April 5, 1995, E.C.B. No. 19/92/87 (56 L.C.R. 55)

 

Between:Read Marketing Inc.
Claimant
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**
Art Guthrie, Board Member
Appearances:J. Barry Carter, for the Claimant
Alan V.W. Hincks, for the Respondent
*Jeanne Harvey participated in the reasons for decision until her appointment to the Provincial Court of British Columbia on October 7, 1994.
**Robert W. Shorthouse heard this matter in his capacity as Vice Chair and prior to his appointment as Chair.

 

1. INTRODUCTION

The claimant seeks an order of the board fixing the compensation to be paid by the respondent as a result of its acquisition for highway purposes of certain property near Kamloops, British Columbia legally described as Lot 1, District Lot 292, Kamloops Division Yale District, Plan 18718 (the "property"). From the property the claimant operated a gas station and convenience store commonly known as "Monte Creek Esso".

The threshold question in this case is whether the claimant has a claim at all for compensation. In order to maintain such a claim, the claimant must establish itself as an "owner" under the Act. While in the majority of cases which come on for hearing, the claimant's entitlement in that respect is not in dispute, it is very much in issue here.

On February 25, 1992, the claimant filed with the board an application for determination of compensation (the "Form A"). It claimed entitlement to compensation under an agreement made with the respondent pursuant to s. 3 of the Expropriation Act, S.B.C. 1987, c. 23 (the "Act"). That agreement (the "s. 3 agreement"), in effect, characterized the claimant as the owner of a leasehold interest in the property. The statement of claim in the Form A alleged that, as a consequence of the respondent's acquisition of the property, the claimant had to close its business operation and suffered disturbance damages. At the hearing of this claim, the claimant's business expert quantified those damages (primarily in the form of lost profits) in the approximate range of $260,000 to $280,000.

In its reply to the Form A filed with the board on April 15, 1992, the respondent alleged that the claimant did not have a leasehold interest in the property but merely operated its business there pursuant to a revocable licence. Furthermore, according to the respondent's pleadings, any compensation in the nature of disturbance damages to which the claimant might be entitled as a leaseholder would be limited by settled principles of expropriation law related to commercial tenancies. The respondent further pleaded that the claimant had already been adequately and properly compensated by way of advance payment from the respondent. The advance payments totalled some $28,000.

The hearing of evidence in this matter took place in Kamloops, B.C. on October 4, 5, 6 and 7, 1993. Lay witnesses called on behalf of the claimant were Mr. William J. ("Bill") Read, the principal of the claimant who operated the Monte Creek Esso station on its behalf, and Mr. Owen Gilbert, for many years a senior accounts manager with Esso Petroleum Canada, a division of Imperial Oil Ltd. ("Esso"), who had supervisory responsibility for Monte Creek Esso during most of the relevant period. Mr. Gordon D. Herrington, of the chartered accountancy firm of Tombe Herrington, testified on behalf of the claimant as an expert in business valuation with respect to his report dated July 23, 1993, on the calculation of the claimant's disturbance damages. All three witnesses called to testify on the respondent's behalf were of the chartered accountancy firm of Price Waterhouse: Messrs. Chuck Whipps, Lorne Pellegrin and Kerry Winkler. The latter two witnesses were qualified as experts in business valuation. Mr. Pellegrin testified with respect to his report dated March 11, 1992, estimating the value of the claimant's commercial goodwill, and both he and Mr. Winkler critiqued the report of Mr. Herrington. Mr. Whipps testified that he had assisted Mr. Pellegrin in the preparation of his report and had interviewed Mr. Read concerning the operation of the claimant's business. The respective valuation reports were entered as exhibits in these proceedings.

The hearing of oral argument commenced in Victoria, B.C. on October 12, 1993, and continued on January 17, 1994. Shortly after the conclusion of the hearing, respondent's counsel addressed to the board a letter containing further submissions on the issue of the claimant's entitlement to compensation. The board, in turn, offered claimant's counsel an opportunity to respond, and eventually succeeded in convening a teleconference call for that purpose including both counsel and all members of the panel on May 13, 1994.

 

2. BACKGROUND

A summary of the board's background findings of fact in this matter will assist in placing the central issue of the claimant's entitlement to compensation in context.

2.1 The Claimant

The claimant is a company which was incorporated on January 30, 1989 under the laws of the Province of British Columbia. Its principals are Bill and Frances Read. The Reads relocated from Alberta to Kamloops in 1987. Mr. Read had a varied background in retailing, marketing, banking, credit bureau work, and bulk plant management. He sought a position with Esso in the Kamloops area and ultimately negotiated with the oil company to take over management of the service station at Monte Creek which Esso had recently acquired from Husky Oil. Mr. Read commenced his operation of Monte Creek Esso on August 1, 1988 and, on February 1, 1989, transferred the assets which he had employed for that purpose to the newly-incorporated claimant company.

2.2 The Service Station Property

Monte Creek Esso was well located adjacent to the busy Trans Canada Highway No. 1 some 28 kilometres east of Kamloops and close to the major intersection of Highways 1 and 97. It comprised a service station with pumping units for petroleum products, including propane, as well as a small convenience store facility. Esso completed a major refit of the service station just prior to Mr. Read's taking over its operation in August 1988.

A company known as Y.B. Holdings Ltd. held the fee simple to the property at all material times. The fee simple owner in turn leased the property to Esso pursuant to a lease dated April 25, 1988, as modified by agreement dated August 23, 1989. This lease was registered on title to the property. Neither the claimant nor Mr. Read ever effected a registered interest in the property in their favour.

