2008 BCSC 849 Idle-O Apartments Inc. v. Charlyn Investments Ltd.

Before: The Honourable Madam Justice Morrison

Reasons for Judgment

Counsel for the Plaintiff	H. William Veenstra
Counsel for the Defendant	William D. Holder
Date and Place of Hearing:	June 22-23, 2006 and February 5, 2008
	Vancouver, B.C.

Authorities Considered:

International Paper Industries Ltd. v. Top Line Industries Inc. (1996), 20 B.C.L.R. (3d) 41, [1996] 7 W.W.R. 179 (C.A.)

Land Title Act, R.S.B.C. 1996, c. 250

Miscellaneous Statutes Amendment Act (No. 2), 2007, S.B.C. 2007, c. 24

Gustavson Drilling (1964) Ltd. v. Canada (Minister of National Revenue), [1977] 1 S.C.R. 271

Martelli v. Martelli (1981), 33 B.C.L.R. 145 (C.A.)

Upper Canada College v. Smith (1920), 61 S.C.R. 413

Ruttan v. Burk (1904), 7 O.L.R. 56 (Div. Ct.)

Re Matejka (1984), 8 D.L.R. (4th) 481 (B.C.C.A.)

Wiest v. Middelkamp, 2003 BCCA 437

Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34

Central Okanagan Teachers’ Association Local No. 23 v. British Columbia (1991), 56 B.C.L.R. (2d) 26 (S.C.)

Highland Valley Copper v. British Columbia, 2003 BCCA 440

MacKenzie v. British Columbia (1992), 69 B.C.L.R. (2d) 227 (C.A.)

McKim v. Pollard, [1939] 4 D.L.R. 486 (Ont. H.C.)

McLean v. Leth, [1950] 2 D.L.R. 238 (B.C.C.A.)

Strata Plan VR 29 (Owners) v. British Columbia (Registrar, Vancouver Land Registration), [1978] 6 W.W.R. 557 (B.C.S.C.)

Scott v. College of Physicians and Surgeons of Saskatchewan (1992), 95 D.L.R. (4th) 706 (Sask. C.A.)

Minchau v. Busse, [1940] 2 D.L.R. 282 (S.C.C.)

Mitts v. LeClair (1957), 10 D.L.R. (2d) 662 (Ont. H.C.)

Krangle v. Briscoe, 2000 BCCA 147

Krangle v. Briscoe, 2002 SCC 9

RDOS, Osoyoos Rural Zoning Bylaw No. 2261, 2004 (excerpts)

RDOS, Subdivision Servigin Bylaw No. 2000 (excerpts)

Zelmer v. Victor Projects Ltd. (1997), 34 B.C.L.R. (3d) 125 (C.A.)

Trethewey-Edge Dyking District v. Coniagas Ranches Ltd., 2003 BCCA 197

Armstrong v. Sheppard & Short Ltd., [1959] 2 Q.B. 384 (C.A.)

Peel (Regional Municipality) v. Canada, [1992] 3 S.C.R. 762

Garland v. Consumers’ Gas Co., [2004] 1 S.C.R. 629

Maddaugh & McCamus, The Law of Restitution, looseleaf ed., pp. 15-1 to 15-14

Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27

Dikranian v. Quebec (Attorney General), [2005] 3 S.C.R. 530

Canadian Assn. of Industrial, Mechanical and Allied Workers (CAIMAW) v. British Columbia (Director, Employment Standards Branch) (1992), 91 D.L.R. (4th) 219 (B.C.S.C.)

Kaiser v. Vancouver (City) (1995), 2 B.C.L.R. (3d) 85 (C.A.)

Campbell v. Campbell (1995), 130 D.L.R. (4th) 622 (Man. C.A.)

Acme (Village) School District No. 2296 v. Steele Smith, [1933] S.C.R. 47

Report on Leases of Unsubdivided Land and the Top Line Case, BCLI report No. 38, July 2005

Bill 35 – 2007 Miscellaneous Statutes Amendment Act (No. 2), 2007

Official Report of Debates of the Legislative Assembly (Hansard), 2007 Legislative Session: Third Session, 38th Parliament

Re Air Canada and International Association of Machinists, Lodge 148 (1990), 13 L.A.C. (4th) 110

P. St. J. Langan, Maxwell on the Interpretations of Statutes, 12th ed. (London: Sweet & Maxwell, 1969)

Strata Plan LMS 1220 v. North Fraser Holdings Ltd., 2003 BCSC 1051

Jack v. Jack Estate, 2001 BCSC 1497

[1] This dispute involves 0.62 acres of land on Lake Osoyoos that have been the subject of a lease since 1974.

[2] The plaintiff seeks a declaration that the most recent lease, dated September 12, 1978, executed by the parties for a term of 998 years, is illegal and unenforceable because it contravenes s. 73 of the Land Title Act, R.S.B.C. 1996, c. 250. The plaintiff seeks an order that the defendant deliver up possession of the leased land and remove all buildings and chattels belonging to the defendant.

[3] By notice of motion, the defendant seeks a declaration that the lease is valid and enforceable, and an order that the plaintiff consent to an application for subdivision to be made by the defendant, or alternatively, an order dispensing with that consent.

[4] The defendant also seeks a number of other orders in the alternative: a declaration that the defendant is entitled to an irrevocable licence to occupy the premises pursuant to the terms of the lease; alternatively, a declaration that the defendant has an undivided interest in the lands proportional to the area of the leased property and an order that the plaintiff holds that interest pursuant to a constructive trust in favour of the defendant; alternatively, an order for damages for unjust enrichment due to the loss of the lease in the amount of $810,000, which the defendant says is the value of the leased land; alternatively, an order for damages for unjust enrichment arising from the contribution of labour and improvements the defendants have made to the leased land over the years in an amount to be determined by assessment of the Registrar.

