Skip to main content

REGS Committee Meeting

Notices of Meeting include information about the subject matter to be examined by the committee and date, time and place of the meeting, as well as a list of any witnesses scheduled to appear. The Evidence is the edited and revised transcript of what is said before a committee. The Minutes of Proceedings are the official record of the business conducted by the committee at a sitting.

For an advanced search, use Publication Search tool.

If you have any questions or comments regarding the accessibility of this publication, please contact us at

Previous day publication Next day publication

Proceedings of the Standing Joint Committee for the
Scrutiny of Regulations

Issue 9 - Evidence, May 1 2008

OTTAWA, Thursday, May 1, 2008

The Standing Joint Committee for the Scrutiny of Regulations met this day at 8:32 a.m. for the review of statutory instruments.

Senator J. Trevor Eyton and Mr. Derek Lee (Joint Chairs) in the chair.



(For text of documents, see Appendix A, p. 9A:1.)

The Joint Chair (Mr. Lee): We will begin with the appearance of witnesses: Gerard Power, from the Canada Post Corporation; and André Morency and April Nakatsu from Transport Canada.

Welcome and thank you for coming this morning. Mr. Power, please proceed with your presentation.


Gerard Power, Vice-President, General Counsel and Corporate Secretary, Canada Post Corporation: Mr. Chair, I thank you for the opportunity to address concerns raised by the committee with respect to certain aspects of the postage rate formula in the Letter Mail Regulations.


The first concern that was brought to my attention with the assistance of counsel to the committee related to the use of a formula in this regulation. Subsection 19(1) of the Canada Post Corporation Act permits rates of postage to be prescribed by regulation. The issue is whether the regulation prescribes a rate.

The ordinary definition of "prescribe" in the Shorter Oxford English Dictionary and Black's Law Dictionary is to lay down a rule, guideline or direction. This ordinary meaning of prescribed is consistent with the interpretation of the word by Canadian courts. In the Re Eurig Estate case, a 1994 decision of the Ontario court, which was affirmed by the Court of Appeal and which was affirmed on a further appeal by the Supreme Court on other grounds, held that "the use of the word 'prescribe' was intended to give wide authority for regulations to be made that set down a specific rule or direction on how the fees were to be calculated." The Eurig case involved prescribing fees that varied based on the particular value of an estate. The Ontario court in Eurig relied on a 1967 decision of the Supreme Court of Canada in Canada (Attorney General) v. Compagnie de Publication la Presse Ltée. In the La Presse case, the Supreme Court considered regulations under the Radio Act, which set fees for it broadcast licences as a percentage of the gross revenue of a broadcasting station. In other words, the regulation set fees by a formula that included a variable to be determined at a future date. The Supreme Court did not raise any issue with that formula. Likewise, the Federal Court of Appeal, in Altagas Marketing v. The Queen, considered a provision of the Frontier Lands Petroleum Royalty Regulations, which prescribed royalty fees using a formula set at a percentage of gross revenues.

Accordingly, Canada Post's view is that adopting the price-cap formula in the regulation is squarely within the meaning of "prescribing rates of postage" under section 19(1) of the Canada Post Corporation Act.


The second point raised was to determine whether the formula is at odds with the intention of Parliament that any increase in the postage rate be approved by the Governor-in-Council. The legal framework that governs Canada Post provides the government with a number of opportunities to set the direction for the corporation's management, including postage rates.

Three years after the Canada Post Corporation Act was passed, the Financial Administration Act was amended. The amendments included provisions about the business plan. Canada Post must submit a detailed five-year plan, including its assumptions, its budgets and its investments, to the ministers for their approval. The ministers therefore are able to set the corporation's direction, including the direction that the corporation wants to take on rates.

Furthermore, the two acts that I have previously mentioned provide the authority to issue directives to Canada Post, either from the minister responsible for Canada Post or from the Governor-in-Council.


I note that today, unlike in the early 1980s, the issue of postage rates is a less-consuming passion for Canadians. Today, consumers are able to insulate themselves from the immediate and medium-term impact of increases in postage by purchasing permanent stamps. These stamps have no value marked on them but are identified by the letter "P," making them valid forever.

There are many more affordable substitutes available today than there were in 1981. For example, fax machines at that time could be used only by the largest businesses. Today, many individuals are able to afford a fax machine at home. Email, SMS messages and other tools mean that the basic letter rate increase is of much less concern.

The third issue raised by the joint committee is that the price-cap formula is inconsistent with the requirement in section 19(2) of the Canada Post Corporation Act that rates be fair and reasonable. The fair and reasonable requirement must be taken into consideration every year, even in the absence of a change to the rates of postage. In a period of prolonged deflation, it is possible that the rates that might have been set by way of an absolute number, would cease to be fair and reasonable and, therefore, would have to be reduced. Accordingly, the consideration must form, and does form, part of the annual prepublication of postage rates in that six-month notification period pursuant to today's regulation.

As described above, the price-cap formula in the Letter Mail Regulations was the result of concerted and considered policy efforts by Canada Post working together with the federal government, including the Governor-in-Council. Canada Post is confident that the regulations, including the price-cap formula, are consistent with the intention of Parliament and with the overall intention of the Canada Post Corporation Act. Our view continues to be, as it was when the joint committee first raised its concerns several years ago, that enacting the price-cap formula was within Canada Post's authority to prescribe rates of postage that are fair, reasonable and constitute sound public policy.

The Joint Chair (Mr. Lee): Mr. Power, you framed the issue nicely. We will go to questions.

Mr. Power, you have touched on the section 19(2) consideration in the Canada Post Corporation Act and described it as being something imposed by statute. Someone must take into consideration that the postal rate be fair and reasonable.

In fact, the Governor-in-Council is charged with making the decision about whether a rate is fair and reasonable under section 19(2). It is not out there as a fuzzy standard to be used by anyone, including Canada Post. That standard is imposed.

The mechanism of having a formula, as you have designed it — and as the Governor-in-Council has designed it, we believe improperly — does not allow the government the window to address the issue of whether a postal rate is fair and reasonable. They simply walk away from it. They put a formula in place and say bye-bye, we will see you when and if there is ever a problem.

That is not what Parliament legislated. We believe that, based on the wording of section 19(2) and section 19(1), it was clearly the intent that the Governor-in-Council, the cabinet ensure that a postal rate set was fair and reasonable and that the rate not be put on autopilot forever.

