE: 31

         offerings involve only one securities commission.22 Clearly, even small public
         securities issues constitute essentially extraprovincial activities;

         - Every day in Canada, 750 million shares change hands, representing a value of
         about $7 billion.23 Clearly, the secondary market comprises a major activity in the
         Canadian economy;

         - Stock exchange activities in Canada have been divided into three electronic
         trading floors since 1999. Since 2008, the three stock exchanges have been
         owned by the same financial group, TMX Group Inc. Each category of security is
         now listed on a single stock exchange for the entire country. The trend toward
         consolidation is even a global one, as can be seen in the grouping of the major
         foreign stock exchanges. Clearly, the three Canadian stock exchanges are now
         companies whose activities are primarily extraprovincial and international;

         - The Canadian capital market consists of diverse and very sophisticated
         participants in addition to small investors, such as mutual funds and pension
         plans. All residents of Canada are, directly or indirectly, holders of securities
         (portfolio, mutual funds, pension plan, RRSP, etc.). Clearly, the securities market
         now affects all Canadians;

         - A very large majority of mutual funds are located in Ontario (over 80%). These
         funds are increasingly investing outside Canada. To date, their main regulator is
         the OSC, which refuses to adhere to certain homogenized policies or practices,
         such as the single passport;

         - Traditional brokerage firms have been acquired by banks or other financial
         institutions.24 While the four pillars of the economy (banks, trust companies,
         insurance companies and securities firms) were quite separate in 1867, it must
         be acknowledged that this is no longer the case, with the banks having absorbed
         the major brokerage firms and trust companies, to offer a range of services,
         branching out all the way to insurance (Canadian Western Bank, supra,
         para. 1).25 While that recent interpretation gives the major banks more clout and

22
     Cécile Carpentier & Jean-Marc Suret, Réglementation des valeurs mobilières au Canada: un
     réexamen des arguments avancés pour justifier la commission unique, June 23, 2010, at 66.
23
     Minister of Finance of Quebec, Monique Jérôme-Forget, Journal des débats de l’Assemblée nationale
     du Quebec, Bill 19, Vol. 40, No. 28 (Thursday, October 18, 2007).
24
     Marion G. Wrobel, Report of Canadian Bankers Association Regarding Parliament’s Jurisdiction to
     Create a National Securities Regulator, document dated August 26, 2010, produced by the Canadian
     Bankers Association.
25
     The Alberta Court of Appeal stated, at para. 2 of its decision, citing a passage from Canadian
     Western Bank, that the three pillars, excluding the banks, have historically been regulated solely by
     the provinces. That is true in terms of the relationship between the customer and the company. For
     example, trust contracts, insurance contracts or securities purchase contracts are regulated by the
     provinces, while the relationship between the bank and its customers is regulated by Parliament, and
     suppletively by the provinces. However, it must be added that regulation of insurance and trust
No.: 200-09-006746-090                                                                        PAGE: 32

         more revenue, it exposes them to risks that would formerly have contaminated
         only one other pillar of the economy that is unrelated to them;

         - Canadians increased the value of their investments in shares and debt security
         outside Canada by 36 percent between 2005 and 2009, with the value rising from
         $279.1 to $379.5 billion. Again, the extraprovincial aspect of Canadian investors‘
         activities is striking;

         - The Canadian capital market is totally integrated (only one stock exchange for
         each security; intermediaries regulated by national associations or groups, for
         example the IDA;26 leading brokerage firms acquired by banks or other financial
         institutions and operating Canada-wide), forming a vast single and now
         indivisible entity. The provinces are aware of this fact, and work together and
         enact standardized legislation, and the commissions work together within the
         CSA27 to develop harmonized policies, like the passport. Clearly, the Canadian
         capital market has become integrated and forms a single whole that cannot be
         described as a mere collection of provincial markets;

         - Markets fluctuate globally; a drop in one regional stock exchange can lead to
         major fluctuations on exchanges located thousands of kilometres away. All
         parties recognize that there are new systemic risks associated with the
         globalization of markets.28 In response, the leaders of the G-20 and global
         economic organizations are calling for international coordination, particularly in
         respect of systemic risk management. The regulatory agencies in each country
         must be capable of assessing the situation in real time and responding rapidly.

[464] In short, the trend noted by the Supreme Court in Global Securities, supra,
para. 28, has not just persisted, it has intensified: ―The securities market (in the French
version, ―le marché des valeurs mobilières‖) has been an international one for years‖,
an observation that it reaffirmed the next year in Committee for the Equal Treatment of
Asbestos Minority Shareholders v. Ontario, supra at para. 62: ―Capital markets and
securities transactions are becoming increasingly international.


      companies is in fact divided, and federal trust and insurance company legislation have existed for a
      long time. In the area of insurance: Insurance Act, S.C. 1885-1886, c. 45; Insurance Act, S.C. 1910,
      c. 32; Insurance Act, S.C. 1917, c. 29; Canadian and Britisih Insurance Companies Act, S.C. 1932,
      c. 46, Foreign Insurance Companies Act, S.C. 1932, c. 47; Insurance Companies Act, S.C. 1991,
      c. 47. See also An Act to Authorize the Establishment of Mutual Fire Insurance Companies, 4 Will. IV,
      c. 33. For trust companies: Trust Companies Act, S.C. 1914, c. 55; Trust and Loan Companies Act,
      S.C. 1991, c. 45. We have also seen trust companies or insurance companies move from one
      jurisdiction to another to take advantage of different requirements or powers. The federal
      Superintendent still plays a large role in the area of insurance and trusts, however.
26
     Investment Dealers Association of Canada, the self-regulatory body recognized by the commissions,
      including the AMF.
27
     Canadian Securities Administrators.
28
     Hockin Panel, Final Report and Recommendations, 2009 at 2 and 3.
No.: 200-09-006746-090                                                               PAGE: 33

[465] It is against this backdrop, of a Canada-wide, integrated capital market, where
transactions are essentially interprovincial and international, a situation radically
different from the one that existed in 1867 or even 15 years ago, that the federal
government would like to submit the proposed Act to Parliament.

[466] This completes the consideration of the extrinsic evidence. I will now move on to
an analysis of the text.

[467] The purpose of the proposed Act is described as follows in the preamble and
section 9:

   Preamble                                        Préambule

  Whereas:                                          Attendu:

   Capital markets affect the well-being           Que les marchés des capitaux touchent le
   and prosperity of all Canadians;                bien-être et la prospérité de tous les
                                                   Canadiens;

   Capital markets are increasingly                Que les marchés des capitaux prennent
   national and international in scope;            une ampleur nationale et internationale
                                                   accrue;

   Capital markets are rapidly evolving            Que les marchés des capitaux évoluent
   and include increasingly complex                rapidement et comportent des produits
   financial products and methods of               financiers et des méthodes de placement
   distribution and trading;                       et de négociation de plus en plus
                                                   complexes;

   It is important for Canada to have              Qu‘il est primordial pour le Canada d‘avoir
   competitive capital markets and a               des marchés des capitaux compétitifs et
   strengthened, comprehensive and                 assujettis à un régime de contrôle
   coordinated enforcement regime for              d‘application de la loi renforcé, complet et
   those markets;                                  coordonné;

