The King v. Eastern Terminal Elevator Co., [1925] SCR 434

Supreme Court of Canada

The King v. Eastern Terminal Elevator Co., [1925] S.C.R. 434

Date: 1925-05-05

His Majesty The King (Plaintiff) Appellant;

and

Eastern Terminal Elevator Company (Defendant) Respondent.

1925: March 9, 10; 1925: May 5.

Present: Anglin C.J.C. and Idington, Duff, Mignault and Rinfret JJ.

ON APPEAL FROM THE EXCHEQUER COURT OF CANADA

Constitutional Law—Statute—Validity—Control and regulation of a trade—Canada Grain Act, 2 Geo. V, c. 27—S.s. (7) added to s. 95, 9-10 Geo. V, c. 40 s. 3.

Subsec. 7 added to sec. 95 of The Canada Grain Act, 1912, by 9-10 Geo. V, c. 40, sec. 3, is ultra vires of the Parliament of Canada. Anglin C.J.C. diss.

Judgment of the Exchequer Court ([1924] Ex. C.B., 176) affirmed.

The Canada Grain Act was passed in 1912 to control and regulate, through The Board of Grain Commissioners, the trade in grain. It provides that all owners and operators of elevators, warehouses and mills and certain traders in grain, shall be licensed; for supervision of the handling and storage of grain in and out of elevators, etc.; and prohibits persons operating or interested in a terminal elevator from buying or selling grain. It contains, also, provisions for inspection and grading. It was amended in 1919 by adding to sec. 95 subsec. 7 which provides that if at the end of any crop year in any terminal elevator "the total surplus of grain is found in excess of one-quarter of one per cent of the gross amount of the grain received in the elevator during the crop year" such surplus shall be sold for the benefit of the Board.

Held, Anglin C.J.C. dissenting, that this subsection is only a part of the scheme of the Act to control and regulate the business, local and otherwise, of terminal elevators which it is not within the competence of Parliament to enact.

Held, per Duff and Rinfret JJ., that the legislation is not warranted by the fact that three-fourths of the trade in grain is export out of Canada. If Parliament can provide for control of the local business under that condition it must have power to do so whatever may be the extent of the export trade.

Per Mignault J.—Nor can the legislation be supported as relating to agriculture (B.N.A. Act, 1867, sec. 85). The subject matter is only a product of agriculture and an article of trade. It is trade legislation and not for the support or encouragement of agriculture.

APPEAL from the judgment of the Exchequer Court of Canada[1] holding that the amendment in 1919 to the Canada Grain Act, sec. 95 (7), is ultra vires.

The material provisions of the Act are outlined, and the substance of the amendment set out in the above head-note and both appear at length in the reasons for judgment published herewith.

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Symington K.C. and Varcoe for the appellant.

Hoskin K.C. for the respondent.

Symington K.C. and Varcoe for the appellant. The legislation in question may be justified under one or more of several enumerations in sec. 91 of the B.N.A. Act and also as legislation ancillary to the objects of the whole Act. It is sufficient if it is reasonably, not necessarily absolutely, ancillary. City of Toronto v. Canadian Pac. Ry. Co.[2]; Attorney General for Canada v. Attorney General of Quebec[3] at page 421.

The grain trade has achieved national dimensions and Parliament may regulate it for the good government of Canada. See The King v. Manitoba Grain Co.[4]. See also Gold Seal Co. v. Dominion Express Co.[5] at page 456.

And see Attorney General of North Dakota v. Farmers' Grain Co.[6].

Hoskin K.C. for the respondent. The Parliament of Canada has no more power to enact subsec. 7 than it had in The Reciprocal Insurance Case, Attorney General of Ontario v. The Reciprocal Insurers[7].

The general power to make laws for peace, order and good government does not justify this legislation any more than in The Insurance Case7; The Board of Commerce Case[8]; or in the City of Montreal v. Montreal Street Railway Co.[9] nor does any of the provisions of sec. 91 B.N.A. Act.

The Chief Justice (dissenting).—I understand that a majority of the court has reached the conclusion that the judgment of the Exchequer Court holding s.s. 7 of s. 95 of the Canada Grain Act to be ultra vires must be affirmed. That the impugned subsection is not necessary to the project of the statute and that, taken alone, it encroaches on the provincial domain of local works and undertakings and property and civil rights (B.N.A. Act, s. 92 (10)-(13)), I conceive to be the basis of the judgment of the learned President of the Exchequer Court; and his view is shared by some members of this court. Another opinion condemns s.s. 7 as an incidental provision in a statute that does not

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come under any of the heads of Dominion legislative jurisdiction enumerated in s. 91 and contains many essential features which impinge on the provincial field and are so interwoven with other provisions, possibly in themselves unobjectionable, as not to be readily severable from them. Such legislation, they maintain, cannot be supported under the general power vested in Parliament to legislate for the peace, order and good government of Canada.

No good purpose will be served by an elaborate exposition of the reasons which lead me respectfully to dissent from these views. I shall, therefore, merely outline them.

Assuming that the Canada Grain Act as a whole is intra vires of Parliament, s.s. 7 of s. 95 seems to me to be defensible as an incidental enactment designed to promote the attainment of the purposes of the Act. It not only provides for the obtaining of revenue from persons and corporations instrumental and beneficially interested in the carrying out of the scheme which it sanctions, and to be applied towards the cost of working it, but it furnishes, perhaps, the best possible security that one of the main operations for which the Act provides, namely, the cleaning of the grain so that it will actually conform to the grade and quality called for by the Government certificate based on its prior inspection, will be honestly and efficiently carried out. It removes the greatest inducement to fraud or carelessness in the cleaning. Moreover any property right of the respondent in the surplus grain left in its elevator is very doubtful. The subsection would also seem to be defensible as regulatory of the licensed elevator company's remuneration. I cannot regard it as confiscatory. Toronto v. Can. Pac. Ry. Co.[10]. If Parliament has jurisdiction over the subject matter of the legislation as a whole, I am not prepared to condemn this ancillary provision as in excess of its powers.