You seem to think that the rate formula that is there works. We do not. We do not know what the rate will be in 2010. Do you know what the postal rate will be in the year 2010?

Mr. Power: I submit that Canadians have a better sense of what the postal rate will be in 2010 — with the ability to project where the Consumer Price Index, CPI, will move to, and apply two thirds of that — than they had in the past.

The Joint Chair (Mr. Lee): That may be true, but I asked you if you knew what it would be. You do not. The answer to the question is, I believe — and I am leading you here — is that you do not know what the postal rate will be in the year 2010. If you know, tell me what it is.

Mr. Power: I am not able to swear that the rate of postage in 2010 will be 53 cents or 54 cents, because I am not able to tell you with absolute certainty what the rate of inflation will be in that period of time. However, six months before the rate comes into effect, Canadians will know. One of the desires of Canadian customers was to know well in advance.

The double gazetting process that is used for all other regulations under the Canada Post Corporation Act means that if we were to publish in the Canada Gazette on July 1 for a rate increase, with a 60-day consultation period and then a further 60-day period for the Governor-in-Council to consider the proposal, that could leave as little as 45 days' notice, in an absolute sense, of what the increase is.

If I may, Mr. Chair —

The Joint Chair (Mr. Lee): Before you may anything, I would like you to conclude with an answer to my question.

Mr. Power: The answer is there is no absolute —

The Joint Chair (Mr. Lee): I am asking you, sir, if you know. Are you able now to calculate the postal rate in place in the year 2010 — yes or no? If you cannot, it is all right. It is not a criminal offence.

Mr. Power: I am not.

The Joint Chair (Mr. Lee): Thank you. You may want to carry on with another part of the explanation.

Mr. Power: Yes; you referred to the responsibility of the Governor-in-Council to ensure that the rates of postage are fair and reasonable. I submit that this requirement is a more absolute one. Indeed, if a Canadian who is affected — and I would say that virtually every Canadian is affected by rates of postage — felt the rates of postage were not fair and reasonable, they would have an opportunity to challenge the rate of postage. It is much broader than simply Parliament or the Governor-in-Council providing that oversight. The Canadian judicial system could be caused to intervene to examine whether the rates are still fair and reasonable.

The Joint Chair (Mr. Lee): I want to read to you an excerpt from the Regulatory Impact Analysis Statement, RIAS, which accompanied this regulation when it was enacted in the year 2000. The name on the RIAS from Canada Post Corporation is William R. Price, Director, Economic Strategy and Regulatory Affairs.

I will read the excerpt because I think it nails why the committee continues to have concern here. The RIAS is frank in its wording and it reads as follows:

Establishing the domestic basic letter rate formula in the corporation's regulations permits formula-acceptable increases to be implemented outside the regulatory process in future years when warranted.

I emphasize the words "outside the regulatory process." I think those words are precisely what our difficulty is. The cabinet and Canada Post have, unto themselves, decided that they will rid themselves of the rate-setting responsibility, place it with a formula and that those future increases will happen "outside the regulatory process in future years."

I believe the view of the committee is that Canada Post cannot establish rate increases outside the regulatory process. For colleagues, that quote is on page 1465 of the Regulatory Impact Analysis Statement that accompanied the gazetted publication of this RIAS. It is contained in your documents with counsel's note on this matter.

Do you have a response to that, Mr. Power?

Mr. Power: Yes: When this amendment was considered, one of the considerations raised was whether it was possible for there to be discretion. Can Canada Post say that because of issues of price elasticity, it does not want to have a rate increase in a given year — it wants to forego an increase?

In considering the language of the statute, the advice was that we cannot do that; that it must be in a fixed formula, which can have a reference to something external but cannot have any degree of discretion. If it has discretion in the corporation, that is contrary to the intention of Parliament and is not prescriptive.

The Joint Chair (Mr. Lee): Thank you.

Mr. Szabo: We are moving in an interesting direction. This joint committee has a responsibility to apply the rules and practices consistently. This particular situation probably puts us in a situation where, if we do not address it, we are not consistent.

The bottom line is that the current operation of setting postal rates is inconsistent with what is prescribed by the act. The solution is to amend the act to reflect what is now happening, and we are done.

Do you agree?

Mr. Power: It is always possible to bring additional precision in anything that we write — whether it is we, as lawyers, or you, as parliamentarians.

My opinion has been — as I have expressed earlier today — that the word "prescribe" is not inconsistent with an approach of a mathematical formula. Parliament's intention is something that we will always respect and if Parliament's intention, through this committee, is that there be an amendment to the statute, we have to respect that intention.

Mr. Szabo: I will ask the question again. Is the current operation of the act and its regulations inconsistent with what we are doing in terms of right now; what is actually happening and what the legislation calls for?

Mr. Power: My legal opinion is that the current legislation permits the regulation as it exists today. It permits a formula.

Mr. Szabo: The act allows or provides the ultimate responsibility or approval for a rate to cabinet. Is that right?

Mr. Power: The act provides that, ultimately, cabinet approves regulations that prescribe rates of postage.

Mr. Szabo: Can cabinet override a rate right now?

Mr. Power: Cabinet can do one of two things.

Mr. Szabo: Answer the question.

Mr. Power: Yes, it can through the corporate plan approval process. Through a directive, it can also require that Canada Post introduce a regulation that would otherwise change the rate.

Mr. Szabo: Therefore the answer is "no." They would have to make another regulatory change, which is exactly why we raised the issue in the first place.

To provide cabinet with that authority, we need to change the regulation that currently exists. Someone behind you is shaking their head "no;" I want to play cards with you sometime.

I think the chair used the right word when he identified the real issue here. The situation has been put on autopilot and it appears that the legislation and the intent of the legislation was that cabinet has that responsibility. As you tried to explain, they could control the rates or approve the rates. However, it would take a process that would not be a first choice if, in fact, that is what you wanted to do.

The bottom line seems to be that we are talking about a substantive affirmation for the process that you suggest should continue. For that to happen and for us to have the consistency between the application of the law and the regulations that enable that, an amendment to the act would be needed to reflect what is currently happening.

I believe that is all the committee has raised with Canada Post. I would like your comments.

Mr. Power: I understand your view that there should be an amendment to the statute to clarify that a rate can be set by formula. The opinion that I have given, and that was adopted in 2000, is that it is consistent and permissible under the statute today to have the regulation as it reads today.

Mr. Szabo: I will pass.


