File No 30243

IpsofactoJ.com: International Cases [2005A] Part 10 Case 9 [SCC]


SUPREME COURT OF CANADA

Coram

Harry Dikranian

- vs -

Attorney General of Quebec

McLACHLIN CJ

BASTARACHE J

BINNIE J

LEBEL J

DESCHAMPS J

ABELLA J

CHARRON J

2 DECEMBER 2005


Judgment

Bastarache J

(with whom McLachlin CJ, Binnie, Lebel, Abella & Charron JJ, join)

1 Introduction

  1. The class action giving rise to this appeal was instituted by Mr. Dikranian on behalf of approximately 70,000 students; it concerns the recovery of interest paid on student loans granted under the former Act respecting financial assistance for students, R.S.Q., c. A‑13.3 (“AFAS”), and the Regulation respecting financial assistance for students, R.R.Q., c. A‑13.3, r. 1 (“RFAS”).

  2. The problem in the case at bar stems from the fact that the loans were made under private contracts between individual financial institutions and students while the repayment terms have been set by the government in the AFAS and the RFAS. The Minister of Education (the “Minister”) has imposed these terms by incorporating them into a loan certificate that must be obtained to enter into a contract of loan, to which the Minister is not a direct party.

  3. The instant case results from two amendments to the AFAS and the RFAS – one in 1997 and the other in 1998 – that reduced the period during which students are exempt from making interest payments and repayments on the principal. It must first be established whether, considering that the first amendment contained no transitional provisions, that amendment applied to loans that had already been granted. It will then be necessary to determine the meaning and scope of the transitional provision in the second legislative amendment, according to which the new provisions apply to “juridical situations in progress”.

  4. The student aid plan in place prior to the AFAS was based on administrative contracts (see the Web site of Quebec’s Aide financière aux études, www.afe.gouv.qc.ca/english); under that plan, the government set the terms of the contract and could amend them as it saw fit at any time.  Under the current plan, however, a certificate is issued in which the Minister guarantees the loan should the student default on it (AFAS, ss. 27, 28 and 29) (see Appendix) and pays the interest during the exemption period (AFAS, s. 24) (see Appendix). After the certificate is issued, the student enters into a private contract with a financial institution. Although the government dictates some of the terms of the contract by incorporating them in the certificate it issues, it is not a party to the contract.  The government neither grants the loan nor approves it. The government makes parallel commitments in accordance with the AFAS. The issue here is whether, in the instant case, the changes to these legal obligations have had the effect of limiting the rights conferred on the student in his or her contract with the financial institution.

  5. This means that there is no need for me to consider the exact nature of the legal relationship between the government and the student. The substantive issue is whether the National Assembly can alter the private law relationship between the financial institution and the student and, if so, whether the legislative amendments of 1997 and 1998 satisfy the conditions under which it may do so.

    2 Origin of the Case

  6. Student loans in Quebec are governed by the AFAS. The Minister issues, to a student who is entitled to it under the RFAS, a loan certificate authorizing the student to contract a loan with a financial institution recognized by the Minister within 90 days. The government pays the interest (AFAS, s. 24) and guarantees the repayment of the principal. Before 1997, the legislation exempted students who had completed their studies from paying interest on their loans for a period specified in the loan certificate.

  7. On July 1, 1997 (the day the first amending statute came into force), the National Assembly reduced the period during which student borrowers were exempt from making interest payments and repayments on the principal by one month:  An Act to amend the Act respecting financial assistance for students and the General and Vocational Colleges Act, S.Q. 1996, c. 79, s. 5 (“Amending Act, 1997”). For students who, like the appellant, completed their studies during the winter trimester, the date on which interest payments and repayments on the principal were to begin was brought forward from January 1, 1999 to December 1, 1998.  Effective May 1, 1998 (the day the second amending statute came into force), students had to begin paying the interest as soon as they completed their studies:  An Act to amend the Act respecting financial assistance for students, S.Q. 1997, c. 90, ss. 4 and 5 (“Amending Act, 1998”).

  8. The appellant obtained student loans between 1990 and 1996. He signed the last loan certificate with his financial institution, the Royal Bank of Canada, on November 15, 1996. The certificate issued by the Minister stated that the appellant could borrow an additional $4,255, which, after the amounts were consolidated, increased the total of his student loans from $22,510 to $26,765. The appellant completed his studies on about January 31, 1998, in the winter trimester. According to clause 10 of the loan certificate, he had to begin repaying the principal and paying the interest on the loan upon the expiration of the exemption period, that is, on January 1, 1999.

  9. Around July 21, 1998, the appellant inquired about the repayment of his loan. A Royal Bank representative informed him verbally that interest on the loan had been debited since June 1, 1998 and that the principal would be repayable as of December 1, 1998, in accordance with the directives issued by Aide financière aux étudiants.  As a result of the 1997 and 1998 legislative amendments, the appellant was being charged interest on his loan that, under the certificate signed in 1996, was supposed to have been paid by the Minister. 

  10. On August 7, 1998, the appellant repaid the principal of the loan and paid, without prejudice, $308.53 for the interest accrued from June 1 to August 6, 1998.

  11. The appellant was authorized to institute, on behalf of himself and other students forming a specific group, a class action against the respondent, the Attorney General of Quebec, seeking reimbursement of the interest paid on the loans that had been granted (Dikranian v Québec (Ministère de l’Éducation), [1999] Q.J. No. 2086 (QL), per Lévesque J.).  He argued that Quebec’s Ministère de l’Éducation had to pay that interest in accordance with the loan certificate issued before the legislative amendments were passed.

    3 Judicial History

  12. On December 13, 2001, Journet J. of the Superior Court dismissed the appellant’s action. On January 27, 2004, a majority of the Court of Appeal dismissed his appeal, Rothman J.A. dissenting.

