If Google is correct, the Canadian Government established the Canadian dollar as the national currency in 1871. But it wasn't until 1935 when the Bank of Canada issued the first banknotes. So when did the Canadian Bank notes actually take precedence? What did Canadians commonly pay for stuff with? British Pound Sterling, I'm guessing? But was USD in there too? My question is basically around how long the transition time was?
They paid with the coins and banknotes issued by chartered banks, and also by the Canadian government directly. The 1935 date only refers to when the Bank of Canada, created in 1933, started issuing its own notes. From Wikipedia (Canadian dollar):
Canadian dollar banknotes were later issued by the chartered banks starting in the 1830s, by several pre-Confederation colonial governments (most notably the Province of Canada in 1866), and after confederation, by the Canadian government starting in 1870.
This is analogous to the way banknotes were issued in the United States before the creation of the Federal Reserve system in 1913.