The object of Parliament in enacting the Canada Grain Act was, in my opinion, to provide for the economical expeditious and profitable export and marketing abroad of what is to-day the most valuable product of Canada—the most important subject of its trade and commerce—its greatest source of wealth. The scheme of the Act is the

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constitution and regulation of machinery to effectuate that purpose. It provides, as only the Dominion Parliament can, for the control and handling of the grain from the moment it leaves the hands of the grower—practically always in one of the Western Provinces—until its shipment in Ontario or one of the eastern provinces for the foreign market accompanied by a government certificate of its grade and quality, upon the acceptance of which in that market the Canadian shipper can depend. Main features of this scheme are the inspection of the grain in transit at Winnipeg by Dominion Government officials and the cleaning, storing and handling of it, subsequent to inspection, under such control and supervision that it can properly and safely be accompanied on shipment by the Government certificate of grade and quality which forms the basis of our Canadian foreign grain trade. No single province could legislate to cover this field. Concurrent legislation by all the provinces interested, if practicable (which I doubt), would be ineffectual to accomplish the purpose. Dominion legislation is required. Apart from the fact that a provicial certificate would not carry the weight and authority attaching to a certificate issued under Dominion sanction, the necessary control over transit and handling in different provinces and ultimate shipment could not be exercised under provincial legislation.

I regard the subject matter of the Canada Grain Act, therefore, as lying outside the scope of the powers entrusted to the legislatures by the sixteen heads of provincial legislative jurisdiction contained in s. 92. Insurance reference[11].

It is established that in legislation properly ascribable to the exercise of jurisdiction conferred by one of the enumerative heads of s. 91 of the B.N.A. Act, the Dominion Parliament is supreme. Such legislation, even in provisions properly ancillary, may deal with matters that would fall under provincial jurisdiction, if they were not appurtenant to a subject specifically assigned to the Dominion. Viscount Haldane, in the judgment cited, attributes the like right to Parliament

when the subject matter (of its legislation) lies outside all the subject matters enumeratively entrusted to the province under s. 92.

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This view was reiterated by his Lordship in the Lemieux Act Case when, referring to Russell v. The Queen, he says, at p. 410:

It has been observed subsequently by this committee that it is now clear that it was on the ground that the subject matter lay outside provincial powers * * * that the Canada Temperance Act was sustained.

That Act undoubtedly deals with some matters prima facie within s. 92.

In alluding to the Lemieux Act judgment I feel that I should respectfully take exception to the suggestion there made, that the Board which decided Russell v. The Queen (2) must be considered to have had before their minds an emergency putting the national life of Canada in unanticipated peril (p. 416) as the occasion of the enactment by Parliament of the Canada Temperance Act, 1878. Referring to this supposed emergency his Lordship says, at p. 412:

Their Lordships think that the decision in Russell v. The Queen (2) can only be supported to-day, not on the footing of having laid down an interpretation, such as has sometimes been invoked of the general words at the beginning of a. 91, but on the assumption of the Board, apparently made at the time of deciding the case of Russell v. The Queen (2), that the evil of intemperance at that time amounted in Canada to one so great and so general that at least for the period it was a menace to the national life of Canada so serious and pressing that the National Parliament was called on to intervene to protect the nation from disaster. An epidemic of pestilence might conceivably have been regarded as analogous.

I cannot find anything in the judgment delivered by Sir Montague E. Smith in the Russell Case[12] suggestive of such a view having been entertained by the Judicial Committee. On the contrary, the whole tenor of the judgment seems to me inconsistent with its having proceeded on that basis. I should indeed be surprised if a body so well informed as their Lordships had countenanced such an aspersion on the fair fame of Canada even though some hard driven advocate had ventured to insinuate it in argument.

By its concluding paragraph, s. 91 declares that

any matter coming within any of the classes of subjects enumerated in this section shall not be deemed to come within the class of matters of a local or private nature comprised in the enumeration of classes of subjects by this Act assigned exclusively to the legislatures of the provinces. The restriction of provincial legislative power, which this paragraph clearly imports, to "matters of a local or private

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nature" has perhaps not always received the attention to which it is entitled when there has been question whether the subject matter of a particular statute falls within provincial or Dominion jurisdiction.

Although counsel for the appellants invoked several of the enumerated heads of Dominion legislative power—the regulation of trade and commerce, the raising of money by any mode or system of taxation, weights and measures (s. 91, s.s. 2, 3, and 17), inter and extra-provincial transportation (s. 92 (10)), and agriculture (s. 95)—the only one of them within which, in my opinion, the Canada Grain Act as a whole might fall would be "the regulation of trade and commerce," unless, perhaps, inter and extra-provincial transportation might also be invoked. Attempts to uphold Dominion legislation under head no. 2 of s. 91 have hitherto received little ecouragement from the Judicial Committee. In Citizens' Ins. Co. v. Parsons[13], power to regulate by legislation the contracts of a particular business such as the business of fire insurance, was held not to fall within it; but it was stated (p. 113) that it would include

political arrangements in regard to trade with foreign governments requiring the sanction of Parliament, regulation of trade in matters of inter-provincial concern and, it may be, * * * general regulation of trade affecting the whole Dominion.

