REFERENCE RE VALIDITY OF THE ORDERLY PAYMENT OF
DEBTS ACT, 1959 (Alta.), C. 61
Orderly Payment of Debts Act (Alta.) -Right of Debtor to seek
consolidation order to force creditors to accept periodic payments-
Invalid invasion of Federal power in relation to bankruptcy and
insolvency.
Arnold H. Isaacson*
L Introduction
The role of provincial debt adjustment and the scope of its power in the
light of Federal jurisdiction over bankruptcy and insolvency under s. 91 (21)
of the B.N.A. Act has come under close scrutiny in a recent decision of the
Supreme Court’. This case is significant in that it brings to light many
important issues, one of which is revived by the comments of the court on the
Voluntary Assignments Case2, a decision of the Privy Council which has prevailed
for more than sixty years. It is also sententious because its reasoning shows
that, in the future, in determining how far provincial legislation dealing with
subjects analogous to bankruptcy and insolvency legislation can be used, a
careful re-appraisal of the earlier decision and its effects will be necessary.
This comment will deal specifically with the effects and consequences of
this decision on the Voluntary Assignments Case and on the Lacombe Law,
Quebec’s long unquestioned debt adjustment legislation. Embodied in articles
697 (a) to 697 (i) of the Code of Civil Procedure, the Lacombe Law, as a result
of this case, should be subjected to renewed scrutiny.
IL The Facts
The question referred to the court was whether a certain Debt Adjustment
Act of Alberta 4 was valid as coming within the enumerated heads of section 92
of the B.N.A. Act of 1867, or whether it was ultra vires as coming within the
Federal power over bankruptcy and insolvency under 91 (21).
The Alberta Act attempted to regulate the payment of debts by a debtor to
his creditors. The Act provided that in the case of judgments or claims not
exceeding $1,000, or in excess of $1,000, with the consent of the creditor, a
debtor could apply for a consolidation order to the clerk of the District Court
of the-judicial district in which he resided. The debtor was required to file
an affidavit giving information as to all his creditors with the amounts owed to
*Executive Editor of the McGill Law Journal; third year law student.
1[1960] 23 D.L.R. 2d. 449.
2[1894] A.C. 189.
‘/Hid., p. 189.
g’he Orderly Payment of Debts Act, Alberta, 1959, C. 61.
No. 3]
CASE AND COMMENT
each; his total income and, if married, his wife’s income; the persons dependent
upon him; and the amount payable for board, lodging or rent; whether any of
his creditors were secured, and if so, the nature and particulars of the security
held by each. The clerk was able to settle the amount to be paid by the debtor
into the court periodically, and provisions were made for hearing objections.
On the basis of the clerk’s findings and the hearing, if any, a consolidation
order was made. The Act gave authority to impose terms on the debtor with
respect to his property and to require the debtor to make an assignment of money
owing to him to the clerk of the court. Provisions were made for the adding
of additional creditors to the affidavit. The clerk was required to distribute
the monies paid into the court rateably among the creditors at least once every
three months. Upon the making of the consolidation order, no further
proceedings could be taken against the debtor in respect of the judgments or
claims to which it applied. The Attorney General for the Province argued that
the Act was within Provincial legislative powers under sections 92 (13), (14),
and (16) of the B.N.A. Act of 1867.
The Federal Government based its argument against the validity of the
Act on Sections 91 (15), (18), (19), and (21). It was also contended that the
Act gave to the Clerk of a District Court the powers of a section 96 judge.
On the other hand,
the Province relied upon three earlier decisions: the
Voluntary Assignments Case’, Leclerc v. Bennet” and Abitibi Power and Paper Co. Ltd
v. Montreal Trust Co. 7.
Ill. The Findings
The Alberta Supreme Court decided unanimously that the Act was ultra tires
because it infringed upon section 91 (21) of the B.N.A. Act. The Supreme Court
of Canada upheld unanimously the decision of the lower court.
a) Reasoning of Kerwin C. J. C.
Kerwin C. J. C. reasoned that the Act was, in pith and substance, bankruptcy
and insolvency legislation and was therefore wholly within federal jurisdiction.
