Gibson,
J:—On
this
hearing,
five
separate
income
tax
appeals
were
heard
on
common
evidence,
namely,
Plan
A
Leasing
Limited
v
Her
Majesty
the
Queen
(T-2224-75);
Plan
B
Leasing
Limited
v
Her
Majesty
the
Queen
(T-2225-75);
Plan
C
Leasing
Limited
v
Her
Majesty
the
Queen
(T-2226-75);
Calfonta
Investments
Limited
v
Her
Majesty
the
Queen
(T-2227-75);
and
Strathearn
Holdings
Limited
v
Her
Majesty
the
Queen
(T-2228-75).
(The
appeals
for
the
taxation
years
1967
and
1968
for
the
plaintiff
Plan
A
Leasing
Limited
and
the
plaintiff
Strathearn
and
the
appeals
for
the
taxation
years
1968
and
1969
for
the
plaintiff
Plan
B
Leasing
Limited
and
for
the
plaintiff
Plan
C
Leasing
Limited
were
not
proceeded
with
because
such
appeals
were
from
nil
assessments
in
those
respective
years.)
The
issue
in
this
appeal
is
whether
during
the
relevant
taxation
years
the
plaintiff
“owned”
the
building
called
Commerce
and
Transportation
Building,
159
Bay
Street,
Toronto,
Ontario
or
whether
it
“leased”
it.
It
is
not
disputed
that
the
plaintiff
leased
the
lands
upon
which
the
said
building
sits
during
the
relevant
taxation
years.
For
taxation
purposes,
different
results
obtain
if
the
plaintiff
"owned”
the
said
building
than
if
the
plaintiff
“leased”
the
said
building
as
follows:
A.
If
on
the
resolution
of
this
issue,
it
should
be
held
that
the
plaintiff
owned
the
said
building,
then
the
plaintiff
is
entitled
to
capital
cost
allowance
on
a
decreasing
basis
as
a
Class
3
asset
as
described
in
Schedule
B
of
the
Regulations
at
the
rate
of
5%
per
annum
of
the
capital
cost
of
the
building
in
1962.
B.
If
on
the
other
hand,
on
the
resolution
of
this
issue,
the
plaintiff
should
be
held
to
have
a
leasehold
interest
only
in
this
building,
then
the
plaintiff
is
entitled
to
claim
a
deduction
from
income
for
the
building
as
a
Class
13
asset
under
Regulation
[sic]
H
at
the
rate
of
214%
per
annum
on
a
straight
line
basis.
The
difference
in
the
result
for
income
tax
purposes
for
the
plaintiff
between
the
resolutions
referred
to
in
A
and
B
above,
is
that
under
A
there
is
a
certain
tax
deferral
for
25
years.
Certain
transactions
took
place
in
1962
and
it
is
the
legal
effect
of
them
from
the
point
of
view
of
real
estate
law
and
its
application
to
the
Income
Tax
Act
and
regulations
that
is
the
subject
matter
of
the
issue
on
this
appeal.
These
facts
may
be
summarized
as
follows:
1.
In
February
1962
Samuel
Lunenfeld,
the
owner
of
the
lands
(the
“lands”)
and
the
building
(the
“building”)
situated
at
the
northwest
corner
of
Bay
and
Front
Streets,
in
the
City
of
Toronto,
accepted
an
offer
to
sell
the
lands
and
building
to
Joseph
Rosenblum.
2.
Joseph
Rosenblum
subsequently
accepted
an
offer
dated
February
16,
1962
made
by
The
Great
West
Life
Assurance
Company
which
offer
stated
that
it
was
for
the
purchase
of
the
lands
only,
excluding
the
building.
The
offer
provided
that,
contemporaneously
with
the
closing
of
the
transaction,
a
lease
of
the
lands
would
be
granted
by
Great
West,
as
landlord,
to
Joseph
Rosenblum,
or
his
nominee,
as
lessee,
for
a
term
of
99
years.
3.
By
a
deed
dated
April
16,
1962
Samuel
Lunenfeld
stated
that
he
conveyed
the
lands
to
Great
West.
4.
A
deed
dated
April
16,
1962
executed
by
Samuel
Lunenfeld
purported
to
convey
the
building
to
159
Bay
Street
Limited.
5.
A
lease
dated
April
16,
1962
was
entered
into
between
Great
West
as
landlord,
and
159
Bay
Street
Limited,
as
lessee.
