Supreme Court of Canada· 1890
Hobbs v. Ontario Loan and Debenture Co.
(1890) 18 SCR 483
EvidenceJD
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Hobbs v. Ontario Loan and Debenture Co. Collection Supreme Court Judgments Date 1890-12-10 Report (1890) 18 SCR 483 Judges Ritchie, William Johnstone; Strong, Samuel Henry; Fournier, Télesphore; Taschereau, Henri-Elzéar; Gwynne, John Wellington; Patterson, Christopher Salmon On appeal from Ontario Subjects Lease Decision Content Supreme Court of Canada Hobbs v. Ontario Loan and Debenture Co., (1890) 18 S.C.R. 483 Date: 1890-12-10 Hobbs, Osborne & Hobbs (Defendants) Appellants; and The Ontario Loan and Debenture Company (Plaintiffs) Respondents. 1890: March 17; 1890: December 10. Present: Sir W.J. Ritchie C.J. and Strong, Fournier, Taschereau, Gwynne, and Patterson JJ. ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO. Landlord and tenant—Creation of tenancy by mortgage—Demise to Mortgagor—Construction of—Rent reserved—Intention to create tenancy. A mortgage of real estate provided that the money secured thereby, $20,000, should be payable with interest at 7 per cent. per annum as follows: $500 on December 1st, 1883; $500 on the first days of June and December in each of the four following years; and $15,500 on June 1st, 1888; and it contained the following provision: “And the mortgagees lease to the mortgagor the said lands from the date hereof until the date herein provided for the last payment of any of the moneys hereby secured, undisturbed by the mortgagees or their assigns, he, the mortgagor, paying therefor in every year during the said term, on each and every of the days …
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Hobbs v. Ontario Loan and Debenture Co. Collection Supreme Court Judgments Date 1890-12-10 Report (1890) 18 SCR 483 Judges Ritchie, William Johnstone; Strong, Samuel Henry; Fournier, Télesphore; Taschereau, Henri-Elzéar; Gwynne, John Wellington; Patterson, Christopher Salmon On appeal from Ontario Subjects Lease Decision Content Supreme Court of Canada Hobbs v. Ontario Loan and Debenture Co., (1890) 18 S.C.R. 483 Date: 1890-12-10 Hobbs, Osborne & Hobbs (Defendants) Appellants; and The Ontario Loan and Debenture Company (Plaintiffs) Respondents. 1890: March 17; 1890: December 10. Present: Sir W.J. Ritchie C.J. and Strong, Fournier, Taschereau, Gwynne, and Patterson JJ. ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO. Landlord and tenant—Creation of tenancy by mortgage—Demise to Mortgagor—Construction of—Rent reserved—Intention to create tenancy. A mortgage of real estate provided that the money secured thereby, $20,000, should be payable with interest at 7 per cent. per annum as follows: $500 on December 1st, 1883; $500 on the first days of June and December in each of the four following years; and $15,500 on June 1st, 1888; and it contained the following provision: “And the mortgagees lease to the mortgagor the said lands from the date hereof until the date herein provided for the last payment of any of the moneys hereby secured, undisturbed by the mortgagees or their assigns, he, the mortgagor, paying therefor in every year during the said term, on each and every of the days in the above proviso for redemption appointed for payment of the moneys hereby secured, such rent or sum as equals in amount the amount payable on such days respectively according to the said proviso, without any deduction. And it is agreed that such payments when so made shall respectively be taken, and be in all respects in satisfaction of the moneys so then payable according to the said proviso.” The mortgage did not contain the statutory distress clause, or clause providing for possession by the mortgagor until default and it was not executed by the mortgagees. The mortgagor was in possession of part of the premises and his tenants of the remainder and such possession continued after the mortgage was executed. The goods of the mortgagor having been seized under execution the mortgagee claimed payment of a year’s rent under the Statute of Anne. Held, per Strong, Gwynne and Patterson JJ. (Ritchie C.J. and Taschereau J. dissenting,) the mortgage deed failed to create between the mortgagor and mortgagees the relation of landlord and tenant, so as to give the mortgagees the right to distrain for arrears of rent, under the provisions of 8 Anne c. 14, as against an execution creditor of the mortgagor; because, even if the deed could operate as a lease although not signed by the mortgagees, the rent reserved was so unreasonable and excessive as to show conclusively that the parties could not have intended to create a tenancy and that the arrangement was unreal and fictitious. The right to impugn the validity of a lease between a mortgagor and mortgagees on the ground that it is merely fictitious and colorable is not to be confined to any particular class such as assignees in bankruptcy, but may be exercised wherever the interests of third parties may be involved. Per Strong J. The excution of the deed by the mortgagor estopped him from disputing the tenancy, and the mortgagees were also estopped by their acceptance of the mortgagor as their tenant, evidenced by their accepting the deed, advancing their money upon the faith of it and permitting the mortgagor to remain in possession. The mortgage deed, although executed by the mortgagor only, operated in any event to create a tenancy at will, at the same rental as that expressly reserved by the demise clause. Sec. 3 of 8 & 9 Vic. c. 106, (R.S.O. c. 100, sec. 8,) has not the effect of repealing the words of the statute of frauds which make the lease required by that statute to be in writing signed by the lessor so far effectual as to create a tenancy at will. Per Gwynne and Patterson JJ. The mortgage deed not having been signed by the mortgagees failed to create even a tenancy at will. Per Gwynne J. The form adopted for the demise clause is such that by the mortgagees executing the deed it would operate as a lease, and by their not executing it the clause would be simply inoperative. Per Ritchie C.J. and Taschereau J. The execution of the mortgage by the mortgagor and continuing in possession under it amonnted to an attornment and the relation of landlord and tenant was created. The deed was intended to operate as an immediate lease with intent to give the mortgagees an additional remedy by distress and was a bonâ fide contract for securing the payment of principal and interest, and in the absence of any bankruptcy or insolvency laws there was nothing to prevent the parties from making such a contract. APPEAL from a decision of the Court of Appeal for Ontario[1] reversing the judgment of the Queen’s Bench Division[2] in favor of the defendants. The facts of the case are sufficiently set out in the head-note and in the following judgments of the court. At the trial judgment was given for the plaintiffs, then learned judge holding that while the rent would be unreasonably excessive if the tenancy was treated as for the whole term of five years, yet that the term was divisible and there was a good lease for four and a‑half years at $1,000 a year. The Divisional Court reversed this decision and held that no real tenancy was created. The Court of Appeal, in turn, reversed the decision of the Divisional Court and held in favor of the tenancy. The defendants appealed to this court. Gibbons for the appellants cited Trust and Loan Co. v. Lawrason[3]; Ex parte Voisey[4]; Ex parte Jackson[5]. Moss Q.C. for respondents referred to Ex parte Punnett[6]; Alton v. Harrison[7]. SIR W.J. RITCHIE, C.J.—I think there is nothing in this case to lead one to doubt the bonâ fides of this transaction, or to lead to the conclusion that as a matter of fact the partners did not intend to create the relationship of landlord and tenant; the mortgagor was, at the time of the execution of this mortgage, in perfectly solvent circumstances, and the mortgagee advanced his money by way of loan on the security of this mortgage and the provisions contained therein. The mortgagor was the owner of this land in fee and he conveyed it by way of mortgage to the mortgagee. I cannot understand why the redemise clause cannot be treated as a lease, or as creating a tenancy. The mortgagee was at law the owner of the land in fee, what then prevented him from making a lease for the term mentioned in the mortgage? I think the payments made must be taken to have been made as rent payable in accordance with the terms of the mortgage. Why should this clause be eliminated from the mortgage, what right have we to say that the mortgagee would have advanced his money without the security of this clause, and does not this very litigation show that such a relationship was for the better securing the payment of the mortgage money? What right have we to say, contrary to the express language of the redemise clause, that that was a provision merely that the mortgagor shall remain in possession until default? Why, if that was the intention, was it not so treated and plainly expressed? Why should we be called on to say that the parties intended that the contract should be different from that expressed in the deed by which his right to remain in possession rests on the express demise creating the relation of landlord and tenant? I think that after the execution of the mortgage and continuing in possession under the mortgage amounted to an attornment and the relation of landlord and tenant was created. I think the deed was intended to operate as an immediate lease with intent to give the mortgagee an additional remedy by distress. There was no bankruptcy law in existence when this deed was excuted. In the absence of any bankrupt or insolvent laws, what was to prevent the parties making this contract? What right have we to say it does not express the true bargain and that a tenancy was not created which the parties expressly say shall be created? The mortgagor agrees that a tenancy shall exist on the terms mentioned in the mortgage and this deed is delivered to the mortgagees who accept and assent to it, and the mortgagor pays rent under it. What more perfect attornment could there be? What