His Lordship contended that the Act was not legislation for the recovery of
debts, but rather for the adjustment of the debts of a person who is unable to
pay them. He quoted Lord Thankerton’s definition of insolvency as “the
inability to meet one’s debts or obligations…”, in the case of Attorney-General
for British Columbia v. Attorney-General for Canada et all. Having thus defined
insolvency and having placed it under Federal jurisdiction, Chief Justice
Kerwin concluded:
While the Act applies only to claims or judgments which do not exceed one thousand
dollars, unless in the case of a judgment for the payment of money in excess of one thousand
dollars, the creditor consents to come under the Act, I can read these provisions in no other way
6Supra, note 2, at p. 189.
1[1939] A.C. 468.
7[1943] A.C. 536.
8[1937] A.C. 39 at p. 407.
McGILL LAW JOURNAL
[Vrol. 8
than showing that they refer to a debtor who is unale to tay his debts as they mature. Why else is
authority given the Court to impose terms with respect to the custody of his property or any
disposition thereof or of the proceeds thereof as it deems proper to protect the registered
creditors (s. 12)? And why else may no powers be issued in any court against the debtor at the
instance of a registered creditor or a creditor to whom the Act applies, except as stated (s. 13)?
Section 14 authorizing the Clerk to require an assignment to him by the debtor of any monies
due, owing or payable or to become due, owing or payable to the debtor, or earned or to be
earned by the debtor is surely consonant only with the position of an insolvent debtor. In fact
a debtor under the Act is ceasing to meet his liabilities generally as they become due and
therefore falls within S. 20 (1) (j) of the Bankruptcy Act, R.S.C. 1952, c. 14.’
This definition of insolvency, which is very broad, suggests that few
Provincial Debt Adjustment Acts would be declared intra vires by the use of
such a definition.
Commenting on the merits of the Volunta y Assignments Case’ 0, Kerwin C.J. C.
declared that it is distinguishable from the case under comment and that it is
doubtful whether in view of later pronouncements by the Judicial Committee,
the former case would at present be decided in the same sense, even in the absence
of Dominion legislation upon the subject of bankruptcy and insolvency.”
An analysis of this early case will be dealt with later on by the author.
b) Reasoning of Locke J.
Mr. Justice Locke concluded that while the Act does not actually require that
the debtor who applies must be insolvent in the sense that he is unable to pay
his debts as they become due, it must be so construed, since it is impossible to
believe that it was intended that the provisions of the Act might be resorted to
by persons who were able to pay their way but did not feel inclined to do so. 2
Hence the true nature of the legislation was to deal with insolvency. In his
opinion there was a clear invasion of the legislative field of insolvency, which
was an exclusive federal power. To him the procedure of the Alberta Act is
comparable to that provided for dealing with proposals which may be made to
a trustee in bankruptcy by an insolvent person under the provisions of Part III
of the Bankruptcy Act”. In deciding what subject matters were generally
regarded as included in the terms under dispute, LockeJ. looked to the bankrupt-
cy laws of England and the terms of the statutes in force in England prior to
1867.
There have been bankruptcy laws in England since 1542 dealing with the
estates of insolvent persons, and for more than 100 years compositions and
schemes of arrangement have been treated as subject-matter falling within the
Sa p’a, note 1, p. 452. Italics are mine.
oSupra, note 2, at p. 189.
tI/Id., p. 453. Among the later pronouncements which Kerwin C. J. C. might have in mind are:
(1) Reference Re Alberta Debt Adjustmcn Act 1937, 24 C.B.R. 129; (2) Atty.-Gen. for Sask. v. Aty.-Gen.
for Can. [1949] A.C. 110; (3) Atty.-Gen. for Alta. v. Atty.-Gen. for Can. [1943) A.C. 356; (4) Referenct
re Legal Prcedings Si pension Act [194213 D.L.R. 318; (5) Canadian Bankers’ Association v. Aty.-Gn.
for Sask
[1956] S.C.R. 31.
me
“lSpro, note 1, at p. 458.
12/iid., p. 458.
No. 3]
CASE AND COMMENT
scope of the statutes relating to bankruptcy and insolvency 4. Locke J. con-
cluded, therefore, that the Act under consideration was indeed an attempt to
substitute for the provisions of the Bankruptcy Act and the Farmers’ Creditors
Arrangement Act, “relating to proposals for an extension of time or a scheme
of arrangement which are submitted to the interested creditors for their
approval and, if approved, thereafter to the judge in bankruptcy, a scheme
whereby the propriety of accepting such a proposal is to be determined by a
clerk of the district court. The provisions of the Provincial Act thus conflict
with those in the legislation passed by Parliament dealing with the same
matters.” 1 5
The precedent relied on by the Province” was dismissed by Locke J. as
being in relation to matters different from the problem considered in this case.
