The Town of Cobalt v. The Temiskaming Telephone Company, (1919) 59 SCR 62

Supreme Court of Canada

The Town of Cobalt v. The Temiskaming Telephone Company, (1919) 59 S.C.R. 62

Date: 1919-06-02

The Town of Cobalt (Defendant) Appellant;

and

The Temiskaming Telephone Company (Plaintiff) Respondent.

1919: April 2; 1919: June 2.

Present: Idington, Anglin, Brodeur and Mignault JJ. and Masten J. ad hoc.

ON APPEAL FROM THE APPELLATE DIVISION OF THE SUPREME COURT OF ONTARIO.

Municipal corporation—Franchise—Telephone company—Use of streets—Time limit—“Ontario Municipal Act,” 1903, 3 Edw. VII. c. 19, ss. 330, 331 (1) and 559 (4).

The Legislature of Ontario has not given the municipalities of the province authority to permit telephone companies to occupy the streets and highways with their poles and wires for a longer period, at one time, than five years.

An agreement by a municipality to permit, by irrevocable license, a telephone company to occupy the streets with poles and wires is ultra vires.

Judgment of the Appellate Division (44 Ont. L.R. 366), reversed; that on the trial (42 Ont. L.R. 385), restored.

APPEAL from a decision of the Appellate Division of the Supreme Court of Ontario^[1], reversing the judgment at the trial^[2], in favour of the appellant.

The respondent brought action for an injunction to restrain the Town of Cobalt from removing its poles and wires from the streets and for damages. The streets were so occupied under an agreement with the town made in 1905 which the respondent claimed gave it a perpetual franchise. The two questions raised were whether or not the perpetual franchise was given and, if it was, whether or not the town had power to give it. The present appeal was disposed of on the second question.

[Page 63]

Tilley K.C. for the appellant.

H.J. Scott K.C. for the respondent.

IDINGTON J.—The question raised herein is whether or not respondent, which is a telephone company incorporated under and by virtue of the Ontario “Companies Act,” has, under the circumstances I am about to refer to, the right to maintain on the public highways of appellant, which is a municipal corporation, poles and wires and ducts against the will of appellant’s council.

It may conduce to clarity of thought on the subject to appreciate correctly the limits of power, right, and jurisdiction which these corporate bodies respectively had, or have, in the premises in question.

The respondent is a legal entity which only has the capacity given it by its charter and so far only as that is effective by virtue of the said “Companies Act.”

That charter only professes to give it the corporate capacity:—

To carry on within the District of Nipissing the general business of a telephone company and for that purpose to construct, erect, maintain and operate a line or lines of telephone along the sides of or across or under any public highways, roads, streets, bridges, waters, water courses or other places, subject, however, to the consent to be first had and obtained, and to the control of the municipal councils having jurisdiction in the municipalities in which the company’s lines may be constructed and operated, and to such terms for such times and at such rates and charges as by such councils shall be granted, limited and fixed for such purposes, respectively.

The exercise of such powers as it may thus acquire is subjected to the limitations contained in a long proviso following this definition of capacity, expressed in distinctly separate paragraphs enumerated from (a) to (k).

Many of them are express limitations on the jurisdiction of the municipal corporations which may be concerned and designed to protect the public against

[Page 64]

the possibilities of neglect by municipal authority or aggressive acts of respondent impairing the rights of others.

It is to be observed that all the respondent can acquire is by the above quoted definition of its capacity expressly subject

to the consent to be first had and obtained, and to the control, of the municipal councils having jurisdiction * * * and to such terms for such times and at such rates * * * as by such councils shall be granted * * *

It does not always happen that the legislature is so cautiously and properly restrictive relative to what a municipal council can do as has been thus expressed. Its acts here in question should be interpreted and construed consistently therewith.

Now let us turn to the powers of the municipality and see how far its council could go in disregard of the rights of those coming after it.

The title in and to the road allowance for a public highway may be, and generally is, technically vested in the municipal corporation, whose council has jurisdiction over it. But the jurisdiction of its council over that property is limited to discharging the duties relative to its maintenance and use as such, and it has no more power to grant concessions such as now in question to any one, than any man on the street has save so far as expressly conferred by statute.

As to its powers in that regard we are referred in argument to the provision in the “Municipal Act,” 3 Edw. VII. ch. 19, sec. 559, sub-sec. 4, enabling the council to pass by-laws:—

(4) For regulating the erection and maintenance of electric light, telegraph and telephone poles and wires within their limits.

And to the amendment of that by 6 Edw. VII. ch. 34, which amended it by substituting the following:—

[Page 65]

(4) For permitting and regulating the erection and maintenance of electric light, power, telegraph and telephone poles and wires upon the highways or elsewhere within the limits of the municipality.

These are simply general powers under the caption of Highways and Bridges to pass general by-laws, repealable when the council chooses, relative thereto and, besides the fact that no such by-law of appellant is in evidence, give respondent nothing more than in substance is conferred, by sub-sec. 3 of same section, on cabmen to occupy certain stands on the street.