stronger language could be used to show that a tenancy was created and the mortgagor assumed the position of tenant at the rent specified. I think there is no ground for saying that this was a mere device for evading the bankruptcy or insolvent laws, in fact it could not be, for there were no bankrupt or insolvent laws to evade nor to defraud or interfere with any others, and therefore the rent reserved, even if out of proportion to the annual value, is no objection to the demise. I think the contract in this case was a bonâ fide contract a reality and no sham by which the relation of landlord and tenant was established for securing the payment of principal and interest on the mortgage security. I will only cite one authority which I consider conclusive; other cases bearing on this question have been so fully discussed in the court below that I do not deem it necessary to refer to them, all of which, in my opinion, fully justify the decision at which the Court of Appeal have arrived. It is the case of Ex parte Voisey[8]. Jessel, M.R. says: But some other points have been taken. It was said that there was no tenancy at all, because you cannot make a tenancy except by agreement, and that, as the mortgage deed was not executed by the mortgagees, there is no agreement. The fallacy of that argument appears to me to be in confounding agreement with evidence of agreement. Certainly there must be an agreement, or else you cannot have a tenancy, but an attornment may be evidence that the landlord has entered into an agreement for a tenancy. In this case we have an attornment to the legal owner by deed executed by the tenant in possession and delivered to the legal owner—very good evidence of a tenancy—evidence, therefore, of an agreement for a tenancy, and as was said in Ex parte Punnett[9] that is an estoppel in pais which would prevent the tenant from denying the tenancy. Therefore, there is in this case a well created tenancy. Page 457. Brett J. says: Now the stipulation which is called an attornment, if it be a bonâ fide and honest transaction, is a contract in writing between the two parties to it. It is signed by only one of them, if you please, but it is delivered by that person to the other, and kept by him, and the intention of it is that it shall form a contract and, if that be so, it is a contract. If it is a contract, it is a contract in writing, and if it be a bonâ fide contract, and is in writing, the effect of it depends entirely upon the construction of the writing. And at page 459: That raises the question whether the contract was a bonâ fide one. Now, in what sense can it be said that it is not bonâ fide? Whatever may be its terms, and however excessive the rent, it is not a fraud as between the parties, because nothing was concealed by the one from the other, and both agreed to the terms. Therefore it could not be a fraud as between the parties. It was not intended to defraud any known individual. It cannot, therefore, in the ordinary sense of the term, be a fraud at all. The only way in which it can cease to be a bonâ fide contract is if it was not intended to be acted upon between the parties at all, and was only a device to evade the bankruptcy laws. That would not be what is ordinarily called a fraud, but it would be what is called a fraud upon the bankruptcy laws, that is, an attempt to evade the bankruptcy laws in case of a bankruptcy. Now that attempted evasion, that want of bonâ fides with regard to the bankruptcy law, must exist, if at all, at the moment when the contract is made. Therefore what we have to consider is this (and this is the real meaning of Ex parte Williams[10] at the time when the contract was made it was made for the purpose of its being acted upon between the parties, whether there should be a bankruptcy or not, or, although in terms it appears to be made between the parties with the intention that it should be acted upon whether there is a bankruptcy or not, were their minds really then fixed upon this, that it was to be acted upon only if there should be a bankruptcy? In other words, they must have had bankruptcy in their contemplation at the time of making the contract, they must have contemplated evading or attempting to evade the fair distribution of the mortgagor’s property in case of his bankruptcy. That seems to me to be the true proposition and the true principle of the law which is laid down Ex parte Williams10. And at page 461 he says: I take it that the question is whether there was a real honest stipulation between the parties, intended to be acted upon whether there should be a bankruptcy or not, or whether it was a stipulation which they intended to be acted upon only for the purpose of defeating the bankruptcy law. Cotton J. at page 464 says: Of course the question is, was the transaction a sham or a reality? and I think we ought in the present case to take it to be a reality and not a sham. And, if we come to this conclusion, there being nothing to prevent a mortgagee and a mortgagor from agreeing together that the relation of landlord and tenant shall exist between them, we cannot deprive the mortgagee of the consequences resulting from the legal relation which has been honestly and really constituted by the contract between the parties. Jessel, M.R. at page 465, says: I wish to add that I entirely agree in the observations of Lord Justice Brett, as to the principles of law which are te extracted from Ex parte Williams[11] and the two subsequent cases. I think, therefore, that the appeal should be dismissed. STRONG J.—This was an interpleader issue. The appellants who were the defendants in the issue were execution creditors of David Darvill and under their executions certain goods and chattels, the property of the execution debtor, were seized by the sheriff of Middlesex. These goods were, at the time of the seizure, upon certain lands and premises of the execution debtor which had previously been mortgaged by him to the respondents. The respondents insisted that under the terms of this mortgage the relation of landlord and tenant had been created between themselves and the mortgagor, and that a rent equal to the instalments of principal and interest of the mortgage debt, which the mortgagor had covenanted to pay, had been duly created, and they claimed that the sheriff should not remove the goods seized by him from the mortgaged premises until certain arrears of the rent mentioned should be paid to them, pursuant to statute 8 Anne ch. 14. The mortgage was to secure the repayment of a loan of $20,000 and interest, and was, by indenture dated the 31st May, 1883, the parties to the deed being David Darvill the mortgagor, and the present respondents the mortgagees. It contained the following proviso for defeasance, viz.: Provided, this mortgage to be void on payment of twenty thousand dollars of gold coin of legal tender in Canada, or at the option of the mortgagees or their assigns, the then equivalent thereof of lawful money of Canada, with interest of seven per cent. per annum as follows:—Five hundred dollars of the said principal sum to be paid on the first of December next (1883); five hundred dollars on the first day of each of the months of June and December in each of the four following years: 1884, 1885, 1886 and 1887, and fifteen thousand five hundred dollars, being the balance of the said principal sum, on the first day of June, in the year eighteen hundred and eighty-eight. And the interest at the rate aforesaid, likewise of gold coin or its equivalent as aforesaid, on the unpaid principal from the first day of the month of June, 1883, to be paid semi-annually on the first day of each of the months of June and December, in each year, until the said principal sum and interest shall be fully paid and satisfied. The first of said semi-annually payments of interest to become payable on the first day of December, in the year eighteen hundred and eighty-three. There was also a power to take possession and sell in case of default in payment conferred by the following words: Provided, that the said mortgagees, on default of payment for one month may, on one month’s notice, enter on and lease or sell the said lands. Provided also that any such sale may be for cash or on terms of credit, and that in case of default of payment as in foregoing proviso mentioned, for three months, the foregoing powers of entry, leasing and sale, or any of them may be exercised without any notice having been given as therein provided. And there was also in the deed the following clause purporting to be a demise of the mortgaged property by the mortgagees to the mortgagor: And the mortgagees lease to the mortgagor the said lands from the date hereof until the date herein provided for the last payment of any of the moneys hereby secured, undisturbed by the mortgagees or their assigns, he, the mortgagor, paying therefor in every year during the said term, on each and every of the days in the above proviso for redemption appointed for payment of the moneys hereby secured, such rent or sum as equals in amount, the amount payable on such days respectively, according to the said proviso without any deduction. And it is agreed that such payments when so made shall respectively be taken and be in all respects in satisfaction of the moneys so then payable according to the said proviso. Provided always, and it is agreed that in case any of the covenants or agreements herein of the mortgagor, his heirs, executors, administrators or assigns, be untrue, or be unobserved or broken at any time, the mortgagees, their successors or assigns, may without any previous demand or notice enter on the said lands or any part thereof, in the name of the whole, and take and retain possession thereof, and determine the said lease. And no reconveyance, release or discharge from these presents, of any part or parts of the said lands by the mortgagees or their assigns shall cause an apportionment of the said rent, but the whole thereof shall be payable out of the remainder of the said lands. The mortgage deed was duly executed by the mortgagor but not by the mortgagees. The sheriff having seized the goods of the mortgagor found