He dismissed the Voluntary Assignments Case,17 which based itself on the unoc-
cupied field doctrine, by saying that “.
. the language of s. 91 is that the
exclusive legislative power of the Parliament of Canada extends to all matters
in relation to, inter alia, bankruptcy and insolvency, and the provinces are
excluded from that field .
. “. In considering the Leclerc Case, 1 it was noted,
the courts held that while the legislation affected the rights of persons who
had claims against insolvent municipalities, it was in pith and substance
related to municipal institutions in the province and as such, was intra vires
of s. 92(8) of the B.N.A. Act of 1867. In the Abitibi Case- the purpose. of the
impugned legislation was to stay proceedings in an action under a mortgage
until the interested parties had an opportunity of considering a plan for re-
organization of the company-the true nature of the legislation was held to
be concerned with property and civil rights within the province. The pith and
substance of both these cases was thus found to be of a provincial nature.
.
IV. The Effect of the Orderly Payment of Debts Case on the
Voluntary Assignments Case
The words of Kerwin C.J.C. and Locke J. with regard to the Voluntary
Assignments Case2′ appear to bring an end to the precedent which the Privy
“Ibid., p. 459. In support of his argument he quotes Sir Lyman Duff in the Reference re Companies
Creditors Arrangement Act [19343 S.C.R. 660. He says Duff J. seems to show clearly that legislation
in respect of compositions and arrangements is a natural and ordinary component of a system of
bankruptcy and insolvency law.
151bid., p. 459.
‘tSupra, p. 221.
7Supra, note 2, at p. 189.
‘0 Supra, note 1, at p. 460. To further support his point, he quotes Lord Watson in Union Collier)
Co. v. BryJen [1899] A.C. 580 at p. 588: “The abstinence of Dominion Parliament from legislating to
the full limit of its power could not have the effect of transferring to any provincial legislature,
legislative power which had been assigned to the Dominion by s. 91 of the B.N.A. Act of 1867.”
“Supra, note 6, at p. 468.
“5Supra, note 7, at p. 536.
“Supra, note 2, at p. 189.
McGILL LAW JOURNAL
[Vol. 8
Council decision created in 1894. In this early decision, the Privy Council
held a law passed by a provincial legislature which affected the assignments
and property of insolvent persons to be valid as falling under s. 92(13) of the
B.N.A. Act, although it was of such a nature as to be a suitable auxiliary
provision to bankruptcy law. The basis of the decision was that the law in
question did not fall within the scope of “Bankruptcy and Insolvency” in the
sense in which these words are used in s. 91 (21). The court employed the double
aspect doctrine and said that although the Federal Parliament must be able to
deal with priority among the executive creditors of an insolvent debtor from
the point of view of effective bankruptcy legislation, the provincial legislatures,
nevertheless, have to deal with priorities among such executive creditors from
the point of view of provincial responsibility for civil procedure. In other
words, the principle stated was that “Subjects which in one aspect and for one
purpose fall within section 92 may have another aspect and for another purpose
fall within section 91.11 2 In recognizing such a situation the court concluded
that a concurrent power existed: both authorities had power to make laws in
the same field. The Privy Council also maintained, using what is known as
the doctrine of the unoccupied field, that the provincial legislation could
operate in this field as long as no federal statute existed-that is, as long as the
field remained unoccupied by federal legislation.
The Voluntary Assignments Case hinged, therefore, on two points: (1) that
the Provincial Act was auxiliary to the provincial powers of property and
civil rights, and. civil procedure; and (2) that since there was an unoccupied
field because no Bankruptcy legislation of the Federal Parliament existed, the
provincial law would prevail. The decision is summarized at pp. 200-201 of
the case:
It appears to their Lordships that such provisions as are found in the enactment in
question, relating as they do to arrangements purely voluntary, do not infringe on the exclusive
legislative power conferred upon the Dominion Parliament. They would observe that a system
of bankruptcy legislation may frequently require various auxiliary provisions for the purpose
of preventsng the scheme of the Act from being defeated. It may be’necessary for this purpose
to deal with the effect of executions and other matters which would otherwise be within the
legislative competence of the provincial legislature. Their Lordships do not doubt that it
would be open to the Dominion Parliament to deal with such matters as part of a bankruptcy
law, and the provincial legislature would doubtless be then precluded from interfering with
this legislation inasmuch as interfernce would affect the bankruptcy law of the Dominion Parliamrnt.
