Indexed As: Reference Re Securities Act

In The Matter Of a Reference by the Governor in Council concerning the proposed Canadian Securities Act, as set out in Order in Council P.C. 2010-667, dated May 26, 2010 (33718; 2011 SCC 66; 2011 CSC 66) Indexed As: Reference Re Securities Act Supreme Court of Canada McLachlin, C.J.C., Binnie, LeBel, Deschamps, Fish, Abella, Charron, Rothstein and Cromwell, JJ. December 22, 2011. Summary: In provincial references, both the Alberta Court of Appeal (510 A.R. 200; 527 W.A.C. 200) and the Quebec Court of Appeal (2011 QCCA 591), concluded that the proposed Canadian Securities Act (CSA) was unconstitutional. A reference was brought under s. 53 of the Supreme Court of Canada Act to determine the validity of the CSA. The Supreme Court of Canada held that the CSA as presently drafted was unconstitutional; it was not valid under the general branch of the federal power to regulate trade and commerce under s. 91(2) of the Constitution Act, 1867. Constitutional Law - Topic 5.1 General principles - Unwritten constitutional principles - Federalism (incl. principle of subsidiarity) - The Supreme Court of Canada provided an historic view of the federalism principle - The court stated that ss. 91 and 92 of the Constitution Act, 1867, divided legislative powers between Parliament and the provincial legislatures - This division remained the "primary textual expression of the principle of federalism in our Constitution, agreed upon at Confederation" - Inherent in a federal system was the need for an impartial arbiter of jurisdictional disputes over the boundaries of federal and provincial powers - That impartial arbiter was the judiciary - The court stated that "notwithstanding the Court's promotion of cooperative and flexible federalism, the constitutional boundaries that underlie the division of powers must be respected." - See paragraphs 54 to 62. Constitutional Law - Topic 5.1 General principles - Unwritten constitutional principles - Federalism (incl. principle of subsidiarity) - [See Constitutional Law - Topic 2950]. Constitutional Law - Topic 1581 Extent of powers conferred - Double aspect doctrine - General - The Supreme Court of Canada stated that "Canadian constitutional law has long recognized that the same subject or 'matter' may possess both federal and provincial aspects. This means that a federal law may govern a matter from one perspective and a provincial law from another. The federal law pursues an objective that in pith and substance falls within Parliament's jurisdiction, while the provincial law pursues a different objective that falls within provincial jurisdiction... This concept, known as the double aspect doctrine, allows for the concurrent application of both federal and provincial legislation, but it does not create concurrent

jurisdiction over a matter (in the way for example s. 95 of the Constitution Act, 1867 does for agriculture and immigration)." - See paragraph 66. Constitutional Law - Topic 2624 Determination of validity of statutes - Considerations - Motivation of legislature - A reference was brought under s. 53 of the Supreme Court of Canada Act to determine the validity of the proposed Canada Securities Act - Canada, Ontario and several interveners argued that the Act fell within federal jurisdiction to regulate trade and commerce under s. 91(2) of the Constitution Act, 1867 - Other provinces and interveners asserted that the matter fell under provincial power over property and civil rights under s. 92(13) and trenched upon matters of a merely local or private nature (s. 92(16)) - Two other provinces opposed the Act, but sought a more nuanced approach - They contended that Parliament's participation in securities regulation was best achieved through an exercise in federalprovincial cooperation, as in the agricultural products marketing context - The Supreme Court of Canada stated that "Canada must identify a federal aspect distinct from that on which the provincial legislation is grounded. The courts do not have the power to declare legislation constitutional simply because they conclude that it may be the best option from the point of view of policy. The test is not which jurisdiction - federal or provincial - is thought to be best placed to legislate regarding the matter in question. The inquiry into constitutional powers under ss. 91 and 92 of the Constitution Act, 1867 focuses on legislative competence, not policy." - See paragraphs 32 to 35 and 90. Constitutional Law - Topic 2950 Determination of validity