TRUEMAN J.A. (dissenting in part) :—The University of Manitoba was founded by ec. 11 of the Statutes of Manitoba, 1877 (40 Vict.) as a body politic and corporate. By s. 2 it is provided that the corporation may purchase, take and hold, real and personal estate which may be hereafter sold, ceded, exchanged, bequeathed or granted to the University. In 1887, by ce. 43 of 50 Vict., it was enacted (s. 5) that: "‘All property, real and personal, owned by or held for the use of the University . . . Shall be exempt from taxation.”’
The provision was continued in the University Act, e. 171, R.S.M. 1902, by s. 55; in c. 201, R.S.M. 1913, by s. 58; and in ce. 47 of the Acts of 1936, by s. 63(1). The last named section was amended by ec. 45, s. 1 of the Acts of 1937-38 by adding the following proviso thereto, viz. :
"‘Provided that from and after the first day of January, 1938, notwithstanding this Act or any other Act of the Legislature the exemption of lands and buildings from taxation shall not apply to such lands and buildings, if any, thereon owned by The University of Manitoba in rural municipalities which are not directly used for educational purposes and which are revenue bearing, but taxes shall not be payable by the University on any parcel of land in excess of the net revenue arising therefrom in the year of taxation. Revenue herein shall include principal, interest and rent but not the proceeds from hay and wood permits. ‘ ‘
By s. 3 of c. 93 of the Acts of 1935, in amendment of s. 278(3) of the Winnipeg Charter, 1918, c. 120, amended by s. 2 of c. 92 of the Acts of 1936, it was enacted as follows: ‘‘ Provided that from and after the first day of January, 1936, notwithstanding ‘The University of Manitoba Act’ 1936, or any other Act of the Legislature, the exemption of lands and buildings from taxation shall not apply to such lands and buildings, if any, thereon owned by the University of Manitoba which are not directly used for educational purposes and which are revenue bearing, but taxes shall not be payable on any parcel of land in excess of the net revenue arising therefrom in the year of taxation.”
At the instance of the University, the constitutionality of the foregoing taxing authorization is made the subject of a reference to this Court by Order in Council.
Pursuant to Rupert’s Land Act, 1868 (Imp.), e. 105, and Order of Her Majesty in Council, under date of June 23, 1870, Rupert’s Land and the North-Western Territory were surrendered by the Governor and Company of Adventurers of England trading into Hudson’s Bay to the Crown and became part of the Dominion of Canada. The Manitoba Act, 1870, c. 3, which provided for the formation of the Province out of Rupert 9 Land and the North-Western Territory, enacts by s. 30 that “All ungranted or waste lands in the Province shall be . . . vested in the Crown and administered by the Government of Canada for the purposes of the Dominion.”
In 1885, by ec. 50 of 48-49 Vict., of the Statutes of Canada,
intituled An Act for the final settlement of the Claims made by the Province of Manitoba on the Dominion, it was provided by s. 1 that: “All Crown lands in Manitoba which may be shown to the satisfaction of the Dominion Government to be swamp lands, shall be transferred to the Province and enure wholly to its benefit and uses.’’
Section 2 enacts as follows: ‘‘ An allotment of land, not exceeding one hundred and fifty thousand acres, of fair average quality, shall be selected by the Dominion Government and granted as an endowment to the University of Manitoba for its maintenance as a University capable of giving proper training in the higher branches of education, and to be held in trust for that purpose upon some basis or scheme to be framed by the University and approved by the Dominion Government.’’
Section 7 provides that: ‘‘The grants of land and payments authorized by the foregoing sections shall be made on the condition that they be accepted by the Province (such acceptance being testified by an Act of the Legislature of Manitoba,) as a full settlement of all claims made by the said Province . .. and all other questions and claims discussed between the Dominion and the Provincial Government, up to the tenth day of January, one thousand eight hundred and eighty-five. ‘ ‘
The Manitoba Legislature, by c. 38 of 49 Vict., 1886, after reciting said Dominion Act and Dominion Act, 49 Vict., c. 8, supplementary thereto, enacted as follows: ‘‘The Legislature of the Province of Manitoba accepts the grants and payments as authorized and construed by the above recited Acts as a full settlement of all claims by the said Province upon the Dominion, as therein set forth . . . ”
A final basis or scheme, pursuant to s. 2 of said Dominion Act. c. 00 of the Acts of 1885 (re-enacted by c. 47, R.S.C. 1886), agreed upon by the Dominion and University, is set out on a patent granted by the Dominion under date of March 29, 1898, the delay being due to negotiations as to its terms between the University and Dominion authorities.
