Grant J.
The judgment of Judson, Ritchie, Spence and Beetz JJ. was delivered by
SPENCE J.
SPENCE J.—This is an appeal from the judgment of the Court of Appeal for Ontario pronounced on October 25, 1974. By that judgment, the Court of Appeal dismissed an appeal from the judgment of Grant J. pronounced on October 15, 1973. The respondent, Dominion Stores Limited, had applied to the Supreme Court of Ontario for relief from forfeiture and reinstatement of its lease upon certain premises known as 418 Spadina Road, in the City of Toronto, for an extension of its option agreement for a renewal of the said lease and for an injunction to restrain the three respondents from any future interference with the applicant under its lease and extension or option agreement.
Grant J. did grant relief from forfeiture and “ordered and determined” that the applicant Dominion Stores Limited was entitled to exercise its option to renew the lease until June 30, 1982.
Grant J. further ordered that the respondent United Trust Company be restrained from further excluding Dominion Stores Limited from possession of the said premises so long as Dominion Stores Limited complied with the terms of the said lease.
At the opening of the appeal, I pointed out that no leave to appeal had been obtained and that, therefore, the appeal was governed by the provi-
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sions of s. 36 of the Supreme Court Act which at the appropriate time gave an appeal as of right on a question that is not a question of fact alone from a final judgment of the highest court of final resort for a province in judicial proceedings where the amount or value of the matter in controversy in the appeal exceeds $10,000 while the order of Grant J. confirmed by the Court of Appeal contained no reference to any monetary amount and simply granted the injunction and declaration applied for. Counsel for the appellant referred to the affidavit of Grant Edwardh, an appraiser who deposed that the rental upon the premises was $2.18 per square foot and that the firm market or economic rent was $6.25 per square foot, a difference of $4.07 per square foot per year. Even in one year, the difference between the rent reserved in the lease and the economic rent would exceed $10,000, and such affidavit could have been filed with the notice of appeal to bring the appeal within the provisions of the said s. 36 of the Supreme Court Act as it then existed. Under these circumstances, this Court determined that if leave to appeal were necessary it should be granted.
Dominion Stores Limited had been tenants of the said premises under written lease from September 5, 1935 and had carried on a supermarket in the said premises under the terms of the said lease and various renewals thereof. The respondents Geller and Granatstein became the owners of the said premises subject to such lease in 1946. The last renewal of the lease was dated September 12, 1967 and was to have terminated on November 30, 1970. The said renewal contained an option in favour of Dominion Stores to renew such lease for a further period from December 1, 1970, to November 30, 1975, upon the same terms and conditions except that the rental was increased to $475 per month and also subject to the usual clause as to increase to cover real estate taxes. Dominion Stores gave due notice of the exercise of such option.
Desiring to make extensive repairs to the premises and to devote them to a specialty shop rather than to a supermarket, Dominion Stores Limited entered into negotiations with the owners for a longer term of leasing. Such negotiations con-
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tinued from February 1971 until the early months of 1972.
On April 12, 1972, Dominion Stores Limited, over the signature of its real estate manager, one J.A. Munro, wrote to the landlords’ solicitor confirming the arrangement which it was alleged had been orally arrived at prior thereto. I quote that letter in full:
Dear Sir:
Re: 418 Spadina—Option to Lease
Pursuant to our discussion yesterday please find attached a copy of the letter received from Simpsons Contract Division covering the cost of renovations required to bring this building in line with Health, Building, Fire and Labour Department regulations.
The existing Dominion lease for this location expires November 30th, 1975. It is understood the owners are now prepared to grant an option to Dominion Stores Limited for the period from December 1, 1975 to June 30th, 1982, at the same rental, terms and conditions as contained in the existing lease. As discussed with you it is the intention for Dominion Stores Limited to proceed with a sublease of these premises at the earliest possible date to Quintana Stores Limited.
On receipt of your clients written acceptance of the option to lease and the proposed sublease, we will have our legal department draw the necessary documentation for execution. Your early attention to this matter will be greatly appreciated.