    3.1 Superior Court ([2002] R.J.Q 969)

  13. Journet J. began by rejecting the appellant’s arguments based on the provisions of the Civil Code of Québec, S.Q. 1991, c. 64 (“C.C.Q.”), concerning contracts of adhesion as well as his arguments relating to the Consumer Protection Act, R.S.Q., c. P‑40.1.  He found that the rights and obligations of the financial institution and the student were governed by the statute and the regulation, and not by the loan certificate. The rights and obligations were not imposed by one of the parties to the contract, as is the case with a contract of adhesion.  They simply flowed from the exercise of statutory or regulatory powers.  In his view, a mandatory provision of a statute or regulation cannot be nullified pursuant to the C.C.Q. on the ground that, because it is incorporated into a contract, it is contractual in nature. This would be [translation] “to confuse and distort concepts of nullity that were incompatible with each other – the rules of nullity applicable to contracts on the one hand and the rules of nullity and invalidity applicable to statutes and regulations on the other ....” (at para. 76). Journet J. was of the opinion that the loan certificate was not in itself a contract but rather a juridical act issued pursuant to an enactment governing the rights and obligations of the parties referred to therein.

  14. Journet J. then addressed the question of the retroactivity of the legislation. In his view, the issue was the immediate applicability of the legislation, not its retroactive application. He noted that the two amending statutes did not state that their provisions would take effect before they came into force. He added the following [translation] [at paras. 88‑92]:

    Section 13 of the 1997 statute states that the new provisions of the Act are applicable to the juridical situations in progress at the time of their coming into force. This statutory provision shows that the legislature intended the new legislation to apply immediately to all existing and future loans. 

    The Court does not see how it could conclude that the two new statutes created different juridical situations for loans made before and after their enactment. In the absence of a provision to the contrary, every statute must apply immediately, both to contracts entered into before and to those entered into after it comes into force.

    The Court notes that there cannot be multiple sets of repayment terms for students completing their studies in the same trimester unless specific legislative provisions so indicate.

    The Court must favour an interpretation that results in the uniform application of one legislative scheme rather than a multiplicity of schemes. 

    The interpretation suggested by [the appellant] for dealing with the temporal effect of the 1996 and 1997 statutes on the [AFAS] leads to unfair and different treatment of students who are nonetheless in the same situation, that is, who complete their studies in the same trimester and with the same loan amount to repay. If we accept the argument of [the appellant], only some of these students, he being one of them, would have to pay less interest on their loans and would thus obtain benefits not granted to others.

  15. Finally, on the issue of vested rights, Journet J. noted that none of the students concerned, the appellant included, had completed their studies at the time the two statutes giving rise to the conflicting interpretations were enacted. The appellant had accordingly not taken advantage of the exemptions provided for in the original statute as of the time when the new provisions were enacted. He could not therefore claim to have vested rights.

    3.2 Court of Appeal ([2004] Q.J. No. 303 (QL))

  16. The appellant appealed from this judgment but was unsuccessful.

    3.2.1 Forget J.A.

  17. Forget J.A., Beauregard J.A. concurring, was of the opinion that the appeal should be dismissed. His brief reasons for judgment read as follows [translation] [at paras. 48‑51]:

    With due respect for the opinion of Rothman J.A., I am of the view that the trial judgment was correct.

    While the relationship between the student and the financial institution can be characterized as contractual, the same cannot be said of the relationship between the student and the government under the Act respecting financial assistance for students, which implements a public program to facilitate access to education.

    The amendments introduced by the 1996 and 1997 statutes applied immediately and governed active loans. 

    I would dismiss the appeal with costs.

    3.2.2 Rothman J.A.

  18. Rothman J.A. accepted the appellant’s arguments. To begin with, he found that the loan certificate imposed obligations on the appellant that were clearly contractual in nature. He wrote the following [at paras. 21‑27]:

    While it is true, as the trial judge indicates, that the financial assistance programs created under the Act are worthy social programs designed to encourage equal accessibility to education for all Quebec students, the program of student loans contemplated in the Act did nevertheless impose contractual obligations upon students who obtained these loans, contractual obligations which included conditions as to the repayment of the capital of the loans as well as conditions concerning the payment of interest. One of the conditions in this contract stipulated the period of the loans during which the student was to be exempt from the payment of interest.

    The certificate of loan, issued by the Department and signed by the student as well as the financial institution, is in the form of a contract and the clauses setting out the conditions of the loan contain numerous references to “this contract”. Any reasonable borrower or lender reading the document would consider himself bound by a contract.

    And while it is true that the Department did not itself sign the document, it was the Department that issued it to the student and it was the Department that had stipulated the conditions of repayment of capital and the exempt period for the payment of interest by the student. The Department was, moreover, itself contractually involved in the loan made to the student in that it guaranteed the repayment of the capital of the loan as well as the payment of interest to the financial institution, including the payment of interest for the period during which the student was exempt from interest payment.

    In sum, while the programs created under the Act can fairly be characterized as social and educational, the obligations and the rights of students under their loan agreements with the lenders were substantially contractual. 

    I do not wish to suggest, of course, that the Financial Assistance for Education Expenses Act did not govern the relationship between the lending banks and the students and the relationship between the Banks and the Government.

                                                                       ....

    But that being said, once it has been concluded that the contractual rights and obligations of a student borrower and a lender bank satisfy the requirements of the statute and the regulations, we must logically look to the contract concluded and the law that then existed to determine the rights and obligations of the borrowing student.

    Unless the subsequent amendments to the law are expressly stipulated to be retroactive or are retroactive by necessary implication, I can see no basis for applying provisions in the amendments in conflict with the rights of the parties under their contract and the law which was applicable when it was concluded .... On signing the contract of loan, the student had no reason to believe that the Government might, by simple legislative amendment, rewrite his contract with the bank and modify his interest obligation. Nor, in the absence of an intention, expressed or tacit, to impair the rights of the student under his loan contract, do I see any basis for interpreting the amendments in a manner that would have that effect.