The patent grants, conveys and assures unto the University, their successors and assigns forever the lands therein described:
"‘To have and to hold the said lands unto the said ‘The University of Manitoba,’ their successors and assigns forever, for the purposes hereinafter mentioned and upon and subject to the trusts and conditions hereinafter expressed and contained . . . that is to say :
‘1. That the said University, their successors and assigns, may at any time and in such manner and on such terms as they may deem proper, sell and dispose of, mortgage, pledge or lease the said lands or any portion thereof, and receive the proceeds or income resulting therefrom.
"‘2. That the said University, their successors or assigns, may apply such portion of the said proceeds and income as may be considered proper to pay the expenses of the care and management of the said lands, and of the.moneys arising therefrom; to purchase a suitable site, or suitable sites for and to erect thereon University buildings and to furnish such buildings, and shall invest such portion of the said proceeds as may not be immediately required for any of the said objects, in such securities and on such terms as the said University, their successors or assigns, may deem proper and safe for the purpose of deriving an income therefrom, and may apply the income arising out of the leasing of the said lands and from such investments or any portion thereof to any of the purposes aforesaid or to any purposes contemplated or provided for either by the said Chapter 47 of the Revised Statutes of Canada, or by the Act of Incorporation of the said University, or any acts amending the same.
“Provided always, that if at any time hereafter the said University shall be dissolved or shall cease to exercise its functions as a University, then, and in such case, any and all of the said lands which may remain unsold shall revert to and become revested in Us and Our successors as of Our and their former estate therein, subject to any mortgage or pledge which may have been given by the said University; and all funds in the hands of the said University, their suecessors or assigns, the proceeds of, or which in any way result from the sale, lease, mortgage, pledge or other disposal of the said lands, shall be immediately paid over to Us, Our successors and assigns.
" Provided further, and it is hereby made an express condition of this grant, that at all times hereafter the said University, their successors and assigns, shall keep or cause to be kept such separate and distinct accounts of the proceeds and income resulting from the sale, lease, mortgage, pledge or other disposal of and of all moneys in any way derived from or arising out of the said lands as shall clearly and readily disclose the amount and nature thereof as well as all dealings therewith, and also that all books, vouchers and papers containing, or in any way relating to such accounts, shall at all times be open to the inspection of any person or persons appointed by Our Governor in Council to inspect. the same.”
The University considers that its position is further fortified by the Natural Resources Agreement between the Dominion and Manitoba which was entered into on December 19, 1929. The Agreement, after reciting inter alia that by s. 30 of the Manitoba Act, c. 3 of 33 Vict., it is provided that all ungranted or waste lands in the Province shall be vested in the Crown and administered by the Government of Canada for the purposes of the Dominion, it is declared in para. 1 that :
“In order that the Province may be in the same position as the original Provinces of Confederation are in by virtue of section one hundred and nine of ‘The British North America Act, 1867,’ the interest of the Crown in all Crown lands . . - shall, from and after the coming into force of this agreement, and subject as therein otherwise provided, belong to the Provinee, subject to any trusts existing in respect thereof, and to any interest other than that of the Crown in the same.’’
Paragraph 2 provides that : " " The Province will carry out in accordance with the terms thereof every contract to purchase or lease any Crown lands . . . and every other arrangement whereby any person has become entitled to any interest therein as against the Crown, and further agrees not to affect or alter any term of any such . . . arrangement by legislation or otherwise, except . . . with the consent of all the parties thereto other than Canada . . .”
Paragraph 25 states that: "This agreement is made subject to its being approved by the Parliament of Canada and by the Legislature of the Province of Manitoba, and shall take effect on the fifteenth day of July, 1930, if His Majesty has theretofore given His Assent to an Act of the Parliament of the United Kingdom of Great Britain and Northern Ireland confirming the same . . .”
Approval of the agreement was given by the Legislature of Manitoba, by ec. 30 of the Statutes of 1930; and by the Parliament of Canada, by c. 29 of the Statutes of 1930 ; and confirmed by the Parliament of the United Kingdom of Great Britain and Northern Ireland, by the B.N.A. Act, 1930, ¢. 26 of 20 & 21 Geo. 5, assented to July 10, 1930.
Of the said endowment of 150,000 acres of land, Mr. Allen states that substantially the whole had been transferred to the University prior to July 15, 1930. In a letter to him from the Dominion Department of Mines and Resources, under date of January 20, 1939, it is stated that the area for which patents were issued comprise 149,701.28 acres. Of these it appears that 45,000 acres remain unsold.
The foregoing material speaks for itself, and leaves little room for observation or legal construction. There is first the Dominion Act of 1885 by which the endowment is to be held in trust for the maintenance of the University "‘upon some basis or scheme to be framed by the University and approved by the Dominion Government.’’ Then, by s. 7, it is provided, inter alia, that the grants of land (ss. 1 and 2) are made on the condition that they be accepted by Act of the Legislature of Manitoba, as a full settlement of all claims made by the Province. Pursuant thereto the Manitoba Act of 1886 recites said Dominion Act and accepts, inter alia, said grants as a full settlement of said claims.