6.
Under
an
agreement
dated
May
4,
1962
the
plaintiff
Plan
A
Leasing
Limited
purported
to
purchase
the
building
from
159
Bay
Street
Limited
and
to
acquire
from
it
an
assignment
of
the
lease
that
the
latter
held
from
Great
West.
Pursuant
to
the
said
agreement,
a
deed
dated
May
—,
1962
purported
to
convey
the
building
to
Pian
A
Leasing
Limited
and
also
an
assignment
of
lease
dated
May
17,
1962
purported
to
assign
the
interest
of
159
Bay
Street
Limited
in
the
lease
to
Plan
A
Leasing
Limited.
In
respect
to
the
issue
on
this
appeal,
the
plaintiff
claims
capital
cost
allowance
(at
the
rate
of
5%
per
annum
on
a
decreasing
balance)
as
owner
of
the
building
called
Commerce
and
Transportation
Building,
159
Bay
Street,
Toronto,
Ontario
by
reason
of
the
said
above
quoted
transactions
that
took
place
in
1962.
Speaking
generally,
a
person
or
a
corporation
who
owns
or
leases
a
building
is
entitled
to
deduct
from
income
such
amounts
for
capital
cost
allowance
or
depreciation
as
is
permitted
by
the
regulations
made
under
the
Income
Tax
Act.
For
example,
in
the
four
situations
listed
hereunder,
the
applicable
regulation
is
cited
and
its
application
discussed:
1.
An
owner
of
a
brick
building
is
entitled
to
capital
cost
allowance
at
the
rate
of
5%
on
a
decreasing
balance
by
reason
of
Regulation
1100(1)(a)(iii)
being
a
Class
3
property
referred
to
in
Schedule
B
of
the
regulations.
1100.
(1)
Under
paragraph
(a)
of
subsection
(1)
of
section
11
of
the
Act,
there
is
hereby
allowed
to
the
taxpayer,
in
computing
his
Income
from
a
business
or
property,
as
the
case
may
be,
deductions
for
each
taxation
year
to
equal
to
(a)
such
amounts
as
he
may
claim
in
respect
of
property
of
each
of
the
following
classes
in
Schedule
B
not
exceeding
in
respect
of
property
ii)
of
class
3,
5%,
Class
3
Property
not
included
in
any
other
class
that
is
(a)
a
building
or
other
structure,
including
component
parts
such
as
electric
wiring,
plumbing,
sprinkler
systems,
air-conditioning
equipment,
heating
equipment,
lighting
fixtures,
elevators
and
escalators,
2.
A
person
who
has
a
leasehold
interest
in
a
building
is
entitled
to
depreciate
the
cost
of
it
over
the
lifetime
of
the
lease,
plus
one
renewal
period—with
a
maximum
period
in
total
of
40
years
by
reason
of
Regulation
1100(1)(b)
being
a
Class
13
property
referred
to
in
Schedule
H
of
the
regulations.
Regulation
1100(1)(b):
Leasehold
Interest
(b)
such
amount,
not
exceeding
the
amount
for
the
year
calculated
in
accordance
with
Schedule
H,
as
he
may
claim
in
respect
of
the
capital
cost
to
him
of
property
class
13
in
Schedule
B;
SCHEDULE
H
Leasehold
Interests
1.
For
the
purpose
of
paragraph
(b)
of
subsection
(1)
of
section
1100,
the
amount
that
may
be
deducted
in
computing
the
income
of
a
taxpayer
for
a
taxation
year
in
respect
of
the
capital
cost
of
property
of
class
13
in
Schedule
B
is
the
lesser
of
(a)
the
aggregate
of
each
amount
determined
in
accordance
with
section
2
of
this
Schedule
that
is
a
prorated
portion
of
the
part
of
the
capital
cost
to
him,
incurred
in
a
particular
taxation
year,
of
a
particular
leasehold
interest;
or
(b)
the
undepreciated
capital
cost
to
the
taxpayer
as
of
the
end
of
the
taxation
year
(before
making
any
deduction
under
section
1100)
of
property
of
the
class.
2.
