Supreme Court of Canada· 1898
Province of Ontario & Province of Quebec v. Dominion of Canada. In re common School Fund & Lands
(1898) 28 SCR 609
Quebec civil lawJD
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Province of Ontario & Province of Quebec v. Dominion of Canada. In re common School Fund & Lands Collection Supreme Court Judgments Date 1898-06-14 Report (1898) 28 SCR 609 Judges Strong, Samuel Henry; Taschereau, Henri-Elzéar; Gwynne, John Wellington; Sedgewick, Robert; King, George Edwin On appeal from Federal Court of Appeal Subjects Constitutional law Decision Content Supreme Court of Canada The Province of Ontario and the Province of Quebec v. The Dominion of Canada (1898) 28 SCR 609 Date: 1898-06-14 The Province of Ontario and The Province of Quebec Appellants And The Dominion of Canada Respondent IN RE COMMON SCHOOL FUND AND LANDS. 1897: Nov. 2, 3, 4; 1898: June 14. Present:—Sir Henry Strong C.J., and Taschereau, Gwynne, Sedgewick and King JJ. ON APPEAL FROM AN AWARD IN AN ARBITRATION RESPECTING PROVINCIAL ACCOUNTS. Constitutional law—B. N. A. Act, s. 142—Award of 1870, validity of—Upper Canada Improvement fund—School fund—B. N. A. Act, s. 109—Trust created by—Effect of Confederation on trust. The arbitrators appointed in 1870, under s. 142 of the B. N. A. Act, were authorized to "divide" and "adjust" the accounts in dispute between the Dominion of Canada and the Provinces of Ontario and Quebec, respecting the former Province of Canada. In dealing with the Common School Fund established under 12 V. c. 20 (Can.), they directed the principal of the fund to be retained by the Dominion and the income therefrom paid to the provinces. Held, that even if there was no ultimate…
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Province of Ontario & Province of Quebec v. Dominion of Canada. In re common School Fund & Lands Collection Supreme Court Judgments Date 1898-06-14 Report (1898) 28 SCR 609 Judges Strong, Samuel Henry; Taschereau, Henri-Elzéar; Gwynne, John Wellington; Sedgewick, Robert; King, George Edwin On appeal from Federal Court of Appeal Subjects Constitutional law Decision Content Supreme Court of Canada The Province of Ontario and the Province of Quebec v. The Dominion of Canada (1898) 28 SCR 609 Date: 1898-06-14 The Province of Ontario and The Province of Quebec Appellants And The Dominion of Canada Respondent IN RE COMMON SCHOOL FUND AND LANDS. 1897: Nov. 2, 3, 4; 1898: June 14. Present:—Sir Henry Strong C.J., and Taschereau, Gwynne, Sedgewick and King JJ. ON APPEAL FROM AN AWARD IN AN ARBITRATION RESPECTING PROVINCIAL ACCOUNTS. Constitutional law—B. N. A. Act, s. 142—Award of 1870, validity of—Upper Canada Improvement fund—School fund—B. N. A. Act, s. 109—Trust created by—Effect of Confederation on trust. The arbitrators appointed in 1870, under s. 142 of the B. N. A. Act, were authorized to "divide" and "adjust" the accounts in dispute between the Dominion of Canada and the Provinces of Ontario and Quebec, respecting the former Province of Canada. In dealing with the Common School Fund established under 12 V. c. 20 (Can.), they directed the principal of the fund to be retained by the Dominion and the income therefrom paid to the provinces. Held, that even if there was no ultimate "division and adjustment," such as the statute required, yet the ascertainment of the amount was a necessary preliminary to such "division and adjustment," and therefore intra vires of the arbitrators. Held further, that there was a division of the beneficial interest in the fund and a fair adjustment of the rights of the provinces in it which was a proper exercise of the authority of the arbitrators under the statute. By 12 V. c. 200, s. 3 (Can.), one million acres of the public lands of the Province of Canada were to be set apart to be sold and the proceeds applied to the creation of the "Common School Fund" provided for in sec. 1. The lands so set apart were all in the present Province of Ontario. Held, that the trust in these lands created by the Act for the Common Schools of Canada did not cease to exist at Confederation, so that the unsold lands and proceeds of sales should revert to Ontario, but such trust continued in favour of the Common Schools of the new Provinces of Ontario and Quebec. In the agreement of reference to the arbitrators appointed under Acts passed in 1891 to adjust the said accounts questions respecting the Upper Canada Improvement Fund were excluded, but the arbitrators had to determine and award upon the accounts as rendered by the Dominion to the two provinces up to January, 1889. Held, that the arbitrators could pass upon the right of Ontario to deduct a proportion of the schools lands the amount of which was one of the items in the accounts so rendered. Appeal from an award of the arbitrators appointed to adjust the accounts between the Dominion of Canada and the Provinces of Ontario and Quebec respectively and between the said provinces. The arbitrators were appointed under authority of statutes passed by the Dominion Parliament and legislatures of the said provinces in 1891, namely, 54 & 55 Vict. ch. 6 (D); 54 Vict. ch. 2 (Ont.); and 54 Vict. ch. 4 (Que.) These statutes were identical in terms that passed by the Dominion Parliament containing the following provisions:— "An Act respecting the settlement of accounts between the Dominion of Canada and the Provinces of Ontario and Quebec, and between the said provinces." "Whereas certain accounts have arisen or may hereafter arise in the settlement of the accounts between the Dominion of Canada and the Provinces of Ontario and Quebec, both jointly and severally, and between the two provinces, concerning which no agreement has hitherto been arrived at; and whereas it is advisable that all such questions of account should be referred to arbitration; Therefore Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:" "1. For the final and conclusive determination of such accounts, the Governor General in Council may unite with the Governments of the Provinces of Ontario and Quebec in the appointment of three arbitrators, to whom shall be referred such questions as the Governor General and the Lieutenant-Governors of the said provinces shall agree to submit." "2. The arbitrators shall consist of three judges, one to be appointed by the Governor General in Council and one by each of the said Provincial Governments, and all three shall be approved of by each Government." "3. The arbitrators shall not assume to decide any disputed constitutional question; but if any are raised they will note and report them with their award, but without delaying their proceedings." "4. Any two of the arbitrators shall have power to make an award." "5. The arbitrators, or any two of them, shall have power to make one or more awards, and to do so from time to time." "6. The arbitrators shall not be bound to decide according to the strict rules of law or evidence, but may decide upon equitable principles, and when they do proceed on their view of a disputed question of law, the award shall set forth the same at the instance of either or any party. Any award made under this Act shall be, in so far as it relates to disputed questions of law, subject to appeal to the Supreme Court of Canada and thence to the Judicial Committee of Her Majesty's Privy Council, in case their Lordships are pleased to allow such appeal." "7. In case of an appeal on a question of law being successful, the matter shall go back to the arbitrators, for the purpose of making such changes in the award as may be necessary, or an appellate court shall make any other direction as to the necessary changes." "8. The appointment of the said arbitrators by Order in Council and their award in writing, shall be binding on Canada, save in case of appeal on question of law, in which case the final decision thereon shall be binding on Canada." "9. In case of a vacancy by death or otherwise among the arbitrators, the same shall be filled in the same manner as the appointment was first made, any such appointment to be approved of by the other two Governments." The Honourable John A. Boyd, Chancellor of Ontario; the Honourable Sir Louis Napoleon Casault, Chief Justice of the Superior Court of Quebec; and the Honourable George A. Burbidge, Judge of the Exchequer Court of Canada, were appointed arbitrators, in accordance with the provisions of the said statutes, and an agreement of submission was entered into on behalf of the three governments, which provided that the following, among other matters, should be submitted to them: "1. All questions relating to or incident to the accounts between the Dominion and the Provinces of Ontario and Quebec, and to accounts between the two Provinces of Ontario and Quebec." "2. The accounts are understood to include the following particulars:" "(a) The accounts as rendered by the Dominion to the provinces up to January, 1889." "(b) In the unsettled accounts between the Dominion and the two provinces the rate of interest and the mode of computation of interest to be determined." "(c) The accounts as rendered by the Dominion to the two provinces up to January, 1889, to be determined upon." * * * * * * * "(A). The ascertainment and determination of the amount of the principal of the Common School Fund, the rate of interest which would be allowed on such fund and the method of computing such interest." "(i) In the ascertainment of the amount of the principal of the said Common School Fund, the arbitrators are to take into consideration, not only the sum now held by the Government of the Dominion of Canada, but also the amount for which Ontario is liable, and also the value of the school lands which have not yet been sold." On this submission the arbitrators made and published an award in respect to the Common School Fund and Lands which, after formal recitals proceeded as follows: "Now therefore we, the said arbitrators, exercising our authority to make an award at this time respecting some of such questions and to reserve others for further consideration, do award, order and adjudge in and upon the premises as follows:" "1. That the sum held by the Government of the Dominion of Canada