Files Nos. 35009 / 35033

SUPREME COURT OF CANADA

(ON APPEAL FROM JUDGMENTS OF THE QUÉBEC COURT OF APPEAL)

S.C.C. 35009

BETWEEN: BANK OF MONTREAL CITIBANK CANADA TORONTO-DOMINION BANK NATIONAL BANK OF CANADA

APPELLANTS (Appellants) - and -

RÉAL MARCOTTE BERNARD LAPARÉ

RESPONDENTS (Respondents) - and -

ATTORNEY GENERAL OF QUÉBEC LE PRÉSIDENT DE L’OFFICE DE LA PROTECTION DU CONSOMMATEUR

RESPONDENTS (Mis en cause) - and -

ATTORNEY GENERAL OF CANADA

INTERVENER (Intervener) - and -

ATTORNEY GENERAL OF BRITISH COLUMBIA ATTORNEY GENERAL OF ONTARIO ATTORNEY GENERAL OF ALBERTA CANADIAN BANKERS ASSOCIATION

INTERVENERS (style of causes continues inside cover page)

ENGLISH TRANSLATION OF THE ATTORNEY GENERAL OF CANADA’S FACTUM

Henri A. Lafortune Inc. 2005 Limoges Street Tel. : 450 442-4080 Longueuil, Québec J4G 1C4 Fax. : 450 442-2040 www.halafortune.ca [email protected] L-3595-12

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AND BETWEEN:

RÉAL MARCOTTE BERNARD LAPARÉ

APPELLANTS (Respondents)

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BANK OF MONTREAL AMEX BANK OF CANADA ROYAL BANK OF CANADA TORONTO-DOMINION BANK CANADIAN IMPERIAL BANK OF COMMERCE BANK OF NOVA SCOTIA NATIONAL BANK OF CANADA LAURENTIAN BANK OF CANADA CITIBANK CANADA

RESPONDENTS (Appellants)

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ATTORNEY GENERAL OF CANADA RESPONDENT (Intervener)

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LE PRÉSIDENT DE L’OFFICE DE LA PROTECTION DU CONSOMMATEUR ATTORNEY GENERAL OF QUÉBEC

INTERVENERS (Interveners) - and -

ATTORNEY GENERAL OF BRITISH COLUMBIA ATTORNEY GENERAL OF ONTARIO ATTORNEY GENERAL OF ALBERTA CANADIAN BANKERS ASSOCIATION

INTERVENERS

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S.C.C. 35033

BETWEEN:

AMEX BANK OF CANADA APPELLANT (Appellant) - and - SYLVAN ADAMS RESPONDENT (Respondent) - and - ATTORNEY GENERAL OF QUÉBEC and LE PRÉSIDENT DE L’OFFICE DE LA PROTECTION DU CONSOMMATEUR RESPONDENTS (Interveners) - and - ATTORNEY GENERAL OF CANADA ATTORNEY GENERAL OF ONTARIO ATTORNEY GENERAL OF BRITISH COLUMBIA ATTORNEY GENERAL OF ALBERTA CANADIAN BANKERS ASSOCIATION

INTERVENERS

Mr.Bernard Letarte Mr. Christopher M. Rupar Mr. Pierre Salois Justice Canada Mr. Michel Miller Assistant Deputy Attorney General Justice Canada 5th Floor, Room 557 5th Floor, East Tower 50, O’Connor Street 200 René-Lévesque Street West Ottawa, Ontario Montréal, Québec K1A 0H8 H2Z 1X4

Tel.: 613 946-2776 (Mr. Letarte) Tel.: 613 670-6290 Tel.: 514 283-8733 (Mr. Salois) Fax: 613 954-1920 Tel.: 514 283-3582 (Mr. Miller) [email protected] Fax: 613 952-6006 Fax: 514 283-3856 [email protected] [email protected] [email protected]

Counsel for Agent for Attorney General of Attorney General of Canada Canada

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Mr. Mahmud Jamal Ms. Patricia J. Wilson Ms. Silvana Conte Osler, Hoskin & Harcourt LLP Mr. Alexandre Fallon Suite 1900 Mrs. Anne-Marie Legendre-Lizotte 340 Albert Street Mr. W. David Rankin Ottawa, Ontario Osler, Hoskin & Harcourt LLP K1R 7Y6 Suite 2100 1000 de la Gauchetière Street West Montréal, Québec H3B 4W5

Tel.: 514 904-8100 Tel.: 613 787-1009 Fax: 514 904-8101 Fax: 613 235-2867 [email protected] [email protected] [email protected] [email protected] [email protected] [email protected]

Counsel for the Banks Agent for the Banks

Mr. Sylvain Deslauriers Mr. Alberto Martinez Deslauriers & Co., Attorneys s.a. 7th Floor 1100 des Canadiens de Montréal Av. West Montréal, Québec H3B 2S2

Tel.: 514 878-0303 (Mr. Deslauriers) Tel.: 514 878-0305 (Mr. Martinez) Fax: 514 878-0018 [email protected] [email protected]

Counsel for the Banks

Mr. Stephen Walter Hamilton Ms. Julie Girard Stikeman Elliott LLP 40th Floor 1155 René-Lévesque Blvd. West Montréal, Québec H3B 3V2

Tel.: 514 397-3055 (Mr. Hamilton) Tel.: 514 397-2440 (Ms. Girard) Fax: 514 397-3222 [email protected] [email protected]

Counsel for the Banks

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Mr. Bruce W. Johnston Ms. Moira Dillon Mr. Philippe H. Trudel Supreme Law Group Trudel & Johnston Suite 900 Suite 90 275 Slater Street 750 Côte de la Place d’Armes Ottawa, Ontario Montréal, Québec, H2Y 2X8 K1P 5H9

Tel.: 514 871-8385 Tel.: 613 691-1224 Fax: 514 871-8800 Fax: 613 691-1338 [email protected] [email protected] [email protected]

Counsel for Agent for Réal Marcotte and Bernard Laparé Réal Marcotte and Bernard Laparé

Mr. André Lespérance Lauzon Bélanger Lespérance Inc. Suite 100 286 Saint-Paul Street West Montréal, Québec H2Y 2A3

Tel.: 514 844-4646 Fax: 514 844-7009 [email protected]

Counsel for Réal Marcotte and Bernard Laparé

Mr. Peter Kalichman Mr. Guy Régimbald Mr. Mathieu Bouchard Gowling Lafleur Henderson LLP Ms. Catherine McKenzie 26th Floor Irving Mitchell Kalichman LLP 160 Elgin Street 2 Place Alexis Nihon, Suite 1400 Ottawa, Ontario K1P 1C3 3500 De Maisonneuve Blvd. West Montréal, Québec H3Z 3C1

Tel.: 514 935-4460 Tel.: 613 786-0197 Fax: 514 935-2999 Fax: 613 563-9869 [email protected] [email protected] [email protected] [email protected]

Counsel for Sylvan Adam Agent for Sylvan Adams

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Mr. Jean-François Jobin Mr. Pierre Landry Mr. Francis Demers Noël & Associés Mr. Samuel Chayer 111 Champlain Street Bernard, Roy et Associés Gatineau, Québec Suite 8.00 J8X 3R1 1 Notre-Dame Street East Montréal, Québec H2Y 1B6

Tel.: 514 393-2336 Tel.: 819 771-7393 Fax: 514 873-7074 Fax: 819 771-5397 [email protected] [email protected] [email protected] [email protected]

Counsel for Agent for Attorney General of Québec Attorney General of Québec

Mr. Marc Migneault Mr. Pierre Landry Allard, Renaud et Associés Noël & Associés Suite RC 11 111 Champlain Street 100 Laviolette Street Gatineau, Québec Trois-Rivières, Québec J8X 3R1 G9A 5S9

Tel.: 888 672-2556 Ext. 3426 Tel.: 819 771-7393 Fax: 819 371-6489 Fax: 819 771-5397 [email protected] [email protected]

Counsel for Agent for Le Président de l’Office de la Le Président de l’Office de la protection du consommateur protection du consommateur

Ms. Nancy E. Brown Mr. Robert E. Houston, Q.C. Attorney General of British Columbia Burke-Robertson LLP P.O. Box 9280 Stn Prov Govt Suite 200 1001 Douglas Street 441 MacLaren Street Victoria, British Columbia Ottawa, Ontario V8W 9J7 K2P 2H3

Tel.: 250 356-5597 Tel.: 613 236-9665 Fax: 250 356-9154 Fax: 613 235-4430 [email protected] [email protected]

Counsel for Agent for Attorney General of British Columbia Attorney General of British Columbia

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Attorney General of Ontario Mr. Robert E. Houston, Q.C. Burke-Robertson LLP Suite 200 441 MacLaren Street Ottawa, Ontario K2P 2H3

Tel.: 613 236-9665 Fax: 613 235-4430 [email protected]

Agent for Intervener Attorney General of Ontario

Attorney General of Alberta Mr. Henry S. Brown, Q.C. Gowling Lafleur Henderson LLP Suite 2600 160 Elgin Street Ottawa, Ontario K1P 1C3

Tel.: 613 233-1781 Fax: 613 788-3433 [email protected]

Mr. John B. Laskin Ms. Patricia J. Wilson Torys LLP Osler, Hoskin & Harcourt LLP 3000 Maritime Life Tower, TD Centre Suite 1900 79 Wellington Street West 340 Albert Street Toronto, Ontario Ottawa, Ontario M5K 1N2 K1R 7Y6

Tel.: 416 865-7317 Tel.: 613 787-1009 Fax: 416 865-7380 Fax: 613 235-2867 [email protected] [email protected]

Attorney for the Canadian Bankers Agent for the Canadian Bankers Association Association

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TABLE OF CONTENTS

DESCRIPTION OF DOCUMENTS Page

ATTORNEY GENERAL OF CANADA’S FACTUM

PART I – CONCISE OVERVIEW OF THE POSITION AND STATEMENT OF FACTS ...... 1

Overview ...... 1

Statement of facts ...... 3

a. Background of these cases ...... 3

b. Statutory schemes at issue ...... 4

i) The Consumer Protection Act and the CPA Regulations ...... 4

ii) The federal legislation at issue ...... 5

c. Judgments of the Superior Court ...... 7

d. Judgments of the Court of Appeal ...... 8

PART II – ISSUES ...... 9

PART III – SUBMISSIONS ...... 10

I The provisions at issue are constitutionally inapplicable by reason of the doctrine of interjurisdictional immunity ...... 10

a. The doctrine of interjurisdictional immunity ...... 10

b. Federal jurisdiction over banking and the exercise of this jurisdiction by Parliament ...... 12

c. Consumer protection in banking legislation ...... 15

– Legislative History ...... 15

d. The regulation of lending is at the core of Parliament’s jurisdiction over banking ...... 19

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TABLE OF CONTENTS

DESCRIPTION OF DOCUMENTS Page

e. The provisions at issue impair Parliament in the exercise of its exclusive jurisdiction over banks and banking ...... 22

f. This case does not affect the common law ...... 26

II. The provisions at issue are constitutionally inoperative by reason of the doctrine of federal paramountcy ...... 27

a. The doctrine of federal paramountcy – general principles ...... 27

b. There is a conflict of purpose: the provincial legislation frustrates the purpose of the federal framework ...... 28

c. The federal purpose of setting up an exclusive national framework ...... 31

d. The federal framework is not permissive ...... 35

PART IV – COSTS ...... 39

PART V – ORDER SOUGHT ...... 40

PART VI – ALPHABETICAL TABLE OF AUTHORITIES ...... 41

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Attorney General of Canada’s Factum Concise overview of the position and facts

ATTORNEY GENERAL OF CANADA’S FACTUM

PART I – CONCISE OVERVIEW OF THE POSITION AND FACTS

OVERVIEW

1. This appeal concerns the exclusive legislative jurisdiction conferred upon the Parliament of Canada with respect to banking. Over time, the granting of this exclusive jurisdiction has allowed Parliament to build a comprehensive and coherent body of legislation in order to ensure the soundness of the Canadian banking system as well as the protection of the consumer in the banking sector.

