Montreuil v. The Ontario Asphalt Co.

Montreuil v. The Ontario Asphalt Co.
Collection
Supreme Court Judgments
Date
1922-02-07
Report
(1922) 63 SCR 401
Judges
Davies, Louis Henry; Idington, John; Duff, Lyman Poore; Anglin, Francis Alexander; Mignault, Pierre-Basile
On appeal from
Ontario
Subjects
Statutes
Decision Content
Supreme Court of Canada
Montreuil v. The Ontario Asphalt Co., 63 S.C.R. 401
Date: 1922-02-07
Alexander L. Montreuil and Others (Plaintiffs) Appellants;
and
The Ontario Asphalt Company and the Caldwell Sand and Gravel Company (Defendants) Respondents.
1921: November 11; 1922: February 7.
Present: Sir Louis Davies C.J. and Idington, Duff, Anglin and Mignault JJ.
ON APPEAL FROM THE APPELLATE DIVISION OF THE SUPREME COURT OF ONTARIO.
Statute—Application—Lessor and Lessee—Lessee’s option to purchase—Improvements by lessee—Mistake as to lessor’s title—Action for possession—Retention of land—Belief in ownership—Equitable relief—R.S.O. [1914] c. 109 s. 37.
R.S.O. [1914] ch. 109 sec.37 provides that a person who makes lasting improvements on land under the belief that it is his own is entitled to a lien thereon for the enhanced value given it by such improvements or may retain it on making compensation to the owner.
Held, Idington and Duff JJ. dissenting, that a lessee of land with an option to purchase at the end of the term is not entitled to the benefit of this statute. As lessee he could not believe the land to be his own and the option does not warrant such a belief before it is exercised.
The lessee in such a case may obtain, as equitable relief, compensation for his improvements to the extent to which they enhanced the value of the land. His mistaken belief that the lessor owned the fee which he could acquire on expiration of the term was such a mistake of title as to bring him within the equitable doctrine applicable. To entitle the lessor to such compensation where the owner has not encouraged nor acquiesced in the expenditure therefor it is necessary that the latter must himself be asking some equitable remedy, but
Held, that in Ontario, in the common law action of ejectment and for mesne profits the compensation so made for improvements may be set off against the allowance for such profits.
Held also, that no compensation can be allowed for improvements made after the lessee was aware that the lessor’s title was questionable.
Judgment of the Appellate Division (47 Ont. L.R. 227) which reversed that on the trial (46 Ont. L.R. 136) varied.
APPEAL from a decision of the Appellate Division of the Supreme Court of Ontario[1] reversing the judgment at the trial[2] in favour of the Appellants.
The material facts and the question of law raised on the appeal sufficiently appear from the above head-note.
Armour K.C. and Bartlet K.C. for the appellants. The respondents are not entitled to the benefit of the Act. They could not have believed that the lessor had a title in fee.
The cases of Gummerson v. Bunting[3] and Bright v. Boyd[4] have no application. In both cases there was an actual purchase and justification for the belief that the vendor could convey the title.
Nor are they entitled to equitable relief. The belief in ownership is essential to this also. And there is no evidence that lasting improvements were made.
In any event no compensation can be granted for improvements made after respondents became aware of the lessor’s want of title. Rodd K.C. and Fripp K.C. for the respondents. The appellants are stopped from disputing the claim as they must be held to have acquiesced in the placing of improvements on the land. The judgment of the trial judge should be restored.
THE CHIEF JUSTICE.—For the reasons stated by my brother Anglin, I am of the opinion that the judgment of the Appellate Division appealed from should be varied by striking out sub‑paragraph 2 of paragraph 3 and substituting a direction for a reference to ascertain (1) to what amount the plaintiffs are entitled for mesne profits; (2) by what amount the value of the property has been enhanced by reason of permanent improvements effected by the defendants before the 2nd of October, 1908; (3) what balance, (if any) the plaintiffs should recover as their actual damages.
No costs of main appeal.
