Supreme Court of Canada
C.P.R.
v. City of Winnipeg, [1952] 1 S.C.R. 424
Date:
1951-10-22
Canadian Pacific Railway Company (Plaintiff) Appellant;
and
The City Of Winnipeg (Defendant) Respondent
and
The City Of Winnipeg (Defendant).Appellant
and
Cadaian Pacific Railway Company (Plaintiff) Respondent
1951: February 20, 21, 26, 27, 28; 1951: October 22.
Present: Rinfret C.J. and Kerwin, Taschereau, Rand, Kellock,
Estey, Locke, Cartwright and Fauteux JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR MANITOBA.
Taxation—Municipal Corporations—Companies—Covenant by
C.P.R. to continue its workshops within limits of City of Winnipeg forever—
Covenant by City to forever exempt C.P.R. property then owned or thereafter
owned within city's limits for railway purposes from all municipal taxes
forever—C.P.R. incorporated by Letters Patent under Great Seal authorized by
special act of Parliament—Whether possessed
[Page 425]
of powers of a Common Law corporation or of statutory
company— Whether possessed of power to so covenant—By-laws embodying agreement
validated by Act of Provincial Legislature—Whether agreement ultra vires of
City—Whether city's limits to be construed as of date of agreement or to apply
to subsequent extensions—Whether business tax within exemption—Whether exemption
includes C.P.R. hotel and restaurant.—The Canadian Pacific Railway Act, 1881
(Can.) c. 1; 1883 (Man.) c. 64; Canada Joint Stock Companies' Act, 1877 (Can.)
c. 43, s. 3.
Under an agreement entered into by the Canadian Pacific
Railway Company and the City of Winnipeg ratified by by-law of the latter and
validated by statute, the C.P.R. undertook to construct 100 miles of railroad
from the city south westerly and to erect a passenger depot within the city on
or before February 1, and November 1, 1883, respectively, and to deliver to the
city a bond obligating it with all reasonable despatch to build within the
limits of the city its principal workshops for the main line of its railway
within the Province and the branches thereof radiating from Winnipeg and to
forever continue the same within the city, and to erect within the city
cattleyards suitable for its main line and the said branches. The city
undertook in return to convey the lands upon which the depot was to be built
and to issue to the company debentures for the sum of $200,000. The agreement
further provided that upon the fulfilment by the C.P.R. of the conditions
stipulated in the by-law, all property then owned or that might thereafter be
owned by the company "within the limits of the City of Winnipeg for
railway purposes, or in connection there-with shall be forever free and exempt
from all municipal taxes, rates, and levies, and assessments of every nature
and kind."
The obligations assumed by both parties were fulfilled and no
question arose until 1948 when the City assessed all the lands and buildings,
including a hotel and restaurant, owned by the company, for realty and business
taxes.
In this action brought to restrain the assessment, four main
questions arose :
(1) Is the said agreement valid and binding?
If valid—
(2) Is the exemption operative only within the limits of the
city as these existed at the time the agreement was made or as those limits may
have been from time to time constituted?
(3) Is the exemption applicable to the hotel and restaurant?
(4) Does the exemption include business tax?
All questions were decided by the trial judge in favour of the
company. On appeal, his decision on question one was affirmed, but reversed on
the others.
Held: The appeal of the C.P.R. should be allowed, the
appeal of the City of Winnipeg dismissed, and the trial judgment restored. Rand
and Kellock JJ. would have varied the judgment so as to exclude the hotel and
restaurant from the exemption.
Per: Rinfret C.J., Kerwin, Taschereau, Locke and
Fauteux JJ.—It was unnecessary to determine whether the company was a common
law corporation; by virtue of 1881 (Can.) c. 1 and s. 4 of the Letters Patent,
the company had the power to enter into the agreement.
[Page 426]
Per: Rand and Kellock JJ.—The powers of the company
were not those of a common law corporation. Assuming that the company could not
bind itself to maintain the works in the city forever, but considering that (1)
the company might in fact maintain them indefinitely, (2) the city, having up
to the present time received the entire current consideration for which it had
bargained, (3) recission having been virtually impossible from the completion
of the works, and (4) for any failure in the future, security by way of
recoupment from future tax exemptions will be available, the city should be
restrained from repealing the by-law, upon the company undertaking, in the
event of any future removal of the works, to recoup the city for such damages,
not to exceed the amount of the benefits enjoyed under the tax exemption
hereafter, as might be found to be suffered by the city by reason of the
removal.
Per: Estey and Cartwright JJ.—The power to execute the
contract here in question was, in any event, necessarily incidental to the
express powers.
APPEAL by the city of Winnipeg, and a further appeal
by the Canadian Pacific Railway Company, from a judgment of the Court of Appeal
of Manitoba allowing in part an appeal by the city
from a judgment of Williams C.J.K.B. in favour of the C.P.R. in an action to
enjoin the city of Winnipeg from imposing certain taxation.
C. F. H. Carson, K.C., H. A. V. Green, K.C. and Allan
Findlay for the Appellant. As to whether the exemption is applicable to the
part added to the City The City's contention is that the phrase "the City
of Winnipeg", even though used without qualification, should be construed
as meaning the City of Winnipeg as it existed at the time By-law 148 was
passed. In the absence of such a qualification and of clear evidence to be
derived from the facts and circumstances existing at the time or from
subsequent conduct of the parties that such a qualification was intended, the
phrase should be given its natural meaning, that is, the City as from time to
time constituted. The facts and circumstances existing at the time of the
By-law and the subsequent conduct of the parties indicate that it was not
intended to give the phrase a restricted meaning but that it should have its
natural meaning. Charrington & Co. Ltd. v. Wooder ;
River Wear Commsrs. v. Adamson . By-law 148 was submitted
to
[Page 427]
and approved by the ratepayers of the city as then constituted
on August 24, 1881, and less than a year later, on May 30, 1882, a considerable
area was added to the city by c. 36 (Man.). On Sept. 20, 1882, By-law 195, the
sole purpose of which was to amend By-law 148, was referred to the ratepayers
of the city as extended. Had it been intended that the "City of
Winnipeg" in By-law 148 was to have the restricted meaning, it might
fairly be expected that this would have been indicated in the amending By-law.
It was not. Similarly when the City became subject to the general Municipal Act
of the Province, 1886, (Man.) c. 52, if the exemption was to be limited to the
City as it existed prior to the 1882 extension, it might be expected that the
City would have required some qualification to be inserted in the Act to make
that clear.
According to the majority of the Court of Appeal the provision
in clause 4(9) of By-law 148 that "this by-law shall take effect from and
after" Sept. 21, 1881, indicated that the exemption was to be limited to
the area of the City as it existed on the date the by-law came into effect. No
such interpretation can be fairly put or any such inference drawn. There are at
least two reasons why the by-law contained an express provision as when it was
to take effect. 1st—the by-law recited that the debentures to be given by the
City were to be payable in "twenty years from the date this by-law is to
take effect"; 2nd— S. 931 of the City's charter 1875 (Man.) c. 50, provided
that any by-law for contracting debts by borrowing money would only be valid if
the by-law "shall name a day in the financial year in which the same is
passed, when the bylaw shall take effect". The subsequent conduct of the
parties and the practices they followed under the agreement constitute a useful
guide in determining the construction to be placed on the phrases in the
agreement which are ambiguous. Ottawa v. C.N.R. . If the
exemption clause had not been operative in the added area prior to the time
when The Railway Taxation Act, 1900 (Man.) c. 57, came into force the
City would have had the power and the duty to tax the property of the Company
in that area. Realizing the exemption applied to it the City did not, except
for an unsuccessful attempt to levy
[Page 428]
school taxes, attempt to tax the Company's property-situated
either within the City's limits as constituted in 1881 or as subsequently
enlarged. The fact that the property of the Company in the area added by the
City after 1881 was not taxed from 1882 to 1900 and like other property of the
Company was shown on the assessment rolls with the notation "exempt by
By-law 148", is cogent evidence of the City's own interpretation of the
phrase "within the limits of the City of Winnipeg".
Pursuant to the bond and covenant given by the Company it duly
built its principal workshops for Manitoba in the City of Winnipeg as it
existed at the date of By-law 148 whereby it was bound to "forever
continue the same within the said City of Winnipeg." In 1903 it moved the
workshops to a location in the area added to the City in 1882 and has continued
them there ever since. No complaint was made by the City. This indicates that
neither the Company nor the City regarded the phrase "within the limits of
the City of Winnipeg" as used in clause 4(3) to have the restricted
meaning now contended for. If it was not used in the restricted sense in clause
4(3) of By-law 148, it can hardly be suggested that the same phrase was used in
a restricted sense in the exemption clause 4(8). In City of Winnipeg v. C.P.R.
,
the City did not contend that the exemption was inapplicable to the part of the
City added after 1881, and therefore, that at the very least the property of
the Company in that part of the City was liable for school taxes. This again
indicates that the City regarded the agreement as meaning that the exemption
applied to the added areas. Assistance may be furnished by other cases in which
the court had to deal with a similar problem. In City of Calgary v. Canadian
Western Natural Gas Co. , it was held that "the city"
referred to in a franchise agreement was not restricted to the limits of the
City as it existed when the franchise was granted. Other cases are: Toronto
By Co. v. Toronto ; Union Natural Gas Co. v. Chatham
Gas Co. ; United Gas & Fuel Co. of Hamilton
v. Dominion Natural Gas Co. .
[Page 429]
The question of whether the exemption is restricted in
application to the City as it existed in 1881 is now res judicata by
virtue of the School Tax case . The decision of the Court that the
"property of the Company is exempt from any liability to contribute toward
the support of the city schools", must be taken to have decided that the
property of the Company in the area added to the City in 1882 was subject to
exemption. Hoystead v. Commissioner of Taxation .
As to whether the exemption is applicable to the hotel and
restaurant of the Company. The exemption as set out in clause 148 of By-law
applies to "all property now owned or that hereafter may be owned" by
the Company "… for railway purposes or in connection therewith". The
question raised in the Empress Hotel case was
quite different. What was decided there was that that hotel within the meaning
of s. 92(10) (a) of the B.N.A. Act and of ss. 2 (21) and 6(c) of The
Railway Act 1919 (Can.) c. 68 was not part of the Company's
"railway" as the expression "railway" was used in those
sections. In the present case the question is whether the hotel is owned by the
Company "for railway purposes or in connection therewith". In other
words is the hotel owned by the Company for the purposes of the railway or in
connection with the purposes of the railway. Even if the question had been the
same in both cases, what the Privy Council decided as to the Empress Hotel
could not bind this Court in considering the position of the Royal Alexandra
Hotel. The decision of the Privy Council must be considered in the light of the
facts of the case. The position here is different. The evidence as to the
nature and functions of the hotel establishes clearly that it is owned
"for railway purposes and in connection therewith."
The agreement dated August 4, 1906, whereby the Company agreed
to make certain payments to the City, expressly recites that "the Company
has built and constructed in the City of Winnipeg (in connection with its
railway and the operation thereof) an hotel building …" Thus while the
City had claimed that the hotel "was not originally included within the
meaning of a railway or
[Page 430]
railway enterprise" it recognized by the terms of the
recital that the hotel was constructed "in connection with" the
railway and its operation, a recognition that the hotel was owned "for
railway purposes or in connection therewith" within the meaning of the
exemption in By-law 148. The Railway Taxation Act up to 1909 exempted
"the property of every nature and kind" of the Company, with certain
exceptions not relevant, and there could be no doubt the exemption included the
hotel. By the 1909 amending Act an additional exception was made namely
"all lands and property held by the Company not in actual use in the
operation of the railway." In 1914 and 1942 the Company was called on and
agreed to make larger payments to the City, on neither occasion did the City
base its claim for payment on the ground that the hotel and restaurant were not
"in actual use in the operation of the railway" and that because of
the change in the Act the conditions which existed when the agreement of 1906
was entered into no longer existed. Not only on the evidence of fact but also
on the interpretation placed on the terms of the exemption by the parties to
the agreement the hotel and restaurant constitute property owned for railway
purposes and in connection with railway purposes and are thus within the exemption.
As to whether the business tax is within the exemption. The majority of the
Court of Appeal were of the opinion that under the terms of the City's charter
the assessment for business tax was not an assessment of property and the tax
itself was a tax on the person and not on property, and therefore that the
exemption did not apply. Their decision was reached before judgment was
delivered in C.P.R. v. A.G. for Saswatchewan . It is
submitted that for the reasons given in the majority judgment in that case the
judgment of the majority of the Court of Appeal in the present case on the
question of business tax should be reversed.
Whether the agreement between the City and the Company set
forth in By-law 148 as amended by By-law 195 is valid and binding is raised by
the appeal of the City from the judgment of the Court of Appeal. So far as this
question is concerned the City is the appellant and the Company the respondent.
It is clear that all necessary steps
[Page 431]
were taken to render By-law 148 and amending By-law 195 valid
and binding upon the City. If there was any doubt as to the powers of the City
when the agreement was made to enter into the agreement and to enact the two
by-laws, such doubt was removed by the Legislature of Manitoba. By statute,
1883 (Man.) c. 64, s. 6, the two by-laws were declared to be "legal,
binding and valid upon the said Mayor and Council of the City of
Winnipeg". The Supreme Court of Canada in School Tax Case
held that "the whole and every part of the by-law was in express words
confirmed" by the validating act. The question has therefore been
concluded against the City.
Another question arising out of the City's appeal is whether
the Company had power to enter into the agreement. It is submited (i) That the
Company had the status of a common law company and as such had power to enter
into the agreement. (ii) It also had such power by virtue of its expressly
enumerated powers. The following cases are submited in support of the first
proposition. Baroness Wenlock v. River Dee Co. ; Bonanza
Creek Gold Mining Co. v. The King . As to the second
submission, the Company had the power to enter into and perform the agreemnt by
virtue of the expressly enumerated powers granted it by the charter. Even if it
were held to have the status of a statutory company with powers restricted to
those expressly enumerated, it is submitted that the Company had power to enter
into and perform the obligations contained in the Contract. Vide para. 4
of the Charter; clause 7 and 8 of the Contract.
The agreement with the City was intra vires the Company
as being expressly authorized by its charter or as being reasonably incidental
to the business expressly authorized by its charter. A. G. v. Mersey
Ry. ; A. G. v. Great Eastern Ry.
Co. ; Deuchar v. Gas Light &
Coke Co. . As to Whitby v. G.T.R. Co.
,
the facts and the conditions imposed differ and the case is to be
distinguished.
W. P. Fillmore, K.C., F. J. Sutton, K.C., and G. F. D.
Bond, K.C., for the respondent. While the Company delivered to the City a
form of bond and covenant in pur-
[Page 432]
ported compliance with the conditions and stipulations set out
in By-law 148, s. 4 (3) and (4) such bond and covenant was of no force or
effect as the Company had no power either expressly or by implication to give
it. The fact that it was soon found necessary to remove the workshops outside
the original limits of the City shows that the original site was not suitable
and that the covenant to forever continue them within the City as then constituted
was incompatible with the efficient operation and management of the railway.
The directors of the railway had no power to enter into an agreement so onerous
on the Company and binding on it for all time. It amounted to a covenant not to
exercise its statutory powers. It was in conflict with the Company's
contractual obligations to the government to forever efficiently maintain and
operate the C.P.R. To ascertain the statutory powers of the Company it is
necessary to turn to the Consolidated Railway Act, 1879 (Can.) c. 9, to
which the charter is subject. The following sections appear material, ss. 2(2),
5 (1),(16), 6, and 7(1), (2), (8), (10) and (19). Nowhere in 1881 (Can.) c. 1,
the incorporating Act or charter of the Company, nor in the Consolidated Ry.