upon the mortgaged premises under the execution of the appellants, the respondents on the 8th June, 1887, served him with a notice that there was due to them for rent reserved in respect of the tenancy alleged to have been created by the mortgage, the aggregate amount of $3,180, being composed of the three payments which had fallen due in June and December, 1886, and in June, 1887, and they required the sheriff not to remove the goods until they were paid. The appellants disputed this claim. Thereupon the sheriff obtained the interpleader order, whereby it was directed that an issue should be tried to ascertain the rights of the respective parties. An issue was accordingly framed in which the present respondents were plaintiffs and the appellants defendants; whereby the question to be determined was stated to be whether the respondents were entitled as landlords of David Darvill or otherwise under the mortgage from said David Darvill to the plaintiffs dated the thirty-first day of May, A.D. 1883, to be paid out of the moneys realized on the sale of the goods and chattels of said David Darvill, seized on the first day of June, A.D. 1887, in execution by the sheriff of the county of Middlesex, the sum of $1,077.50 and $1,060.00 due to the plaintiffs for arrears of rent or otherwise under said mortgage, and payable on the first day of June, 1886, and the first day of December, 1886, respectively, in respect of the lands upon which the said goods and chattels were at the time of the seizure and sale thereof, or some part thereof, as against the execution creditors. This issue came on to be tried at the Middlesex assizes before Mr. Justice Rose and a jury, when the learned judge having discharged the jury reserved the case for further consideration and subsequently found the issue in favour of the present respondents and entered judgment for them accordingly. Upon motion to the Divisional Court of Queen’s Bench this judgment was set aside and judgment was ordered to be entered in favour of the appellants. The respondents then appealed to the Court of Appeal by which court the order of the Divisional Court was reversed and the judgment of Mr. Justice Rose restored. The judgments in the Divisional Court and in the Court of Appeal were respectively concurred in by all the learned judges who took part in those decisions. It is well settled by authority that it is competent for the parties to a mortgage of real property to agree that in addition to their principal relation as mortgagor and mortgagee they shall also as regards the mortgaged lands stand towards each other in the relation of landlord and tenant, the mortgagor thus remaining in possession as the tenant of the mortgagee. It is, however, essential to the validity of such an arrangement that it should be so carried out as to comply with the requirements of the law prescribed for the creation of leases, and further that it should appear that it was really the intention of the parties to create a tenancy at the rental (if any) which may be reserved and not merely under colour and pretence of a lease to give the mortgagee additional security not incidental to his character of mortgagee. If these conditions are complied with the relation of lessor and lessee is considered to be established not merely as between the parties themselves but in respect of third persons also. In such a case it has been held that the mortgagee may distrain for rent in arrear upon the goods of a stranger found upon the mortgaged or demised lands, and it also follows that in a case like the present, he is entitled to insist as against the sheriff and the execution creditors of the mortgagor upon the rights conferred on landlords by the statute 8 Anne ch. 14 and claimed by the respondents in the present instance. It is somewhat remarkable that the right of the mortgagee to distrain the goods of a stranger does not appear to have been finally determined by judicial authority in England until a date so recent as 1883, when in the case of Kearsley v. Philips[12], it was so decided by the Court of Appeal. Previously, however, to the date of this decision in Kearsley v. Philips the courts of Ontario had in many cases recognized this right of distress and it may now be regarded as well established, subject however, to the conditions already mentioned. The questions we have to deal with in the present case are two, namely,1st, was the mortgage deed, having regard to the fact that it was executed by the mortgagor only and not by the mortgagees, sufficient to create any tenancy at all between the parties at the rent assumed to be reserved by its terms, three gales of which are claimed by the mortgagees by the notice served on the sheriff; and 2ndly if the instrument was itself sufficient does it appear to have been the real intention of the parties, in good faith, to constitute between themselves the relation of landlord and tenant and that at a real rental or was the arrangement not real but merely a fiction or sham entered into for no other purpose than to obtain for the mortgagees an additional security similar to that which a landlord would have by means of the common law right of distress upon such goods as might be found upon the premises. Upon the first question I am of opinion that the mortgage executed as it was was sufficient to create a tenancy. In support of their position under this head the respondents have relied principally upon two cases, Morton v. Woods[13] and the same case in the Exchequer Chamber[14] and West v. Fritche[15]. It appears to me, however, that neither of these cases exactly covers the question arising here, though the judgments delivered in Morton v. Woods do I think contain the enunciation of principles which greatly assist in deciding the point now under consideration. In Morton v. Woods the clause of the mortgage which was relied on as creating the tenancy was in its terms different from that in the instrument before us; it was in form an attornment clause, by which the mortgagor declared that he attorned to and became tenant to the mortgagees; in the present case the clause (before stated) is in terms a demise by the mortgagee to the mortgagor. It seems, however, that this is an immaterial difference; in this case as in the case of the attornment clause there is an admission under seal by the mortgagor of the terms of the demise and by force of the words “yielding and paying therefor” a covenant to pay the rent. This coupled with the facts that the mortgagees advanced their money on the faith of all the provisions contained in the deed and that the mortgagor was allowed to remain in possession after the execution of the mortgage and as it must be assumed under the provision in question would it seems to me amount to an estoppel binding the mortgagor as well as the mortgagee, and which would therefore be sufficient to constitute a tenancy unaffected by the provisions contained in the statute of frauds and in the eighth section of the revised statutes of Ontario, 1887 ch. 100 (a re-enactment of the Imperial Act 8 & 9 Vic. ch. 106 sec. 3). These enactments require that when a lease for more than three years depends on the conventional acts of the parties it must be evidenced by a deed; but this in no way interferes with the doctrine of estoppel which proceeds upon the principle not that there is sufficient legal evidence of a demise but that the parties are by their acts debarred from disputing that fact. Therefore I should, if there were no other grounds for so determining, be prepared to hold that the mortgagor’s execution of the deed estopped him from disputing the tenancy and that the mortgagee was also estopped by his acceptance of the mortgagor as his tenant evidenced by his accepting the deed, advancing his money upon the faith of it and permitting the mortgagor to remain in possession. This conclusion would, I think, be fully supported by the case of West v. Fritche15. In Morton v. Woods it was not necessary to have recourse to the doctrine of estoppel for the purpose of establishing that there was a demise, though it was resorted to in order to get over another difficulty there arising, that from the circumstance of there having been a prior outstanding mortgage there was no legal reversion in the mortgagor. The objection founded upon the requirements of the statute making a deed essential to the creation of a tenancy for more than three years was got over in a different way. It was there held that inasmuch as it appeared that upon the true construction of the attornment clause the parties did not intend to create a tenancy for a term but a mere tenancy at will, the statutes did not apply; and that all that was requisite for the creation of such tenancy at will was some evidence even by parol to that effect. Further, that there had been an actual present demise by the mortgagee to hold at the will of the latter and that this was to be implied from the execution by the mortgagor of the mortgage deed containing the attornment clause, and from the assent to its terms by the mortgagee to be inferred from his acts in advancing the money on the faith of the deed allowing the mortgagor to continue in possession and otherwise acting on the mortgage. The statutes therefore had no application whatever, and by the agreement of the parties without in any way resorting to the doctrine of estoppel a good parol demise or lease at will was made out. The difficulty occasioned in the present case by the non-execution of the mortgage by the mortgagee might be got over in precisely the same way if it were possible to say that upon the true construction of the mortgage deed the parties intended to create only a tenancy at will. This, however, I am unable to do, for, differing with great respect from Mr. Justice Burton, I have failed to discover from the terms of the deed that any other tenancy was designed to be created than one which was to continue until the expiration of the time limited for the last payment under the mortgage on the 1st of June, 1888. There is, however, another alternative by which as it seems to me this technical objection might be surmounted. In the judgment of the Exchequer