on the tenth day of April, 1893, as part of the principal of said Common School Fund, amounted to two million four hundred and fifty-seven thousand six hundred and eighty-eight dollars and sixty-two cents ($2,457,688.62), made up of the following sums, that is to say: 1st, the sum of one million five hundred and twenty thousand nine hundred and fifty-nine dollars and twenty-nine cents ($1,520,959.29), that at the Union of the Provinces came into the hands of the Government of Canada, and upon which interest has from time to time in the accounts referred to us been credited to the said Provinces; secondly, the sum of nine hundred and twenty-five thousand six hundred and twenty-five dollars and sixty-three cents ($925,625.63), for which, in 1889, the Government of Ontario accounted to the Government of the Dominion; and thirdly, the sum of eleven thousand one hundred and three dollars and seventy cents ($11,103.70), for which the Government of Ontario accounted to the Government of the Dominion in the following year (1890)." "From this finding Chief Justice Sir Louis Napoleon Casault dissents, he being of opinion that the sum then held by the Dominion Government as part of the principal of the said Common School Fund was greater than has been stated by an amount of one hundred and twenty-four thousand six hundred and eighty-five dollars and eighteen cents ($124,685.18), which sum in the said accounts has been deducted from the said fund and credited to the Upper Canada Improvement Fund." "2. That the Province of Ontario is not liable out of the proceeds arising from the sale of the Crown Lands of the Province, other than the million acres of Common School Lands as set apart in aid of the Common Schools of the late Province of Canada, to contribute anything to the said Common School Fund." "Mr. Chancellor Boyd dissents from so much of this finding as may imply that Ontario is under any liability in respect to the Common School Fund or lands." "3. That, subject to certain deductions, the Province of Ontario is liable for the moneys received by the said province since the first day of July, 1867, or to be received from or on account of the Common School Lands set apart in aid of the Common Schools of the late Province of Canada." "Mr. Chancellor Boyd dissents from this finding as to liability." "4. That from the moneys received by the Province of Ontario since the first day of July, 1867, from or on account of the Common School Lands set apart in aid of the Common Schools of the late Province of Canada, the Province of Ontario is entitled to deduct and retain the following sums as provided by the award of the 3rd of September, 1870, that is to say": "First,—In respect of all such moneys, six per centum on the amount thereof for the sale and management of such lands." "Secondly,—In respect of moneys arising from sales of such lands made between the fourteenth day of June, 1853, and the sixth day of March, 1861, twenty-five per centum of the balance remaining after the deduction of six per centum for the sale and management of such lands." "Chief Justice Sir Louis Napoleon Casault dissents from so much of this finding as relates to the deduction in the cases mentioned of the twenty-five per centum on such balance." "5. That in respect of the matters mentioned in the four preceding paragraphs, we the said arbitrators have proceeded upon our view of disputed questions of law." "6. With reference to the Quebec Turnpike Trust debentures in which a part of the Common School Fund was invested, we do award, order and adjudge that there is in respect thereof no liability on the part of the Dominion to either of the provinces, or on the part of the Province of Quebec to the Province of Ontario, but that whatever sums may be realized from the principal moneys due on such debentures, or from the arrears of interest due thereon, on the first day of July, 1867, shall be added to and shall form part of the principal of the said Common School Fund, and that whatever sums may be realized for interest on such debentures that has accrued due since the first day of July, 1867. or which may hereafter accrue due shall be dealt with as income arising from such fund " "7. With respect to the claim made by the Province of Quebec, that the Dominion is liable for interest on moneys received by the Province of Ontario from the sales of Common School Lands and retained by that province, we do award, order and adjudge that the Dominion is not liable therefor." "8. And with respect to other questions and matters relating to the Common School Lands and Fund, we, the said arbitrators, do not now make any award, but reserve the same for further consideration." Each of the said arbitrators published his reasons for the decision arrived at on the disputed questions of law dealt with in the said award, which reasons are as follows: BOYD C.—"1. No claim exists on the part of Quebec, to have more lands set apart for Common School purposes than were actually set apart by Old Canada. Upper and Lower Canada, now Ontario and Quebec, were the constituents of the joint Province of Canada, and are bound by what was done, or what was left undone in this regard prior to Confederation. That the claim is a 'new one' does not for that reason bar it, but it goes a long way to discredit it; nor do I perceive any intrinsic merit in the claim which would justify us in taking it into further consideration." "2. So far as Quebec claims to impeach the action of the first arbitrators in their award of 1870 touching the Upper Canada Land Improvement Fund, and as to what they have directed to be placed to the credit of that fund, presently and prospectively, I cannot see my way to interfere for many reasons. For one thing, the very subject matter is withheld from our jurisdiction by the terms of the reference. (See paragraph 5 of Deed of Submission of 10th April, 1893);" "And, for another thing: Apart from the provisions of the first award of 1870, the Province of Quebec would have no locus standi to make any claim as to the Common School Fund out of which this Land Improvement Fund was segregated by the first arbitrators." "3. The key to that award is the fact that all the fund was derived from land in Upper Canada, and that all the school lands were locally situate in Ontario and became or were retained as the property of Ontario on the dissolution of the Union. It was of grace to give any (much more a substantial) proportion of the future proceeds of those lands to Quebec, and the arbitrators could well modify the former proportion by withdrawing so much for the purposes of land improvement in the counties of the terrritory which furnish the lands. That was within the equity of the Act, Consolidated Statutes of Canada, Chapter 26, section 7, which provided for such a reserve being formed." "4. But, again, if the first award is as to these lands, impeachable (as I think it is), consider the state of affairs when Old Canada ceased to exist: What became then of the Common School Fund? Now, it is not hypercritical to apply accurate rules of construction to the language used in the constituting Statute, 12th Victoria, Chapter 200, which was reserved for and obtained the Queen's Royal sanction. The Act recites that 'it is desirable to raise moneys from the public lands of this province (that is Canada) for the maintenance and support of Common Schools therein' (i.e., in the Province of Canada). The same thought is repeated in the body of the Act, section 4, 'for the support, etc., of Common Schools in this Province.' Consolidated Statutes of Canada, Chapter 26." "What became of these schools when Canada ceased to exist as a joint Province and became a new political entity formed by the addition of other Provinces and established as the Dominion? There were then, in truth, no Common Schools in Canada. The existing schools became Common Schools in Ontario and Common Schools in Quebec, and not, therefore, the objects of the trust. The scheme of the Act and the scope of the trust was that public lands of Canada should support the Public Schools of Canada; but it does not therefore follow that the public lands of Ontario should help to support the Public Schools of Quebec, unless clear legislation to that effect is found. But none such can be found, for it is submitted that the general words of Section 109 of the Imperial Act 'subject to any trusts existing in respect thereof and to any interest other than that of the province in the same,' do not cover the case in hand. It is no answer to say that then there would be no trust remaining for the Common Schools of Ontario quoad the unsold lands— granted; but Ontario having all the lands could provide for her own schools." "In this aspect the reason and the motive of the whole scheme of support for the Public Schools of Canada disappeared when the union of the provinces was dissolved and Ontario retained her lands out of which the fund had been created and was to be maintained. When there ceased to be any Common Schools of Old Canada there ceased to be any beneficiaries for the future annual payments out of this fund. The fund itself, as it then existed, would revert in equity to the province out of whose lands it was created, if there was no legislation to the contrary, and there is none. Compare, by contrast, sections 139 and 140 of the British North America Act, making careful provision for events in the provinces after Confederation, but nothing analogous to which is found as to the trusts relating to Common Schools." "5. The point is therefore pressed that no trust exists as to this Old Common School Fund of Canada. The Award of 1870 itself, in clause IX, shows its invalidity, for it purports to deal with moneys received and to be received by Ontario 'on account of the Common School lands set apart in aid of the Common Schools of the late Province of Canada,' but the province had disappeared politically and really and so had the schools; what remained was the Dominion of Canada and the schools of Ontario and the schools of Quebec. The annihilation of the beneficiaries appears on the face of the Award, and, therefore, the futility of the supposed trust