REGS Committee Meeting

THE STANDING JOINT COMMITTEE OF THE SENATE AND THE HOUSE OF COMMONS FOR THE SCRUTINY OF REGULATIONS

LE COMITÉ MIXTE PERMANENT D'EXAMEN DE LA RÉGLEMENTATION DU SÉNAT ET DE LA CHAMBRE DES COMMUNES

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, October 29, 1998

• 0830

The Standing Joint Committee of the Senate and the House of Commons for the Scrutiny of Regulations met this day at 8:30 a.m. for the review of statutory instruments.

Mr. Gurmant Grewal (Joint Chairman) in the Chair.

The Joint Chairman (Mr. Gurmant Grewal (Surrey Central, Ref.)): I will call the meeting to order. Good morning, everyone.

Thursday of last week was the first meeting of the Joint Committee for Scrutiny of Regulations I had attended. I was delighted to learn afterward that the committee had done a good job last year. I would like to thank all the members of the committee, who worked very hard last year, and the staff, as well as the former joint chairman of the committee, Mr. Lee, who did such a good job.

SOR/86-878 — SHIPS STORES REGULATIONS

SOR/88-425 — SHIPS STORES REGULATIONS, AMENDMENT

SOR/93-153 — SHIPS STORES REGULATIONS, AMENDMENT

The Joint Chairman (Mr. Grewal):Today, we have before us special agenda items: SOR/86-878 — Ships Stores Regulations, SOR/88-425 — Ships Stores Regulations, Amendment, and SOR/93-153 — Ships Stores Regulations, Amendment.

As you know, these ships stores regulations were discussed by this committee at its meeting on May 28, 1998. At that time it was decided to invite the Deputy Minister of the Department of Revenue before the committee, Mr. Robert Wright. Mr. Denis Lefebvre, the Assistant Deputy Minister, Customs and Trade Administration Branch, is appearing in the place of Mr. Wright. Mr. Wright is not in Ottawa, unfortunately, so he cannot appear before the committee. Mr. Lefebvre was formerly the Assistant Deputy Minister for Policy and Legislation and in that capacity was responsible for the file on the regulations before the committee today.

Before I ask Mr. Lefebvre to make any statement or any comments, I will see if counsel would like to say something.

Mr. Wappel: Mr. Chairman, I have a point of order.

I believe you just said that we invited the Deputy Minister to appear before us.

The Joint Chairman (Mr. Grewal): That is right.

Mr. Wappel: I looked at the file last night. I notice that the final letter that we received was from the Deputy Minister, not from Mr. Lefebvre. This committee wanted Mr. Wright to appear, not Mr. Lefebvre. We could have asked Mr. Lefebvre to come if we had wanted to. I would like to know when we invited Mr. Wright, when he advised us that he was not available for this particular day, and whether he advised us that he was available on some other day.

The Joint Chairman (Mr. Grewal): That is a valid comment, Mr. Wappel. I learned only this morning that Mr. Lefebvre is appearing before the committee. Since he is here and Mr. Wright is not, let us hear from him and then we will know the reason, and if we feel the need, we can pursue this further.

Mr. Wappel: I am sorry, Mr. Chairman, that is not acceptable. When this committee asks someone to appear before it, this committee expects that someone to appear before it, unless there is good reason that that person cannot appear. I am sorry, I am not in Ottawa, in my opinion, for a deputy minister, who is in Ottawa all the time, or should be, unless he is on business or vacation, is not an acceptable reason.

Mr. Chairman, of course I fully understand you cannot possibly answer my questions in view of your newness to the position, but I ask counsel to provide an answer to my question: When did we invite Mr. Wright and when did he respond that he could not attend?

The Joint Clerk of the Committee (Mr. Tõnu Onu): In answer to Mr. Wappel's question, this goes back to the spring when we first advised Mr. Wright that we wanted him to appear. At the beginning of October I contacted Mr. Wright's office looking for a date on which he could appear. I wrote a letter to him on October 20, after confirming by phone that he could appear on October 29. I then received a call late Friday, informing me that he would not be in Ottawa. I understand he was on other business.

Mr. Wappel: Mr. Clerk, that is after he gave you the date of October 29?

The Joint Clerk (Mr. Onu): Yes. The department suggested that Mr. Denis Lefebvre, who is here this morning, since he was in charge of this file and had the most knowledge of it, appear in place of Mr. Wright.

Mr. Wappel: I would have expected Mr. Lefebvre to come with Mr. Wright so that he could advise the Deputy Minister, who would then be answering the questions on behalf of the department.

The notice that we received, dated 11:21 a.m. on October 27, indicated that the Deputy Minister would be the witness. Did that fall through after October 27?

The Joint Clerk (Mr. Onu): That notice was actually sent out earlier, and when we found out that for some reason —

Mr. Wappel: I am only reading the time and date that was on it.

The Joint Clerk (Mr. Onu): That was the second time that notice was sent out. It was after the notice was sent out that we discovered that Mr. Wright could not attend here this morning. That notice was put out when we thought Mr. Wright was still coming here this morning.

The Joint Chairman (Mr. Grewal): Mr. Wappel, your comments are correct. We will make note of that point and raise it in due course. However, since Mr. Wright is not here now, let us proceed with the meeting. Let us hear from Mr. Lefebvre.

Mr. Wappel: I want the record to show that, for my part — and, I do not know about other members of the committee — I am totally dismayed at Mr. Wright and his office. I am perfectly willing to listen to an explanation but there is no explanation, either in letter form or by telephone or in person, about his cavalier disregard of this committee. That is absolutely unacceptable.

The Joint Chairman (Mr. Grewal): Thank you. We will make a note of that.

[Translation]

Mrs. Venne: I totally agree with Mr. Wappel. We agreed to meet this morning, an off day since normally, we meet every second Thursday. Members made a point of staying in Ottawa to hear Mr. Wright and he does not bother to show up. I think this is truly inconsiderate of him. I too am outraged by this behaviour and would like a note of this to be made in our proceedings.

[English]

The Joint Chairman (Mr. Grewal): We will make a note of that as well. I have the same opinion.

[Translation]

Mrs. Venne: I also think that we should let Mr. Wright know how we feel about this.

[English]

The Joint Chairman (Mr. Grewal): I said that we will convey our point.

Mr. Lee: Mr. Chairman, you have indicated that we would take note of this matter. We are making note as we speak. I wish to point out that if Mr. Wright's non-attendance today signals an attitude amongst public officials that they wish to play poker and be cavalier with respect to invitations from Parliament, then that does not give Parliament much choice. That would cause parliamentarians to begin to order attendance so that the failure to attend would then constitute a contempt.

Generally, we have not found it necessary to treat these matters in that way. Up to now, it is my understanding that public officials live up to their commitments and they do not lightly regard invitations from Parliament.

I want the record to show that if Mr. Wright's apparent attitude signals a change in the attitude of public officials, then I am confident that Parliament will want to change its attitude. The next letter that goes out will manifest an order to appear.