In Montreal v. Montreal Street Railway Co.[14], however, the power of Parliament when legislating under this head to make laws applicable throughout Canada in regard to matters which in each province are substantially matters of local or private interest was held to be subject to like restrictions as those which apply to its general power to legislate for the peace, order and good government of Canada in regard to subjects not enumerated in s. 91. Such legislation, as Lord Watson pointed out in the Local Prohibition Case[15], at p. 360,

ought not to trench on provincial legislation in respect to any of the subjects enumerated in s. 92.

In John Deere Plow Co. v. Wharton[16], on the other hand, not only was the passage in Citizens' Ins. Co. v. Parsons15, above referred to, approved (p. 340), but Viscount Haldane, while intimating that the head, "the regulation of

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trade and commerce," in s. 91 must receive a limited application, said that it

at all events enables the Parliament of Canada to prescribe to what extent the powers of companies the objects of which extend to the entire Dominion should be exercisable, and what limitations should be placed on such powers. For if it be established that the Dominion Government can create such companies, then it becomes a question of general interest throughout the Dominion in what fashion they should be permitted to trade. Their Lordships are, therefore, of opinion that the Parliament had power to enact the sections relied on in this case.

But in the Board of Commerce Case[17], at p. 198, his Lordship stated that effect had been given the legislative power conferred by s.s. 2 of s. 91 in the Wharton Case[18] in aid of powers conferred by the general language of s. 91

because the regulation of the trading of Dominion companies was sought to be invoked only in furtherance of a general power which the Dominion possessed independently of it.

In the still later Lemieux Act[19] decision, at p. 409, his Lordship alludes to the Wharton Case20 as illustrating "a really definite effect" given to the Dominion power over the regulation of trade and commerce

when applied in aid of what the Dominion Government is specifically enabled to do independently of the general regulation of trade and commerce, for instance in the creation of Dominion companies with power to trade throughout the whole of Canada.

He adds, at p. 410, referring to Attorney General for Canada v. Attorney General for Alberta[20]:

It is, in their Lordships' opinion, now clear that, excepting so far as the power can be invoked in aid of capacity conferred independently under other words in s. 91, the power to regulate trade and commerce cannot be relied upon as enabling the Dominion Parliament to regulate civil rights in the provinces.

The incorporation of Dominion companies, which is held to be competent to Parliament, does not fall under any enumerative head of s. 91. It rests on the general power to make laws for the peace, order and good government of Canada in matters not entrusted to the provinces by s. 92. That power does not warrant an encroachment on the provincial domain[21]. While it is held that the power to regulate trade and commerce, operating independently and as an enumerated head of Federal legislative jurisdiction, does not justify such an encroachment, the Board of Commerce case and the Lemieux Act decision are authority for the statement that it may do so in furtherance or aid

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of powers conferred by the general language of s. 91. With the utmost respect, I fail to appreciate the reasoning on which this view is based. If neither the power conferred by the general language of s. 91, nor the power under the enumerative head No. 2, to regulate trade and commerce, taken independently, warrants Dominion legislation which trenches on the provincial field, if both powers are subject in this respect to the like restriction[22], I find rather elusive and difficult to understand the foundation for the view that legislation authorized only by the former may be so helped out by the latter that invasion by it of the provincial domain may thus be justified. But the decisive authority of the judgments which have so determined cannot now be questioned in this court. I defer to it.

If the view be sound that the subject matter of the Canada Grain Act, because it has mainly to do with the export trade in grain and the inter-provincial handling of it, and because of the magnitude of that trade and its vital importance to the entire trade and commerce of Canada—to its very solvency as a nation—is not

within the class of matters of a local or private nature comprised in the enumeration of classes of subjects assigned exclusively to the legislatures of the provinces.

but lies outside that field and accordingly falls within "the Dominion powers conferred by the general language of s. 91," may not "the regulation of trade and commerce," on the authority of the passages to which I have referred in the decisions of the Judicial Committee in the Wharton Case[23], the Board of Commerce Case[24] and the Lemieux Act Case[25] (p. 409), be invoked as "aiding Dominion powers conferred by the general language of s. 91" and "in furtherance of a general power which the Dominion Parliament possesses independently of it" to support any necessary interference by the provisions of that Dominion statute with what might otherwise be regarded as subjects of provincial legislative jurisdiction?

But for their Lordships' emphatic and reiterated allocation of "the regulation of trade and commerce" to this subordinate and wholly auxiliary function, my inclination would have been to accord to it some independent

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operation, such as was indicated in Parsons' Case[26], and within that sphere, however limited, to treat it as appropriating exclusively to the Dominion Parliament an enumerated subject of legislative jurisdiction with consequences similar to those which attach to the other twenty-eight enumerative heads of s. 91. It is incontrovertible and readily apprehended that the subject matter of head No. 2 must be restricted as was indicated in Parsons' Case28 of which the authority has been frequently recognized in later decisions of the Judicial Committee. But that it should be denied all efficacy as an independent enumerative head of Dominion legislative jurisdiction—that it must be excluded from the operation of the concluding paragraph of s. 91, except for the subsidiary and auxiliary purposes indicated in recent decisions,—these are propositions to which I find it difficult to accede. They seem to me, with deference, to conflict with fundamental canons of construction and with the views expressed in Parsons' Case28. I am far from convinced that the regulation of Canada's export trade in grain, including all provisions properly ancillary to its efficient exercise, may not legitimately be held to come within Dominion legislative power conferred by clause no. 2 of sec. 91 operating independently as an enumerative head of federal jurisdiction. Gold Seal, Limited v. Attorney General for Alberta[27].