2.3 The Agency Agreement and Operation of the Business

Mr. Read carried on the business of Monte Creek Esso in his own right through an agreement dated August 1, 1988, called "Esso Served and Self-Serve Agent Agreement" (the "agency agreement"). The claimant company did not formally assume Mr. Read's benefits and obligations under the agency agreement until June 1, 1991, when it entered into an assumption agreement with Esso. However, for the purpose of this decision, it is both convenient and sufficient to treat the agency agreement throughout as one subsisting between the claimant and Esso. The actual terms and conditions of the agency agreement will require close scrutiny by the board later in this decision since the parties agree that its overall characterization as being in the nature of either a lease or a licence is critical to the claimant's case for compensation for disturbance damages.

From all indications the claimant's operation of the service station and convenience store was a financial success. Mr. Read testified that he initially anticipated an annual net income from the business on the order of $30,000 to $35,000. However, under the agency agreement the claimant was entitled to the profits of the convenience store, and by increasing the sales volume of "highway groceries" in particular, the claimant was soon able to garner an annual net income on the order of $70,000.

Until shortly before the respondent's acquisition of the property, the claimant operated Monte Creek Esso under its agency agreement with the oil company on a year-to-year term and as a "split-serve" facility, that is, one which offered passing motorists both full-service and self-service refueling options. However, in the spring of 1991, Esso unilaterally changed the format of the station to self-service only and also converted the claimant's agency agreement to a month-to-month term. The evidence indicates that these changes came about, in part at least, because of the respondent's impending acquisition.

2.4 The Respondent's Acquisition of the Property

The respondent did not acquire the property through expropriation, nor did it enter into a s. 3 agreement with the registered owner. Rather, on March 28, 1991, the respondent concluded an agreement with Y.B. Holdings Ltd. to purchase the fee simple of the property. The claimant was not a party to that agreement. The agreement provided that the respondent would take title to the property on September 15, 1991, and have vacant possession the following day. It left to the registered owner the responsibility of clearing title and ensuring vacant possession. In the result, Monte Creek Esso ceased operations and the claimant vacated the property on September 16, 1991.

2.5 The Respondent's Dealings with the Claimant

The evidence reveals a pattern of ongoing direct involvement between the respondent and the claimant concerning the respondent's acquisition of the property. As early as December of 1990, the respondent's regional property negotiator entered into settlement discussions with the claimant. During the months of July and August, 1991, the respondent communicated in writing with claimant's counsel in connection with its purchase of the property and closure of the claimant's business. On February 17, 1992, some months after the acquisition was completed and Monte Creek Esso closed, the respondent entered into the s. 3 agreement with the claimant. On the same date the respondent made an advance payment to the claimant of $10,000 pursuant to s. 19 of the Act. It made a further advance payment of $18,000 on May 1, 1992. This pattern of dealings between the parties raises further questions for the board bearing on the issue of the claimant's entitlement to compensation.

2.6 The Claimant's Replacement Business

After having been displaced from Monte Creek Esso, the claimant sought other similar business ventures in the area without immediate success. Ultimately, however, the claimant located an opportunity, assembled its financing and, on May 27, 1992, purchased the assets of a business known as Pritchard Station, located about 40 kilometres east of Kamloops. The claimant used at least some of the monies received from the respondent by way of advance payment to help finance the purchase. The assets acquired included two pieces of land, one of which was vacant and the other of which included a house, a store and an Esso gas station. The store at Pritchard Station comprised a considerably more varied business than did the small convenience store at Monte Creek Esso; it included, for example, a post office and liquor outlet. The claimant's operation of the gas station there was governed by a dealer sales agreement with Esso, quite different in its terms from the agency agreement formerly in place at Monte Creek Esso. At the compensation hearing, the claimant led evidence to suggest that the Pritchard Station operation, while profitable, was significantly less so than Monte Creek Esso had been.

 

3. ISSUES

The principal issues which the board has been asked to determine are as follows:

(1) Does the claimant have a claim for compensation for disturbance damages under the Act?

(2) If the claimant does have a claim for compensation, how is that claim affected by the principles that govern compensation where a commercial lease is involved?

(3) If the claimant does have a claim for compensation, what is the appropriate quantum of disturbance damages?

The board heard evidence and submissions at the compensation hearing on all of these issues. Nevertheless, it is only if the board finds, on the threshold issue, that the claimant is entitled to disturbance damages under the Act, that it will become necessary to consider the second and third issues.

 

4. THE ISSUE OF ENTITLEMENT

4.1 The Basis of Entitlement

The respondent takes the position that the foundation of a right to compensation for disturbance damages or losses suffered as a result of the lawful actions of an expropriating authority must be found in statute. There is compelling support for that proposition in E.C.E. Todd, The Law of Expropriation and Compensation in Canada, 2nd ed. (Toronto: Carswell, 1992), who states at p. 35:

It has never been suggested that there was a common law right to compensation. On the contrary, as Lord Parmoor stated in Sisters of Charity of Rockingham v. R., [1922] 2 A.C. 315, 322 (P.C.) "Compensation claims are statutory provisions. No owner of lands expropriated by statute for public purposes is entitled to compensation, either for the value of the land taken, or for damage, on the ground that his land is 'injuriously affected', unless he can establish a statutory right."

Because this is so, the question of entitlement necessarily turns, in the first instance, on locating and interpreting the particular statutory provisions which serve as the basis for compensation. In the present instance, the respondent acquired the property pursuant to the Highway Act and the Ministry of Transportation and Highways Act, R.S.B.C. 1979, c. 280. Notably, there was no expropriation of the registered owner's interest nor an agreement with that owner under s. 3 of the Act. However, s. 14 (1) of the Highway Act provides for the payment of compensation "for land entered and taken possession of". Pursuant to s. 14 (3), the Act applies to proceedings under the Highway Act. Accordingly, if it could be said that the claimant had an interest in land entered and taken possession of by the respondent, then the claimant could maintain a claim for compensation under the Act. Section 29 (3) of the Act recognizes certain limitations on compensation provided for by s. 14 (1) of the Highway Act, but they appear to have no application in this instance.