The patent which thereafter followed, and which grants an estate in fee simple in the lands to the University, is drawn, it will have been noticed, with marked deliberation in order to ensure that the trusts thereby created should be scrupulously delimited and observed and that the proceeds from . sales, mortgages, pledges, and leases of the land, and income therefrom, should be strictly applied to the specific purposes enumerated therein. These need not be recapitulated. What must be emphasized is the close and continuing oversight of the perform- ance of the trust the patent reserves to the Dominion and the. reversion rights of the Dominion in the event of the University’s dissolution.
Studying the patent, the Dominion Act of 1885, and the Mamtoba Act of 1886, my conclusion is that the trust set out in the patent is a statutory trust and binds the Province as well as the University, with the result that no encroachment thereon may be made by provincial legislation. See C.P.R. V. Burnett (1889), 5 Man. R. 395; C.P.R. v. Cornwallis (1890), 7 Man. R. 1; 19 S.C.R. 702; North Cypress v. C.P.R. (1903), 14 Man. R. 382 ; 35 S.C.R. 550. The integrity of an endowment fund, with restriction upon the uses of income therefrom, even though not created by a» legal trust, is upheld by the New York Court of Appeals in St. Joseph’s Hospital v. Bennett (1939), 281 N.Y. 115, 22 N.E. (2nd) 305.
In view of the terms of the taxing power conferred upon municipalities by the impeached legislation, it. should be pointed out that none of the lands still unsold is farmed by the University, and that any revenue derived from such land is exclusively principal, interest or rent within the words of the patent.
I am not insensible to what can be said on the other side. There is the fact that the Manitoba Legislature, by s. 5 of c. 43 of the Acts of 1887 (supra) enacted that: "‘All property, real or personal, owned by or held for the use of the University . . .. shall be exempt from taxation,’’ and that this legislation remained in foree until qualified by the enactments made the subject of the reference. I do not read the foregoing provision as indicative that the University and the Legislature studied the patent and the Dominion Act of 1885 and the Manitoba Act of 1886, and came to the conclusion that unless taxation was prohibited by the Province the lands were taxable by municipalities. Even had that opinion been arrived at, it could have no weight or place in the argument herein. It could equally be said that the legislation was passed for the guidance of municipalities and to prevent the question being made the subject of litigation. Had the power to tax been given to municipalities by the Act of 1887 no one can doubt that it would have been resisted as a violation of the trust. To have exposed the land to taxation would conceivably have seriously impaired the trust in event of the lands not being quickly sold. Continued against the present unsold lands it would probably have nullified the trust with respect to them : Spooner Oils Ltd. v. Turner Valley Gas Conservation Board, [1933], 4 D.L.R. 545 at pp. 558-9, S.C.R. 629. Had the University asked for drainage or ditching of the lands or other municipal services in connection with them, the con-
dition of getting them would be that they be paid for. See Minister of Justice for Canada v. Levis, 45 D.L.R. 180, [1919] A.C. 505. ‘m
The real estate owned by the University in the City of Winnipeg, and made subject to taxation by the city by virtue of legislative amendments to the University ‘s charter, represents lands purchased for investment by the University from proceeds of sales of said endowment lands, and lands on which the University made mortgage loans from the same source and to which the University acquired title through foreclosure and other default proceedings. While the Dominion patent authorizes the University to invest proceeds from the sales, etc., of land thereby conveyed in "such securities and on such terms as the said University . . . may deem proper and safe for the purpose of deriving an income therefrom,” it is open to question whether mortgage loans on real estate are within the words in the foregoing context. See Re Rayner, [1904] 1 Ch. 176; Re Gent & Eason s Contract, [1905] 1 Ch. 386: Re Johnson, Greenwood v. Robinson (1903), 89 L.T. 84, 520; Re Tapp (1905), 74 L.J. Ch. 023. What is certain is that neither the purchase of real estate nor its acquisition by reason of default in payment of mortgage loans is within the clause. It follows that these lands are subject to taxation under said amendments to city’s charter.