of statutes or acts - Pith and substance - General principles - A reference was brought under s. 53 of the Supreme Court of Canada Act to determine the validity of the proposed Canada Securities Act - Canada, Ontario and several interveners argued that the Act fell within federal jurisdiction to regulate trade and commerce (Constitution Act, 1867, s. 91(2)) - Other provinces and interveners argued that the matter fell under provincial power over property and civil rights (s. 92(13)) - The Supreme Court of Canada held that the Act as presently drafted was not valid under the general branch of the federal power to regulate trade and commerce (s. 91(2)) - The day-to-day regulation of securities within the provinces, which represented the main thrust of the Act (its pith and substance), remained essentially a matter of property and civil rights within the provinces (s. 92(13)) and therefore subject to provincial power - As important as the preservation of capital markets and maintenance of Canada's financial stability were, they did not justify a wholesale takeover of the regulation of the securities industry, the ultimate consequence of the proposed federal legislation - The court noted the growing practice of resolving the complex governance problems that arose in federations, not by the bare logic of either/or, but by seeking cooperative solutions that met the needs of the country as a whole as well as its constituent parts - Such an approach was supported by, inter alia, the Canadian constitutional principles - See paragraphs 91 to 133. Constitutional Law - Topic 5660 Federal jurisdiction (s. 91) - Regulation of trade and commerce - General - The Supreme Court of Canada stated that "On its face, the general trade and commerce power (as distinguished from the more specific federal power to regulate interprovincial and

international trade and commerce) is broad - so broad that it has the potential to permit federal duplication (and, in cases of conflict, evisceration) of the provincial powers over large aspects of property and civil rights and local matters. This would upset the constitutional balance envisaged by ss. 91 and 92 and undermine the federalism principle. To avoid this result, the trade and commerce power has been confined to matters that are genuinely national in scope and qualitatively distinct from those falling under provincial heads of power relating to local matters and property and civil rights. The essence of the general trade and commerce power is its national focus." - See paragraph 70. Constitutional Law - Topic 5667 Federal jurisdiction (s. 91) - Regulation of trade and commerce - Matters of general national interest or concern - [See Constitutional Law - Topic 5660]. Constitutional Law - Topic 7201 Provincial jurisdiction (s. 92) - Property and civil rights - General - [See Constitutional Law - Topic 5660]. Constitutional Law - Topic 7285 Provincial jurisdiction (s. 92) - Property and civil rights - Regulatory statutes - Securities - [See Constitutional Law - Topic 2950]. Constitutional Law - Topic 7501 Provincial jurisdiction (s. 92) - Matters of local or private nature - General - [See Constitutional Law - Topic 5660]. Cases Noticed: Lymburn v. Mayland, [1932] A.C. 318 (P.C.), refd to. [para. 43]. Multiple Access Ltd. v. McCutcheon et al., [1982] 2 S.C.R. 161; 44 N.R. 181, refd to. [para. 44]. Global Securities Corp. v. British Columbia Securities Commission et al., [2000] 1 S.C.R. 494; 252 N.R. 290; 134 B.C.A.C. 207; 219 W.A.C. 207; 2000 SCC 21, refd to. [para. 44]. R. v. W. McKenzie Securities Ltd. (1966), 56 D.L.R.(2d) 56 (Man. C.A.), leave to appeal denied [1966] S.C.R. ix, refd to. [para. 45]. West & Dubros v. The Queen - see R. v. W. McKenzie Securities Ltd. Gregory & Co. v. Quebec Securities Commission, [1961] S.C.R. 584, refd to. [para. 45]. Québec (Sa Majesté du Chef) v. Ontario Securities Commission - see Asbestos Corp., Société Nationale de l'amiante and Quebec, Re. Asbestos Corp., Société Nationale de l'amiante and Quebec, Re (1992), 58 O.A.C. 277; 10 O.R.(3d) 577 (C.A.), leave to appeal denied [1993] 2 S.C.R. x; 157 N.R. 400; 64 O.A.C. 320, refd to. [para. 45]. Bennett et al. v. British Columbia Securities Commission (1992), 18 B.C.A.C. 191; 31 W.A.C. 191; 94 D.L.R.(4th) 339 (C.A.), refd to. [para. 45]. Bell Canada v. Commission de la santé et de la sécurité du travail (Qué.) and Bilodeau et al., [1988] 1 S.C.R. 749; 85 N.R. 295; 15 Q.A.C. 217, refd to. [para. 45]. Smith v. The Queen, [1960] S.C.R. 776, refd to. [para. 45].