The question of entitlement further requires a determination of the legal nature of the interest taken in order to decide whether there is a right to compensation in the particular instance. The importance of determining whether the claimant has a compensable interest under statute is underlined by the decision of the British Columbia Court of Appeal in Cream Silver Mines Ltd. v. British Columbia (1993), 49 L.C.R. 171 (Leave to appeal to S.C.C. refused 50 L.C.R. iv).

That was an appeal from a judgment of the Supreme Court of British Columbia holding that the Crown had taken certain recorded mineral claims held by a mining company in a provincial park for which it had to pay compensation. Southin J.A., at p. 173 of the appellate judgment, found that the interest evidenced by the recorded mineral claims

… is not one known to the common law. It is a statutory creation with no life apart from statute. Thus, to discover what rights, if any, those entries confer upon the holder of the claim, one must look to the applicable legislation.

It had already been determined in earlier court proceedings that a recorded mineral claim was not an interest in land but rather was a chattel interest. Reviewing the applicable statutes, the Court of Appeal determined that, although they expressly provided for compensation for the taking of land, none provided any scheme of compensation for the expropriation of a chattel interest in the form of a recorded mineral claim within a park. The mining company argued that, given the absence of any statutory provision explicitly denying compensation, the legislature must have intended that there be compensation for such a taking. The Court of Appeal rejected that argument and held that the mining company was not entitled to compensation. Madam Justice Southin stated at pp. 179-80:

If the argument were accepted, the Crown would be, in law, obliged to pay compensation for all "takings", for all types of "property", no matter what the legal nature is of that "property" and no matter how the "taking" occurs, unless the enabling legislation expressly denies compensation.

Acceding to that argument would be an impermissible intrusion by the courts into the domain of the legislature under the guise of applying a rule of construction which owes its origin to far different times from our own.

In the present instance, the threshold issue of the claimant's entitlement to compensation also largely turns upon a determination for the purposes of the Act of the claimant's legal interest, if any, in the property. The parties, in making their submissions in this regard, addressed three distinct questions. Two of them involve an interpretation of the definition of "owner" in s. 1 of the Act. The relevant portions of that definition read as follows:

"owner", in relation to land, means

(a) a person having an estate, interest, right or title in or to the land …

. . .

(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 first question which arises is whether the claimant was an "owner" under subsection (a) above by virtue of having "an estate, interest, right or title" in or to the property. It was common ground that, if the agency agreement with Esso was construed as granting a lease to the claimant, the claimant would clearly have an interest in the property. If it was construed simply as granting a licence to occupy, the claimant would enjoy no such interest. However, even if the agency agreement were found to be a licence rather than a lease, the second question is whether the claimant was nevertheless an "owner" under subsection (c) above as someone "in legal possession or occupation" of the property. If the claimant were found not to be an "owner" under either of those two subsections, the third question remains whether the respondent is nonetheless estopped from denying the claimant's entitlement to compensation by reason of the respondent's course of dealings with the claimant, which included entering into the s. 3 agreement and making advance payments as provided for under the Act. The board now turns to an examination of these three questions.

4.2 The Agency Agreement: Lease or Licence?

In Re B.A. Oil Co. & Halpert, [1960] O.R. 71 at p. 77 (Ont. C.A.), Schroeder J.A. made the following observations concerning the difference between a lease and a licence:

Wherever the relationship of landlord and tenant exists there is present the element of permission or consent on the part of the landlord, and subordination to the landlord's title and rights on the part of the tenant. There must be a reversion in the landlord, the creation of an estate in the tenant, and a transfer of possession and control of the premises to the tenant. …  It will be observed, therefore, that the transmission of an estate to the tenant is an essential characteristic of the relationship of landlord and tenant. No estate in the land passes to a licensee and this, on the authorities, is the principle distinguishing trait between the two relationships. An agreement which confers exclusive possession of the premises against all the world, including the owner, is a lease, while if it merely confers a privilege to occupy under the owner, it is a licence. It is often difficult to determine whether a particular agreement is to be regarded as a lease or a licence. Broadly speaking, however, the general concept of a licence is that it is a mere permission to occupy the land of another for some particular purpose.

The claimant says that the overall effect of its agency agreement with Esso was to make the claimant a tenant having an interest or estate in the property. Specific rights and responsibilities contained within that agreement were, according to the claimant, more consistent with the relationship of landlord and tenant than with that of licensor and licensee. Moreover, the opportunity afforded the claimant under the agency agreement to carry on the convenience store business on its own account, in the claimant's submission, made that agreement a lease.

The respondent posits several reasons for its submission that the agency agreement is not a lease. It points to the form of the agreement itself and the absence of specific words of grant normally found in a lease. It refers to the intentions of Esso in entering into this particular type of agreement and, especially, the control which it says Esso retained over every aspect of the claimant's activities on the property.

The parties referred the board to several decided cases in which the issue was the proper characterization of an agreement as being either a lease or a licence. No individual case cited is, in the board's view, by itself conclusive of the issue to be determined in this matter. Each turns on its own peculiar facts.

The claimant relies upon the judgment of the Ontario Court of Appeal in Metro-Matic Services Ltd. v. Hulmann (1973), 48 D.L.R. (3d) 326. In that case the plaintiff had installed coin-operated washing and drying machines in an apartment building pursuant to a written agreement with the building owner. The agreement was entitled a "lease agreement" and the parties were referred to as "landlord" and "tenant". The building was subsequently sold and the new owner required the machines to be removed. The plaintiff brought an action for loss of profits and damages for breach of the alleged lease. The learned trial judge concluded that the restrictions which the agreement imposed upon the plaintiff's entry to and use of the premises were such that it amounted to no more than a mere licence in the form of a concession agreement and that it failed to create any estate in the plaintiff.

