Supreme Court of Canada
Irwin v. Campbell, (1915) 51 S.C.R. 358
Date: 1915-05-18
Eliza Jane Irwin (Defendant) Appellant;
and
Frank Alexander Campbell (Plaintiff) Respondent.
1915: March 3, 4; 1915: May 18.
Present: Sir Charles Fitzpatrick C.J. and Davies, Idington, Duff and Anglin JJ.
ON APPEAL FROM THE APPELLATE DIVISION OF THE SUPREME COURT OF ONTARIO.
Lessor and lessee—Lease of adjoining lots—Separate demises—Assignment to one person—Termination of lease—Valuation of improvements—Valuation as a whole—Consent of counsel.
Two leases of adjoining lots were, by assignment, vested in C. Each lease provided that if, on its expiration, the lessor refused to renew he should give notice thereof to the lessee and that valuators should be appointed to value the buildings on the land. Notice was given under each lease and valuators were appointed who, without objection by the lessor’s counsel valued the buildings on the two lots as a whole and fixed $35,000 as the value of them all. In an action by the lessee to recover this amount,
Held, reversing the judgment of the Appellate Division (32 Ont. L.R. 48), Davies and Anglin JJ. dissenting, that the valuation must be set aside, that the value of the buildings on the lots should have been ascertained separately.
Held, also, applying the principle of Cameron v. Cuddy ([1914] A.C. 651) that the action should not be dismissed, but that the same or other valuators should be appointed to ascertain the value in a proper manner.
APPEAL from a decision of the Appellate Division of the Supreme Court of Ontario, affirming the judgment at the trial in favour of the plaintiff.
The material facts are set out in the above head-note.
[Page 359]
W.N. Tilley for the appellant.
Rowell K.C. and George Kerr for the respondent.
THE CHIEF JUSTICE.—I concur with Mr. Justice Idington.
DAVIES J. (dissenting) concurred with Anglin J.
IDINGTON J.—This is an action brought upon two covenants in two separate leases of which respondent is the assignee. The covenant in each was as follows:
And the lessor shall pay or cause to be paid to the lessee the amount so found to be proper to be paid for the said buildings not less than two months before the end of the then expiring term, and in the event of the said value of the said buildings not being paid as aforesaid within the time limited as aforesaid, or in the event of the lessor not having given six months’ notice in writing as aforesaid of his desire that no further term should be granted, and of the lessee having given, five months’ previous to the end of the term hereby granted, notice in writing of his desire that such further term should be granted, it is hereby agreed that the lessee shall be entitled to a renewal of the lease of the said premises for a further term of twenty-one years to be computed from the expiry of the previous term, at the annual rent which shall have been ascertained by the valuators as aforesaid as the proper sum to be paid as the ground rent of the said premises for the following term of twenty-one years, if such term should be granted.
Each lease had provided by what preceded said covenant that the lessor might give notice of his desire instead of renewal of lease to terminate at the end of the term the relationship of landlord and tenant and then the value of the buildings on the property leased should be valued by a board of valuators.
It is in respect of such value of buildings to be so determined that the foregoing covenant was entered into.
Due notice was given under each of said leases by appellant, the representative of the estate of the orig-
[Page 360]
inal lessor, and a board was duly constituted under each lease. That board was composed of the same men in each case but the proceedings to constitute the board had of necessity to be separate and independent.
The lessor held each parcel covered by said leases under leases from two different estates and his leases had similar though not identical provisions relative to the termination thereof and of repayment for buildings.
Every consideration, therefore, bearing upon the questions involved herein, required that though the board might be composed of the same men yet the proceedings under each lease here in question should have been carefully preserved independent of each other.
By some remarkable oversight this was not done by the board of valuators, but an award was made by them that treated these separate properties, independent in origin and the personalities concerned therein, as if they had always been one whole. And one sum of $35,000 was found by said award.
It so happened that at the time when it became necessary to proceed the persons interested as lessor and lessee respectively of each were the same. But that was not any justification for departing from the frame of the separate notices and other proceedings separating what the board (or rather boards composed of same men) were constituted to determine.
Had they found separate values and sums due in respect of the buildings upon each parcel and then added them together there might, seeing the party to pay and the party to receive were same, have been no insurmountable objection to the award.
