T-1351-83
The Queen (Applicant)
v.
R.L. Belleau Inc. (Respondent)
Trial Division, Dubé J.—Québec City, May 29;
Ottawa, August 31, 1984.
Crown — Whether federal Crown bound by provincial stat
ute — Provincial statute giving lessee right to acquire land
held under lease — Lease between CN and respondent
assigned to Crown — Crown not bound by statute unless
expressly stated — Exception where Crown entering into con
tract governed by particular statute — Contract comprising
"everything normally resulting from it according to usage or
law" — Crown voluntarily subjecting itself to provincial laws
governing contract — Interpretation Act, R.S.Q. 1977, c. I-16,
ss. 42, 61(1) — Bills of Exchange Act, R.S.C. 1970, c. B-5, s.
49(3),(4).
Civil law — Quebec legislation giving lessee right to acquire
land held under lease where value of improvements equalling
or exceeding value of land — Lease between CN and respon
dent assigned to Crown — Crown subject to Quebec law
governing contract — Respondent lessee entitled to acquire
land before registration of notice of confirmation of expro
priation — Compensation — Constitut or Tenure System Act,
R.S.Q. 1977, c. C-64, s. 1.
Expropriation — Land in Québec City — Lease between CN
and respondent assigned to Crown — Lessee entitled to pur
chase land pursuant to provincial statute — Offer to purchase
rejected by Crown — Land expropriated — Contract governed
by provincial laws — Lessee entitled to compensation for
"interest in land" — Right of lessee to acquire land before
registration of notice of confirmation to expropriate — Mone
tary value of right not to be determined by Court — Expro
priation Act, R.S.C. 1970 (1st Supp.), c. 16, ss. 2(1), 16(1).
The issue is whether the federal Crown is subject to the
Quebec Constitut or Tenure System Act, section 1 of which
gives a lessee the right to acquire lands held under a lease on
which he has made improvements, the value of which is equal
to or exceeds that of the lands. The respondent leased from CN
a parcel of land in the City of Québec. The lease was subse
quently transferred and assigned by CN to Her Majesty. The
respondent, advised that its lease would not be renewed, offered
to purchase the land pursuant to the tConstitut or Tenure
System Act, but that offer was rejected. After the expiry of the
lease, the applicant served the respondent with a notice to
expropriate the land. The notice was registered according to the
Expropriation Act.
Held, judgment in favour of the respondent.
The Crown is not bound by a statute that does not mention it
expressly. There are, however, exceptions to that principle. The
Crown may submit to a statute that does not bind it directly
when, for example, it enters into a contract which is governed
by that particular statute. In that case, the Crown implicitly
accepts the statute as an element of a contract which it has
"voluntarily concluded".
In entering into a contract with CN the federal Crown
became bound by a contractual obligation in the sense that it
took possession of the land subject to the former owner's (CN)
obligation vis-Ã -vis its lessee. The contract comprises every
thing that "normally results from it according to usage or the
law". By purchasing the land the Crown voluntarily became
subject not only to the contract between the two parties but also
the provincial laws governing that contract.
The federal Crown may, under the Expropriation Act,
expropriate any rights in land which it needs for a public work.
The lessee cannot force the Crown to resell to it the land
already expropriated. It is, however, entitled to be compensated
for its "interest in land". The "interest in land" in relation to
land in Quebec as defined in subsection 2(1) of the Expropria
tion Act includes "the interest of a lessee therein". The subsec
tion defines "expropriated interest" as "any right, estate or
interest that has been lost, in whole or in part, by the registra
tion of a notice of confirmation". Thus, the respondent lessee
could immediately, before the registration of the notice of
confirmation, exercise its right under the Constitutor Tenure
System Act to acquire the land in question. It is not up to the
Court to determine the monetary value of that right.
CASES JUDICIALLY CONSIDERED
FOLLOWED:
Bank of Montreal v. Attorney General (Que.), [1979] 1
S.C.R. 565.
