Beer Battle; Cross-border out of bounds

The SCC’s ruling in R. v. Comeau continues interprovincial trade restrictions

Before they met, the only thing that really connected Arnold Schwisberg and Gerard Comeau was alcohol.

But Schwisberg, an Ontario lawyer, had been waiting for Comeau, a resident of New Brunswick since 1995. And s. 121 of the Constitution Act, 1867 had been waiting much longer — almost 100 years — for the twain to meet.

When they all finally converged, their association produced a legal drama watched by the entire country, business and consumers alike. It culminated in the Supreme Court of Canada’s (SCC) decision in R. v. Comeau earlier this year, a case that arose from a $292.50 fine for a liquor-smuggling offence under a regulatory statute. “I never doubted for a second that this case would capture the imagination of the Supreme Court, even when we were dealing with what was not much more than a traffic ticket,” says Bill Richards of Fredericton, the Crown Prosecutor who, with co-counsel Kathryn Gregory, represented the Attorney General of New Brunswick.

Humble origins notwithstanding, the SCC ruling, which held that s. 121 did not render unconstitutional New Brunswick’s regulatory limits on importing liquor from other provinces, will have a profound impact on interprovincial trade and the many industries engaged in it. Perhaps more importantly, it could turn out to be the Supreme Court of Canada’s defining iteration of federalism in the modern age.

Indeed, what was at stake was the fate of a myriad of interprovincial trade barriers, which august organizations like the Canadian Chamber of Commerce claim cost Canadians billions in higher costs. So weighty was Comeau’s potential impact that the entire constitutional practice team from Langlois lawyers, LLP attended the two-day SCC hearing. “We had many clients affected and we wanted to be right up-to-date on developments,” says Sean Griffin in the firm’s Montréal office.

Needless to say, Gerard Comeau knew nothing of s. 121 when a 2012 RCMP sting nabbed him after he purchased 354 bottles of beer and three bottles of spirits in Pointe-à-la-Croix, located in the Gaspésie region of eastern Québec, then drove them to his home in Tracadie, NB. But beer smuggler that he might have been to authorities, Comeau was only mimicking the actions of many of his neighbours who regularly crossed the bridge over the Restigouche River from Campbellton to buy their booze in la-Croix at a discount of almost 50% to what it sold for in their home province. “Most of the liquor sold in la-Croix was purchased by New Brunswickers,” Schwisberg says. “Taking beer across the border was part of their everyday lives.”

No surprise, then, that Comeau’s view of his rights, expressed publicly after his arrest, probably made a lot more sense to most Canadians than did the unanimous judgment of the country’s highest court. “The way I look at it, I’m a Canadian citizen,” he told media. “I don’t see any reason why I can’t go buy merchandise anywhere in this country and bring it home. You can buy anything else, like cars, clothes, everything. Except for beer.”

Markham, Ontario-based Schwisberg, who calls himself a “liquor lawyer,” saw the charges against Comeau as an opportunity. He had been looking for a case that challenged the constitutionality of Canada’s liquor monopolies since 1995, when he was representing Magnotta Winery Corporation in a lawsuit against the Liquor Control Board of Ontario. During the litigation, Schwisberg ran into the Importation of Intoxicating Liquors Act, a 1928 federal statute that prohibits anyone except provincial liquor boards from bringing in liquor from other provinces. “I started thinking, ‘This can’t be,’” Schwisberg told Lexpert. “Hasn’t anyone heard of s. 121?”

Section 121, as a paradigm of complex legislative language, isn’t exactly the Income Tax Act. It seems straightforward, stating simply that “All articles of the Growth, Produce, or Manufacture to any one of the Provinces, shall, from and after the Union, be admitted free into each of the other Provinces.” But straightforward it certainly wasn’t: “Free,” it turned out, had more elasticity than rubber.