2. Banking refers to a set of financial activities carried out by institutions that are incorporated as “banks” and which thus have the distinctive institutional character of banks. Parliament’s jurisdiction over banks must be examined from an institutional perspective. An activity is banking in the constitutional sense if it is carried out by a bank and to the extent that this activity is at the core of banking, it is subject to the exclusive jurisdiction of Parliament. Lending, including loans by means of credit cards, is not only a banking transaction, it is also one of the activities that are at the heart of modern banking. The fact that other businesses engage in the same activities in no way changes this reality. To the extent that it concerns banks, the power to regulate lending, including by means of credit cards, is at the core of federal jurisdiction over banking.

3. In this case, the Court of Appeal rightly acknowledged that the issuing of a credit card by a bank to one of its clients constitutes the entering into a contract of variable credit, and is therefore an action that is at the core of its activities. However, the Court of Appeal erred in refusing to apply the doctrine of interjurisdictional immunity, essentially on the ground that the banks had not created this “product” and that other institutions lend in this manner.

4. If the Court of Appeal’s reasoning is accepted, there would, in effect, be no basic, minimum, and unassailable content to federal legislative jurisdiction over banking, as one - 2 -

Attorney General of Canada’s Factum Concise overview of the position and facts

would be hard pressed to find banking activities that are not or could not be carried out by other institutions or persons. The Court of Appeal’s approach renders Parliament’s exclusive jurisdiction over banking meaningless.

5. After concluding that the issuance of a credit card by a bank was at the core of its activities as a bank, the Court of Appeal should have asked itself whether the application of the Consumer Protection Act (CPA) and the Regulation Respecting the Application of the Consumer Protection Act (the CPA Regulation) impaired the exercise of federal power over banking. Had it done so, it should have concluded that this power would be impaired because Parliament would be required to assess the impact of the provincial legislation in light of the existing federal regime and decide whether it is or is not necessary to override the provincial legislation. Parliament should not be confronted with such a dilemma – it should not always be forced to react to provincial legislatures’ decisions.

6. The relevant provisions of the Bank Act and the Cost of Borrowing (Banks) Regulations, as well as those of the Financial Consumer Agency of Canada Act (the FCACA), constitute a detailed exhaustive and comprehensive legislative framework regulating the calculation and disclosure of the cost of borrowing and non-interest charges of all loans made by a bank. The enactment of this detailed national regime, that not only includes substantive rules but also provided the means to sanction non-compliance, demonstrates that Parliament intended to establish a single regime applicable to banks in such matters.

7. If the CPA provisions at issue were applicable, they would be inoperative under the doctrine of federal paramountcy as they would frustrate the purpose of federal legislation, which is to set up an exclusive national framework. It is not material that the federal and provincial regimes both share a general objective to protect consumers. The conflict of purpose lies in the choice of means used to achieve this objective. The various statutory choices made by Parliament as to how to regulate the obligations of banks should be respected. In particular, unlike Quebec, which has chosen to go the route of civil remedies, Parliament chose to establish a system of administrative and penal sanctions to - 3 -

Attorney General of Canada’s Factum Concise overview of the position and facts

address contraventions of federal statutes intended to protect consumers in the banking sector. The federal legislative framework should not be considered incomplete or permissive for having, in some respects, different solutions from those chosen by the provincial legislature.

STATEMENT OF FACTS

a. Background of these cases

8. These cases arise from the use of credit cards for payments in foreign currencies, such as when a card providing credit in Canadian dollars is used outside the country to pay in a foreign currency. When a Visa, MasterCard or Amex cardholder uses their card to make payments in foreign currencies, the card-issuing bank charges a conversion fee set as a fixed percentage of the amount converted (between 1.5% and 2.5% during the period in question) to the cardholder’s account, in addition to the interbanking exchange rate .

9. In the mid-2000s, the respondents Marcotte and Laparé (the individual respondents) were given authorization to institute a class action in which they seek reimbursement of the conversion fees they were charged by the appellants since April 2000. The respondents are essentially alleging that the appellants infringed certain provisions of the CPA1 and of the CPA Regulation2 relating to the calculation and disclosure of credit charges.

10. This class action is founded in large part on the premise that the conversion fees charged by the appellant banks constitute credit charges within the meaning of the CPA3, charges that must be included in the annual credit rate calculated as a percentage and cannot be exacted by the bank if the consumer pays the outstanding balance within 21 days of the date of the statement of account. It is further alleged that some of the banks simply failed in their obligation to disclose the existence of these conversion fees.

11. In their defence, in addition to arguing that conversion fees do not constitute credit charges within the meaning of the CPA, the appellant banks raise two constitutional

1 CQLR, c P-40.1, art. 12, 71, 72, 83, 91, 92, 126, 219 et 228, recueil de sources du procureur général du Canada, hereinafter « R.S.P.G.C. », vol. I, tab 10 2 CQLR, c. P-40.1, r.3, art. 55-61, R.S.P.G.C., vol. I, tab 12 3 S. 69 and 70 of the CPA, vol. I, tab 10 - 4 -

Attorney General of Canada’s Factum Concise overview of the position and facts

arguments. First, the provisions of the CPA that are at issue would be inapplicable under the doctrine of interjurisdictional immunity. Second, if they apply, these provisions would be inoperative under the doctrine of federal paramountcy as they would frustrate the purpose of the federal legislation applicable in this matter, namely the Bank Act,4 the Cost of Borrowing (Banks) Regulations5 and the FCACA.6

12. In Amex v. Adams7, the Respondent Adams, in another class action, sought reimbursement of the conversion fees that he was charged between 1993 and 2003 by Amex Bank, on the ground that it had failed to disclose to American Express cardholders the very existence of the conversion fees, all of which in contravention of section 12 of the CPA. In its defence, Amex Bank raises the same constitutional arguments as those raised in Marcotte.

b. Statutory schemes at issue

i. The Consumer Protection Act and the CPA Regulations

13. The CPA is a statute of considerable scope that contemplates a broad range of contracts and business practices as between a consumer and a merchant.8 In this case, the relevant provisions of the CPA and the CPA Regulation are the following:

a) Section 12 of the CPA, which provides that no costs may be claimed from a consumer unless the amount thereof is precisely indicated in the contract;

b) Sections 66 to 72, 83, 91 and 92 of the CPA and sections 55 to 61 of the CPA Regulation, which define what constitutes credit charges, stipulates the obligation with respect to their disclosure and method of calculation and require that they be included in the calculation of the credit rate expressed as an annual percentage, except where otherwise provided;

4 S.C. 1991, c. 46, R.S.P.G.C., vol. I, tab 6 5 SOR/2001-101, R.S.P.G.C., vol. I, tab 15 6 S.C. 2001, c. 9, R.S.P.G.C., vol. I, tab 9 7 CSC No. 35033 8 Richard v. Time Inc., [2012] 1 S.C.R. 265, par. 41 and 42, R.S.P.G.C., vol. IV, tab 39 - 5 -

Attorney General of Canada’s Factum Concise overview of the position and facts

c) Sections 126 and 127 of the CPA, which set out the obligation to furnish to the consumer a periodic statement of account that includes specific information and which prohibit, in particular, exacting credit charges until the end of the 21-day period following the mailing of the statement of account;

d) Sections 219 and 228 of the CPA, which prohibit merchants, manufacturers or advertisers to make false or misleading representations to a consumer or to fail to mention an important fact in any representation made to a consumer; and

e) Sections 271 and 272, which set out specific remedies for non-compliance with the provisions of the CPA, including the ability of a consumer to demand the nullity of a contract, the reimbursement of credit charges charged in contravention of the Act as well as compensatory and punitive damages.

ii. The federal legislation at issue

14. The federal legislative framework on which the appellants rely is comprised of provisions of the Bank Act, of the Cost of Borrowing (Banks) Regulations and of the Financial Consumer Agency of Canada Act.

15. The relevant provisions of the Bank Act are:

a) Section 449, which defines “cost of borrowing” in respect of a loan made by a bank, as being the applicable interest or discount, any amount charged in connection with the loan that is payable by the borrower to the bank and any charge prescribed to be included in the cost of borrowing;

b) Section 450, which requires a bank to disclose to the borrower the cost of borrowing and other information, prescribed by the regulations;

c) Section 451, which states that the cost of borrowing is to be calculated, in the manner prescribed by regulations, and expressed as an annual rate and, in prescribed circumstances, as an amount in dollars and cents; - 6 -

Attorney General of Canada’s Factum Concise overview of the position and facts

d) Subsection 452(2), which provides that where a bank issues or has issued a credit, payment or charge card to a natural person, the bank shall, in addition to disclosing the costs of borrowing, disclose to the person a certain amount of information in accordance with the regulations, including any charges for which the person becomes responsible by using the card;

e) Section 454, which allows the Governor in Council to make regulations respecting the time and place at which, and the form and manner in which, a bank is to disclose to a borrower the cost of borrowing and any rebate of the cost of borrowing; and

f) Sections 980, 980.1, 985, which set out offences and penalties in respect of violations of the Act, and section 988, which states that a contravention of any provision of the Act or the regulations does not invalidate a contract entered into in contravention of the provision, unless otherwise expressly provided under the Act.

16. The Cost of Borrowing (Banks) Regulations complements the Bank Act in respect of the calculation and disclosure of the cost of borrowing by providing, among other things, a precise mathematical formula for calculating the cost of borrowing (s. 3), included and excluded charges in the calculation of the cost of borrowing (s. 5), and the timing of when disclosure statements in writing are to be provided, as well as their content and form (s. 6, 7, 8, 9, 10 and 11). These regulations also contain specific provisions imposing obligations on banks as issuers of credit cards (ss. 3(3), 6(2), 6(2.1), 11, 12(1) to 12(9)). In particular, section 12 of the Regulations sets out the obligation to disclose non interest fees.

17. In addition, the Financial Consumer Agency of Canada (the Agency), established under the Financial Consumer Agency of Canada Act , has as its mandate the supervision of federal financial institutions, including banks, to ensure they comply with the consumer provisions specified in the FCACA. The Agency has the jurisdiction to impose significant - 7 -

Attorney General of Canada’s Factum Concise overview of the position and facts

administrative penalties and publish certain information about violations.9 In particular, the violation of any “consumer provision”10 (including disclosure obligations relating to credit cards) can result in a maximum penalty of $50,000 in the case of a violation committed by a natural person and $500,000 if the violation was committed by a financial institution.11 The Agency’s Commissioner may also enter into a compliance agreement with a bank for the purpose of implementing any measure that is designed so as to further compliance by it with the consumer provisions.12 The Commissioner may also apply to a court for an order directing the bank or authorized foreign bank, director, officer, employee or agent to comply with—or restrain from acting in breach of—the consumer provision.13

c. Judgments of the Superior Court

18. In Marcotte, Gascon J. held that the conversion fees charged by banks constituted credit charges within the meaning of the CPA. He dismissed the two constitutional arguments and determined that the appellants had breached certain provisions of the CPA regarding the disclosure of those charges. In particular, he decided that the CPA and the CPA Regulations applied to the banks and that the extension of credit by means of credit cards was not part of the core of federal jurisdiction over banking.

19. He also dismissed the federal paramountcy argument. In his opinion, there was no operational conflict because the obligations imposed by the CPA and the federal legislation are essentially to the same effect, in some cases, and in other cases, the CPA contains additional obligations while the federal legislation is silent and permissive. The Court also dismissed the argument based on conflict of purpose, on the basis that, contrary to the banks’ argument, it was not Parliament’s intent to establish a comprehensive framework. Accordingly, he ordered the banks to reimburse the conversion fees charged to cardholders who were part of the class action.

9 Financial Consumer Agency of Canada Act, above, s. 19 to 31. Examples of the Agency’s decisions, in particular with regard to incomplete disclosure to consumers: Exhibits I-8A, I-8B, D-AMX-14, P-172, and P-138, R.S.P.G.C., vol. I, tab 9 10 Financial Consumer Agency of Canada Act, above, s. 2, R.S.P.G.C., vol. I, tab 9 11 Financial Consumer Agency of Canada Act, above, s. 19(2) and 22, R.S.P.G.C., vol. I, tab 9 12 Bank Act, above, s. 661, R.S.P.G.C., vol. I, tab 6 13 Bank Act, above, s. 989(3), R.S.P.G.C., vol. I, tab 6 - 8 -

Attorney General of Canada’s Factum Concise overview of the position and facts

20. In Adams, the Court came to the same conclusions on the constitutional arguments for essentially the same reasons and granted the class action.

d. Judgments of the Court of Appeal

21. The judgment of the Court of Appeal in Bank of Montreal v. Marcotte should be read in tandem with its judgment in Fédérations des Caisses Desjardins v. Marcotte14 in which it concluded, contrary to the Superior Court, that the conversion fees charged by the appellants were not credit charges within the meaning of the CPA. Regarding the first constitutional question, the Court of Appeal confirmed that the CPA is applicable to banks. Despite finding that the issuance of a credit card by a bank to its clients is an action at the heart of its activities, the QCA held that lending does not fall under Parliament’s exclusive jurisdiction over banking, as numerous other institutions, federal or provincial, grant credit in this manner. It therefore cannot be an activity that is beyond the scope of provincial legislation.

