Canadian Industrial Gas & Oil Ltd. v. Province of Saskatchewan et al. and Attorney General of Canada et al., (1977) 18 N.R. 107 (SCC)

• Judge: Laskin, C.J.C., Martland, Judson, Ritchie, Spence, Pigeon, Dickson, Beetz and de Grandpré, JJ.
• Court: Supreme Court (Canada)
• Case Date: November 23, 1977
• Jurisdiction: Canada (Federal)
• Citations: (1977), 18 N.R. 107 (SCC);1977 CanLII 210 (SCC);[1978] 2 SCR 545;[1977] CTC 616;[1977] SCJ No 124 (QL);18 NR 107;[1979] 1 WWR 384;[1977] 6 WWR 607;1977 CanLII 192 (SCC);80 DLR (3d) 449;[1978] 1 SCR 1047

Cdn. Ind. Gas & Oil Ltd. v. Sask. (1977), 18 N.R. 107 (SCC)

MLB headnote and full text

Canadian Industrial Gas & Oil Ltd. v. Province of Saskatchewan et al. and Attorney General of Canada et al. (Intervenants)

Indexed As: Canadian Industrial Gas & Oil Ltd. v. Province of Saskatchewan et al. and Attorney General of Canada et al.

Supreme Court of Canada

Laskin, C.J.C., Martland, Judson, Ritchie, Spence, Pigeon, Dickson, Beetz and de Grandpré, JJ.

November 23, 1977.

Summary:

This case arose out of taxes imposed by the Province of Saskatchewan on oil and gas producers in 1973 following the sharp rise in world oil prices. 98 per cent of the crude oil produced in Saskatchewan was exported from the Province. The purpose of the taxes was to divert the enhanced value of Saskatchewan oil from the oil producers to the Province of Saskatchewan. The taxes, called a mineral income tax and a royalty surcharge, had the effect of imposing a freeze on the producer's income from the sale of oil and also compelled the producer to sell his product at a price equivalent to what the minister considered to be its fair market value. The amounts received by the producers in excess of their fixed or frozen income were required to be remitted to the Crown. One of the oil producers commenced an action for a declaration that the legislation which imposed the taxes was beyond the legislative competence of the Province of Saskatchewan. The trial court dismissed the action and declared that the legislation in question was valid.

On appeal to the Saskatchewan Court of Appeal the appeal was dismissed and the judgment of the trial court was affirmed - see [1976] 2 W.W.R. 356.

On appeal to the Supreme Court of Canada the appeal was allowed, the judgment of the Saskatchewan Court of Appeal was set aside and the legislation in question was declared invalid. The Supreme Court of Canada stated that the taxes were essentially export taxes imposed on oil production and were intended by the legislature to be incorporated into the purchase price and, accordingly, the taxes were not direct taxes on oil producers in Saskatchewan within the provincial power under s. 92(2) of the British North America Act - see paragraphs 31 to 56. The Supreme Court of Canada also held that the power granted to the Crown to fix prices receivable by Saskatchewan oil producers on their export sales was a power which involved the regulation of interprovincial trade and was invalid because it entrenched upon the federal power to regulate trade and commerce under s. 91(2) of the British North America Act 1867 - see paragraphs 57 to 60.

Dickson and de Grandpré, JJ., dissenting, in the Supreme Court of Canada, would have dismissed the appeal and would have affirmed the judgment of the Saskatchewan Court of Appeal. Dickson, J. stated that the taxes in question were direct taxes within the competence of the Province of Saskatchewan and that the legislative scheme was aimed at taxation and its effect upon extra-provincial trade and commerce was incidental and non-disabling - see paragraph 74.

