PREFACE

The coexistence in Canada of Quebec civil law and the common law can occasionally create some problems in interpreting and applying federal statutes. According to a rule of statutory interpretation that is now well established in Canadian law, since property and civil rights are under provincial jurisdiction, provincial private law may have to be used to supplement federal law or a federal statute that is silent or incomplete or that refers expressly to provincial law. As a result, in Quebec, the Civil Code of Québec is sometimes used to supplement federal statutes, such as the Excise Tax Act, whereas in the other Canadian provinces it is the common law that applies. Unfortunately, the enormous historical and structural differences between those two legal traditions sometimes lead to inequities in the application of such statutes.

One such problem involves the Excise Tax Act, under which the common law concept of licence must be applied in a Quebec civil law context. That concept, as understood in a property law context in the common law, is meaningless in the civil law. So how can the provisions of the Excise Tax Act that refer to it be interpreted and applied? The purpose of this study is therefore to define the common law concept of licence in order to try to find its legal equivalent in Quebec civil law. We will also try to make some recommendations for harmonizing the Excise Tax Act with Quebec civil law in relation to that concept using the various harmonization techniques developed by the Department of Justice Canada under the Program to Harmonize Federal Legislation with the Civil Law of Quebec.

I would like to thank all those who have participated directly or indirectly in carrying out this project. I thank Maurice Arsenault, a partner at Raymond Chabot Grant Thornton in Montreal, for agreeing to be my essay supervisor. I would also like to thank Mathieu Legris of the Department of Justice Canada for his support throughout this long project. I cannot forget professors Joseph E. Roach and Mistrale Goudreau of the University of Ottawa, who provided much advice and many suggestions. Finally, I would especially like to thank Carmen Crête of the Quebec Department of Revenue for all the time she generously gave me and above all for her moral support and encouragement.

The writing conventions used in this study are from the Guide de présentation des publications (Montreal: Association de planification fiscale et financière, 1999).

Introduction

The various legal systems in the world include mixed law systems in which two or more legal traditions apply concurrently, interactively or even side by side. From this point of view, the Canadian legal system is characterized by the coexistence of two private law systems: the civil law in Quebec and the common law in the rest of the country. Canadian bijuralism also combines the application of these legal traditions in the two official languages, English and French. The coexistence remains peaceful in most cases, but admittedly, in some circumstances, these distinctive characteristics lead to serious theoretical as well as practical conflicts.

The enormous historical and structural differences between these two legal traditions often give rise to many problems in applying federal statutes, which must seek to harmonize with the ordinary law of every province. Unfortunately, such harmonization is not always achieved. Moreover, with the reform of the Civil Code of Lower Canada and the coming into force of the Civil Code of Québec[1]on January 1, 1994, the civil law applicable in Quebec changed considerably to adapt to the legal needs of Quebec society at the end of the century. However, these major changes in provincial legislation necessarily affect the provisions of federal statutes that are connected with that legislation. It was therefore in that wave of reform that the Department of Justice Canada created the Civil Code Section in 1993. Its mandate included the implementation of the Program to Harmonize Federal Legislation with the Civil Law of Quebec,[2] the purpose of which is to prevent and remedy problems in applying federal legislation in the province of Quebec.

It is in this context that we are proposing to analyse the problems that arise in applying the provisions of the Excise Tax Act[3] (hereinafter "E.T.A.") that refer to the concept of licence. That concept — permission in French[4] — is an exclusively common law concept, which creates a legal vacuum in this area in Quebec civil law, as we will see in our analysis. Any reference to the concept in the E.T.A. is therefore potentially problematic in so far as its application may lead to different treatment or even inequities, depending on whether the provisions apply to a taxpayer in Quebec or in one of Canada's other provinces.

Our first objective is therefore to take an exhaustive look at the concept of licence in order to define the legal reality that it seeks to express in the common law of property and then specifically in the E.T.A. We will then analyse the problems that exist in applying that concept in Quebec civil law, and we will try to examine the administrative policies of the federal and provincial governments in this regard. The fundamental questions we will try to answer are as follow. Do licences exist in Quebec civil law? Do they exist under another name or in another form? What civil law institution is most similar to that concept? Finally, our answers will lead us to explore some solutions for harmonizing the problematic provisions of the E.T.A. using the four harmonization techniques developed by the Department of Justice Canada.

Chapter I – Study of the Concept of Licence

1.1 Overview of property law in the common law: classification of property

Before starting to look at the concept of licence, we have thought it appropriate to refer briefly to the common law classification of property. That classification, which several authors[5] view as being of a complexity that has become almost legendary, differs greatly in several respects from the classification of property found in Quebec civil law.[6] The common law classification, which involves two main categories of property — real property and personal property — originated in the old rules of civil procedure and in the tenure system of medieval England. At that time, all property[7] was considered real property if a plaintiff dispossessed of it could obtain full restitution thereof by bringing an action in rem.[8] In contrast, property was personal property if the plaintiff, through an action in personam,[9] could only expect damages and not the restitution of the property. Thus, in the common law, personal property is basically the counterpart of movable property and real property is the counterpart of immovable property, with just one exception: leases.

The category of real property is also divided into corporeal and incorporeal hereditaments, depending on whether the property is a physical object[10] or an intangible, the latter being an interest[11] closely related to land. The best known intangibles are profits à prendre and easements. Logically, this subcategory should also include leases, which are unquestionably an interest related to land. However, for historical reasons, leases have a special status within personal property.

One reason why property law in the common law is often described as totally illogical is the fact that there are two subcategories of personal property, namely chattels real (nonsensical to some given the very definition of "personal property") and chattels personal. Besides the produce of the land, crops, natural vegetation and trees,[12] leases are the chattels real that are the best known and most used today. Because of their nature, leases should be in the category of real property. However, according to old feudal customs, a tenant under a lease had an interest in land for only a specified period[13] and therefore did not have a free right of ownership of indefinite duration,[14] which was necessary for the highly coveted status of landowner. A tenant who was inopportunely evicted could not bring a real action for restitution, as described above, to regain possession of the leased property. He could bring only a personal action against the landlord for breach of contract and hope to obtain damages. This explains the personal nature of leases. It was not until near the end of the 15th century that tenants were given the right to bring a real action if they were unlawfully evicted.[15] Unfortunately, that change had no effect on the classification of real and personal property. At the most, leases were given the hybrid name of chattels real within personal property.

The other subcategory of personal property, namely chattels personal, is a residual subcategory that includes all personal property that is not a chattel real. It encompasses tangible property, of course, such as furniture, which can be physically possessed, and intangible property, that is, rights from which the holder may derive some benefit.[16] In their simplest form, as we will see later,[17] licences belong to this latter category of chattels personal.

1.2. Study of the concept of licence in the common law

Our study concerns the legal concept of licence as defined by the common law (permission in French). However, in legislation, case law and some academic writing, the term "licence" is used in both English and French to describe the legal reality that we call permission in French. To add to the confusion, the term "licence" is not exclusive to property law. We will look at definitions of the term in the next section of our study.

1.2.1. Definitions

Among the various definitions of the word "licence", the definition most frequently used comes from the Latin licentia, which refers to any type of authorization, such as a [translation] "right to do or say something upon being granted permission by a higher authority" or an "administrative authorization to carry on a business or regulated activity for a specific time"; one thinks of an import or fishing licence, synonymous with permit.[18] In French only, legal practitioners will also recognize [translation] "the higher education degree between the bachelor's degree and the doctoral degree: the licence en droit".[19] A licence may also be [translation] "freedom of action given to or claimed by someone, such as a writer with the rules of versification, spelling or syntax".[20]

In the context of intellectual and industrial property, a licence may be, inter alia, [translation] "a patent licence agreement, which can be defined as an agreement through which the patent owner authorizes a third party to exercise his or her exploitation right in whole or in part in return for the payment of a royalty. . . . The prevailing view among authors, which is approved by the courts, is that licensing has all the characteristics of leasing and that articles 1713 et seq. of the Civil Code should apply to it. Some authors believe that, where a licence is free, it should be should be considered a loan for use."[21] The parallel drawn by those authors between licences and certain civil law institutions, namely contracts of lease and loans for use, is drawn in the context of French civil law.[22] However, we see the comparison as very revealing, and we will return to it in analysing licences in a Quebec civil law context.[23]

The concept of licence, and specifically the concept of licensee (the person who holds the licence), is also found in the field of civil liability. The remedies available to someone who has an accident on someone else's property differ depending on whether the civil liability principles that apply are common law or Quebec civil law principles. Historically, in the common law, the legal rules applicable in determining the degree of liability of the owner/defendant in such circumstances have varied based on whether the victim is an invitee, a licensee or a trespasser. An invitee and a licensee are on someone else's property with the express or implied authorization of the owner, but an invitee, unlike a licensee, is generally there in the owner's interest — for example, a customer in a restaurant. In contrast, a licensee is not, prima facie, on the premises in the owner's direct interest. A person who takes a walk in a public park is a licensee. A trespasser is someone who goes onto another person's property, in good or bad faith, without permission and is an intruder there. The owner will have much less liability in the case of a trespasser than in the other two cases.[24]

Quebec civil law does not use the common law's invitee-licensee-trespasser trilogy to determine the liability of the owner/defendant. The legal rule that applies to all victims is the rule set out in article 1457 C.C.Q. As Mr. Justice Albert Mayrand, formerly of the Quebec Court of Appeal, humorously put it:

         [translation]

. . . [T]he civil law and the common law are decidedly different as regards the liability of occupiers toward persons who go onto their land and incur harm there. The licensee-invitee-trespasser doctrine is part of the common law just like plum pudding is part of English cooking. However, the Quebec courts have sometimes confused plum pudding with crêpes-suzette. The confusion is very difficult to justify but easy to explain. Not only is Quebec surrounded by common law provinces and states, but the common law has also spread into the province, governing a number of areas of the law. In such circumstances, opportunities for confusion abound.[25]

The confusion referred to by Mayrand J.A. also worried Beetz J. of the Supreme Court of Canada in Anastasia Rubis v. Gray Rocks Inn Ltd.[26] In that case, the Court had to determine the degree of liability of the respondent, which owned a hotel in which the appellant was staying when she accidentally fell out of the window of her room. In the Quebec Court of Appeal, the concepts of invitee and licensee had been referred to and found applicable by that court. On appeal from that decision, the judges of the Supreme Court therefore had to decide whether the Court of Appeal had rightly relied on those concepts to make its decision. Beetz J. took the following position:

 I have already had occasion to express doubt as to whether these categories are part of the civil law: Hamel v. Chartré, [1976] 2 S.C.R. 680, at p. 688.[27] . . . However, I no longer entertain any doubt, and I am of the opinion that it is an error to refer to these common law categories in the civil law.[28] . . . We do not have to decide how we would judge if we applied the common law. Common law precedents are of no assistance in the case at bar, and we must apply to them what Mignault J. wrote in Desrosiers v. The King (1920), 60 S.C.R. 105, at p. 126:

[TRANSLATION] With respect, it seems to me that it is time to react against the habit, in cases from the province of Quebec, of resorting to English common law precedents, on the ground that the Civil Code contains a rule which is in accordance with a rule of English law. On many points [...] the Civil Code and the common law do have similar rules. However, the civil law is a complete system in itself and must be interpreted in accordance with its own rules. If, whenever the legal principles are the same, the courts can resort to English law in order to interpret French civil law, the monuments of French jurisprudence might equally be cited to throw light upon the rules of English law. I repeat, each system is complete in itself, and apart from the case where one system takes from the other a rule that was formerly foreign to it, there is no need to go beyond it in search of the rule which should be applied to varied situations that arise in daily practice.[29]

Thus, in the field of extracontractual liability, the concept of licence and the trilogy it is part of have not been recognized as a principle that is part of Quebec civil law. The Supreme Court of Canada has categorically refused to borrow that concept from the common law. Would it do the same in a property law case or in a contractual context? As we emphasized above, "apart from the case where one system takes from the other a rule that was formerly foreign to it", would the Supreme Court, in such circumstances, recognize the concept of licence in Quebec property law? Would that concept fall under the exception set out by Mignault J.? Is it a "foreign rule" in Quebec civil law? This is the fundamental question we must answer.

These few detours lead us, finally, to the common law definition of the concept of licence in property law. It would seem that the use of the term "permission" is preferable in French,[30] although there is some lack of uniformity in this regard within the prevailing academic writing. Thus, for the purposes of our study, we will use the term "licence" in English and alternately the term "permission" in French where the texts and legislative provisions to which we refer call for this.

The traditional definition on which nearly all of the case law in this area relies dates back to 1673, when Lord Vaughan L.C.J. wrote the following in Thomas v. Sorrell: "A dispensation or licence properly passeth no interest, nor alters or transfers property in anything, but only makes an action lawful, which without it had been unlawful."[31]

The definitions of the term "licence" found in certain specialized common law dictionaries and books set out the essential characteristics of that concept without referring to the various types of licences that exist, as we will see.[32] Here are a few of the many definitions:

[translation] Licence: Permission given to someone authorizing the performance of an act that would otherwise constitute trespassing. It is a personal right, not a right in rem. Unlike an easement, a licence does not have to be recorded in a deed.[33]

Licence: . . . In the law of property, a licence is a personal privilege or permission with respect to some use of land and is revocable at the will of the landowner. Wood v. Leadbitter (1845), 14 L.J. Ex. 161. The privilege attaches only to the party holding it and not to the land itself since, unlike an easement, a licence does not represent an estate or interest in land.[34]

The permission given to do something which would otherwise be unlawful. . . . "Under a licence the licensee has no exclusive possession, and his right both to the possession and the use may be revoked at any time by the licensor, unless the license is coupled with an interest or the circumstances raise equitable considerations to which the court will give effect." Johnson v. British Canadian Insurance Co., [1932] 4 D.L.R. 281 at 284.[35]

"Licensee" and "licensor" are defined as follows:

Licensee: One to whom a license has been granted; in property, "a person whom the proprietor has not in any way invited — he has no interest in his being there — but he has either expressly permitted him to use his land or knowledge of his presence more or less habitual having been brought home to him, he has then either accorded permission or shown no practical anxiety to stop his further frequenting the lands." Robert Addie and Sons (Collieries) Ltd. v. Dumbreck, [1929] A.C. 358 at 371 (H.L.).

Licensor: One who grants a licence.[36]

It can therefore be seen that there are some basic elements, such as the concept of a personal right granted for free by the licensor, who derives no particular benefit therefrom, as well as the concept of irrevocability at the licensor's discretion. Moreover, the absence of an interest in land not only confirms that licences belong in the category of chattels personal under the common law classification of property but will also be important when the time comes to distinguish licences from other rights with which they are often confused.[37]

Licences as defined above are what the common law characterizes as bare licences.[38] However, there are several types of licences, which vary depending on the rights and obligations that characterize them. Before looking at those rights and obligations, we will briefly consider the nature of licences and the circumstances in which they are created.

1.2.2. Nature and creation of licences

Basically, a licence makes it lawful for a person to be on someone else's property for some reason when that person would otherwise be a trespasser.[39] A licence is therefore, prima facie, a possible defence to any legal action[40] brought by the owner of the premises. However, although the concept of trespass is the source, it must not be inferred that the licensor grants a licence solely to ensure that the licensee will not be trespassing. A licence is above all the grant of a right to occupy or use land.

A licence does not confer an interest in the land for which it is granted. The concept of an interest in land[41] is closely connected to the feudal tenure system. Unlike personal property, of which full ownership is possible, real property is owned by the Crown. An individual can therefore have only interests in land, such as a fee simple, which is the most complete interest an individual can have and which can, for all practical purposes, be equated with full ownership. The interest in land may confer an estate,[42] of which there are two main categories: freehold estates and leasehold estates.[43] Since licences fall within the category of personal property, this concept of an interest in land does not apply to them, subject to one exception that we will examine later.[44]

Since a licence is above all a purely personal right, it is not possible, prima facie, for the licensee to assign the right to someone else. In the case of a bare licence, this is not surprising given that, besides his or her personal right, the licensee has no interest in the land that could be assigned. A licence coupled with an interest can be assigned in the same way as the interest that accompanies it (a profit à prendre, for example). Only a contractual licence can be assigned, except where the contract expressly provides otherwise. This is because the parties' freedom of contract allows them to determine the rights and obligations of each contracting party.

A licence may be recorded in a document or written contract but may also simply be inferred from the circumstances, a verbal agreement or the actions of the parties.[45] In some cases, there is what is called an implied licence, [translation] "which results from the occupier's passive tolerance of those who would otherwise be real trespassers".[46] However, according to the case law,[47] the parties' intention remains an element that is essential to the creation of a licence. The court will refer to it to determine the scope of the parties' rights but also to determine the true nature of the legal relationship they were trying to establish. In cases where one party argues that there is a lease and the other that there is a licence, that intention will be central to the debate.

No formalities are usually required to create a licence.[48] There is one important exception to this general rule: a licence coupled with an interest. Such a licence must comply with the conditions of formation and formalities required to create the interest that accompanies it.[49] A licensee can terminate the licence unilaterally simply by surrendering his or her rights, except where any contractual agreement between the licensee and the licensor provides otherwise. No formalities are usually required for a surrender: the licensor will be able to presume from the licensee's conduct that the licence has ended.[50]

Since their formal introduction in Thomas v. Sorrell[51] in 1673, licences have evolved according to the trends in the courts that established them. After giving them, in some circumstances, the status of an interest in land that was irrevocable by the licensor and even enforceable against a successor in title, the courts became hostile to that liberation and ended up putting licences back within their traditional parameters. That being said, these judicial about-faces must not be confused with the various other types of licences that may incidentally give licensees more extensive rights and legal protection.