   It is in the national interest to effectively   Qu‘il est dans l‘intérêt national de
   protect      and     promote      Canadian      protéger et de promouvoir efficacement
   interests      internationally,    including    les intérêts du Canada à l‘étranger,
   through the development of consistent           notamment par l‘élaboration d‘orientations
   regulatory policies for capital markets;        cohérentes en matière de réglementation
                                                   des marchés des capitaux;

   The integrity and stability of Canada‘s         Que la présence, au sein du régime
   financial system would be enhanced by           réglementaire canadien du secteur
No.: 200-09-006746-090                                                                PAGE: 34

       the presence of a single Canadian            financier, d‘un seul organisme canadien
       securities regulator as part of the          de réglementation des valeurs mobilières
       Canadian      financial   regulatory         rehausserait l‘intégrité et la stabilité du
       framework;                                   système financier du Canada;

       Parliament intends to create a single        Que le Parlement entend créer un tel
       Canadian       securities    regulator,      organisme, encadré par un régime
       supported    by    a     comprehensive       législatif et réglementaire complet qui
       statutory and regulatory regime that         s‘applique dans l‘ensemble du Canada;
       applies across Canada; and

   Parliament chooses to do so through a             Que le Parlement choisit de le faire au
   process under which the regime will apply         moyen d‘un processus au titre duquel
   as willing provinces and territories opt in;      le régime s‘appliquera au fur et à
                                                     mesure que les provinces et territoires
                                                     intéressés y adhéreront,

       Section 9                                    Article 9


                   PURPOSES                                     OBJET DE LA LOI

 9. The purposes of this Act are                    9. La présente loi a pour objet de:

 (d) to provide protection to investors             d) Protéger les investisseurs contre les
     from unfair, improper or fraudulent               pratiques déloyales, irrégulières ou
     practices;                                        frauduleuses;

 (e) to   foster    fair,  efficient and            e) Favoriser des marchés des capitaux
     competitive capital markets in which              justes, efficaces et compétitifs en
     the public has confidence; and                    lesquels le public a confiance;

 (f)     to contribute, as part of the Canadian     f) Contribuer, dans le cadre du régime
         financial regulatory framework, to the        réglementaire des finances du Canada,
         integrity and stability of the financial      à l‘intégrité et à la stabilité du système
         system. [emphasis added]                      financier.



[468] To achieve these purposes, the government would like to propose that
Parliament act by adopting a range of measures, from criminal offences to
administrative sanctions to civil remedies, registration and oversight of market
participants, institution of professional conduct standards for intermediaries and third
parties associated with the securities market, ongoing and occasional information,
No.: 200-09-006746-090                                                              PAGE: 35

regulation of securities issues on the primary market, transactions on the secondary
market, stock exchange transactions and clearing house transactions, supervision of
self-regulatory bodies, insider trading, record keeping, the creation of an agency and its
regulatory, investigative and prosecutorial powers, its capacity to act in coordination
with other regulatory agencies and bodies, as needed, such as the Department of
Finance, the Bank of Canada and the Superintendent of Financial Institutions, and the
implementation of mechanisms by which the federal government could intervene in
normal and emergency situations. The proposed Act will be supplemented by a large
body of future regulations.

[469] It is true that the proposed Act is in large part modeled on the Alberta Securities
Act, that two of its purposes, to protect investors and maintain a sound and effective
market, are found in the provincial statutes, and that the methods for achieving them are
similar to those already in place.

[470] Its second purpose, however, ―to foster fair, efficient and competitive capital
markets in which the public has confidence‖, is broader than the purpose that might be
stated in a provincial statute, since the provincial statute focuses on the capital market
in the province. The proposed Act also asserts a desire to have regard to provincial and
regional interests, a factor that a provincial authority does not take into consideration,
since it is, and rightly, concerned with promoting its province, and not its neighbour.

[471] The proposed Act contains elements that are novel in comparison to the
provincial statutes: provisions on systemic risks and provision for the federal
government and its Minister of Finance to act, that I think it is important to reproduce
here:

  109 (3) On request by the Chief                109 (3) Sur demande du régulateur en
  Regulator, a market participant must           chef, le participant du marché lui fournit
  provide the Chief Regulator with the           l‘information pouvant être exigée en vue
  information that may be required for the       de la contribution à l‘intégrité et à la
  purpose of contributing to the integrity       stabilité des marchés financiers ou de
  and stability of financial markets or          l‘analyse en matière d‘orientations
  conducting policy analysis related to the      concernant l‘exécution de la présente loi
  administration of this Act or to securities    ou la réglementation des valeurs
  regulation in general.                         mobilières en général.

  228 ...                                        228 …
  (4) Despite subsection (1), a notice is        (4) Malgré le paragraphe (1), la
  not required to be published in the            publication d‘un avis n‘est pas exigée
  following circumstances: ...                   dans les cas suivants: …

      (c) the Authority considers that                c) d‘une part, l‘Autorité est d‘avis
      there is an urgent need for the                 que le projet de règlement
No.: 200-09-006746-090                                                               PAGE: 36

      proposed regulation and that,                    répond à un besoin urgent et
      without it, there is a substantial               que,      sans      celui-ci,  les
      risk of material harm to investors               investisseurs ou l‘intégrité ou la
      or to the integrity or stability of              stabilité des marchés des
      capital markets, and the Authority               capitaux risqueraient fortement
      has the Minister‘s consent to                    de subir un préjudice important
      make the regulation and to not                   et, d‘autre part, elle a obtenu
      publish a notice.                                l‘agrément du ministre quant à la
                                                       prise du règlement et à la non-
                                                       publication de l‘avis.

  231(1) The Governor in Council may              231(1) Le gouverneur en conseil peut,
  make an order requiring the Authority to        par décret, ordonner à l‘Autorité
  undertake the process set out in                d‘entreprendre le processus prévu aux
  sections 228 to 230 in order to have the        articles 228 à 230 afin de prendre, de
  Authority make, amend or repeal a               modifier ou d‘abroger un règlement en
  regulation under section 227, as                vertu de l‘article 227, de la façon
  provided in the order.                          précisée au décret.

  232 (1) The Governor in Council may             232 (1) Le gouverneur en conseil peut,
  make an order requiring the Authority to        par décret, ordonner à l‘Autorité la prise,
  make, amend or repeal a regulation              la modification ou l‘abrogation, dès que
  under section 227, as provided in the           possible et de la façon précisée au
  order, as soon as practicable, if the           décret, d‘un règlement au titre de
  Governor in Council is of the opinion           l‘article 227 s‘il est d‘avis que la mesure
  that there is an urgent need for such a         répond à un besoin urgent et que sans
  measure and that, without it, there is a        elle les investisseurs ou l‘intégrité ou la
  substantial risk of material harm to            stabilité des marchés des capitaux
  investors or to the integrity or stability of   risqueraient fortement de subir un
  capital markets.                                préjudice important.