Citizens' Insurance of Canada v. Parsons (1881), 7 App. Cas. 96 (P.C.), refd to. [para. 45]. Wakim, Re; Ex parte McNally, [1999] HCA 27; 198 C.L.R. 511, refd to. [para. 50]. R. v. Hughes, [2000] HCA 22, 202 C.L.R. 535, refd to. [para. 50]. Reference Re Secession of Quebec, [1998] 2 S.C.R. 217; 228 N.R. 203, refd to. [para. 54]. Reference Re Remuneration of Judges of the Provincial Court (P.E.I.), [1997] 3 S.C.R. 3; 217 N.R. 1; 206 A.R. 1; 156 W.A.C. 1; 121 Man.R.(2d) 1; 158 W.A.C. 1; 156 Nfld. & P.E.I.R. 1; 483 A.P.R. 1, refd to. [para. 55]. Northern Telecom Canada Ltd. et al. v. Communication Workers of Canada et al. and Canada Labour Relations Board et al. (No. 2), [1983] 1 S.C.R. 733; 48 N.R. 161, refd to. [para. 55]. Canada (Attorney General) v. Ontario (Attorney General), [1937] A.C. 326 (P.C.), refd to. [para. 56]. Hodge v. The Queen (1883), 9 App. Cas. 117 (P.C.), refd to. [para. 56]. Edwards v. Attorney-General for Canada, [1930] A.C. 124 (P.C.), refd to. [para. 56]. Reference Re Employment Insurance Act, [2005] 2 S.C.R. 669; 339 N.R. 279; 2005 SCC 56, refd to. [para. 56]. Ontario Public Service Employees' Union et al. v. Ontario (Attorney General) et al., [1987] 2 S.C.R. 2; 77 N.R. 321; 23 O.A.C. 161, refd to. [para. 57]. Potato Marketing Board (P.E.I.) v. Willis, [1952] 2 S.C.R. 392, refd to. [para. 57]. Lord's Day Alliance of Canada v. Attorney General of British Columbia, [1959] S.C.R. 497, refd to. [para. 57]. Coughlin v. Ontario Highway Transport Board, [1968] S.C.R. 569, refd to. [para. 57]. Fédération des producteurs volailles du Québec et al. v. Pelland, [2005] 1 S.C.R. 292; 332 N.R. 201; 2005 SCC 20, refd to. [para. 58]. Canadian Western Bank et al. v. Alberta, [2007] 2 S.C.R. 3; 362 N.R. 111; 409 A.R. 207; 402 W.A.C. 207; 2007 SCC 22, refd to. [para. 60]. RJR-MacDonald Inc. et Imperial Tobacco Ltd. v. Canada (Procureur général), [1995] 3 S.C.R. 199; 187 N.R. 1, refd to. [para. 63]. Quebec (Attorney General) v. Lacombe et al. (2010), 407 N.R. 1; 2010 SCC 38, refd to. [para. 63]. Kitkatla Indian Band et al. v. British Columbia (Minister of Small Business, Tourism and Culture) et al., [2002] 2 S.C.R. 146; 286 N.R. 131; 165 B.C.A.C. 1; 270 W.A.C. 1; 2002 SCC 31, refd to. [para. 63]. Reference Re Firearms Act (Can.), [2000] 1 S.C.R. 783; 254 N.R. 201; 161 A.R. 201; 225 W.A.C. 201; 2000 SCC 31, refd to. [para. 65]. Initiative and Referendum Act, Re, [1919] A.C. 935 (P.C.), refd to. [para. 71]. Lawson v. Interior Tree Fruit and Vegetable Committee of Direction, [1931] S.C.R. 357, refd to. [para. 72]. General Motors of Canada v. City National Leasing - see City National Leasing Ltd. v. General Motors of Canada Ltd. City National Leasing Ltd. v. General Motors of Canada Ltd., [1989] 1 S.C.R. 641; 93 N.R. 326; 32 O.A.C. 332, appld. [para. 76]. Attorney General of Canada v. Canadian National Transportation Ltd. - see Canadian National Transportation Ltd. et al. v. Canada (Attorney General). Canadian National Transportation Ltd. et al. v. Canada (Attorney General), [1983] 2 S.C.R. 206; 49 N.R. 241; 49 A.R. 39, refd to. [para. 76].