The Property

[5] The total property owned by the plaintiff is comprised of 3.49 acres on the shore of Lake Osoyoos in southern British Columbia. Of that property, 0.62 acres is subject to the lease in question. The defendant’s interest as putative lessee amounts to 17.76% of the plaintiff’s land.

[6] The property has 346 feet of waterfront, of which 165 feet stretches along the front of the disputed leased land. The remaining 281 feet of waterfront is clearly under the control of Idle-O Apartments Inc. (“Idle-O”) as registered owner of the whole property.

Background

[7] On May 31, 1966, Charles Dean and Gary Coulter purchased a block of land, including the lands in dispute here. In 1971, Dean and Coulter subdivided their property, and Dean became the sole owner of property legally described as PID No. 006-378-439, Lot 1, District Lot 2450S, Similkameen Division Yale District, Plan 20821.

[8] Between 1966 and 1971, Dean built four cottages on Lot 1. One was located on the 0.62 acres that is now the disputed land, and the other three were originally built on the rest of the land, but were later moved on to the 0.62 acres.

[9] In 1971, Dean incorporated the defendant company, Charlyn Investments Ltd. (“Charlyn”), a B.C. company solely owned by Dean and his wife, Marilyn Dean. That same year, Dean transferred Lot 1 to Charlyn.

[10] Charlyn began construction on a two-storey apartment building in 1972. The apartments were ready for occupancy around May 1974.

[11] Just prior to occupancy, in March 1974, the Deans incorporated the plaintiff company, Idle-O Apartments Inc. The Deans held one share each as incorporating shareholders.

[12] On May 1, 1974, the Deans held an Idle-O directors meeting at which Charles was appointed President and Marilyn was appointed Secretary. They then caused 499,998 shares to be issued, for a total of 500,000 issued and allotted shares.

[13] That same day, Charlyn entered into an agreement of purchase and sale to sell Lot 1, including the land and buildings, to Idle-O, for a purchase price of $700,000, which substantially consisted of the 500,000 Idle-O shares valued at $1.00 per share and the assumption by Idle-O of two mortgages totalling $200,000 in principal. In addition, the terms of the agreement granted Charlyn a 998-year lease of each of the apartments in the Idle-O apartment building. Each apartment was assigned a certain number of Idle-O shares and a corresponding percentage of the liability for the payment of monthly assessments covering the mortgage, taxes, utilities, and other payments. The Deans’ plan was to sell leasehold interests in each apartment unit, and they arranged matters so that each unit buyer would become both a lessee of the unit and a shareholder of Idle-O.

[14] At the end of these transactions, Charlyn was the sole shareholder of Idle-O, Idle-O was the registered owner in fee simple of Lot 1, and the Deans were the sole directors and officers of both companies.

[15] Approximately one month later in June 1974, the Deans, acting on behalf of both companies, signed an agreement purporting to lease a portion of Lot 1 from Idle-O, as registered owner and lessor, to Charlyn, as lessee, for a term of 99 years. The lease was made expressly “for the sole and exclusive use of the immediate family and friends of the Directors of Charlyn, to be used by them for vacation purposes only.”

[16] Over the next four years, Charlyn sold the apartment units and corresponding Idle-O shares. By July 1976, Charlyn no longer held a controlling interest in Idle-O, and Charles Dean was removed as an Idle-O director. The new tenant-shareholders elected five new directors.

[17] Sometime later, the new directors met with Mr. and Mrs. Dean, as directors of Charlyn, to negotiate some modifications to the lease agreement. The Deans agreed to pay the legal fees to have a new lease drafted. That second lease is dated September 12, 1978.

[18] Under the terms of the second lease, Charlyn agreed to give up some of the leased property to the Idle-O tenant-shareholders, reducing the property covered by the lease to the currently disputed 0.62 acres. The area of leased land was to extend only 215 feet from the water and not quite as far to the north as it had under the 1974 lease. In exchange, Idle-O agreed to pay the taxes on the whole property and extend the term of Charlyn’s land lease from 99 years to 998 years beginning July 1, 1974, to match Charlyn’s lease of the apartment units. Both parties agreed to cancel and surrender any rights they held under the terms of the original 1974 lease.

[19] The premises subject to the second lease included the reduced land area, the present buildings on the property, any buildings to be erected during the term of the lease, a right-of-way at all times in common with the lessor, a right-of-way over the boat launching ramp, which was located in the leased area, and all paths, water, privileges, advantages, etc. of the leased lands. Charlyn was required to keep the property and buildings in good repair, keep up fences, and refrain from cutting trees or timber. Idle-O would provide quiet enjoyment. The rent was set at $100 per year payable by Charlyn to Idle-O. In addition, Charlyn was to pay the light, gas, and telephone bills, and Idle-O was to pay the water rates. Charlyn would obtain water from a well on the leased property, and Idle-O would pay for the operation of water pumps.

[20] The second lease provided that if a creditor of Charlyn seized the leased land, the remaining term of the lease would be forfeited, and the lease would become void. It also granted Idle-O a right of first refusal if Charlyn wanted to sell or assign its interest in the lease. Charlyn was not permitted to change the use or occupation of the land, including any assignment or sublease, without Idle-O’s written consent. Nor could Charlyn replace the existing buildings, being the four cottages now located on the 0.62 acres, or build new structures, or make other permanent improvements without Idle-O’s consent as lessor. However, Charlyn could make reasonable additions to the existing buildings without obtaining consent.

[21] During the decades that Mr. and Mrs. Dean have occupied the lands, first as owners and then as lessees, they built the initial four cottages which were summer residences. They upgraded those four cottages with electrical installations, fixtures, plumbing, insulation, and ensured the outside of the cottages were in stucco that matched the style of construction of the Idle-O apartments. They also installed an asphalt tennis court and fencing, constructed a five-car garage and shop. They did the landscaping of the leased premises, and maintained and repaired the boat launch ramp which is located on the leased property. The defendant provided the fencing and equipment necessary to construct the tennis court, and had it installed. They have maintained the tennis court since its installation.

