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1943 Supreme(SC) 5
Privy Council At Canada
Clauson, Romer, Macmillan, Lord Russell of Killowen, Justice Viscount Maugham, JJ.
Attorney-General of Alberta -Appellant
Versus
Attorney-General of Canada and others -Resopndent
Privy Council Appeal No.20 of 1942
Decided On : 01-02-1943
Jones and Co., Lawrence, Russell and Co., Charles, Redden, Slake, C.F.H. Carson, Frank Gahan, D.N. Pritt, A.G. Saskatchewan, A.G. New Brunswick, A.G. Ontario, A.G. Manitoba, F. W. Wallace, J. W. Estey, F.W. Wallace, J.L. Stone, C. Romer, J. Leonard Stone, Wilfrid Barton
Provincial legislation that restricts the enforcement of debts and compels compositions to relieve insolvent debtors is ultra vires as it encroaches upon the exclusive federal legislative authority over "Bankruptcy and Insolvency."
Headnote:(A) British North America Act, 1867 - Sections 91(21), 92(13), 92(14), and 92(16) - Bankruptcy and Insolvency - Property and Civil Rights - Administration of Justice - Local or Private Nature - Debt Adjustment Act, 1937 - Validity of provincial legislation restricting the enforcement of debts without a permit from a board - Whether such legislation encroaches upon the exclusive legislative authority of the federal parliament regarding bankruptcy and insolvency - Legislation that precludes access to courts to enforce rights against resident debtors and compels acceptance of compositions is in pith and substance legislation relating to insolvency - Such legislation is ultra vires the provincial legislature as it invades the exclusive federal domain and interferes with existing federal bankruptcy laws.
(B) Constitutional Law - Division of Powers - Pith and Substance - Where a provincial statute's main purpose is to relieve debtors unable to pay debts as they become due by restricting legal remedies, it falls within the federal head of power over bankruptcy and insolvency, regardless of whether it is framed as a matter of property and civil rights or local nature.
Facts of the case:
A provincial legislature enacted a statute to relieve resident debtors and farmers during a period of economic distress. The Act established a board with the power to issue permits for the commencement or continuation of legal actions for the recovery of money, execution, or foreclosure. Without such a permit, creditors were prohibited from pursuing legal remedies. The board was also empowered to negotiate debt settlements or compositions based on the debtor's ability to pay.
Findings of Court:
The Act as a whole constitutes a serious and substantial invasion of the exclusive legislative powers of the federal parliament in relation to bankruptcy and insolvency. It obstructs and interferes with existing federal legislation on these matters.
Issues: Whether the provincial Act was ultra vires the provincial legislature by encroaching upon the federal authority over "Bankruptcy and Insolvency" under the constitutional framework.
Ratio Decidendi: The court held that the "pith and substance" of the Act was to relieve resident debtors from enforceable liabilities and compel creditors to accept compositions. By depriving creditors of the remedies by which rights are enforced and interfering with the ability to present bankruptcy petitions under federal law, the Act entered the exclusive domain of the federal parliament. Provincial legislation cannot occupy a field exclusively reserved for the federal parliament, even if the provisions are claimed to be ancillary to provincial powers.
Result: Appeal dismissed.
Legal Category Hierarchy
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constitutional law
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division of powers
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federal jurisdiction
- bankruptcy and insolvency
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provincial jurisdiction
- property and civil rights
- administration of justice
- local or private nature
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federal jurisdiction
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division of powers
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civil law
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debt and credit
- debt adjustment
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debt and credit
Viscount Maugham.:-
This appeal by special leave is presented by the Attorney-General of Alberta against the decision of the Supreme Court of Canada dated 2nd December 1941, which answered certain questions concerning the constitutional validity of the Debt Adjustment Act, 1937 , of the Province of Alberta as amended by five later Acts. These questions had been referred to the Supreme Court for hearing and consideration pursuant to S. 55, Supreme Court Act (Revised Statutes of Canada, 1927, chapter 35) by the Governor General in Council by an order made on 19th May 1941. The Supreme Court decided that the Act in question is ultra vires of the Legislature of Alberta. The Attorney-General for Saskatchewan as a respondent and the Attorneys-General for Manitoba, Ontario and New Brunswick as intervenants supported the appeal. Distress of a very serious nature was rife in Alberta and the adjoining Prairie Provinces from at any rate the year 1920, and divers statutes were passed in those Provinces and in particular in Alberta directed to the relief of the inhabitants. In the view their Lordships have taken, it does not seem to be necessary to give even a summary of these statutes beginning with the Drought Area Belief Act , chap. 43 of 1922. The Act now under consideration (to be hereafter generally referred to as "the Act") is the last of a series of legislative attempts to relieve the distress of resident farmers and others while keeping within the legislative powers of the Province as laid down in the British North America Act, 1867 , as amended. Their Lordships approach the important questions before them on the assumption that there was sufficient and it may be said grave need for legislation for the relief of distress in the Province. They desire, however, to point out that the question before them is not as to the expediency, still less as to the wisdom, of the present Act. The question is simply one as to the power of the Province to pass it. If the answer should be in the negative it must necessarily follow that the Dominion has full power to pass a statute dealing with the matter or such part of it as is beyond the power of the Province.
Before stating the nature of the Act, it should be mentioned that it contains amendments designed to deal with the objection that a preceding Act encroached upon the matter of "Bankruptcy and Insolvency" which (under S. 91 (21) of the British North America Act) is within the exclusive legislative authority of the Parliament of Canada. O'Connor J. had decided in favour of this objection, (1941) 1 WWR 430, North American Life Assurance Co. v. McLean Certain compulsory composition provisions mentioned by the learned Judge are now removed; but the important provisions of S.8 (which will be stated in detail later) remain. The consideration of the Act (as it now stands) came before the Supreme Court of Canada in the year 1940 in Winstanley's case (Attorney-General for Alberta v. Atlas Lumber Co., Ltd.). This was an action brought without "a permit" under the Act against a resident debtor in Alberta upon a promissory note. It was there held (the judgment of Deff C. J. being concurred in by Rinfret, Crocket, Davis, Kerwin, Hudson and Taschereau JJ. affirming the judgment of Ewing J.) that S. 8 (a) of the Act so far as it extends to actions upon bills of exchange and promissory notes is repugnant to the enactments of the Dominion in the Bills of Exchange Act (chap. 16 of the Revised Statutes of Canada, 1927, and amendments thereto) and that the absence of a permit to bring the action was therefore not a defence. The Act is now under consideration in a proceeding which involves its validity as a whole. It is in four parts; but part 2 has been repealed. There is a preliminary part containing definitions including one stating that a resident debtor means a person who is a debtor and who is an actual resident of and personally living in the Province and includes the personal representative or representa
