United Trust v. Dominion Stores et al.

United Trust v. Dominion Stores et al.
Collection
Supreme Court Judgments
Date
1976-10-05
Report
[1977] 2 SCR 915
Judges
Laskin, Bora; Judson, Wilfred; Ritchie, Roland Almon; Spence, Wishart Flett; Beetz, Jean
On appeal from
Ontario
Subjects
Property law
Decision Content
Supreme Court of Canada
United Trust v. Dominion Stores et al., [1977] 2 S.C.R. 915
Date: 1976-10-05
United Trust Company (Plaintiff) Appellant;
and
Dominion Stores Limited (Defendant) Respondent;
and
Molly Geller and Bella Granatstein (Defendants) Respondents.
1976: March 31, 1976: April 1; 1976: October 5.
Present: Laskin C.J. and Judson, Ritchie, Spence and Beetz JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.
Land titles—Priorities—Actual notice—Encumbrance—Lease—Unregistered renewal of lease—Purchaser of freehold having notice of leasehold interest—Transferee’s interest subject to leasehold interest—The Land Titles Act, R.S.O. 1970, c. 234 as amended, ss. 78(1), (2), 79(1), 85(5), 91, 94.
Dominion had been tenants since 1935 of land governed by the Ontario Land Titles Act under a written lease and various renewals thereof. The last renewal which was to have terminated on November 30, 1970 contained an option in favour of Dominion to renew until November 30, 1975 subject to a rental increase and the usual clause as to increase to cover real estate taxes. Dominion gave due notice of the exercise of the option but entered negotiations for a longer term of leasing. The negotiations continued until 1972, when on April 20, the landlords’ solicitors advised that their clients were prepared to enter into an option agreement for the period from December 1, 1975 to June 30, 1982 and suggested that Dominion’s solicitor draft the required documentation. The draft option agreement was submitted shortly thereafter by Dominion’s solicitor. United had however been negotiating with the landlords for the purchase of the premises and on May 17, 1972 the landlords agreed to sell to United who had actual notice of the lease and the agreement between Dominion and the landlords. On May 25, 1972 the landlords’ solicitors replied to Dominion’s letter of April 28 that the landlords had “no intention of executing the documents which you have forwarded as the said documents do not meet with the approval of the writer or our clients in their form and substance”. On June 22, 1972, the day after closing the purchase, United placed a new door with new lock on the premises and excluded Dominion therefrom notwithstanding that Dominion had paid rent up to and including June 30, 1972. An application by Dominion for an order granting relief from forfeiture and reinstatement in the premises was granted and the subsequent appeal was dismissed by the Court of Appeal.
Held (Laskin C.J. dissenting): The appeal should be dismissed.
Per Judson, Ritchie, Spence and Beetz JJ.: The doctrine of actual notice as to all contractual relations and particularly the law of real property has been firmly based in law since the beginning of equity. Such a cardinal principle of property law cannot be considered abrogated unless the legislative enactment is in the clearest and most unequivocal of terms. The Land Titles Act, R.S.O. 1970, c. 234, as amended by 1972 (Ont.), cc. 1, 132 and 1973 (Ont.), c. 39 contains no such provision. Section 85(5) did not affect the law as stated in Re Jung and Montgomery, [1955] 5 D.L.R. 287, as first, the subsection did not purport to repeal generally the law in Re Jung and was therefore not enacted simply for the purpose of such repeal and second, the subsection deals with instruments registered in respect of or affecting the same estate or interest in the same parcel of registered land.
Per Laskin C.J. dissenting: Several provisions of The Land Titles Act make the register the sole mirror of title and curtain off any unregistered interests regardless of notice. The scheme and language of the Act are adequate to show the irrelevancy of actual notice. If fairness from a common law stand point was the dominant consideration, irrespective of legislative policy and of the circumstances which brought title registration systems into being the matter would be different but here the concern was not with common law but rather with a complete break from it through a choice of legislative policy reflected in some Canadian Provinces and elsewhere by the adoption of the Torrens system and in Ontario and England by the adoption of a related system of title registration. Section 85(5) cannot be construed to exclude the effect of notice where the notice is of a claim to the same interest as that purchased by another for value on the face of the register but not to exclude it where the notice is of a claim to a subordinate interest. Sections 78(1), (2), 79(1), 91 and 94 of the Act make it clear that notice of an unregistered interest cannot qualify the registered title of a transferee for value from the registered owner. This conclusion is reinforced by s. 85 and in particular by subs. (5).