The contention can be made, and is made by Mr. Allen, that as the patent granted to the University an estate in fee simple in the land, it was necessary that their exemption from taxation, if such was intended, should have been expressly declared in the patent. An analogy is drawn from the contract between the Dominion and the Canadian Pacific R. Co. for the construction of the main line of the railway to the British Columbia seaboard. In aid of the company the contract provided for a grant to it by the Dominion of 25,000,000 acres of Crown lands in western Canada, and by el. 16 it was provided that the lands until they were either sold or occupied should be free from taxation by 1 rovinces thereafter to be established, or by any municipal corporation therein. The contract was confirmed by Dominion Act, 44 Vict., c. 1. By Act, 44 Viet., c. 14, increasing the boundaries of Manitoba, it is provided (s. 2) that:
‘The terms and conditions upon which such increase is made are as follows:
‘(b) The said increased limit and the territory thereby added to the Province of Manitoba shall be subject to all such provisions as may have been or shall hereafter be enacted, respecting the Canadian Pacific Railway and the land to be granted in aid thereof. ‘ ‘‘
The terms and conditions were accepted by the Legislature of Manitoba by Act, 44 Vict., c. 6.
The grant of lands to the railway company has nothing in common with the University endowment. The contract with the company necessarily gave to the company complete control of the -sale or disposition of the lands thereby granted, and in the use of the proceeds. The University, while empowered by the patent to sell, mortgage, lease or pledge the lands granted to it, is restricted in its use of the proceeds therefrom to the specific objects set out in the patent and put beyond reach of change by the legislation associated therewith.
Counsel for the Crown and for the University devoted considerable argument to insisting upon a literal reading of s. 129 of the B.N.A. Act, by which it is declared that: "No Lands or Property belonging to Canada or any Province shall be liable to Taxation.”
Counsel for the Province was concerned to show that the University is not an arm or function of the Crown, and is therefore not within the section. Counsel for the University was equally tenacious in pressing the view that the University stood in such a relationship, for which reason the Province could not authorize taxation of the lands in question. Qui haeret in litera haeret in cortice! The section was enacted to serve a two-fold purpose. One was that it should be made clear that neither the Dominion nor the Province in the exercise of their taxing powers should undertake to tax the lands or property of the other. The other purpose was to serve notice on municipalities that Crown lands are not subject to municipal taxation. To suppose that the section forbids the Province from authorizing municipal taxation of its own lands or property is to impose a singularly inept restriction upon the plenary powers the Province is endowed with by the B.N.A. Act. In Hodge v. The Queen (1883), 9 App. Cas. 117, the Judicial Committee said (p. 132) :
"When the British North America Act enacted that there should be a legislature for Ontario, and that its legislative assembly should have exclusive authority to make laws for the Province and for provincial purposes in relation to the matters enumerated in sect. 92, it conferred powers not in any sense to be exercised by delegation from or as agents of the Imperial Parliament, but authority as plenary and as ample within the limits prescribed by sect. 92 as the Imperial Parliament in the plenitude of its power possessed and could bestow. Within these limits of subjects and area the local legislature is supreme, and has the same authority as the Imperial Parliament, or the Parliament of the Dominion, would have had under like circumstances to confide to a municipal institution or body of its own creation authority to make by-laws or resolutions as to subjects specified in the enactment, and with the object of carrying the enactment into operation and effect.’’ See also R. v. Anderson (1930), 54 Can. C.C. 321 at p. 323, 39 Man. R. 84, where reference is made to Lord Loreburn’s statement, speaking for the Judicial Committee, in A.-G. Ont. v. A.-G. Can., 3 D.L.R. 509 at p. 013, [1912] A.C. 571, that "‘whatever belongs to self-government in Canada belongs either to the Dominion or to the Provinces, within the limits of the British North America Act.’ 1 The Legislature of the Province having by s. 92 of the B.N.A. Act power to exclusively make laws in relation to ‘‘2. Direct Taxation within the Province in order to the raising of a Revenue for Provincial Purposes,’’ can by virtue thereof and (8) authorize municipal taxation of provincial lands or property: A.-G. Ont. v. A.-G. Can., [1896] A.C. 348 at pp. 363-4; Montreal v. Beauvais (1909), 42 S.C.R. 211 at p. 218; Smith v. London (1909), 26 O.L.R. 133 at p. 154.