The Joint Chairman (Mr. Grewal): That point is noted.

[Translation]

Ms. Jennings: I have to say that I agree with all of the comments I have heard until now and that I have no great desire to hear from the Associate Deputy Minister. We invited him here today as a courtesy, as Mrs. Venne pointed out. The committee would not normally have held a meeting this Thursday. I find it unacceptable that after agreeing to meet with us, he committed to something else and failed to show up.

I wonder if the committee should not suspend its proceedings, contact the Deputy Minister again and compel him to appear before us at a time that is convenient to us.

[English]

The Joint Chairman (Mr. Grewal): The point is noted. Any other comments on this matter?

Mr. Bailey: Mr. Chairman, the situation has been well explained by a number of people. Perhaps we could reach a decision as to the operation of this meeting and someone could move a motion that we continue, or whatever. If we are to sit here and complain about the absence of the individual who should have been here — and, I agree with it — we will not have a productive meeting this morning. Let us get it down to a motion from the committee and, perhaps, that will solve it one way or the other so that we can get on with the matter this morning.

Ms. Jennings: I move that this committee suspend the hearing and that we resume this matter at a date that is convenient to this committee with Mr. Wright here as the principal witness.

Is there a seconder?

Mr. Malhi: I second the motion.

The Joint Chairman (Mr. Grewal): Would it be appropriate to have Mr. Lefebvre comment on it? We will then see if the committee wants to proceed or adjourn.

Let me get some comments from Mr. Lefebvre first.

Mr. Lee: Point of order, Mr. Chairman! It is most inappropriate to suggest that our witness comment on the motion put forward by a member of the committee here. If anything, it might be more polite to ask him to leave while we debate it.

We have a motion that has been seconded. I should like to think that we might be able to make some intellectual progress on the file dealing with it here today, although we may well not be able to complete our review because of Mr. Wright's absence.

I would prefer to have this motion dealt with after we have had an opportunity to review the file. We may learn some information from our witness as well. Members may well feel at the end, when we take up the motion, that it is essential that Mr. Wright appear here at a subsequent date.

That is my suggestion. I am, in a sense, moving that the motion be tabled until we have an opportunity to discuss things with the witness.

The Joint Chairman (Mr. Grewal): Is it the will of the committee that we table the motion for the time being?

Mr. Maloney: I concur in that suggestion.

The Joint Chairman (Mr. Grewal): Let us hear from Mr. Lefebvre, then. Before we proceed, is it the will of the committee that we set out our complaint in a letter? Is that correct?

Mr. Wappel: I think Madam Venne made the appropriate suggestion, namely, that we provide a transcript of this meeting directly to Mr. Wright and draw to his attention — as I am sure Mr. Lefebvre will; in fact, I have no doubt of it — our great displeasure at his unexplained actions, because there could be an explanation.

The Joint Chairman (Mr. Grewal): I will proceed in that manner, since the motion is tabled. Let us now hear Mr. Lefebvre's comments on the situation and then we will decide if we want to proceed.

Mr. Lefebvre, please proceed.

Mr. Denis Lefebvre (Assistant Deputy Minister, Customs and Trade Administration Branch, Revenue Canada): Mr. Chairman, I appreciate the opportunity of appearing before this committee to clarify a situation that has been unclear for too long. The invitation to Mr. Wright was received in his office. It is certainly not because of disregard for this committee that Mr. Wright asked me to appear in his place.

The clerk of the committee was contacted. Not knowing the internal proceedings of the committee, Mr. Wright thought that me appearing here this morning would be acceptable to the committee. That is the only reason I am here.

I can also say that I am speaking on behalf of Mr. Wright and the department on the issue before the committee.

I am available to answer any and all of your questions. My main purpose, in understanding the mandate of your committee, is to try to explain the position of the department. I hope to be able to convince the committee that there is no conflict between your mandate and the position we have taken in respect of this regulation.

In answering your questions, I will take into account the fact that we are now in court with respect to the same issue we will discuss today. I hope to be able to answer your questions without prejudice to our position in the matter of a court case of some importance.

Again, I hope that following clarification on our part, the committee will see fit to allow the courts a chance to determine whether our interpretation of the regulations was reasonable in the circumstances. I know that the committee has received from Mr. Bernier a summary of the long history with respect to the ship stores regulations.

The Joint Chairman (Mr. Grewal): Mr. Lefebvre, I am sorry to cut you off. We have heard the explanation as to why Mr. Wright could not be here. Is it the will of the committee to proceed with the meeting to take advantage of the time that we have already spent on this issue?

Hon. Members: Agreed.

The Joint Chairman (Mr. Grewal): Mr. Lefebvre, you can make your brief presentation and then we will open it up to questions.

Mr. Lefebvre: For the most part, I agree with the submissions made to the committee over time by Mr. Bernier. There are few disagreements on the facts.

I will present a summary of the situation as we see it. The ship stores regulations are made with a view to giving some tax advantages to certain ships in respect of the ship stores, the provisions on board and the fuel.

Until 1986, for the longest time, the regulations granted some exemption from tax to ships on the Seaway and the Great Lakes. In 1986, there was a new Customs Act and dozens of regulations had to be re-enacted under the new statute. Ship stores regulations were re-enacted. In that process, the definition was changed inadvertently to extend the category of ships entitled to the tax break from those on the Seaway and Great Lakes to those on a larger body of non-salt water in Canada.

This error was detected early on. The intention of the department, because that was the policy, was to restrict again that tax break to those ships operating on the Seaway and Great Lakes. In 1988, a regulation was passed for that purpose. The definition was changed. The 1986 regulations were amended to restrict the definition to ships operating on the Great Lakes and the Seaway.

The issue before this committee, as I understand it, is whether that 1988 regulation was valid because it was not pre-published. That is the nub of the issue.

Presumably under instructions from this committee, Mr. Bernier wrote to the department immediately. To his credit, he picked up that lack of pre-publication in 1988. He wrote to the department and noted the lack of pre-publication of the 1988 amendment and pointed out that this went to the validity of the amendment.

A long exchange of correspondence ensued from 1988 to 1990 between the committee representative and the department. At the end of that exchange of correspondence, the department decided to re-enact the regulations at the urging of the committee and at this time to pre-publish them. They were pre-published in 1992 and re-enacted in 1993.

At this point in time, the ship stores regulations are valid. No one would disagree that they have been valid since 1993. The question is whether they were valid between 1988 and 1993? That is how we understand the issue.

The main issue again is the validity of those regulations. We are of the view that they are valid and I will tell you why.

The regulations we are discussing were passed pursuant to two statutes. That was clear in the Order in Council which passed the regulations, that they were passed pursuant to both the provision in the Customs Act and a provision in the Excise Tax Act. The provision in the Customs Act expressly states that such regulations must be pre-published. Under the Excise Tax Act, it does not so state.

