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Kingstreet Investment Ltd V. New Brunswick Notes

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KINGSTREET INVESTMENT LTD V. NEW BRUNSWICK FACTS Since 1988, the corporate appellants have been operating a number of night clubs in the cities of Fredericton and Moncton, New Brunswick, that are licensed to sell alcoholic beverages. They purchase their alcohol from the New Brunswick Liquor Corporation's retail stores and, in addition to the retail price, pay a user charge, as prescribed by regulation adopted pursuant to the Liquor Control Act, R.S.N.B. 1973, c. L 10, s. 200(3). That user charge has varied over the years from 11 percent of the retail price to the current 5 percent: see Fees Regulation --- Liquor Control Act, N.B. Reg. 89 167,s. 5. The trial judge found, and the parties agree, that the appellants have paid over $1 million in such charges. The appellants have challenged the constitutional validity of the user charge and seek by way of relief reimbursement of all amounts paid over the years with compound interest. I agree: the trial judge's decision that the user charge constitutes an unconstitutional indirect tax must stand. HOLDING Constitutional basis for recovery - not Unjust Enrichment This appeal concerns whether restitution is available for the recovery of monies collected under legislation that is subsequently declared to be ultra vires. For the reasons given below, I find that restitution is generally available. I agree with Robertson J.A. that there is no general immunity affecting recovery of an illegal tax. I would, however, decide the case on the basis of constitutional principles rather than unjust enrichment. The Court's central concern must be to guarantee respect for constitutional principles. One such principle is that the Crown may not levy a tax except with authority of the Parliament or the legislature: Constitution Act, 1867, ss. 53 and 90. This principle of "no taxation without representation" is central to our conception of democracy and the rule of law. As Hogg and Monahan explain, this principle "ensures not merely that the executive branch is subject to the rule of law, but also that the executive branch must call the legislative branch into session to raise taxes." When the government collects and retains taxes pursuant to ultra vires legislation, it undermines the rule of law. To permit the Crown to retain an ultra vires tax would condone a breach of this most fundamental constitutional principle. As a result, a citizen who has made a payment pursuant to ultra vires legislation has a right to restitution.

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