Saskatchewan moves to amend Constitution amid civil trial with Canadian Pacific

Constitutional tax battle

The basis of a lawsuit between Canadian Pacific Railway Ltd. and the Saskatchewan government moves to the floor of the provincial legislature Monday, before possibly heading to Ottawa in a bid 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However, Saskatchewan argues the tax exemption was rescinded on Aug. 29, 1966, in a letter from then CP president Ian D. Sinclair to the former federal minister of transport John Pickersgill in exchange for modernized transportation legislation.

The trial, which began four weeks ago, is scheduled wrap up in mid-December.

In the meantime, the Saskatchewan Party government is working to amend the Constitution.

Last week, Justice Minister Gord Wyant introduced a motion to change the Constitution as it relates to the Saskatchewan Act. On Monday, it's to be debated in the legislature.

"It's kind of cool,” said 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."

The province wants to have Section 24 of the Saskatchewan Act repealed — the part which exempts CP from paying the taxes — and make the change retroactive to Aug. 29, 1966.

"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.

CP declined to comment on the motion.

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."

He said he expects the motion to pass unanimously Monday, with support from the Opposition NDP.

However, the amendment must be approved by the federal government.

“Once (our motion) passes, we'll transmit it to the federal government, asking them to present their collateral resolution on the floor of Parliament,” Wyant said, adding the province has already given Ottawa a heads-up on the issue.

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.”

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