Chamber, in Morton v. Woods,[16] delivered by Chief Baron Kelly, the following passage occurs:— But even if there were any doubt upon the construction of this instrument as to the intention to create a tenancy at will only, and if as was contended on behalf of the plaintiffs, it be taken to have been the intention to create a term of ten years the operation of the statute puts an end to the question. For if it had been clearly intended to grant a lease of ten years, the lease being by parol only by reason of the non-execution of the deed by the mortgagees, by the express words of the statute of frauds the lease is not absolutely void but has the effect of a lease at will. From the execution of the deed therefore, or on the attornment by the mortgagor he became tenant at will to the defendants and there being a rent of the specified amount of $800, appearing on the face of the deed a distress by them for that specific rent would be lawful. Although this was a dictum merely and was not required for the purposes of the decision in Morton v. Woods, it indicates a safe ground upon which to rest the determination of the point now under consideration in the present case. Assuming that I am wrong as to the estoppel, and aside from that principle altogether, there was here an assent by both parties to the demise clause purporting to create a present lease for a term of five years—that is to say, an assent by the mortgagor in signing and sealing the deed and in remaining in possession under it, and an assent by the mortgagees by their adoption of its terms, by acting upon it in the way they did advancing their money, and allowing Darvill, the mortgagor, to continue in possession. There was, therefore, in fact, an actual present lease which would have been a good parol lease at common law for the whole term, though it was not actually valid as such for the reason that it did not comply with statutory requirements. By the express provision of the Statute of Frauds, however, as the Chief Baron pointed out in Morion v. Woods, a parol lease for a term exceeding three years is void as to the term, but is, nevertheless, to operate so far as to create a tenancy at will; and there is nothing in the subsequent statute enacting that when the statute of frauds required a writing signed by the lessor a deed should be requisite, and that the lease should be void if not made by deed, which repeals the words of the statute of frauds making the lease in such a case so far effectual as to create a tenancy at will. The later statute is to be read and construed merely as substituting a deed for the signed writing required by the earlier enactment, and the avoidance of the lease has reference only to its nullity as a lease of a term; the tenancy at will arising in such a case is not created by, nor is it dependent on the lease, but is a creation of the statute, a statutory consequence of the attempt to create a lease by parol for more than three years, and of the nullity of such a proceeding declared by the statute. There is, therefore, no more inconsistency between this implied or resulting tenancy at will raised by the statute and the provision that the lease shall be a nullity if not by deed, than there was between the original enactment that the lease should be wholly void unless in writing and signed by the lessor, and the proviso which followed saying that in such a case there should be a tenancy at will. This proviso is still preserved, although the lease for term must now be made by deed. In other words, it is apparent that the tenancy at will in such a case did not arise from the agreement of the parties, but was the effect of the statute which has never been repealed. Then to apply this principle to the present case it must be held that the parties having attempted to create a term of five years by a parol lease, which, as I have said, must be the result of the mortgagor having signed and sealed the deed, and of the mortgagees having assented to its terms by acting upon it in the way before mentioned, the consequence follows that this parol demise being void under the statute as a lease for five years operates as a tenancy at will under the provision of the statute of frauds. And if there was a tenancy at will it must have been a tenancy at the same rental as that expressly reserved by the demise clause in respect of the void lease. For these reasons the objection to the judgment of the Court of Appeal based on the non-execution of the mortgage deed by the mortgagees wholly fails. The language of the Master of the Rolls (Jessel) in the case of Ex parte Voisey[17], is applicable to both points on which, as it appears to me, the objection founded on the non‑execution of the deed by the mortgagee fails, on estoppel and agreement. As I have already shown, agreeing in this respect with Mr. Justice Osler, there can be no material difference between the demise clause in the deed before us and what is called the attornment clause generally found in the mortgages which have come in question in the English cases, and the execution by the mortgagor alone of the demise clause in the present mortgage, its acceptance by the mortgagee was just as effectual as an acknowledgment of tenancy, as would have been the execution by the mortgagor alone of an attornment clause. This being so the following language of the Master of the Rolls in re Voisey seems conclusive. Sir George Jessel there says:— But some other points have been taken; it was said that there was no tenancy at all, because you cannot make a tenancy except by agreement, and as the mortgage deed was not executed by the mort- gagees there is no agreement. The fallacy of that argument appears to me to be in confounding agreement with evidence of agreement. Certainly there must be an evidence or else you cannot have a tenancy, but an attornment may be evidence that the landlord has entered into an agreement for a tenancy. In this case we have an attornment to the legal owner by deed executed by the tenant in possession and delivered to the legal owner, very good evidence of a tenancy, evidence therefore of an agreement for a tenancy, and as was said in ex parte Punnett[18] that is an estoppel in pais which would prevent the tenant from denying the tenancy. Therefore there is in this case a well created tenancy. Further, I think it would not be difficult to demonstrate that for equitable reasons based on the doctrine of part performance this first objection is not sustainable. I think it unnecessary, however, to enter upon a consideration of them, as I consider what has already been said sufficient for the purpose. It remains to consider the objection to the clause of tenancy, contained in this mortgage, which is based on the more substantial ground that it was not intended by the parties in reality to constitute by it the relation of lessor and lessee, but merely to give by means of it to the mortgagees a right corresponding to that which in case of a bonâ fide lease the lessor has to exercise the common law power of distress, and thus to extend the mortgagees’ security to the chattel property which might be found on the mortgaged premises; in other words, it is insisted that upon the evidence as to the annual value of the property it must be taken as established that the tenancy which the parties assumed to create was not a bonâ fide lease but was, to use the expression applied in some of the English cases, a sham, a mere colourable contrivance, to obtain the benefit of the power of distress, which in the case of a real lease the law gives to the landlord as an incident of his reversion and by this means to acquire a priority over the creditors of the mortgagor having executions against his chattels, and also to seize and sell the goods of third persons which might be found upon the premises. I confess it is not easy to see for what object these clauses of tenancy, inserted in mortgages, were designed, except for the purpose of conferring on the mortgagor the power of making all distrainable chattel property found on the premises available towards the satisfaction of the principal and interest of the mortgage debt, and as the right of distress must necessarily in every case where it comes in conflict with the rights of assignees in bankruptcy of execution creditors or of a third person owning goods found upon the land, have the effect of prejudicing their rights in a most unjust manner I should have thought that in all cases in which a conflict occurs the right of honest creditors and innocent third parties ought to prevail over an arrangement which could only be attributed to the object mentioned or at least that this should be so in all cases where the security of the land being ample, the mortgagor, if this device of creating a tenancy had not been open to him, would never have thought of taking possession. The authorities, however, have, beyond doubt or question, established the validity of such agreements in all cases where it appears that the intention of the parties was to create a real tenacy at a real rent. The advantage accruing to the mortgagee from such a tenancy must, for some reason, be considered of considerable value, for by it there is conferred upon him a very onerous obligation, viz., the liability to account to subsequent mortgagees not only for rents actually received, but for such as might without wilful default have been received, and the mortgagee is thus compelled for his own protection to be active in enforcing his right as a lessor though his security otherwise may be ample; he is thus as it were converted into a bailiff for subsequent incumbrancers, a position which I should have thought not desirable for a mortgagee with a sufficient security, however it might be with one whose security was not ample. However, the practice of conveyancers, both in England and in this country, to insert such clauses seems to have become universal, and the decisions of the courts have now too firmly settled the validity of such provisions in mortgages to admit a doubt of their legal validity in proper cases. It is, however, laid down in several cases lately decided by the English Court of Appeal, that, however binding these claims may be between the actual parties, it is open to third persons affected by their enforcement to impeach them in cases in which it may appear from the evidence that they were not intended to create a real tenancy, but were designed merely as a cloak for an additional security to the mortgagee. The principal authorities in which this has been held or in which the doctrine has been recognized are the following, viz.: Ex parte Williams[19]; ex parte Stockton Iron Co.