The Court of Appeal allowed the plaintiff's appeal of that judgment and found the agreement to be a lease. The Court observed that covenants in the agreement severely restricting the use which the plaintiff could make of the premises did not make its possession of the premises any the less exclusive. Brooke J.A. also noted at p. 331:

… it is significant that the parties have been careful to employ numerous words customarily used in leases but, perhaps more important, words traditionally required to create an estate or interest in land. One cannot ignore the important effect of the words "demise" and "lease" and of the habendum and the covenant for quiet enjoyment which I should think, in the absence of a clear statement of the parties' intention to the contrary, are conclusive of the intention to grant a lease of the land in question with exclusive possession and control thereof.

The respondent cites several cases in support of its proposition that the agency agreement between the claimant and Esso should be construed as a licence rather than a lease. The first such case is that of Attorney-General of Canada v. Walsh et al. (1980), 19 L.C.R. 333 (Fed. Ct. T.D.). It involved an expropriation under federal legislation in which the issue was whether a brother of the expropriated fee simple owner, carrying on farming operations on the expropriated lands, held a leasehold interest entitling him to compensation. After reviewing the evidence, the court concluded that the brother was merely in the position of a bare licensee and, as such, could not assert a claim for compensation. The court said at p. 336:

He was granted the privilege to use the land in a certain manner and for a specified purpose. He never had exclusive possession for a certain period of time, and his brother never intended to create in his favour more than a personal right that could be extinguished at will. Such a personal right extinguishable at will could not give him any estate or interest in the land …

In two of the other cases referred to by the respondent, the agreements in question were actually found to be leases but the respondent submits that they contained terms and language clearly absent from the agency agreement at issue here.

In Re B.A. Oil, the parties had executed two documents, the first of which was described as a service station lease and the second as a retail dealer sales agreement. The landlord sought from the court a writ to recover possession of the premises under landlord and tenant legislation. The learned trial judge dismissed the application on the ground that he was without jurisdiction since he considered the true relationship between the parties to be that of licensor and licensee. On appeal of that decision, the Alberta Court of Appeal identified the problem as deciding what was the true legal relationship between the parties. To determine that relationship, the Court observed at p. 81:

… the intention of the parties must be ascertained. In the present case the whole of the documents signed by the parties must be carefully scrutinized and considered.

Having earlier noted that the parties had signed a document described as a lease, and in which the respondent had been described as a tenant, the Court concluded that the agreements created a tenancy rather than a mere licence. It continued:

The first document, known as the service station lease is couched in language peculiar to a lease, and contains terms which leave no doubt that it was the intention of the parties that the service station operators should have exclusive possession of the lands demised, subject to certain reservations and restrictions which, in the circumstances, are not extraordinary. … Not only do the agreements in question give exclusive possession to the respondents in clear and unmistakable terms, but the very nature of the acts to be done and the business to be carried on by them required that they should have exclusive possession. In plain and simple terms these agreements impose on the grantees, in substance, the rights and obligations of tenants, and on the grantors, in substance, the rights and obligations of a landlord.

In Raysue Enterprises Ltd. v. Nova Scotia (1991), 47 L.C.R. 133, which involved a claim for injurious affection before the Nova Scotia Expropriations Compensation Board, the claimant operated a restaurant pursuant to a franchise agreement. The respondent argued that there was no intention on behalf of the landlord to grant exclusive possession to the claimant. It contended that the claimant was a licensee and as such did not come within the definition of "owner" or "tenant" in the relevant expropriation legislation. The agreement described the parties as "licensor" and "licensee". The only reference to any tenancy arrangement was a clause requiring the licensee to pay a "realty rental". That reference evidently satisfied the Board that the substance of the transaction was "a franchise agreement coupled with a leasehold arrangement for the land" (p. 136). The Board found that the words "licensor" and "licensee" referred to the franchise agreement rather than to land use and that, as to the land, there was a month-to-month lease.

The respondent's position rests perhaps most heavily upon the judgment of the English Court of Appeal in Shell-Mex and B.P. Ltd. v. Manchester Garages Ltd., [1971] 1 W.L.R. 612. There the plaintiff oil company had allowed the defendant to go into occupation of a filling station pursuant to two documents covering two different parts of the premises. The front part of the lands, consisting of the filling station itself, the fuel pumps, a kiosk, a car sales display canopy and offices, was covered by a document called a licence. The back lands, used for service bays, car storage and a car wash, were covered by a document called an underlease for a term of 21 years. After the so-called licence agreement on the front lands expired, the defendant continued to operate the filling station and the plaintiff applied for, among other things, an injunction to restrain the defendant from doing so. The defendant sought the protection of landlord and tenant legislation.

The question confronting the Court of Appeal was therefore whether the transaction involving the front lands was truly a licence as described or whether it was, in reality, a lease. In addressing that point, Lord Denning M.R. made the following initial observation at p. 615:

This does not depend on the label which is put on it. It depends on the nature of the transaction itself … Broadly speaking, we have to see whether it is a personal privilege given to a person (in which case it is a licence), or whether it grants an interest in land (in which case it is a tenancy).

Lord Denning M.R. then went on to identify within the document those terms which indicated that its true nature was that of a licence. First, it was significant to the learned judge that the document was called a licence. Second, the provisions in the document relating to the purpose for which it was granted suggested that they were personal in their nature. At p. 616:

There is a personal tie between the parties whereby the licensees are to deal in Shell petrol only and are to take all their supplies from Shell, who are to supply them.