Act, 1879, is there any express power conferred on the Company to enter into a
perpetual covenant to forever maintain their principal workshops for the main
line at any designated location. On the contrary, there are clear implications
that the Company had no such right or authority. The Company has not been able
to point to any express power but it is argued that the Company has all the
powers of a common law company on account of the charter having been dealt with
under the Great Seal. As to the powers of the Company to enter into a perpetual
covenant relating to the operation of the railway, the City relies upon Whitby
v. G.T.R. ; Montreal Park & Island Ry. Co.
v. Chateauguay & Northern Ry. Co. ; Town of Eastview
v. R. C. Episcopal Corporation of Ottawa . The
Company had no express or implied power to fetter or part with its statutory
powers by entering into the covenant which was a condition precedent to tax
exemption. Further any implications to be found in the charter and relevant
statutes are to the contrary. The agreement must be construed as if the
controversy had
[Page 433]
arisen the day after the agreement was executed. You cannot
test the question of ultra vires by waiting to see whether the
corporation which acted beyond its express powers made a good bargain. Re
North Eastern Ry. v. Hastings ; Charrington v. Wooder
.
The agreement must be evaluated in the light of the circumstances existing at
the time it was entered into. Bank of N.Z. v. Simpson ;
River Weir Commsrs. v. Adamson .
The City contends that the incorporating Act, the contract
thereby approved and the schedule annexed together with the Consolidated Ry.
Act, 1879, exhibit all the powers Parliament granted or authorized to be
granted the Company and the doctrine of ultra vires applies. It submits
in particular that (a) The incorporating Act was a special Act. (b)
The recitals in the incorporating Act and in the charter show that the Governor
in Council carried out the directions of Parliament, acted as its delegate in
issuing the prescribed charter and did not purport to exercise and did not
exercise the royal prerogative in that behalf. (c) The Governor in
Council could not by royal prerogative create a railway company with all the
powers, privileges and property rights granted the Company and the charter
would have been invalid without the Act of Parliament. (d) Any intention
to create a common law corporation is excluded by necessary implication.
The incorporating Act was not only a special Act but a special
Act for a special purpose and the Company derives its legal existence wholly
from the incorporating statute and the charter thereby prescribed and
authorized. 1881 (Can.) ss. 21, 22, The Railway Act, 1879, s. 5 (1) and
(16). Corresponding sections of The Railway Act, 1919, were discussed in
C.P.R. v. A.G. of B.C. . It was there held that it was only by
virtue of this Act that the Company had power to acquire hotels, etc., and it
was the opinion of the Court or some members thereof that the C.P.R. Act of
1902 was a special Act. (Estey J. at 386, 87). This opinion is in line with Elve
v. Boyton . In the Bonanza Creek case
Lord Haldane at 584: "In the case of a company the legal existence of
which is wholly derived from the
[Page 434]
words of a statute the company does not possess the general
capacity of a natural person and the doctrine of ultra vires applies".
The recitals in the incorporating Act and in the charter show
that the Governor-in-Council carried out the directions of Parliament and acted
as its delegate in issuing a charter to the Company and did not purport to
exercise and did not exercise the Royal Prerogative in that behalf. Vide
s. 2 of the Act and the recital in the charter. Cobalt v. Temiskaming
Telephone Co. . As the exact form of charter was prescribed
by statute and agreed upon by the approved contract it is clear that the
authority conferred upon the Governor General was merely to bring into
existence the entity to be known as the Canadian Pacific Railway. The Governor
General could not and did not purport to over-ride the Act of Parliament or the
approved agreement by conferring additional powers on the railway company. The
Governor-in-Council could not by Royal Prerogative create a railway company
such as the C.P.R. and the charter would have been invalid if not authorized by
an Act of Parliament. The Canada Joint Stock Companies Act, 1877 (Can.),
c. 43, s. 3. C.P.R. v, Notre Dame de Bonsecours Parish .
Any intention to create a common law corporation is excluded
by necessary implication. The Company derived its entire existence from the act
and will of Parliament and did not require and did not receive any grant from
the Crown either directly or through the Governor General as its delegate. It
was brought into existence by direct legislative action. Cobalt v. Temiskaming
Telephone Co. supra at 74, 75. A.G. v. De Keyer's Royal Hotel
,
B.C. Coal Corp. v. The King , Canadian Bank of
Commerce v. Cudworth Telephone Co. , where the Bonanza Creek
case was distinguished. In Re Northwestern Trust Co. and the Winding-up Act
,
the Cudworth case was followed and the Bonanza Creek case
distinguished. Toronto Finance Corp. v. Banking Corp.
is also relied on.
The powers of the C.P.R. and the C.P.R. Act of 1902 are
discussed at length in C.P.R. v. A.G. for B.C. but
[Page 435]
the contention that the C.P.R. possessed all the powers of a
common law corporation was apparently not made in the argument or referred to
in any of the judgments. On this point the City refers to and relies on the
judgment of Dysart J.A. in the court below, concurred in by Richards J.A. The
majority of the judges in the court below failed to appreciate that the Company
was not incorporated under a Joint Stock Companies Act but was a company
incorporated for a special purpose and pursuant to a contract between the
government and the promoters. They failed to appreciate that the Bonanza Creek
Gold Mining Co. was incorporated by letters patent under the Ontario Joint
Stock Companies Act and in the opinion of Lord Haldane purported to derive its
existence from the Act of the sovereign and not merely from the words of the
regulating statute and therefore possesed a status resembling that of a
corporation at common law.
In the event of the Court holding that it was beyond the power
of the Company to give the bond and covenant mentioned in By-law 148 as amended
by By-law 195, the question arises whether the City is estopped from setting
this up by reason of the judgment in C.P.R. v. Winnipeg .
The power of the Company to give the bond and covenant was not discussed or
even mentioned in the pleadings or judgment or reasons for judgment in the
Supreme Court or in the Court below, and it is submitted that no issue was
raised in the pleadings upon which this question could have been determined. It
is submitted there can be no estoppel by res judicata unless everything
in controversy in the proceedings where the question of estoppel is raised was
also in controversy in the litigation which resulted in the judicial decision
relied upon as an estoppel. Outram v. Morewood ; Notes
to the Duchess of Kingston's case Spencer Bower's Res
Judicata at p. 121 citing Moss v. Anglo Egyptian Navigation Co.
;
13 Hals. pp. 411-12, s. 466 (2nd ed.) Langmead v. Maple ;
Johanesson v. C.P.R. ; Howlett v. Tarte .
[Page 436]
All that the court decided in the first action between the
City and the Company was that by-law No. 148 as amended by by-law 195 was a
valid by-law and that school taxes were included in the phrase "municipal
taxes, rates and levies and assessments of every nature and kind." The
question of whether it was ultra vires the company to give the bond and
covenant was not fundamental to the decision in the first action, and it is not
res judicata in the present action.
If the agreement set forth in By-law 148 was ultra vires
the Company it cannot become intra vires by reason of estoppel, lapse of
time, ratification, acquiesence or delay. York Corp. v. Henry Leetham
& Sons Ltd. ; Toronto Electric Light Co. v. City
of Toronto . It is also submitted for the reasons
mentioned in para. 341 of the reasons for judgment of the learned trial judge,
the agreements between the City and the Company relating to the Royal Alexandra
Hotel in 1906, 1914 and 1942, do not operate as an estoppel as contended by the
plaintiff.
The judgment of the Chief Justice, Kerwin, Taschereau and
Fauteux, JJ. was delivered by:
Kerwin J.:—The
Canadian Pacific Railway Company appeals and the city of Winnipeg cross-appeals
against a judgment of the Court of Appeal for Manitoba. The dispute between the
parties hinges upon clause 8 of by-law 148 of the city, passed September 5,
1881, which clause reads as follows:
8. Upon the fulfilment by the said Company of the conditions
and stipulations herein-mentioned, by the said Canadian Pacific Railway Company
all property now owned, or that hereafter may be owned by them within the
limits of the City of Winnipeg, for Railway purposes, or in connection
therewith shall be forever free and exempt from all municipal taxes, rates and levies,
and assessments of every nature and kind.
The conditions and stipulations referred to are contained in
preceding clauses of the by-law by which the company undertook to build,
construct and complete, on certain property in the city, a substantial and
commodious
[Page 437]
general passenger railway depot, and particularly clause 3,
reading as follows:
3. The said Canadian Pacific Railway Company, shall
immediately after the ratification of this by-law as aforesaid, make, execute
and deliver to the mayor and Council of the City of Winnipeg a Bond and
Covenant under their Corporate Seal, that the said company shall with all
convenient and reasonable dispatch establish and build within the limits of the
City of Winnipeg, their principal workshops for the main line of the Canadian
Pacific Railway within the Province of Manitoba, and the branches thereof
radiating from Winnipeg, within the limits of the said province, and for ever
continue the same within the said City of Winnipeg.
This by-law and an amending by-law No. 195 passed September
20, 1882, were ratified and confirmed by an Act of the Manitoba Legislature. It
is admitted that the company fulfilled its obligations and with the exception
of an abortive attempt by the city to impose school taxes, Canadian Pacific
Railway Co. v. City of Winnipeg , no question arose
between the parties as to the company's liability to taxation until, in the
year 1948, the city attempted to assess and levy realty and business taxes,
when this action was brought for a declaration that the company was not so
liable.
The company succeeded at the trial but the judgment in its
favour was set aside by the Court of Appeal by a majority, although there a
majority were in agreement with the conclusions of the trial judge upon the first
question involved, viz., the capacity of the company to enter into the
agreement evidenced by by-laws 148 and 195. The trial judge considered that the
company had the status of a common law corporation with powers analogous to
those of a natural person and in that view the Chief Justice of Manitoba and
Coyne J.A. and Adamson J.A. agreed. The latter also held, as had the trial
judge, that in any event the expressly enumerated powers of the company gave it
authority to make the agreement, and on this additional ground held the
agreement intra vires. Richards J.A. and Dysart J.A. held that the
company's powers were limited to those set forth in a special Act authorizing
its charter but the former held that the agreement was within such powers and intra
vires the company so that the latter was the only member of the court
dissenting on the question as to the company's power to enter into the
agreement.
[Page 438]
On this first point I find it unnecessary to determine
whether the city was incorporated by Royal Charter and hence had all the powers
of a natural person, and therefore it is inadvisable to say anything upon the
subject. The enumerated powers of the company, which appear in the reasons for
judgment of several of the members of this court, and in the reasons for
judgment in the courts below are sufficient in my view to authorize the company
to do as it agreed, and as was subsequently carried out. Decisions like Whitby
v. Grand Trunk Railway Co. relied upon by the city, depend upon the
terms of the enactments conferring the particular powers there in question. I
might add that I have found it unnecessary in the consideration of this point,
or any of the others, to deal with the company's argument that because of the
decision in C.P.R. v. City of Winnipeg (supra), several of
the matters now raised by the city are res judicata.
The second question is whether the exception is confined to
property within the limits of the city existing at the date of by-law 148. Upon
a review of all the terms of the by-law, and in view of the circumstances that
existed at the time of its enactment, I have come to the conclusion that this
question should be answered in the negative. If there be any ambiguity in the
construction of those terms, which I do not think there is, the company's
contention would be advanced by the fact that by the time by-law 195 was passed
the company had executed part of its obligation on land that had been taken
into the city subsequent to the enactment of by-law 148.
The third question, whether business taxes are included in
the exemption is settled by the decision of this court in C.P.R. v. Attorney
General of Saskatchewan .
The fourth question, whether the exemption is applicable to
the company's Royal Alexandra Hotel and the restaurant in the railway station
should be answered in the affirmative. Whatever bearing the company's
enumerated powers under its charter might have upon the point as to the power
of the company to build hotels need not be considered in view of the Act of
1902. Undoubtedly since then the company has such power and the Royal Alexandra
Hotel and the restaurant fall in my opinion within the
[Page 439]
words of the exemption: "all property owned or that
hereafter may be owned … for railway purposes, or in connection therewith."
The hotel property or restaurant need not be owned exclusively either for
railway purposes or in connection with railway purposes. Other cases decided
upon other provisions are not helpful but in connection with the point as to
the limits of the city, as well as the point now under discussion, the
arrangement set forth in by-law 148 as amended should be construed as is said
by Lord Sumner in City of Halifax v. Nova Scotia Car Works, Limited
,
as "one of bargain and of mutual advantage." The decision of the
judicial committee in Canadian Pacific Railway Company v. Attorney
General for British Columbia , depended upon the construction of the
British North America Act, 1867.
The appeal should therefore be allowed and the cross-appeal
dismissed, both with costs, the judgment of the Court of Appeal set aside and
that of the trial judge restored. The appellant should have its costs in the
Court of Appeal.
Rand J.:—Of
the several points raised, I shall deal with only one: the authority of the
company to bind itself forever to maintain the principal workshops for the
province in the city and the legal situation resulting from its absence.
On the first branch of the argument, that is, whether the
company, from its incorporation by letters patent under the Great Seal of
Canada, possesses all the powers of a common law corporation, the controlling
consideration, as decided by the judicial committee in the Bonanza Creek Co.
case , is the source from which the
incorporating efficacy is drawn, whether from the statute or from the
prerogative. On this, I should say that that source cannot be the prerogative
alone for the reason that the authority to construct a railway, as given to the
company, could not arise from it. The incorporation not only creates the
capacities of the company but clothes it with essential powers and some of
these latter impinge on common law rights and liberties for which legislation
is essential. Nor can I infer from the statute an intention to authorize
faculties proceeding from both sources: the incorporation
[Page 440]
was of an entirety of objects, capacities and powers; and
although special powers can by legislation be conferred on a common law
corporation, I know of no authority under the prerogative to add capacities to
a statutory corporation.
Then it is argued that the scope of the statutory endowment
was sufficient for the covenant given. Viewing the question from the standpoint
of the interest of the company as a private enterprise, it is difficult to see
the creation of any obligation that violates the original compact of the
shareholders inter se; but the principle of ultra vires, in
addition to the general public interest in the authorization of corporate
action, has public aspects of special significance in enterprises of the nature
of that before us. Here was an undertaking conceived primarily for a high
national purpose; it was designed as a bond to complete the scheme and
organization of a Dominion extending from ocean to ocean by furnishing the
essential means for the settlement and the utilization of the resources of its
western half; and the company was made the beneficiary of substantial
assistance from the public in money, lands and privileges. That object indeed
exemplifies the importance of the initial construction; once permanent works
were established, they would tend to draw to themselves an adjustment of other
services and arrangements and the system of operations would become a settled
accommodation which, in ordinary circumstances, would deepen its rigidity with
the years. All this, in turn, would have its reflex in shaping the course and
development of the social and business life of the community which it was to
serve. But unusual circumstances, as at times eventuated in the early days of
railway projects, might necessitate changes in transportation plans and
arrangements and we might have such a situation as was presented to the courts
of Ontario in Whitby v. Grand Trunk Railway Co. .
I do not find it necessary, however, to decide the question.
I will assume that the company could not bind itself to continue forever the
workshops, and the question is, what follows from that. The entire transaction
must be kept in view, and for that purpose it is desirable to summarize the
details.
[Page 441]
By-law No. 148 (later embodied in by-law No. 195) was passed
by the city on September 5, 1881 and its provisions were to take effect from
September 21, 1881. Along with others it was confirmed by c. 64, Statutes of
Manitoba, 1883, and by c. 52 of the Statutes of 1886. It was to become
effective as a contractual obligation of the city on the performance by the
company, to which it is to be observed the company did not bind itself, of
certain conditions. These were the construction of the Pembina branch line to
the southwest on or before February 1, 1883; the construction of a passenger
depot in the city within the same time; and the giving of a covenant forthwith
after the passing of the by-law to build within the city and with all
reasonable despatch and forever to continue the principal workshops of the
railway within Manitoba, and as soon as convenient to erect suitable
stockyards. Upon the fulfillment of those three conditions, bonds of the city
in the sum of $200,000 were to be delivered to the company and all property of
the company within the city was thereafter and forever to be free and exempt
from municipal taxation.
