REGINA — The basis of a lawsuit between Canadian Pacific Railway Ltd. and the Saskatchewan government is moving to the floor of Parliament after provincial legislature members passed a motion to amend the Constitution.
Canadian Pacific is suing the province for $341 million over a clause that was written in a contract so old John A. Macdonald was prime minister and Saskatchewan wasn’t yet a province.
The court battle, which has been going on for 13 years, is currently being argued at trial in Regina’s Court of Queen’s Bench.
In its statement of claim, CP says it wants a return of taxes paid to Saskatchewan since 2002 and a declaration that future taxes are not payable.
The corporation argues it's exempt from paying certain taxes based primarily on a 1880 contract between Canada and CP’s predecessor. In exchange for tax exemptions, CP agreed to build the transcontinental railway.
“In exchange for CP’s investments and commitment to build and to operate this railway forever, the prairie provinces and federal government agreed to certain tax exemptions for business conducted on this main line,” CP spokesman Patrick Waldron said in an email.
The exemption became part of the Saskatchewan Act in the Constitution, when the province was created 116 years ago.
However, Saskatchewan argues the tax exemption was rescinded on Aug. 29, 1966, in a letter from then-CP president Ian D. Sinclair to the federal transport minister, John Pickersgill, in exchange for modernized transportation legislation.
The trial, which began four weeks ago, is scheduled wrap up in mid-December.
On Monday, the Saskatchewan government unanimously made a resolution to amend the Constitution as it relates to the Saskatchewan Act.
"It would be unfair to the residents of Saskatchewan if a major corporation were exempt from certain provincial taxes, casting that tax burden onto the residents of Saskatchewan,” the motion reads.
Members of the government voted to repeal Section 24 of the Saskatchewan Act — the part that exempts CP from paying the taxes — and make the change retroactive to Aug. 29, 1966.
"It's kind of cool,” said Justice Minister Gord Wyant, who practised as a lawyer before he was first elected in 2010. “You can imagine how exciting it is for a constitutional lawyer to be working on amending the Constitution."
CP declined to comment on the resolution.
It's not disputed that CP paid taxes for over a century. The issue to be determined at trial is whether the company was legally obligated to do so and, if not, whether it's entitled to a return of the money paid.
Wyant declined to comment on the lawsuit. But he said "modern taxation and transportation policy kind of demand an equal playing field," as not all provinces have this tax exemption written into the Constitution.
The resolution still needs to be approved by the federal government and pass through the House of Commons and the Senate.
Wyant, who has been in talks with federal Justice Minister David Lametti, said he hopes the amendment to the Constitution will pass during this session of Parliament.
"We're quite hopeful they will recognize and understand the inherent fairness we're proposing," Wyant said. If the resolution is not passed this session, he added, it will not expire.
"It will sit there until somebody else brings it forward," Wyant said.
Finance critic Trent Witherspoon with the Opposition NDP said it was important to join the governing Saskatchewan Party in supporting the motion.
"This was a bit of history in the making, amending our Constitution with a motion that originates in the Saskatchewan legislature ... we are quite proud we're sending a united legislature call for this amendment to our Constitution to Ottawa," Witherspoon said.
As for when the last time the Saskatchewan Act in the Constitution was amended?
“It's not certainly within the living memory of anybody in our province,” said Wyant. “It’s fairly unique.”
This report by The Canadian Press was first published Nov. 29, 2021.
Mickey Djuric, The Canadian Press