But it does not follow that such subjects as might properly be treated as auxiliary to such a law and
therefore within the power of the Dominion Parliament, are excluded from the legislative authority ef the
Provincial Legislature when there is no bankruptcy or insolvency legislation of the Dominion Parliament
in rxiste”nc. 2
The Privy Council, in this instance, went very far by implying that even if
there were Federal Bankruptcy legislation, the provincial law could exist side
by side with it if there was no conflict between the two. A distinction was also
drawn between voluntary and compulsory assignments; the Privy Council
stated that if the assignment were compulsory, it would infringe upon the
“Hodge v. The Quen (1883) 9 A.C. 117 at p. 130.
“Italics are mine.
No. 3]
CASE AND COMMENT
exclusive legislative power conferred upon the Dominion Parliament under
s. 91(2) of the B.N.A. Act. As it will later be shown, this distinction makes
no difference as to whether or not the assignment comes under Federal or
Provincial jurisdiction.
What are the criticisms of the Voluntary Assignments Case in the light of the
case under comment? It is submitted that the importance of the Orderly Payment
of Debts Case stems from the broad interpretation given to the word “insol-
vency” and the fact that it is an enumerated power of the Federal Parliament
under s. 91(21). If we consider that the Federal power, and bankruptcy and in-
solvency is a power exclusive to the Federal Parliament, (and it was classified
as such by the Privy Council in the Voluntary Assignments Case), then we must
conclude that in no instance can a provincial parliament legislate in this field
either as auxiliary to one of its powers such as property and civil rights, or by
using the double aspect doctrine, if it can be shown that in pith and substance
the legislation concerns bankruptcy and insolvency.
By invoking the doctrine of the concurrent field, one can argue that jurisdic-
tion over subjects can be given to both Federal and Provincial legislatures, as
in Section 95 of the B.N.A. Act. In the Voluntary Assignments Case the con-
current field was implied in the argument on the unoccupied field. However,
it is submitted that bankruptcy and insolvency is an exclusive field of the
Federal Parliament; thus the provincial legislature cannot legislate in that field
by relying on any doctrine of interpretation, if it can be shown that the chal-
lenged legislation falls within the terms of the definition given by law either
to the word “bankruptcy” or “insolvency”.
If we admit an exclusive field,
then concurrency cannot exist. As Laskin says:
It is a well established doctrine of the courts that Dominion legislative powers are
exclusive in the sense that the abstinence of the Dominion Parliament from legislating to the
full limit of its powers could not have the effect of transferring to any provincial legislature
the legislative power which has been assigned to the Dominion by s. 91.
As to the “pith and substance” of challenged legislation regarding matters
of insolvency, whether or not it is a voluntary or compulsory assignment or
anything else which is or is not yet included in the Bankruptcy Act, if the
Act under dispute has anything to do with a debtor who is “unable to pay his
debts as they become due” (the definition of insolvency used by the judges in
the recent case), it is a matter of insolvency and hence exclusively within the
federal field of legislative jurisdiction.
Indeed, the definition used is quite
broad and will most likely encompass much of the provincial legislation today
dealing with subjects analogous to bankruptcy legislation. The double aspect
doctrine will not apply if the nature of this legislation can be encompassed in
the definition set out in the Orderly Payment of Debts Case. As Viscount Haldane
said in the Snider Case:
When there is a question as to which legislative authority has the power to pass an act,
the first question must therefore be whether the subject falls within s. 92. Even if it does, the
“Laskin, Canadian Constitutional Law, 2d ed. 1960, p. 89. Cf., also Union Colliery Co. v. Bryden
[1889] A.C. 580 at p. 588.
LVol. 8
further question must be answered, whether it falls also under an enumerated hcad in s. 91.
If so, the Dominion has the paramount power of legislating in relation to it.$
McGILL LAW JOURNAL
It can also be argued that the general language in the heads of s. 92 yields to
particular expressions in s. 91 where the latter are unambiguous 5 .
W. R. Lederman, Dean of the Law School at Queens University, does not
agree with the stringent view taken above. He feels that the classification of
powers in s. 91 and s. 92, inevitably, by its nature leads to overlapping and in
this manner tends to place a “straight-jackect’ on provincial powers.2 7 As Dean
Lederman views it, if the challenged law has features that might reasonably
cause it to fall within one or more of the provincial classes of law in section 92
as well as features of meaning that might reasonably cause it to fall within one
or more of the federal classes of laws in section 91, a further question must be
asked. What is the relative importance of the federal features and the provincial
features of the challenged law? The answer to this question will determine
whether the power to pass such a law is exclusively federal or exclusively
provincial or is something over which both legislative authorities have juris-
diction. According to Lederman, the criteria of relative importance here arise
from the social, economic, political and cultural conditions of the country.