Subject
to
section
3
of
this
Schedule,
the
prorated
portion
for
the
year
of
the
part
of
the
capital
cost,
incurred
in
a
particular
taxation
year,
of
a
particular
leasehold
interest
is
the
lesser
of
(a)
one-fifth
of
that
part
of
the
capital
cost;
or
(b)
the
amount
determined
by
dividing
that
part
of
the
capital
cost
by
the
number
of
12-month
periods
(not
exceeding
40
such
periods)
falling
within
the
period
commencing
with
the
beginning
of
the
particular
taxation
year
in
which
the
capital
cost
was
incurred
and
ending
with
the
day
the
lease
is
to
terminate.
3.
For
the
purpose
of
determining,
under
section
2
of
this
Schedule,
the
prorated
portion
for
the
year
of
the
part
of
the
capital
cost,
incurred
in
a
particular
taxation
year,
of
a
particular
leasehold
interest,
the
following
rules
apply:
(a)
where
an
item
of
the
capital
cost
of
leasehold
interest
was
incurred
before
the
taxation
year
in
which
the
interest
was
acquired,
it
shall
be
deemed
to
have
been
incurred
in
the
taxation
year
in
which
the
interest
was
acquired;
(b)
where,
under
a
lease,
a
tenant
has
a
right
to
renew
the
lease
for
an
additional
term,
or
for
more
than
one
additional
term,
after
the
term
that
includes
the
end
of
the
particular
taxation
year
in
which
the
capital
cost
was
incurred,
the
lease
shall
be
deemed
to
terminate
on
the
day
on
which
the
term
next
succeeding
the
term
in
which
the
capital
cost
was
incurred
is
to
terminate;
(c)
the
prorated
portion
for
the
year
of
the
part
of
the
capital
cost
incurred
in
a
particular
taxation
year,
of
a
particular
leasehold
interest
shall
not
exceed
the
amount,
if
any,
remaining
after
deducting
from
that
part
of
the
capital
cost
the
aggregate
of
the
amounts
claimed
and
deductible
in
previous
years
in
respect
thereof;
(d)
where,
at
the
end
of
a
taxation
year,
the
aggregate
of
(i)
the
amounts
claimed
and
deductible
in
previous
taxation
years
In
respect
of
a
particular
leasehold
interest,
and
(il)
the
proceeds
of
disposition,
if
any,
of
part
or
all
of
that
interest
equals
or
exceeds
the
capital
cost
as
of
that
time
of
the
interest
the
prorated
portion
of
any
part
of
that
capital
cost
shall,
for
all
subsequent
years,
be
deemed
to
be
nil;
and
(e)
where,
at
the
end
of
a
taxation
year,
the
undepreciated
capital
cost
to
the
taxpayer
of
property
of
class
13
is
nil,
the
prorated
portion
of
any
part
of
the
capital
cost
as
of
that
time
shall,
for
all
subsequent
years,
be
deemed
to
be
nil.
(Schedule
H
added
by
PC
1964-1857,
December
4,
1964,
Canada
Gazette
Part
Il,
December
23,
1964.)
3.
A
tenant
who
erects
a
building
on
leased
land
and
has
a
leasehold
interest
in
the
building,
is
entitled
to
treat
the
building
as
if
he
owned
it
and
deduct
capital
cost
allowance
as
in
situation
1
above
by
reason
of
Regulation
1102(5).
Regulation
1102(5):
Buildings
on
Leased
Properties
(5)
Where
the
taxpayer
has
a
leasehold
interest
In
a
property,
a
reference
in
Schedule
B
to
a
property
that
is
a
building
or
other
structure
shall
be
deemed
to
include
a
reference
to
that
part
of
the
leasehold
interest
acquired
by
reason
of
the
fact
that
the
taxpayer
has
(a)
erected
a
building
or
structure
on
leased
land,
(b)
made
an
alteration
to
a
leased
building
or
structure,
or
(c)
made
alterations
to
a
leased
property
which
substantially
change
the
nature
of
the
property,
unless
the
property
Is
included
in
class
23
in
Schedule
B.
4.
A
tenant
who
erects
a
building
on
leasehold
land
has
a
leasehold
interest
in
the
building
if
he
subsequently
assigns
his
leasehold
rights
to
an
assignee,
then
the
assignee
is
entitled
to
a
deduction
from
income
for
depreciation
only
at
the
rate
of
216%
on
a
straight
line
basis,
that
is,
on
the
same
basis
as
in
situation
2
above.
(This
regulation
was
changed
in
January
1976
so
that
the
situation
now
is
the
same
as
in
situation
3
above.)