[Waimiha Sawmilling Company Limited, v. Waione Timber Company Limited, [1926] A.C. 101; Assets Co. Ltd. v. Mere Roihi et al., [1905] A.C. 176 distinguished; Re Skill and Thompson (1908), 17 O.L.R. 186; John Macdonald & Co. Limited v. Tew (1914), 32 O.L.R. 262; Re Jung and Montgomery, [1955] 5 D.L.R. 287; Pitcher v. Shoebottom, [1971] 1 O.R. 106; Zbryski v. City of Calgary (1965), 51 D.L.R. (2d) 54 referred to.]
APPEAL from a judgment of the Court of Appeal for Ontario[1] dismissing an appeal from a judgment of Grant J.[2] allowing an application for an order granting relief from forfeiture and reinstatement in devised premises. Appeal dismissed, Laskin C.J. dissenting.
D.T. Stockwood and J. Ryan, for the appellant.
P.S.A. Lamek and D.J.T. Mungovan, for the respondents.
THE CHIEF JUSTICE (dissenting)—This appeal raises a question of first instance in this Court in respect of The Land Titles Act, R.S.O. 1970, c. 234, as amended. The question is whether an unregistered interest in land governed by the Act, and not being an overriding interest thereunder, may be asserted against a purchaser for value of the freehold of the land who obtains a transfer from the owner on the Land Titles register with actual notice of the unregistered interest. Grant J. held that the purchaser’s title was subject to the unregistered interest, and this decision was affirmed by the Ontario Court of Appeal. I take a different view. In my opinion, notice, actual or constructive, of unregistered interests cannot qualify the title of a purchaser for value as shown on the register.
The unregistered interest in the present case, sought to be asserted against the appellant’s free- hold title, is a leasehold which had an unexpired term exceeding three years at the time the appellant obtained its Land Titles transfer. As such it was not a protected or overriding interest under the Act. Section 51, item 4, makes registered land subject to any lease or agreement for a lease for a period yet to run that does not exceed three years where there is actual occupation under it. Hence, where the unexpired term exceeds three years, even if there is occupation under it, The Land Titles Act would seem to require registration of the leasehold interest if it is to be protected against the preclusive claim to the entire freehold interest by a registered transferee for value from the registered owner.
Why the respondent lessee, a large food chain, which had first become lessee of the land in 1935, did not register notice of its leasehold interest is unfathomable. It had access to competent legal advice no less than did the appellant. On the argument of the appeal, its counsel contended that, in the circumstances of the case, the admitted notice and knowledge by the appellant of the respondent’s outstanding leasehold interest before purchasing the freehold made its purchase through a Land Titles transfer fraudulent when it sought, on the strength of the transfer, to dispossess the respondent. The basis of this contention by the respondent, a contention which was not raised in its original application to Grant J. for relief from forfeiture and reinstatement of its lease, lies in the course of negotiations between solicitors for the respective parties when the appellant was seeking to obtain a surrender of possession by the respondent concurrently with the carrying out of its intended purchase of the freehold. I would not be justified, on the record in this case, in coming to a conclusion that there had been a deliberate misleading of the respondent. The latter knew of the agreement for purchase of the freehold by the appellant and had ample opportunity to protect its interest. The respondent cannot improve its position by labelling actual notice as fraud. If its position is maintainable, it must be on the ground that The Land Titles Act does not defeat unregistered interests of which a subsequent purchaser for value has actual notice. I have had the advantage of seeing the reasons prepared by my brother Spence sustaining that proposition and affirming the judgments below. I agree with him on the other aspects of the present appeal which, of course, cease to be material if the appellant can succeed on the issue of notice.
