658 THE FEDERATIONS AND THE UNION [PART IV
From this decision the liquidators appealed to the Privy
Council. It was there argued at length for the appellants
that the effect of the Act of 1867 was to terminate any
direct connexion between the Crown and the provinces ;
the Governor-General of Canada alone represented the
Crown, and the Lieutenant-Governor of each province did
not. Certain portions of the prerogative were given to the
Lieutenant-Governors, and such a partial grant was incon-
sistent with the claim that they represented the Crown
entirely. Otherwise if both the provinces and the Dominion
possessed full prerogative rights, the Crown as representing
the one might contend with the Crown as representing the
other. It was admitted that if the provinces possessed
the rights which the Colony had before 1867 the priority
would certainly have existed, but the scheme of the Act
of 1867 was to establish a local Executive and Legislature
under a Lieutenant-Governor who was appointed by the
Governor-General and not by the Queen, with functions
different from the old Government and Legislature, and
with powers limited and defined by statute and municipal
in their general character.
On the other hand, it was argued that the true effect of
the Act of 1867 was to leave the Provincial Governments
and Legislatures supreme within their own spheres, while
the Federal Government and Legislature were supreme within
their sphere,
The judgement of the Privy Council was in favour of the
respondents. They quoted and approved the decision of
the Supreme Court of Canada in Reg. v. The Bank of Nova
Scotia,* which had held that the Crown as a simple contract
creditor for public moneys of the Dominion deposited with
a provincial bank was entitled to priority over other creditors
of equal degree. They referred to their decision in Exchange
Bank of Canada v. The Queen,® on the ground that they had
1 (1885) 11 8. C. R. 1, where the Oriental Bank Corporation case, 28
Ch. D. 64, and ¢n re Bateman’s Trust, 15 Eq. 355 were followed.
2 (1886) 11 App. Cas. 157. Of. as to forfeiture on conviction of felony.
Dumphy v. Kehoe, (1891) 21 R. L, 119.
