June 20, 1995, E.C.B. No. 17/94/88 (56 L.C.R. 112)

Between: El and El Investments Ltd. and
Stephanie Perla Chuchman and George Chuchman
Claimants
And: The Board of School Trustees of School District No. 36 (Surrey)
Respondent
Before: Robert W. Shorthouse, Chair
Fiona M. St. Clair, Vice-Chair
Sharon I. Walls, Board Member
Appearances: Robert J. Baumann, Counsel for the Claimant, El and El Investments Ltd.
John A. Coates, Q.C., Counsel for the Claimants, Stephanie Perla Chuchman and George Chuchman
Michael C. Woodward, Counsel for the Respondent

 

1. INTRODUCTION

The respondent, the Board of School Trustees of School District No. 36 (Surrey) ("the school board"), filed a notice of motion seeking directions pursuant to subsections 19 (3) and (5) of the Expropriation Act, S.B.C. 1987, c. 23 ("the Act") as to whether the claimants, Stephanie Perla Chuchman and George Chuchman ("the Chuchmans"), are owners under the definition of "owner" set out in section 1 of the Act, and if so, as to the nature and extent of their interest in the subject lands. The notice of motion also sought directions respecting the amount and manner of the making of an advance payment, but this portion of the application was adjourned, pending the determination of the ownership issues. The other claimant in this proceeding, El & El Investments Ltd. ("El & El") is the registered owner of the subject lands, and the respondent is the expropriating authority. All four parties were represented by counsel at the hearing of the application, which took place in Vancouver on February 13 and 14, 1995. The Chuchmans and Andrew Lai, the principal of El & El, gave oral testimony at the hearing.

 

2. BACKGROUND

The subject property is a 10 acre parcel located at 9915 - 156th Street in Surrey. Its 1994 assessed value was $2.2 million. The school board executed the expropriation notice on March 31, 1994, dealing with approximately 7 of the 10 acres. The notice was filed at the Land Title Office on April 18, 1994 and was served on El & El on April 20, 1994. The Chuchmans were served with the expropriation notice on June 3, 1994. At the time of the hearing the property had not yet vested in the respondent, pending the holding of an inquiry under the Act, and as indicated above, the respondent has not made any advance payment to the Chuchmans.

El and El has owned the property since 1969, and Mr. Chuchman has lived there since the winter of 1974. He is 49 years old, and was about 28 when he first moved onto the property. He testified that at that time there was a house on the property in barely habitable condition. There were also three outbuildings in various states of disrepair and a dilapidated barn. The property was unfenced and overgrown. Mr. Chuchman stated that he converted one of the outbuildings to his use as a shelter/residence at first, and gradually made improvements and alterations to the various buildings on the property. He married Mrs. Chuchman in July of 1982, and she lived on the property for part of each year and in her home town of Los Angeles, California for the remainder, until 1989 or 1990, when she moved onto the property on a full-time basis. The Chuchmans also now have a teenage foster child, Linda, residing with them.

Mr. Chuchman testified that he effected major improvements to the property at his own expense over the years. He stated that he turned the three outbuildings into habitable cottages, which he rented out to sub-tenants, up to the time he and his wife became aware of the expropriation. Mr. Chuchman also testified that he completely renovated the main house and the barn, turning the latter into a 10 stall unit with a loafing area for the horses and two outside paddocks. He also stated that he did landscaping, fencing and driveway improvements and maintenance. In addition, he gave evidence that he put in a septic tank and field, converted the main house's electricity from 110 to 220 volts, brought propane heating and plumbing to the three cottages, and assisted with hooking up the main house to the city sewer system. Neither the Chuchmans nor El & El ever insured any of the buildings on the property. In addition to renting out the cottages, the Chuchmans both testified that they from time to time raised goats on the property, and more recently boarded horses and provided riding lessons to local children.