[20]; ex parte Jackson[21]; ex parte Punnett[22]; ex parte Threlfall[23]; and ex parte Voisey[24]. Perhaps I ought to have omitted from this list the first case mentioned, that of ex parte Williams, as the ratio decidendi in that case was that well known principle applied under bankruptcy and insolvency statutes, that any provision by a debtor that in the event of his becoming bankrupt or insolvent there shall be a different distribution of his effects from that which the law provides is void [see Watson v. Mason[25]]; the deed in that case did provide for an advantage to arise to the mortgagee from the tenancy clause in the case of bankruptcy. It is obvious that this doctrine has no application to the present case. Here we have nothing to do with bankruptcy, or insolvency statutes, and I only point this out to avoid confusion. The dicta in this case of Ex parte Williams are broad enough to cover the law as laid down in the subsequent decisions. The other cases, however, do establish the law as I have stated it, and are distinct authorities for the proposition that if it appears that the tenancy for which the mortgage deed provides is not intended by the parties to be a real lease, at a real bonâ fide rent, but is a mere sham and pretence intended merely to give the mortgagee the extraordinary remedies of a landlord, such a clause is void at least as against the assignees in bankruptcy of the mortgagor; and it has also been held that in case it should appear from evidence that the rent was greatly in excess of the annual value of the mortgaged premises, and such a rent as no bonâ fide tenant would think of paying, the fact that such an excessive and unreasonable rent had been reserved was conclusive to show that the parties could not have intended to create a tenancy, and that the arrangement must therefore be considered unreal and fictitious. In Ex parte Jackson (ubi supra) Baggallay L.J. says: Now as was pointed out by the Master of the Rolls, in re Stockton Iron Furnace Company, there was nothing unreasonable in the original introduction into mortgage deeds of attornment clauses in cases in which the mortgagor was in possession of the mortgaged premises. If the mortgaged premises had been occupied by a stranger the mortgagee could at any time have demanded from him payment of his rent in arrear and he could have applied any rent paid to him under such a demand in discharge in whole or part of the interest in arrear on his mortgage and if the rent received by him was more than sufficient to discharge the interest it could be applied in discharge or satisfaction pro tanto of the mortgage debt. Now so far as any inference can be drawn from the practice of inserting attornment clauses it appears to me that the benefit to be derived by the attornment clause was in- tended to be an equivalent for that which the mortgagee would have derived from the rent if the tenant had been a stranger. What would that equivalent be? Would it not be the right to the payment of a fair and reasonable rent such as an ordinary tenant would be willing to give for the property under ordinary circumstances. That as it seems to me, is the rent for which a properly prepared attornment clause should make provision; not necessarily the exact amount which a tenant would pay for the property, bat such an amount as a willing tenant would probably pay as a bonâ fide rent. If the rent so reserved is clearly in excess of what would be a fair and reasonable rent it appears to me though that you may call it rent, it is no longer a real rent but a fictitious payment under the name of rent. In this same case of Ex parte Jackson, we find the following passage in the judgment of Cotton L.J. Undoubtedly a mortgagor and a mortgagee have a right to insert in their mortgage deed a clause making the mortgagor attorn as tenant to the mortgagee and thus by contract constituting the relation of landlord and tenant between them. Under such circumstances when it is a real and not a fictitious and sham arrangement the ordinary consequences of a tenancy follow and there can be a distress for the rent agreed upon which will be valid and effectual in the case of bankruptcy. As has been pointed out by Lord Justice Baggalley, this is quite reasonable for the mortgagee has a right to take possession and to turn out the mortgagor whether he be in possession by himself or his tenant. If the mortgagor is in possession by a tenant then the rent which that tenant pays comes into the hands of the mortgagee. If the property is in the possession of the mortgagor himself the mortgagee may turn him out and let the property either to a stranger or to the mortgagor; and, therefore, there is nothing unreasonable or that can be called a fraud in the law of bankruptcy in allowing the parties to make a contract in the mortgage deed which they might validly and effectually make afterwards. If the mortgagee lets to a third party no question can arise as to the amount of the rent; and if the attornment clause is one which really constitutes the relation of landlord and tenant between the mortgagor and mortgagee the court will not be nice in considering whether the rent is too great for the mortgaged property. But it is a very different question which we have now to consider, viz., whether there is a real or only a fictitious or ostensible contract to constitute the relation of landlord and tenant. On that question the amount of the rent created may be most material; it may be so excessive as to afford even of itself, a probability that that which is in form a contract constituting the relation of landlord and tenant and reserving a return for the use of the property was not so in substance and fact but was a mere colour in order to cover something else. Nor is it material how the rent, if rent is to be applied. No doubt, the rent may be sufficient to cover the interest, but if it is more than sufficient to cover the interest and is received by the mortgagee he must apply it in reduction of the capital, subject to the question whether the interest was in arrear at the time he took possession for as against a mortgagor in possession when the interest is not in arrear an account would be taken with annual rents. Therefore, the stipulation that a rent fairly reserved, a real rent, is to be applied in paying the principal and interest of the mortgage debt, cannot avoid a contract which in other respects is a real contract and not a mere device to cover something else. Further on the learned Judge says:— Under these circumstances the conclusion to which I have come is this, that there was no real rent, though a sum was stipulated for under the name of rent. But it was not a rent in respect of which the legal incident of distress arises, and, therefore, on the ground that there was no legal right to distrain the bank under their distress, have not got any title to these goods which, unless there has been an effectual distress, remained the property of the bankrupt. And I go further than that. No doubt, any distress which is exercised does give to a mortgagee, if he is a landlord, something which he would not have got if he had not exercised it. But, yet, it must be a distress for a real rent, to which the law has annexed as an incident the power of distress. Lord Justice Cotton also says:— Here there was no real rent and no real relationship of landlord and tenant, and, therefore, there was no power of distress. In the same case Lord Justice Thesiger holds the following language:— Therefore although it is clear that persons may bargain with each other as to the amount of rent and the courts will not rightly interfere with bargains so made it is obvious looking at the nature of these uses and the object with which they can be legitimately inserted in mortgage deeds that the amount of the rent may, under certain circumstances, become a matter very important to consider in order to determine whether they are real attornment clauses, whether the rent fixed is a real rent and whether a real tenancy has been created. * * * Granted that these attornment clauses are valid and operative under ordinary circumstances, yet if from the terms of the particular deed or from the amount of the rent fixed by the attornment clause it can be concluded by the court that the rent is not a real rent buta mere sham, and that the attornment clause is a mere device to give the mortgagee a hold in the event of bankruptcy over the goods and chattels of the mortgagor which could otherwise have been distributed among his general creditors then the attornment clause is invalid and inoperative because it is a fraud upon the bankruptcy law. * * * The learned judge also says: The question is whether for any purpose there was a real rent or real tenancy. And he adds: But here the right of distress can only be supported upon the ordinary principles of law which attach that right to a legitimate tenancy with a legitimate rent. If once you arrive at the conclusion that there is no tenancy and no rent, but that the attornment clause creates only a sham tenancy and a sham rent for purposes such as I have described, then it follows that no distress, can by the ordinary principles of law be attached to such a tenancy in respect of such a rent and for that reason it seems to me, that no legitimate distinction can be drawn between a distress levied before and a distress levied after bankruptcy. In the last reported case, that of ex parte Voisey (ubi supra) the judges are equally distinct in their enunciation of the same principles of law. Thus Brett L.J. says: That raises the question whether the contract was a bonâ fide one. Now in what sense can it be said that it