So what did “free” mean? It was a question that Schwisberg pondered for 23 years. In 2009, he shared his view with Ian Blue, Counsel at Toronto’s Gardiner Roberts LLP and his co-counsel in Comeau. Blue, fascinated, took it upon himself to write a series of articles questioning the validity of the SCC’s 1921 decision in Gold Seal Ltd. v. Alberta (Attorney-General). In that case, the court held that s. 121 prohibited only direct tariff barriers, such as customs duties, on goods moving between provinces. Decided in the Prohibition area, Gold Seal stood as the binding precedent on the meaning of s. 121 from an appellate court for 97 years, until Comeau came along. “The courts hadn’t really pronounced on s. 121 conclusively in almost 100 years, although there are a lot of cases that have touched on it and judges who expressed various views — albeit not definitive views,” Richards says.

Meanwhile, Schwisberg and Blue were looking for a test case. Schwisberg, in fact, went so far as to try to engineer several. At one point, he advised Terry David Mulligan, a former RCMP officer turned radio and television personality, on a publicity stunt that involved transporting beer across the border from British Columbia to Alberta. “We were hoping he would be arrested, but he wasn’t,” Schwisberg said. In another instance, Schwisberg tried to induce several Nova Scotia restaurateurs to import wine from BC, but they declined for fear of regulatory reprisals.

It all bore fruit, however, when Comeau retained Campbellton criminal lawyer Mikaël Bernard to represent him. Bernard came across Blue’s writing on s. 121 and contacted the Toronto lawyer. Blue got in touch with the Canadian Constitution Foundation (CCF), a charity dedicated to defending Constitutional rights and freedoms, who retained him to conduct Comeau’s defence pro bono. As it turned out, Blue was unable to attend the trial in Campbellton Provincial Court in August 2015, and Schwisberg appeared in his stead as co-counsel with Bernard and Karen Selick, Litigation Director for the CCF.

From the outset, Schwisberg and Blue knew they had a problem: Gold Seal, as the binding precedent from the highest authority, clearly limited s. 121’s applicability to direct tariff barriers. But s. 134(b) of New Brunswick’s Liquor Control Act, under which Comeau had been charged, was no such thing. Rather, it was part of a broad regulatory scheme — common to most Canadian provinces — whose overall constitutionality had not been seriously questioned. “From day one, we were mindful that Gold Seal was binding and that we had to get around it,” Schwisberg said. “So we set out to adduce facts that would fundamentally change the nature and parameters of the debate.”

For starters, Schwisberg retained a private detective to conduct surveillance that confirmed the extent to which New Brunswickers were resorting to Québec for their beer. He also imported Andrew Smith, a historian at the University of Liverpool and an expert on the events surrounding Confederation. “Smith testified that the Fathers of Confederation wanted to form a single economic union that would replace the free trade treaty that existed with the United States and that the Americans were then trying to abrogate,” Schwisberg says.

Smith turned out to be a terrific witness — but it took lots of work. “My rule of thumb is to spend two hours preparing a witness for every hour you expect them to be on the stand,” Schwisberg says. “It paid off, because Smith was so spellbinding that when he finished there wasn’t a person in the courtroom who didn’t understand what the Fathers intended.”

In response to Richards’s arguments that s. 134(b) was not aimed at other provinces but rather part of a regulatory scheme to control the sale and use of liquor, Schwisberg got the Crown’s witness to admit that the chief purpose of the prohibition on importation was to protect provincial revenues.

Richards, who spends much of his time on Aboriginal law matters, had found the issues in the case “tantalizing” from the get-go. “I realized it had the potential to go a long way, even to the Supreme Court,” he said. “We at head office are rarely involved in lower court cases of this kind, but this one had huge potential consequences.”

It wasn’t the only way in which Comeau was different. “It’s not the typical case where you strategize over calling one witness over the other, because the facts really weren’t in dispute,” Richards says. “The core question here was how to argue it properly.”

Richards’ key decision was whether to challenge what he calls Smith’s “very competent” evidence and risk having the case devolve into a debate between historians. “Ultimately, I decided that that approach was inappropriate and not what the court needed,” he said. Instead, Richards countered with Tom Bateman, a political scientist from St. Thomas University in Fredericton. “Bateman didn’t have a background in history, but he did provide a sense of how Constitutional theory and cooperative federalism had developed, and how things get done today as opposed to the past,” he said. “His evidence backfilled and supported the respect that the courts and the federal government have shown for the scope of provincial powers.”