22. Regarding the issue of federal paramountcy, the Court concluded that the obligation to disclose certain pieces of information, in particular credit charges and credit rates, is not incompatible with the federal framework governing the costs and rates of borrowing.

23. However, with respect to the calculation of interest rates and fees, the Court found that if conversion fees constituted credit charges within the meaning of the CPA, as the trial judge had concluded, there would be a conflict of intention, even an operational conflict between the two regimes. Indeed, this would create an obligation of sending consumers statements of account containing two sets of different information with regard to interest rates and other applicable fees, which would lead to confusion. There would also be a conflict with respect to the collection of conversion fees, because if conversion fees constitute credit charges, the grace period under the CPA would apply, whereas under the federal regime, conversion fees are not included in the cost of borrowing, which means that the consumer must pay them irrespective of when he or she pays off their account balance. Given that the Court determined that conversion fees are not credit charges

14 2012 QCCA 1395 (CanLII) - 9 -

Attorney General of Canada’s Factum Concise overview of the position and facts

within the meaning of the CPA, however, it indicated that there is no incompatibility with the federal regime.

24. That said, the Court was of the view that Parliament had intended to make the Agency solely responsible for complaints regarding banks. To avoid a conflict of purpose and to render the federal framework effective and coherent, the Court stated that the provisions of the CPA regarding complaints made to the Consumer Protection Office must be rendered inoperative for banks under the doctrine of federal paramountcy. The Court did specify, however, that consumers’ civil remedies would continue to be governed by the Civil Code and the CPA, given the lack of specific provision of civil remedies in the federal regime.

25. In Adams, which essentially involved non-compliance with section 12 of the CPA, prohibiting the claiming of any cost not mentioned in the contract, the Court of Appeal dismissed the two constitutional arguments. It indicated that it would be difficult to fathom how section 12 of the CPA could be considered as being contrary to Parliament’s objective, given that section 452 of the Bank Act essentially sets out the same obligation.

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PART II – ISSUES

26. As the constitutional issues raised in both cases are essentially the same, the proposed responses will be organized accordingly.

First question – File No. 35009: Are sections 12, 66-72, 83, 91, 92, 126, 127, 219, 228 and 271-272 of the Consumer Protection Act, R.S.Q., c. P-40.1, and ss. 55-61 of the Regulation Respecting the application of the Consumer Protection Act, R.R.Q., c. P-40.1, r.3, constitutionally inapplicable in respect of bank-issued credit cards by reason of the doctrine of interjurisdictional immunity? - 10 -

Attorney General of Canada’s Factum Issues

First question – File No. 35033: Are ss. 12, 219, and 272 of the Consumer Protection Act, R.S.Q., c. P-40.1, constitutionally inapplicable in respect of bank-issued credit and charge cards by reason of the doctrine of interjurisdictional immunity?

Response: These provisions of the Consumer Protection Act and the CPA regulations are constitutionally inapplicable to credit and charge cards issued by banks.

Second question – File No. 35009: Are ss. 12, 66-72, 83, 91, 92, 126, 127, 219, 228 and 271-272 of the Consumer Protection Act, R.S.Q., c. P-40.1, and ss. 55-61 of the Regulation Respecting the Application of the Consumer Protection Act, R.R.Q., c. P- 40.1, r.3, constitutionally inoperative in respect of bank-issued credit cards by reason of the doctrine of federal paramountcy?

Second question – File No. 35033: Are sections 12, 219, and 272 of the Consumer Protection Act, R.S.Q., c. P-40.1, constitutionally inoperative in respect of bank- issued credit and charge cards by reason of the doctrine of federal paramountcy?

Response: These provisions of the Consumer Protection Act and the CPA Regulations are constitutionally inoperative with regard to credit and charge cards issued by banks.

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PART III – SUBMISSIONS

I – THE PROVISIONS AT ISSUE ARE CONSTITUTIONALLY INAPPLICABLE BY REASON OF THE DOCTRINE OF INTERJURISDICTIONAL IMMUNITY

a. The doctrine of interjurisdictional immunity

27. The doctrine of interjurisdictional immunity is rooted in the very words used in the introductory paragraphs of sections 91 and 92 of the Constitution Act, 1867 (the CA 1867). Although this doctrine is currently of limited application, it remains a necessary tool for creating “a certain degree of predictability with regard to the division of powers between Parliament and the provincial legislatures”, which is essential to attaining the - 11 -

Attorney General of Canada’s Factum Submissions

objectives of Canadian federalism.15 As the Court acknowledged in Bell Canada (1988) and Canadian Western Bank16, the classes of subject enumerated in sections 91 and 92 must be assured a basic, minimum and unassailable content immune from the application of legislation enacted by the other level of government. As appears from Quebec (Attorney General) v. Canadian Owners and Pilots Association and Marine Services International Ltd. v. Ryan (Succession), the doctrine of interjurisdictional immunity can be analysed prior to that of federal paramountcy in cases where the application of both doctrines is raised17.

28. The analysis required for the application of the doctrine of interjurisdictional immunity involves two steps: the first is to determine whether the provincial law trenches on the protected core of a federal competence, and, if so, the second step is to determine whether the provincial law’s effect on the exercise of this protected federal power is sufficiently serious to invoke the doctrine of interjurisdictional immunity. This would require the impairment of the exercise of the federal power in question.18

29. In recent rulingss on the subject, this Court noted that the doctrine of interjurisdictional immunity is of limited application and should in general be reserved for situations already covered by precedent,19 that is to say:

“… that it will be largely reserved for those heads of power that deal with federal things, persons or undertakings, or where in the past its application has been considered absolutely indispensable or necessary

15 Canadian Western Bank v. Alberta, [2007] 2 S.C.R.3, paras. 21 to 24, R.S.P.G.C., vol. II, tab 19; see also Canada (Attorney General) v. PHS Community Service Society, [2011] 3 S.C.R.134, para. 7, R.S.P.G.C., vol. II, tab 22 16 Canadian Western Bank, par. 33, R.S.P.G.C., vol. II, tab 19; Bell Canada v. Quebec (Commission de la santé et de la sécurité du travail), [1988] 1 S.C.R.749, pp. 839- 840, R.S.P.G.C., vol. II, tab 21 17 Quebec (Attorney General) v. Canadian Owners and Pilots Association, [2010] 2 S.C.R. 536, R.S.P.G.C., vol. III, tab 33; Marine Services International Ltd. v. Ryan (Succession), R.S.P.G.C., vol. III, tab 28 18 Quebec (Attorney General) v. Canadian Owners and Pilots Association, [2010] 2 S.C.R. 536, para. 27, 45, R.S.P.G.C., vol. III, tab 33; reiterated in Marine Services International Ltd. v. Ryan (Succession), 2013 SCC 44, para. 54, 60, 64, R.S.P.G.C., vol. III, tab 28 19 Marine Services International Ltd. v. Ryan (Succession), 2013 SCC 44, para. 49, R.S.P.G.C., vol. III, tab 28, Quebec (Attorney General) v. Canadian Owners and Pilots Association, [2010] 2 S.C.R.536, para. 36, R.S.P.G.C., vol. III, tab 33 - 12 -

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to enable Parliament or a provincial legislature to achieve the purpose for which exclusive legislative jurisdiction was conferred”.20 30. Considering in particular Canadian Pioneer Management and Canadian Western Bank, and given the fact that banks are federal undertakings within the meaning of the Constitution, it is clear that the doctrine of interjurisdictional immunity may legitimately be invoked in litigation involving banks and their operations.21 The Attorney General of Quebec’s claim that the doctrine cannot be invoked in the case, due to the absence of constitutional precedents relating to credit cards and conversion of currencies is erroneous as it is based on too narrow of a reading of the application of the doctrine. As it is indisputable that exclusive jurisdiction over banking includes a basic, minimum and unassailable content, one may validly inquire whether specific provisions of a particular provincial legislation, such as the CPA, impair Parliament’s exercise of its power.

b. Federal jurisdiction over banking and the exercise of this jurisdiction by Parliament

31. In Canadian Western Bank, the Court noted that “the purpose of allocating “Banks, Incorporation of Banks and the issue of Paper Money” to Parliament under subsection 91(15) of the Constitution Act, 1867 was to create an orderly and uniform financial system subject to exclusive federal jurisdiction and control in contrast to a regionalized banking system (…)”.22

32. In that same decision, the Court stated that:

“… at least in part, the importance of having national control over the banks was due to the peculiar status of bankers [as financial intermediaries], their importance at the centre of the financial community [and] the expectation of the public that it can grant them implicit and utmost confidence.”23

20 Canadian Western Bank, para. 77, R.S.P.G.C., vol. I, tab 19 21 Canadian Pioneer Management Ltd, v. Labour Relations Board of Saskatchewan, [1980] 1 S.C.R.433, R.S.P.G.C., vol. II, tab 23, Bank of Montreal v. Hall, [1990] 1 S.C.R.121, R.S.P.G.C., vol. II, tab 20; Canadian Western Bank v. Alberta, [2007] 2 S.C.R.3, R.S.P.G.C., vol. I, tab 19 22 Canadian Western Bank, para. 83, R.S.P.G.C., vol. I, tab 19 23 Canadian Western Bank, para. 84, R.S.P.G.C., vol. I, tab 19 - 13 -

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33. It is also revealing about the importance the Fathers of the Confederation attached to the establishment of a national banking system that they conferred upon Parliament jurisdiction over both banking and the incorporation of banks,24 therefore over the very existence of banks as well as all of their operations.

34. It was therefore from this perspective that, as early as 1870, Parliament stated, in the preamble of the Act Respecting Banks and Banking, that “it is important that the provisions of Law respecting Banks and Banking in Canada should be as nearly as practicable uniform, and it is therefore expedient to enact certain clauses and provisions adapted to protect as well the interests of the public as of the Shareholders, which may be incorporated into any Act hereafter to be passed for establishing a new Bank”.25 This affirmation of the importance of having a national and uniform legislative framework applicable to banks was made to protect the public interest as well as that of the banks and their shareholders.