Following his reasoning through, if the federal features of the challenged law
are deemed dearly to be more important than its provincial features, then the
power to pass the law is exclusively federal and the doctrine of abstinence
applies. If, however, both the federal and provincial aspects of the challenged
law seem to be of equivalent importance, then the double aspect doctrine and
concurrent powers apply and the two laws can exist together as long as there
is no inconsistency. The doctrine of Dominion Paramountcy will of course
prevail. Lederman’s analysis of a complex problem is indeed a laudable one.
However, it is submitted that this argument is merely a compromise. A close
study of the intentions of the Fathers of Confederation at the London and
Quebec Conferences reveals that this interpretation would not suit their
intentions for a strong federation. It is contended that the problem should be
solved by looking at the pith and substance of the challenged law and asking the
question: Has this law the qualitative and quantitative features that would
bring it under the definition, for example, of insolvency? If it does, then it is
an exclusive Federal law and, if the province attempts to justify it under a
provincial head, using the double aspect doctrine, it becomes colourable
legislation.28
The Orderly Payment of Debts Act Case applied the pith and substance criterion.
The Judges examined the definition of insolvency and the Alberta Act and
“6Torotto Electric Commissioners v. Snider [1925] A.C. 396 at p. 406.
uJackett, W. R., “Section 91 and 92 of the B.N.A. Act and the Privy Council”, Legal Essays in
Honour of Arthur Moxon, 1953, p. 161.
2 7tLederman, “Clarification of Laws and the B.N.A. Act”, ibid., p. 183.
28See the following cases: (1) Atey.-Gen. for Can. v. Atty.-Gen. for Ont. (1898) A.C. 700; (2) Atty.-Gen.
for Ont. v. Reciprocal Insurers [1924] 1 D.L.R. 789; (3) In re Insurance Act of Canada [1932) A.C. 41;
(4) Turne’s Dairy Ltd. v. Louer Mainland Dairy Products Board [1941] S.C.R. 573.
No. 31
CASE AND COMMENT
concluded that the features of the Act implied the same results as the definition.
Cartwright J., in concurring with his brothers, contended that the only reason
that other provincial legislation was upheld in previous cases was because (1)
the challenged law did not conflict with section 91 (2) and (2), the impugned
legislation was not in truth and substance bankruptcy and insolvency legisla-
tion. In other words, the challenged law did not comply with the definition
given to the words in sections 91 (21).29 As Laskin writes: “Surely the real
question in connection with the exclusive powers conferred by sections 91 and 92
is (to paraphrase the Privy Council) whether a matter expressed in legislation
is fairly included within the class of subject to which it is sought to attribute
it; and if so, then the authority is exclusive.””3
V.
Implications of the Case: The Lacombe Law
It is submitted, that the Quebec Lacombe Law appears to be ultra vires of
the provincial legislature because in its pith and substance it comes under in-
solvency legislation as defined in the case under comment. The Lacombe Law
is covered by articles 697 (a) to 697 (i) of the Code of Civil Procedure. The
essence of this law is that the salary or wages of a debtor cannot be seized by
his creditor if he deposits a sizeable portion of the sum at the Lacombe Court,
within four days of the payment of his salary. He is to give the Clerk of the
Magistrates Court a list of all his creditors and the amounts owing to each,
the address of his employer or employers, his status and family responsibilities,
etc. Any creditor can file his claim with the Clerk of the Magistrates Court
and also has a right to contest a claim filed on record; the debtor is given a
chance to do likewise. The Clerk’s duty is to distribute among the creditors
every three months the amounts owing to each such creditor after it has been
determined summarily and rateably and without cost.
