The Liquidators of the Maritime Bank of the Dominion of Canada v. The Receiver-General of the Province of New Brunswick, (1889) 20 SCR 695

Supreme Court of Canada

The Liquidators of the Maritime Bank of the Dominion of Canada v. The Receiver-General of the Province of New Brunswick (1889) 20 SCR 695

Date: 1889-04-30

The Liquidators of the Maritime Bank of the Dominion of Canada (Contestants)

Appellants

And

The Receiver-General of the Province of New Brunswick (Claiming to represent Her Majesty the Queen) (Demandant)

Respondent

1888: Oct. 22; 1889: April 30.

Present:—Strong, Fournier, Taschereau, Gwynne and Patterson JJ.

ON APPEAL FROM THE SUPREME COURT OF NEW BRUNSWICK.

Prerogative—Exercise of by local government—Provincial rights.

The government of each province of Canada represents The Queen in the exercise of her prerogative as to all matters affecting the rights of the province. The Queen v. The Bank of Nova Scotia (11 Can. S. C. R. 1) followed. Gwynne J. dissenting.

Under s. 79 of the Bank Act (R.S.C. c. 120) the note-holders have the first lien on the assets of an insolvent bank in priority to the Crown. Strong and Taschereau JJ. dissenting. But see the present Bank Act (53 V. c. 31 s. 53) passed since this decision.

APPEAL from a decision of the Supreme Court of New Brunswick[1] in favour of the demandant on a special case.

The Maritime Bank was insolvent and the government of New Brunswick was a creditor. The questions presented to the court by the special case were:—

"1. Is the Provincial Government entitled to payment in full by preference over the note-holders of the said bank?

"2. If not, is the Provincial Government entitled to payment in full over the other depositors and simple contract creditors of the bank?"

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The Liquidators of the Maritime Bank of the Dominion of Canada v. The Receiver-General of the Province of New Brunswick.

The Supreme Court of New Brunswick decided both these questions in favour of the government and the liquidators appealed to this court.

The preference indicated by the first question is now settled by the Bank Act, 53 Vic. ch. 31, sec. 53, which makes the outstanding notes the first charge on the assets of an insolvent bank, claims of the Dominion Government the second charge and claims of the Government of a province the third charge. In the case of The Maritime Bank v. The Queen[2], the Supreme Court of Canada held that the Bank Act then in force, R. S. C. ch. 120, did not give the noteholders a lien in priority to the Crown.

The only substantial question raised by this appeal is: Does the provincial government represent the Queen so as to entitle it to priority of payment in full over other creditors of the bank?

A. A. Stockton and Palmer for the appellants. The provincial government does not represent Her Majesty in the exercise of prerogative rights since confederation. Todd on Parliamentary Government in England[3]; Cox on the Institution of English Governments[4].

Prerogative cannot be created by statute. Watson's Constitution of Canada[5].

The learned counsel referred also to the following authorities: Mercer v. Atty. Gen. of Ontario[6]; United States v. State Bank of North Carolina[7]; United States v. Bryan[8]; Lenoir v. Ritchie[9]; Exchange Bank v. The Queen[10].

Blair, Atty. Gen. of New Brunswick, and Barker Q. C., for the respondent cited Théberge v. Landry[11];

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The Queen v. Bank of Nova Scotia[12]; Sloman v. The Governor of New Zealand[13].

STRONG J.—This case raises the same question as to priority which was raised in the The Maritime Bank v. The Queen[14] and also another question. As to priority I refer, as in the former case, to The Queen v. The Bank of Nova Scotia (1). As to the second question, the right of a province to exercise and enjoy this prerogative of the Crown, I adhere to what I said during the argument, that there can be no doubt that the provinces have this right. I think the appeal should be wholly dismissed.

FOURNIER J.—The questions raised on this appeal are as follows:

1. Is the provincial government entitled to payment in full by preference over the note-holders of the said bank?

2. If not, is the provincial government entitled to payment in full over the other depositors and simple contract creditors of the bank?