Third, the document made clear that the oil company retained rights of possession and control and could re-enter at will. In finding that this agreement was a licence for one year and not a tenancy, Lord Denning M.R. noted further at p. 616:

It seems to me that when the parties are making arrangements for a filling station, they can agree either on a licence or a tenancy. If they agree on a licence, it is easy enough for their agreement to be put into writing …

Sachs L.J., in agreeing with the Master of the Rolls, also made note of the fact that the agreement was not assignable, an element which in his view could be taken into account since one normal characteristic of a lease, involving as it does an interest in land, is that it may be assigned. The learned judge summarized his view of the agreement as follows, at pp. 616-17:

Upon looking at the substance of the matter as a whole, it becomes apparent that the dominant objective of the contractual relationship between the parties was to further the promotion of the sale of the Shell-Mex company's products on the site which they had selected, with the aid of the structures and equipment which they had provided and over which they were to exercise a right of control -- including a right to deal with the layout and equipment as they desired from time to time. The general tenor of the relevant document … points strongly in this direction when taken as a whole… a licence best fits into the character of the transaction as a whole.

In light of the foregoing discussion of the law, the board now turns to examine the provisions of the agency agreement between the claimant and Esso in this matter. It is a document in standard form, the accompanying instructions for which indicate that it is to be used when Esso enters business relations with a sales associate for the sale of motor fuels as Esso's agent. "In most cases", the instructions continue, "Esso owns the real estate and licences the Agent to occupy it under the agreement." The agency agreement in this case commenced on August 1, 1988. Its term was for an initial period of one year. Thereafter it was to be automatically renewed for successive periods of one year each unless Esso, on 30 days' prior notice, terminated the agreement on the expiration of the term or unless either party terminated the agreement under another of its provisions. In respect of the term alone, the Walsh decision, which found only a personal right extinguishable at will, can be distinguished from this matter.

However, the following additional observations emerge. Firstly, the recitals to the agreement make clear the dominant objective of the arrangement between the parties. They provide that Esso requires the services of the claimant to sell Esso motor fuels on the premises as agent. The claimant, in turn, is said to desire to enter into such a business relationship, with the right to sell as a principal for his own account such other products and services as the parties may agree "will complement that business".

Secondly, nowhere is the agency agreement described as a lease. To the contrary, its provisions confer upon the claimant an entitlement "to occupy" the premises in return for which, among other things, the claimant is to pay "all occupancy costs". Additionally, the agreement says that the claimant, in consideration for the opportunity to operate the convenience store, is to pay to Esso what is described as a "license fee" rather than as "rent". A schedule to the agreement fixes the initial monthly fee payable at $1,500. Significantly, Esso reserves the right unilaterally to amend the amount of the license fee from time to time simply by sending the claimant a new schedule.

Thirdly, the control exercisable by Esso over the claimant's operations at Monte Creek Esso under the agency agreement is pervasive. Title to and property in all motor fuels supplied to the claimant remains in Esso until they are sold to the retail customer. Esso is to be the exclusive supplier of fuel and to determine both the quantity to be supplied and the retail price at which it is to be sold. The agreement specifies the required hours of operation for the business and Esso can unilaterally add to, vary or modify the exhaustive schedule of operating standards which the claimant must observe.

Although the claimant is said to be a principal for his own account when dealing with the convenience store, Esso's control under the agency agreement firmly embraces that segment of the business as well. Under article 3.11, the claimant agrees to use the retail sales area of the premises:

"… as permitted by Esso, solely for the promotion and sale of a selection of packaged automotive products, tobacco, confectionary, beverages and sundry items as stipulated by Esso from time to time, all in compliance with the Operating Standards …"

The operating standards themselves specify that the claimant must use the retail sales area package provided by Esso from time to time, "including displays, racks, shelving, fixtures, equipment, signage and point of purchase material" and must comply with "the floor plan layouts, merchandise planning, cleanliness, product mix and overall conceptual development as stipulated by Esso from time to time".

A further indication of the level of control lies in Esso's right at all reasonable times to enter the premises and fully appraise or inspect whether the claimant is in compliance with the required operating standards and inventory control systems. As to the convenience store, the claimant, although in business on his own account, can be required by Esso to provide complete information concerning its revenues, expenses and margins, and Esso can audit the claimant's records to verify this information. Esso retains very comprehensive rights to terminate the agreement in the event of any non-compliance.

Fourthly, while the agency agreement indicates that the claimant carries on its business as "an independent contractor in pursuit of an independent calling and not as an employee or servant of Esso", it also makes clear that the agency agreement is "personal" as between the parties and is not assignable except by Esso to a subsidiary company. It is an event of termination if the claimant transfers or otherwise parts with control of the business. There is no provision which allows the claimant to seek Esso's prior consent to a transfer or assignment or which obligates Esso not to withhold consent unreasonably.

In the board's view, the foregoing provisions are indicia of an agreed arrangement between the claimant and Esso in the nature of a licence rather than a lease. They point to a personal contractual relationship through which the claimant can, in accordance with strictly prescribed standards, exercise a personal privilege to occupy premises for the dominant purpose of furthering the interests of Esso and the subsidiary purpose of allowing the claimant its own business opportunity. Absent from the agency agreement is the language of "lease" and "demise", the habendum clause, and the covenant for quiet enjoyment customarily associated with a lease. There is only one reference to a lease within the entire agency agreement and it offers further evidence of the intention of the parties when they made their arrangements for the operation of Monte Creek Esso. It occurs in a clause which contemplates that the claimant might, as was the case in Shell-Mex, hold a lease of other premises in addition to its licence to occupy the subject lands. Article 9.03 (l) makes it an event of termination if the claimant:

"… is the lessee from Esso or an affiliate of Esso of adjacent premises on which service station bays are situated, and the [claimant's] lease of the adjacent premises expires or is terminated."

Both the Metro-Matic Services Ltd. and the B.A. Oil decisions stand for the proposition that the language employed by the parties in concluding their agreement offers, in the absence of a clear statement of the parties' intention to the contrary, compelling evidence as to the true nature of the relationship which they seek to form.