We face here another instance of a temptation to construe a statute in the light of the common law, to qualify a statute by an equitable doctrine alien to the purpose (a clear purpose in the circumstances underlying its enactment) which the statute sought to achieve. Because notice of unregistered interests was not expressly excluded as a qualifying consideration, the integrity of the land titles register is shaken by the judgment in appeal, although the scheme and language of The Land Titles Act are, in my opinion, adequate enough to show the irrelevancy of such notice. A system of registration of title is treated, in respect of the effect of notice of unregistered interests, as if it were a system of registration of documents, such as exists under The Registry Act, R.S.O. 1970, c. 409, as amended, an Act now qualified by The Certification of Titles Act, R.S.O. 1970, c. 59, as amended.
If fairness from a common law standpoint was the dominant consideration, irrespective of legislative policy, irrespective of the circumstances which brought title registration systems into being, there could be less quarrel with the decision of the Courts below. We are not, however, concerned with the common law, but rather with a complete break from it through a choice of legislative policy reflected in some countries and in some Canadian Provinces by adoption of the Torrens system, and in England and Ontario by the adoption of a related system of title registration.
The Ontario Land Titles Act, first enacted by 1885 (Ont.), c. 22 is modelled not on the Torrens system, which got its start in South Australia in 1857, but on the English Land Transfer Act, 1875 (U.K.), c. 87. There had been a Royal Commission on Registration of Title in England which reported in 1857 but this report, although adopted by Parliament, was not carried out in ensuing legislation, the Land Registry Act, 1862 (U.K.), c. 53. Why this Act failed and was supplanted by a new Act in 1875 is briefly told in Curtis and Ruoff, Registered Conveyancing (2d ed. 1965), at pp. 5-6:
...Unfortunately, however, the 1862 Act did not apply the principles elaborated by the Commissioners. The system established by parliament attempted to achieve perfection. The disregard of what was practicable brought about a failure so catastrophic that, only four years after the passing of the Act, a Royal Commission was set up to inquire into the reasons for it. This Commission reported in 1870 that the failure of the registration system could be attributed to three fundamental departures from the principles advocated by the Royal Commission of 1857. They were:
(1) That the title shown to land before it could be registered must be impeccable, with all technical imperfections cured and that the registrar had no discretion to ignore blemishes which were of no practical consequence;
(2) That the boundaries of every piece of land had to be determined to the last inch by notice to adjoining owners and that this caused disputes over trifles and great expense and delay;
(3) That partial interests, such as life interests, must be registered instead of confining the register to the ownership of the entirety and that this prevented the register from simplifying titles.
As a result of this report, a further Act was passed in 1875. This Act practically repealed the 1862 Act and established a new registry, which is in fact the Land Registry of today, with an entirely different system of registration modelled, this time, on the recommendations of the Royal Commission of 1857. Under this new system the registrar was given a wide discretion as to the titles he might accept for registration and power to hear and determine objections instead of having to refer them to the court. It was no longer necessary to fix the boundaries of properties down to the last inch and registration was confined to the ownership of the full legal freehold or leasehold estate in the land.
The 1857 Report, an extensive canvass of the considerations supporting a title registration system as opposed to a system of registration of deeds or documents, was one of a series of inquiries into real property problems which had earlier come under examination by the Real Property Commissioners in reports of 1829 and 1830. The Report of 1857 considered, inter alia, the question of notice of unregistered interests and said this about it (in para. 73):
“We propose that fraud in obtaining a transfer of the registered ownership shall defeat the title of the person who becomes registered owner by fraud, but that notice of unregistered rights shall not merely as notice have any such effect. We think that though the purchaser in the course of his inquiries, or before he concludes the purchase, has notice of any claims upon the estate, it will not be unjust to deprive the parties interested in such claims of their rights in favour of such purchaser, if their rights are not protected upon the register. We do not agree that any attempt to exclude the application of the doctrine of notice would prove abortive. We are aware that it has been said that the judges would, notwithstanding any law to the contrary, in the course of time contrive some means of neutralising any enactment which went to exclude the doctrine of notice, just as our Courts of old contrived to prevent the Statute of Uses having the effect intended by the legislature; and that to abolish the doctrine of notice altogether would be contrary to every principle of justice and equity. After full consideration, however, we cannot adopt these views, but, on the contrary, we concur generally in the reasons adduced by the Real Property Commissioners in their Second Report (pp. 37-40), in favour of excluding the interference of Courts of equity on the ground of notice.”