On the first I am of opinion that the appeal should be allowed, and on the second that it should be dismissed.

I fully concur in the reasons given by Mr. Justice Patterson in support of his conclusion. No costs should be given to either party.

TASCHEREAU J.—As I have said in the preceding case I do not see it possible, in view of the wording of the Interpretation Act, to construe the Banking Act as excluding Her Majesty's prerogative rights. I think that the Crown has priority over the note-holders.

The appeal on this point should be dismissed.

As to the question whether the provincial government is entitled to preference over the other creditors

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of the bank I would also dismiss the appeal and answer this question in the affirmative as it has been in the court below. In my opinion under the B.N.A. Act the executive power in the provinces is, as a general rule, vested with the same rights and privileges in the administration of the functions, powers and duties thereto assigned under this act as are attached to analogous functions, powers and duties of the executive authority in England. Such was my opinion when, twelve years ago in the Superior Court at Montreal, I determined Church v. Middlemiss[15] and the appellant has failed to change my views on the question, though I admit now that in order to reach this conclusion it is not necessary to hold, as I did in that case, that Her Majesty forms part of the provincial executive authority.

GWYNNE J.—I am of the opinion that the appeal in this case should be allowed, and that both of the questions submitted in it should be answered in the negative as well for the reasons given by me in the case of The Liquidators of the same Bank v. The Queen[16] as for other reasons. If for the reasons therein given by me the prerogative privilege insisted on does not exist in the interest of the Dominion Government, it cannot in my opinion exist for the benefit of the governments of any of the provinces of the Dominion. However properly by reason of the nature of the constitution given to the Dominion debts due to the Dominion Government may be regarded as debts due to Her Majesty, I can see nothing in the constitution of the provinces of the Dominion which makes debts due to the provincial governments to be, or which requires them to be regarded as being, debts due to Her Majesty, and certainly there is nothing in my opinion which, assuming

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them to be debts due to Her Majesty, attaches to them the application of the royal prerogative of priority in payment.

There is a very distinctly marked difference between the constitution given by the British North America Act to the Dominion of Canada, and that given to the several provinces of the Dominion. As to the constitution of the Parliament of the Dominion the act expressly declares that the Parliament shall consist of "The Queen—an Upper House called the Senate—and the House of Commons,"[17] and the Executive Government and authority of and over Canada—that is the Dominion—is declared to continue and be vested in the Queen. The intent of these provisions in my opinion was, and their effect also was, to constitute the Dominion of Canada an integral, and subject only to the provisions of the British North America Act an independent, portion of the British Empire of which the Queen is the executive head and of whose Parliament Her Majesty is an integral and independent part equally as she is, and in the same sense as she is, of the Parliament of the United Kingdom. How different are the terms of the act which define the constitution of the provinces of the Dominion.

In the first place, the Lieutenant-Governor of the several provinces is no longer appointed by Her Majesty but by the Governor General in Council and he holds office during the pleasure of the Governor General, subject to this qualification that he shall not be removable within five years from his appointment except for cause assigned which shall be communicated to him in writing within one month after the order for his removal is made, and shall be communicated by message to the Senate and to the House of Commons within one week thereafter, if the Parliament is

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then sitting, and if not, then within one week after the commencement of the next session of the Parliament. Secondly, the legislatures of the provinces are made to consist of "the Lieutenant-Governor and one House styled the Legislative Assembly of Ontario" in the province of Ontario; and in the other provinces of "the Lieutenant-Governor and two houses styled the Legislative Council and the Legislative Assembly."

To the passing of acts by these legislatures Her Majesty is no party, nor is her name necessary to be used as assenting thereto.

While as to the Dominion of Canada the constitutional charter expressly provides that (1):

It shall he lawful for the Queen by and with the advice and consent of the Senate and House of Commons to make laws[18], &c.

