Supreme Court of Canada
Alexander Brown Milling and Elevator Co. v. Canadian Pacific Ry. Co., (1910) 42 S.C.R. 600
Date: 1910-02-15
The Alexander Brown Milling and Elevator Company (Defendants) Appellants;
and
The Canadian Pacific Railway Company (Plaintiffs) Respondents.
1909: November 26, 29; 1910: February 15.
Present: Sir Charles Fitzpatrick C.J. and Davies, Idington, Duff and Anglin JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.
Lessor and lessee—Covenant to renew—Severance of term—Consent of lessor—Enforcement of covenant—Expropriation—Persons interested.
The covenant for renewal of a lease for a term of years is indivisible and if the lessee assigns a part of the demised premises neither he nor his assignee can enforce the covenant for renewal as to his portion.
The assignment of part of the leasehold premises included an assignment of the right to renewal of the lease for such part and the lessor executed a consent thereto.
Held, that he did not thereby agree that his covenant for renewal would be exercised in respect to a part only of the demised premises.
In the case mentioned the lessee who has severed his term cannot, when the land demised is expropriated by a railway company, obtain compensation on the basis of his right to a renewal of his lease.
Judgment of the Court of Appeal (18 Ont. L.R. 85) affirmed.
APPEAL from a decision of the Court of Appeal for Ontario, reversing the judgment at the trial in favour of the defendant company.
The City of Toronto leased certain water lots to the Toronto Grape Sugar Co. for a term of twenty-one
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years, from July 1st, 1881, and covenanted that should the lessees at the expiration of the term, desire a renewal and give notice thereof to the lessors, the latter would renew for a like term or pay for improvements. This lease afterwards became vested in one Gooderham, who, in 1889, with the assent of the city in writing, sold a part of the leasehold premises to the Canadian Pacific Railway Co., and the remainder was assigned with the like assent to the appellants in 1902, who shortly after gave notice to the city that they desired a further lease of the lots less the portion taken by the railway company and remained in possession for some time after the lease expired without notice that their request would be denied.
In June, 1902, the railway company gave notice to the appellants of their intention to expropriate another strip of the leased lands and took the necessary steps to accomplish their purpose. The action in this case was to settle the question of the appellants’ right to compensation for the loss of a renewal of the lease for the portion of the land so taken.
The trial judge held that they were entitled to the renewal and, consequently, to the compensation claimed. His judgment was reversed by the Court of Appeal and the defendants then appealed to the Supreme Court of Canada.
Shepley K.C. and A.A. Miller for the appellants. The appellants were clearly entitled to a renewal unless barred by the severance. But a severance of the term does not prevent a reversioner from enforcing covenants in the lease: Piggott v. Middlesex County Council; Winter’s Case; and the same principle applies here.
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Armour K.C. and MacMurchy K.C. for the respondent. To entitle the appellants to compensation they must have something which they could convey. In re Morgan and London & North Western Railway Co.; The Queen v. Poulter; here they had nothing as the right to renewal cannot be severed: Finch v. Underwood; Cook v. Jones; Barge v. Schick. Even if it could they have no absolute right to renewal, as the city may elect to pay for improvements.
THE CHIEF JUSTICE.—I am of opinion that this appeal should be dismissed with costs.
DAVIES J.—I concur in the opinion of Mr. Justice Anglin.
IDINGTON J.—This appeal raises the question of what rights an assignee under an assignment by the lessee of a part of the demised premises comprised in a renewal lease acquired under and by virtue of the right of renewal, can have to further renewal, in the absence of any express provision in his favour therefor or anything from which an implication may be drawn conferring any such right upon such an assignee of a part.
The City of Toronto demised to the Toronto Grape Sugar Company certain lands for a term of twenty-one years from the 1st July, 1881.