Can any one pretend that because a certain stand has been so allotted as therein provided, a cabman acquires thereby a right in perpetuity to stay at or on that same stand no matter what change of circumstances or by-law?

All that the amendment does relative to our present inquiry is to insert the word “permitting” which was rather stupidly omitted from the first of those enactments.

They furnish, however, incidentally, a very good illustration of how little importance is to be attached to the mere power of permission without anything more being given.

Section 331 of same Act is in truth the only one the respondent can rely upon and that is as follows:—

331. (1) The council of every city, town and village may pass by-laws granting from time to time to any telephone company upon such terms and conditions as may be thought expedient the exclusive right within the municipality for a period not exceeding five years at any one time to use streets and lanes in the municipality for the purpose of placing in, upon, over or under the same poles, ducts and wires for the purpose of carrying on a telephone business and may on behalf of the municipal corporation enter into agreements with any such company not to give to any other company or person for such period any licence or permission to use such streets or lanes for any such purpose; but no such by-law shall be passed nor shall any such agreement be entered into without the assent of two-thirds of the members of the council of the municipality being present and voting therefor.

[Page 66]

I fail to find in this section any warrant for the claim that a perpetual franchise could be granted by the municipality even if it desired. Nothing but an exclusive franchise and that for a limited time is countenanced in a single syllable of this section and, properly so, those who stop to think will say.

The implication in the proposition put forward that there is such a power seems to me, I submit with due respect, bordering upon the absurd, if not quite beyond.

The grant may be “from time to time” but it must be exclusive. The municipality cannot, as a matter of public convenience, grant more than one such company rights to encumber and endanger the public highway, and the terms thereof must be so well considered and approved of, that two-thirds of the members of the council must approve.

The enactment of the provision therein specifically enabling the council to assure the successful applicant for the grant that no other shall be granted indicates how limited the legislature deemed the contracting powers of the council relative to such a subject matter had been.

And it can only be for a term of five years that it can be granted. The only right, otherwise given, is pursuant to another provision to give private parties a personal convenience, if desirable for their business reasons, and not detrimental to the public.

The assumption that the enactment in above quoted section was ever contemplated as giving powers to grant concurrent franchises to more than one public company is fraught with such evil consequences that it can only be reached, I submit, by a disregard of the future possibilities of a growing town and an over-looking of the nature of the subject matter so involved.

[Page 67]

The business is of a nature that, from every point of view, must involve a crossing of streets, by the works to carry it on, even if the cumbering of the public highway with poles or other appliances could be avoided; prudence, therefore, palpably dictates that the like appliances should not be multiplied.

The legislature, no doubt, had that in view and conferred no other power than the granting of one such concession at a time. It is not a kind of interference with public right to use the highway which we should try to spell out from possible constructions of the language used. It is a jurisdiction given to be used within the most restricted meaning possible that will effectuate the obvious purpose had in view in the same manner as every private act invading public rights is construed.

I submit there is no such plain and express language conferring the jurisdiction alleged to have been exercised as would have entitled the council of the appellant to have granted a perpetual franchise.

Nor do I think the council ever so intended by the agreement in question. To read the first clause of that standing alone as governing the whole instrument is not the way to interpret such a document.

It must be governed by the same restrictive canon of construction as relative to private Acts.

Read as a whole, and as amended by the later agreement if we have regard to the scope and purpose of the business in hand, can there be a doubt as to the intention of the council?

And as to the particularistic criticism of the amendment indicating a longer term than five years to which to apply the operation of the amendment, surely there was within the view of all concerned the possibility, pay, probability, of a satisfactory service leading to a

[Page 68]

continuation of business relations between these parties on the same terms as then reached.

On any other supposition we are driven to say that the first clause alone of the whole agreement was to stand when all else in it had become null and void and the respondent had a free hand unrestricted by the necessity of observing obligations important to the appellant to be duly observed by one serving the public.

In other words, the respondent was no longer to be a public servant, but a master of the public streets and possessed of a right of property therein which would debar the appellant from closing or widening or narrowing any of same unless upon such terms as the respondent should choose to dictate.

To test the construction contended for, and upheld below, suppose the agreement had consisted of nothing but clause 1, could it have been maintained as within the power conferred by section 331?

I cannot reach such a conclusion as to answer in the affirmative, and, therefore, think the appeal should be allowed with costs throughout, and the judgment of the learned trial judge be restored.

ANGLIN J.—The plaintiff company sues for an injunction to restrain the defendant municipal corporation from removing poles and wires of the plaintiffs from its streets, the company having itself refused to do so. The learned trial judge dismissed the action^[3], holding that the only right of the company to maintain its poles and wires on the streets of the town was conferred by an agreement made in June, 1912, with the municipal corporation, that the power of the latter to enter into such an agreement existed only by

[Page 69]

virtue of sec. 331 (1) of the “Municipal Act” of 1903 (3 Edw. VII. ch. 19), and that under that section

the right to operate as a monopoly for the period of five years could alone have been given.