The provision as to the provinces is that:

In each province "the Legislature," that is to say, in Ontario, "The Lieutenant-Governor and Legislative Assembly of Ontario," and in the other provinces, "The Lieutenant-Governor, the Legislative Council and Legislative Assembly," "may make laws, &c."

And whereas with respect to the Dominion it is enacted that, when a bill passed by the Houses of the parliament is presented to the Governor General for the Queen's assent, he shall declare either that he assents in the Queen's name, or that he withholds the Queen's assent, or that he reserves the bill for the signification of the Queen's pleasure, the provision made in respect of the provinces is that, when the bill passed by the Houses of the legislature of a province is presented to the Lieutenant-Governor for the Governor General's assent, he shall declare that he assents thereto in the Governor General's name, or that he withholds the Governor. General's assent, or that he reserves the bill for the signification of the Governor General's

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pleasure, and power is given to the Governor General of the Dominion in Council to disallow any act within one year after a certified copy of the act assented to by the Lieutenant-Governor shall have been transmitted to the Governor General by the Lieutenant-Governor upon whom is imposed the duty of transmitting to the Dominion Government certified copies of all bills assented to by him. It thus appears that Her Majesty's name is not necessary to be inserted in any act of the provincial legislatures, nor is her assent to such acts made necessary. True it is that the legislature of the province of Quebec in passing acts makes use of the form following:—

Her Majesty, by and with the advice and consent of the Legislature of Quebec, enacts as follows.

Or in other words supplying for the word "Legislature" the several parts of which by the British North America Act it is composed, the form would read thus:—

Her Majesty, by and with the advice and consent of the Lieutenant-Governor, the Legislative Council and Legislative Assembly of Quebec, enacts as follows.

And the Legislature of Ontario makes use of the form following:—

Her Majesty, by and with the advice and consent of the Legislative Assembly of the Province of Ontario, enacts as follows.

Thus omitting the "Lieutenant-Governor," who by the British North America Act is expressly declared to be a part of the "Legislature."

This use of Her Majesty's name is not required by the British North America Act; as being but matter of form it may be immaterial, but it certainly is not at all necessary to the validity of the acts of the provincial legislatures which would be quite valid and in perfect conformity with the British North America Act, if in all the provinces of the Dominion, whose

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legislatures have two houses, the form used should be the same as that in use in the provinces of Nova Scotia and New Brunswick viz.:—

Be it enacted by the Lieutenant-Governor, the Legislative Council and Assembly as follows:—

And in those provinces whose legislatures consist of but one House:

Be it enacted by the Lieutenant-Governor and Legislative Assembly of,

Or if the form following which would apply to all the Provinces should be that used:

The Legislature of the Province of               enacts. &c., &c.

Then upon the provinces is conferred the peculiarly democratic privilege, which is qualified only by the veto power vested in the Dominion Government, of amending from time to time, notwithstanding anything in the British North America Act, the constitution of the provinces except as regards the office of Lieutenant-Governor.

It cannot be contended that this royal prerogative right which is invoked, and which may be exercised always to the prejudice and sometimes it may be to the ruin of all the private creditors of a bankrupt corporation, is a necessary incident to these provincial governments, for it surely cannot be argued with any show of reason that this royal prerogative is necessary to the healthy working of governments which partake so much of the democratic element as these provincial constitutions do. To my mind it seems to involve a singular inconsistency that this prerogative right which in its nature is so injurious to the public and is asserted as an ancient common law incident to royalty should be claimed by governments of modern creation and of so democratic a character as are the governments of the provinces of this Dominion.