If two sets of regulations had been passed, as opposed to one, it is pretty clear that the regulations passed under the Excise Tax Act would have been valid and not questioned by the committee. However, the set of regulations passed under the Customs Act would have been questioned.

I was faced with making a decision. We were talking about tens of millions of dollars in claims by shipowners or suppliers who are claiming refunds for the period between 1988 and 1993. I had to determine whether the regulations were valid or not, and I had to be diligent because large sums of money were at stake. If I had determined that the regulations were invalid, I would have conceded the claims, paid the refunds, and moved on with business.

After examining the issue closely, I concluded, after advice from many quarters and after close examination, that the refund claims we are talking about are in respect of the Excise Tax Act. Again, the Excise Tax Act does not require pre-publication.

I was faced with determining the fact that only one regulation was made under two statutes. The fact that a condition in one of the two statutes was not met did not vitiate or nullify the regulations? It is a difficult call, but in talking with the experts we looked at the structure of the two statutes.

We tried to determine whether the regulations were so interrelated that it would not make sense to say that, for the purposes of the Excise Tax Act, the regulations were valid, and not for the purposes of the Customs Act. We concluded that the structure of the tax advantages under the Excise Tax Act were a body of related provisions that could work by themselves, independent of the drawback provisions under the Customs Act.

Having considered this seriously again, we concluded that, on balance, it was a fair position and the better legal position to deny the claims on the grounds that the regulations authorized by the Excise Tax Act were validly made, and it was our duty then to deny the claims.

Faced with that decision, the claimants have now seized the courts of this issue. No doubt, all the arguments that I have put before you just now will be debated at great length. I do not for one second disagree with the committee's review of this situation and with the fact that we have only one regulation under two statutes. Having one statute asking for pre-publication while the other one does not does not lend an argument to those people, to the claimants and to the businesses that may feel they have a legitimate claim under those regulations.

However, I submit that the position is certainly not black and white. It is a difficult and complex issue. I submit it is fair to allow the courts to determine who is right and who is wrong on the basis of a full, in-depth court analysis of the situation and weighing the arguments on both sides.

I think that is the nub of the issue.

If I may, Mr. Chairman, very briefly, I should like to talk about something that is not the essence of the issue, but that goes to history and has been frustrating to this committee. We do appreciate the patience of this committee. I came to this issue a bit late because the two departments were merged in between the start of the discussions between the committee and the Department of Customs and Excise and then we were combined with the Revenue Department. The parties have moved on but I have looked at the paper trail as best I could and tried to understand why, being apprised of this situ

I think, at best, what we can say is that the situation is not clear. There was a genuine belief in the department, notwithstanding the lack of pre-publication in 1988 —

Mr. Lee: On a point of order, Mr. Chairman, the witness has indicated that there is in existence now at least one piece of litigation involving these regulations or former regulations. I assume that the Government of Canada is the respondent or defendant in these actions. I suggest, so that we have a freer discussion of these issues, that the discussions now be conducted in camera, without the exclusion of any parties that are here now, that they be ordered to be in camera, with the recorded intention that none of the discussion, questions, answers, or views of the witness be usable outside

I propose that course so that we can have a freer discussion without impairing our abilities here today or anyone who is here or even anyone who might be listening on CPAC. I move that our proceedings continue in camera for that purpose.

Mr. Wappel: But they would be recorded.

Mr. Lee: There is no harm in recording the proceedings in camera. The in camera rule suggests that they not be used.

The Joint Chairman (Mr. Grewal): Any comment?

Mr. Bailey: That is I think is a fair procedure at this point.

[Translation]

Mrs. Venne: I would like the opinion of counsel because I get the feeling that he does not totally agree.

[English]

The Joint Chairman (Mr. Grewal): I was going to give the floor to him for his comments and then we will decide.

Mr. François-R. Bernier (General Counsel to the Committee): I am sorry my body language is so transparent. I just have a question in my mind as to the necessity for this. This is a parliamentary forum, and I think before it goes in camera there should be a fairly good reason. I have a question about this, and perhaps Mr. Lee has the answer, given he has made the proposal. I do not think that a court would allow parties in a case before it to refer to a parliamentary record. Therefore, even if there is a record of this discussion, it would not be admissible in the court case in question. That is my only concern, but I suppose if the committee continues in camera, then there is 100 per cent certainty.

Ms. Jennings: Briefly, I am not sure that the fact that this is a parliamentary committee would exclude the testimony that is given before us, because if there is an admission made by the Assistant Deputy Minister that would be un aveu extrajudiciaire, so I have a question.

Mr. Bernier: If the Assistant Deputy Minister were to accept before this committee that the regulation of 1988 is indeed invalid, then the Government of Canada should not be defending that case. It should proceed properly in accordance with the law. That, I think, is the simple answer.

The Joint Chairman (Mr. Grewal): Mr . Lee, briefly?

Mr. Lee: I want to point out that the witness has already mentioned in his opening remarks that that context existed, and to the extent that that context creates a chill factor in either his testimony or discussion amongst members, then I think that is a good reason and it ought to be taken into account.

Second, there is a risk of admissions against interest in this proceeding, which would be recorded. Although that may be found to be hearsay, admissions against interest are actually exceptions to the hearsay rule. In terms of anything in this forum becoming evidence for another forum, for greater certainty we should lock in whatever happens here to protect our discussions from use elsewhere so that they can be as free as possible. That is my view. I think it is a good reason for going in camera.

The Joint Chairman (Mr. Grewal): The will of the committee is that we continue in camera.

Ms. Jennings: I have no objection to continuing in camera. However, if admissions are made to the effect that these regulations are invalid and claims for reimbursement had to be paid, I am of the view of our counsel, namely, that the government should not be defending such regulations. At that point, I would — and I am putting the committee on notice — move that our decision to have this part of the hearing in camera be lifted.

Mr. Lee: That is a catch-22 situation. That defeats the purpose of the motion.

The Joint Chairman (Mr. Grewal): Let me suggest something. Since we have a previous motion on the floor — and, for the sake of precaution and fair discussion — I think we should now continue in camera. That will not harm in any way and may protect some ways. Will that satisfy the criteria you are putting forward?

Mr. Lee: Call the question, please.

The Joint Chairman (Mr. Grewal): All those in favour that we move in camera please say yea.

Some Hon. Members: Yea.

The Joint Chairman (Mr. Grewal): All those who are opposed please say nay.

Some Hon. Members: Nay.

The Joint Chairman (Mr. Grewal): The motion is carried, and we will continue in camera.

Notes will be taken but the recording will stop.

Mr. Wappel: The recording will continue but the broadcasting will stop.

The Joint Chairman (Mr. Grewal): That is what I meant, namely, that the recording will continue but the broadcasting will stop. Is there anyone who must leave?

Ms. Jennings: I must leave. I have a clause-by-clause hearing elsewhere.