Constitutional Law - Topic 6824

Enumeration in s. 92 of the British North America Act 1867 - Provincial power of direct taxation within the province - What constitutes a direct tax - The Province of Saskatchewan imposed taxes on oil and gas producers in 1973 following the sharp rise in world oil prices (98% of crude oil produced in Saskatchewan was exported from the Province) - The purpose of the taxes imposed was to divert the enhanced value of Saskatchewan oil from the oil producers to the Province of Saskatchewan - The taxes, called a mineral income tax and a royalty surcharge, had the effect of imposing a freeze on the producers' income from the sale of oil and also compelled the producer to sell his product at a price equivalent to what the minister considered to be its fair market value (and the amounts received by the producers in excess of their fixed or frozen income were required to be remitted to the Crown) - The Supreme Court of Canada stated that the taxes were essentially export taxes imposed on oil production which were intended by the legislature to be incorporated into the purchase price and, accordingly, the taxes were not direct taxes on oil producers in Saskatchewan within the provincial power under s. 92(2) of the British North America Act - The Supreme Court of Canada declared invalid the legislation which imposed the taxes - See paragraphs 31 to 56.

Constitutional Law - Topic 5670

Enumeration in s. 91 of the British North America Act - Federal power of regulation of trade and commerce - The Province of Saskatchewan imposed taxes on oil and gas producers in 1973 following the sharp rise in world oil prices (98% of crude oil produced in Saskatchewan was exported from the Province) - The legislature gave the Crown the power to fix the prices receivable by Saskatchewan oil producers on their export sales - The Supreme Court of Canada held that such a price fixing power involved the regulation of interprovincial trade and was beyond the legislative competence of the Province of Saskatchewan - See paragraphs 57 to 60.

Constitutional Law - Topic 6821

Enumeration in s. 92 of the British North America Act - Provincial power of direct taxation within the province - The Supreme Court of Canada referred to the distinction between direct and indirect taxation - See paragraphs 31 and 100 to 106.

Constitutional Law - Topic 6822

Enumeration in s. 92 of the British North America Act - Provincial power of direct taxation within the province - What constitutes a tax - The Supreme Court of Canada held that a "royalty surcharge" constituted a tax and did not constitute a royalty - See paragraphs 36 to 43 and 128 to 135.

Cases Noticed:

R. v. Caledonian Collieries, Limited, [1928] A.C. 358, refd to. [para. 32]; folld. [para. 103].

Atlantic Smoke Shop v. Conlon, [1943] A.C. 550, folld. [paras. 34, 107].

Cairns Construction Limited v. Government of Saskatchewan, [1960] S.C.R. 619, folld. [paras. 34, 107].

Lawson v. Interior Tree Fruit and Vegetable Committee of Direction, [1931] S.C.R. 357, folld. [paras. 39, 131].

Attorney General for British Columbia v. McDonald Murphy Lumber Company Limited, [1930] A.C. 357, folld. [paras. 53, 107].

Farm Products Marketing Act, Reference re The, [1957] S.C.R. 198, folld. [paras. 58, 138].

Carnation Company Limited v. Quebec Agricultural Marketing Board, [1968] S.C.R. 238, dist. [para. 61]; folld. [para. 138].

Amax Potash Limited v. Government of Saskatchewan, 11 N.R. 222; [1976] 6 W.W.R. 61, folld. [para. 65]; refd to. [para. 146].

Canadian Pacific Railway Company v. Attorney General for Saskatchewan, [1952] 2 S.C.R. 231, folld. [para. 86].

Attorney General for Quebec v. Reed (1884), 10 A.C. 141, folld. [para. 100].

Bank of Toronto v. Lambe (1887), 12 A.C. 575, folld. [para. 100].

City of Halifax v. Fairbanks Estate, [1928] A.C. 117, folld. [paras. 101, 105].

Attorney General for British Columbia v. Kingcome Navigation Co. Ltd., [1934] A.C. 51, folld. [para. 101].

City of Charlottetown v. Foundation Maritime Company, [1932] S.C.R. 589, folld. [para. 102].

Attorney General for British Columbia v. Canadian Pacific Railway Company, [1927] A.C. 934, folld. [para. 107].

Attorney General for British Columbia v. Esquimalt and Nanaimo Railway, [1950] A.C. 87, folld. [paras. 108, 115].

Forbes v. Attorney General of Manitoba, [1937] A.C. 260, refd to. [para. 111].

Nickel Rim Mines Ltd. v. Attorney General for Ontario, [1966] 1 O.R. 345, dist. [para. 112].

Security Export Co. v. Hetherington, [1923] S.C.R. 539, folld. [para. 115].