35. The progressive evolution of banking legislation that followed reflects this concern of establishing a uniform legislative framework applicable to banks, and of considering all essential aspects of banking operations and all interests represented, while keeping pace with the country’s social and economic evolution.26

36. Moreover, as authors Brun, Tremblay and Brouillet noted in their treatise on constitutional law, federal jurisdiction over banking has been interpreted broadly and progressively.27 This is easily understandable given that Parliament need to be able to adapt its legislation to the rapid changes in the financial services sector and to new issues that arise therein. In 1996, the Task Force on the Future of the Canadian Financial

24 Constitution Act, 1867, s. 91(15) 25 Act respecting Banks and Banking, 33 Vict. C. 11, Assented to May 12, 1870, preamble, R.S.P.G.C., vol. I, tab 1 26 Department of Finance of Canada, White Paper on the Revision of Canadian Banking Legislation, August 1976, p. 8, R.S.P.G.C., vol. V, tab 51 27 Brun, Henri, Guy Tremblay and Eugénie Brouillet, Droit constitutionnel, 5th ed. (Cowansville, Qc: Yvon Blais, 2008), R.S.P.G.C., vol. IV, tab 43; Canadian Western Bank v. Alberta, [2007] 2 S.C.R.3, par. 4, 65, R.S.P.G.C., vol. II, tab 19; A.G. Alberta v. A.G. Canada, [1947] A.C. 503, 516, R.S.P.G.C., vol. I, tab 18; Tennant v. Unions Bank of Canada, [1894] A.C. 31, 46, R.S.P.G.C., vol. IV, tab 41 - 14 -

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Services Sector, whose work culminated in the tabling of a White Paper in 1999, was given the mandate to assess public policies affecting the financial services sector and to make recommendations to enhance:

“… the sector’s contribution to job creation, economic growth and the new economy; competition, efficiency and innovation; the international competitiveness of the sector in light of the globalization of financial services, while at the same time maintaining strong, vibrant domestic financial institutions; the ability of the sector to take full advantage of technological advances as they occur and to meet the competitive challenges resulting from the introduction of new technologies; and the contribution of the sector to the best interests of Canadian consumers.”28

37. This polycentric and progressive character of legislation applicable to banks, which legislation developed gradually over the years, was recently evidenced by the addition, in 2012, of a preamble to the Bank Act, which takes into account the multiple interests at stake and the Parliament’s intention to provide for exclusive, national standards applicable to banks:

« Attendu : « que la présence d’un secteur “Whereas a strong and efficient bancaire solide et efficace est banking sector is essential to essentielle à la croissance et à la economic growth and prosperity; prospérité de l’économie ; qu’un cadre législatif qui permet aux Whereas a legislative framework that banques de soutenir efficacement la enables banks to compete effectively concurrence et de s’adapter à and be resilient in a rapidly evolving l’évolution rapide des marchés tout marketplace, taking into account the en prenant en compte les droits et rights and interests of depositors and l’intérêt des déposants et autres other consumers of banking services, consommateurs de services contributes to the stability and public bancaires contribue à la stabilité et confidence in the financial system au maintien de la confiance du and is important to the strength and public dans le système financier et security of the national economy; est important pour assurer la vigueur et la sécurité de l’économie

28 Exhibit D-BNC-5, 1999 White paper: Reforming Canada’s Financial Services Sector: A Framework for the Future, Department of Finance, pp. 5-6, Joint Book of Documents, vol. 89, pp. 72-73 - 15 -

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nationale ; « qu’il est souhaitable et dans And whereas it is desirable and is in l’intérêt national d’établir des the national interest to provide for normes nationales claires, complètes clear, comprehensive, exclusive, et exclusives applicables aux national standards applicable to produits et services bancaires offerts banking products and banking par les banques. »29 services offered by banks.

c. Consumer protection in banking legislation

38. Consumer protection in the banking sector is one of the many facets of banking legislation. Measures put in place by Parliament in this regard take into account the need to protect consumers while minimizing the risk to the financial system and to its competitiveness, as well as the need to maintain confidence in the soundness of financial institutions.30 Parliament’s exclusive jurisdiction over banking allows for such a polycentric approach. Consumer protection is not an area over which jurisdiction was granted to one or the other level of government by the Constitution Act, 1867. Both levels of government may adopt legislative measure to protect consumers in their respective areas of jurisdiction.31

– Legislative History

39. Parliament’s approach to consumer protection in the banking sector has been progressive and iterative.32 Consumer protection measures were added to Canadian banking legislation over the years, in step with the evolution of products and services offered by banks, which stemmed in particular from new technologies.

29 Bank Act, S.C. 1991, c. 46, Preamble, as amended from the Jobs, Growth and Long-Term Prosperity Act, S.C. 2012, c. 19, s. 525, 525, R.S.P.G.C., vol. I, tab 6 30 1999 White paper: Reforming Canada’s Financial Services Sector: A Framework for the Future, pp. 49 and 75, Exhibit DBNC-5 31 Richard v. Time Inc., 2012 SCC 8 - [2012] 1 S.C.R. 265, par. 36-38, R.S.P.G.C., vol. IV, tab 39; Mattel, Inc. v. 3894207 Canada Inc. - 2006 SCC 22 - [2006] 1 S.C.R. 772, par. 2. R.S.P.G.C., vol. III, tab 29; V.K. Mason Construction Ltd. v. Bank of Nova Scotia - [1985] 1 S.C.R. 271, p. 287, R.S.P.G.C., vol. IV, tab 42 32 In fact, banking legislation is reviewed every 5 years:: see section 21 of the Bank Act, R.S.P.G.C., vol. I, tab 6 - 16 -

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40. In 1967, the Act respecting Banks and Banking33 added a definition of the “cost of borrowing” payable by a borrower to a bank, established rules for the calculation of the cost of borrowing, and required banks to disclose the cost of borrowing calculated and expressed in accordance with the prescribed regulations. These provisions were complemented and further nuanced by the Bank Cost of Borrowing Disclosure Regulations.34

41. In the 1976 White paper on the Revision of Canadian Banking Legislation, the government announced the next review of “legislation in respect of the protection of borrowers and depositors” in which would be incorporated “[a]ll aspects of protection for borrowers and depositors which are applicable to banks”.35 The government also stated that this would place an “emphasis on competition in banking … to ensure that Canadian consumers and business will enjoy financial services as lenders or borrowers at prices as favourable as they can be, consistent with the interests of each and the financial health and stability of the institutions involved and the economy at large.”36

42. This announcement materialized in 1980 with the enactment of the Banks and Banking Law Revision Act, 198037 in which the French version’s “frais d’emprunt” was replaced by “coût d’emprunt”, obligations relating to payment, credit or charge cards were added, as was a section that provided for a penalty for any bank’s failure to respect these obligations.38 The legislation was complemented in 1983 by the adoption of the Cost of Borrowing Disclosure Regulations.39

33 Act respecting Banks and banking, S.C. 1966-67, c. 87, s. 92 and 93, R.S.P.G.C., vol. I, tab 2 34 Règlement sur la révélation des frais d’emprunt exigés par la banque, DORS/67-504, R.S.P.G.C., vol. I, tab 13 35 Department of Finance of Canada, White Paper on the Revision of Canadian Banking Legislation, August 1976, p. 45, R.S.P.G.C., vol. V, tab 51 36 Ibid, p. 47, R.S.P.G.C., vol. V, tab 51 37 Banks and Banking Law Revision Act, 1980, S.C. 1980-81-82-83, c. 40, a. 202. Sections 92 and 93 of the previous Act were replaced by sections 202 and 203, R.S.P.G.C., vol. I, tab 3 38 Ibid, s. 204, R.S.P.G.C., vol. I, tab 3 39 Cost of Borrowing Disclosure Regulations, SOR/83-103, R.S.P.G.C., vol. I, tab 11 - 17 -

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43. In 1991, another major restructuring of banking legislation occurred with the Bank Act40, in parallel with a reform of several other statutes affecting financial institutions.41 The section of the Act dealing with the cost of borrowing42 was revised. The Act also added the requirements for banks to “establish procedures for dealing with complaints made by customers of the bank about the application of charges applicable to deposit accounts or payment, credit or charge cards with the bank or the disclosure of or manner of calculating the cost of borrowing in respect of a loan made by the bank.”43 New regulations on the cost of borrowing were also adopted.44

44. In 1997, the Act to amend certain laws relating to financial institutions45 once again widened the scope and specified the type of information to be disclosed to consumers, in particular with regard to the cost of borrowing.46 The provisions of the Bank Act in issue in the present case took on their current form following these amendments adopted in 1997 and amendments adopted in 2001.47

45. At the end of the 1990s, the federal and provincial governments set about trying to harmonize laws in their respective jurisdictions that governed disclosure of costs of consumer loans, lines of credit and credit cards.48 The Cost of Borrowing (Banks) Regulations49, which pertains to the present case, was enacted by the federal government as a result of this exercise.

40 Bank Act, S.C. 1991, c. 46, R.S.P.G.C., vol. I, tab 6 41 Act Governing Trust and Loan Companies; Act respecting insurance companies and fraternal benefit societies; Cooperative Credit Associations Act 42 Bank Act, S.C. 1991, c. 46, s. 449 to 456, .R.S.P.G.C., vol. I, tab 6 43 Ibid, s. 455 44 Cost of Borrowing (Banks) Regulations, SOR/92-320, R.S.P.G.C., vol. I, tab 14 45 An Act to amend certain laws relating to financial institutions, S.C. 1997, c. 15, R.S.P.G.C., vol. I, tab 4 46 Ibid, s. 49-51, amending s. 452 to 454 of the Bank Act, R.S.P.G.C., vol. I, tab 4 47 S.C. 2001, c. 9, R.S.P.G.C., vol. I, tab 9 48 Regulatory Impact Analysis Statement on Cost of Borrowing (Banks) Regulation, Canada Gazette, Vol. 134, n. 21, May 20, 2000, p. 1597, R.S.P.G.C., vol. V, tab 50 49 SOR/2001-101, R.S.P.G.C., vol. I, tab 15 - 18 -

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46. In 2001, Parliament established the Agency.50 The mandate of the Agency is notably to supervise the federally regulated financial institutions to ensure that they comply with the “consumer provisions” (including the provisions in question here) and to oversee the implementation of voluntary codes of conduct adopted by federal financial institutions in order to protect the interests of their customers.

47. In 2007, Parliament once again strengthened regulations designed to ensure consumers were better informed, by requiring banks to make information on the procedures for dealing with complaints available to the public.51 In 2009, the federal government enacted the Credit Business Practices Regulations52, the purpose of which is to protect consumers in the bank credit sector. These regulations provide for, among other things, a minimum grace period applicable to new purchases by credit card, rules on the allocation of payments arising from the use of credit cards, rules on the disclosure of debt collection practices and the obligation to obtain the consent of the credit card holder for any increases in credit limits.

48. Finally, in 200953 and 201054 Parliament gave the Minister of Finance the power to approve an external body corporate whose purpose is to deal with complaints that were not resolved to their satisfaction of the complainant under procedures established by his or her member financial institution. The banks’ membership in this body would be obligatory.

49. Thus, for decades, Parliament progressively established measures designed to protect consumers in the banking sector, while maintaining its general approach to banking legislation, which is to seek a balance between the multiple interests at play and the need to ensure the continued stability and competitiveness of the national banking system.

50 Financial Consumer Agency of Canada Act, S.C. 2001, c. 9, R.S.P.G.C., vol. I, tab 9 51 An Act to amend the law governing financial institutions and to provide for related and consequential matters, S.C. 2007, c. 6, s. 32, R.S.P.G.C., vol. I, tab 5 52 SOR/2009-257, R.S.P.G.C., vol. I, tab 16 53 Canada Not-for-profit Corporations Act, S.C. 2009, c. 23, s 306, replacing s. 455.1(1) of the Bank Act, R.S.P.G.C., vol. I, tab 7 54 Sustaining Canada’s Economic Recovery Act, S.C. 2010, c. 25, s. 147, addendum to s. 455.01 of the Bank Act, R.S.P.G.C., vol. I, tab 8 - 19 -

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50. The federal statutory provisions at issue in this case, which impose on banks obligations to protect consumers when providing credit by means of credit cards, are part of this framework.

d. The regulation of lending is at the core of Parliament’s jurisdiction over banking

51. For the doctrine of interjurisdictional immunity to apply, it must first be determined whether the provisions of the provincial statute encroach on the core of a federal jurisdiction, in that they affect the basic, minimum and unassailable content of the federal legislative power55. That is the case here.

52. The provisions of the CPA and the CPA Regulations impose obligations on persons who provide credit, in particular by means of credit cards. Most of these provisions are found in Division III of the CPA, which contemplates “credit contracts”.56 The others also apply to such contracts.57 The definition of “contracts extending variable credit” under Division III of the CPA specifically states that they include “in particular, contracts made for the use of what are commonly called credit cards”58. Each credit card transaction involves the granting of a loan by the financial institution to the cardholder,59 whether or not the cardholder is required to pay interest. Thus, a credit card is essentially an instrument by which a bank, in this case, provides credit to its customer and issues a loan to them. The card is directly tied to the credit contract and is a part of it.