But as it stands there clearly was on the face of
[Page 361]
it no separate valuation upon which the covenant could operate and an action thereon be founded. And the evidence adduced at the trial of this action puts beyond doubt not only the fact that there was none, but also that the valuators entirely misconceived their duty in the premises.
It seems they had from the beginning so misconceived the purpose of their appointment that they opened their proceedings on the assumption that they were arbitrators and as such had to hear evidence and determine accordingly. They were, after a remonstrance by appellant’s counsel and discussion of an hour or two, persuaded that such was not the case and that they must act as valuators only.
One if not more of them frankly admitted he was not qualified by personal knowledge to discharge such duty. Explanations were given them that they had a right to become informed in such a way as they deemed best.
In the course of this discussion they and others concerned allege that the counsel who had appeared for appellant to explain that they must act as valuators and not as arbitrators, led them to believe they could award a lump sum including both the buildings held under each lease. Even if that were so it cannot bind appellant. He denies this so alleged and adds he had no authority to do any such thing. And in this latter regard he stands uncontradicted.
No attempt is made to prove such authority, but it is argued he was counsel for the appellant and hence must be held to have had implied authority.
Inasmuch as there was no trial, no judicial proceedings, in which counsel could act as such, the argument seems idle. And even if there had been such a
[Page 362]
judicial proceeding, counsel could have no implied authority to do any such thing. If it were a mere matter of procedure in such a case counsel might have been held to have implied authority relative to the scope thereof. But it is not matter of procedure. It is a most material substantive right appellant had to be dealt with upon the lines laid down in each of the separate notices under and pursuant to which the valuators were bound to act. They had no power beyond. Nor could they have acquired it except by some binding agreement between the parties fixing or blending into a new consolidated covenant the two independent covenants and the rights arising thereunder.
All this seems so clear as matter of law that I do not think the board correctly understood what counsel said and what they were about or they would at once have insisted upon his filing with them a consent by appellant to such a departure from the terms of their two respective appointments.
The advantages for the appellant in keeping the two things separate were so obvious that I cannot impute to any lawyer acting for the appellant his intentionally surrendering such advantage.
The buildings had been erected under a system of leasing such as adopted and were the separate results of different leases and rights in relation thereto. The buildings had not, as I understand it, been all built at the same time. But by reason of being on adjoining lands they were made in fact to form and to be used as a whole. That was a mere accident which so long as held by same party might secure a more profitable use than if kept separate. That advantage the occupying tenant could rightfully enjoy during the concurrence of the terms and do no injury to the lessor. But
[Page 363]
at or within a few days of the end of each of the terms, which were approximately but not identically the same, the appellant’s right in one of these parcels ceased. All she could ask from her landlord was to be compensated for the buildings thereon without any such advantage or augmented value incidentally flowing from such antecedent concurrence.
If, as suggested or hinted at in argument, she by some one else’s stupidity, escaped the observation of this, and gained thereby, we have nothing to do therewith.
Again there was an agreement come to during the proceedings and reduced to writing whereby the valuators were fully relieved from the burden of the other part of the inquiry for which they were appointed and by which they were to determine what would be a proper rental in case of renewal.
If there had as alleged been in fact any further waiver or limitation of the duties to be discharged by the board it in all probability would have formed part of that writing. But it did not.
And the insurmountable reply of the appellant to the respondent and to the members of the board is that the written award does not in its recitals pretend to allege any such thing as now set up but proceeds on the original notices; if that is what it means.
But does it mean that? Indeed it reads or may be read as if founded only upon one notice. If that was what was present to the valuators’ minds and they in truth had forgotten that there were two different sets of notices and appointments then the whole business has miscarried. In that event clearly there have not been any such valuations as the appointing notices required.
[Page 364]
In any way one can look at it there seems no escape from the conclusion that there never was such a valuation and finding within the requirements of either covenant as to entitle a recovery thereon.
Such a finding and valuation is a condition precedent to the covenant having any operative effect herein unless alternatively in the way I am about to point out as applicable to such a failure of purpose as is apparent.