In passing I may observe that, notwithstanding the history of sec. 331 (1) (see Biggar’s Municipal Manual, page 345, note) and its collocation, I agree with what I conceive to have been Mr. Justice Middleton’s idea that it should be regarded not as merely providing for an exception to the prohibition of sec. 330, but as conferring a substantive power to create a monopoly which a municipal council might not possess even were sec. 330 not in the “Municipal Act.” But I cannot accede to the view that sec. 331 (1) is the only provision of that Act empowering a municipal council to authorize the use of its highways by a telephone company.

In the second Appellate Divisional Court this judgment was reversed^[4], the majority of the court (Mulock C.J., Sutherland and Kelly JJ.), holding that a municipal corporation had power under sec. 559 (4) of the “Municipal Act,” as enacted by 6 Edw. VII. ch. 34, sec. 20, irrevocably to authorize the use of its streets by a telephone company for the purpose of erecting and maintaining its poles and wires for an indefinite period or in perpetuity, although its power to confer an exclusive right was restricted by sec. 331 (1) to a term of five years, and that upon the proper construction of the agreement in question such authorization for an indefinite term or in perpetuity had been granted. Riddell and Latchford JJ. dissented, holding that on the proper construction of the contract the authorization was limited to the five year term for which the municipal corporation had agreed that the right of the company should be exclusive.

[Page 70]

The Town of Cobalt is in the District of Nipissing. In June, 1912, the plaintiff company had already established telephone lines in the town. In that month an agreement was made between the company and the municipal corporation on the efficacy of which as an irrevocable consent or licence to the exercise of its powers within the municipality it is now conceded that the right of the company to maintain its poles and wires on the streets of Cobalt solely depends. It thus becomes unnecessary further to consider what the company had done in Cobalt prior to June, 1912, or the physical conditions then existing in regard to its poles and wires on the streets of that town, on which, at an earlier stage of this case, the plaintiffs had partly rested their claim of right to continue to maintain them.

While two questions—the first one of construction of the agreement of June, 1912, and the other one of the power of the municipality to make that agreement, if it should bear the construction put upon it by the plaintiff company—are presented for our consideration on this appeal, I have found it necessary to deal only with the second of these questions, which may be stated as follows:—If, notwithstanding the negative provision of the seventh clause of the agreement limiting the exclusive rights of the company to a period of five years and other clauses relied upon as indicating that the consent of the municipal corporation

to the company exercising its powers by constructing, maintaining and operating its lines of telephone upon, along, across, or under any highway, square or other public place within the limits of the town, etc.,

given by the first clause should be likewise restricted in its operation to the same term of years, the consent, permit or licence so accorded should be regarded as having been intended to be effective and irrevocable

[Page 71]

for an unlimited period, was it within the power of the municipal corporation to give such a consent, licence or permission?

Having regard to its definition clause, its scope and the fact that telephone companies were the subject of a special statute concurrently enacted, I agree with Mr. Justice Middleton that the “Municipal Franchises Act” of 1912 (2 Geo. V. ch. 42) does not apply to those companies.

The “Telephone Companies Act” of 1912 (2 Geo. V. ch. 38) only came into force on the 1st July of that year and, therefore, did not apply to the agreement of the 19th of June, 1912.

The plaintiff company was incorporated in April, 1905, by Letters Patent issued under the Ontario “Companies Act” (R.S.O. 1897, ch. 191)

to carry on within the District of Nipissing the general business of a telephone company, and for that purpose to construct, erect, maintain and operate a line or lines of telephone along the sides of, or across, or under, any public highways, roads, streets, bridges, waters, water courses, or other places,’ subject, however, to the consent to be first had and obtained, and to the control, of the municipal councils having jurisdiction in the municipalities in which the company’s lines may be constructed and operated, and to such terms, for such times and at such rates and charges as by such councils shall be granted, limited and fixed, for such purposes respectively.

Under section 9 of that Act the Lieutenant-Governor in Council was empowered to grant a charter of incorporation,

for any of the purposes and objects to which the legislative authority of the Legislature of Ontario extends,

with certain immaterial exceptions. By section 15 it was enacted that the corporation so created

shall be invested with all the powers, privileges and immunities which are incident to such corporation or are expressed or included in the Letters Patent and the “Interpretation Act” and which are necessary to carry into effect the intention and objects of the Letters Patent and such of the provisions of this Act as are applicable to the company.

[Page 72]

At bar the case was discussed as if, apart from the effect of any municipal by-law or contract conferring powers or rights upon the company, ch. 191 of the R.S.O., 1897, were the only legislation to be taken account of in determining its status, capacity, powers and rights. No allusion was made, nor do I find any in the judgments below or in the factums, to the legislation of 1907 repealing that Act and replacing it by a new “Companies Act” (7 Edw. VII. ch. 34) which, by sec. 210 (c), is made applicable (except so far as otherwise provided) inter alia

to every company incorporated under any special or general Act of the Legislature of the Province of Ontario.