[472] The Canadian Securities Transition Office, established by sections 295, 296 and
297 of the Budget Implementation Act, 2009, states, in the July 12, 2010, transition
plan:

  Regulatory Approach                             Approche de réglementation

  The CSRA will take a risk-based,                L'ACRVM           appliquera      à      la
  outcomes-focused         approach        to     réglementation une approche fondée
  regulation, identifying and responding to       sur les risques et axée sur les résultats
  threats to investors and the integrity and      qui cernera les menaces pour les
  stability of capital markets. It will be        investisseurs de même que pour
  committed to ensuring that the cost of          l'intégrité et la stabilité des marchés de
  regulation is commensurate with the             capitaux, et y réagira. Elle s'engagera à
No.: 200-09-006746-090                                                              PAGE: 37

  intended benefits and that investor             faire en sorte que le coût de la
  protection is at the core of all of its         réglementation soit proportionnel aux
  regulatory activities. It will set national     retombées escomptées et que la
  standards that are informed by, and             protection   des     investisseurs   soit
  sensitive to, the needs of investors and        toujours au coeur de toutes ses activités
  market participants in all parts of             de réglementation. Elle établira des
  Canada and all sectors of the market.           normes nationales qui seront guidées
  (p.3)                                           par les besoins des investisseurs et des
                                                  participants du marché de partout au
                                                  Canada et de tous les secteurs du
                                                  marché, et qui y seront sensibles.

  …                                               ...
  An Effective Contribution to the                Contribution efficace à l'intégrité et à
  Integrity and Stability of the Financial        la stabilité du système financier
  System                                          Les événements récents démontrent
  Recent events demonstrate that capital          que l'activité sur les marchés de
  market activity can be a source of              capitaux peut engendrer des risques
  systemic risks that threaten the stability      systémiques qui menacent la stabilité
  of financial systems nationally and             des systèmes financiers à l'échelle
  internationally.     While     provincial       nationale et internationale. Même si les
  regulators have had some exposure to            organismes           provinciaux        de
  systemic risk issues as part of the             réglementation      ont    une    certaine
  informal Heads of Agencies group, the           connaissance des enjeux des risques
  CSRA‘s mandate to contribute to the             systémiques du fait de leur présence au
  integrity and stability of the financial        sein     du     groupe     informel   des
  system, as part of the Canadian                 responsables d'organismes1, le mandat
  financial regulatory framework, is new to       de l'ACRVM de contribuer à l'intégrité et
  securities regulation in Canada. (p.9)          à la stabilité du système financier à titre
                                                  d'intervenant du cadre canadien de
                                                  réglementation financière constitue un
                                                  nouveau volet de la réglementation des
                                                  valeurs mobilières au Canada.


[473] Plainly, the proposed Act is a general scheme of securities legislation, within the
meaning of Multiple Access. In light of the foregoing, I find that its pith and substance is
the regulation of all participants in what is now a single, integrated Canada-wide market,
characterized by essentially interprovincial and international transactions. I therefore
agree with the Alberta Court of Appeal, per Slatter J.A., which stated the following at
para. 14:
No.: 200-09-006746-090                                                                           PAGE: 38

         [14] … The parties agree that the pith and substance of the proposed legislation
         is the regulation of the participants in the public capital markets in Canada, and
         transactions relating to the raising of capital.

[474] The desired effects of the proposed Act, if it becomes law, are diverse: protection
of investors (sporadic and ongoing information, prevention of fraud, competence of
intermediaries, civil remedies), transparency in the securities market, standardization of
rules, facilitation of access to capital, improvement of sanctions and minimization of
systemic risks.

[475] In reality, investor confidence is an important and even essential element in
achieving the purpose of the proposed Act, preserving a vigorous capital market in
Canada, which is needed to ensure that thousands of Canadian enterprises have
access to financing other than bank financing so they will continue to contribute to the
prosperity of the country and its population. As the Barreau du Québec pointed out in its
factum, at para. 36, the federal government‘s aim in the proposed Act is to accomplish
macroeconomic objectives for all of Canada, which does not rule out regional aspects
adapted to local needs (see section 16 (1)(b) of the proposed Act).29 If the proposed Act
is passed by Parliament, the Government of Canada will have a significant tool for
managing Canada‘s monetary and economic policy and will be able to ensure the
stability of the capital market otherwise than by informal cooperation meetings with the
existing provincial commissions.

[476] To summarize, the proposed Act is part of an economic policy designed to
preserve the capital market in Canada, a market that is now an integrated, single, cross-
Canada market characterized by essentially extraprovincial transactions, by regulating
market participants and transactions. That is its pith and substance, and we must avoid
confusing that with the methods chosen for achieving it, which in fact cannot help but
resemble the methods used by the provinces and elsewhere in the world.

Second step

[477] Is there authority under section 91 of the Constitution Act that allows Parliament
to enact the proposed Act, in whole or in part? To answer that question, in interpreting
the heads of power enumerated in sections 91 and 92 of the Constitution Act, we must
remember that they have to be continually adapted to new circumstances (Reference re
Same-Sex Marriage, supra at para. 30). In other words, the interpretation must evolve
(Canadian Western Bank v. Alberta, supra at para. 23).



29
     The proposed Act includes a Council of Ministers that includes all provinces and territories (sections
     11 and 13) and calls for reports to and consultation with those Ministers (sections 12, 19(2), 21, 50(6),
     61(3)). As well, the Authority‘s board of directors must be representative of the regions (section
     19(3)(b)).
No.: 200-09-006746-090                                                          PAGE: 39

[478] That being said, I will move on to the possible heads of power under which
Parliament could enact the 16 parts of the proposed Act, in whole or in part.

(i) Jurisdiction in relation to criminal law

[479] The provisions found in Part 10, Division 6, of the proposed Act are undeniably
criminal in nature and intra vires Parliament under section 91(27). The argument by the
Barreau du Québec that because the rest of the proposed Act is invalid, nothing
survives, including the criminal provisions, is without merit. In fact, counsel for both
Alberta and Quebec and my colleagues in the group of three concede the validity of that
Part.

[480] I would add that the same is true of the interpretive portion of Part 2 relating to
the Canadian Securities Regulatory Authority (the Authority), in so far as the Authority is
made responsible for the administration of the criminal provisions and powers assigned
to it: investigations, seizures, prosecutions, and so on (Reference re Assisted Human
Reproduction Act, supra at para. 124). I would note that Parliament may assign the
power to a federal agent to commence prosecutions, and that this does not preclude the
provincial Crown, which may prosecute as of right (A.G. (Can.) v. Can. Nat.
Transportation, Ltd., [1983] 2 S.C.R. 206).

(ii) Jurisdiction in relation to federal corporate law

[481] As noted earlier, the courts have long recognized that Parliament‘s jurisdiction in
relation to federal corporate law allows it to regulate all essential aspects of the proper
operation of corporations under federal authority, including the distribution of their
securities, directors‘ duties and responsibilities, the company‘s relations with
shareholders, ongoing information and prospectuses, proxy solicitation, voting rights,
forced redemptions, takeovers, insider trading, and so on.

[482] Parliament‘s authority to enact Parts 6, 8, 9, 10, 12 and 13 of the proposed Act,
which essentially deal with matters of corporate law, in relation to enterprises
incorporated under the authority of Parliament, seems to me to be indisputable (Multiple
Access, supra). It follows that Parliament could establish an agency and a specialized
tribunal and give them the budgets and powers needed (Parts 2, 3, 4, 11 and 14) to
enforce compliance with those portions of the proposed Act by corporations under
federal authority.

