St. Mary's Young Men's Society v. Albee, (1910) 43 SCR 288

Supreme Court of Canada

St. Mary's Young Men's Society v. Albee, (1910) 43 S.C.R. 288

Date: 1910-03-11

Saint Mary's Young Men's Total Abstinence and Benevolent Society (Plaintiffs) Appellants;

and

Edward F. Albee and Others (Defendants) Respondents.

1910: February 17, 18; 1910: March 11.

Present: Sir Charles Fitzpatrick C.J. and Davies, Idington, Duff and Anglin JJ.

ON APPEAL FROM THE SUPREME COURT OF NOVA SCOTIA.

Lease—Construction of covenant—Taxes—Partial exemption.

A society owned a building worth about $20,000 which, by the statute law of the province, was exempt from municipal taxation so long as it was used exclusively for the purposes' of the society. A portion of the building having been used at intervals for other purposes, it was assessed at a valuation of $1,000 and the society paid, the taxes thereon for some years. Such portion was eventually leased for a term of years to be used for other purposes than those of the society, and the valuation for assessment was increased to $10,000. The lease contained this covenant:—

"The said lessees * * * shall and will well and truly pay or cause to be paid any and all license fees, taxes or other rates or assessments which may be payable to the City of Halifax, or chargeable against the said premises by reason of the manner in which the same are used or occupied by the lessees hereafter, or which are chargeable or levied against any property belonging to the said lessees (the said lessor, however, hereby agreeing to continue to pay as heretofore all the regular and ordinary taxes, water rates and assessments levied upon or with respect to said premises, and the personal property thereon belonging to the lessor )."

The society was obliged to pay the taxes on such increased valuation and brought action to recover the amount so paid from the lessees.

Held, Fitzpatrick C.J. and Anglin J. dissenting, that the taxes so paid were "regular and ordinary taxes" which the lessors had agreed to pay as theretofore and the lessees were not liable therefor on their covenant.

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APPEAL from a decision of the Supreme Court of Nova Scotia affirming the judgment of the trial judge dismissing the plaintiffs' action.

The material facts are sufficiently stated in the above head-note.

O'Connor K.C. for the appellants.

Newcombe K.C. for the respondents.

The Chief Justice (dissenting).—I am of opinion that the appeal should be allowed for the reasons given by Mr. Justice Anglin.

Davies J.—For the reasons given by Chief Justice Townshend when delivering the majority judgment of the Supreme Court of Nova Scotia, I am of the opinion that this appeal should be dismissed with costs.

I think the trial judge, Longley J., neatly and fairly stated the true meaning of the covenant in question in the following words:

It means that the lessor is to pay the regular city assessment on the property demised and that the defendants are to meet any special impositions which the city shall by law impose upon them on account of their business. For instance, if the city should impose a license fee upon public shows then the defendants must pay it. If by special legislation they should obtain the right to levy a special tax or assessment upon all moving picture shows then defendants must bear all of these even if they should be made a lien on the building in which such shows were carried on.

Idington J.—The City of Halifax has to assess property according to its value but must exempt that of such benevolent societies as the appellant when exclusively used by the society.

The charter, by section 505, enables the city council to pass ordinances relative to entertainments and

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licenses for or in respect of same. This, coupled with other sections, is wide enough to enable a fee tax or rate to be imposed in respect of such entertainments either per period of time of occupancy, or number of exhibitions.

Licenses for such purposes, it was admitted in argument, must be taken out not by the lessees, but by the owner of the building in which the entertainments are held and hence there are secured thereby to the city the payment of the license fees and obedience to all city ordinances regarding the manner of carrying on such business.

The following covenants were inserted in the three year lease in question to carry on theatrical exhibitions—

The lessees will well and truly pay, or cause to be paid, any and all license fees, taxes or other rates of assessment which may be payable to the City of Halifax, or chargeable against the said premises by reason of the manner in which the same are used or occupied by the lessees hereafter, or which are chargeable or levied against any property belonging to the said lessees (the said lessor, however, hereby agreeing to continue to pay as heretofore all the regular and ordinary taxes, water-rates and assessments levied upon or with respect to said premises, and the personal property thereon belonging to the lessor).

Much confusion has been created in the interpretation of these covenants by entirely overlooking the power of the city to impose such fees or other like taxes, by the means above referred to.

The first covenant above quoted, obviously referred to this power, and its past exercise as well as its future possible exercise and extension.

The very words used, "license fees," etc., "chargeable," etc., "by reason of the manner in which the same are used" seem attributable to the possibilities under the powers I refer to for imposing license fees which are certainly a form of tax.

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Inasmuch as the appellant by virtue of the city ordinance had to apply for and get the license, yet according to the bargain was not to bear the tax therefor, it was necessary for it to protect itself in regard to repayment of that or any like imposition, and did so by this indemnifying covenant.