53. Yet, the granting of credit and issuing of loans are unquestionably vital and essential activities carried out by banks, and this has long been recognized by the courts. In Canadian Western Bank, the Court noted that in 1914 the High Court of Australia held

55 Quebec (Attorney General) v. Canadian Owners and Pilots Association, par. 35, R.S.P.G.C., vol. III, tab 33; Bell Canada v. Quebec (Commission de la santé et de la sécurité du travail), [1988] 1 S.C.R.749, p. 839, R.S.P.G.C., vol. II, tab 21; Canadian Western Bank, para. 50, R.S.P.G.C., vol. II, tab 19 56 S.C. 1991, c. 46, R.S.P.G.C., s. 66 à 72, 83, 91, 92, 126 and 127, R.S.P.G.C. vol. I, tab 6 57 S.C. 1991, c. 46, s. 12, 272 and 272, R.S.P.G.C, vol. I, tab 6 58 Consumer Protection Act, s. 118, R.S.P.G.C., vol. I, tab 10 59 Exhibit DRS-1, Report by Ronald A. Shearer : “Revolving Credit and Foreign Exchange in Canadian Banking History” April 27, 2007, Joint Book of Documents, Volume 44, page 120 - 20 -

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that among the essential characteristics of banks and banking was the collection of money by the banks by receiving deposits upon loan and the use of the money so collected by lending it again.60

54. Bastarache J.’s reasons in Canadian Western Bank, concurring in the result, clearly state that the granting of credit is at the core of banking operations:

Thus, deposit taking and credit granting easily fall at the heart of this core set of operations and activities, since these activities constitute in many ways the raison d’être of banks. It is also possible to see these activities as part of the core of banking because this is so clearly and palpably the “domain” of banks as federal undertakings.61

55. These statements are consistent with those of Justices Binnie and LeBel who, in writing for the majority, describe banks in general terms as “takers of deposits and granters of credit”.62

56. In contrast to the insurance-promoting activities at issue in Canadian Western Bank, which were prohibited until 1991, it cannot be claimed that lending activities exercised by banks do not constitute vital and essential activities of banks. Such activities, unlike promoting insurance, are at the core of banking. The validity of this proposition is recognized by the established jurisprudence of this Court63 and by eminent authorities on the subject.64 That other businesses grant credit, or that banks were not the first to grant

60 Canadian Western Bank, par. 84, citing Commissioners of the State Savings Bank of Victoria v. Permewan, Wright & Co., (1914), 19 C.L.R. 457, pp. 470-471, R.S.P.G.C., vol. II, tab 19 61 Canadian Western Bank, par. 118, R.S.P.G.C., vol. II, tab 19 62 Canadian Western Bank, par. 85, R.S.P.G.C., vol. II, tab 19 63 Reference as to the Validity of the Debt Ajustment Act, Alberta, [1942] S.C.R.31, p. 37, R.S.P.G.C., vol. III, tab 35; Reference re Alberta Statutes – The Bank Taxation Act; The Credit of Alberta Regulation Act; and the Accurate News and Information Act, [1938] S.C.R.100 at p. 124, R.S.P.G.C., vol. IV, tab 36; Ontario Bank v. McAllister, [1910] 43 S.C.R. 338, p. 350, 364, R.S.P.G.C., vol. III, tab 31; Bank of Montreal v. Hall, p. 132, R.S.P.G.C., vol. II, tab 20; see also Attorney General for Alberta v. Attorney General of Canada, [1947] C.A. 503, pp. 516, 517, R.S.P.G.C., vol. I, tab 18; In Re Bergethaler Waisenamt (No. 2), [1949] 1 W.W.R. 323, p. 334, R.S.P.G.C., vol. III, tab 26; R. v. Milelli, (1989), 45 B.L.R. 209, p. 216, R.S.P.G.C., vol. III, tab 34 64 Crawford, B., Crawford and Falconridge – Banking and Bills of Exchange, vol. 1, 8th ed. (Toronto: Canada Law Book, 1986); Ogilvie, M.H., Bank and Customer Law in Canada, 2d ed. (Toronto: Irwin Law, 2013), R.S.P.G.C., vol. IV, tab 46 - 21 -

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credit by way of credit cards, does not alter the fact that when a bank grants credit, it is exercising one of its vital and essential activities, regardless of the manner in which it does so. One cannot limit the examination of methods of granting credit to only those methods used in the past. Such an approach would run counter to this Court’s progressive interpretation of the Constitution.65 Furthermore, as this Court stated in Canadian Western Bank, the basic, minimum and unassailable content of Parliament’s exclusive jurisdiction over banking must not be narrowly interpreted.66

57. As with the granting of credit, currency conversion is also an activity within the basic, minimum content of federal jurisdiction over banking. Indeed, as author Ogilvie explains, the Bank Act no longer contains any specific reference to authorizing banks to lend money or convert currency as it is obvious that such activities are at the heart of banking.67 Another author noted that “banking is primarily concerned with dealing in currency” and that conversion of currency, like the granting of credit, constitutes a function which falls within “the very core of banking”68.

58. In the case at bar, the Court of Appeal rightly acknowledged that the issuance of a credit card by a bank to one of its clients is in fact the conclusion of a variable credit contact, and therefore constitutes an act at the core of its activities.69 However, it did not see fit to apply the doctrine of interjurisdictional immunity, essentially on the grounds that the banks had not created this “product”, that other institutions, financial or otherwise, grant credit in this manner, and that, at the end of the day, it was nothing more than a new way for banks to extend credit to their clients.70 59. The Court of Appeal did not ask itself the right question. The fact that an activity carried out by a bank is also carried out by institutions other than banks is irrelevant. Banking,

65 Reference re Employment Insurance Act (Can.), ss. 22 and 23, [2005] 2 S.C.R.669; Reference re Same-sex Marriage, [2004] 3 S.C.R.698, para. 22, R.S.P.G.C., vol. IV, tab 37 66 Canadian Western Bank, para. 85, R.S.P.G.C., vol. II, tab 19 67 Ogilvie, M.H., Bank and Customer Law in Canada, 2d ed. (Toronto: Irwin Law, 2013), pp. 154- 157 68 Johnston, C.C., “Judicial Comments on the Concept of “Banking Business”, (1962) 2 Osgoode Hall L.J. 327, p. 353 69 Judgment of the Court of Appel in Marcotte, para. 83 70 Judgment of the the Court of Appeal in Marcotte, paras. 84-86; Crawford, B., The Law of Banking and Payment in Canada, vol. 2, loose-leaf (Toronto: Canada Law Book, 2013), p. 8- 24.2-8.24.3, 8-384e), R.S.P.G.C., vol. IV, tab 45 - 22 -

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and for that matter Parliament’s jurisdiction over banks, must be assessed from an institutional perspective, in that“[b]anking involves a set of interrelated financial activities carried out by an institution that operates under the nomenclature and terms of incorporation which clearly identify it as having the distinctive institutional character of a bank.”71 An activity is banking, in the constitutional sense, if it is conducted by a bank.72

60. Accepting the Court of Appeal’s reasoning would effectively empty all substance and meaning from the jurisdiction conferred upon Parliament pursuant to subsection 91(15) CA 1867, as one would be hard pressed to find any banking activity that is not or could not be carried out by institutions or persons other than banks. In other words, there would be, in practice, no basic, minimum and unassailable content of the legislative power over banking.

61. Thus, from the moment the Court of Appeal concluded that the issuance of a credit card by a bank, as a variable credit contract, was at the heart of its activities as a bank, it ought to have asked itself whether the application of the provisions of the CPA and the CPA Regulations at issue would impair the exercise of federal jurisdiction over banking.

e. The provisions at issue impair Parliament in the exercise of its exclusive jurisdiction over banks and banking

62. Once it is established that the provincial legislation encroaches on the core of a federal power or on the essential activities of a federal undertaking, it must be determined whether the application of this provincial legislation impairs the exercise of federal power or of the vital or essential elements of the federal undertaking in question. In Bell Canada (1988), the Court indicated that in order for the doctrine of interjurisdictional immunity to be given effect, it is sufficient that the provincial statute which purports to apply to the

71 Canadian Pioneer management Ltd. v. Labour Relations Board of Saskatchewan, [1980] 1 S.C.R.433, p. 465, R.S.P.G.C., vol. II, tab 23; Tennant v. Union Bank of Canada, [1894] C.A. 31, R.S.P.G.C., vol. IV, tab 41 72 Canadian Pioneer Management Ltd. v. Labour Relations Board of Saskatchewan, [1980] 1 S.C.R. 433, p. 465, R.S.P.G.C., vol. II, tab 23; Crawford, B., The Law of Banking and Payment in Canada, vol. 2, loose-leaf (Toronto: Canada Law Book, 2013), p. 8-13, 8-14, R.S.P.G.C., vol. IV, tab 45 - 23 -

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federal undertaking affects a vital or essential part of that undertaking, without necessarily going as far as impairing or paralyzing it.73

63. The Court changed the test in Canadian Western Bank when it indicated that it was not enough for the provincial legislation simply to affect or touch on that which makes a federal subject or object of rights specifically of federal jurisdiction, it had to impair it. The Court explained that the difference between “affects” and “impairs” is that the former does not imply any adverse consequence whereas the latter does. In so doing, the Court indicated that, in its view, the law as it stood before Bell Canada (1988) better reflected Canada’s federal scheme.74 In the Canadian Owners and Pilots Association (COPA) decision issued in 2010, the Court stated that the impairment test marked a midpoint between sterilizing and merely affecting. It added that the term “impairment” is stronger than “affects” and that it suggests “an impact that not only affects the core federal power, but does so in a way that seriously or significantly trammels the federal power.”75

64. Thus, in COPA, the Court decided that the application of a provincial law prohibiting the construction of aerodromes in agricultural zones did impair the federal power to decide where and when aerodromes should be built and therefore impaired the federal exercise of the core federal power.76 Similarly in this case, if applicable to banks, the CPA and the CPA Regulations would have the effect of setting the method of calculation and requiring the disclosure of credit charges of loans provided by banks by means of credit or debit cards. This would constitute an impairment of Parliament’s power to legislate in respect of loans provided by banks through such means, an activity which is at the core of its jurisdiction over banking.

73 Bell Canada v. Québec (Commission de la santé et de la sécurité du travail), [1988] 1 S.C.R.749, R.S.P.G.C., vol. II, tab 21 74 Canadian Western Bank, par. 48, R.S.P.G.C., vol. II, tab 19 75 Quebec (Attorney General) v. Canadian Owners and Pilots Association, par. 43-45, R.S.P.G.C., vol. III, tab 33 76 Quebec (Attorney General) v. Canadian Owners and Pilots Association, par. 46-48, R.S.P.G.C., vol. III, tab 33 - 24 -

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65. It is of significance that the Court, in COPA, rejected Quebec’s argument that the federal government’s power was not impaired because Parliament, if it so wished, could always pass legislation that would override the provincial restrictions on where aerodromes could be built. According to the Court, such an argument confused the two constitutional doctrines, as the doctrine of interjurisdictional immunity does not imply examining whether or how Parliament has chosen to exercise its power to legislate. It explained that if Quebec’s argument was accepted, Parliament would be obliged to legislate in a piecemeal way and not be free to introduce broad, permissive legislation, thus limiting Parliament’s legislative options and impeding the exercise of its core jurisdiction over aeronautics.

66. Similarly, in this case the application of the provincial law would force Parliament to accept provincial standards or legislate to override them in respect of activities that are at the core of its jurisdiction. This would amount to a serious impairment of Parliament’s power as the CPA provisions and regulations at issue regulate exhaustively the obligations of a lender governed by the CPA.

67. In particular, article 12 of the CPA provides that no “costs” can be charged to the consumer, unless the amount of such costs is clearly indicated in the contract. Sections 66 to 72, which apply to credit contracts, define what constitutes net capital and credit charges in contracts and set out the way in which credit charges must be computed and disclosed. Sections 126 and 127 set out the obligations in relation to the sending of statements of account. Sections 271 and 272 allow for consumers to demand the nullity of a contract if certain rules under the CPA are not respected and to demand reimbursement of credit charges that were imposed in contravention of the Act.

68. In addition, sections 55 to 61 of the Regulation Respecting the Application of the Consumer Protection Act provide for the way credit rates and credit charges are to be calculated. Moreover, merchants are prohibited to exact credit charges if the consumer pays its account in full within 21 days of the mailing of the statement of account (grace period). - 25 -

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69. There is no doubt that Parliament has the power, under subsection 91(15) of the CA 1867, to enact similar, analogous or contrary provisions, as long as their application is limited to the banking sector. In fact, it has already done so many respects and the question here is not whether the provincial provisions offer a better protection than the federal rules.

70. If the provisions of the CPA and the CPA Regulations at issue were applicable to banks, they would impair the federal Parliament’s power to legislate or not, exhaustively or not, on such matters regarding their application to banks. It is up to Parliament, not the provincial legislatures, to determine the scope of obligations applicable to banks when they extend credit and the nature of the applicable remedies available in cases of non- compliance.