IDINGTON J. (dissenting)—The result of this appeal and cross-appeal, in my opinion, should turn upon the question of whether or not section 37 of the Conveyancing and Law of Property Act, being chapter 109 of the Revised Statutes of Ontario, should govern the rights of the parties concerned.
That section reads as follows:—
37. Where a person makes lasting improvements on land under the belief that the land is his own, he or his assigns shall be entitled to a lien upon the same to the extent of the amount by which the value of the land is enhanced by such improvements; or shall be entitled or may be required to retain the land if the Court is of opinion or requires that this should be done according as may under all circumstances of the case be most just, making compensation for the land, if retained, as the Court may direct. I shall revert presently to the history of that enactment but meantime may be permitted to state the outline of the story out of or in relation to which its relevancy has to be considered.
By a lease of the 2nd February, 1903, the late Luc Montreuil demised to the Ontario Asphalt Block Company certain parcels of land for ten years at an annual rental of one thousand dollars a year, and thereby gave it an option to purchase same on giving six months notice during said period at the price of $22,000.
The said company thereby bound itself not only to pay said yearly rental but also to build a dock to cost not less than $6,000.00, which, if the option not exercised within said period, was to become the property of the said lessor.
The said lessee at once proceeded to erect upon said property a building and factory for the purposes of its business at a cost of eighty thousand dollars, or more, and the said dock at a cost much exceeding said $6,000.00 and added to such equipment, year by year, a great deal in way of improvement.
After this expenditure it was discovered, in October, 1908, in regard to some other property which had been held by said lessor, upon an identical title by which part of that, covered by said lease and agreement, was held by him, that his title was found to be only that of a tenant for life and that the remainder would go to his children.
He made good to other purchasers by inducing appellants to release their claims therein.
Upon learning of this, on the 2nd October, 1908, the respondent Asphalt Company’s secretary wrote the said lessor as follows:— Windsor, Ont., Oct. 2nd, 1908.
Luc Montreuil, Esq.,
Walkerville, Ont.
Dear Mr. Montreuil:—
I understand that some question has arisen with reference to your right to sell the farm property at Walkerville, and it occurs to me that being the case, you should get from your children a confirmation of the lease that you made to The Ontario Asphalt Block Company, Ltd., of the premises they now occupy. In case of your death the children might repudiate the lease and as we have spent a very large sum of money on the building, etc., we would be obliged to hold your estate liable on your covenant for quiet enjoyment, in case any trouble arose, and all this can be avoided now by your getting from the children some documents confirming the lease.
Yours truly,
O.E. Fleming,
Secretary.
And not receiving any reply again wrote him the following:—
Windsor, Ont., Dec. 24th, 1908.
Luc Montreuil, Esq.,
Walkerville, Ont.
Dear Sir.—
It would be very much more satisfactory to us and also to yourself if you would have your children convey to you the property leased by you to the Asphalt Block Company, and under which lease you are bound to convey to them at the expiration of the lease.
We would feel very much more satisfied if you would do this.
Yours truly,
O.E. Fleming,
Treasurer.
The writer of said letters was called as a witness on the trial of this action brought by appellants to eject respondents from the possession of that part of said lands for which the said lessor had failed to get the said deed from appellants, as requested, and in course of his explanatory reason for writing said letters, testified as follows:— Mr. Rodd: You had made a large expenditure? A. Yes, and we had not any idea but what when we spent the first dollar on the property that we had purchased under the option we could not afford to spend the money without doing that.
Q. You say that was the intention of the company from the outset? A. Yes.
Q. Why did you take the lease instead of buying out-right at the first? A. Because $1,000 a year is less than 5% on the purchase price of $22,000, and in addition to that $22,000 meant a lot to us in establishing a plant of this sort.
Q. At any rate that was the reason you wrote the letter? A. Yes.
Q. Did you ever get any reply to those letters? A. No, no reply.
Q. You were going to tell me what you had spent up to December 31st, 1912, on the plant? A. $159,126.18, and on the 31st December, 1917, $174,354.78.