Mr. Chuchman testified that when he first moved onto the property, rent in the amount of $150 per month was paid to Mr. Lum Lai, the father of Andrew Lai and the former principal of El & El. The rent at the time of the expropriation was $500 per month. Mr. Chuchman testified that, to begin with, the payments were made monthly, but that for most of his tenancy the rent was forwarded in groups of varying numbers of post-dated cheques. On occasion, if Andrew Lai came out to the property, Mr. Chuchman would pay him in cash for the next month's rent, in which case Mr. Lai would simply destroy the cheque, if any, that he had been holding for that month.

Mr. Chuchman stated that after discussions about his tenancy with Lum Lai in the spring or early summer of 1975 or 1976, Lum Lai brought him two documents -- a release of liability and a lease. He recalls having executed the lease, but testified that, to the best of his knowledge, Lum Lai never returned to pick it up from him. After a number of years, Mr. Chuchman lost track of the document, and now cannot find it. He did state, however, that he used to keep all of his personal papers, including the lease, in a cedar chest in the main house. He recalls that one of his sub-tenants once came across the lease, found out that Mr. Chuchman did not own the property, and tried unsuccessfully to cause problems between Mr. Chuchman and the landlord. Some time after that, the roof of the main house leaked badly and damaged the chest and its contents. Mr. Chuchman believes that the lease was probably thrown out inadvertently when the chest was cleaned out of its ruined contents.

Mr. Chuchman testified that his only recollection of the term of the lease is that it would entitle him to stay on the property for a "secure number of years." Although he testified that he did not examine the lease document closely, he maintained that he now believes the term of the lease to have been 25 or 30 years.

Mr. Chuchman thought that Lum Lai's name appeared on the lease, and not El & El's. He stated that his first knowledge that El & El was the legal owner of the land, and not the Lais, was when he assisted with the sewer hookup in 1989 or 1990.

Mr. Chuchman also testified about a discussion he had with Andrew Lai in 1993, around the time of the last rental increase. He said that he asked Andrew Lai whether El & El had any plans for the property, and how long he could expect to stay there as a tenant. His testimony was that Mr. Lai responded that he could look forward to renting there for "another 20 years anyway."

Andrew Lai also testified about the Chuchman tenancy. He denied having made the statement attributed to him by Mr. Chuchman, recalling only that he had told him that he had no immediate plans to develop the property. He said that he considered Mr. Chuchman to be a tenant of El & El. When the rent was paid by cheque, the cheques were made out to him personally, but he signed the funds over to El & El and entered the payments in the company's books. Mr. Lai stated that he believed Chuchman's tenancy was a year to year one, because most of El & El's other rental arrangements were structured that way. He was unable to find a written rental agreement among El & El's records. He testified, however, that his father told him that there were written rental agreements for all of the company's properties, so he concluded that at one time such a document had existed. Finally, Mr. Lai testified that if he had wanted to terminate Mr. Chuchman's tenancy, he would have treated him as an "annual tenant."

 

3. FACTUAL DETERMINATIONS

We find, on the basis of the evidence and on a balance of probabilities, that there was a written rental agreement entered into between Mr. Chuchman as tenant and either the owner, El & El, or Lum Lai as agent for El & El, in approximately 1975.

Regarding the term of the lease, we accept Andrew Lai's testimony. He testified that leases of one year were the usual practice of El & El for similar properties, and that he did not think the lease would have been for more than one year's term. In addition, he stated that, if he had wanted or needed to terminate the Chuchman tenancy, he would have done so on the basis of it being an "annual tenancy." It is highly improbable, in our view, that a developer like El & El would enter into a lease of property for a term of 25 or 30 years.

We therefore find that the written agreement was for the duration of one year with the possibility of further renewals, and we find that it has been renewed on a year to year basis by the oral, and rather informal, agreement of the parties since that date.