was not bonâ fide? Whatever may be its terms, and however excessive the rent, it is not a fraud as between the parties because nothing was concealed by the one from the other, and both agreed to the terms. Therefore it could not be a fraud as between the parties. It was not intended to defraud any known individual. And the Lord Justice then proceeds to point out that it was a fraud on the bankruptcy law. In the same case L.J. Cotton affirms distinctly and emphatically the law as he had laid it down in the previous case and thus expresses himself: It is undoubted that a mortgagor may enter into a contract with his mortgagee, that the mortgagor shall be a tenant to the mortgagee and it is equally undoubted that the law gives certain rights and priorities to a landlord but the question is whether the contract between the parties was one under which (whatever were the words they used) they really intended to create the relation of landlord and tenant, or whether, under the mask of certain words, they intended, without any real tenancy, to endeavour to give to the mortgagee all those rights which he could have only if he was landlord and the mortgagor was his tenant. This may be put in other words. It may be said that the question is, whether there was between the parties any real relation of landlord and tenant or whether whatever were the words used it was all a sham. In considering that question we must look at both the amount of the rent or what is called the rent and the other circumstances, and if we find that the so-called rent is so excessive that it never could have been meant to be paid by the occupier to the owner of the land for its use and occupation, that is very strong evidence indeed that there was no real intention to create a tenancy. And subsequently the learned judge adds, referring to Ex parte Jackson:— In that case there could be no doubt that there was a mere nominal creation of the relation of landlord and tenant, or that in reality the intention was to try and get the benefit which a landlord only can have over any other creditor by using the words landlord and tenant without any intention of creating any such relation. It is to be observed of all these cases that they are instances in which the validity of the leasing clause was impugned by assignees in bankruptcy, and therefore the language is in some respects confined to the rights of such persons. I am of opinion, however, and the passages I have extracted from the judgments delivered in the Court of Appeal entirely bear me out, that it was not intended to restrict the principles laid down to cases in which the question was raised after a bankruptcy, but that these principles must be generally applied wherever the interests of third persons require their application. Some of the learned judges in the judgments I have quoted from, lay it down generally that when it appears on the face of the deed, or otherwise, that an actual demise at a bonâ fide rent was not really intended by the parties, but that the pretended demise was a mere contrivance to enlarge the mortgagee’s remedies, the common law incident of a right of distress would not attach at all. The mort- gagor himself would be considered as having incapacitated himself from asserting the invalidity of what he had deliberately affirmed to be the true relation between himself and the mortgagee in an instrument under seal, but as regards third parties interested in so doing I know of no reason why it should be confined to any particular class such as assignees in bankruptcy. The avoidance of the fictitious lease at the fictitious rent is not dependent on any principle peculiar to the bankrupt laws, but proceeds on this—that when there is no real tenancy, and therefore no real rent, an extraordinary and very stringent remedy which the common law has made an incident of the reversion for the purpose of recovering a rent service cannot exist. And if it does not “lie in the mouth” of the mortgagor to assert this, it ought nevertheless to be open to all third parties really interested to do so. Therefore I regard the cases in which it has been considered open to assignees in bankruptcy in the interest of the general creditors to set up the colorable character of an attornment clause, as only instances of the application of a general rule which upon every ground of reason and law must also apply to other third parties whose rights ought only to be intercepted by a bonâ fide landlord and especially to execution creditors of the mortgagor as well as to persons whose goods are sought to be taken by one who has no real but only a pretended and colourable right to the privilege which he assumes to exercise. It only remains to enquire whether this mortgage deed does upon its face show that the parties did not really intend to constitute the relation of landlord and tenant. The passages which I have extracted from the judgments delivered in the English Court of Appeal show that upon this enquiry the gross excess of the rent over the actual rental value of the property is conclusive. That being so there is no alternative but to pronounce against the validity of the alleged tenancy in the present instance at least so far as it would affect the appellants and make them liable to the claim asserted by the mortgagees. The evidence is conclusive to show that $750 per annum is the highest annual value which can be placed on the mortgaged property. The rent reserved is in the aggregate $20,000 for the five years of the pretended tenancy. This would make a rental of $4,000.00 a year more than four times the actual value. This is sufficient to establish that the parties never intended to create a tenancy at such a rental otherwise than for the indirect purposes to which I have before referred, and it must therefore be adjudged that the respondents have failed to make out their right to the arrears they claim. Mr. Justice Rose thought the difficulty could be got over by excluding the rent for the last year and treating the rental reserved for the first four years as a bonâ fide rent, but I do not feel at liberty so to model the contract of the parties; we must take it in its integrity and so taken it shows that for a term of five years a gross rental of $20,000 was reserved and this is so greatly in excess of the real value that we must assume that it never was the intention of the parties to make a true lease at such a rent; and the circumstance that the payments to be made for the first four years were moderate and fair in amount cannot do away with the inevitable inference to be drawn from the payment of $15,500 stipulated to be made for the last year of the term. The appeal must be allowed with costs to the appellants in all the courts and judgment must be entered in the interpleader issue accordingly. FOURNIER, J. concurred with STRONG J. TASCHEREAU J. was of opinion that the appeal should be dismissed for the reasons given by the Chief Justice. GWYNNE J.—Upon the 31st of May, 1883, one David Darvill executed an indenture of mortgage in pursuance of the Ontario Act respecting short forms of mortgages of certain lands therein mentioned, in favor of the Ontario Loan and Debenture Company, for the purpose of securing re-payments to them of the sum of twenty thousand dollars then lent by them to Darvill, together with interest thereon; the clause or proviso for redemption contained in the mortgage was that the mortgage should be void on payment of twenty thousand dollars of gold coin of legal tender in Canada, or at the option of the mortgagees or their assigns the then equivalent thereof of lawful money of Canada with interest at seven per centum per annum, as follows:— Five hundred dollars of paid principal sum to be paid on the first day of December next (1883), five hundred dollars on the first day of each of the months of June and December in each of the four following years, 1884, 1885, 1886 and 1887, and fifteen thousand five hundred dollars, being the balance of the said principal sum, on the first day of June, in the year eighteen hundred and eighty-eight; and the interest at the rate aforesaid, likewise of gold coin, on the unpaid principal from the first day of the month of June next (1883), to be paid semi-annually on the first day of each of the months of June and December until the said principal sum and interest shall be fully paid and satisfied; the first of the said semi-annual payments of interest to become payable on the first day of December, in the year eighteen hundred and eighty-three, and taxes and performance of statute labor; the mortgagor, his heirs or assigns, having the privilege of paying one hundred dollars, or any multiple thereof not exceeding one thousand dollars on account of the said principal moneys in advance on the days of any of the above mentioned half-yearly payments. There was a proviso that on default of payment for one month the mortgagees might on one month’s notice enter upon and lease or sell the said lands, and further, that in default of payment of any instalment of principal or interest thereby secured the whole of the principal thereby secured should become payable. The fifteenth clause of the form of mortgage given in the schedule to the act, that is to say, the clause providing that the mortgagee might destrain for arrears of interest, which, as extended in the statutory form, (is expressed to be for the purpose of enabling the mortgagee in case the mortgagor should make default in payment of any part of the interest secured by the mortgage at any of the days and times limited for the payment thereof to destrain therefor on the mortgaged premises, and by distress to recover by way of rent reserved, as in the case of a demise, such arrears of interest, was altogether omitted from the mortgage, and a clause not in the statutory form given in the schedule to the act was inserted, in the terms following:— And the mortgagees lease to the mortgagor the said lands from the date hereof until the date herein provided for the last payment of any of the moneys hereby secured, undisturbed by the mortgagees or their assigns, he, the said mortgagor, paying therefor in every year during the