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Case Number

On Appeal from the Supreme Court of Ontario

Attorney(S)

Lawrence Jones and Co.
Tulk
Powell
Harrison
Intervener
McGregor Young
Tilley
N.A. Belcourt
Leese
Fresh fields
John Simon

Judges

Justice Duff
Lord Dunedin
Lord Buckmaster
Justice Viscount Haldane

Acts

provision of Section 93, sub-Section 1 of the British North America Act, 1867;
Section 93, sub-Section 1 of the British North America Act

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Smart Summary

Judgment Summary — Lord Dunedin

Factual and Procedural Background

This dispute arises from a prolonged disagreement between the Board of the Roman Catholic Separate Schools of the City of Ottawa ("the appellants") and the City's educational authority. Earlier decisions involving the same parties were reported in two Privy Council cases: Ottawa Separate Schools Trustee v. Mackell (A.I.R. 1916 P.C. 184 = (1917) A.C. 62) and Ottawa Separate Schools Trustees v. Ottawa Corporation (A.I.R. 1916 P.C. = (1917) A.C. 76). The first of those cases had held that a regulation prescribing the exclusive use of English in the schools was not ultra vires under Section 93(1) of the British North America Act, 1867; the second held that a provincial Act appointing a commission to take over the schools and supersede the board was ultra vires.

In July 1915 a Commission was appointed and entered into possession of the schools on 26 July 1915, and maintained them until November following the second-cited judgment when possession was returned to the appellants. During the Commission's administration it levied a half-year's rate, withdrew about $97,000 from a Quebec Bank account standing in the appellants' name, and incurred liabilities of about $71,000 to the Bank of Ottawa.

The appellants brought consolidated actions against the Quebec Bank (seeking approximately $97,000), the Bank of Ottawa (seeking approximately $37,000 that had been transferred and earmarked as a sinking fund), and certain individual Commissioners (seeking roughly $84,000 from the half-year rate). While the actions were pending, the Legislature of Ontario enacted statute 7 Geo. V, Clause 60 (set out in full in the opinion), which, among other declarations, (1) declared that the Commissioners had properly disbursed funds and incurred liabilities necessary to maintain the schools, (2) deemed those payments to have been made by the Commissioners on behalf of and at the request of the Board and entitled the Commissioners to indemnity, (3) declared the Bank of Ottawa liability to be a debt of the Board subject to set-off, (4) allowed payment from the Consolidated Revenue Fund in default, and (5) permitted the Act to be pleaded as a defence in pending actions.

The Attorney-General for Ontario intervened as a defendant. At trial (before Clute, J.) judgment was given in favour of the appellants subject to deductions for sums the Commissioners could show were properly expended. The Appellate Court of Ontario unanimously reversed and dismissed the actions. The appellants then appealed to the Judicial Committee (this Board).

Legal Issues Presented

Whether statute 7 Geo. V, Clause 60 (the Ontario statute enacted while the actions were pending) is intra vires the provincial legislature, or whether it is ultra vires by contravening the exception in Section 93, sub‑section 1 of the British North America Act, 1867 — i.e., whether it prejudicially affects any right or privilege of the appellants to maintain separate schools.
Whether, if the statute is valid, it provides a complete defence to the appellants' consolidated actions against the banks and the Commissioners for monies disbursed and liabilities incurred while the Commission conducted the schools.

Arguments of the Parties

Appellants' Arguments

The appellants contended that amounts withdrawn from the appellants' bank account and other funds should be available to them and that deductions (as allowed by Clute, J.) were unwarranted.
Implicit in their position was the contention that the later statute (7 Geo. V, Clause 60) prejudicially affected their rights relating to separate schools and so could be ultra vires under Section 93(1) — although the opinion records that counsel admitted the monies were properly expended for school purposes.