But apart from any assistance afforded by head No. 2 of s. 91, I would uphold the Canada Grain Act as a statute of which the

subject matter lies outside all of the subject matters enumeratively entrusted to the (provinces under s. 92,

in which case, said Lord Haldane in the Insurance Reference[28], "the Dominion Parliament can legislate effectively as regards a province." His Lordship cites Russell v. The Queen[29] as an instance of such a case.

In my view not only is the grain trade of Canada a matter of national concern and of such dimensions as to effect the body politic of the Dominion, but the provisions of the Canada Grain Act, with some possible exceptions, deal with matters which, as envisaged by that legislation, do not

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come within that class of matters of a local or private nature * * * assigned exclusively to the legislatures of the provinces.

As to most of them there is, therefore, no encroachment on the provincial domain. To enable the Dominion Government to exercise legislative control over links in the inter-provincial and extra-provincial operations of handling and transporting export grain so important as terminal elevators, I cannot think it necessary that each of them should be declared by Parliament to be a work for the general advantage of Canada, or for the advantage of two or more provinces, although such declarations might, no doubt, with propriety be made. Any sections of the Canada Grain Act which may involve undue invasion of the provincial field could probably be readily identified and severed. None such has been shewn to be vital to the scheme of the Act as a whole.

So regarded the Canada Grain Act may, I think, be supported without having recourse to the existence of abnormal conditions involving some extraordinary peril to the national life of Canada, recently indicated as a justification for the invasion by Parliament of the provincial field when legislating under the general power conferred by s. 91. But if there should be in the statute provisions essential to its effective operation for the purpose aimed at which must be regarded as trenching on the provincial domain, and if it should therefore be deemed necessary to meet this test of their validity, I know of nothing more likely to create a national emergency in Canada than a judicial determination that the Dominion Parliament lacks the power to legislate for the regulation of the export grain trade of the country. It cannot be that Parliament must defer legislative action until a national emergency with attendant disaster has developed. To protect the national interest it assuredly may anticipate and ward off such an evil. There is an emergency connected with the movement of the grain crop at the end of each season incontrovertibly greater than any which can be supposed to have existed in 1878 with regard to the liquor traffic, and it is noteworthy that this emergency is specially recognized by Parliament in the provisions of the Bank Act for relaxing the restrictions upon the issue of paper money. Regarded as legislation essential to prevent such a financial crisis as would

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be not unlikely to ensue upon the relinquishment, voluntary or forced, of Dominion control over the grain trade, the Canada Grain Act might well withstand the test of validity suggested in the Board of Commerce[30], the Fort Frances[31] and the Lemieux Act[32] cases.

But, as already stated, that Act can, in my opinion, be successfully defended as a whole on the broader ground that, in the aspect in which they were viewed by Parliament, its vital provisions deal not with matters of a local or private nature properly the subject of provincial legislative jurisdiction, but rather with matters of Dominion importance and concern and, therefore, do not involve such interference with provincial jurisdiction as would prevent Parliament enacting them under its general power

to make laws for the peace, order and good government of Canada in relation to all matters not coming within the classes of subjects * * * assigned exclusively to the legislatures of the provinces.

I accept the conclusion of the learned President of the Exchequer Court as to the basis on which the defendant's liability should be computed.

I would for these reasons allow this appeal and maintain the plaintiff's action for the amount to be settled as indicated in the judgment of the President of the Exchequer Court.

Idington J.—I agree with the judgment of the learned President of the court below who tried this action, that the amendment to the Grain Act, upon which the action is rested, is ultra vires, and hence I would dismiss this appeal with costs.

Duff J.—The Grain Act was passed in 1912. The authors of the legislation proceeded upon the view upon which the Dominion Parliament had acted in 1910 in enacting the Insurance Act, that, in exercise of the powers given by sec. 91 (2), for the regulation of trade and commerce, the Dominion Parliament could, by a system of licences and otherwise, regulate individual trades, both locally and in respect of interprovincial and external trade. The Act provides for a Board, to be known as the Board of Grain Commissioners, to be appointed by the Governor in Council,

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and this Board is invested with very wide powers. By sec. 20, the Board is empowered, with the consent of the Governor in Council, to make rules and regulations for the government, control and licensing of terminal and other elevators. By sec. 119, the Board shall—

(a) require all track-buyers arid owners and; operators of elevators, warehouses and mills, and all grain commission merchants and primary grain dealers to take out annual licences;

(b) fix the amount of bonds to be given by the different operators of elevators, mills and flat warehouses and by grain commission merchants, track-buyers and primary grain dealers;

(c) require the (person so licensed to keep books in form approved by the Board;

(d) supervise the handling and storage of grain in and out of elevators, warehouses and cars;

(e) enforce rules and regulations made under this Act.

And by subsection (4), any person who engages in any business for which a licence is required, without obtaining such a licence, is declared guilty of an offence. Section 128 (2) specifically provides for the licensing of the owners of terminal elevators as public warehousemen. By sec. 123

no person owning, managing, operating or otherwise interested in any terminal elevator shall buy or sell grain at any point in the Eastern or Western Inspection Division,

subject to certain exceptions not material. By sec. 153 it is specifically provided that the owner or lessee of a country elevator must be licensed to receive, ship, store or handle grain. By sec. 156 the Board is specifically authorized to promulgate regulations respecting country elevators.

In addition to the power of regulation conferred upon the Board, the Act contains elaborate substantive provisions defining the duties of persons engaged in the business of operating elevators, in respect of the cleaning of grain, the grading of, it, the storage of it; defines the effect of warehouse receipts, the rights of holders of them.

By secs. 210 et seq., provision is made for licensing persons in the Western Division to carry on the business of selling grain on commission; and persons not so licensed are prohibited from engaging in that occupation. By secs. 218 et seq. there is provision for licensing track-buyers, and prohibition against engaging in the occupation of a track-buyer without such a licence. By secs. 219 (a) et seq. there is a prohibition against carrying on the business

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of a primary grain dealer without first having obtained a licence to do so from the Board.