The lease contained, besides the usual covenants to be found in such a lease, the following:
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The said lessors covenant with the said lessees for quiet enjoyment, and also that if at the expiration of the term hereby granted or of any future term of twenty-one years the said lessees, their successors or assigns shall be desirous of taking a new lease of the premises hereby granted for a further term of twenty-one years, having conformed to all the terms and conditions herein mentioned and set forth, and having given to the council of the said corporation thirty days’ notice in writing of such desire, the said lessors will, at the costs and charges of the said lessees, their successors or assigns as aforesaid, grant such new lease for the further term of twenty-one years from the determination of the present or existing lease at such a rental per foot per annum as the said premises shall then be worth, irrespective of any improvements made by the said lessees, their successors or assigns, such value to be determined as hereinafter provided for determining the value of the lessees’ improvements. Provided, that if the said lessors do not see fit to renew this or any future lease the said lessees, their successors or assigns, shall receive from the said lessors such reasonable sum as the buildings and permanent improvements made and erected by the said lessees shall then be worth, such value to be determined by three arbitrators nominated in writing for that purpose as follows:—
and then sets forth the method of constituting an authority to determine such questions as contemplated herein and the principles upon which such constituted authority should proceed and the means for enforcing its determination.
The assignees of this lease assigned, first, a part of the land so demised and the demise with right of renewal as to the part so assigned to one party and later assigned the rest of the land so demised, and the demise thereof with right of renewal to another party under whom the appellants claim.
Did the appellants acquire thereby any legal or equitable right to a renewal of the lease, confined to and in respect of this part alone of the lands in the original lease?
They only acquired such rights as the above quoted covenant for renewal gave him.
It seems impossible to so read such a covenant, which by its express words refers only to the whole, as
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to make it applicable only to a part thereof. How can we (when we go beyond these words and try to find some implication therein or in the rest of the contract making it or them relative to a part only), apply distributively all the conditions and incidents to be dealt with in relation to the whole, as if in any way relevant to a diversity of notices to be given, by divers persons, and of rents to be reserved, to say nothing of covenants to be entered into, and last, but not least, the right of distress? The simple method and principles to determine the conditional rights relative to the whole and the alternatives of refusal and payments for buildings thereon seem unfitted and inapplicable to the complex case of parts and possibly numerous parts.
I can find no shadow of warrant for claiming a right of renewal to the assignee of a part.
That should end the appellants’ claims as far as I am concerned, but for what they urge is to be drawn from the terms of the consents which were given by the respondents to these assignments.
There was the usual proviso in the lease for its forfeiture on the event of assignment or sub‑letting without the leave of the landlord.
The consent to the first is as follows:
The corporation of the City of Toronto in accordance with an order of the Committee on Property of the said corporation made on the 13th day of April, A.D. 1893, being Minute No. 149 and pursuant to By-law No. 2445, hereby consents to the annexed lease and agreement dated the 5th day of February, A.D. 1889, but such consent shall not be considered or construed to be a waiver of the covenant in the original lease of the within described leasehold premises from the said corporation to the Toronto Grape Sugar Company not to assign and shall not extend or be construed to extend beyond the permission to execute the annexed indenture, nor shall it be taken to sanction the removal of any improvements of any kind now or that may hereafter be placed upon the said premises.
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The second is somewhat more lengthy, but in my view no more effective for the appellants’ purpose than this.
Besides, the first instrument which this one relates to lends itself by its express language as to a renewal much more readily than does that of the second one to aid the argument submitted on this appeal.
It is said that as these instruments profess to assign the right of renewal therefore we must hold these consents thereto respectively as of a contractual nature extending the original obligation of the respondent and distributing its benefits.
Such, though not the language of the forcible argument addressed to us, must be taken in light of what I have said to be what it means or nothing.
We must always have regard to the business the parties had in hand. Obviously all that ever was intended was to avert a possible forfeiture.
Seeing the far-reaching results of holding otherwise, and the radical changes in the original contract to be thereby implied, I cannot find any such implication as reasonably within the contemplation of the parties to this consent.
Moreover, the possibility existed of the severance being got over by later assignments uniting the right to renewal in one person as a lessee who might claim the benefits of the right to claim a renewal of the term as a whole.
Indeed, having regard to the general powers of a municipal corporation, though no point was made of that, I suspect a by-law giving express authority to so modify the contract would likely be necessary.
In the view I have taken altogether apart from this last suggestion, I do not think it necessary to follow
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the matter in the many subsidiary conditions under and in relation to which the right is set up.
There is no foundation in law therefor, however hard or possibly unjust in light of what an ordinary business man might reasonably have expected.
