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.