[22] Some notations on the back of the 1978 lease indicate a possible attempt to register the lease. One notation states “declared value $99,800.” However, the lawyer who acted on behalf of the Deans died in 2000, and Mr. Dean is unable to recall whether or when a formal attempt to register the lease was made. The parties agree that the lease was never registered.

[23] There is also some evidence that between June 1974 and August 1978, Mr. Dean made inquiries about subdividing the leased land from the rest of Lot 1. He deposed that if the application for subdivision had been successful, he intended to ask Idle-O to transfer the ownership of the leased portion of Lot 1 to Charlyn rather than continue with a lease.

[24] When Dean and Coulter had originally subdivided their block of land in 1971, there was no impediment because the area was considered unorganized territory. However, by 1974, the Regional District had come into existence, the land was zoned, and subdivision approval was more difficult to obtain. In a letter dated October 4, 1979, the approving officer rejected an application for subdivision relating to the leased lands, citing problems with zoning, frontage, potable water, and other related issues as the reasons for rejection.

[25] Idle-O alleges that the defendant never informed it of this subdivision rejection or of the fact that the lease had not been registered. In any event, both parties assumed that the leases they had entered into were valid. Both parties operated from 1974, and more particularly, from 1978 onwards in accordance with the lease terms.

The Defendant’s Proposed New Building 1999 – 2000

[26] In November 1999, Idle-O became aware that Charlyn was making plans to construct a two-storey building adjacent to the line of cottages on the leased land. Charlyn had obtained a building permit and had begun breaking ground. A dispute ensued about whether the terms of the lease require Idle-O’s consent for such an improvement, and both parties sought legal advice. It was at that point that both parties learned that the 1978 lease contravened s. 73 of the Land Title Act, which prohibits the long-term leasing of an unsubdivided portion of land. For the first time, both parties were forced to consider that the second lease might not be valid.

[27] By letter on February 1, 2000, Idle-O’s directors advised Charlyn that Idle-O did not consent to the proposed new building. Idle-O also advised the Regional District Office that a building permit had been obtained without proper consent of the lessor. The permit was withdrawn, and construction halted.

[28] The parties attempted to negotiate a settlement of their differences, but by June 29, 2000, three of Idle-O’s directors met with Mr. Dean and advised him that, in the opinion of their counsel, the lease was illegal for failure to comply with s. 73 of the Land Title Act, and Charlyn would not be permitted to continue construction without Idle-O’s consent. A year later, on June 19, 2001, counsel for Idle-O wrote a formal demand that Charlyn deliver up possession of the lands forthwith on the grounds that the lease was illegal and unenforceable.

[29] Negotiations since that time have been unsuccessful. Idle-O made a further demand for possession in January 2004, and this action was commenced on May 27, 2004. The parties then brought the matter forward on an application under Rule 18A to determine the validity of the lease and their respective rights under it.

[30] The position of the plaintiff is that the lease contravenes s. 73 of the Land Title Act and is therefore illegal and unenforceable in accordance with the Court of Appeal’s 1996 decision in International Paper Industries Ltd. v. Top Line Industries Inc., supra (“Top Line”).

[31] The position of the defendant at the hearing in June 2006 was that despite its contravention of s. 73, the clear intent of the lease and the rights of the parties under it may be preserved by treating the lease as a valid executory contract, which requires a successful subdivision application before the lease comes into full force and effect. In the alternative, the defendant argued that the court may give effect to the parties’ long-standing bargain by treating the lease as a licence or by fashioning an equitable remedy on unjust enrichment principles.

[32] The relevant portions of s. 73, as it was then, provided:

73 (1) Except on compliance with this Part, a person must not subdivide land into smaller parcels than those of which the person is the owner for the purpose of

(a) transferring it, or

(b) leasing it, or agreeing to lease it for a life, or for a term exceeding 3 years.

(3) Subsection (1) does not apply to a subdivision for the purpose of leasing a building or part of a building.

(6) An instrument executed by a person in contravention of this section does not confer on the party claiming under it a right to registration of the instrument or a part of it.

[33] The “part” referred to in subsection 1 is Part 7 of the Land Title Act, which set out the procedure for obtaining approval for the subdivision of land. The effect of s. 73(1)(b) was to prohibit long-term leases of unsubdivided land.

Top Line

[34] The leading case interpreting s. 73 as it was then is the Court of Appeal’s 1996 decision in Top Line, a case with similar facts to the case at bar. The parties in Top Line had a long-term lease of an unsubdivided portion of property belonging to the landlord. As in this case, both parties assumed the lease was valid and operated in accordance with its terms for several years. When the lease came up for renewal, the landlord refused to honour the tenant’s right of renewal, and the tenant applied for a declaration that the lease was valid and enforceable. The landlord opposed, arguing that the lease was illegal pursuant to s. 73 of the Land Title Act.

[35] The Court of Appeal held that the lease was void ab initio and unenforceable. In her reasons for decision at para. 1, Newbury J.A. stated that the court must balance three important policies when determining the effect of s. 73 on the validity of a lease of unsubdivided land, particularly in circumstances where neither party was aware of the subdivision requirement and where the lease was not only acted on by both parties, but had been the subject of court orders that presumed the lease was valid. Those three policies are: “the desirability of holding parties to their contractual obligations, the public interest in municipal control of real estate development that lies behind s. 73, and the policy in favour of the finality of judicial proceedings.”

[36] Newbury J.A. found that public policy operated equally in the interests of the landlord and tenant, but that the objective of ensuring that municipalities maintain control of development as a means of regulating such things as zoning, drainage, utility supply, and building encroachment must take precedence. In addition, s. 73 maintained the Torrens system of land title registration, which Newbury J.A. found would “quickly break down” if de facto unregistered subdivisions were enforceable. She concluded that the statutory prohibition against long-term leases of unsubdivided land in s. 73 must be given effect despite the unexpected loss this would cause the tenant.