1.2.3. Types of licences

Licences exist in a number of forms, from a roomer at an inn[52] to a variety of more temporary licences, such as an admission ticket to see a movie in a theatre[53] or a race in an arena[54] or simply a licence to use a pleasure boat on a canal.[55] However, academic commentators agree that there are three main types of licences: bare licences, contractual licences and licences coupled with an interest.[56]

1.2.3.1. Bare licence

In its simplest form, a licence is an authorization to enter someone else's property, for example to occupy a room,[57] store goods[58] or simply play a cricket match.[59] A bare licence does not create an interest in land or give the licensee exclusive possession of the premises in the way that full ownership or a lease does.[60] Moreover, a bare licence is not enforceable against a successor in title if the land is transferred, regardless of whether the successor in title was previously notified of the existence of the licence: "If a man gives a licence and then parts with the property over which the privilege is to be exercised, the licence is gone. A licence is a thing so evanescent that it cannot be transferred."[61]

The rights granted to the licensee are also revocable at any time, although notice of revocation must be given, but all licences are automatically revoked by the death of the licensor or the licensee.[62] What Viscount Simon stated in Winter Garden Theatre Ltd. v. Millennium Productions[63] provides a good illustration of this fundamental element:

The effect of a licence by A. to permit B. to enter upon A.'s land or to use his premises for some purpose is in effect an authority which prevents B. from being regarded as a trespasser when he avails himself of the licence (Thomas v. Sorrell (1673) 124 E.R. 1098). Such a licence may fall into one of various classes. It may be a purely gratuitous licence in return for which A. gets nothing at all, e.g., a licence to B. to walk across A.'s field. Such a gratuitous licence would plainly be revocable by notice given by A. to B. Even in that case, however, notice of revocation conveyed to B. when he was in the act of crossing A.'s field could not turn him into a trespasser until he was off the premises, but his future right of crossing would thereupon cease.[64]

This type of licence, whether express or implied, is usually not granted by contract and is more often than not gratuitous.[65] As we have said, a bare licence is revocable at any time, even if it was granted for a specific period of time:

The fact that a licence is granted for a stated period of time does not prevent the licensor revoking that licence at any time, subject to certain well-known exceptions in which equity[66] will interfere to restrain such a revocation.[67]

The time within which the notice of revocation reaches the licensee must be reasonable. That reasonableness is assessed by the court and may vary depending on the purpose and duration of the licence and the expenses incurred by the licensee as a result of the licence.

1.2.3.2. Contractual licence

This type of licence is granted under a contract between the licensor and the licensee. The contract will often be express but may also be implied. The licence may be irrevocable if the contract so provides. If so, the licensor cannot terminate the licence prematurely.

Moreover, such a licence is often granted for some kind of consideration (licence fee), accompanied by payment terms similar to those applicable to rent. However, in one judgment,[68] we found an additional subdivision of such licences for value, with three categories being identified: licences the consideration for which is a lump sum, where the licensee receives a specific benefit in return at the time of payment; licences the consideration for which is paid periodically (weekly, monthly or even yearly); and, finally, licenses granted through the purchase of a ticket that gives access to a specific show or event.

Thus, based on the principle of the parties' freedom of contract, we can see that a contractual licence may be very different from a bare licence. The licence's irrevocability, which may be guaranteed by the contract, makes it much more attractive to the licensee and therefore makes this type of legal relationship more common in areas in which a lease, with its many restrictions and obligations, is often deliberately avoided in favour of a contract of licence.[69]

1.2.3.3. Licence coupled with an interest

This type of licence involves the presence of two concepts, namely a licence and an interest in land. The interest must be an interest recognized in property law and not merely a contractual interest. It must also have been validly created. Common examples of this combination are an authorization to walk on another person's property to hunt and take away the game killed or to go onto another person's property to cut down trees and take them away. There is thus a combination of two legal relationships, namely a licence and, in this example, a profit à prendre.[70] The licence is merely incidental to the interest in question. The interest authorizes the holder to go onto someone else's property and take something, such as sand, gravel, coal, trees or fish.

This type of licence coupled with an interest is considered an irrevocable interest in land that may be assigned, but only because of the existence of the interest to which the licence relates. The licence cannot exist or be assigned alone as a licence. Like the interest, it can be enforced against any third party purchaser of or heir to the land. Like the interest, it can be entered in the land register as a charge on the land. It can, for example, join a profit à prendre as an accessory, in which case it must comply with the formation conditions therefor (a profit à prendre can be created by statute, grant or prescription).[71]

1.2.4. Rights and obligations of the licensor and the licensee

So far, we have briefly explained the various characteristics of the three types of licences. However, the revocability and enforceability of licences are two fundamental elements that have caused a lot of ink to flow over the years, or even over the centuries. Does the common law provide licensees with any protection against eviction? If so, is that protection effective against a successor in title to the land? As we will see, the introduction of the rules of equity in the common law courts in 1875 considerably altered the legal landscape in the area of property law and, above all, literally caused a revolution in licensees' rights.

1.2.4.1. Revocability of licences

According to the established common law rules,[72] a bare licence is revocable by the licensor at any time. No remedy is available to a licensee who is ejected. The same is true of a licensee with a licence under a contract in so far as all the licensee can claim from the licensor is damages for breach of contract. Pursuant to those rules, the licensee cannot ask to have his or her rights confirmed or prevent ejection by the licensor.

That was the case in Wood v. Leadbitter,[73] where the holder of a valid admission ticket to the races was turned off the premises. In such circumstances, all he could do was sue the licensor to have the price of his admission ticket refunded. Despite that remedy, if the licensee had insisted on remaining on the premises after the licence was revoked, he could well have been sued by the owner in trespass. Thus, as the court noted a few years later in Kerrison v. Smith,[74] the licensee sues the licensor pursuant to the contract and not pursuant to the licence. Those two elements remain separate, and the fact that the licence is revoked does not prevent the licensee from suing the licensor for breach of contract:

There appears to be no case in which the point has been specifically raised and decided, as to whether there is a right to maintain an action for breach of contract, if a licence is revoked, although there is a right to revoke the licence, but on principle it seems to me that the two rights are compatible with one another. . . . For the reasons which I have given I am clearly of opinion that the mere fact that the licence was revoked is not enough to defeat the plaintiff's claim as it was put forward in the present case. It follows that the plaintiff was wrongly nonsuited and there must be a new trial.[75]

The situation changed completely with the introduction of equitable remedies in 1875. In Hurst v. Picture Theatres Ltd.,[76] the holder of an admission ticket for a theatrical performance was ejected from the premises. The court's view was that, in addition to the common law remedies through which the licensee could be reimbursed for the price of his ticket, the rules of equity entitled him to sue the licensor for assault and false imprisonment and to obtain damages. A few years later, Viscount Simon confirmed that decision:

I regard this case as rightly decided, and repudiate the view that a licensor who is paid for granting his licensee to enter premises in order to view a particular event, can nevertheless, although the licensee is behaving properly, terminate the licence before the event is over, turn the licensee out, and leave him to action for the return of the price of his ticket. The licence in such a case is granted under contractual conditions, one of which is that a well-behaved licensee shall not be treated as a trespasser until the event which he has paid to see is over, and until he has reasonable time thereafter to depart, and in Hurst v. Picture Theatres Ltd. where these rights were disregarded and the plaintiff was forced to leave prematurely substantial damages for assault and false imprisonment rightly resulted.[77]

Those principles were laid down in Winter Garden Theatre (London) Ltd. v. Millennium Productions Ltd.[78] The circumstances that led to the interpretation of the contract of licence by the House of Lords in that case provide a good illustration of the established principles concerning the revocability of contractual licences. Basically, the licensor, which owned a theatre, had granted the licensee a licence to put on plays, ballets and other shows there. A contract was signed by the parties determining the price to be paid weekly by the licensee, the terms on which the licence could be renewed and the time within which the licensee had to give the licensor notice of departure if it wanted to stop using the theatre.

Unfortunately, the contract did not contain a clause concerning the revocability or irrevocability of the licence by the licensor or the time within which any notice of revocation should be given to the licensee. The licensee therefore argued that, since there was no such clause, the licence was irrevocable or even perpetual. The licensor argued that the licence was revocable and that the month it had given the licensee to leave the premises was reasonable in the circumstances. The court decided in favour of the licensor.

If the contract contains no express clause concerning the revocability of the licence, the parties' intention must be inferred from the language and other provisions of the contract. All contracts must be interpreted based on the circumstances of each case.[79]

. . . When the clauses of the present licence are carefully studied, the proper inference from the language used is that the licence was not perpetual but that the intention of the parties, to be inferred from the document, though not expressly stated, was that, upon the appellant's indicating their decision that the permission given by the licence would be withdrawn, the respondents were to have a reasonable time to withdraw after which they would become trespassers. There is, in my opinion, no reason at all for saying that the only alternative to a perpetual licence is an instant termination of the respondents' right without any period of notice at all.[80]

Thus, for example, if a licence is granted in connection with the licensee's employment, it can be inferred that the parties' intention is to make the licence irrevocable as long as the employment lasts.[81] Or, as in Hurst v. Picture Theatres Ltd.,[82] the holder of a movie admission ticket has a licence whose implied duration is at least as long as the performance lasts.

Where the licence is irrevocable according to either the express or the implied terms of a contract, an injunction may be granted by the court to preserve the licensee's rights. As Lord Uthwatt put it: "The settled practice of the court of equity is to do what they can by an injunction to preserve the sanctity of a bargain."[83] The injunction may be granted for the term of the contract or for a period that the court considers appropriate in the circumstances. However, if an injunction cannot be obtained at the appropriate time, as in Hurst v. Picture Theatres Ltd.,[84] the court will take account of that impediment in its judgment and award damages accordingly.

Compliance with the contract of licence is a such a priority that the court took the position that, based on these principles, the licensee can have any other provision of the contract enforced and require it to be implemented. Rendering judgment in another case, Lord Denning wrote:

Since the Winter Garden case, it is clear that once a man has entered under his contract of licence, he cannot be turned out. An injunction can be obtained against the licensor to prevent his being turned out. On principle it is the same if it happens before he enters. If he has a contractual right to enter, and the licensor refuses to let him come in, then he can come to the court and in a proper case get an order for the specific performance to allow him to come in.[85]

According to the court, the licensor must give the licensee "reasonable" notice of revocation. Moreover, Lord MacDermott stated that the licensor must give the licensee a reasonable time to leave the premises, namely "a packing-up period", before being considered a trespasser. What is reasonable depends greatly on the circumstances: in that case, the court felt that the production of plays involved major expenses, not to mention contractual commitments of all kinds, not only with suppliers and actors but also toward the public. Thus, despite what the parties may have predetermined, the court can unilaterally change the time period agreed on in the contract:

. . . The assessment of what is reasonable may depend on a great variety of factors and cause considerable difficulty in particular instances. This period of grace can, of course, be the subject of agreement, but it exists for gratuitous as well as contractual licensees and, on that account, must, I think, be generally ascribed to a rule of law rather than to an implied stipulation. For that reason it need not be read into this contract.[86]

The rules of equity have had a major impact on the remedies available to a licensee against an abusive licensor. The question of the revocability of licences is one example, but the rules of equity have also led to the development of licences by estoppel.[87] According to a common law rule that is now well established, "[a] licence executed is not countermandable, but only if it is executory".[88] Thus, if A gives B a licence to perform work on A's land and B does all the work, A cannot revoke the licence or complain about the work, regardless of the terms of the contract.[89] The source of this principle is the equitable doctrine of proprietary estoppel, which has now more or less replaced the common law rule. Under this principle, if A has a licence with regard to B's land and B encourages A to act contrary to A's interests and incur expenses there by making A believe that he or she has rights to the land, the rules of equity will protect A's rights by estoppel by declaring that A's licence is irrevocable or even perpetual. In Inwards v. Baker,[90] a father encouraged his son to build a house on his land. When the father died, the estate wanted to repossess the house. The court ruled in favour of the son, recognizing that there was a licence by estoppel authorizing him to reside on the deceased's land perpetually. Lord Denning illustrated this principle in the following oft-cited passage:

It is an equity well recognised in law. It arises from the expenditure of money by a person in actual occupation of land when he is led to believe that, as the result of that expenditure, he will be allowed to remain there. It is for the court to say in what way the equity can be satisfied. I am quite clear in this case it can be satisfied by holding that the defendant can remain there as long as he desires to as his home.[91]

1.2.4.2. Enforceability against third parties

Prima facie, a licence is not binding on a successor in title to the land.[92] This restriction applies to bare licences, which are automatically revoked by the death of the licensor or the assignment of the land to a third party purchaser.[93] This is because a licence is a purely personal right and therefore does not confer an interest in the land to which it relates. However, there is one exception to this principle, namely a licence coupled with an interest, as we have already mentioned.[94] As for contractual licences, we can identify the applicable legal rule only through a review of the case law.

Traditionally, the courts have always refused to recognize a contractual licence as a right that can be enforced against a successor in title simply because such a licence is a personal right that arises out of a contract between two individuals and that does not confer on the licensee any interest in land that could give the licensee further rights in relation to a non-party to the contract. Thus, in Clore v. Theatrical Properties Ltd.,[95] a licensee, D, was prevented by the new owner of the theatre, B, from selling its drinks in the rooms in the theatre. D had obtained its rights through an assignment from a licensor, C, who had himself been a licensee of the former owner of the theatre, A. The new owner, B, refused to recognize the licence that D said it had with A. The court confirmed the new owner's rights and concluded that the only remedy available to the plaintiff, D, was an action for damages against the licensor/licensee C, who had assigned his rights to D.

However, a new approach could be discerned in Errington v. Errington and Woods,[96] a 1952 case. A father purchased a house, paid for part of it and told his son and daughter-in-law that they could live in it if they made the mortgage payments. They also agreed that, if the payments were duly made, the father would bequeath the house to them. The father died. A dispute arose between the deceased's widow and the daughter-in-law, who by then was separated from the son and living in the house while continuing to make the payments as agreed. The widow claimed to be entitled to repossess the house. The court concluded that there was a contractual licence that, in equity, conferred an interest in land that was enforceable against third parties in the following circumstances:

They were not tenants at will, but licensees. They have a mere personal privilege to remain there, with no right to assign or sub-let. They were, however, not bare licensees. They were licensees with a contractual right to remain. As such they have no right at law to remain, but only in equity, as equitable rights now prevail. . . . This infusion of equity means that contractual licences now have a force and validity of their own and cannot be revoked in breach of the contract. Neither the licensor nor anyone who claims through him can disregard the contract except a purchaser for value without notice. . . . They have acted on the promise and neither the father nor his widow, his successor in title, can eject them in disregard of it.[97]

This position taken by the court was not only very bold but was also contradictory to the established case law. Moreover, the decision led to some criticism, including by Lord Upjohn and Lord Wilberforce in National Provincial Bank Ltd. v. Ainsworth.[98]They could not resign themselves to seeing a contractual licence as something other than a purely personal right, despite the rules of equity that could make such a licence irrevocable. According to them, this did not mean that the licence was converted into an equitable interest in land that was binding on a successor in title.

Along the same lines, in Binions v. Evans,[99]the court concluded that the contractual licence given to a widow authorizing her to reside in the house of her deceased husband, a former employee of the licensor, was enforceable against the plaintiff, who had purchased the house from the estate. Two factors distinguish this case from the others: the purchaser had been notified of the licence prior to the sale, and the price had been reduced accordingly. The purchaser claimed possession of the house in court. The judges were unanimous in stating that the widow's rights were protected, but they gave different reasons. Lord Denning in particular introduced the concept of a contractual licence as an interest in equity that could give rise to a fiduciary duty (constructive trust). This concept was taken up again later, but only in very specific circumstances.

Following these few fluctuations in the case law, the court in Ashburn Anstalt v. Arnold[100] (in obiter) set the record straight by reiterating that a contractual licence does not confer an interest in land that is enforceable against a successor in title, even where the successor in title was notified of the licence:

The far-reaching statement of principle in Errington was not supported by authority, not necessary for the decision of the case and per incuriam in the sense that it was made without reference to authorities which, if they would not have compelled, would surely have persuaded the court to adopt a different ratio. Of course, the law must be free to develop. But as a response to problems which had arisen, the Errington rule (without more) was neither practically necessary not theoretically convincing. By contrast, the finding on appropriate facts of a constructive trust may well be regarded as a beneficial adaptation of old rules to new situations.[101]

1.2.5. Criteria for distinguishing between licences and other rights

1.2.5.1. Licences and leases

The purpose of this section is not to thoroughly analyse the concept of lease in the common law but merely to point out the similarities and especially the differences between these two rights.[102]

A lease or tenancy in the common law can basically be defined as follows:

At common law the relation of landlord and tenant is a contractual one, arising when one party, retaining in himself a reversion, permits another to have exclusive possession of a corporeal hereditament, for some definite period or for a period which can be made definite by either party. The contract may be express or it may be implied by law. It is more than a mere contract, as it vests in the tenant taking possession an estate or interest in the land or premises demised. Tenancies are sometimes created by statute, and there may also be tenancies by estoppel. Rent need not be, but usually is, reserved, and payment of rent is often evidence of the existence of a tenancy.[103]

A lease gives the tenant an interest in the leased land (leasehold interest) along with a leasehold estate, whereas a licence is merely a purely personal right that binds only the licensor and the licensee. Thus, unlike a licensee, a tenant can enforce his or her lease against a successor in title to the leased land. At the end of the lease, the successor in title will thus be transferred the seisin of the land, that is, actual possession, which until then is merely a future interest in the property (the tenant has the right to enjoy the property during the term of the lease). The reversionary interest[104] is therefore the future interest in land that the successor in title obtains from the landlord when the landlord sells, for example, land that is already leased. That future interest is likened to an incorporeal hereditament and must be transferred through a deed. The successor in title therefore becomes the lessor of the land just like his or her predecessor.