On April 20, 1972, the landlords’ solicitor replied to that letter as follows:
Attention: Mr. J.A. Munro
Real Estate Manager
Dear M. Munro:
Re: 418 Spadina—Option to Lease
We acknowledge receipt of your letter dated April 12th, 1972, and wish to advise that our clients would be prepared to enter into an option agreement with your company for the period from December 1st, 1975 to June 30th, 1982, at the same rental, terms and conditions as contained in the existing lease.
It is clearly understood that the option agreement will contain a condition that renovations must be made by your company to the building in the minimum amount of $15,000.00 or else the agreement would be terminated. It is also understood that the renovations would be
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commenced and completed within a reasonable period of time after the execution of the option agreement.
We would suggest that you draw the documentation which is required and if the form and substance meet with our approval we shall submit it to our clients for their immediate execution.
On April 28, 1972, Dominion Stores Limited, over the signature of J.R. Morrison, a solicitor in its legal department, again wrote to the solicitor for the landlords a letter which read:
Attention: Mr. Lawrence S. Crackower
Re: Your File No. 72-10835
Molly Geller & Bella Granatstein
418 Spadina Road, Toronto
Dear Sirs:
Further to your letter of April 20th last addressed to the attention of our Mr. J. A. Munro, we have prepared and enclose herewith option agreement in accordance with the understanding reached, and if it meets with your approval we shall be obliged if you will have same executed by your clients and return all three copies to us for execution by Dominion Stores Limited, following which we shall return to you one fully executed copy.
As the remainder of the current term and the renewal term total more than ten years we may wish to register a Notice of Lease, and will be much obliged if you could let us have a legal description of the property or if not the lot and plan numbers.
Yours very truly,
J.R. Morrison,
Solicitor,
Legal Department.
The learned trial judge, after a careful consideration of the evidence and documents which I have recited and of the appropriate law, came to the conclusion that by the letter of April 20, 1972, there had been concluded an enforceable agreement to extend the lease on the premises until the year 1982. The learned trial judge then considered the situation if his determination had been in error and that the correspondence properly construed expressed the intention that the agreement between the parties would be subject to the prepara-
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tion and execution of a new agreement which met the approval of the landlords’ solicitors. Again, after an examination of the evidence and the case law, he came to the conclusion that the solicitors for the landlords did not act judiciously in the matter and that they withheld their approval in bad faith. The learned trial judge, therefore, granted the order which I have recited above determining that Dominion Stores Limited was entitled to exercise its option to renew the lease until June 30, 1982.
Jessup J.A. disposed of this issue in the Court of Appeal in the following short paragraph:
The appellant also argues that the agreement in question here for the extension of a lease was only an agreement to agree but I do not think that contention is supported by a fair consideration of the entire correspondence between the landlord’s solicitor and the tenant.
Arnup J.A., in his reasons, said:
The other points raised by the appellant and mentioned by Jessup J.A. were in my view correctly disposed of by Grant J.
I have come to the conclusion that upon this issue the judgment of the learned trial judge confirmed by the Court of Appeal was the correct one and I need add little to his carefully considered reasons.
There is only one point dealt with in the argument before this Court which requires particular mention and that is that the agreement with Dominion Stores Limited was arrived at by a letter from the solicitors for the landlords and that there is nothing over the signature of the landlords themselves, and further that although the solicitors are and were in this case authorized to negotiate whether the lease should be renewed and the terms of such renewal, they were not authorized to conclude an agreement for the renewal. I am of the opinion that the actual language of the solicitors’ letter of April 20 which I have quoted above clearly indicates that they had instructions from the landlords to conclude a renewal on the terms set out in the said letter and that they were simply carrying out their instructions and acting properly as the communicator for their clients.
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This application was presented to Grant J. upon affidavit evidence. There is no affidavit from either of the respondents Molly Geller or Bella Granatstein and no affidavit from any member of the firm of solicitors who acted for them and who wrote the letter of April 20. Under such circumstances, I am entitled to conclude, as were the courts below, that the letter of April 20 was written upon instructions of the clients and bound the clients as if it had been signed by them personally.
I turn to a much more difficult question, and in order to deal with it resume the outline of the facts.