The Act is an attempt to regulate, directly and through the instrumentality of Grain Commissioners, the occupations mentioned. It is also an attempt to regulate generally elevators as warehouses for grain, and the business of operating them; and it seems, ex facie, to come within the decision of the Judicial Committee, Attorney General for Canada v. Attorney General for Alberta[33], condemning the Insurance Act of 1910 as ultra vires.

Mr. Symington, in a very able argument, attempted to support the Act on the ground that the trade in grain is largely an external trade (between seventy and eighty per cent, apparently, of the grain produced in the country is exported); and that the provisions of the Act are, on the whole, an attempt to regulate a branch of external trade, the provisions dealing with local matters being, as a rule, subsidiary and reasonably ancillary to the main purpose of the Act.

It is undeniable that one principal object of this Act is to protect the external trade in grain, and especially in wheat, by ensuring the integrity of certificates issued by the Grain Commission in respect of the quality of grain, and especially of wheat; and the beneficent effect and the value of the system provided by the legislation as a whole is not at all disputed by anybody. I do not think it is fairly disputable, either, that the Dominion possesses legislative powers, in respect of transport (by its authority over Dominion railways, over lines of ships connecting this country with foreign countries, over navigation and shipping); in respect of weight and measures; in respect of trade and commerce, interpreted as that phrase has been interpreted; which would enable it effectively, by properly framed legislation, to regulate this branch of external trade for the purpose of protecting it, by ensuring correctness in grading and freedom from adulteration, as well as providing for effective and reliable public guarantees as to quality. It does not follow that it is within the power of Parliament to accomplish this object by assuming, as this legislation does, the regulation in the provinces of particular occupations,

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as such, by a licensing system and otherwise, and of local works and undertakings, as such, however important and beneficial the ultimate purpose of the legislation may be. There are, no doubt, many provisions of this statute which, as they stand, can be sustained; with them we are not concerned at this moment. The particular provision which is sought to be enforced is one of a series of provisions which are designed to regulate elevators and the occupations of those who make it their business to operate elevators. The particular provision, if it stood alone, might, perhaps, be sustained as a tax, but it cannot be separated from its context; it is only one part of a scheme for the regulation of elevators. There is one way in which the Dominion may acquire authority to regulate a local work such as an elevator; and that is, by a declaration properly framed under section 92 (10) of the B.N.A. Act. See Union Colliery Co. of B. C. v. Bryden[34]. This, of course, is not to say that there may not be elevators subject to Dominion control, as being, for example, adjuncts of the undertaking of a Dominion railway or of a company operating a line of steamships under Dominion jurisdiction; but the general regulation of all elevators is a different matter.

There are two lurking fallacies in the argument advanced on behalf of the Crown; first, that, because in large part the grain trade is an export trade, you can regulate it locally in order to give effect to your policy in relation to the regulation of that part of it which is export. Obviously that is not a principle the application of which can be ruled by percentages. If it is operative when the export trade is seventy per cent of the whole, it must be equally operative when that percentage is only thirty; and such a principle in truth must postulate authority in the Dominion to assume the regulation of almost any trade in the country, provided it does so by setting up a scheme embracing the local, as well as the external and interprovincial trade; and regulation of trade, according to the conception of it which governs this legislation, includes the regulation in the provinces of the occupations of those engaged in the trade, and of the local establishments in which it is carried

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on. Precisely the same thing was attempted in the Insurance Act of 1910, unsuccessfully. The other fallacy is (the two are, perhaps, different forms of the same error) that the Dominion has such power because no single province, nor, indeed, all the provinces acting together, could put into effect such a sweeping scheme. The authority arises, it is said, under the residuary clause because of the necessary limits of the provincial authority. This is precisely the view which was advanced in the Board of Commerce Case[35] and, indeed, is the view which was unsuccessfully put forward in the Montreal Street Railway Case[36], where it was pointed out that in a system involving a division of powers such as that set up by the British North America Act, it may often be that subsidiary legislation by the provinces or by the Dominion is required to give full effect to some beneficial and necessary scheme of legislation not entirely within the powers of either.

In one respect there is a close analogy between this case and the Montreal Street Railway Case38. The expedient which their Lordships there pointed out as the appropriate one in order to enable the Dominion to acquire the authority it was seeking to exercise, is precisely that by which the Dominion could invest itself with the authority over such elevators as it might be considered necessary to regulate; that is to say, by resorting, as already suggested, to the power conferred by section 92 (10) to assume, through the procedure there laid down, jurisdiction in respect of "local works."

Fortunately, however, to repeat what has been said above, the control possessed by the Dominion over the subject matters mentioned, and especially over transport (both land transport and water transport) and over external trade, would really appear to be amply sufficient to enable the Dominion, by appropriately framed legislation, effectively to secure the essential objects of this statute.

The appeal should be dismissed with costs.