is also manifested; hence the Award is at variance with section 109 of The British North America Act, which gives the lands in Ontario and the moneys due thereon to that province subject to existing trusts only, but this is a non-existing trust, and so the lands and moneys due for the lands go absolutely to Ontario. So far as concerns the money collected out of the lands and held by Old Canada prior to Confederation but not invested, the Imperial statute is silent. The part investment, namely, the $58,000 represented by the Quebec Turnpike Trust, is included in the fourth schedule of assets as the property of Ontario and Quebec jointly. That being mentioned, and the uninvested fund being excluded from mention, throughout the Act favours rather than makes against the present argument." "Now the moneys collected and held by the Dominion as part of the general account are also earmarked as parts of this Trust Fund intended for the benefit of the Common Schools of (United) Canada, but when these schools ceased to exist, as such, at the date of Confederation, the moneys should, on principles of equity and fair dealing, have reverted to Upper Canada (i.e., Ontario) from whom it was taken[1]. A gift to a charity which has expired is as much a lapse as a gift to an individual, and it cannot be applied cy-pres—Re Rymer[2]. Where the society intended has merged in another society then the gift fails—Mackeown v. Ardagh[3]. This is a case in which the sub-division of Canada and the alteration of the Common School organization consequent upon the change of Government destroy the identity of the original beneficiaries[4]." "6. This is not a case in which there can be or should be any application of the cy-pres doctrine for this one good reason, that the scheme was one wherein the property and the schools were subject to one common Legislature, but it would be a perversion of the bounty to apply the property jointly when all control of the Quebec schools has passed from (United) Canada and Ontario. When the scheme was framed and intended to be perpetual there was but one Government controlling all,—fund, trustees and beneficiaries. But now the perpetuity has ended and there are three Governments; and matters of school legislation are no longer controlled by the general Government but are remitted, as matters of local concern, to local legislation. Surely these circumstances, leaving out of sight others which might be mentioned, are sufficiently distinctive from those existing when the fund was formed to displace any equitable claim of Quebec[5]." "The words of the Imperial Statute 'subject to existing trusts,' etc., yield a plain, intelligible meaning, and call for no latitude of construction to include anything beyond what is obvious. To ascertain what are the trusts we must fall back upon prior provincial legislation, and one cannot affirm that the Legislative body which enacted 12th Victoria and sanctioned its consolidation in Chapter 26, had any trusts in view other than those pertaining to the whole body of the Canadian Public Schools in (United) Canada and that in perpetuity. If there is meant to be a continuation of that trust for schools after the constitutional disappearance of Old Canada and the practical severance of that trust to and for the benefit of the new Provinces of Ontario and Quebec, one would expect to find proper provision therefor in suitable and explicit language." "CASAULT C.J.—The Provincial Statute 4 & 5 Vict. ch. 18, which by its sec. 23, was to come in force on the first of January, 1842, enacted, sec. 2:" 'That for the establishment, support and maintenance of Common Schools in each and every township and parish in this province, there shall be established a permanent fund which shall consist of all such moneys as may accrue from the selling or leasing of any lands which, by the legislature of this province, or other competent authority, may hereafter be granted and set apart for the establishment, maintenance and support of Common Schools in this province, and of such other monies as are hereinafter mentioned; and all such monies as shall arise from the sale of any such lands or estates, and certain other monies hereinafter mentioned, shall be invested in safe and profitable securities in this province, and the interest of all monies so invested, and the rents, issues and profits arising from such lands or estates as shall be leased or otherwise disposed of without alienation, shall be annually applied in the manner hereinafter provided, to the support and encouragement of Common Schools.' "Section 3 of the same Act decreed that fifty thousand pounds should be granted annually, to be distributed amongst the several districts of the province, and that this sum should be composed and made of the revenue derived from the permanent fund to be created under the previous section, and such further sums from the unappropriated moneys which were then raised and levied or might thereafter be raised and levied by the legislature for the uses of the province as might be required to make the above mentioned sum, and that the said annual grant should be and be called 'The Common School Fund.' "At the same session was passed the statute 4 & 5 Vict. ch. 100 for the disposition of public lands within the province, which was reserved as required by the Union Act (sec 42 of the Imperial statute 3 & 4 Vict. ch. 35), and received the royal assent which was duly signified. That statute gave to the Government of Canada the power to deal with the public lands, but it excluded free grants excepting to the extent of ten acres for schools, school houses, etc." "The limit put by that statute to the extent of free grants for schools, etc., etc., did not preclude the appropriation of a larger area for the maintenance of schools generally. It only limited the number of acres which could be granted to each special school, as shown by its reproduction in 16 Vict. ch. 159, sec. 10, in the Consolidated Statutes of Canada, chap. 22, sec. 11, and in 28 Vict. ch. 2, sec. 14." But this question has no interest because the setting apart of one million of acres the price of which when sold was to constitute the Common School Fund was done under the authority of a subsequent Act." "It has been contended that 4 & 5 Vict. ch. 18, had never been repealed and is law to this day. This contention has also for the same reason no interest. But it is incorrect. This statute was repealed, 1st, implicitly by 12 Vict. ch. 200, which covered the same grounds, and 2nd, by the Consolidated Statues of Canada, (22 Vict. ch. 29, p. xxxv), which at sec. 5, stated that the several Acts or parts of Acts mentioned as repealed in Schedule A thereto annexed, and in which we find as repealed 4 & 5 Vict. ch. 18, shall stand and be repealed. The Act 7 Vict. ch. 9 need not be noticed except in so far as it directs the sum of fifty thousand pounds granted for the support of the Common Schools to be apportioned between the divisions of the former provinces of Upper and Lower Canada in proportion to the population of each as ascertained by the next anterior census." "Then comes, in 1849, the statute 12 Vict. ch. 200, sanction of which was reserved and granted by Her Majesty in Council on the 9th of March, eighteen hundred and fifty (1850) and communicated to the legislative council and assembly on the twenty-seventh of May one thousand eight hundred and fifty (1850), and which was law until repealed by the Revised Statutes of Canada, where all its provisions have been embodied. It is copied in extenso in the Ontario case. It is enacted by its first section that all moneys that shall arise from the sale of any public lands of the province, shall be set apart for the purpose of creating a capital which shall be sufficient to produce a clear sum of one hundred thousand pounds per annum, which said capital and the income to be derived therefrom shall form a public fund to be called the Common School Fund; by section 2, that the capital of the said fund may be invested as therein mentioned and that the fund and the income thereof shall not be alienated but shall remain a perpetual fund for the support of Common Schools and the establishment of township and parish libraries; by section 4, that the grant of money out of the provincial revenue for common schools shall cease when the income from the school fund shall have realized fifty thousand pounds, with, however, a proviso that, if the income from the school fund fall short of that amount, the Receiver General shall complete that amount out of the consolidated revenue and repay these advances from the said income whenever it shall exceed the said sum; and by section 3, 'that the commissioner of crown lands under the direction of the Governor in Council, shall set apart and appropriate one million of acres of such public lands, in such part or parts of the province as he may deem expedient, and dispose thereof on such terms and eonditions as may by the Governor in Council be approved, and the money arising from the sale thereof shall be invested and applied towards creating the said Common School fund; provided always that before any appropriation of the moneys arising from the sale of such lands shall be made, all charges thereon, for the management and sale thereof, together with all Indian annuities charged upon and payable thereout, shall be first paid and satisfied.' "An Order in Council of the 8th of October, eighteen hundred and fifty (1850), approved the report of the Commissioners of Crown Lands of the same date proposing the appropriation of one million acres of land for school purposes indicating and determining the lands so appropriated, to wit: in the counties of Huron, Gray, Bruce and Perth, and, as some of said lands not yet surveyed might contain swamps and lands of very inferior quality, suggesting that fifty-nine thousand six hundred and twenty-five acres in the township of Carrick be reserved until the quality of the unsurveyed part of one million acres be ascertained, and the department be authorized to make the exchanges, acre for acre, from the disposable Crown lands in the said township or elsewhere." "An Order in Council of the seventh July, one thousand eight hundred and fifty-two, reduced the price of school lands in the counties of Bruce and Grey to ten shillings an acre, and decided that a measure be submitted to parliament to authorize the expenditure of a sum equal to two shillings and sixpence per acre of the purchase money on the improvement of roads and harbours within the said counties. That authorization was granted on the fourteenth day of June, one thousand eight hundred and fifty-three by the following section of the Act to amend the law for the sale and settlement of public lands (16 Vict. ch. 159.) 