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Abstract:
Canadian Prime Ministers appoint judges to the Supreme Court of Canada at their own discretion. This practice has been criticized as providing Prime Ministers with the ability to appoint judges whose policy preferences are regarded as politically congenial. We examine the Court's judgments in the post-Charter era to discern the apparent policy preferences of the judges. Our results suggest that the policy preferences of judges are not strongly associated with the political party of the appointing Prime Minster and that their policy preferences shift over time in seemingly unpredictable ways. We discuss the implications of this analysis for possible reforms of the appointments process.

Judicial Decisionmaking, Empirical Legal Studies, Supreme Court of Canada

Abstract:
Internet use has grown dramatically in Canada in recent years. This trend has joined with the increasing popularity and social legitimacy in Canada of gambling to produce an environment that is particularly receptive to the growth of online gambling. Online gambling sites compete with gambling options provided by provincial governments. This is problematic. Casual gambling gains are not subject to income tax at the federal or provincial level. This has been acceptable historically because subjecting casual gambling gains to income tax is administratively difficult and provincial governments have been earning considerable and growing revenues in an indirect way by being the regulators and providers of most Canadian gambling opportunities. However, to the extent that Canadians (and tourists from the United States and elsewhere) are now beginning to substitute online gambling with foreign entities for gambling facilities controlled by the provinces, this indirect revenue will be lost. The primary implication of the proliferation of foreign gambling websites is therefore that Canadian provincial governments will be sacrificing gambling revenues.

Canadian policymakers should respond to this challenge by asking and answering two fundamental questions. First, should net gambling gains be made subject to income tax? Second, how should online gambling be regulated? With regard to the first question, so long as an effective response is mounted to the issues raised by the second question, net gambling gains need not be taxed. Given widespread tastes for gambling and the possibilities presented by emerging technologies, prohibition is not likely to be a stable long-term approach. As the early 20th century experiences with the attempted prohibition of alcohol demonstrated, attempts to prohibit online gambling are apt to be costly to enforce and relatively ineffective. Two more promising routes to preserve government revenues from gambling include (i) following the example set by the United Kingdom in fashioning a new regulatory approach for gambling more generally (this would require the cooperation of the federal government); and (ii) within the existing legal framework at the federal level, provinces individually or collectively could operate one or more competing online gambling sites.

online gambling, taxation, remote gambling, tax

Abstract:
Over the past 25 years, the justices of the Supreme Court of Canada have not exhibited the divergent policy views along party lines that have been characteristic of the justices of the United States Supreme Court. This apparent lack of partisan polarization in Canada may at first give rise to smugness about the appointments process in Canada; after all, our process appears to have successfully sidestepped the politicization associated with the US nomination and confirmation system. However, before any claim that the Canadian appointments process is in fact superior can be made or defended, it is necessary to understand what these findings imply about the judicial decision-making process and quality of adjudication by our Court relative to the US Supreme Court. In this paper we argue that whether the relative nonpartisan nature of the Supreme Court in Canada is advantageous depends on a number of assumptions surrounding the nature of the appointments process, the characteristics of justices who are appointed in each system, and the decision-making processes used by the justices on each Court.

This paper discusses the relationship between two potential determinants of a justice's votes: her personal policy preferences and the extent and nature of cooperation between justices on the Court at a given time. To set the context Part II briefly outlines the main findings of some recent empirical research on the judicial voting behaviour on the Supreme Court of Canada and compares it to similar empirical studies of the US Supreme Court. Part III then sets out a framework for analyzing the difference in voting patterns based on the extent to which a judge votes in accordance with her policy preferences and the extent to which the justices of a multi-member court can be characterized as cooperative. Part IV uses this framework to assess the different patterns of voting on the Canadian and US Supreme Courts and discusses the important normative tradeoff between deliberation ("positive" cooperation) and logrolling ("negative" cooperation). Finally, Part V briefly discusses the connection of this normative tradeoff to the appointments process, and identifies some additional considerations to guide future theoretical and empirical research.

judicial appointments, supreme court of canada, judicial decision-making, law and courts