HIS LORDSHIP:—And then you went on after the discovery; after 1908 you went on? A. Yes, my Lord, we had to take care of the business; it was a case of necessity.
MR. RODD:—What position would your client have been in if you had not gone on? A. We would not have been able to have taken care of the increase of business; business has to grow or go back; we could not stand still.
This evidence seems to have been overlooked by the court below when quoting part of the evidence given on cross-examination by the same witness, in the judgment appealed from.
Taken together therewith and the other facts in evidence to which I will presently refer, I respectfully submit that it seems to me that the conclusion reached resting upon said cross‑examination is far from convincing.
Passing meantime from that to relate what ensued, the respondent Asphalt Block Company continued in possession of said premises, enlarging and improving the factory so built, and in course of so doing making it quite evident that its owners were determined to enforce the option of purchase contained in the said lease. And in due course of time the respondent Asphalt Block Company served the lessor, on the 5th January, 1912, with notice pursuant to the terms of said option, that it intended to exercise the right to purchase said lands and premises according to the terms in the said lease provided, at the end of the said term of ten years.
The said notice recited the facts of the lease for ten years from the 2nd day of February, 1903; the going into possession; the option given of purchase at the expiration of said term upon giving six months previous notice in writing of its intention to do so.
The said lessor refused to carry out his agreement and the respondent Asphalt Block Company brought an action on the 10th February, 1913, for specific performance which was tried on the 27th of following May. Judgment was given therein directing specific performance of so much of the interest in said lands as the lessor could convey and allowing an abatement of price for what he could not convey, and damages for breach of his contract.
On appeal to the Appellate Division of the Supreme Court of Ontario that judgment was modified as appears in the report of the case[5]. And an unsuccessful appeal therefrom to this court was heard in 1916.
I understand counsel agreed in the statement that the reference directed thereby has never been proceeded with.
Luc Montreuil, the said lessee when this case was before the said Appellate Division, as directed by that court, filed an affidavit shewing that he got a grant to himself of part of the lands covered by said lease in 1874 and giving in detail the ages of his children, from which it appears that the present appellants were each at the time of his making the lease in question over twenty-one years of age. They are shewn also to have made at his request conveyances of their interests to other purchasers from him of property held upon the same title as in question herein.
They also are shewn to have known of the improvements made by the appellant Asphalt Block Company, now in question, but never objected or in any way protested or warned the said company of their claim to be entitled to the remainder of said property, upon which they rest herein, asserting the right to eject the respondents from that part of the premises now in question.
The lessor and vendor Luc Montreuil, died in January, 1918.
And in the following August, his children, the appellants, brought this action of ejectment.
The Asphalt Block Company, respondent, in reply set up the salient facts which I have set forth above and rely thereon, by way of counter claim, upon estoppel and seek a declaration to that effect, and next a declaration
that this defendant upon making proper compensation is entitled to retain the lands in question or in the alternative a lien thereon in respect of the improvements made under mistake of title as claimed in paragraph thirteen hereof.
The appellants joined issue thereon and the case went to trial before the late Chief Justice Falconbridge who gave effect to the latter contention. And in doing so of course rested entirely upon the section I have quoted above.
The First Appellate Division quoting, as already stated, the cross-examination of the secretary of the Asphalt Block Company, overlooking his examination in chief and, I respectfully submit, also overlooking the weight to be given the actual facts of such a large expenditure as made upon lasting improvements and all implied therein, and which testify, in my appreciation of fact, much more forcibly than the mere words, of doubtful import, upon which the Appellate Court relied, to the existence of the realities required by the statute, of belief in the efficacy of an option as a means or method of ownership.
Such is, I submit, the attitude which the court should hold in trying to solve the question of fact as to belief in ownership.
And when we come to consider what the quality of ownership may be upon which such a belief may be reasonably founded, certainly we are not to bind him seeking relief under the statute in question to prove an actual absolute ownership or its equivalent, for then the statute would be rendered meaningless.