In A.-G. B.C. v. A.-G. Can., [1923] 4 D.L.R. 669, 42 Can. C.C. 398, [1924] A.C. 222, it is pointed out by the Judicial Committee that s. 125 is not to be taken alone and read without consideration of the scheme of the B.N.A. Act, with its different allocations of powers and authorities to the provincial and Dominion Governments :
"‘It is to be found in a series of sections which beginning with see. 102 distribute as between the Dominion and the Province certain distinct classes of property and confer control upon the Province with regard to the part allocated to them. But this does not exclude the operation of Dominion laws made in exercise of the authority conferred by sec. 91.’’ (pp. 670-1 D.L.R., p. 400 Can. C.C.) It is on this principle that a provincial Legislature may impose direct taxation upon those portions of a Dominion railway which are within the Province in order to the raising of a revenue for provincial purposes: C.P.R. v. Parish of Notre Dame de Bonsecours, [1899] A.C. 367. So while s. 125 precludes the taxation of any interest the Crown has in any land or property, it is within the power of a Province to authorize the taxation of the beneficial or equitable interest of a person in lands to which the Crown in the right of the Dominion holds the legal title and retains some beneficial interest as well: Calgary & Edmonton Land Co. v. A.-G. Alta. (1911), 45 S.C.R. 170 at p. 191 ; Smith v. Vermilion Hills, 30 D.L.R. 83, [1916] 2 A.C. 569; Southern Alberta Land Co. v. McLean (1916), 29 D.L.R. 403, 53 S.C.R. 151. See also Montreal v. A.-G. Can., 70 D.L.R. 248, [1923] A.C. 136, followed in Halifax v. Fairbanks, [1927] 4 D.L.R. 945, [1928] A.C. 117.
Section 125 states a common law principle. Property owned and occupied by the Crown, or in which the Crown has a beneficial interest, is exempt from taxation unless rendered liable by statute, either by express words or necessary implication. See Hornsey Urban Dist. Council v. Hennell, [1902] 2 K.B. 73 at p. 80. The exemption is held to apply where Crown property is occupied by bare trustees for public purposes, such as are required and created by the Government of the country : Mersey Docks & Harbour Board Trustees v. Cameron, 11 H.L.C. 443 at p. 005, 11 E.R. 1405.
A further argument by Mr. Allen should be noticed, lest it be deemed that it was overlooked. It is concerned with the need he felt of getting rid of the reversionary interest in the lands, etc., in the Dominion Crown by reason of the reservation thereof in the patent, in event of the dissolution of the University, his view apparently being that if this reservation still exists it constitutes a bar to taxation by rural municipalities by the legislation in question. With all respect I cannot admit, so far as the Crown’s case is concerned, the relevance of this argument. The reference turns, in my opinion, upon the material I have set out, and presents no other issue than whether or not a statutory trust was created, and, if so, whether it precludes the enactment of said legislation.
l'he reterence propounds the following questions :
"‘(1) Is the University of Manitoba an emanation or arm or braneh of the Government of Manitoba so that any property standing in its name is therefore exempt from taxation? <A. For the reasons I have stated, the question requires no answer.
"‘2. Is s. 3 of the said Statutes of Manitoba, being c. 93 of 1935, as amended by s. 2 of e. 92 of the Statutes of Manitoba, 1936, within the legislative competence of Manitoba to enact? (This relates to taxation by the City of Winnipeg.) A. Yes.
« (3) Is s. 1 of the Statutes of Manitoba, 1937-38, e. 45, within the legislative competence of the Province to enact? (This relates to taxation by municipalities.) <A. No.
(4) Has the Province of Manitoba any legislative competence to authorize the imposition of taxation upon
" " (a) any part of the 150,000 acres of land conveyed to the University by the Dominion as an endowment, and still remaining in the name of the University unsold? <A. No.
(b) any part of the proceeds of the sale or other disposition of any part of the said endowment grant? A. The question in this general form cannot be answered.
"‘(c) any part of the investments of the proceeds or income from any part of the endowment? A. The answer to (b) applies to this question.
"‘(d) any property which may be said to result from or arise out of the management or disposition of the said endowment ; or
" (e) the estate or interest of the University therein ’? A. The answer to (b) applies to Qq. (d) and (e).‘‘
ROBSON J.A.:—This is a reference by His Honour the Lieutenant-Governor under the Act for Expediting the Decision of Constitutional and other Provincial Questions, R.S.M. 1913, c. 38.
The questions now put relate to the right of the Province to tax lands which formed part of the endowment of the University of Manitoba. The grant was made by the Crown at a time when lands not already granted were held by the Crown in the right of the Dominion.
Section 2 of c. 50 of the Statutes of Canada, 48-49 Vict. (1885),
being An Act for the final settlement of the Claims made by the Province of Manitoba on the Dominion, is as follows: "‘An allotment of land, not exceeding one hundred and fifty thousand acres, of fair average quality, shall be selected by the Dominion Government and granted as an endowment to the University of Manitoba for its maintenance as a University capable of giving proper training in the higher branches of education, and to be held in trust for that purpose upon some basis or scheme to be framed by the University and approved by the Dominion Government. ’ ’
The form of Crown patent to be used was settled in 1898 and therefore long before the agreement whereby all land resources were to be transferred from the Dominion to the Province. The form of grant so decided on and which has been followed, after the formal part, reads as follows :
“Now Know YE That WE do by these presents grant, convey and assure unto the said University of Manitoba, their successors and assigns forever, all that parcel or tract of land, situate, lying and being in the (Description of property.)