Abstract:
This article examines a specific category of legal transfers between the United Kingdom and Canada, considering the legacy of UK tax concepts in Canadian income tax law. Two main areas are considered where, in our view, this influence has been most profound: (i) the concept of income deployed for Canadian tax purposes; and (ii) judicial approaches to statutory interpretation and tax avoidance. Although the rules and concepts that Canadian courts and legislatures have adopted in each of these areas have necessarily evolved over time, the path of this evolution as well as current approaches reflect the enduring influence of UK tax concepts on Canadian income tax law. The first substantive section examines the structure and concept of income in Canadian tax law, linking its origins and development to the global and schedular taxes that were adopted in the United Kingdom in 1799 and 1803, and to the source and trust concepts that UK courts have employed to interpret the meaning of income for tax purposes. The next section considers judicial approaches to the interpretation of tax statutes and tax avoidance in Canada, tracing the origins of a strict construction approach to interpretation and a formalistic approach to the characterisation of transactions and relationships to early judicial decisions in the UK, and explaining the influence of this traditional approach on subsequent legislative and judicial developments. The final section concludes that the traditional approach endures, albeit uneasily, in Canadian income tax law in the continuing emphasis on textual interpretation of tax legislation and in the formalist application of the general anti-avoidance rule by the Supreme Court of Canada.

The British Tax Review is available on Westlaw

Abstract:
It is accepted throughout the common law that agreements founded on a mutual misunderstanding are void ab initio. It follows from this that unenforcement is necessary and inevitable; indeed, there is simply no contract to enforce. Curiously, however, in cases involving mutual misunderstanding the parties themselves usually believe and behave as if they have settled upon a knowable and enforceable agreement from the outset. It is typically only sometime later that the mutual misunderstanding between the parties comes to light. In this article I question the wisdom of the widely accepted common law rule surrounding mutual misunderstanding. I present and defend an alternative legal rule that significantly improves upon the efficiency of the results in cases involving mutual misunderstanding. The rule I propose would allow each party to an agreement founded on mutual misunderstanding to have the option to enforce his or her reasonable understanding of the agreement vis-a-vis the other party. This rule can be shown to preserve the reasonable expectations of the parties, promote reliance on promises, and provide implicit insurance against the risk that a mutual misunderstanding will interfere with the realization of expected contractual surplus.

Abstract:
Tax-free savings accounts ("TFSAs") became available in Canada in January 2009. A TFSA is a "tax prepaid" or "yield-exempt" investment account that does not provide any deduction for contributions and allows for tax-free compounding of investment returns in addition to tax-free withdrawals at any time. This article examines the theory surrounding tax-prepaid and tax-postpaid accounts and shows that there are important theoretical and practical differences in how the two types of tax-advantaged savings accounts operate. The paper predicts that the TFSA regime will not provide a significant incentive to save and that most contributions will not be "new" savings but will be amounts that would have been saved in any event or, equivalently, will be assets shuffled from taxable savings into the tax-free accounts.

Abstract:
This paper examines how justices on the Supreme Court of Canada voted in Charter appeals between 2000 and 2009. Charter appeals, at least in popular belief (and possibly also in theory), have the greatest potential to reveal voting that is influenced by extra-legal policy preferences. Confining the analysis to the time during which Chief Justice McLachlin has led the Court aids in controlling for the effects of a particular Chief Justice in assessing the roles of ideology and consensus.

Several of the Court's members have exhibited sharply different voting proclivities in s.15 (equality rights) appeals as compared with Charter claims made in the context of criminal law appeals (and, indeed, other Charter appeals). This finding suggests that at least some of the justices on the Court have been influenced by policy preferences on at least some occasions in discrete areas of Charter rights adjudication. On the other hand, it also suggests that judicial policy preferences are richer and significantly more nuanced than can adequately be captured by a simple "right"-"left" or "conservative"-"liberal" characterization of these policy preferences. The paper discusses a number of implications of the analysis and findings.