The appellant United Trust Company had been negotiating with the respondents Geller and Granatstein for the purchase of the premises known municipally as 418 Spadina Road and on May 17, 1972 submitted a written offer to purchase to the said Geller and Granatstein. This offer was accepted by the said Geller and Granatstein on the same day. One term thereof provided:
This offer is conditional for a period of thirty days from the date of acceptance herein upon the purchaser obtaining a surrender of lease from Dominion Stores Limited which will allow the purchaser vacant possession of the premises herein on the date of closing and should such surrender not be obtained within thirty days from the date of acceptance herein then this offer shall be null and void at the purchaser’s option and all deposit monies shall be returned forthwith upon demand without any deductions whatsoever.
The United Trust Company then entered into negotiations with Dominion Stores Limited in an attempt to have them surrender their lease and vacate the premises. These negotiations continued until on or about the 15th of June when two solicitors for United Trust met with an officer and the solicitor for Dominion Stores Limited in what the solicitor for United Trust Company described as being “a bona fide attempt to settle the matter which is now before the court”. The said solicitor in his affidavit continued:
5. It was agreed that I would discuss with my clients the amount of rent which they would be prepared to accept from Dominion Stores should Dominion Stores lease the premises from them. As an alternative path to settlement, Mr. Shaw agreed that Mr. Morrison would deter-
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mine the amount of compensation which Dominion Stores would accept to reimburse them for the alleged out-of-pocket expenses incurred and for the loss of the location.
The representatives of the two parties parted on that basis and no further negotiations seem to have taken place but on the same June 15, 1972 the United Trust Company, not its solicitor, wrote to Mrs. Geller and Mrs. Granatstein the following letter:
Re: 418 Spadina Road, Toronto
Dear Mrs. Geller and Mrs. Granatstein:
This letter will confirm that we intend to waive our rights with respect to the condition about obtaining vacant possession of the above property from Dominion Stores Limited as set out in the agreement between United Trust Company and yourselves dated May 17th, 1972.
Therefore, we have instructed our solicitors, Goodman & Goodman to proceed to close the transaction.
I would like to take this opportunity to thank you for the courtesy extended to us by reducing the interest rate on the mortgage back to 8%.
It was quite apparent therefore that rather than continue to negotiate with Dominion Stores Limited, United Trust Company were ready to waive the condition in the accepted offer to purchase of May 17, 1972 which made the transaction dependent upon its success in obtaining a surrender of the Dominion Stores lease. The final paragraph of that letter is also most noteworthy. The offer to purchase which I have recited above provided for interest at the rate of 9 per cent per annum. On the basis that the United Trust Company was not going to be able to obtain possession of the premises free from lease, it succeeded in reducing the interest on the mortgage back by one per cent per year.
It was only on May 25, 1972 that the solicitors for the respondents Geller and Granatstein replied to the Dominion Stores’ letter of April 28, which I have quoted above, and that reply read:
Attention: Mr. J.R. Morrison, Solicitor, Legal Department
Dear Mr. Morrison:
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Further to your letter to us of April 28th, and further to our recent telephone coversation with Mr. Munro, please be advised that our clients have instructed us to advise you that they have no intention of executing the documents which you have forwarded as the said documents do not meet with the approval of the writer nor our clients in their form and substance.
At this time, we are returning your draft Agreements to you.
Although the offer to purchase provided for closing “on or before the 31st of July 1972”, the transaction was closed between the respondents Geller and Granatstein as vendors and the United Trust Company as purchasers on June 21, 1972, and the following day, without any notice to Dominion Stores Limited, United Trust Company placed a new door with a new lock on the premises at 418 Spadina Road and excluded Dominion Stores Limited from the premises, although Dominion Stores had paid rent for the period up to and including June 30, 1972. On the same June 21, 1972, the solicitors for United Trust Company wrote to the Dominion Stores Limited a letter which read:
Re: United Trust
418 Spadina Road
Geller and Granatstein
Dear Nat:
Subsequent to our meeting last Thursday we met with the vendors’ solicitors to attempt to obtain an extension of the time for the fulfilment of the condition in the contract, to enable us to further explore the possibility of a settlement with Dominion Stores Limited.
