Humford Developments Ltd. v., 2011 ABQB 655

Court of Queen ’ s Bench of Alberta Citation: Humford Developments Ltd. v. 1026451 Alberta Ltd., 2011 ABQB 655 Date: 20111028 Docket: 1103 05813 Registry: Edmonton Between: Humford Developments Ltd. and Daly Grove G.P. Ltd. Plaintiffs - and - 1026451 Alberta Ltd. Defendant _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice T.D.

Clackson _______________________________________________________ Circumstances [ 1 ] On April 30, 1986, Imperial Oil (“Imperial”) leased a portion of its lot 37 to Leigh Simpson Management Ltd. (“Leigh Simpson”) for 50 years at $1.00 per year. Leigh Simpson owned lot 36 and the lot 37 lease from Imperial was to provide additional parking. [ 2 ] On May 6, 1986, with Imperial’s consent, Leigh Simpson assigned the lease to Humford Developments Ltd. (“Humford”). On May 9, 1986, Leigh Simpson caveated the lease. On May 12, 1986, Leigh Simpson sold lot 36 to Humford. No caveats were filed by Humford at that time.

[ 3 ] On May 19, 2007, Humford sold lot 36 to Daly Grove G.P. Ltd. (“Daly”) and forgot to assign the lease. At that point, the state of the tile insofar as is germane to this proceeding showed Imperial as owner and Leigh Simpson as caveator. [ 4 ] That was the condition of the title when, on February 25, 2010, Imperial sold lot 37 to 1026451 Alberta Ltd. (“1026451") the respondent. [ 5 ] Apparently, 1026451 asked Imperial about the caveated lease, prior to purchasing, but learned nothing. Presumably the inquiry was prompted by the caveat which had been registered by Leigh Simpson.

The salient portion of the caveat was as follows: “Claim or interest by virtue of a lease agreement dated the 30 th day of April, A.D. 1986 between the caveator as Tenant and Imperial Oil Ltd. as Landlord, particulars of which are: Term: 30 th of April, 1986 to 29 th of April, 2036. Rent: One Dollar per year.” [ 6 ] In May 2010, 1026451 served noticed on Leigh Simpson to take proceedings on the caveat.

No proceedings were taken and the caveat lapsed. [ 7 ] In August 2010, Humford discovered it had not assigned the lot 37 lease to Daly and on September 28, 2010, Humford filed a caveat to protect the lease. [ 8 ] In March 2011, Humford requested the approval of 1026451 to the assignment of the lease to Daly.

That consent was not given nor was any reason given for refusal, except as appears in the affidavit of Gurprett Sunner, in these words: “The interest which Humford Development Ltd. now claims in the land owned by 1026451 Alberta Ltd. greatly impedes the ability of 1026451 Alberta Ltd. to redevelop lot 37.” [ 9 ] Humford and Daly now apply for a declaration that 1026451 has unreasonably withheld its consent to the assignment and that the applicants are entitled to proceed with the assignment of the lease. [ 10 ] Although no actual application has been made, 1026451, by virtue of a reference in Mr.

Sunner’s affidavit, seeks discharge of the Humford caveat. Analysis 1. Caveat invalidity, knowledge, impact on the underlying interest. [ 11 ] 1026451 argues that the caveat filed by Leigh Simpson was completely invalid as it had no interest to caveat having completely assigned its interest under the lease. Therefore, the caveat was not effective notice to subsequent purchasers of lot 37 and therefore, 1026451 is entitled to priority. [ 12 ] The assignment by Leigh Simpson to Humford extinguished Leigh Simpson’s interest in the estate and the benefits and obligations under the contract.

Its privities were lost: 412904 Alberta Ltd. v. Wellming Group Ltd. , [1992] A.J. No. 860 (Q.B.) ; Francini v. Canuck Properties Ltd. , [1982] O.J. No. 2556 (Ont. C.A.) ; Athan Holdings Ltd. v. Merchant Holdings Ltd. , [1982] A.J. No. 885 (Q.B.) .

