Loopholes: Rights and Taxes

10 03 2010

I was planning on responding to this article I had read earlier, but then I read this and I began to see a theme and I asked myself: what relationship is there, if any, between so-called ‘loophole’ or ‘override’ provisions and their parent statutes? The answer, I would suggest, might go against our common sense.

Tax Code

What do Canadians like to complain about besides the weather (and losing to the US in hockey)? In a word: taxes. The Globe & Mail article linked to above seemed to think it was doing us a favour in that regard. It was purporting to educate ‘wealthy’ Canadians about their options when it came time to file their taxes (though, perhaps, a little too late for this year). What did the enlightened individuals who habitually post comments to G&M articles have to say about that? Well, in two words: loopholes bad.

Why are they bad? Because they allow these ‘wealthy’ Canadians to shirk their responsibility to society by not paying the maximum amount of taxes possible to the government(s). My question is: why should they have to? The tax code says, among other things, that certain entities are taxed at certain rates and sets out the way in which tax brackets work. What it does not do (as far as I am aware) is forbid those who are not wealthy from taking the same liberties (yes, I chose that word on purpose). Now, as with many private/civil rights (‘civil’ as in distinguished from the Charter, not as in the 1960s movement in the US), many of the liberties that the tax code affords are simply not worth pursuing unless you happen to be wealthy. I say this because the right to sue someone who has totalled your car is worth far less when the car in question is a 1992 Corolla than if it were a Bentley. The same, I would suggest, applies to the tax code. Just because your means don’t make the setting up of holding companies and trusts or the making of spousal loans worthwhile doesn’t mean they are ‘loopholes’.

My problem with the term, is that it suggests that those who avail themselves of their legal rights are engaged in some kind of moral breach. If (big if for some, I know) paying your taxes is a morally good thing and if these moral goods are set out in a certain statutes, then it is unclear to me how other provisions of that statute come to take on this sinister moral character. Now, this is not to suggest that you can’t claim that certain parts of a statute are immoral without impugning the entire thing (certain parts of the Criminal Code come to mind). It is to suggest, however, that if a statute explicitly provides for a course of action, then that course of action should not be labelled a ‘loophole’. This is for the simple reason that this course of action does not occupy some weird conceptual space left hanging between (hypothetically) ss. 3.4(1) and 3.4(3); it is actually s. 3.4(2). A loophole, then, would properly be a course of action that,while not explicitly forbidden in a statute, is nonetheless not explicitly provided for either. The scary part about that statement? It describes most of your ‘civil rights’ (as understood above) and, in fact, characterizes most of the common law.

The Charter

It seems that Mr. Yunusov’s concern in his article (link above) is that between ss. 1 and 33 the rights guaranteed in the Charter aren’t worth the paper they are written on. He’s not in bad company, to be sure, but his argument about the Charter sounds decidedly similar to the arguments about the tax code above. Both s. 1 and s. 33 of the Constitution Act, 1982 are part of the ‘Charter’ which is the first 34 sections of that document. In what sense are those two sections loopholes? They both allow government actors to behave in ways that otherwise limit a Charter right, either by establishing that the limitation is a reasonable one in the circumstances (s. 1) or by passing legislation notwithstanding that particular right (s. 33). In short, both sections allow the government to dodge their obligations and undermine the Charter, much the same way the wealthy do with their taxes every year.

My response here is substantially the same. I also want to highlight what is, in my opinion, a paradigm example of why we have s. 33 in the first place. First, a constitutional loophole (i.e. something that would really allow a government to disrespect someone’s rights) would be the result of a poorly worded constitution, not the result of a particular section of the constitution itself. A perfect example would be  s. 15’s protection of equal treatment irrespective of a set of characteristics (race, colour, faith, gender, etc.). Sexual orientation was left out of that list, and quite deliberately I’m told, and that, in my mind, constitutes a loophole that some governments attempted to exploit (Alberta, that would be you). Now, the courts are, unsurprisingly, not thrilled when such bona fide loopholes are brought to their attention. They tend to close them quite quickly, as they did here, by reading sexual orientation into s. 15 as a protected ground.