  19. Rothman J.A. pointed out that the 1997 and 1998 amendments, if applicable, would have had the effect of retroactively reducing the interest exemption period provided in the appellant’s loan certificate. Yet this would have offended the principle against the retroactivity of legislation. He stated: “I can see no necessary implication that would require this interpretation” (at para. 33). He added the following [at paras. 34‑35]:

    Nor can I easily accept that the phrase “[juridical situations in progress]” was intended to make the 1997 and 1998 amendments applicable so as to reduce the interest exemption period provided in the previously existing statute and in the contract signed by the borrowing student and the lending bank. In my respectful opinion, once the loan was approved by the Department and the contract of loan was signed by the student and the bank, appellant's obligation to pay interest and his exemption from the payment of interest were not “[juridical situations in progress]”. They were rights and obligations which were no longer “in progress”. They were crystallized, finalized and definitively concluded under the terms and conditions of the contract.

    There is no suggestion in the law or the contract that the obligations of the student or the bank as regards the payment of interest by the student or the duration of the exemption period were subject to discussion or change. These were matters definitively concluded in the contract insofar as appellant and the Bank were concerned. Appellant had no right to demand that the exemption period be extended and the Bank had no right to demand that the exemption be reduced. The Government had no right to demand that its guarantee in favour of the bank be reduced. What “[juridical situations]” remained “[in progress]”?  Absolutely none.

  20. Rothman J.A. then noted that, in the absence of an express or tacit intention to do so, a new law should not be read as impairing vested rights. He wrote [at paras. 39‑43]:

    In the 1998 amendment, Sec. 13 provided that the amending provisions would apply to “[juridical situations in progress at the time of their coming into force].”

    While it is true that when the 1998 amendment came into force, appellant had not yet ended the period of exemption provided in his contract, I find it hard to imagine that the Legislature intended, in adopting the 1998 amendment, to change the interest exemption period of a contract of loan that had previously been concluded merely on the basis that the period of exemption had not yet expired.

    When appellant undertook the loan, he did so under specific conditions for repayment of capital and payment of interest. There was no suggestion in the certificate of loan issued by the Department or in the contract that these conditions might be changed at any time. Nor is an interest exemption period, by its nature, of a kind that would be subject to periodic change. Appellant had every right to expect that his obligations for the repayment of capital and the payment of interest were those set out in the contract and that these conditions would be respected.  Appellant fulfilled his obligations in repaying the loan and paying the interest on the loan under the terms required under his contract.

    In the absence of very clear terms in the amending statutes establishing that the Legislature intended to impair appellant's rights under his existing contract, I can see no reason why the Government should not respect the rights and obligations existing under that contract. If that means the payment of interest by the Government for the period of exemption in the contract, so be it. That was the basis on which the certificate was issued and the contract was signed.

    I would find it very difficult to interpret the words “[juridical situations in progress]” as evidence of an intention on the part of the Legislature to vary the terms of a loan contract that was concluded prior to the coming into force of the new law.

    [emphasis in original]

    4 Analysis

  21. Simply put, the Court must answer the following questions:  whether the version of the AFAS in force on November 15, 1996, when the certificate was signed, governs the interest exemption period applicable upon the completion of studies; and whether the new legislative provisions altered the terms of the contract of loan that had been entered into before they came into force. 

  22. As a preliminary matter, I would like to make it clear that the plan set up by the AFAS and the RFAS is a complete one. This appeal does not concern the application of either the Act respecting the implementation of the reform of the Civil Code, S.Q. 1992, c. 57 (“Implementation Act”), or the transitional provisions set out in that Act. Nor is it either helpful or necessary to refer to the rules relating to consumer protection.

    4.1 Legal Nature of the Relationship Between the Parties

    4.1.1 Contractual Relationship

  23. The starting point for this analysis is the observation that there is a private law contract between the student and the financial institution, and the terms of the contract leave no doubt in this regard (arts. 1372, 1385 and 1387 C.C.Q.). The two parties signed the loan certificate and made specific undertakings. There is no question that the contractual relationship between the student and the financial institution has a special feature, as the Minister, who is not a signatory, has unilaterally undertaken to guarantee the loan and pay the interest for a certain time.

  24. It appears that the AFAS implicitly recognizes the contractual relationship established between the student and the financial institution.  The version of s. 15 that was in force at the time of the events that led to the dispute provided as follows:

    15.

    The Minister shall issue, to a student who is entitled to it and who is enrolled or deemed to be enrolled within the meaning of the regulation, a loan certificate authorizing him to contract a loan with a financial institution recognized by the Minister. The modalities of presentation of the certificate and payment of the loan shall be determined by regulation.

    Before the amendments, the verb “contract” was also used in ss. 40, 41 and 62 of the AFAS and in s. 56 of the RFAS. 

  25. In short, any reasonable borrower or lender reading the document would consider himself or herself bound by a contract, as Rothman J.A. stated.  It also appears that all the parties involved in this case recognize the contractual relationship between the student and the financial institution.

    4.1.2 Contract of Loan:  Loan Certificate

  26. The contract of loan signed by the student and the financial institution on September 15, 1996 contains the following clauses (R.S.Q., c. A‑13.3, s. 23):

    This contract is signed in accordance with the prescriptions of the Act respecting financial assistance for students (R.S.Q., c. A‑13.3), the Regulation thereunder (A‑13.3, r.1) and the prescriptions of the Loan Guaranty Program for the Purchase of a Microcomputer, if applicable.

    Without restricting the scope of the above, the parties also agree to the following:

    LOAN UNDER THE ACT RESPECTING FINANCIAL ASSISTANCE FOR STUDENTS

    ....

    5.

    The student is exempt from payment of interest on the principal loaned by the financial institution, under the Act respecting financial assistance for students, for the exemption period defined in section 23 of the Act, which is cited in clause 10 of this contract.

    ....

    10.