[483] Because the power to incorporate legal entities, including insurance and trust
companies, is divided between Parliament and the legislatures, and large corporations
that issue securities are governed by federal legislation (Air Canada, CP, CN, BCE,
banks, certain insurance and trust companies, communications companies, etc.),
Parliament could regulate numerous aspects of the securities currently covered by
provincial statutes, for the largest Canadian issuers by enacting the proposed Act. In the
event of conflict, the federal rules would be paramount.
No.: 200-09-006746-090                                                                     PAGE: 40

[484] However, we might wonder what limits there are on Parliament‘s power to
legislate in relation to federal corporate law. Certainly, the Supreme Court says that it
extends to shareholders, directors, officers and employees of those corporations
(Multiple Access, supra, p. 176), but can that cover brokers, rating firms, stock
exchanges and market participants‘ self-regulatory bodies?

[485] In any event, the approach based on the federal corporate law head of power
could only lead to greater complexity in securities regulation, since transactions relating
to federal corporations might be subject to rules that were different from corporations
governed by provincial statutes, when the capital market calls for homogenization, as
the efforts of the various provincial authorities to harmonize the regulations
demonstrate.

(iii) Jurisdiction in relation to extraprovincial transactions

[486] To avoid that, the federal government seeks to base its authority on the
regulation of trade and commerce (section 91(2)), to make the legislation applicable to
all actors in the Canadian capital market.

[487] Before determining whether the indicia developed by the Supreme Court for
validating the use of that authority by Parliament have been met, we must verify that
there is a rational basis to justify the proposed federal legislation, or it consists, rather,
of a pretext, a coloured attempt. In the words of Laskin C.J., writing for himself and
Judson, Spence and Dickson JJ. in Reference re Anti-Inflation Act, [1976] 2 S.C.R. 373
at 423: ‖the extrinsic material need go only so far as to persuade the Court that there is
a rational basis for the legislation which it is attributing to the head of power invoked in
this case in support of its validity‖. In this case, in light of the context summarized
earlier, there is an obvious rational basis, within the meaning of Reference re Anti-
Inflation Act, as between the proposed Act and the federal government‘s argument that
it is related to Parliament‘s authority to regulate trade and commerce.

[488] The leading case on the interpretation of the power to regulate trade and
commerce is General Motors, supra. The Supreme Court wrote that the jurisprudence
has recognized two branches of that power: (i) the regulation of international and
interprovincial trade and commerce, and (ii) the regulation of trade and commerce
affecting Canada as a whole.

[489] As the Attorney General of Alberta states (factum, paras. 95 and 96, and in oral
argument), a federal statute that was limited to the interprovincial and international
aspects of trading in securities might be valid under the first branch.30 My colleagues in
the group of three avoid that point, undoubtedly being aware that it jeopardizes their
hypothesis of exclusive provincial power over the regulation of securities and the

30
     The Attorneys General of British Columbia and Saskatchewan seem to share that view in their factum
     in the Supreme Court.
No.: 200-09-006746-090                                                               PAGE: 41

absence of a double aspect in the subject matter. However, 95 percent of public issues,
even the smallest, have an extraprovincial dimension, since they involve the distribution
of securities in more than one province. Parliament could therefore make the proposed
Act in its entirety applicable to that dimension of public issues and the participants in
them. That would include the three stock exchanges and CDS Clearing and Depository
Services (Services de dépôt et de compensation CDS) (Jean Leclair, ―‘Please, Draw Me
a Field of Jurisdiction‘: Regulating Securities, Securing Federalism‖ (2010), 51 S.C.L.R.
(2d), 555 at 565-566), or, at least, their interprovincial and international activities, that is,
a majority of their operations, and the participants involved.

[490] If Parliament adopted that approach, the result would be a regime that would
apply to transactions characterized as interprovincial and international, in addition to
transactions by the enterprises under federal jurisdiction referred to earlier. The new
regime would apply to a very large majority of securities transactions in Canada, but
would not regulate the entire capital market. Strictly intraprovincial transactions that do
not involve a corporation under federal law would not be covered by the proposed Act,
except for the criminal law provisions. That would be the case for a mining company in
British Columbia that issued shares only in that province or a gas company in Alberta
that issued shares only in Alberta.

[491] Under that approach, a lot of time would undoubtedly be devoted to determining
the nature of certain transactions. To avoid that, some opponents propose establishing
a national agency whose mandate it would be to administer both the federal and the
provincial legislation, somewhat as is the case for chicken and egg marketing. They add
that this solution would be more compatible with cooperative federalism. That is the
approach endorsed by the Chief Justice in his reasons.

[492] To date, the federal government seems to have rejected that option, preferring a
federal law of general application, including the intraprovincial aspects of the securities
market; this can be justified only by relying on the second branch of its authority under
91(2), the regulation of trade and commerce affecting Canada as a whole. This is a
policy choice (choix politique) that is quite simply not conclusive as to the outcome of
the reference, as Laskin C.J. wrote in Reference re Anti-Inflation Act, supra at 421:

   No     doubt,    federal-provincial   co-        Il n‘y a pas de doute que la coopération
   operation along the lines suggested              fédérale-provinciale dans le sens
   might have been attempted, but it does           suggéré aurait pu être essayée, mais il
   not follow that the federal policy that          ne s‘ensuit pas que la politique fédérale
   was adopted is vulnerable because a              adoptée est vulnérable parce qu‘on n‘a
   co-operative scheme on a legislative             pas tenté au préalable l‘application d‘un
   power basis was not tried first. Co-             système coopératif. Le fédéralisme
   operative     federalism      may      be        coopératif peut résulter d‘une absence
   consequential upon a lack of federal             de pouvoir législatif fédéral, mais il ne
   legislative power, but it is not a ground        peut être invoqué pour le contester.
No.: 200-09-006746-090                                                                   PAGE: 42

   for denying it. [emphasis added]



(See also Firearms Reference).

[493] In this case, the judges‘ role is therefore limited to determining whether the option
preferred by the federal government can result in constitutionally valid legislation, and
not taking on the role of promoting a policy approach different from the one adopted to
date by the Government of Canada.

(iv) Jurisdiction in relation to the general regulation of trade

[494] In General Motors, supra, Dickson C.J. focused on seeking a general rule that
strikes a fair balance between Parliament‘s jurisdiction in relation to general trade and
commerce and the provinces‘ jurisdiction in relation to property and civil rights. He
formulated a set of indicia, in the form of questions, for determining ―whether an activity
should be regulated by Parliament as opposed to the provinces‖ (Kirkbi, supra at
para. 16). Those questions were summarized by LeBel J. in Kirkbi at para. 17:

       (i) Is the impugned legislation part of a regulatory scheme?

       (ii) Is the system monitored by the continuing oversight of a regulatory agency?

       (iii) Is the legislation concerned with trade as a whole rather than with a particular
       industry?

       (iv) Is the legislation of a nature that the provinces jointly or severally would be
       constitutionally incapable of enacting?

       (v) Would the failure to include one or more provinces or localities in a legislative
       scheme jeopardize the successful operation of the scheme in other parts of the
       country?

[495] Dickson C.J. stated that these factors ―are not exhaustive‖, ―nor is the presence
or absence of any of these five criteria necessarily determinative‖ (General Motors
at 662-663; see also Kirkbi, para. 17).