By sec. 211 (1) this statute enacts that:—

Any Letters Patent * * * made or granted with respect to any company, corporation or association within the scope of this Act under any enactment hereby repealed shall continue in force as if it had been made or granted under this Act.

It would seem to follow that the plaintiff company cannot invoke sec. 15 of ch. 191 of the R.S.O. 1897, of which I find no counterpart in the Act of 1907, to support or justify the existence or exercise of any powers or rights subsequent to the 1st of July, 1907.

On the other hand, Part XII. of the Act of 1907, dealing with

companies operating municipal franchises and public utilities,

is, by section 154, confined in its operation to “applications for incorporation” by such companies, and would, therefore, seem not to apply to a company like the plaintiff already incorporated, unless it should seek reincorporation (sec. 9) or (possibly) the grant of additional powers by Supplementary Letters Patent (sec. 10). Section 3 of the Act of 1907 re‑enacts sec. 9 of the superseded statute of 1897, and its purview is unaffected by a subsequent formal amendment

[Page 73]

made by the 8 Edw. VII. ch. 43, sec. 1. Section 17 is in part as follows:—

17. A company having share capital shall possess the following powers as incidental and ancillary to the powers set out in the Letters Patent or Supplementary Letters Patent:—

* * * *

(f) To enter into any arrangements with any authorities, municipal, local or otherwise, that may seem conducive to the company’s objects, or any of them, and to obtain from any such authority any rights, privileges and concessions which the company may think it desirable to obtain, and to carry out, exercise and comply with any such arrangements, rights, privileges and concessions.

* * * *

(i) To purchase, take on lease or in exchange, hire or otherwise acquire, any personal property and any rights or privileges which the company may think necessary or convenient for the purposes of its business and in particular any machinery, plant, stock‑in‑trade;

* * * *

(q) To do all such other things as are incidental or conducive to the attainment of the above objects.

The corresponding provisions of the present law are to be found in the R.S.O. 1914, ch. 178, sec. 23, sub-sec. 1, clauses (f), (i) and (q).

It may be probable that under the Act of 1907 Letters Patent in the terms of those granted to the plaintiff would not be issued and it is not improbably the correct view that a company obliged to have recourse to clauses (f), (i) and (q) of that Act as the source of its powers and rights in that regard would possess nothing more than a subjective capacity to receive from a municipal corporation such rights upon its highways as it should see fit, acting within its powers, to confer. But I incline strongly to the view that the opening paragraph of section 17 has the effect of a legislative recognition of the existence of the powers which their Letters Patent purport to confer, if not in the case of companies incorporated under the Act of 1907, at all events in that of companies then in existence which had been incorporated under any of

[Page 74]

the superseded Acts—inter alia ch. 191 of the R.S.O. 1897. That recognition, I think, placed companies incorporated under the Act of 1897 in the same position after 1907 with regard to the character and efficacy of the powers and rights which their Letters Patent purported to confer as if section 15 of that Act were still in force.

I am, with respect, unable to appreciate the force of the contention of counsel for the appellant that the powers and rights of a company incorporated as this company was under the Ontario “Companies Act” of 1897 in regard to the use and occupation of the streets of a municipality (apart from the effect of the “Companies Act” of 1907) differed from what they would be had it been incorporated by a private statute conferring the same rights and powers in identical language.

We are probably bound, in deference to the authority of the Judicial Committee in Bonanza Creek Gold Mining Co. v. Rex^[5], to hold that a company incorporated by Letters Patent under the Ontario “Joint Stock Companies Act”

purports to derive its existence from the act of the Sovereign (through his representative the Lieutenant-Governor) and not merely from the words of the regulating statute,

and therefore possesses

a status resembling that of a corporation at common law—a general capacity analogous to that of a natural person.

But—I speak with deference—it possesses, in addition within the province whatever capacity, powers and rights, within its competence the legislature, having provided for the creation of the corporation by the Lieutenant-Governor in Council, as its delegate, has seen fit by the terms of the “Companies Act” itself