Does this make rights (both civil and human) a little uncertain? Sure. Does it allow for a more flexible approach to complex questions? Sure. Some, like Mr. Yunusov, might argue that to protect something so important as your Charter rights such flexibility is a cost he is willing to accept. He is entitled to that view (s. 2(a) and/or (b) if you’d like to check), but I cannot share it. Rights are never absolute (see all the ink spilt over ‘fighting words‘ in the US for but one example). Sure, their Bill of Rights makes for a more stirring read than ours, but does that surprise anyone coming from a country whose founding principles are “peace, order, and good government”? We’ve always had a more practical bent, but, perhaps ironically, we also tend to have a better record when it comes to protecting those rights. Perhaps its a cold comfort, but in our jurisprudence we explicitly recognize when we are limiting someone’s rights. In other systems, the protection isn’t engaged because the argument is that the right wasn’t engaged, that is, it wasn’t limited. Often that is patently false (as with fighting words – you are clearly limiting my ability to express myself. It is, obviously, a reasonable limitation, but that doesn’t change the fact that it is a limitation).

This brings me to my second concern, about those who would wage war against ‘loopholes’ and that is the recent SCOTUS decision in Citizens United. I’m just going to guess that Obama & Co. would really like a s. 33 of their own right about now. Their alternative? The intellectually honest, precedent respecting, and time honoured tradition of waiting for a judicial opening and filling it with someone who thinks like you do. This is clearly the President’s prerogative, but it is also a far less principled way of dealing with the issues at stake. Furthermore, while any appoint to the bench carries a degree of uncertainty, any statute passed pursuant too s. 33 is subject to renewal every five years or else the exception expires (and brings the legislation back into the realm of Charter scrutiny). You can’t say the same about binding Supreme Court decisions.

Tomato, Tomato you say?

It seems to me that if the ‘offending clause’ (let’s call them) is part of the document itself, then it was intended to be there as a matter of positive law. If this is true, then we cannot suggest that those who are taking advantage of them are doing something wrong. The objection at this point would be: we aren’t suggesting they are doing anything wrong, only that they are doing something immoral. That is a tougher question, indeed. Still, I would think that the blame would be on the offending legislature(s), not on the particular person who happens to be exercising their liberty. If there is something immoral about reasonable and demonstrably justified limits on rights or on paying less taxes through the proper use of trusts, then it is the legislature’s fault for endorsing them.

‘But they’re still immoral then!’ you say. I don’t dispute that, I only dispute the imputation that it is a legal problem. It is not. It is decidedly a political problem and, in the case of the Charter, a fairly intractable one. Both cases, however, allow governments to be flexible in their approach to complex problems and, that alone, seems laudable. They won’t get it right every time, but as long as it keeps them from getting it spectacularly wrong, that seems good enough.


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Categories : Legal Analysis, Theory

Private Law, Public Policy

18 11 2009

We have been studying the law of negligence in my first year tort class here at Western Law. In fact, it has, quite unexpectedly, become one of my favourite classes. To this I credit the quality of instruction, though the subject matter certainly is thought provoking. So much so, that I have become rather disturbed by the Canadian, and other Commonwealth countries’, approach to the subject. Even in an apparently clear case, such as Cooper v. Hobart, the Supreme Court of Canada feels compelled to expound the public policy reasons for their decision. This, I think, misses the point and, worse yet, overreaches.

Inconsistent Theory, Uncertain Policy

As my professor would explain it, negligence, properly understood, is still very much within the mould of Donoghue v. Stevenson. When it comes to the duty of care proximity serves to limit liability. The question is: did the plaintiff share a relationship with the defendant such that the defendant should have reasonably foreseen that the plaintiff might be among those affected by her actions? In this respect, the defendant’s liability is delimited by a circle or series of circles with her at the centre. If the plaintiff falls within the scope of this proximity (within the circle), then we can say a duty was owed and you may proceed to the next step of the negligence analysis. If not, then there was no duty and, therefore, no right upon which to sue.