The vendors refused to grant an extension and accordingly our client had no alternative other than to close the transaction which was completed today. Notwithstanding, I am instructing our client to provide us with the information as per our discussion so that we can, without prejudice to the legal rights of either party, attempt to settle this matter.
The first paragraph of this letter is rather interesting. It refers to a meeting on “last Thursday”. June 21 would appear to have been a Wednesday. If so, the previous Thursday would have been the 15th, but on June 15 United Trust Company was writing to Mrs. Geller and Mrs. Granatstein waiv-
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ing the condition which entitled them to a surrender of the Dominion Stores’ lease before they could be required to close the transaction and purchase the premises. It is difficult to understand how there could have been any negotiation at the time specified in that letter other than one to reduce the cost to United Trust Company and such negotiation was in fact successful when the rate on the interest was reduced. Such rejection was, of course, on the basis that United Trust would have to take the title to the premises subject to the lease and the solicitors for the respondents Geller and Granatstein accepted this understanding when they wrote to the solicitors for the United Trust Company on June 19, 1972 saying in part:
Since your clients have now agreed to waive the condition in the said Agreement of Purchase and Sale, it now appears that your clients have agreed to assume the tenancy obligations with Dominion Stores Limited.
[The underlining is my own.]
On July 7, 1972, the solicitors for Dominion Stores Limited delivered to the solicitors for the United Trust Company a letter demanding that possession be returned and on July 10, 1972 the same solicitors for Dominion Stores Limited delivered to the same solicitors for United Trust Company a letter enclosing a cheque dated July 7, 1972. The cheque was returned. The Dominion Stores Limited, therefore, commenced these proceedings.
The title to the premises at 418 Spadina Road, Toronto, is under the provisions of The Land Titles Act, R.S.O. 1970, c. 234, as amended by 1972 Statutes of Ontario, cc. 1 and 132, and 1973, c. 39.
The appellant United Trust Company admits it had full actual notice of the lease which the respondent Dominion Stores Limited held on the premises and indeed it could not say otherwise as its officers had engaged in long negotiations with the officers of Dominion Stores Limited in an attempt to obtain a surrender of that lease and the offer to purchase made by the appellant United Trust Company to the respondents Geller and Granatstein was originally subject to the condition that such surrender of lease could be obtained
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from the respondent Dominion Stores Limited. It is the contention, however, of the appellant that under the provisions of The Land Titles Act the lease to Dominion Stores Limited never having been registered on the title in accordance with the provisions of that Act the purchaser took free of any encumbrances created by that lease. Put baldly, this contention is that under the Ontario Land Titles Act, apart from fraud, actual notice of a non-registered instrument is ineffective to put the burden of the encumbrance resulting therefrom upon a purchaser for value.
It should first be noted that by the express provisions of The Land Titles Act, i.e. s. 51(1), para. 4, any lease for a period with less than three years to run is protected despite lack of registration by providing that the title is subject to such a lease which for the purpose of the Act should be deemed to be not an encumbrance and, therefore, not requiring registration. As pointed out by Grant J., the lease to Dominion Stores Limited, apart from any right of or option of extension, did not expire until November 30, 1975, and the United Trust Company closed the purchase from the respondents Geller and Granatstein on June 21, 1972, more than three years prior to the expiry of the term and, therefore, the lease was not protected by the provisions of s. 51 (1).4.
The appellant submits, in support of its contention, the provisions of ss. 52, 75, 78, 79, 85(5), 91 and 115(5) of The Land Titles Act. Section 52 deals with a first registration and is not applicable upon the present appeal. I set out the other sections cited by the appellant:
75. (1) No person, other than the registered owner, is entitled to transfer or charge registered freehold or leasehold land by a registered disposition.
(2) Subject to the maintenance of the estate and right of the registered owner, a person having a sufficient estate or interest in the land may create estate, rights, interests and equities in the same manner as he might do if the land were not registered.
…
78. (1) Any person entitled to or interested in any unregistered estates, rights, interests or equities in registered land may protect the same from being impaired by
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any act of the registered owner by entering, on the register such notices, cautions, inhibitions or other restrictions as are authorized by this Act or by the director of titles.