“To have and to hold the said lands unto the said ‘The University of Manitoba,’ their successors and assigns forever, for the purposes hereinafter mentioned and upon and subject to the trusts and conditions hereinafter expressed and contained; saving and reserving nevertheless, unto Us, Our successors and assigns, the free uses, passage and enjoyment of, in, over, and upon all navigable waters that now are or may be hereafter, found on, or under, or flowing through or upon any part of the said parcel or tract of land; also reserving thereout and therefrom all rights of fishery and fishing and occupation in con- nection therewith, upon, around and adjacent to said land, and also the privilege of landing from and mooring boats and vessels upon any part of the said lands, and using the said lands in connection with the rights of fishery and fishing hereby reserved, so far as may be reasonably necessary to the exercise of such rights.
" " Provided always that the said lands are to be held by the said University, their successors and assigns for the purposes hereinafter mentioned, and upon and subject to the following trusts and purposes, that is to say :
"1. That the said University, their successors and assigns, may at any time and in such manner and on such terms as they may deem proper, sell and dispose of, mortgage, pledge or lease the said lands or any portion thereof, and receive the proceeds or income resulting therefrom.
2. That the said University, their successors or assigns, may apply such portion of the said proceeds and income as may be considered proper to pay the expenses of the care and management of the said lands, and of the moneys arising therefrom; to purchase a suitable site, or suitable sites for and to erect thereon University buildings and to furnish such buildings, and shall invest such portion of the said proceeds as may not be immediately required for any of the said objects, in such securities and on such terms as the said University, their successors or assigns, may deem proper and safe for the purpose of deriving an income therefrom, and may apply the income arising out of the leasing of the said lands and from such investments or any portion thereof to any of the purposes aforesaid or to any purposes contemplated or provided for either by the said Chapter 47 of the Revised Statutes of Canada, or by the Act of Incorporation of the said University, or Acts amending the same.
Provided always, that if at any time hereafter the said University shall be dissolved or shall cease to exercise its functions as a University, then, and in such case, any and all of the said lands which may remain unsold shall revert to and become revested in Us and Our successors as of Our and their former estate therein, subject to any mortgage or pledge which may have been given by the said University; and all funds in the hands of the said University, their suecessors or assigns, the proceeds of, or Which in any way result from the sale, lease, mortgage, pledge or other disposal of the said lands, shall be immediately paid over to Us, Our successors or assigns.
“Provided further, and it is hereby made an express condition of this grant, that at all times hereafter the said University, their successors and assigns, shall keep or cause to be kept such separate and distinct accounts of the proceeds and income resulting from the sale, lease, mortgage, pledge or other disposal of and of all moneys in any way derived from or arising out of the said lands as shall clearly and readily disclose the amount and nature thereof as well as all dealings therewith, and also that all books, vouchers and papers containing, or in any way relating to such accounts, shall at all times be open to the inspection of any person or persons appointed by Our Governor in Council to inspect the same.’’
It is now contended by the University that under this form of patent the University was not the owner of an estate in fee simple but merely the holder of a power of sale to realize on the lands for the purposes set out and that the Dominion still held and in fact now holds any lands not disposed of by the University under the power. The result would be that under s. 125 of the B.N.A. Act the residue of lands, being on that hypothesis Dominion lands, would not be subject to any form of provincial taxation. The Attorney-General of the Province contests this. The Minister of Justice was notified of this reference but did not appear nor enter into the controversy. A great deal of material was adduced showing the difficulties encountered in settling the form of patent but in my view inquiry into such matters is irrelevant.
It is my view that the expression in the first proviso "‘subject to the following trusts and purposes’’ does not restrict the scope of the grant—all the "‘trusts and purposes’’ stated are merely the aims of the University which the University would naturally discharge and accomplish in its own normal operations. Clause 2 of the first proviso authorizes use of Income to any purpose contemplated " " by the Act of Incorporation of the said University or any Acts amending the same. ‘ ‘ There is nothing restrictive about that.
The second proviso provides for reverter in case the University shall be dissolved or cease to exercise its functions as a University. To my mind this is no more than a condition subsequent. Whether it is repugnant to the deed and so void need not be discussed. At all events the estate remains vested in the University absolutely meanwhile.