Other Parties

The opinion does not set out detailed affirmative arguments advanced by the banks, the Commissioners, or the Attorney-General of Ontario beyond the position that the later statute provided a defence. The Attorney-General intervened and was allowed to defend the statute.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Ottawa Separate Schools Trustee v. Mackell, A.I.R. 1916 P.C. 184 = (1917) A.C. 62	Decided that a regulation of the education authority prescribing the use of English in the schools was not ultra vires under Section 93(1) of the British North America Act (i.e., it did not unlawfully infringe denominational school rights).	Referred to as background on the legal framework governing the maintenance of Catholic separate schools; cited to show prior treatment of provincial regulation vis-à-vis Section 93(1).
Ottawa Separate Schools Trustees v. Ottawa Corporation, A.I.R. 1916 P.C. = (1917) A.C. 76	Held that an Act of the Ontario Legislature appointing a commission to take over the schools and supersede the board was ultra vires as infringing Section 93(1) (because it removed the board's management indefinitely).	The Court distinguished the present statute from that Act: in the earlier case the board's management was taken away for an indefinite period (a prejudicial effect), whereas the present statute did not have that effect and instead validated payments made while others carried on the schools.

Court's Reasoning and Analysis

The Court proceeded in the following analytical steps, relying only on the facts and law as stated in the opinion:

At common law, the claim against the Quebec Bank would be good: the Bank was the appellants' debtor and the fact that the Bank had paid money to a Commission whose authority derived from a provincial Act later declared ultra vires would not, at common law, defeat the appellants' claim.
However, the Ontario Legislature had enacted statute 7 Geo. V, Clause 60 while the actions were pending. By its terms that statute declares the Commissioners' payments and liabilities to be valid, deems payments to have been made on behalf of the Board (entitling Commissioners to indemnity), recognizes the Bank of Ottawa liability as a debt of the Board (subject to third-party rights and set-off), permits payment from the Consolidated Revenue Fund in default, and allows the Act itself to be pleaded as a defence to actions.
The critical legal question for validity (intra vires) was whether the statute prejudicially affected any right or privilege protected by Section 93(1) of the British North America Act, 1867. The Court acknowledged that provincial legislation generally dealing with civil rights falls within provincial legislative competence; it would be ultra vires only if it prejudicially affected denominational school rights.
The Court noted that counsel for the appellants had frankly admitted the money spent and the liabilities incurred were properly spent and incurred in carrying on the schools. The appellants did not dispute that the funds were applied to proper school purposes; rather, their dispute related to control over those funds and the consequences of deductions at trial.
The Court contrasted the present statute with the earlier statute held ultra vires in the Ottawa Corporation case. There the board's management had been taken away indefinitely and restoration depended on others; that was a prejudicial effect. By contrast, the present statute does not remove the appellants' right to maintain separate schools; it merely validates payments made by others in order to carry on the schools while the appellants were not in management.
The Court reasoned that if the appellants' contention were upheld (i.e., that the deductions were unwarranted and the statute could not be relied on), the practical result would be that third parties (the banks or commissioners) would have carried on the schools via funds they provided gratuitously, while the appellants would retain funds destined for the schools but no longer applicable for that purpose — resulting in a gratuitous bonus to the appellants. The statute prevents that unjust result by declaring the payments valid and by providing indemnity and set-off rules.
On these grounds the Court concluded that the statute did not prejudicially affect the appellants' denominational school rights under Section 93(1) and therefore was within provincial competence. Consequently, the statute afforded a complete defence to the pending actions.
The Court also addressed a practical point: the $37,000 held by the Bank of Ottawa, which had been set aside as a sinking fund for debentures, would become available to the appellants on payment of the debt the appellants owe to the Bank of Ottawa (the liability of about $71,000).

Holding and Implications

Core Holding: The Judicial Committee advised His Majesty to DISMISS THE APPEALS. The Court held that statute 7 Geo. V, Clause 60 is not ultra vires under Section 93(1) of the British North America Act and that, by its terms, it supplied a complete defence to the appellants' consolidated actions.

