Citizens Insurance Co of Canada v Parsons

Citizens Insurance Co of Canada v Parsons[1] is a major Canadian constitutional case decided by the Judicial Committee of the Privy Council. It interpreted the property and civil rights clause of section 92(13) in the Constitution Act, 1867 to be read expansively, to include contracts related to insurance to be within the power of the provincial governments, but the countervailing Trade and Commerce clause of section 91(2) was to be read narrowly.

Citizens Insurance Co of Canada v Parsons
CourtJudicial Committee of the Privy Council
Full case nameThe Citizens Insurance Company of Canada and The Queen Insurance Company v Parsons
Decided26 November 1881
Citation(s)[1881] UKPC 49, [1881] 7 A.C. 96
Case history
Prior action(s)Citizens' and The Queen Insurance Cos. v. Parsons 1880 CanLII 6, 4 SCR 215 (21 June 1880), affirming a decision of the Ontario Court of Appeal
Appealed fromSupreme Court of Canada
Court membership
Judges sittingSir Barnes Peacock, Sir Montague Smith, Sir Robert P. Collier, Sir Richard Couch, Sir Arthur Hobhouse
Case opinions
Decision bySir Montague Smith
insurance, division of powers, trade and commerce, property and civil rights


Parsons was the owner of a hardware store in Orangeville, Ontario, covered by an insurance policy provided by Citizens' Insurance Co. of Canada. At the time the policy was issued, he had a similar policy in effect with the Western Assurance Company. When a fire burnt down the store in August 1877, Citizens' refused to pay on the basis that the nondisclosure of the Western policy violated the terms of its policy and a statutory condition, under Ontario's Fire Insurance Policy Act.[2] Parsons sued to collect on the policy and contended that it did not comply with the presentation requirements of the Act.

Lower courts

The Court of Queen's Bench entered a verdict in favour of Parsons. Citizens' appealed to the Court of Appeal bycontending that the Act was ultra vires because of federal jurisdiction over trade and commerce. The Court of Appeal agreed with the plaintiff and dismissed the appeal with costs.

On appeal to the Supreme Court of Canada, Sir Oliver Mowat, acting in his role as Attorney General for Ontario, intervened to champion Parson's case. The Court decided 3-2:

  1. The Fire Insurance Policy Act was not ultra vires provincial jurisdiction and applied to all insurance companies that insured property within the province.
  2. The Act was not a regulation of trade and commerce under s. 91(2) of the BNA Act, 1867.
  3. Insurers in Ontario had to comply with the statutory conditions imposed under the Fire Insurance Policy Act.

Ritchie CJ asserted that the regulation of insurance contracts fell under the provincial property and civil rights power:

If an insurance company is a trader, and the business it carries on is commercial, why should the local legislature, having legislative power over property and civil rights, and matters of a private and local character, not be enabled to say to such a company: "If you do business in the province of Ontario, and insure property situate here, we have legislative control over property and over the civil rights in the province, and will, under such power, for the protection of that property and the rights of the insured, define the conditions on which you shall deal with such property," it being possibly wholly unconnected with trade and commerce, as a private dwelling or farming establishment, and the person insured having possibly no connection with trade or commerce?

How can it be said that such property and such civil rights or contract shall be outside of all local legislation, and so outside of all local legislative protection? If the business of insurance is connected with trade and commerce, the legislation we are now considering does not attempt to prohibit the carrying on of the business of insurance, but having the property and the civil rights of the people of the province confided to them this legislation, in relation thereto, is simply the protection of such property and of such rights.[3]

Henri Elzéar Taschereau and John Wellington Gwynne, who dissented in the Supreme Court decision, advised Sir John A. Macdonald to consider intervening if necessary to have the decision appealed to the Judicial Committee of the Privy Council. In particular, Gwynne said:

Citizens’ Insurance was the thin end of the wedge to bring about Provincial Sovereignty which I believe Mr. Mowat is labouring to do.

Citizens' Insurance appealed to the Privy Council, and Mowat asserted his influence on the case by having the province assume Parson's costs and by briefing his lawyers to argue that the provincial legislative jurisdiction should be broadly defined, and the federal government could not encroach upon it.