The significant word in s. 2 of c. 50 {supra) is "granted” and as might be expected the patent reads ‘‘grant, convey and assure. ’ ‘ These are words of conveyance in fee simple and mean that an estate in fee simple in the lands was to be conveyed to the University. The title then left the Crown and the Crown had no further estate. The phrase grant from the Crown came in for consideration in the several C.P.R. land grant cases such as North Cypress v. C.P. Ry. Co., 35 8.C.R. 550; R. v. C.P.R., [1911] A.C. 328. That this is the effect is clear from the language of these instruments, but from the necessities of the case it was to be so, for, if trust it was, it was an active trust and the University needed the title to carry out its obligations whence the Courts, apart from the conveyancer’s language, would hold there was an intention that the University be seized in fee simple. According to the patent the University "‘may at any time . . . . sell and dispose of, mortgage, pledge or lease the said lands or any portion thereof and receive the proceeds or income resulting therefrom.’’ It could not do this without the fee: Underhill on Trusts, 7th ed., pp. 193-196, ec. II: Re Lashmar, [1891] 1 Ch. 258, per Lindley, L.J. at p. 270. Then the instrument goes on to say that the University may apply the proceeds for its own purposes, in other words it is itself the beneficiary of the supposed trust. The case was argued as if the University were a bare trustee of the land for the Crown. It is in no such position. The University is beneficial owner of the land subject to a right in the Crown to require a reconveyance of the residue on hand in case the University dissolves or ceases to function. Until that at present remote possibility happens and is seized upon by the Crown the University’s title remains that of a person holding in fee simple.
It is the title to the land that is under discussion here. No one 1S questioning that the Crown has an immature personal right to certain performance but it is in my opinion the right of a covenantee and not a present estate or interest in the land.
This to my mind ends the matter on this branch but, by way of perhaps unnecessary addition, I would say I cannot see how there can be passed over the fact that though the Crown might retain an interest nevertheless the University has and will have, as long as it carries on, an interest which it is within the power of the Province to tax. See Calgary & Edmonton Land Co. v. A.-G. Alta., 45 S.C.R. 170, and in Alberta, 2 A.L.R. 446, per Beck J.; Smith v. Vermilion Hills, 30 D.L.R. 83; Southern Alberta Land Co. v. McLean, 29 D.L.R. 403. A glance at the two clauses of the first proviso shows such an interest. I think that these provisoes cannot be put on higher ground than that they are conditions subsequent.
In Leith’s Blackstone, 2nd ed., p. 183 there appears the following: “‘In all these instances of limitations or conditions subsequent, it is to be observed that so long as the condition, either express or implied, either in deed or in law, remains unbroken, the grantee may have an estate of freehold, provided the estate upon which such condition is annexed be in itself of a free- hold nature; as if the original grant express either an estate of inheritance or for life; or no estate at all, which is constructively an estate for life. For, the breach of these conditions being contingent and uncertain, this uncertainty preserves the freehold: because the estate is capable to last for ever, or at least for the life of the tenant, supposing the condition to remain unbroken.”
I think the case of Kennedy v. Toronto (1886), 12 O.R. 211 has much application here. It was the decision of Ferguson J., on demurrer. The case was exhaustively argued by eminent counsel. It touches this case in several aspects. I will describe it as briefly as possible, using the headnote to great extent. Certain Ordnance land vested in the Crown was in 1858 patented to the corporation of the City of Toronto with the following clause in the patent:
“Provided-always and this grant is subject to the following conditions, viz. that the land . . . . shall be dedicated by the said corporation and by them maintained for the purpose of a public park for the use, benefit and recreation of the inhabitants of the said City of Toronto for all time to come. ‘ ‘
In an action by a ratepayer to prevent the land being used as a cattle market and money being spent on it for that purpose, in which it was contended that the land was granted upon a condition under which the Crown might retake it, it was held on demurrer that the words in the patent “Provided always and this grant is subject to the following conditions’’ did not create a condition annexed to the estate granted but a trust was created the same as if the words used had been ‘‘upon the following trusts’’ and that by the grant the grantors parted with all their estate and interest (see per Ferguson J. at pp. 222-225).
See also Yates v. University College, London (1875), L.R. 7 H.L. 438.
In A.-G. Can. v. A.-G. Ont., [1897] A.C. 199 at p. 210, (a converse case) Lord Watson dealt with the phrase “subject to any trusts existing in respect thereof ‘ ‘ as follows: " Their Lordships are not prepared to hold that the word ‘trust’ was meant by the Legislature to be strictly limited to such proper trusts as a court of equity would undertake to administer ; but, in their opinion, it must at least have been intended to signify the existence of a contractual or legal duty, incumbent upon the holder of the beneficial estate or its proceeds, to make payment, out of one or other of these, of the debt due to the creditor to whom that duty ought to be fulfilled.”
In the view I take as to the title the Natural Resources agreement has no bearing on the case in that the lands were transfer- red to the University by the Dominion long before the agreement for the transfer was effected: except that the Province succeeds to the right to enforce the terms on which the grant was made.