In order to determine whether this law can be considered part of bankruptcy
and insolvency legislation (an exclusive Federal Field), we must, following the
Orderly Payment of Debts Case, determine what is the pith and substance of the
legislation. As Labrie states: “. . . in order to ascertain the class of subjects in
relation to 91 and 92 to which any particular enactment belongs, it is first
necessary to ascertain what is variously described as ‘the primary matter dealt with’
by it, its ‘true nature and character’, its ‘subject matter’, and ‘legislative character’,
its ‘leading feature’ or its whole pith and substance. ’31 Following the method of
the judges in the case under comment a conclusion can be reached as to the
nature of the Lacombe Law. They approached the problem by looking at the
pith and substance of the legislation. They first defined, as was previously
Z”Cf. The Debt Adjustment Act, 1937 (Alta.) Ch. 9, (R.S.A. 1942, Ch. 119) was held to be wholly
ultra vires because in its pith and substance it was an act dealing with insolvency. See also: (1)
North American Life Ass. v. McLean, 22 C.B.R. 288; (2) Atti.-Gen. for Alta. v. Atty.-Gen. for Can.,
24 C.B.R. 129.
“Supra, note 20, at p. 69. Sec also Refermnce re Alberta Bill of Rights lct [1947, A.C. 503, at p. 517.
3iLabrie F. E., Canadian Constitutional Intertretation and Legislative Review at p. 300. See also
O’Connor Report to the Senate of Canada on the B.N.A. Act, 1939, Annex 1, p. 40. Italics are mine.
McGILL LAW JOURNAL
[Vol. 8
discussed, what came under insolvency, then looking at the challenged Act
they asked if it had features which met the given definition.
The features need not be explicit in the challenged Act, as LockeJ. concluded
in speaking of the Alberta Act:
While the Act does not require that the debtor who applies must be insolvent in the sense
that he is unable to pay his debts as they become due, it must, in my opinion, be so construed since
it is puite impossible to believe that it was intended that the provisions of the Act might be resorted to by
persons who were able to pay their way bat do not feel inclined to do so. In my opinion, this is a clear
invasion of the legislative field of insolvency and is, accordingly, beyond the Power of the legislatire.A
Applying this directly to the merits of the Lacombe Law, one can ask, is
not this a type of system of debt adjustment for a debtor who is unable to pay
his debts? No person who is able to pay his debts will make a proposal to the
Lacombe Court because he feels inclined to do so. Why else is authority given
to the Lacombe Court to impose terms with respect to the salary handed to it
as a means of distributing it rateably amongst the creditors? And why else
may no creditor seize the salary or wages of the debtor who at any time before
the said salary or wages were seized, produced a declaration in conformity with
article 697 (b) and conforms to all other requirements as mentioned in 697 (a)
of the Code of Civil Procedure?33 The Act does not require that the debtor who
applies to the court must be insolvent in the sense that he is unable to pay his
debts as they become due, but as LockeJ. submitted, in the case under comment,
it can be interpreted in no other way. Hence, this is a clear invasion of the
legislative field of insolvency and is accordingly beyond the power of the
legislature. The double aspect doctrine cannot play any part because the
primary matter of Lacombe Law, its true nature and character and its leading
feature, come under the definition of insolvency. The Lacombe Law is in pith
and substance
insolvency legislation under the definition of insolvency.
Provisions dealing with assignments and proposals by an insolvent debtor to
his creditor are an essential part of bankruptcy and insolvency legislation under
section 26 and 27 of the Bankruptcy Act. As Holden and Morawetz note:
Section 20(2) of the Bankruptcy Act provides that every assignment other than an assign-
ment pursuant to the Bankruptcy Act by an insolvent debtor for the general benefit of creditors
is null and void. Various provincial statutes make provisions for assignments, e.g., the Assign-
ments and Preferences Act, R.S.Q. 1950, ch. 26. TIese statutes were passed to provide for the
situation which existed when there was no federal Bankruptcy Act. Assignments made
pursuant to these statutes are now null and void by virtue of Section 20(2).”
It can be argued in the light of the criticism of the Voluntary Assignments
Case that even prior to s. 20 (2) of the Bankruptcy Act these provincial enact-
ments were ultra vires. There can be no doctrine of the unoccupied field when
dealing with an Act which is exclusive to the federal field. Thus, whether the
Lacombe Law is or is not covered by the Federal Bankruptcy Act is of no signifi-
cance because any legislation coming within the pith and substance of s. 91
3Supra, note 1, at p. 458. Italics are mine.
USpra, p. 221-2 and the quote by Kerwin J.
UHolden & Morawetz, Bankruptcy Law of Canada at p. 82. See also Hamilton v. Vipond, 1 C.B.R. 483.