Claimant's counsel urges the board to distinguish between the strict control which Esso was able to exercise under the terms of the agency agreement and the degree of independence which he submits the claimant, in fact, enjoyed in the conduct of its business. The evidence on that point from both Mr. Read, the claimant's principal, and Mr. Gilbert, Esso's former representative, indicates to the board that a well-run operation such as the claimant's could expect to function without Esso's obtrusive interference in every area. Nevertheless, the board is struck by the way in which the oil company actually exercised an ongoing surveillance, sometimes surreptitiously, over the manner in which the claimant carried on the business, varied the licence fee, and unilaterally changed both the mode of operation of the station and the duration of the agency agreement from an annual to a month-to-month term.

It is, in the last analysis, the true legal relationship created between the parties to which the board must look in determining whether the claimant possessed an interest or estate in the property. In that regard the claimant points to particular provisions of the agency agreement which it argues, and the board acknowledges, are consistent with the finding of a lease. First, the requirement placed upon the claimant to pay operating costs, including utilities, to meet certain repair and insurance obligations, and to indemnify Esso with respect to any claims arising out of the claimant's use and occupation of the premises, are conditions which the board recognizes as common to leases. They are also, however, not inconsistent with a licence. Second, Esso's right of entry to the premises, although wide-ranging, is nevertheless expressed in reference to particular purposes which arguably it would not be necessary to spell out if the claimant enjoyed something less than exclusive possession. Furthermore, the claimant is obliged at the end of the term of the agreement to "peaceably surrender and yield up" the premises to Esso, language which might also suggest that the claimant until that time enjoyed exclusive possession. In this respect the legal relationship between Esso and the claimant at Monte Creek Esso varies somewhat from that in Shell-Mex where the agreement, which the court held to be a licence, contained a clause cited at p. 616 under which the occupier agreed with the oil company:

"Not to impede in any way the officers servants or agents of the company in the exercise by them of the company's rights of possession and control of the premises …"

However, when carefully scrutinizing the whole of the document, the apparent intention of the parties when executing it, and the restrictions on the claimant which it imposes, the board is drawn to the conclusion that a licence best characterizes the legal nature of the agency agreement. On the authorities cited above, the claimant therefore does not have "an estate, interest, right or title in or to the land" and is not an "owner" entitled to maintain a claim for compensation pursuant to subsection (a) of that defined term under the Act.

4.3 The Question of Legal Occupation and Possession

The question next arises whether the claimant may maintain its claim for compensation pursuant to subsection (c) of the definition of "owner" in the Act, as "a person who is in legal possession or occupation of land". The claimant did not actually refer the board to subsection (c) as an alternative basis of its entitlement to compensation, and the issue was not argued in depth. It was simply in response to an inquiry by the panel during the course of the hearing that counsel first addressed the possible applicability of this subsection. The intended scope of its words has not until now been considered in a decision of the board.

On a plain reading, subsection (c) would appear to offer very broad scope. It might refer to any person in legal occupation or possession of land other than a short-term residential tenant and, as such, encompass a person in the position of a licensee.

Initially, claimant's counsel pointed out the difficulty that such an interpretation would raise when attempting to apply the basic formula for compensation under s. 30 of the Act, since compensation seems to be predicated upon an owner having an estate or interest in the land. The relevant portion of s. 30 (1) provides:

30. (1) The board shall award compensation to an owner for his estate or interest in the expropriated land for the market value of that estate or interest plus reasonable damages for disturbance …

Later, Mr. Carter noted that the Act, while defining an "owner", nowhere defines the term "lease" or "lessee". He suggested as one possible conclusion to be drawn that the subsection therefore offers the statutory definition of whom the board may consider to be a lessee.

Respondent's counsel submitted that the wording of this subsection should be considered in its entirety and with reference to both s. 37 of the Act and the 1971 Report on Expropriation of the Law Reform Commission of British Columbia.

Subsection (c) of the definition states in full that an "owner", in relation to land, means

(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;

Subsection (2) of s. 37 of the Act, entitled "occupiers and lessees", provides as follows:

37. (2) Where expropriated land includes "residential premises" as defined in the Residential Tenancy Act, a person who leases or occupies those premises under an agreement having a term of less than one year, is entitled to be paid

(a) an amount equivalent to 3 months rent of those residential premises, and

(b) reasonable moving costs.

The Law Reform Commission, when considering the position of a tenant within its proposed reform of expropriation legislation in British Columbia, made the following observations at p. 41 of its Report:

The interest of a tenant under a lease, although an interest in land, has traditionally been regarded as personal property and not real property. However, under the recent Landlord and Tenant Act amendments, residential tenancy agreements no longer create a property interest at all. Section 35 provides that, in so far as residential tenancies governed by Part II of the Act are concerned, the relationship of landlord and tenant is one of contract only, and a tenancy agreement does not confer on the tenant an interest in land.

The purpose of section 35 was, the Commission believes, to make residential tenancies subject to the law of contract rather than the law of property, which in many respects is archaic. While the Commission has no quarrel with that objective, it does not believe that it was ever intended that one of the consequences of section 35 would be to deprive a residential tenant of the right to compensation should there be an expropriation of the leased premises. Accordingly, the Commission believes that the proposed statute should be made expressly applicable to residential tenancies governed by Part II of the Landlord and Tenant Act.

The landlord and tenant legislation to which the Law Reform Commission referred has long since been substantially rewritten. However, the board is persuaded that the rationale which underlay the words of the Commissioners very likely informed those provisions of the Act which relate to the rights upon expropriation of residential tenants. Applying a purposive approach to statutory interpretation based upon the available evidence, it appears to the board that the legislative intent was to recognize as an "owner" a person in legal occupation and possession of residential premises under an agreement having a term of one year or more, conferring under s. 37 (2) of the Act the entitlement to compensation of a person who leases or occupies residential premises for a term of less than a year.

