October 16, 1995, E.C.B. No.: 61/91/98 (57 L.C.R. 146)

 

Between: Perry James Anderson and
Natalie Sonya Anderson
Claimants
And: Her Majesty The Queen in Right of the Province of
British Columbia as represented by the Minister of
Transportation and Highways
Respondent
Before: Jeanne Harvey, Chair*
Robert W. Shorthouse, Chair**
Susan E. Ross, Board Member
Appearances: Shelley Bentley, for the Claimants
Alan V. W. Hincks, for the Respondent

* Jeanne Harvey did not participate in the reasons for decision.
** Robert Shorthouse heard this matter in his capacity of Vice-Chair and prior to his appointment of Chair.

 

1.0   INTRODUCTION

The claimants, Perry and Natalie Anderson, operated a restaurant called Louie's Place located, along with some other businesses, in Frayne Centre, a small strip mall at the intersection of Frayne Road and the Trans-Canada Highway, near the community of Mill Bay on Vancouver Island. An improvement project to widen and re-align the Trans-Canada Highway through Mill Bay caused the Ministry of Transportation and Highways to acquire by agreement certain property from the Andersons' landlord, and also resulted in construction disruption which adversely affected the enterprises at Frayne Centre. Business at the restaurant suffered and it was ultimately closed down, according to the Andersons all because of the highway project.

The Andersons filed a claim, subsequently amended, under the Expropriation Act, S.B.C. 1987, c. 23 (the "Act") for compensation in relation to an interest they say they had in an unregistered commercial lease of the premises in which Louie's Place operated. They then brought a motion to the board for severance of the hearing and separate determination of liability and quantum, and for the determination of liability on affidavit evidence. The board ordered severance and proceeded to hear liability on the basis of three affidavits of Mr. Anderson and one affidavit each of Roderick Hood, a lawyer with the firm representing the Andersons, Greg Mertton, a manager employed by the respondent, and Ali Yusuf, a law student also employed by the respondent.

This is the board's determination of the liability issues in this compensation claim. Those issues turn on whether for the purposes of the Act the Andersons' lease made them "owners" of the property the Ministry acquired by agreement from the landlord.

 

2.0   BACKGROUND

On April 1, 1989, Mr. Abu Keiri entered into a 14 page typewritten, 3 year lease of Louie's Place with its owner, Jan Cornelis Van Der Have. Around October 1989, Keiri assigned his interest in the lease to the Andersons who took over operation of the restaurant. Neither the lease nor its assignment was ever registered under the Land Title Act, R.S.B.C. 1979, c. 219.

On June 11, 1990, the Ministry entered into the agreement with Van Der Have for the purchase of approximately one third (0.0378 ha) of the parking lot in front of the restaurant. A sketch attached as Schedule "A" to these reasons for decision shows Frayne Centre relative to the Trans-Canada Highway, Frayne Road, and the part of the parking area that was acquired by the Ministry. The Andersons' landlord received combined cash and land compensation of $52,000.00 for the acquisitions which also included a 0.1910 ha property south west of Frayne Centre. In 1991 the Ministry also paid Van Der Have $3,975.00 as compensation for injurious affection and disturbance damages for the construction disruption, in consideration of which he signed a release of claim against the Ministry for "business disturbances and damages, revenue losses, delays or interruptions due to highway construction and access effecting (sic) property owned by JAN CORNELIS VAN DER HAVE (The Frayne Centre) in Mill Bay, B.C.". The Ministry has never made, nor offered to make, any compensation to the Andersons.

Around the same time and, the Andersons say, also as a result of the highway construction, a number of events made Louie's Place less appealing to its patrons. The restaurant sign was removed and placed in a different and, the Andersons say, less desirable location. The highway construction caused traffic disruption and some temporary loss of access to the restaurant and eventually the changes permanently cut off direct highway traffic access to the restaurant.

The nub of the compensation claim is that use of the parking lot in front of Frayne Centre was appurtenant to the Andersons' lease, in the sense that it was a right which belonged to and was a necessary part of the interest granted to the Andersons under the lease. Thus they were "owners" of the parking lot within the meaning of paragraph (a) of the definition in s. 1 of the Act and the Ministry's acquisition of some of it was an expropriation of part of their leasehold interest. The Andersons want compensation for the market value of their leasehold interest in the parking area taken ($5,000.00), for injurious affection to the remainder in the form of permanent loss of parking spaces and direct access to the highway ($10,000.00), for disturbance damages due to temporary loss of highway access and removal of restaurant signage during the highway construction ($20,000.00) and for costs and interest. The taking is said to have been under s. 6 of the Highway Act and the compensation claim is made under s. 14 of the Highway Act and ss. 29, 30, 33 (1) (a), 38 and 39 (1) (a) and (b) of the Act. No claim is made under s. 40 of the Act for injurious affection without a taking of land.

Article 1.01 of the lease describes the premises concerned in the following terms:

… the Landlord does hereby demise and lease unto the Tenant that portion of the Building outlined in red in Schedule "B" hereto (herein called the "Premises") comprising an area approximately 2,400 square feet of floor area, more or less.