'Sec. 14.—It shall be lawful for the Governor in Council to reserve out of the proceeds of the school lands in any county, a sum not exceeding one-fourth of such proceeds, as a fund for public improvements within the county, to be expended under the direction of the Governor in Council, and also to reserve out of the proceeds of unappropriated crown lands in any county a sum not exceeding one-fifth as a fund for public improvements within the county, to be also expended under the direction of the Governor in Council: Provided always, that the particulars of all such sums, and the expenditure thereof shall be laid before parliament within the first ten days of each session: Provided always, that not exceeding six per cent on the amount collected, including surveys, shall be charged for the sale and management of lands forming the Common School Fund, arising out of the one million acres of land set apart in the Huron Tract.' "On the third of July, one thousand eight hundred and fifty-four, an Order in Council fixed at ten shillings the upset price of the school lands in the counties of Huron, Perth, Bruce and Gray." "An Order in Council of the twenty-seventh February, one thousand eight hundred and fifty-five, authorized the expenditure of thirty-five thousand five hundred and eighty-nine pounds from the improvement fund which the fourteenth section above transcribed of the Act 16 Vict. ch. 159, gave authority to establish. But it appears by an Order in Council of the seventh December, one thousand eight hundred and fifty-five (1855), that, notwithstanding the expenditure of twenty-five thousand pounds from the same, the improvement fund had not yet been set apart, and that the Crown Lands Department was directed to apprize the Inspector General of the amount at the credit of each county from the proceeds of sale of both Crown and School Lands, so that the proportions accruing to the improvement fund might be set apart by the Receiver General for that purpose." "Such were the legislation and the Orders in Council under it relating to the Common School lands which I think important to notice at present, when the Consolidated Statutes of Canada took effect on the fifth December, one thousand eight hundred and fifty-nine. These last repeal 12 Vict. ch. 200; (ch. 29, sec. 5, and schedule A); but they incorporate at ch. 26 all the enactments of this last mentioned statute and of section 14 of 16 Vict. ch. 159, without in any way changing their sense so that it is useless to cite them again. It may be noted that the 14th section of 16 Vict. ch. 159, though forming part of that land Act, was omitted from ch. 22 of the Consolidated Statues of Canada, where the Land Act is reproduced; and that ch. 22 of the Consolidated Statutes of Canada was subsequently repealed by 23 Vict. ch. 2, which was still law at Confederation; and that, on the sixth March, one thousand eight hundred and sixty-one an Order in Council rescinded that above mentioned of the seventh December, one thousand eight hundred and fifty-five." "The Common School Fund was not dealt with by the Government of the province of Canada as the law directed; most of the lands set apart were sold and proceeds realized of the same, though kept as a separate fund which was credited with interest quarterly, (see Public Accounts of the Province of Canada, 1864 ii, p. 47; 1865 ii, p. 53; 1866 ii, p. 45; 1867 ii, p. 61) were not invested as directed by law, save $58,000 of the same which were exchanged for debentures of the Quebec Turnpike Trust, nor was the interest accruing applied towards the expenses of education, but the fund and the interest were left to accumulate, and the two hundred thousand dollars which the law required to be applied yearly for the maintenance of Common Schools was furnished out of the Consolidated Fund and exclusively charged to the same. So that, at the date of Confederation the funds in the hands of the Government amounted to $1,733,224.47, including the $58,000 debentures mentioned and $29,580 interest on the same, and it appears that $1,704,738 remained due upon the lands already sold, and 8,559 acres of land had not yet been disposed of. (See Langton's Report, Long Book, pp. 4 and 8)." "The British North America Act, 1867, (30 Vict. ch. 3), came in force on the first of July, 1867. By section 109 of the same all lands belonging to the Province of Canada and all sums then due and payable for such lands were given to the provinces of Ontario and Quebec, in which the same were situated or arose, subject to any trusts existing in respect thereof and to any interest other than that of the province in the same." "It seems to be undeniable that the lands which had been set apart in execution of a special law directing it so that the proceeds of their sales should constitute a fund for the maintenance of Common Schools in the then two sections of the Province of Canada as well as the sums due or payable for the same were affected by a trust, and that Quebec, one of the sections, had in what remained unsold of these lands and in the unpaid balance of the price of those already sold, a special interest distinct from that of Ontario, where those lands were situate., We have already decided that the lands ceded by the Indians were affected with a trust for the payment of the annuities which were stipulated as the consideration of their cession, though the deeds of cession contained no stipulation to that effect, whilst the school lands were expressly set apart and dedicated to a special service required for the welfare and good government of the Province of Canada," "The division of that province into two separate sections with distinct legislative powers could not without direct terms and did not revoke the dedication made for the common benefit of both; and far from so directing the British North America Act, as already mentioned, in giving the lands and the sums due for the same to the province in which they were situated, expressly stated that the lands and the unpaid balance of those sold did remain subject to the trust existing in respect of them and to any kind of interest other than that of the province to which they were assigned in the same." "Was it possible to maintain in a more forcible way as against the unsold lands and what remained due of the price of those already sold, the existence of the trust with which they had been affected, and to reserve to the late Province of Lower Canada, made Quebec by that Act, the interest which it then had in both? To my mind, it was not. I deduce, from what precedes, that the Province of Quebec owes to the law and not to the award of eighteen hundred and seventy the right which it has to a share of the proceeds of the lands in Ontario whether sold or unsold, which have been set apart for the benefit of the common schools, and that its share was independent of that award. I will hereafter examine the effect the award had on the same." Such was the opinion of the late Auditor Langton. At page 8 of his remarks in the long book headed 'Arbitration between Ontario and Quebec,' he expresses himself as follows: 'There are, however, many questions which are not represented by any items in the statement of affairs which will necessarily come before the Arbitrators. The most important of these in amount, are the amounts not yet realized from the common school lands. They are all situated in Ontario, and are handed over to that province, but subject to a trust, in which Quebec is interested to the extent of its share according to population, or in whatever other way the realized fund may be divided. The sums must necessarily be collected by Ontario, and it might either pay over annually to Quebec its share of the collections, less expenses; or, which would be much more convenient, the lands and arrears due might be valued, a deduction being made for costs of collection, and upon Quebec's share of the capital ascertained Ontario might pay five per cent interest. The best way of arranging this would be for Ontario to pay the Dominion so much more interest, and Quebec so much less. As to the valuation from a return made to me by the Crown Lands Department, the outstanding instalments amount to $1,7 [Illegible Text] 4,-738.00, and only 8,959 acres remained unsold, valued at two dollars an acre, or $17,918. As all the other instalments bear six per cent interest, the whole property can hardly be valued at less than $1,700,000, or, charging twenty per cent for costs of management and collection $1,460,000. Of this sum the share of Quebec would be, on its population in eighteen hundred and sixty, about $648,000, equal to an annual sum of $32,400.' And the treasurer of Ontario in his argument before the first arbitrators said (see Quebec case, p. 16; the whole speech is there cited as being in Vol. 220 of the miscellaneous pamphlets in the library at Ottawa): 'As to the outstanding moneys on lands sold, and the unsold lands, I think Ontario took them subject to the trust in respect of the same, and are therefore bound to collect the moneys, charging only the statutory allowance therefor, and when collected, to pay the money over to the Dominion, to be added to and held on the same trust as it holds the fund already in its hands.' And further on, speaking of the statute creating the Common School Fund, he said: 'By that Act the fund was created for the support of the Common Schools, as well in Lower Canada as in Upper Canada, and although the relations of the two sections of the late Province of Canada are now changed, yet in the Confederation