[496] The presence of the first two factors is not in issue here, as acknowledged in the
factums of the three opponents, the Attorney General of Alberta (para. 111), the
Attorney General of Quebec (para. 75) and the Barreau du Québec (para. 58). I agree.
If the proposed Act were enacted, it would result in a complete regulatory scheme for
the Canadian capital market with the aim of eliminating activities that could hinder its
competitiveness, could harm enterprises looking for capital, and could prejudice
investors, under the authority of a single regulatory and oversight body, the Authority. I
will therefore not devote any more time to looking for those first two factors.
No.: 200-09-006746-090                                                          PAGE: 43

[497] I will move on to the third: is the legislation concerned with trade as a whole
rather than with a particular industry? The proposed Act is not concerned with a specific
supply of goods or services, such as the provision of investment advice, the operation of
a stock exchange or the sale of shares by mining companies; rather, it is concerned
with all aspects of the capital market in Canada. If the proposed Act were enacted,
Parliament would not be seeking to regulate a local transaction, such as the sale of a
fire insurance policy to a subscriber by an insurance company in the province (Parsons,
supra), or a particular industry, such as brewing (Labatt Breweries of Canada Ltd. v.
Attorney General of Canada, [1980] 1 S.C.R. 914), or various unrelated local industries;
rather, it would be all participants in the Canada-wide capital market, a market so
integrated that it has prompted the provinces and territories to harmonize their securities
legislation. The proposed Act is not limited to regulating the securities industry or, as
noted earlier, in my eighth comment, enterprises whose primary business is trading in
securities; rather, it extends as well to suppliers of services such as stock exchanges
and clearing settlement houses, professionals like external accountants, issuing
corporations (nearly 4,000) and their officers, and mutual funds. It is no less than an
entire sector of the Canadian economy that is affected.

[498] The third factor is plainly present, unless it is made a requirement such that it de
facto neutralizes Parliament‘s jurisdiction under the second branch of 91(2), in relation
to general trade and commerce, as proposed by my colleagues who are thus trying to
revive an old interpretation by the Privy Council that has in fact been rejected by the
Privy Council itself and then by the Supreme Court. They seem to forget that these
factors are intended only to distinguish between an economic issue of national interest
and one that is simply a set of local issues (Parsons, supra, and Attorney General of
Canada v. Can. Nat. Transportation, Ltd., [1983] 2 S.C.R. 206 at 268, cited with
approval in Kirkbi at para.17). Refusing to acknowledge that if Parliament enacted the
proposed Act it would be tackling an economic issue of national interest can be
explained only by an all-out defence, although well articulated, of their theory of the
exclusivity of control over securities by the provinces.

[499] I would add that the sale of insurance products is in no way comparable to the
sale of shares on the primary or secondary market. A fire insurance contract between
an insurer and a subscriber is an isolated transaction, the terms of which are defined in
the contract, which is often regulated, between the insurer and insured. It can come as
no surprise that the Privy Council saw that as no more than a private matter relating to
civil rights in the province (Parsons). While an insurer may do business across the
country and even around the world, each contract it signs with an insured is still a
unique transaction between it and the insured, with no need to involve a third party or
parties such as a stock exchange, issuing company, and so on. As well, the sale of
insurance policies is an isolated sector of the economy, an important sector, certainly,
but a limited one, unlike access to the capital market, which is vital for over 60 percent
of Canadian enterprises, whatever business they are in.
No.: 200-09-006746-090                                                                             PAGE: 44

[500] Some have also tried to persuade us that trading in securities is now a strictly
local matter between an investor and a broker operating31 in the province, followed by
other separate, local transactions elsewhere. In support of that position, they cite the
existence of the centralized depository system (CDS) in Toronto, where registered
shareholders are often brokers and not individual investors.32 The result would be that
the investor is doing business only with their broker‘s local representative, who buys
and sells securities at the investor‘s request, with the securities remaining at all times
under the control of the broker or CDS, which has a separate legal relationship with the
broker. With respect, that approach must be rejected, as we are urged to do by Robert
Leckey and Eric Ward, Taking Stock: Securities Matters and the Division of Powers,
(1999) 22 Dalh. L.J. 250 at p. 272:

         We suggest that analysis of the Canadian securities markets as simply a
         co-existence of separate local industries is myopic.

In reality, securities are negotiated at a price determined on a stock exchange, often
located outside the investor‘s jurisdiction; holding the securities gives the investor a
bundle of rights against the issuer, which is often located outside the investor‘s
jurisdiction, and even against third parties (for example, auditors or officers), and a
broker registered in CDS‘s records is merely the nominee of the client, who is, in law,
the true owner of the securities. The fact that the security is dematerialized, for
convenience, does not mean that it is not an intangible movable property sold or
purchased in the course of essentially extraprovincial transactions.

[501] Let us move on to the fourth factor. Opponents of the federal initiative and my
colleagues argue that the provincial commissions, acting together, are capable of
regulating the entire Canadian capital market, and accordingly federal action is not
valid. They add that the proof of this is that the provincial commissions are capable of
acting jointly, all except for Ontario having signed on to the Canada-wide policy
regarding authorization of prospectuses referred to as the single passport, in 2004.


31
     The requirement that a broker reside in the province has been relaxed.
32
     The role of the Central Depository System, a company located in Toronto, is defined on its website as
     follows: ―CDS is accountable for the safe custody and movement of depository-eligible domestic and
     international securities, accurate record-keeping, processing post-trade transactions, and collecting
     and distributing entitlements arising from securities deposited by customers. Securities may be held
     in book form (BEO – book-entry-only), non-certificated inventory (NCI), deferred certificated inventory
     (DCI) or certificate form. CDS manages the safekeeping of securities in both physical certificate and
     electronic form for its participants. Most CDS-eligible securities are in physical certificate form and are
     held by CDS or transfer agents and registered in CDS‘s nominee name. Once physical securities are
     deposited with CDS, CDS enters them in a ledger and they trade electronically. CDS‘s electronic
     system virtually eliminates the risk of securities being lost, damaged or stolen. More than 88,000
     equity and debt security issues are eligible for deposit at CDS. Of these, 60 per cent are Canadian
     issues and 40 per cent foreign, mostly U.S. About 200 issues are interlisted on two or more
     exchanges‖. http://www.cds.ca/cdsclearinghome.nsf/Pages/-EN-Depositorysystem?Open. Accessed
     on March 16, 2011.
No.: 200-09-006746-090                                                                     PAGE: 45

[502] In my opinion, that argument is based on a false premise, as Professor Lee
writes, supra at p. 104:

       Consider the fourth criterion: provincial incapacity. The principle underlying the
       criterion is that there cannot be gaps in the distribution of powers. It follows that if
       it is established that the provinces lack the power to enact a law on a given
       subject-matter, then it should be the case that Parliament possesses the power
       to enact it. Thus, provincial incapacity is a "strong indication" of federal
       jurisdiction. However, the converse is not true. There is no constitutional principle
       against overlapping legislation - quite to the contrary. Therefore, one cannot
       reason from the premise that the provinces possess the power to enact a given
       law to the conclusion that Parliament does not. Provincial capacity is not an
       indication (strong or otherwise) of the absence of federal jurisdiction. [Emphasis
       added]

[503] In any event, even with the greatest goodwill, the jurisdiction of each of those
bodies is still provincial, while the capital market is now interprovincial and international,
there is only one stock exchange in Canada for each category of securities, the number
of principal participants is limited, and their control is often located in a province that has
not signed on to the Canada-wide policy. In a share distribution, the issuer may be
located in Alberta, the purchaser in Nova Scotia and the rating agency in Montreal, the
security may be listed on the TSXV and the intermediary may be an on-line service
offered by a broker whose head office is in Toronto. Five provincial bodies could assert
the right to act, and conflicts of rules or decisions are still possible, while a national
regulator could supervise all participants (most of them in fact are self-regulated by a
national organization and not local associations) directly and consistently. Only a
national agency can have simultaneous jurisdiction over all participants in a transaction,
including being able to investigate all aspects of the transaction without calling in
assistance.