A deed of the land on which the station was to be built was
to be delivered to the company upon the delivery of the covenant. On April 18,
1882 that deed was executed and it recites in the preamble that "the said
bond (covenant) has been by the said company made, executed and delivered as
required in the said by-law mentioned". Upon the further completion of the
branch line and the depot within the time stated, the bonds were delivered
under the authority of by-law No. 219 passed on March 30, 1883. In its preamble
it is recited:
AND WHEREAS the Canadian Pacific Railway Company mentioned
in said by-law No. 195 have completed and performed all the conditions mentioned
in the said by-law and in all other respects complied with the same: and it is
desirable that the said trustee should be instructed to deliver the bonds
mentioned therein, with the coupons still unmatured, to the Canadian Pacific
Railway Company or their proper officer on that behalf.
Later, pursuant to the covenant, the workshops and the
stockyards were constructed and the former have at all times since then been
maintained. As from the same time, that is, the time for the delivery of the
bonds, the exemption from taxation has been respected until 1948.
[Page 442]
The language of by-law No. 148 dealing with the furnishing
of the covenant should be noticed:
(3) The said Canadian Pacific Railway Company shall
immediately after the ratification of this by-law as aforesaid, make, execute,
and deliver to the mayor and council of the City of Winnipeg a bond and
covenant under their corporate seal * * *
The company was clearly within its powers in building the
branch line, depot, workshops and stockyards as it did; it would be absurd to
say that the city could object to any part of that performance on the ground
that the obligation to make it was invalid: and the remaining obligation to
continue the workshops is clearly severable from that for their construction. But
on the assumption I am now making the instrument cannot be said to furnish the
entire consideration to which the city was entitled and there is, to that
extent, a partial failure of a promissory character, although the performance
has to this moment been completely and validly maintained.
The question of law then is this: whether a partial and
severable failure of promissory consideration, followed by an entirety of
irrevocable execution of the remaining consideration to the benefit of the
other party, can be the ground on which a continuing and substantial obligation
on the part of the latter can be repudiated. Rescission is obviously impossible
as it has been from the moment the first work was completed. As early as 1888
the city could have taken the ground it now takes: and it is only the accident
of the present search for grounds of escaping taxation exemptions that
discloses the flaw today.
The significance of the contract to the city lay in the
location of the railway and its centres of administration. The city was at the
beginning of its life: it was seeking to establish itself as a focal point in
the massive development of the West which was then in prospect. At that stage
the action of the railway was of controlling importance. Transportation was the
paramount agency in creating and promoting business and population groupings
and probably no single factor has contributed so largely to the growth and
wealth of what is now a great metropolis than the measures dealt with in the
contract before us. The railway system is now too deeply integrated with the
settled life of the province and the entire West to permit of any major
readjustment: the city has attained a dominant position
[Page 443]
on the prairies, and the removal of the workshops could have
no more than a minor effect on its economic life or interest. In other words,
the city having absorbed irrevocably the substance of the benefit under the
contract seizes upon this item which may never manifest itself in default, and
which even in actual breach would create little more than a ripple on the
surface of its economy, to justify repudiation notwithstanding that the courts,
as I shall endeavour to show, could deal effectively with such a default should
it ever arise.
Both parties assumed the capacity of the company to make the
covenant and acted under a common mistake of law; as executed it was in the
precise form stipulated by the by-law; and it was accepted as a fulfilment of
one of the conditions upon which the exemption from taxation became effective.
On the strength of that acceptance, the construction of the workshops and
stockyards was carried out. In these circumstances, the city is now estopped
from taking the position that the exemption clause in the by-law never became
effective; the coming into force of that provision is in the same category as
to effectiveness as was the delivery of the bonds to the company: it is the
same as if a new by-law had then been passed. The exemption provision became
therefore and remains in effect, and in the absence of its repeal, there is
today no authority in the city to tax the company's property.
The principle of enforcement in equity of contractual
obligations with compensation is long established, and its employment here is
dictated by the reasons on which it is based. Its general application has been
confined to contracts for the sale of land. But the sale of land was part of
the consideration here; the remainder was and is an indirect interest in and a
beneficial consequence resulting from the operation of works on land. The
controversy is broadly, then, within the scope of matters in which the
principle has in the past been employed: there is not merely a close analogy,
the actual items of land and interest constitute the basic subject-matter.
The circumstance that differentiates the situation here from
the generality of ultra vires contracts is the characteristic of time
attached to the physical acts of performance. Those acts by both parties are intra
vires: the exemption
[Page 444]
was confirmed by the legislature; the workshops may, in the
discretion of the company, be continued within the city limits forever, indeed
the existing circumstances may in fact compel that performance, and the city
would then receive from the company the whole of what, by the contract, it
sought. It is only the substitution of obligation for discretion in that
continuance that raises the difficulty.
The company could, at the outset, have validly accepted and
can today accept the future tax exemption on the condition that if at any time
the workshops should be removed, the amount of the taxes so saved would be
recouped to the city to the extent of damages it might suffer from the removal:
it would be the return of a benefit conditioned on a failure to maintain a work
within the power of the company to create, maintain, or abandon. Such an
arrangement would, I think, be clearly within the company's powers expressly or
impliedly conferred by the incorporating statute as well as the Railway Act.
That is closely analogous to one case of specific
performance with compensation. When a vendor seeks to enforce an agreement,
compensation is a voluntary condition of relief; the vendor enters Court
offering to give up a portion of the price of what he promised to and cannot
fully convey. This may, roughly, be equivalent to damages, but it is not in law
of that character.
Such a mode of adjustment may here be said to substitute a
conditional for a promissory term in the contract: instead of mutual promises
to maintain and exempt, the obligations would be, to exempt so long as the
workshops are maintained and to recoup should that cease. It is modifying the
legal situation no doubt, but that would not be novel in equitable
administration: all equitable relief modifies the legal situation; and since,
at law, the parties would now be left as they are, that neither of the
outstanding obligations would be enforced, it is just such a result that the
principle of relief against unjust enrichment is in every case called in to
redress.
In this exceptional conjunction of circumstances, to carry a
rule of ultra vires to an ultimate logic would, in the presence of the
institution of equity, be its reduction to absurdity. At such a point, logic
must yield to common sense as well as to justice. The city, by reason of these
[Page 445]
matters, has drawn upon itself an equity of obligation; it
would be inequitable and unjust while it is enjoying to the full the actual
benefits for which it bargained to refuse to pay the price for them. There is
no question of enforcing an ultra vires promise against the company nor
of exacting performance by the city as the consideration of an ultra vires
promise. The position of the city before any step was taken to withdraw the
exemption, a position of full current but unenforceable performance on both
sides, can in substance, from now on, be preserved by the application of
established principles; and as equity looks at the substance and not the form
of what is presented to it, to maintain that position would accord with the basic
reason for equitable interposition at any time.
As the company asserts the covenant to be good, it is as if
it were proffering an undertaking, in the event of the removal of the workshops
from the city, to recoup to the city out of the benefit received through the
future tax exemption, such amount of compensation as the Court might determine
to be the loss the city might thereby sustain; on that basis, the declaration
and injunction asked for should go.
In all other respects, I concur in the views reached by my
brother Kellock whose reasons I have had the privilege of reading.
Kellock J.:—This
is an appeal from a judgment of the Court of Appeal for Manitoba in an action
brought by the appellant for a declaration that certain property owned by it in
the respondent municipality is entitled to exemption from municipal assessment
under by-law No. 148 as amended by by-law No. 195 of the city, both having been
validated by provincial legislation. The appellant succeeded at the trial, but,
while the agreement evidenced by the by-laws was upheld on appeal, it was
construed so as to deprive the appellant of the essential relief claimed. Four
questions are involved:
(1) the capacity of the appellant to enter into the
agreement evidenced by the by-laws;
(2) whether the exemption is confined to property within the
limits of the city existing at the effective date of the by-law;
(3) whether business taxes are included in the exemption;
and
(4) whether the exemption is applicable to the appellant's
Royal Alexandra Hotel.
[Page 446]
As to the first question, it was held by the Chief Justice,
Coyne and Adamson JJ.A., in agreement with the learned trial judge, that the
appellant has all the powers of a common law corporation and accordingly had
capacity to enter into the agreement in question. Dysart and Richards JJ.A.
were, however, of opinion that the appellant had only statutory powers. The
former considered that the agreement was not within those powers. The latter
was of a contrary opinion.
With respect to the other questions, the opinion of
Richards, Dysart and Adamson JJ.A. was in favour of the respondent. The Chief
Justice and Coyne J.A. dissented.
By-law No. 148, passed September 5, 1881, recites that it is
desirable that a line of railway southwesterly from the city should be built
for the purpose of developing and advancing the traffic and trade between the
city and the southern and southwestern portions of Manitoba; that it is also
desirable to secure the location of the workshops and stockyards of the company
for the province of Manitoba at the city of Winnipeg, as a central point on the
main line of the railway and the several branches thereof, and that it
is expedient for the city, in consideration of the agreement of the company to
do these things, to lend their aid to the company by granting to the company
debentures of the city to the amount of $200,000, and by exempting property of
the company
now owned or hereafter to be owned by the said Railway
Company for Railway purposes within the City of Winnipeg from taxation forever.
A suitable site for a station was also to be conveyed by the
city to the company.
The by-law authorizes the issue and delivery of the
debentures upon fulfilment by the railway company of certain conditions,
namely,
1. Construction of the railway mentioned in the recital by
February 1, 1883;
2. Construction by the same date of a station on the lands
to be conveyed to the company by the city;
3. Delivery by the company, upon ratification of the by-law
by the ratepayers, of a formal covenant that the company would, with all
convenient and reasonable dispatch, establish and build "within the limits
of the city of Winnipeg" their principal workshops for "the main line
within the province of Manitoba, and the branches radiating from the
city," and "forever continue the same within the said city of
Winnipeg";
[Page 447]
4. The covenant should extend also to the erection within
the "city of Winnipeg" of stock or cattle yards suitable for the
central business of the main line and the said branches.
The covenant does not of itself stipulate the continued
maintenance of the stockyards within the city, but the recital states that the
company had so agreed.
With respect to the question of capacity, I agree with the
conclusion of Richards and Dysart JJ.A. that the appellant has not the powers
of a common law corporation. Appellant was incorporated by letters patent under
the Great Seal issued pursuant to s. 2 of the statute of Canada, 44 Vict. c. 1,
assented to on February 15, 1881. The statute approved of a contract dated
October 21, 1880, for the construction of "the Canadian Pacific
Railway" as described in the Act of 1874, 37 Vict. c. 14, in part by the
company and in part by the government, the whole of which was to become the
property of the company, which obligated itself forever thereafter to
"efficiently maintain, work and run" the same. Paragraphs 21 and 22
of the contract read as follows:
21. The company to be incorporated, with sufficient powers
to enable them to carry out the foregoing contract, and this contract shall
only be binding in the event of an Act of incorporation being granted to the
company in the form hereto appended as Schedule A.
22. The Railway Act of 1879, in so far as the provisions of
the same are applicable to the undertaking referred to in this contract, and in
so far as they are not inconsistent herewith or inconsistent with or contrary
to the provisions of the Act of incorporation to be granted to the company,
shall apply to the Canadian Pacific Railway.
The schedule referred to in para. 21 above provides by para.
1 that certain individuals,
with all such other persons and corporations as shall become
shareholders in the company hereby incorporated, shall be and they are hereby
constituted a body corporate and politic, by the name of the "Canadian
Pacific Railway".
Para. 4 reads as follows:
All the franchises and powers necessary or useful to the
company to enable them to carry out, perform, enforce, use, and avail
themselves of, every condition, stipulation, obligation, duty, right, remedy,
privilege, and advantage agreed upon, contained or described in the said
contract, are hereby conferred upon the company. And the enactment of the
special provisions hereinafter contained shall not be held to impair or
derogate from the generality of the franchises and powers so hereby conferred
upon them.
[Page 448]
Para. 17 contains provisions similar to para. 22 of the
contract, and by paragraphs 18 to 23 inclusive, certain sections of the
Consolidated Railway Act are varied in their specific application to the
company. The schedule, in subsequent sections, bestows further specific powers.
With respect to the enacting provisions of the statute
itself, s. 2 reads as follows:
For the purpose of incorporating the persons mentioned in
the said contract, and those who shall be associated with them in the
undertaking, and of granting to them the powers necessary to enable them to
carry out the said contract according to the terms thereof, the Governor may
grant to them in conformity with the said contract, under the corporate name of
the Canadian Pacific Railway Company, a charter conferring upon them the
franchises, privileges and powers embodied in the schedule to the said contract
and to this Act appended, and such charter, being published in the Canada
Gazette, with any order or Orders in Council relating to it, shall have
force and effect as if it were an Act of the Parliament of Canada, and shall be
held to be an Act of incorporation within the meaning of the said contract.
The appellant contends that in the change from the method of
incorporation provided for by the contract, namely, by special Act in the form
of the schedule appended to the contract, to the method provided for by s. 2 of
the statute, namely, by letters patent under the Great Seal, Parliament had in
mind the decision in Ashbury v. Riche , decided
some six years earlier, and intended that the ambit of the powers of the
appellant company should not be restricted in accordance with the principle
which had been applied in that case, but should be those of a common law
corporation. Appellant stresses that the letters patent recite that they are
granted not only under the authority of the Special Act, but also under the
authority of
"any other power and authority whatsoever in us
vested in this behalf,"
and counsel refers to the judgment of the judicial
committee in the Bonanza Creek case .
As stated by Viscount Haldane in the course of his judgment
in that case, the question thus raised is simply one of interpretation of the
language employed by Parliament. The words employed, to which the corporation
owes its legal existence, must have their natural meaning, whatever that may
be. Their Lordships, after tracing the prerogative power as to the
incorporation of companies by the Governor
[Page 449]
General and the Lieutenant Governors
respectively, considered the question whether there was, in the case before
them, any legislation of such a character that the power to incorporate by
charter from the Crown had been abrogated or interfered with to the extent that
companies so created no longer possessed the capacity which would otherwise
have been theirs. Reference is made to the Act of 1864, 27-28 Vict. c. 23,
which authorized the Governor to grant charters for incorporation of companies
for certain purposes named in the statute. S. 4 provided that every company so
incorporated should be a body corporate "capable forthwith of exercising
all the functions of an incorporated company as if incorporated by a special
act of Parliament."
Their Lordships construed this provision as enabling, and
not as intended to restrict the existence of the company to what could be found
in the words of the Act as distinguished from the letters patent granted in
accordance with its provisions. They therefore held that the doctrine of Ashbury
v. Riche does not apply where
the company purports to derive its existence from the act of the Sovereign and
not merely from the words of a regulating statute.
It is to be observed that the Act of 1864 and the Dominion
and provincial Companies Acts in question in the Bonanza case were each
enacted at a time when the prerogative power to incorporate was unaffected by
other legislation. In the case at bar, however, when the Act of 1881 was
passed, any power to incorporate a company for the construction and working of
railways by virtue of the prerogative, had previously been expressely abrogated
by s. 3 of the Joint Stock Companies Act of 1877, 40 Vict. c. 43, and prior
thereto by s. 3 of the Act of 1869, 32-33 Vict. c. 13. Accordingly, the
language in para. 1 of the letters patent, so much relied upon by counsel for
the appellant company, namely, "and of any other power and authority
whatsoever in us vested in this behalf," is meaningless, there being in
1881 no power vested in the Governor General in Council with respect to the
incorporation of a railway company, apart from that bestowed by the statute of
1881 itself. One must therefore find in that Act, or not at all, an intention
[Page 450]
to revive the prerogative for the purpose of the
incorporation of the appellant company; Attorney General v. De Keyser's Royal Hotel ,
particularly at pp. 526 and 539-540.