At the same time the words might be wide enough to cover other rates, and the lessors having agreed to pay the ordinary taxes it was necessary to see that the indemnity did not cover too much, and hence the second part binding appellants to pay the ordinary rates.

A mere minute verbal analysis such as put forward in argument without having due regard to the business the parties had in hand is, I submit, of little value.

The lessees agreed to pay all taxes incidental to their business and the lessors all incidental to their ownership.

It was an incident of such ownership that, unless exclusively occupied or as interpreted so far as not exclusively occupied, their property was subject to taxes. This interpretation by the assessing power of this exemption may or may not have been the correct one.

It certainly was the equitable one. And I have no doubt it was when so interpreted properly applied.

The hall that only brought in rental for a dozen nights in a year was in truth not worth more than a thousand dollars.

The hall that brought in ten times as much per year was worth ten thousand dollars.

Such rates as a varying assessment fixed from time to time were the ordinary taxes the lessor had to pay, and the word “heretofore,” if reasonably applied,

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means no more than this; as we have paid in the past  according to current assessable value we will pay in the future.

It may not be quite accurate according to all the rules of law and logic for people so to think and so to speak.

It accurately represents, I am convinced, the sound common sense of the assessor and Court of Revision of Halifax.

We have not to decide the question of law for them, but we have to try and understand what they were about, and what being their method of doing things must have been in the minds of the contracting parties hereto who would in adjusting their business accept and act upon the well-known understanding of these authorities relative to the law, and the measure they were likely to apply in assessing in the ordinary way this piece of property.

This was not the only property of the kind in Halifax concerning the use of which the like questions arose and had to be solved, for the Masonic Hall and Oddfellows' Hall the assessor says were dealt with by a similar method.

I have no doubt that what the parties intended has been carried out by the judgments of the courts below.

And if I had to treat the matter in the way of trying to give to each word its literal meaning and give effect to every word the result would be the same.

It would be impossible in any way one can try to give such an interpretation or apply such a construction not to leave a doubt of whether or not the exact shade of meaning of each word had been properly assigned.

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The strain put upon one or two words by the appellants' method destroys the proper meaning of others.

But of one thing I feel sure and that is, that if taxes upon an assessment of only one thousand dollars a year had been deliberately agreed upon it should have been inserted, and, I think, would have been inserted.

Those dealing with the business of finding a clear mistake made in this regard should, on its discovery, have taken steps to rectify the mistake rather than their method of settling it.

I think the appeal should be dismissed with costs.

Duff J.—I concur in the opinion of Mr. Justice Davies.

Anglin J. (dissenting).—The plaintiffs claim indemnity from the defendants in respect of certain taxes levied by the City of Halifax on a building owned by the plaintiffs and leased to the defendants. The alleged right to indemnity arises upon the following covenant contained in the lease:

The said lessees for themselves, etc., covenant, promise and agree to and with the said lessor, etc., that the said lessees, etc., shall and will well and truly pay or cause to be paid to the said lessor, its successors and assigns * * * any and all license fees, taxes or other rights or assessments which may be payable to the City of Halifax or chargeable against the said premises by reason of the manner in which the same are used or occupied by the lessees hereafter, or which are chargeable or levied against any property belonging to the said lessees (the said lessor, however, hereby agreeing to continue to pay as heretofore all the regular and ordinary taxes, water-rates and assessments levied upon or with respect to said premises, and the personal property thereon belonging to the lessor.

In the special Act incorporating the plaintiff society it is provided that

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all real and personal property exclusively used for the purposes of the society shall be exempted from taxation.

It has been established by evidence admitted at the trial that prior to the making of the lease to the defendants the plaintiffs were assessed upon the sum of $1,000 in respect of the building in question, the value of which is said to be about $20,000. The reason for this partial taxation of the property, notwithstanding the exemption provision, was that the society occasionally let a part of their building for other purposes and the assessor in respect of such user deemed the property liable to assessment. Upon appeal from a larger assessment made by the assessor, the amount for which the property should be assessed, having regard to such occasional user by other persons, was fixed at the sum of $1,000. After the lease in question had been made the assessment of the building was increased from $1,000 to $10,000 and the assessor in giving evidence says that this increase was because part of the building

was let out for a large  rent and occupied permanently and continuously.

Whether or not the fact that a portion of the building was used for other purposes entirely disentitled the plaintiffs to any exemption from taxation under their charter is a question not before us. The only question for determination upon this appeal is whether in respect of the taxes on the increased assessment, amounting to $9,000, the plaintiffs are or are not entitled to indemnity from the defendants, and that question must be determined upon a proper construction of the covenant above quoted.

Much attention has been given, and properly, to the meaning and effect of the words

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by reason of the manner in which the same are used or occupied by the lessees hereafter.