(2) Where a notice, caution, inhibition or restriction is registered, every registered owner of the land and every person deriving title through him, excepting owners and encumbrances registered prior to the registration of such notice, caution, inhibition or restriction, shall be deemed to be affected with notice of any unregistered estate, right, interest or equity referred to therein.
…
79. (1) No person, other than the parties thereto, shall be deemed to have any notice of the contents of any instruments, other than those mentioned in the existing register of title of the parcel or land or that have been duly entered in the books of the office kept for the entry of instruments received or are in the course of entry.
(2) For the purposes of subsection 1, the Highways register mentioned in clause c of section 182 shall be deemed to be a book kept for the entry of instruments.
(3) Subject to the regulations, the Trans-Canada Pipe Line register established under clause c of section 182 shall be deemed, for the purposes of this Act, to be a register of the title of land or interests therein, including easements, owned by Trans-Canada Pipe Lines Limited.
85. (5) Subject to any entry to the contrary in the register and subject to this Act, instruments registered in respect of or affecting the same estate or interest in the same parcel of registered land as between themselves rank according to the order in which they are entered in the register and not according to the order in which they were created, and, notwithstanding any express, implied or constructive notice, are entitled to priority according to the time of registration.
…
91. A transfer for valuable consideration of land registered with an absolute title, when registered, confers on the transferee an estate in fee simple in the land transferred, together with all rights, privileges and appartenances, subject to,
(a) the encumbrances, if any, entered or noted on the register; and
(b) the liabilities, rights and interests, if any, as are declared for the purposes of this Act not to be encumbrances, unless the contrary is expressed on the register,
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and to such rights, privileges and appurtenances, subject also to any qualifications, limitation or encumbrance to which the same are expressed to be subject in the register, or where such rights, privileges and appurtenances are not registered, then subject to any qualification, limitation or encumbrance to which the same are subject at the time of the transfer, but free from all estates and interests whatsoever, including estates and interests of Her Majesty, that are within the legislative jurisdiction of Ontario.
…
115. (1) A lessee or other person entitled to or interested in a lease or agreement for a lease of registered land may apply to the proper master of titles to register notice of the lease or agreement in the prescribed manner.
…
I shall deal with these sections hereafter.
It is the appellant’s argument that the enactment of the Torrens land titles system in the Province of Ontario made applicable in that province the main theory of a Torrens title registration system, to wit, the absolute authority of the register, and that it is the effect of such a principle that actual notice, no matter how clearly proved so long as encumbrances do not appear on the register, does not affect the clear title of the purchaser for value. I am ready to agree that this is a prime principle of the Torrens system and that it has been referred to as such by various text writers which I need not cite in support thereof.
The Torrens Registration System was the brainchild of a Mr. Robert Torrens of South Australia and, due to his perseverance, a statute embodying the principles of his land titles system was enacted in South Australia in 1857. Similar statutes based on the same principles and using the same technique were enacted in rapid succession in Queensland in 1861, in Tasmania, Victoria and New South Wales in 1862, in New Zealand in 1870, and in Western Australia in 1874. Use of the system spread to Canada and a like statute was enacted in the Colony of Vancouver Island in 1861, and then in the Province of British Columbia in 1869. The Land Titles Act was enacted in Ontario in 1885. At that time, the Legislature in Ontario had before it as models all these
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previous enactments which I have listed. In every case, those enactments contained an express provision making actual notice ineffective to encumber the registered title.
The subsequent enactment of Land Titles Acts in Alberta, Saskatchewan and Manitoba contained like provision. In Ontario, no such provision appeared. The respondent Dominion Stores Limited submits that this omission is crucial and certainly could not be considered to be an accident.
Counsel for the respondent Dominion Stores Limited submits, and I agree with him, that the many cases cited by counsel for the appellant for the proposition that actual notice is ineffective, including some cases which bear an almost exact resemblance to the present, are cases which depend upon the statutory provisions in the various jurisdictions containing such express provision and, therefore, are irrelevant in considering the situation in Ontario which lacks such a provision. I have read the authorities cited by the appellant and I do find that in each of those cases there is express reference to such a section. As an example, may be cited the provisions of s. 203 of The Land Titles Act of Alberta, R.S.A. 1970, c. 198, which I quote:
203. Except in the case of fraud, no person contracting or dealing with or taking or proposing to take a transfer, mortgage, encumbrance or lease from the owner of any land in whose name a certificate of title has been granted shall be bound or concerned to inquire into or ascertain the circumstances in or the consideration for which the owner or any previous owner of the land is or was registered or to see to the application of the purchase money or of any part thereof, nor is he affected by notice direct, implied, or constructive, of any trust or unregistered interest in the land, any rule of law or equity to the contrary notwithstanding, and the knowledge that any trust or unregistered interest is in existence shall not of itself be imputed as fraud.