Before considering the language of the statute, it is not
irrelevant to observe that had it been the intention of Parliament to create
the appellant company with the powers of a common law corporation, one would
have expected, at that date at least, that something in the nature of express
language would have been used. That the decision in Ashbury v. Riche had nothing to do with the form
of s. 2 of the statute is, I think, indicated by the provisions of ss. 14 and
15 of the Canadian Pacific Railway Act of 1872, 35 Vict. c. 71, which make
provision for incorporation by letters patent, in the circumstances there
mentioned, of a corporation for the construction and operation of the railway
later to be the subject of the contract with the appellant. In the case of
these sections, it is not possible, in my opinion, to say that by the letters
patent so authorized, a common law corporation would have emerged.
Moreover, in my opinion, it is not possible to construe s. 2
of the statute of 1881 as enabling in relation to a coexistent power to
incorporate, existing apart from the statute. Such a power did not then exist.
Further, the authority given by s. 2 of the Act of 1881 for the purpose of
incorporating the persons named in the contract, and of granting to them
"the powers necessary to enable them to carry out the said contract
according to the terms thereof", was to grant to them "in conformity
with the said contract" a charter conferring upon them
"the franchises, privileges and powers embodied in
the schedule to the said contract."
Pausing there, I find nothing in this language which
operates to constitute such letters patent, letters issued by virtue of any
royal prerogative or any authority apart from the statute itself, and in my
opinion, the following language,
and such charter, being published * * * shall have force and
effect as if it were an Act of the Parliament of Canada, and shall be held to
be an Act of incorporation within the meaning of the said contract,
extends in no way the effect of the preceding language.
[Page 451]
The contract itself contemplates nothing more than a statute
of incorporation with the powers mentioned in the schedule to the contract. The
contractors themselves contracted with the government on that basis, and it
surely cannot be supposed that it was in the minds of any of the contractors,
or of the government, that the capital of the corporation to be created could
be devoted to any purpose but the construction and continued operation of the
railway therein described. It was an express term of the contract (para. 21)
that the contractors were to be bound only in the event of an Act of
incorporation being granted to the company "in the form herein
appended as Schedule A." That schedule contemplates no powers being
granted to the company apart from those contained within the four corners of
the schedule itself. Accordingly, in my opinion, it was intended, by the words
last quoted above, to satisfy the terms of para. 21 of the contract and to do
no more. I think it is impossible to read into the legislation some bestowal of
power upon the company outside of that which was contracted for.
It would no doubt be speculation as to why incorporation by
letters patent was adopted rather than by a special statute. It is to be
observed, however, that the letters patent were issued the very day after
assent was given to the statute, so that time seems to have been an important
factor. It may have been thought that to have incorporated all the terms of the
letters patent in 44 Vict. c. 1 itself would have been awkward from a drafting
standpoint and that an additional statute would have consumed more time, and
getting on with the business of the transcontinental railway was an urgent
matter. However that may be, it would seem, if the appellant's contention on
this point be correct, that under a statute approving of a contract, a very
large departure from the contract was at the same time effected in a very
unobtrusive way. In my opinion, however, upon the true construction of the
language of the statute, no such intention can fairly be gathered.
The subsequent legislative history of the appellant company,
for what it may be worth, is consistent with this interpretation. It may be
said, and it was said on behalf of the appellant, that the subsequent
legislation granting additional powers to the appellant company, was merely
[Page 452]
obtained ex abundanti cautela. Such a theory,
however, is rather negatived by the preamble to the Act of 1890, 53 Vict. c. 47
to which no reference was made on the argument. That Act recites inter alia,
and whereas several other railway companies are duly
empowered to enter into agreements whereby the Canadian Pacific Railway Company
may work, lease, or obtain running powers over their respective lines, and the
Canadian Pacific Railway Company, not having the requisite legislative
authority for taking part in such an agreement, has prayed that the
necessity for special legislation, giving such authority in each case in
which it may find it expedient to do so, be avoided, and that Parliament give
it the general authority hereinafter mentioned * * *
It might be said that this recital refers not to the
creation of further capacity on the part of the appellant company, but to the
granting of further rights, and such an answer might account sufficiently for
s. 6 of the statute which authorized the appellants to enter into certain
arrangements with Canadian companies. Such an explanation cannot account,
however, for s. 7 which authorizes the appellant to make similar arrangements
with companies outside Canada. Parliament can only create capacity to receive
rights outside Canada. It cannot create the rights themselves. While the above
recital may not be conclusive, and while it cannot control, if on a proper
construction of the Act of 1881 the situation were otherwise, the position
clearly appearing on the recital indicates that the conclusion to which I have
come as to the proper construction of the incorporating Act is the one
entertained by the appellant itself.
Reduced to its essence, the contract, for the performance of
which the appellant was incorporated, was for the construction by the company
of certain parts of the railway, and, upon the completion and conveyance to the
company of the parts constructed by the government, for the permanent operation
of the whole by the company. Apart from certain specific powers which are not
relevant, the powers actually conferred upon the company by para. 4 of the
letters patent were all the franchises and powers necessary or
"useful" to the company to enable it to cary out, perform, enforce,
use, and avail itself of every condition, stipulation, obligation, duty, right,
remedy, privilege and advantage agreed upon, contained or described in the
contract. It is the contention of the respondent that the covenant of the
[Page 453]
appellant with respect to the maintenance of the shops at
Winnipeg amounts to a covenant not to exercise its statutory powers.
It is said for the respondent that the removal in fact of
the appellant's shops from their original location to a point outside the 1881
boundaries of the city, and the establishment of additional stockyards outside
those boundaries, shows that the covenant in question is incompatible with the
efficient operation and management of the railway required by the contract with
the Crown. It is said that other unforeseen events, such as excessive floods,
might not only interfere with or prevent efficient operation, but might even
yet render necessary the entire removal of the shops and yards from the city.
The respondent also points to para. 13 of the contract which
reads,
The company shall have the right, subject to the approval of
the Governor in Council, to lay out and locate the line of railway hereby
contracted for, as they may gee fit, preserving the following terminal points,
namely: from Callander station to the point of junction with the western
section at Kamloops by way of Yellow Head Pass.
and contends that a later event of the character
already mentioned might have resulted in the establishment of the centre of
population at Selkirk instead of at Winnipeg, and that the obligation to build
and forever maintain the shops for the main line at Winnipeg, involving as it
did an obligation (I quote from respondent's factum) "by necessary
implication to establish Winnipeg as a terminus of the railway in lieu of
preserving the same at Selkirk," or to establish Winnipeg as a "central
point" on the main line, was in conflict with para. 13.
It may be pointed out, however, that the obligation of the
appellant under the covenant was not to establish Winnipeg as a "central
point" on the main line. What the appellant covenanted to do was to
establish and build within the city limits their "principal
workshops for their main line of railway within the province of Manitoba, and
for the branches thereof, radiating from the said city" and to continue
them forever within the city, and it would seem obvious that shops for the
branches radiating "from" the city at least, could hardly, from a
practical point of view, be located elsewhere than at Winnipeg.
[Page 454]
I do not think, either, that the covenant involved any
implied obligation upon the appellant to substitute Winnipeg for Selkirk as a
"terminal point" of the main line. There appears to be involved in
this contention of the respondent that the maintenance of the principal
workshops at Winnipeg necessarily involved Winnipeg as a "terminal"
or "divisional" point from the standpoint of the operation of the
railway, and that as Selkirk and Winnipeg are only some twenty miles apart, the
latter would be elbowed out of its position as such a point, contrary to the
statute. This argument is, in my opinion, founded on a misconception of the
statute.
Para. 1 of the contract defines four sections of the main
line, with Selkirk as the western end of the Lake Superior section, which was
to be built by the government, and the eastern end of the central section which
was to be completed by the appellant. The "terminal points" mentioned
by para. 13 have nothing to do, in my opinion, with the operation of the
railway but only with construction.
It may perfectly well have been, and probably was intended when
the statute was passed, that from Selkirk west the main line would run north of
Winnipeg, but under the terms of para. 13, the appellant with the concurrence
of the Governor in Council, was free to construct the central section of the
main line from Selkirk to Winnipeg and then west if it saw fit.
As appears from para. 15 of the letters patent, there was
already in existence, at the time of the contract, a branch line of railway
from Selkirk to Pembina. It appears also from the schedule to c. 13 of the Act
of 1879, 42 Vict., that this line was in course of building, and by para. 2 of
the contract contained in the schedule to the Act, the government had
undertaken to complete the line by August 3rd of that year. Winnipeg or Fort
Garry was, of course, on this line. Chapter 14 of 42 Vict, establishes this, if
it needs to be established.
P.C. 1458, dated November 19,1881, shows that the main line
had by that time been routed through Winnipeg. That this in no way interfered
with the position of Selkirk is clear from the Act of 1882, 45 Vict. c. 53.
This statute amends the very paragraph of the contract under consideration,
viz., para. 13, with respect to a change in the
[Page 455]
location of the railway through the
Yellow Head Pass, but the statute, by s. 1, shows clearly that Selkirk was
still on the main line.
If it were necessary to decide as to whether or not the
covenant to build and forever maintain the workshops at Winnipeg was a covenant
which the company could validly enter into, regard should be had to the
principle laid down by Lord Selborne in Attorney General v. Great
Eastern Ry. Co. , namely, that whatever may fairly be
regarded as incidental to, or consequential upon, those things which the
legislature has authorized ought not, unless expressly prohibited, to be held
by judicial consideration to be ultra vires. However, I do not consider
it necessary to decide the question for the reason that, assuming the covenant
to have been beyond the power of the company, the respondent, in the
circumstances here present, is not now entitled to take the position that its
obligation with respect to the exemption from taxation, is no longer binding
upon it.
The position of the respondent, as set out in its factum, is
that the "purported agreement" between the parties is void for want
of mutuality and that no consideration for the tax exemption was received by
the respondent for the agreement or bylaw or the granting of the exemption from
taxation, and that the plaintiff did not as a result of or in reliance upon
said agreement or any term or terms thereof, exercise any forbearance or change
its plans or incur any expense or make any investment or in any way change or
alter or prejudice its position or the location, construction or operation of
its railway or of any works connected with its railways, or give any
consideration. It is said that the giving of the bond and covenant amounted to
a covenant by the appellant not to exercise its statutory powers which it had
no right to do.
In my opinion, it is plain that both parties contracted on
the basis that the appellant had the power to give the covenant in question,
and each was in as good a position as the other to ascertain whether or not
that was so. The contract has been fully executed except as to the future performance
on the part of the city as to the maintenance of the tax exemption, and on the
part of the appellant as to the maintenance of its shops at their present
location.
[Page 456]
With respect to the point taken as to the lack of power on
the part of the company, the view expressed by Lord Cairns L.C. in Ashbury's
case at p. 672, is, in my opinion, applicable. There is nothing involved in the
covenant, in my view, which "involves that which is malum prohibitum
or malum in se or is a
contract contrary to public policy and illegal in itself." The question is
not "as to the legality of the contract; the question is as to the
competency and power of the company to make the contract." The covenant
here in question, on the assumption it was beyond the powers of the company,
which I make for present purposes, was simply void. Being ultra vires
the appellant, and therefore void, there can be no question of damages.
Otherwise, the case would fall, in my opinion, within the principle of Boone
v. Eyre . In that case, the plaintiff had
conveyed to the defendant by deed the equity of redemption of a plantation
together with the stock of negroes upon it in consideration of £500 and an
annuity of £160 per annum for his life; and covenanted that he had a good title
to the plantation, was lawfully in possession of the negroes, and that the
defendant should quietly enjoy. The defendant covenanted, that the plaintiff
well and truly performing all and everything therein contained on his part to
be performed, he, the defendant, would pay the annuity. The breach assigned was
the non-payment of the annuity, while the plea was that the plaintiff was not,
at the time of making the deed, legally possessed of the negroes on the
plantation, and so had not a good title to convey. On demurrer, it was held by
Lord Mansfield that where mutual covenants go to the whole of the consideration
on both sides, they are mutual conditions, the one precedent to the other. But
where they go only to a part, where a breach may be paid for in damages, there
the defendant has a remedy on his covenant and shall not plead it as a
condition precedent. Lord Mansfield went on to say,
If this plea were to be allowed, any one negro not being the
property of the plaintiff would bar the action.
In Carter v. Scargill , there
was in question an agreement between the parties for the sale and purchase of a
business the estimated profit of which was £7 per week,
[Page 457]
and it was agreed that in the event of it being proved by
the books of the vendor that the profit should be as stated, the purchaser was
to pay the purchase price in specified installments. Possession was taken of
the business by the defendant and resold, but in an action to recover the
balance of the installments, the position was taken that the plaintiff had not
established that the business was as profitable as stated. It was there held by
Cockburn C.J., Quain and Field JJ. that that which might have been a condition
precedent had ceased to be so by the defendant's subsequent conduct in
accepting less than his bargain, with the result that the condition went only
to a portion of the consideration and that not a substantial portion.
While the present case is not one in which the respondent
may be compensated in damages should it suffer any in the event that the
assumed obligation of the appellant to maintain the shops at Winnipeg cannot be
enforced against it, I think that the view more fully expressed by my brother
Rand as to the proper relief in equity is the correct one. It is past question,
in my view, that the case is one for equitable relief rather than that the
respondent, having obtained to date everything for which it originally
stipulated with the exception of a binding agreement in which the existing
status of the shops will be maintained, cannot in conscience be allowed to take
the position that its agreement with respect to the tax exemption is no longer
to be enforced against it. I think the facts are eminently such as to call for
the application of the principle of compensation insofar as performance on the
part of the appellant may fall short of that which it would have been obliged
to provide if the covenant on its part, and which it asserts to be binding,
were binding in law. I therefore agree on this branch of the case with the
order proposed by my brother Rand.
It is next argued for the respondent that the obligation to
maintain the workshops and stockyards "within the city of Winnipeg"
means within the limits of the city as they existed at the date of the by-law,
and that the removal of the workshops in 1903 from their location within the
original city to a location outside that area but within the limits of the city
at the time of removal, was a breach of contract. It is contended that even if
this did not put an
[Page 458]
end to the exemption in toto, no lands of the
appellant company outside the existing limits at the date of the contract are
entitled to the exemption.
In my opinion, this contention is without merit. Under the
terms of para. 8 of the by-law, the exemption was to extend to
all property now owned, or that hereafter may be owned by
them (the company) within the limits of the city of Winnipeg, for railway
purposes, or in connection therewith.
This provision itself looks to the future, and on the
natural reading of the language employed, the words "within the limits of
the city of Winnipeg" should be held to mean within the limits of the city
as they shall from time to time exist. The whole object of the agreement was to
induce the continued development and growth of the city, and that being so, it
would be in contradiction to the plain meaning of the language to restrict the
paragraph to the limits then existing. That that is not even a plausible
contention is, I think, borne out by reference to the first recital of the by-law,
which is as follows:
Whereas it is desirable that a line of railway southwesterly
from the city of Winnipeg, towards the westerly limit of the province of
Manitoba, through the Pembina Mountain District should be built for the purpose
of developing and advancing the traffic and trade between the city of Winnipeg
and the southern and south western portions of the province.