Nor can I find any solid basis for the argument sought to be drawn from the alleged compulsory nature of the transfer to the Canadian Pacific Railway Company.
The appeal must be dismissed with costs.
DUFF J.—I agree that the appeal should be dismissed with costs. I concur in the reasons given by my brother Idington.
ANGLIN J.—The material facts are fully stated in the judgment of Mr. Justice Riddell.
I agree in his view that the rights of the parties
are to be determined as of the 21st September, 1903, as provided by statute 51 Vict. ch. 59, sec. 145, and now by R.S.C. [1906] ch. 37, sec. 192(2).
This, the learned judge says, was “admitted, and indeed the common case before me.” The subsequent transactions between the city and the railway company, and between the city and the defendants, have no bearing upon the question presented for adjudication, which is whether the defendants had or had not, on the 21st September, 1903, an interest in the lands expropriated by the railway company for which they are entitled to compensation. If the defendants then had a right to a renewal of the lease, which had expired on the 30th June, 1902, and were in a position to claim that this right should be enforced against their lessors in an action for specific performance,
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they had, in my opinion, an interest in respect of which they are entitled to compensation from the expropriating railway company.
On the authority of Ward v. City of Toronto—which, I may be permitted to say with respect, was, in my opinion, well decided upon the ground stated by Moss J.A., and by Meredith C.J.9, at p. 733, concurred in by Osler J.A.10—I am of the opinion that, had there been no prior severance of the term, the defendants would have been, on the 21st September, 1903, absolutely entitled to a renewal of their lease from the City of Toronto. They had given notice of their desire for renewal more than thirty days before the expiry of their lease. They had, in the meantime, remained in possession of the leasehold premises, and had not received any notice from the municipal corporation that it had elected against renewal, and would pay for improvements. This election the city would, I think, have been bound to make and to notify to its lessees before the expiry of their lease, or, at all events, within a reasonable time thereafter. If, as seems not improbable, the defendants remained in possession under the provisions of their expired lease10, at p. 228, per Maclennan J., two gales of rent had accrued due since its expiry. It seems to me impossible that, had there been no severance, the city, on the 21st September, 1903, could still have retained its right to elect against its covenant to renew. Unless the city had exercised its right of election against its covenant within the time allowed under the terms
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of the lease that covenant would have become absolute and the right of the defendants to renewal might have been specifically enforced.
The only refusal of the city was a refusal to renew as demanded by the Canadian Pacific Railway Company in respect of another part of the leasehold premises acquired by it some years before. With the consequences of the severance of the term then effected I shall presently deal. But, if there had been no such severance, or if, notwithstanding such severance, the original lessees had, in respect of the portion of the lands not alienated, a several right of renewal which passed to the defendants as assignees, it is impossible to treat the refusal to grant a renewal to the Canadian Pacific Railway Company as in any sense a refusal to grant a renewal to the defendants.
I am, therefore, with respect, of the opinion that the judgment in appeal cannot be supported on the ground on which I understand it to have been put by Mr. Justice Garrow.
But the judgment must, I think, be supported because of the severance of their term by the original lessees in 1889. They then agreed to sell part of their leasehold premises to the Canadian Pacific Railway Company, and this agreement was carried out by an assignment of lease in January, 1902.
By the agreement of 1889 the vendors agreed to sell all their right, title and interest in the lands to be conveyed “including all right of renewal of the lease in respect of such lands.” For the defendants it is contended that when the city consented to the execution of this agreement—as it did by writing under seal indorsed on the document—it thereby assented to an apportionment of the covenant for renewal. It was not argued
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that a covenant for renewal is apportionable by a lessee without the consent of his lessor; and, although it has been held that the assignee of part of leasehold premises may, without joining his co-assignees, recover damages from a mesne landlord for breach of a covenant to apply for and do his utmost to procure a renewal of the head lease, it by no means follows that a covenant on the part of the lessor to renew would confer upon an assignee of part of the leasehold premises a like right as against the lessor—still less a right to maintain an action for specific performance of the covenant.
At a later date (February, 1902) the original lessees sold and assigned the residue of their leasehold rights to the defendants, including
all right of renewal or payment for buildings or improvements in place of renewal.