To be validly created, a lease must transfer actual possession of the leased premises to the tenant. Before that time, the tenant is considered to have a right (interesse termini) that is less than a common law estate but that can nevertheless be relied on if an action for trespass is brought against the tenant. Some statutes governing leases have abolished the interesse termini and recognized that tenants have a right to quiet enjoyment of the premises from the start of the term set out in the contract.[105] Moreover, the tenant may bring an action against any person who tries to interfere with that right.

The landlord-tenant relationship always creates rights and obligations, which are provided for in the contract of tenancy or in legislation, for example the Tenant Protection Act, 1997.[106] As we have just noted, quiet enjoyment of the premises is a right that is often explicit in the contract of tenancy. If it is not explicit, it is implied and recognized as such by the law. The tenant takes possession of the premises in the condition they are in, subject to the health and safety conditions imposed by the authorities. In return, the tenant is obliged to pay rent in accordance with the terms of the contract. The tenant must keep the leased property in good condition and avoid any intentional damage that would change the nature of the property. The tenant is also liable for any damage caused by himself or herself or a third party for whom the tenant is responsible.

A lease must always include a sufficient description of the premises, which must be identified or easily identifiable. A lease must also be granted for a specific period that is determined in advance. A lease cannot be granted for an indefinite time, such as for the duration of a war or until the occurrence of an event whose exact date cannot be known.

Despite these distinctive elements, leases and licences are sometimes confused. The contracting parties argue that there is a lease or a licence, depending on their respective interests. Landlords usually prefer the creation of a bare licence to avoid the application of landlord and tenant acts, whereas licensees seek the protection provided by leases and the legislation governing them. However, the distinction between these two legal relationships is not always obvious. A review of the case law shows that there have been several attempts to identify the test that can be used in all circumstances to distinguish a lease or tenancy from a licence.

One of the first tests identified by the courts was exclusive possession. A lease must always give the tenant exclusive possession of the leased premises. The tenant is thus entitled to deny access to anyone, including the landlord or the owner of the premises. There is no lease if the owner retains general control of the property being rented. For example, a person who is merely staying at a hotel has a licence and not a lease. Although it can be said that the person has an exclusive right to use the room for one or two nights, he or she cannot claim to have actual possession of the room within the meaning of the common law, that is, control over the room as an owner. As Lord Templeman said in Street v. Mountford:[107]

The traditional view that the grant of exclusive possession for a term at a rent creates a tenancy is consistent with the elevation of a tenancy into an estate of land. The tenant possessing exclusive possession is able to exercise the rights of an owner of land, which is in the real sense his land albeit temporarily and subject to certain restrictions. A tenant armed with exclusive possession can keep out strangers and keep out the landlord unless the landlord is exercising limited rights reserved to him by the tenancy agreement to enter and view and repair.[108]

Thus, in the case of a lease or tenancy, a landlord who enters the tenant's premises without the tenant's permission is trespassing. In the case of a licence, the licensor may at the very most be accused of breach of contract if a clause to that effect was included in the contract of licence.

But is this test sufficient? If a tenancy always confers exclusive possession of the premises, does exclusive possession always create a tenancy? In Errington v. Errington and Woods,[109] Lord Denning cast doubt on this proposition following an exhaustive review of certain court decisions in which the test could not be systematically applied:

In distinguishing between them, a crucial test has sometimes been supposed to be whether the occupier has exclusive possession or not. . . . This test has, however, often given rise to misgivings because it may not correspond to realities. . . . The test of exclusive possession is by no means conclusive. . . . The result of all these cases is that, although a person who is let into exclusive possession is, prima facie, to be considered to be a tenant, nevertheless he will not be let to be so if the circumstances negative any intention to create a tenancy. Words alone may not suffice. Parties cannot turn a tenancy into a licence merely by calling it one. But if the circumstances and the conduct of the parties show that all that was intended was that the occupier should be granted a personal privilege with no interest in the land, he will be held only to be a licensee.[110]

Thus, the parties' intention must be to create a tenancy or, in contrast, a licence. That intention is inferred from the contract, if there is one, or from the parties' conduct and the circumstances. However, in Booker v. Palmer,[111] an analysis of the parties' intention showed not only that they had not wanted to create a tenancy but also that they had not intended to enter into any legal relationship whatsoever: "There is one golden rule which is of very general application, namely, that the law does not impute intention to enter into relationships where the circumstances and the conduct of the parties negative any intention of the kind."[112] In that case, the owner of a cottage had offered a friend whose house had been bombed a free place to stay during the war. The judges of the Court of Appeal could not find a contractual intention behind that act of generosity. Thus, even the intention test can occasionally prove insufficient.

The question of what test is most appropriate was addressed again in Addiscombe Garden Estates Ltd. v. Crabbe.[113] The Court of Appeal had to rule on the nature of an agreement entered into by a hotelkeeper that owned tennis courts and a club whose members had been authorized to use the courts as well as certain premises needed for their activities. The term of the agreement was two years. On the expiry of the term, the club refused to leave the premises, arguing that the owner had not served on it the notice required by the Landlord and Tenant Act, 1954.[114] The Court chose to review the rights and obligations of tenants and licensees to see which of the two rights was most dominant under the agreement. Jenkins L.J. explained this method as follows:

The principles applicable in resolving a question of this sort are, I apprehend, these. It does not necessarily follow that a document described as a licence is, merely on that account, to be regarded as amounting only to a licence in law. The whole of the document must be looked at; and if, after it has been examined, the right conclusion appears to be that, whatever the label may have been attached to it, it in fact conferred and imposed on the grantee in substance the rights and obligations of a tenant, and on the grantor in substance the rights and obligations of a landlord, then it must be given the appropriate effect, that is to say, it must be treated as a tenancy agreement as distinct from a mere licence.[115]

In that case, the Court concluded that the club had possession and exclusive control of the premises, occupancy for a fixed term, an obligation to pay what could be likened to rent, an obligation to maintain the premises and keep them in good condition and an obligation not to cut down the trees, all of which were rights and obligations rarely seen in an agreement conferring only a licence. The clauses were therefore the usual clauses of a lease. The Court also insisted on looking beyond the terminology used by the drafter of the agreement. It noted that, despite a meticulous choice of words that showed caution regarding the use of terms specific to leasing (tenant, landlord, tenancy, to deliver up, etc.), the agreement was nevertheless not a licence: "The agreement must be construed as a whole, and their relationship was determined by the law and not the label which they chose to put on it."[116] It was therefore a tenancy subject to the Landlord and Tenant Act, 1954. We can thus see that the Court in that case did not base its decision on whether any particular test, such as exclusive possession, had been met, but rather considered all of the parties' rights and obligations under the agreement.

The review approach was followed by the Ontario Court of Appeal shortly thereafter in Re British American Oil Co. Ltd. v. De Pass,[117] in which the Court once again had to determine the nature of an agreement to lease a service station that was accompanied by an agreement concerning the retail sale of petroleum products and the loan of equipment. The lessee argued that, notwithstanding the terminology used in the agreement, he was a licensee because he did not have exclusive possession of the station to sell the lessor's products and he therefore did not have effective control of the premises he was renting; if he tried to use or sell products for purposes other than those set out in the agreement, he could well have his rights revoked.

After looking at the terms of the contract, the Court determined that it was indeed a lease. The provisos and restrictions[118] that led the lessee to believe he did not have exclusive control of the premises were, in the Court's opinion, common in the circumstances:

There is nothing in the leases or the sales agreements which suggests that the lessors intended to retain possession of and the control of the service station premises in a manner which would be inconsistent with the grant of a right of exclusive possession to the lessees. 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 require they should have exclusive possession.[119]

Finally, Lord Templeman provided an excellent summary of these concepts in Street v. Mountford,[120] in which the House of Lords again had to characterize the relationship between persons who turned out to be a landlord and tenant. Lord Templeman rendered judgment by taking account of all the tests set out above, and he expressed the view that, depending on the circumstances, no one of them is better than the others. Moreover, he felt that, when there is no dispute between the parties concerning exclusive possession of the premises, it is not necessary to apply the review approach from Addiscombe Garden Estates Ltd. v. Crabbe[121] to characterize the legal relationship involved:

In the agreement in the Addiscombe case it was by no means clear until the whole of the document had been narrowly examined that exclusive possession was granted by the agreement. In the present case it is clear that exclusive possession was granted and so much is conceded. In these circumstances it is unnecessary to analyze minutely the detailed rights and obligations contained in the agreement.[122]

In conclusion, although the exclusive possession test had been put aside somewhat since Errington v. Errington and Woods,[123] Lord Templeman felt that that test could be decisive in some circumstances. He adopted the comments of Jenkins L.J. in Addiscombe Garden Estates Ltd. v. Crabbe[124] reconsidering what Denning L.J. had written in Errington v. Errington and Woods[125] ("The test of exclusive possession is by no means decisive"), stating that ". . . [I]t seems to me that, save and except cases of the kind mentioned by Denning L.J. in that case, the law remains that the fact of exclusive possession, if not decisive against the view that there is a mere licence, as distinct from a tenancy, is at all events a consideration of the first importance."[126]

It can therefore be concluded that the main tests for distinguishing a lease or tenancy from a licence in the common law are exclusive possession of the premises and, since that test is sometimes insufficient to decide the question, a more thorough analysis of the agreement in cases where the parties' respective rights and obligations must be reviewed to identify their true intention in the circumstances.

1.2.5.2 Licences and profits à prendre

By contrast with leases, the situations in which profits à prendre and licences cannot be distinguished are less frequent. However, in so far as a licence may be coupled with a profit à prendre to create an interest in the land to which it relates, it is important to clearly define the rights and obligations characterizing that interest.[127]

Under the common law classification of property, profits à prendre fall into the incorporeal hereditament subcategory of real property. Unlike easements, profits à prendre do not require the presence of a servient estate and a dominant estate. This interest can therefore be transferred to a successor in title for valuable consideration independently of the land on which the profit à prendre may be exercised.

More specifically, a profit à prendre may be described as "a right to take something off another person’s land",[128] although this definition requires some clarification. The things taken off another person's land must be part of that land, such as minerals, crops or wildlife found there. Moreover, the things taken must, at the time they are taken, be susceptible of ownership. Think of game that, once killed, becomes the property of the hunter. On the other hand, going onto another person's land to take water from a spring, for example, does not constitute a profit à prendre because water is a non-trade good that is not only not part of the soil but, when taken from the spring, is not owned by anyone. At the very most, there can be an easement for the right to take water.[129]

Profits à prendre can be created by statute, grant or prescription. The duration of the interest may be that of a perpetual estate, such as fee simple, or less. However, when a profit à prendre is obtained through prescription, its duration cannot be less than that of a perpetual estate. Since it is an interest in land, it is not valid unless provided for in a deed, subject to the more flexible rules of equity.[130] The grantee of a profit à prendre is not necessarily exclusively entitled to the things to which the right applies. Thus, subject to the terms of their agreement, the grantee cannot prevent the grantor, who is often the owner of the land, from taking or hunting the same types of property as the grantee.[131] However, the grantor and the grantee must behave so as not to prevent each other from exercising their rights. The profit à prendre ends if the grantee abandons his or her rights, if the rights of the grantee and the grantor in the land merge or, finally, if the subject of the profit disappears by being used up or otherwise.

This brief description of profits à prendre is important given that, as we have already mentioned, a licence may become an accessory of a profit à prendre and will then have to comply with the restrictions associated with that interest.

1.2.5.3. Licences and easements

The common law easement is an interest in rem that falls within the incorporeal hereditament subcategory of real property, just like a profit à prendre.[132] However, unlike a profit à prendre, an easement involves no transfer of an estate. It simply authorizes its holder to carry on an activity on another person's land or to prevent someone from doing something there:

A right annexed to land to utilize other land of different ownership in a particular manner (not involving the taking of any part of the natural produce of that land or of any part of its soil) or to prevent the owner of the other land from utilizing his land in a particular manner.[133]

Moreover, there must be a servient estate and a dominant estate. The holder of an easement, such as a right of way, must be the owner of land adjacent to the servient estate, for otherwise he or she will merely have a bare licence. An easement is binding on successors in title to the servient estate. It is also tied to the dominant estate as an appurtenance if that estate is transferred to a successor in title. Since it is not a personal right, it is always conferred to benefit land and not the owner thereof. According to the in alieno solo principle, an individual cannot have an easement on his or her own land. This could apply if an individual became the owner of the servient estate and the dominant estate by merger or succession.

A distinction had to be drawn between licences and easements in Gypsum Carrier Inc. v. The Queen.[134]  In that case, the Federal Court of Canada had to characterize the legal relationship between the government and a railway company, the Canadian National Railway (hereinafter "CNR"), that was using a drawbridge owned by the Crown. The dispute arose when a ship coming down the river seriously damaged the drawbridge. CNR's activities on the drawbridge were suspended for eight days. The shipowner was found guilty and the Crown claimed damages from it. CNR also sued the shipowner to be reimbursed for the expenses it had incurred detouring trains to other railways during the eight days the bridge was inaccessible. The shipowner, in defence, refused to compensate CNR because the accident had not caused any injury to it or any physical damage to its property or to property in which it had a proprietary interest.

The issue was therefore whether CNR had an easement or a bare licence on the Crown property that had been damaged. The Court examined the written agreements describing the right the Crown had given CNR to use the drawbridge. CNR had to pay 53 cents per car to cross the bridge, but the Crown retained control over maintenance, the usual repairs and the replacement of certain tracks. However, if stronger tracks were needed, the Crown did not undertake to strengthen the bridge structure, and CNR then had the option of terminating the agreement. The Crown also reserved the right to terminate the agreement in question if CNR failed to pay. Aside from those circumstances, the agreement was renewable every year until the contract ended by mutual consent.

CNR argued that the agreement gave it an easement, the servient estate being the drawbridge and its approaches and the dominant estate being the railway trackage owned by it; that the owners of those estates were different; and that the easement definitely served to accommodate the dominant estate. The Court rejected that suggestion as follows:

The document, superficially, appears to contain the so-called essentials of an easement. But I think one must ascertain the intention of the parties. To my mind, when the agreements are read as a whole, there was no intention to create easements. The purpose was to create certain contractual rights whereby the railways, in return for stipulated fees, were permitted to run their trains over the bridge and approaches. There was no intention to create any rights annexed to land, or any interest in land. . . . At best, the railway companies may have had some kind of licence in respect of land (bridges and approaches).[135]

Thus, as can be seen, the method used by the Court to characterize the parties' legal relationship was similar to the review approach proposed in Addiscombe Garden Estates Ltd. v. Crabbe.[136] The parties' intention was still the dominant factor, and the Court remained cautious since, although several features essential to the creation of an easement were present, it was very careful not to infer that the parties had an intention that obviously did not emerge from their agreement.

1.2.5.4. Licences and bailment

Distinguishing between bailment[137] and licences may, at first glance, seem as simple as distinguishing between leases and licences can be difficult. Bailment under the common law may be defined as the delivery of property (a chattel) by a person, called the bailer,[138] to another person, the bailee, who will care for it.[139] At the end of the term, the bailee is obliged to give the property back to the bailer in its original or transformed state, depending on the bailer's instructions. Bailment may or may not be contractual and may be for valuable consideration or gratuitous. It is usually for a predetermined term, and the bailer cannot take the property back until the end of the term unless the bailee acts contrary to the agreement and commits breach of contract. If the bailment is for an indefinite time, the bailer is entitled to repossess the property at any time and the bailee must give it back to the bailer when requested.

Bailment may also exist when a person voluntarily takes possession of property owned by another person without being expressly authorized by the latter to do so. This occurs, for example, where a person finds property and keeps it until the real owner is found. This would be considered involuntary bailment.

So far, bailment and licences have little in common. Where A gives property to B, there is bailment. However, where B lets A put property on B's land, there is a licence. The legal characterization is very important given that the responsibility and obligations of the bailee and the licensor are very different. A licensor has no particular obligation toward the licensee's property. He or she can be held liable for stealing the property or being so negligent that the property is damaged or ends up in a state that is not consistent with normal wear and tear. In contrast, the bailee must be prudent and diligent. The standard of care that must be met by a bailee was established in Coggs v. Bernard,[140] in which the court distinguished six types of bailment. While a thorough analysis is not necessary for the purposes of our study,[141] suffice it to say that, if the contract expressly dictates how the bailee must act toward the property, whether with regard to its care or with regard to its transformation, the bailee may be sued if he or she does not comply with the terms of the contract. Thus, we can see that, in these circumstances, the bailee's legal and contractual obligations may become much more onerous than those of a licensor, whose strictest obligations usually derive from the contract and not the law.

The licence versus bailment issue often arises in a parking context.[142] The courts have identified a variety of tests, such as whether the keys are given to the bailee, the degree to which the bailee's employees supervise the parking lot,[143] the bailment terms listed on the parking stub, the value of the property, the consideration charged to the bailer,[144] the degree of organization of the bailment premises and, finally, the proximity of the owner of the property.[145] The dominant test is often whether the keys are given to the bailee, but that test is not always decisive.[146]

In so far as the tests for distinguishing between licences and bailment are not always foolproof, the basic question remains: was possession of the property transferred, what degree of responsibility does the licensor or bailee have and what are the obligations of the licensor or bailee toward the property according to the contract, the law or simply the circumstances surrounding the licence or bailment?

1.3.  Context in which the term "licence" is used in the E.T.A.

Our analysis of licences has so far been limited to the field of property law in the common law. Since the ultimate goal of our study is to identify the civil law institutions that best illustrate or reflect the common law concept of licence so that they can be incorporated into the E.T.A., let us look more specifically at how the term "licence" is used in that federal statute.

1.3.1.   Various meanings give to the term "licence" in the E.T.A.

What is noticeable at first glance is that the term "licence" is used in both the English and French versions of the E.T.A. Thus, as we have seen, the French term "permission" does not appear anywhere in the E.T.A. to translate the concept of a licence in property law, as defined by the common law. Nor is any definition provided. The term "licence" is not specifically defined in the E.T.A., whether in the general definitions section, section 123(1),[147] or elsewhere in the other parts or schedules or in the regulations.[148] It should also be noted that the expression "lease, licence or similar arrangement" and the terms "lease" and "similar arrangement" found therein are not defined.