[37] The chambers judge had ruled that while the lease was illegal and could not confer property rights, it was effective to confer personal rights on the parties. Newbury J.A. disagreed, finding that such an interpretation would offend the important public policy objectives of subdivision control and land title registration. As the lease was contrary to s. 73 as it was then, it was illegal, and thus could not create personal or proprietary rights between the contracting parties.

[38] The Court of Appeal also refused to “rescue” the lease by implying a condition precedent requiring the parties to seek approval for subdivision. There was no evidence that the parties had ever considered subdivision, so they could not be presumed to have intended to agree to such a term. Newbury J.A. was also concerned that implying such a term would involve considerable expense, and the Court could not be confident how the parties would have chosen to meet those expenses if they had turned their minds to the problem.

[39] The Court’s reluctant conclusion was that the lease was illegal and therefore void ab initio, even though neither party had been aware of the illegality, and notwithstanding the tenant’s “unassailable argument based on estoppel per rem judicatem.” The tenant could not enforce a void lease and could not be granted any other relief that would bestow a right of occupation of the leased lands without violating the important public objectives of regulating land use and title registration.

[40] Idle-O has maintained that Top Line is a complete answer to Charlyn’s position in this action because Charlyn raises the same arguments that were before the Court of Appeal. In Idle-O’s view, because the lease contravened s. 73 at the time in question, it is void ab initio, and ineffective to confer any personal or proprietary rights on Charlyn.

[41] And then, on May 31, 2007, the legislation changed. In particular, s. 26 of the Miscellaneous Statutes Amendment Act (No. 2), 2007, S.B.C. 2007, c. 24. That amended the portion of s. 73 of the Land Title Act by adding the following section:

73.1 (1) A lease or an agreement for lease of a part of a parcel of land is not unenforceable between the parties to the lease or agreement for lease by reason only that

(a) the lease or agreement for lease does not comply with this Part, or

(b) an application for the registration of the lease or agreement for lease may be refused or rejected.

(2) This section does not apply to an airport lease, as defined in section 41 of the Municipalities Enabling and Validating Act (No. 2).

[42] Following that change in legislation, counsel made further argument on their applications on February 5, 2008.

The Position of the Plaintiff

[43] Counsel for the plaintiff submits that the new s. 73.1 has no impact on the issues that were before the court previously on June 22 and 23, 2006. The new section is written in the present tense, and there is nothing in the amendment to indicate retroactivity or interference with vested rights.

[44] The plaintiff maintains that it has a vested right, the right to fee simple in the entire property, including the leased property, unencumbered by any lease. Further, the plaintiff has taken steps to enforce that right. On June 19, 2001, counsel for the plaintiff wrote to counsel for the defendant advising that the lease was invalid and unenforceable, and demanding possession of the land forthwith, as set out in the first affidavit of Robert Hartshorne.

[45] In January 2004, there was a further demand for possession, after settlement negotiations failed. Then this action was begun by the plaintiff on May 27, 2004.

[46] The plaintiff points to the history of the legislation that governs these issues. In 1960, the former Land Registry Act had similar provisions prohibiting the subdivision of land for conveyance or leasing for a term longer than three years, and the proviso that such a lease could not be registered. This would be similar to the later enactment of the Land Title Act and the 1996 revision which existed until the May 31, 2007 revision of s. 73.

[47] The Miscellaneous Statutes Amendment Act (No. 2) provided that the amended section 73.1 of the Land Title Act would come into force on Royal Assent, which was May 31, 2007. As counsel points out, there was no transitional provision.

[48] Counsel referred to Gustavson Drilling (1964) Ltd. v. Canada (Minister of National Revenue), and particularly, the ruling of Chief Justice Dickson at page 279 of that decision:

The general rule is that statutes are not to be construed as having retrospective operation unless such a construction is expressly or by necessary implication required by the language of the Act. An amending enactment may provide that it shall be deemed to have come into force on a date prior to its enactment or it may provide that it is to be operative with respect to transactions occurring prior to its enactment. In those instances the statute operates retrospectively.

[49] Further, Chief Justice Dickson, at page 282 stated:

The rule is that a statute should not be given a construction that would impair existing rights as regards person or property unless the language in which it is couched requires such a construction: Spooner Oils Ltd. v. Turner Valley Gas Conservation Board, at p. 638. The presumption that vested rights are not affected unless the intention of the legislature is clear applies whether the legislation is retrospective or prospective in operation.

[50] There are occasions when legislation is clear that a statute be given retroactive force. Counsel cites the case of Martelli v. Martelli, a decision of our Court of Appeal. In that case, certain sections of the new Family Relations Act were to be applied, whether the marriages had been entered into before or after the Act came into force. Further, a provision of the Family Relations Act provided that it was retroactive to the extent necessary to give effect to certain provisions.

[51] In that case, Lambert J.A. was quoted, “It is true that if there is any doubt a statute should not be given a retroactive application.” (paragraph 11).

[52] In the Upper Canada College case, the court quoted from Phillips v. Eyre, 1980 L.R. 6 Q.B. 1, 23:

Retrospective laws are, no doubt, prima facie of questionable policy, and contrary to the general principle that legislation by which the conduct of mankind is to be regulated ought, when introduced for the first time, to deal with future acts, and ought not to change the character of past transactions carried on upon the faith of the then existing law. ... Accordingly, the court will not ascribe retrospective force to new laws affecting rights, unless by express words or necessary implication it appears that such was the intention of the legislature.

[53] Counsel for the plaintiff referred to other cases, where the courts clearly emphasized the prospective nature of a statute in question, as opposed to a retrospective application. These included Ruttan v. Burk, Re Matejka, Wiest v. Middelkamp, and a case in 2007, Dell Computer Corp. v. Union des consommateurs, a decision of the Supreme Court of Canada.