At the Privy Council

The Supreme Court ruling was affirmed. The Queen's Bench verdict was reversed, however, because of outstanding questions as to the interpretation of certain interim notes and the matter was remitted back to that court for reconsideration.

Sir Montague Smith noted as a general proposition that the British North America Act, 1867 must be interpreted as an ordinary statute.

Trade and Commerce

The case largely turned on the issue of the law overlapping two heads of power. Smith focused on interpreting the Trade and Commerce power; he famously stated:

The words "regulation of trade and commerce," in their unlimited sense are sufficiently wide, if uncontrolled by the context and other parts of the Act, to include every regulation of trade ranging from political arrangements in regard to trade with foreign governments, requiring the sanction of parliament, down to minute rules for regulating particular trades.


But a consideration of the Act shows that the words were not used in this unlimited sense. In the first place the collocation of No. 2 with classes of subjects of national and general concern affords an indication that regulations relating to general trade and commerce were in the mind of the legislature, when conferring the power on the dominion Parliament. If the words had been intended to have the full scope of which in their literal meaning they are susceptible, the specific mention of several of the other classes of subjects enumerated in sect. 91 would have been unnecessary...


Construing therefore the words "regulation of trade and commerce" by the various aids to their interpretation above suggested, they would include political arrangements in regard to trade requiring the sanction of parliament, regulation in matters of inter-provincial concern, and it may be that they would include general regulation of trade affecting the whole dominion.

In all, Smith established three characteristics of the trade and commerce power:

  1. The "regulation of trade and commerce" should not be read literally.
  2. It includes international and interprovincial trade as well as "general regulation of trade affecting the whole dominion."
  3. It does not extend to regulate contracts between businesses.

Incorporation of federal companies

Taschereau J, in his opinion, had expressed concern that if the Parliament of Canada did not possess the power to regulate companies under the trade and commerce power, it did not have the power to incorporate companies either.[4] Smith declared that the federal incorporation power arose from s. 91's introductory words:

in relation to all Matters not coming within the Classes of Subjects by this Act assigned exclusively to the Legislatures of the Provinces

S. 92(11) gave the provincial legislatures power over "The Incorporation of Companies with Provincial Objects" so Smith declared:

... it follows that the incorporation of companies for objects other than provincial falls within the general powers of the Parliament of Canada.

However, the power to incorporate does not confer the exclusive right to regulate contracts.


Parsons had constitutional and political consequences:

  1. It circumscribed the influence of Taschereau and Gwynne JJ's highly centralist views in Canadian constitutional jurisprudence.
  2. It significantly restricted the federal trade and commerce power for decades in Privy Council jurisprudence, which started to transform only in the 1970s, beginning with Caloil Inc. v. Canada and seeing change in General Motors of Canada Ltd. v. City National Leasing.
  3. It represented a major victory in Mowat's championing of increased provincial rights, which received further support in forthcoming Privy Council appeals in other cases. They still influence Canadian political and constitutional debate.


  1. The Citizens Insurance Company of Canada and The Queen Insurance Company v Parsons [1881] UKPC 49, [1881] 7 A.C. 96 (26 November 1881), P.C. (on appeal from Canada)
  2. R.S.O. 1877, ch. 162
  3. SCC judgment, pp. 251–252
  4. SCC judgment, pp. 309314

Further reading

  • Paul Romney (1994). "Mowat, Sir Oliver". In Cook, Ramsay; Hamelin, Jean (eds.). Dictionary of Canadian Biography. XIII (1901–1910) (online ed.). University of Toronto Press. contains background on Ontario's involvement in the dispute
  • Paul Romney (1994). "Gwynne, John Wellington". In Cook, Ramsay; Hamelin, Jean (eds.). Dictionary of Canadian Biography. XIII (1901–1910) (online ed.). University of Toronto Press.
  • David Howes (1998). "Taschereau, Henri-Elzéar". In Cook, Ramsay; Hamelin, Jean (eds.). Dictionary of Canadian Biography. XIV (1911–1920) (online ed.). University of Toronto Press.
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