Act it remains as it was before Confederation, and must be carried out in all its provisions; and therefore, Lower Canada must, in my opinion, according to law, have the same portion of the annual income from the capital of this fund as it would have had, had Confederation never taken place.' "The several statutes authorizing this arbitration, namely, 54 & 55 Vict oh. 6, Canada; 54 Vict. ch. 2 (1891), Ontario, and 54 Vict. ch. 4 (1890), Quebec, at section 1 of each of them, limit the powers of the arbitrators and their inquiring into the accounts between Canada and the Provinces of Ontario and Quebec jointly and severally and between the two provinces to such questions as the three governments shall mutually agree to submit. The first agreement of submission which was approved and concurred in by the three governments, referred to the arbitrators the following questions which may have arisen from the controversy relating to the Common School Fund: '1. All questions relating or incident to the accounts between the Dominion and the provinces of Ontario and Quebec and to accounts between the two provinces of Ontario and Quebec, said accounts being understood to include, amongst other particulars, the following:' '(b) In the unsettled accounts between the Dominion and the two provinces, the rate of interest and the mode of computation of interest to be determined.' '(e) The arbitrators to apportion between Ontario and Quebec any amount found to be payable by the Dominion of Canada.' '(f) All other matters of account (1) between the Dominion and the two provinces; (2) between the Dominion and either of the two provinces, and (3) between the two provinces.' '(g) The rate of interest, if any, to be allowed in the accounts between the two provinces, and also whether such interest shall be compounded, and in what manner.' '(h) The ascertainment and determination of the amount of the principal of the Common School Fund, the rate of interest which should be allowed on such fund, and the method of computing such interest.' '(i) In the ascertainment of the amount of the principal of the said Common School Fund, the arbitrators are to take into consideration, not only the sum now held by the Government of the Dominion of Canada, but also the amount for which Ontario is liable, and also the value of the school lands which are not yet sold.' '5. It is further agreed by and between the parties hereto that the questions respecting the Upper Canada Building Fund, and the Upper Canada Improvement Fund are not at present to form any part of this reference, but this agreement is subject to the reservation by Ontario of any of the rights to maintain and recover its claims, if any, in respect of the said funds as it may be advised.' "The last clause reserved to the parties the right to submit, upon mutual agreement, other questions or matters." "It appears to me that; under clause (e) of this submission, being empowered to apportion between Ontario and Quebec the amount found to be payable to them by the Dominion, we could not only determine the amount due by Canada to the Common School Fund, but also apportion that amount between the provinces. But as this would divide only part of that fund, and as the statutes passed by the Parliament of Canada and by the legislatures of the two provinces, in eighteen hundred and ninety-four (1894) contemplate a division of the whole, and the counsel for Quebec did not insist upon a partition of anything but the annual interest, it may be that we should not go beyond establishing the total amount of the fund and dividing the income or interest derived therefrom." "But it seems to me that, with the exception to our powers made by clause five (5) of the submission, we must determine the amount of the fund without any regard to the Upper Canada Improvement Fund and as if it did not exist, save by adding in the terms of the submission, that we do so under reservation to Ontario of its rights to maintain and recover its claim, if any, in respect to that fund. Both parties have argued that we have no right to pass on the question of that fund, true it is for different reasons, Ontario maintaining it has incontrovertibly been made hers by the first award, and Quebec that the award was in that respect, a nullity. It has been argued by Ontario that what was excluded by the reference was its claims for the addition to that fund of one-fifth of the proceeds of the Crown lands sold between June, one thousand eight hundred and fifty-three (date of the sanction of 16 Vict, ch. 159, which authorized the creation of that fund), and March, eighteen hundred and sixty-one, when the fund was abolished. But the reference permits no such distinction. It excludes in plain words the Improvement Fund, without exception. I do not see how we can take upon ourselves to say that that designation does not include the whole fund and to limit its meaning to a part of it only. To urge upon us that distinction or limitation it has been argued that Quebec never objected to that part of the award. But we find that the Treasurer of Ontario, on the ninth December, eighteen hundred and sixty-eight (1868), not satisfied with the statement of liabilities prepared by the Dominion,. transmitted to the Finance Minister at Ottawa one according to his views where he mentions the Improvement Fund at $5,180.04, as stated in the Dominion account, and puts down the Common School Fund at $1,733,224.47, without any deduction, and proposes that Canada should keep all investments on account of trust funds (Canada Sessional Papers, 1869, No. 46). In eighteen hundred and sixty-nine the same Treasurer sent another revised statement of debt where he charges $124,685.18 for the Improvement Fund, besides the $5,119.08, at which, after a small reduction therein specified, that Fund was entered in the Dominion statement of the debt. The statement so submitted by the Treasurer of Ontario was communicated to the Treasurer of Quebec, who, on the twenty-ninth of December, 1869, prepared himself a statement where he puts $5,119.08 as the only amount constituting the Improvement Fund. (Canada Sessional Papers, 1870, No. 11)." "That was a protest against the larger amount introduced by the Treasurer of Ontario in his statement. We find Quebec still protesting after the award." "I do not think that the mention of the sum of $124,685.18 as part of the Improvement Fund in the joint case of Ontario and Quebec on the question of interest can be taken as an admission by the counsel for the latter province, that Ontario was entitled to that amount. As Mr. Girouard did put it, the only question then mooted was that of interest; and as the Improvement Fund was excluded by the reference, what was said or written about the Fund in the joint case prepared for the two provinces by the counsel for Ontario was immaterial and its exclusion not worth an objection by the counsel for Quebec to a case which, in all other particulars, met his views." "But, moreover, No. 49, at pp. 65, 66 and 67 of the joint case on interest, was only a citation of part of the award, followed with a statement of the funds in the hands of the Dominion for the purpose of showing how the Government at Ottawa treated it and had come to the amount of the semi-annual interest there mentioned as paid to each province by that Government." "I wish it to be understood that I express no opinion whatever on the merits or demerits of the pretensions of Ontario as to that Fund. What I say about the protest of Quebec is only to show that the exclusion of that fund from the matters submitted to our decision was not only to part of what Ontario claims to be the Improvement Fund but to the whole Fund." "I now come to what, in the submission, is stated under letter (A), the ascertainment and determination of the amount of the Common School Fund." "I think that Fund must be composed: 1. Of the amount which is in the hands of the Dominion $1,733,224 47 Less investment in Quebec Turnpike Trust Debentures $58,000 00 And eight and a half year's interest credited, though not received 29,580 00 —————— 87,580 00 And subsequent payments by Ontario to the Dominion on account of that Fund, which were credits given Ontario for so much, and which must be debited to the Dominion from the date of the credit, 1889, December 1st.. Of the credit, 1890, April 20th $1,645,644 47 925,169 14 11,103 70 $2,581,907 31 "2. The debentures above mentioned and the interest due on the same." "3. The amount received by Ontario on account of the price of school lands sold before and since the first day of July, 1867, less the two amounts above mentioned as credited by the Dominion on the first December, 1889, and the twentieth of April, 1890. In this must be included the amounts which will be established as erroneous entries and which are claimed by Quebec under No. 1 at p. 11 of its case, as $9,468.59." "4. The outstanding balances due on sales of lands, which, in the reply of Quebec, are stated to have been on the thirty-first December, 1892, $485,801,65." "5. The ascertained value of the lands unsold, if the parties agree to such valuation. If they do not agree, our award should state that the price of those lands when sold, less six per cent for management, shall form part of the Common School Fund and be accounted for by Ontario as such. I say less six per cent, though an Order-in-Council of the twenty-third June, eighteen hundred and sixty, authorized a charge of twenty per cent, because six is the amount fixed by 16 Vict, chapter 159 and by section 7, No. 2 of chapter 26 of the Consolidated Statutes of Canada, and that an Order-in-Council could not change the law. The Treasurer of Ontario admitted in his speech above in part quoted, that the statutory allowance only could be charged." "I do not think, either, that though the investment of part in debentures of the Quebec Turnpike Trust was not one authorized by the law, that the late Province of Canada can be made responsible for the same. The dealings of the province bound its two successors, the Provinces of Ontario and Quebec, and they have all along since recognized those debentures to be what they were