The Pawnbroker's Case on Appeal

In 2006, we published an article entitled The Regulation of Pawn Brokers by Municipalities. The BC Court of Appeal in Royal City Jewelers and Loans Ltd. v. New Westminster (City) [2007] BCCA 398 has overturned the lower Court decision. The lower Court came to a number of conclusions regarding the grounds of Royal City's petition. In particular, it concluded that section 59 of the Community Charter authorized the Pawn Broker Bylaw adopted by the City of New Westminster; that it did not encroach into the criminal law jurisdiction; and that it was not contrary to section 8 of the Charter of Rights and Freedoms or freedom of information legislation.

However, the Court of Appeal has concluded that the authority to regulate business (section 8(6) of the Community Charter), and the authority to require and prohibit in respect of persons engaged in the business activity of purchasing, taking in, bartering or receiving used or second-hand goods (section 59(1)(b) of the Community Charter) does not authorize New Westminster's Pawn Brokers Bylaw. In particular, it does not authorize the requirement that the pawnbroker take the full name, address and description of the person from whom the second-hand article is received or bought and require confirmation by some picture identification, as well as a description of any motor vehicle with provincial licence wherever possible.

The Court of Appeal found that the authority in section 59(1)(b) of the Community Charter to require notification to the Chief Constable within the time period established by the bylaw (the "notification power") does not extend to the requirement to obtain the identity, description or biographical information of the person from whom the goods were received.

The lower Court took advantage of the fact that section 59 of the Community Charter does not define what it is that the Chief Constable is to be notified of. The Court of Appeal conceded that implicit in the notification power is the power to require disclosure of information identifying the goods. However, the Court of Appeal concluded that the disclosure of the additional information regarding the name and address of the borrower or seller, together with verifying ID as well as a physical description, occupation, description of the vehicle the person used in attending the premises is not implicit in, or necessarily incidental to, the power in section 59(1)(b) to notify the Chief Constable.

Although the Court of Appeal agreed that the additional information is useful in the investigation of potential property crimes and in locating persons of interest to the police, the requirement goes well beyond any reasonable understanding of the general power to regulate a business activity or the specific power to require these businesses to provide information about transactions to the police.

This Court of Appeal decision is significant to local governments in a variety of ways. First, a significant number of municipalities will have a pawnbroker and second-hand dealer bylaw similar to the New Westminster Bylaw that was struck down. This means that their bylaws are in jeopardy.

Second, this case illustrates the limitation on the power to regulate business. In the earlier drafts of the Community Charter, the power in relation to business included both the power to prohibit and to impose requirements. Had the power to impose requirements in relation to business remained in the Community Charter there would have been no need to include section 59(1)(b). Section 59(1)(b) is an authority which is in addition to the authority contained in section 8 and is aptly described by the title of the Part of the Community Charter in which this section is found – "Additional Powers and Limits on Powers".

There has been considerable judicial consideration of the concept of imposing requirements in relation to regulating business. In my eariler article, http://www.sms.bc.ca/handbooks/pawnbroker/pawnbroker.html I set out a number of cases where the Courts determined that the authority to require the taking of names, addresses and other personal information could only be justified if it were required for the purposes of "regulating" the business.

There would appear to be no regulatory aspect of the Pawnbroker and Second-Hand Dealer Bylaw which would require the municipality to obtain this information for the purposes of inspecting, restricting, authorizing, or controlling. For example, if the Bylaw required that the pawnbroker could only accept goods from someone over the age of 18, requesting that the pawner provide identification as to their age would be justified in accordance with the earlier case law.

Although the Court of Appeal, in Royal City Jewelers, reviewed the genesis of the authority of municipalities to regulate pawnbrokers and second-hand dealers, the Court did not mention the Pawnbrokers Act. The Pawnbrokers Act was adopted in 1897 and remained largely unchanged until its repeal in 2001. The Provincial Government enforced this legislation. Interestingly, the requirement to keep a pledge book included a requirement to take the name of the pawner and the address of the pawner, the name of the owner if the pawner was not the owner and the address of the owner as well as the articles pawned. This requirement was to be completed within four hours after the end of each day. Further, the pawnbroker was statutorily obligated to make all enquiries necessary to obtain that information. This information was to be displayed on the pawn tickets, which were to be kept in a place readable by persons entering the business premises.

The Court of Appeal decision in the Royal City Jewelers decision is not terribly surprising. Municipalities will have one of two options:

Under the first option, they must amend their pawnbroker and second-hand dealer bylaws to remove the offending provisions in which pawnbrokers are required to obtain personal information from borrowers or sellers.

The second option is to petition the government to amend the Community Charter to provide more specific powers like the ones that were originally contained in the now repealed Pawnbrokers Act. If such an amendment is forthcoming, it would be worthwhile to clarify that it applies to pawnbrokers as well as dealers in second-hand goods.

Kathryn Stuart

This article was published in Fall 2007 and may be superseded by changes in the law at a later date. It is for general information only. Specific legal advice should be obtained from a qualified lawyer.