Mr. Harvey: Thank you for being here today. I have some questions. If I am not mistaken, Canada Post enjoys exclusive access to the market. You are the only people in Canada able to deliver mail in envelopes to Canadians. Is that correct?

Mr. Power: Yes.

Mr. Harvey: Why can other businesses not set themselves up in competition with Canada Post? Does the federal government give you your exclusive mandate?

Mr. Power: Yes. This is established in the Canada Post Corporation Act.

Mr. Harvey: In recent months, I have seen a number of those multiple mailboxes appearing — I do not know what the precise technical name is. But in recent months, I cannot say that service levels have increased; the increase has been in the number of multiple mailboxes.

As I am sure you are aware, more and more billing is being done by e-mail, via the Internet. In Quebec, even Hydro- Québec is in the middle of a huge advertising campaign to persuade its customers to get their bills on the Internet. Personally, I pay all my bills through my bank, my payments are made automatically.

Have you considered the possibility that, given that your competition is a service that is practically free, increasing your rates could make companies decide to stop doing business with you, which would, of course, not mean an increase in your revenues? Have you considered the possibility of looking at the competition, of seeing what is done elsewhere, before you think about increasing your rates?

Mr. Power: Yes indeed, we are constantly looking at the question of whether we have the flexibility in pricing that allows us to continue to increase rates.

But if you look at what it costs a large company to send a bill, the postal part is minimal. When they pay 52 cents for mailing, they have already paid $1.10 to print and prepare the statement. It is even more expensive for a small business to use this physical service. Even if mailing were free, it would be to their advantage to send bills electronically, if their customers would go along with it. This is why we have established epost: to allow our customers to send and receive bills electronically.

Certainly, some companies are deciding to create their own websites to send bills directly to their customers. But most have found that customers are not really interested in visiting several sites each month to get their bill.


The Joint Chair (Mr. Lee): I will interrupt you there, Mr. Power. The meeting agenda this morning sets out the subject matter that we are dealing with. I appreciate that some of the questions Mr. Harvey has asked have broader public interest importance. Mr. Power could spend the next half-hour going through the commercial mechanics of all these issues, but we need to focus on the core issue. If, at the end, you wish to raise some of these issues and there is still time, we can do that.

I will ask Mr. Power to terminate his answer and I will ask Mr. Harvey if he has another question on the subject of postal rate increases as shown in our agenda today.

No? Thank you. Then I will proceed with Mr. Wappel.

Mr. Wappel: There are three issues for me. As I understand it, committee members, the reason the witnesses are here today is as a result of the minister's letter. My first question is to the representative of Transport Canada.

The minister wrote to us what I would describe as a "perfunctory letter," the last line of which said our comments were being considered. We did not know what that meant. Therefore we wanted someone to come here to explain it to us.

I have reviewed the printed remarks of Mr. Power, given that I arrived late. I apologize for that. I cannot see that our comments are being considered at all. Mr. Power's legal advice to the corporation since the year 2000 has been consistent: Canada Post is doing absolutely nothing wrong and there is nothing wrong with the regulation. He said that again today.

Why did we receive a letter from the minister saying our comments are being considered? Our comments are not being considered since the corporation accepts — and I will say, properly — the advice of its general counsel. We are at loggerheads. Why did we receive such a letter? Can you answer that, Mr. Morency? Someone must have drafted the letter for the minister.

André Morency, Assistant Deputy Minister, Corporate Management and Crown Corporation Governance, Transport Canada: In sending that response, the minister wanted to avail himself of some time to look at the issues after taking over as the minister responsible for Canada Post. He has also received legal counsel on the matter and reviewed the regulations. He maintains the view of the minister of the day when the regulations were made, who was satisfied that the regulation was authorized by the Canada Post Corporation Act and was consistent with the intent of Parliament. I am here today, Mr. Wappel, to convey that message to the joint committee.

Mr. Wappel: Thank you. That clears it up.

I will move to the second issue. Obviously, the committee is at loggerheads with the department, with Canada Post and with respective governments. That is interesting. It is neither the first time that the joint committee has found itself in that position, nor will it be the last.

Mr. Power, in your remarks you quoted certain parts of section 19(2) of the CPCA, but not all of it. Your presentation states:

. . . shall be "fair and reasonable" and consistent so far as possible with providing a revenue, together with any revenue from other sources, sufficient to defray the costs incurred by Canada Post in the conduct of its operations under the Act.

I understand those words to mean there is not supposed to be any profit. Am I wrong?

Mr. Power: I believe this section must be read in concert with section 5 of the CPCA as well, which says that the corporation, while carrying out its obligations and providing basic customer postal service, is to have a mind to conducting its operations on a financially self-sufficient basis. That financial self-sufficiency, in my legal view, includes the ability to invest in equipment and other capital elements to continue to provide those postal services.

Mr. Wappel: I do not disagree with what sounds like a reasonable legal view. Given that, does Canada Post use a formula to determine whether the formula that is used to determine postal rates is consistent with what I will call "not making a profit," subject to the comments that you made about capital costs and keeping the corporation modern? How is that situation looked at?

Mr. Power: There is a policy framework agreement. Perhaps I can ask Mr. Morency to speak to that question in greater detail.

Mr. Morency: Mr. Wappel, a policy framework was established coming out of the last annual review of Canada Post, which fixed the rate within the formula to two-thirds of the Consumer Price Index. That formula is applied by Canada Post in its considerations as to when an increase to the basic letter rate can be applied, following the process explained by Mr. Power.

Mr. Wappel: I understand. However, suppose the other aspects of the business of Canada Post bring in so much money that a postal rate increase is unnecessary because there is enough money to generate the kind of leeway that the corporation needs to remain modern; to upgrade its hardware, et cetera. I do not see any leeway in the formula to prevent an increase. It seems to be an automatic increase based on the Consumer Price Index. Am I right? It never stops. It is never zero or negative, as far as I know. I suppose through history one might find an example but the rate usually increases regularly, which is why the cost of stamps increases regularly. Thus, you print stamps that do not have a price on them so you do not waste time reprinting stamps with different prices when the rate goes up each year. That is okay because everything goes up in price.