[Page 75]

to bestow upon it when so created; and it derives its existence, at least in part, from that statute under and pursuant to which the Lieutenant-Governor in Council purported to act in creating it and in defining its purposes, I am, with respect, unable to read the facultative language of authorization of sections 9 and 15 of the Ontario “Companies Act” of 1897 as amounting to nothing more than

words * * * which merely restrict the cases in which such a grant (i.e., of corporate existence) may be made

by the Lieutenant-Governor in the exercise of the prerogative^[6]. In both cases alike—that of such a company incorporated by Letters Patent issued under the Act of 1897 and that of the like company incorporated by special Act—the source of the power or right to use or occupy the highways is the legislature, the corporate body enjoying them being brought into existence in the one case by the act of its delegate, the Lieutenant-Governor in Council, and in the other by direct legislative action. In both alike, on the assumption that it is conferred in identical terms, the exercise of the power or right is conditional on the consent of the municipal corporation being obtained—which, so far as the constating instrument of the company affects the matter, may be given on such terms as the municipal corporation sees fit to impose—and remains subject to its control and regulation. But when and so far as that consent is effectively given the condition is satisfied and the power and right is then exercisable not by virtue of the consent, which merely removes a restriction that might not exist if unexpressed: City of Toronto v. Bell Telephone Co.^[7]; but see Sherbrooke Telephone Association v. Corporation of Sherbrooke^[8];

[Page 76]

but by virtue of the authority of the legislature over public highways exerted on behalf of the company, British Columbia Electric Rly. Co. v. Stewart^[9].

If, on the other hand, the view should prevail that the effect of its incorporation, whether by Letters Patent issued under the “Companies Act,” or by special statute (the purpose and powers in either case being formulated in the terms of the plaintiff company’s letters patent and of the Ontario “Companies Act” of 1897 above set forth), is merely the endowment of the company with a quasi-subjective capacity to acquire from those in control of it rights and powers in regard to the use of property vested in others, so that the exercise of such rights and powers when they are conferred upon it by those in control of the property on or over which they are to be enjoyed will not be ultra vires of the company or something to which any shareholder may object—for instance, to acquire from a municipal corporation the right to use and occupy highways under its control, so that the true source of the company’s rights and powers in that respect is the act of the municipal council—what I am about to say as to limitations upon the consent, licence, or permission to use its highways which a municipal council in Ontario may give to a telephone company will lose none of its force.

When the question before us is considered from the aspect of the power of the municipality to permit or consent to the use of the public highways, it may well be that such a power would be implied from a special Act of the legislature incorporating a company and granting to it powers similar to those here conferred in similar language, whereas the like implication would not arise upon the grant of Letters Patent of incorpora-

[Page 77]

tion under the “Companies Act” couched in like terms. The Lieutenant-Governor in Council is not by that Act made the delegate of the legislature to confer powers on municipal corporations. Any implication from a special Act incorporating a telephone company, however that power is thereby conferred on a municipal corporation to license the use of its highways by the company, would, in my opinion, be subject to such restrictions as are imposed by secs. 330 and 331 (1) of the “Municipal Act.”

But if the charter of the plaintiff company did not impliedly authorize the Corporation of the Town of Cobalt to give the requisite consent to the exercise of its powers by the plaintiff company within that municipality, sec. 559 (4) of the “Municipal Act,” in my opinion, clearly did so, subject, however, to such limitations as were imposed by secs. 330 and 331 (1) of the same Act.

Sub-section 4 of sec. 559 (as enacted by 6 Edw. VII., ch. 34, sec. 20) and secs. 330 and 331 (1) of the “Municipal Act” of 1903 (3 Edw. VII., ch. 19) are as follows:—

559. By-laws may be passed by the councils of the municipalities and for the purposes in this section respectively mentioned, that is to say * * *

* * * *

(4) For permitting and regulating the erection and maintenance of electric light, power, telegraph and telephone poles and wires upon the highways or elsewhere within the limits of the municipality.

330. Subject to the provisions of secs. 331 and 332 of this Act no council shall have the power to give any person an exclusive right of exercising within the municipality any trade or calling or to impose a special tax on any person exercising the same or to require a licence to be taken for exercising the same unless authorized or required by statute, so to do, but the council may direct a fee not exceeding $1 to be paid to the proper officer for a certificate of compliance with any regulations in regard to such trade or calling.

331 (1). The council of every city, town or village may pass by-laws granting from time to time to any telephone company upon such terms and conditions as may be thought expedient the exclusive right

[Page 78]

within the municipality for a period not exceeding five years at any one time to use streets and lanes in the municipality for the purpose of placing in, upon, over or under the same poles, ducts and wires for the purpose of carrying on a telephone business and may, on behalf of the municipal corporation, enter into agreements with any such company not to give to any other company or person for such period any licence or permission to use such streets or lanes for any such purpose; but no such by-law shall be passed nor shall any such agreement be entered into without the assent of two-thirds of the members of the council of the municipality being present and voting therefor.

Sections 331 (1) and 559 (4) being both found in the same statute must, if possible, be harmonized. So far as they may conflict, sec. 331 (1) dealing with the special subject of user of highways by telephone companies must prevail over sec. 559 (4), which has to do with the more general subject of the erection and maintenance by electric light, power, telegraph and telephone companies of poles and wires, whether on highways or elsewhere within the limits of the municipality. Whatever restriction or limitation may be necessary to give full effect to sec. 331 (1) must be placed on sec. 559 (4).