We may, first recalling that in our English law there is no such thing as any absolute ownership of land except in the Crown, properly turn to the many varying meanings which the word “owner” may present.
We find in Bouvier’s Law Dictionary the following:—
Owner.—He who has dominion of a thing, real or personal, corporeal or incorporeal, which he has a right to enjoy and do with as he pleases,—even to spoil or destroy it, as far as the law permits, unless he be prevented by some agreement or covenant which restrains his right.
Surely a man having an option to purchase can well believe himself such a person as therein and thus defined.
Clearly a man possessed of such an option as the opinion expressed in London and South Western Ry. Co. v. Gomm,[6] demonstrates, has an interest in land and the extent thereof may be demonstrated by the acts of the optionee evidencing this intention to exercise, long before the actual notice of acceptance as foundation for an assertion of belief in his ownership. The right of dominion over the land in respect of which he has such an option of absolute purchase is as absolute as any man may desire and the only question remaining, I submit, is whether or not at the time when he acts on his alleged belief, that is, under all the circumstances, an honest belief, in other words, an honest determination to exercise the option.
There are also cases cited in Stroud’s Judicial Dictionary in which, though turning (in some of the cases cited) possibly on legislative interpretation, yet in the mode of reasoning adopted in disposing of. same, are worthy of note.
The judgments in the cases of Ramsden v. Dyson,[7] and Plimmer v. Mayor, etc., of Wellington,[8] may also be advantageously referred to for an elucidation of the principles upon which the courts of equity act in protecting the parties making improvements under the belief that they have such an interest in the property or right to acquire same, as entitles them to rely thereon in making substantial improvements.
Surely one is, in such a case as presented herein, in just as good a position as the vendee paying a mere nominal deposit and that test seems to me to be important and ought to be observed as a guide, for such was the chief basis of the recognized law; and springing from that the doctrine so grew as to cover other like cases. Possibly prevention of fraud was the earlier basis.
The sole reason for the statement of the first part of the statute in question as it appeared in 36 Vict. c. 22, s. 1, was doubtless to render clear and of universal application by the imperative requirement of a statutory law, a doctrine developed in courts of equity and not so uniformly observed even there as was desirable, and seemed even to startle learned judges in common law courts. For example, though the doctrine had been enunciated and applied by the Chancellor of Upper Canada in the case of Bevis v. Boulton,[9] his successor, only four years later, in the case of Kilborn v. Workman,[10], refused to apply it, and nine years thereafter in the case of Gummerson v. Banting,[11], after reviewing many of the then leading cases in point, applied the doctrine.
In doing so it may be observed that he referred to the said Kilborn v. Workman10 and excused its non-application there by referring to the case of McKinnon v. Burrows, and mentioning that a later case in England had shown he was in error. The only McKinnon v. Burrows case I can find is a common law action in[12]
Clearly there was an error in failing to observe the English decision in the case of Bunny v. Hopkinson,[13] perhaps excusable if regard is had to the changed conditions from then to now. And, I submit, that the right therein recognized was no higher than the right of him possessed of an option upon which he might reasonably act and assert as a basis of honest belief in ownership as above defined.
My own impression is that there was another case in Ontario which in a more remarkable degree brought to public attention the want of uniformity in applying the law and led to the enactment of the first part of the clause now in question. I cannot find it reported, and my memory does not serve me to recall the name thereof. Illustrative, however, of the state of, even the judicial mind, in the common law courts, then being constrained to apply some equitable doctrines and procedure, I find the new enactment referred to as follows in the case of Carrick v. Smith[14], at page 399:—
36 Vic. ch. 22, O., declares that: “in every case in which any person has made or may make lasting improvements on any land under the belief that the land was his own, he or his assignee shall be entitled to a hen upon the same, to the extent of the amount by which the value of such land is enhanced by such improvement.” This is a very extensive protection, and perhaps it may be called very advanced legislation to give a lien in every case to a person who has made improvements, ments, even lasting improvements, on any land, under the belief that the land was his own.