The
documentation
in
respect
to
the
transactions
in
1962
purport
to
cause
the
following
legal
results
to
obtain:
A.
Re
Lands—Great
West
Life
Assurance
Company
owns
the
lands
upon
which
the
subject
building
sits.
The
plaintiff
leases
(by
way
of
assignment
of
lease)
the
said
lands
from
Great
West
Life
Assurance
Company.
B.
Re
Building—the
plaintiff
owns
the
building,
159
Bay
Street,
Toronto,
called
Commerce
and
Transportation
Building.
The
deeds
and
leases
which
purport
to
accomplish
the
above
results
are
as
follows:
A.
Re
Land—Deed
of
land
(Exhibit
A-3)
dated
April
16,
1962
between
Samuel
Lunenfeld
of
Montreux,
Switzerland
as
grantor
and
The
Great
West
Life
Assurance
Company
as
grantee.
The
granting
clause
reads:
he
the
said
grantor
DOTH
GRANT
unto
the
said
grantee
in
fee
simple
B.
Re
Building—(1)
Deed
of
building
(Exhibit
A-4)
dated
April
16,
1962
between
Samuel
Lunenfeld
of
Montreux,
Switzerland
as
grantor
and
159
Bay
Street
Limited
as
grantee.
The
granting
clause
reads:
he,
the
said
Grantor,
DOTH
GRANT
unto
the
said
Grantee
ALL
those
the
buildings,
improvements,
appurtenances
thereto
and
fixtures
therein
or
thereon,
situate
upon
(but
not
including)
the
lands
more
particularly
described
in
Schedule
“A”
hereto
(hereinafter
referred
to
as
‘‘the
said
buildings”)
(2)
Deed
of
building
(Exhibit
A-7)
dated
May
—,
1962
between
159
Bay
Street
Limited
the
grantor
and
Plan
A
Leasing
Limited
the
grantee.
The
granting
clause
reads:
the
said
Grantor
DOTH
GRANT
unto
the
said
Grantee
ALL
those
the
buildings,
improvements,
appurtenances
threreto
and
fixtures
therein
or
thereon,
situate
upon
(but
not
including)
the
lands
more
particularly
described
in
Schedule
“A”
hereto
(hereinafter
referred
to
as
“the
said
buildings”)
C.
Re
Lease—Lease
of
lands
only
(Exhibit
A-5)
dated
April
16,
1962
between
The
Great
West
Life
Assurance
Company
as
lessor
and
159
Bay
Street
Limited
as
lessee.
The
granting
clause
reads:
WITNESSETH,
that
in
consideration
of
the
rents,
covenants
and
agreements
hereinafter
reserved
and
contained
on
the
part
of
the
Tenant
to
be
paid,
observed
and
performed
the
Landlord
has
demised
and
leased
and
by
these
presents
does
hereby
demise
and
lease
unto
the
Tenant
All
and
Singular
the
lands
and
premises
situate,
lying
and
being
in
the
City
of
Toronto,
in
the
County
of
York,
more
particularly
described
in
Schedule
“A”
hereto
annexed,
which
lands
exclusive
of
any
buildings
or
other
improvements
are
hereinafter
referred
to
as
the
“demised
premises”
D.
Assignment
of
Lease
of
Lands
Only—Assignment
(Exhibit
A-8)
dated
May
17,
1962
between
159
Bay
Street
Limited
as
assignor
and
Pian
A
Leasing
Limited
as
assignee.
The
granting
clause
in
said
assignment
reads:
NOW
THIS
INDENTURED
WITNESSETH
that
in
consideration
of
other
valuable
consideration
and
the
sum
of
TWO
($2.00)—Dollars
now
paid
by
the
Assignee
to
the
Assignor
(the
receipt
whereof
is
hereby
acknowledged)
the
Assignor
doth
hereby
grant
and
assign
unto
the
Assignee
all
that
certain
parcel
of
land
situate
in
the
City
of
Toronto,
in
the
County
of
York,
as
more
particularly
described
in
Schedule
“A”
hereto
annexed;
together
with
the
residue
unexpired
of
the
term
of
years
in
the
said
lease
mentioned,
and
the
said
lease
and
all
benefit
and
advantage
to
be
derived
therefrom.
Recapitulating
and
referring
to
the
exhibit
evidence,
the
relevant
contracts
of
deed,
lease
and
assignment
of
lease
are:
The
plaintiff’s
contracts
of
deed
and
lease:
A.