[504] The possibility of rapid market fluctuations caused by a systemic risk adds an
economic problem that it is impossible to resolve through cooperation among more than
ten bodies that are answerable to an equal number of Ministers of Finance. In reality,
regulation of all aspects of an integrated Canada-wide market by thirteen bodies can
only be a complex process, ill-suited to managing systemic risks in real time.

[505] As well, the proposed Act allows the Governor in Council to issue directions to
the Authority, and so, where necessary, to the Minister of Finance, to coordinate the
Minister‘s actions with the other important actors in Canada‘s economic policy, such as
the Bank of Canada, the Office of the Superintendent of Financial Institutions, and so
on. The Minister of Finance of Canada cannot order the provincial bodies to do
anything, as they are not under his ministerial authority.

[506] Moreover, only a federal agency could have access to all coercive measures
available, whether regulatory, penal or criminal, and use the ones most appropriate in
No.: 200-09-006746-090                                                              PAGE: 46

each case, thus avoiding parallel proceedings being brought against a single person for
the same violation, sometimes duplicating efforts, as in the Norbourg case, where there
were penal proceedings initiated by the AMF and criminal proceedings by the Crown.

[507] As well, in the case of an administrative sanction, it would be applied
automatically everywhere in the country, an effect that an order of a provincial
commission can never have (to strike a broker registered in ten provinces, it takes
10 decisions, and there is the possibility of ten challenges/appeals).

[508] Lastly, despite their efforts to collaborate and harmonize, the twelve Canadian
regulatory authorities other than the OSC are unable to make orders against the
Toronto Stock Exchange, although it is the largest in the country, the third largest in
North America and the eighth largest in the world. Only the OSC can do that. Obviously,
a federal agency would not have that problem. By virtue of the composition of the
Authority‘s board of directors, and secondarily by virtue of the Council of Ministers,
representatives of other regions of the country would be involved, for the first time, in
supervising that Ontario actor, and this cannot be done any other way.

[509] To summarize, the proposed Act would allow for several things to be achieved
that the provinces, jointly or severally, cannot accomplish, constitutionally. The fourth
factor is plainly present.

[510] This leaves the fifth: would the failure to include one or more provinces or
localities in a legislative scheme jeopardize the successful operation of the scheme in
other parts of the country?

[511] In my opinion, that factor involves asking whether the effectiveness or viability of
the proposed system requires legislation that applies uniformly across the country, as is
the case for competition and trade-marks. In other words, because the capital market is
now Canada-wide and integrated, if it is to be regulated in a legally viable manner, is
federal legislation necessary?

[512] In the area of securities, it is obvious that failure to have similar rules that apply to
participants and transactions in some parts of the country could jeopardize the
administration of the desired regime in other parts. For example, the easy mobility of
some issuers enables them to migrate to a province where the system would not apply,
to take advantage of less onerous provisions, such as in relation to directors‘ liability or
insider trading. For some years, the provinces and commissions have recognized,
through their actions, that there is a pressing need for uniform rules throughout the
country, to ensure the proper operation of the Canadian capital market, and they have
acted accordingly by enacting common legislation or adopting common policies on
various aspects of securities, such as the harmonized legislation on the civil liability of
issuers or the single passport policy. To summarize, participation by all provinces and
territories is necessary to ensure the proper operation of the Canadian capital market
(even though Ontario has not signed the single passport agreement, the other
No.: 200-09-006746-090                                                                         PAGE: 47

authorities accept the OSC‘s receipts as equivalent to a passport issued under the
policy, since they know they do not have the option of doing otherwise).

[513] The viability of the new regime will also call for uniform application of its rules
across the country.

[514] The proposed Act adopts the opting-in formula (section 250) for all of its
provisions except the provisions relating to criminal offences (section 251), production
orders (section 252(1)) and whistle-blower protection (section 252(2)). Opponents and
my colleagues then point out that the opting-in formula will prevent national application;
in other words, the opposing provinces will refuse to opt in and will thus make it
impossible to achieve the objective of uniformity of the proposed system. They concede,
however, that the fifth factor would be satisfied if Parliament enacted legislation that
applied everywhere in Canada, without negotiating with the provinces. The provinces
could then repeal or maintain their legislation. In both cases, we would have another
double aspect case: a federal law enacted under the federal power in relation to trade
and commerce (91(2)) and a provincial law enacted under the power to regulate civil
rights in the province (92(13)). Issuers would have to comply with both laws, and in the
event of conflict the federal law would be paramount.

[515] Their position can be summarized as follows: because the federal government is
proposing to proceed by agreement with the provinces, to avoid duplication for those
subject to the legislation, the fifth factor cannot be present.

[516] With respect for my colleagues, the formula favoured for the gradual application
of the proposed Act seems to me to be irrelevant to the determination of the validity of
the proposed Act under section 91(2) of the Constitution Act. Whether Parliament opts
for gradual, negotiated application of the federal legislation rather than unilateral
application in stages is, once again, a policy choice. It is not up to the courts to use the
fifth factor to review that choice.

[517] What the opponents are actually questioning is not that a national statute alone
can effectively, in legal terms, regulate the Canadian capital market (participants and
transactions) as it now exists, but rather the fact that the proposed Act, if it is enacted,
will possibly not have national application. The argument then comes down to the de
facto degree of effectiveness of the proposed system.

[518] From a strictly factual point of view, the case that the proposed regime is
ineffective has not been made. Ontario, the province were the largest share of the
Canadian market is located, in terms of issuers, intermediaries and investors,33 supports

33
     48 percent of firms listed on the TSX are Ontario companies; Ontario firms represent 43 percent of the
      capitalization of companies listed on the TSX and TSXV; mutual funds based in Ontario represent
      81 percent of shares hold in that manner; 64 percent of the others are affiliated with companies based
      in Ontario.
No.: 200-09-006746-090                                                             PAGE: 48

the federal initiative and is promising to transfer significant expertise to the Authority. It
also seems that other provinces, including British Columbia and Saskatchewan, are in
favour of a single federal agency, but are hoping for amendments to the proposed Act.
In the meantime, those provinces are among the ten jurisdictions collaborating with the
Transition Office. There seems to be every indication that if the bill passed by
Parliament accommodated certain policy concerns, which it is not up to the courts to
advise on, a large majority of the provinces would opt in.

[519] For the provinces that are staunchly opposed to a single authority, such as
Alberta and Quebec, the pressure to standardize the rules that apply to the Canadian
capital market will not disappear with the advent of a federal authority with seven or
eight provinces and territories opted in; quite the contrary. Refusal to opt in, for the
moment, therefore does not mean that this will be the case in the medium term and that
the objective stated in the preamble to the proposed Act, which can be seen in Part 15 –
to have a single commission for the entire country – will not be achieved in the medium
term. Rather, it is foreseeable that all provinces will voluntarily opt in, or will at least
adopt provisions that are similar to the federal regime in terms of rules, responsibility
and prohibitions. The result will be a uniform or nearly uniform regulatory system
throughout the country, even if, in practice, in certain aspects, it is ultimately less
effective than anticipated.