That omission is intensified by the fact that the term "licence" does not always have the same meaning in the E.T.A. One meaning is that of a permit issued by an authority, such as the federal government, a provincial government or a municipality,^[149] to regulate certain activities. Paragraph 146(d) of the E.T.A. provides a good illustration of this: "a supply of a licence, permit, quota or similar right in respect of the importation of alcoholic beverages". This type of licence may be granted under the E.T.A. or another enabling statute:

For the purposes of subsection (7), "specified property" means property in respect of which a person would be required to pay tax under paragraph 50(1)(a) if the person were a licensed manufacturer of the property under Part VI and the person had sold and delivered the property to a consumer in Canada in 1990.[150]

Or:

[T]he cigarettes are marked or stamped in accordance with the Tobacco Tax Act, R.S.N.S. 1989, c. 470, to indicate that the cigarettes are intended for retail sale in the Province of Nova Scotia and are delivered by the manufacturer or producer of the cigarettes to a wholesale vendor licensed as such under the Health Tax Act, R.S.P.E.I. 1988, c. H-3. . . .[151]

The term "licence" is also used in an intellectual property context, as in section 135 of the E.T.A.:[152]

For the purposes of this Part, where a public sector body makes

(a) a supply of a service, or

(b) a supply by way of licence of the use of a copyright, trade-mark, trade-name or other similar property of the body,

to a person who is the sponsor of an activity of the body for use by the person exclusively in publicizing the person's business, the supply by the body of the service or the use of the property shall be deemed not to be a supply, except where it may reasonably be regarded that the consideration for the supply is primarily for a service of advertising by means of radio or television or in a newspaper, magazine or other publication published periodically or for a prescribed service.

Finally, the term "licence" is used in a property law context, where it has the meaning we saw above, namely [translation] "permission given to someone authorizing the performance of an act that would otherwise constitute trespassing".[153] It should be noted that Parliament makes no reference to the various types of licences that exist, which we looked at above. In both English and French, only the term "licence" is used, whether what is involved is a bare licence, a contractual licence or a licence coupled with an interest. Must it be inferred from this that Parliament wanted the E.T.A.'s provisions to apply in a similar way to all types of licences or that the term "licence" implicitly refers only to a bare licence? In the provisions of the E.T.A. where the term "similar arrangement" is used, can it be argued that Parliament was aiming, inter alia, at those other types of licences? Unfortunately, the Act alone does not enable us to answer these questions. 

Strangely enough, the term "licence" is used, either alone or in the expression "lease, licence or similar arrangement", to define other terms or expressions found in the E.T.A. The definition of the term "supply" in section 123(1) is an example of this:

"supply" means, subject to sections 133 and 134, the provision of property or a service in any manner, including sale, transfer, barter, exchange, licence, rental, lease, gift or disposition;

This definition allows us to identify the rights that Parliament distinguishes from licences, such as rental, lease and sale. Unfortunately, none of those rights is defined by Parliament except sale:

"sale", in respect of property, includes any transfer of the ownership of the property and a transfer of the possession of the property under an agreement to transfer ownership of the property;[154]

The definition of the term "business" also refers to a licence, but this time as part of the expression "lease, licence or similar arrangement", an expression that we will examine in the next section of our study:

"business" includes a profession, calling, trade, manufacture or undertaking of any kind whatever, whether the activity or undertaking is engaged in for profit, and any activity engaged in on a regular or continuous basis that involves the supply of property by way of lease, licence or similar arrangement, but does not include an office or employment;

1.3.2. Licences and the expression "lease, licence or similar arrangement"

Several provisions of the E.T.A. refer to the supply of property by way of "lease, licence or similar arrangement". The importance of this expression becomes clear when one considers the fact that, for the purposes of the E.T.A., supplies of real property can be made only by way of "sale" or by way of "lease, licence or similar arrangement". The Department of Finance confirmed this in its June 1999 Technical Notes concerning subsection 191(4.1) of the E.T.A.:

Throughout Part IX of the Act, the expression "lease, licence or similar arrangement" is used in relation to supplies of property made otherwise than by way of  "sale" (i.e., otherwise than by way of transfer of ownership), unless the provision is intended to apply strictly to licences and not leases or vice versa.[155]

A supply of real property by way of sale differs from a supply by way of "lease, licence or similar arrangement" in that, although possession of the property is transferred to the other contracting party in accordance with the agreement in each case (sale, lease, licence or similar arrangement), only a sale permits ownership of the property to be transferred to the other contracting party, namely the purchaser. A transfer of possession without a transfer of ownership cannot be a supply of real property by way of sale for the purposes of the E.T.A.[156]

As for the definition of "real property", Parliament was especially precise in wording that definition, taking account of the gulf that divides the common law from Quebec civil law when it comes to property law. The definition is found in subsection 123(1) of the E.T.A.:

"real property" includes

(a)  in respect of property in the Province of Quebec, immovable property and every lease thereof,

(b)  in respect of property in any other place in Canada, messuages, lands and tenements of every nature and description and every estate or interest in real property, whether legal or equitable, and

(c)  a mobile home, a floating home and any leasehold or proprietary interest therein;

Subsection 136(1) of the E.T.A. also states that "a supply, by way of lease, licence or similar arrangement, of the use or right to use real property or tangible personal property shall be deemed to be a supply of real property or tangible personal property, as the case may be." This presumption is crucial since, without it, a supply of such rights would be considered a supply of intangible property. The nature of a supply is important in applying the provisions concerning liability for the goods and service tax and also for the import taxes on intangible property. Moreover, this presumption will be important in the context of our examination of section 25 of Part VI of Schedule V of the E.T.A., the application of which is problematic in Quebec.

Despite the importance of the expression "lease, licence or similar arrangement" and the frequency with which it is used, that expression is not defined in the E.T.A. It is therefore necessary to turn to judicial, administrative and academic interpretations to determine its parameters. According to author David Sherman, the most appropriate technique for determining whether a supply is made by way of lease, licence or similar arrangement is as follows: "It is more appropriate to distinguish the arrangement from a 'sale' than to try to determine whether the supply meets the traditional legal definitions of 'lease', 'licence' or 'similar arrangement'."[157] As an illustration of this technique, he refers us to Green Timbers Retirement Housing Society v. Canada,[158]in which the Tax Court of Canada (hereinafter "T.C.C.") had to determine whether the occupation of a seniors' residence by members of a non-profit society could be characterized as a "lease, licence or similar arrangement". The society's members had to make an interest-free loan to the society for the duration of their respective occupation and to pay current expenditures for the maintenance of the residence. Revenue Canada assessed the occupants of the dwelling units under subsection 191(3) of the E.T.A., which applies where there is a self-supply of a multiple unit residential complex.

The society argued that the conditions for the formation of a lease or licence had not been met and that a valid similar arrangement could exist only if most of the elements essential to the formation of a lease or licence were present, which it maintained was not the case either. The society relied on IBM Canada Ltd. v. The Queen,[159] Johnson v. B.C. Insurance Co.[160] and Keith Whitney Homes Society v. Payne[161] as regards the four conditions for the formation of a lease: a predetermined fixed or periodic term, the payment of rent for the duration of the term, the transfer of an interest in land and, finally, exclusive possession of the leased property. It argued that the conditions for the formation of a licence are as follows: the presence of a purely personal right and non-exclusive possession of the occupied premises. With regard to a similar arrangement, the society referred to Ontario Regional Assessment Commissioner, Region 13 v. Downtown Oshawa Property Owners Association[162]and Trizec Equities Ltd. v. Regional Assessment Commissioner, Region 27,[163] in which it was established that, when it has to be determined whether two things are "similar", it is not enough to show that they have the same nature, character or function; all points of comparison must be considered.

Judge Watson refused to adopt that interpretation, confirmed the Minister's assessment and concluded that he did not have to decide whether the agreement was a lease or a licence but simply had to determine whether it was an arrangement similar to a lease or licence:

Considering the "many points of comparison" in the light of the plain and ordinary meaning of the words "or a similar arrangement", I do not think that I must decide on whether this arrangement is a "lease" or a "licence", but was it "a similar arrangement". In the facts of this appeal, it is clear that the builder gives possession of a residential unit for the purpose of its occupancy by an individual as a place of residence and not as a purchaser. The right of possession is spelled out in the agreement as an "in personam" right only; however, the occupier has many obligations that are similar to those of a person who has possession pursuant to a lease; there is an exchange in return for a consideration that includes the monthly fee and a loan from which the Society has the use interest free during the existence of the agreement. Although the term "rent" is never mentioned, the combination of the two factors, in my opinion, constitutes a rent payable for the exclusive occupation of the premises as a residence.[164]

Since the parties' freedom of contract is virtually unlimited, it is obvious that, without the expression "similar arrangement", taxpayers would merely have to word their agreements so that they could not be characterized as leases or licences in order to avoid the application of the E.T.A.'s provisions imposing tax liability on them pursuant to such rights. The rationale for that expression is therefore easy to justify.

Revenue Canada's official administrative position in this regard is along the same lines as Judge Watson's interpretation:

There may be supplies of real property by way of similar arrangements which are not strictly leases or licences. The term "similar arrangement"is not defined in the Act. Administratively, it is interpreted as an arrangement which is not strictly a lease nor a licence, but which also offers the possession and use of real property. A similar arrangement could be viewed as an arrangement whereby one of the parties is either granted, imposed or deprived of something for a period of time.[165]

Revenue Canada has provided examples of what it considers an arrangement similar to a lease or licence. An easement, since it confers an interest in land, is similar not only to a lease but also to a licence in so far as it confers on the dominant estate only specific rights to do something or not to do something. According to the Department, an easement granted otherwise than by way of sale is granted by way of "lease, licence or similar arrangement". Similarly, Revenue Canada's view is that an emphyteutic lease as described in the Civil Code of Québec[166]is an arrangement similar to a lease or licence. It is equated with a long-term lease in the common law, with the lessor permitting the lessee, in return for remuneration, to use land and any immovables thereon for not less than 10 years and not more than 100 years.[167] Finally, Revenue Canada recently expressed its view on how usufruct as codified in the Civil Code of Québec should be characterized, concluding that it is a supply by way of "lease, licence or similar arrangement". In a timesharing context, the Department characterized usufruct as follows:

The Department views the supply of a usufruct right, under the Civil Code of Québec (C.C.Q.) as a supply of real property by way of lease, licence or similar arrangement. As such the supplier of usufruct rights under the timeshare arrangement will be viewed as making supplies by way of lease, licence or similar arrangement that are one week in duration.[168]

These conclusions therefore make it possible for us to more clearly define what Parliament means by "similar arrangement". However, the terms "lease" and "licence" remain undefined in the E.T.A. Since they are fully integrated into the private law of the common law provinces, that law can be relied on to fill the legislative gap. Moreover, the tests developed by the English and Canadian courts, which we looked at above, make it possible to distinguish between those two rights. However, in Quebec, licences are not recognized as a distinct legal vehicle by Quebec civil law. What is more, a lease under the Civil Code of Québec, although similar to a common law lease, has certain distinctive characteristics that make the common law tests for distinguishing between leases and licences inapplicable. What then are the tests for distinguishing between leases and licences according to civil law principles? How can the term "licence" in the E.T.A. be interpreted in Quebec? The fact that no explanation is given by the tax authorities can only mean that there is some uneasiness with these questions, and for good reason. These fundamental questions will therefore be the subject of the next chapter of our study.

Chapter II – Problems with the Use of the Common Law Licence in Quebec Civil Law

The goods and services tax (hereinafter "GST") came into effect in Canada on January 1, 1991. Its predecessor, the federal sales tax (FST),[169]was abolished because it was an unreliable source of revenue for the government given its relatively narrow tax base. Moreover, avoidance practices with respect to the tax were increasingly widespread. The government, which wanted sound financial management of the sales tax, therefore embarked upon a reform that had three fundamental objectives:

The GST will contribute to the deficit reduction effort and ensure we can continue to pay for programs and services Canadians value. The GST is an essential element of the government's plan to make the changes necessary to ensure that Canada can compete effectively in the world economy. The GST will improve the overall fairness of the tax system. Lower and modest income Canadians will be better off once the GST is in place.[170]

As mentioned, one of the objectives of the reform was to make the tax system fairer. That fairness objective is part of a trilogy of taxation objectives that are now well established: equity, neutrality and simplicity. Those objectives were clearly stated in the famous Carter Commission report in 1967.[171]

Basically, neutrality is achieved in a tax system when the system does not influence the behaviour of taxpayers in terms of their consumption patterns or personal choices.[172] Think, for example, of a couple who decide for tax reasons to live on just one salary rather than two because this is more beneficial for them.[173] The objective of simplicity in a tax system is attained when the system is easy for the authorities to administer and for taxpayers to understand and comply with.

The objective of equity has two components: vertical equity and horizontal equity. Vertical equity is achieved when two taxpayers with different incomes pay proportionally different amounts of tax. The objective of horizontal equity is attained when two taxpayers in the same situation have the same tax liability. As we will show, this objective is sometimes not accomplished when the common law concept of licence must be applied in Quebec. Given that it is an exclusively common law concept, how can the E.T.A.'s provisions referring to it be applied in Quebec civil law?

2.1. Problems applying the E.T.A.'s provisions in Quebec civil law

Since we have now more fully defined the concept of licence in the common law, we will try in this section to look at how that concept is used in the E.T.A., with the help of concrete examples. We will look more specifically at the application of one paragraph, namely paragraph 25(f) of Part VI of Schedule V of the E.T.A., since it enables us to clearly identify how the use of the term "licence" other than in the expression "lease, licence or similar arrangement" can lead to surprising results in some circumstances.

The following facts give rise to a problem in applying, in Quebec civil law, a provision of the E.T.A. that refers to the common law concept of licence. A marina undertakes a waterpark project on the banks of the St. Lawrence River. The marina considers itself a "public service  body" under sections 123 of the E.T.A.and 1 of the Act Respecting the Quebec Sales Tax^173a)  The marina has three types of income, including income from the supply of seasonal mooring rights. The mooring rules state, inter alia:

[translation]

5. Management reserves the right to rent them all the pontoon berths when they are free, but users who are passing through shall give up their place, on Management's orders, to seasonal users or those who have reserved the said wharf in advance; berths cannot be sublet and boats cannot be moved from one pontoon to another. The owner agrees that, in an emergency, the Management of the port of refuge can change the boat's location from the mooring pontoon rented by the owner to another. . . .[174]

To be able to claim certain credits and rebates provided for in the Act, the marina must determine whether the supply of seasonal mooring rights (use of a berth for the season) is a taxable supply when made in the course of the business carried on by the marina. More specifically, is the supply of seasonal mooring rights one of the items excluded from exemption under paragraph 25(f) of Part VI of Schedule V of the E.T.A.? This question was submitted to the tax authorities for interpretation.[175]

Under section 25 of Part VI of Schedule V of the E.T.A., supplies of real property made by a public service body (other than a financial institution or a government) are exempt, except for the supplies referred to in paragraphs (a) through (i), including paragraph (f):

(f) real property (other than short-term accommodation) made by way of

(i) lease, where the period throughout which continuous possession or use of the property is provided under the lease is less than one month,

(ii) a licence,

where the supply is made in the course of a business carried on by the body;

What is relevant for the purposes of our analysis is that, according to the interpretation they gave the marina, the tax authorities' view is that, in so far as the common law licence does not exist in Quebec civil law, the supply of a seasonal mooring right in Quebec is a supply of that real property by way of lease.[176] Moreover, it was established that, under their agreement with the marina, users have continuous occupancy rights for a period of more than one month.[177] The presence of both of these elements makes it possible to conclude that the supply of the seasonal use of a berth in Quebec is a supply by way of lease involving a period of continuous possession or use of more than one month. Such a supply is therefore not covered by any of the exceptions to the exemption under section 25 of Part VI of Schedule V of the E.T.A. In other words, the supply in question is an exempt supply.

If we take the facts set out above and transfer them to another Canadian province, a common law province, would the supply be a lease or a licence for the purposes of paragraph 25(f) of Part VI of Schedule V? According to the tests for distinguishing leases from licences that we looked at in Chapter I of our study, a lease confers exclusive possession and control of the leased premises as well as an interest in land, and the tenant may assign his or her rights in the leased property to a third person if the contract so allows. However, it is ultimately the parties' intention that dictates how the legal relationship in question will be characterized.

Based on the facts and the rules that users have to comply with, the marina retains considerable general control over the wharves and pontoons in an emergency but also in the day-to-day management of the boats. The marina promises to provide boat users with a berthing space, but that space is only one among many, despite the fact that a space is specifically allocated to each user. In other words, the spaces are identical and interchangeable. The marina reserves the right to change the organization of the spaces and allocate another space to a user for one reason or another. Thus, the test of exclusive possession is not met. Moreover, one would expect that the agreement between the parties is contractual but also intuitu personae and that the users cannot assign their rights as they please without some approval by the marina. It can therefore be concluded, based on the applicable tests, that the rights set out above give users a licence and not a lease.[178] This interpretation is much the same as that of the Department of Finance Canada in the Technical Notes concerning paragraph 25(f) of Part VI of Schedule V of the E.T.A.:

. . . [A]ll licences of real property by a public service body are taxable, irrespective of the period of the supply under the licence. . . . The following are a few examples of licences that would be taxable: . . . the supply by a municipality or a non-profit organization, to an individual, of a right to moor a boat for a six month period;[179]

The supply of mooring rights by way of licence will therefore be taxable in a common law province under paragraph 25(f) of Part VI of Schedule V of the E.T.A.