CONSIDERED:
Gauthier v. The King (1918), 56 S.C.R. 176; Her Majes
ty in right of the Province of Alberta v. Canadian
Transport Commission, [1978] 1 S.C.R. 61.
REFERRED TO:
Magdalen College in Cambridge (Master and Fellows of)
Case (1616), 11 Co. Rep. 66 b.; 77 E.R. 1235 (K.B.);
Bombay, Province of v. Municipal Corporation of the
City of Bombay and Another, [1947] A.C. 58 (P.C.).
COUNSEL:
J.-C. Ruelland, Q.C. for applicant.
Jacques Marquis, Q.C. for respondent.
SOLICITORS:
Deputy Attorney General of Canada for
applicant.
Marquis, Jessop, Gagnon & Associés, Québec
City, for respondent.
The following is the English version of the
reasons for judgment rendered by
DUBÉ J.: The issue to be determined here is
whether the federal Crown must take into account
the Constitut or Tenure System Act' a Quebec
statute which gives a lessee the right to acquire
lands held under a lease on which he has made
improvements the value whereof is equal to or
exceeds that of the said lands.
On February 22, 1937 the respondent became a
lessee of a parcel of land located in the City of
Québec pursuant to a lease between it and the
lessor, the Canadian National Railway Company
("CN"). This lease was amended in 1967 and
renewed one last time on March 1, 1980 for a
supplementary period of three years ending on the
last day of February 1983. In the meantime, on
March 31, 1982, CN sold the said land to Her
Majesty, subject to the above-mentioned lease,
which it transferred and assigned to the new pur
chaser, with the latter assuming all obligations
thereunder. A few months before the lease expired,
on June 15, 1982, the applicant sent the lessee a
notice informing it that its lease would not be
renewed.
In reply the respondent sent the applicant on
June 22, 1982 (while the respondent was still a
lessee) a notice pursuant to the Constitut or
Tenure System Act expressing its desire to become
the owner of this land with an offer of purchase in
the amount of $58,000.
In January 1983, in view of the applicant's
refusal to sell, the respondent (still a lessee) filed
in the Quebec Superior Court a petition under the
Constitut or Tenure System Act requesting the
Court to confirm the respondent's offer of pur
chase or to itself fix the price for the land and to
order the proprietor to give the respondent a title.
On March 10, 1983, while the respondent's
petition was still pending before the Superior
Court but its lease had expired, the applicant sent
the respondent a notice requesting that it remove
from the land everything that did not belong to the
new lessor.
' R.S.Q. 1977, c. C-64.
On April 6, 1983 the applicant sent the lessee a
notice under paragraph 12(c) of the lease, which
reads as follows:
[TRANSLATION] Before the expiry of this lease, the Lessee
shall, without any further notice from the Lessor, remove from
the demised premises everything that does not belong to the
Lessor, leaving the demised premises clean and in good repair,
to the Lessor's satisfaction. If upon the expiry of this lease the
Lessee has not complied with the provisions of this clause, the
Lessor shall be entitled, entirely at its discretion:
(c) to withhold, as liquidated damages, and to become owner
without compensation of everything that is then on the
demised premises by giving the Lessee notice in writing to
this effect.
On April 15, 1983 the applicant served the
respondent with notice of its intention to expropri
ate the land. On May 22, 1983 a notice of confir
mation of expropriation was registered to this
effect pursuant to the provisions of the Expropria
tion Act. 2
Having thus removed the dispute to the Federal
Court, the applicant is asking the Court, by means
of this application under section 16 of the Expro
priation Act, to decide whether the respondent has
any rights in the property that is the subject of the
expropriation. In other words, this judgment must
determine whether the federal Crown is subject to
the Constitut or Tenure System Act, section 1 of
which provides that the lessee has a right of pur
chase if he has made improvements the value of
which exceeds that of the land (as is admitted in
the instant case). The section reads as follows:
1. The lots or lands held under contract of lease, alienation for
rent or constitut, upon which the holder, the lessee, the party
owing the rent or their auteurs have built a house at their own
cost which is used as a dwelling or place of business by the
lessee or holder of the immoveable or have made improvements
thereon, the value whereof is equal to or exceeds that of the lot
or land, may be acquired by the latter, in full ownership, upon
paying the value thereof to the proprietor after fulfilling the
formalities hereinafter set forth.