Abstract:
Contracts that contemplate alternative possible modes of performance, frequently referred to as alternative contracts, are common wherever written contracts are routinely used and relied upon. Nevertheless, courts in major legal systems have encountered enormous difficulty articulating a consistent and appropriate remedial principle to govern damages when such contracts are breached by the contracting party having the election to perform in alternative ways. This article analyzes this issue, and attempts to identify the most appropriate remedial principle for breaches of alternative contracts. To this end, Part I adopts a positive standpoint canvassing the rules governing remedies in a number of leading common law and civilian jurisdictions and illustrating in the process that remedies for breaches of alternative contracts are not consistently approached across jurisdictions. Indeed, even within several jurisdictions there are inconsistencies. Part II takes a normative approach to the question and illustrates that the most desirable remedial principle is a solution that has not yet been adopted for breaches of alternative contracts. Strikingly, we demonstrate that the ordinary common law remedy for breach of contract can be regarded as a special case of the most appropriate remedial approach for contracts with one or more modes of performance. Part III offers some thoughts regarding the possible reconciliation of Parts I and II, suggesting that existing rules may be normatively justified as the second-best in some circumstances. Part IV concludes with the suggestion that courts adopt the principle that the mode of performance that would be selected by the party with the election if specific performance were ordered be used for the purposes of assessing damages.

remedies, contracts, law and economics, optional performance, alternative contracts

Abstract:
The General Anti-Avoidance Rule (the GAAR) was originally introduced in Canadian income tax law in 1988 with prospective effect. The GAAR was amended in May 2005 to broaden its scope (by bringing under its ambit the regulations, treaties, etc.) and to lessen the burden of persuasion faced by the Minister in the misuse or abuse demonstration. What is peculiar about this amendment is that it was explicitly stated to have retroactive effect to the date the GAAR was first in effect - September 12, 1988.

This chapter discusses the retroactive nature of the amendment of the GAAR. It proceeds in three stages. First, it provides an account of the relevant law surrounding the effectiveness and applicability of retroactive legislation in Canada, outlining the general presumption against retroactive legislation and addressing how express terms can override this presumption in many (but not all) contexts. Particular attention is paid to how Canadian courts have approached the application of retroactive enactments to pending proceedings. Second, this background is used to evaluate the Supreme Court of Canada's handling of the amendment of the GAAR in its first GAAR judgment (Canada Trustco). Finally, the chapter closes with a discussion of the policy underlying retroactivity and the GAAR more generally, suggesting that so long as retroactive fiscal legislation is possible (as it is in Canada) it is somewhat curious that so much reliance is placed on the GAAR. Enacting retroactive specific anti-avoidance rules (perhaps with a penalty) is possible and, from a policy perspective, arguably more effective and desirable at curbing aggressive tax avoidance.

Abstract:
The passing on defence is frequently invoked by defendants as a defence to claims for restitution. The defence was invoked by the Province in Kingstreet Investments v. New Brunswick in response to claims for the return of unconstitutional indirect taxes on sales of alcoholic beverages to licensees. Although the defence was accepted in principle by both the trial judge and the New Brunswick Court of Appeal, it was rejected soundly by the Supreme Court of Canada.

In this comment I show that the passing on defence is economically irrelevant if one assumes that (i) there is perfect information; and (ii) adjudication is costless and error-free. I then argue that relaxing these assumptions suggests that the passing on defence is economically relevant, and that the correct response is to reject the defence, though only partly for the reasons advanced by the Supreme Court in Kingstreet Investments.

restitution, passing on, irrelevance

Abstract:
The US Supreme Court typically sits en banc. By contrast, it is unprecedented for the House of Lords in the UK to sit en banc; instead, its twelve members are assigned to fixed panels of five to hear the vast majority of appeals. The Supreme Court of Canada, which has nine members like the US Supreme Court, routinely sits in panels of five, seven, or nine justices, depending on the appeal; about half of the appeals are heard by panels of seven justices. This variation in high court practices gives rise to a puzzle. Is a fixed panel size optimal or is there some reason to prefer a system which allows panel size to vary? If panel size ought to be fixed, is the largest possible panel size generally preferable? Should a panel that is a subset of the court's members be deployed, or is sitting en banc better? In this paper, we develop a formal model of the optimal choice of panel size. The model suggests that in the presence of scarce judicial resources, panel sizes can be deliberately adjusted to improve allocational efficiency. Using data from more than 2000 appeals decided by the Supreme Court of Canada from 1984-2005, we show that the Court appears to be using varied panel sizes in a manner consistent with the predictions of our model.