The reference in this passage to what the Real Property Commissioners had to say in their Second Report, made in 1830, is a reference to the following observations of those Commissioners:
The reasons in favour of excluding the interference of Courts of Equity on the ground of notice, may be thus stated.
If the public good require that a purchaser, to have the protection of the Law, should comply with a form, and that form be made simple and easy, a purchaser omitting the form has no just ground of complaint that the protection is not given. If the omission were not wilful, he should still blame only his own want of care, or that of his agents. It is greatly for the public good, that civil rights should be capable of being ascertained without difficulty, and for this purpose the Law on which they depend should as far as possible be general, and not varying in different circumstances, which would lead to mistakes; they should be supported by evidence, not open to doubt, and as little as possible exposed to falsification. For these reasons, it has been thought necessary in most Countries to require the title of land to be proved by written documents, and thereby prevent attempts to enforce pretended claims by parol testimony or circumstantial evidence. A registered title possesses the advantages of certainty and security in a high degree, but they will be impaired, if preference be given to an unregistered over a registered deed, on the ground of notice. The fact of notice will in every case be possible and in many probable; there will be a temptation therefore to the unregistered claimant to commence a suit, in the hope that the other claimant may confess notice, or circumstances from which it may be implied; and there may also be a temptation to support the suit so commenced by false evidence.
The mischiefs of letting in constructive notice have been so strongly felt, that some Equity Judges have held it excluded under the present Registry Acts; but no provision which can be made for denying effect to constructive notice will be effectual, because the distinction between actual and constructive notice cannot be defined, and must therefore often fail to be justly drawn either by a Court or a Jury; and cases of individual hardship might lead to a course of decisions which would encroach on the spirit of the Act, and impair its benefits.…
…
The exclusion of interference on the ground of notice will very rarely prevent the jurisdiction of a Court of Equity, in case of actual fraud. In all cases in which priority may be given to a registered over an unregistered deed by means of fraud, although notice must be one of the ingredients to prove the existence of the fraud, there will usually be other circumstances by which, independently of the notice, a fraudulent intention will be manifested. Any conspiracy or improper conduct, for preventing or impeding the registration of one deed in order to give effect to another, may always be avoided as fraudulent; and in other cases, fraud will be shown by inadequacy of price, or the circumstances under which the subsequent deed was executed. Where a party suffers from his own negligence, or from not requiring a caveat, which would have protected him against any superior activity in another, he will have relied upon confidence in the parties instead of the protection afforded by the Law, and will have no just cause of complaint. The key sections of the Ontario Act of 1885, following the text of similar sections In the English Act of 1875, were ss. 35, 38, 54(1)(2)(3) and 99. These sections (which, in the present Act, are respectively ss. 91, 94, 75, 78(1) (the original 54(3)) and 174) read as follows:
35. A transfer for valuable consideration of land registered with an Absolute title shall, when registered, confer on the transferee an estate in fee simple in the land transferred, together with all rights, privileges, and appurtenances belonging or appurtenant thereto, subject as follows:—
(1) To the incumbrances, if any, entered on the register; and
(2) To such liabilities, rights, and interests, if any, as are by this Act declared for the purposes of the Act not to be incumbrances (unless the contrary is expressed on the register),
But free from all other estates and interests whatsoever, including estates and interests of Her Majesty, her heirs and successors, which are within the legislative jurisdiction of this Province.
…
38. A transfer of land registered under this Act, made without valuable consideration shall, so far as the transferee is concerned, be subject to any unregistered estates, rights, interests, or equities subject to which the transferor held the same; but, save as aforesaid, shall, when registered, in all respects, and in particular as respects any registered dealings on the part of the transferee, have the same effect as a transfer of the same land for valuable consideration.
