Vol. 36 No. 02 (September 2026) pp. 16-19
DEBT AND FEDERALISM, VOLUME 2: PROVINCIAL EFFORTS TO PROTECT INSOLVENT DEBTORS IN CANADA, 1939–1960, by Thomas G.W. Telfer and Virginia Torrie. Ottawa, Ontario: Canadian Legal Information Institute Authors Program, 2026. 181 pp. Open Access.
Reviewed by Camden Hutchison, Peter A. Allard School of Law, University of British Columbia. Email: hutchison@allard.ubc.ca.
As its title suggests, DEBT AND FEDERALISM, VOLUME 2: PROVINCIAL EFFORTS TO PROTECT INSOLVENT DEBTORS IN CANADA, 1939–1960 is a chronological and conceptual follow-up to the authors’ earlier work, DEBT AND FEDERALISM: LANDMARK CASES IN CANADIAN BANKRUPTCY AND INSOLVENCY LAW, 1894–1937. Volume 1, published in 2021, documented the emergence of the modern Canadian insolvency regime through a study of four “landmark cases” establishing federal priority in bankruptcy and insolvency legislation. Volume 2 documents the subsequent process of judicial curtailment of provincial legislation. At the time, the policy stakes were high: In response to the twin economic calamities of the Great Depression and the Dust Bowl, populist governments in the western provinces passed a range of creative and far-reaching debt relief measures intended to protect farmers from creditors’ collection efforts. As Telfer and Torrie detail, most of these measures were struck down by the Supreme Court of Canada and the Judicial Committee of the Privy Council as ultra vires provincial authority. A central claim of Volume 2 is that these restrictions on debt relief legislation had the effect of “reserving for Parliament a broad field in which it has taken a largely passive role” (p. 161).
As in their first volume, Telfer and Torrie construct their historical argument around a close examination of legal decisions. The “landmark” cases addressed in Volume 2 are LADORE V BENNETT (1939), REFERENCE RE DEBT ADJUSTMENT ACT, 1937 (1943), REFERENCE RE FARM SECURITY ACT, 1944 (1948), REFERENCE RE MORATORIUM ACT, 1943 (1956), and REFERENCE RE ORDERLY PAYMENT OF DEBTS ACT, 1959 (1960). Following the establishment of federal authority over bankruptcy and insolvency law described in Volume 1, these five cases had the inverse effect of restricting provincial authority within the same area. In four of the five cases, courts struck down legislative attempts to reduce, forestall, or otherwise restructure the liabilities of provincial debtors as unconstitutional encroachments on Parliamentary authority. Telfer and Torrie make the convincing argument that these decisions further centralized insolvency policy under the federal government, leaving “very limited scope for provinces to legislate with respect to debt” — a situation that would endure until at least the late 1970s (p. 157).
Each of the five cases in Volume 2 is assigned a single chapter, four of which are based on previous academic articles by the authors. These five chapters are contextualized by an introduction and conclusion which frame the volume’s historical arguments. The introduction sets out the central constitutional issue addressed in each of the five cases—namely, how to resolve the overlapping powers of the provinces and federal government in the area of debtor-creditor law. Pursuant to s. 91 of the CONSTITUTION ACT, 1867, the Parliament of Canada has exclusive authority over both “interest” and “bankruptcy and insolvency.” Pursuant to s. 92, however, the provinces have exclusive authority over “property and civil rights,” “the administration of justice,” and other matters “of a merely local or private nature.” Although earlier cases had established a broad scope for the federal bankruptcy and insolvency power, economic conditions in the 1930s led several provinces to test this authority by introducing their own debt relief measures to protect insolvent farmers.
Following the authors’ introduction, Chapter 2 discusses the case of LADORE V BENNETT, decided by the Privy Council in 1939. Among the five cases, LADORE V BENNETT is something of an anomaly, as it is the only case in which the Privy Council upheld provincial legislation as consistent with the federal bankruptcy and insolvency power. Under the facts of the case, the Government of Ontario had addressed the municipal insolvency of Windsor and three of its surrounding municipalities by legislatively amalgamating them into a single municipal corporation. As part of this amalgamation, the debt of the municipalities was consolidated and restructured at lower interest rates. Plaintiff creditors argued that this amalgamation plan encroached upon matters of “interest” and “bankruptcy and insolvency,” areas of exclusive federal authority. Interveners for the defendants (including the Attorney General of Ontario) argued that the “true pith and substance” of the amalgamation legislation was to regulate “municipal institutions in the province,” which fell within the provincial powers of s. 92. Any effects on either interest or bankruptcy and insolvency were incidental to Ontario’s primary goal. The Privy Council agreed, holding the amalgamation legislation intra vires the province’s constitutional powers. Telfer and Torrie describe LADORE V BENNETT as an “outlier” and a “significant divergence” from twentieth-century insolvency jurisprudence (pp. 37–38). The case therefore serves as an odd (and somewhat underexplained) introduction to the authors’ five selected decisions.