Mignault J.—In this case, His Majesty the King, in right of the Dominion of Canada, the appellant, claims from the respondent, the Eastern Terminal Elevator Company, Limited, operating, under a license issued by the

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Board of Grain Commissioners, a public terminal elevator at Port Arthur, Ontario, the surplus of grain in excess of one-quarter of one per cent, alleged to be 1,107,330 pounds, found in its elevator at the close of the crop year ending 31st August, 1920, or the sum of $43,431.20, value of this surplus of grain. The action is based on subsection 7 of section 95 of The Canada Grain Act (2 Geo. V, (Can.) ch. 27 (1912)), which was added to the Act by 9-10 Geo. V, ch. 40, sec. 3 (1919), and further amended by 10 Geo. V, ch. 6, sec. 1 (1919, 2nd session). Subsection 7 in its present form, reads as follows:—

7. In the month of August in each year, stock shall be taken of the quantity of each grade of grain in the terminal elevators; if in any year after the crop year ending the thirty-first day of August, 1919, the total surplus of grain is found in excess of one-quarter of one per cent of the gross amount of the grain received in the elevator during the crop year, such excess surplus shall be sold annually by the Board of Grain Commissioners and the proceeds thereof (paid to the said Board. Such proceeds shall be applied towards the cost of the administration of The Canada Grain Act in such manner as the Governor in Council may direct.

The respondent denies that there was any such surplus of grain in its elevator on August 31, 1920, and, in the alternative, alleges that the said subsection, as well as The Canada Grain Act itself, always were and are now ultra vires of the Parliament of the Dominion.

The first point involves the mode of calculation of the surplus of grain in excess of one-quarter of one per cent. It will however not be necessary to deal with this question if, on the second point, the conclusion be that subsection 7, or The Canada Grain Act of which it is a part, was not competently enacted by Parliament. The latter question therefore must be first considered.

Before doing so, however, it will be convenient to state how the grain trade of Canada is carried on under the authority of The Canada Grain Act, which was first enacted in 1912.

This statute divides Canada into two divisions for inspectional purposes, the Western division (by for the most important) comprising that part of the Dominion to the west of the cities of Port Arthur and Fort William, these two cities included, and the Eastern Division which lies to the east of Port Arthur.

The practice followed in the Western Division, from the time the grain leaves the farm until it reaches a terminal

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elevator and is shipped to its ultimate market, may be conveniently stated in the language of the learned trial judge.

The producing farmer usually sells, or stores, his grain to or in what is termed a country elevator, the business of which is to store grain for a charge, or to purchase the same outright. He may store on the basis of receiving the identical grain, or grain of the same grade, at a terminal elevator. He may also load his grain on a car consigned to a commission agent to sell for his account. In due course, the grain is forwarded to a terminal elevator at say Port Arthur, and in transit thereto, passes through Winnipeg, where the first inspection under the Grain Act takes place. An inspection certificate issues from the office of the chief inspector of grain of the Western Division, setting forth for whose account the grain was inspected, the number of the car, the railway station shipped from, the kind of grain, the grade, and the percentage of dockage, if any, "dockage" meaning the inspectors' estimate of unmarketable grain and foreign matter in the carload, which must be removed by the terminal elevator When cleaning the same. This noncommercial grain and foreign matter when separated from the grain at the terminal elevator are called "screenings." If the grain is considered sufficiently clean by the inspector, or is estimated not to contain more than three-fourths of one per cent of foreign or unclean matter, the carload is marked as "clean," and is stored with grain of the same kind and grade when it reaches a terminal elevator.

The inspected car then proceeds to Fort William or Port Arthur, the inspectors' certificate reaching there at the same time or earlier, and then being in the possession of an officer of the Board. The grain is subsequently weighed into an elevator, and pursuant to the Grain Act a certificate of weight is issued. This certificate shews the number of the car, the place where weighed, the date, the kind of grain and the weight of the carload of grain. Thereupon, and in conformity with the Grain Act, the receiving elevator company issues to the owner, of the grain a terminal warehouse receipt to the effect that it has received and holds, subject to the order of the owner, a specified quantity of a definite kind of grain expressed in bushels of an inspected and designated grade, to be stored with grain of the same grade. The quantity is the weight of the carload, less the deduction for dockage. This grain, or grain of the same grade, is deliverable upon the return of the warehouse receipt, properly indorsed by the holder thereof, and upon payment of storage and other charges. The certificate further states that the grain will be kept stored and insured for the benefit of the person to whose order the receipt is issued, or his assignee, and in conformity with the provisions and conditions of the laws of Canada relating to the warehousing of grain. The evidence shews that Canadian grain is usually sold in international markets, on the certified grades established by the inspection under the Grain Act, and the certificate shewing the grades accompanies the shipment to the ultimate market. Grain exported from Australia, India or Argentina is usually purchased on the basis of fair average quality on arbitration.

A concrete case introduced in evidence illustrates the practice with respect to "dockage." Car No. 303,015 G.T.P. was inspected at Winnipeg and the certificate of inspection shews the grade to be Manitoba 3 Northern and

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the dockage is placed at 4½ per cent. When the car reached Port Arthur, the grain was weighed in the elevator and a certificate was issued giving the contents of the car as wheat and the weight of the grain as 72,100 lbs., this weight including the dockage. A warehouse receipt was then given by the respondent to the owner of the grain acknowledging receipt from car 303,015 of

exactly 1,147 bushels 40 pounds exactly of 3 Nor. inspected grade to be stored with grain of the same grade by inspection.

The 1,147 bushels, 40 pounds, represented the 72,100 pounds of wheat, less the dockage which was also received by the terminal elevator company, but for which no warehouse receipt was given. The dockage was removed from the grain by the process of screening and left a residue termed "screenings."

The course of dealing with regard to the screenings, the admission of the parties shews, was that a return had to be made by the elevator company for the balance of the screenings after deducting one half of one per cent of the gross weight of the car for waste. The screenings were rescreened and commercial grain was recovered therefrom. This commercial grain was placed in the storage bins containing grain corresponding in grade, and the residue of the screenings was put in separate bins used exclusively for screenings. During the crop year ending the 31st of August, 1920, the respondent made a return to the owners of the grain for a balance of screenings of $33,384.17 representing 3,186,894 pounds of screenings.