[13] Therefore, in a contest of priorities, the caveat filed by Leigh Simpson would be invalid and the lease interest would besubservient to after acquired interests: Holt Renfrew & Co. v. Henry Singer Ltd., 1982 ABCA 135 , [1982] A.J. No. 726(C.A.). As well, even where a purchaser of property encumbered by lease knows of the lease, in the absence of fraud, the lease is notbinding upon him unless it has been registered. Holt Renfrew, supra., Darnley v.

Tennant, 2006 ABQB 575 , [2006] 408 A.R.261 (Q.B.). [14] However, the interest underlying the caveat, in this case the lease, is not undone or diminished by the lack of a valid caveat:White Resource Management Ltd. v. Durish, [1995] S.C.J. No. 14. [15] In this case, while invalid, the caveat filed by Leigh Simpson plainly notified all subsequent potential purchasers of the limitto the title of lot 37. 1026451 was admittedly warned by the caveat. Therefore, having knowledge or a result of registration, 1026451 wasbound to accept the prior claim of the lawful tenant of its vendor. 2.

Assignment and compelling consent. [16] 1026451 also argued that even if bound by the lease, it can refuse to consent to the assignment. [17] The onus of showing that consent is being unreasonably withheld is the applicants’, here, Humford and Daly: SundanceInvestment Corp. v. Richfield Properties Ltd., [1983] A.J. No. 557 and Southgate Shopping Centre Ltd. v. Alberta (Gaming andLiquor Commission), 2000 ABCA 45 , [2000] A.J.

No. 119. [18] However, 1026451 must first explain why it refuses to consent, before the onus shifts to the applicants to establish theunreasonableness of that refusal: Zurich Canadian Holdings Ltd. v. Questar Exploration Inc., [1998] A.J. No. 609. [19] In this case, 1026451 did not provide explanation for refusing to consent. Indeed, two of its three directors had advised thatconsent would be forthcoming. [20] In the affidavit filed in opposition to this application, Mr. Sunner complained that the lease impedes 1026451's intent toredevelop lot 37.

In the brief in opposition to this application, 1026451's counsel argues that the lease has oppressive provisions and isparsimonious relative to rent. 1026451 did not provide any authority to assist in determining whether the reasons offered could besufficient or were even properly considered by me in this application. On the other hand, the applicants rely upon Zurich where Mason J.said the following: 65 There is conflict in the evidence as to whether or not Zurich wants to obtain a higher rent from the Sub-Tenant, or simply acquirethe sub-leased premises for its own use.

Either of those reasons would be an unreasonable withholding of consent under the terms ofSection 8, having regard to all of the terms of the Sub-Lease. See Cowitz v. Siegel, (ON CA), [1955] 1 D.L.R. 678(Ont. C.A.), Dominion Stores Ltd. v. Bramalea Ltd. (1985), 38 R.P.R. 12 (Ont. Dist. Ct.), Steinberg Inc. v. Tilak Corp. (1991), (ON SC), 2 O.R. (3d) 165 (Ont. Gen. Div.), Williams and Rhodes, Canadian Law of Landlord and Tenant (6th Ed.), 1988,Carswell, pp. 15-51 to 15-54, 15-58 to 15-60, St. Jane Plaza v. Sunoco Inc. (1992) 24 R.P.R. (2d) 161 (Ont. Gen. Div.), and Lewis &Allenby

(1990) Ltd. v. Pegge [1914] 1 Ch. 782. [21] However, none of the authorities upon which Mason J. relied were provided to me nor updated. In the circumstances, I amleft in the unsatisfactory position of being inadequately informed on a crucial aspect of the application. Therefore I am constrained todirect counsel to prepare briefs on this subject. The applicants’ written brief is due within 30 days of the release of these reasons. Therespondent’s brief is due within 30 days of receipt of the applicants’ brief.

If either of the parties wish to present oral argument, they mustadvise me in their brief and thereafter contact the offices of the Trial Co-ordinators in Edmonton to arrange a suitable time.

Heard on the 14 th day of September, 2011. Dated at the City of Edmonton, Alberta this 27 th day of October, 2011. T.D. Clackson J.C.Q.B.A. Appearances: Coralie J. Schultz Mohr and Justine Mageau (Student-at-law) Witten LLP for the Plaintiffs Murray L. Engelking Engelking Wood for the Defendant