That is, if we take my professor’s view. The courts, at least on the basis of both my (admittedly limited) experience and the authority of my professor, often adopt a different approach. The first step is to address foreseeability and proximity with respect to the particular plaintiff(s) and defendant(s). If both they both obtain, then the court attempts to fit the case into an existing category of negligence. Where they are unable to do so, they turn to public policy to assess whether or not the case under consideration should give rise to a new case of action. In this determination they will consider if there are any reasons of public policy that might prevent them from creating such a new cause of action. As the term may suggest, public policy can include just about anything of concern to the public, be it the precedent set or broader social concerns.

Coherence Breeds Certainty

And what’s wrong with that? Well, in a word, everything. On the relationship-based view of negligence liability turns on the issues in the case. Sounds simple, but that is what private law is meant to be about or, at least, so I’m told. If it were a question of general concern, then it would likely be an exercise in public law.

Fine, but perhaps the court should take the consequences of its decision into account. After all, if the Supreme Court of Canada makes a pronouncement on a particular private law dispute it will certainly have a very public effect. This concern should not be easily dismissed. It does not, however, grant the courts carte blanche. While surely there would be some concern if, in the course of a judgment, the court imputed unlimited liability to an unlimited class of people. The concept of proximity, however, seems to address that very concern.

I do not owe you a duty and, therefore, I risk no liability if you are not, as Lord Atkin put it, my ‘neighbour.’ Now, some actors and some actions may be so large and pervasive that a great many people become their neighbours, but this, in and of itself, does not really present a problem. Indeed, that is the beauty of coherency: all actions have consequences that are roughly proportional to their scope. This perturbs some, like the Supreme Court of Canada, so much that they at once recognize the existence of liability and dismiss it for reasons of ‘public policy.’

P-Words Belong to Parliament

This approach raises its own questions. First, why do we need to limit liability at all? Granted, liability ceases to make sense if it captures all actions: if you are liable for everything, then, in some sense, you are liable for nothing. I don’t see, however, that such consequences are the realistic outcome of the application of Donoghue v. Stevenson. It seems rather arbitrary to proclaim that you, massive business enterprise, are entitled to all the benefits that accrue to your size while simultaneously bearing only some of the concomitant risks. If the duties and rights are there, then it would seem no answer to suggest that ‘public policy,’ whatever that means, somehow extinguishes them.

Second, and perhaps more importantly, ‘public’ questions should be left to representative institutions. This is not to say that the courts cannot make evaluative decisions. In fact, that is largely what the Charter requires them to do. Similarly, whenever the courts are called to make decision upon equitable grounds they often have no choice but to evaluate each party’s actions. The irony, then, is that by citing ‘public policy’ the courts set about extinguishing rights that are otherwise admittedly valid. The Charter calls for balancing, tort law, as far as I am aware, does not.

If the logical application of liability would lead to ‘publically’ undesirable outcomes, then that is a question for Parliament. In this respect, the courts seem to have it backwards. They will not extend liability where the doctrine demands it, but they will read into s. 7 of the Charter a richer definition of ‘fundamental justice’ than was clearly ever intended. If the application of ‘public policy’ is from a genuine concern with public welfare, then leave that essentially contestable concern to those who are competent do deal with it. That was the approach of the courts with nuisance in the former half of the 20th century. I don’t see why it should be any different today.


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Categories : Legal Analysis

Do You Know Your (Employment) Rights?

4 11 2009

What comes to mind when I say the word ‘rights’? Is it the Charter? If it is, fair enough; it is the largest single repository of rights in Canada. It is not, arguably, the only one, however. When it comes to your day-to-day life, the right to be free from arbitrary search and seizure (s. 8), while good for piece of mind, is not all that pressing. If you’re like most people, though, you spend upwards of 40 hours a week working away from home and under someone else’s authority. In this context, do you know your rights?