I think these several decisions and judicial expression show how much need there was for an enactment of the kind now in question not so much as an advancement in legislation, as the need of having the law well understood and of universal application.
It was much needed. It was introduced, I believe, by the late Hon. Edward Blake, a master of law and language, well knowing what he was about, and was aptly entitled
An Act for the protection of persons improving Land under a Mistake of Title.
The case of Gummerson v. Banting[15], cited above, is relied upon in the judgment appealed from to give herein the measure of relief which, in principle, was on all fours with the said enactment passed a couple of years after said decision. I am unable to distinguish the doctrine applied in the said decision, from the principle sought to be enforced by the enactment as it first stood. And all that was done thereafter was to add thereto by an enactment passed on the eve of the 1877 Revision of the Statutes of Ontario, which reads as follows:—
or shall be entitled or may be required to retain the land if the Court is of the opinion or requires that this should be done, according as may under all circumstances of the case be most just, making compensation for the land, if retained, as the Court may direct.
If justice is to be done in many cases in applying either the doctrine in Gummerson v. Banting,[16] or the statute of 1872, which in principle are, I think, identical, this addition was necessary, otherwise, innocent men might suffer unduly.The later enactment confers on the courts the power to avoid and avert such possible injustice.
I think we have presented in this case a state of actual facts which call for such a legislative enactment, and that its efficacy should not be rendered futile or entirely nullified by reason of a witness hesitating under pressure of cross-examination to give the true and obvious meaning of what respondents claim and that too when at the very outset he had declared what he meant.
I think the late Chief Justice Falconbridge was absolutely right and that his judgment should be restored.
The appeal should, I therefore hold, be dismissed with costs and the cross-appeal so far as seeking that alternative should be allowed with costs save so far as same increased by the contention that there never was a mere life estate but an estate tail or otherwise.
I have not perhaps examined the lastly mentioned question as thoroughly as it may deserve. It seems, however, untenable and to have been abandoned since argument. DUFF J. (dissenting).—The enactment to be considered, (sec. 37 R.S.O. ch. 109) is in these words:
37. Where a person makes lasting improvements on lands under the belief that the land is his own, he or his assigns shall be entitled to a lien upon the same to the extent of the amount by which the value of the land is enhanced by the improvements or shall be entitled as may be required to retain the land if the Court is of opinion or requires that this should be done according as may under all the circumstances of the case be most just making compensation for the land, if retained, as the Court may direct.
It should first be noticed that the draftsman of this enactment has carefully avoided technical legal nomenclature. “Under the belief that the land is his own” does not contain a single word (except the word “land”) having a definite legal meaning. The word “owner” itself is indeed a word of very flexible signification. Lister v. Lobley[17]; Phyn v. Kenyon,[18] United States of America v. 99 Diamonds[19]. The appellant company, that is to say the officers of the appellant company, believed that company was entitled to possession under a lease for a defined period under which the company had the right to make improvements and to remove them at the expiration of the term; and under it also the company was entitled to receive a conveyance of the fee simple from the lessor (who, it was believed, was the owner of the title in fee simple subject to the lease) upon the payment of a fixed sum of money and upon notice by the company exercising its option not later than a prescribed date. Treating the assumptions upon which all the parties were proceeding as facts, the company, it having been decided that the option should be exercised and the necessary moneys being available, had not only the necessary means within its hands but had all the necessary legal rights vested in it to acquire at its sole discretion the full title in fee simple. In a practical business sense the company was in control of the property. It could sell, investing the purchaser with not indeed a title in fee simple in possession, but the absolute right to acquire such a title on the payment of a specified sum of money. It had possession with full power to use the property for all the purposes of its business and particularly for the purpose of making the improvements over which the dispute arises. It may be open to argument whether or not the company so long as its option was not exercised, could by legal process prevent the lessor from transferring his title, but by exercising the option, that is to say, by binding itself to take the property on the stipulated terms, such a right would immediately become vested in it. A lessee invested with such a measure of control occupies a position which I think is not in any practicable way distinguishable (discarding of course the technical legal point of view) from that of a mortgagor in possession of property held by him subject to a mortgage securing a debt equal almost to the pecuniary value of the property and still less from a purchaser who has bound himself to buy but has paid only a small sum on account of the purchase money. In all these cases the person in possession has, subject to one condition, the payment of a sum of money, the same power of control over the property as that possessed by the owner in fee simple. If he makes improvements under the belief that his rights are in fact what they appear to be he does so in the belief that he possesses powers of control that will enable him to make full use of the improvements so long as his rights remain vested in him and which at the same time will enable him to transfer his powers and rights to another and on such transfer to obtain in the ordinary course the enhanced value of the property due to the improvements.