The committee continued in camera.

[Editor's Note: The in camera portion is included according to a decision taken at the committee hearing of November 5, 1998]

The Joint Chairman (Mr. Grewal): Please proceed, Mr. Lefebvre.

Mr. Lefebvre: New regulations were passed. Although the paper trail is not clear, there is evidence to suggest that those regulations were re-enacted by the department in 1993 at the urging of this committee for greater clarity and to put that regulation on a less questionable footing. However, there is evidence to show that all along the department believed, for a number of reasons — some of which I can expand upon — that the regulations were valid.

Basically, that is the point I wanted to mention in my opening remarks.

The Joint Chairman (Mr. Grewal): Thank you, Mr. Lefebvre. The floor is open now to questions.

Mr. Wappel: Witness, you have SOR/86-878 in front of you?

Mr. Lefebvre: Yes.

The Joint Chairman (Mr. Grewal): Do you have it there, Mr. Lefebvre?

Mr. Lefebvre: I have the Ships Stores Regulations, chapter 476.

Mr. Wappel: I am talking about the registration of the document on August 14, 1986, Ships Stores Regulations.

Mr. Lefebvre: Yes, SOR/86-878.

Mr. Wappel: The second paragraph states:

Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of National Revenue, pursuant to paragraphs 164(1)(c) and (i) of the Customs Act and — It does not say and/or. The paragraph continues:

— subsection 35(2.3) of the Excise Tax Act, is pleased hereby to make the annexed Regulations respecting ships stores, effective on the coming into force of paragraphs 164(1)(c) and (i) of the Customs Act. It is not on the coming into force of anything to do with the Excise Act but the Customs Act. The regulation is made pursuant to the Customs Act, and the Customs Act is shown as coming first.

Do you agree with that? It is clear, is it not?

Mr. Lefebvre: I agree that you have read the second paragraph and that is how it reads.

Mr. Wappel: Thank you. Now, in 1986, the department made a mistake, right?

Mr. Lefebvre: Right.

Mr. Wappel: The mistake made by the department was that it inadvertently, to use your word, extended the exemption to all ships and not just Great Lakes ships. Is that right?

Mr. Lefebvre: It was extended to more ships than that limited area, yes.

Mr. Wappel: That regulation that the department made was made correctly, correct? There was nothing illegal about it.

Mr. Lefebvre: It was legally made.

Mr. Wappel: It was legally made and it was legally in force, correct?

Mr. Lefebvre: It was legally made.

Mr. Wappel: It was legally in force. If it is legally made and it is a regulation then it is in force. Is that correct?

Mr. Lefebvre: The regulations were the law of the land between 1986 and 1988.

Mr. Wappel: I think your words were that the department detected early that it had made a mistake. You decided — and, when I say you I mean the department, not you personally — that, notwithstanding that there were legal regulations on the books, you would interpret them the way you saw fit. Furthermore, notwithstanding that the clear, legal regulations indicated that all ships — or certainly a broader class of ships — would have the exemption, your department, the almighty Minister of National Revenue, would interpret them as if you had not made the mistake. How is that legal?

Mr. Lefebvre: It seemed that at the time the regulations were being administered on the basis of understanding with the industry and, perhaps, not the black letter of the law.

Mr. Wappel: Not the letter of the law at all.

Mr. Lefebvre: In respect of that period, claims were made for refunds and we had paid money for people outside the limited geographic area — that is, those who made some claims in respect of that amount — because we were faced with the fact that the regulations were not what we thought they were or what they should have been. The department, for the period between 1986 and 1988, paid some claims.

Mr. Wappel: Did the department dispute any claims between that period of time? Is there any litigation going on for the period 1986 to 1988?

Mr. Lefebvre: There was an extra-judicial settlement or an out-of-court settlement in respect of the claims between that period. The department, presumably because they realized that they had not a sound legal footing to refuse the claims, paid out-of-court settlements.

Mr. Wappel: I have two questions arising from that situation. Why did it take until 1988 then? If the department detected early on that the department had made a mistake, why did it take two years to come forward with a changed regulation? Did it not occur to anybody to pass legislation to retroactively put things back the way they should have been, in your view?

Mr. Lefebvre: Retroactive legislation in situations like that is almost impossible. It is extremely rare that the government will go back in situations like that and pass retroactive legislation that would deny some rights that have been accruing prior to such legislation. I do not think that would have been an option.

The second part of your question is why did it take so long. I do not know exactly when, after 1986 passage of the regulations, the error was detected. I just assume that it took some months, some period of time —

Mr. Wappel: Sir, excuse me. Your words were that it was detected early. How can you tell this committee that it was detected early if you do not know when it was detected?

Mr. Lefebvre: I know that going through the process of making new regulations takes some time. I do not know exactly the period of months but we have from August 13, 1986 to August 11, 1988. About two years passed. I cannot say on which date and I do not think it is possible to say exactly when this error was detected.

Mr. Wappel: We were given to understand — please correct me, counsel, if I am wrong — that during this period of time the industry, or perhaps more specifically, shippers agreed not to take advantage of your mistake. That is what we were told by your department. Are you now telling us that in fact that is not true. Are you saying there were claims made and that you ultimately paid them out?

Mr. Lefebvre: Yes.

Mr. Wappel: Why did you tell this committee earlier that the industry agreed to treat the regulations as if they were pre-1986? I repeat, when I say you, I do not mean you.

Mr. Lefebvre: I understand, as a matter of fact, that we paid some out-of-court settlements after the 1988 regulations. At the time, the claims that were denied were not challenged. However, some shippers looked into the purpose of the 1988 regulations; they made some claims and we paid those claims.

Mr. Wappel: What legal justification did you have to interpret the 1986 regulations in a way contrary to the way in which they were written? What legal authority did the department have to do that?

Mr. Lefebvre: I must admit the only answer I can have is that things were not always based on the black letter of the law. There seemed to be some understandings at the time which were prevailing and accepted within the industry, but I do not have a better answer than that.

Mr. Wappel: That is a very poor answer in fact.

Let us get to the 1988 regulation. The 1988 regulation says, of course, exactly the same things pursuant to the Customs Act, exactly the same way I read it in the previous one.

I mention this only because you have brought to our attention so carefully that you are sheltering under the Excise Act and ignoring the Customs Act. I do not buy that for a minute. That is specious reasoning in my view, particularly in view of the very words of the regulations which both quote and rely on the Customs Act.

However, is it the position of the department that you did not pre-publish?

Mr. Lefebvre: Yes.

Mr. Wappel: Is it the position of the department that not pre-publishing invalidates the regulation?

Mr. Lefebvre: No.

Mr. Wappel: Is that your position?

Mr. Lefebvre: That is our position.

Mr. Wappel: What is the legal rationale for that, if it is given that this is not a minor thing? Do you accept that this is not a minor mistake?