Exhibits
A-1,
A-3,
A-4
and
A-5
indicate
that
Lunenfeld
split
the
ownership
of
the
land
from
that
of
the
building
by
(i)
conveying
the
ownership
of
the
land
to
Great
West
Life
Assurance
Company
(see
Exhibit
A-3);
and
(ii)
by
conveying
the
ownership
of
the
building
to
159
Bay
Street
Limited
(Exhibit
A-4).
B.
159
Bay
Street
Limited
at
the
same
time
as
it
became
owner
of
the
building
(Exhibit
A-4)
leased
the
lands
from
Great
West
Life
Assurance
Company
(Exhibit
A-5).
C.
Then
the
plaintiff,
Plan
A
Leasing
Limited
acquired
all
the
rights
of
159
Bay
Street
Limited
by
(i)
purchasing
the
building
(Exhibit
A-7),
and
(ii)
by
accepting
an
assignment
of
the
lease
of
the
lands
(Exhibit
A-8).
It
is
by
virtue
of
what
happened
at
A
above
that
the
plaintiff
claims
to
be
owner
of
the
building
and
entitled
to
claim
for
income
tax
purposes
capital
cost
allowance
pursuant
to
the
regulations
made
under
the
Income
Tax
Act
of
the
building
as
owner.
The
determination
of
the
issue
on
this
appeal
involves
real
estate
law
questions
by
virtue
of
what
took
place
in
1962
as
above
recited.
Counsel
for
the
defendant
contends
that
in
law
in
the
Province
of
Ontario
what
was
alleged
to
have
been
successfully
done
here
is
impossible,
namely,
to
sign,
seal
and
deliver
separate
conveyances
of
the
lands
and
the
building
which
sits
on
those
lands
after
(as
was
the
case
here)
the
building
has
been
built
on
such
lands.
Counsel
says
that
what
the
grantee
in
the
conveyance
of
the
building
received
in
this
case
was
only
a
leasehold
interest
in
the
building
and
not
the
freehold
title
of
ownership.
He
says
that
if
a
building
is
conveyed
separate
and
apart
from
the
land
(as
was
done
here),
such
conveyance
gives
to
the
grantee
title
to
the
building
as
a
fixture
together
with
the
right
to
remove
the
building
from
the
site
or
dismantle
it
within
a
reasonable
time;
and
if
on
the
contrary,
there
is
included,
even
in
a
collateral
and
contemporaneous
conveyance
as
eg
a
lease,
a
right
to
keep
the
building
on
the
lands
on
which
it
sits,
such
is
dependent
solely
on
such
lease
of
the
lands.
He
then
concludes
as
a
consequence,
what
the
plaintiff
received
by
such
a
conveyance
of
the
building,
was
only
a
leasehold
interest
in
the
building.
Alternatively,
counsel
for
the
defendant
submitted
that
if
the
conveyance
of
the
building
(as
in
this
case,
separate
from
the
lands)
gave
more
rights
to
the
grantee
than
above
mentioned,
then
the
rights
received
by
the
grantee
were
subject
to
the
terms
of
the
subject
lease
(entered
into
collaterally
with
the
deed
of
the
building)
among
whose
provisions
is
a
clause
requiring
the
grantee
of
the
biulding
to
convey
without
compensation
the
building
to
the
lessor
of
the
lands
upon
which
it
sits
on
the
termination
of
the
land
lease.
Counsel
submits
that,
as
a
result,
the
rights
obtained
by
the
grantee
by
these
transactions
amount
in
law
to
no
more
than
a
leasehold
interest
in
the
building.