[R.S.A. 1955, c. 170, s. 203]
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There is no doubt that when such a term appears in the governing statute, the result is that unregistered encumbrances fail in any way to affect the title of the purchaser for value.
Lord Buckmaster said in Waimiha Sawmilling Company Limited v. Waione Timber Company Limited[10], at p. 106:
The first of these sections provides in plain language that, except in the case of fraud, the registered proprietor of land holds it freed from everything except what is notified on the register, subject to the three exceptions, not one of which is relevant for the present purpose; while s. 197 expressly declares that knowledge of the existence of an unregistered interest shall not of itself be imputed as fraud.
[The emphasis is my own.]
and adopted the definition of “fraud” given by Lord Lindley in Assets Co. v. Mere Roihi and others,[11], at p. 210:
...by fraud in these Acts is meant actual fraud, i.e., dishonesty of some sort, not what is called constructive or equitable fraud—an unfortunate expression and one very apt to mislead, but often used, for want of a better term, to denote transactions having consequences in equity similar to those which flow from fraud.
However, in Ontario, only a few years after the enactment of The Land Titles Act, the courts have expressed a disinclination to imply such an extinction of the doctrine of actual notice. There is no doubt that such doctrine as to all contractual relations and particularly the law of real property has been firmly based in our law since the beginning of equity. It was the view of those courts, and it is my view, that such a cardinal principle of property law cannot be considered to have been abrogated unless the legislative enactment is in the clearest and most unequivocal of terms. Such a provision, as I have said, does appear in all the other statutes cited by the appellant.
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The view of the Ontario courts was expressed by Meredith J. in Re Skill and Thompson[12]. There, a master of titles had made an order in which he refused to expunge from the register a caution which was registered by a person claiming under an agreement to purchase from the person who had been the owner and who had, despite such agreement to purchase in the hands of the person, conveyed to one who became the registered owner on the title. Riddell J. allowed an appeal from the master of titles and ordered that the caution be expunged. Thompson appealed to the Divisional Court composed of Meredith C.J.C.P. and Anglin and Mabee JJ. and Mabee J. gave the reasons for the Divisional Court in reversing Riddell J. Skill then appealed to the Court of Appeal composed of Moss C.J.O. and Osler, Garrow, and Maclaren JJ.A. In the Court of Appeal, Meredith J.A. alone dealt with the point and his statement has been quoted ever since as expressing the Ontario view as to the effect of actual notice. It was:
MEREDITH J.A.: The Land Titles Act is not an Act to abolish the law of real property; it is an Act far more harmless in that respect than in some quarters seems to be imagined, at times, at all events, when the wish is father to the imagination. It is an Act to simplify titles and facilitate the transfer of land; and, doubtless, greater familiarity with it will tend to remove a good many false notions regarding its revolutionary character. Its main purpose is to assure the title to a purchaser from a registered owner; but, surely, it is not one of its purpose to protect a registered owner against his own obligations, much less against his own fraud:
Some years later, in 1914, in John Macdonald & Co. Limited v. Tew[13], Mulock C.J. Ex. said at p. 265:
The Land Titles Act deals simply with the question of registration; it does not interfere with any common law or other rights of an owner of land to mortgage the same by instrument not capable of registration under the
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Land Titles Act. The appellant, being a volunteer, acquired by the transfer from the mortgagor to him only the mortgagor’s interest, or, in other words, took subject to the respondent company’s lien: National Bank of Australasia v. Morrow (1887), 13 V.L.R. 2; Jellett v. Wilkie (1896), 26 S.C.R. 289.