said term, on each and every of the days in the above proviso for redemption appointed for payment of the moneys hereby secured, such rent or sum as equals in amount the amount payable on such days respectively, according to the said proviso, without any deduction, and it is agreed that such payments, when so made, shall respectively be taken and be in all respects in satisfaction of the moneys so then payable according to the said proviso. Provided always, and it is agreed that in case any of the covenants or agreements herein of the mortgagor, his heirs, executors, administrators or assigns, be untrue, or be unobserved or broken at any time, the mortgagees, their successors or assigns, may, without any previous demand or notice, enter on the said lands or any part thereof in the name of the whole and take and retain possession thereof and determine the said lease, and no reconveyance, release or discharge from these presents, or of any part or parts of the said lands by the mortgagees or their assigns shall cause an apportionment of the said rent, but the whole thereof shall be payable out of the remainder of the said lands. Upon the first day of June, 1887, the sheriff of the county in which the lands were situate seized certain chattel property of the mortgagor upon the mortgaged premises to the amount of about three thousand dollars to satisfy an execution placed in his hands to be executed, which had issued upon a judgment recovered by the above appellants against the mortgagor. Upon the 8th day of the said month of June, a notice, upon behalf of the mortgagees, was served upon the sheriff in the words following:— To the sheriff of the County of Middlesex, &c., &c. Take notice that the sum of three thousand one hundred and eighty dollars is now due and owing to the Ontario Loan and Debenture Company from David Darvill, of the City of London, manufacturer, for the following payments of rent of the premises in his occupation at said City of London and township of Westminster: $1,077.50 due on the 1st day of June, 1886, $1,060.00 due on the 1st day of December, 1886, and $1,042.50 due on the 1st day of June, 1887, under and by virtue of an indenture dated 31st May, 1883, made by said David Darvill to said company, upon which premises you claim to have seized and taken in execution certain goods and chattels. And you are hereby required not to remove any of said the goods and chattels from off the said premises until the said arrears of rent are paid pursuant to the statute in such case made and provided. Dated this 8th day of June, 1887. An interpleader issue was sent down to be tried in pursuance of an order in that behalf, dated the 5th day of September, 1887, wherein the said Ontario Loan and Debenture Company were plaintiffs and the said appellants and others execution creditors of the said David Darvill were defendants, and wherein the said plaintiffs affirmed and the said defendants denied that the said plaintiffs are entitled as landlords of David Darvill, or otherwise under the mortgage from the said David Darvill to the plaintiffs, dated the 31st day of May, A.D. 1883, to be paid out of the moneys realized on the sale of the goods and chattels of the said David Darvill seized on the 1st day of June, 1887, in execution by the sheriff of the County of Middlesex, the sum of $1,077.50 and $1,060.00 due to the plaintiffs for arrears of rent or otherwise under said mortgage, and payable on the 1st June, 1886, and the 1st December, 1886, respectively in respect of the lands upon which the said goods and chattels were, at the time of the seizure and sale thereof, or some part thereof, as against the execution creditors. Mr. Justice Rose before whom the interpleader issue was tried without a jury, found, as matters of fact, that at the date of the mortgage a large portion of the mortgaged property was under lease to persons who were tenants of the mortgagor, and as I understand his judgment that the annual rents of the property so under lease was at the time of the execution of the mortgage about $2,250, and the annual value of the part in the actual occupation of the mortgagor, $1,216; or a total annual value of nearly $3,500. The learned judge was of opinion that in estimating the bonâ fides of the creation of the relation of landlord and tenant he might separate the annual payments to be made in the first four years from the residue, thus, the amounts to be paid under the proviso contained in the mortgage appears to have been for the first year, terminating on the 1st June, 1884, $2,382,50; for the second year, terminating 1st June, 1885, $2,312.50; for the third year, terminating 1st June, 1886, $2,242.50; for the fourth year, terminating 1st June, 1887, $2,172.50. These amounts the learned judge was of opinion would not be an excessive rent if he was at liberty to compare such annual payments alone with the annual value of the whole of the mortgaged property, including that already under lease to the mortgagor’s tenants, but if such four annual payments, as above, should be regarded as issuing only out of the land in the actual occupation of the mortgagor, then he was of opinion that even these amounts would be so excessive, having regard to the actual annual value of the land in such actual occupation of the mortgagor, as to prevent the transaction being held to be one in which a bonâ fide lease at a rent reserved was in reality intended, and that, therefore, the relation of landlord and tenant had not been created, and he came to the conclusion that he might determine the bonâ fides of the transaction by such comparison of the first four annual payments with the annual value of the whole property instead of with the value only of that part which was in the actual occupation of the mortgagor, but he was further of opinion that if he was bound to take into consideration the $15,500 of principal, together with the interest on the unpaid principal made payable at the expiration of the term, amounting together to the sum of $16,042.60, he must hold that to be so excessive as to exclude all idea that a real rent was intended to be reserved; he came, however, to the conclusion, upon the authority of Kitching v. Hicks[26], that he could exclude from consideration such last mentioned reservation and that, therefore, he could hold the lease to be good as to the rent reserved payable up to 1888, and so he held the plaintiff to be entitled to recover on the issue upon the authority of Morton v. Woods[27], Ex parte Jackson[28], and In re Stockton Iron Furnace Company[29], which cases, he considered, governed the present. The Queen’s Bench Division upon appeal reversed this judgment, and held the clause as to the lease of the premises by the mortgagees to the mortgagor to be void, as it was for a term exceeding three years and was not by deed, the mortgagees never having executed the deed—and that the relation of landlord and tenant was never in reality intended to be created—that there was no tenancy at a rent reserved on a lease for years at will or otherwise, so as to entitle the mortgagees to claim as landlords under statute 8 Anne ch. 14 the amounts claimed by them as due for rent for any lands leased by them to the mortgagor. The Court of Appeal for Ontario, upon appeal to them from the Queen’s Bench Division, were of opinion that the case was governed by West v. Fritche[30], Morton v. Woods[31], In re Threlfall[32], Ex parte Voisey[33], Walsh v. Lonsdale[34], Allhusen v. Brooking[35], and other cases, and they reversed the judgment of the Queen’s Bench Division and restored the judgment of Rose J. In this conflict of opinion, I find myself compelled to concur substantially with the judgment of the Queen’s Bench Division, that this is not a case of a rent reserved on a lease for a term of years, at will or otherwise, within the provisions of the statute 8 Anne c. 14, and for the following reasons: In West v. Fritche[36], the mortgage deed, although executed by the mortgagor only, contained the ordinary attornment clause, whereby, for the better and more effectual recovery of the interest of the said sum of £800 by and out of the rents, issues and profits of the said messuage, hereditaments and effects, the mortgagor did attorn and become tenant to the said G. Fritche, his executors, &c., of the same premises, at the yearly rent of £40, to be paid half-yearly on the 9th day of June and the 9th day of December in every year, during so long time as the said sum of £800 or any part thereof shall remain secured upon said premises. Now, it is to be observed that in this case no question under the statute of frauds, or 8 & 9 Vic. ch. 106, arose. The mortgagor did not attorn as tenant for any term of years at all—the tenancy might not have lasted for three years, and the statute of frauds, as decided in Ex parte Voisey[37], applies only where the tenancy, if good, must, of the necessity of the contract, last more than three years, or that the case was one simply of a tenancy for a term not required to be in writing by the statute of frauds; and the decision merely was that in such a case continuance in occupation by the mortgagor under the covenant involved in his express attornment to the mortgagees as their tenant, did create the relation of landlord and tenant, and did entitle the mortgagees to destrain. Parke B. giving the judgment of the court said: We all think that the subsequent occupation coupled with the covenant constituted the relation of landlord and tenant. Morton v. Woods[38], raised a question merely of intention on the construction of the deed. There a mortgagor in possession executed a second mortgage of the mortgaged premises to the defendants to secure repayment with interest of certain advances. The mortgage was by indenture between the mortgagor and the defendants, but was not executed by the latter. The mortgagor conveyed to the defendants all the premises comprised in the first mortgage, which was recited, upon trust that the defendants should either immediately, or at any time, sell the premises, and should apply the purchase money to arise from such sale in the manner therein mentioned:— And as further security