When one looks at the words "the city of Winnipeg"
where they secondly appear in the above recital, it is plain, in my opinion, as
in the case of para. 8, that the city spoken of there, with respect to which
traffic and trade was to be "developed and advanced," meant the city
of Winnipeg as it should from time to time develop and expand.
It is pointed out on behalf of the respondent that while
by-law 148 was passed on September 5, 1881, and the amending by-law on October
30, 1882, the amended by-law was to take effect from September 21, 1880, and it
is contended that had the agreement been intended to apply to any territory not
within the city at the effective date of the by-law, some express language to
that effect would have been employed. In my opinion, this is not the situation
to which these provisions were directed.
In the first place, the by-law provides for the issue of
debentures payable in twenty years from the day "this by-law takes
effect." By para. 1, the debentures were made
[Page 459]
payable on September 20, 1901, and
accordingly, the date upon which the by-law should come into operation had to
be fixed, as it was fixed by para. 9, on September 21, 1881. In addition, the
provincial Act of 1875, 38 Vict. c. 50, provided by s. 931 that any by-law for
contracting debts by borrowing money would be valid only if the by-law should
name a day in the financial year in which the same was passed when the by-law
should take effect. I think it is clear, therefore, that the contention under
consideration is not well founded.
It is also contended on behalf of the appellant that the
exemption extends to so-called business taxes. As this point is concluded in
this court by our decision in Canadian Pacific Railway Company v. Attorney
General for Saskatchewan , effect must be given to this
contention.
The remaining question is as to whether or not the exempting
provision extends to the Royal Alexandra Hotel and restaurant of the appellant
company. The hotel is a modern, high class structure of a well known type,
having six floors with 445 rooms available for guests. It is one of a system
maintained by the appellant company across the country. While it serves to draw
traffic to the appellant's railway, it is not only available to the travelling
public generally, but serves the local community in providing suitable space
for entertainment and public functions as well as for more or less permanent
guests. It is also used by the appellant to lodge employees from time to time,
and it is a convenient place for the holding of railway conferences, and
passengers are, at times, accommodated there in emergencies. The hotel laundry
looks after some of the laundry for the railway.
It is to be observed that the only property which the by-law
exempts is property owned by the appellant for "railway purposes or in
connection therewith," i.e. in connection with "railway"
purposes. As pointed out by their Lordships in Canadian Pacific Railway
v. Attorney General for British Columbia , a
company may be authorized to carry on, and may in fact carry on, more than one
undertaking, but merely because the company is a railway company, it does not
follow that all its activities must relate to its railway undertaking. As shown
by the evidence,
[Page 460]
the first Canadian Pacific hotels were established in the
Rocky Mountains. Because of the very heavy grades existing in the early days,
the trains were not able to have diners, and it was necessary that they be
stopped at convenient points to enable the passengers to take food and rest.
That day has long since passed, and hotels of the type at present under
consideration do not owe their existence to any necessity in connection with
the operation of the railway proper.
As pointed out earlier in this judgment, the company was
incorporated for the purpose of carrying out the contract of October 21, 1881,
and for no other purpose. The power to erect the mountain hotels was no doubt
incidental to the powers conferred upon the company at its incorporation, but
until 1902 the company did not have the power to go into the hotel business in
connection with such hotels as the Royal Alexandra at Winnipeg and the Empress
at Victoria.
Their Lordships in the Empress case state that the
case with which they were dealing was not the case of an hotel conducted solely
or even principally for the benefit of travellers on the system of the
appellant company, and that there was little to distinguish the Empress Hotel
from an independently owned hotel in a similar position. The same applies with
equal force to the Royal Alexandra. No doubt, the fact that there is a large
and well managed hotel at Winnipeg does tend to increase traffic on the appellant
system, and it may be that the appellant's railway business and hotel business
help each other, but that does not prevent them from being separate businesses
or undertakings which, in my view, is the case so far as the Royal Alexandra is
concerned.
In my opinion, therefore, the conduct of such an hotel as
the Royal Alexandra was not within the contemplation of the contracting parties
at the time of the passing of by-law 148, and I do not think that such an hotel
is. owned by the company for "railway" purposes or "in
connection therewith" within the meaning of the by-law. The fact that the
business of the hotel may be operated in connection with the business of the
railway does not, in my
[Page 461]
opinion, make the hotel exempt property
within the meaning of para. 8 of the by-law. That the hotel is in physical
connection with the appellant's Winnipeg railway station does not affect the
matter.
By an agreement of August 4, 1906, entered into between the
appellant and the respondent at a time when, by c. 57 of the Statutes of
Manitoba, 63-64 Vict. (1900) s. 18, the property of the appellant company
within the city was exempt from municipal taxation, it was arranged that the
appellant should pay a stated sum to the respondent in lieu of taxation in respect
of the hotel "if the same were anyway liable to any taxation." The
appellant points to the first recital in the agreement which states that the
company has built "in connection with its railway and the operation
thereof", as a recognition that the hotel is owned by the company in
connection with "railway purposes" within the meaning of by-law 148.
The agreement contains a further recital, however, that the "city has
claimed that said hotel property should be made subject to municipal taxation
on the grounds that an hotel was not originally included within the meaning of
a railway" enterprise. In view of this, I think that the first recital
cannot be taken as a recognition that the hotel was to be considered as within
the meaning of the agreement of 1881, but rather the contrary.
I further think that the words in the first recital,
"in connection with its railway and the operation thereof," have not
the same meaning as the words, "property owned for railway purposes or in
connection therewith," in by-law 148. In the case of the latter, the
property dealt with was property owned for the purpose of the construction and
operation of the railway described in the statute of 1881, while the property
referred to in the first recital of the agreement of 1906 was property acquired
by virtue of the express power granted to the appellant by s. 8 of its Act of
1902 by which it was authorized to conduct an hotel business "for the
purposes of its railway and steamships and in connection with its
business" of operating the railway, which in 1881 had been its exclusive
business. The first recital in the agreement of 1906 is evidently based on this
legislation. Moreover, as by-law 148 and the amending by-law required and
received validation at the hands of
[Page 462]
the provincial legislature, it was not competent for the
city, without further legislation, to vary by any act or conduct, the terms of
the agreement evidenced by the by-law.
In my opinion, therefore, appellant derives no assistance
from anything contained in the agreement of 1906. In 1909, amending legislation
was passed, by the provincial legislature which deprived the hotel of its
exemption from municipal taxation, following which, in 1914 and 1942, further
agreements were made between the parties with respect to payment to the city by
the appellant in respect of the hotel property in lieu of municipal assessment.
The appellant again says that these agreements are a recognition that the
respondent construed the exemption in by-law 148 as extending to the hotel in question.
I do not think, however, that, apart from enabling legislation, it was
competent for the city in this way to extend the meaning of the words used in
1881, or to exempt property, which by general law was subject to taxation. I
think, therefore, the appellant's contention with respect to the hotel fails.
We heard no argument that, in this event, the restaurant could be considered in
any other position.
In the result, the appellant succeeds substantially, and
should have three-quarters of the costs in this court and in the Court of
Appeal. The judgment of the trial judge should be restored with the variation
indicated above as to the hotel and restaurant. The order as to costs at trial
should not be interfered with.
The judgment of Estey and Cartwright JJ. was delivered by:
Estey J.:—The
Canadian Pacific Railway Company (hereinafter referred to as the company)
contends that it is exempt from realty and business taxes assessed and levied
in the year 1948 by the city of Winnipeg (hereinafter referred to as the city).
This contention is based upon an agreement made between the city and the
company in 1881 under which the company undertook to build 100 miles of railway
southwest from the city, a passenger station and stockyards in the city and to
execute and
[Page 463]
deliver to the city a bond and covenant under its corporate
seal to the effect that the company would
build within the limits of the city of Winnipeg, their
principal workshops for the mainline of the Canadian Pacific Railway within the
province of Manitoba, and the branches thereof radiating from Winnipeg, within
the limits of the said province, and for ever continue the same within the said
city of Winnipeg.
The city, on its part, undertook to issue debentures in the
sum of $200,000 at 6 per cent, payable to the company on September 20, 1901,
and to convey to the company the land upon which the station was constructed.
This agreement also included the following provision:
8. Upon the fulfilment by the said company of the conditions
and stipulations hereinmentioned, by the said Canadian Pacific Railway Company
all property now owned, or that hereafter may be owned by them within the
limits of the city of Winnipeg, for railway purposes, or in connection
therewith shall be forever free and exempt from all municipal taxes, rates, and
levies, and assessments of every nature and kind.
This agreement is set out in by-law 148 as passed by the
city on September 5, 1881, and amended by by-law 195 passed by the city on
October 30, 1882. Apart from extending the time for completing the 100 miles of
railway and the passenger depot and cancelling the first two interest coupons
on the debentures, by-law 195 effected no other changes. The province of
Manitoba in 1883, by statute (46-47 Vict., S. of M. 1883, c. 64), declared that
the by-laws (148 and 195) were "legal, binding and valid upon the said the
mayor and council of the city of Winnipeg …" It is conceded that the
company has not made default under this agreement, that the city conveyed the
land and delivered the debentures and, apart from an unsuccessful attempt, The
Canadian Pacific Railway Company v. The City of Winnipeg ,
to levy school taxes for the years 1890-94, no further or other taxes have been
levied in respect of this property by the city until 1948, from which the
company in this litigation claims exemption.
The four main questions raised, and all decided by the
learned trial judge in favour of the company, are as follows:
(a) Is the agreement between the city and the
company, contained in by-laws 148 and 195, valid and binding?
(b) If valid and binding, is the exemption operative
only within the limits of the city of Winnipeg as these existed at the time the
agreement was made or as these limits have been from time to time constituted?
[Page 464]
(c) If the agreement is valid and binding, is the
exemption therein provided for applicable to the Royal Alexandra Hotel and
restaurant of the company within the city of Winnipeg?
(d) If the agreement is valid and binding, does the
exemption therein provided for include the business tax?
In the Appellate Court the decision of the learned trial
judge on question (a) was affirmed, but a majority of that court
reversed the learned trial judge upon questions (b), (c) and (d).
The city contends that while the Canadian Pacific Railway
Company was incorporated by letters patent under the Great Seal of Canada dated
February 16, 1881, it is not a common law corporation endowed with the powers
of an individual, but is, in effect, a statutory corporation and, therefore,
can exercise only those powers expressly provided in, or necessarily implied
from the terms of incorporation and that these terms do not expressly, or by
necessary implication, give to the company the powers to bind itself forever,
as it purported to do by the agreement of September 5, 1881.
The original agreement for the construction and operation of
the Canadian Pacific Railway executed between a group therein styled "the
company" and the government of Canada, under date of October 21, 1880,
contemplated an Act of incorporation as evidenced by para. 21 thereof:
21. The company to be incorporated, with sufficient powers
to enable them to carry out the foregoing contract, and this contract shall
only be binding in the event of an Act of incorporation being granted to the
company in the form hereto appended as Schedule A.
Before the statute (44 Vict., S. of C. 1881, c. 1) approving
and ratifying this contract was enacted it was evidently deemed desirable to
provide for an alternative method of incorporation and accordingly sec. 2 of
that statute provided:
2. For the purpose of incorporating the persons mentioned in
the said contract, and those who shall be associated with them in the
undertaking, and of granting to them the powers necessary to enable them to
carry out the said contract according to the terms thereof, the Governor may
grant to them in conformity with the said contract, under the corporate name of
the Canadian Pacific Railway Company, a charter conferring upon them the
franchises, privileges and powers embodied in the schedule to the said contract
and to this Act appended, and such charter, being published in the Canada
Gazette, with any Order or Orders in Council relating to it, shall have
force and effect as if it were an Act of the Parliament of Canada, and shall be
held to be an Act of incorporation within the meaning of the said contract.
[Page 465]
The language of this s. 2 is consistent with the view that
Parliament intended the letters patent should be issued by the Governor General
in, the exercise of the prerogative right. At the outset it is provided that
For the purpose of incorporating … and of granting to them
the powers necessary to enable them to carry out the said contract according to
the terms thereof …
This wide and comprehensive language is not limited or
restricted by the provision
a charter conferring upon them the franchises, privileges
and powers embodied in the schedule to the said contract …
The position is similar to that in the Bonanza Creek
case , where, though granted in accord with
the statute, the letters patent were granted by the Lieutenant Governor of
Ontario in the exercise of the prerogative right. The company, therefore, was
endowed with the powers and capacities of a natural person, subject to any
limitations or restrictions imposed by the statute.
Moreover, while this alternative method is provided in the
same statute (S. of C. 1882, c. 1) in which statutory effect is given to sec.
21 of the contract, under which it was contemplated incorporation would be by
statute, it was, as already pointed out, arranged for at a date subsequent to
the contract. In these circumstances the intent and purpose of Parliament in
making this alternative provision would be to provide something different in
effect from that of incorporation by statute, and in the absence, as here, of
any specific explanation, that intent and purpose would appear to be that if
letters patent were issued the Governor General would do so in the exercise of
the prerogative right and thereby give to the company the powers and capacities
of a natural person, possessed only by corporations created in that manner,
subject to such limitations or restrictions as the statute imposed.
The position is somewhat analogous to that in Elve v.
Boyton , where it was contended that a company
incorporated by letters patent pursuant to a statute (6 Geo. I, 1719, c. 19)
was not incorporated by an Act of Parliament. Lindley, L.J., with whom Lopes,
L.J., agreed, stated at p. 508:
The answer is, it would have been impossible, without the
Act of Parliament, to create such a corporation by that charter or any other
[Page 466]
charter. The real truth is, that, if
you look at it very closely, the corporation owed its birth and creation to the
joint effect of the charter and of the Act of Parliament, and you can no more
neglect the Act of Parliament than you can neglect the charter.
The language of Lindley L. J., is particularly apt as, apart
from s. 2 above quoted, the company could not have been, in 1881, incorporated
by letters patent. Parliament had, in 1877, expressly prohibited that
possibility by providing that the incorporation of companies for the
"construction and operation of railways" could not be effected by
"Letters Patent under the Great Seal" (40 Vict., S. of C. 1877, c.
43, s. 3). When, therefore, it was decided that the alternative method of
incorporation by letters patent should be made available, it was necessary that
such be provided for by an express statutory provision, as indeed it was in s.
2.
This statute (44 Vict., S. of C. 1881, c. 1) was assented to
on February 15, 1881, and on the following day letters patent were issued under
the Great Seal of Canada incorporating the company. These letters patent
recited the contract of the 21st of October, 1880, and the foregoing s. 2 and
that "the said persons have prayed for a charter for the purpose
aforesaid" and then provided:
Now know ye, that, by and with the advice of our Privy
Council for Canada, and under the authority of the hereinbefore in part recited
Act, and of any other power and authority whatsoever in us vested in this
behalf, We Do, by these our Letters Patent, grant, order, declare and provide *
* * are hereby constituted a body corporate and politic, by the name of the
"Canadian Pacific Railway Company."
The reference to statutory authority in the foregoing
paragraph immediately followed by the words "and of any other power and
authority whatsoever in us vested in this behalf," with great respect to
those who entertain a contrary view, leads rather to the conclusion that the
Governor General, in issuing the letters patent, acted not only pursuant to the
statutory but to another authority separate and apart therefrom which, in the
circumstances, could be only the prerogative right. 6 Halsbury, 2nd Ed., p. 459, s. 547. The words "in this behalf," again
with great respect, do not, in this context, refer to the contract but rather
the power and authority to issue letters patent for the incorporation of
companies.
[Page 467]
In the Bonanza Creek case supra the letters
patent, apart from the inclusion of the word "Statute" instead of
"Act," included the following identical words that appear in the
foregoing :
under .the authority of the hereinbefore in part recited
Act, and of any other power and authority whatsoever in Us vested in this
behalf.