[54] In Dell, the Quebec government had amended its Consumer Protection Act to provide that a stipulation that would oblige a customer to refer a dispute to arbitration, and thereby prohibit the customer from bringing a class action, would be prohibited. A group had sought to bring a class action against Dell, but Dell insisted on referring the case to arbitration, as was set out in its terms and conditions of purchase.

[55] The court found that the amendment had no application to the case before them. They found that all the facts that gave rise to the application of the binding arbitration clause had occurred totally before the enactment came into force. And there was nothing in the statute that would indicate it was to apply retroactively. The court confirmed that retroactive operation is exceptional. The court also opined that they thought it highly unlikely that the legislature intended that the enactment should apply to all arbitration clauses in force prior.

[56] At paragraph 157, the court stated:

Under well-established principles of statutory interpretation, in general, new laws affecting substantive matters do not apply to pending cases. It is also well recognized that a new law will be applicable to a pending case if it clearly expresses an intent to retroactively modify the substantive rights at issue. ...

The rule is different for new laws affecting procedural matters. Such laws have immediate effect and apply to pending cases.

[57] At paragraph 162 of that decision, the court referred to “the general presumption against the retroactivity of the statute has not been rebutted...”.

[58] There are statutes which are clearly stated to be retroactive, and counsel for the plaintiff cited some authorities dealing with such a situation. But that is not the situation here.

[59] Further to denying any retroactive effect of s. 73.1, the plaintiff asserts it has vested rights, namely that of a registered owner of the land in fee simple.

[60] In dealing with the issue of when does a vested right arise, the plaintiff has referred to Strata Plan VR 29 (Owners) and also Scott v. College of Physicians and Surgeons. In Scott, a doctor was applying for reinstatement with the College, and prior to his application being granted, the law changed, requiring an applicant for reinstatement in his circumstances to be treated as a first time applicant. He lacked qualifications under that new enactment. The Saskatchewan Court of Appeal found that first there must be “a tangible or particular legal right ...” and eventually found that the steps taken by the doctor to qualify for reinstatement were sufficient to give rise to his right.

[61] In this case, the legal proceedings are still pending. The applications and arguments were made, but judgment was reserved. Before judgment was given, the amendment, s. 73.1, was enacted. The plaintiff says that it has taken sufficient steps to exercise and solidify its rights prior to the change in legislation. Counsel referred to some cases on this point, including Mitts v. LeClair, a 1957 decision of the Ontario High Court. In that case, at paragraph 9, the court stated:

The law appears to be well-settled that where, during the pendency of an action the law is altered the rights of the parties are decided according to the law as it existed when the action was commenced unless the new statute shows clear intention to vary such rights... No clear intention to vary the rights of the parties appears in the above quoted statute.

[62] Chief Justice McEachern dealt with the issue of interference with existing rights in Krangle v. Briscoe in 2000. There, there had been a change in the law after an action had been commenced. It was a wrongful birth case, dealing with the issue of legal obligation to care for the child after the age of majority.

[63] At paragraph 61 of his judgment, McEachern C.J. quoted Driedger, 2d ed., “A new statute does not apply to pending actions, in the absence of contrary intention in the statute...”.

[64] This was a dissenting judgment by McEachern C.J., and under his subheading of Interference with Existing Rights, in talking about a new statute not applying to pending actions, at paragraph 64 he said the following:

The principle itself seems clear enough. The difficulty, however, is in identifying the kinds of rights that will be protected by the principle. Academics and others have debated this requirement in various writings but I find much more assistance in the decided cases, many of which recognize immunity from suit as a vested right.

[65] At paragraph 67 he stated: “Regardless, it seems clear to me that in the absence of express statutory language..., there is a presumption that pre-existing causes of action or defences are preserved against legislation enacted after litigation has been commenced.”

[66] At paragraphs 71 and 72, the Chief Justice noted that it is often difficult to identify a vested right and determine when it will be protected against the operation of a particular statute. He quoted Driedger at page 530, “whether the particular interest or expectation for which protection is sought is sufficiently important to be recognized as a right and sufficiently defined and in the control of the claimant to be recognized as vested or accrued.” Further, that property and contractual rights are easily recognized rights.

[67] The plaintiff contends that the lease in this case was invalid from the beginning. The defendant should not be allowed to have a determination that the 2007 amendment operates retroactively back to 1978. That would give validity to a lease that has been invalid since that time.

[68] There is nothing in the language of the amended s. 73.1 to suggest retroactivity or a justified interference with the vested rights of the plaintiff. The plaintiff argues a new law cannot validate an invalid transaction.

[69] The plaintiff has a right and an expectation that its vested right, the right to ownership in fee simple of the entire property, should be recognized. The plaintiff has taken steps to enforce its right. The court must apply the law as it stood when the dispute was submitted for a decision. The relevant date for application of a statute is the date the proceedings are commenced, when the Writ of Summons is issued. This new amendment has no application in the determination of this case.

The Position of the Defendant

[70] The defendant seeks dismissal of the plaintiff’s claim. As of May 31, 2007, once s. 73.1 of the Land Title Act was in force, the lease between the parties was no longer illegal or void ab initio. The sole basis for the relief that the plaintiff is seeking was the failure or the illegality of the lease to comply with s. 73 of the Land Title Act as it stood before the amendment in May 2007.

[71] Counsel for the defendant argues that the legislature intended s. 73.1 to be remedial legislation to remedy the hardships caused by the Top Line decision. The defence also contends that s. 73.1 does not deny a party a vested right, but rather creates rights where the parties originally intended to do so.

[72] The defence points to the concerns that the Top Line case caused. In July 2005, the British Columbia Law Institute issued a report, “Report on Leases of Unsubdivided Land and the Top Line Case”. The British Columbia Law Institute (“BCLI”) was created in 1997 under the Society Act to promote the clarification and simplification of the law and its adaptation to modern social needs, to promote improvement of the administration of justice, and to promote and carry out scholarly legal research. It succeeds the former Law Reform Commission of British Columbia.