     

    Exemption period “means the period beginning on the date on which the borrower obtains a first loan or on which he becomes a full‑time student again after having ceased to be so, and ending

    1º

    on 1 April, for a borrower who completes or abandons his full‑time studies during or at the end of the preceding summer trimester;

    2º

    on 1 August, for a borrower who completes or abandons his full‑time studies during or at the end of the preceding autumn trimester;

    3º

    on 1 January, for a borrower who completes or abandons his full‑time studies during or at the end of the preceding winter trimester.

    Under the contract of loan, the appellant, who completed his studies on January 31, 1998 (winter trimester), was therefore obliged to repay the principal and assume the interest payments on his loan as of the expiration of the exemption period, that is, on January 1, 1999.

  27. The reference to the AFAS has the effect of incorporating the relevant provisions of the AFAS. Moreover, this reference relates specifically to the juridical situation that existed when the certificate was signed, that is, before the legislative amendments. Rothman J.A. shared this view [at para. 26]:

    But that being said, once it has been concluded that the contractual rights and obligations of a student borrower and a lender bank satisfy the requirements of the statute and the regulations, we must logically look to the contract concluded and the law that then existed to determine the rights and obligations of the borrowing student.

  28. Thus, the substantive issue is whether the rights conferred by the contract of loan can be unilaterally modified by the legislature, which is not a signatory to the contract. 

    4.2 Vested Rights

  29. Before considering the question of vested rights, I would like to note that a distinction must be drawn between the principle of vested rights and the principle against retroactivity. This issue is of great importance here. The Attorney General of Quebec submits that the principle of the retroactivity of legislation is not in issue and asks the Court to apply the principle of the retrospectivity of legislation that was recently reiterated in Épiciers Unis Métro‑Richelieu Inc., division “Éconogros” v Collin, [2004] 3 S.C.R. 257, 2004 SCC 59.  However, it should be noted right away that Épiciers Unis dealt with the application of the Implementation Act, ss. 2 and 3 of which indicate that “the recent reform of the Civil Code is based not on the principles established at common law, principles which give great importance to vested rights. Rather, it is a system essentially based on the ideas of the French jurist Paul Roubier, a system which clearly dispenses with the notion of vested rights” (P.‑A. Côté, The Interpretation of Legislation in Canada (3rd ed. 2000), at p. 118).  This appeal does not concern a dispute resulting from the coming into force of the C.C.Q. We must therefore apply the Interpretation Act, R.S.Q., c. I‑16, which gives effect to the principle of “acquired rights” in s. 12. 

    4.2.1 Distinctions Between Vested Rights and Retroactivity

  30. Vested rights result from the crystallization of a party’s rights and obligations and the possibility of enforcing them in the future.  Professor Côté writes that, “[w]ithout being retroactive, a statute can affect vested rights; correspondingly, a statute can have a retroactive effect and yet not interfere with vested rights” (at p. 156). In general, it will be purely prospective statutes that will threaten the future exercise of rights that were vested before their commencement:  Côté, at p. 137.

  31. Although the courts have in the past analysed the same question from the perspective of either the presumption against interference with vested rights or the presumption against retroactive legislation, there remains, as the submissions of the parties in the instant case demonstrate, a clear distinction between these two rules of construction: Venne v Quebec (Commission de protection du territoire agricole), [1989] 1 S.C.R. 880, at p. 906; Attorney General of Quebec v Expropriation Tribunal, [1986] 1 S.C.R. 732, at pp. 741 and 744; Gustavson Drilling (1964) Ltd. v Minister of National Revenue, [1977] 1 S.C.R. 271, at pp. 279 and 282.

    4.2.2 Statement of Principle

  32. The principle against interference with vested rights has long been accepted in Canadian law. It is one of the many intentions attributed to Parliament and the provincial legislatures. As E. A. Driedger states in Construction of Statutes (2nd ed. 1983), at p. 183, these presumptions

    .... were designed as protection against interference by the state with the liberty or property of the subject.  Hence, it was “presumed”, in the absence of a clear indication in the statute to the contrary, that Parliament did not intend prejudicially to affect the liberty or property of the subject.

    This had already been accepted by Duff J. in Upper Canada College v Smith (1920), 61 S.C.R. 413, at p. 417:

    .... speaking generally it would not only be widely inconvenient but “a flagrant violation of natural justice” to deprive people of rights acquired by transactions perfectly valid and regular according to the law of the time.

    (See also Acme Village School District No. 2296 (Board of Trustees of) v Steele‑Smith, [1933] S.C.R. 47, at p. 51; R. Sullivan, Sullivan and Driedger on the Construction of Statutes (4th ed. 2002), at pp. 569‑70.)

  33. The leading case on this presumption is Spooner Oils Ltd. v Turner Valley Gas Conservation Board, [1933] S.C.R. 629, at p. 638, where this Court stated the principle in the following terms:

    A legislative enactment is not to be read as prejudicially affecting accrued rights, or “an existing status” (Main v Stark [(1890), 15 App. Cas. 384, at 388]), unless the language in which it is expressed requires such a construction. The rule is described by Coke as a “law of Parliament” (2 Inst. 292), meaning, no doubt, that it is a rule based on the practice of Parliament; the underlying assumption being that, when Parliament intends prejudicially to affect such rights or such a status, it declares its intention expressly, unless, at all events, that intention is plainly manifested by unavoidable inference.

  34. The principle has since been codified in interpretation statutes.  The Interpretation Act is no exception:

    12.

    The repeal of an act or of regulations made under its authority shall not affect rights acquired .... and the acquired rights may be exercised .... notwithstanding such repeal. 

    4.2.2.1  Rule of Construction

  35. In the past, this Court has stressed that the presumption against interference with vested rights could be applied only if the relevant legislation were ambiguous, that is, reasonably susceptible of two constructions (see Gustavson Drilling, at p. 282; Acme Village School District, at p. 51; Venne, at p. 907).