I need not therefore enter upon the undesirable features of the case as presented and argued at length. I may be permitted, however, to point out that this is the third or fourth case where we have recently had to consider the duties of valuators, and this is not the first in which suspicions were cast, in argument, upon the manner of conducting the proceedings arising from indiscretion on the part of some of those concerned therein.
It is unpleasant to have to deal with such features. To palliate or excuse them tends to lead others to go and do likewise and to needlessly fix blame upon any one by pointing out wherein he has been indiscreet is not desirable. I, therefore, abstain from saying more than is prompted by what the experience of what has transpired in other cases as well as herein and that is that valuators should not listen to one party, or any one acting on his behalf or under him, unless the other is present or is consenting thereto, and it would be safer to keep away from having anything to do with either of such parties pending the inquiry and until the award is signed or otherwise openly declared to both parties.
And when valuators are sworn as they were here I submit, with great respect, none of them can properly
[Page 365]
be treated as managing or acting for him who has appointed him or them.
This appeal should be allowed without costs to either party throughout except the costs of the proceedings up to trial so far as same usefully served the purpose of presenting plaintiff’s claim.
But instead of dismissing the action the judgment should be so framed, in accordance with the principle proceeded upon by the Judicial Committee of the Privy Council in the case of Cameron v. Cuddy, as to have the value of the buildings in question under each lease determined by a referee to be named by this court or by the court below, unless the parties desire that the same board as originally constituted should proceed to do so.
It seems to me having regard to the facts in said case the paragraph therein, at page 656, covers this, as follows:—
When an arbitration for any reason becomes abortive it is the duty of a court of law, in working out a contract of which such an arbitration is part of the practical machinery, to supply the defect which has occurred. It is the privilege of a court in such circumstances and it is its duty to come to the assistance of parties by the removal of the impasse and the extrication of their rights. This rule is in truth founded upon the soundest principle, it is practical in its character, and it furnishes by an appeal to a court of justice the means of working out and of preventing the defeat of bargains between parties. It is unnecessary to cite authority on the subject, but the judgment of Lord Watson in Hamlyn & Co. v. Talisker Distillery, might be referred to.
That case in which this language is used is alleged to have involved an arbitration and conceivably a distinction may be drawn between a valuation by arbitrators and by valuators. But the language quoted seems applicable in principle, especially when regard is had
[Page 366]
to the very involved contract before them in that case and to the fact that it was a case of valuation that was in question therein though those to value were designated arbitrators.
In that case apparently their Lordships assumed the party concerned might have had another remedy under the contract, and so it seemed to some of us. In this case the very “impasse” from which the parties’ rights have “to be extricated” seems to render it impossible within the words preceding and forming the foundation of the covenants in the leases to find therein any remedy and hence renders it more imperative than there that the court must act in order that justice be done.
The case cited in the above paragraph and much therein suggests there was nothing more therein than the court doing what is done every day in our law unless the arbitration is made a condition precedent to the right of recovery. As I read their Lordships’ language which I quote, in light of the contract they were dealing with, it means much more. It is, to repeat, the very “impasse” from which the parties’ rights have “to be extricated” that is the pith of the judgment.
The agreement filed reduces the question involved, in order that justice may be done, to one of ascertaining in a proper manner the respective values of the buildings in question in each lease.
That being obtained the judgment finally should be for the respondent for the aggregate value thereof with all the costs of the reference if directed as I suggest and of entering judgment on the result.
After writing foregoing I modified my opinion as to the disposition of costs. I agreed to the judgment delivered.
[Page 367]
DUFF J.—This appeal should be allowed. It is necessary in may view to consider only one point.
The action is brought upon two distinct covenants in two separate leases. Each provides for the payment of the value of the buildings on the land demised to be ascertained in a certain way. In neither case has that value been ascertained. In fact there is one building, i.e., a building which is a physical unit situated partly on the land demised by one lease and partly on that demised by the other, and it is the value of this building as a whole that has been ascertained. That sum cannot be recovered under either or both of the covenants for the simple reason that both the obligations and the accessory rights of action are distinct and independent. The obligation in each case is to pay a sum “proper to be paid” in respect of the buildings on the land demised by the lease in which the covenant appears which sum is to be ascertained by a valuation to be made in the prescribed manner. There is no such valuation in respect of buildings upon either parcel demised, and the condition the essential term that there shall be such a valuation is not purged by the production of a valuation of such buildings plus something else.