[73] After setting out its summary and criticism of the Top Line case, and detailing its consultation process, the BCLI recommended legislative reform to the B.C. Provincial Legislature. In faulting Top Line, the report stated at page 5, “The Land Title Act does not dictate the harsh result of invalidity; it only provides that such leases cannot be registered.” Further at page 5, the report stated:

Other criticisms of Top Line have focussed on the effect that the decision could have on commercial leasing. The court touched on these concerns when it referred to “... the desirability of holding parties to their contractual obligations....” A Declaration that an agreement is void ab initio can cause a disaster for one party and a windfall for the other. Even in the absence of a windfall, parties to leases similar to the one in Top Line may have an incentive to litigate. Increased litigation would cast doubt on existing commercial leases. Avoiding potential litigation could also add time and expense to the process of negotiating new leases.

[Emphasis added]

[74] At page 10 of its report, the BCLI recommended that the legislature enact legislation to address the difficulties created by the Top Line case. Their recommendation was an amendment to the Land Title Act.

[75] The suggested draft legislation by the BCLI was as follows:

1 The Land Title Act, R.S.B.C. 1996, c. 250 is amended by adding the following section:

73.1 (1) A purported lease executed in contravention of section 73 must take effect as a licence for the purpose of creating personal rights and obligations among the parties to it.

(2) Nothing in subsection (1) affects the right of the purported lessee to claim damages for breach of contract.

(3) Subsection (1) applies to purported leases executed before or after the subsection comes into force, unless the purported lease is the subject of a proceeding commenced before the subsection comes into force.

[76] When Bill 35 was put forward last year, that being the Miscellaneous Statutes Amendment Act (No. 2), by the Attorney General, the explanatory note issued by the legislature stated as follows:

Section 25: [Land Title Act, section 73.1] provides that a lease or an agreement for lease of part of a parcel of land is not unenforceable for specified reasons only, abrogating a 1996 ruling of the British Columbia Court of Appeal in International Paper Industries Ltd. v. Top Line Industries Inc.

[77] Counsel for the defendant then produced the Official Report of the Debates of the Legislative Assembly for May 14, 2007, when the Attorney General moved the enactment of Bill 35. The Attorney General stated as follows:

Amendments to the Land Title Act will also create new opportunities for farmers by ensuring they can enter into valid, enforceable long-term leases for unused portions of agricultural land. The amendment addresses side effects of a 1996 decision, a court case that interpreted the act’s requirements on leases on unsubdivided land. The decision has resulted in confusion, extra costs for farmers and an unintended burden on local governments. The amendments will enhance farmers’ abilities to affordably access unused farmland and set out requirements for leases with terms exceeding three years. The change will promote certainty for land agreements and reduce unnecessary litigation.

[78] The defendant submits that the legislature clearly intended to correct a hardship that was created by the Top Line decision. However, the wording of s. 73.1 is much broader and less restrictive than the suggested draft legislation of the BCLI. The defence points out that the legislature rejected the limiting language proposed by the BCLI and made the remedy in the amended s. 73.1 much broader, by stating that a lease is no longer to be considered invalid for the reason that it does not comply with Part 7 of the Land Title Act. The defence claims it is clear that the legislature did not intend to limit the effect of s. 73.1 to leases made after May 2007. It is the contention of the defence that the legislature intended s. 73.1 to apply to all leases, no matter when they were made, that this is remedial legislation to apply to any proceeding related to a lease, no matter when it was commenced; so long as no determination of a matter had been made before May 31, 2007 when the amendment came into effect. The amendment was precisely to remedy the wrongs created by Part 7 of the Land Title Act and the hardship of Top Line, irrespective of when a lease might have been entered into.

[79] Both parties believed that the first lease of June 1974 and the second lease of September 1978 were valid when they were made, and both parties acted accordingly for decades after. Both parties and their shareholders conducted themselves absolutely in accordance with the leases. The only defect then found, in 2000, was that the leases did not comply with Part 7 of the Land Title Act and could not be registered.

[80] Counsel for the defendant submits that the plaintiff is not being denied a vested right; the defendant is now legally entitled to the vested right that it should have had in 1974 with the first lease and in 1978 with the second. Without this amendment enacted, the plaintiff would have had a significant windfall, and the defendant would have suffered a grave injustice.

[81] In dealing with the law of statutory interpretation, counsel submits that a statute would have retrospective effect when it changes pre-existing rights for the future. Counsel agrees that the general rule of interpretation is that a statute is not to be considered retrospective, but one must look at the entire statute, and legislative intent must also be considered. The defence argues that fact-based legislation is generally seen to operate retrospectively when considering the rights of parties at the time the legislation is brought into effect. In this case, s. 73.1 was enacted to protect the public against an abuse or hardship, namely, the effects of the Top Line decision, which the legislature sought to remedy. In such a case, this legislation operates retrospectively, even though it might deprive another party of vested rights.

[82] Counsel concedes that there is no express wording to limit the effect of s. 73.1, but it must be considered to have retrospective effect with regard to a lease in existence at the time the amendment was passed. This 1978 lease had not been declared void ab initio. There had been no decision on the plaintiff’s application. The defence contends that s. 73.1 makes enforceable this lease which may have previously been declared unenforceable because it could not comply with the registration requirements of Part 7 of the Land Title Act.

[83] Counsel referred to the Supreme Court of Canada decision of Rizzo & Rizzo Shoes Ltd. (Re). At paragraph 21, the court stated:

...Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.

[84] In referring to the Gustavson decision, counsel submits that the law has evolved and developed since that case in 1977. In support of that, the defence refers to the Dikranian v. Quebec (Attorney General) case in the Supreme Court of Canada in 2005. That case dealt with student loans, and how many months would be interest free on repayment terms.

