When the government disregards its contractual or settlement obligations, taxpayers who fall short of receiving relief under private law usually pin their hopes on public law (or restitutionary) remedies. However, these are typically a last resort and only available in exceptional circumstances! One interesting remedy, first established by the Supreme Court of Canada (“SCC”) in Kingstreet Investments Ltd. v. New Brunswick (Finance)[1] (“Kingstreet”) – now called the “Kingstreet” remedy – provides a restitutionary cause of action to recover taxes levied under unconstitutional legislation, which before Kingstreet was doomed to fail under a claim for unjust enrichment against Crown.
Recently, the Federal Court in Canadian Pacific Railway Company v. Canada [2] (“CPRC ”) had the opportunity to consider the scope of this extraordinary remedy. The Court in CPRC emphasized the limited application of the Kingstreet remedy: it is only triggered when a tax charged by a government is constitutionally ultra vires (i.e., by virtue of unlawful legislation), and not triggered as a result of other unlawful administrative actions!
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