I repeat, the language of the enactment is not lawyers’ language, and construing the language according to the usage and understanding of men who are not lawyers I think the appellant company has brought itself within the condition expressed in the words above quoted.
I am unable to agree that anything in Mr. Fleming’s evidence creates any obstacle in the way of giving effect to this view. Mr. Fleming, a member of the bar, was being pressed on cross‑examination to give an answer which would involve an expression of opinion on a question of law, namely, the construction of the statute now under consideration. He gave the only answer that could be given, that is to say could properly be given if he was to answer the question at all; and in effect his answer is that he believed that the rights which the lease purported to give to the company were in fact vested in the company.
This is sufficient to dispose of the appeal. In view of the ground upon which, however, the majority of the court has proceeded I think it is important to make an observation or two upon the rule respecting the measure of damages in an action to recover mesne profits. In the American courts a rule has been adopted (the effect of which is stated in a well known text book Sedgewick on Damages, sec. 915) that the action for mesne profits is a liberal and equitable action and one which will allow of every kind of equitable defence and in particular that improvements made by the occupant may be the subject of set off. This is based upon reasoning derived in part from the rules of the civil law. But the reasoning is also based upon the supposed effect of earlier English decisions. The case principally relied upon in support of it, see Putnam v. Ritchie,[20] Jackson v. Loomis[21], is Coulter’s Case[22] in which a set off was allowed of rent payable under a rent charge and the decision is explicitly put upon the ground that the disseisor might have recovered what he had paid in an action and the set off was allowed for the purpose of avoiding circuity of proceedings.
The American authorities appear also to proceed to some extent upon the analogy of the ancient real actions in which Mr. Sedgewick says, the set off was always allowed. Sec. 915. It would be profitless to follow the American authorities into this discussion. At common law damages were not recoverable in the real actions generally. They were recoverable in the assize, because it was regarded as a mixed action and by the Statute of Gloucester, VI Ed. I, this procedure was made applicable and this right given to the plaintiffs in real actions generally; Booth, Real Actions. But in ejectment which was a development of the old action of trespass de ejectione firmae damages, that is to say, damages in the nature of reparation for deprivation of possession or compensation for use and occupation were not recoverable prior to the statute of Geo. IV (I Geo. IV, c. 87 sec. 2); for this relief the plaintiff was obliged to resort to a supplementary action in trespass—trespass for mesne profits. And the law governing the measure of damages in such an action was well settled. It is stated in these terms in Mr. Justice Lush’s book on Practice, vol. 2 p. 1012:— The measure of damages is the yearly value of the land, subject to such deductions for ground rent, taxes &c., as were chargeable thereon, and as the defendant necessarily paid, and the costs of such proceedings as were necessarily taken in order to obtain possession, and in case of judgment by default, the costs of ejectment to be taxed as between party and party. If any special damage had been sustained this also may be recovered if specially laid in the declaration.