For the purposes of this appeal I shall assume that, were it not for the effect of secs. 330 and 331 (1), the defendant municipal corporation might, under sec. 559 (4), have permitted or licensed a telephone company to erect and maintain its poles and wires upon highways within the municipality for an indefinite term without power of revocation. Whether that has in fact been attempted in the present instance is, of course, another question. But I am, with respect, of the opinion that secs. 330 and 331 (1) impliedly precluded the giving of such a consent or the granting of such an irrevocable permit or licence to be effective for more than a term of five years. It was, in my opinion, incompetent for the municipal corporation to do any act which would have the effect directly or indirectly

[Page 79]

either of creating a monopoly prohibited by section 330, or of divesting itself of, or curtailing the free exercise of, the power conferred on it by sec. 331 (1) of providing, by by-laws to be passed from time to time, for an exclusive right of user of its streets for the purpose of carrying on a telephone business during a period of five years being vested in some one telephone company.

A municipal corporation cannot validly contract not to use discretionary powers committed to it for the public good. Ayr Harbour Trustees v. Oswald^[10], at page 634, per Lord Blackburn; Staffordshire and Worcestershire Canal Navigation v. Birmingham Canal Navigations^[11], at pages 268, 278-9; Brice on Ultra Vires (3rd ed.), p. 111. Dillon on Municipal Corporations (1911), par. 245; Town of Eastview v. Roman Catholic Episcopal Corporation of Ottawa^[12]. This case does not fall within the line of exceptions to or qualifications on this salutary rule indicated in Stourcliffe Estates Co. v. Corporation of Bournemouth^[13]. The municipal corporation in the exercise of its control over streets is a trustee for the public. It can sanction or licence the exercise of rights which derogate from the public right of user of the highways only in so far as it is given legislative authority to do so.

The necessary effect of granting for an indefinite period—a period which might, therefore, endure throughout the existence of the licence—an irrevocable licence or permit to use the streets of the municipality for the purpose of carrying on a telephone business would be to preclude the municipal council from granting to any other company at any future time such an exclusive right as sec. 331 (1) contemplates it

[Page 80]

may grant “from time to time.” The continued existence of such a licence is incompatible with the creation of such an exclusive right. In Hull Electric Co. v. Ottawa Electric Co.^[14], cited at bar, the licence of the respondent was revocable.

Having regard to the practical necessity for a single telephone system in a municipality owing to the manifest and manifold disadvantages and inconveniences of duplication, the granting of such an irrevocable licence for an indefinite term would, in effect, be tantamount to the conferring of an exclusive right of equally indefinite duration upon the licensee. The legislature certainly did not contemplate that a municipality should be enabled, however indirectly, to tie itself up to one company as a donee of an exclusive right of indefinite duration. Its doing so would alike be contrary to the spirit, if not to the letter, of the prohibition of section 330 and would set at naught the limitation imposed by sec. 331 (1).

Upon the grounds that the granting of an irrevocable consent or a licence or permit of indefinite duration, such as it had been held the respondent company obtained, would involve the municipal corporation divesting itself of the discretionary power conferred by sec. 331 (1), which it was the manifest policy of the legislature that it should retain in order to be in a position to exercise it from time to time in the interests of the municipality, and would, in effect, operate as an evasion, if not a direct violation, of section 330, I am of the opinion that such a consent, licence or permit, if the agreement here in question purported to grant it, would be ultra vires and therefore void.

I would, accordingly, allow this appeal with costs

[Page 81]

here and in the Appellate Division and would restore the judgment of the learned trial judge.

BRODEUR J.—Without expressing any view on the power of a municipal corporation to make a perpetual grant to a telephone company I am of opinion that in this particular case the contract passed between the appellant and the respondent would not authorize the respondent to claim a perpetual franchise in the streets of Cobalt.

The telephone company had no right to put its poles upon the streets of the municipality without the consent of that municipality and on such terms for such times and at such rates and charges as were agreed upon with the municipal authorities. In this particular case, the time limit was five years and even during that time the privilege should be exclusive.

The contract was for that period of time only. The municipal corporation is now entitled, the five years having expired, to have the poles removed from the streets and the telephone company cannot claim a perpetual franchise.

The appeal should be allowed with costs of this court and of the court below and the respondent’s action should be dismissed.

MIGNAULT J.—The question involved in this appeal is whether the appellant having, in 1912, made a contract with the respondent, whereby it consented to the latter exercising its powers by constructing, maintaining or operating its lines of telephone in the Town of Cobalt; and having agreed during the period of five years not to give to any other person, firm or company any licence or permission to use the highways, squares and public places of the town for the purpose of carrying on a telephone business, the respondent has

[Page 82]

the right to maintain its lines and poles in the said town indefinitely and in perpetuity.