 

4. THE POSITIONS OF THE PARTIES

The definition of "owner" under s. 1 of the Act is:

"owner", in relation to land, means

(a) a person having an estate, interest, right or title in or to the land including a person who holds a subsisting judgment or builder's lien,

(b) a committee appointed under the Patients Property Act and a guardian, executor, administrator or trustee in whom land is vested, or

(c) a person who is in legal possession or occupation of land, other than a person who leases residential premises under an agreement having a term of less than one year;

The Chuchmans must fit within one of these categories in order to be able to claim compensation from the school board arising from its expropriation of El & El's land.

4.1 The Chuchmans' Position

Mr. Coates, counsel for the Chuchmans, maintained that the Chuchmans are owners under both subsections (a) and (c) of the definition. He argued that since the Chuchmans "are tenants of one kind or another", they have an interest in land and therefore come within the purview of subsection (a). He also submitted that the evidence supported a finding that at one time there was a written lease for at least a one year term, and that this lease would renew from time to time on the acceptance of rent for the ensuing term. (As indicated above, we concur with this view of the evidence.) This, he submitted, would bring the Chuchmans under the definition in subsection (c), since their lease would not be a lease of residential premises with a term of less than one year.

4.2 The School Board's Position

Mr. Woodward, counsel for the school board, submitted three legal bases for finding that the Chuchmans do not qualify as owners under the Act. The first was that the rental agreement did not meet the required "3 P's of certainty" of parties, property and price set out in the common law. In essence, the absence of these required components would render the agreement too uncertain to be enforceable, and therefore also too uncertain to form the basis of a claim for compensation. The second basis for excluding the Chuchmans as owners was that the rental agreement failed to comply with the registration requirements under the Land Title Act, R.S.B.C. 1979, c. 219, and the third was that it failed to comply with the requirements of s. 54 of the Law and Equity Act, R.S.B.C. 1979, c. 224.

 

5. DISCUSSION

We will review the components of the school board's argument first, since if the tenancy agreement were to be unenforceable for any of the three reasons cited by the school board, that would be the end of the matter and we would not need to deal with the Chuchman's arguments about whether the tenancy agreement brings them under the definition of "owner".

5.1 The 3 P's of Certainty

Counsel for the school board cited Currie v. Thomas (1985), 19 D.L.R. (4th) 594 (B.C.C.A.) in support of the proposition that a rental agreement, to be proven and enforceable, "must include the essential terms of the parties, the property and the price" (at p. 597). This case involved a determination of whether a particular contract met the requirements of s. 1 (1) of the then Statute of Frauds. That section read:

"An agreement concerning an interest in land is not enforceable by action unless evidenced in writing, signed by the party to be charged or by his agent."

The component aspects of the "3 P's" are set out below, along with our analysis of their applicability to the rental agreement at issue.

5.1.1 "P" #1: Parties:

5.1.1.a Landlord

Mr. Woodward argued that there was no agreement with El & El, the owner of the land, and that the company is not the same as its principals. In support of this latter principle he cited Beamish v. Regional Municipality of York (1981) 23 L.C.R. 259, a decision of the Ontario Land Compensation Board. In that case, Mr. and Mrs. Beamish owned property that they rented to their own company, K.J. Beamish Construction Company Limited. The company, as a claimant in the expropriation proceedings, was seeking compensation based upon its tenancy, regarding which there was no written lease. It was held that no reasonable prospect of renewal of the rental arrangement could be implied simply on the basis of the relationship of the corporate claimant to the personal claimants, as landlords and shareholders. The Ontario Board referred to the well established principles set out in Salomon v. A. Salomon & Co. Ltd., [1897] A.C. 22, and found that Beamish the shareholder was not one and the same as Beamish the corporation. Based on this reasoning, Mr. Woodward argued that an agreement between Mr. Chuchman and Mr. Lum Lai does not constitute an agreement between Mr. Chuchman and El & El.

Mr. Woodward did not, however, deal with the legal principle of agency, and when questioned about this by one of the panel members, he answered only that Mr. Chuchman had made his rental payments to the individuals rather than to the company.