However, I want to ensure that the formula used to increase the price of stamps takes into account the other aspects of Canada Post's business so that Canada Post does not make an undue profit on the backs of the people who buy stamps. That is how I see it with a formula that is automatic. You are supposed to consider the conduct of the operations. I am asking how you consider it. I know the formula works and that a few months before it is implemented, the formula is figured out. When do you sit down and look at the other aspects of your business that bring in X, Y and Z that are expected to bring in X, Y, Z plus 10 per cent come January 1 and realize that the formula is high and, therefore, should be adjusted.

Mr. Power: I submit that the corporate plan approval process, which comes from the Governor-in-Council, is the opportunity for that review.

Mr. Wappel: By whom is that review?

Mr. Power: It is by cabinet. Cabinet approves the corporate plan.

Mr. Wappel: It approves the plan on the recommendation of whoever submits it. I would hate to sit on the cabinet committee that goes through a line-by-line analysis of Canada Post. The committee would be at it for the next 10 years.

Mr. Power: I can assure you, Mr. Wappel, having worked closely with the corporate plan in the past that the secretariats within the centre spend a great deal of time conducting that review and advising ministers.

Mr. Wappel: On the third issue, it appears that everything is done with the approval of the Governor-in-Council. What happens if the Governor-in-Council does not approve something and Canada Post does not listen? For example, what happens if the Governor-in-Council decides there should not be an increase because of political backlash amongst the constituents given that the formula has resulted in an unnecessarily high postal rate in the opinion of the constituents? Cabinet decides that the automatic formula is not politically acceptable and the Governor-in Council does not approve the increase. Canada Post defends its increase on the basis of the regulations and its status as a business. Would that happen?

Mr. Power: Cabinet has the power to issue a directive. If the board and the chief executive were to fail to obey that directive, they would be in breach of the directive and they would be suspended automatically. Once the directive is issued, there is no choice but to follow that directive.

Mr. Wappel: What statute does that power flow from?

Mr. Power: Two statutes give a directive power: The Canada Post Corporation Act contains the minister's power; and the Financial Administration Act contains the power of a cabinet decision.

Mr. Wappel: You say that statutes are in place with respect to this issue whereby if cabinet said no to an increase pursuant to the formula, and the corporation refused to follow that statement by cabinet, cabinet could issue a directive which, by law, would then remove whom?

Mr. Power: Cabinet could issue a directive to the corporation requiring that the corporation change the regulation so that a rate increase would not happen in a given year or that the rates be changed in some other way.

Mr. Wappel: They would issue a directive to the corporation to change a regulation.

Mr. Power: That is correct.

Mr. Wappel: If the corporation did not change the regulation then, according to you, by statute someone would be removed from office automatically.

Mr. Power: Yes.

Mr. Wappel: That would be whom?

Mr. Power: That could be the CEO and the board of directors.

Mr. Wappel: That directive is written in a statute.

Mr. Power: Yes.

The Joint Chair (Mr. Lee): Do you have a pre-existing formula for the removal of an executive officer?

Mr. Epp: Two-thirds of them.

The Joint Chair (Mr. Lee): Mr. Wappel's third issue raises the question of the directive, so I will ask Mr. Bernhardt to ask one or two additional questions.

Peter Bernhardt, General Counsel to the Committee: Perhaps I can begin with an observation, chair. While it is true that section 22 of the act requires Canada Post to comply with directives from the minister, I think it would be stretching the obvious scope and intent of that provision considerably to suggest that section gives the discretion to order someone to carry out a particular law-making activity.

I strongly suggest that in the absence of far more explicit wording than that, it is highly unlikely that provision can be interpreted as permitting someone to order someone else to make a particular law. There may well be political or administrative ramifications for not following through with a particular suggestion, but I do not think it would give rise to any legal obligation to change a regulation.

The Joint Chair (Mr. Lee): Do you have a response, Mr. Power?

Mr. Power: I disagree. I would say that the Governor-in-Council, in such a directive, can cause the corporation to submit a revised regulation for pre-gazetting. Ultimately, because the Governor-in-Council has the power to either accept or reject the regulation as proposed, the Governor-in-Council makes the law, not the corporation. The corporation proposes.

The Joint Chair (Mr. Lee): We may not have agreement on that subject. I will go to Mr. Laframboise now.


Mr. Laframboise: My first question goes to Mr. Morency. You said before — I hope I understood correctly — that, as soon as the minister arrived, he became aware of the file and wrote a letter to the committee. He took the time to look at the situation and now recognizes that what is in place is satisfactory. Is that more or less what you said?

Mr. Morency: Yes.

Mr. Laframboise: Great. Of course, if the committee keeps going, it is probably because, historically, we have always asked questions. Mr. Power, I listened to your presentation carefully and I read your document carefully. You seem very comfortable with the formula. It seems complicated to me. You submit a five-year plan and then cabinet follows up in order to deal with your proposal on rates. Can you summarize that for me quickly?

Mr. Power: Each year, the corporation is required to draw up a plan. Normally, it is done in October and submitted at the end of October to the minister who, after approving it, submits it to Treasury Board. The plan contains our forecasted revenues. Of course, we forecast revenues because we have to see if Canadians buy as many postal services as we had thought. We add our proposals on rates in general terms. Letter mail — the letter that you and I put in the mail, regrettably not every day, but perhaps twenty times per year — is so important that we talk about it in the plan. It is brought to the ministers' attention.

There are obviously in-depth discussions between Canada Post Corporation and some officials. The officials work in the offices of the ministers who examine the document before submitting it to the Treasury Board or to cabinet.

Mr. Laframboise: As I understand it, it is capped at two thirds, correct?

Mr. Power: Yes.

Mr. Laframboise: Were the increases that we have seen in recent years always at the level of the cap or were they under the cap?

Mr. Power: For letter mail, yes. For our other services, those where we compete, some increases were 100 per cent of inflation, others less, others slightly more.

Mr. Laframboise: For letter mail, it has always been two thirds, according to the formula that was in place. For how many years?

Mr. Power: Since 2001, when this regulation was passed. But, if you look at it historically, since 1982 — Canada Post was created in October 1981 — increases have been two thirds of inflation, even under the old formula. In some years, we had no increase, then, the next year, the increase was two cents rather than one. Since I have been with Canada Post since 1984, I have seen what happens when the increase is greater. Public reaction is much stronger than when increases are more predictable. When there was no increase one year, there was a larger increase the next, and that caused problems.

That also happened in the United States where they had years with no increase but, the next year, had perhaps an increase of five cents, which causes problems for consumers.

Mr. Laframboise: If I understand correctly, if the government did not want an increase, it could have the regulations changed. Is that correct?