It would, I must confess, require very cogent reasons to make me think that the parties ever contemplated that by this contract the Town of Cobalt had granted to the respondent a perpetual right to use its streets and public places for the purposes of its business. And notwithstanding the negative form of clause 7 preventing the town from granting to any other person or company during five years the right to use its highways, I would think, reading the contract as a whole, that it should be construed as having given to the respondent an exclusive right for five years to construct, maintain and operate its telephone lines, and that at the expiration of this term any right of the respondent to maintain its lines and poles in the public streets of the town came to an end unless a new agreement was made. I would not easily assume, in the absence of an express and clear covenant, that a perpetual right was granted, which would virtually deprive the town from exercising its full powers as to its streets and from making improvements or alterations therein.

But, if I am wrong in this construction of the agreement, I am of the opinion that in view of the terms of secs. 330 and 331 of the “Municipal Act” of 1903 (3 Edw. VII. ch. 19), fully discussed by my brother Anglin, the appellant could not grant a perpetual right to the respondent to construct and maintain its telephone lines and poles in the Town of Cobalt. Had the appellant granted such a right—and I think it has not—it would have abdicated its power to

pass by-laws granting from time to time to any telephone company upon such terms and conditions as may be thought expedient, the exclusive right * * * for a period not exceeding five years at any

[Page 83]

one time to use streets and lanes in the municipality for the purpose of carrying on a telephone business.

That such abdication by a municipal corporation of its powers over and to its streets and highways would be contrary to law and against public policy does not seem to me open to doubt. Dubuc v. La Ville de Chicoutimi^[15].

If the consent contained in the first clause of the respondent’s contract with the appellant be severable from the exclusive right conferred on the respondent by the seventh clause, so that it would continue after the expiration of the exclusive period, I would think that it would amount to a mere licence or permission which would be revocable at any time after the five years.

I would, therefore, allow the appeal with costs here and in the Appellate Division, and restore the judgment of the learned trial judge.

MASTEN J. (ad hoc).—This is an appeal from the judgment of the Appellate Division of the Province of Ontario, declaring that the respondent has the right in perpetuity to maintain and operate on the streets of Cobalt its telephone system, and enjoining the appellant corporation from interfering with such rights.

Concurring as I do in the result at which other members of the court have arrived, I think the appeal should be allowed and the judgment of the trial judge restored.

I base my conclusions on the view that the rights of the respondent company were acquired by agreement with the municipality of Cobalt and that such rights terminated either on the expiry of the five year term mentioned in clause seven of the agreement of June,

[Page 84]

1912, or by an effective revocation by the appellant corporation of any licence granted under clause 1 of that agreement—if such licence continued in force after the expiry of the five year term.

I think that what is termed in popular language “the franchise” granted by the agreement is to be defined in legal phraseology as a licence coupled with an interest and the duration of such licence, that is to say whether it was terminable or existed in perpetuity, is to be ascertained by an investigation of the intention of the parties and of their powers.

No express stipulation is made in the written agreement with regard to the continuance of the licence after the expiry of five years of exclusive enjoyment and consequently the intention of the parties as to its duration falls to be ascertained by a general consideration of all the terms of the agreement, the surrounding circumstances, the capacity of the parties and by an application of the principle that a grant in derogation of a public right is in case of doubt to be construed in favour of the public and against the licencee. I agree with the view expressed by Riddell J. in the court below, that clause 9 of the agreement (see Note “A” below) indicates that the parties intended an agreement for a certain term, that is a terminable agreement, not an agreement in perpetuity.

Note A.—Clause 9 above referred to is as follows:—

That the said company shall not, during the term of said franchise, charge more than forty dollars per year for a business wall telephone and twenty dollars per year for a private wall telephone to said municipality.

I also think that there is great force in the argument of the appellant corporation as stated in their factum in these words:—

* * * that the Letters Patent shew clearly that a consent once given is not an end of the matter particularly where, as here, no

[Page 85]

consent whatever was given before the lines were constructed. The first action by the town that is claimed to amount to a consent occurred in 1912. By the Letters Patent, the consent of the Municipal Council was a condition precedent and they also provide for “control” by the municipality after consent is given. It could also impose and fix “terms,” “times,” “rates and charges,” at any time after granting consent. Assuming, therefore, that the town consented to the respondent using its streets and originally imposed no limitation as to time and fixed no terms and rates, it could at a subsequent date limit the time and impose and fix terms and rates. Until the company fixed a time in a binding way its hands were free. The Letters Patent so provided.

For the terms of the charter see Note B.:—

Note B.—To carry on within the District of Nipissing the general business of a telephone company and for that purpose to erect, construct, maintain and operate a line or lines of telephone along the sides of or across or under any public highways, roads, streets, bridges, waters, water courses or other places subject, however, to the consent to be first had and obtained, and to the control of the municipal councils having jurisdiction in the municipalities in which the company’s lines may be constructed and operated and to such terms for such times and at such rates and charges as by such councils shall be granted, limited and fixed for such purposes respectively.