Accordingly, the board concludes that subsection (c) of the definition of "owner" under the Act is not intended to apply to a person in the claimant's position.

4.4 The Estoppel Question

One peculiarity of this case is that the respondent, both before and after its acquisition of the property on which Monte Creek Esso operated, treated the claimant as an owner having a right to compensation under the Act. The board has already referred to the course of negotiation and agreement between the parties in this matter. Most significantly, some five months after the respondent's acquisition of the property, the parties entered into the s. 3 agreement in which the claimant is throughout referred to as the "Owner". The second recital to the agreement states:

"B. The Owner was an occupier and tenant on the property and operated a business on the property."

Within the body of the agreement the respondent agrees to make an advance payment in accordance with s. 19 of the Act and, as indicated above, it made payments to the claimant totalling $28,000. The final paragraph of the agreement further provides:

"4) The Expropriating Authority and Owner agree that:

a) compensation shall be determined by the Expropriation Compensation Board;

b) the date fixed for possession shall be September 15, 1991;

c) the Owner's entitlement to be paid his actual reasonable legal and professional fees and disbursements and other costs incurred by him, both before and after the date of this Agreement for the purpose of asserting his claim for compensation or damages shall be determined under the Expropriation Act as if the business had been expropriated;

d) nothing herein contained shall be construed as restricting the Owner's entitlement to compensation to be determined in accordance with the provisions of the Expropriation Act and more particularly Part 6 thereof."

The claimant takes the position that the board should accord sanctity to the law of contract and enforce the agreement. The respondent seeks to resile from that agreement. It says the parties entered into the agreement, at best, under a common mistake of law as to the claimant's entitlement and that, if the board itself determines that the claimant was not an owner for the purposes of the Act, the terms of the s. 3 agreement cannot now make it otherwise.

The third and final issue therefore arising is whether, although the claimant is not an owner under the Act, the respondent is estopped from denying compensation to the claimant. According to S.M. Waddams, The Law of Contracts, 2nd ed. (Toronto: Canada Law Book Inc., 1984) at p. 143, "[t]he basic concept of estoppel is that a person is precluded from retracting a statement upon which another has relied." The following definition of estoppel was approved in Pannenbecker v. Dominion of Canada General Ins. Co. (1977), 76 D.L.R. (3d) 132 at pp. 139 (Alta. S.C.T.D.), revd on other grounds 93 D.L.R. (3d) 450 (S.C. App. Div.):

… where one person ('the representor') has made a representation to another person ('the representee') in words, or by acts and conduct, or (being under a duty to the representee to speak or act) by silence or inaction, with the intention (actual or presumptive), and with the result, of inducing the representee on the faith of such representation to alter his position to his detriment, the representor, in any litigation which may afterwards take place between him and the representee, is estopped, as against the representee, from making, or attempting to establish by evidence, any averment substantially at variance with his former representation, if the representee at the proper time, and in the proper manner, objects thereto.

The respondent submits that there are several reasons why the doctrine of estoppel should not apply in this instance. First, it says, detrimental reliance is an essential ingredient of the doctrine and the claimant did not rely to its detriment upon the respondent's representations as to its status as owner. The respondent cites the judgment of the British Columbia Court of Appeal in Tompkins Estate v. Tompkins (1993), 76 B.C.L.R. (2d) 323, wherein Southin J.A. stated as follows at p. 329:

At the root of the modern doctrine of estoppel, however one puts it, is that the person who relies on the acts of the other must show he did so to his detriment and, therefore, the other cannot be heard to assert his legal right.

Second, the respondent argues, the doctrine of estoppel applies only to representations of fact and not of law. Those representations contained in the s. 3 agreement, and the questions which they beg as to whether the claimant was an owner or tenant, are, in the respondent's submission, pure matters of law.

The respondent refers the board to the judgment of the Supreme Court of Canada in Sohio Petroleum Co. et al. v. Weyburn Security Co. Ltd. (1970), 13 D.L.R. (3d) 340. There the parties to a petroleum and natural gas lease were mutually mistaken in believing that the term of the lease was still running. In their respective mistaken beliefs, the lessor insisted that the lessee oil company continue to meet certain obligations under the lease and the lessee did so. The lessor later sought a declaration that the lease had expired. The lessee oil company maintained that, by its conduct, the lessor was estopped from denying the continuance of the lease. The learned trial judge accepted that position but his judgment was reversed on appeal to the Saskatchewan Court of Appeal. The Supreme Court of Canada upheld the decision of the Court of Appeal, and Martland J. quoted from its reasons as follows, at p. 345:

… Sohio considered it was obligated to perform … under the terms of the lease. The [respondent], in requesting or demanding that … Sohio carry out the terms of the lease, and in allowing … Sohio to proceeed as it did, simply accepted the mistaken position that the lease had not terminated. Because the [respondent] was not aware of the true legal position, it is not now precluded from exercising its rights.

Third, the respondent refers to judicial pronouncements suggesting that the doctrine of estoppel can only be used as a "shield" and not as a "sword" in order to found a new cause of action. While acknowledging that legal commentators have called into question the usefulness of that distinction, the respondent also cites the judgment of the British Columbia Court of Appeal in Pentagon Construction (1969) Co. Ltd. v. United States Fidelity & Guaranty Co. (1977), 77 D.L.R. (3d) 189. A central issue in that case was whether an insurance company could rely upon a particular exclusion in its policy of coverage after the insurer had expressed an opinion to the insured that the kind of loss suffered by the insured and excluded in the policy would be covered. After finding that there was no promise intended to affect the legal relations of the parties, and no detrimental reliance, Robertson J.A. went on to say the following at p. 206:

If I am wrong in the conclusion on this issue that I have stated above, I am still of the opinion that the plea of estoppel must fail. … The result of giving effect to the plea would be to extend the insurance so that it did cover such a loss. It would create a cause of action that did not exist before, and this an estoppel may not do.