To the execution of this assignment the lessors also assented, and it is contended that they thus recognized the covenant for renewal as still subsisting, and also again agreed to its apportionment.
The primary purpose of procuring the consent of the lessors to each of the assignments made by the original lessees was to avoid committing a breach of the lessees’ covenant not to assign or sublet without leave. But I have no doubt that, assuming that the effect of the severance would otherwise have been to entirely relieve the lessors from their covenant to renew, they effectively waived their right to take that position, because some right of renewal was unquestionably recognized by them as still subsisting, when, in February, 1902, they assented to the assign-
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ment to Brown, which expressly purported to give to him rights under the covenant for renewal in the lease.
It does not, however, follow that there was an assent by the city to an apportionment of its covenant such that, as a result of each assignment, the assignee became entitled by way of renewal to a separate lease of the part of the leasehold premises thereby transferred.
The transfer to each of the assignees was merely of the lessees’ right of renewal in respect of the part of the lands conveyed. That right was not for renewal as to these lands separately, but only as part of the entire leasehold premises. The landlords’ covenant was merely to give one renewal of the lease of the whole. Had the original lessees remained the owners of the entire leasehold premises no one would suggest that they could ask for separate renewal leases of the two parcels into which they divided the property.
Under the covenant to renew the tenant can only ask for such a lease as the landlord covenanted to grant.
Finch v. Underwood, per Mellish L.J., at p. 316. It is difficult to understand how he can by any act of his vest any other right in his assignees. The lessors’ burden might be much increased by the granting of such separate leases; their rights and remedies would be materially diminished.
It is quite consistent with the terms of the consents actually given that the only right of renewal on the part of the assignees to which the lessors assented was, in the first case, a right to be exercised by the lessees and their assignee jointly, and in the second, a right to be exercised jointly by the two assignees, to
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take a single new lease of the entire premises at a single rental for the whole of which both should in each case become liable. There is nothing in the documents to warrant a construction which would carry the obligation of the lessors or the rights of the lessees or their assigns further. It would require the substitution of a new and a different covenant on the part of the lessors to support the contention of the defendants, and the burden is upon them to establish that such a covenant was in fact entered into. This they have, in my opinion, not done.
Although notice demanding a renewal was given by the defendants in respect of the part of the leasehold premises assigned to them and a similar notice by the Canadian Pacific Railway Company in respect of the part held by it, there was no notice given on behalf of both or either of the assignees demanding a single renewal of lease of the entire premises. In the view I have taken of the proper construction and effect of the document in evidence, no notice was given to the lessors which complied with the condition attached to the covenant for renewal. This covenant, therefore, never became operative and for this reason neither of the lessees’ assignees became entitled to renewal.
Mr. Shepley urged that because the Ontario and Quebec Railway Company was in a position to expropriate the interest of the original lessees in the leasehold lands which they agreed to sell to the company in 1889, the transfer of that interest to the company should be regarded as made under compulsion of law. The railway company could not have expropriated the lessees’ interest alone. Their only right by this method was to acquire the fee. They certainly could
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not have obtained in expropriation proceedings any such agreement as they actually secured from the lessees. I, therefore, think it impossible that the transaction between the lessees and the railway company should be treated as the equivalent of a compulsory acquisition by the latter of these leasehold lands.
But if, notwithstanding these objections, the severance effected in 1889 may be treated as involuntary, I cannot see how that fact would justify the imposition upon the lessors of a covenant for renewal other than and different from that which they had made. This case is, I think, distinguishable from Piggott v. Middlesex County Council, relied on by Mr. Shepley. It was there held that an involuntary severance of a reversion did not destroy the condition of re-entry. The saving of a condition such as that of re-entry differs materially from the imposition of a new and different obligation such as the renewal in parcels of a lease which the lessor had agreed to renew only in entirety.
For these reasons I am of opinion that this appeal should be dismissed with costs.
Appeal dismissed with costs.
Solicitors for the appellants: Donald & Miller.
Solicitor for the respondents: Angus MacMurchy.
26 Ont. App. R. 225, at p. 231.
Simpson v. Clayton, 4 Bing. N.C. 758.
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