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The provincial legislatures have under the British North America Act, unquestionably in my opinion, without any consent of Her Majesty, undoubted power to make all debts due to the provincial governments respectively to be due and payable to, and recoverable by and in the name of, the person for the time being filling the office of Provincial Treasurer or Attorney-General, or the Lieutenant-Governor or any other officer of the provincial government; but inasmuch as Her Majesty is not by the British North America Act, as for the reasons above given I am of opinion that she is not, a party to the passing of any act of the provincial legislatures constituted as they are by the British North America Act, if debts due to the several provincial governments should be regarded as debts due to Her Majesty to which the royal prerogative relied upon necessarily attaches, as is contended, the effect would be that it would be impossible for the provincial legislatures ever to pass such an act as I have suggested, upon the principle upon which the province of New Brunswick now rests its claim for priority in payment of the debts due to it over all the other creditors of this insolvent bank, namely, that the rights of the Crown cannot be affected otherwise than by an express provision contained in an act of parliament to which Her Majesty is a party. If we should so hold we should, in my opinion, without any power or authority so to do, be crippling in a very marked manner the power of the provincial legislatures over a matter which, in my opinion, is beyond all doubt placed under their jurisdiction and control. I can, therefore, as I have already said, see nothing in the British North America Act which requires that debts due to the several provinces should be regarded as debts due to Her Majesty, but much which, as it appears to me, leads to the contrary conclusion, and as the

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only object to be gained by regarding such debts to be debts due to Her Majesty would seem to be to lay a foundation for the introduction into the constitution of the provinces of this Dominion of a vexatious and obnoxious privilege not introduced by the terms of the British North America Act—wholly un suited to the constitution of the provinces—unjust to their inhabitants and repugnant to the spirit of the age—we are, in my opinion, justified in arriving at the conclusion that debts due to the several provinces of this Dominion are not debts due to Her Majesty, and that therefore the prerogative relied upon cannot be invoked and exercised by or on behalf of the government of any of those provinces.

Assuming, however, debts due to the several provincial governments to be debts due to Her Majesty, the prerogative privilege relied upon is not, in my opinion, attached to them. It is contended by the province of New Brunswick that the prerogative relied upon is attached to, and can be exercised by its government in respect of debts due it, although the prerogative privilege should not be attached to, or be exercisable in respect of, debts due to either of the provinces of Quebec or Ontario or even in respect of debts due to the Dominion Government. This point of vantage asserted on behalf of the Government of the province of New Brunswick is claimed under sec. 64 of the British North America Act but that section has, in reality, no bearing whatever, in my opinion, upon the point under consideration.

As the old province of Canada was by the British North America Act divided into two provinces of the Dominion of Canada as constituted by that act, namely, the provinces of Quebec and Ontario, sec. 63 of the act provides for the formation of the Executive Council, that is to say of the executive authority, of

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those provinces, by declaring of what officers of the provincial governments those councils shall be composed. The provinces of New Brunswick and Nova Scotia as they respectively existed prior to the passing of the British North America Act had executive councils composed of certain officers of the goverments of those respective provinces. The limits of the provinces of New Brunswick and Nova Scotia, as provinces of the Dominion of Canada as constituted by the British North America Act, were declared to be the same as the limits of the old provinces of New Brunswick and Nova Scotia respectively had been; it was necessary in like manner to provide for the constitution or composition of the executive authority, that is to say of the executive councils, of those provinces as constituted provinces of the Dominion under the British North America Act, and for this purpose sec. 64 was inserted in the act the sole object and effect of which is to enact that until a different provision shall be made by the new provinces respectively as constituted under the act, the persons who constituted the executive councils of the old provinces of Nova Scotia respectively, shall continue to be the executive authority of the new provinces of New Brunswick and Nova Scotia as constituted under the act, but subject to the provisions of the act; thus placing the executive authority of all the provinces upon a precisely similar footing. The section is supplemental simply to sec. 63 and not, as was contended, to sec. 65 with the subject of which sec. 64 has no relation whatever.