With respect to the surrounding circumstances, I note that in June, 1912, the respondent company had for some years been occupying the streets of the appellant corporation with their poles and wires. No consent had been given to such occupation and claim had been frequently put forward on behalf of the appellant corporation that the respondent company were trespassers. I think that clause 1 of the agreement was intended to operate as a fulfilment of the requirement of the charter as to municipal consent and an elimination of the claim which had theretofore been put forward that the respondent company had been or were then trespassers. Having thus cleared the ground, the next step taken by the parties was to provide by the combined operation of clauses 1 and 7 for an exclusive franchise definitely granted for a period of five years. It is possible that at the expiry of the

[Page 86]

five years of exclusive franchise the situation as contemplated by the parties was that the respondent company should still be in occupation of the streets, not as trespassers, but as licencees under the provisions of clause 1. In other words, that clause 1 remained in effect notwithstanding the expiry of the exclusive franchise granted for the first five years, but in that event I think that the right of the appellant corporation to fix the time of the duration of the licence came into operation and enabled it to effect a revocation, which it has done.

With respect to the capacity and power of the appellant corporation, I observe, without attempting to reach any positive conclusion, that it is manifest from the course of judicial decision in this case that grave doubts exist regarding the extent of the powers conferred on the municipality by the “Municipal Act.” In ascertaining the intention of the parties respecting the duration of the franchise the presumption is that the appellant corporation intended to act within the powers which it clearly possessed and not that it intended to assume powers the right to which was at least doubtful.

Lastly, if doubt remain notwithstanding the consideration to which I have adverted, such doubt is to be resolved in favour of the public right and against the respondent company.

I think that the principle of construction enunciated by Lord Stowell in The Rebeckah^[16], at page 230, applies to this case.

All grants of the Crown are to be strictly construed against the grantee, contrary to the usual policy of the law in the consideration of grants; and upon this just ground that the prerogatives and rights and emoluments of the Crown being conferred upon it for great purposes and for the public use it shall not be intended that such pre-

[Page 87]

rogatives, rights and emoluments are diminished by any grant, beyond what such grant by necessary and unavoidable construction shall take away.

I think that the principle so stated applies to a licence granted by a municipal corporation whereby the rights of the public in a highway are diminished. The principle was so applied by the Supreme Court of the United States in Knoxville Water Co. v. Knoxville^[17], where Mr. Justice Harlan, in delivering the judgment of the court, after referring to the various cases where the above principle had been applied, said:—

It is true that the cases to which we have referred involved in the main the construction of legislative enactments. But the principles they announce apply with full force to ordinances and contracts by municipal corporations in respect of matters that concern the public. The authorities are all agreed that a municipal corporation, when exerting its functions for the general good, is not to be shorn of its powers by mere implication. If by contract or otherwise it may, in particular circumstances, restrict the exercise of its public powers, the intention to do so must be manifested by words so clear as not to admit of two different or inconsistent meanings.

The same view was maintained in Blair v. City of Chicago^[18].

This conclusion renders it unnecessary for me to consider the capacity or powers of the appellant corporation or of the respondent company, but in view of the discussion that has taken place in the courts below respecting the effect of the “Companies Act” and the Letters Patent incorporating the respondent company, I ought perhaps to add one word.

It seems to me that when the agreement of June, 1912, was made the respondent company was governed by the “Companies Act” of 1907 as amended in 1908 and 1910. In support of that view I refer to secs. 210 (c) and 211 (1) of the “Companies Act” of 1907. I agree with the view that the ultimate source from which the powers of a company are derived is the

[Page 88]

legislature and in certain cases the Crown (Bonanza Creek Gold Mining Co. v. Rex^[19]). I also agree that the legislature can clothe the company with rights as well as with powers and that in so doing it can act either directly or by delegating to the Governor-in-Council the necessary authority. I fail, however, to find in the provisions of the “Companies Act” of 1907, as amended in 1908 and 1910, any warrant for holding that there has been delegated by the legislature to the Lieutenant-Governor in Council power to confer on a company objective rights as distinguished from subjective powers, or that this company was invested with such rights in 1912. I think that the “pith and marrow” of the “Companies Act” of 1907 is the incorporation of a company—the designation of its powers and the definition of the mutual rights of its shareholders inter se. In other words, the authority conferred upon the Governor-in-Council is, in my opinion, merely to bring into existence the entity known as the company and to endow it with certain powers, but I think the Act gives to the Governor-in-Council no authority as against other subjects of His Majesty to confer on the company so created objective rights of the kind here in question.

Dealing concretely with the facts of this case, I think that no actual immediate right, to occupy the streets of Cobalt was, or could be, conferred on the respondent company through the provisions of the “Companies Acts” under which it was constituted, but that any such right must have been acquired from the appellant corporation. I agree on this point with the views expressed by the trial judge and by Kelly J. in the courts below.

[Page 89]

The appeal should be allowed and the judgment of the trial judge restored.

Appeal allowed with costs.

Solicitors for the appellant: Tilley, Johnston, Thomson & Parmenter.

Solicitor for the respondent: F.L. Smiley.