[85] Mr. Justice Bastarache dealt with the issues of vested rights and retroactivity beginning at paragraph 29 of the decision. He then stated at paragraph 35 the following:

In the past, this Court has stressed that the presumption against interference with vested rights could be applied only if the relevant legislation were ambiguous, that is, reasonably susceptible of two constructions (see Gustavson Drilling …).

[86] In paragraph 36:

This statement must be qualified somewhat in light of this Court’s recent decisions. As Professor Sullivan says, care must be taken not to get caught up in the last vestiges of the literal approach to interpreting legislation:

In so far as this language echoes the plain meaning rule, it is misleading. The values embodied in the presumption against interfering with vested rights, namely avoiding unfairness and observing the rule of law, inform interpretation in every case, not just those in which the court purports to find ambiguity. The first effort of the court must be to determine what the legislature intended, and... for this purpose it must rely on all the principles of statutory interpretation, including the presumptions.

Since the adoption of the modern approach to statutory interpretation, this Court has stated time and time again that the “entire context” of a provision must be considered to determine if the provision is reasonably capable of multiple interpretations.

[87] The defence also relies upon the decision of Canadian Assn. of Industrial, Mechanical and Allied Workers, a decision in 1992 by Mr. Justice Vickers of our court. This case dealt with workers who had been laid off in a factory. The question was whether vested rights were impacted, and whether new legislation was retroactive. At page 9 of his decision, Vickers J. cites Craies on Statute Law, 3rd ed., at page 336:

If a statute is passed for the purpose of protecting the public against some evil or abuse, it will be allowed to operate retrospectively, although by such operation it will deprive some person or persons of a vested right.

[88] Just prior to that quote, Vickers J. stated:

In my opinion section 157 was passed to remedy an evil which had been found to exist. It should, therefore, be construed in conformity with the well established rule that all cases within the mischief aimed at by that statutory provision are, if the language permits, to be held to fall within its remedial influence.

[89] Section 73.1 is clearly remedial legislation, according to the defendant. Section 8 of the Interpretation Act, R.S.B.C. 1996, c. 238 is quoted by the defendant. That states that “Every enactment must be construed as being remedial, and must be given such fair, large, and liberal construction and interpretation as best ensures the attainment of its objects.”

[90] Counsel for the defence argues that a remedial amendment precludes the survival of the previous legislation. He refers to Kaiser v. Vancouver (City), a 1995 decision of the B.C. Court of Appeal by Finch J.A.

[91] At paragraph 23 of the Kaiser decision, Finch J.A. referred to A.G. (Quebec) v. Expropriation Tribunal, [1986] 1 S.C.R. 732 where the court cited Professor Pierre-André Côté:

A statute operates in the present when it governs events occurring after its commencement and before its death. …from the day of its commencement, the new statute applies to all future effects of both pending and future legal relations.

… A second corollary is that the statute applying immediately in the present does not allow for the survival of previous legislation.

This principle is so obvious and self-explanatory that it rarely appears as such in the case law, but there are numerous examples of its application...

[92] In paragraph 24, Finch J.A. also referred to the Gustavson Drilling case.

[93] In Campbell v. Campbell, the parties had waived any interest in each other’s pension benefits in a separation agreement. The husband later tried to have the wife’s pension benefit credits divided. Waiver was prohibited by law when the parties executed the separation agreement. Then there was an amendment to the Pension Benefits Act some six years later, which did allow waivers in certain circumstances. The court found that the amendment permitted the same thing that the parties themselves, Mr. and Mrs. Campbell, had opted to agree to in 1986. The court decided the agreement was binding on the parties on the basis of retroactivity and public policy. Both counsel acknowledged the legislation was retroactive. But counsel for the husband said that the amendment was not binding on the parties, and that the husband could still request a division of his wife’s pension credits because the parties had failed at the time they entered into the separation agreement to comply with the legislation that existed at that time.

[94] The court agreed that the amendment was retroactive. At paragraph 13, the court said, “It is a generally accepted principle of interpretation that a statute is not to be read retroactively unless the statute so specifies. There are instances however when this dictum can and must be modified somewhat.” The court then reviewed the case of Acme (Village) School District No. 2296, a decision in 1933 of the Supreme Court of Canada. In that case, a teacher was terminated without the necessary inspector’s approval. Legislation was then passed dealing with the contract between the teacher and a school board. At page 51 of the Acme (Village) School decision, the court stated:

Rules of construction, however, are only useful in ascertaining the true meaning of a statute where the language is not clear and plain. If the intention of the legislature can be ascertained all rules of construction must yield to the legislative intention.

[95] The court found that the legislation had been passed to remedy an evil which had been found to exist.

[96] The court in Campbell then went on to quote Fridman in The Law of Contract in Canada, 3rd ed. (Carswell, 1994):

What these decisions illustrate is that, recently, courts in Canada have been placing more emphasis upon the underlying policy and aims of a statute than upon other factors which previously were invoked to determine the legality of a contract that infringed the statute. The courts appear to be playing a more interpretive role in these instances, and are being less technical in their approach to the problem of construction of the statutes. The language of McIntyre J. of the Supreme Court of Canada in the Ontario Human Rights Commission case suggests that the true basis for declaring a contract invalid for infringement of a statute is the common-law doctrine of “public policy”. If public policy, rather than the construction of the statute in terms of an “implied prohibition” of a contract (as suggested by Devlin J.), is the correct rationale for statutory illegality in such instances, then it becomes clear that the proper function of a court is to determine the policy behind the statute in question, to discover whether it is in accordance with that policy, or outside that policy’s ambit or scope, to hold the allegedly offending contract to be illegal and therefore valid.

[97] In its conclusion, the court in Campbell v. Campbell said that the amendment must be given a retrospective effect, “not only because the respondent concedes it, but more so because to do so gives effect to the intent of the legislation and deals with the mischief that the amendment was clearly intended to deal with.”