Mr. Power: Yes, it could issue a directive.

Mr. Laframboise: And you would have to change the regulations?

Mr. Power: Yes.

Mr. Laframboise: You are a lawyer, you are defending Canada Post. I tend to agree with committee counsel's comments. I am quite comfortable with your position and the department's. But, after all these years, do you not think that it is time to clarify some of the regulations?

Mr. Power: I do not know if Mr. Morency wants to comment on that, because it is a political question — with a small "p" — rather than a legal one.

Mr. Morency: We consulted our legal services about the bill and the regulations. We are satisfied, because it is in accordance with the intention of Parliament that, at the time, gave its approval to move forward. We feel that it is perfectly legal and appropriate to continue with that formula.

Mr. Laframboise: You do not feel that there may be room to reinforce the power of cabinet or the Governor-in- Council — as counsel seemed to be suggesting — in order to avoid all confusion if ever Canada Post wanted to oppose it or did not react to the directive? You feel perfectly comfortable with the bill as it stands?

Mr. Morency: That is a cabinet process. Clearly, if it decides at some stage to issue a directive to the corporation, it can choose to do so. That has not happened up to now. We are still comfortable with the way in which the regulations have been established.

Mr. Laframboise: Are you saying that you have never issued a directive?

Mr. Morency: Canada Post received two directives in December 2006. The Governor-in-Council has already implemented some measures on matters it considered to be very important. It can always do so in the future too.


Mr. Epp: As the others have said, we appreciate you coming here and enlightening us. I want to warn you off the top, I am a math-physics major, not an accountant or a lawyer, so please keep your explanations simple.

I want to ask a question with respect to the formula that you use, which is two-thirds of the inflation rate. From a mathematical point of view, it appears to me from what I have read that you accumulate all the decimal fractions so that when you multiply by 1.0269, which is two-thirds of the inflation rate for a certain year, you might come up with a postage rate of 51.9376. What would you charge in that year? Would you round it up to 52 or would you leave it at 51?

Mr. Power: We round down.

Mr. Epp: The following year, the formula takes the price up to another number, somewhere on the continuum between the integers. You then round to the next integer. However, in your records you keep seven or eight digits of significance, is that correct?

Mr. Power: Yes.

Mr. Epp: The next thing I wanted to ask is how this formula actually works. You have it set at two-thirds of the inflation rate. If you apply that formula over the long term, it would appear to me that you are moving further and further into debt or into deficit. I hear this from seniors all the time: Their pensions are not keeping up with inflation so they are always losing.

You apply a formula on a relatively permanent basis. It follows that sort of scheme and so you are always falling behind the actual rate of inflation. If we trust your formula, it should reflect the cost of providing the service from the larger perspective of what the act says.

Mr. Power: I agree with what you have said.

The formula at two-thirds of the rate of the inflation, as part of the policy framework agreement, was designed to place pressure on Canada Post to extract greater efficiency from its operations. The corporation has done so since 2001.

Can that continue in perpetuity is your question. The answer to that, I submit, is no. It is not logical that the costs can continue to rise only at two-thirds the rate of inflation when we are faced with the fuel increases that we see every day.

Therefore, at some point, the policy framework agreement must be re-examined and a determination made as to whether, in the case of the basic letter rate, there should be a re-examination of the regulation and of the formula.

Mr. Epp: If I send a parcel or something, I pay a fuel surcharge. Therefore, you receive your money back through means other than the first-class postal rate. This formula applies only to first-class postage. Is that correct?

Mr. Power: That is correct.

Mr. Epp: I am surprised you would do that. The legislation says you must look at the total revenue and operate without going into deficit or without creating a profit which, in accounting terms, is an estimate as to whether you will be on target. Do you have a five-year plan; do you have a zero goal over five years? How does that work?

Mr. Power: There is a five-year plan. The reference in section 5 of the act is to be financially self-sufficient and, in our opinion, that includes not only, on an operating basis, not having a loss, but being able to invest in the operation. For example, we need to replace the plant in Winnipeg. The old plant is 55 years old. There are structural problems caused by the vibrations from machinery and so on. That is necessary and is a part of the consideration.

Mr. Epp: You are telling us, then, that notwithstanding you have that formula, you still perform a big picture analysis every year and look at all your revenues and expenses from all sources, and you aim for a zero-sum gain?

Mr. Power: We aim at a gain that provides for self-sufficiency. That is not zero-sum. That means we are setting aside money to make investments. It also means we cover our cost of capital. As a company, we have some degree of debt we must repay. We also pay a dividend to the Government of Canada because we use up some of the Government of Canada's capital.

Mr. Epp: What is your situation now? Do you have a net debt as opposed to a nest egg sitting somewhere?

Mr. Power: We have some cash on hand. I am not the chief financial officer so I cannot tell you what cash is on hand. However, the corporate plan that was submitted for 2008 has significant investments to reinvest in the postal infrastructure.

The Joint Chair (Senator Eyton): Mr. Power, I will put on my businessman's hat for a minute. You seem so certain in your positions and so certain that you have the right policy in terms of setting the rates for letters. However, do you know of any enterprise, public or private, that establishes its price for services offered in such a way?

It seems to me the formula you have adopted is one that will almost always result in an increase. I do not agree with Mr. Epp when he suggests that, somehow, there is increasing pressure on the post office.

The formula reflects monopolistic thinking but does not take into account the competition or the significant cost savings that occur because of new technology and things of that sort. I do not know of any example of an organization that uses a formula like that; namely where increases in the price of your product or service are automatic by formula. I would be pleased to hear from you if you know of one or two.

As a businessman, I would say it is arbitrary; it is likely stupid. You need to look at the marketplace and establish a price that reflects all the competition and keeps you in a position where your business can at least stay stable or perhaps even grow. Do you know of any example, public or private, that has a formula like this one?

Mr. Power: In the Regulatory Impact Analysis Statement published in 2000, the example of several other posts were given as regulated industries where this happens. It happens to a greater extent now with the greater market opening that occurs in postal administrations or the postal sector around the world.

The Joint Chair (Senator Eyton): I would want to look at that in context. I accept that inflation can be a factor, but there are 10, 12 or 15 other elements in price setting that come into play. To rely on one formula must be exceptional.

Do you suggest that these other postal authorities in other countries and other circumstances have exactly the same formula and same approach?

Mr. Power: They use the same approach of looking towards an external price index; an inflation index.