Abstract:
Class action legislation is a relatively new phenomenon in several Canadian provinces. The state of the law, particularly in Ontario, is at a pivotal stage. We have a sufficient number of decided cases to draw some conclusions about how well the Class Proceedings Act, 1992 as it is currently being interpreted and applied is meeting its goals, but not so many decided cases that a settled approach has emerged to its application in the courts. In this article, I analyze a sample of twenty-seven reported Ontario class action decisions, focusing in particular on what the courts have done with respect to the approval of class counsel fees. I find that courts have by and large tended to use an enhanced "lodestar method" for compensating class counsel, whereby class counsel's base fee is adjusted with a multiplier to reflect the riskiness of the litigation. In the twenty-seven class actions I analyze, the average fee award per case is approximately $3 million, representing approximately 15 percent of the average settlement. The average multiplier is about 2.5. Under the current provisions of the CPA I argue that, given the incentives facing class counsel, a percentage contingency fee would be superior to the lodestar method, could more easily be monitored for abuses by judges, and would increase access to justice for potential claimants with independently non-viable claims.

class proceedings, class actions, legal profession

Abstract:
Do interveners matter? Under Chief Justice McLachlin the Supreme Court of Canada has allowed an average of 176 interventions per calendar year and interveners have cumulatively made submissions in half of the cases heard by the Court. This level of activity suggests that interveners are doing something. But what is it that they are doing?

In the abstract, there are at least three functions that the practice of intervention might perform. First, hearing from interveners might provide objectively useful information to the Court (i.e., interveners might promote the “accuracy” of the Court’s decision-making). A second possibility is that the practice of intervention allows interveners to provide the “best argument” for certain partisan interests that judges might want to “affiliate” with. A third possibility is that interventions are allowed mainly (if not only) so that intervening parties feel they have had their voices heard by the Court and by the greater public, including Parliament, regardless of the effect on the outcome of the appeal (i.e., the Court might be promoting the “acceptability” of its decisions by allowing for an outlet for expression).

It is disconcerting that until now the effects of interventions on the decision-making of the Supreme Court of Canada have not been systematically explored through empirical analysis. A growing body of literature has examined the role of amicus curiae at the Supreme Court of the United States. To date, however, the related literature in Canada is slim and, to the extent it exists, does not deploy the empirical methods necessary to test independently for the influence of interveners on the decisions of individual judges. This work fills this gap in the existing literature and expands our collective understanding of the consequences of the practice of intervention at Canada’s highest court. We find evidence that interveners matter more than many observers might expect.

Abstract:
The Supreme Court of Canada in 1990 in Fries v. The Queen confirmed as a legal matter the longstanding administrative practice of characterizing strike pay as a non-taxable receipt by virtue of its not being income . . . from a source pursuant to paragraph 3(a) of the Income Tax Act. By contrast, in the United States, strike pay is generally subject to income tax, consistent with the more inclusive approach to defining income that predominates under section 61 of the Internal Revenue Code. This article examines in detail this tax policy difference. In the process, it canvasses the attitude of some other countries to similar issues, maps out what can be inferred about the likely fiscal and economic consequences of not taxing strike pay, and suggests some ideas for reform for Canadian policy makers.

income, labour disputes, strikes, tax exemptions, tax policy, unions

Abstract:
Donald R. Songer, an American political scientist, highlights in the introduction of his recent book, 'The Transformation of the Supreme Court of Canada: An Empirical Examination,' that he is not Canadian and has no legal training. Readers inclined to be uncharitable might take this admission as evidence that Songer is ill-suited to carry out the task of analyzing the Supreme Court of Canada in a subtle or careful way. The unfairness of such a snap judgment is obvious. Indeed, anticipating this concern, Songer himself claims that his 'outsider' status possibly confers the advantage of 'a perspective that may be somewhat different from those of ‘insiders’ and thus help to cast new light on some recurring themes in discussions of the Supreme Court of Canada' (p. 11). This may well be the case; after all, many Canadian observers and commentators have criticized the legitimacy of the Court’s decision-making in particular cases or its role more generally out of a normative distaste for the results of the Court’s toil. Songer himself claims to be in a position to be able to avoid these normative concerns. This book review assesses the extent of Songer's success in casting new light on the Supreme Court of Canada with the benefit of a more disinterested and external perspective.