This comparison between the application of that paragraph in Quebec civil law and in the common law clearly shows that there is a lack of horizontal equity. A user of a berth in a common law province will have to pay the GST (or HST) on the supply received, whereas a user of a berth in Quebec will be exempt! How can this dichotomy be justified? Besides the tax authorities' various interpretations of paragraphs 25(f), two legislative amendments enable us to answer this question.

2.2. Legislative amendments to paragraph 25(f) of Part VI of Schedule V

Paragraph 25(f) has been amended twice by Parliament since the introduction of the E.T.A. in 1991. It originally read as follows:

(f) real property (other than short-term accommodation) made by way of lease, licence or similar arrangement for a period of less than one month, where the supply is made in the course of a business carried on by the body;[180]

The first legislative amendment dates back to 1992,[181] when it was proposed to make all supplies of real property by public service bodies taxable if they were made by way of licence. Supplies made by way of lease for a period of more than one month remained exempt. Thus, for supplies the agreement for which was entered into after September 14, 1992, paragraph 25(f) read as follows:

(f) real property (other than short-term accommodation) made by way of

(i) lease, where the term of the lease is less than a month, or

(ii) a licence,

where the supply is made in the course of a business carried on by the body;

Strangely, the expression "similar arrangement" was removed from the paragraph, reducing GST liability accordingly for supplies made by way of similar arrangements, such as servitudes, emphyteutic leases and usufructs, to name just a few. Moreover, the dropping of the expression "lease, licence or similar arrangement" gave rise to a problem in applying the provision, as we have already seen. Before the amendment, the distinction between a lease and a licence did not have to be drawn, since, even if a supply was made by way of licence in the common law provinces and the same supply was considered to have been made by way of lease in Quebec, both supplies were given the same tax treatment under paragraph 25(f) of Part VI of Schedule V of the E.T.A.: leases and licences for a period of less than one month were taxed. To illustrate this point and better understand the source of the amendment, we will look at Attorney General of Canada v. Metropolitan Toronto Hockey League.[182]

The Metropolitan Toronto Hockey League (hereinafter "MTHL") was a non-profit organization incorporated under the laws of Ontario. MTHL qualified as a non-profit organization within the meaning of subsection 123(1) of the Act. Some of the hockey games it organized were played in arenas operated by or on behalf of municipalities. Both the municipalities and the municipal arenas were "public service bodies" under subsection 123(1) of the Act. MTHL entered into several agreements to use the various arenas during its fiscal period of January 1 to December 31, 1991.[183] The agreements provided for the use of the arenas on specific days and at specific times during the week for the duration of the hockey season. The supplies governed by the agreements were made in the course of a business carried on by a municipality or municipal arena.

MTHL filed a GST rebate application in respect of amounts paid in error on January 15, 1992 pursuant to section 261 of the Act. The application was denied. MTHL appealed to the T.C.C., and the Minister appealed the T.C.C.'s decision to the Federal Court of Appeal (hereinafter "F.C.A.").

Section 165 of the Act imposes GST on every recipient of a "taxable supply" made in Canada, unless it is an exempt supply under Schedule V of the Act. It was agreed by the Minister that the exemption under section 25 of Part VI of Schedule V applied to MTHL unless the exclusion in paragraph (f) operated to withdraw the benefit of that exemption. Thus, the issue was whether the supply was made by way of lease, licence or similar arrangement for a period of less than one month. The Court concluded that the supply, by way of licence, of ice time from a municipality to MTHL was for a period of more than one month and was therefore exempt. What would the decision have been if MTHL had been a non-profit organization incorporated under the laws of Quebec?

As we stated when analysing the supply of mooring rights, the Department's view is that a supply made by way of licence could, in Quebec, be a supply made by way of lease pursuant to civil law principles. If the issue had been the same as above, the Court would very likely have given the same answer. The supply by way of lease of ice time from a municipality to MTHL would also have been exempt, thus creating no horizontal inequity as regards the taxation of that supply. When Parliament uses the expression "lease, licence or similar arrangement," distinguishing between a lease and a licence in the common law or the civil law is therefore unnecessary, whether under paragraph (f) or under any other provision of the E.T.A.

However, those findings are not what is mainly of interest in Attorney General of Canada v. Metropolitan Toronto Hockey League.[184] The issue that the T.C.C. and the F.C.A. had to decide was whether the rental by a public service body of ice surfaces to persons organizing hockey tournaments was a taxable supply and specifically a supply of real property by way of lease, licence or similar arrangement for a period of less than one month. On appeal from the T.C.C.'s decision, Revenue Canada took the position that the supply was taxable, arguing that, while the trial judge had correctly determined that the expression "for a period of less than one month" modified "a supply of . . . real property" and not "lease, licence or similar arrangement", he should nevertheless have concluded that the agreement provided only for a right to occupy the ice surfaces for a period of less than one month.[185] According to the Minister, "the period to consider for the purposes of paragraph 25(f) is the time during which the conferred right or interest was actually made available for use".[186] 

The F.C.A. refused to endorse that interpretation of the expression "for a period of less than one month". According to Stone J.A., the contracts as a whole constituted a supply for the entire hockey season and not several supplies for each use of ice time. The hockey tournament could not have been organized without a firm, long-term commitment by the municipality guaranteeing specific times and dates for each use of ice time. A week-to-week agreement with the municipality could not have met MTHL's needs. From this point of view, although the ice surfaces were used discontinuously, the judge concluded that the period of use was more than one month. The factors that motivated his decision were as follows:

Nonetheless, the applicant (Revenue Canada) contends that the phrase "for a period of less than one month" includes everything that is not a supply for a continuous period of use of at least one month. I have difficulty with this contention. To begin with, the argument effectively adds words to the Act which are simply not present. Secondly, such a reading makes no sense in light of the fact that the supply of real property could be made by way of lease, licence or [similar] arrangement. It is in the nature of a lease, licence or [similar] arrangement to allow a person to use a given property for a limited time or in a discontinuous manner. It remains, of course, to determine whether the use made of ice surfaces under the various agreements was for periods of less than one month. It is not disputed that the answer to this question must take into account the nature and purpose of the agreements under which such use was granted.[187]

The Court concluded that the supply of the use of ice surfaces by way of "lease, licence or similar arrangement" was for a period of more than one month and was therefore exempt pursuant to paragraph 25(f) of Part VI of Schedule V of the E.T.A. That decision was contrary not only to Revenue Canada's interpretation but also to Parliament's intention, namely taxing supplies of real property made by way of licence where the parties' agreement did not confer a right of continuous use — for example, the periodic rental of an arena. Well before the decisions of the T.C.C. and the F.C.A. in Metropolitan Hockey, the tax authorities were not unaware that taxpayers saw the application of paragraph 25(f) differently. The issue in Metropolitan Hockey had already been the subject of several interpretation requests requiring Revenue Canada to express a view on the interpretation of the expression "period of less than one month".[188]

In light of that situation, Parliament decided in 1992 to end the debate and amend paragraph 25(f) of Part VI of Schedule V of the E.T.A. to make all supplies of real property by way of licence taxable from then on, no matter what the duration of the right of occupancy granted by the parties' agreement. The amendment was thus directed particularly at supplies of real property under agreements providing for the use of the property only a few times a day, week or month, and thus discontinuously. Revenue Canada confirmed its interpretation of paragraph 25(f) in a policy statement dated May 25, 1993:

(ii) Period or Term of the Lease

For purposes of applying the one month requirement in paragraph 25(f), the period or the term of a lease (or licence if entered into prior to September 15, 1992) should be regarded as the length of time of continuous occupancy, or right to such occupancy, provided in the lease (or licence prior to September 15, 1992), rather than the total time span covered by the agreement. If, for example, the lease specifies several periods of continuous occupancy, and some are for less than one month and some are for one month or more, it may be necessary to prorate the lease so that part of the lease may be exempt pursuant to paragraph 25(f) and part may not, because of the varying periods of occupancy.[189]

However, in light of the decision rendered in 1995 by Stone J.A. in Metropolitan Hockey, the 1992 amendment turned out to be insufficient to ensure that paragraph 25(f) of Part VI of Schedule V of the E.T.A. was applied as intended by the tax authorities. The reason why Revenue Canada's interpretation was not applied by Stone J.A. in Metropolitan Hockey was that, according to that judge, it went beyond what was specifically written in the Act: "The argument effectively adds words to the Act which aresimplynot present."[190] Thus, the tax authorities' interpretation could again have been contested, not for supplies by way of licence, which were now always taxable regardless of the type of use involved, but for supplies by way of lease, for which an exemption was allowed only if the lease provided for the right to use real property continuously for more than one month. This was because Stone J.A.'s ratio decidendi concerning the interpretation of the expression "period of less than one month" would, for all practical purposes, have been applicable to supplies made by way of lease.

Since that judicial interpretation was not consistent with the tax authorities' interpretation, Parliament proposed a second legislative amendment to paragraph 25(f) in 1996. Thus, for supplies made under an agreement entered into after September 14, 1992, paragraph 25(f) must be read as follows:

(f) real property (other than short-term accommodation) made by way of

(i) lease, where the period throughout which continuous possession or use of the property is provided under the lease is less than one month,

(ii) a licence,

where the supply is made in the course of a business carried on by the body;

Fortunately, this 1996 amendment, which added the qualifier "where the period throughout which continuous possession or use of the property is provided under the lease", partly resolves the inequity problem raised earlier. This is because, in some cases, this new wording makes the application of paragraph 25(f) similar in the common law provinces and in Quebec. The rental of an ice surface, for example, will be a taxable supply by way of licence in the common law regardless of the period of continuous use involved. In the civil law, it will be considered a supply by way of lease involving a period of continuous use of the ice surface of less than one month. It should be noted that, to determine the period of continuous use of real property, it is not the term of the lease that must be considered but rather the actual time the property is used. This type of supply will thus be taxable in both of Canada's legal systems, eliminating the horizontal inequity that existed previously.

However, this legislative amendment resolves only part of the inequity problem. As we have already seen, the tax treatment of supplies of mooring rights is still different in Quebec than in the common law provinces even with the current wording of paragraph 25(f). The source of the problem is quite simple: supplies of real property by way of lease are exempt if the period throughout which continuous possession or use is provided under the lease is more than one month, while supplies of the same property by way of licence are still taxable. In so far as a licence in the common law is equated with a lease in the civil law, this inequity will always exist.

2.3. Administrative policy of Revenue Canada and the Quebec Department of Revenue

2.3.1. Paragraph (f) before the 1992 legislative amendment

The tax authorities are not unaware of the problems that exist in applying certain provisions of the E.T.A. With regard to paragraph 25(f) of Part VI of Schedule V, a number of interpretation requests have been made concerning that provision since its introduction. When the provision was in its original form, Revenue Canada was asked how the expression "lease, licence or similar arrangement" and the terms found therein should be interpreted. However, since those three types of rights were given the same tax treatment and it was therefore not necessary to specifically determine the nature of the agreement involved, most of the interpretation requests concerned the expression "period of less than one month". As we stated when looking at A.G. of Canada v. Metropolitan Toronto Hockey League,[191] Revenue Canada's position was always consistent in this regard. For example, in response to an interpretation request concerning an agreement between a children's centre and a school board for the use of the centre's premises a few times a week, the Department expressed the opinion that the supply of the premises was taxable because the agreement conferred only a right to use the premises discontinuously and each period of occupancy lasted less than one month:

In order that the supply will be exempt, the property has to be supplied to the recipient for a period of at least one month of continuous occupancy. The supply will not be exempt if the recipient has a long-term lease but is only entitled to use the property for several days at a time. Consequently, if the School Board is only entitled to use these facilities on an intermittent basis, GST must be paid on the consideration of the supply.[192]

The 1996 legislative amendment confirmed that interpretation and cast aside Stone J.A.'s interpretation in Metropolitan Hockey. The addition of the words "continuous possession or use" in the Act now makes the interpretation of paragraph 25(f) in this regard unequivocal.

2.3.2. Paragraph (f) since the 1992 legislative amendment

Since the 1992 legislative amendment eliminating the words "similar arrangement" from paragraph 25(f) of Part VI of Schedule V of the E.T.A., the distinction between leases and licences has become crucial, as now all supplies by way of licence are taxable and supplies by way of lease are exempt only where the period throughout which continuous possession or use of the property is provided under the lease is more than one month. These changes have also prompted the publication of Policy Statement P-062, which is devoted entirely to the distinction between leases, licences and similar arrangements.

It goes without saying that the treatment of agreements that had been characterized as "similar arrangements" by either Revenue Canada or the courts has had to be clarified again. As we saw in Chapter I of our study, such arrangements are, in strictly legal terms, neither leases nor licences. In the case of easements, which are arrangements similar to leases and licences, the Department draws a distinction between easements granted in perpetuity and easements granted for a limited time:

Since easements can not be classified as either leases or licences because they have features of both, and may in certain cases be considered a "sale" of real property (for example, where they are granted in perpetuity for a single consideration), they should be treated as being outside the scope of 25(f), effective for agreements entered into after September 14, 1992, and consequently exempt of tax pursuant to section 25 from such time provided the other exclusions to section 25 do not apply.[193]

However, the Department's view is that easements granted for a period of less than one month will be infrequent. It is therefore reasonable to think that easements granted for a limited time will generally be granted for a period of continuous possession longer than one month (since they are similar to long-term leases) and will therefore be exempt supplies in most cases. In addition, the Department believes that the common law easement has a number of similarities with its civil law counterpart. Thus, the Department's position is that "an easement in common law is similar to a 'servitude', as referred to under the principles of civil law. Therefore, the previous discussion will generally apply in a consistent manner in the province of Quebec and the other provinces."[194] The problems we have seen with the application of common law licences in Quebec civil law will therefore, very fortunately, not arise with easements and servitudes. However, what about the other rights characterized as similar arrangements? Without specifically deciding how they are to be treated, the Department has expressed its view on the procedure to be used to determine the tax treatment for such agreements:

Other arrangements should be treated as either leases, licences or where not clearly a lease or a licence, as a similar arrangement (similar to those in the nature of easements) where appropriate. The parties to and the terms of the arrangement, the nature of the interest being supplied, and the actual dealings between the parties should be considered to determine how the supply is to be classified.[195]

For leases and licences, the Department has clearly adopted the definitions developed by the English and Canadian courts under the common law. With regard to licences, the following definition contains all the elements of a bare licence:

It is the Department's understanding that, under common law, a licence is in the nature of a right or privilege to enter upon and use real property in a certain manner or for a specified purpose. It is a personal right between the licensor and licensee and does not create any estate or interest in the property.[196]

Worded this way, the definition could also encompass contractual licences, but the Department does not refer specifically to them. Unfortunately, neither Parliament nor the Department has provided any explanation of how to treat the various types of licences we have looked at. Based on the above definition, is the Department's view that the term "licence" in the E.T.A. refers to a bare licence and nothing more? Or, conversely, does it intend the definition to cover all types of licences? However, when we examine the circumstances in which paragraph 25(f) of Part VI of Schedule V applies, in most cases the licensor and the licensee have a formal contractual commitment. Just think of agreements between a marina and boat owners for the rental of berths,[197] a municipality and sports teams for the use of playing fields[198] or a municipality and a mobile canteen for permission to sell beverages in municipal recreation parks.[199] Moreover, in dealing with interpretation requests, the Department often relies on the terms of such contracts to determine the tax liability of public service bodies. In response to an interpretation request concerning sections 20 and 25 of Part VI of Schedule V, Revenue Canada distinguished a licence in property law from a licence as a right of entry onto real property granted by a government or municipality (a permit):

. . . [T]he type of licence referred to in paragraph 25(f) of Part VI of Schedule V relates to the actual supply of the real property by way of licence that is normally of contractual nature in which both parties agree to the terms and conditions set out in the agreement or contract.[200]

Can it therefore be concluded that a bare licence is not the only type of licence encompassed by the term "licence" in the E.T.A.? In our opinion, regardless of the tax authorities' answer to this question, the tax treatment of a bare licence and a contractual licence will be the same under paragraph 25(f) of Part VI of Schedule V; the same is true of a licence coupled with an interest, even though such a licence is in several respects more similar to a lease than to a bare licence.

As for leases, they are often defined by comparing them with licences:

In the common law provinces, it has generally been determined that a lease normally confers exclusive possession, while a licence of real property normally would not. A person may be considered to have a right of exclusive possession, and therefore a lease of the real property, even where the right is subject to some limits, such as restrictions on the use to which a property may be put. An agreement that imposed such limits could still be regarded as a lease, unless the other terms of the agreement clearly revealed an intention to have a licence. . . . In the common law provinces, a lease generally confers an interest in the real property, binding on the property owner and on other persons. . . . [A] lessee can generally sublet or assign its interest in the real property, subject to the terms of the lease; a licensee may not "sublicence" or assign its rights to a third party, except by the express agreement of the licensor. Further, if real property is sold or the lease is assigned by the lessor, the interest of the lessee normally flows with the property; rights under a licence normally cease upon the sale of the property.[201]

Moreover, the tests adopted by the tax authorities for distinguishing leases from licences are in every respect the common law tests that we examined in Chapter I of our study:

The following factors are of assistance in characterizing this agreement as a lease or licence: the intention of the parties, exclusive possession, legal interest in land, right to assign or sublet and the form of the agreement.[202]

Unfortunately, those tests are valid only for applying paragraph 25(f) in the common law provinces. The tax authorities' comments regarding the development of such tests for Quebec are conspicuous by their absence. Thus, Revenue Canada's administrative position can be summarized as follows: "In the province of Quebec, for real property purposes, the distinction between a lease and licence should be made in accordance with civil law principles."^[203] But what are those civil law principles for distinguishing a lease from a licence when it is also acknowledged that [translation] "the concept of licence as understood in the common law does not exist in the civil law"?[204]

At an open forum in 1996, the Quebec Department of Revenue, as Revenue Canada's agent for applying the E.T.A. in Quebec, briefly explained the problems involved in applying paragraph 25(f) of Part VI of Schedule V in Quebec. An analysis of the circumstances surrounding the amendments to the provision thus made it possible to provide a partial answer to the above questions:

[translation]

In 1992, paragraph 25(f) was amended to exempt only the supply of real property by way of lease for a period of more than one month; the supply of real property by way of licence became taxable regardless of the period of use agreed on in the contract. That amendment applied to supplies of real property made after September 14, 1992.