  36. This statement must be qualified somewhat in light of this Court’s recent decisions. As Professor Sullivan says, care must be taken not to get caught up in the last vestiges of the literal approach to interpreting legislation [at p. 576]:

    In so far as this language echoes the plain meaning rule, it is misleading. The values embodied in the presumption against interfering with vested rights, namely avoiding unfairness and observing the rule of law, inform interpretation in every case, not just those in which the court purports to find ambiguity. The first effort of the court must be to determine what the legislature intended, and .... for this purpose it must rely on all the principles of statutory interpretation, including the presumptions.

    Since the adoption of the modern approach to statutory interpretation, this Court has stated time and time again that the “entire context” of a provision must be considered to determine if the provision is reasonably capable of multiple interpretations (see, for example, Bell ExpressVu Limited Partnership v Rex, [2002] 2 S.C.R. 559, 2002 SCC 42, at para. 29).

    4.2.2.2  Criteria for Recognizing Vested Rights

  37. Few authors have tried to define the concept of “vested rights”.  The appellant cites Professor Côté in support of his arguments. Côté maintains that an individual must meet two criteria to have a vested right:  (1) the individual’s legal (juridical) situation must be tangible and concrete rather than general and abstract; and (2) this legal situation must have been sufficiently constituted at the time of the new statute’s commencement (Côté, at pp. 160‑61). This analytical approach was used by, inter alia, the Saskatchewan Court of Appeal in Scott v College of Physicians and Surgeons of Saskatchewan (1992), 95 D.L.R. (4th) 706, at p. 727.

  38. I am satisfied from a review of the case law of this Court and the courts of the other provinces that the analytical framework proposed by the appellant is the correct one.

  39. A court cannot therefore find that a vested right exists if the juridical situation under consideration is not tangible, concrete and distinctive. The mere possibility of availing oneself of a specific statute is not a basis for arguing that a vested right exists:  Côté, at p. 161. As Dickson J. (as he then was) clearly stated in Gustavson Drilling, at p. 283, the mere right existing in the members of the community or any class of them at the date of the repeal of a statute to take advantage of the repealed statute is not a right accrued (see also Abbott v Minister for Lands, [1895] A.C. 425, at p. 431; Attorney General of Quebec, at p. 743; Massey‑Ferguson Finance Co. of Canada v Kluz, [1974] S.C.R. 474; Scott, at pp. 727‑28).  In other words, the right must be vested in a specific individual. 

  40. But there is more. The situation must also have materialized (Côté, at p. 163). When does a right become sufficiently concrete?  This will vary depending on the juridical situation in question. I will come back to this point later. Suffice it to say for now that, just as the hopes or expectations of a person’s heirs become rights the instant the person dies (see, for example, Marchand v Duval, [1973] C.A. 635, at p. 637, and art. 625 C.C.Q.), and just as a tort or delict instantaneously gives rise to the right to compensation (see, for example, Holomis v Dubuc (1974), 56 D.L.R. (3d) 351 (B.C.S.C.); Ishida v Itterman, [1975] 2 W.W.R. 142 (B.C.S.C.); and arts. 1372 and 1457 C.C.Q.), rights and obligations resulting from a contract are usually created at the same time as the contract itself (see Côté, at p. 163).

    4.2.3 Application to the Legislation at Issue

  41. The government submits that the two amending statutes applied immediately and therefore necessarily had the effect of changing the repayment terms, since those terms concerned the future effects of the contract.  According to the government, this result is justified by the rule relating to the retrospective application of legislation. It argues that repayment in accordance with the terms set out in the contract was merely an expectation. A contextual analysis favours this result, it submits, since the plan applies each year to a large number of students who, out of fairness, must be subject to the same repayment terms. The government adds that administering loans on an individual basis would be problematic.  Also, it would directly undermine the integrity of the plan, which must be uniform, and this is another indication that the legislature could not have intended that loans be administered on an individual basis.

  42. The appellant submits that his situation is a tangible one governed by a private contract the administration of which is the responsibility of a financial institution, not the government. He points out that the certificate was amended in 1997 to require him to comply with the repayment terms that would be in effect at the time he had to begin repaying the loan.  The appellant thus argues that the two statutes modifying the legal obligations that are assumed and must in all cases be performed by the parties are retroactive. However, since retroactivity is not specified, it cannot be imposed.

    4.2.3.1  Amending Act, 1997

  43. The basic fact remains that the appellant and the financial institution signed a loan certificate provided by the Minister, thereby turning the certificate into a contract and crystallizing the parties’ rights and obligations. 

  44. The Amending Act, 1997, which shortened the interest exemption period by one month, does not contain any transitional provision that might reveal the legislature’s intent. In short, there is nothing to justify a conclusion that the legislature clearly and unambiguously intended to apply the new provisions so as to limit the rights of borrowers. Moreover, it seems obvious to me that just because the government argues for the immediate and future application of the Amending Act, 1997 does not mean it is authorized to interfere with rights conferred on the appellant in his contract. The Amending Act, 1997 does not refer to contracts that have already been entered into and therefore cannot apply to them.  Moreover, I can find no evidence in the record that justifies imputing to the legislature an intention to interfere with vested rights. Nevertheless, let us continue with the review of the amending statutes. 

    4.2.3.2 Amending Act, 1998

  45. In the Amending Act, 1998, the legislature provided for transitional measures in s. 13. It is the second paragraph of this section that interests us:

    13.

    The provisions introduced by sections 2 and 3 of this Act are applicable in respect of the years of allocation subsequent to their coming into force.

    The other provisions introduced by this Act and the first regulations made thereunder are applicable to the juridical situations in progress at the time of their coming into force.

    The issue is therefore what the expression “juridical situations in progress” means. The majority of the Court of Appeal, as well as Journet J. of the Superior Court, found that the expression covered all student loans contracted before and after the coming into force of the new legislation. I do not agree.

  46. First of all, it is necessary to determine the true scope of this section:  does it clearly state the legislature’s intention to change the terms of contracts of loan entered into prior to May 1, 1998?  I do not think so.