Abstract:
Michael Trebilcock is by all accounts one of his generation's most prolific and important scholars of law and economics. Through more than 200 articles, book chapters, books, edited volumes, and other academic publications, Trebilcock has made lasting contributions to many fields including (and this is a partial list): contracts, torts, consumer protection, antitrust, international trade, immigration, regulation, and law and development. In recognition of his teaching and research, he has received awards and distinctions from students, universities, governments, and scholarly societies. The symposium for which this essay was prepared is only the latest token of appreciation for Trebilcock's profound and prominent contributions to the intellectual depth and breadth of legal thought.

And yet, despite the accolades, the attention, and the richly-deserved scholarly fame, there is a comparatively unlit corner of Trebilcock's oeuvre; the part dealing with income tax law. Although it would be the inaccurate to say that it has been entirely overlooked, most readers of Trebilcock's more discussed work will not be acquainted with the fact that his scholarly career began, inauspiciously as it might seem, nearly five decades ago with a 224 page long LL.M. thesis at the University of Adelaide. Almost unbelievably, this substantial piece of work was dedicated to analyzing just a single provision of Australian income tax law: a general anti-avoidance rule aimed at combating tax avoidance. This essay seizes control of the spotlight that has been trained on Trebilcock's other work and redirects it to Trebilcock's early tax scholarship.

Abstract:
Until now the legal and regulatory measures that have been taken in the United States and Canada to combat excessive executive compensation have been largely ineffectual. The one possible exception is the tax deductibility cap of ý162(m) of the US Internal Revenue Code, which was introduced in 1993. A similar but improved provision ought to be considered by Canadian policymakers. There are several lessons Canadian policymakers can take from the US experience with ý162(m). First, policymakers should consider tightening, although not eliminating, the performance-based exemption. Second, policymakers should not anticipate a deductibility cap to raise a considerable amount of tax revenue or totally prevent CEOs from engaging in rent-seeking behaviour. Third, policymakers should strongly consider prohibiting executives from unravelling the incentives associated with performance-based compensation by entering into hedging transactions. Finally, Canadian policymakers would be wise to carefully consider the effects a deductibility cap would have on the competitive international environment in which Canada competes for corporate patronage.

Abstract:
On October 19, 2005, the Supreme Court of Canada released its much-anticipated decisions in The Queen v. Canada Trustco Mortgage Co. and Mathew v. The Queen, the first two cases from Canada's highest court addressing the general anti-avoidance rule (GAAR) in section 245 of the federal Income Tax Act. The Faculty of Law at the University of Toronto hosted a symposium on November 18, 2005, which brought together academics, practitioners, representatives of the Canada Revenue Agency, and Chief Justice Donald Bowman of the Tax Court of Canada to discuss the implications of the decisions. This article summarizes the formal presentations and comments of participants in the proceedings.

This article is reproduced with the permission of the Canadian Tax Foundation.

anti-avoidance, GAAR, statutory interpretation, Supreme Court decisions, tax administration, tax avoidance

Abstract:
There are two widely shared views of Frank Iacobucci as a justice of the Supreme Court of Canada. The first is that he was a liberally inclined justice, particularly in the area of criminal law. That he has conventionally been regarded as a liberal despite being appointed in 1991 by the Progressive Conservative prime minister Brian Mulroney raises a number of questions. Is this conventional view of Justice Iacobucci actually correct? That is, is it borne out by his voting record over his more than thirteen years on the Court? If so, does this 'left of centre' claim hold fast beyond criminal law and extend to other areas of law? The second image of Justice Iacobucci is as a justice committed to building consensus on the Court by encouraging his fellow justices to reach agreement with him and with each other in deciding appeals. This second view also raises a series of questions. Was Justice Iacobucci the 'swing' justice on the Court in that the other justices needed to have him onside to form a winning coalition? Alternatively, was he part of a natural coalition on one side of most issues and able to persuade other, disinclined justices to join his view? Did his relative position on the Court shift depending upon the area of law at issue? Did Justice Iacobucci's leanings or preferences change over time? This article addresses these and other related questions using an empirical analysis of Justice Iacobucci's time at the Supreme Court of Canada.