Consequences and immediate implications (as stated in the opinion):

The actions brought by the appellants against the Quebec Bank, the Bank of Ottawa and the individual Commissioners were dismissed.
The appellants were ordered to pay the respondents' costs; the Attorney‑General of Ontario was to bear his own costs.
Regarding the $37,000 held by the Bank of Ottawa as a sinking fund: once the appellants pay the debt of approximately $71,000 owed to the Bank of Ottawa, that $37,000 will be available to the appellants for the purpose for which it was set aside.
The opinion distinguished the present validating statute from prior provincial legislation (held ultra vires in the Ottawa Corporation case) that removed the management of the separate schools indefinitely; the Court found no prejudicial effect on the appellants' protected rights here.

The opinion does not state that a new legal precedent beyond the facts of the case is being established; it rests its decision on the conclusion that the statute in question did not prejudicially affect the appellants' rights under Section 93(1).

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Trustees Of The Roman Catholic Separate Schools For The City Of Ottawa v. Quebec Bank And Others

Lord Dunedin :-

The present case is what it is to be hoped is the last chapter of the history of the unfortunate disagreement between the Board of the Roman Catholic Schools and the educational authority of the City of Ottawa. This matter has already been before this Board in the two cases of Ottawa Separate Schools Trustee v. Mackell. A.I.R. 1916 P.C. 184 = (1917) A.C. 62, and Ottawa Separate Schools Trustees v. Ottawa Corporation. A.I.R. 1916 P.C. = (1917) A. C. 76. It is unnecessary to state on this occasion the system under which the Catholic Schools are maintained as that is set out at length in those judgments. It is sufficient to say that it was decided in the former case that a regulation of the education authority prescribing the use of English in the schools was not ultra vires as infringing the provision of Section 93, sub-Section 1 of the British North America Act, 1867; while in the latter it was held that an Act of the Legislature of Ontario appointing a commission to take over the schools and supersede the board was ultra vires as infringing the said provision.

The Commission was in occupation of the schools theretofore managed by the appellants from 26th July, 1915, till November following when, upon the above second-mentioned judgment being pronounced they gave up possession to the appellants. During the regime of the Commission the schools were carried on by them. In order to meet the expenses of the schools the Commission besides levying a half year's rate took a sum of 97,000 dollars odd standing at the credit of the appellants on an account in their name with the Quebec Bank. They also incurred a liability of 71,000 dollars odd to the Bank of Ottawa.

These actions were raised by the appellants against the Quebec Bank, the Bank of Ottawa and certain individual members of the Commission. There was claimed against the Quebec Bank the said sum of 97,000 dollars odd, against the Bank of Ottawa a sum of 37,000 dollars odd which had been transferred to it out of the 97,000 dollars and kept as a sinking fund to meet certain debentures issued by the Board and against the Commissioners the sum of 84,000 dollars odd, being the produce of the half year's rate above referred to. These actions were consolidated. Pending these actions the legislature of Ontario passed the statute of 7 Geo. 5, Clause 60 which is as follows :-

"Whereas pursuant to an Act respecting the Board of Trustees of the Roman Catholic Separate Schools of the City of Ottawa passed in the fifth year of the reign of His Majesty, King George Fifth, Chapter 45, the Minister of Education with the approval of the Lieutenant Governor in Council on 20th July, 1915 appointed a commission consisting of Denis Murphy now deceased Thomas D'Arey McGee and Arthur Charbonneau herein referred to as "the Commissioners" to conduct and manage the Roman Catholic Separate Schools of the City of Ottawa which said Act has been declared to be ultra vires; and whereas the Board of Trustees of the said Separate Schools prior to the appointment of the said Commission has neglected and failed to open, keep open, maintain and conduct the said schools according to law and to provide qualified teachers therefor, had threatened at various times to close the said schools and had neglected and refused to discharge and perform the duties imposed upon it by law to the loss and damage of the supporters of the said schools and to the serious prejudice of the children entitled to attend the same; and whereas by reason of the neglect and default of the Board as aforesaid it was necessary to provide - special means for the education of the children entitled to attend the said schools until the Board should be willing to perform its lawful duties in respect to said schools, and the Commissioners were appointed for that purpose; and whereas the Commissioners entered into possession of the school premises and property on 26th July, 1915, and thereafter maintained and conducted the said schools continuously until the said Act was declared to be ultra vires during the whole of which time the said board was unwilling to conduct the said schools according to law; and whereas the Commissioners in carrying on said schools and meeting obligations of the Board disbursed $ 68,873,43 which at the date of their appointment stood to the credit of the Board in the Quebec Bank of Ottawa, the further sum of $ 84, 156.04 received out of Court pursuant to an Order of the Appellate Division of the Supreme Court of Ontario dated 3rd April, 1916 and the further sum of $ 71,944.08 received from other sources, all of which sums of money were by law applicable to the maintenance and conduct of the said schools; and the Commissioners in the maintenance conduct and management of the said schools, also incurred a liability to the Bank of Ottawa for $ 71,891.16 and interest thereon which still remains unpaid; and whereas the Board has commenced actions against the Quebec Bank, the Bank of Ottawa and the Commissioners to recover the moneys so disbursed as aforesaid and has refused to assume the said liability to the Bank of Ottawa and it is desirable to declare the rights of the parties.

