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Home News Articles Arbitrary Covid-19 orders could bankrupt some businesses. Is that constitutional?

Arbitrary Covid-19 orders could bankrupt some businesses. Is that constitutional?

By | on May 19 2020

From News, Articles

In March, Canada’s premiers were faced with apocalyptic images of overwhelmed hospitals in Italy. They responded by shutting down as many businesses as they could. The idea was that by keeping most of the population at home, they could stop the spread of Covid-19.

These emergency orders seem to have helped Canada avoid the worst case scenario, but they created some unfair hardship for small business owners. Just to give one example, between March 24 and May 8, stand-alone garden centres were deemed “non-essential” in Ontario and faced fines of up to $10 million for defying the emergency order while big-box stores like Loblaws and Costco were allowed to sell plants. A spokesperson for the flower industry told Global News that the industry makes 60 per cent of sales between Easter and Mother’s Day. That suggests the arbitrary distinction likely put some independent garden centres out of business.

That seems intuitively unfair but is it unconstitutional? Matthew Harrington, head of the common law program at Université de Montréal, says there’s an argument to be made that governments can’t make arbitrary orders that push businesses into bankruptcy without compensation. The argument is based on Section 7 of the Charter of Rights and Freedoms, which states that “everyone has the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice.”

There is still much debate about what “life, liberty and security of the person” mean. The Supreme Court has said that “liberty” protects not only the right to be free from physical imprisonment (except in accordance with the principles of fundamental justice) but also “inherently private choices” that go to the “core of what it means to enjoy individual dignity and independence” (Godbout v. Longueuil (City). Some lower courts have decided that “liberty” protects the right to work or do business (Wilson v. British Columbia (Medical Services Commission) but the Supreme Court has said that it does not protect the right to “transact business whenever one wishes” (R. v. Edwards Books and Art Ltd.). In other words, the constitutional right to “liberty” may or may not protect a business owner pushed into bankruptcy.

“Security of the person” seems more likely to offer protection, considering that the court discussed this possibility in the 2002 case Gosselin v. Quebec. Louise Gosselin was a Quebec woman who argued that section 7 required the province to provide her with a minimum level of social assistance. Justice Louise Arbour agreed, writing that “the right to a minimum level of social assistance is intimately intertwined with considerations related to one’s basic health and, at the limit, even one’s survival,” and that “these rights can be readily accommodated” by section 7.

Seven other judges, led by Chief Justice Beverley McLachlin, disagreed that section 7 creates a positive obligation on the government to provide for life, liberty and security of the person, because the words “not to be deprived of” suggest only that the government cannot take away life, liberty and security of the person. However, Chief Justice McLachlin noted that section 7 might protect what former Chief Justice Brian Dickson had called the “economic rights fundamental to human … survival.”

Harrington says that a business owner forced into bankruptcy who can no longer feed himself or put a roof over his head could argue that he has been deprived of the economic rights that are fundamental to his survival. The restriction would not be in accordance with the principles of fundamental justice because it was arbitrary to close stand-alone garden centres but not big box stores, considering that independent garden centres are just as safe or safer than big box stores.

A garden centre owner pushed into bankruptcy might also argue that the government has, in effect, taken his property. This argument would be based on the doctrine of “taking,” which means that governments cannot snatch property without fair compensation unless they’ve passed a statute specifically allowing for that. Even emergencies don’t appear to absolve governments of the requirement not to take without compensation. In the 1920 English case Attorney-General v. De Keyser’s Royal Hotel, Britain’s House of Lords ruled that the Crown needed to pay compensation for a hotel that the military had taken over during the First World War.

The 1979 case Manitoba Fisheries Ltd. v The Queen, could also be cited here. Manitoba Fisheries Ltd. was in the business of buying and selling fish. Supreme Court Justice Roland Ritchie ruled that the “obliteration” of Manitoba Fisheries Ltd.’s business as a result of a new government regulation amounted to the government “taking” Manitoba Fisheries’ goodwill. The court said that Manitoba Fisheries had to be compensated for the goodwill taken.

Harrington says the province might argue it didn’t “take” anything from a bankrupt garden centre because—unlike in Manitoba Fisheries where the government was itself getting into the business of selling fish and therefore arguably using the goodwill—the province was not gaining anything by forcing the garden centres out of business. The Manitoba Court of Appeal accepted this argument in a 1992 case called Steer Holdings Ltd. v Manitoba, after the province had passed a law making part of Steer Holdings Ltd.’s land unusable. In that case, the court said that “before one can imply a right to compensation in the legislation, there must be more than a limitation on use. To qualify for compensation there must be an expropriation, if not in name, then in effect.”

Harrington says a garden centre owner could try to argue that the province, in effect, “took my garden centre and gave it to Costco.” He says this would be going beyond what the Canadian courts have previously decided but that does not mean they shouldn’t go there if that’s what the constitution is actually meant to protect. “The American theory of the regulatory taking is that if you remove all of a thing’s economic value, you’re taking it,” Harrington adds. “The American view has some merit: if you have to show that they got something, like a quid pro quo, then that leaves the provinces to destroy anything they wanted through regulation.”

Of course, if a claimant were to succeed in showing a breach of section 7, the court may find that it was justified under section 1 of the Charter, which says that the rights and freedoms set out in it are subject to “such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society.” This is determined by a two-step process called the Oakes test. The first step is that the government must show its objective is pressing and substantial; it’s highly likely that halting the spread of Covid-19 would meet that step of the test. The second step is for the government to show the means chosen are proportional to the burden on the rights of the claimant. This is where the arbitrary of nature of closure of independent garden centres but not big box store garden centres comes into play. If the courts don’t believe this was a proportional response, then the government could be on the hook for forcing garden centres out of business.

Image by Tejvan Pettinger and used under CC 2.0.

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