The Court found that legislation passed by the government of Newfoundland to take back water rights contracted out to the province of Quebec was unconstitutional.

In 1969, the company, controlled by the British Newfoundland Development Corporation (BRINCO) entered an agreement with Hydro-Québec, a public utility owned by the government of Quebec, to sell a large majority of the power generated by the Falls at a low fixed rate for the next 65 years.

After buying out BRINCO's shares in 1974, the government of Newfoundland began to explore ways to get a greater portion of the power generated from the Falls.

In 1980, the legislature passed the Upper Churchill Water Rights Reversion Act, which reverted ownership of the Falls to the provincial government, repealed the Act that granted the land to the CF(L)Co, expropriated the company's assets, including Hydro-Québec's participation in the joint venture.

The "Pith and Substance" of the Act, its dominant feature or purpose, was to interfere with the right of Hydro-Québec granted by the agreement with Churchill Falls Corp to receive power from across the provincial border.