The judgment at the trial was not really based upon these covenants at all.
In substance the learned trial judge proceeded on the view that the appellant was “estopped” from taking this objection that the covenants were separate.
I think probably by this the learned trial judge means that the appellants are estopped by Millar’s conduct from denying the existence of an agreement to pay the amount of the valuation.
[Page 368]
I think the learned judge himself holds that Millar never intended to enter into such an agreement; and I think it does not appear that Millar understood that the other parties thought he was entering into such an agreement or that they in fact thought so. If they had thought so and intended to rely upon it is difficult to suppose that they would not have put the agreement in writing. My strong impression is, and indeed I think it is the proper conclusion, that Mr. Kerr thought the course taken was strictly regular and the Appellate Division has upheld his view. I think he was wrong and that this action as framed fails.
I say nothing of the charge of misconduct except this: Assuming Mr. Garland’s honesty to be unimpeachable he has himself to thank for the suspicions which his conduct aroused.
It does not follow that the respondent should be dismissed empty handed. I agree with my brother Idington in thinking that the principle of Cameron v. Cuddy applies, and I concur in his proposal as to the disposition of the appeal.
ANGLIN J. (dissenting).—Except in regard to the objection that, as the respondent’s building occupied two parcels of land held under separate leases and notice was given for a distinct valuation under each lease, the valuators should have made two distinct valuations and should not have fixed one sum to be paid for the building as a whole, which seems to require further consideration, I fully concur in the disposition made of this case in the provincial courts.
[Page 369]
That the leases provided for a valuation and not for an arbitration is res judicata between the parties, Re Irwin and Campbell.
Notwithstanding Mr. Tilley’s ingenious and plausible argument, it is quite clear that there was no ground for his attack on the valuator Garland (nominated by his own client) as a person illegally biased for the respondent and interested in his success. There was no connection of any kind between Garland and the respondent until after the valuators had determined upon, and communicated to the parties, the amount of their valuation; Re Underwood and Bedford and Cambridge Railway Co.; and, while it is to be regretted that relations between them arose before the valuation was formerly completed, they were probably of such a character as would not have affected the validity of the valuation had they arisen earlier. Drew v. Drew. There is nothing whatever to suggest that Garland was subject to any improper influence in making the valuation.
The obtaining from the respondent, probably in the absence of any representative of the appellant, of a statement of the lowest value which he would place on his building, though indiscreet, would appear to have been within the right of the valuators if, indeed, it was not something which was warranted by the views that had been expressed to them by the appellant’s solicitor as to the scope of their duties and the methods by which they should be discharged. At all events it is quite clear upon the evidence of all three valuators that, as the direct result of their having re-
[Page 370]
ceived the respondent’s statement, the figure at which they made their valuation was lower by several thousand dollars than it otherwise would have been. Of that the appellant cannot very well complain.
I am also satisfied that the appellant had every reasonable opportunity to furnish the valuators with such information as her solicitor thought it was in her interest that they should have. If he omitted to call an expert witness to answer the statements made by Waggett and Pickard as to the value of the building it was because the opinion of the expert Smith whom he consulted, if communicated to the valuators, would have confirmed the estimates of Waggett and Pickard.
Smith’s opinion was communicated to Garland, the valuator chosen by the appellant, but not to the other valuators, and it goes far to establish that the valuation in appeal was not excessive.
In fine, no case has been made for impeaching the valuation on any ground of bias, interest, unfairness or misconduct. There is perhaps a little more difficulty in the question whether the valuation of the building as a whole can be sustained.
It cannot, in my opinion, be supported on the consent given by counsel for the appellant. Without at all suggesting wilful falsehood on the part of Mr. Millar, I feel bound to accept the finding of fact in that portion of the judgment of the learned trial judge in which he says:—
The witnesses who testified upon this question are all men of unassailable integrity, men in whom I would place implicit credit. But, unfortunately, there is a clear conflict of testimony upon this one point, and I only conclude that there is an unintentional mistake somewhere. There is a strong preponderance of testimony to the effect that it was distinctly understood and agreed by all parties that this building should be valued as one building—“as a whole,” as it is expressed. The defendant must abide by this.