The general principle of the law of agency has been stated by S.M. Waddams in his text, The Law of Contracts (1977, Canada Law Book Limited), at p. 151:

"Where an agent in fact is expressly or impliedly authorized to contract with a third person on behalf of the principal, and the third person knows it and deals with the agent on that basis, there is no difficulty in concluding that a contract is formed between the principal and the third party. It is as though the principal were dealing directly with the third party, an agent forming a mere means of communication between two principal parties."

In this case, El & El does not seek to deny the contract made by Lum Lai, nor the renewals effected through Andrew Lai. Speaking as the president of El & El, Andrew Lai acknowledged El & El's role as landlord of the Chuchman tenancy. His testimony was that any cash received by him, and any cheques made out to him, were converted to the use of the company, and that in this way all rental payments were negotiated by and ultimately paid to the credit of the company. We accept that both of the Lais had the authority of El & El to act on its behalf regarding the Chuchman tenancy.

Mr. Chuchman, however, testified that he did not know of the existence of El & El until 1989 or 1990, at the time of the sewer hook-up. If his recollection is correct, he was not knowingly dealing with El & El's agent. Waddams deals with the issue of an undisclosed principal in an agency situation further on in his text, at p. 153:

"Greater difficulties arise in the case where the agent does not disclose that he is acting for another person. Where the agent is in fact authorized to act as he does, it has been held that the third party may elect to sue either the agent personally or the principal; the principal on his part may disclose his identity and enforce the contract against the third party."

Non-disclosure of the agency relationship to the third party, then, does not invalidate the contract made by the agent. It merely provides the third party (in this case Mr. Chuchman) with an additional party against whom to enforce the contract if necessary, and the contract can still be enforced by the principal (in this case, El & El) against the third party.

We find on the basis of the evidence adduced that, even though Mr. Chuchman did not know that the company owned the property, he dealt properly and in good faith with its principals, first Lum Lai and then Andrew Lai. We also accept that both of the Lais had the authority of El & El to act on its behalf regarding the Chuchman tenancy. We are therefore satisfied that the fact that the lease was entered into by Lum Lai and thereafter renewed and dealt with by Andrew Lai, does not constitute a legal bar to the lease being a valid and enforceable agreement between Mr. Chuchman and El & El.

5.1.1.b Tenant

In order for a lease agreement to be legal and enforceable, it must be clear who the tenants are. Without clarity as to the identity of the tenants, the lease agreement would be too uncertain to be enforceable.

Mr. Woodward did not challenge Mr. Chuchman's status as a tenant. He did, however, argue that Mrs. Chuchman is not a tenant, on the basis that in order to be a legal tenant one has to have a legal agreement with the landlord, and one does not acquire such legal status merely through marriage. Mr. Coates did not provide any legal argument to the contrary, but did cite evidence of Mrs. Chuchman's involvement with the improvements to and maintenance of the property, and of her personal dealings with Andrew Lai. Mrs. Chuchman's evidence, and that of Andrew Lai, however, indicated that her dealings with him were on a friendly, personal level, and did not point to her making any formal legal arrangements with him about the tenancy.

We therefore agree with Mr. Woodward that Mrs. Chuchman is not a legal tenant of El & El. In our view, this does not render the lease agreement uncertain, however, because we view the evidence as demonstrating that the only person who was a party to the agreement as tenant was Mr. Chuchman.

5.1.2 "P" #2: Property

The first required certainty under the "property" heading is regarding the subject matter of the tenancy agreement. There was no dispute in this case as to what the subject matter of the agreement is.

5.1.2.a Term

Mr. Woodward submitted that there was no reliable evidence about the term of the lease that would demonstrate the existence of an agreement between the parties on that point.

We have, however, as set out above, concluded that there was sufficient evidence before us to conclude that the written agreement was of one year's duration with the possibility of further annual renewals.