"Therefore His Majesty, by and with the advice and consent of the Legislative Assembly of the Province of Ontario enacts as follows :-

"1. It is declared that the Commissioners disbursed the monies and incurred the liability herein recited for payments and expenditures which were necessary to maintain and carry on the said schools and which should have been made by the Board in the proper conduct and management of the said schools but for its wrongful neglect and default as aforesaid.

"2. It is further declared that the said payments and expenditures shall be deemed for all purposes to have been made by the Commissioners for and on behalf and at the request of the Board and that the Commissioners are entitled to indemnity from the Board in respect thereof.

"3. It is further declared that the said liability of $ 71,891.16 and interest thereon to the Bank of Ottawa subject to the rights of third parties, if any, is a debt of the Board to the said Bank and that the Bank is entitled to set off the same against any other monies of the Board in its hands.

"4. In default of payment of the said liability by the Board the same may be paid to the Bank out of the Consolidated Revenue Fund of the Province and thereafter the said sum with proper interest thereon shall be a debt to His Majesty and may be recovered from the Board in any action brought for that purpose.

"5. This Act may be pleaded as a defence to any action now pending or that may hereafter be brought by the Board against any person or Corporation in respect of any of the monies received and disbursed by the Commission as aforesaid.

"6. The Order in Council made on 26th August, 1915, which is set out in the Schedule herewith, is confirmed and declared to be and to have been from the said date, legal, valid and binding, and the Commissioners shall be indemnified by the Province from and against all liability for indebtedness incurred by them or damages recovered against them by reason of any of said payments and expenditures by them as aforesaid or in consequence of anything done or suffered by them or any of them while acting as such Commissioners.

Schedule.

Copy of an Order in Council approved by His Honour the Lieutenant Governor, 25th August, 1915.

"The Committee of Council have had under consideration the report of the Honourable G.H. Ferguson, Acting Minister of Education, dated 19th August, 1915, wherein he states that in view of the pending litigation in which the Roman Catholic Separate School Board for the City of Ottawa is plaintiff and the Quebec Bank a party defendant, the Quebec Bank has declined to pay to the Ottawa Separate School Commission the monies heretofore, now or hereafter standing to the credit of the said Board in the said Bank without a bond of indemnity from the Province in that behalf, and that there is urgent need of the monies in question for the purpose of the Commission and of the separate schools under their control and management and it is advisable to comply with the request of the Bank. The Minister therefore recommends that he be authorized and empowered as Acting Minister of Education on behalf of the Province to execute and deliver with the seal of the Department of Education to the Quebec Bank a bond indemnifying and saving harmless the Bank from all loss, costs or damage the Bank may at any time suffer or sustain on account of or by reason of the payment or transfer at any time and from time to time by the said Bank to the Ottawa Separate School Commission of any monies heretofore, now or hereafter standing to the credit of the Roman Catholic Separate School Board for the City of Ottawa in the books of the said Bank or that otherwise but for the appointment of the said Commission would be the property of or payable to the said Board or of any loans, advances, overdrafts or credits at any time or from time to time that may be made or given by the Bank to the Commission or of anything otherwise lawfully relating to the premises, the bond to be in such penal sum and in such form and to contain such provisions as may be satisfactory to the said Bank and to the Counsel for the Department of Education.