To the same effect it is given in Selwyn’s Nisi Prius at p. 685, in Roscoe’s Nisi Prius at p. 947 in Tidd’s practice vol. 2 p. 889 and in Cole on Ejectment at pp. 642 & 643. Under the head of special damage a jury might take into consideration the plaintiff’s trouble and inconvenience by reason of being kept out of possession and the costs of ejectment. The “yearly value of the land” calculated as in an action for use and occupation, Cole, 643. The rule is and has long been settled that the measure of damages in such an action is the value of the mesne profits calculated as mentioned subject to deductions of the character mentioned plus special damage if any be alleged and proved and it is a claim for such damages so measured which by the statute of Geo. IV and the Common Law Procedure Act (1852 sec. 218) the landlord might at his option add to a claim in ejectment against an overholding tenant and which under the Judicature Act of 1875 might and under the existing practice may now be joined to a claim to recover possession of land. In Ontario the statute of Geo. IV was adopted and re-enacted in 1856; it was reproduced in the C.S.U.C. ch. 27 sec. 60 and remained the law in Ontario until the passing of the Ontario Judicature Act of 1881 when the English rule of 1875 above referred to was reproduced as marginal rule 116, the rule which is now in force.
The claim for mesne profits authorized by the Upper Canada statute of 1856 and by the Ontaro rule just mentioned of 1881 was a claim the plaintiff was entitled to assert prior to the statute of Geo. IV in England and prior to the statute of 19 Vict. in Upper Canada in an action of trespass for mesne profits and it is such a claim and only such a claim that the plaintiff is now under the English Judicature Act and under the practice in Ontario entitled to join to an action for the possession of land.
It can I think be conclusively shewn that in passing upon such a claim whether under the existing procedure or under the old procedure the courts in England have never admitted the right of the defendant by the law of England to a set off for the cost of improvements except of course in a case in which (under the existing procedure) an equitable right arises, for example, from the conduct of the owner in encouraging the defendant to make such improvements relying upon a supposed title or right of possession. That is made quite clear by reference to the well known text books referred to above as well as by the decision of the Court of Exchequer in Cawdor v. Lewis[23], which is a decisive authority upon the point.
I call attention to the law in this point because it is important in view of the course which has been taken in respect of the appeal, to make it quite clear that whatever be the law in Ontario the rule in other provinces where the law of England prevails in relation to these matters is definitely settled.
As regards the rule in Ontario, no point having been raised as touching the common law right of set off either in the court below or in this court and not having had the benefit of any argument upon it I should have required something much more convincing than anything I have seen to induce me to concur in laying down a rule for the guidance of the Ontario courts on this subject which diverges in a very marked way from the law governing the rights of the parties in the common law action of trespass for mesne profits as uniformly laid down in all the recognized books on procedure and as accepted and administered by the courts in England. The legislature of Canada in making provision for the joining of a claim for mesne profits in a landlord’s action of ejectment reproduced the statute of Geo. IV ipsissimis verbis and in 1881 in providing for joining such a claim in all actions to recover possession of land the legislature of Ontario reproduced the English rule on the subject also ipsissimis verbis. Prima facie the claim thus dealt with by the legislature was the claim known to lawyers by the designation trespass for mesne profits and governed by long established rules, (rules as I have said expounded in all the recognized books of practice) governing the disposition of such a claim by the English courts. Prima facie that seems to be so and the presumption that it is so could only be displaced by shewing a continuity of decision and a settled practice in accordance with such decisions which it would be the duty of this court to respect as establishing a divergence between the Ontario and the English law. I find no evidence of any such course of decision. Two cases have been cited in which the court en banc refused to interfere with the verdict of a jury although the jury had evidently taken into account the improvements made by a trespasser in passing upon the question of damages but I cannot find any evidence that these decisions have been regarded as laying down any definite rule which has since been followed. They are not referred to in the latest books on practice, they are not cited in Mr. Justice Maclennan’s book on the Judicature Act or in Holmested & Langton’s book. They are referred to in one or two subsequent cases in an incidental way but in a manner which goes to indicate a considerable doubt as to the precise effect of them. Mr. Justice Osler, whose knowledge of practice must have been exact, says in McCarthy v. Arbuckle[24] at p. 415 that these decisions apply only where the possession is not tortious meaning apparently that they are limited to cases where the plaintiff’s conduct has been such as virtually to amount to a licence.