It should be remarked that at terminal points like Port Arthur and Fort William there are also private elevators, said to be considerably more numerous than the public ones. The terminal elevators are operated under a licence granted by the Board of Grain Commissioners, the private elevators are not mentioned in the Grain Act except for a passing reference in subsection 5 of section 57.

The admission of the parties, after referring to the method of ascertaining the surplus of grain contended for by the appellant, states that if that method be correct, there was in the respondent's elevator, on the 31st of August, 1920, a surplus of grain (termed in the evidence "overage") in excess of one-quarter of one per cent of the gross amount of the grain received in the elevator during

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the preceding crop year, and that the value of such surplus was $49,027.07. The appellant and the Board of Grain Commissioners, the admission states, assert no claim as to this surplus, except in so far as the claim may be justified under subsection 7 of section 95 of the Grain Act, and unless this subsection was within the jurisdiction of the Parliament of Canada.

The learned trial judge, the President of the Exchequer Court, was of opinion that subsection 7 is ultra vires. He however, in view of a possible appeal, passed upon the different modes of calculating the surplus of grain, and gave the preference to one of the modes suggested by the respondent. The appellant's action was dismissed with costs. In view of the conclusion to which I have come on the constitutional question, it will be unnecessary to deal with these modes of calculating the surplus of grain.

Coming now to the constitutional point, the scope of the Canada Grain Act must be stated as briefly as possible. A complete analysis of the statute with its 248 sections would necessarily be very lengthy; and it has therefore seemed preferable to emphasize its main features, rather than to follow their application in minute detail to such a complex problem as the Canadian grain trade.

This problem, being largely a geographical one, the Act divides the Dominion into the two inspection divisions to which I have already referred (section 21). And as the economical transportation of the grain to its market is one of the chief objects which Parliament has in view, the statute deals with terminal elevators for the storage of the grain (sections 122 et seq.), the most important of which are at the head of the great lakes, at Port Arthur and Fort William in Ontario, and with country elevators along the railways and near the farms (sections 151 et seq.) for the receipt and storage of the grain prior to its shipment en route for the seaboard. We are told that these country elevators in Manitoba, Saskatchewan and Alberta number some 4,000. We are also informed that ninety per cent of the shipments out of the terminal elevators are made by water.

The general administration of the Grain Act is entrusted to a Board called the Board of Grain Commissioners for

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Canada, consisting of three commissioners (one termed the Chief Commissioner), appointed by the Governor-in-Council, who hold office during good behaviour for a period of ten years, subject to removal by the same authority for cause (sections 3 et seq.). The duties of this Board are multifarious and are explained in a large number of sections to which it is impossible to refer in detail.

Two great objects are dealt with throughout the Act, the inspection of the grain and its proper grading.

For the inspection of the grain the Act provides for chief inspectors, inspectors and deputy inspectors (section 24). The two latter are granted a certificate qualifying them to act as inspectors after an examination before a board of examiners (sections 40 et seq.), and the chief inspector is selected among those who hold an inspector's certificate (section 44), so the qualifications of the inspecting officers are thus carefully safeguarded. The duty of the inspecting officer is to inspect the grain "when called upon to do so by the owner or possessor thereof or his authorized agent" (section 27). While this language seems to make the inspection optional in so far as the owner is concerned, and while nothing in the Act prevents any person from selling or buying grain by sample regardless of its grades (section 57), the inspection system, in practice, seems to be a necessary requirement of the great bulk of transactions in grain. All grain placed in public or terminal elevators is subject to inspection (section 90), and the certificate of inspection in all cases accompanies the grain to its destination (section 97).

The inspection determines the grade of the grain which is specified in the certificate granted by the inspecting officer. The Act contains elaborate provisions as to the grading of the different qualities of grain (sections 105 et seq.). All grain produced in Manitoba, Saskatchewan and Alberta and in the Northwest Territories (and much the larger part of Canadian grain is produced in these provinces and territories), passing through the Winnipeg district, is inspected at Winnipeg or a point within the district, and on grain so inspected the inspection is final (section 91). All grain of the same grade is kept together and stored in the terminal elevators only with grain of a similar grade (section 94). It is binned under the direction,

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supervision and control of the inspecting officer, who has full control of all grain in terminal elevators, and no grain is shipped out of, transferred or removed from any terminal elevator without his supervision (section 95). The Act provides for the appointment of a grain survey board to which an appeal against the grading of grain may be brought by the owner or possessor of the grain (sections 101 et seq.). It also makes provision for the granting of warehouse receipts for the grain stored in terminal elevators (sections 127 et seq.).

I have mentioned several times the country and terminal elevators. The latter are often called public elevators as distinguished from private elevators. These public elevators include every elevator or warehouse which receives grain for storage from the western inspection division after it has been inspected under the Act (section 2, subsection (w)). There are, the evidence shows, a large number of private elevators at terminal points. I have found nothing in the Grain Act specifically dealing with them. But the Act mentions hospital and mill elevators, the names of which are sufficiently descriptive. There are also what are known as flat warehouses (sections 180 et seq.). The owner of a terminal elevator cannot buy or sell grain (section 123), but this prohibition is not extended to the country elevators.

The licensing system under the Act is most elaborate, and here we find compulsory features which shew that the statute really regulates the Canadian grain trade. Section 119 states that the Board of Grain Commissioners shall

require all track buyers (these are persons who buy grain by the car load, see sections 218 et seq.), and owners and operators of elevators (this term is possibly wide enough to include private elevators), warehouses and mills, and all grain commission merchants and primary grain dealers to take out annual licences.

The requirement of a license is again specifically mentioned in section. 122 for terminal elevators, in section 124 for hospital elevators, in sections 153 and 238 for country elevators, in section 218 for track buyers, and in section 219a for primary grain dealers. Licences granted can be revoked by the Board for cause.