The Joint Chair (Senator Eyton): As the sole factor?

Mr. Power: As the sole factor in that regulation, yes.

The Joint Chair (Senator Eyton): I am surprised at that approach because it seems to me it is arbitrary and probably stupid.

Second, I would say you seem unqualified in your opinion. You are a lawyer. As it happens, I am a lawyer, as well. It is rare for lawyers to be unqualified. You, in your opinion, seem to be unqualified. You have little doubt that your position is correct and that it can sustain any questioners here or, indeed, perhaps even the courts themselves.

Can you not accept that there are some doubts here and that we might be well served to consider an amendment to section 19 that would remove that doubt?

Mr. Power: Let me preface my remarks by saying that I am a commercial lawyer. I am not a legislative draftsperson. It has never been an issue for me as a commercial lawyer when a client or someone with whom I am negotiating suggests that we might want to change language and add further certainty.

I have no qualms about advising that the regulation is consistent with the law in terms of giving an opinion to my client of what is within the law here and what is done by way of regulation.

Would I have some deep-seated objection to amendments? That is not my nature. That is not my call to make, either.

The Joint Chair (Senator Eyton): You are a different kind of lawyer. Congratulations on that. At least you are certain.

Ms. Barnes: I find this situation a little unusual. Everyone around this table has a duty to look at these things. We are advised by people who are specialists in legislative drafting. We seem to believe that you are on the wrong track, Mr. Power. We seem of the opinion that "fair and reasonable" is not being taken care of properly in the way that you are giving your legal opinion.

I think an amendment is in order and I want to hear from our legal authority what our options are as a committee. I do not think anyone at that end of the table is listening to what parliamentarians of both Houses are saying. This is on a train that has left the station and no one has any oversight. The section 19(2) power is not being interpreted properly and it would be a simple drafting change, in my submission. Does counsel for the committee agree?

Mr. Bernhardt: In respect of available options, Ms. Barnes is right. One simple solution is to amend the Canada Post Corporation Act to provide the power to prescribe a rate, or the manner of determining a rate. I suppose from the corporation's perspective, that amendment would be a clarifying minor housekeeping one because, in their view, it gives them nothing they do not have now. It simply will state explicitly what, in their view, exists now.

The committee has the same options that it has on any file: It can continue to argue the point with the regulation- making authority; it can report to both Houses; or it can proceed with disallowance, although that option always requires careful consideration.

Ms. Barnes: I want to hear a reaction to that information. This committee meets and listens to people push back and ignore what is said to them. If that is the case on this file, then we can do something about it. However, I want to know, Mr. Power, whether Canada Post is prepared to do something about it, as Senator Eyton suggested.

Mr. Power: From a Canada Post perspective, and as counsel to the committee said, it is not our position to be opposed vociferously to the intention of Parliament. If Parliament chooses to amend the legislation, then we must respect that choice. Canada Post is a creation of Parliament and, therefore, in every respect must respect Parliament.

I believe that I have been asked to appear before the committee to share my legal opinion, which was not arrived at easily. We examined the matter between 1998 and 2000 with great care and a great deal of debate before we found comfort that the statute permitted us to propose the regulation that was ultimately proposed and adopted.

With respect to section 19(2), even if the rate of postage is set at a given amount, for example 52 cents, and there is a period of deflation, that rate might no longer be fair and reasonable. Where will that mischief be addressed through an amendment? I am unsure of that and I am unsure that the mischief is addressed in any other way than, as I indicated earlier, as an absolute requirement that does not necessarily require cabinet intervention. Canadians can challenge the current rate of postage by saying that it is not fair and reasonable. We would face that challenge before the courts.

The Joint Chair (Mr. Lee): You have another court to deal with: Parliament. We have a problem, and I turn to the minister's representatives. The only way out could be disallowance. You might want to think about the effect disallowance would have on your rates. It sounds like a hornet's nest. I do not prejudge the will of the House on this issue but simply put that out to you.

Mr. Wappel: It seems we have heard that, even if Canada Post's position is the stronger one, an amendment to the act to provide that Canada Post has the power to prescribe, including the power to prescribe a formula, would solve our problem. The act would then specifically state what you think you are already doing correctly. That might not be what this committee thinks should happen because we might not agree necessarily that this solution is the proper way to approach the problem, but that is a different issue.

Could you say that clarifying the legislation is a reasonable approach? There are those of us who do not believe you, Mr. Power, when you say that the statute gives you the power to prescribe and the power to make a formula.

Mr. Power: I tried to answer that in response to the comments by the joint chair when I said that I have no particular pride in how the statute is drafted. If it is the will of Parliament that the best solution is to put in place such an amendment, then far be it from me to suggest that it is inappropriate. If I were negotiating a commercial contract and the other party said it would like more clarity, why would I say no?

Mr. Wappel: If that were to come forward, would your advice be, as a commercial lawyer, go for it? In that case, there could be absolutely no ambiguity.

Mr. Power: Certainly, yes, in my advice to the corporation. However, I turn to Mr. Morency to respond in respect of the minister because I do not advise the minister.

The Joint Chair (Mr. Lee): I thank Mr. Power for providing the six-page briefing document. It will be useful for the committee's consideration of a response.

The Joint Chair (Senator Eyton): I remind Mr. Power and Mr. Morency that this committee is charged with taking the right measures in the right way, and is attempting to carry out that responsibility. The concern we are talking about today is opposite Canada Post but the overriding concern of this committee is the precedent that this kind of regulation would set. Assuming we leave the regulation as is, you can count on it being accepted as a precedent by any number of agencies or entities. Suddenly, it will become a significant problem across the board. We are looking at the regulation from the point of view of both Canada Post and as a dangerous precedent for the way in which government behaves.

The Joint Chair (Mr. Lee): The witnesses and accompanying persons are excused. The committee will continue with other business.


Mr. Bernhardt: The draft report concerns what seems to be a flaw in the Species At Risk Act. Under the act, when the Committee on the Status of Endangered Wildlife in Canada completes an assessment on the status of a species, it must then provide the Minister of the Environment with a copy and its reasons. The act also says that within nine months after receiving an assessment, the Governor-in-Council must review it. The Governor-in-Council can add the species to the list of species at risk, decide not to add it to the list or refer it back to the committee. Where the Governor-in-Council has not taken action within nine months, the minister is required to amend the list in accordance with the assessment.

