Wednesday, July 09, 2014

L'Union St-Jacques de Montréal v. Dame Julie Bélisle -- Provincial Insolvency Powers -- Thumbs Up

Canadian constitutional law starts with a widow's fight for her pension. Consistent with our jurisprudence's lack of a sense of potential movie adaptation rights, she lost.

As the Pithlord grows older, few phrases evoke more pity or fear into his heart than "actuarial insolvency". As the former firefighters and teachers of Detroit have discovered, a promise to pay a benefit is only as good as the funding available to pay it. Human nature being what it is, error or misfeasance may mean that the funding is not good enough. At that point, someone does not get what they were promised.

Actuarial insolvency brought down Detroit, it brought down Greece and it could bring down all the western countries, since in a demographic decline, no solution seems likely to pass without the support of physically frail, but politically potent oldsters. The Pithlord imagines a death spiral in which more and more financial demands are placed on the still-fertile, who react by having even fewer kids. Eventually, the forest returns, preferably with some suitable Wagnerian background music.

Nineteenth century Quebec did not have those kinds of demographic worries, since most people could number their siblings with double digits. It also did not have state-sponsored social security systems, solvent or otherwise. It did have numerous benevolent societies, which collected premiums and then promised pensions and other insurance. L'Union St.-Jacques du Montréal was one such institution. Unfortunately, its actuaries weren't up to snuff, and it ended up owing a number of widows more in pensions than it could afford to pay. Some of the widows agreed to voluntary reduction, but as with Argentina's creditors today, there were hold outs. Julie Bélisle was one. She insisted on being paid what she had been promised. And her stuborness started the whole tradition of Canadian constitutional jurisprudence.

The provincial legislature of Quebec (not yet calling itself the National Assembly) responded to the dilemma by restructuring all the pensions. Each of the widows would get $200 as capital, plus a possibility of more if the association got out of its financial difficulties. This was an ad hoc, political solution, but as General Motors and Chrysler taught us, we can't afford to be superior about it.
But ad hoc political solutions do not always have much legitimacy, and Madame Bélisle did not like the restructuring of her pension one bit. She pointed out that "Bankruptcy and Insolvency" is a matter to which "exclusive Legislative Authority" was given to the federal Parliament by item 21 of section 91 of the then-recent British North America Act, 1867. Only the feds could do what the province had done. She had a powerful argument, since in substance the province was restructuring obligations of an insolvent entity. The association argued that such a private Act (quite common in the 19th century) fit within the class of "Generally all Matters of a merely local or private Nature in the Province" given to the provinces by section 92 (16).

The Canadian court agreed with the widow, but the Privy Council did not. Certainly, the federal Parliament could have passed a general law dealing with the insolvency of beneficial societies. But it had not. It was therefore open to the province to deal with the sticky situation in a specific case. The Privy Council were conscious of how much of private law is really about priorities when there is not enough to go around, and saw that a rule like the one Madame Bélisle was seeking would have destoryed much of a provincial legislative power:
Their Lordships are by no means prepared to say that if any such law [as a general insolvency law for associations] had been passed by the Dominion Legislature, it would have been beyond their competency; nor that, if it had been so passed, it would have been within the competency of the provincial legislature afterwards to take a particular association out of the scope of a general law of that kind [...] But no such law every has been passed; and to suggest the possibility of such a law as a reason why the power of the provincial legislature over this local and private association should be in abeyance or altogether taken away, is to make a suggestion which, if followed up to its consequences, would go very far to destroy that power in all cases.
B´lisle is now a pretty obscure case, even though it was the first and even though the issues in it are still with us. But it is useful for the following points:
  • While it has been suggested (most recently in the Tsilhqot’in case, that overlapping jurisdiction is a "modern" problem based on our "more complex" society, courts had to grapple with it from the beginning.
  • Relatedly, the very earliest case suggested a reluctance to declare provincial laws invalid for entering the federal sphere when the federal Parliament had done nothing inconsistent with what the province was trying to do.
  • * If the heavily centralist approach of the early domestic courts had prevailed instead of the approach of the Privy Council to respect provincial autonomy and diversity in private law, the country would have looked very different. As Trudeau suggested, Quebec secession would then have been an accomplished fact.

Wikipedia's account is here.

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