Liquor License?

From time to time the national legal establishment rediscovers that in one way or another a province has overstepped the constitutional prohibition against their levying "indirect" taxes.This one hit because a bar owner in New Brunswick had the wit and the inclination to challenge New Brunswick liquor user charges on the basis that they were really "indirect" taxes. That province had to deliver up its consitutionally ill-gotten gains.News of the decision stimulated a bevy (!) of speculative avarice in the local press. Government needs not only to get on this issue and make sure that any windfalls go to the right places, not the wrong. Just as much it needs to address the bigger issue of putting class action legislation in place in Nova Scotia.

This was now written some time ago, but it's as applicable now as it was three months ago.

Exuberant Halifax bar owners and lawyers who have been winding up to try to score a major hit resulting from the Supreme Court of Canada’s recent decision declaring certain government liquor user fees unconstitutional had best walk softly.Two weeks ago the court announced that certain charges the New Brunswick liquor corporation had been levying on bar owners were unconstitutional and could not be kept by that province. The judges directed that the monies collected be returned, with interest, to the people who signed the cheques paying them.This weekend, lawyers and tavern owners have been lining up to tell Halifax’s press their intention to take class action lawsuits against this province to recover similar past payments.They may well be leading with their chins. The courts have left entirely open the possibility that the consumers who funded the millions of dollars of payments hidden within the bold print of their bar tabs have an equal right against the very people who are now rubbing their hands at the prospect of a windfall.And maybe, just maybe, creative lawyers and policy makers within the government may find the way to prevent a windfall to liquor operators and to benefit the patrons whose wallets funded the payments.The Supreme Court’s recently released decision in a lawsuit against the New Brunswick department of finance, held that the province had to repay night club operators millions of dollars in "user charges" collected over the past six years. Finance department officials had, the court ruled, collected the charges unlawfully. Legally, the Court concluded the funds have to be returned to the corporations who had remitted it.Over the weekend, this ruling has lead to local liquor purveyors rubbing their hands and contemplating collective war by "class action" against this province which has, in the past, levied such charges itself.But before Nova Scotia’s publicans and their various counsel break open the champagne, they had better take a deep breath and perhaps even put the cork back in, at least for a minute.It is true that the court’s decision, Kingstreet v. New Brunswick, does say that that province must remit its unconstitutional takings to the bar owners whose cheques paid it. But, there needs to be a big red warning light going off here.Kingstreet is a long way from saying that the money belongs to the bar owners or, indeed, if challenged by patrons who actually funded it, that the night club owners really get to keep it.That hole could, and perhaps should, well mean that Nova Scotia is a long way from seeing any money it collected finding its way into bar owners’ pockets.Here’s the background. The Supreme Court judges said, by collecting these charges from the bars, the province was really levying an "indirect" tax on the operations and through the operations, on their patrons. But in this country, our Constitution gives the power to levy indirect" taxes, unlike direct taxes (such as income taxes or sales taxes, which both the provinces and Ottawa can charge) exclusively to the Federal Government.Therefore, the decisions says, because the tax was collected unconstitutionally, it has to be returned toto the bars who had paid it. The Court reasoned that the "rule of law," the principle that everyone–governments and citizens alike are subject to the law and must abide by it– meant that governments should not be allowed to keep the fruits of a tax that they charged illegally.But the fact that the monies were to be paid back to tavern operators had nothing to do with who really is entitled to them, and had everything to do with the fact that in the considered view of the justices, the province was not.So, there needs to be a big red light flashing here...to bar owners and everyone else.What the proper treatment of taxes and other charges that a government has wrongly collected should be has been the subject of a legal debate for decades. Some judges and some courts have held that because they have been collected from persons who have only "passed on" the expense to others such as consumers, the illegal charges are not something that actual cheque writers such as the bar owners who remitted them have lost themselves. Therefore, so the reasoning goes, the bar owners receiving repayment of these charges have given up nothing themselves, and so should get nothing.Many courts had held in the past that no one in the position of the bar owners should get such a windfall.In Kingstreet, however, Canadian law has now been identifyied as saying that in ordering repayments of unlawful government taxes and charges, the court should only consider that as between government and the liquor establishments, government should not be allowed to keep the proceeds. The court concluded that between the crown and the liquor purveyors, , the question of whether the payor in the position of the liquor interests has been able to recoup from others the taxes, such as consumers, is "‘simply irrelevant.’"As between consumers and the liquor establishments themselves, however, there is every probability that consumers have their own enforceable right to recover their own overpayments from the bars.That is a far cry from saying that the liquor owners would be allowed to keep it.What does this mean?Firstly, to the extent that bar owners in this province do claim or receive a repayment of wrongly collected charges the would-be class action warriors could well be subject to their own "class action" suit, by their own patrons.But more importantly the Kingstreet decision, and the marvels of constitutional law, could well leave open a prospect for a province like this one to consider its own legislation, determining how, and to whom the illegally gotten gains could be directed not to hungry bar owners and tavern operators but to or for the benefit of the people who actually paid them.I would look hard, if I were in government to find a way to remit any illegally collected contributions to the individuals who have really suffered in their operation.The Kingstreet decision did not say that governments have to refund liquor charges to liquor operators themselves but only that between the two parties to that action, the province and the operator itself that monies had to be refunded.The province should look hard for means to give individual consumers whose dollars ultimately paid those taxes, the legislated opportunity participate in any of these class actions by bar owners, to establish their own separate claims to the funds and to redirect payment of these funds outside of the bars themselves to the consumers who can benefit from them.One place to start might be to see it judicially and legislatively applied for the benefit of the consumers with alcohol dependency or the gambling addiction who funded their own fair share of the charges.-30-