Dental v. Sperry Rand, [1971] SCR 266

Supreme Court of Canada

Dental v. Sperry Rand, [1971] S.C.R. 266

Date: 1971-02-01

The Dental Company of Canada Limited Appellant;

and

Sperry Rand Canada Limited Respondent;

and

Her Majesty the Queen in Right of the Province of Ontario as Represented by the Minister of Public Works Respondent.

1970: November 12; 1971: February 1.

Present: Martland, Judson, Ritchie, Spence and Pigeon JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.

Landlord and tenant—Head lease—Rights of renewal—Lessee entering into agreement to lease—Whether rights of renewal granted to lessee under head lease accrued to sublessee under sublease.

By lease dated March 26, 1954, L leased certain property to RR for a term of 25 years ending on December 31, 1978. RR obtained the consent of L and entered into an agreement to lease dated June 9, 1964, by which the premises were to be sublet to D for a term of 10 years and one-half month, less one day, commencing on December 16, 1968, and expiring on December 30, 1978.

The agreement provided for the excution of a sublease which was attached as Schedule “B”, and contained in cl. 3 a term (not included in the sublease itself) entitling D to require RR to exercise its renewal privileges as set forth in the head lease. The sublease itself contained a term entitling D “to all the benefit and services and privileges used and enjoyed by [RR] under the terms of the Head Lease”.

The land in question had been sublet by RR to the Crown until December 15, 1968. The Crown subsequently purchased L’s reversionary interest in the land and by agreement dated August 13, 1968, D agreed to sell to the Crown all its interest in the premises.

SR succeeded RR in 1966, and by agreement dated December 16, 1968, the premises were sublet to D upon exactly the same terms as those contained in Schedule B to the 1964 agreement to lease.

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D moved to have its rights under the head lease and sublease declared, and succeeded at trial in obtaining a declaration that the rights of renewal granted to RR under the head lease accrued to D under the sublease. On appeal, this judgment was reversed. D appealed to this Court from that decision.

Held: The appeal should be dismissed.

The questions submitted for determination could only be answered affirmatively if (a) the sublease and lease to D were assignments of the full unexpired term of the head lease, or (b) cl. 3 of the agreement to lease and the benefit and services and privileges clause of the sublease combined to make D the lessee of the renewal terms.

The reversion of one day expectant upon the expiry of the term granted to D in the lease and sublease prevented the sublease from becoming an assignment to D.

Clause 3 of the agreement to lease only entitled the appellant to force SR to exercise its renewal privileges, which then might be the subject of a further agreement between the parties, but it did not in itself allow D to claim further rights in the leasehold. The conferral of all benefit, services and privileges enjoyed by SR under the head lease to the appellant in the sublease could not be interpreted so as to grant the right of renewal to D also, as this would be inconsistent both with the interpretation placed upon cl. 3 of the agreement to lease and with the express reservation of one day to SR.

APPEAL from a judgment of the Court of Appeal for Ontario, allowing an appeal by the respondent Sperry Rand Canada Limited from an order of King J., upon motion made by the appellant for an order declaring the rights of the parties under a certain agreement to lease and under a certain lease. Appeal dismissed.

R.J. Rolls and L.D. Roebuck, for the appellant.

W.J. Smith, Q.C., and P. Ridout, Q.C., for the respondent Sperry Rand Canada Limited.

The judgment of the Court was delivered by

JUDSON J.—The appellant, The Dental Company of Canada Limited, is presently the sub-

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lessee of land in the City of Toronto which was owned by the London Life Insurance Company but is now owned by the respondent, Her Majesty the Queen in right of the Province of Ontario as represented by the Minister of Public Works. The respondent, Sperry Rand Canada Limited, is the successor to Remington Rand, which was the lessee and sublessor of the property. The Dental Company moved to have its rights under the head lease and sublease declared, and were successful at trial in obtaining a declaration that certain rights of renewal granted to Remington Rand under the head lease accrued to the Dental Company under the sublease. On appeal, this judgment was reversed. The appellant now appeals from that decision.

By lease dated March 26, 1954, The London Life Insurance Company leased the property in question to Remington Rand for a term of 25 years ending on December 31, 1978. This head lease contained the following terms which are relevant to the present proceedings:

3. The lessee covenants that it will not assign or sub-let the said premises without having first obtained the consent in writing of the Lessor, provided, however, that said consent shall not be unreasonably withheld.

18. …the Lessee shall, at its option, have the privilege of taking a new lease of the demised premises for each of one or more or all of four (4) further consecutive terms of five (5) years each, at a yearly rental which shall be equal to One and One-half percentum (1½%) of the cost of the demised premises, which sum shall be payable in equal monthly instalments, in advance, and otherwise upon and subject to the terms and provisions of this indenture. If and to the extent that Remington Rand shall elect to exercise that privilege, it shall, with respect to each of the said four (4) renewal terms of five (5) years each, give notice in writing to the Lessor not later than three (3) months prior to the expiry of the said term, or of any one or more of the said four (4) renewal terms of five (5) years each; which notice may be given by the Lessee not more than six (6) months prior to the dates of the expiry of each such term; whereupon the Lessor will, at the cost and expense of the Lessee, grant such new lease for a further period of five (5) years from the expiry of the term of the then current lease of the demised

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premises. In the event of such notice being given by the Lessee of such desire to renew for a further term of five (5) years, the Lessee covenants with the Lessor to accept such renewal lease.