…
54. (1) The registered owner alone shall be entitled to transfer or charge registered land by a registered disposition.
(2) But, subject to the maintenance of the estate and right of such owner, any person, whether the registered owner or not of any registered land, having a sufficient estate or interest in the land, may create estates, rights, interests and equities in the same manner as he might do if the land were not registered.
(3) And any person entitled to or interested in any unregistered estates, rights, interests, or equities in registered land may protect the same from being impaired by any act of the registered owner, by entering on the register such notices, cautions, inhibitions, or other restrictions as are in this Act in that behalf mentioned.
… 99. Subject to the provisions in this Act contained with respect to registered dispositions for valuable consideration, any disposition of land or of a charge on land which if unregistered would be fraudulent and void, shall, notwithstanding registration, be fraudulent and void in like manner.
The purpose disclosed in these provisions to make the register the sole “mirror” of title and to “curtain” off any unregistered interests regardless of notice (the terms in quotation marks come from Ruoff, An Englishman Looks at the Torrens System (1957), at p. 8) was fortified by an amendment in 1893 (Ont.), c. 22, s. 11 enacting what is now s. 79(1) of the Act. The original s. 54(3), now s. 78(1), was also fortified by 1972 (Ont.), c. 132, s. 18 by adding s. 78(2). The importance of ss. 78 and 79(1) in the light of s. 91 makes it desirable that I should set them out in full, and they are as follows:
78. (1) Any person entitled to or interested in any unregistered estates, rights, interests or equities in registered land may protect the same from being impaired by any act of the registered owner by entering on the register such notices, cautions, inhibitions or other restrictions as are authorized by this Act or by the director of titles.
(2) Where a notice, caution, inhibition or restriction is registered, every registered owner of the land and every person deriving title through him, excepting owners of encumbrances registered prior to the registration of such notice, caution, inhibition or restriction, shall be deemed to be affected with notice of any unregistered estate, right, interest or equity referred to therein.
79. (1) No person, other than the parties thereto, shall be deemed to have any notice of the contents of any instruments, other than those mentioned in the existing register of title of the parcel of land or that have been duly entered in the books of the office kept for the entry of instruments received or are in course of entry.
…
Section 51 of the present Act lists the overriding interests, as for example, taxes, existing easements, dower, certain leasehold interests as previously mentioned, and rights of expropriation, to which registered land may be subject, and s. 52 expresses the position as to title upon the first registration of ownership. Section 52 reads as follows:
52. The first registration of a person as owner of land, in this Act referred to as first registered owner with an absolute title, vests in the person so registered an estate in fee simple in the land, together with all rights, privileges and appurtenances, free from all estates and interests whatsoever, including estates and interests of Her Majesty, that are within the legislative jurisdiction of Ontario, but subject to the following:
1. The encumbrances, if any, entered on the register.
2. The liabilities, rights and interests that are declared for the purposes of this Act not to be encumbrances, unless the contrary is expressed on the register.
3. Where the first registered owner is not entitled for his own benefit to the land registered, then as between him and any persons claiming under him, any unregistered estates, rights, interests or equities to which such person may be entitled.
From its beginning, the Act provided and still provides for the registration of charges (an updated designation of the mortgage) and for protecting claimed interests in registered land by the registration of a caution: see ss. 26 and 58 of the original Act, now ss. 98 and 143. The Master of Titles plays, of course, a key role in the administration of the Act, and there is an assurance fund to back up what is in effect a government guarantee of the title as shown on the register. Registration is not automatic, but must pass administrative scrutiny and be in compliance as to required forms and otherwise with the prescriptions of the Act.
