Kingstreet Investments: Taking a Pass on the Defence of Passing On
Canadian Business Law Journal, Vol. 46, No. 1, pp. 36-49, 2008
19 Pages Posted: 23 Oct 2007 Last revised: 17 Sep 2009
Date Written: October 22, 2007
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.
Keywords: restitution, passing on, irrelevance
JEL Classification: K00, K10, K34, K42
Suggested Citation: Suggested Citation