Although the act provides for a nine-month period for taking action that begins on receipt of the assessment by the Governor-in-Council, the act does not provide for the receipt of the assessment by the Governor-in-Council but only by the minister. The intent of the act is that action taken on an assessment must be taken within a fixed period of time. However, if the minister has discretion to determine when or even if an assessment is passed on to the Governor-in- Council, the minister could defeat entirely the intent of the act. It is difficult to conclude that this discretion is what Parliament intended. The committee therefore concluded that the failure to provide for receipt of an assessment by the Governor-in-Council reflects a gap in the scheme that the act sets up.

The purpose of the report is to draw the matter to the attention of the Houses. It was also intended that the Committee on the Status of Endangered Wildlife in Canada, COSEWIC, as well as the environment committees in both Houses, be provided with copies of the report once it is tabled.

Mr. Wappel: I compliment counsel, because the brief report sets out the issue exactly as we discussed at our meeting. However, if I might make a small suggestion in paragraph 10, I am always against namby-pamby language. I find that "it is hoped" is fluid. I suggest that in the second sentence we say, "In particular, it recommends that the Standing Senate Committee" et cetera. . . .

Or, if the committee feels that the word "recommends" is too strong, then "it urges" that the Senate committee and the House of Commons committee investigate these matters, as opposed to "it is hoped."

I suggest that we change it. If you agree, then it will read:

In view of this conclusion, your Committee felt it desirable to draw this defect to the attention of the Houses. In particular, it recommends that . . .

Mr. Bernhardt: It follows after environment and sustainable development.

Mr. Wappel: We would need to change that.

Mr. Bernhardt: Should it be only "will examine"?

Mr. Wappel: No, "examine this issue and this report," — something like that, so it is not a "we hope that you will do it" kind of thing.

The Joint Chair (Mr. Lee): Counsel, I did some more homework last night on this item, and it became apparent that this statute is to have a five-year review, beginning immediately. The five-year period that triggered the review ended on December 12, 2007. A five-year review of this legislation by the environment committee clearly must take place. That review should be referred to either in the report or at least sent off to them quickly, because they will probably start this review.

I want to take up another thing. I think the report is fair and objective, and it suggests there is only one reasonable reading here. I agree that it is not believable that Parliament intended for this gap to be there, especially in light of the words of the minister at the committee.

I am confident that any court reading this would say there is no intended gap and the only receipt of a report viable here is the receipt that happens when COSEWIC issues its assessment. It is the only assessment transmission that happens in the whole process.

I accept the wording that is there, except in a couple of places. An inference is made by the drafter that there is only one transmission; that the assessment by COSEWIC only goes to the minister. However, clearly, the statute provides that the assessment is transmitted to the minister and the council. There is a council here.

Mr. Bernhardt: The council gives it to the minister.

The Joint Chair (Mr. Lee): The assessment must go to the council — COSEWIC itself.

Mr. Bernhardt: No, they do the assessment.

The Joint Chair (Mr. Lee): Yes, they do; then the assessment is transmitted to the minister and the council, and it is also filed in the public registry under section 25. You may not have that there; you have not reproduced the sections.

This creation of an assessment and its transmittal creates a three-way transmission, not only to the minister. The drafting of the report says if only the minister receives it, then only the minister can transmit it to the Governor-in- Council, the additional entity.

I will walk you through that later, counsel, because we do not have the statute in front of us.

Because of that, I am not able to infer that it is only the minister who might be in a position to transmit the assessment to the Governor-in-Council. The council could, The Globe and Mail could, and it is also in the public registry.

The wording of the report is a little narrow. I suggest some amendments; they are only editorial but will open up the possibility that the minister is not the only party capable of transmitting this assessment.

I thought that we ought to be more clearly of the view that Parliament did not intend the gap. It intended that once the assessment was issued, all the other things would fall into place. The interpretation given by the department here is that no, there is another gap without a clock running; and if the minister fails to take any action on the assessment ever, then nothing else happens ever. I am confident, beyond any doubt, that situation was not the intention of Parliament.

Maybe we could do another draft and bring the draft back to committee. It will have to come back to the committee anyway.

Ms. Barnes: The only thing is that I would not want to mention the five-year review. I know many statutes that have a five-year or three-year review, and it is three, four or five years later. I do not want anyone to receive this report and say it is not necessary because it is coming up for a review; when, in fact, the reviews do not necessarily take place when they are supposed to. I can think of many examples in the Department of Justice and the Department of Public Safety and Emergency Preparedness right now where that is the case.

Even though it is correct, I do not want to flag it in the report because I do not want someone to take this report and set it aside because of this need for a review. I think there is a serious gap here.

To your other point, that someone could learn about it through The Globe and Mail, that is not the official transmission. That is only information reporting.

I want to see your points examined by counsel and come back. I agree, but I do not want it stressed so they can say they do not need to do anything now because a review is coming up.

The Joint Chair (Mr. Lee): I do not agree with Ms. Barnes. It is not like we are flagging something that does not exist. It is written right into the statute explicitly that there shall be, after five years following the enforced date, a review by Parliament through a parliamentary committee. I do not think there is any harm in noting that situation in our report.

Ms. Barnes: I disagree again, Mr. Lee, because I think that —

The Joint Chair (Mr. Lee): If we have a disagreement, we will have counsel draft alternatives and put it to a vote. The report is not drafted yet and it will come back before the committee.

I understand your point. You have expressed your view and I have expressed mine. We can deal with it later when the draft report comes forward.

Mr. Epp: What will we do with these lawyers who keep disagreeing with each other? It confuses the rest of us.

The Joint Chair (Mr. Lee): We put it to a vote.

The Joint Chair (Senator Eyton): You find new lawyers.

The Joint Chair (Mr. Lee): We have two other items. One is the Canadian Wheat Board regulations, which is an interesting file. Did you want to do the fisheries one first, counsel?

Counsel has prepared an overview of our files outstanding with the Department of Fisheries. By the way, it is a good report and I was impressed with all the movement that had taken place.


(For text of document, see Appendix B, p. 9B:1.)

Mr. Bernhardt: You have summarized it in a nutshell, Mr. Chair. This item arose out of a discussion at the February 28 meeting, as a result of which counsel was asked to go through all the Department of Fisheries and Oceans files with a view to deciding whether it would be useful to have the representatives of the department appear to discuss all the outstanding issues.