5.1.2.b Renewal

Mr. Woodward argued that the Chuchmans must demonstrate a legally enforceable right to renew, and not just a possibility of renewal. He submitted that they cannot use the possibility or even the probability of renewal as a foundation for the certainty of the term.

We have found, on the evidence, as set out above, that the original one year lease provided for the possibility of renewals. We have also found that the lease was renewed over a period of some 20 years, although the renewal arrangements were extremely informal and the renewals were not reduced to writing. The Chuchmans, in any event, are not relying on these renewals as the foundation for the certainty of the term of the original lease, since the original lease was set out in writing, and we have found that its term was certain.

5.1.3. "P" #3: Price

Counsel for the school board argued that there was no fixed rent for the duration of the tenancy. We have concluded that it is sufficient that the rent was fixed in writing for its first term, and by oral agreement for each period of renewal. We find that there was sufficient evidence to support the conclusion that this was the case here.

5.2 Land Title Act Registration Requirements

Counsel for the school board referred us to section 20 of the Land Title Act. Section 20 (1) provides that an unregistered instrument is inoperative to pass an estate or interest in land, except for the following single exception set out in subsection (3):

"Subsection (1) does not apply to a lease or agreement for lease for a term not exceeding 3 years where there is actual occupation under the lease or agreement."

We have concluded that this lease was in fact unregistered, and that it was for a period of one year. It follows, then, that it does not have "a term … exceeding 3 years" as set out in subsection 20 (3). In addition, we find that Mr. Chuchman was actually occupying the premises under the lease. On this basis, subsection 20 (3) operates to exclude the lease from the requirement of land title registration.

5.3 Law and Equity Act Requirements

Counsel for the school board also referred us to section 54 of the Law and Equity Act. This section replaces the old Statute of Frauds provisions requiring agreements concerning land to be in writing in order to be enforceable. Like section 20 of the Land Title Act, however, section 54 specifically excludes, in subsection (2) (b), "a grant of a lease of land for a term of 3 years or less." This provision, therefore, also has no application to the lease agreement at hand.

5.4 Legal Possession or Occupation of Land

Mr. Woodward made one additional argument, which was that the Chuchmans were not in "legal possession or occupation of land" as required by subsection (c) of the definition of owner. He argued that "legal" is meant to modify both "possession" and "occupation", and that the Chuchmans' possession or occupation could only be "legal" as that term should be interpreted, if it complied with the requirements of the "3 P's", the Land Title Act and the Law and Equity Act. Since we have concluded that the latter two of these three requirements do not pertain to the Chuchman's tenancy arrangements, and that the lease did comply with the certainty requirements of the "3 P's", we must reject this argument.

 

6. CONCLUSIONS

We find that Mr. George Chuchman is an "owner" under the provisions of subsections (a) and (c) of the definition in the Act. He has a written tenancy agreement of one year's duration which has been renewed for approximately 20 years, by informal agreement with the landlord. An interest as a tenant is an "interest in land", and unless a tenancy comes within the exception contained in the subsection (c) portion of the definition or is otherwise unenforceable (as the result, for example, of the operation of s. 54 of the Law and Equity Act), a tenant will qualify as an owner under subsection (a) by virtue of that interest. We view Mr. Chuchman as being in legal possession and occupation of the land pursuant to the lease, and since he is not leasing "residential premises under an agreement having a term of less than one year," he is not prevented from being an owner by virtue of the subsection (c) exception. The nature and extent of his interest is that of a tenant under an annual lease with subsequent renewals.

We find that Mrs. Stephanie Chuchman was not a party to the original lease, and that she did not acquire any contractual rights as a tenant by the mere fact of her marriage to Mr. Chuchman. Without a specific agreement adding her as a party to the original lease and its extensions, El & El would not be successful in enforcing any claims against her as its tenant, and she would not have status to seek any remedies against El & El based on its agreement with her husband. It therefore follows that she cannot base a claim for compensation against the expropriating authority on her non-existent legal status in the rental agreement.

 

Government of British Columbia