Now it is true that in Macdonald v. Tew Chief Justice Mulock was dealing, as he said, with a person who as assignee for creditors was not a purchaser for value but his statement as to the effect of The Land Titles Act upon the common law rights of an owner of land to mortgage, or to lease, is indicative of the view held by Ontario courts.
The next decision in Ontario to which I wish to refer is Re Jung and Montgomery[14]. There, Duranceau D.C.J. had considered a landlord’s application for possession. The landlord and a tenant had both been the tenants of adjoining parcels of land held under The Land Titles Act. The landlord purchased the parcel which he had previously leased and the parcel leased by Montgomery. Montgomery’s lease, including the option to renew, ran for more than three years. Jung, the new registered owner, had full knowledge of Montgomery’s tenancy at the time he purchased from the previous owner. After having closed the transaction, Jung continued to accept rental from Montgomery but later made application for possession. This latter fact, in my view, could have determined the case simply on the basis that Jung had accepted Montgomery as his tenant and was saddled with Montgomery’s lease. The learned district court judge, however, mentioned this point only at the close of his reasons and devoted the main portion thereof to a consideration of the question of whether Jung’s actual notice of Montgomery’s lease prior to his having closed the transaction of purchase resulted in him having to take title subject to Montgomery’s lease and held that it did so relying particularly on Skill and Thompson and Macdonald v. Tew which I have cited above. Jung appealed to the Court of Appeal and the
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disposition there is set out in the report in these words:
The court dismissed the appeal at the conclusion of the appellant’s argument and orally expressed its agreement with the judgment appealed from.
In 1955 O.W.N. at p. 936, a similar notation appears.
Shortly thereafter, in 1960, The Land Titles Act was amended by the addition of s. 54(5). That amendment now appears as s. 85(5) of The Land Titles Act which I have cited above.
In Pitcher v. Shoebottom[15], Lieff J. considered a case where the plaintiff had entered into an oral agreement to buy certain lots from the defendant. Prior thereto, the defendant had approached the real estate agent for the purpose of selling his land. As a result of that agent’s endeavours, an agreement had been entered into between the defendant and one Block for the sale of part of the lands in November 1960. That transaction was closed in 1960. The plaintiff took action against the defendant for specific performance of the agreement made in 1958 relying on Jung and Montgomery, supra. The defendant pleaded the provisions of what is now s. 85(5) of The Land Titles Act. Lieff J. said at p. 112:
At the time the agreements of purchase and sale were entered into there seems to be no doubt that actual notice of an unregistered interest was sufficient to defeat a registered purchaser’s claim to priority over that unregistered interest. That this was the situation at the time the agreements were entered into is supported by Re Jung and Montgomery, [1955] O.W.N. 931, [1955] 5 D.L.R. 287, where the Court of Appeal dismissed an appeal from the judgment of Duranceau, D.C.J., for the reasons given by him.
…
It is argued by the corporate defendants that the Land Titles Amendment Act [now s. 85(5)] has the effect of eliminating the doctrine of actual notice from the Land Titles Act. If this is so, and the proper law to apply in the present case is the statute as amended, the effective date of which was January 1, 1960, then this would
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necessarily be an end to the matter with respect to the doctrine of actual notice.
Lieff J. found it unnecessary to decide this point as he held, as a matter of fact, that the purchaser had not notice of the unregistered interest.
In the present case, both Jessup J.A. and Arnup J.A. considered s. 85(5) in giving the reasons for the Court of Appeal, as had Grant J. upon the hearing of the application. Jessup J.A. was of the opinion that by the enactment of s. 85(5) the Legislature had disclosed the intent of the statute and that it was the intent found in the decision of Re Jung and Montgomery, noting:
The subsection does not purport to repeal generally the law as laid down in Re Jung and therefore was not enacted simply for the purpose of such repeal.
As an alternative reason for the conclusion, Jessup J.A. pointed out that s. 85(5) dealt with “instruments registered in respect of or affecting the same estate or interest in the same parcel of registered land” while the issue considered was a freehold estate in the purchaser United Trust Company and a leasehold estate in Dominion Stores Limited.