No. 3]
CASE AND COMMENT
is outside the competence of the Provincial legislature and it is immaterial
whether the Dominion has dealt with the subject by legislation or whether
that legislative field is or is not occupied by the Dominion Parliament.3 5
The arguments that the Lacombe Law is justified under sections 92(13) and
92(14) of the B.N.A. Act and that it is a purely local matter cannot hold because
of the pith and substance rule36 . It has been shown that the subject-matter of
the Lacombe Law falls within the definition of insolvency. Even using the
method formulated by Lederman, the same conclusion can be reached. Even
if the Lacombe Law had in it features which fell under both 91 and 92, the use
of the term “relative importance” would indicate that the need for national
standards under federal law outweighs the need for provincial law.
In other words, the federal features of the Lacombe Law are clearly deemed
more important than its provincial features; thus, the power to pass the law
is exclusively federal. The federal characteristics are more important because,
in the writer’s opinion, the regulation of bankruptcy and insolvency is an in-
tegral and important aspect of running the economy of Canada. The Fathers
of Confederation envisioned a strong, united country, both powerful and
stable enough to be forever free from such situations that had forced the
provinces as separate entities to the very brink of disaster. Stability can only
be realized under basic controlling laws under federal powers, one of these
being bankruptcy and insolvency.
If one wishes to contend that a conflict and not merely a similarity must
exist before one can declare this law ultra vires, this contention is defeated by
the case of Re Regina v. Duhie, Re Regina v. Pomerleau17 . There the judge held
that the Crown’s argument-that Dominion and provincial legislation of the
same general terms or effect does not imply conflict-did not in his opinion
“hold water” because to him the similarity constituted the very reason for the
clash or the conflict.
“At y.-Gen. for Alta. v. Atty.-Gen. for Can. [1943] A.C. 356, Viscount Maughn. The majority of
the previous cases, before this recent 1960 Supreme Court decision, seem to hinge on the unoccupied
field doctrine, that is, that where the Bankruptcy Act did not provide for a situation, the provincial
legislature would. (1) In re Davison 5 C.B.R. 860; (2) In re United Exhibitors 5 C.B.R. 200; (3) In
re Cohen and Mahlin Ltd. 7 C.B.R. 655; (4) Card v. Yates (1936) 17 C.B.R. 168.
2oThe case of Parent v. Trudel(1887) 13 Q.L.R. 136 in discussing articles 853 to 893 of the Codeof Civil
Procedure, had taken a similar line. The Court stated that abandonment of property is a purely
local matter of property within the Province, or it may be regarded as a mode of execution, in civil
matters and hence within paragraphs (13), (16), of s. 92 of the B.N.A. Act. The court further stated
that it was to be distinguished from bankruptcy and insolvency on the ground that the latter is
compulsory, whereas abandonment is a right of the creditor and voluntary. However, looking at
Philippe Ferland’s Code of Civil Procedure under Chapter 26 entitled “Abandonment of Property”,
it is stated that articles 853 to 893 are in conflict with the B.N.A. Act 1867, s. 91(21), thus indicating
the exclusiveness of the Federal power of bankruptcy and insolvency.
37[1955] 2 D.L.R. p. 757. See also Johnson v. Atty.-Gen. for Alta. [1954] S.C.R. 127. Rand J. noted
that if the acts are the same it is merely leading to repetition and confusion and hence would hinder
exclusive Dominion power. Quoted in Laskin, op. cit., at p. 838.
McGILL LAW JOURNAL
[Vol. 8
It is submitted that the test used by Cartwright J. in the Orderly Payment
of Debts Case is sound, but if the two criteria used by him are interpreted to be
used cumulatively instead of alternatively, the reasoning is fallacious. In
other words, if you can show that the impugned legislation is in pith and sub-
stance Federal, there is no need to look for a conflict.
Returning to the merits of the Lacombe Law, since the B.N.A. Act gives
exclusive power over bankruptcy and insolvency to Parliament and because it
has been proved that according to the definition given to insolvency, the main
features of the Lacombe Law are included under it, it must be concluded that
the subject matter of the Act should be given to Parliament and not to the
provincial legislature. This reasoning is also justified by the fact that debt
adjustment is practically indispensable to the type of national economy under
which we have been living, hence such an important matter that it should be
handled by the federal authority. The rule then, should be the one stated in
the case of Canadian Bankers’ Association et al v. Attorney-General for Saskat-
chewan”8 : “If the Province steps in and actively assumes general protection of
such a debtor, by whatever means, it is acting in relation to insolvency, and assum-
ing the function of Parliament; it is so far administering, coercively as to
creditors, the affairs of insolvent debtors. In this it is frustrating the laws of
the Dominion in relation to the same subject.”