71. Thus, if the CPA provisions in question were held to apply to banks, Parliament would find itself in a situation in which it would have to assess the impact of each such provision on banking activities based on existing federal standards, to then decide whether it is advisable to legislate to the contrary. Ultimately, this kind of exercise would need to be done for legislation from ten provinces. In this regard, it should also be noted that Parliament may decide not to directly regulate certain areas in order to provide the industry with an opportunity to implement its own voluntary codes of conduct, compliance with which would be enforced by the Agency.77 If a provincial law that was deemed to be applicable was inconsistent with a given code, Parliament would then be forced to enact overriding legislation to ensure the continued effectiveness of the code.

72. To echo the Court’s decision in COPA, such an approach would limit Parliament’s legislative choices and impair the exercise of its fundamental jurisdiction over banks and banking. Parliament should not find itself in a position whereby it would constantly be forced to react to the provincial legislatures’ decisions.

73. To paraphrase this Court in COPA, if the CPA provisions at issue were to be applied, Parliament would be forced to choose between accepting that a province can regulate vital and essential banking activities on the one hand and specifically legislating to

77 Financial Consumer Agency of Canada Act, S.C. 2001, c. 9, s. 3, R.S.P.G.C., vol. I, tab 9 - 26 -

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override the provincial law on the other hand.78 This would seriously impair the exercise of federal jurisdiction over banking.

74. In short, the application of the CPA provisions in issue here would lead to the existence of a comprehensive provincial regulation of the calculation and disclosure of the cost of borrowing and non-interest charges related to loans by way of credit cards issued by banks. In and of itself this constitutes an impairment of federal power to legislate over banking, just as regulation by the provinces of labour relations and working conditions in a federal undertaking impairs Parliament’s exclusive power to legislate concerning such matters.

f. This case does not affect the common law

75. It is false to assert, as the individual respondents do, that applying the doctrine of interjurisdictional immunity in this case would also render inapplicable to banks an indefinite number of rules set out in the Civil Code of Quebec (the C.C.Q.). First of all, no provision of the C.C.Q. at issue here. It would therefore be inappropriate, without the appropriate factual background, to undertake the kind of comparative exercise the respondents are asking this Court to do.

76. In addition, the analogies made by the Respondents on this point are patently erroneous. Article 2778 of the C.C.Q. applies to a bank when it has availed itself of Quebec law regarding securities. When a financial institution makes a hypothecary loan based on provincial law, as was the case in CIBC Mortgage Corp. c. Vasquez79, it must agree to comply with the conditions governing the exercise of its rights as a hypothecary creditor under provincial law. This situation is completely different form the case at bar. The present case would have no impact on such a situation.

77. As for article 1399 of the C.C.Q., it is clear that provincial common law rules regarding consent apply to contracts entered into between banks and individuals. If a person is able to show that one of the defects of consent set out in the C.C.Q. (error, fraud, fear) was

78 Quebec (Attorney General) c. Canadian Owners and Pilots, [2010] 2 S.C.R.536, par. 60, R.S.P.G.C., vol. III, tab 33 79 CIBC Mortgage Corp. v. Vasquez, 2002 3 S.C.R.168, 2002 SCC 60, R.S.P.G.C., vol. II, tab 24 - 27 -

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present at the moment the contract was entered into, that person can avail itself of remedies provided in the C.C.Q to remedy the situation. The person could ask that the contract be declared null and void under articles 1416 et seq. C.C.Q. In such a circumstance, section 988 of the Bank Act, which stipulates that a contravention of any provision of the Bank Act or the regulations does not invalidate any contract entered into in contravention of the provision, would not apply because there would not be any violation of the Bank Act.

78. Using the same example, the person deceived or misled at the moment the contract was entered into may also be compensated under the general civil liability regime set out in the C.C.Q. if it can be demonstrated that he or she suffered prejudice as a result of a “fault” committed by the bank. No one questions that reality.

79. For all these reasons, the Court should answer the first constitutional question stated in each of the two cases in the affirmative.

II. THE PROVISIONS AT ISSUE ARE CONSTITUTIONALLY INOPERATIVE BY REASON OF THE DOCTRINE OF FEDERAL PARAMOUNTCY

a. The doctrine of federal paramountcy – general principles

80. Under the doctrine of paramountcy, a valid federal law must take precedence over a valid provincial law where there is a conflict between the two. Two kinds of conflict can give rise to the application of the doctrine of federal paramountcy: operational conflict and conflict of purpose. There is an operational conflict between two statutes when “compliance with one is defiance of the other”.80 A conflict of purpose exists between two statutes where “imposing an obligation to comply with provincial legislation would in effect frustrate the purpose of a federal law even though it did not entail a direct

80 Multiple Access Ltd. c. McCutcheon, [1982] 2 S.C.R.161, p. 191, R.S.P.G.C., vol. III, tab 30; Quebec (Attorney General) v. Canadian Owners and Pilots Association, 2010 SCC 39, [2010] 2 S.C.R.536, para. 64, R.S.P.G.C., vol. III, tab 33; Quebec (Attorney General) v. Canada (Human Resources and Social Development), 2011 SCC 60, para. 17, R.S.P.G.C., vol. III, tab 32; Marine Services International Ltd. v. Ryan Estate, 2013 SCC 44, para. 68, R.S.P.G.C., vol. III, tab 28 - 28 -

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violation of the federal law’s provisions.”81 In other words, there is a conflict of purpose where the application of the provincial law frustrates the purpose of the federal law.82

b. There is a conflict of purpose: the provincial legislation frustrates the purpose of the federal framework

81. In this case, we can see that there is a conflict of purpose between the provisions of the CPA and the federal framework. The application of the provisions of the CPA to banking impedes the fulfilment of Parliament’s purpose of establishing an exclusive national framework applicable to banks with respect to calculating and disclosing the cost of borrowing and non-interest charges. This federal framework includes not only substantive provisions, but also complaint and recourse mechanisms to encourage compliance with the legislation and to sanction non-compliance, all of which to better inform and protect consumers. The conflict of purpose is clearly apparent from the fact that Parliament sought to make banks calculate and disclose the cost of borrowing and non-interest charges relating to credit card lending in a certain way while the CPA provides that the calculation and disclosure of credit card lending be carried out differently. In addition, applying the CPA provisions would prohibit banks from charging fees in certain circumstances where such fees are permitted to be charged under federal law. This would therefore thwart Parliament’s will. Lastly, federal legislation provides for administrative and criminal remedies to sanction violations of the federal provisions in issue, contrary to the CPA which provides for civil remedies.

82. In this case, the Court of Appeal recognized that there was a conflict of purpose in several respects. In particular, it recognized that there would be a conflict of purpose, and even an operational conflict, if the provincial provisions relating to the calculation of credit

81 Canadian Western Bank, par. 73, R.S.P.G.C., vol. II, tab 19; Bank of Montreal v. Hall, [1990] 1 S.C.R. 121, R.S.P.G.C., vol. II, tab 20; Law Society of British Columbia v. Mangat, [2001] 3 S.C.R.113, para. 72, R.S.P.G.C., vol. III, tab 27; Rothman, Benson & Hedges Inc. v. Saskatchewan, [2005] 1 S.C.R.188, para. 14, R.S.P.G.C., vol. IV, tab 40; Marine Services International Ltd. v. Ryan Estate, 2013 SCC 44, para. 69, R.S.P.G.C., vol. III, tab 28 82 Marine Services International Ltd. v. Ryan Estate, 2013 SCC 44, para. 69, R.S.P.G.C., vol. III, tab 28 - 29 -

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charges and rates and to the collection of credit charges were applicable to banks.83 As the two frameworks provide for different ways to calculate credit charges and rates, banks would be obliged to disclose to consumers on their statements of account one set of information under the federal framework and another set of information under the provincial framework, which would only create confusion for consumers. The federal objective of better protecting and informing consumers would therefore not be achieved.

83. With respect to the collection of charges, the Court of Appeal indicated that Parliament decided not to include conversion fees in the cost of borrowing, which means that consumers must pay these fees, regardless of whether they pay off their balance within the grace period.84 The CPA regime, on the other hand, sets out that consumers who pay the entire balance of their account within the grace period do not have to pay conversion fees. To the extent that conversion fees constitute credit charges, there is a conflict between the provincial legislation and the purpose of the federal legislation.

84. The Court of Appeal further held that Parliament intended to make the Agency the sole body for dealing with complaints regarding banking. To avoid a conflict of purpose and ensure the federal framework is effective and consistent, the Court indicated that the CPA provisions on complaints made to the Office de protection du consommateur must be rendered inoperative with respect to banks under the doctrine of federal paramountcy.85

85. The Court of Appeal’s reasoning is well founded. It is clearly apparent that, with respect to these aspects of the framework, provincial legislation is incompatible with the federal purpose.

86. However, the Court of Appeal held that the obligation at s.12 of the CPA to disclose all fees, as well as the provisions providing for civil remedies to sanction contraventions of the CPA, did not conflict with the federal purpose, because the federal scheme provide for the same disclosure obligation and is silent with respect to civil remedies.86

83 Judgment of the Court of Appeal, par. 104 84 Ibid, par. 105 85 Ibid, par. 107-109 86 Ibid, par. 106 and 111 - 30 -

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87. These findings are erroneous. Despite the fact that both schemes impose on banks the same disclosure obligations, the conflict of purpose lies in the fact that Parliament and the provincial legislature did not choose the same means to sanction non-compliance with these obligations. To assess whether there was a conflict of purpose, the Court of Appeal could not simply limit its analysis to the fact that the federal and provincial frameworks both contained an obligation to disclose fees. It should have proceeded further and examined how each legislator intended to deal with the issue of failure to comply with these disclosure obligations. In Quebec, civil remedies which included the possibility of nullifying a contract were the preferred methods. At the federal level, administrative and criminal sanctions were chosen and the Bank Act specifically provides that the violation of the Act or its regulations does not nullify a contract. It is therefore apparent that the intentions of the two levels of government are not compatible. The absence of civil remedies in the federal framework does not mean that the framework is incomplete. Quite to the contrary, it rather attests to the existence of different political choices made by Parliament as to how to sanction contraventions of the obligations at issue.87

88. Overall, the Court of Appeal’s conclusion fails to acknowledge Parliament’s purpose of setting up an exclusive national framework to govern the obligations of banks with respect to calculating and disclosing the cost of borrowing and non-interest charges when granting loans to their clients and the sanctions associated with violations of those obligations. The Court of Appeal’s finding in this regard is also inconsistent with its own conclusion that the Financial Consumer Agency of Canada Act regime was not optional - Parliament intended for the Agency to be the sole complaint resolution body for consumers who were unsatisfied with their bank, and made no room for the Office de la protection du consommateur.

89. Following the Court of Appeal’s reasoning, unsatisfied consumers would have to submit their complaints to the federal Agency for violations of section 12 of the CPA. In concluding that Parliament intended to set up an exclusive federal oversight regime,

87 Crawford, B., The Law of Banking and Payment in Canada, vol. 2, loose-leaf (Toronto: Canada Law Book, 2013) p. 8-38.4d), 8-38.4f), R.S.P.G.C., vol. IV, tab 45 - 31 -

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the Court of Appeal ought to have concluded that only substantive federal provisions were applicable to banks in this context.

c. The federal purpose of setting up an exclusive national framework

90. It is by considering provisions at issue in their context that the legislative purpose and scope of the federal measures, for the purposes of identifying Parliament’s purpose and determining whether a conflict exists, are revealed.88 As mentioned earlier, the relevant federal legislative framework is found in three enactments: the Bank Act,89 the Cost of Borrowing (Banks) Regulations,90and the Financial Consumer Agency of Canada Act,91 creating the FCAC. These enactments and the context of their adoption, as well as the Credit Business Practices Regulations92 reveal a clear intention by Parliament to establish an exclusive national regulatory framework in respect of credit offered by banks with a view to protecting consumers.

91. Contrary to the individual respondents’ submissions, the fact that two frameworks, one provincial and the other federal, share the same general purpose of protecting the consumer does not mean that there cannot be a conflict in purpose. To characterize the purpose of federal legislation in such a general manner, as the respondents do, does not make it possible to grasp Parliament’s more precise objective. Virtually all banking legislation, including “prudential” regulation, is ultimately aimed at protecting consumers. However, it is possible to want to achieve this purpose in different ways. Here, the specific purpose of the federal legislative framework is to be comprehensive and exclusive in respect of the bank’s obligations in their relationships with their customers with respect to disclosing and calculating borrowing costs and non-interest charges.