However, even after the amendment, the problem raised in the Metropolitan Toronto Hockey League case remained unresolved in Quebec for the application of both the GST and the QST, since the concept of "licence" in relation to corporeal property does not exist in Quebec civil law. It is a concept that exists only in the common law provinces. In those provinces, a contract of licence may be defined, inter alia, as a non-exclusive right to use real property granted to a person by the owner of the property. The owner may therefore grant a right to use the same property to other persons at other times.

In Quebec, there is no distinction between an exclusive and a non-exclusive right to use immovable property. In both cases, there is a contract of lease.

Thus, as a result of the judgment in the Metropolitan Toronto Hockey League case, a supply of immovable property in Quebec made by way of "lease" could be exempt if the lease were for a period of more than one month, while the same supply of real property in another Canadian province could be taxable if made by way of "licence".

That was why another amendment to paragraph 25(f) was proposed in the Notice of Ways and Means Motion made public by the Minister of Finance of Canada on April 23, 1996. A supply of real property made by a public service body by way of "lease" is therefore taxable where the period throughout which continuous possession or use of the property is provided under the lease is less than one month. To be more specific, we stress that account must be taken not of the full period for which the lease was granted but rather of the periods of continuous use of the real property granted under the lease.

This latest amendment applies retroactively to supplies of real property made after September 14, 1992. . . .[205]

It is interesting to note that the Department considered it important to specify that the common law test of exclusive possession with regard to leases does not exist in the civil law. Thus, is it possible that rights that cannot be characterized as a lease in the common law because the tenant does not have exclusive possession of the rented premises can nevertheless be characterized as a lease in Quebec civil law? This possibility will be examined in greater detail in the next section of our study.

Moreover, in responding to an interpretation request by a Quebec taxpayer, the Quebec Department of Revenue had to apply this interpretation of paragraph 25(f) of Part VI of Schedule V of the E.T.A. in a civil law context. We have already set out the circumstances in which that interpretation request was made (in section 2.1 of our study), but we will repeat the salient facts here: to be able to claim certain credits and rebates provided for in the Act, a marina (public service body) had to determine whether the supply of seasonal mooring rights was a taxable supply for it when made in the course of the business it carried on, pursuant to paragraph 25(f). At the time, that paragraph read as follows:

(f) real property (other than short-term accommodation) made by way of

(i) lease, where the period throughout which continuous possession or use of the property is provided under the lease is less than one month,

(ii) a licence,

where the supply is made in the course of a business carried on by the body;

After pointing out that the common law concept of licence does not exist in Quebec, thus eliminating any potential questions about whether the agreement between the marina and the boat owners could be likened to such a concept, the Department felt that the only question it had to answer was as follows:

[TRANSLATION]

It is therefore a matter of determining whether the supply of seasonal mooring rights by the Marina is a supply of real property by way of lease, in which case it is not encompassed by the exception set out in paragraph 25(f) of Part VI of Schedule V of the federal Act since it is a supply involving a period of continuous possession or use of the real property of more than one month.[206]

The Department began demonstrating this by noting that the right to moor a boat at a pontoon for a season constitutes a supply of real property under subsection 136(1) of the E.T.A., which provides that the use of or right to use real property is a supply of such property by way of lease, licence or similar arrangement.

Relying on the C.C.Q.'s definition of a contract of lease, the Department then drew a parallel between the rights and obligations set out in the agreement to be characterized and a contract of lease according to Quebec civil law principles. As a result, the Department characterized the agreement as a lease and formally expressed its view on how the supply should be treated:

[translation]

Based on the facts submitted, it is our view that the seasonal use of a mooring pontoon constitutes a supply of real property by way of lease for a period of more than one month, which is not encompassed by the exception set out in paragraph 25(f) of Part VI of Schedule V of the federal Act. Accordingly, such a supply is exempt unless it falls under any of the other exceptions listed in section 25 of Part VI of Schedule V.[207]

What should be thought of this characterization? The supply of a seasonal mooring right is unquestionably a supply of real property whereby the parties' agreement provides for the possession or use of, or the right to use, the mooring pontoons for a period of more than one month. Unlike situations involving the rental of ice surfaces for hockey games or rooms for special events, the lessees' access to the mooring pontoons is continuous and not limited to certain specific times or days, and the lessees are certain that a mooring pontoon will be available, no matter what agreements the marina has entered into with other seasonal or daily lessees. The rental is therefore for the season, without interruption. However, can the agreement between the marina and the boat owners be characterized as a lease according to civil law principles? In other words, can a right that would be a licence in the common law be interpreted as a lease in the civil law? We will analyse these questions in the next section of our study. That analysis will be important in seeking solutions for harmonizing paragraph 25(f) of Part VI of Schedule V of the E.T.A. with Quebec civil law, which is the primary objective of this study.

2.4. Does the common law concept of licence exist in Quebec civil law?

According to a rule of statutory interpretation that is now well established in Canadian law, provincial private law principles are applicable in a field of exclusively federal jurisdiction only where federal law or a federal statute is silent or incomplete or refers expressly to provincial law. In this regard, what Décary J.A. stated in A.G. of Canada v. Constance St-Hilaire,[208] especially when he quoted Professor J-M. Brisson,[209] provides a good illustration of which suppletive rules are applicable to federal legislation:

. . . [F]ederal legislation, understood in its broadest sense, expresses in itself the federal law, unless in some particular statutory or regulatory text the competent authority has expressly designated a law that is to serve in some suppletive capacity. Absent such designation, there is no set of fundamental legal rules in federal law that can serve as a reservoir for legislation, because the federal government, unlike the territories that make up Canada, has never received any such rules.

In principle, therefore, it is the law of the provinces that constitutes this reservoir, the content of which may consequently vary by necessity from one province to another. To block the use of the provincial law in a suppletive capacity, it suffices, but it is necessary either to compensate for the deficiency that renders this use indispensable in a given case or to impose specifically by name some other law of reference in its place. To put it bluntly, it must be kept in mind that there is no ordinary law that is strictly federal in a particular area, without words to that effect.

. . . Indeed, whenever a federal statute that is to be applied to Quebec resorts to a private law concept without defining it, and the Interpretation Act is likewise silent, or the federal statute does not fully occupy the possible field of private law jurisdiction in question, it is the Civil Code that supplies the necessary conceptual support for an intelligent application of that statute. The implicit dependency of federal legislation is therefore by far the situation that is most widespread.[210]

From this point of view, the gaps in the E.T.A. as regards the definition of terms "lease" and "licence" must be filled by applying civil law principles in Quebec and common law principles in the other Canadian provinces. The tax authorities recognize and regularly use this interpretation technique. However, what happens when provincial private law is not able to provide the legal rules needed to apply the provisions of the federal statute involved? What happens when the legal concept used in the federal statute, the concept that must be interpreted, does not exist in provincial private law?

The concept of licence referred to in the E.T.A. is a concept that originates solely in the common law. Not only are there no provisions of the Civil Code of Québec that use the term "licence" in a property law context, but the common law concept as such does not appear in the Code as a separate contractual vehicle. Thus, if the common law concept of licence exists in the civil law, it is represented by other civil law institutions whose formation conditions and operation are similar to those of licences.

It is therefore from this perspective that we will, first of all, provide an overview of property law institutions in the civil law to determine whether there are any similarities between common law licences and certain dismemberments of the right of ownership as defined in articles 1119 et seq. of the Civil Code of Québec. We will then look at licences in a contractual context to try to determine whether they can be equated with any of the nominate contracts in Book Five of the Civil Code of Québec. Finally, if none of these steps meets our expectations, we will try to determine whether licences can, through the general rules applicable to contracts, be incorporated into Quebec civil law as innominate contracts. Since the concept of licence in the E.T.A. is almost always used in the context of a contractual relationship between a supplier and the recipient of the supply, it will be mainly in that context that we will ultimately attempt to find a harmonization solution for paragraph 25(f) of Part VI of Schedule V.

2.4.1. Licences and property law in Quebec civil law

The classification of property in Quebec civil law differs from the common law classification. In the civil law, a distinction is made between corporeal property (things that can be appropriated) and incorporeal property (art. 899 C.C.Q.), which includes personal rights, real rights and mixed rights.[211]

A personal right [translation] "is a right to claim: the right to require a prestation (doing or not doing something – 1371 C.C.Q.). What is a claim for the creditor (active subject) is, in contrast, an obligation for the debtor (passive subject)."[212] From this point of view, the right to claim is exercised against the debtor as a person and not against corporeal property, subject to the measures set out in article 1590 C.C.Q.[213] A personal right usually cannot be enforced against third parties[214] unless such enforceability is provided for in legislation or achieved through publication where authorized by law (arts. 2938, 2941, 1887 and 1936 C.C.Q.)[215] According to this definition, a contractual licence would therefore, prima facie, fall within this category of incorporeal property.

Real rights are exercised in relation to corporeal or incorporeal property. [translation] "Unlike personal rights, real rights (art. 911 C.C.Q.) do not create any obligations in se, except as an accessory (art. 1178 C.C.Q.)."[216] Their principal advantage is that they are enforceable against everyone. The main real rights are the right of ownership and its dismemberments (arts. 911, 947 and 1119 C.C.Q.), the attributes of which are usus, fructus and/or abusus. The division of those attributes among several persons leads to the creation of dismemberments of the right of ownership, namely usufruct, use, real servitudes and emphyteusis (art. 1119 C.C.Q.). Although a common law licence bears some similarity to usufruct and use, it would be difficult to characterize it as a real right, since it confers no interest in land. Moreover, a licence, unlike a real right, is not binding on a successor in title.

Some of the above-mentioned dismemberments lead to the suspension of the bare owner's right to use (usus) and enjoy (fructus) the property, and in some cases his or her right to dispose of (abusus) the property, in favour of the holder of that other real right. However, when the dismemberment ends, the owner regains all the attributes of ownership. In the case of usufruct, for example, the bare owner's rights of usus and fructus are suspended until the usufruct ends: [translation] "It curtails most prerogatives of the owner, who becomes a bare owner."[217] In some circumstances, the usufructuary may also have abusus for consumable property (art. 1127 C.C.Q.),[218] whereas in the case of a licence, none of the conditions or incidents of ownership of the landowner (licensor) are suspended. Even where a licence is coupled with a profit à prendre, that right generally does not give the licensee exclusive use of the land to which the profit à prendre relates.[219] Finally, the usufructuary's right of usufruct can be hypothecated or transferred (art. 1135 C.C.Q.).[220] The transfer may be inter vivos or mortis causa, but it does not necessarily end with the usufructuary's death if, for example, the act creating the usufruct provides that it will not end until the expiry of the term (art. 1162 C.C.Q.), notwithstanding the usufructuary's prior death.[221] None of these terms and conditions correspond to those of a licence, except, in the case of a contractual licence, where the right to transfer the licence is explicitly provided for in the contract.

The right of use and habitation (art. 1172 C.C.Q.) gives the holder rights that are similar to the so-called family licence, whereby at one time, under the rules of equity (deserted wife's equity[222]), the courts granted an irrevocable licence that was enforceable against third parties so that a wife deserted by her husband could continue living in the family home. However, that licence was eventually abolished and replaced by more modern statutory provisions, which now deal with that type of situation.[223] In addition to that specific case between spouses, the courts used the rules of equity to protect certain licences granted to family members. Those licences were therefore more similar to a right of habitation (which confers only the usus of a dwelling house)[224] than to a conventional right of use (which confers the usus and fructus, to the extent of the needs of the user and the persons living with the user (art. 1172 C.C.Q.)).[225] However, use is the only dismemberment that is personal in nature:

[translation]

The right of use (and not the property it applies to, which may be leased, except where there is a right of habitation – 1175 C.C.Q.) may not be assigned or seized and is imprescriptible. It may therefore not be hypothecated. However, the act establishing it may provide that it can be assigned or seized; if the act is silent, the court may, in the interest of the user and after ascertaining that the owner suffers no damage, authorize the assignment or seizure of the right (1173 C.C.Q.).[226]

As regards dismemberments of the right of ownership, we can therefore see that only contractual licences and licences coupled with an interest combine some, though not all, of these few characteristics of usufruct and use. In these circumstances, it is difficult to equate licences, basically because of their purely personal nature, with one of those real rights in Quebec civil law.

In addition to those real rights, personal servitudes require some consideration:[227]

[translation]

A personal servitude is a charge imposed on corporeal property in favour of one person only, who may or may not own other corporeal property. . . . There is servient land but no dominant land: the charge, we repeat, is real because of its object but personal because of its subject. . . . Unlike real servitudes, personal servitudes are basically temporary, most often for life where the holder is an individual. That individual's death or the alienation of the pseudo-dominant land generally ends the servitude.[228]

From this point of view, a licence is similar to a personal servitude in the civil law. However, it should be noted that a personal servitude is a real right as long as it affects the servient land. Thus, real and personal servitudes may be difficult to distinguish, as may personal servitudes and personal obligations. According to the applicable rules of interpretation, the parties' intention is central to the characterization, and it is essential to determine whether the parties wanted to [translation] "charge land or oblige a person".[229] Finally, we note that a personal servitude can be a charge on movable or immovable property.[230] In these circumstances, only a thorough examination of the agreement involved will make it possible to determine whether a personal servitude may be similar to a licence. However, we note that, despite the similarities, the concept of personal servitude does not allow the common law concept of licence to be fully integrated into Quebec civil law.

Finally, mixed rights are generally personal rights that have some attributes of real rights. According to the Civil Code of Québec, a lessee who has a lease of a dwelling (arts. 1892 et seq. C.C.Q.) has a right to maintain occupancy (arts. 1936 et seq. C.C.Q.), which means that, despite the purely personal nature of leases, the lessee may "set up" his or her rights against a successor in title to the property, not pursuant to his or her contract but as a matter of law. The contract of lease will be discussed in an upcoming section of our study. Since we have found that, in both the civil law and the common law, licences fall within the category of personal rights, which are connected mainly with contracts and the law of obligations, we will attempt to determine whether the common law licence may be similar to one of the nominate contracts under the Civil Code of Québec, especially loan for use and the contract of lease, as suggested by the tax authorities.

2.4.2. Licences and nominate contracts under the Civil Code of Québec

In the common law, a licence may originate in a juridical fact or a legal transaction. As we have seen, a bare licence results from an event that has legal effects even though those effects are not necessarily sought by the licensor or the licensee. This brings to mind, for example, implied licences but also situations in which the parties had no intention of entering into a legal relationship. As we saw with Booker v. Palmer,[231] the owner of a cottage who offers it to a friend whose house was destroyed during a war has no intention of entering into a contractual relationship with his guest when he makes that offer out of generosity. In such circumstances, the licence that exists between the two individuals arises out of a juridical fact and is recognized as such by the common law.

In contrast, an oral or written contractual licence gives rise to contractual obligations for the parties pursuant to a legal transaction. The transaction is an expression of the parties' intention to create, change or extinguish one or more rights. Basically, a contractual licence has the same characteristics as a bare licence, subject to the changes made by the parties in the contract. The licensor and the licensee therefore bind themselves in anticipation of those legal effects.

Since the circumstances leading to the application of the E.T.A.'s provisions at issue in our study are almost exclusively contractual in nature, our comparative analysis of licences in the common law and the civil law will be limited to contractual licences as defined in Chapter I of our study. Moreover, it is our view that the common law licence does not exist in Quebec civil law as a juridical fact. The effects of a juridical fact, unlike a legal transaction or juridical act, are predetermined by law. The Civil Code of Québec gives no recognition to the concept of licence in property law or the doctrine of obligations. Thus, how can the legal effects of such a licence be determined?

The existence of contractual licences in Quebec civil law will therefore be subject to compliance with the general conditions for the formation of contracts set out in articles 1385 et seq. C.C.Q. Depending on its characteristics, a contractual licence will then fall either within the field of nominate contracts, the contracts regulated by the Civil Code itself (arts. 1708 et seq. C.C.Q.), or the field of innominate contracts, the contracts that the legislature does not specifically regulate but that the parties may enter into pursuant to their freedom of contract. There are also contracts that are "mixed" because they are similar to two or more nominate contracts. Hire-purchase is an example.

Despite the large number of nominate contracts provided for in the Civil Code of Québec,[232] few of them seem, prima facie, to reflect the common law concept of licence. However, two of them are worth considering: loan for use and the contract of lease. As we said in our analysis of the concept of licence in intellectual property,[233] some comparisons between that type of licence and contracts of lease and loan are accepted in French civil law.[234] However, French law, like the common law, recognizes the existence of certain agreements that, while having several characteristics of leases, are not leases. They are precarious occupation agreements,[235] innominate contracts[236] that can be defined as follows:

[translation]

Leases are characterized by the right of enjoyment conferred on the lessee, which the lessor must respect. If it is agreed that that right may end at any time, without notice or compensation, the lessee's enjoyment is precarious and is similar to that of a borrower under a loan for use,[237] but this does not necessarily mean that it is gratuitous. Alongside leases, precarious occupation agreements are considered valid by the courts and the law.