attitudinal model, law and courts, judging, decision-making

Abstract:
The subject of this paper is the impact of the new globalized order on the integrity of corporate governance. Corporate governance is the system of laws, markets and institutions that seeks to control and discipline corporate activity in the service of the public interest. Over the last several years, many critics have bemoaned the growing integration of various economic markets across national boundaries because it is seen to lessen the capacity of states to regulate corporate behaviour. Essentially, the claim is that in a setting of reduced barriers to factor and product mobility, corporations are rendered much more effective in their capacity to extract regulatory concessions from host governments, and these concessions have the effect of lowering social welfare. The argument is that in a setting of high international corporate mobility, footloose corporations will relocate their operations to whichever jurisdiction offers the most congenial (meaning least stringent) regulation.

In the face of certain corporate migration in response to more stringent regulation, states will have no choice but to refrain from adopting socially optimal regulation. This is because states fear the loss of benefits associated with corporate activity: namely, employment, investment and tax revenue. The effect is an international race to the bottom in which states are rendered helpless in countering the effect of heightened corporate mobility.

Abstract:
Interestingly, Canada has had relatively little recent experience with anything like the heated concerns expressed in American and EU tax policy circles regarding excessive compliance costs of corporate income taxes. The lack of debate regarding compliance costs cannot be attributed to a lackadaisical or uncritically accepting attitude toward personal and corporate income tax policy in Canada. On the contrary, there are issues in Canadian tax policy circles that are widely considered to be troubling. However, compliance costs are not one of our most contentious concerns. The conspicuous lack of heated debate relating to compliance costs can probably be attributed to early successes in fashioning an income tax system that has a relatively low overhead associated with compliance. Because of the perceived effectiveness of the Canadian system on the compliance cost front, those individuals in the EU who are interested in formulary apportionment of corporate income might well wish to examine the Canadian experience in more detail. This paper provides an outline of what is known about the compliance costs associated with Canadian tax collection.

Abstract:
Although the positive externalities associated with higher education favour substantial government support, sound arguments also favour student contributions to the costs of post-secondary education, based on both the private benefits obtained and the regressive impact of general subsidies for higher education. At the same time, the central role that higher education performs as a vehicle for social mobility and the general reluctance of private lenders to finance individual investments in higher education suggest that governments also have an important role to play in the area of student assistance - ensuring that higher education is accessible to all students on the basis of merit, irrespective of financial ability. The need for a well-designed student assistance program is more important than ever.

Among many proposals for a restructured student aid system, one of the most promising is to replace existing 'mortgage-style' student loads with a financing arrangement involving repayment obligations that depend on the student's income after graduation. To the extent that this 'income-contingent' approach reduces the risk to borrowers with respect to their investments in higher education, it will likely lessen the reluctance that students exhibit with respect to such borrowing. Moreover, where funding covers both the direct costs of higher education as well as living expenses, income-contingent financing programs may enhance accessibility by making higher education effectively free at the point of purchase - offsetting the 'sticker shock' associated with increased tuition fees as well as living costs which generally exceed the direct costs of higher education. Finally, collection through the income tax should reduce the incidence of nonpayment and dramatically lessen the costs of administering student financial aid.

This paper proposes an income-contingent financing program (ICFP) for Ontario to replace the current system of mortgage-style loans, automatic debt remission, and interest and debt relief available under the Ontario Student Assistance Program. Part 1 reviews the current system of government-provided student aid in Ontario, providing an essential foundation for our subsequent proposal for an ICFP. Part 2 examines the experience with ICFPs in Australia, New Zealand, Sweden, and the UK, in order to derive lessons relevant to the design of an ICFP for Ontario. Part 3 considers the essential features of an ICFP, canvassing the competing arguments and making specific recommendations informed by our review of the current system in Ontario and the international experience with ICFPs.