88 Quebec (Attorney General) v. Canada (Department of Human Resources and Social Development), 2011 SCC 60, paras. 26-28, R.S.P.G.C., vol. III, tab 32 89 S.C. 1991, c. 46, R.S.P.G.C., vol. I, tab 6 90 SOR/2001-101, R.S.P.G.C., vol. I, tab 15 91 S.C. 2001, c. 9, R.S.P.G.C., vol. I, tab 9 92 SOR/2009-257, R.S.P.G.C., vol. I, tab 16 - 32 -

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92. The Bank Act contains provisions regarding the definition of “cost of borrowing”, how to calculate it and the obligation to disclose it along with other information, in respect of a number of types of credit contracts, including credit or chargecards.93 It also allows for, in section 454, the enactment of regulations governing the manner in which the cost of borrowing is calculated, the manner in which the cost of borrowing and any other information is disclosed, the disclosure of any applicable charges or penalties, and all other questions necessary to achieve the objective of sections 449.1 to 453 of the Act. The Cost of Borrowing (Banks) Regulations sets out these requirements.

93. The enactment of these regulations in 2001 was preceded by the publication of a White Paper, in 1999, which revealed that the regulatory approach was based on the premise that Parliament has exclusive jurisdiction to introduce legislation to protect consumers in the banking sector:

Constitutional jurisdiction over consumer protection in the financial services sector is shared between the federal and provincial governments, depending on the financial institution in question and the activity being carried on by the institution. The federal government has exclusive authority over banks and shares authority over federally incorporated trust and loan and insurance companies.94

94. These regulations stem from an agreement in 1998 between the provinces and the federal government to harmonize legislation on the disclosure of the costs of consumer loans, lines of credit and credit cards.95 One of the main objectives of the regulations was to level the playing field among financial institutions, thus facilitating comparison, by the consumers, of the cost of borrowing from one type of financial institution to another, and therefore, to better inform them.96 This approach was consistent with the idea that the

93 Bank Act, ss. 449 to 452, R.S.P.G.C., vol. I, tab 6 94 Crawford, B., The Law of Banking and Payment in Canada, vol. 2, loose-leaf (Toronto: Canada Law Book, 2013), p. 8-18, 8-38.4, R.S.P.G.C., vol. IV, tab 45;1999 White Paper: Reforming Canada’s Financial Services Sector – A Framework for the Future, Department of Finance, July 25, 1999, p. 64, Exhibit D-BNC-5, Joint Book of Documents, vol. 89, p. 138 95 Regulatory Impact Analysis Statement on Cost of Borrowing (Banks) Regulation, Canada Gazette, Vol. 134, n. 21, May 20, 2000, p. 1597, R.S.P.G.C., vol. V, tab 50 96 Ibid - 33 -

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“the fundamental interests and needs of consumers do not vary from jurisdiction to jurisdiction”.97 95. The harmonization contemplated was based on the premise that the federal rules provided for in the Regulations would only apply to banks, whereas the provincial rules would only apply to provincial financial institutions. At the time, there was no question of overlapping regimes, as illustrated by the following excerpt from the report of the panel established under the Agreement on Internal Trade to arbitrate a dispute that arose during discussions on harmonization:

There is no duplication or overlap in regulatory measures in this case because the federal and provincial measures relate to different types of financial institutions and neither Party purports to apply its measure to persons falling within the jurisdiction of the other Party.98

96. Thus, when it enacted the Regulations, Parliament’s intention was that banks be subject only to the Regulations and not that they also be governed by provincial rules covering essentially the same subjects; and no one claimed otherwise.

97. The federal framework also includes the Financial Consumer Agency of Canada Act under which created the FCAC, an independent federal government regulatory agency, responsible for the supervision of federally regulated financial institutions with a view to protecting consumers. With the creation of the Agency, Parliament removed all doubt as to the intention of Parliament to establish an exclusive national framework aimed at protecting consumers in their relationships with the banks. At the time of its creation, it was clear that the Agency would be the turnstile through which dissatisfied consumers of financial products offered by banks must pass,99 as the Court of Appeal rightly noted.100

97 1999 White Paper: Reforming Canada’s Financial Services Sector – A Framework for the Future, Department of Finance, July 25, 1999, p. 66, Exhibit D-BNC-5, Joint Book of Documents, vol. 89, p. 140 98 Agreement on Internal Trade, Report of the Article 1704 Panel Concerning the Dispute Between Alberta and Canada Regarding the Federal Bank Act – Cost of Borrowing (Banks) Regulations, 2004, Appellants’ Book of Authorities, Tab 2 99 Crawford, B., The Law of Banking and Payment in Canada, vol. 2, loose-leaf (Toronto: Canada Law Book, 2013), p. 8-38.4; Pièce D-BNC-5, 1999 White Paper: Reforming Canada’s Financial - 34 -

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98. Taken together, all these elements are indicative of the intention to establish comprehensive national regulations for the disclosure of costs and the calculation and disclosure of borrowing costs, with the main objective of protecting consumers.101 It is clear that Parliament did not intend that multiple provincial regulatory frameworks would apply to banks in addition to the federal framework or that multiple provincial bodies would play a role in the supervision of banks’ activities. Such an overlap would defeat the purpose of the federal framework.

99. Furthermore, the presence of two or more regulators would have the effect of increasing the risk of contradictory decisions in the area of consumer protection, given the often similar provisions in the federal and provincial frameworks.

100. This intention of Parliament was reiterated and confirmed in general terms through the addition, in 2012, of the preamble of the Bank Act, which states that the Act arises out of the intention to establish “a legislative framework… taking into account the rights and interests of depositors and other consumers of banking services” and that “it is desirable and is in the national interest to provide for clear, comprehensive, exclusive, national standards applicable to banking products and banking services offered by banks”.102

101. In short, the relevant provisions of the CPA are essentially intended to govern the calculation and disclosure of the cost of credit. Their application to banks frustrates the purpose of Parliament to establish an exclusive national framework for calculating and disclosing the cost of borrowing and non-interest charges. This framework differs, in some respects, from that put in place by Quebec. The application of the relevant provisions of the CPA would necessarily frustrate Parliament’s purpose of establishing an

Services Sector – A Framework for the Future, Department of Finance, July 25, 1999, pp. 59-60, Joint Record, vol. 89, p. 220-221 100 Judgment of the Court of Appeal, para. 107, Joint Record, vol. III, p. 40 101 Carron, Christine A. and Guillaume Beaupré, “Les consommateurs mieux protégés que jamais” in Développements récents en droit bancaire – 2003, vol. 195, Service de la formation permanente, Barreau du Québec (Cowansville, Qc: Yvon Blais, 2003) 149, pp. 149-166, 171-176, R.S.P.G.C., vol. IV, tab 44; Ogilvie, M.H., Bank and Customer Law in Canada, 2d ed. (Toronto: Irwin Law, 2013), pp. 72-73, R.S.P.G.C., vol. IV, tab 48 102 Bank Act, preamble, adopted by S.C. 2012, c. 19, s. 525, R.S.P.G.C., vol. I, tab 6 - 35 -

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exclusive national framework. Federal legislation must, therefore, render the provincial legislation inoperative.

d. The federal framework is not permissive

102. The Attorney General of Quebec submits that there is no conflict of purpose because the federal framework is permissive. In his view, there is a risk that the appellant banks’ position could revive the occupied field theory. This contention is ill-founded. As we will see, the federal framework cannot be characterized as a permissive framework. It is rather an exhaustive scheme, different from the Quebec framework.

103. It is established that “permissive federal legislation, without more, will not establish that a federal purpose is frustrated when provincial legislation restricts the scope of the federal permission”.103 In the case of a permissive statute, an express provision is required, to exclude the application of provincial law.

104. Thus, in 114957 Canada ltée (Spraytech, Société d’arrosage) v. Hudson (Town),104 the Court held that a by-law on the use of pesticides within the municipality’s territorial limits did not frustrate the purpose of the federal legislation relating to the regulation of pesticides. The Court noted that the federal legislation was permissive, rather than exhaustive, so there was no operational conflict and no concern that the municipal by-law frustrated the legislative purpose of Parliament.105 However, it is important to note that the federal legislation relating to the pesticides at issue in Spraytech regulated the import, export, sale, manufacture, registration, packaging and labelling of pesticides, as opposed to the municipal by-law, which, in turn, regulated the use of pesticides, a distinct subject. With respect to the use of pesticides, the federal legislation could in fact be considered as being permissive, especially since it also envisioned the existence of complementary

103 Quebec (Attorney General) v. Canadian Owners and Pilots Association, 2010 SCC 39, [2010] 2 S.C.R..536, para. 66, R.S.P.G.C., vol. III, tab 33; reiterated in Marine Services International Ltd. v. Ryan Estate, 2013 SCC 44, para. 69, R.S.P.G.C., vol. III, tab 28 104 114957 Canada ltée (Spraytech, Société d’arrosage) v. Hudson (Town), [2001] 2 S.C.R. 241, R.S.P.G.C., vol. I, tab 17 105 114957 Canada ltée (Spraytech, Société d’arrosage) v. Hudson (Town), [2001] 2 S.C.R. 241, para. 35 - 36 -

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municipal by-laws, which the Court pointed out later on in discussing this case in Canadian Western Bank.106

105. Here, the federal framework is not permissive. It imposes a set of compulsory requirements on the banks regarding the disclosure of charges and the calculation and disclosure of borrowing costs for loans issued by them. The exhaustiveness of the federal legislation is evidenced by the existence of specific provisions on the cost of borrowing, from the legislative authority to introduce regulations on many aspects of the cost of borrowing, and from the establishment of a federal regulator responsible for supervising compliance with these provisions.107 The federal provisions share, in many respects, the same general purpose as the provincial provisions, but Parliament has chosen a different approach. For example, the fact that under the Cost of Borrowing (Banks) Regulations, conversion fees are considered as being “non-interest charges” that must be expressed separately from the annual interest rate, is a choice that was made by the federal legislator. This choice is not problematic even though the federal approach is different from the provincial approach taken in that respect.

106. Also, contrary to the situation in Spraytech concerning the regulations of pesticides, no provision of the Bank Act, or of the Cost of Borrowing (Banks) Regulations refers directly or indirectly to the possible existence of provincial legislation relating to the same issues and which would be applicable to banks.

107. The same is true for the remedies afforded to consumers by the federal framework. As appears from the Financial Consumer Agency of Canada Act and the Bank Act, the choice of Parliament for the implementation and oversight of the obligations imposed on financial institutions under its jurisdiction focuses on administrative measures, including investigative powers,108 and statutory offences.109 This approach is consistent with the

106 Canadian Western Bank, para. 103, R.S.P.G.C., vol. II, tab 19; 114957 Canada ltée (Spraytech, Société d’arrosage) v. Hudson (Town), [2001] 2 S.C.R.241, paras. 40 and 42, R.S.P.G.C., vol. I, tab 17 107 Appellants’ factum, paras. 438 to 449 108 Financial Consumer Agiency of Canada Act, s. 5, R.S.P.G.C., vol. I, tab 9 109 Ibid, s. 19. Penalties of up to $50,000 for a natural person and up to $500,000 for a financial institution apply: s. 19 (2) - 37 -

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principles set out in instruments preceding the legislation concerning the Agency, which indicated that Parliament’s intent, in order to protect banks’ customers and consumers, is to establish the conditions that create “a marketplace of well-informed consumers and a sufficient number of competitive suppliers. Adequate information and range of choice, backed by strong regulatory oversight and an effective redress process, will ensure a relative balance of power between the consumer and the provider and justify consumer confidence in their financial institutions. This, in turn, will deliver the best results for consumers, firms and the economy as a whole”.110

108. Reinforcing this finding is the fact that section 988 of the Bank Act provides that a contravention of any provision of this Act or the regulations does not invalidate any contract entered into in contravention of the provision, contrary to the recourse provided for by the CPA, which provides for the contract to be rescinded, set aside or annulled (in full or in part).111

109. In this case, the better analogy is to Bank of Montreal v. Hall, Law Society of British Columbia v. Mangat and British Columbia (Attorney General) v. Lafarge. As illustrated by these cases, exhaustiveness can be apparent from the entire framework and it cannot be argued that a framework is not exhaustive on the basis that it does not contain the same protections or does not provide for the same remedies as the provincial framework. To conclude otherwise would mean that any federal legislation that is not identical to provincial legislation relating to the same subject matter could be considered to be non- exhaustive, thus making the provincial legislation the referential basis for assessing the exhaustiveness of the federal framework.