24. And it is expressly agreed between the Parties hereto that all grants, covenants and agreements, rights, powers, privileges and liabilities contained in this Indenture shall be read and held as made by and with and granted to and imposed upon the respective parties hereto, their successors and assigns, and these presents shall be read and construed the same as if the words successors and assigns had been inscribed in all proper and necessary places.

Remington Rand obtained the consent of London Life and entered into an agreement to lease dated June 9, 1964, by which the premises were to be sublet to the Dental Company for a term of 10 years and one-half month, less one day, commencing on December 16, 1968, and expiring on December 30, 1978.

The agreement provided for the execution of a sublease which was attached as Schedule “B”, and contained in clause 3 a term which was not included in the sublease itself. This clause reads:

3. At any time not later than three (3) months prior to the expiration of the term of the sublease to the Tenant the Tenant may by notice in writing to Remington require Remington to exercise the renewal privileges set forth in Paragraph 18 of the Head Lease which Remington covenants and agrees to do.

The sublease itself contained the following term, the interpretation of which, along with clause 3 of the agreement to lease, is the subject of this appeal:

IT IS FURTHER UNDERSTOOD and agreed that the Dental Company shall be entitled to all the benefit and services and privileges used and enjoyed by Remington under the terms of the Head Lease so far as the same shall be applicable to the demised premises.

The land in question had been sublet by Remington Rand to the Crown until December 15, 1968. The Crown subsequently purchased London Life’s reversionary interest in the land and by agreement dated August 13, 1968, the Dental Company agreed to sell to the Crown all its interests in the premises. The latter transaction

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has not been closed, pending the outcome of these proceedings. Understandably, the Crown supports the position of the Dental Company.

Sperry Rand succeeded Remington Rand in 1966, and by agreement dated December 16, 1968, the premises were sublet to the Dental Company upon exactly the same terms as those contained in Schedule B to the 1964 agreement to lease.

Four questions were submitted to the Court for determination:

1. Whether The Dental Company of Canada Limited has by virtue of the said agreement to lease and the said lease all the rights and privileges granted to Remington Rand Limited under the Head Lease referred to in the said agreement to lease and the said lease;

2. Whether such rights and privileges include the right to renewal granted to Remington Rand Limited under the said Head Lease;

3. Whether Sperry Rand Canada Limited is obliged to exercise the renewal privileges granted to it in Paragraph 18 of the said Head Lease if and when required to do so by The Dental Company of Canada Limited in accordance with Paragraph numbered 3 of the said agreement to lease;

4; Whether in the event that The Dental Company of Canada Limited does require Sperry Rand Canada Limited to exercise the renewal privileges granted to it in Paragraph 18 of the said Head Lease, the benefit of the renewal term will accrue to The Dental Company of Canada Limited?

These four questions were, in the first instance, answered in the affirmative which had the effect of entitling the Dental Company, not Sperry Rand, to exercise the option for the successive five-year renewals as contained in the head lease. The Court of Appeal reversed this finding, answering questions 1, 2 and 4 in the negative.

In his reasons for judgment given orally in the Court of Appeal, Laskin J.A. (as he then was) pointed put that the questions could only be answered affirmatively if

(a) the sublease and lease to Dental were assignments of the full unexpired term of the head lease, or

(b) clause 3 of the agreement to lease and the benefit and services and privileges clause of

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the sublease combined to make Dental the lessee of the renewal terms.

The reversion of one day expectant upon the expiry of the term granted to Dental in the lease and sublease prevents the sublease from becoming an assignment to Dental. As to the second possible ground, clause 3 of the agreement to lease only entitled the appellant to force Sperry Rand to exercise their renewal privileges, which then might be the subject of a further agreement between the parties, but it does not in itself allow the Dental Company to claim further rights in the leasehold. The conferral of all benefit, services and privileges enjoyed by Sperry Rand under the head lease to the appellant in the sublease cannot be interpreted so as to grant the right of renewal to Dental also, as this would be inconsistent both with the interpretation placed upon clause 3 of the agreement to lease and with the express reservation of one day to Sperry Rand.

I am in complete agreement with the judgment and reasons of the Court of Appeal and would dismiss the appeal with costs.

Appeal dismissed with costs.

Solicitors for the appellant: Fasken & Calvin, Toronto.

Solicitors for the respondent, Sperry Rand Canada Limited: Manning, Bruce, Macdonald & Macintosh, Toronto.

Solicitors for the respondent, Her Majesty The Queen: Day, Wilson, Campbell, Toronto.