If these words affect and qualify the entire covenant of the lessees it is, I think, obvious that they undertook by that covenant to pay only taxes imposed by reason of something peculiar in the manner of their use or occupation of the premises. It is, therefore, essential to determine whether this adverbial phrase modifies merely the verb "may be chargeable," or modifies also the earlier verb, "may be payable."

The two clauses in the covenant descriptive of the taxes of the lessors which the lessees agree to pay are separated by the disjunctive "or." Having regard to this fact and to the grammatical rule—ad proximum antecedent fiat relatio—the adverbial phrase would primà facie qualify only the verb, "may be chargeable." Otherwise there would appear to be no reason for the use of "or" and the clauses would be read as if "and" rather than "or" had been used, which should not be done without some cogent reason. Mersey Docks and Harbour Board v. Henderson Brothers[1], at p. 603.

If, however, the ordinary grammatical rule of construction to which I have referred be disregarded, it certainly cannot be said that the adverbial phrase "by reason of, etc.," unquestionably qualifies both the members of the covenant which precede it ; at most it would be doubtful whether it should be deemed to apply to and modify one or both of the preceding clauses.

If it be taken to modify both clauses and if, as I have indicated, the result of such an application of the adverbial phrase would be that the lessees covenanted to pay only special taxes levied by reason of

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something peculiar to the manner of their use or occupation of the premises, it is clear that they would thereby assume no liability for "regular or ordinary taxes." Upon that construction of the covenant the excepting parenthetical clause at the end would have no application. That the draughtsman of the lease thought that he had by the earlier part of the covenant imposed upon the lessees some obligation in respect of "regular and ordinary taxes" seems clear; otherwise he would not have deemed it necessary to make the exception contained in the concluding parenthetical clause. The suggestion that this exception was inserted solely ex majori cautelâ and is mere surplusage does not commend itself to my judgment as a sufficient explanation of its presence in the covenant. Only in the absence of any other satisfactory explanation of its raison d'être would I deem this explanation sufficient. Ditcher v. Denison[2], at p. 337. Craies' Statute Law, 101 et seq.

If, on the other hand, the adverbial phrase,

by reason of the manner in which the same are used or occupied by the lessees,

relates only to the particular clause in which it is found and modifies only the verb, "may be chargeable," and not the earlier verb, "may be payable," it would follow that by the earlier member of the lessees' covenant they undertook to pay taxes generally, i.e., regular and ordinary taxes, and that by the second member of their covenant, they undertook also to pay any taxes specially levied by reason of their peculiar user or occupation of the premises. So read the lessees' covenant would impose upon them an obligation which might require that the lessors'

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liability as to some portion of the regular and ordinary taxes should be saved by express exception, if that were the intention of the parties, and the presence of the parenthetical proviso or exception is thus satisfactorily accounted for. That a proviso may be used as a guide in the selection of one or other of two possible constructions of the covenant in which it occurs is well established. West Derby Union v. Metropolitan Life Assurance Society[3], at pp. 653, 655.

It is, however, objected that the exception in favour of the lessees is of all regular and ordinary taxes and that it is therefore inconsistent with and repugnant to a construction of the lessees' covenant which would impose upon them any obligation of indemnity in respect of regular and ordinary taxes. This argument overlooks entirely the important words in the exception, "as heretofore." The meaning of these words requires to be elucidated by evidence of the circumstances antecedent to the making of the lease, because the exception is of regular and ordinary taxes "as heretofore" paid. For this purpose the evidence to which I have above referred was, I think, clearly admissible, and that evidence shews that before the lease, i.e., "heretofore," the lessors were paying in respect of regular and ordinary taxes, an amount levied on an assessment of $1,000. It is, in my opinion, reasonably clear, reading the whole covenant in the light of the evidence of the circumstances in which it was made, that what the lessors intended to continue to pay in the future, was a portion of the regular and ordinary taxes levied on an assessment equivalent to that upon which they had theretofore paid, and

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that the purpose of the exception was to take out of  the general obligation assumed by the lessees in respect of taxes so much of the future regular and ordinary taxes as should represent what had been theretofore paid on account of such taxes by the lessors.

It is a fundamental canon of construction that effect must, if possible, be given to every clause and to every word of an instrument. By no other construction except that which I have indicated can due effect, in my opinion, be given to the parenthetical exception and to the words "as heretofore" found in that exception. If the covenant of the lessees imposes no liability for regular and ordinary taxes upon them the exception serves no purpose; if the exception itself is construed as including all regular and ordinary taxes the words "as heretofore" are given no meaning or effect

For these reasons I am of opinion that the construction placed on the covenant in question by Mr. Justice Meagher and Mr. Justice Laurence in the Supreme Court of Nova Scotia was correct and that this appeal should be allowed with costs and judgment entered in the court below for the appellants also with costs.

Appeal dismissed with costs.

Solicitor for the appellants: T. J. N. Meagher

Solicitor for the respondents: W. H. Fulton.