  47. It will be helpful at this point to set out the legal steps for obtaining a student loan. The following passage is from the appellant’s factum (at para. 101):

    We would submit that there are two legal steps required for the obtaining of a Student Loan:  first, the issuance of the Loan Certificate by the Minister and second, the signing of the Loan Certificate by the student and the Financial Institution to conclude a contract. The first step, by which the student obtains his Loan Certificate, creates the student’s right to proceed to the second step and receive his Student Loan in accordance with the specific terms and conditions indicated on the Loan Certificate. If a change in the law were to modify the terms and conditions of student loans, this change (in the absence of clear legislative language) would not apply to modify or amend Loan Certificates already issued, as long as the student who had received it, signed it within the stipulated delay (90 days as per section 60 of the Regulation respecting financial assistance for education expenses, R.R.Q., c. A‑13.3, R‑1). In other words, by the mere receipt of his Loan Certificate, a student would have a right to sign the Loan Certificate and obtain his Student Loan in accordance with the terms and conditions of the Loan Certificate, notwithstanding a change in the governing law.

    In my opinion, the appellant is correct to submit that, in the general context of the plan, the expression “juridical situations in progress” applies to a student who has received a loan certificate but not yet signed it (nor has the financial institution done so).

  48. Section 13 does not provide that the amendments apply to contracts or “contractual situations”. Yet it appears that in the past the Quebec legislature has drawn a distinction between “legal (juridical) situations which exist” and contractual situations which exist”, as it used both expressions in the Implementation Act (in the Implementation Act, the words “en cours” were translated as “which exist”, while in the Amending Act, 1998, the same words were translated as “in progress”). Section 3 of the Implementation Act contains the expression “legal situations which exist”:

    3.

    The new legislation is applicable to legal situations which exist when it comes into force.

    Any hitherto unfulfilled conditions for the creation or extinction of situations in the course of being created or extinguished are therefore governed by the new legislation; it also governs the future effects of existing legal situations.

    Section 4 of the same statute contains the expression “contractual situations which exist”:

    4.

    In contractual situations which exist when the new legislation comes into force, the former legislation subsists where supplementary rules are used to determine the extent and scope of the rights and obligations of the parties and the effects of the contract.

    However, the provisions of the new legislation apply to the exercise of the rights and the performance of the obligations, and to their proof, transfer, alteration or extinction.

    We need not, in the instant case, define these expressions in the context of the Implementation Act, which, as I mentioned above, is based on the ideas of P. Roubier (see P.‑A. Côté and D. Jutras, Le droit transitoire civil: Sources annotées (1994)). It is nonetheless significant that both expressions have been used by the Quebec legislature, which means that they must refer to different realities. 

  49. In the case at bar, a contract was signed and entered into before new provisions came into force. The contract continued to produce its effects notwithstanding those provisions. The rights and obligations resulting from the contract were fixed and crystallized as soon as the contract was entered into (see P. Roubier, Le droit transitoire: conflits des lois dans le temps (2nd ed. 1993), at pp. 315‑16; H., L. and J. Mazeaud and F. Chabas, Leçons de droit civil, t. 1, vol. 1, Introduction à l’étude du droit (11th ed. 1996), No. 147). Naturally, this included the repayment terms, which are essential clauses in any contract of loan. On this point, I adopt the following words of Rothman J.A. [at para. 34]:

    Nor can I easily accept that the phrase “[juridical situations in progress]” was intended to make the 1997 and 1998 amendments applicable so as to reduce the interest exemption period provided in the previously existing statute and in the contract signed by the borrowing student and the lending bank. In my respectful opinion, once the loan was approved by the Department and the contract of loan was signed by the student and the bank, appellant's obligation to pay interest and his exemption from the payment of interest were not “[juridical situations in progress]”. They were rights and obligations which were no longer “in progress”. They were crystallized, finalized and definitively concluded under the terms and conditions of the contract.

  50. In light of the ambiguity of s. 13 of the Amending Act, 1998, we must apply the principle against interference with vested rights. 

  51. The cases dealing with purely statutory rights that an individual did not exercise prior to a legislative amendment are of no help here (see Gustavson Drilling; Attorney General of Quebec; Venne). In the instant case, the right was provided for in legislation but was later incorporated into a private contract (between the student and the financial institution) in which the parties freely, and on an informed basis, defined their rights and obligations. It was the contract (not the legislation) that created rights and obligations for the parties as soon as it was formed (see Côté, at p. 163; Épiciers Unis, at para. 48; Township of Nepean v Leikin (1971), 16 D.L.R. (3d) 113 (Ont. C.A.); Location Triathlon Inc. v Boucher‑Forget, [1994] R.J.Q. 1666 (Sup. Ct.)). The right not to pay more interest than the contract specified was also acquired at that time.

  52. With regard to the administrative grounds raised by the government, particularly the need for consistent and equal treatment of students who complete their studies at the same time, they cannot lead the Court to disregard the express wording of the private contract. On this point, Rothman J.A. wrote the following [at para. 46]:

    With great respect, I do not think this is a question of treating students uniformly nor even treating all students equitably. It is rather a question of respecting the difference in contractual rights and obligations concluded prior to the amendments. I can see nothing equitable in impairing the contractual rights and obligations that were concluded prior to the amendments on the basis that all students should be treated uniformly in their conditions of loan repayment. There is nothing equitable in treating students less favourably than they were entitled to be treated under their contracts and under the law that was applicable when the contracts were concluded.

    It is perfectly normal for some students who completed their studies on the same date to be treated differently if they obtained their student loans at different times and signed different loan agreements on an informed basis. It is the very foundation of the individualized contractual right that leads to this result. In determining the scope of the obligations of the parties to the contract, there is no reason to disregard the date the contract was entered into in favour of the date studies were completed; the government expressed its intention in the loan certificate. 

    5 Conclusion

  53. The Quebec legislature’s involvement in student loans clearly makes such loans one component of a social program designed to improve access to education. However, it is impossible to disregard the fact that the legislature intended its program to be based on private contractual obligations, even though several terms of the contract were to be imposed on students. The contract of loan between the student and the financial institution, which arises out of the loan certificate issued by the Minister, creates rights and obligations as soon as the contract is entered into.  This explains the need not to interfere with vested rights.

