1. Provincial statute declaring bank deposits unclaimed for thirty years as vacant property belonging to the province — challenge to legislative competence. (Para 1 , 2 , 3 )
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1946 Supreme(SC) 42
Privy Council At Quebec
Sir Lyman Poore Duff, Uthwatt , Porter , Lords Wright, Justice Viscount Simon, JJ.
Attorney-General of Canada and another -Appellant
Versus
Attorney-General of the Province of Quebec and another, Respondents, Attorney-General of Saskatchewan, Alberta and Manitoba,Interveners -Resopndent
Privy Council Appeal No. 43 of 1944
Decided On : 23-10-1946
Advocates Appeared:
Redden, Blake, Lawrence Jones and Co., Charles Russell Co., A.G. of Canada, Frank Gahan, Frank Gahan, L.E. Beaulieu , V, C.F.H. Carson, L.A. Forsyth , Attorney-General of Canada, W.R. Jackett, H.E. O’Donnell
Redden, Blake, Lawrence Jones and Co., Charles Russell Co., A.G. of Canada, Frank Gahan, Frank Gahan, L.E. Beaulieu , V, C.F.H. Carson, L.A. Forsyth , Attorney-General of Canada, W.R. Jackett, H.E. O’Donnell
A provincial law declaring unclaimed bank deposits as vacant property is ultra vires because the receipt and repayment of deposits are essential to the business of banking, which falls under exclusive federal jurisdiction.
Headnote:(A) Constitutional Act - Section 91 - Banking; Provincial Statute - Act Respecting Certain Vacant Property Without an Owner - Validity of provincial legislation regarding unclaimed deposits in credit institutions - If the pith and substance of a law falls within a federal head of power, it is beyond the legislative competence of the province, even if the subject matter overlaps with provincial jurisdiction over property and civil rights. (Paras 16, 17)
(B) Banking - Nature of relationship - The relationship between a banker and a customer is that of debtor and creditor; the receipt and repayment of deposits are essential parts of the business of banking. (Paras 19, 20, 21)
(C) Pith and Substance - A provincial law that interferes with the right of depositors to receive payment from a bank is, in essence, legislation on banking and is therefore ultra vires. (Para 26)
Facts of the case:
A provincial statute provided that deposits of money or securities in credit institutions, which remained unclaimed for thirty years or more, would be deemed vacant property belonging to the province. A bank challenged the validity of this statute, contending that banking is an exclusive federal power and that the provincial law was therefore void and in conflict with federal banking legislation.
Findings of Court:
The court found that the receipt and repayment of deposits are essential functions of banking. The provincial legislation, by declaring unclaimed deposits as vacant property and effectively confiscating them, interfered with these essential functions.
Issues: Whether a provincial law declaring unclaimed bank deposits as vacant property is ultra vires the provincial legislature as it encroaches upon the exclusive federal power to legislate on banking.
Ratio Decidendi: The court held that the "pith and substance" of the provincial act was banking. Since the repayment of deposits to customers is an essential part of the business of banking, any provincial law interfering with this right is ultra vires, regardless of whether it also touches upon property and civil rights. The court rejected the analogy that bank deposits are trust funds, affirming instead that they are loans for use where the bank is a debtor to the depositor.
Result: Appeal allowed.
Legal Category Hierarchy
Table of Contents
2. Whether the legislation concerns banking — exclusive federal jurisdiction — or property and civil rights — provincial jurisdiction — and whether it conflicts with federal banking legislation. (Para 4 , 5 , 10 , 11 , 12 )
3. The receipt and repayment of deposits is an essential part of banking; the relationship between banker and customer is that of debtor and creditor. (Para 6 , 9 , 15 )
4. Does the repayment of bank deposits fall under federal or provincial jurisdiction?
It falls under federal jurisdiction. The receipt and repayment of deposits to depositors or their successors is an essential part of the business of banking, which is an exclusive power of the Parliament of Canada. (Para 9 )
5. How is the pith and substance of a law determined when it overlaps multiple jurisdictions?
The court examines the whole scheme for distribution of powers. If the matter comes within a class enumerated in Section 91, it is not deemed to come within provincial classes, even if they overlap. (Para 15 )
Lord Porter:-
In this matter consolidated appeals are brought to the Judicial Committee by the Attorney General of the Canada and the Bank of Montreal from a judgment of the Court of King's Bench for the Province of Quebec (Appeal Side) dated 29th June 1943, affirming by a majority the judgment of the Superior Court of the Province (Demers J.) delivered on 6th October 1941, which held the Quebec Statute entitled "an Act Respecting Certain Vacant Property Without an Owner" (3 George VI, 1939, ch. 28) to be within the powers of the Legislature of Quebec to enact and to apply to the Bank of Montreal. The Court of King's Bench consisted of Letourneau C. J., St. Germain, Walsh, Francoeur and Marchand JJ., Marchand J. dissenting.
[2] The material clause in the Quebec Statute runs as follows:
"The following are deemed to be vacant property and without an owner, belonging to His Majesty in the rights of the Province of Quebec, deposits of money and of securities and all credits in specie or in securities, with the fruits thereof, in credit institutions and all other establishments which receive funds or securities on deposit, whenever, for thirty years or more, such deposits or credits have not been the subject of any operation or claim by the persons entitled thereto." The Act came into force on 28th April 1939.
[3] In November 1940, the Attorney-General of Quebec instituted proceedings in the Superior Court alleging that the Bank of Montreal was a "credit institution" within the meaning of the Act and that it held deposits of money, etc., made by certain depositors as set out in an attached list, which deposits had not been the subject of any operation or claim by the persons entitled thereto, for thirty years or more. The declaration claimed that, in virtue of the Quebec Statute, these deposits were deemed to be "vacant property and without an owner" and the Attorney-General of Quebec accordingly claimed that the Defendant Bank should pay over the total of these deposits to him, together with the total of certain other deposits in the Molson's Bank, which were similarly left untouched by their owners for more than thirty years and which had been taken over by the Bank of Montreal when it absorbed Molson's Bank.
[4] To this declaration the Bank of Montreal pleaded that it was not a "credit institution", so that the Act did not apply to it at all, and it also pleaded that the funds it had received from depositors were not "deposits" within the meaning of the Act. Apart from these special points the Bank raised the broad contention that the Act was beyond the powers of the Quebec Legislature to pass, as "banking" is one of the subjects allotted exclusively to the Parliament of Canada and, moreover, that the Bank Act of Dominion (24-25 George V, 1934, Ch. 24) contains provisions with which the Statute of Quebec is in conflict.
[5] On this last issue of the validity of the Quebec Statute of 1939, the Attorney-General of Canada at once intervened to support the view that the Act of the Quebec Legislature is beyond its powers and void, at any rate in respect to Banks, and their Lordships have heard arguments on his behalf as well as on behalf of the Bank of Montreal, in support of the appeal. On the other side the Attorney-General of Quebec has been supported by counsel acting for the Attorney-General of Saskatchewan, Alberta and Manitoba.
[6] It is convenient firstly to deal with the special contentions advanced by the Bank of Montreal as to the true interpretation of the Quebec Statute, leaving until later the examination of the constitutional issue. None of the Judges who have dealt with this case in Canada accepted the contention that the Quebec Statute did not apply to banks in general, and to the Bank of Montreal in particular. On the contrary, Demers J., expressed the suspicion that the draftsman of the Act while using the phrase: "credit institutions and all other establishments which receive funds or securities on deposit" deliberately
