INCORPORATION And the doctrine of ultra vires in the light of Privy Council Decisions BY VICTOR E. MITCHELL, K.C., B.C.L. Author of "Canadian Commercial Corporations" A Paper read before the JUNIOR BAR ASSOCIATION OF MONTREAL MARCH 10th, 1917 Financial Times Press INCORPORATION And the Doctrine of Ultra Vires in the light of Privy Council Decisions On the 24th February, 1916, the Privy Council rendered decisions in three very important cases affecting Canadian Constitutional Law in its bearing upon company incorporation in Canada, viz.: The Bonanza Creek Gold Mining Company Case (a); The Insurance Act Reference (b), and the case involving references Re Companies Incorporation (c). Before proceeding to a review of the above important decisions of the Privy Council, it is desirable to give a retrospect of the principal decisions dealing with the rights and powers of Dominion and Provincial companies respectively, under the British North America Act. The questions chiefly involved in the controversy centering round sections 91 and 92 of the B.N.A. Act are: (1) What are the respective rights of the Dominion and of the provinces in respect of the incorporation of companies; and (2) What are the respective rights and powers of such companies after incorporation under the opposing jurisdictions contained in sections 91 and 92 of the B.N.A. Act? 1. As to Incorporation of Companies: Part VI of the B.N.A Act deals with "Distribution of Legislative Powers." Sec. 91 of this part deals with "Powers of Parliament." Sec. 92 deals with "Exclusive Powers of Provincial Legislature." Sec. 91 contains no express mention of the incorporation of companies by the Dominion Parliament; sec. 92 does contain express mention of "The incorporation of companies with provincial objects," and gives the provinces exclusive powers in regard to such incorporation. But sec. 91 says: "It shall be lawful for the Queen by and with the consent of the Senate and House of Commons, to make laws for the peace, order and good government of Canada, in relation to all matters not coming within the classes of subjects by this Act assigned exclusively to the legislatures of the Provinces." Hence, the Privy Council has held that the power of legislating with reference to the incorporation of companies with other than provincial objects belongs exclusively to the Dominion Parliament, for the matter is one "not coming within the classes of subjects assigned exclusively to the Legislatures of the Provinces," and may be properly regarded as a matter affecting the Dominion generally, and covered by the expression "the peace, order and good government of Canada" (d). Thus it may be concisely stated: 1. The power of legislating with reference to the incorporation of companies with other than provincial objects belongs exclusively to the Dominion Parliament. 2. The power of legislating with reference to the incorporation of companies with provincial objects belongs exclusively to the provincial legislatures. In 1883 the important point was established that where a corporation is incorporated by the Dominion Parliament with power to carry on business within the Dominion, the fact that it chooses to confine the exercise of its powers to one province and to local and provincial objects does not operate to render its original incorporation illegal as ultra vires of the said Parliament (e). But it would probably be ultra vires of the Dominion to incorporate a company formed for the sole purpose of buying a tract of land in a stated province (1). In 1901 Langelier J. held in Bank of Toronto vs. St. Lawrence Fire Insurance Company (9), that a fire insurance company incorporated in Quebec to carry on the business of fire insurance in that province could enter into (d) Citizens' Insurance Co. v. Parsons, 7 App. Cas. p. 96, pp. 116-117; Colonial Building & Investment Assn. v. Attorney-General, 9 App. Cas. p. 165; John Deere Plow Co. v. Wharton (1915) A.C. p. 340. Colonial Building and Investment Assn. v. Attorney-General, 9 App. Cas. 157. (e) (f) Forsyth v. Bury, 15 S.C.R. 543 per Ritchie and Strong JJ. a contract of insurance in that province covering a risk on goods situated in Toronto. The Court of King's Bench (h), though dismissing the action on another ground, unanimously agreed that the fire insurance company had no defence on this ground. On appeal to the Privy Council (i), where the plaintiffs succeeded, the above defence does not appear to have been abandoned, but is referred to apparently in the decision of the Privy Council as one of a number of defences not "seriously argued at the bar." (See per Duff, J., in Canadian Pacific Ry. Co. vs. Ottawa Fire Insurance Co. (3), who said:-"Conceding that this case ought not upon this point to be regarded as a decision of the Privy Council, it would at least seem that the eminent counsel who appeared for the insurance company did not think it worth while seriously to challenge the view of the Quebec Courts upon it; and it is obvious that the action must have been dismissed if the defence could have been maintained. This seems to be the only case in which the point has ever been raised.") But it might perhaps have been argued in this case that the insurance company was not exercising its powers in an outside jurisdiction, for the contract was entered into in the province of the company's incorporation, and was of a personal nature, being a contract to indemnify the insured against loss in the event of certain of its property in Ontario (where it was domiciled) being destroyed by fire. Such a contract does not attach to the property insured (k). In 1906 the Supreme Court of Canada in Canadian Pacific Ry. Co. vs. Ottawa Fire Ins. Co. (1), had occasion to determine the meaning of the clause "The incorporation of companies with provincial objects," in its application to a fire insurance company incorporated in Ontario and which had, by a contract entered into within the province of its incorporation, with a company domiciled in another province, insured risks of the latter company in the State of Maine. The majority judges decided that "a company incorporated under the authority of a provincial legislature (h) Q.R. 11 K.B. 251. (i) (j) (k) (1903) A.C. 59. 39 S.C.R. at p. 475. Saddlers' Company v. Badcock, 2 Atk. 554; Lynch v. Dalzell, 3 Bro. |