Employment Standards

Perhaps the single most important document in this respect is the Employment Standards Act, 2000 (in Ontario, anyway – this will vary by province and/or industry). Of particular interest will be sections 5, 55, and 57. Section 5 ensures that you, as an employee, are guaranteed at least the minimum protections of the Act, but that you and your employer may contract for, and be bound to, higher standards if you so agree. This is significant because even if you sign an employment contract that allows for less than, say the minimum notice periods for termination, then it is the Act, and not the contract, that applies. Similarly, if your contract provides for more than the minimum notice period in the Act, then it is the contract that applies. Basically, whichever of the two most benefits the employee will apply.

Section 55 is interesting because it tells you that certain prescribed classes of employees are not entitled to notice of termination or pay in lieu of notice. To find out who exactly this is, however, you’ll have to check out Ontario Regulation 288/01, specifically section 2. Here you will see, for example, that an employee will not be eligible for notice of termination if they are:

“guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer.”

This is kind of a sneaky way for the government to make the Act seem very employee-centric while still leaving a fair amount of power in the hands of the employer.

Section 57 sets out the minimum notice periods that employer’s must honour when terminating an employee. Keep in mind that section 54 tells us that these only apply if you have been continuously employee for more than 3 months. After that, its roughly 1 week for every year you’ve worked for that employer. This tops out at 8 weeks, however, so even if you’ve been working for an employer for 10 years, you’ll only get 8 weeks (unless some other provisions apply, of course).

What Else You Need Yo Know

Labour & employment law is a complicated area: the Employment Standards Act alone weighs in at over 100 pages. This doesn’t even include the regulations and thousands of cases that help further define this complicated area. For example, what does ‘wilful misconduct’ even mean? Well, to figure that out you need to some some legal research: there is no simple answer. In this respect, if you are facing a labour or employment dispute, do yourself a favour and find a lawyer. Not just any lawyer though, one that specializes in this area. Labour & employment law, like criminal defence, is not a subject where there is a lot of room for a general practitioner to figure it out as s/he goes along.


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Categories : Legal Analysis

Supreme Court Considers Freedom of Religion: Alberta v. Hutterian Brethren of Wilson Colony

29 07 2009

Now, I may not be in much of a position to perform legal analysis, having not quite started law school yet, but a recent Supreme Court decision has piqued my interest. The case in question revolves around the conflict between the right to freedom of religion and the integrity of the driver’s licensing system in the province of Alberta. The Hutterites’ concern is that consenting to having a picture taken amounts to breaking the Second Commandment, that is, it is an act that amounts to the making of idols. The government of Alberta’s position, however, is that to ensure that an Alberta driver’s licence remains a secure form of identification necessitates their requirement that a digital photograph be taken of all those who carry one. The conflict, then, is readily apparent.

While both inferior courts found in favour of the Hutterite colony, the Supreme Court, in a split decision, sided with the government of Alberta. While it may appear, on the face of it, that this decision will be of little moment for those Canadians who do not share the Hutterite faith, the decision is poised to be applied in other situations.

For example, the (not so) recent debate over the visual identification of voters at polling booths could be one of those affected areas. Whether or not this particular clash of rights and systemic integrity will ever get to the courts is unclear, but it does appear, at least on the face of it, to be a comparable situation. The main difference, admittedly, is that voters are allowed to cast ballots by mail, without any visual identification, where no one else in Alberta was allowed to carry a driver’s licence without a photo. Unless such identification-less options were also tightened or otherwise demonstrated to be reasonable, necessary, and sufficiently different from the case of those who cover their faces for religious reasons it may remain unlikely that this particular issue will gain much traction.

What is really interesting about the judgement, of course, is its split nature. Only four of the seven sitting justices found in favour of the Albertan government. This, along with the adverse decisions in the lower courts, does suggest that this matter is not as straightforward as a simple reading of the conclusion in paragraph 109 would suggest. This room for manoeuvre, coupled with the peculiarities of future cases, will undoubtedly limit the impact of Alberta v. Hutterian Brethren on other alleged infringements of the right to freedom of religion. It would seem, then, that it is a question of when, not if, this precedent will be challenged.


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