The note summarizes the various files. There are 17 files currently open with the department. As point 4 explains, seven of those files are in the process of being closed because of a miscellaneous amendments order that was published on April 16. Certain other issues will be addressed if Bill C-32 passes. Another ongoing issue is the review and removal of token close times; some action has been taken on that issue.

Several other files are in the early stages of correspondence. Another file is ready for the agenda; probably at the next meeting.

All in all, frankly, I am not sure there is much outstanding that warrants yet another appearance by officials at this time. However, that is for members of the committee to decide.

The Joint Chair (Mr. Lee): While not quite a home run, the report is a good B-plus or A-minus. We have had a good response to many of these issues and a statute is in the pipeline now that will correct our major difficulties.

If there are no questions, we can proceed to the last item, the Canadian Wheat Board issue. Counsel might want to tell us succinctly where we are on that file. I understand we are nowhere because the issue has been addressed fully by the Federal Court of Appeal.



(For text of document, see Appendix C, p. 9C:1.)

Jacques Rousseau, Counsel, Parliamentary Information and Research Services, Library of Parliament: As you have just said, Mr. Chair, this matter is submitted to the committee for information because the Federal Court of Appeal already decided that SOR/2007-131, to remove barley from the exclusive marketing authority of the Canadian Wheat Board, was of no force and effect.

A copy of the Federal Court decision, confirmed by the Court of Appeal, is attached to the note prepared for the committee. As the note mentions, Parliament is now dealing with Bill C-46. If that bill is passed, it will clarify that the Governor-in-Council does in fact have the authority to remove barley from the exclusive marketing authority of the Canadian Wheat Board. At that time, the Governor-in-Council could once more pass the regulations that the Federal Court of Appeal held to be illegal.

Since SOR/2007-131 has been declared to be of no force and effect by the courts, there are no regulations for the committee to review. If the committee is satisfied, the file can be closed.


The Joint Chair (Mr. Lee): Are there any questions? We would have received this file here sooner or later as a question of ultra vires, illegality. Fortunately, the courts arrived there within about six weeks, as a result of civil-side litigation. Happily, we have not needed to deal with it here. It is an item that might have been charged with a high degree of policy politics. We are essentially off the hook because the courts have ruled the regulation to be ultra vires.

If it had not been so politically charged, I might have wanted to report to the Houses to clarify on it and to echo the views of the court. However, given there are some politics behind it, it might be safer to acknowledge on the record that the courts have done their job.

Mr. Wappel: I have a brief comment. Based on the certainty of previous general counsel, it is interesting to note that, no doubt, there was general counsel that advised the minister and the department on these regulations. There is no doubt they were reviewed by the Department of Justice lawyers and passed by those lawyers. There is no doubt the counsel were as certain that they were not ultra vires. Even counsel possessed of certainty is sometimes wrong.

The Joint Chair (Mr. Lee): That comment almost brings us back to the postal rate regulations, but we will not go there.

Counsel, can you bring us up to date on the witnesses from British Columbia?



(For text of document, see Appendix D, p. 9D:1.)

Mr. Rousseau: Mr. Chair, at its March 13, 2008 meeting, the committee heard from representatives of the British Columbia Vegetable Marketing Commission, the National Farm Products Council and the Department of Agriculture and Agri-Food. The issue was the absence of any valid order of the commission to fix and collect levies on persons engaged in the growing and marketing of vegetables for the interprovincial and export markets.

Despite the lack of an order, levies have been collected on vegetables marketed outside the province. At its meeting, the committee had before it a letter from the British Columbia Farm Industry Review Board, the provincial supervisory body corresponding to the National Farm Products Council.

Several undertakings were given by the witnesses in the course of the meeting. First, the commission agreed to immediately prepare and put in place a federal levies order. We have received a copy of the proposed order, and it is attached to the note prepared for the committee. Second, the commission and the review board agreed with the committee's recommendation that remedial legislation should be passed by Parliament to retroactively validate what the committee views as the illegal collection of levies. Officials from the Department of Agriculture and Agri-Food agreed to consider such a course of action.

In addition, members of the committee were interested in the mandate and responsibilities of the National Farm Products Council. The council undertook to provide a detailed description of the role and mandate of the council and the Department of Agriculture and Agri-Food under the Agricultural Products Marketing Act. The council also undertook to find out whether there are other provincial boards in similar situations.

In the course of the testimony, as well as in the written material submitted by the commission and the review board, witnesses made reference to two arguments on which to base a conclusion that the absence of a federal levies order did not mean the commission lacked authority to collect levies on all fruits and vegetables, regardless of whether they were eventually marketed inside or outside the province.

Mr. Chair, given that the commission has undertaken to pass a levies collection order under its federal authority, and that the parties agree with the recommendation to introduce remedial legislation to retroactively validate the levies already collected, the witnesses' arguments on the matter are largely academic. Nevertheless, the note prepared for the committee contains an analysis of the two arguments. The first is based on the distinction between the production and the marketing of agricultural products. The second is based on the quasi-judicial nature of the commission. For reasons mentioned in the note, neither argument appears to be very solid.

If the committee is in agreement, it would be appropriate for the moment to write back to the National Farm Products Council to find out, first, about the progress made on the undertaking to provide a detailed description of the role and mandate of the council and of the department under the Agricultural Products Marketing Act and, second, about the result of the research conducted to find if other provincial boards are in the same position as the British Columbia Vegetable Marketing Commission.


Mr. Wappel: First, I am glad counsel made that recommendation because I wanted to urge members not to let it fall through the cracks; the council was supposed to tell us its mandate. I am sure they do not know what it is and that will help them find out.

Second, this memo explains the usefulness of having witnesses before our committee periodically. As we all remember, nothing happened in this file before they came. Right after they left, look what happened. I agree with counsel's recommendation.

The Joint Chair (Mr. Lee): Any other comments?

Ms. Barnes: By asking them to give us copies of what they were doing, it probably gave some urgency to it. We might want to hold that as a future tactic, also.

Mr. Epp: On a different topic, during the course of today's meeting, I made some remarks about lawyers being at odds with each other. I meant it with levity. I think the legal minds on this committee are valuable.

The Joint Chair (Mr. Lee): Thank you for that comment. This item was not planned but Senator Eyton and I wanted to thank Mr. Epp for chairing the previous committee meeting in our unavoidable absence. We completed a lot of work today. If there is no further business, we will adjourn.

The committee adjourned.

Top of document