The phrase "in part recited Statute," in the
Bonanza Creek letters patent, refers to the Companies Act of Ontario
(R.S.O.1897, c. 191), s. 9 of which reads, in part, as follows:
The Lieutenant-Governor in Council may, by letters patent,
grant a charter * * * creating and constituting * * * a body corporate and
politic for any of the purposes or objects to which the legislative authority
of the Legislature of Ontario extends, except the construction and working of
railways, * * * *
Viscount Haldane points out that s. 9 of the Ontario Act
corresponds to s. 5 of the Dominion Companies Act (R.S.C. 1906, c. 79), the
predecessor of which is s. 3 of the Companies Act of 1877 (40 Vict., S. of C.
1877, c. 43). While letters patent were not granted to the company under any of
the foregoing general statutory provisions, they would, no doubt, be present to
the minds of the parties when determining the method of incorporation.
The contract, statute and charter must all be construed in
relation to the circumstances that obtained in 1880 and 1881. The construction,
maintenance and operation of the railway was then an undertaking of the
greatest magnitude. Parliament, particularly because of its obligations to
British Columbia under the terms and conditions of the latter's admission into
Confederation, desired not only that the railway should be constructed, but
that its maintenance and operation should be efficient. It had provided that
two parts of the railway should be constructed by the government of Canada and,
when completed, handed over to the company. It was in these circumstances that
Parliament enacted the provisions in s. 2 that, as an alternative to the
incorporation by the Act of Parliament, letters patent might be issued. The
language then adopted, particularly when construed in relation to the letters
patent, as well as the circumstances of 1880 and 1881, discloses an intention
that these were issued in the exercise of the prerogative right and thereby
ensure to the company the benefits and advantages of that method of
incorporation, subject only to the provisions of the statute.
[Page 468]
Even if, however, the letters patent incorporating the
company were not issued by the Governor General in the exercise of his
prerogative right, but rather in the exercise of a power delegated to him by
the statute, and, therefore, the company must be treated as if it had been
incorporated by statute, it would seem that the power to execute the contract
here in question would be necessarily incidental to those powers expressed in
the charter. That it was present to the minds of the parties that the company
would be called upon to pay taxes is evident from the fact that they had
provided for certain property of the company to be forever exempt in the
contract with the government (cl. 16). In the same contract (cl. 7) the company
agreed to "forever efficiently maintain, work and run the Canadian Pacific
Railway." Under these circumstances the power to make agreements binding
forever with respect to payment of and exemption from taxes would be included,
or at least necessarily incidental to the powers conferred upon the company by
the words "granting to them the powers necessary to enable them to carry
out the said contract according to the terms thereof," (S. 2 supra).
This provision is in accord with cl. 21 of the contract, where it was provided:
The company to be incorporated, with sufficient powers to
enable them to carry out the foregoing contract, * * *
and all this is implemented in the letters patent where
it is provided that the company shall possess
All the franchises and powers necessary or useful to the
company to enable them to carry out, perform, enforce, use, and avail
themselves of, every condition, stipulation, obligation, duty, right, remedy,
privilege, and advantage agreed upon, contained or described in the said
contract * * * *
It is not suggested that at the time the contract with the
city was made, or at any time thereafter, it has not proved useful to the
company.
The concluding words of s. 2 above quoted make it clear
that, while the charter is not an Act of Parliament, it shall have the force
and effect thereof and shall be held to be in compliance with the provisions of
the contract relative to incorporation. This provision was necessary by virtue
of the terms of cl. 21 of the contract and it would appear that that was the
only reason for its insertion.
[Page 469]
In either view, the company, in executing the contract, did
not exceed its powers as provided in its charter. This distinguishes this case
from that of the Whitby v. The Grand Trunk Railway Co. ,
where the contract to erect and maintain the chief workshops of the company at
Whitby was held to be beyond the powers given to the company incorporated in
Ontario by 31 Vict., c. 42.
The company's covenant to "for ever continue" its
principal workshops for the main line in Manitoba and the branch lines
radiating out of the city and within the province does not offend against the
principle that a company incorporated and entrusted with powers and duties by
the legislature "cannot enter into any contract or take any action
incompatible with the due exercise of its powers or the discharge of its
duties." 8 Halsbury, 2nd Ed., 74, para. 126.
The contention of the city is that this covenant is incompatible
with the company's obligation to "forever efficiently maintain, work and
run the Canadian Pacific Railway." The foregoing principle was applied in Montreal
Park and Island Railway Company v. Chateauguay and Northern Ry. Co. ,
where Davies J. (later C.J.C.), with whom Girouard J. agreed, stated at p. 57:
* * * the courts ought not to enforce and will not enforce
an agreement by which a chartered company undertakes to bind itself not to use
or carry out its chartered powers. I do not think such an agreement ought to be
enforced because it is against public policy.
The learned judge went on to explain that if the company can
covenant not to exercise its powers in part it may do so in whole and that
The courts have no right to speculate whether Parliament
would or would not have granted these chartered powers to the defendant company
over the limited area. Parliament alone can enact the limitation, and neither
courts of justice nor companies can substitute themselves for Parliament.
See also Winch v. Birkenhead, Lancashire
and Cheshire Junction Ry. Co. ; Ayr Harbour Trustees v. Oswald
;
Town of Eastview v. Roman Catholic Episcopal Corp. of Ottawa ;
Re Heywood's Conveyance .
[Page 470]
The company's powers do not require the construction of its
said principal workshops in any particular place in the province of Manitoba.
They might, therefore, have been placed by the company at any point that it
might have selected. What is significant is that its placing of them in the
city has never been regarded as inconsistent or incompatible with its duty to
forever maintain and operate the railway efficiently. In other words, the
complaint is not that the company has failed or contracted not to exercise its
power, but only that it has contracted not to exercise that power elsewhere in
the province of Manitoba than the city of Winnipeg. That city may always remain
the proper place for the maintenance of these principal workshops. Therefore,
the language of the contract does not disclose any inconsistency or
incompatibility with the company's duty. The city, however, suggests that
future events, such as war, floods or other emergency, amalgamation or
development in transportation equipment or methods may require the company, in
the discharge of its duty, to move these principal workshops elsewhere, which
would then be prevented by virtue of the existence of this covenant to forever
maintain them in Winnipeg.
This is not a case, therefore, such as the Montreal Park
and Island Railway Co. supra where the company contracted not to construct
its railway in an area where its powers authorized it to do so. It is equally
distinguishable from Ayr Harbour Trustees v. Oswald supra where
the trustees purported to bind themselves in respect to the use of land and
thereby to impose restrictions upon their use thereof, contrary to the purpose
as contemplated under the statute under which they had acquired same. In both
of these cases the language of the covenant was incompatible with the due
exercise of the company's power. On the same basis the other cases above
mentioned are also distinguishable.
Moreover, where, as already pointed out, the language of the
covenant is not, upon its face, inconsistent or incompatible with the due
exercise of the powers and the performance of the duties of the company, then,
as pointed out by Lindley L.J., in Grand Junction Canal Co. v. Petty
,
the presence of incompatibility must be established by
[Page 471]
evidence. This view was referred to by Lord Sumner in Birkdale
District Electric Supply Co. v. Corporation of Southport ,
and where, as here, no evidence is adduced, the statements of Lord Sumner would
appear relevant where, at p. 375, he states:
In the present case the company's activities have not yet
been and may never be impaired by the agreement at all. So far it may have been
and probably has been safe and beneficial. How, then, can it have been ultra
vires hitherto?
These remarks are particularly applicable because the
possible incompatibility here present is founded upon the future possibility
that these workshops, as located, would prevent the efficient management of the
Canadian Pacific Railway. In such circumstances a finding of incompatibility
should be established by evidence and not founded upon speculations as to the
future, particularly in respect of a company that has been carrying on for over
seventy years in a manner that in no way constitutes a suggested inconsistency
or incompatibility.
No case was cited, nor have we found one, which, in
principle, would justify the decree here requested, where the incompatibility
is neither apparent from the language used nor established by evidence, but is
supported only upon the possibility of future events which, even if they should
occur, might not require the removal of the workshops in order that the railway
might be efficiently maintained and operated and, therefore, would not
establish the suggested incompatibility.
Moreover, it should be noted that the covenant here in
question is concerned only with the principal workshops and, therefore, what
other workshops may be necessary may be constructed by the company at such
points in Manitoba as it may deem necessary or desirable.
Counsel on behalf of the city contends that it had no power
to pass by-laws 148 and 195. The city derives its corporate powers from the
province of Manitoba and even if, at the time, the province had not vested the
city with the necessary power to pass the by-laws, any deficiency in that
regard was supplied when the province enacted 46-47 Vict., S. of M. 1883, c.
64, declaring these by-laws 148 and 195 to be "legal, binding and valid
upon the said the
[Page 472]
mayor and council of the city of Winnipeg * * * *" This
language does not support the city's contention that the statute merely validated
the power of the city to enter into the agreement with the company and did not
validate the agreement itself. The view that it did validate the agreement is
not only supported by the foregoing language, but is strengthened by the
language of the recital of the statute which reads, in part:
And whereas, it is deemed expedient to set at rest all
doubts that may exist as to the validity of any or all the above in part
recited by-laws and the debentures issued thereunder, and to legalize and
confirm the same, and each of them respectively.
The city of Winnipeg possessed the authority to enact
by-laws, but it was the terms or the substance of by-laws 148 and 195 that gave
rise to the questions as to their validity and the legislature resolved these
questions by the foregoing enactment. In Ontario Power Co. of Niagara Falls
v. Municipal Corporation of Stamford , where similar questions
were raised, the legislature of Ontario "legalized, confirmed, and
declared to be legal, valid and binding * * *" the by-law. Then once the
terms of the by-law were validated there remained only the question of the
construction of the terms thereof.
It was also submitted that the agreement was negotiated
under the mistaken belief that it would assure the passage of the main line of
the railway through the city of Winnipeg. By-laws 148 and 195 do not contain
any undertaking on the part of the company to construct the main line through
that city. On the contrary, throughout these by-laws it is rather assumed, as
indeed the fact was, that the main line had already been altered to run through
that city. In the recital Winnipeg is declared to be "a central point on
the main line" and in the operative part the company undertakes to
"establish and build within the limits of the city of Winnipeg, their
principal workshops for the main line * * * *". It, therefore, appears
that the parties were contracting upon the basis that the main line had already
been altered to run through the city of Winnipeg and, therefore, there was no
misunderstanding or mistake as to the facts in relation to which they were
contracting, nor was there any failure of consideration.
[Page 473]
The city contends that the company's obligation to build
their principal workshops "within the limits of the city of Winnipeg"
should be construed to mean the limits as constituted on September 5, 1881, the
date of the passage of by-law 148. It is important to observe that this phrase
is not contained in an enactment of a law providing merely for an exemption
from taxation, but is rather a law embodying the terms of an agreement in which
the city, in consideration of undertakings to be, and, in fact, later executed
by the company, obligated itself to exempt the company from taxation as therein
provided. In these circumstances it should be construed, as stated by Lord
Sumner, as "one of bargain and of mutual advantage," rather than as a
statute providing for an exemption from taxation. City of Halifax v. Nova
Scotia Car Works Ltd. . When the contract, as set out in by-law
148, is read as a whole, the conclusion is inevitable that the parties were
looking to the future. The railway was not entirely constructed. The route of
its main line had been altered to pass through Winnipeg. It would, when in
operation, open up a vast new territory and Winnipeg was anxious to become an
important commercial and railway centre. With this end in view, it agreed to
help the company if the latter would construct certain facilities within its
boundaries. The first recital states that 100 miles of railway southwest out of
Winnipeg
should be built for the purpose of developing and advancing
the traffic and trade between the city of Winnipeg and * * * *
The second recital emphasizes the establishment and
continuation of the principal workshops and the stock yards. Then in the
operative part, particularly in para. 4, the company undertakes to
erect * * * large and commodious stock or cattle yards,
suitable and appropriate for the central business of their main line of railway
and the several branches thereof.
At the time this covenant was given there was at Winnipeg
neither main line nor branch lines and, of course, no railway business, and,
while it is not necessary to determine the precise extent of this undertaking,
it is obvious that it was looking to future circumstances. There is found,
therefore, both in the recital and the operative parts, language
[Page 474]
that supports the view that the parties were, in this
contract, looking to the future development of both the railway and the city.
In so far as the contract provided for the debentures of $200,000 and the
payment therefor, it could only deal with the limits as then constituted.
It is significant that between the passage of by-laws 148
and 195 the area of the city of Winnipeg was more than doubled. By-law 148 was
passed on September 5, 1881. The legislation providing for the enlargement of
the city boundaries was assented to on May 30, 1882. About five months
thereafter, on October 30, 1882, by-law 195 was passed amending by-law 148.
Therefore, the amendment to by-law 148 contained in by-law 195 was passed at a
time when the extension of the boundaries would be present to the minds of the
mayor and the council of the city. If, therefore, the parties had intended in
their contract, as evidenced by by-law 148, that the words "within the
limits of the city of Winnipeg" meant the limits as they then existed, and
those limits only, the possibility of misunderstanding and the desirability of
clarification would have been equally present to their minds when amending
by-law 148 by the passing of by-law 195. In these circumstances, had it been
intended that the contract should forever apply only to the limits as fixed at
the date of the contract, apt words would have been included in by-law 195 to
give expression to that intention.
It is contended that, because by-law 148 specified that it
should take effect as of the 21st day of September, 1881, and this date was
carried forward in by-law 195, that the parties intended the words "within
the limits of the city of Winnipeg" to mean the limits as constituted at
the date of the contract. It is important to observe that the statute (37
Vict., S. of M. 1873, c. 7) incorporating the city of Winnipeg, as amended in
1875 (38 Vict., S. of M. 1875, c. 50, s. 93, subsec. 1), provided that a by-law
such as 148 would not be valid unless it set out a day when the by-law should
take effect. In accordance with that provision, by-law 148 set out that it
should take effect on the 21st day of September, 1881. It had a particular significance
in this case because the debentures were to be granted by way of bonus payable
in twenty years from the day this by-law was to take effect with interest at 6
per cent per annum. Any
[Page 475]
amendment, therefore, changing this date would affect the
provisions for the issue of the debentures which were left, apart from that
with respect to the first two coupons, entirely unchanged by the by-law 195. In
these circumstances the fact that this provision was carried forward in
identical language in by-law 195 does not support a conclusion that the parties
intended thereby that the exemption should apply only to the boundaries of the
city of Winnipeg as constituted on the date of the contract.
The workshops, as originally constructed, were within the limits
of the city of Winnipeg as it existed at the time of the execution of the
contract, and there remained, until 1903, when they were moved and
reconstructed upon a location within the area added to the city in 1882. The
city now, so far as the record discloses, for the first time contends that this
removal of the workshops constituted a breach of the conditions of the contract
and of the bond and covenant given as provided. This removal was openly made in
a manner that could not but have been known to the officials of the city of
Winnipeg. They did not then nor at any time have they made any objection
thereto and have never sought to impose taxes thereon.
The subsequent conduct of the parties may be looked at, not
to add to or vary the contract, but to assist in determining the intent and
meaning of the parties. The record discloses that throughout the period from
1881 to date the city of Winnipeg has not, at any time, suggested that the
phrase "within the limits of the city of Winnipeg" meant the limits
as constituted at the date of the contract, but, on the contrary, the terms of
the contract itself and the subsequent conduct of the parties indicate that
such was never intended. City of Calgary v. The Canadian Western
Natural Gas Co. .