Attorney General for Manitoba v. Attorney General for Canada, [1925] A.C. 561, folld. [para. 120].

Grain Marketing Act, 1931, In re, [1931] 2 W.W.R. 146, folld. [para. 121].

Attorney General for Alberta v. Huggard Assets Ltd., [1953] A.C. 420, refd to. [para. 128].

B. & B. Royalties Ltd. v. Minister of National Revenue, [1940] Ex. C.R. 90, folld. [para. 131].

Ross v. Minister of National Revenue, [1950] Ex. C.R. 411, folld. [para. 131].

Lower Mainland Dairy Products Sales Adjustment Committee v. Crystal Dairy Ltd., [1933] A.C. 168, folld. [para. 131].

Home Oil Distributors Ltd. v. Attorney General for British Columbia, [1940] S.C.R. 444, folld. [para. 137].

Shannon v. Lower Mainland Dairy Product Board, [1938] A.C. 768, folld. [para. 137].

Brant Dairy Company Limited v. Milk Commission of Ontario, [1973] S.C.R. 131, folld. [para. 138].

Attorney General for Manitoba v. Manitoba Egg and Poultry Association, [1971] S.C.R. 689, folld. [para. 138]; dist. [para. 139].

Swift & Co. v. United States (1905), 196 U.S. 375, refd to. [para. 138].

Stafford & Wallace (1922), 258 U.S. 495, refd to. [para. 138].

Chicago Board of Trade v. Olsen (1923), 262 U.S. 1, refd to. [para. 138].

MacDonald v. Vapor Canada Ltd., 7 N.R. 477; [1976] 22 C.P.R.(2d) 1, folld. [para. 138].

Coe v. Errol, 116 U.S. 517, refd to. [para. 138].

Richfield Oil Corp. v. State Board of Equalization, 329 U.S. 69, refd to. [para. 138].

Empresa Siderurgica v. Merced Co., 337 U.S. 154, refd to. [para. 138].

Burns Foods Ltd. v. Attorney General for Manitoba, 1 N.R. 147; [1975] 1 S.C.R. 494, dist. [para. 139].

Statutes Noticed:

Oil and Gas Conservation Stabilization and Development Act, 1973, S.S. 1973-74, c. 72, 73, sect. 3 [para. 5]; sect. 4(1) [para. 6].

Mineral Resources Act, S.S. 1973-74, c. 64.

Mineral Resources Act Regulations, O.C. 95/74, O.C. 1238/74.

British North America Act 1867, sect. 91(2), sect. 92(2).

Authors and Works Noticed:

Mill, John Stuart, Principles of Political Economy, Book 5, c. 3 [para. 100]; Book 2, page 435 [para. 107].

Counsel:

J.J. Robinette, Q.C., W.M. Elliott, Q.C., and Marjorie A. Gerwing, for the appellant, Canadian Industrial Gas & Oil Ltd.;

Geo. Taylor, Q.C., Ken Lysyk, Q.C., and Roy S. Meldrum, Q.C., for the respondents, Province of Saskatchewan et al.;

T.B. Smith, Q.C., and J. Mabbutt, for the intervenant Attorney General of Canada;

Pierre Lamontagne, Q.C., and Jocelyne D. Knoppers, for the intervenant Attorney General of Quebec;

I.D. Frost, for the intervenant Attorney General of Manitoba;

Wm. Henkel, Q.C. and E. Bruce Corenblum, for the intervenant Attorney General of Alberta.

This appeal was heard by LASKIN, C.J.C., MARTLAND, JUDSON, RITCHIE, SPENCE, PIGEON, DICKSON, BEETZ and de GRANDPRE, JJ., at Ottawa, Ontario on November 8, 9 and 10, 1976.

The judgment of the Supreme Court of Canada was delivered on November 23, 1977 and the following opinions were filed:

MARTLAND, J. - see paragraphs 1 to 65;

DICKSON, J., dissenting - see paragraphs 66 to 147.

LASKIN, C.J.C., JUDSON, RITCHIE, SPENCE, PIGEON and BEETZ, JJ. concurred with MARTLAND, J.

de GRANDPRE, J. concurred with DICKSON, J.