Under such an agreement, the owner does not intend to bind himself or herself as a lessor but confers enjoyment of immovable property temporarily by onerous title. The tests for such a contract are variable: the lessor's right to take back the premises at any time without notice, the low rental charge, free occupation. This is regardless of whether the occupation has actually lasted a long time.[238]

Like licences, precarious occupation agreements developed and became popular in France because they met a certain legal need but also because they made it possible to avoid the application of the legislation governing leases:[239]

[translation]

Precarious occupation agreements therefore resulted from friendships or exceptional situations created by the circumstances existing at the time or the nature of the property being rented. Thus, owners who were temporarily unable to use their premises because of acts of war entered into precarious occupation agreements while they were away so that their immovable property would not remain unproductive or simply unoccupied. Owners awaiting the demolition or expropriation of their immovable property also gave temporary enjoyment thereof to an occupant. Finally, lessors provided their friends with accommodation without charge while they were away.[240]

It is interesting to note that the development of tests for distinguishing between leases and precarious occupation agreements has been as problematic as in the common law. This is because those two agreements have the same purpose, namely providing enjoyment of the thing being rented. However, some judges feel that the most conclusive test for distinguishing between them is the precariousness of the agreement, which is closely tied to the property owner's right of revocation.[241] Another line of authority considers precariousness to be merely a term of the agreement and not its nature, meaning that the contract remains a lease.[242] Thus, the debate revolves around the nature of the two rights and, as in the common law, exclusive enjoyment of the thing being rented is the factor that will reveal the true nature of the agreement:

[translation]

Admittedly, both contracts give any person other than the owner the right to settle on the thing given for enjoyment. However, there is a fundamental difference in the scope of the right. Under article 1719 of the Civil Code, a lease is a contract that gives the lessee a personal right of use and enjoyment that must be understood in the most absolute sense. All things considered, the lessee is put, mutatis mutandis, in a situation analogous to that of a usufructuary. In particular, the right of enjoyment implies that the lessee has free and permanent access to the thing being rented, without being subject to any kind of control by the lessor. That right of enjoyment is also strengthened by the imposition on the lessor of a series of maintenance and warranty obligations. . . .

On the other hand, if there is no right of exclusive enjoyment of the thing being rented, the contract cannot be considered a lease and becomes a precarious occupation agreement. There is an infringement of an essential component of a lease, making it impossible to maintain that characterization.[243]

The similarity between licences and precarious occupation agreements is striking. That similarity is also shown by the following few examples. The seasonal rental of immovable or real property, whether private or hotel property, is characterized as a precarious occupation agreement in France[244] and as a licence in the common law in so far as the owner retains control of the premises. Moreover, in a case where a merchant was evicted from the premises by the owner after being in business for 20 years and was not paid the eviction indemnity provided for by law, the court concluded that the merchant was not entitled to such an indemnity because the merchant was occupying the premises under a mere precarious occupation agreement.[245] In accordance with the general principles of the law of obligations, [translation] "the judge characterized the contract at issue without taking account of the terms used by the signatories or the clumsy drafting of the act. . . . The judge looked at the content and structure of the act. . . ."[246] In that case, the judicious choice of lease-related terms could not convince the court that a lease existed.

In so far as [translation] "comparative law has always had an important place in Quebec",[247] especially as regards French law, we propose to determine whether these elements of French law are found in Quebec civil law.

2.4.2.1. Loan for use

Loan for use is "a gratuitous contract by which a person, the lender, hands over property to another person, the borrower, for his use, under the obligation to return it to him after a certain time".^[248] Loan for use relates to property, whether movable or immovable.^[249] Since only contracts concerning immovable property are of interest for the purposes of our study, we will look at loan for use from that perspective only. Loan for use is not a consensual contract but rather a real contract, since delivery of the immovable property is an essential condition of formation.^[250] The loan therefore does not exist until the immovable property is delivered to the borrower. Delivery can occur in accordance with the general rules set out in article 1717 C.C.Q., whereby the lender puts the borrower in possession of the property or consents to the borrower taking possession of it and all hindrances are removed. Under common law rules, this condition for the formation and validity of loan for use does not exist for the creation of a licence, since a licence is created as soon as the parties agree.

Thus, in the civil law, although a contract is formed as soon as there is an exchange of consents, the contract will be merely a promise to lend until the property is actually delivered.[251] Moreover, under article 2316 C.C.Q., if the promisor-lender fails to deliver the property to the beneficiary of the promise (the borrower), the latter will not be able to demand specific performance.[252] The borrower will only be able to claim damages under the contract. In contrast, the rules of equity made it possible for a licensee to obtain an injunction to have his or her rights confirmed and to oblige the licensor to allow him or her to enter the premises in accordance with the licence.[253] These are therefore the first two distinctions to be drawn between a licence and a loan for use.

Although it is in the nature of contracts to create obligations for both contracting parties, we note that loans for use and licences both impose few obligations on lenders or licensors. Aside from their obligation to put the immovable or real property at the disposal of the borrower or licensee, their obligations are quite secondary. In the case of the lender, there is an obligation to provide information and an obligation relating to expenses for preserving the property.^[254] The first is closely tied to the field of civil liability in so far as article 2321 C.C.Q. freely recasts the general principles set out in articles 1457 and 1375 C.C.Q.: "Where the lender knew that the property loaned had latent defects but failed to inform the borrower, he is liable for any injury suffered by the borrower as a result." In the common law, the invitee-licensee-trespasser trilogy makes it possible to determine the degree of extracontractual liability of the owner of the premises, since that liability depends on the scope of the rights of the person harmed, namely the licensee.[255] However, this obligation must not be confused with the lessor's obligation to provide peaceable or quiet enjoyment of leased property. The lender is obliged only to put the property at the borrower's disposal in a condition that will not harm other people. This is also the licensor's obligation.

Under article 2320 C.C.Q., the lender must also reimburse the borrower for any necessary and urgent expenses the borrower incurred for the preservation of the property.[256] If the lender fails to do so, the borrower can retain the property under article 2324 C.C.Q. This is therefore a right of retention based on the general principle applicable to all contracts under article 1592 C.C.Q.[257] Does a licensee have a right of retention according to the applicable common law or equitable principles? If such a right exists, we believe that it arises not from the existence of the licence but from the terms of the contract. However, since those two sources of law are separate from each other,[258] the licensee will be able to sue the licensor to obtain such reimbursement if the contract contains a provision to the same effect as article 2320 C.C.Q.

One specific thing should be mentioned with regard to the lender. The Civil Code of Québec does not specify whether the lender must also be the owner of the property loaned. According to academic commentators, however, it would seem that this is not essential to the validity of a loan for use.[259] Thus, the right of retention mentioned above is apparently enforceable against both the lender and the owner of the property loaned: [translation] ". . . [I]t is not essential to the validity of a loan for use that the lender be the owner of the thing; the right of retention should therefore apply to any property loaned, whether or not the lender is the owner."[260] In contrast, according to the decisions in Clore v. Theatrical Properties Ltd. and Ashburn Anstalt v. Arnold,[261] a contractual licence in the common law is not enforceable against a third party even if the third party was informed of it. Thus, where the licensor is not the owner of the land and the licensee tries to retain the property under the contract, this will not be effective against the owner of the land, who will be entitled to take back the property, subject, of course, to his or her agreement with the licensor. A licence remains a strictly personal right that is not binding on anyone who is not a party to the contract. This is therefore another distinction to be drawn between loans for use and licences.

The borrower's obligations are as follows. The borrower must safeguard the property, although the borrower's duty of prudence and diligence under article 2317 C.C.Q. is less strict that that of a depositary.[262] However, the borrower cannot put the property to a use for which it is not intended. The borrower must pay necessary expenses for the normal use of the property.[263] Moreover, the borrower is obligated to return the property to the lender. It should be specified that the borrower, like the licensee, must return the same property, namely the property originally loaned.[264] If the contract includes a term, the borrower will, in principle, return the property on the expiry of that term.[265] If the contract is silent in this regard, the borrower must, in principle, return the property when he or she "ceases to need it".[266] However, the borrower must return the property to the lender if the lender so requests, even if the borrower has not ceased to need it or the term has not expired, but only if the lender is in urgent and unforeseen need of it.[267] [translation] "[S]ince loan for use is a benevolent contract, the legislature feels that the lender's interest must take precedence over the borrower's in such a case".[268] This obligation therefore gives the lender a certain right of revocation that is similar, although not as broad, as the licensor's right of revocation in the common law. It will be recalled that a contractual licence is irrevocable only where there is an express provision in the contract to this effect.

These obligations show that there are a few basic similarities and differences between loans for use and licences. They are both strictly personal rights, and if the borrower or licensee dies (or, in the case of a legal person or corporation, ceases to exist), the loan (art. 2319 C.C.Q.) or licence ends. A loan or licence may also be extinguished where the borrower (art. 2319 C.C.Q.) or licensee voluntarily returns the property or simply surrenders his or her rights by ceasing to use the property.

Loan for use implies that the lender relinquishes possession of the property to the borrower. The lender's enjoyment of the property is therefore suspended, for otherwise there would be no reason for article 2319 C.C.Q. The purpose of a loan for use is therefore to give the borrower possession of the property so that he or she can use it. This purpose is also found in the definition of "licensor": "the proprietor . . . has either expressly permitted him [the licensee] to use his land. . . ."[269]

As we know, a licence does not confer exclusive possession of property.[270] Thus, the licensor may not only grant several licences for the same property but, in the case of real property such as land or a house, a licence does not imply the suspension of the licensor's enjoyment of the property unless the contract so provides or the very nature of the property requires it. Although the Civil Code of Québec is silent about the possibility of several loans for use in relation to the same property, the nature of the property and the use that the borrower wishes to make of it will determine whether the borrower has exclusive use of the property.

In the common law, exclusive possession also means that the licensor retains control and management of the property and may go onto or into the real property affected by the licence to check its condition, make repairs and so on. In this regard, the lender's obligation to make repairs to preserve the property suggests that he or she retains some control over the general administration of the property. The lender is able to limit the use of the property by people other than the borrower (art. 2318 C.C.Q.) and may, if that use is not appropriate, claim the property immediately under article 2319 C.C.Q. Moreover, the borrower's rights, like the licensee's rights, cannot be assigned. From this perspective, it would seem that a loan for use does not confer exclusive possession of property within the meaning of the common law. It seems to us that, if the legislature had wanted to limit the lender's access to the property, it would have done so expressly through provisions similar to articles 1930 et seq. C.C.Q., which concern leases of dwellings. Licences and loans for use are therefore very similar in this regard.

Finally, something must be said about the last element that defines loan for use: it is a gratuitous contract.[271] A licence may be gratuitous or for value, depending on the terms of the contract. However, a bare licence is generally gratuitous. As well, a bare licence is, more often than not, considered a "benevolent contract ". As we have seen, this is because a licensee, unlike an invitee, is generally not on the licensor's property in the licensor's interest. However, since our study is limited to the concept of licence as used in the E.T.A., and since supplies made by way of licence are generally made for value, which is why there is liability for the GST, we propose at this point to analyse the contract of lease, an onerous contract closely related to loan for use.

2.4.2.2. Contract of lease

In Quebec civil law, a contract of lease is defined as follows:

Lease is a contract by which a person, the lessor, undertakes to provide another person, the lessee, in return for a rent, with the enjoyment of a movable or immovable property for a certain time. The term of a lease is fixed or indeterminate.[272]

This definition allows us to identify the elements essential to the formation of a lease: the lessor must provide peaceable enjoyment of the leased property, while the lessee must pay rent in return for that enjoyment during the entire term of the lease. Moreover, the lessor must provide peaceable enjoyment "for a certain [minimum] time", but that period may not exceed one hundred years (art. 1880 C.C.Q.). Aside from these essential elements, the parties can take advantage of their freedom of contract and insert exemption clauses in the contract to derogate from the provisions of the Civil Code of Québec, subject to the Code's mandatory provisions and provisions of public order (art. 9 C.C.Q.). In this regard, it is important to draw a distinction between the general provisions concerning contracts of lease (arts. 1851-91 C.C.Q.), the provisions specifically relating to leases of dwellings (arts. 1892-1978 C.C.Q.) or leases with educational institutions (art. 1979 C.C.Q.) and, finally, the provisions concerning the lease of land intended for the installation of a mobile home (art. 1996 C.C.Q.). It should be noted that the provisions specifically relating to leases of dwellings and the provisions listed in article 1893 C.C.Q. are mandatory and cannot be changed by contract. The legislature has deliberately circumscribed the parties' freedom of contract in order to protect lessees:

[translation]

One becomes aware that housing is a fundamental human need that, in some circumstances, cannot be met without government assistance. The "right" to decent housing at a suitable price often conflicts with the absolutist notion of the lessor's right of ownership. It therefore seems legitimate for the state to arbitrate that conflict.[273]

For the purposes of our study, we will look only at the general provisions on contracts of lease and, in a more incidental way, the provisions on leases of dwellings. Our objective is to determine whether, generally speaking, a licence in the common law may be similar to a contract of lease in Quebec civil law. According to the tax authorities, licences do not exist in Quebec civil law but, depending on the facts, the legal reality they represent could be reflected in a contract of lease under the Civil Code. As we will show, it was with good reason that this analogy was introduced in applying paragraph 25(f) of Part VI of Schedule V of the E.T.A. to the supply of mooring rights in Quebec.

In the common law, leases and licences are distinguished using a variety of tests that we have already examined. Along with the many definitions provided by the courts and authors, those tests enable us to clearly identify the essential elements of a licence: it is a purely personal right that does not confer an interest in land or exclusive possession of property and, finally, it cannot be assigned or enforced against third parties. We therefore intend to use these elements to determine whether a licence can meet the various conditions for the formation of a contract of lease established by the Civil Code of Québec. This approach seems relevant in the circumstances:

[translation]

This definition [of a contract of lease] allows us to identify the essential elements of a lease, namely an obligation to provide enjoyment of property, an obligation to pay rent and, from a certain point of view, the term of the contract. It is by referring to these elements that the courts characterize the agreements submitted to them as leases or other contracts, as the case may be.[274]

Thus, if all of these formation conditions are met, it will be possible to conclude that licences can exist in Quebec civil law as contracts of lease under the Civil Code of Québec.

2.4.2.2.1.  Interest in land

Basically, what characterizes a licence and distinguishes it from a lease in the common law is its very nature. According to the common law classification of rights, a licence is a strictly personal right that creates obligations only between the licensor and the licensee. It therefore confers no interest in the land for which it is granted. In contrast, a lease in the common law does confer an interest in land, thus enabling the tenant to claim and enjoy exclusive possession of the leased property. There lies the very essence of these two rights.

Exclusive possession is simply an expression of the tenant's interest in land. That is why the courts have relied on this element time and time again to distinguish licences from leases. The parties' intention is also a fundamental criterion, since what matters is not the terms used by the parties in their agreement but rather the legal reality they were trying to express. Thus, the true nature of the contractual relationship between them can be found in their intentions and their conduct. In these circumstances, what the landlord, the owner of the land, transfers to the tenant is nothing less than his or her exclusive possession of the premises resulting from his or her title of ownership. This incident of ownership is therefore suspended in the tenant's favour for the term of the lease.

This is also the reason why, in the common law, the interest in land and possession of the property must "revert" to the owner at the end of the lease through the owner's reversionary interest. The owner therefore regains all incidents of ownership at that time. A licensor does not give the licensee an interest in land. If the land changes owners, the new owner will take the property free of any rights that may affect it, since the licensee has no "real" relationship with the property, no security of tenure. This is therefore why no reversionary interest is transferred from the former owner to the new owner and why the licence is not enforceable against the new owner. Nothing is created or lost, and so nothing has to be taken back. The same is basically true of the contract of lease in the civil law.

The analogy between an interest in land in the common law and a real right in the civil law is far from perfect, or even permitted, but it is very revealing in the circumstances. The rights that a lease confers in the common law are more similar to the rights conferred by certain dismemberments of the right of ownership in the civil law, such as usufruct or emphyteusis, than to the rights conferred by a contract of lease in the civil law. We have seen how the classification of leases in the common law misrepresents the real nature of that right.[275] Leases were ultimately characterized as chattels real despite their close connection to incorporeal hereditaments, a subcategory of real property. A tenant can bring an action in rem to enforce his or her rights, but that does not change the classification of leases as personal property. Basically, the fact remains that a lease is an interest closely related to land, like a real right. In the civil law, what is the nature of the lessee's right? Does the lessee have a real right or a personal right?

Some authors characterize the contract of lease as a mixed right, that is, a personal right that has some of the attributes of real rights.[276] One of those attributes is the right to maintain occupancy, which is a right that lessees of dwellings have. Since that right is not normally associated with a purely personal right, the legislature, by setting it out explicitly in article 1936 C.C.Q., has made it a right from which the parties cannot derogate by contract. This right to follow therefore means that, where there is a new owner, a residential lessee can exercise against that owner all the rights he or she previously had against the former owner (art. 1937 C.C.Q.). Among other things, the new owner cannot resiliate the lease.

A second attribute is the ability to have the rights resulting from a lease entered in the register of immovable real rights. Although this mechanism for protecting rights is usually associated with real rights, the legislature has also extended this right to contracts of lease (art. 1852 C.C.Q.). Thus, if a non-residential lessee wants the new purchaser of an immovable to be obliged to adhere to the lease until the end of the term,[277] the lessee must take care to have his or her rights published prior to the deed of sale. A lessee who neglects to do so will be protected from possible eviction for only 12 months (arts. 1886 and 1887 C.C.Q.).

However, as author Pierre-Gabriel Jobin warns us, just because these attributes of real rights are present does not mean we can conclude that the lessee has a real right in the leased property:

[translation]

This does not prevent the lessee's right of enjoyment from remaining a strictly personal right. It is not the characteristics or techniques that must determine whether the lessee's right is real or personal, but rather the nature of the lessee's relationship with the lessor. No doubt, the lessee in part profits from the leased property directly and without going through a third party; for example, the lessee collects the fruits and makes certain repairs to maintain the property. In this respect, the lessee's right is like a real right. Basically, however, it is the lessor who must ensure that the lessee benefits from the property. To fulfil the essential obligation of providing the lessee with enjoyment of the property, the lessor must do certain things to the property, such as maintaining and heating it. It is primarily because of what the lessor does to the leased property that the lessee can derive full enjoyment of it. In contrast, with a real right, it is normally the holder of the right alone who must do everything necessary to derive a benefit therefrom, such as maintenance; the owner's role is limited to doing nothing that bothers the holder. The relationship between a lessor and a lessee is therefore basically in the nature of a personal right.[278]

Moreover, it must not be forgotten that the right to maintain occupancy exists only for residential lessees. Giving all types of leases the status of real rights would turn an exception into a general principle. As well, despite these attributes, a lease produces only a jus ad rem, whereas real rights, such as a lease in the common law, create a jus in re. Thus, it can be seen that, by nature, a licence is similar to a lease in Quebec civil law. A lease in the common law has more in common with dismemberments of the right of ownership than it does with a civil law lease.