I do not need to descend into further detail as to the provisions of the Act to support my view that notice of an unregistered interest by a purchaser for value who buys the title as shown on the register cannot qualify that title. This appears to have been the view taken also of the English Land Transfer Act, 1875 by virtue of s. 49 thereof, the equivalent of s. 75 of the Ontario Act (which was originally s. 54(1)(2) and is quoted above): see 24 Halsbury (1st ed. 1912), at p. 320, s. 591. No doubt the Legislature could have added to what it said about the primacy of the register by referring even more expressly to notice than it did in ss. 78 and 79, as was done in England in the revision of its title registration legislation by the Land Registration Act, 1925 (U.K.), c 87, s. 59(6) and as is the case in Torrens system legislation but that, in my view, would have merely exaggerated an existing sufficiency.
To repeat myself, I am unable to appreciate how there can be any escape from the force of ss. 52 and 91 of the present Act which constitute a code as to the title that is acquired upon first registration and upon a transfer on the register. The supporting provisions, especially ss. 75, 78 and s. 79(1), show that registration is the method of obtaining protection of claimed interests in registered land and that only fraud is an external qualifying consideration.
In one respect, the English Land Registration Act gives protection to unregistered interests which is given in only a limited fashion by the Ontario Land Titles Act, and that is protection for the “rights of every person in actual occupation of the land or in receipt of the rents and profits thereof” unless the rights are not disclosed upon inquiry. As Megarry and Wade, The Law of Real Property (4th ed. 1975), say, at p. 1066, “equitable owners in possession even though they have not lodged cautions or other entries in the register [are safeguarded and protected] even when their occupation is not obvious to a purchaser”; and, again, “a tenant in possession of registered land under a mere agreement for a lease, for example, or who has an option to renew the lease or to purchase the freehold will be in no danger of losing his rights to a later purchaser, if, as will often happen, he fails to protect his rights by entry on the register”. Such a provision in the Ontario Act would have protected the respondent in the present case, and it is worth considering its introduction into that Act. A good deal of argument was addressed by counsel for the parties to Torrens system case law. The main value of the cited cases for the present case is the dissociation of notice and fraud, the rejection of the notion that a person with notice of an unregistered interest can be charged with fraud: see, for example, the Australian case of Friedman v. Barrett[3]. The importance of the distinction is underlined in Torrens system legislation by the express exclusion of notice and by making fraud an exception to the integrity of the register. In some jurisdictions, the legislature has gone further by providing that knowledge of an unregistered interest was not itself to be imputed as fraud. Such a provision existed in the New Zealand Land Transfer Act, 1915, which was considered by the Privy Council in Waimiha Sawmilling Co. v. Waione Timber Co.[4], but was not part of the Queensland legislation which came under examination in Friedman v. Barrett. Its absence did not, however, dissuade the Courts from distinguishing mere notice from fraud and from protecting the registered owner against an unregistered claim of an interest of which he had notice. Cases on this question go back to the pioneer judgment of the Privy Council in Assets Ltd. v. Mere Roihi[5] at p. 210.
Fraud is, of course, an exception to the integrity of the register under the Ontario Act (see s. 174), but since this Court is agreed that the respondent has not made out a case of fraud, there is only the question of notice to consider, a question which the respondent contends must be answered in its favour because, despite what the various provisions of the Act referred to in these reasons may indicate, notice has not been expressly excluded under the Ontario Act as it is under Torrens system legislation.
The respondent points to such express exclusion in the New Zealand legislation which was before the Privy Council in the Waimiha Sawmilling case, supra, a case upon which the appellant relied. The reliance was based on the fact that the Judicial Committee, in its reasons upholding the title of a registered purchaser as being free from an unregistered agreement of which it had notice, appeared to proceed on the strength of that provision of the New Zealand statute which was comparable to s. 91 of the Ontario Act. Its only reference to the New Zealand provision, which was s. 197, excluding notice was to that part of it which stated that knowledge of the existence of an unregistered interest was not itself to be imputed as fraud. However, the whole of s. 197 was quoted, and I agree with the respondent that the appellant cannot draw much comfort from the Waimiha Sawmilling case.