Mr. Lefebvre: The position of the department at the time, if I look at the paper trail, seems to indicate that the department, for reasons they had at the time, took the position that this was not a major change, given the words in the Customs Act that call for pre-publication. That was the position of the department at the time.

Mr. Wappel: Do you know what happened, Mr. Lefebvre? This is what happened. The Department of National Revenue made a huge mistake in 1986 by expanding the definition of ships. The department could not admit that to itself so, illegally, it interpreted the regulations as if it had not made a mistake. Then when it got caught with its pants down, so to speak, they said, Oh-oh, we had better change the regulations because we have made a mistake, and then the department made another mistake because they did not pre-publish the second regulations.

Now they have got two mistakes and faces as red as those curtains. It is the Department of National Revenue and that situation will continue long after all taxpayers have died. It will use its mighty sword against the lowly shippers and let them fight it out in court. That is what disturbs me about your comment that you are in court and you will have a long substantial discussion about this in court.

Who will pay for that? The taxpayers of Canada will be paying for that court time because the Ministry of National Revenue made two gross and glaring errors. Now it is attempting to cover up those errors with legal niceties. It is forcing people to go to court. That is, in my view, unconscionable. Shame on you!

The Joint Chairman (Mr. Grewal): Any comments, on the last point?

Mr. Saada: I am not a lawyer. I will just ask layman-type questions. I think my colleague just touched on this point. If we know from the outset that the mistakes were made by the government, and if we know that the case is, to say the least, very shaky, why are we spending taxpayers' money on delaying the process? That is a very simple straightforward question.

Mr. Lefebvre: Mr. Chairman, first let me add something to what I have said already. Part of the claims that are now before us are in respect of the period between 1988 and 1993, but the claims are much broader than that. The claimants disagree with the regulations as they stand today for a number of other reasons that are not before this committee. It is not only in respect of that period but for a broader period.

I put the mistakes of the department in one category. Yes, there was a mistake in 1986. The definition was unduly and inadvertently expanded. Then, yes, in a perfect world, the regulations should have been pre-published under the Customs Act in 1988. I agree with that. That would have removed such discussions as we are having here today. It would be neat and clear.

The fact of the matter is that the decision we have to make is whether the regulations — as they are, with this imperfection, with this lack of pre-publication under the Customs Act — are valid with respect to the claims under the Excise Tax Act that we are facing today?

Again, looking at the issue and this lack of clarity, we have concluded that the regulations were valid for the purposes of the claims that are made under the Excise Tax Act, and that that is the responsible thing to do when looking at regulations. We are faced with that situation every day, with having to look for the best interpretation in our view. That is the one we have and that is why we have taken that position.

[Translation]

Mr. Saada: I understand very well what you are saying, but I fail to see the logic in it. If we ask the courts to interpret the regulations for which we have responsibility and which we know to be inaccurate, at least from a procedural standpoint, I do not see why the taxpayer should assume any responsibility for this. I do not see why the other parties should be made to assume the consequences either. Nor do I understand why, at the same time, we agreed to settle certain relevant matters out of court. Perhaps I am wrong, but the logic of this escapes me.

Mr. Lefebvre: That is a very good question. It should be noted that in the judicial process, claims payments, that is payments made in connection with an out-of-court settlement, resulted from regulations adopted in 1986, regulations which were in effect until 1988. As Mr. Wappel mentioned, these regulations were legally binding. When these claims were rejected, the department was forced to pay for the period from 1986 to 1988.

New regulations were adopted in 1988. As you indicated, the procedure set out in the two enactments pursuant to which the regulations were adopted was not followed, at least in the case of the procedure set out in the Customs Act, one of the two enactments involved. The provision calling for pre-publication was not followed.

We find ourselves confronted with a situation where the regulations were adopted pursuant to two enactments. In one instance, a provision calls for pre-publication, whereas in the second instance, there is no such provision.

Are the regulations pursuant to which specific claims were made valid? If so, we have a duty to reject the claims. Conversely, if the regulations are invalid, then we must accept these claims.

For these reasons, because there is no provision respecting pre-publication in the Excise Act and because the claims were submitted pursuant to this legislation, we must conclude that the regulations were valid and that therefore, we have no choice but to reject the claims.

[English]

Mr. Bailey: You mentioned, sir, that during the period 1986 to 1988, that because the department had recognized their error you had made some settlement claims. When you say some settlement claims, do I understand from that statement that you made payments to some and not to others?

Mr. Lefebvre: I believe that may be the case.

Mr. Bailey: Could I ask you on what grounds? You recognized that the error was the fault of the department. What would be the difference in the type of claims that you received at that time where some were paid and others did not receive any remuneration at all?

Mr. Lefebvre: I believe that a number of shippers challenged the department on their interpretation of the regulations and the department agreed to pay their claims.

Mr. Bailey: Having said that, was there anything to notify those who were receiving claims and yet not notify others who were eligible for payment as well? Was the process just kind of as they came in, on an ad hoc basis?

Mr. Lefebvre: I am not aware of those that did not made a special request, if you wish. I am not aware that it was procedure to go back and identify those that may not have received the tax advantages.

Mr. Bailey: Would you say, sir, that this error where some were being paid, some were not being paid, some were being recognized, others were not, perhaps by 1993 — and indeed from 1993 to 1998, we have five years of blundering — we were still basically in the same position as we were in 1988?

Mr. Lefebvre: I think that the claims that we are facing are with respect to the period between 1988 and 1993, for the agreement.

Mr. Bailey: Would those claims have any relationship to the fact that the ad hoc payments between 1986 and 1988 became widely known?

Mr. Lefebvre: I believe that the claims we have received in respect of the period between 1988 and 1993 were probably prompted by the activities of this committee.

Mr. Bailey: They were not related to the payments made between 1986 and 1988?

Mr. Lefebvre: No.

The Joint Chairman (Mr. Grewal): I have a question of my own as well. Have West Coast shippers, contrary to the assurances given to this committee, filed any claims?

Mr. Lefebvre: We have received some claims for the period 1988-1993.

The Joint Chairman (Mr. Grewal): Do you know the approximate total value of those claims?

Mr. Lefebvre: It is difficult to estimate the value of the claims with respect to the issue before this committee because the claimants are taking a position that is much broader.

The Joint Chairman (Mr. Grewal): Do you know approximately the total value of the claims? Not exact, but approximate?

Mr. Lefebvre: Again, I do not know even approximately the parts of the claim that would be as a result of the lack of pre-publication, because even the regulations taken in 1993 are being challenged by the claimants. Therefore, we have all those claims in 1994, 1995, 1996, 1997, and there are a number of issues in the litigation that go way beyond. I can tell you that the total value of the claims now before the court is in the range of $80 million.

The Joint Chairman (Mr. Grewal): Resulting from these two errors?

Mr. Lefebvre: No. Part of the claim is in respect of this issue we are discussing today of lack of pre-publication, but the rest relates to other issues after 1993.