  54. I would therefore allow the appellant’s action:  (1) student borrowers with student loans that were active on July 1, 1997 have a vested right with respect to the duration of the exemption period applicable when the contracts were signed, as this right was not affected by the Amending Act, 1997; and (2) students with loans that were active on May 1, 1998 have a vested right with respect to the duration of the exemption period applicable when the contracts were signed, as this right was not affected by the Amending Act, 1998. The case is remanded to the Superior Court to determine the method for making claims, the amounts owed by Quebec and the payment procedures. 

  55. For these reasons, the appeal is allowed and the judgments of the Court of Appeal and the Superior Court are set aside, with costs throughout.

    Deschamps J

    (dissenting)

  56. In declaring, in s. 13, that the Act to amend the Act respecting financial assistance for students, S.Q. 1997, c. 90 (“AFAS”), applied to juridical situations in progress, the Quebec legislature clearly indicated that the statute applied with immediate effect to the exemption period for the payment of interest by the appellant to his financial institution.

  57. As this Court held in Épiciers Unis Métro‑Richelieu Inc., division “Éconogros” v Collin, [2004] 3 S.C.R. 257, 2004 SCC 59, common law concepts that place a strong emphasis on vested rights do not apply where an approach based on the immediate application of legislation and the concept of juridical situations in progress is adopted. Thus, the doctrine of vested rights should not be relied on to decide the instant case.

  58. Bastarache J. is of the opinion that the expression “juridical situations in progress” applies only to situations that are still being formed (at para. 47) and that the effects of the contract continue to be governed by the legislation in force when the contract was entered into (at para. 49). I myself believe that the expression includes both situations that are being formed and the effects of a given juridical situation.

  59. In using the expression “situations juridiques en cours” (translated as “juridical situations in progress” in the AFAS, but as “legal situations which exist” in the context of the transitional law relating to the implementation of the Civil Code of Québec), the Quebec legislature drew inspiration from jurist Paul Roubier’s work on transitional law (Droit civil québécois (looseleaf ed.), vol. 8, at para. DT1 555, “Conflit de loi dans le temps”). Since transitional law is precisely what we are concerned with in the instant case, I consider it relevant to refer to his writings to determine the scope of the expression (P. Roubier, Le droit transitoire: conflits des lois dans le temps (2nd ed. 1993)) [translation] [at pp. 181‑82]:

    The term “legal [juridical] situation” was chosen intentionally as being the most encompassing. We consider it better than “vested rights” because it is not subjective in nature .... we also consider it better than “legal relationship” .... which implies a direct relationship between two persons, whereas a legal situation can be unilateral and can be set up against any person whomsoever.

                                                                       ....

    To understand the difficulties that may result from the temporal effect of a statute, one need only note that legal situations generally do not come about all at once; they develop over time, such that the new statute may come into effect at a certain point in this development.... .

    However, this is where an essential distinction must be drawn as regards the development of the successive moments of a legal situation:  there is a dynamic phase, which is the moment when the situation is created (and also when it is extinguished), and there is a static phase, which is the period when the situation produces its effects.

    [emphasis added]

  60. If we rely on Roubier’s  use of the expression “legal situation”, this concept encompasses at once the formation of the situation, its extinction and its effects. In light of this work, there is no reason to conclude that, when the legislature used the words “juridical situations in progress”, it intended to refer to juridical situations in the process of being formed but not to juridical situations in the process of producing effects. 

  61. Côté and Jutras (P.‑A. Côté and D. Jutras, Le droit transitoire civil: Sources annotées (1994)), commenting on Roubier’s theory, also include in the expression “legal situations which exist” not only to the dynamic phase, that is, the formation and extinction of a juridical situation, but also to the static phase, that is, its effects [translation] [at para. 1.048]:

    In Roubier’s system, once a rule has been tied to a given legal situation, a distinction must be drawn based on whether the rule relates to the situation’s creation or extinction or determines its effects.  There are two phases in the development of legal situations: the dynamic phase, which corresponds to their formation and extinction, and the static phase, which corresponds to their effects. This distinction between the dynamic (formation and extinction) phase and the static (effects) phase of a legal situation is echoed in the second paragraph of sections 2 and 3 of the Implementation Act.

  62. It is true that these comments relate to the Act respecting the implementation of the reform of the Civil Code, S.Q. 1992, c. 57 (the “Implementation Act”), and that we do not have to interpret that statute here. However, we cannot disregard the fact that the same legislature, in the same decade, used the same expression for a concept that originated in the same legal works.

  63. The Quebec Court of Appeal has also held that the expression “legal situation” includes effects [translation]:

    Even where it is created unilaterally and there is no immediate legal relationship, the concept of “legal situation” applies to the existence of legal effects from the moment the situation arises.

    [emphasis added]

    (Montréal (Ville) v 9013‑5286 Québec inc., [2002] Q.J. No. 2361 (QL), at para. 18)

  64. Thus, when a loan certificate is issued to a student, a juridical situation (a situation that produces legal effects) is created. This situation does not cease to be “in progress” when the student and the financial institution together sign the certificate, transforming it into a contract of loan. To adopt the approach suggested by Bastarache J. would mean that the legislature has split the concept into two parts: the formation of the contract and its effects (at para. 47). I cannot accept this interpretation. An interpretation that denies that a juridical situation is still “in progress” when it has been formed, has not been extinguished and is producing effects is not consistent with the theory on which the legislature relied.

  65. In the case at bar, the obligation to pay interest flowed from the contract, and the interest exemption period was clearly in progress.  Since the duration of this exemption period was legislated, it could be modified by legislation of immediate application.