Finally, the respondent refers the board to the claimant's pleadings, noting that they raise no issue of estoppel. As the scope of the hearing is to be governed by the pleadings, the respondent argues, the claimant is not now in a position to advance such a plea.

The board is not persuaded that it was necessary for the claimant in this instance to have raised in its pleadings the doctrine of estoppel in order to be in a position to address that issue at the hearing. Both parties in their pleadings allege the presence of the s. 3 agreement and it is, in part, the legal effect to be given to that agreement which the board must consider.

Certain issues surrounding the doctrine of estoppel remain, in the board's view, somewhat unsettled in law. What is, however, clear to the board is the requirement for a claimant, in order to make use of the doctrine, to be able to demonstrate detrimental reliance upon a respondent's representations. Except in one respect to be considered shortly, there was simply no evidence before the board to show that the claimant relied upon the respondent's approaches and efforts at negotiation, nor its entry into the s. 3 agreement and receipt of advance payments, to its detriment.

In this instance the respondent acquired the property from the fee simple owner through purchase rather than expropriation. The claimant, as the holder of a month-to-month licence from Shell at the time, was not in a legal position to assert an interest as owner of the property as against the respondent or to do otherwise than acquiesce in the respondent's purchase of the property, close Monte Creek Esso, and vacate the premises. It did not therefore rely to its detriment upon representations of the respondent in taking those steps. But for the claimant's subsequent entry into the s. 3 agreement, the board would have had no jurisdiction to intervene in this matter at all. Having concluded that the claimant was not an owner under the Act, the board considers that the presence of that agreement cannot in itself confer jurisdiction on the board to treat the claimant as an owner.

The board accepts, however, that the claimant did rely upon receipt of the second advance payment from the respondent in connection with its purchase of Pritchard Station. The claimant also relied upon the respondent's representations in proceeding with the prosecution of its claim. The claimant retained legal counsel for that purpose. It filed the Form A with the board within a matter of days of entering into the s. 3 agreement and receiving the initial advance payment. It engaged an expert to value its alleged losses and prepare a report. Notwithstanding the respondent's position, in the first instance, that the claimant was not an owner, the claimant brought its application before the board for hearing. That step, in the board's view, was not unreasonable in the circumstances. In the result, the claimant did so to its financial detriment.

Waddams, Law of Contracts, at pp. 147-51, discusses cases where courts have given a measure of protection to a representee's reliance short of enforcing the representations to their full extent: see Hughes v. Directors etc. of Metropolitan Ry. Co. (1877), 2 App. Cas. 439 (H.L.); Owen Sound Public Library Board v. Mial Developments Ltd. (1979), 102 D.L.R. (3d) 685 (Ont. C.A.), leave to appeal to S.C.C. refused 31 N.R. 449n. The board considers the principle underlying those judgments to be applicable here. While the doctrine of estoppel is not available to the claimant for the purpose of asserting a claim as owner, the board is of the view that it is available to the extent necessary to protect the claimant's detrimental reliance and to prevent an injustice.

 

5. CONCLUSION

The board has concluded that the claimant's agency agreement with Shell was in the nature of a licence rather than a lease. Accordingly, the claimant does not have "an estate, interest, right or title in or to the land" so as to be able to maintain a claim for compensation pursuant to subsection (a) of the definition of "owner" under the Act. Furthermore, the claimant cannot be said to have been in "legal possession or occupation of land" pursuant to subsection (c) of the definition, given the board's interpretation of the scope of that subsection. Finally, the board is unable to find that the negotiations and agreements entered into between the parties raise, except to a limited degree, the doctrine of estoppel enabling the claimant to maintain its claim for compensation.

The board has considerable sympathy for the predicament in which the claimant finds itself. It has gone through a protracted and possibly expensive process at the conclusion of which the board finds itself unable to consider an award of compensation for disturbance damages. That claim, for the reasons already stated, must be dismissed.

The claimant received from the respondent advance payments totalling $28,000. The status of those payments is necessarily cast in doubt by s. 29 (2) of the Act which provides:

29. (2) Where the amount of compensation determined under this Act is less than

(a) the amount paid under section 19, or

(b) any other amount paid by the expropriating authority on account of compensation,

the board shall certify the amount of the difference, and that amount is debt due and payable to the expropriating authority recoverable by action from the owner to whom the overpayment was made.

In the course of final argument during the hearing, the panel asked respondent's counsel for his client's position with respect to the advance payments in the event that the claimant was held not to be entitled to compensation as an owner. Mr. Hincks replied that he had no instructions to seek the return of those monies. He also made reference to a decision of the Supreme Court of Canada on the basis of which he conceded that monies paid under a mistake of law might not be recoverable: see Hydro Electric Commission of Township of Nepean v. Ontario Hydro (1982), 132 D.L.R. (3d) 193. The board considers that the interest of justice would be served if the claimant were allowed to retain those payments. Certainly, the board feels strongly that there has been no unjust enrichment of the claimant in these circumstances.

The board is also of the view that the claimant should be entitled to be paid costs necessarily incurred for the purpose of asserting its claim for compensation or damages pursuant to s. 44 of the Act. As indicated above, the s. 3 agreement provided for no less and the claimant has relied to its detriment on that agreement in pursuit of its claim. To this extent, the doctrine of estoppel applies. Accordingly, the board orders that the respondent shall pay to the claimant the actual reasonable legal, appraisal and other costs of, and incidental to, the application and hearing before the board in such amount as may be agreed upon, and failing such agreement, in such amount as may, upon application to the board, subsequently be determined and allowed by the chair.

 

Government of British Columbia