This does not mean, in my view, that there is necessarily a gap in the Ontario Act. We are dealing with different albeit related systems of title registration, and I do not think that the presence of an express provision in Torrens system legislation is evidence of a gap in the Ontario Act or, indeed, in the comparable English legislation of 1875. Especially is this so when the consequence is said to be the importing of a doctrine which denies the central policy of the Ontario Act. Of course, an express exclusion of notice as a qualifying consideration in respect of title as shown on the register might have obviated this litigation, but so too would registration of notice of its lease by the respondent pursuant to s. 115 of the Ontario Land Titles Act.
So much for legislative history and for the legislation itself. I wish to deal now with such case law as there is on the question at issue. The reasons of the Ontario Court of Appeal in the present case are the only reported reasons of an Ontario appellate court holding that previous notice of an unregistered interest may qualify the title of a purchaser for value acquired by a transfer from the owner as shown on the register. Yet those reasons, subject to a matter to be mentioned in a moment, merely rest on Re Jung and Montgomery[6] where the Ontario Court of Appeal, without written reasons, affirmed a judgment of Duranceau Co. Ct.J. Speaking in the present case for himself and for Brooke J.A., Jessup J.A. was candid enough to say that (and I quote his words) “if I were approaching the problem in the state of the statute as it was when Re Jung was decided, I would have doubt whether that case was correctly decided, particularly in view of the terms of what is now s. 91 of the statute”. Jessup J.A. felt, however, that the enactment in 1960 of what is now s. 85(5) of The Land Titles Act must be taken as an affirmation of Re Jung and Montgomery as holding that notice of an unregistered interest will qualify a title taken by a purchaser for value on the faith of the register. I shall come later in these reasons to s. 85(5), upon which both parties relied; but I address myself now to what was before Duranceau Co.Ct.J. in Re Jung and Montgomery and to what he decided in that case.
Jung had purchased certain premises under a Land Titles transfer of June 26, 1953 which was registered on June 30, 1953. At that time Montgomery was a tenant of part of the premises under a five year lease running from April 1, 1950 to March 31, 1955. Notice of the lease was not registered, but Jung himself had been a tenant of another part of the premises before purchasing the freehold and after his purchase Montgomery continued as tenant of Jung, paying rent which Jung accepted. Montgomery’s lease contained an option to renew for three years on giving three months’ notice and Montgomery gave proper notice of renewal on November 8, 1954. On February 9, 1955 Jung served a notice to quit on Montgomery, and on the latter’s refusal to leave he brought proceedings for possession.
Judge Duranceau found as a fact that Jung was aware of Montgomery’s lease and of the option therein for renewal before he purchased the prem- ises. So far as the remainder of Montgomery’s original term was concerned, it was protected as an overriding interest, being an unexpired term not exceeding three years and with actual occupation. The renewal term presented a different situation. It did not exceed three years but there could be no actual occupation under it until it began, and this could not be before April 1, 1955. Judge Duranceau treated the option as creating a separate interest to be considered on its own terms, and hence it could not be an overriding interest within s. 51, item 4. It does not appear that any argument was made for treating the option as a covenant running with the land, in which event no separate registration would be required: cf. Di Castri, Law of Vendor and Purchaser (2nd ed. 1976), p. 427. For present purposes, however, it is unnecessary for me to determine whether a “covenant” view of the option would be correct. Although the reasons of Judge Duranceau are not explicit on the point, I take it that the February 9 notice to quit served on Montgomery was a notice to him to quit at the end of his five year term. The issue between the parties was whether Jung could insist on dispossessing Montgomery after March 31, 1955 or whether Montgomery had a valid renewal term of three years from that time.
There are indications in the reasons of Judge Duranceau that because Jung recognized Montgomery’s lease by accepting rent under it, he was bound to its terms. The reasons do not indicate whether any remonstrance was made by Jung when the notice of renewal was given on November 8, 1954, three months before Jung gave notice to quit. This could have been enough to dispose of the case without introducing notice into The Land Titles Act. In affirming Judge Duranceau, the Court of Appeal is reported as having dismissed the appeal without calling on the respondent tenant and to have agreed with the judgment at first instance. Perhaps it also agreed with all the reasons for judgment, which clearly included reliance on notice, and this was certainly the view taken of Re Jung and Montgomery by both Grant J. and the Ontario Court of Appeal in the present case.