[98] The defence emphasizes that s. 73.1, given a retrospective interpretation, gives effect to the clear intentions of the parties from the time the first of the two leases was entered into. Those leases gave substantive rights to both parties. When the defendant sold their shares in Idle-O Apartments Inc. to the various shareholders, it was based upon the fact that the lease was in place. The shares were sold subject to Mr. and Mrs. Dean, who ended up as the sole shareholders of the defendant company, retaining their ability to lease a portion of the lands in question.

[99] If there is a vested right in the plaintiff of freehold ownership, it came and does come with the express reservation by way of the lease, that the defendant will have a long-term lease. The defence suggests that if the lease should fall, then the condition precedent to the sale of the shares would also fall. Had the Deans, and then their defendant company, been selling all of the land outright, without retaining the leased lands, then the price to the plaintiff and its individual shareholders would have been much greater.

[100] Finally, the defence refers to the case of Strata Plan LMS 1220, a decision by Mr. Justice Pitfield in 2003. The legislature abolished the right to increased costs as of July 1, 2002. This change occurred in the middle of the litigation between the plaintiff and the defendant. Pitfield J. found that the legislature’s intention was clear, “to deprive a party of the right to recover and another party of the obligation to pay, increased costs after July 1, 2002 without exception.”

[101] Counsel for the defence argues that this also is an ongoing case. Judgment has not been rendered. Section 73.1 should be applied retrospectively. The intent and effect of the amendment is to abolish the hardship effects of the Top Line decision.

Conclusion

[102] I find myself in agreement with the position taken by the defendant. There is no need thus to rule on the other issues raised by the defendant in the original application.

[103] Of interest is a 2001 case, Jack v. Jack Estate, a decision by Mr. Justice Shaw. In that case, the plaintiff had registered a lis pendens against property that his father had willed to his stepmother, the defendant, Sharon Jack. The property was part of an 80 year old horticultural business that the plaintiff was now running, in place of his father.

[104] The defendant was applying for an order discharging the lis pendens. Following the father’s death, the parties were in litigation. They reached a settlement agreement, and a consent dismissal order was granted dismissing the plaintiff’s action under the Wills Variation Act. The settlement consisted of three leases. The terms of the leases were in excess of three years, and they were not in compliance with s. 73 of the Land Title Act, as it then was. They could not be registered.

[105] The defendant was trying to sell the property, which prompted the plaintiff to put a lis pendens on the property to protect his interests, and his lease. The plaintiff argued that both he and his stepmother had acted in good faith and he had compromised his lawsuit on the understanding that he would have the right to farm the land in question through to 2008. He alleged his stepmother was now breaching her agreement.

[106] Top Line reared its mischievous head.

[107] At paragraph 20 of the Jack decision, Mr. Justice Shaw stated:

In BC Rail v. Domtar Inc. 2001 BCCA 117, the Chief Justice ordered a five judge court to hear an appeal for the purpose of reconsidering the Court's decision in Top Line No. 1. The appeal was never heard. The case was settled on the eve of the hearing of the appeal. The Court held that the appeal was moot and declined to hear it.

At paragraph 21:

In my view, the issue of whether Top Line No. 1 was correctly decided is best left with the Court of Appeal or the Supreme Court of Canada.

At paragraph 22:

For the purposes of the present application, I need only note that there is some question as to the correctness of Top Line No. 1 and, should it ultimately be over-ruled, the result could well be that the lease will confer rights, either proprietary or personal, or both, upon the Plaintiff against Mrs. Jack and against any purchaser with knowledge of the lease.

[108] Shaw J. also noted at paragraph 24 that the Court of Appeal in Top Line made it clear that declaring the lease void and unenforceable did not preclude whatever claims might be available under other branches of the law. This court raised the question as to whether the lease created rights and obligations which would be binding upon the parties. Shaw J. found that the defendant was walking away from a commitment, “legally enforceable or not” that she made to her stepson, in return for his agreement to give up his court action.

[109] Shaw J. seems to be thinking along the same lines as the BCLI when they wrote in their 2005 Report, ...“The Land Title Act does not dictate the harsh result of invalidity; it only provides that such leases cannot be registered.”

[110] In this case, the plaintiff is emphatic that it has a vested right, and this is a right that must be protected. I would note that this is not a right that the plaintiff has clung to all these years. The awareness of this right came late, 26 years late, from 1974 to 2000 to be exact. Should the position of the plaintiff prevail, the inequity to the defendant is obvious. So is the windfall to the plaintiff.

[111] In my view, s. 73.1 is clearly remedial legislation. It was passed to bring fairness and equity to a situation like this. The mischief or hardship caused by the Top Line case was so apparent that the BCLI as well as the provincial legislature drafted legislation to ensure that the unfairness would not continue.

[112] This is a situation where the intention of the legislature is before us; the mischief must be corrected.

[113] The rules of statute construction allow the courts to go beyond strict literal interpretation, given certain circumstances. Namely, to avoid unfairness, observe the rule of law, and give full meaning to the intention of the legislature.

[114] I adopt the observation by Professor Côté in The Interpretation of Legislation in Canada, “...the statute applying immediately in the present does not allow for the survival of previous legislation.” This case is still before the courts. The former legislation is not. The recent amendment is. The recent amendment governs the rights and obligations between these parties. There is also the desirability of holding parties to their contractual obligations.

[115] In my view, the 1978 lease is legal. It is a valid lease between these two parties. Nor is this a case where the plaintiff “carried on upon the faith of the then existing law”. Both parties carried on for 26 years in complete ignorance of s. 73 of the Land Title Act.

[116] The plaintiff’s claim to have the lease of September 12, 1978 declared illegal and unenforceable is dismissed.

[117] Costs to the defendant, Scale B.

“Morrison J.”

Madam Justice Morrison

Citation:	*Idle-O Apartments Inc. v. Charlyn Investments Ltd.,*
	2008 BCSC 849