Counsel
for
the
defendant
cites
as
authorities
for
these
submissions
the
following:
Stack
v
Eaton
(1902),
4
OLR
335;
Holland
v
Hodgson
(1872),
LR
7
CP
328;
Hobson
v
Gorringe,
[1897]
1
Ch
182;
Haggert
v
Town
of
Brampton
(1897),
28
SCR
174;
Reynolds
v
Ashby
&
Son,
[1904]
AC
466;
Crossley
Brothers
Limited
v
Lee,
[1908]
1
KB
86;
Seeley
v
Caldwell
(1908),
18
OLR
472;
Devine
v
Callery
(1917),
38
DLR
542:
Scarth
v
Ontario
Power
and
Flat
Co
(1894),
24
OR
446;
Davy
v
Lewis
(1860),
18
UCQB
21;
Agricultural
Development
Board
v
Ricard
(1927),
32
OWN
140;
Liscombe
Falls
Gold
Mining
Co
et
al
v
Bishop
et
al
(1905),
35
SCR
539;
In
re
Morrison,
Jones
&
Taylor
Limited
et
al,
[1914]
1
Ch
50;
Struthers
v
Chamandy
(1917),
42
OLR
508;
City
of
Vancouver
v
Attorney
General
of
Canada
and
others,
[1944]
SCR
23;
Re
Hornell,
[1945]
1
DLR
440;
Cohen
and
Zalkind
v
MNR,
[1968]
1
Ex
CR
110;
[1967]
CTC
254;
67
DTC
5175;
Reitman
v
MNR,
[1968]
1
Ex
CR
120;
[1967]
CTC
368;
67
DTC
5253;
Rudnikoff
v
Her
Majesty
the
Queen,
[1975]
CTC
1;
75
DTC
5008;
La
Banque
d’Hochelaga
v
Waterons
Engine
Works
Company
(1897),
27
SCR
406;
Megarry
and
Wade,
The
Law
of
Real
Property,
3rd
edition,
pages
68-83,
141,
556-7
and
715-23;
Brown,
The
Law
of
Personal
Property,
2nd
edition,
pages
725-8.
Counse!
for
the
plaintiff
submitted
that
the
transactions
above
referred
to
resulted
(1)
in
the
plaintiff
Plan
A
Leasing
Limited
being
the
owner
of
the
freehold
in
the
subject
building
on
the
said
subject
lease
of
the
lands
upon
which
the
building
sits,
but
not
the
lands;
(2)
in
Great
West
Life
Assurance
Company
being
the
owner
of
the
freehold
in
the
said
lands,
but
not
the
building
erected
thereon;
and
(3)
in
the
plaintiff
Plan
A
Leasing
Limited
being
the
owner
of
the
leasehold
interest
in
the
said
lands
by
way
of
assignment
of
lease.
So
much
for
the
submission
of
counsel.
From
a
careful
reading
of
Exhibits
A-1
to
A-14
it
is
obvious
that
the
relevant
parties
at
all
material
times
by
contracts
of
deed,
lease
and
assignment
of
lease
very
carefully
spelled
out
and
executed
their
intention
in
entering
into
these
said
transactions.
In
law,
the
title
of
the
lands
and
the
title
to
the
building
on
such
lands
can
be
conveyed
separately
when
parties
have
made
a
special
contract
to
do
so.
When
parties
do
so
by
proper
conveyances,
they
may,
as
was
said
in
Davy
v
Lewis
(supra)
at
page
30,
define
and
make
a
law
for
themselves
in
respect
to
such
lands
and
building.
In
other
words,
the
usual
rule
of
law
that
the
building
is
part
of
the
freehold
can
be
abrogated
by
a
contract
of
parties.
They
can
completely
sever
the
right
title
and
interest
in
the
freehold
in
the
building
from
the
right
title
and
interest
in
the
freehold
of
the
lands
on
which
the
building
sits,
even
though
the
building
continues
to
be
annexed
to
such
lands.
This
exception
to
the
rule
of
common
law
has
obtained
since
Lord
Coke’s
time
(see
Challis,
The
Law
of
Real
Property,
3rd
edition,
p
54).
And
as
is
said
in
Megarry
and
Wade,
The
Law
of
Real
Property,
3rd
edition,
at
page
70:
An
owner
can,
if
he
wishes,
divide
his
land
horizontally
or
in
any
other
way.
He
can
dispose
of
minerals
under
the
surface,
or
the
top
floor
of
a
building,
so
as
to
make
them
separate
properties.
in
this
Court
in
Rudnikoff
v
Her
Majesty
the
Queen
(supra)
at
page
2
[5009],
Jackett,
CJ
said:
However,
in
my
view,
while
the
general
rule,
both
in
the
common
law
provinces
and
in
the
Province
of
Quebec
Is
that
a
substantial
building
becomes
a
part
of
the
land
and
belongs
to
the
owner
of
the
land,
this
situation
may
be
changed,
by
contract
or
otherwise,
so
that
ownership
of
the
building
is
separate
from
ownership
of
the
land
and
the
building
would
not
be
a
part
of
the
subject
matter
of
the
lease.