The Act contains several other prohibitions and imposes penalties for various offences with which it is impossible

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to deal in detail without unduly lengthening this statement of the main features of the statute. Enough, however, has been said to shew that the Grain Act is an elaborate scheme of regulation of the Canadian grain trade.

The learned trial judge restricted his decision on the constitutional question to subsection 7 of section 95 of the Canada Grain Act which he held ultra vires on the ground that it dealt with a subject matter, the right of ownership of the surplus of grain, falling within the provincial domain. He stated that this subsection is

in essence legislation dealing with property and civil rights, and is not a regulation of trade and commerce within the meaning of section 91, No. 2 of the British North America Act.

He also found that it was an attempt to regulate profits or dealings which give rise to profits. The legal title to the grain surplus in question in this case was, he said, in the defendant which had extinguished every other right or title in the surplus, and no other claim or title therein was put forward, or could be put forward, except by the Board under this legislation. This was not a case, it seemed to him, where the Grain Act purported to do something coming within the powers assigned to Parliament by section 91 of the B.N.A. Act, but which incidentally and necessarily in its operation came in conflict with property and civil rights. It was not the case, he added, of an ancillary provision, encroaching upon matters assigned to the provincial legislatures, but required to prevent the scheme of such a law being defeated, nor was it the case where, in order to operate a validly enacted scheme, procedure must be adopted to make effective that law even though invading the legislative field of the legislatures in respect of property and civil rights.

Elsewhere the learned judge said:—

It was contended before me that the export of Canadian grain was a matter of national concern, by reason of its value and volume, by itself, and in relation to the total export trade of Canada; that such grain was sold in international markets as inspected and graded under the Grain Act, much to the advantage of Canadian grain growers and exporters, and that the whole enactment should be regarded in its entirety as a legislative scheme evolved in the interest of a primary industry of great magnitude, and for high national interests, and it was urged that under head 2 sec. 91, "regulation of trade and commerce," there was legislative authority for the Grain Act, and the particular section under consideration. This view is not without force and must be seriously considered. The validity of the Grain Act as a whole is not challenged and I am not

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called upon to decide whether the more prominent features of the Act, such as the inspection, grading, and weighing of grain are within the legislative competence of Parliament by virtue of section 91 (2) or otherwise.

It appears to me that such provisions of the Grain Act as might be said to constitute its main purposes and objects might stand, while others might fall for want of jurisdiction, and without destroying the vital parts of the legislative scheme. The general scheme of the Act may be of paramount national concern and of national dimensions, and assuming its principal provisions to be within the legislative authority of the Dominion Parliament, such as inspecting, grading, weighing, cleaning, railway car facilities, etc., it does not, I think, follow that subsec. 7 of sec. 95 is a necessary factor in that scheme. That is to say the Grain Act might operate in the way of a regulation of trade and commerce, as well without this section as with it, as in fact it did for many years. If the general scheme of the Act comes within the head of "regulation of trade and commerce" or any other part of sec. 91, that might stand and function by itself, without subsec. 7 of sec. 95. That legislation, it seems to me, assumes to do something unrelated to the general scheme and purposes of the Grain Act.

If it be conceded that Parliament can deal with the regulation of the Canadian grain trade, with the licensing of those who take part in it, with the prohibition to operate terminal or country elevators without a licence, and with the operation generally of these elevators, I confess that I would have great difficulty in following the contention that Parliament cannot also deal, as was done by subsection 7, with the disposal of the surplus of grain, if any, which remains in a public terminal elevator after the latter has delivered all the grain for which it has issued warehouse receipts. It is rather because subsection 7 is a part of such a statute as I have described that I think its validity cannot be supported.

I am constrained to this conclusion by successive pronouncements of the Judicial Committee; Attorney General for Canada v. Attorney General for Alberta[37]; In re Board of Commerce Act[38]; Fort Frances Pulp and Power Co. v. Manitoba Free Press Co.[39]; Attorney General for Ontario v. Reciprocal Insurers[40]; culminating in its very recent decision in Toronto Electric Commissioners v. Snider[41], where all the pertinent judgments of the Board were fully discussed and applied. These judgments have settled the law. In this case all the familiar contentions were

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addressed to us by the appellant's counsel in support of this legislation, but they are all finally answered by these decisions. It follows that the statute under consideration cannot be sustained on the ground that it is a regulation of trade and commerce or that it is for the general advantage of Canada. Nor can it be contended that it was designed to cope with a national emergency. In my opinion, this legislation cannot be brought under any of the heads of section 91 of the British North America Act, as they have been construed, and it would certainly, within any of the provinces, have been competent provincial legislation under section 92. This is decisive of the question at issue.

I have not overlooked the appellant's contention that the statute can be supported under section 95 of the British North America Act as being legislation concerning agriculture. It suffices to answer that the subject matter of the Act is not agriculture but a product of agriculture considered as an article of trade. The regulation of a particular trade, and that is what this statute is in substance, cannot be attempted by the Dominion on the ground that it is a trade in natural products. What we have here is trade legislation and not a law for the encouragement or support of agriculture, however wide a meaning may be given to the latter term.

I express no opinion on the question whether the grain surplus dealt with by subsection 7 is the property of the respondent. I merely agree, for the reasons above stated, with the holding of the learned trial judge that this subsection is ultra vires and that the action fails.

The appeal should be dismissed with costs.

Rinfret J.—I concur with Mr. Justice Duff.

Appeal dismissed with costs.

Solicitor for the appellant: E. L. Taylor.

Solicitors for the respondent: Pitblado, Hoskin & Co.