The Joint Chairman (Mr. Grewal): If these two errors had not been committed, what would have been the saving? Or if the department had resolved this error sooner rather than later, what would the department have saved out of the $80 million in claims?

Mr. Lefebvre: I do not have a figure that for the 1988 to 1993 period. There is a subissue there. It is that the definition that took place in 1986 is even broader. There is a question there as to whether some claimants will say that that definition was broader in 1986 to 1988. We say that that definition that was broader included all non-salt water internal bodies of water in Canada. The claimants are saying that it includes salt water — that is, all internal waters. There are a number of arguments there.

The Joint Chairman (Mr. Grewal): Is it possible that your department said why? This committee wants the dollar value of the claims. We are talking about the information.

Mr. Lefebvre: Yes.

Mr. Lee: Is there a statute of limitations or a deadline for making claims under the Excise Tax Act?

Mr. Lefebvre: Yes.

Mr. Lee: What is that? Would it involve so many years following the last reported filing?

Mr. Lefebvre: Yes.

Mr. Lee: Is it similar to the Income Tax Act?

Mr. Lefebvre: There are some limits. Unfortunately, I cannot give you the exact limits but there are some limits.

Mr. Lee: It would not be correct for me to assume, then, that we have gone past limitation periods for 1993, or do you believe we have gone past the limitations for 1993?

Mr. Lefebvre: In respect of the periods from 1988 to 1993, which is the period in question, we are way past 1988, 1989, 1990, and probably 1991 and 1992. I do not know if 1993 is out or if it is 1994.

Mr. Lee: You are guessing about this limitation, are you?

Mr. Lefebvre: There is a limitation period.

Mr. Lee: You are not sure when it kicks in, however — that is, whether that happens in five years or six years?

Mr. Lefebvre: No.

Mr. Lee: I am trying to get a practical handle on the department's difficulties here, which are not the committee's difficulties. Our committee focuses on application of the law. That is our job.

You have indicated there might be as much as $80 million at stake involving some other issues but including the 1988 to 1993 issue. In my experience, our counsel to this committee, the four counsel, always give good advice. Our chief counsel, who is with us here today, gave some advice to the department on October 16, 1990. It was good advice then and it is probably good advice now. With 20-20 hindsight, it was probably excellent advice. In 1990, the advice of our counsel to the department was, first, that it rely on the goodwill of the industry in not claiming 1986 to 1988, which the department had indicated existed; and, second, to pass a new properly drafted regulation. That was the first advice.

The department took three years to do that. I can only suggest to you that that three-year delay, from October of 1990 to the fall of 1993 — and, I assume there was a period of pre-publication beginning in 1992, so there was at least a two-year delay in implementing it — may well have proven costly in terms of legal fees.

That was actually great advice, would you not agree — that is, if your department had taken the advice of this committee through its counsel?

Mr. Lefebvre: I wish that the regulations had been pre-published immediately, redone immediately after counsel advised us that there had been no pre-publication.

Mr. Lee: There was another piece of advice. The second alternative was to seek passage of legislation validating the 1988 amendment. Had that approach been taken, we would not be here today, on the assumption that Parliament would have been prepared to adopt that legislation. That would have involved some retroactivity, but it would have been retroactivity to correct what most people would accept as having been an error.

We still have that possibility. I am curious why, given that the record is clear on this — at least, to me it is reasonably clear, and my colleagues here have outlined it in further questioning — the department would not be considering legislation to finally correct the error. I do not think parliamentarians would have difficulty fixing either a $50 million or a $100 million mistake. It seems to be kind of logical — that is, provided no one is prejudiced. The burden would be on those who would rely on an error to show some equitable factor in their favour.

Is the department considering that second piece of advice that was given in 1990?

Mr. Lefebvre: In my experience, it is only in the most extraordinary of circumstances that Parliament has seen fit to pass retroactive legislation in matters such as this, where citizens have acquired rights to tax advantages, that Parliament would retroactively, because of error or other reasons, take away those rights. It is only in the most extraordinary circumstances that it is done. Every time, it becomes a big issue in Parliament as to whether, in the public interest, it is acceptable to pass retroactive legislation in the tax field.

Again, you will probably be able to find one or two examples in the past decade where such things took place. However, in the current circumstances, I think it would have been more appropriate for the government if we had concluded that the claims were valid because the regulations were invalid. Our position would have been to pay the claims and not to propose to Parliament legislation to retroactively remove those rights from the citizens who had acquired those rights. That would have been our position. The only reason we denied the claim is because we believed the regulation was validly made. Therefore, under the law they are not entitled to those claims.

Mr. Lee: I hear what you are saying and I have a couple of problems with it. I do not want to prolong this too much but your department, among all departments, is the one that imposes retroactive tax measures after notice has been tabled in the House of Commons. It is the finance department — in fact, I think it is the only one after the ways and means motion is tabled, after the minister brings down his or her budget — where the legislation is retroactive. How can you sit here today and tell us that your department espouses this principle of not adopting retroactive legislation? If you can impose a tax measure retroactively, back to the date of notice, surely your department can correct a mistake retroactively back to the date of notice.

In one case you have your hand in the person's pocket. In this one, you are simply correcting an error and not giving money to a claimant who has already had notice that the measure was not well-founded. Am I being a little too hard on you here?

Mr. Lefebvre: I welcome that question. The member is referring to a long-standing practice in Canada. It is a well-entrenched position for budget measures to be effective as of budget day. This is necessary for proper governance.

I do not deny that if, with respect to these regulations, the Minister of Finance had given public notice that he would introduce legislation as of the day he made the announcement — as of that day, although the legislation would come later — it might have fallen within that category of measures that are announced on one day and the legislation is retroactive to that particular day.

In all taxes, this is a necessary evil, I think, that has been recognized as necessarily part of the parliamentary tradition. Otherwise, undue tax planning, undue benefits could be received by individuals between the day of a tax measure and the day of the passage of the legislation. You are referring to a longstanding tradition.

Mr. Lee: This we understand.

Mr. Lefebvre: That is one exception to the rule that there is no retroactivity except in the most extraordinary circumstances.

Mr. Lee: You have explained to parliamentarians what the parliamentary attitude is. What about the department's attitude in not wanting to go retroactive and fix up the mistake? You are only listing half the issue here.

Mr. Lefebvre: As a department administering revenue, we come —

Mr. Lee: No. I am asking you to really try to hit the nail on the head here. I am asking you why the department is prepared to legislate retroactively back to 1993 when the department is already — publicly, in camera, out of camera, all over the place — taking the view that the regulations were revoked in 1988. That is the department's position, that legally those regulations were changed; they were kaput; they were gone.

You are saying now that the department does not want to legislate the position it is taking, like somehow there is some evil retroactivity at work here. That is just not the case. I do not see it. Can you explain it to me?

Mr. Lefebvre: The regulations in 1986 were made applicable to a larger area. In 1988 they were reduced to a smaller area.