Such
a
result
would,
however,
follow
only
as
a
result
of
clear
language
and,
in
my
view,
in
this
case,
the
terms
of
the
emphyteutic
lease
are
not
such
as
to
produce
such
a
result.
Also
in
this
Court
in
Cohen
and
Zalkind
(supra)
Noel,
ACJ
said
it
was
possible
to
modify
the
terms
of
an
emphyteutic
lease
under
the
Quebec
Civil
Code.
He
said
at
pages
116
and
119
[259-62,
5179-80]
as
follows:
An
examination
of
the
deed
of
lease
and
agreement
between
the
Ecclesiastics
of
the
Seminary
of
St-Sulpice
of
Montreal
and
The
Transportation
Building
Company
Limited
as
well
as
of
the
deed
of
sale
to
the
appellants
of
the
rights
in
the
original
lease
and
agreement
and
in
the
building
constructed
on
the
property
reveals
that
some
of
the
clauses
of
the
deed
of
lease
and
agreement
are
standard
emphyteutic
clauses
whereas
others
are
not
and
are
unusual.
I
shall
now
consider
only
those
clauses
pertinent
to
the
present
case
and
which
may
be
helpful
in
determining
the
nature
of
the
rights
the
appellants
purchased
from
The
Transportation
Building
Company
Limited.
lt
therefore
appears
to
me
that
whatever
are
the
rights
of
an
ordinary
emphyteutic
lessee
in
Quebec
or
whatever
difficulties
there
may
be
in
the
common
law
provinces
because
ownership
of
the
land
carries
with
it
whatever
is
built
thereon,
I
cannot,
on
the
documents
as
they
stand
herein,
reach
any
other
conclusion
but
that
the
appellants
were
the
proprietors
of
the
building
erected
on
the
land
owned
by
the
Seminary.
In
addition,
in
this
case,
the
fact
that
the
first
subiect
deed
of
the
freehold
of
the
building
(Exhibit
A-4)
did
not
also
in
it
include
a
conveyance
of
easements
for
such
things
as
support,
access
etc,
does
not
change
the
legal
effect
of
the
said
deed.
Another
transaction
was
entered
into
in
this
case
in
1962
to
obtain
such
easements,
namely,
the
lease
with
Great
West
Life
Assurance
Company
(Exhibit
A-5).
Such
accomplished
the
same
result
as
would
have
been
accomplished
by
including
a
conveyance
of
such
easements
in
the
same
deed
as
the
conveyance
of
the
freehold
of
the
building
(Exhibit
A-4).
The
only
other
question
that
arises
is
whether
or
not
the
subject
documentation
in
law
carried
out
the
intention
of
the
parties
in
this
case.
In
deeds
and
leases
the
granting
clause
governs.
Any
later
clause
which
purports
to
qualify,
abrogate
or
in
any
way
destroy
the
rights
created
by
the
granting
clause
is
to
be
rejected
in
law
as
repugnant
and
the
granting
clause
prevails.
(See
Ouston
v
Williams
et
al
(1857),
16
UCQB
405
at
406;
Forbes
v
Jean
K
Git,
61
DLR
353;
Armour
on
Real
Property,
2nd
edition,
1916,
page
350;
Anger
and
Honsberger,
Canadian
Law
of
Real
Property,
1959,
pages
16-17.)
A
review
of
the
deeds,
leases
and
conveyances
above
referred
to
indicates
that
the
granting
clauses
in
all
the
relevant
deeds,
leases
and
assignment
were
drafted
correctly
in
law
and
these
documents
were
correctly
executed
and
delivered.
As
a
consequence,
in
law
the
plaintiff
Plan
A
Leasing
Limited
is
the
owner
of
the
freehold
of
the
building,
159
Bay
Street
Limited,
Toronto,
known
as
Commercial
and
Transportation
Building;
and
was
during
all
the
relevant
taxation
years.
It
is
therefore
entitled.
during
the
relevant
taxation
years,
to
a
deduction
from
income
for
capital
cost
allowance
in
respect
to
its
cost
of
such
building
at
the
rate
of
5%
per
annum
on
a
decreasing
basis.
The
appeal
is
therefore
allowed
with
costs,
and
the
matter
is
directed
to
be
referred
back
for
reassessment
not
inconsistent
with
these
reasons.
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