The remaining four cases all invalidated provincial insolvency legislation. Chapter 3 addresses the case of REFERENCE RE DEBT ADJUSTMENT ACT, 1937, in which the Privy Council assessed the constitutionality of debt relief legislation adopted by the populist Social Credit party of Alberta. The DEBT ADJUSTMENT ACT, 1937 created a provincial “Debt Adjustment Board” which could effectively block creditors from bringing legal actions against Alberta debtors. The central issue before the law lords was whether this legislation properly fell within a provincial head of power under s. 92 or a federal head of power under s. 91. The Privy Council found that, in “pith and substance,” the DEBT ADJUSTMENT ACT, 1937 was legislation in relation to insolvency, and thereby fell within the exclusive jurisdiction of Parliament. Telfer and Torrie emphasize the legalistic nature of this decision, which expressly disclaimed any consideration of the policy wisdom of the legislation, instead focusing on Alberta’s power to enact it.
Chapter 4 discusses REFERENCE RE FARM SECURITY ACT, 1944, which struck down similar legislation in Saskatchewan. Interestingly, the FARM SECURITY ACT, 1944 was invalidated not because it interfered with federal authority over insolvency law, but rather because it interfered with federal authority over interest. The challenged legislation, which had been passed by the populist Cooperative Commonwealth Federation Government, purported to freeze mortgage payments under specified agricultural conditions and to reduce outstanding principal on mortgages in an amount equal to “the percentage at which interest would accrue that year” (p. 68). Although this rule nominally affected principal, its purpose and intent was to cancel interest payments (indeed, the Cooperative Commonwealth Federation had explicitly campaigned on cancelling interest). The legislation was challenged by the federal Government and the Dominion Mortgage and Investments Association, who argued that the law usurped Parliamentary authority over interest, as well as bankruptcy and insolvency. The fate of the legislation again turned on its true “pith and substance,” with Saskatchewan arguing that the law addressed local “property and civil rights” in the specific context of the province’s agricultural economy. The Supreme Court and the Privy Council both disagreed, with the Privy Council ruling that interest “lay at the heart of the legislation” (p. 83).
Chapters 5 and 6 address REFERENCE RE MORATORIUM ACT, 1943 and REFERENCE RE ORDERLY PAYMENT OF DEBTS ACT, 1959, respectively. These decisions addressed similar legislation and raised similar constitutional issues as the cases discussed in Chapters 3 and 4. Again, provincial debt relief legislation (the Saskatchewan MORATORIUM ACT, 1943 and the Alberta ORDERLY PAYMENT OF DEBTS ACT, 1959) was challenged by creditors as unconstitutional; and again, the Supreme Court ruled the acts to be ultra vires provincial authority. Telfer and Torrie note that the former case is also important for the concurring reasons of Justice Rand, which established the modern definitions of “bankruptcy” and “insolvency,” and the legal differences between them.
The concluding chapter positions these decisions within their broader constitutional context, arguing that by limiting provincial authority, they consolidated federal dominance in the area of bankruptcy and insolvency law. The authors also observe that by the time of REFERENCE RE ORDERLY PAYMENT OF DEBTS ACT, 1959, the farm debt crisis of the 1930s had largely ended, and the political energy to continue passing ambitious debt relief legislation had faded. In addition, the federal Government had adopted certain features of provincial legislation into federal law, further reducing the policy conflict between Ottawa and the provinces. Nevertheless, the authors argue that the broad space for federal authority established by these cases partially explains the tepid nature of Canadian bankruptcy and insolvency reform, even to this day.
Assessing the book as a whole, Telfer and Torrie provide a detailed account of some of the most important bankruptcy and insolvency cases of the twentieth century. In my review of the authors’ first volume, I lamented that their narrow focus on legal decisions “fails to explain the broader forces that shaped Canadian insolvency legislation.” Perhaps the authors read my review, as Volume 2 provides greater context regarding the political and economic conditions that influenced the course of constitutional litigation. Each chapter ranges beyond the courtroom to describe the economic dislocation experienced by western provinces and the political origins of the challenged legislation. In reading the volume, one gets a clear sense of both the alienation and parochialism that characterized mid-century Canadian regionalism.
The book is not without its flaws, however. Most notably, the discussion of the selected cases across the five chapters becomes highly repetitive, as many of the cases raise similar constitutional issues and featured similar arguments from the provinces and the federal government. One can clearly detect that many of the chapters are reworked stand-alone articles, as expository information is often repeated without drawing connections across the cases. In addition, although the amount of historical context is an improvement over Volume 1, curious readers will still crave greater discussion of the economic and political factors that contributed to western populism and its unfavourable reception among eastern elites. This is all the more so at a time in which western alienation has resurfaced as a salient issue in Canadian politics.
That said, Telfer and Torrie are to be commended for their detailed account of these important cases and their broader consequences for Canadian insolvency law. The authors present a convincing explanation of how federal insolvency law was consolidated, not through aggressive legislative efforts on the part of the federal government, but rather through judicial curtailment of provincial legislative power. Together with Volume 1, Volume 2 of DEBT AND FEDERALISM is the authoritative account of the constitutional evolution of Canadian bankruptcy and insolvency law.
CASES:
LADORE V BENNETT, [1939] AC 468.
REFERENCE RE DEBT ADJUSTMENT ACT, 1937, [1943] AC 356.
SASKATCHEWAN (ATTORNEY GENERAL) V CANADA (ATTORNEY GENERAL), [1949] AC 110.
CANADIAN BANKERS’ ASSOCIATION V SASKATCHEWAN (ATTORNEY GENERAL), [1956] SCR 31.
REFERENCE RE ORDERLY PAYMENT OF DEBTS ACT, 1959, [1960] SCR 571.
© Copyright 2026 by author, Camden Hutchison.