[Page 371]
Moreover, Mr. Millar was present when the valuation was formally executed by the valuators. He knew that it was a single valuation of the building as a whole and he took no exception to this course being followed. He had apparently instructed his own expert, Smith, to value the building as a whole. Indeed his conduct throughout the proceedings is consistent only with his knowledge of, and assent to, what the valuators were doing.
But while I think, with respect, that this conclusion of fact should not have been disturbed on appeal, I incline to think the view that neither as counsel in this non-litigious and extracurial matter; 2 Hals. L. of E., 241; nor as solicitor, Chinnock v. Marchioness of Ely, could Mr. Millar, without express authority, of which there is no evidence, by his consent bind his client to forego any substantial advantage which she might derive from the making of separate valuations under the two leases. In the view I take, however, it is unnecessary to determine this question.
It was, no doubt, the right of the appellant, but for the circumstances to which I shall presently allude, to have had a separate valuation under each of the leases. If the result of making separate valuations of the two parts of the building would have been substantially more advantageous to her than that reached by valuing the building as a whole, she would, in my opinion, be entitled to have the valuation which has been made treated as invalid and ineffectual. But I think in the present case there would have been no material difference between the result of the two methods of valuation such as would render that course necessary.
[Page 372]
In delivering the judgment of the Appellate Division Mr. Justice Hodgins says:—
I am not impressed with the idea, only faintly developed in the evidence, that this severance really destroys the usefulness of the building. It is admitted that the store can be reconstructed at a reasonable cost, and an examination of the plans filed shews that 14 feet is sufficient to provide for a store and an independent entrance as well.
If this view be sound the difference in the net result between the valuation of the building as a whole and separate valuations of its two component parts would be the cost of the alterations necessary to permit of each part being used as a separate building.
But there is another aspect of this case which indicates that even this difference did not in fact exist. The appellant was acquiring both parts of the building and she was obtaining it intact and as a whole. The possibility of her being able to arrange with her immediate landlords to obtain the benefit of holding or disposing of the building as a whole was something which the valuators would properly take into account. Although they are expropriation cases, I see no good reason why the principle underlying the decisions in Re Lucas and Chesterfield Gas and Water Board, and Cedars Rapids Manufacturing and Power Co. v. Lacoste, should not be applicable to a valuation between a tenant and his landlord who is taking over the tenant’s building on the expiry of a lease, subject, however, to this important difference that, in the case of the expired lease, it is not, as in expropriation proceedings (as the cases cited shew), the value of the property to the person relinquishing it which is to be fixed, but its value to the landlord, who is the party taking it over, or to his incoming tenant. Of course that value must include
[Page 373]
the potentialities of the property in the landlord’s hands and where he has already made the realization of a potentiality a certainty for himself I can see no reason why the valuation should not proceed on the basis of such potentiality having been realized, since it is the value of the building to him that is to be fixed—“the amount proper to be paid by the lessor to the lessee for the building.” There is some evidence—slight, no doubt, but I think sufficient—that the appellant had succeeded in advantageously disposing of the building as a whole before the valuation proceedings now under review took place. This fact, asserted and not seriously disputed at bar, appears to have been known to all parties and it probably accounts for Mr. Millar’s readiness—otherwise, as Mr. Justice Hodgins points out, difficult to understand—to consent to a single valuation of the building as a whole, which he seems afterwards to have forgotten so completely. The value of each part of the building to the appellant was not that of a portion which might have to be severed and dealt with independently, but that of a part destined to continue to be used, so far as she was concerned, as a portion of the building as a whole. The sum of the value to the appellant of the two component parts of the building erected respectively on the two parcels of leasehold land must under these circumstances have equalled the value of the building as a whole.
I would, for these reasons, affirm the judgment of the Appellate Division.
Appeal allowed with costs.
Solicitors for the appellant: Millar, Ferguson & Hunter.
Solicitors for the respondent: Kerr, Bull, Shaw, Montgomery & Edge.
4 Ont. W.N. 1562; 5 Ont. W.N. 229.
Email this Content