What Richards didn’t anticipate was the result in the Provincial Court. In an 87-page decision, Judge Roland LeBlanc refused to follow Gold Seal, effectively overruling the century-old precedent from the high court. The evidence before him was not before the court in Gold Seal, he reasoned, and if it had been, the SCC would have decided the longstanding precedent differently. Judge Leblanc concluded, therefore, that s. 134(b) of the Liquor Control Act was unconstitutional, mandating Comeau’s acquittal. “I was completely, completely floored by the decision,” Richards said. “It was well-written, but I never thought we’d lose at the Provincial Court level.”

Yet another observer, who spoke on condition of anonymity, thought otherwise. In his view, the stars were lined up for a decision favouring Comeau. “Leblanc was a brilliant judge, this was his last case before retirement, and he had all the evidence he needed to support circumventing Gold Seal,” the lawyer said. “With all that, did he want to retire as a hero or a goat to his neighbours?”

The wag’s point of view notwithstanding, Richards now had an uphill bottle. Perhaps because of the “traffic ticket” status of the case, he had some difficulty convincing his superiors to proceed with an appeal. They eventually relented.

Typically, appeals from the Provincial Court in matters of this kind are to the New Brunswick Court of Queen’s Bench. But the Provincial Offences Procedure Act also provides for an appeal directly to the Court of Appeal, albeit only with leave of the court. “Because the facts were mundane and we were dealing with a question of law for the most part, we decided to take that route,” Richards said.

It was an unfortunate choice. Although Comeau’s legal team did not oppose the leave application, Court of Appeal Justice Margaret Larlee dismissed it without reasons. Schwisberg believes that the Crown made a tactical error in pursuing the matter at all. “The Provincial Court judgment was not binding on anyone and persuasive at best,” he says. “Now the province had not only a Provincial Court ruling against it, but one that had become more entrenched because the Court of Appeal had refused to hear the appeal.”

Richards, of course, doesn’t look at it that way: “The leave application had nothing to do with anything but whether we had met the test for bypassing the Court of Queen’s Bench,” he says.

The Crown now had only one recourse: rely on the provision in the Supreme Court Act that permits applications for leave to appeal to the high court even when the Court of Appeal below has already declined to hear the case. “Having failed to get leave at the Court of Appeal, I had to pull out all the stops to convince my supervisors to plod on with an application for leave to the Supreme Court,” Richards says. “The argument that eventually won the day was that given the importance of the issue to all of the provinces, we had to continue, regardless of our chances in the Supreme Court.”

After losing in the Court of Appeal, Richards consulted various legal scholars, who encouraged him to persist. As it turned out, the province’s application for leave to the SCC went unopposed. In the minds of most of the lawyers involved, there was little question that Comeau met the “broad public importance” threshold that constituted the basis on which leave could be granted. “The economic impacts of the case were enormous, and it was the test case for which my clients had been searching for a long time,” says Shea Coulson, now a partner at Dentons Canada LLP in Vancouver, co-counsel with Allan Doolittle of Gudmundseth Mickelson LLP in Vancouver for several wineries that intervened in Comeau.

Leave was granted. Comeau’s lawyers — now a team of four that included Schwisberg, Blue, Bernard and Daria Peregoudova, an associate at Blue’s firm, Gardiner Roberts — asked for and were awarded costs in any event.

But it wasn’t just Comeau’s team that had grown. Recognizing the broad swath its decision might cut, the SCC acknowledged some 23 intervenors (see sidebar on page 43), including all the provincial governments, the federal government, the Canadian Chamber of Commerce, the Canadian Federation of Independent Business, Cannabis Culture, Consumers Council of Canada, Federal Express and representatives from the wine, beer and various farm industries. “The provinces don’t need leave to intervene on a constitutional question, but the court granted intervenor status to every other party that applied,” Schwisberg said.

There were two key ways to argue the substantive appeal at the two-day hearing. The first was on a “balance of powers” basis, asking the court to strike a balance between the powers of the federal and provincial governments; the second was to formulate a test that would provide a standard for determining whether a particular piece of legislation offended s. 121.

Richards and his team chose the latter. “What I thought the court wanted to hear was how judges should approach s. 121,” he said. “What they didn’t want to hear was a standoff between federal and provincial powers such as the one that had characterized the longstanding tension between the federal power to regulate trade and commerce and the provincial power to regulate property and civil rights.”