considered by the late Province of Canada, that is as so much to be deducted from the amount received by the Province of Canada on account of the Common School Fund and as an absolutely valueless asset." "Quebec cannot be made responsible for the same from the decision of the Privy Council in the case of Belleau et al v. The Queen[6], that the bearers of the debentures of the Quebec Turnpike Trust had no other recourse for their payment than against the trust." "While on this subject, I may say that I entirely concur with the opinion expressed by my brother arbitrators at the argument, that the provinces have no recourse against the Dominion for the interest on said debentures which it appears could have been partly collected. Barring all other reasons, the two provinces having, by their dealings, concurred in the opinion that the debentures were valueless, could not afterwards, without notice to the contrary, and a request that the debentures themselves or the interest on the same should be collected, pretend that the Dominion was responsible for either." "The claim which the counsel for Quebec qualified as a "New Aspect" is the addition to the Common School Fund of the amount from the sales of Crown lands by the Province of Ontario and Quebec since Confederation required to form, with the net proceeds of the school lands and the net proceeds of the public lands sold from the twenty-seventh of May, 1850, to the first of July, 1867, a capital sufficient at six per cent to produce an annual revenue of $400,000. It is founded on section 2 of the Statute, 12 Vict. ch. 200, which is in the following terms: 'All moneys arising after the twenty-seventh of May, 1850, from the sale of any public lands of the province, shall remain, or be set apart as part of the capital of said school fund until the same is sufficient at the rate aforesaid (six per cent) to produce the said sum of $400,000.' "The Government of the late Province of Canada never carried that law into effect. It did not credit the Common School Fund with the proceeds of any of the public lands, but it furnished every year the whole of the $200,000 which the school law required to be applied for the establishment and maintenance of Common Schools, not only without charging any part of it against the revenue of the school fund, as directed by law, but adding quarterly interest to the same. Quebec could not, and does not complain of what was done in that respect by the late province, but it wants us to award that the Common School Fund must be credited out of the price of public lands sold by Ontario and Quebec since the first of July, 1867, with the amount required to make, with the price of the school lands sold, the value of those unsold and the price of the public lands sold from the twenty-seventh of May, 1850, to the first of July, 1867, after deducting a percentage for administration, a sum of $6,666,666.66." "Ontario contends that the sale of lands in 12 Vict. ch. 200, comprises the lease of lands for cutting wood. I do not think so. The license to cut wood, though renewable, were made for one year only, and conveyed no proprietary rights in the soil. They were, as they expressed it, but a permit to cut timber (12 Vict. ch. 30, sec. 1, and Consolidated Statutes of Canada, ch. 23, sec. 2,) which when cut, was the property of the licensee. His license even contained a condition that lots thereafter licensed to settlers would be excepted from the limits in which he was authorized to cut. The amounts received from the licensees to cut timber being excluded, the price of the public lands sold from the twenty-seventh of May, 1850, to the first of July, 1867, together with the price of the school lands sold and the value of those unsold, did not, after deduction of percentage for administration, amount to $6,666,666.66," "But Quebec has never urged what is now, and for the first time presented by its counsel as a "New Aspect." It has always limited its claim to the part of the Common School Fund in the hands of the Dominion to the balances due on the first of July, 1867, by the purchasers of Common School lands, and to the proceeds of those lands sold since and the value of those unsold. This is admitted by its counsel, and the fact that they lay that part of its claim as a "New Aspect" is of itself a substantial acknowledgement that the province which they represent adopted the dealings of the Government of the late province in relation to the proceeds of the Crown lauds, and consented that they should continue to be dealt with as previous to Confederation. This is made the more apparent from the fact that Quebec during the twenty-five years which have elapsed since it became a distinct province has not kept a separate account of the proceeds of its Crown lands but has continued to merge them in its Consolidated Fund, and to deal with them as part of the same. Section 2 of 12 Vict. ch. 200, affected the lands of the whole Province of Canada, and, if the lands which section 109 of the Imperial Act made the property of Ontario could still be subject to the completion of the $6,666,666.66, amount required to complete the Common School Fund, those which by the same Act were made that of Quebec, were also subject to it. And the agreement, clause 3 (i), should have joined Quebec to Ontario when it stated that in the ascertainment of the amount of the principal of the Common School Fund, the arbitrators were to take into consideration not only the sum held by Canada but also the amount for which Ontario is liable and the value of the school lands not yet sold. The exclusion of Quebec shows plainly that the liability of Ontario was intentionally limited to the price of the school lands, as otherwise Quebec would have been liable for the price of its lands sold since the first of July, 1867, required, with those sold by Ontario after that date, to make up the above mentioned capital of the said Common School Fund. I take it, therefore, that the submission clearly excludes from our consideration what Quebec has presented as a "New Aspect." "The counsel for Quebec have not urged before us the claim against the Dominion for interest on collections not remitted by Ontario or moneys uncollected by that province. We have not to concern ourselves about it, save perhaps to adjudicate by the award that there is no liability in the Dominion on that score." "As to the division of income, the assets in the fourth schedule of the Imperial Act were not the only ones which had to be divided between Ontario and Quebec. There were others as well as properties and credits of the late province which were common to the two sections of that province and which, alter the loss of its distinct existence, remained the joint property of its successors, Ontario and Quebec. Amongst others of that description were the Common School Fund, the credits of which formed part of that fund, and the lands which had been appropriated to the fund, and which the Act of Confederation had assigned to Ontario subject to the trust with which they were affected. That fund, as well as all other joint properties or assets which the Confederation Act did not assign to the Dominion or specially to either Ontario or Quebec, were to remain in the possession of the Dominion until they were either divided between, the two new provinces or regularly made over to one or the other." "But though the possession of the fund remained with the Dominion until divided, the property of the same passed directly from the Province of Canada to its two successors, who hold it jointly. From the first of July, 1867, the Common School trust was the property of both Ontario and Quebec in the proportion of their respective populations, until a regular division should have changed that proportion." "The Common School Fund had been created for a purely local service—the maintenance of Common Schools. That service after Confederation devolved on the Provinces of Ontario and Quebec, within whose jurisdiction it fell. The Dominion Government had no jurisdiction in the matter, could not continue it, or dispose of it. It was bound to hold it until divided between the two provinces and, until then, to give each province annually what on the first of July, 1867, apppeared to be the share of each province in the income produced by the fund. But the fund itself could not be left in abeyance, or its administration continued. It had to be divided and handed to the provinces in the proportions of their population at the preceding census, or perhaps in the proportion determined by the arbitrators. The law made this clear and it was so understood generally." "In the statement of assets, which was prepared for the arbitrators, it is expressed as appearing that the part of the fund which had been allowed to accrue before Confederation should be divided as the grants were divided which should have been charged against it, viz.: according to population. In the principles upon which all transactions since the thirtieth of June, 1867, were to be introduced into the settlement of affairs of the late province, it is stated that 'the lands in each province were surrendered to them subject to existing trusts, and the Dominion is bound to see that the trusts are executed.' A very large sum, upwards of $1,700,000.00, remains outstanding on sales of Common School lands, situated in Ontario, but in which Quebec has a joint interest, and the apportionment of this asset must be left to the arbitrators. In the principles upon which the statement of affairs of June 30th, 1867, was to be revised in preparation for the arbitration between Ontario and Quebec, we also find, 'but as Ontario and Quebec have a joint interest in the Common School Fund, the investments for that fund and the accrued interest thereon must be handed over to Ontario and Quebec conjointly, to be dealt with by the arbitrators.' "In the suggestions by Mr. Langton, Auditor General, speaking of the Common School Fund, he says: 'As the educational grants, which ought to have been charged against this fund so far as it would bear them, have always been distributed according to population, the fund ought to be similarly