It is suggested that in using the words "within the
limits of the city of Winnipeg" the parties intended to designate the
boundaries as then constituted, particularly as in other parts of the by-law
the phrase used is "in the city of Winnipeg." It will be observed
that in the second recital it is stated that the company have agreed to
establish and continue their principal workshops and stock yards for the
province of Manitoba "in the city of Winnipeg"; that with
[Page 476]
respect to the stock or cattle yards the company undertook
to erect them "within the city of Winnipeg." When they come to the
exempting paragraph (cl. 8) they again use the words "on property now
owned or that hereafter may be owned by them within the limits of the city of
Winnipeg." It does not appear to me, in these circumstances, that the
parties had in mind any particular distinction between the words "within
the city of Winnipeg" and "within the limits of the city of
Winnipeg."
When the contract is read as a whole and regard is had to
the purpose and object thereof, as well as the circumstances surrounding the
parties as they negotiated and executed it, and the subsequent conduct of the
parties, particularly that of the city, one is led to the conclusion that the
parties were contracting in respect of Winnipeg as an entity, regardless of its
boundaries at any particular time, and, therefore, the exemption is applicable
to areas that have been subsequently included within the boundaries of the
city.
The company was authorized to own and operate hotels in 1902
(2 Edw. VII, S. of C. 1902, c. 52). Under this authority it constructed, in
1906, the Royal Alexandra Hotel, and it is now contended by the city that the
Royal Alexandra Hotel and the restaurant therein are not included within the
scope of the exemption set out in para. 8 of bylaw 148, wherein it is provided,
in part, that
all property now owned, or that hereafter may be owned * * *
within the limits of the city of Winnipeg, for railway purposes, or in
connection therewith shall be forever free and exempt from all municipal taxes,
rates, and levies, and assessments of every nature and kind.
The evidence in this case establishes that the hotel is
adjoining the railway station and physically attached thereto; that "the
railway uses the hotel services extensively"; that through the medium of
its restaurant, dining room and other hotel facilities it provides food and
lodging to passengers and employees of the company. It is conceded that these
services are available to and utilized by the general public; the laundry in
the hotel provides services to the sleeping and dining car department of the
railway; that in the hotel "railway conferences and staff meetings are
held"; that supplies for the hotel are provided or purchased for the hotel
by the railway purchasing department.
[Page 477]
The language of the exemption does not require that the
property should be used exclusively "for railway purposes or in connection
therewith" and, having regard to the evidence adduced in this case, it
cannot but be concluded that even if the Royal Alexandra Hotel and restaurant
are not used for railway purposes they are used "in connection
therewith" and, therefore, within the terms of the exemption.
This case must be determined upon the language adopted by
the parties, which raises issues quite distinct from that of determining
whether the Empress Hotel was an integral part of the Canadian Pacific Railway
system within the meaning of the British North America Act. Canadian Pacific
By. Co. v. The Attorney General of British Columbia .
It is suggested that, because the Canadian Pacific Railway
Company was not authorized to own and operate hotels until 1902, the exemption
provided for in 1881 cannot be said to cover an enterprise which, at that date,
would have been illegal. In the construction and operation of this hotel the
company has acted within the authority granted to it by the statute of 1902. As
already indicated, the company had, from the date of its incorporation, all the
powers possessed at common law by a corporation created by charter. Even if
this were not so, it is my opinion that, while the parties to the contract did
not contemplate illegal acts, they did contemplate that as the enterprise
developed significant changes would be made and, therefore, provided that not
only the property "now owned" but also "that hereafter may be
owned" by the company "shall be forever free and exempt." The
fact that in 1902 the company was granted further statutory powers does not
limit or restrict the meaning and effect of the words "that hereafter may
be owned." The Royal Alexandra Hotel and the restaurant are, therefore,
included within the language of the foregoing exemption.
In 1906, in 1914 and again in 1942 the parties to this
litigation entered into agreements under which the Canadian Pacific Railway Co.
paid certain amounts in lieu of taxation in respect of the hotel. These
agreements disclose that there was a disagreement as to whether the property
[Page 478]
was taxable and that in lieu of determining the issue the
Canadian Pacific Railway Co. agreed to pay, and the city to accept, the
specified amounts. Counsel for both parties ask that certain conclusions be
drawn favourable to their respective contentions from the language used, but,
having regard to the nature and character of the agreement and the language
used, no conclusion ought to be drawn that would assist either party in
determining their rights in these matters. These agreements were essentially
made in lieu of the determination of those rights.
Then with respect to the validity of the business tax, prior
to 1893 the city of Winnipeg was authorized to impose taxation upon real and
personal property. In that year, by an amendment to the Assessment Act (56
Vict., c. 24), the city was no longer empowered to impose taxation upon
personal property but was authorized to impose a business tax and it was
expressly provided that this tax was "levied in lieu of a tax upon
personal property." This has since been continued and is now found in the
charter of the city of Winnipeg (S. of M. 1940, c. 81, as amended in 1948 by S.
of M., c. 92) as sec. 291(1):
291. (1) * * * every person carrying on any business in the
city whether he resides therein or not shall be assessed for a sum equal to the
annual rental value of the premises * * *
and s. 9 provides:
9. Nothing in this Act shall
(a) injure, affect,
prejudice, or cause the forfeiture or impairment of, the benefit, right,
exemption, or privilege, if any, of the Canadian Pacific Railway Company under
(i) by-laws numbered respectively
148 and 195 or any other by-law of the city of Winnipeg; * * *
Apart from this statutory recognition of the exemptions
created by by-laws 148 and 195 with respect to the business tax, the language
of this exemption which we are here considering—"all property now owned,
or that hereafter may be owned * * * shall be forever free and exempt from all
municipal taxes, rates, and levies, and assessments of every nature and
kind."—is even more broad and comprehensive than that in cl. 16 considered
in Canadian Pacific Ry. Co. v. Attorney General for Saskatchewan ,
where this court held that the business tax was included within the exemption
there provided for. The principle of that decision resolves this issue in
favour of the company.
[Page 479]
The appeal should be allowed. The costs at trial should
remain as directed by the Chief Justice of the Court of King's Bench for
Manitoba. The appellant Canadian Pacific Railway Co. should have its costs in
the Court of Appeal. In this court the two appeals, by order of Mr. Justice
Kerwin, were consolidated and proceeded with as one appeal. The appellant
Canadian Pacific Railway Company should have its costs in this court.
Locke J.:—By
the agreement which provided for the construction of the Canadian Pacific
Railway made between Her Majesty, acting in respect of the Dominion of Canada,
and George Stephen and others, referred to therein as the company, dated
October 21, 1880, it was provided inter alia that the portions of the
proposed line which were to be built by the latter should be completed and in
running order on or before May 1, 1891, and after providing that the portions
to be constructed by the government of Canada should be duly completed and then
conveyed to the company, the latter agreed to "thereafter and forever
efficiently maintain, work and run the Canadian Pacific Railway". In
addition to the land grant and subsidy in money provided by the contract, it
was agreed that there should be granted to the company the lands required for
its road-bed, stations, station grounds, buildings, yards and other
appurtenances required for the convenient and effectual construction and
working of the railway, in so far as such land should be vested in the
government, and that, in addition, there should be admitted free of duty all
steel rails and a number of other enumerated articles required for the
construction of the road free of duty. By a further term, it was stipulated
that the company should have the right, subject to the approval of the Governor
in Council to lay out and locate the line of the railway.
The first reference to the incorporation of a company
appears in paragraph 17 of this contract which commences:
The company shall be authorized by their Act of
incorporation to issue bonds, etc. * * * *
and this is followed by the language which has given
rise to so much discussion in the present matter, incorporated in sections 21
and 22 which reads:
21. The company to be incorporated, with sufficient powers
to enable them to carry out the foregoing contract, and this contract shall
only be
[Page 480]
binding in the event of an Act of incorporation being
granted to the company in the form hereto appended as Schedule A.
22. The Railway Act of 1879, in so far as the provisions of
the same are applicable to the undertaking referred to in this contract, and in
so far as they are not inconsistent herewith or inconsistent with or contrary
to the provisions of the Act of Incorporation to be granted to the company,
shall apply to the Canadian Pacific Railway.
Schedule A to the contract bears the heading
"Incorporation" and is expressed in the language in common use for
the incorporation of companies by private Acts. Section 4 of this document
reads:
All the franchises and powers necessary or useful to the
company to enable them to carry out, perform, enforce, use, and avail
themselves of, every condition, stipulation, obligation, duty, right, remedy,
privilege, and advantage agreed upon, contained or described in the said
contract, are hereby conferred upon the company. And the enactment of the
special provisions hereinafter contained shall not be held to impair or
derogate from the generality of the franchises and powers so hereby conferred
upon them.
By chapter I of the Statutes of Canada, 1881, assented to on
February 15th of that year, the contract was approved and ratified by
Parliament and the government authorized to perform and carry out its
conditions. While s. 21 of the contract made it clear that what was
contemplated was that the company to be formed should be created by an Act of
Parliament, the statute contained as s. 2 the following provision:
For the purpose of incorporating the persons mentioned in
the said contract and those who shall be associated with them in the
undertaking and of granting to them the powers necessary to enable them to
carry out the said contract according to the terms thereof, the Governor may
grant to them in conformity with the said contract, under the corporate name of
the Canadian Pacific Railway Company, a charter conferring upon them the franchises,
privileges and powers embodied in the schedule to the said contract and to this
Act appended, and such charter, being published in the Canada Gazette,
with any Order or Orders in Council relating to it, shall have force and effect
as if it were an Act of the Parliament of Canada, and shall be held to be an
Act of Incorporation within the meaning of the said contract.
What was meant by the word "charter" in this
section was immediately made clear. On February 16, 1881, letters patent of
incorporation under the Great Seal of Canada were issued incorporating the
Canadian Pacific Railway Co. There is apparently no explanation as to why this
procedure for the incorporation of the company was followed rather than that
contemplated by the contract. While s. 4 of the schedule referred to above
indicated that the proposed
[Page 481]
company was to have the widest powers to enable it to carry
out its undertaking and to take advantage of the various privileges and
advantages which it was to receive from the Crown, it was perhaps considered
advisable that it would be preferable to vest in the company the powers of a
common law corporation restricted only in the matter defined by the contract
and the schedule rather than to enumerate those powers which it was to be authorized
to exercise. But this is mere speculation. If, therefore, assuming that the
powers of the company are only those which it would have enjoyed had the
incorporation been by a special Act of Parliament, the contract entered into by
it with the city of Winnipeg was beyond its powers, it would be necessary to
determine a second question, i.e., as to whether the railway company has all
the powers of the natural person.
By its statement of claim, the railway company alleges that
on or about September 5, 1881, an agreement was made between the company and
the city granting to it the exemptions from taxation which are in issue in the
present matter, the terms of which are stated to be set forth in certain
by-laws of the city of Winnipeg. From the terms of the first of these by-laws,
it is evident that there had been an agreement between the parties but, if it
was reduced to writing, the document has not been produced. By-law No. 148 was
adopted by the city on September 5, 1881, the date of the alleged agreement.
After reciting that it was desirable that a line of railway should be built
towards the westerly limit of the province of Manitoba through the Pembina
Mountain district, for the purpose of developing traffic and trade between the
city of Winnipeg and those portions of the province and:
to secure the location of the work-shops and stockyards of
the said company for the province of Manitoba in the city of Winnipeg as a
central point on the main line of the Canadian Pacific and the several branches
thereof, and the said company have agreed to construct a railway south and
south-westerly, as aforesaid, at the time and in the manner as in this by-law
hereinafter mentioned, and have agreed to establish and continue their
"principal workshops and stockyards for the province of Manitoba in the
city of Winnipeg aforesaid."
the by-law authorized the council to issue debentures
in the total sum of two hundred thousand dollars charged on the whole rateable
property in the city of Winnipeg
[Page 482]
and to deliver them to the railway company on the
performance by it of certain defined conditions. Of primary importance is
condition 3, which provided as follows:
The said Canadian Pacific Railway Company shall immediately
after the ratification of this by-law as aforesaid, make, execute and deliver
to the mayor and council of the city of Winnipeg a bond and covenant under
their corporate seal that the said company shall with all convenient and
reasonable despatch, establish and build within the limits of the city of Winnipeg,
their principal workshops for the main line of the Canadian Pacific Railway
within the province of Manitoba, and the branches thereof radiating from
Winnipeg within the limits of the said province, and forever continue the same
within the said city of Winnipeg.
In addition to providing for the delivery of the debentures,
the by-law declared that:
Upon the fulfilment by the said company of the conditions
and stipulations herein mentioned by the said Canadian Pacific Railway Company,
all property now owned or that hereafter may be owned by them within the limits
of the city of Winnipeg, for railway purposes or in connection therewith, shall
be forever free and exempt from all municipal taxes, rates and levies and
assessments of every nature and kind.
By a by-law No. 195, adopted by the city on October 30,
1882, by-law No. 148 was amended and re-enacted and by c. 64 of the Statutes of
Manitoba for 1883 assented to. On July 7 of that year the Act of Incorporation
of the city was amended upon the petition of the mayor and council by declaring
inter alia that these two by-laws were "legal, binding and valid
upon the said the mayor and council of the city of Winnipeg". The learned
trial judge has found as a fact that the railway company performed its various
obligations referred to in the by-law in accordance with the terms of the
agreement referred to: and that the city, on its part, discharged the
obligations which it had assumed.
The first question to be determined is raised by the plea in
the statement of defence of the city of Winnipeg that the railway company:
had no right, power or authority under its charter or
otherwise, to make, or execute, or deliver such a bond and covenant,
Referring to the bond and covenant required to be given by
the company under condition 3 above referred to, and by a further plea that the
railway company was without power under its charter or otherwise, to agree to
build within the city of Winnipeg, or at any other place, its principal
workshops for the main line of its railway within the province of Manitoba and
to continue them forever.
[Page 483]
For the railway company, it is contended that the
incorporation being by letters patent, under the Great Seal of Canada, it has
all the powers of a natural person and that the doctrine of ultra vires
does not apply to it and reliance is placed upon the judgment of the judicial
committee in Bonanza Creek Gold Mining Co. v. The King .
For the city, it is said that the powers of the city are those only which it
would possess if incorporated by an Act of Parliament and that the principle
stated in Ashbury Ry. Carriage and Iron Co. v. Riche ,
applies.
The learned chief justice of the Court of King's Bench was
of the opinion that the railway company had all of the powers of a common law corporation
and in the Court of Appeal the Chief Justice of Manitoba and Coyne and Adamson
JJ.A. agreed. The late Mr. Justice Richards considered that the company's
powers were limited to those set forth in the Act authorizing its charter but
that to enter into the agreement was within its powers. Dysart J.A. concluded
that although the charter was in the form of a Royal Charter it was in
substance a statutory one and the agreement ultra vires the company.
In the view I take of this matter, it is unnecessary to
decide whether or not the Canadian Pacific Railway Company is vested with the
powers of a common law corporation. I think that, if it be assumed for the
purpose of argument that the powers of the company are simply those it would
possess if the incorporation had been by statute and the terms of the letters
patent contained in that statute, to enter into the bond and covenant was
within those powers.