[520] One thing is certain: the proposed Act cannot be constitutionally invalid because
of the threatened prolonged refusal by a province or provinces to opt in. Otherwise, we
would be granting a provincial right of veto over the exercise by Parliament of its powers
under the second branch of section 91(2) of the Constitution Act.

[521] I would note in passing that if a province opts in to the proposed Act, if it is
enacted by Parliament, and then repeals its securities legislation and abolishes its
commission, this would not constitute a delegation of power as happened in Australia,
where the federal Parliament had no head of jurisdiction equivalent to 91(2); rather, it
would amount to realization that the purposes of the federal law are similar, identical or
superior to the purposes of the provincial law and there is no longer any reason to keep
its law or its commission. Similarly, a 0.05 reduction in the blood alcohol level permitted
by the Criminal Code might justify the provinces in repealing the provisions of their
highway traffic laws setting a rate. There would be nothing to prevent a province from
enacting a new law in future, since it is settled constitutional law that a legislature may
not bind itself for all time (François Morel and Herbert Marx, Droit constitutionnel, Les
Presses de l'Université de Montreal, 1982, chap. 2, section 2); issuers would then have
to comply with both laws, and in the event of conflict the federal law would be
paramount, as has always been the rule in double aspect cases.

[522] Overall, I am of the opinion that the fifth factor has been proved. In the
alternative, if the Supreme Court were to conclude that it has not, because of the opting-
in process created, Parliament would need only to enact a law with mandatory
No.: 200-09-006746-090                                                               PAGE: 49

application across the country, with a transition period for coming into force, by region or
otherwise.

[523] Lastly, some opponents contend that this kind of legislation could not
constitutionally regulate strictly intraprovincial transactions, which in fact account for
only a small percentage of transactions on the Canadian capital market.

[524] With respect, while that position is based on certain old decisions of the Privy
Council, it does not reflect the law as it stands today, and it is another attempt to
neutralize Parliament‘s jurisdiction under the second branch of 91(2). It is now settled
law that once the analysis concludes that federal legislation is valid under the head of
power relating to the general regulation of commerce, that legislation may regulate all
transactions, including those characterized as intraprovincial (Caloil Inc. v. Attorney
General of Canada, [1971] S.C.R. 543; General Motors; Kirkbi). In fact, as Peter W.
Hogg, Constitutional Law of Canada, 5th ed., vol. 1, writes at 20-16, that is logically the
only possible conclusion from the existence of the second branch of the power
under 91(2):

       It is important to notice that the general branch of the trade and commerce power
       authorizes the regulation of intraprovincial trade. Indeed, there would be no need
       for a general branch of trade and commerce if it did not exceed beyond
       interprovincial and international trade.

[525] Similarly, see the comments by Dickson J. in General Motors, supra at 681, when
he rejected the argument by counsel for Quebec that the provision on civil rights of
action had to be read down to exclude intraprovincial offences (see also: Robert Leckey
& Eric Ward, supra at 273).

[526] In short, the application of the proposed Act to strictly intraprovincial proposals is
a case of incidental encroachment on provincial jurisdiction in relation to local
transactions, which is as valid as the encroachment by existing provincial legislation in
relation to securities on the federal powers in relation to extraprovincial commerce and
federal corporate law.

                                            *****

[527] In conclusion, I am of the opinion that Parliament may validly enact the proposed
Act in order to regulate all participants in the Canadian capital market, an integrated
market that is critical to the country‘s economy, where transactions are essentially
extraprovincial, by virtue of its power in relation to general trade and commerce (section
91(2) Constitution Act).
No.: 200-09-006746-090                                                                         PAGE: 50




                                    Comments on Parts 12 and 13


[528] Although this was not really argued by the opponents, I questioned counsel
regarding Parts 12 and 13, which create and regulate civil remedies. Part 12, ―Civil
Liability‖, contains 24 sections: sections 169 to 193; the next Part, ―Civil Liability for
Secondary Market Disclosure‖ contains 24: sections 194 to 219. It talks about time
limits, quantum of damages, defences, appeal rights, and so on. As well, the remedies
described there are not new; they already exist under provincial securities legislation (in
Quebec, this type of remedy is governed by a specific statute that is harmonized with
the other provinces, and not by the Civil Code34). These remedies would in fact continue
to be exercised in the provincial courts and to be otherwise governed by the provincial
rules of evidence and procedure and suppletive substantive law. Clearly, this deals with
a civil right of action, something that, as a rule, falls within the provincial jurisdiction in
relation to civil rights.

[529] In General Motors, the new Competition Act incorporated a civil remedy in the
event of violation. The new right of action, which was a necessary result of a criminal
conviction, had to be exercised in the Federal Court. Section 31.1 of that Act set out a
time limit, the methods for proving the criminal conviction and the quantum of damages
that could be awarded. Its constitutionality was attacked, separately from the
constitutionality of the Act. Dickson J., writing for the Supreme Court, said, at 648:

     The principal issue in this appeal is the             La principale question que soulève ce
     constitutional validity of s. 31.1 of the             pourvoi porte sur la constitutionnalité de
     Combines Investigation Act, R.S.C. 1970,              l'art. 31.1 de la Loi relative aux enquêtes
     c. C-23. Section 31.1 creates a civil                 sur les coalitions, S.R.C. 1970, chap. C-
     cause of action for certain infractions of            23. L'article 31.1 établit un droit d'action
     the Combines Investigation Act. It is this            de nature civile à l'égard de certaines
     fact    which     makes      the    section           infractions à la Loi relative aux enquêtes
     constitutionally suspect: a civil cause of            sur les coalitions. C'est ce fait qui jette le
     action is within the domain of the                    doute sur la constitutionnalité de l'article:
     provinces to create.        The essential             il appartient aux provinces d'établir un
     question raised by this appeal is whether             droit d'action de nature civile. La question
     s. 31.1 can, nevertheless, be upheld as               essentielle que soulève ce pourvoi est de
     constitutionally valid by virtue of its               savoir si la constitutionnalité de l'art. 31.1
     relationship     with    the     Combines             peut néanmoins être confirmée en raison
     Investigation Act. Answering this question            de son rapport avec la Loi relative aux
     requires addressing two issues: first, is             enquêtes sur les coalitions. Pour

34
     Act to amend the Securities Act and other legislative provisions, S.Q. 2007, c. 15.
No.: 200-09-006746-090                                                             PAGE: 51

  the Act valid under the federal trade and      répondre à cela, il faut examiner deux
  commerce power, expressed in s. 91(2)          points: premièrement, la Loi est-elle
  of the Constitution Act, 1867; and             valide en vertu de la compétence
  second, is s. 31.1 integrated with the Act     fédérale en matière d'échanges et de
  in such a way that it too is intra vires       commerce      qui    est    conférée    au
  under s. 91(2). [emphasis added]               subs. 91(2) de la Constitution Act de
                                                 1867? Deuxièmement, l'art. 31.1 est-il si
                                                 intimement lié à la Loi qu'il est lui aussi
                                                 constitutionnel en vertu du subs. 91(2)?