treated, and would give to Ontario $964,940.27, to Quebec $768,284.20, unless indeed the population, as it is presumed to have stood at the date of the Union, be assumed as the basis.' "The treasurer of Ontario did not, in December, 1868, contemplate that the School Fund 'would remain as a trust in the hands of the Dominion.' Writing on the fifth of December, 1868, about the Trust Funds, which the then Minister of Finance proposed to keep on paying five per cent, and mentioning specially amongst others the Common School Fund, he wrote (Canada Sssional Papers, 1869): 'I do not think the Government of Ontario have any authority to deal with these funds as you propose. Its action would be ultra vires. If the people of Ontario should decide to have these funds invested it may be, and most likely would be, that they could invest them in good security at six per cent. Your Government owes these moneys. Instead of paying the principal you propose to pay five per cent in perpetuity. I am not prepared to say the people of Ontario will accept this proposition. As these funds are for public purposes, it may be that Ontario and Quebec may sweep them away altogether and merge them in the general revenues of the provinces, and provide, by annual grants or otherwise, for the object contemplated by the creation of these special funds. By doing so it would save much labour and many complications.' "At a subsequent conference, to be found in the same papers, he renews his objection to leaving the Common School and other funds in the hands of the Dominion. "It was to put an end to the joint ownership and joint liability of the Provinces of Ontario and Quebec that section 142 of the Imperial Act enacted: 'The division and adjustment of the debts, credits, liabilities, properties and assets of Upper Canada and Lower Canada shall be referred to the arbitrament of three arbitrators, one chosen by the Government of Ontario, one by the Government of Quebec, and one by the Government of Canada.' "This section contains the extent and limit of the powers of the Arbitrators. They could adjust and divide; they could do nothing else without exceeding their authority. They could not decree that the joint property of the two provinces should forever remain undivided and be held conjointly by them in perpetuity. They could not create an everlasting trust and charge the Dominion with its execution. They could not, as they have done, assign a portion of the Common School Fund to one of the Provinces and direct that the rest should remain forever undivided and be transferred, or made over in trust to the Dominion which they charged with its execution. This was neither a division nor an adjustment of the joint property of the provinces. Adjust may have a larger meaning than divide; but it cannot be extended beyond regulating the accounts, putting them in order, making them accurate and conformable to the existing rights. In awarding that three-fourths of the Common School Fund should remain in trust in the hands of the Dominion to be by it invested and the proceeds paid by that Government in certain variable proportions to the provinces, the arbitrators were exceeding their authority, and what they did was ultra vires. This has struck one of the counsel for Canada, Mr. Ritchie, who, speaking on the interest question, remarked that the arbitrators had no such powers. Mr. Justice Burbidge seems to have been so impressed at the argument, and it is plain that they had not. The consequence of having so exceeded their authority was to make their award in relation to the part of the Common School Fund in the hands of the Dominion and the uncollected price and interest of the lands set apart for the maintenance of Common Schools whether sold or unsold, a nullity. Their award so far was ineffective and could be resisted when it came in force. These are the expressions of the Lord Chancellor about what is ultra vires in the argument before the Privy Council. Speaking of what the arbitrators were alleged to have done in excess of their authority, he expressed himself as follows: 'These gentlemen were executing a Parliamentary power. It is not as if it was a private arbitration under a private instrument. Either this was within their power or was not. If it was not within their Parliamentary power, it goes for nothing.' And further still, 'there is a certain thing to be done under a certain Act of Parliament by particular individuals named. If they do anything more than they are authorized to do, it cannot have any possible effect.' "The Government of Canada, though it has paid half-yearly to the provinces the interest on the amount belonging to the School Fund which it had in its hands, cannot be said to have accepted the trust so thrown upon it; but, even supposing that it did, its acceptance could not have made valid what was void, nor made effectual against Quebec, which was one of the parties interested, an unauthorized and illegal award to which it had not consented, and the object of which was to keep it in a kind of tutelage so far as the School Fund was concerned." "The judgment of the Privy Council in 1878 has often been alleged as confirming the award of 1870, and barring any objection to this award. But a reference to the case submitted by the provinces, to the question which that tribunal was called to answer, to the answers it has made and to the pamphlets containing the argument before it, will make it evident that the Privy Council did not pay attention to the objections to the award which were not specifically raised in the case; and confirmed the same upon the questions propounded in the said case without in any way considering the objections, which Mr. Benjamin had invoked against the paragraphs 7, 8, 9 and 10 of the award." "The making and publication of their award was the exhaustion of the powers and authority of the arbitrators. They could not afterwards correct it, nor complete it by providing for what they had omitted. Appointed as we are to determine and award, amongst other things, all matters of accounts between the Dominion and the Provinces of Ontario and Quebec, and between these two provinces, we have to examine the statutes and the first award; and, if we find that any part of the award is null or void, we must proceed to the determination of said accounts as if that part of the award did not exist." "The paragraphs already mentioned, namely, 7, 8, 9 and 10 of the award of 1870, being void for excess of authority, they are inoperative, and the school trust is and has always remained, since the first of July, 1867, the joint property of the Provinces of Ontario and Quebec, and has ever since that date been held by them, absolutely as they then did. The income or interest which the fund produced had therefore to be divided between them in accordance with their respective rights at that date, that is, in proportion to their population, as ascertained by the then previous census, which was that of 1861." "The division had to be complete and final, independent of any ulterior action. On that point I cannot do better than cite the opinion expressed by the late Mr. Gray, Dominion arbitrator: 'The powers of the arbitrators will close with their award, and that award must be so made that it can stand entirely per se, and not be dependent in any way upon ulterior action by either of the parties to the arbitration. It must give the asset, it must assign the burden—clear and unequivocal, whatever it may be, the asset must become the undoubted property, and the debt the undoubted burden of the one province or the other, as the case may be.' (Quebec Sessional Papers, 1870, No, 11.)" "This is a correct definition of the duties of the arbitrators under sec. 142 of the Imperial Act. I cannot understand how the two of them, who must have drawn the award, came to do quite the reverse with the Common School Fund; and that, instead of dividing it, as the law directed, and giving to each of the two parties an undoubted property of its share, they decided that the fund be left in the hands of a third party forever, and the interest only be paid in variable portions to each of the two owners of the fund." "Their award, so far as the Common School Trust was concerned, had no finality, which is an essential element to the validity of all arbitrators' award. Russell on Awards, 7ed. part II, ch. 5, sec. 4; Randall v. Randall,[7]; Ingram v. Milnes,[8]; Smith v. Wilson,[9]; Bhear v. Harradine,[10]; Williams v. Wilson et al.[11]." "Russel cites a decision in an annonymous case, which is to be found in Dyer, p. 242a. That decision seems to me to be especially applicable to the case before us. It is that of a reference respecting the right, title, interest and possession of a certain parcel of land, where the award, instead of awarding the property in the land, only gave a profit out of it. It is precisely what has been done with the Common School Trust by the award of 1870. That this award, so far, was not final, is rendered more than apparent by the legislation that the Dominion and the two provinces have been obliged to originate for the division of that trust. Canada, 57 Vict., ch. 3; Ontario, 57 Vict., ch. II; Quebec, 57 Vic., ch. 3." "I am of opinion that, if the arbitrators had not exceeded their powers and jurisdiction as I think they have, their award on the Common School Trust would be defective and void for this last reason, want of finality; and that we should award as I have already mentioned, that the income or interest produced by the School Fund should be divided irrespective of what the award of 1870 pretends to have ordered, and according to the population of Ontario and Quebec in 1861." "N B.