After citing Magee on Land Titles (1940), pp. 43, 93, 104, to the effect that the doctrine of notice is foreign to the Ontario Land Titles Act and noting that no cases are cited in support, Judge Duranceau refers to a line of cases which he says support the contrary view. Some of these cases are clearly inapplicable to the issue of notice as it arises here; and equally unacceptable is his apparent equating of notice with fraud. Two decisions which were relied on by him and which were cited to this Court on the appeal here may, however, be mentioned. They are Re Skill and Thompson[7] and John Macdonald & Co. Ltd. v. Tew[8]. Neither, in my opinion, is of any assistance on the question of notice in relation to The Land Titles Act.
Re Skill and Thompson ran the gamut of Ontario’s then superior court system; it was heard first by Riddell J. in Chambers, then on appeal by the Divisional Court and on further appeal by the Ontario Court of Appeal. It arose out of the dismissal by the Master of Titles under The Land Titles Act of an application to remove or vacate a caution registered against certain land by Thompson who claimed the interest therein as against Skill, the owner shown on the title register. Skill had purchased from one Sears in whose name the title had stood before the transfer to Skill, but Thompson claimed under a previous option to purchase given by Sears and of which Skill allegedly had notice. Riddell J.’s view was that the register was controlling and, moreover, since Thompson had begun an action for specific performance against Sears and Skill, there was no justification for maintaining the caution; hence, he vacated it. The Divisional Court restored the order of the Master of Titles, holding that to remove the caution before the action for specific performance was tried anticipated the result of the action in which it would be open to the plaintiff to establish fraud, in that the transfer from Sears to Skill was not intended to be registered. There may be here an equating of notice with fraud, but the Divisional Court judgment is not clear on the issue of notice as such. When the case came before the Ontario Court of Appeal, two of its five members gave reasons dismissing the appeal; the other three members simply agreed in that result. Osler J.A. proceeded on the ground that the Master of Titles had jurisdiction, which was properly exercised, to maintain the caution and it was not for him to try the rights of the parties summarily. Nothing in his reasons touches the question of notice unless it be in his recital of the facts as involving a claim by Thompson that the transfer by Sears to Skill was in fraud of Thompson’s rights under his exercised option.
It is on the reasons of Meredith J.A. that Duranceau Co.Ct.J. in Re Jung and Montgomery and the respondent in the present appeal rely. Regrettably, Judge Duranceau in quoting those reasons stops short of placing the quotation in context, that being supplied by a following passage which is not quoted in Re Jung and Montgomery. The following two passages from the reasons of Meredith J.A. are the ones quoted:
The Land Titles Act is not an Act to abolish the law of real property; it is an Act far more harmless in that respect than in some quarters seems to be imagined, at times, at all events, when the wish is father to the imagination. It is an Act to simplify titles and facilitate the transfer of land; and, doubtless, greater familiarity with it will tend to remove a good many false notions regarding its revolutionary character.
Its main purpose is to assure the title to a purchaser from a registered owner; but, surely, it is not one of its purposes to protect a registered owner against his own obligations, much less against his own fraud: see sec. 124.
Section 124 of the Act, as it then was (the provision is now s. 174), protects against fraud in the following terms (previously quoted in its original form as s. 99):
Subject to the provisions in this Act contained with respect to registered dispositions for valuable consideration any disposition of land or of a charge on land which, if unregistered, would be fraudulent and void shall, notwithstanding registration, be fraudulent and void in like manner.
Having referred to this provision, Meredith J.A. went on to say this:
In this case the respondent contends—and it is so plainly alleged in the statement of defence of the defendant Sears in the action—that the appellant acquired title to the land in question from the registered owner, not only with notice of, but expressly subject to, a prior right, which the respondent had, to purchase it, and that he is substantially in the same position as if he had himself agreed to sell it to the respondent. If this be so, how can the Act prevent an enforcement of such a right? But for the registered ca