Mr. Lee: Purportedly.

Mr. Lefebvre: Yes. That is the issue. Were they validly made in 1988? In 1993 then, everything was put beyond question. There is a question about 1988. It is a valid question. One must come on one side or the other of that question.

We are of the view that regulations made in 1988 for the purposes of the Excise Tax Act were validly made. Therefore, in our view —

Mr. Lee: Excuse me. Why not legislate for greater certainty? The statute can say, for greater certainty, in case anyone has any doubt, Parliament says the regulations were amended in 1988 by statute.

Mr. Lefebvre: If I may, Mr. Chairman, we would love, as the revenue department, whenever our interpretations are challenged by citizens to go back and legislate our position. The fact of the matter is that citizens have the benefit of the law as then written. We do not go back and legislate again except in the most extraordinary circumstances.

Our position in the law — because we could always say as a department that that is what we intended, that that is what we wanted and so, for greater certainty we legislate retroactively. Citizens are entitled to the benefit of the law as it was then written.

We believe we are right in our position. Some claimants believe we are wrong, and they are taking us to court. If they win, we will pay the court settlement and we will not legislate them. We will not propose to Parliament that they legislate them out of their rights if, ultimately, the court finds their position to be the right one as opposed to ours. We strongly believe that our position is the right one.

Mr. Lee: Thank you.

Mr. Saada: May I raise a small point of order which I would like to leave with you, Mr. Chairman? It has to do with something which is not within the scope of this precise issue here but it is in answer to a request made last week.

The Joint Chairman (Mr. Grewal): Please make it clear to the members for the sake of the record. There is some correspondence from the RCMP.

Mr. Saada: It comes from the department, from the Solicitor General. It deals with the answer to, number one, put in writing the verbal commitment I made on behalf of the minister last week. It does answer one of your requests which is to have a draft regulation to look at, and it reaffirms the openness of the minister in terms of legislating it.

The Joint Chairman (Mr. Grewal): Do you want to table that?

Mr. Saada: I would like to table it, yes.

Senator Moore: Mr. Lefebvre, I would like to know the total amount of money paid out in 1986 to 1988 claims.

Mr. Lefebvre: Sorry, I do not have that amount, Mr. Chairman.

The Joint Chairman (Mr. Grewal): Will your department submit the figures of the claims to the committee?

Mr. Lefebvre: Yes.

The Joint Chairman (Mr. Grewal): Can we expect them within one week or so?

Mr. Lefebvre: Yes.

The Joint Chairman (Mr. Grewal): Senator Moore, we will have those figures before the next meeting. We have a meeting on Thursday of next week, by the way.

Senator Moore: I would like to pursue Mr. Lee's questioning a bit with respect to the deadlines. You seem to be quite emphatic that the deadline for the 1986 to 1988 claims has passed. What was that? When did it pass? When did it lapse?

Mr. Lefebvre: I will provide to the committee the exact number of years that people have to challenge our decisions, to deny a claim, with the exact starting date that triggers the period, and then the length of the period.

Senator Moore: I would like to know that with respect to the 1986-to-1988 claims plus the 1988-to-1993 claims, Mr. Chairman. I expect it will be the same. I am asking the question because I am not too pleased with some of the answers we are getting here. I do not think they are very complete. I want the witness to know that I want those cut-off dates for both those periods of possible claims.

Mr. Wappel: I want to confirm that the only reason that the 1993 regulations were passed, in your view, is just in case your interpretation of the 1988 regulations is wrong? Just in case, you wanted to cover off by passing the 1993 regulations; correct?

Mr. Lefebvre: Mr. Chairman, this is an important question. The regulations made in 1993, not in the text of the regulations but of the regulatory impact analysis statement that goes with it, state, under the rubric of benefits and costs on the second page, that this amendment will have no impact on the shipping industry or the public as this definition of inland waters ship has in fact been in existence since 1988.

I can only deduct from this assertion that the department was of the view that the 1988 regulations were valid all along. That was their position at the time. The only purpose of re-publishing the regulations was at the urging of this committee.

Mr. Wappel: So the cabinet of this country was required to consider and pass a regulation that it did not need to pass in the view of the department.

Mr. Lefebvre: That is my understanding of the mindset of the department at the time.

Mr. Wappel: That was just on the off chance that their interpretation of the 1988 regulation was wrong; correct?

Mr. Lefebvre: My understanding is that that was not the purpose. The purpose was to satisfy the request of this committee.

Mr. Wappel: That is nonsense. The purpose was to cover your butt just in case you were wrong in the 1988 regulation. Can't you just admit that?

Mr. Lefebvre: I think that what you imply seems to fly in the face of the statement I just read, which was in the document that was part of the regulation package in 1993. I have to draw my conclusions from the written record.

The Joint Chairman (Mr. Grewal): Very briefly, we have some questions from counsel.

Mr. Bernier: Mr. Wappel has furnished me with a nice introduction. Would Mr. Lefebvre agree, I take it, that the sole objection of this committee to the 1988 amendment was the issue of its validity? Would he agree with that?

Mr. Lefebvre: Well, what the committee had in mind is not for me to confirm or infer.

Mr. Bernier: Does the only concern that this committee drew to the attention of your department relate to the validity of the 1988 amendment?

Mr. Lefebvre: Yes.

Mr. Bernier: On December 10, 1990, the Deputy Minister for Customs and Excise wrote a letter to the committee and stated this:

We are in agreement with the essence of your concerns....In the result, and as you advise, we will be proceeding to re-enact the current definition after complying with the statutory exposure and consultation requirements. Given the previous agreement that the sole issue here was one of validity of that amendment, could the witness explain what the Deputy Minister meant when she stated she was in agreement with the essence of the committee's concern?

Mr. Lefebvre: I recognize that this letter was sent and that statement was made.

Mr. Bernier: By the Deputy Minister.

Mr. Lefebvre: By the Deputy Minister. I also note the passage I just quoted from the 1993 regulations.

Mr. Bernier: Which is three years later.

Mr. Lefebvre: Which is three years later.

Senator Moore: A little retroactivity thrown into it.

Mr. Lefebvre: It affirms that the regulation has been valid all along. Therefore I have those two statements and I am trying to reconcile them. One interpretation is that the statement made by the deputy in 1990 was referring to your concern that pre-publication should take place, and certainly, for the purposes of the Customs Act and the regulations made under that act and with respect to the Customs Act issues, I think that your concerns were well taken.