Comeau’s team saw the issue similiarly. But they knew early on that the SCC would never adopt a test that was the equivalent of a free-trade guarantee. “An absolutist position was always doomed,” Schwisberg said. “Instead we put forward a yellow-light test, one that would put an onus on the province to show that the overall purpose of the impugned legislation was forgivable as within the scope of provincial powers despite the fact that it intruded on s. 121 — a test that’s akin to the way the onus is shifted to the government to show that legislation is demonstrably justifiable when it is found to have violated the Charter of Rights.

Comeau’s team gave Blue the task of handling the black-letter law, while Schwisberg was responsible for what he calls the “meta-legal stuff” on what the founding fathers intended and how a broad interpretation of s. 121 was a good thing for Canada. Mindful of the fact that oral argument in the SCC frequently amounted to an exercise in answering questions from the Bench, Comeau’s team flew former SCC justice Marshall Rothstein into Toronto. “We mooted our argument before him for an entire day,” Schwisberg said.

The preparation was prescient, but to no ultimate avail. “Minutes into my argument, Justice [Russell] Brown stepped in and told me that if I wanted to talk about what was good for the country, I should leave the building and turn left to the bell tower on Parliament Hill,” Schwisberg said. “For all intents and purposes, it was over right then and I never really did get to deliver my pitch. They say you have an hour to make your case, but all you really have is two minutes.”

It had gone as Rothstein had predicted. “It was very clear from the court’s questions, as it had been from Rothstein, that there was great concern about upsetting the status quo that existed and tethering the provinces going forward,” Schwisberg said. Nor did it help that the provinces and the feds had uncharacteristically lined up on the same side to vehemently support the constitutionality of New Brunswick’s liquor control scheme. “When it was over, I figured we’d lost,” Schwisberg said.

Schwisberg was right on. In a unanimous judgment delivered in April, the SCC ruled that s. 134(b) was a valid exercise of provincial powers. Comeau had not met the burden of showing that impeding interprovincial trade was the legislation’s primary purpose:

"We conclude that the primary purpose of s. 134(b) is to prohibit holding excessive quantities of liquor from supplies not managed by the province. New Brunswick’s ability to exercise oversight over liquor supplies in the province would be undermined if non-Corporation liquor could flow freely across borders and out of the garages of bootleggers and home brewers. The prohibition imposed in s. 134(b) addresses both. While one effect of s. 134(b) is to impede interprovincial trade, this effect is only incidental in light of the objective of the provincial scheme in general. Therefore, while s. 134(b) in essence impedes cross-border trade, this is not its primary purpose. Section 134(b) does not violate s. 121 of the Constitution Act, 1867."

Following the oral argument, Richards and his team had believed that their chances of success were solid. Their confidence turned out to be justified. “The court reiterated what it had said many times before about how federation works and I just couldn’t see them sidestepping the jurisprudence the SCC had previously laid down in cases like the Québec secession case and the same-sex marriage case,” he said. “Still, when the judgment came out, I felt very relieved.”

Yet Schwisberg remains unstinting in his criticism of the judgment. He believes that Comeau makes it “appallingly easy” for provinces to formulate “a pretextual case” for almost any legislation. “The provinces have had almost a century since Gold Seal to develop non-tariff barriers, and overturning them would have been cataclysmic,” he said. “So it would have taken a lot of guts to uphold the Provincial Court decision, and the Supreme Court just didn’t have what it took.” Indeed, Schwisberg speculates that the judgment is credited “to the Court” because “no judge wanted to put their name on this results-driven, politically oriented and internally inconsistent” judgment. “The decision amounts to saying that we’re not a country, but a federation,” Schwisberg says. “That’s a big difference.”

Schwisberg was not alone in his views. The media almost unanimously condemned the decision, with the National Post going so far as to say the Supreme Court had offered a “foolish beer decision to a foolish nation.”  

Richards, however, says the decision was necessary. “I can’t imagine how the country would operate if the court came to a different conclusion,” he said. Yet true to his calling, Richards maintained his proper position above the fray. “The Crown never celebrates,” he says.

Neither, it appears, will a country of beer drinkers seeking somewhat more affordable libations to fuel their long winter evenings.