In concluding on the merits of the Lacombe Law vis-a-vis the federal jurisdic-
tion, the words of Torrance J. are very significant, when he concluded in
Belisle v. L’Union St. Jacques:3 9
The Dominion Legislature has exclusive legislative authority in matters of insolvency
and there is this most significant clause in section 91 defining the power of the Parliament
of Canada. The Parliament has exclusive legislative authority over “Bankruptcy and In-
solvency” and further on it said, “and any of the classes of subjects enumerated in this section,
(e.g. Bankruptcy and Insolvency) shall not be deemed to come within the class of matters of
a local or private nature, comprised in the enumeration of classes of subjects by this Act assigned
exclusively to the legislatures of the Provinces.”
In other words, the Imperial Act declares first what the Parliament of Canada alone can
do and then to make its meaning plainer, declares what the Local Legislatures shall not do.
The Court is of the opinion that the B.N.A. Act, 1867, being the Imperial Act just now under consi-
deration, has, in as plain language as words can mak.s it, prohibited the Provincial Legislatures from
making laws in matters of insolvency, directly or indirectly.
VI. Conclusions
It is hoped that the importance of the Orderly Payment of Debts Case has
been shown with all its implications. The writer has attempted to discuss its
2835 C.B.R. 135. Italics are mine. It is also interesting to note how the case defines and clarifies the
word “insolvency” under 91(21). As stated in the headnote: “Insolvency,… seems to be a broader
term that contemplates measures of dealing with the property of debtors unable to pay their debts
in other modes or arrangements, as well, there is the composition and voluntary assignment, clauses
which, in appropriate circumstances, may avoid technical bankruptcy without too great prejudice
to creditors and hardship to debtors. These means of salvage from the ravages of misfortune are of the
essence of insolvenc ” legislation and they are incorporated in the Bankruptcy Act. The usual mark of insolvency
is the inability to meet obligations as they mature.” Italics are mine.
31(1870) 15 L.C.J. 212 at p. 214. Note this case went to appeal and was reversed. But it is submitted
the words of Torrance J. are significant and correct. Italics are mine.
INIO. )]
CASE AND COMMENT
significance as regards the Voluntary Assignments Case and to prove that the prece-
dent created by the latter case, which invoked the doctrine of an unoccupied
field, is now dead. The idea of the exclusiveness of the federal power is of the
utmost importance and it would henceforth seem that any provincial legislature
dealing with subjects analogous to bankruptcy and insolvency legislation
would be on very unsure ground. The important factor to consider is the rule
of pith and substance, using as a guide the broad definition given by the court.
Only then can we ascertain in which field the challenged law falls.
As a last comment upon the legality of the Lacombe Law, it can be said
that one need only look at the similarity of the individual sections in both
the Alberta Act and the Lacombe Law to conclude that due to the Alberta
Act being ultra vires, a fortiori, the Lacombe Law is ultra vires.4
1
Whether or not this decision of the nation’s highest tribunal will place
upon the provincial legislatures too restrictive an interpretation of their
legislative powers remains to be seen. It is submitted that the interpretation in
this case is the correct one and complies with the true intention of the Fathers
of Confederation. It was their wish and purpose to create a strong central
government and a vigorous national economy by a broad interpretation of
Dominion powers and a restrictive interpretation of provincial powers.
40It has been argued that the Lacombe Law could not be affected by the decision under review
because of one basic distinction between the two acts. The argument is that, while the Alberta Act
(under section 13) attempted to prohibit federal bankruptcy legislation from coming into the picture,
even in case of conflict, nowhere does the Lacombe Law attempt to do this. This contention is rein-
forced by the case of Ouellete v. Saxe et Allard [1955] S.C. 190 which held that where a debtor goes
under the Lacombe Law and subsequently becomes bankrupt the Bankruptcy Act prevails and the
trustee is entitled to the undistributed funds remaining in the court, based on article 41(1) of the
Bankruptcy Act. However, it is submitted that the above in no way disproves the foregoing article.
For by admitting that the decision in the Oudllette Case is correct, one must admit the doctrine of
concurrency. But concurrency does not apply here because the articles under the Lacombe Law
conform to the definition of insolvency, which the author has repeatedlyattempted to characterize
as an exclusive federal power which cannot be legislated on by the province. The question of whether
or not the Lacombe Law prevents the application of the federal law is in reality superfluous once it
is proven that it is in pith and substance insolvency legislation.