Arnup J.A., in his reasons, dealt with the argument in this term:
The appeal narrows down to the question whether the enactment of s. 85(5) in 1960 changed the law by abolishing the doctrine of actual notice. If this is what the Legislature intended, the amendment was put in a very peculiar place, having regard to the context of subsections (1) to (4) of s. 85.
With respect, I am in complete agreement with that comment. It is difficult to understand why the Legislature, faced with a decision approved in the Court of Appeal that actual notice was still in Ontario effective to encumber the registered titleholder’s estate, should have attempted to eliminate such a conclusion by the enactment of a subsection in a section dealing with details of registration when an appropriate amendment in plain words of s. 52 as to first registration or s. 91 as to subsequent transfers would have been appro-
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priate. The form was available as it already appeared in many other provincial Land Titles Acts. Again, I agree with Arnup J.A. when he said that the law of real property should not be found to have been altered by the Legislature except where such alteration had been made by clear or appropriate words.
Arnup J.A. was of the view that s. 85(5) would have applied between registered instruments even if one were a transfer of the freehold and the other a lease, being of the opinion that the latter affected the former but found it unnecessary to so determine. In view of his opinion, with which, with respect, I agree, s. 85(5) did not affect the law as enunciated in Re Jung and Montgomery.
I am in accord with the reasons set out by Jessup J.A. and Arnup J.A. in the Court of Appeal to that effect and I, therefore, am not required to consider the issue of whether the circumstances which occurred in this appeal, and which I have outlined with some detail above, could result in a finding of fraud against the appellant.
In Zbryski v. City of Calgary[16], Farthing J. considered circumstances which, although they do not resemble the present circumstances, had much the same tenor and found that such circumstances did constitute actual fraud as against the holder of the unregistered interest but he did so after a trial and after witnesses had given viva voce evidence and were cross‑examined extensively.
The present appeal arose upon an application for relief against forfeiture and for an injunction. The application was considered upon the basis of affidavit evidence and documents with a limited amount of transcript of examination upon the affidavits. The application itself did not contain any allegation of fraud. In my view, the well-established principle that fraud must be strictly alleged and strictly proved would not justify a finding of fraud on this kind of a record and, therefore, I have not come to any conclusion as to whether the
[Page 958]
respondent Dominion Stores Limited could have established its case upon the basis of actual fraud.
For the reasons which I have given, I would dismiss the appeal with costs and affirm the judgment of the Court of Appeal for Ontario.
Appeal dismissed with costs, LASKIN C.J. dissenting.
Solicitors for the appellant: Goodman & Goodman, Toronto.
Solicitors for the respondent: Fraser & Beatty, Toronto.
Footnotes
- [1] (1973), 6 O.R. (2d) 199.
- [2] (1974), 2 O.R. (2d) 279.
- [3] [1962] Qd. R. 498.
- [4] [1926] A.C. 101.
- [5] [1905] A.C. 176.
- [6] [1955] 5 D.L.R. 287.
- [7] (1908), 17 O.L.R. 186.
- [8] (1914), 32 O.L.R. 262.
- [9] (1914), 30 O.L.R. 582.
- [10] [1926] A.C. 101.
- [11] [1905] A.C. 176.
- [12] (1908), 17 O.L.R. 186.
- [13] (1914), 32 O.L.R. 262.
- [14] [1955] 5 D.L.R. 287.
- [15] [1971] 1 O.R. 106.
- [16] (1965), 51 D.L.R. (2d) 54.
Cases cited
- Jellett v. Wilkie 26 S.C.R. 289
- Jung and Montgomery Jung and Montgomery, supra
- 5 D.L.R. 287 5 D.L.R. 287
Statutes and regulations cited
-
Supreme Court Act
- s. 36 of the Supreme Court Act
- s. 51(1)
- s. 51
- Section 52
- section 182
- s. 203
- s. 197
- s. 54(5)
- s. 85(5)
- s. 85
- s. 52
- s. 91
-
Unresolved citations
- ss. 52
- 75
- 78
- 79
- 85(5)
- 91
- 115(5) of The Land Titles Act
- s. 203 of The Land Titles Act
- s s. 85(5) of The Land Titles Act
- s. 85(5) of The Land Titles Act
- subsections (1)
- (4)