Clyde K. Wells

The appeal concerned the constitutional validity of provincial legislation that repealed a statutory lease, revested water and water power rights in the province, vested hydro-electric works in the Crown, and limited compensation to creditors and shareholders.

The Court held that extrinsic evidence was admissible in constitutional cases to determine both the operation and effect of legislation and its true object and purpose, particularly where colourability was alleged.

Applying pith and substance analysis, the Court found the legislation was a colourable attempt to interfere with contractual rights to the delivery of power in Quebec under a long-term power contract.

Because those civil rights were situated outside Newfoundland, the legislation was ultra vires.

The appeal was allowed and the Act, taken as a whole, was held invalid.

The Governor in Council referred a constitutional question to the Supreme Court of Canada regarding whether Canada or Newfoundland has the right to explore and exploit, and the legislative jurisdiction over, the mineral and other natural resources of the continental shelf offshore Newfoundland.

The Court held that the continental shelf rights are an extraterritorial manifestation of external sovereignty.

Since Newfoundland did not possess external sovereignty prior to joining Confederation, and international law did not recognize continental shelf rights at that time, the rights accrued to Canada.

Consequently, Canada has both the right to explore and exploit the resources and the legislative jurisdiction over them under its residual peace, order, and good government power.