—By sec. 3 of the British North America Act, 1867, the Dominion of Canada was to come into existence on the day fixed by a proclamation of Her Majesty. That proclamation was issued on the 22nd May, 1867, and fixed the first day of July, 1867, as that on which the three Provinces of Canada, Nova Scotia and New Brunswick, should be united and form the Domini of Canada. Paragraphs 7 and 9 of the award of 1870 profess to deal with the Common School Fund as held on the 30th June, 1867, by the Dominion of Canada. But the Dominion had then no existence, and did not hold the Common School Fund, which, at that date, was still held by the Province of Canada." "There is a very wide difference between annulling the first award and finding that it is on its face null for being ultra vires—as I think it is for dealing with the School Trust otherwise than directed by law, which empowered the arbitrators to divide and adjust and not to maintain it in division forever and to create a trust in relation to the same. If so doing was ultra vires, the award is, in the words of Lord Cairns, already quoted in my memoranda, ineffective and without any possible effect, goes for nothing and can be resisted, and we must treat it as such not for extraneous matter but for matters appearing on the face of it," "I admit that we must, in that case, consider the Common School Trust as it was at Confederation, that is a Trust Fund for the benefit of the Common Schools of Canada, in which the two sections of that province named in the statute were then interested to the proportion of their population at that time. The law especially mentions the two divisions Upper and Lower Canada (sec 5, C. S. C. c, 26) as the divisions of the provinces to which the income of the Fund must be apportioned, and therefore the schools for the maintenance of which the trust was created were the schools of Upper and Lower Canada. The B. N. A. Act, 1867, changed nothing in that law and in the right of the two sections, or rather of Upper and Lower Canada whose names it has changed to those of Ontario and Quebec." "The trust was absolutely for local or provincial purposes and therefore ceased to be under the disposal of the Governor-General, whose duties, so far as provincial matters were concerned, devolved on the Lieutenant-Governor of each province." "But it had first to be divided as a common fund and if it has not yet been legally divided, it is still in common; and, called to establish its amount, we must do so taking it as it was on the first of July, 1867." "The lands had, under the law, been set apart for the maintenance of Common Schools in the two sections of the province; such was their destination. It mattered not where they were situated, they were affected by the object for which they had been so set apart, and which was a trust existing in respect of them; and the successor of Lower Canada, Quebec, was one of the two beneficiaries who had an interest in the same (sec. 109). Section 129 did for the laws in force in Canada before Confederation what secs. 139 and 140 did for the proclamations. C. S. C., oh. 26 remained in force and applied to Ontario and Quebec as it had applied, before the first July, '67, to Canada and its two divisions, Upper and Lower Canada." "The Legislature of the Province of Canada had made the trust perpetual; but it could have altered the law and ordered its division between Upper and Lower Canada. It could even have put an end to the trust and declared its extinction. The division of Canada into the two provinces by making it the distinct and separate property of Ontario and Quebec, did not affect its perpetuity, which remained an obligation on each province so long as it did not legislate otherwise. But as it was theirs, the arbitrators had no authority to award that it should remain in the hands of a third party forever." "If the first arbitrators had exercised the powers which the law had vested in them, that is divide and adjust the trust, they could have assigned to Ontario a much larger share than to Quebec; but as they have assumed an authority which had not been conferred on them, the whole of their award on that Trust Fund is null and thereby without possible effect." "I have already expressed that the fact that part of the trust consisted in lands in Ontario, which were made the property of that province subject to the trust, offered no obstacle to the division, as what was to be divided was the proceeds of the lands and all that was required for an effectual division was to award that Ontario should account to Quebec for a determined proportion of the price when realized." "It seems to me that the cases of legacies to bodies which had ceased to exist at the death of the testator have no analogy to the case before us. Legacies take effect at the death of the testator, and as if made on that date. If the name legatee had previously lost its existence, there is nobody to receive the gift which returns to the general representative of the estate. But if the body to which the legacy was made had still its existence at the death of the testator, it received the gift, and its separation afterwards into two distinct bodies does not revoke the gift or deprive each of its share of the same, especially when each of the two continue the work which the legacy was expressly made to help." "The statute created the trust for the maintenance of Common Schools in Canada, but directed that its income should be divided between Upper and Lower Canada, nominally, (C. S. C. c. 26, s. 3,) for the support of Common Schools in each, which is equivalent to the trust being made for both. It had been carried into effect for a number of years previous to the two sections of the province being divided, and their names, and nothing but their names changed. Even in case of a legacy the mere change before the death of the testator of the name of the legatee would certainly not deprive it of the gift." "If in establishing the amount of the school fund in the hands of the Dominion we deduct the $124,000, which, in the accounts submitted to our review, are deducted therefrom for improvement fund, we decide thereby that Ontario is entitled to that much for the improvement fund, and we therefore pass upon a matter which is specially excluded from our jurisdiction by the reference." "If the arbitrators had divided, as they were directed to do, the Common School Trust Fund, however unjust the partition would have been, they would have acted within the scope of their jurisdiction, and their award, so far, would have on its face been legal; but called upon to adjust and divide that trust, they have chosen to award as to most of it what they had no authority to do, and in that, have exceeded their jurisdiction and made their award a nullity not only as to the part of it which is ultra vires, but as to the whole of that trust fund, as well as the amount of one hundred and twenty-four thousand dollars as the rest. The nullity of an award as to one point affects and nullifies the whole decision as to the other questions or subjects connected therewith, as admitted by the Lord Chancellor in the argument before the Privy Council." "The Common School Trust was one complete asset. The other assets could be separated from it, and therefore, the award as to the others was not affected by the illegality of the same as to the school trust. But no part of the school fund or trust could be separated from the others. It was to be adjusted upon or divided in its entirety as one. It is upon that ground that I find null the deduction of $124,000, as well as the other deduction for improvement fund, and the whole of their award so far as it extends to the subject of the Common School trust." BURBIDGE J.—His Lordship cited the matters referred and the statutes appointing the arbitrators and proceeded as follows: "Now, it is to be observed that the arbitrators are given authority, among other things, to determine all questions relating to or incident to the accounts as rendered by the Dominion to the provinces up to January, 1889 (Par. 2) (a) and (c), and to ascertain the amount of the principal of the Common School Fund, taking into consideration the sum then held by the Government of the Dominion of Canada (Par. 3) (h) and (i); but subject to this limitation, that the questions respecting the Upper Canada Improvement Fund are not to form any part of the reference." "Turning now to the accounts rendered by the Dominion to the provinces up to January, 1889, the first mention I find of the Common School Fund is at page eight, Schedule A of Exhibit V, or No. 56, where it is stated at the sum of $1,733,224.47, which it is conceded on all sides was at the date of the Union the amount of the fund, including therein the sum of $58,000 invested in the Quebec Turnpike Trust Debentures, and also a sum of $29,580, arrears of interest on such debentures, which at the time were considered to be valueless. Then we find the fund mentioned again in Schedule A of the same Exhibit at p. 43, where, in the Ontario and Quebec subsidy account, the provinces are credited with interest on the Common School Fund, the first credit being of an amount of $41,141.11 for a half year's interest due January 1st, 1868; that is, one half year's interest at five per centum upon a sum of $1,645,614.47, the balance of the fund mentioned after deducting the amount of the Quebec Turnpike Trust Debentures, and accrued interest. Some of the other credits of the half year's interest on the fund, as given in this account, are stated at amounts in excess of that mentioned, but the reason therefor and the error have been explained, and not being material to the question now before us need not be further referred to." "In Schedule C. of the same Exhibit, page 102, the Common School Fund is stated in the account in the following manner: 'Common School Fund $1,733,224.47 Less Investments: Quebec Turnpike Trust $58,000.00 Arrears of Interest on Turnpike Trust 29,580.00 87,580.00 $1,645,644.47' "At page 121 of the same schedule, in a statement of the Province of Ontario account, the province is credited with the Upper Canada Improvement Fund, amounting to $124,685.18. This sum of $124,685.18 is an amount which, by the award of the third September, 1870, was deducted from the Common School Fund as held by the Dominion at the date of the Union. In the same statement of account, at page 123, in the Province of Ontario account, the province is credited on the thirty-first day of December, 1867, with its share according to population, of one h
Source: decisions.scc-csc.ca
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