The applicant's main argument is that the feder
al Crown is not subject to the statutory law of a
province: it maintained that it is subject only to the
common law, namely the Quebec Civil Code in the
case of that province.
The respondent replied that at the time the
Crown purchased the land the lease was still in
existence and was assigned and transferred as
2 R.S.C. 1970 (1st Supp.), c. 16.
such, with the rights and obligations thereunder,
which are not limited to the clauses of the contract
but include all rights and obligations which the
respondent and CN had at the time of the
purchase.
Since this was a contract entered into in Quebec
respecting land located in that province, the appli
cable law in the case at bar is of course Quebec
law. According to the Quebec Interpretation Act,
"No statute shall affect the rights of the Crown.
unless they are specially included." Subsection
61(1) of the said Act defines "the Crown" ar
meaning "the Sovereign of the United Kingdom.
Canada and His or Her other Realms and Territo
ries, and Head of the Commonwealth". The Act
does not specify whether this is the provincial
Crown or the federal Crown, but it seems clear
from the case law on the question that it is the
provincial Crown. In Gauthier v. The King, 4 a
decision of the Supreme Court of Canada on an
appeal from a decision of the Exchequer Court.
the Court determined that a reference to the
Crown in a provincial statute means the Crown in
right of that province. Fitzpatrick C.J. stated on
the same occasion that the provinces did not have
the executive, legislative or judicial power to bind
the federal government:
And, in any event, the provinces have, in my opinion, neither
executive, legislative nor judicial power to bind the Dominion
Government. 5
Further on in the decision Anglin J. stated that
the Crown referred to in a provincial statute is the
Crown in right of that province unless it is clear
that it was the intention that the Crown be inter
preted in some other manner:
I think it may be accepted as a safe rule of construction that
a reference to the Crown in a provincial statute shall be taken
to be to the Crown in right of the province only, unless the
statute in express terms or by necessary intendment makes it
clear that the reference is to the Crown in some other sense.
This would seem to be a corollary of the rule that the Crown is
not bound by a statute unless named in it. 6
3 R.S.Q. 1977, c. I-16, s. 42.
4 (1918), 56 S.C.R. 176.
5 dd., at p. 182.
6 Id., at p. 194.
The Supreme Court of Canada considered this
question more recently in Her Majesty in right of
the Province of Alberta v. Canadian Transport
Commission.' Laskin C.J. stated the following at
page 72:
The point that I raise, namely whether Her Majesty or the
Crown, where generally referred to in federal or provincial
legislation should be taken to mean the Crown in right of
Canada or of a Province, as the case may be, is influenced by
the fact that a Provincial Legislature cannot in the valid
exercise of its legislative power, embrace the Crown in right of
Canada in any compulsory regulation. This does not mean that
the federal Crown may not find itself subject to provincial
legislation where it seeks to take the benefit thereof ....
The case law has thus established the principle
that the Crown is not bound by a statute that does
not mention it expressly. 8 However, there are a
few exceptions to this principle. 9 The Crown may
also voluntarily make itself subject to a statute
when it takes advantage of its provisions. In that
case "The law must be taken in its totality." 10 It
may also submit to an Act that does not bind it
directly, when for example it enters into a contract
which is governed by a particular statute. The
Crown then implicitly accepts the Act as an ele
ment of a contract which it has "voluntarily
concluded"." In such circumstances the federal
Crown can implicitly accept a provincial statute
just as well as a federal statute as an element of a
contract entered into with an individual.
In Bank of Montreal v. Attorney General
(Que.), 1 ' the Supreme Court of Canada had to
deal with a claim by the government of the prov
ince of Quebec based on a cheque on which the
endorsement had been forged and which had been
debited by the Bank of Montreal to the govern
ment's account. The government had learned of
the existence of the forgery in 1968 but had not
given the bank notice of it until 1972, when it
' [1978] 1 S.C.R. 61.