for the principal and interest moneys for the time being due from the mortgagor under and by virtue of the indenture, he did thereby attorn and become tenant to the defendants, their heirs and assigns, as and from the date thereof of such of the said hereditaments and premises thereby granted or otherwise conveyed as was or were in his occupation for and during the term of ten years, if that security should so long continue, at and under the yearly rent of £800 to be paid yearly on every first day of October, in every year, the first yearly rent to be paid and payable on the first day of October then next, provided that notwithstanding anything therein contained, and without any notice or demand of possession, it should be lawful for the defendants, their heirs, executors, administrators or assigns, before or after the execution of the trusts of sale therein contained, to enter into and upon the said mortgaged premises or any part thereof and to eject the said grantor and any tenant claiming under him therefrom, and to determine the said term of ten years, notwithstanding any lease or leases that might have been granted by the grantor. It appears, then, that by the deed in that case the grantees were empowered to execute the trusts of sale either immediately or at any time at their will and pleasure, and they were empowered before or alter the execution of the trusts of the deed to evict the grantor and all persons claiming under him. This was a power also to be exercised at the sole will and pleasure of the grantees. It was held, therefore, that upon the true construction of the deed these provisions, notwithstanding the attornment clause being for a term of ten years, showed plainly the intention of the parties to be that the grantor, by his attornment, should become tenant at will of the grantees paying rent for ten years, if permitted by the grantees to remain so long in possession. That was not the case of a lease which, if good, was intended to last for ten years, and therefore neither the statute of frauds, nor 8 & 9 Vic. ch. 106, requiring leases for more than three years to be by deed, applied. Cockburn CJ. giving judgment, says:[39]. With reference to the intention to create a term, and the failure by reason of the non‑execution of the deed, any tenancy for a term not beyond three years may be created without any deed or writing, and in my opinion it is plain that all the tenancy the parties intended to create was a tenancy at will, no more and no less. The primary object of the parties was to secure to the mortgagees the amplest remedies to enforce the repayment of the mortgage money and interest, and though the term of ten years is mentioned it was intended, on the one hand that the lessors should be fully empowered to turn the mortgagor out at any moment, and so to realize their security by sale, while on the other hand the mortgagor should be empowered to get rid of his tenancy by paying off the mortgage money. That, I conceive, amounts to all intents and purposes to no more nor less than an intention to create a tenancy at will, which might be created without any deed. Then Blackburn J. said:[40]. When we look at the instrument to ascertain the intention of the parties, is it the true construction that they intended to create a term of ten years? I cannot think they intended that: the intention was that the mortgagor should become tenant at will to the mortgagees, with the understanding that he should be permitted to remain for ten years, should the will not be determined before. And it is upon this construction that the case of West v. Fritche was applied. Miller J. says: I cannot help thinking that upon the true construction of this deed it was the object of the parties that John Brown should become tenant at a fixed rent to the defendants so as to give them the power of distress, and that it could not have been the intention to create a term of ten years when he was liable to be evicted at any moment, but they intended to create a tenancy at will only. And Lush J., says:[41] The first question is, what term did the parties intend the mortgagor should take from the mortgagees so long as the mortgage money remained unpaid? If a term of ten years, then the intended demise failed; if a term less than three years then the mere assent of the parties amounted to a demise. It is plain that there was no intention that the mortgagor should remain in possession any given length of time, but that he should remain on the premises at the will of the mortgagees, he binding himself to pay £800 for a term not exceeding ten years, if left in possession so long. That being the intention the intended demise did not require a deed for its validity, and the objection that the mortgagees did not execute the deed falls to the ground. This construction put upon the deed by the Court of Queen’s Bench was affirmed in the Exchequer Chamber[42] and the result is that but for these provisions in the deed which showed that the true intention of the parties was to create a tenancy for an indeterminate period, which might have been less than three years and not a term for ten years certain, the attornment clause would have failed to create the relation of landlord and tenant between the mortgagor and mortgagees. In re Stockton Iron Furnace Company[43] the question was, whether the sum of £5,000 reserved as an annual rent by an attornment clause in a mortgage was so unreasonable as to demonstrate that the attornment clause was inserted as a sham and not with the intention of creating a tenancy in reality. No question arose as to whether the tenancy was void as being for more than three years. In point of fact it was not for a term exceeding three years and so did not require a deed for its validity. The attornment clause was in the following terms:— And this indenture further witnesseth that in pursuance of the said recited agreement, and for the consideration aforesaid, the said company do hereby attorn and become tenants from year to year to the the said parties hereto of the second part, their heirs and assigns, for and in respect of the said mortgaged premises at the yearly rent of £5,000, clear of all deductions, to be paid by equal half-yearly payments on the 23rd day of August and the 23rd day of February in every year, the first half yearly payment to be made on the 23rd day of August next. Provided always, and it is hereby declared, that it shall be lawful for the said parties hereto of the second part, their heirs and assigns, at any time after the said 23rd day of August next, without giving previous notice of their intention so to do to enter upon and take possession of the hereditaments and premises whereof the said company have attorned and became tenants as aforesaid, and to determine the tenancy created by the aforesaid attornment and put out and expel the said company from the said hereditaments and premises without any ejectment or other legal process as effectually as a sheriff might do in case the landlords had obtained judgment in ejectment for the recovery of such possession and a writ of habere facias possessionem had issued on such judgment. The tenancy created by this atttornment was one from year to year, determinable, however, at the will of the mortgagees at any time after the expiration of the first six months. In Ex parte Jackson[44], in the Court of Appeal, no question arose either as to the validity or invalidity of the tenancy purported to be created by the attornment clause in a mortgage, by reason of its having been for a period in excess of three years and not created by deed. The question was whether the amount reserved as rent was not so excessive as to demonstrate that no tenancy was, in reality, intended to be created. In it, however, the cases of Morton v. Woods and In re Stockton Furnace Company underwent much consideration, and the principle involved in them was explained. The attornment clause in the mortgage was as follows: The mortgagor doth hereby attorn and become tenant to the said company and their assigns of the hereditaments hereinbefore expressed to be hereby granted and assigned, or such part thereof as is in the possession of the mortgagor, as tenant, from year to year, from the date hereof at the annual rent of £800,&c. Lord Justice Baggallay giving judgment in that case says:[45]. Now, so far as any inference can be drawn from the practice of inserting attornment clauses, it appears to me that the benefit to be derived from the attornment clause was intended to be an equivalent for that which the mortgagee would derive from the rent if the tenant had been a stranger. What would that equivalent be? Would it not be a right to the payment of a fair and reasonable rent such as an ordinary tenant would be willing to give for the property under ordinary circumstances. That, as it seems to me, is the rent for which a properly prepared attornment clause should make provision, not necessarily the exact amount which a tenant would pay for the property, but such an amount as a willing tenant would probably pay as a bonâ fide rent. If the rent so reserved is clearly in excess of what would be a fair and reasonable rent, it appears to me that although you may call it rent, it is no longer a real rent, but a fictitious payment under the name of rent. And referring to Morton v. Woods, he says:[46]. Now, the case of Morton v. Woods has been referred to on behalf of the respondents, and the view presented by their counsel, as I understand it, is this: that it is quite immaterial what the amount of rent is which you place upon the premises by an attornment clause, you are at liberty to make it as much as you choose—to cover the whole principal and interest if you think fit, and the court will not interfere with it—but Morton v. Woods does not decide that. It decides, as a general rule, an attornment clause is not in itself unlawful, provided it is real. The rent need not be limited to the amount of interest from time to time becoming due upon the mortgage debt. It is not introduced for that purpose alone, although it is one
Source: decisions.scc-csc.ca
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