[530] In this case, I have concluded that the proposed Act is valid by virtue of the
federal jurisdiction in relation to general trade and commerce. On the second point, I am
of the opinion that these two Parts are valid because the tie that is required under
General Motors exists between them and the proposed regime. These parts are well
designed as an integral part of the proposed regime. The remedies they create simply
reinforce the prohibitions, obligations and sanctions set out in the proposed Act. They
have no meaning other than in relation to the other provisions of the proposed Act and
have no independent content. They allow for private actions by investors solely in the
event of a violation of the law and do not create a general right of action. The
encroachment by these remedial provisions on the provincial jurisdiction is minimal.
Whether taken together or separately, civil, administrative or criminal remedies have a
deterrent effect that operates against violation of the obligations and prohibitions set out
in the proposed legislation. The two Parts allow for the actions taken by the Authority
and private initiatives to be combined to encourage compliance with the law.

[531] As well, given that these remedies stem from the relationship between investor
and shareholder in the company or company directors, they comprise federal corporate
law in the case of companies under federal legislation, and accordingly are valid
(Multiple Access and Reference re Constitutional Validity of s. 110 of the Dominion
Companies Act, supra).

[532] I will close by noting that leaving this type of remedy to the provinces could
jeopardize the effectiveness of the proposed regime and encourage forum shopping by
issuers or directors who were less concerned about complying with their obligations. In
fact, that is one of the reasons that prompted the provinces to harmonize their
respective laws, to put similar remedies in place.

                          The Budget Implementation Act, 2009

[533] Sections 295 and 296 of the Budget Implementation Act, 2009, S.C. 2009, c. 2,
simply allow the Minister of Finance of Canada to enter into financial arrangements and
agreements with the provinces.

[534] Section 297 enacts the Canadian Securities Regulation Regime Transition Office
Act, section 3 of which establishes the Transition Office, a body that will be dissolved in
No.: 200-09-006746-090                                                             PAGE: 52

2012 or 2013 (section 17 of the Act). The Office‘s purpose is ―to assist in the
establishment of a Canadian securities regulation regime and a Canadian regulatory
authority‖ (section 10 of the Act). The Office‘s powers are set out in sections 11 to 13 of
the Act: develop a transition plan, consult and inform. No regulatory authority is
assigned to it.

[535] In my opinion, the creation of this kind of body is simply an expression of the
federal spending power, as section 295 of the Budget Implementation Act, 2009 plainly
is. Section 296 merely authorizes the Minister of Finance to enter into agreements with
the provinces on behalf of the Government of Canada.

[536] The validity of sections 295, 296 and 297 of the Budget Implementation Act, 2009
does not seem to me to be in any doubt. In fact, the Attorney General of Alberta is no
longer challenging it, and Quebec did not belabour the point.

[537] Nonetheless, the majority has concluded that section 297 is invalid. That means
nothing less than a declaration that the Canadian Securities Regulation Regime
Transition Office Act is invalid in its entirety. Is the Transition Office now required to
cease operating immediately, discharge its staff and pack its bags? Shall the Attorney
General of Canada bring an emergency application in the Supreme Court of Canada for
a safeguard order?

                                       Final remarks

[538] To use an expression that is fitting here, we are not looking at a hostile takeover
of a provincial head of power by the federal government, as some parties have argued;
rather, this is the legal consequence of a gradual but radical transformation of the
concrete reality of the capital market, a market that has become Canada-wide,
integrated and vital to thousands of diverse enterprises, and is essentially characterized
by interprovincial and international transactions.

[539] With respect for my colleagues, their analysis amounts to saying that the
Constitution freezes jurisdiction in relation to a subject matter of area of economic
activity in time, regardless of any subsequent organic or operational evolution. In their
opinion, because the courts have historically recognized the provinces‘ authority to
regulate trading in securities, it follows that regulation of all aspects of the Canadian
capital market by a general law cannot now be brought in by Parliament.

[540] Permanent jurisdiction is certainly the case where the enterprise or activity is a
subject matter assigned specifically and exclusively to one level of government by the
Constitution Act, such as the postal service or hospitals, but not in respect of a subject
matter it does not specifically address. In that case, if regulation is to be valid it must be
related to a head of jurisdiction assigned to one of the levels of government in respect of
the real activities of the enterprise. The broader the activities associated with a subject
No.: 200-09-006746-090                                                           PAGE: 53

matter or area of activity not specifically enumerated in the Constitution Act, the more
likely it is that the possibility of a myriad of powers being in issue will arise.

[541] The Constitution Act recognizes, in section 92(10)(a), that the operational reality
of an enterprise is a critical aspect in determining the head of jurisdiction to which it is
attached. For example, a local or provincial railway company is regulated by the
legislature of the province concerned, while a company operating an interprovincial
railway is regulated by Parliament (Montreal (City) v. Montreal Street Railway, [1912]
A.C. 333). That also means that a change in the nature of an enterprise‘s activities may
result in a change in terms of its attachment to a head of jurisdiction. A local transport
company whose activities broaden out over time to beyond the province‘s borders then
comes under the regulation of Parliament (Ontario (Attorney General) v. Winner, [1954]
A.C. 541). However, an interprovincial and international shipping company that
reorganizes its operations to focus on shipping logistics, and is under subcontract to
third parties, will become not a shipping company, but a freight forwarding company,
regulated by the province where its office is located (Consolidated Fastfrate Inc. v.
Western Canada Council of Teamsters, [2009] 3 S.C.R. 407, 2009 SCC 53).

[542] The same principle applies to enterprises other than those referred to in 92(10),
since our constitutional law acknowledges that the transformation or reorganization of
an enterprise or economic sector may result in the enterprise or sector coming under a
new head of jurisdiction, in either direction. For example, the reorganization of a federal
telecommunications enterprise that results in certain services, such as directory
assistance, being abandoned and assigned to third parties, means that labour relations
in that sector cease to be regulated by Parliament and come under provincial control.
An international airport that hires employees to do cleaning and maintenance on its
buildings will find that they come under the Canada Labour Code, R.S.C. 1985. c. L-2.
However, if the airport management chooses to subcontract that activity sporadically,
the employees assigned to it will come under the provincial labour code that applies to
the workplace (Montcalm Construction Inc. v. Minimum Wage Commission, [1979] 1
S.C.R. 754). The same is true of a local maple syrup business that decides to sell its
products across the country. It will then have to comply with federal rules governing
signage and content of the products; in other words, its new operational circumstances
will bring it under federal heads of jurisdiction that could not have applied before
because of the strictly local or intraprovincial nature of its activities.

[543] In none of the cases referred to in the preceding paragraphs was there any
transfer of legislative authority between the levels of government, let alone a loss of a
head of power; there was only the recognition that transformation of the company‘s
operational circumstances brought it under new rules that may, as in this case, resulting
double aspect cases. Obviously, that does not create any constitutional instability and
does not involve any reinterpretation of the powers assigned to the two levels of
government. I do not see why it would be different for the capital market.
No.: 200-09-006746-090                                                        PAGE: 54

                                      Conclusion

[544] To summarize, because the pith and substance of the proposed Act is the
regulation of all participants in the capital market, which is an integrated, Canada-wide
market characterized by essentially extraprovincial and international transactions and is
critical to the financing of thousands of enterprises operating in all sectors of the
Canadian economy, under the supervision of a national agency, I am of the opinion that
Parliament may validly enact it by virtue of its power under section 91(2) of the
Constitution Act.

[545] For these reasons, my answer to the question submitted is ―no‖.




                                             PIERRE J. DALPHOND J.A.

								
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