8 See also Bombay, Province of v. Municipal Corporation of
the City of Bombay and Another, [1947] A.C. 58 (P.C.)
9 Magdalen College in Cambridge (Master and Fellows of)
Case (1616), 11 Co. Rep. 66 b.; 77 E.R. 1235 (K.B.).
10 The Interpretation of Legislation in Canada, Pierre André
Côté, Les Editions Yvon Blais Inc., 1984, at p. 159.
" Id., at p. 160.
12 [1979] 1 S.C.R. 565.
claimed from the latter reimbursement of the
amount of the cheque. The bank argued that it did
not owe anything since the government had failed
to give notice of the forged endorsement within a
year of the time the government learned of it, in
accordance with subsections 49(3) and (4) of the
Bills of Exchange Act. 13 As for the provincial
government, it invoked the rights and prerogatives
of the Crown and maintained that it was not
bound by this Act. The Quebec Superior Court
and Court of Appeal accepted this claim by the
province. However, the Supreme Court of Canada
allowed the appeal.
The Supreme Court asked itself whether the
Crown was bound by a contract to which it gave a
valid consent. In essence the Court found that
when the government opened a bank account it
entered into a contract with its banker. The Court
decided that the Crown could not invoke its pre
rogatives to limit or alter the terms of a contract,
which comprises not only what is expressly pro
vided but also everything that normally results
from it according to usage or the law. Pratte J., on
behalf of the Court, made a distinction based on
the source of the obligation. Is this a contractual
or a legislative obligation? He stated the following
at page 574:
The rules respecting the liability of the Crown therefore
differ depending on whether the source of the obligation is
contractual or legislative. The Crown is bound by a contractual
obligation in the same manner as an individual, whereas as a
general rule it is not bound by an obligation resulting from the
law alone unless it is mentioned in it. This also means that
subject possibly to a limited number of exceptions which would
not apply here in any event, the rights and prerogatives of the
Crown cannot be invoked to limit or alter the terms of a
contract, which comprises not only what is expressly provided
in it but also everything that normally results from it according
to usage or the law.
In entering into a contract with CN the federal
Crown became bound by a contractual obligation
in the sense that it took possession of the land in
question subject to the former owner's obligations
vis-a-vis its lessee. The question that arises in the
case at bar is therefore whether the lessee's rights
under the Constitut or Tenure System Act "nor-
mally result . .. according to usage or the law".
My answer is that they do. Just as CN would have
13 R.S.C. 1970, c. B-5.
had to face its obligations toward the respondent
under the Constitut or Tenure System Act, so its
successor, the federal Crown, must do so. By pur
chasing the land the latter voluntarily became
subject not only to the contract between the two
parties but also to the laws governing that
contract.
The Constitut or Tenure System Act, infre
quently used though it may be, is a provincial Act
respecting the acquisition of lands held under a
lease with which the parties in question must
comply. Obviously the federal Crown may, under
the Expropriation Act, expropriate any rights in
land which it needs for a public work. In the
circumstances the lessee cannot force the Crown to
resell to it the land already expropriated. However,
the lessee in question had an interest for which it is
entitled to be compensated.
Under subsection 16(1) of the said Act, the
Court must make a determination respecting the
state of the title to the land immediately before the
registration of the notice of confirmation and also
adjudge who had a right, estate or interest in the
land and the nature and extent thereof. The "inter-
est in land" in relation to land in Quebec as
defined in subsection 2(1) of the Expropriation
Act includes "the interest of a lessee therein". This
same subsection defines "expropriated interest" as
"any right, estate or interest that has been lost, in
whole or in part, by the registration of a notice of
confirmation".
In the circumstances my decision is that the
respondent could immediately before the registra
tion of the notice of confirmation exercise its right
under the provisions of the Constitut or Tenure
System Act to acquire the lands in question. It is
not up to me to determine the monetary value of
that right.
Consequently, judgment in favour of the
respondent with costs.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.