With regard to the Spooner Oils case, [1933] 4 D.L.R. 545 which was given much prominence in argument, it is to be observed that here the trust or obligation is in favor of the Crown and is not a contractual license by the Dominion Crown (as in the Spooner Oils case) which under the terms of the Resources Agreement the Province could not reduce. Here the Crown’s obligation was fulfilled long ago by the issue of patents for the lands. The possibility of reverter that was left in the Dominion Crown with regard to the granted lands would go to the Province untrammelled by any condition. In addition the grant of the 150,000 acres was, as stated in the statute, in part settlement of a claim by the Province against the Dominion. In my opinion the Province now possesses the "‘possibility'' and is in unrestricted legislative control of the lands. In addition to the Natural Resources Agreement I think the cases of Kennedy v. Toronto (supra) ; A.-G. Can. v. A.-G. Ont., [1897] A.C. 199, and St. Catharines Mllg. c Lbr. Co. v. The Queen (1888), 14 App. Cas. 46, support this view. It seems to be rather aimless to go into the question whether the contingent right in ease of dissolution of the University belongs to the Dominion or provincial Crown or whether if the former it will be jeopardized by provincial taxation. Wherever it lies I would answer that it is merely a collateral covenant. It is such a problematic possibility that it leaves the value of the land for practical assessment purposes without any measurable diminution. I have already alluded to the clear beneficial interest of the University and I think it is taxable. I think this is quite consistent with the language of Chief Justice Duff in Spooner Oils Ltd. v. Turner Valley Gas Conservation Board, [1933] 4 D.L.R. 545 at pp. 558-9. In case by reason of any dire happening there might be suspension of University operations relief from forfeiture could be expected. Crabbe’s Law of Real Property, p. 2154.
There is no language in the Act or patent that suggests that the Dominion meant the lands to be free from provincial taxation until sold as in the ease of the C.P.R. land grant. In any case these lands were not in the North-West Territories and the Dominion could not, once the lands were granted or an equitable interest created, interfere with provincial taxation of the estate or interest so granted or created.
The other argument advanced on behalf of the University is that it is an emanation from the Crown or an arm of government. I think a perusal of the University Act (1936 (Man.), c. 47), repels this argument. In one sense I suppose it is true that every corporation is an emanation from the Crown but that is a different thing from being an arm of the Executive government. It may be quite true that the Crown exercises a prerogative of naming a majority of the board of governors; that it appoints the Chancellor after nomination by the committee on nominations; that it annually makes large financial augmentations and that the main buildings are on Crown property ; but nevertheless neither the appointment of authorities nor the grants of funds in aid of education are necessarily inconsistent with the independence of the University as an institution of higher learning. It is not to be imputed to the Crown that any of its acts or subsidies would be actuated by any motive of direction, let alone control, of the University’s free scope in its normal sphere of action.
I think the words of Hon. R. M. Meredith in Scott v. Toronto University (1913), 10 D.L.R. 154, are applicable here. That was a case wherein the Board set up immunity from liability for injury to an employee. The Board of Governors there were themselves a corporation but the point is the same. The learned Chief Justice said (p. 156) : "Nor do the other powers, respecting the university, which the Lieutenant-Governor in council has, under the enactments mentioned, bring to the Governors the character of Crown officers governing Crown property for the use or benefit of the Crown. They are but officers of the University, having power to deal with the property under their control for the uses and benefit of the University only.”
There are various other cases in which the difference in effect between independent management and mere executive agency is shown. For instance Gilbert v. Trinity House (1886), 17 Q.B.D. 795; Mackenzie-Kennedy v. Air Council, [1927] 2 K.B. 517; Halifax v. Halifax Harbor Com’rs, [1935], 1 D.L.R. 657, S.C.R. 215.
I would answer the questions as follows :
" (1) Is the University of Manitoba an emanation or arm or branch of the Government of Manitoba so that any property standing in its name is therefore exempt from taxation ? A. No.
44 (2) Was s. 3 of the said Statutes of Manitoba, being c. 93 of 1935, as amended by s. 2 of c. 92 of the Statutes of Manitoba, 1936, within the legislative competence of Manitoba to enact?
A. Yes.
«(3) Was s. 1 of the Statutes of Manitoba, 1937-38, c. 45, within the legislative competence of the Province to enact? A. Yes.
"‘(4) Has the Province of Manitoba any legislative competence to authorize the imposition of taxation upon
"‘(a) any part of the 150,000 acres of land conveyed to the University by the Dominion as an endowment, and still remaining in the name of the University unsold? A. Yes.
"(b) any part of the proceeds of the sale or other disposition of any part of the said endowment grant? A. Yes.
"‘(c) any part of the investments of the proceeds or income from any part of the endowment? A. Yes.
"‘(d) any property which may be said to result from or arise out of the management or disposition of the said endowment? A. Yes.
" (e) the estate or interest of the University therein? A. Yes.’’