When the Provincial Treasurer arranged to issue a cheque to draw the balance out of the special account, the Royal Bank of Canada refused to honour it.

At first instance, the District Court of Northern Alberta, Stuart J. ruled that the proceeds of the bond issue were within the Province, and therefore the matter was one of a local nature in it.

Appeal was allowed by the Privy Council, which noted that the law in this field provided that the lenders in London were entitled to claim from the Bank at its head office in Montreal the money which they had advanced for a purpose that had ceased to exist.

The absolute rule in Royal Bank of Canada v R has since been relaxed somewhat by Re Upper Churchill Water Rights Reversion Act[4] to allow for incidental effects,[5] where, as noted by McIntyre J.:[6] Where the pith and substance of the provincial enactment is in relation to matters which fall within the field of provincial legislative competence, incidental or consequential effects on extra-provincial rights will not render the enactment ultra vires.

Where, however, the pith and substance of the provincial enactment is the derogation from or elimination of extra-provincial rights then, even if it is cloaked in the proper constitutional form, it will be ultra vires.