"The Committee concur in the recommendation of the Minister and advise that the same be acted on.

"Certified,

"J. Lonsdale Capreol,

"Clerk, Executive Council."

The Attorney-General for Ontario was allowed to intervene as a defendant. The consolidated cases were tried by Clute, J., who pronounced judgment in favour of the appellants but under deduction so far as the Commissioners were concerned of whatever sums they could show they had properly expended on the conduct of the schools while under their charge. The Appellate Court of Ontario unanimously overruled this judgment and dismissed the actions. Appeal has now been taken to this Board.

The claim against the Quebec Bank would be obviously good at common law. The Bank was the debtor of the appellants and it would be no defence to say that they had paid the money to a Commission whose authority was based on an Act of the Provincial Legislature which had been declared to be ultra vires. The real defence to the action lies in the later statute quoted above. It is equally clear that this statute by its terms provides a complete defence. The only real question is therefore whether that statute also is ultra vires. It can only so be held if it contravenes the exception to Section 93, sub-Section 1 of the British North America Act or in other words if it prejudicially affects a right or privilege of the appellants. For indubitably in other respects it is measure dealing with civil rights and as such within the domain of the Provincial Legislature.

It was frankly admitted by the learned counsel for the appellants that the money spent and the liability incurred was spent and incurred in the carrying on of the schools in a proper manner; that is to say, was not in any way expended on purposes other than the carrying on of the schools. The appellants cannot say that the money if they had had it would not have been spent on the same purposes; all that they can say is that they would have had the control and spending of it. The right which has got to be prejudicially affected is the right to maintain separate schools under the Education Acts. Now it was pointed out by the Lord Chanceller in deciding the Ottawa Corporation Case (2) that there might be cases where a right might be affected without being prejudicially affected. It will at once be apparent what a contrast there is between the legislation which was the subject of that decision and that in the present case. There the right of the appellants to conduct their schools was taken away for an indefinite period. Their restoration did not depend on themselves but could only be given them by others. They are now restored - that legislation having been held to be ultra vires - but their extrusion from management is a matter of past history which no legislation can obliterate. Nor does the present legislation seek to do so. It is possible to criticise the words used but the gist of the statute is unmistakable. All it does is to declare that the payments made while the schools were being carried on by others than the appellants are good payments against the funds which were only raised and only available for the conduct of the said schools. If the contention of the appellants were given effect to - for they argued that the deduction allowed by Clute, J. was unwarranted - the result would be that the schools would have been carried on by funds provided gratuitously by the Banks or by the individual Commissioners, the appellants would be in the possession of funds which had been destined for the carrying on of the schools in the past and which as they could not now be so applied, would form a gratuitous bonus in their hands. Their Lordships therefore agree with the unanimous judgment of the Supreme Court that the statute is not ultra vires and that the actions fall to be dismissed. They fail to see that the right of the appellants has been in any way prejudicially affected by the statute. The only way in which they were prejudicially affected was by the action of the former statute which extruded them from the management of the schools. Had they been left in management they would necessarily have spent this very money for the same purposes. It cannot be said to create a prejudice to affirm that the money was rightly spent for the purposes for which it was destined. The same ratio applies to a liability incurred by others for an equally proper purpose.

It may be as well to say a word as to the position of the 37,000 dollars held by Bank of Ottawa. On the appellants paying the debt incurred to the Bank of Ottawa of 71,000 dollars odd, the said sum of 37,000 dollars will of course be made available to the appellants for the purpose for which it was set aside - namely, the provision of a sinking fund for certain debentures.

Their Lordships will therefore humbly advise His Majesty to dismiss the appeals.

The appellants will pay the respondents costs. The Attorney-General of Ontario will bear his own costs.

Appeals dismissed. .

Trustees Of The Roman Catholic Separate Schools For The City Of Ottawa v. Quebec Bank And Others

Judgment Summary — Lord Dunedin

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellants' Arguments

Other Parties

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Trustees Of The Roman Catholic Separate Schools For The City Of Ottawa v. Quebec Bank And Others

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