  66. It is also strange to limit the scope of the expression by referring to s. 4 of the Implementation Act. This section establishes a specific rule for contractual situations governed by the Civil Code of Québec, S.Q. 1991, c. 64. In such situations, new legislation applies only “to the exercise of the rights and the performance of the obligations, and to their proof, transfer, alteration or extinction”.  The section does not say that effects are excluded from the expression “legal situations which exist”. Moreover, the Implementation Act deals with the dynamic and static phases in the same way, regardless of whether the situation is a contractual situation or any other legal situation. It is thus clear that effects are included in the legal situation concept.

  67. Furthermore, an interpretation according to which the transitional provision applies to “a student who has received a loan certificate but not yet signed it (nor has the financial institution done so)” is so narrow that I cannot convince myself that the legislature could have intended to limit the scope of the AFAS in this way. In Medovarski v Canada (Minister of Citizenship and Immigration), 2005 SCC 51, at para. 43, the Court rejected an interpretation that limited the application of new legislation to a very limited number of cases. I believe that the same principle of interpretation applies in the instant case.

  68. In Épiciers‑Unis Métro‑Richelieu, the Court did not hesitate to recognize the retrospectivity of a provision of the Civil Code of Québec. Retrospective effect is but one aspect of the concept of the immediate effect of legislation. In The Interpretation of Legislation in Canada (3rd ed. 2000), at p. 154, Professor P.‑A. Côté says the following on this subject:

    Where a new statute is declared applicable, for the future, to situations underway, we say it has immediate effect. This notion is used here to describe a situation not only where the facts contemplated by the rule are underway at the moment the law is modified (what Héron calls the general effect of the new statute), but also to describe situations where it is the legal effects of the rule which are underway (what Héron calls the retrospective effect of the statute).

    It is in fact the retrospective aspect of the legislation that is in issue in the instant case. The exemption period has been modified for the future.

  69. The concept of the immediate effect of legislation has been recognized by the commentators and by the courts. In its terse majority judgment in the case at bar, the Court of Appeal merely applied a concept it was familiar with. The legislature is free to enact statutory provisions that may seem harsh. It is not the place of the courts to interfere in the legislative process.

  70. For these reasons, I am of the opinion that the decision of the majority of the Court of Appeal was correct. I would dismiss the appeal.

    A p p e n d i x

    Act respecting financial assistance for students, R.S.Q., c. A‑13.3

    15.

    The Minister shall issue, to a student who is entitled to it and who is enrolled or deemed to be enrolled within the meaning of the regulation, a loan certificate authorizing him to contract a loan with a financial institution recognized by the Minister. The modalities of presentation of the certificate and payment of the loan shall be determined by regulation.

    23.

    For the purposes of this subdivision, “period of exemption” means the period beginning on the date on which the borrower obtains a first loan, or on which he becomes a full‑time student again after having ceased to be so, and ending

    (1)

    on 1 April, for a borrower who completes or abandons his full‑time studies during or at the end of the preceding summer trimester;

    (2)

    on 1 August, for a borrower who completes or abandons his full‑time studies during or at the end of the preceding autumn trimester;

    (3)

    on 1 January, for a borrower who completes or abandons his full‑time studies during or at the end of the preceding winter trimester.

    24.

    The Minister shall pay to any financial institution which has made an authorized loan the interest on the balance of such loan at the rate fixed by regulation, as long as the borrower is a full‑time student and during his period of exemption.

    27.

    In the event of the death of a borrower, the Minister shall reimburse the amount of the loan to the financial institution.

    28.

    The Minister shall reimburse to any financial institution the losses in principal and interest resulting from an authorized loan.

    29.

    The Minister is subrogated by operation of law in the rights of a financial institution to which he makes a repayment under section 27 or 28.

    40.

    After having been notified in accordance with the provisions of paragraph 1 of section 39, or after having been otherwise informed of a change which may affect the amount of financial assistance to be granted to a student, the Minister shall reconsider the duly completed file of the student and render his decision. 

    However, in no case may the decision reduce the amount of or cancel a loan which has already been contracted.

    41.

    The Minister may, where an application is produced after the time prescribed or where the provisions of paragraph 2 of section 39 have been contravened, refuse an application, reduce the amount of or cancel the financial assistance, or demand the reimbursement of any financial assistance already paid in the form of a bursary.

    However, in no case may the Minister reduce the amount of or cancel a loan which has already been contracted.

    62.

    Any loan contracted under the Student Loans and Scholarships Act shall be deemed to have been contracted under the provisions of this Act.

    An Act to amend the Act respecting financial assistance for students and the General and Vocational Colleges Act, S.Q. 1996, c. 79

    5.

    Section 23 of the said Act is amended

    (1)

    by replacing the word “April” in paragraph 1 by the word “March”;

    (2)

    by replacing the word “August” in paragraph 2 by the word “July”;

    (3)

    by replacing the word “January” in pa0ragraph by the word “December”.

    An Act to amend the Act respecting financial assistance for students, S.Q. 1997, c. 90

    4.

    Section 23 of the said Act is replaced by the following section:

    23.

    For the purposes of this subdivision, “period of exemption” means the period beginning on the date on which the borrower obtains a first loan or on which the borrower resumes being a full‑time student, and ending on the date determined in accordance with the regulations.”

    5.

    Section 24 of the said Act is amended

    (1)

    by replacing the words “his period of exemption” in the third and fourth lines of the first paragraph by the words “the additional period ending on the date determined by the regulation”;

    (2)

    by inserting the words “and provided the person is in a precarious financial situation within the meaning of the regulation” after the word “Minister” in the first line of subparagraph 2 of the second paragraph.

    13.

    The provisions introduced by sections 2 and 3 of this Act are applicable in respect of the years of allocation subsequent to their coming into force.

    The other provisions introduced by this Act and the first regulations made thereunder are applicable to the juridical situations in progress at the time of their coming into force.


Representations

Leon J. Greenberg and Guy St‑Germain (instructed by Sternthal Katznelson Montigny, Montréal), for the appellant.

Mario Normandin (instructed by Bernard, Roy & Associés, Montréal), for the respondent.


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