Mr. Bernier: What a complex web we weave, Mr. Chairman. The legal justification or explanation has been advanced today in support of the validity of the 1988 amendment. I point out for the record and for the benefit of members, Mr. Chairman, this is the first we have heard of this legal rationale. I would like to make sure I understand it correctly. We have the 1988 amendment. We have the text here. There is a single statutory instrument that has been made by his Excellency in Council. That instrument includes a single definition of “inland waters ship”. Now, if I understand correctly —

Mr. Lefebvre: I will not comment on its validity under the Customs Act. I agree that there is a strong argument that the regulations — sometimes a procedure precedent to the making of a regulation goes to the validity of the regulation, other times it does not, but I will admit that for the purposes of the Customs Act, and that is the thrust of our position, that we can make a distinction between the regulations passed and enacted under the Excise Tax Act, and the regulations, the same regulations, enacted under the Customs Act. Our position is that if there had been two regulations, with

Mr. Bernier: The fact is there are not two.

Mr. Lefebvre: The fact that there are not two regulations complicates the issue, makes it debatable, and certainly I respect your argument that one can argue that the fact there is only one regulation made under two statutes, if it is not —

Mr. Bernier: If there is a vice de forme?

Mr. Lefebvre: If there is a vice de forme with respect to one, then the whole thing falls.

The contrary argument to that is that if there had been a claim under the Customs Act, a drawback under the Customs Act as opposed to the Excise Tax Act, we would have had to give in to the claim, and the executive intent would have been frustrated because of this vice de forme. That is the argument, that, yes, it was the intent of the executive for that definition to be valid for both statutes. If a claim had come under the Customs Act, that intent would have been frustrated because of the lack of pre-publication. We looked at whether that intent was frustrated under the Excise Tax Act, an

Mr. Bernier: I understand.

Mr. Lefebvre: We conclude that they cannot. We have two arguments and we believe the better one is that the regulations are valid.

Mr. Bernier: There is a single definition, we agree on that. You accept at least as a real possibility that that definition may be ultra vires as far as the Customs Act goes.

Mr. Lefebvre: May be.

Mr. Bernier: At the same time, it is intra vires as far as the Excise Tax Act goes. Is there any case law in support of this rather schizophrenic view of validity that the department has relied on?

Mr. Lefebvre: No. I am not aware of any case law either way.

Mr. Bernier: I think there is case law, Mr. Lefebvre, on the fact that non-observance of a fundamental requirement of form invalidates the resulting regulation. There is case law.

Mr. Lefebvre: I thought that your question was whether there is case law respecting one statutory instrument made under two statutes with different requirements with respect to procedures precedent to the passage of the regulations.

Mr. Bernier: More particularly, I was referring to support in the case law for the view that one enactment can be both illegal and legal at the same time.

Mr. Lefebvre: With respect to what counsel said earlier, Mr. Chairman, that we had not brought to his attention or to the committee's attention this argument earlier, I must apologize for that. I think that this issue could have been better debated, and the committee would have been better informed, if we had made that information and that position better known and more clearly known to the committee and counsel. That is regrettable.

Mr. Bernier: One last observation, Mr. Chairman. It relates to this business of legislation and the great concern evidenced by the department that it should not retroactively infringe in any way on the rights of citizens. A few years ago, Customs and Excise passed a series of customs orders increasing customs duties on a series of goods. A number of those orders were made retroactive, in fact, and the end result was that importers had been required to pay substantial amounts of money that they should not have paid, that were paid illegally, based on the retroactive portion or application of the orders. Would Mr. Lefebvre not agree with me that, in such a situation, those importers have a right to be reimbursed for the customs duties they have paid illegally?

Mr. Lefebvre: I am sorry, but I am not aware of this other situation.

Mr. Bernier: In that case, Mr. Lefebvre, the department had no problem whatsoever asking Parliament to pass an act validating and deeming the various retroactive customs orders to have been validly made. We have other cases in this committee where, as a result of the work of the committee, similar legislation has been made deeming certain instruments to have come into force at a different date than that of their actual coming into force. This is more in the nature after observation. I put it to you that the course of action that had been suggested to the department, if it had been followed, would have avoided this whole mess, including the cost of lawsuits and government lawyers having to use taxpayers' dollars to represent the government. That course of action is not as rare as you have suggested this morning.

Mr. Lefebvre: I make one observation. It is true that retroactive tax legislation is passed when it is relieving in nature. I am not aware of the example given by counsel. It is extremely rare in a situation where it is augmenting or depriving people of acquired rights.

In the present situation, rather than recommending legislation that would, with absolute certainty, deprive people of rights they think they have acquired, we are prepared, as a department — and we think this is a better position to take — to stand by our position, which we think is a reasonable and responsible one. However, if the courts determine that the arguments that have been put forward by counsel — and, we recognize that they are there — are upheld, we will pay people their claims.

Mr. Bernier: The whole thing will end up costing more, possibly, in the end.

Mr. Wappel: It will certainly cost more. Positively.

The Joint Chairman (Mr. Grewal): Thank you very much. We have two things to decide upon before we adjourn. First, is it the will of the committee that we ask Mr. Wright, the Deputy Minister to appear before the committee?

Mr. Wappel: Perhaps we could defer that to the first item of business next week. Mrs. Jennings is not here. She brought forward a motion. Perhaps we could digest the comments of the witness and consider this as the first item of business at the next meeting.

The Joint Chairman (Mr. Grewal): Is it agreed?

Hon. Members: Agreed.

The Joint Chairman (Mr. Grewal): Carried.

The second thing we must decide is whether or not we should express our anger in writing to the deputy minister because he did not attend here this morning, or do we want to defer that matter to the next meeting? What is the will of the committee.

Mr. Wappel: I believe Madam Venne suggested, and I agree, that we should provide the transcript of this meeting to the deputy minister with our indication that we were very disappointed that he chose not to attend. Not only did he choose not to attend but he did not provide us with a reasonable explanation as to why he did not attend, on a date that he had suggested. Madam Venne, is that pretty well what you suggested?

[Translation]

Mrs. Venne: Before we adjourn, since I am not familiar with how this committee normally operates, I assume we will be meeting next week. Since the House will be in recess the following week, when will our subsequent meeting be scheduled?

[English]

The Joint Chairman (Mr. Grewal): The next meeting for the committee is on November 5. After that, the House is adjourned for one week.

Mrs. Venne: I am asking about the week after.

The Joint Chairman (Mr. Grewal): I do not have a long-term plan. Can we clarify that next Thursday?

Mrs. Venne: I would prefer to know today.

Mr. Lee: I have a minor point of order. I want to reiterate my understanding of our in camera decision. The meeting was not broadcast after the point in time when we went in camera, but for all other purposes the transcript will be produced, the minutes of the meeting will be made public and distributed, as per usual. However, the record will show clearly that it was the decision of this committee that all the proceedings involving this witness are privileged and are deemed to be in camera.

The Joint Chairman (Mr. Grewal): Except that we will send a copy to Mr. Wright.

Mr. Lee: We will send a copy to anyone who wants one. They are deemed to be privileged and in camera for the reasons that I discussed earlier but for all other purposes what happened at this meeting will be public.

The Joint Chairman (Mr. Grewal): Is that agreed?

Hon. Members: Agreed.

The Joint Chairman (Mr. Grewal): Carried.

The committee adjourned.