A copy of Schedule "B", which was also incorporated into the assignment of the lease to the Andersons, is also attached as Schedule "B" to these reasons for decision, with added crosshatching over the "Premises" portion that was outlined in red on the original.

Article 1.02 contains a statement that the lease "is and shall be considered to be the only agreement between the parties and all negotiations and all other agreements acceptable to both parties are included in it." A similar statement is also found in Article 15.2. Article 2 is very short and just describes the term of the lease. Article 3 is one half page long and deals with the amount and payment of rent. Article 4 is not quite one page long and addresses use of the restaurant premises. Article 5 is just over one page long and addresses maintenance and repair of the premises and its "appurtenances" which are undefined (Article 5.01). Other articles, none of them remarkable, address the following issues: insurance (Article 6), alterations (Article 7), landlord's right to perform tenant's obligations (Article 8), tenant's right to perform landlord's obligations (Article 9), landlord's covenants (Article 10), damage to premises (Article 11), landlord's indemnity (Article 12), default (Article 13), assignment (Article 14), general (Article 15), option to renew (Article 16) and registration of lease (Article 17). Parking is specifically referred to in only one place, Article 5.05, which reads as follows (Emphasis added.):

5.05   Save as provided in Article 5.01 hereof the Landlord will make all structural repairs required to maintain the Building in such condition as to ensure the Tenant that it will be able to carry out the purpose for which this Lease is granted, such structural repairs to include, but not be limited to, repair to the roof, outside walls, doors, door hardware, plate glass, or parking areas unless the need of repair is caused by act or omission [sic] of the Tenant, its agents, employees or customers, whether through negligence or intentionally. The landlord agrees to carry out these repairs as expeditiously as reasonably possible in the circumstances.

Article 7.01 refers to "common areas" (Emphasis added.):

7.01   The Tenant may at any time, at its expense, paint and decorate the interior of the Premises and make such changes, alterations, additions and improvements in and to the Premises and the facilities thereto ... except that no structural changes and no alterations to the mechanical, heating, electrical, water or air conditioning systems or to the commons areas or the exterior of the Premises shall be made without the written consent of the Landlord and provided further that ...

Article 10.01 provides a covenant of quiet enjoyment:

10.01  ... the Tenant shall and may peaceably and quietly enjoy the Premises for the term hereby granted without any interruption, hindrance, or disturbance by the Landlord or any other person or persons claiming under it.

 

3.0   ISSUES

Did the lease between the Andersons and their landlord give them an interest in the parking area in front of Frayne Centre? If so, did the nature of that interest make the Andersons "owners" of the parking area under s. 1 of the Act?

 

4.0   ANALYSIS

The Andersons make their case on the premise that, for the Ministry to be liable to compensate them, it must be shown that they had a property interest in the part of the parking lot that was taken possession of by the Ministry for its highway project. The Andersons say that because the landlord had only a reversionary interest in the parking lot, not the fee simple he purported to sell, that reversionary interest was all the Ministry purchased. They say this property interest in the parking area, which the Andersons say was appurtenant to their lease, was taken by the Ministry but without compensation for the taking or for the disturbance damages and injurious affection which flowed from the taking.

The viability of the Andersons' argument turns on their establishing that their lease gave them an interest or estate in land in the parking area in front of Frayne Centre. If it did, then they would qualify as "owners" under paragraph (a) of the definition of "owner" in s. 1 of the Act. The Andersons submissions were concentrated on the law on this point and its application to the lease. Their counsel said that whether or not the Ministry's property acquisition from Van Der Have was by agreement or under compulsion is irrelevant because the Andersons are not relying upon the legalities of the transaction between those two parties. According to the claimants, their property interest in the parking area existed independently of the landlord's interest and the landlord had no right or ability to sell an interest in land which did not belong to him.

The Ministry says that the lease gave the Andersons a leasehold interest only in the restaurant part of the Frayne Centre building and that no property interest was given in the parking area outside the centre. At most there was a licence of necessity to allow the Andersons and their patrons access to the restaurant. Because only part of the parking area was acquired by the Ministry, there always remained reasonable access to the restaurant. The Ministry pointed to Article 1.01 which expressly defines the subject matter of the lease, the Premises, as the 2,400 sq. ft. building outlined in the schedule to the lease. That would not include the parking area which is clearly physically outside the 2,400 sq. ft. building and separately marked with a circle on Schedule "B" to the lease. The Ministry also relies upon Articles 1.02 and 15.02 which state that the lease provides the entire agreement between landlord and tenant. Citing the unreported case of Kontogonis Holdings Ltd. v. Northwest Trust Company, (May 29, 1986), Dawson Creek 1557 (B.C.S.C.), the Ministry said that to imply that the Andersons had a land interest in the parking area would go beyond and contradict the express terms of the lease and was not required to give efficacy to the lease.