An observation or two upon the grounds upon which the court below has proceeded. The view taken appears to be that the decision of the Court of Chancery in Ontario in Gummerson v. Banting[25] and of Mr. Justice Story in Bright v. Boyd[26] constitute a sufficient weight of authority to establish the proposition that according to the law of Ontario a person in possession of land under an honest belief that he has a title to it who expends money upon it in such a way as to enhance its value has apart from statute a charge upon the land to the extent of such enhancement. I do not think that principle is part of the law of Ontario except to the extent to which as a principle of law it is supported by the statute already discussed. It is the opinion of Mr. Justice Osler as expressed in McCarthy v. Arbuckle24 that the object of the statute was to enable a person expending money in such circumstances to assert in a substantive action against the true owner his right to a lien to the same extent to which he could have done so in answer to an equitable claim by the true owner to recover the land. If Mr. Justice Osler’s view be the right view of the statute then, of course, no difficulty arises; it is quite clear that where the owner was obliged to resort to the Court of Chancery for the purpose of asserting his title against a person in possession who in good faith had expended money in effecting improvements increasing the value of the land, the court would require the plaintiff as a condition of equitable relief to make such compensation as might in the circumstances be just. The principle is well settled and it is unnecessary to elaborate it. It is sufficient to refer to Murray v. Palmer[27] at p. 490 and to Sudgen, Vendor and Purchaser (9th ed.) at p. 266. Bright v. Boyd[28] was such a case.
On the other hand the law is clear that where the plaintiff seeks the enforcement of his strictly legal rights and consequently does not require the aid of a court of equity this principle has no application. If the aid of a court of equity is not required then to cite from the work just mentioned “and a person can recover the estate at law, equity, unless there be fraud, cannot, it is conceived, relieve the purchaser on account of money laid out in repairs and improvements, but must dismiss a bill for that purpose with costs”.
ANGLIN J.—In 1903 Luc Montreuil, believing himself to be the owner thereof in fee under his father’s will, leased to the defendants for ten years the land in question, together with an adjoining water lot of which he was in fact owner in fee under a Crown grant to himself. The lease contained an option to purchase for $22,000 the entire property leased, exercisable at the end of the term on giving six months’ previous notice; it also provided, in the event of the option not being exercised, for a renewal for ten years on like terms in other respects, but without the option to purchase; and it reserved to the lessees the right to remove all buildings and plant to be erected by them on the demised premises, except a dock, which they covenanted to build at a cost of not less than $6,000. It was expressly provided that, if the option were not exercised, this dock should become the property of the lessors on the expiry of the term or of any renewal thereof.
The defendants took possession under the lease and before October, 1908, expended on the dock and on buildings $80,000, or possibly a somewhat larger sum. How much of that expenditure was made on the part of the demised lands here in question does not appear.
In October, 1908, doubt first arose as to the extent of Luc Montreuil’s interest. In litigation commenced then or shortly afterwards between him and the late Hiram Walker, over a piece of property held by the same title as that here in question, it was determined, in October, 1911, that under his father’s will, Luc Montreuil was not an owner in fee but merely a life tenant[29] the remainder in fee having been devised to his children. Up to that time the evidence makes it abundantly clear that the children of Luc Montreuil (the present plaintiffs) had believed that their father owned in fee the lands devised to him. They appear to have acquired knowledge of their possible interest in remainder about the same time and probably in much the same way that their father’s lessees learned of it. No investigation of Luc Montreuil’s title had been made on behalf of the defendants either when they took their lease or before they began their large expenditures on the property.
With knowledge of the doubt cast upon the title of their lessor, the defendants made further large expenditures on the leased premises and in January, 1912, gave notice to Luc Montreuil of their intention to exercise the option to purchase. Montreuil having refused to convey an action for specific performance ensued