It is impossible to contend that by reason of anything contained in the British North America Act the constitution given to any one of the provinces of Quebec, Ontario, New Brunswick, or Nova Scotia is in any respect different from that given to any of the others, or that such an incongruity exists in the act as that

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one of the provinces constituted by it a province of the Dominion of Canada can exercise a prerogative of the crown which cannot equally be exercised by all of the provinces of the Dominion, and as already shown in the case of The Liquidators of this Bank v. the Queen[19] in the claim of the Dominion Government, the prerogative relied upon does not exist in, and cannot be asserted in the interest of, either of the provinces of Quebec or Ontario, it is impossible that it can consistently be recognized as capable of being asserted in the interest of the province of New Brunswick. Having regard to the nature of the new constitutions given by the British North America Act to the several provinces of the Dominion the only conclusion which, in my opinion, for the reasons I have given, is warranted is that the application of the prerogative relied upon to the case of debts due to any of the provincial governments is necessarily excluded.

PATTERSON J.—The debt in question is for a deposit in the bank of $35,000 of the public moneys of the province of New Brunswick. The questions for the opinion of the court are:—

1. Is the provincial government entitled to payment in full by preference over the note-holders of the said bank?

2. If not, is the provincial government entitled to payment in full over the other depositors and simple contract creditors of the bank?

The first question is answered in the negative, contrary to the opinion of the court below, by what I have said in the appeal of the present appellants against the Queen (1) respecting the claim made in that case on the part of the Crown for priority over the note-holders.

The second question divides itself into two: First, the right of the Crown to priority; secondly, the right of the provincial government to claim that priority in the name of the Crown or by virtue of the prerogative.

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On both of these branches of the question I agree with the court below.

The general right of the Crown has been affirmed in this court in The Queen v. The Bank of Nova Scotia[20] on grounds which, in my judgment, apply to the provincial governments as well as to that of the Dominion, and there is nothing in the Bank Act[21], which act was not in question in the case referred to, or in the Winding-Up Act[22], to limit the right in respect of such assets of the bank as may remain after all outstanding notes are paid.

On the question of the right of the provincial government to exercise the prerogative in question I cannot add anything by way of argument or illustration to what has been said in the court below by the Chief Justice and by Mr. Justice Fraser.

I agree, as I have said, in the conclusion arrived at. It is, in my opinion, borne out by the cases referred to and by the spirit and tenor of the British North America Act, and is in accord with the views which prevail in the bulk of the decisions under the statute although all the opinions expressed, particularly in the earlier cases, may not have been in harmony.

I shall not attempt to make an independent examination of the cases, and shall merely add that the same apprehension of the status of the provinces on which the judgment proceeds will be found evidenced in the two recent decisions of the Judicial Committee, and in the language of the judgments delivered by Lord Watson, in The St. Catharines Milling Co. v. The Queen[23] and The Attorney-General of British Columbia v. The Attorney-General of Canada[24]; not that these cases bear directly on the point in hand; they are

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merely instances of late utterances where provincial governments are spoken of in the same terms as the Dominion Government as representing the Queen.

I have already quoted the questions proposed in the special case for the opinion of the court.

At the argument in the court below the case was amended by agreement by stating that the Dominion Government was a simple contract creditor of the bank. That fact does not strike me as of any importance. The circumstance that the same debtor, whether an individual or a corporation, may owe for moneys belonging to the Imperial Government and to one or more colonies or provinces cannot possibly derogate from the rights which the Imperial Government or any one of the colonies or provinces would have if it were the sole public creditor. The very case existed in Re Oriental Bank Corporation[25] in which the motion was on behalf of the Treasury, and on behalf of the premier and treasurer of the Colony of Victoria, and the law officers for the Crown colonies of Ceylon, the Mauritius and Natal.

On the first question I am of opinion that the appeal should be allowed, although if the second had been the only question my opinion would be that it should be dismissed.

I would give no costs of appeal to either party, the liquidators of course having their costs out of the estate.

*Appeal allowed without posts as to priority over note-holders, and dismissed without costs as to priority over other creditors.

Solicitor for appellants: A. A. Stockton.

Solicitor for respondent: A. G. Blair.