110. The Hall case112 involved the provisions of the Bank Act allowing a bank to take a security on a specific class of property and enforce it in case of default of payment according to the specific procedure set out in this act. Those provisions were examined

110 ExhibitD-BNC-5, 1999 White Paper: Reforming Canada’s Financial Services Sector – A Framework for the Future, Department of Finance, June 25, 1999, p. 46, Joint Book of Documents, vol. 89, p. 117 111 Consumer Protection Act, ss. 271 and 272, R.S.P.G.C., vol. I, tab 10 112 Bank of Montreal v. Hall, [1990] 1 S.C.R. 121, R.S.P.G.C., vol. II, tab 20 - 38 -

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from the perspective of the federal paramountcy doctrine in a context where a provincial law of general application set out conditions for realizing on security not provided for in the federal legislation. The Court refused to accept the argument that there was compatibility between the schemes because the bank could simply realize on its security by deferring to the provisions of the provincial legislation not provided for in the federal legislation, in addition to the conditions found in the federal legislation. Instead, the Court took into account the fact that the overall scheme established by Parliament for the taking and realization of security interests constituted a single whole, and that the addition of the conditions of the provincial legislation would defeat Parliament’s purpose.113 According to the Court, “to require the bank to defer to the provincial legislation is to displace the legislative intent of Parliament” of “creating a security interest susceptible of uniform enforcement by the banks nationwide”.114 It is important to note that the Bank Act did not contain any express provision excluding the application of provincial legislation in this respect.

111. Mangat115 pitted the provisions of the Immigration Act which allowed non-lawyers to represent aliens before the Immigration and Refugee Board against the provisions of the Legal Profession Act of British Columbia that prohibited non-lawyers to appear for a fee before a tribunal. Although it noted that a person could comply with both enactments either by becoming a member in good standing of the Law Society of British Columbia or by not charging a fee, the Court concluded that such an interpretation would frustrate Parliament's purpose, namely, allowing non-lawyers to represent aliens before the administrative tribunal.116

112. Lafarge117 is another example of a case where the Supreme Court held that the application of provincial legislation of general application would frustrate the federal purpose in circumstances where Parliament had established a specific scheme on a given subject.

113 Ibid, pp. 154, 155 114 Ibid, p. 154 115 Law Society of British Columbia v. Mangat, [2001] 3 S.C.R. 113, R.S.P.G.C., vol. III, tab 27 116 Ibid, paras. 72-73 117 British Columbia (Attorney General) v. Lafarge Canada Inc., [2007] 2 S.C.R. 86 (“Lafarge”), R.S.P.G.C., vol. III, tab 25 - 39 -

Attorney General of Canada’s Factum Submissions

113. That case concerned a municipal zoning and development by-law, and the Canada Marine Act which also included a regulatory framework on port land use. The Court held that the application of the municipal by-law would frustrate the federal purpose by depriving the port authority of its final decisional authority on the development of the project under the federal scheme,118 even though in this case the City approved the contested project, and despite that it was argued that there was no operational conflict because Lafarge could apply for and obtain building permits from both the port authority and the City.119

114. In short, it is only when one can find a clear intention by Parliament to establish a permissive federal framework, or that the federal framework cannot be considered exclusive and exhaustive, that the Court has allowed federal and provincial frameworks to coexist. The fundamental issue remains whether the application of provincial legislation would frustrate Parliament’s purpose. What we have here is a federal framework that regulates a subject matter in great detail, and seeks clarity and coherence on a national level. The fact that Parliament did not make the same choices as the provincial legislator with respect to the substance of its legal provisions and nature of the remedies available to consumers does not make the federal framework a permissive one upon which the provincial framework can be superimposed.

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PART IV – COSTS

115. The Attorney General of Canada, as intervener on constitutional questions stated by the Court, is not seeking costs and asks that no costs be awarded against him.

118 Ibid, paras. 75 and 85 119 Ibid, paras. 75, 83-85 - 40 -

Attorney General of Canada’s Factum Order sought

PART V – ORDER SOUGHT

116. The Attorney General of Canada asks that this Court answer the constitutional questions in the following manner:

First question in both File No. 35009 and File No. 35033: The provisions at issue are constitutionally inapplicable to credit and charge cards issued by banks.

Second question in both File No. 35009 and File No. 35033: The provisions at issue are constitutionally inoperative to credit and charge cards issued by banks.

Ottawa, January 24, 2014

______Me Bernard Letarte Me Pierre Salois Me Michel Miller

Department of Justice Canada - 41 -

Attorney General of Canada’s Factum Alphabetical table of authorities

VI – ALPHABETICAL TABLE OF AUTHORITIES

Legislation Paragraph(s)

Act Governing Trust and Loan Companies, S.C. 1991, c. 45 ...... 43

Act respecting Banks and Banking, 33 Vict. C. 11 ...... 34

Act respecting Banks and Banking, S.C. 1966-67, c. 87 ...... 40

Act respecting insurance companies and fraternal benefit societies, S.C. 1991, c. 47 ...... 43

Act to amend certain laws relating to financial institutions, S.C. 1997, c. 15 ...... 44

An Act to amend the law governing financial institutions and to provide for related and consequential matters, S.C. 2007, c. 6 ...... 47

Bank Act, S.C. 1991, c. 46 ...... 6,11,14,15,16,17,25,37,39 ...... 43,44,48,57,77,87,90,92 ...... 100,106,107,108,110

Bank Cost of Borrowing Disclosure Regulations, SOR/67- 504 ...... 40

Banks and Banking Law Revision Act, 1980, S.C. 1980-81- 82-83, c. 40 ...... 42

Canada Marine Act, S.C. 1998, c. 10 ...... 113

Canada Not-for-profit Corporations Act, S.C. 2009, c. 23 ...... 48

Consumer Protection Act, R.S.Q., c. P-40.1 ...... 5 and ff.

Constitution Act, 1867, 30 & 31 Victoria, c. 3 (U.K.) ...... 31,33,38

Cooperative Credit Associations Act, S.C. 1991, c. 48 ...... 43

Cost of Borrowing (Banks) Regulations¸ SOR/2001-101 ...... 11,45,90

Cost of Borrowing (Banks) Regulations, SOR/92-320 ...... 43

Cost of Borrowing Disclosure Regulations, SOR/83-103 ...... 40,42 - 42 -

Attorney General of Canada’s Factum Alphabetical table of authorities

Legislation (cont’d)...... Paragraph(s)

Credit Business Practices Regulations, SOR/2009-257 ...... 47,90

Financial Consumer Agency of Canada Act, S.C. 2001, c. 9 ...... 6,11,14,17,44,46,71,88 ...... 90,97,107

Jobs, Growth and Long-Term Prosperity Act, S.C. 2012, c. 19 ...... 37

Regulation Respecting the Application of the Consumer Protection Act, R.S.Q., c. P-40.1, r.3 ...... 5,9,26,68

Sustaining Canada’s Economic Recovery Act, S.C. 2010, c. 25 ...... 48

Jurisprudence

114957 Canada ltée (Spraytech, Société d’arrosage) v. Hudson (Town), [2001] 2 S.C.R. 241 ...... 104,106

A.G. Alberta v. A.G. Canada, [1947] C.A. 503 ...... 36,56

Bank of Montreal v. Hall, [1990] 1 S.C.R. 121 ...... 30,56,80,109,110

Bell Canada v. Québec (Commission de la santé et de la sécurité du travail), [1988] 1 S.C.R. 749 ...... 27,51,62,63

British Columbia (Attorney General) v. Lafarge Canada inc., [2007] 2 S.C.R. 86 ...... 109,112,113

Canada (Attorney General) v. PHS Community, Service Society, [2011] 3 S.C.R. 134 ...... 27

Canadian Pioneer Management Ltd. v. Labour Relations Board of Saskatchewan, [1980] 1 S.C.R. 433 ...... 30,59

Canadian Western Bank v. Alberta, [2007] 2 S.C.R. 3 ...... 27,29,30,31,32,36,51,53 ...... 56,63,80,104 CIBC Mortgage Corp. v. Vasquez, [2002] 3 S.C.R. 168, 2002 CSC 60 ...... 76

Commissioners of the State Savings Bank of Victoria v. Permewan, Wright & Co, (1914), 19 C.L.R. 457 ...... 53 - 43 -

Attorney General of Canada’s Factum Alphabetical table of authorities

Jurisprudence (cont’d) Paragraph(s)

In Re Bergethaler Waisenamt (No. 2), [1949] 1 W.W.R. 323 ...... 56

Law Society of British Columbia v. Mangat, [2001] 3 S.C.R. 113 ...... 80,109,111

Marine Services International Ltd. v. Ryan Estate, 2013 SCC 44 ...... 27,28,29,80,103

Mattel Inc. v. 3894207 Canada Inc., 2006 SCC 22, [2006] 1 S.C.R. 772 ...... 38

Multiple Access Ltd. v. McCutcheon, [1982] 2 S.C.R. 161 ...... 80

Ontario Bank v. McAllister, [1910] 43 S.C.R. 338 ...... 56

Quebec (Attorney General) v. Canada (Human Resources and Social Development), 2011 SCC 60 ...... 80,90

Quebec (Attorney General), v. Canadian Owners and Pilots Association, [2010] 2 S.C.R. 536 ...... 27,28,29,51,63,64,65,72 ...... 73,80,103

R. v. Milelli, (1989), 45 B.L.R. 209 ...... 56

Reference re Alberta Statutes – The Bank Taxation Act; The Credit of Alberta Regulation Act; and the Accurate News and Information Act, [1938] S.C.R. 100 ...... 56

Reference as to the Validity of the Debt Ajustment Act, Alberta, [1942] S.C.R.31 ...... 56

Reference re Employment Insurance Act (Can.), [2005] 2 S.C.R. 669 ...... 56

Reference re Same-Sex marriage, [2004] 3 S.C.R. 698 ...... 56

Richard v. Time Inc., [2012] 1 S.C.R. 265 ...... 13,38

Rothmans, Benson & Hedges inc., v. Saskatchewan, [2005] 1 S.C.R. 188 ...... 80

Tennant v. Unions Bank of Canada, [1894] C.A. 31 ...... 36,59

- 44 -

Attorney General of Canada’s Factum Alphabetical table of authorities

Jurisprudence (cont’d) Paragraph(s)

V.K. Mason Construction Ltd. v. Bank of Nova Scotia, [1985] 1 S.C.R. 271 ...... 38

Doctrine

Brun, Henri, Guy Tremblay and Eugénie Brouillet, Droit constitutionnel, 5th ed. (Cowansville, Qc: Yvon Blais, 2008) ...... 36

Carron, Christine A. and Guillaume Beaupré, “Les consommateurs mieux protégés que jamais” in Développements récents en droit bancaire – 2003, vol. 195, Service de la formation permanente, Barreau du Québec (Cowansville, Qc: Yvon Blais, 2003) 149 ...... 98

Crawford, B., Crawford and Falconridge – Banking and Bills of Exchange, vol. 1, 8th ed. (Toronto: Canada Law Book, 1986) ...... 56

Crawford, B., The Law of Banking and Payment in Canada, vol. 2, loose-leaf (Toronto: Canada Law Book, 2013) ...... 58,59,87,93,97

Johnston, C.C., “Judicial Comments on the Concept of “Banking Business”, (1962) 2 Osgoode Hall L.J. 327 ...... 57

Ogilvie, M.H., Bank and Customer Law in Canada, 2d ed. (Toronto: Irwin Law, 2013) ...... 56,57,98

Other

Agreement on Internal Trade, Report of the Article 1704 Panel Concerning the Dispute Between Alberta and Canada Regarding the Federal Bank Act – Cost of Borrowing (Banks) Regulations, 2004 ...... 95

Regulatory Impact Analysis Statement on Cost of Borrowing (Banks) Regulation, Canada Gazette, Vol. 134, n. 21, May 20, 2000, p. 1597 ...... 45,94

Other (cont’d) ......

Department of Finance of Canada, White Paper on the Revision of Canadian Banking Legislation, August 1976 ...... 35,41