MacDonald v. Vapor Canada Ltd. - see Vapor Canada Ltd. et al. v. MacDonald. Vapor Canada Ltd. et al. v. MacDonald, [1977] 2 S.C.R. 134; 7 N.R. 477, refd to. [para. 76]. John Deere Plow Co. v. Wharton, [1915] A.C. 330 (P.C.), refd to. [para. 78]. Kirkbi AG et al. v. Ritvik Holdings Inc. et al., [2005] 3 S.C.R. 302; 341 N.R. 234; 2005 SCC 65, refd to. [para. 82]. Ontario Hydro v. Labour Relations Board (Ont.) et al., [1993] 3 S.C.R. 327; 158 N.R. 161; 66 O.A.C. 241, refd to. [para. 116]. Duplain v. Cameron, [1961] S.C.R. 693, refd to. [para. 126]. Authors and Works Noticed: Canada, Department of Consumer and Corporate Affairs, Proposals for a Securities Market Law for Canada (1979), vol. 2, p. 5 [para. 17]. Canada, Memorandum of Understanding Regarding the Regulation of Securities in Canada (Draft) (1994), 17 OSCB 4401, preamble [para. 19]; sect. 29 [para. 20]. Canada, Royal Commission on Banking and Finance, Report of the Royal Commission on Banking and Finance (1964), p. 348 [paras. 13, 14]. Canada, Royal Commission on Price Spreads, Report of the Royal Commission on Price Spreads (1935), pp. 41, 42 [para. 12]. Canada, Royal Commission on the Economic Union and Development Prospects for Canada, Report, vol. 3, p. 167 [para. 18]. Crawford Panel on a Single Canadian Securities Regulator, Blueprint for a Canadian Securities Commission - Final Paper (June 7, 2006), Online: http://www.cba.ca/contents/files/misc/msc_crawfordreport_en.pdf., p. 16 [para. 25]. Gillen, Mark R., Securities Regulation in Canada (3rd Ed. 2007), pp. 1, 32, 33 [para. 40]. Hockin Panel, Creating an Advantage in Global Capital Markets - Final Report and Recommendations (2009), pp. 60, 61 [para. 27]. Hogg, Peter W., Constitutional Law of Canada (5th Ed. Supp.) (updated 2010, release 1), vol. 1, p. 12-8 ff [para. 119]. Howard, John L., Securities Regulation: Structure and Process, in Proposals for a Securities Market in Canada (1979), vol. 3, p. 1693 [para. 16]. Macey, Jonathan, An Analysis of the Canadian Federal Government's Initiative to Create a National Securities Regulator (2010), pp. 48, 49 [para. 52]. Milne, Frank, The Impact of Innovation and Evolution on the Regulation of Capital Markets (May 19, 2010), paras. 2.1 to 2-4 [para. 40]. Ontario Securities Commission, CANSEC: Legal and Administrative Concepts (November 1967), OSCB 61, p. 66 [paras. 15, 16]. Porter Commission - see Canada, Royal Commission on Banking and Finance. Suret, Jean-Marc, and Carpentier,Cécile, Securities Regulation in Canada (working paper) (July 2003), generally [para. 127]. Trebilcock, Michael J., National Securities Regulator Report (May 20, 2010), para. 26 [para. 103]. Wise Persons' Committee - Committee to Review the Structure of Securities Regulation in Canada, It's Time (2003), pp. 59 [paras. 23, 24]; 60 [para. 23]. Counsel:

Robert J. Frater, Peter W. Hogg, Q.C., Claude Joyal and Alexander Pless, for the Attorney General of Canada; Janet E. Minor, Jennifer A. August and S. Zachary Green, for the intervenor, the Attorney General of Ontario; Jean-Yves Bernard, France Bonsaint and Hugo Jean, for the intervenor, the Attorney General of Quebec; Gaétan Migneault, for the intervenor, the Attorney General of New Brunswick; Eugene B. Szach and Nathaniel Carnegie, for the intervenor, the Attorney General of Manitoba; George H. Copley, Q.C., Nancy E. Brown and Donald Sutherland, for the intervenor, the Attorney General of British Columbia; Graeme G. Mitchell, Q.C., for the intervenor, the Attorney General for Saskatchewan; E. David D. Tavender, Q.C., D. Brian Foster, Q.C., L. Christine Enns and Jordan C. Milne, for the intervenor, the Attorney General of Alberta; Andrew K. Lokan, Massimo C. Starnino and Michael Fenrick, for the intervenor, the Canadian Foundation for Advancement of Investor Rights; Luis Sarabia, Matthew Milne-Smith and David Stolow, for the intervenor, the Canadian Coalition for Good Governance; John B. Laskin and Darryl C. Patterson, for the intervenor, the Investment Industry Association of Canada; Mahmud Jamal, Éric Préfontaine and Raphael T. Eghan, for the intervenor, the Canadian Bankers Association; Kelley M. McKinnon and Brent J. Arnold, for the intervenor, the Ontario Teachers' Pension Plan Board; Guy Paquette and Vanessa O'Connell-Chrétien, for the intervenor, Mouvement d'éducation et de défense des actionnaires; Raymond Doray and Mathieu Quenneville, for the intervenor, Barreau du Québec; Sébastien Grammond and Luc Giroux, for the intervenor, the Institute for Governance of Private and Public Organizations. Solicitors of Record: Attorney General of Canada, Ottawa, Ontario, for the Attorney General of Canada; Attorney General of Ontario, Toronto, Ontario, for the intervenor, the Attorney General of Ontario; Bernard, Roy & Associés, Montreal, Quebec, for the intervenor, the Attorney General of Quebec; Attorney General of New Brunswick, Fredericton, New Brunswick, for the intervenor, the Attorney General of New Brunswick; Attorney General of Manitoba, Winnipeg, Manitoba, for the intervenor, the Attorney General of Manitoba; Attorney General of British Columbia, Victoria, British Columbia, for the intervenor, the Attorney General of British Columbia; Attorney General for Saskatchewan, Regina, Saskatchewan, for the intervenor, the Attorney General for Saskatchewan; Fraser Milner Casgrain, Calgary, Alberta, and Attorney General of Alberta, Edmonton, Alberta, for the intervenor, the Attorney General of Alberta;

Paliare, Roland, Rosenberg, Rothstein, Toronto, Ontario, for the intervenor, the Canadian Foundation for Advancement of Investor Rights; Davies Ward Phillips & Vineberg, Toronto, Ontario, for the intervenor, the Canadian Coalition for Good Governance; Torys, Toronto, Ontario, for the intervenor, the Investment Industry Association of Canada; Osler, Hoskin & Harcourt, Toronto, Ontario, for the intervener, the Canadian Bankers Association; Gowling Lafleur Henderson, Toronto, Ontario, for the intervenr, Ontario Teachers' Pension Plan Board; Paquette Gadler Inc., Montreal, Quebec, for the intervenr, Mouvement d'éducation et de défense des actionnaires; Lavery, de Billy, Montreal, Quebec, for the intervenor, Barreau du Québec; Fraser Milner Casgrain, Montreal, Quebec, for the intervenor, the Institute for Governance of Private and Public Organizations. This reference was heard on April 13 and 14, 2011, by McLachlin, C.J.C., Binnie, LeBel, Deschamps, Fish, Abella, Charron, Rothstein and Cromwell, JJ., of the Supreme Court of Canada, who delivered the following decision, in both official languages, on December 22, 2011. Editor: Jana A. Andersen Order accordingly.