By the contract of October 21, 1880, which was approved and
ratified by c. 1 of the statutes of 1881, the contractors assumed the vast
obligation of building the major portion of the proposed railway through a
country largely unsettled and following a route only generally defined and
thereafter together with those portions of the proposed road to be constructed
by the government, to:
thereafter and forever efficiently maintain, work and run.
the railway. While certain of the terminal points of
the line then in part under construction were to be preserved, the company was
to have the right, subject to the approval
[Page 484]
of the Governor in Council, to lay out and locate the
proposed line and advantage was taken of this provision by abandoning the
proposed route running generally west-ward from Selkirk and establishing the
main line of the railway on a line which included the city of Winnipeg and
changing the route through the mountains from the Yellow Head to the Kicking
Horse Pass. By s. 21 of the contract, the company to be incorporated was to
have "sufficient powers to enable them to carry out the foregoing
contract" and it was apparently realized that wide powers must be given to
the proposed company to enable it to advantageously carry out its terms. It
was, in my opinion, for this reason that s. 4 of Schedule A to the contract was
expressed in such wide language. It is clear that when the contract was signed,
that the proposed incorporation was to be by an Act of Parliament which, I
think, explains the very broad powers described in para. 4. It would have been
quite unnecessary to particularize these powers in this manner had it been
contemplated in 1880 that the incorporation should be by letters patent under
the Great Seal, without any restriction upon the powers which such an
incorporation would have vested in the company. Whatever the reasons which led
to the grant of letters patent and whether or not it was intended by that Act
to vest in the company the powers of a common law corporation, para 4 of
schedule A was incorporated verbatim in the letters patent. Thus, there was
conferred upon the company by s. 4 of the letters patent all the powers
necessary or useful to enable it to discharge its obligations under the
contract. It was, in my opinion, for the railway company to determine the
location of its principal workshops for the main line of the Canadian Pacific
Railway within Manitoba and the branches radiating from Winnipeg and that these
workshops should be continued in such location as it should determine and to
conclude as favourable a bargain as could be negotiated with the city or
municipality where these were to be located. By the Fall of 1881 the directors
of the company had evidently reached the conclusion that Winnipeg, by virtue of
its location, was to be the principal city in the province of Manitoba and,
thus, the most suitable place from which branch lines such as the line running
south to Morris and westerly through the
[Page 485]
Pembina Mountains areas, should have their eastern
terminus. The company was not asked by the city in exchange for the promised
tax exemption and the grant of the debentures to maintain its only railway
workshops for the main line in Manitoba in Winnipeg, but merely the principal
workshops: others might be constructed elsewhere in the province. The further
obligation was to erect large and commodious stock and cattle yards suitable
and appropriate for the central business of the main line and the several
branches as mentioned in section 3 of the by-law, language which was
incorporated in the covenant rather than that of paragraph 2 of the preamble to
the by-law which referred to the "principal workshops and
stockyards." The power of the company to agree to build a general
passenger depot upon a designated site in the city is not, of course,
questioned.
The comment of Lord Selborne L.C., on the decision of the
House of Lords in Ashbury Railway Co. v. Riche, supra, in Attorney
General v. Great Eastern Railway Co. , is that
the doctrine of ultra vires as explained in the earlier case is to be
maintained but that it should be reasonably understood and applied and that
whatever may fairly be regarded as incidental to or consequential upon those
things which the legislature has authorized ought not, unless expressly
prohibited, be held by judicial construction to be ultra vires. There is
nothing in the letters patent or in the Act of 1881 which prohibited the
railway company from entering into such a covenant as the one here in question.
It was, in the language of s. 4, undoubtedly "useful" to the company
to enable it to carry out its contract to construct the railway and thereafter
to operate it in perpetuity to give such a covenant, in order to obtain such
extensive financial assistance and exemption from municipal taxation. In my
opinion, the contention that it was beyond the powers of the Canadian Pacific
Railway Co. to enter into the bond and covenant, fails.
As a further defence to the action, the defendant pleads
that it had no right, power or authority under its charter or otherwise, to
pass by-laws Nos. 148 or 195. The original charter of incorporation of the
defendant is contained in
[Page 486]
c. 7 of the statutes of 1873 and thereby the inhabitants of
the city and their successors were declared to be:
A body (politic and corporate in fact and in law by the name
of "The Mayor and Council of the city of Winnipeg" and separated from
the county of Selkirk for all municipal purposes.
It was by this name that the corporation was described in
the consolidated charter of the city in c. 36 of the statutes of 1882. The
language of s. 6 of c. 64 of the statutes of 1883, in so far as it affects the
present matter, reads:
That * * * by-law No. 148 to authorize the issue of
debentures granting by way of bonus to the Canadian Pacific Railway Company the
sum of $200,000 in consideration of certain undertakings on the part of the said
company; and by-law 195 amending by-law No. 148 and extending the time for the
completion of the undertakings expressed in by-law No. 148 by the Canadian
Pacific Railway Company, and all debentures and coupons for interest issued
under each and every of the said by-laws, be and the same are hereby declared
legal, binding and valid upon the said mayor and council of the city of
Winnipeg.
Without considering the question as to whether the
corporation had the power to agree to the tax exemption and the granting of the
bonus under its existing powers, it is clear that it was intended to validate
the by-laws and declare that the obligations on the part of the city referred
to in them were binding upon it. To otherwise construe the section would be, in
my opinion, to defeat the intention of the legislature. S. 14 of the
Interpretation Act (c. 105, R.S.M. 1940) declares that:
Every Act and every regulation and every provision thereof
shall be deemed remedial and shall receive such fair, large and liberal construction
and interpretation as best insures the attainment of the object of the Act,
regulation or provision.
The object of the amendment was to set at rest any doubts as
to the power of the corporation to obligate itself in the manner described in
the by-laws and the section must, in my opinion, be so construed.
The bond and covenant of the railway company, dated October
10, 1881, delivered in pursuance of the agreement recited in the city by-laws,
after referring in a recital to the agreement of the city to grant aid to the
company to the extent of $200,000 by the issue of debentures and by exempting
the property of the company from certain taxation, obligated the company to:
establish and build within the limits of the said city of
Winnipeg their principal workshops for their main line of railway within the
province
[Page 487]
of Manitoba and for the branches thereof, radiating from the
said city of Winnipeg within the limits of the said province and that they will
forever continue the same within the said city of Winnipeg.
At the time this instrument was made, the area contained
within the limits of the city of Winnipeg were those defined by c. 7 of the
statutes of Manitoba for 1873 and an extension provided by c. 38 of the
statutes of 1875, and it was within this area that the workshops erected in
pursuance of the covenant were placed. Thereafter, on various occasions, the
limits of the city were extended: large areas were added by c. 45 of the
statutes of 1882 and these limits were further extended in the years 1902, 1906
and 1907. In the year 1903, the railway company removed the workshops from the
original site to a point further west within the area added in 1882 where they
have since been maintained. By an amendment to its statement of defence, the
city alleges that the railway company is not entitled to the exemptions from
taxation claimed, since it did not fulfill the conditions mentioned in by-law
No. 148 in that about the year 1903, the company built their principal
workshops or a substantial part thereof, outside the limits of the city of
Winnipeg as defined and constituted in the year 1881. The recitals in the
by-law declared inter alia that it was desirable to secure the location
of the workshops and stockyards of the company for the province of Manitoba in
the city of Winnipeg as a central point on the main line of the Canadian
Pacific Railway and the several branches thereof and that the company had
agreed to establish and continue its principal workshops and stockyards for the
province in the city. "Desirable" meant desirable in the interest of
the municipal entity known as the city of Winnipeg and of its inhabitants. The
purpose of those negotiating on behalf of the municipal corporation was to
ensure in its interest and in the interest of its present and future
inhabitants that these activities of the railway company, with the manifest
benefits which would result, should be continued for all time in Winnipeg. They
did not seek the benefit merely for the then residents of the city living
within its existing limits, but also for those who would thereafter live within
the limits of the corporation from time to time and the corporation whatever
might be its limits. They did not stipulate the place within the corporate
limits where the workshops should be placed
[Page 488]
which was apparently not regarded as a matter of moment:
they sought to ensure simply that they should be constructed and maintained and
operated within the limits of the corporation as they might be from time to
time. The purpose of the railway company which had obligated itself by its
contract with the government to operate the railway line in perpetuity was to
obtain, not only immediate financial help, but exemption from municipal taxes
for all time.
In River Wear Commissioners v. Adamson ,
Lord Blackburn stating the principle to be applied in the construction of the
language of instruments in writing, said in part:
In all cases, the object is to see what is the intention
expressed by the words used. But, from the imperfection of language, it is
impossible to know what that intention is without inquiring farther, and seeing
what the circumstances were with reference to which the words were used, and
what was the object, appearing from those circumstances, which the person using
them had in view; for the meaning of words varies according to the
circumstances with respect to which they were used.
The question is what is the meaning of the words
"within the said city of Winnipeg" as used in this covenant and it is
permissible, in my opinion, to consider the language of the by-law in pursuance
of which it was given as an aid to construction. Once the object of both
parties is ascertained, it seems to me that the meaning is made perfectly
clear. Without resorting to other aids to interpretation, it is my opinion that
the obligation was to continue the workshops within the limits of the city of
Winnipeg as they might be from time to time.
Assuming that there is doubt as to the meaning to be
assigned to these words, the subsequent conduct of the parties may be examined
to resolve the ambiguity and to do this in the present matter makes certain
what both parties intended by the language employed. The workshops were built
within the limits of the City of Winnipeg as defined by the city charter as it
read in the year 1881, but in the following year, those limits were largely
extended. The railway company owned properties within the new areas added to
the city in 1882. Presumably, if effect is to be given to the argument of the
city on this aspect of the matter, the expression "the city of
Winnipeg" in s. S of by-law No. 148 which declared the right to the tax
[Page 489]
exemption, should be construed in the same manner as those
words in s. 3 and of the covenant given in pursuance of the terms of the latter
section. However, it is admitted that none of these lands either in the
original or in the added area were subjected to municipal taxation between the
years 1882 and 1900 except that in 1894 the city sought to levy school taxes
upon the railway company's property and brought an action to recover them,
which failed. Between the years 1900 and 1947, the city was prohibited by the
terms of the Railway Taxation Act (63 and 64 Vict. c. 57) from taxing the
property of the company. Apart from any question as to the effect the judgment
in this action may have upon the present proceedings by rendering issues here
sought to be raised res judicata, it is of importance to note, as
relating to the subsequent conduct of the parties, that in that action (City
of Winnipeg v. Canadian Pacific Railway Co.) , which
was decided upon a demurrer, the question litigated was as to whether school
taxes were within the class of taxes for which exemption had been promised, and
it was not then contended by the city that that exemption was in any event
limited to lands owned by the railway company for railway purposes within the
limits of the city of Winnipeg as they existed in 1881. It is perhaps further
worthy of note that the claim that the railway company had lost its right to
any tax exemption provided by the by-law by virtue of the fact that in 1903 it
had established its principal workshops or a substantial part thereof outside
the limits of the city of Winnipeg as defined and constituted in the year 1881
was first raised by an amendment to the statement of defence made some months
after the original defence, some thirty-five paragraphs in length, had been
filed. This suggests that this point had not occured to the city or any of its
legal representatives until after the original statement of defence was filed.
In the view that I take of this matter it is unnecessary to
deal with the question as to whether the power of the city to enter into the
agreement is res judicata by reason of the litigation between the
parties commenced in the year 1894 above referred to (12 M.R. 581; 30 S.C.R.
561).
The question as to whether business taxes are within the
exemption provided for by the by-law is, in my opinion,
[Page 490]
concluded in favour of the appellant by our decision in Canadian
Pacific Ry. v. Attorney General of Saskatchewan .
There remains the question as to whether the Royal Alexandra
Hotel property falls within the exemption. The promised exemption was of all
property then owned or which might thereafter be owned by the railway company
within the limits of the city of Winnipeg:
"for railway purposes or in connection
therewith".
The Royal Alexandra Hotel is built on railway property at
the corner of Higgins avenue and Main street, in the city of Winnipeg, and is
physically connected with the railway station. Part of the station building
itself is used by the Royal Alexandra Hotel as a coffee shop which provides
meals to the travelling public and railway employees. The hotel was originally
constructed in 1906 and considerably enlarged in the year 1914. According to
Mr. William Manson, vice-president of the prairie region of the railway
company, the railway uses the hotel services of this hotel extensively. All
linen from the sleeping and dining cars is laundered in the hotel laundries.
Accommodation is furnished to extra sleeping and dining car conductors and
dining car crews during periods of heavy traffic, meals are provided to these
employees and some railway conferences and staff meetings are held there. In
the same manner as the other hotels operated by the railway company in Toronto,
Regina, Calgary and elsewhere, the Royal Alexandra Hotel provides food and
lodging for the travelling public. Speaking generally of all the railway
company's hotels, Mr. Manson said that they have been established for the
traffic that they would draw to the railway and that it its considered
essential to proper railway service to have an adequate hotel system. The Royal
Alexandra, however, does not restrict its activities to those above described
but is used by the general public, irrespective of whether they are making use
of the railway's other facilities: balls and entertainments are held there and
other public functions.
The question is simply one of construction of the language
of the by-law. While the hotel is clearly not used exclusively for railway
purposes or in connection therewith, to
[page 491]
the extent that it furnishes lodging and meals to persons
other than those travelling on the railway and its facilities are used for
functions unrelated to any railway activity, I do not think this affects the
matter to be decided. The railway company was, at the time the by-law was
passed, empowered by s. 4 of its letters patent to carry on such activities as
might be useful to it to enable it to carry out its obligations under the
contract. The evidence of the witness Manson is not contradicted. The operation
of railway hotels, where the station and the hotel are incorporated in one
building, is commonplace in England and has been for a very long time. I think
s. 4 of the charter empowered the railway company to maintain and operate
hotels in connection with their railway activities if it was considered that
this would assist the development of its railway properties and the discharge
of its obligation to operate the Canadian Pacific Railway in perpetuity. The
language of the by-law is not that the properties exempted were those then or
which might thereafter be owned exclusively for railway purposes or in
connection therewith, and I think the language should not be construed in a
manner so restricting it.
It has been contended in argument that the decision of the
judicial committee in Canadian Pacific Ry. v. Attorney General for
British Columbia , affects the matter, but I think that
this is not so. The issue in that litigation was as to whether the hours of
work of the employees of the Empress Hotel in Victoria, owned and operated by
the present appellant, were regulated by The Hours of Work Act of British
Columbia. Three questions were considered on the appeal: the first of these was
raised by the contention that the Empress Hotel being an integral part of the
railway system of the company and its activities having become such an
extensive and important element in the national economy of Canada, the
regulation of its activities did not come within the class of matters of a
local or private nature comprised in the enumeration of the classes or subjects
assigned by s. 92 exclusively to the legislatures of the provinces, so that
parliament was entitled under the general powers conferred by the first part of
s. 91 to regulate its affairs; the second was as to whether the hotel was part
[Page 492]
of the appellant's railway works and undertaking connecting
the province of British Columbia with other provinces and thus within the
exception contained in head 10(a) of s. 92; the third was as to whether
the hotel, as part of the company's railway system, fell within head 10(c)
of s. 92 as a work which had been declared by parliament to be for the general
advantage of Canada or of two or more of its provinces. All of these questions
were decided contray to the contentions of the railway company. None of them
appear to me to bear upon the present matter which, as I have said, is simply
one of the construction of the particular language of the by-law.
For these reasons, I think the Royal Alexandra Hotel
property is entitled to the exemption provided for by the by-law and which is
enjoyed by other properties of the company within the present limits of the
city of Winnipeg owned for railway purposes or in connection therewith.
The appeal of the railway company should be allowed with
costs and that of the respondent city dismissed with costs; the judgment of the
Court of Appeal should be set aside and that of the learned trial judge
restored. The appellant should have its costs in the Court of Appeal.
Appeal of the Canadian Pacific Railway Co.
allowed, judgment of Court of Appeal set aside and that of trial judge restored
with costs here and in the Court of Appeal. Appeal of the city of Winnipeg
dismissed with costs.
Solicitor for Canadian Pacific Railway Co.: H. A.
V. Green.
Solicitor for The City of Winnipeg: G. F. D. Bond.
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