The Andersons referred the board to a number of cases with various scenarios where the use of adjoining roads or passages was found to be an appurtenance or implied term of a lease. Several of the cases date from 19th century England. They concerned rights of access to a farm or to the back of freestanding or row housing where, though the accesses were not strictly ways of necessity, from the circumstances it was clear that their conveyance to the tenants had been intended. The board does not find those cases helpful because the case at hand involves not simply access to the restaurant but also use of parking facilities. Furthermore, here only part of the parking area was affected by the Ministry's acquisition and not all of the parking area was necessary for the Andersons and their patrons to have reasonable access to the restaurant.

The most pertinent case relied upon by the Andersons is the decision of the Manitoba Court of Appeal in Merger Restaurants v. D.M.E. Foods Ltd. (1990), 12 R.P.R. (2d) 261. This was an open mall shopping plaza where the landlord purported to designate parking in front of the plaza for the use of the tenant of a nearby building also owned by the landlord. Merger was a tenant of the plaza and its lease expressly gave it use "in common with others entitled thereto" of common areas which were defined to include "all parking areas, roadways, landscaped areas, common loading areas and delivery facilities, driveways, customer and service ramps ...". The case was treated as one of interpretation of the express terms of the lease, rather than one of implying terms into the lease. The court held that the lease did not permit the landlord to unilaterally reassign parking rights essential to Merger to others who were not tenants of the plaza. The extent and availability of parking was found to be so essential to the viability of the Merger restaurant that the parking clause constituted a covenant that ran with the land.

In contrast is the Kontogonis case relied upon by the Ministry. That case dealt with whether or not an express parking provision in a restaurant lease ran with the land or was a collateral covenant binding only against the original lessor. Lander J. determined that if the parking clause concerned the lessee's beneficial occupation of the lands but not the land itself, then it would not run with the title. He held that though the parking provision was clearly beneficial to the operation of the lessee's restaurant, it did not affect the leased premises itself, and therefore only had force of contract against the original lessor.

Kontogonis addressed whether or not an express parking clause in a restaurant lease was a covenant running with the land and the answer was no. Merger addressed whether or not an express parking clause in a shopping mall restaurant lease was a covenant running with the land and the answer was yes. The board has carefully reviewed the Andersons' lease. In contrast to both the Merger and the Kontogonis cases, there is no express provision for parking in this lease. Indeed there is but one fleeting reference to parking in the whole document and no inference in favour of the Andersons' position can be drawn from the rough depiction of a parking area on the schedule to the lease. There is also no express provision in the lease for contribution to common area costs. It is clear that neither Kontogonis nor Merger had to determine the questions key to this case: when will a parking clause be implied into a restaurant lease and, even when it is, when will it be found to be a covenant running with the land?

It is true that the court in Merger accepted that the express parking rights given in that case were essential to the viability of Merger's restaurant and did not follow Kontogonis insofar as it had held that such a provision did not run with the land. It is often said that provisions in an agreement or statutory instrument may be express or implicit, and that an implication will only be made where it is a necessity. Relying on Merger, the Andersons strenuously argued that because parking was essential to the viability of their restaurant the implication of a parking clause in the lease must be "necessary". This argument is superficially attractive, but on closer examination the board finds that in the context of this case it calls for too great an interpretive leap. It requires the board to find that necessity compels the implication into the lease of not simply reasonable access, not simply reasonable use of some parking facilities, but also use of the specific part of the parking area in front of Frayne Centre which was acquired by the Ministry from the landlord. The board cannot accept that the implication of such a term is supported by the language of the lease or is truly necessary to its efficacy. Therefore, while the board accepts, as did the Ministry, that a non-exclusive right of access to Louie's Restaurant must be implied into the lease, it does not accept that a necessary implication arises from the wording of this lease or the nature of this leasehold interest, that parking rights over the particular portion of the land acquired by the Ministry were conferred, much less intended to run with the land.

 

5.0   CONCLUSION

The board finds that the parking area in front of Frayne Centre acquired by the Ministry was not an appurtenance to the Andersons' lease of Louie's Place. Turning to paragraph (a) of the definition of "owner" in s. 1 of the Act, the board concludes that the Andersons had no "estate, interest, right or title in or to" the land their landlord sold to the Ministry for its improvement of the Trans-Canada Highway. It follows that there is no basis for a claim under the Act and the Highway Act that the Ministry expropriated or, to use the words of ss. 6 and 14 of the Highway Act, entered and took possession of, land owned by the Andersons. The claims for disturbance damages and injurious affection also fail because they too depend upon the Andersons being owners of land taken. Finally, because of the board's conclusion on the ownership issue it is unnecessary to resolve the three other questions raised upon by the parties: whether the Ministry's acquisition by agreement of land from the Andersons' landlord could be characterized as an expropriation or entry and taking of that land, whether if the Andersons had lost a property interest that loss frustrated their restaurant lease under s. 35 of the Act, and whether by reason of s. 23 of the Land Title Act the Ministry's acquisition by agreement of land from the landlord could defeat an unregistered interest of the Andersons so that no compensation for taking of that interest was required.

 

Government of British Columbia