2.4.2.2.2. Exclusive possession of the property

The second factor for distinguishing between licences and leases in the common law, namely exclusive possession, derives directly from the first. A tenant who has an interest in land under a lease can claim exclusive possession of the property. That exclusive possession enables the tenant to feel at home and to act, with some restrictions, as the owner of the property for the entire term of the lease:                                                

The traditional view that the grant of exclusive possession for a term at a rent creates a tenancy is consistent with the elevation of a tenancy into an estate of land. The tenant possessing exclusive possession is able to exercise the rights of an owner of land, which is in the real sense his land albeit temporarily and subject to certain restrictions.[279]

Exclusive possession has two components, namely exclusive physical occupation and general control of the leased property.

With regard to the former, the exclusivity derives from the tenant's right to deny entry or access to the property to anyone, even the landlord. Since this incident of the landlord's ownership is transferred to the tenant for the term of the lease, the landlord is no longer able to take advantage of it. From a more practical point of view, it therefore becomes essential for the landlord to include in the contract a clause specifically describing the leased premises (units in the case of an apartment building[280]) and a clause authorizing the landlord to enter the premises. However, if the landlord has a statutory or contractual obligation to maintain and repair the property, such a right of access will be implied, and the landlord will be able to enter or have access to the property to verify its condition or perform work. However, the landlord will have to inform the tenant of his or her intentions by sending a notice. In both cases, some authorization is necessary, without which the landlord could be charged with trespass despite his or her title of ownership. From this perspective, it is interesting to recall that the court in Addiscombe Garden Estates Ltd. v. Crabbe[281] focused special attention on this contractual clause before ruling on the nature of the parties' agreement:

Taking all those considerations together, I am of the opinion that the learned judge was perfectly right in the holding, as he did, that this was tenancy. He was particularly impressed by the express provision entitling the grantors to enter the premises "to inspect the condition thereof and for all other reasonable purpose"; and he held that to be an indication that the right to occupy the premises granted to the grantees was intended to be an exclusive right of occupation, that circumstance, as I have said, being at lowest a strong circumstance in favor of the view that there is a tenancy as opposed to a licence. That is by no means the only ground for the judge's decision. It is amply justified also by the other matters to which I have referred.[282]

However, it must not be inferred from this that there cannot be a lease or exclusive possession where the tenant's rights are subject to restrictions as to the use of the property.[283] Such restrictions must not be interpreted as limiting the second aspect of exclusive possession in the common law, namely general control of the leased premises:

A right to occupy certain premises for a fixed period of time cannot be a tenancy if the person granting the right remains in general control of the property. That is normally the case with rooms in a hotel or boarding-house, so that the lodger is commonly a mere licensee and not a tenant.[284]

From this standpoint, what should be thought of the legal relationship between a marina and its users? General control of the mooring pontoons is certainly not transferred to the users, which explains why the relationship is characterized as a licence and not a lease in the common law. On the contrary, the users expect and pay for the marina to manage, supervise and maintain the spaces rented by them. It is difficult to see how an interest in land could pass to each user in the circumstances. The same is true of a licence to use an arena, since general control of the arena is not transferred to the sports teams but clearly remains with the licensor or the licensor's agents.

The question that arises is the following: what would be the situation in the civil law? Is exclusive possession of the leased property an essential condition for the formation of a contract of lease in Quebec civil law as it is for the formation of a lease in the common law? If so, a licence, which does not give the licensee exclusive possession of the property, cannot be characterized as a contract of lease.

2.4.2.2.3. Exclusive possession and peaceable enjoyment of the leased property

For a lease to exist in Quebec civil law, it is essential that the lessor be obliged to provide the lessee with peaceable enjoyment of the property and that the lessee be obliged to pay rent. Both of these obligations are for a certain time. Derogating from either of these obligations, whether contractually or otherwise, changes the nature of the contract of lease and makes it a sale, usufruct, right of use, loan or some other contract.

The lessor's obligation to provide the lessee with peaceable enjoyment of the property has several aspects. It means that the lessor must deliver the leased property in a good state of repair, warrant that the property may be used for the purpose for which it was leased and maintain the property for that purpose throughout the term of the lease (art. 1854 C.C.Q.), must make all necessary repairs to the leased property (art. 1864 C.C.Q.) and must not change the form or destination of the leased property (art. 1856 C.C.Q.).  Moreover, the lessor is bound to warrant the lessee against legal disturbances (art. 1858 C.C.Q.) and disturbances by the act of a third person where that person is also a lessee or a person whom the lessor has allowed to use or have access to the leased property (art. 1859 C.C.Q.).

Does a lessor who does not confer exclusive possession of the leased property nevertheless fulfil his or her obligation to provide the lessee with peaceable enjoyment? The answer to this question cannot be found merely by reading the provisions of the Civil Code, but it can be inferred therefrom. None of the provisions concerning contracts of lease expressly requires the lessor to provide the lessee, in all circumstances and regardless of their agreement, with exclusive occupation and/or general control of the property as in the common law. If such an obligation exists, it must therefore derive from one of the aspects of the lessor's obligation to provide the lessee with peaceable enjoyment of the leased property.

However, an initial clarification is required at this point. As regards the provisions specifically relating to leases of dwellings, we believe that this kind of lease implies exclusive possession of the property or at least exclusive possession of the unit leased, not including the common areas, such as the hallways, laundry rooms, garage, main entrance, stairs and elevators. While there is no provision that expressly confers exclusive possession on the lessee, we can assume this from the general scheme of the statute.

Articles 1930 et seq. C.C.Q. deal with access to and visits of the dwelling by the lessor. The rights conferred by the statute on the lessee of a dwelling are greater and more specific than the rights conferred on a non-residential lessee under the general provisions (art. 1857 C.C.Q.). This clearly shows that the legislature recognizes the special privacy needs of lessees of dwellings. For example, the lessor cannot go into the lessee's home without giving 24 hours' notice, whether to perform work, show a potential purchaser around or verify the condition of the dwelling to fulfil the lessor's obligation to maintain the property in good habitable condition (arts. 1910 and 1922 C.C.Q.).

This verification right must not be equated with the lessor's right to retain general control of the property. Lessees may do what they want in their dwellings, subject to their duty to be prudent and diligent and to the usual by-laws and restrictions that exist in this area (arts. 1894 and 1911 C.C.Q.). For example, a lessee may not change the form or destination of the leased property (art. 1856 C.C.Q.). Finally, articles 1957 et seq. and articles 1971 et seq. provide indications as to the existence of exclusive possession: aside from the specific situations covered by those provisions, a lessor cannot evict or resiliate the lease of a lessee who is fulfilling his or her obligations and repossess the property, as a licensor who has granted only a bare licence can do.

This is therefore why we believe that, for leases of dwellings, exclusive possession of the property is an essential condition of formation, a condition that licences do not meet. Exclusive possession would therefore be an implicit aspect of the lessor's obligation to provide the lessee of a dwelling with peaceable enjoyment of the property. It is also our view that, contractually and in circumstances where the nature of the property so allows, the parties can agree on a clause that gives a non-residential lessee exclusive possession of the property. The legislature does not expressly prohibit such a contractual term. Thus, a lessee who feels that he or she cannot have peaceable enjoyment of the property without exclusive possession will have remedies against a lessor who does not perform this aspect of his or her contractual obligation to provide peaceable enjoyment (art. 1863 C.C.Q.).

Academic commentators agree that a lessor who leases the same property to two different lessees for the same period under two different agreements (we are not concerned here with co-lessees[285]) could be held liable for such a breach of his or her delivery obligation if the property in question was not supposed to be the subject of several leases. If the property has not yet been delivered to a competing lessee, the lessee can apply for specific performance and damages or the resiliation of the lease (art. 1863 C.C.Q.).

However, if the competing lessee is already in possession of the property, what must be determined is whether he or she has a right to detain it. If not, the lessee can insist that the lessor evict the competing lessee who is currently in possession of the property. If this proves unsuccessful, the lessee can exercise the lessor's remedies in the lessor's name through an oblique action (art. 1627 C.C.Q.). A direct action is not possible because the lessee has no real right in the property and therefore no interest that would allow court proceedings to be brought on the basis of such a right. The lessee can also seek damages from the competing lessee and the lessor (art. 1457 C.C.Q.).

If the competing lessee justifies his or her detention of the property under a lease or other definite right, it will be necessary to apply the rules concerning contracts that are not translatory of ownership, since a lease does not give the lessee a real right. Priority of title will go to the lessee in good faith whose title is oldest. If the property has not yet been delivered to a competing lessee, the lessee who entered into a lease first can compel specific performance and take possession of the property as planned. However, if the property is no longer in the lessor's hands, the lessee, despite the fact that his or her title is older, will be able to apply only for the resiliation of the lease and damages from the lessor and from the competing lessee if he or she is in bad faith.

It can therefore be seen that the rights of a lessee in the civil law are not as extensive as those of a tenant in the common law in the case of adverse possession. This results, of course, from the fact that, in the civil law, a lease is personal and not real in nature. Exclusive possession, which is closely related to the concept of an interest in land in the common law, would have enabled the lessee to claim the property in a third party's possession, just as the holder of a right of ownership or other real right can do in the civil law under article 912 C.C.Q. This element is obviously missing from the lessee's array of rights in the civil law. This leads us to believe that, in the civil law, what a lessee can claim from a lessor is not so much exclusive possession in the common law sense but rather merely exclusive enjoyment of the property, which is a right that does not imply the formation of a relationship of a real nature between the lessee and the leased property as in the common law.

The types of leases we have just looked at are either residential leases or leases that confer exclusive possession of property contractually because this is necessary for the lessee's peaceable enjoyment of the property. A residential lease is entered into for the rental of property for habitation (arts. 1910, 1915 and 1913 C.C.Q.), and the definition of "dwelling" therefore does not include a dwelling leased as a vacation resort, a hotel room, a room in a boarding house or health institution or a dwelling in which over one-third of the floor area is used for purposes other than residential purposes (art. 1892 C.C.Q.). It is interesting to note that these are precisely the rental situations that, in the common law, are covered by licences. Since people's behaviour and needs are not very different in this regard in Quebec and the other Canadian provinces, we are inclined to believe that the circumstances leading to the formation of contracts (licences) that do not confer exclusive possession of property in the common law must also exist in Quebec. The question is whether those simultaneous rental situations will result in the formation of a contract of lease where exclusive possession of the leased property is not given to each lessee.

The Superior Court of Quebec had an opportunity to decide this question in Snowlarks Ski School Inc. v. Mont Gabriel Lodge (1973) Inc.[286] Among other things, the Court had to determine the nature of an agreement governing the rights and obligations of the ski school and the former owner of the ski resort where classes were given, since the new purchaser of the resort argued that the agreement was not a lease of an immovable but rather an innominate contract that could therefore not be set up against it.

After referring to the definition of a contract of lease, the Court expressed its view on the presence of all the essential elements for the formation of a lease:

[translation]

In this case, the object — notwithstanding the purpose proposed by the lessee — consists in the enjoyment of the ski slopes themselves, the ski tows and business premises for ski instruction, and there is a price that includes not only the $15,000 a year to be paid by the lessee but also the expenses it will have to pay for its students using the ski tows. It being accepted that there is a contract for the lease of things, is there a lease of immovable things?[287]

Since the second paragraph of article 1646 C.C.L.C. (now the second paragraph of article 1887 C.C.Q.) related only to leases of immovables, the Court had to pay special attention to that element. It concluded that the slopes, the premises and the ski tows, which had been installed for a permanency and duly incorporated, were, respectively, immovables and immovables by destination.

However, the respondent argued that, since the lessee shared the use of the slopes, the ski tows and certain places intended for ski instruction with other students and customers of the ski resort, the ski school did not have a lease but rather a concession or franchise. The respondent relied on the common law principle that, for a lease to exist, there must be [translation] "enjoyment, and exclusive enjoyment, of the object leased".[288] The Court did not agree:

[translation]

The Court is of the view that this distinction is not reflected in our Quebec civil law and that there may be a lease of an object even where there are many lessees. Having thus concluded that the original agreement between Snowlarks and Mont-Gabriel Lodge Inc. is in the nature of a lease of an immovable because of the significance of the main object to which it relates, the Court must conclude that such a document can be set up against the respondent . . . and that this lease must meet with the same fate in terms of the rights and obligations resulting therefrom pursuant to the provisions of article 1646 C.C.[289]

The Court was therefore of the view that the legal relationship between the ski school and the ski resort as regards the use of the slopes and ski tows was a contract for the lease of an immovable. In the common law, it would be unlikely to be a lease but would rather be a contractual licence similar to the licence that exists when an audience member or spectator purchases a ticket to see a movie or a race in an arena, as we saw in Chapter I of our study.

This interpretation is very similar to that of the Attorney General of Canada in Canada v. Mont-Sutton Inc.[290] In that case, the Federal Court had, inter alia, to determine whether the applicant was manufacturing snow for lease so as to be entitled to claim a credit for manufacturing and processing profits, an investment tax credit and capital cost allowance for Class 29 property under the Income Tax Act.[291] According to the Court, the appellant was clearly not leasing the artificial snow to skiers but was rather leasing the snow-covered surfaces, just as "the owner of a paved parking lot . . . does not lease the asphalt to someone who wants to park his automobile there".[292] In this regard, what the Attorney General stated in his factum for the cross-appeal is especially revealing in the circumstances. One of the arguments made by the Crown to convince the Court not to find that there was a contract of lease was that it was important to promote the equitable application of the Act's provisions throughout Canada and that such a characterization would not allow that objective to be attained:

[translation]

The common law provides that, where a person acquires the right to use property but that right is not exclusive, the contract between the parties is a licence and not a lease, which must confer exclusive use of the property. The use of property under a licence is not a lease within the meaning of the Act. Where the Act applies to both licences and leases, it says so expressly. Since a skier does not have exclusive use of the slopes, ski lifts and chalets, the contract between the parties is a licence in the common law that does not confer a right to the credits claimed by the appellant. The Deputy Attorney General of Canada admits that this concept of licence is not part of Quebec civil law. However, he submits that it supports his position, since the provisions of the Act should be applied uniformly to everyone so far as possible, whatever the legal system.[293]

It therefore seems that a horizontal inequity problem similar to the problem we are trying to resolve exists under the Income Tax Act. However, that is not the question. What the above statements show is that Revenue Canada is very likely to interpret a contract between a skier and a ski resort as a licence and not a lease in the common law. The contract between a skier and a ski resort for the use of slopes, ski tows and chalets would therefore be a licence in the common law and a contract of lease in the civil law. Non-exclusive possession of the immovables used by the skier is therefore not an obstacle to the skier's peaceable enjoyment thereof. The Civil Code also includes provisions warranting the skier against legal disturbances and disturbances by the act of other skiers or third parties who have access to the site. Moreover, lessees of the same property are bound to act in such a way as not to disturb the normal enjoyment of the other lessees (art. 1860 C.C.Q.). We cannot think of a more relevant application of this provision than the situation described above, and it strikes us as being relevant in such other situations as the rental of a mooring pontoon at a marina or space at a campground.

It is thus possible to think of situations in which a lessee will not require exclusive possession of the leased property to have peaceable enjoyment thereof, just as it is possible for peaceable enjoyment to depend entirely on exclusive possession of the property. It is therefore our view that, except in residential lease contracts, the parties can draw up the terms of their agreement to require or not to require the lessor to deliver and keep the property free from competing lessees.

However, we believe that one last factor remains problematic when it comes to equating licences with civil law leases. As we have already stated, the lessor's obligation to provide peaceable enjoyment of the property has several aspects: delivery of the property in a good state of repair, the lessor's warranty that the property may be used for the purpose for which it was leased, the obligation to repair and maintain the property, etc. Does a licensor have the same obligations under a licence? Theoretically, no. Moreover, in the common law, a landlord under a lease would not have them either.

In this regard, leases in the common law are more like real rights than personal rights. Over the years, the common law has established the basic rights and obligations of landlords and tenants:[294] the landlord is obliged to provide the tenant with quiet enjoyment of the property, except where the parties decide otherwise by agreement. It should be noted immediately that, in the civil law, a clause exempting the lessor from this obligation would be void. Moreover, unlike in the civil law, the obligation to provide quiet enjoyment implies only that the landlord warrants the tenant against legal disturbances to the tenant's enjoyment. The landlord therefore undertakes not to grant other rights that may disturb the tenant's exclusive possession of the property.

As for the obligation to maintain and repair the property, it is basically non-existent: "In certain cases, obligations as to fitness and repair: In general, the landlord gives no implied undertaking that the premises will be fit for habitation, nor is he liable to repair them."[295] This basic rule must now be interpreted in light of the various statutes and regulations governing this area.[296] However, it shows us that the common law sees the landlord's role the same way that the civil law sees the role of a bare owner, without more. From this standpoint, it is obvious that a licensor's obligations will not be more onerous than a landlord's. Moreover, it must not be forgotten that licences are not subject to the various statutes applicable to leases, which is why they are so popular among landlords and tenants who do not want to submit to such severe restrictions.

It therefore seems that licences do not meet this essential condition for the formation of a lease in the civil law. Thus, only contractual licences requiring the licensor to provide peaceable enjoyment of the property within the meaning of the Civil Code of Québec may be equated with civil law leases. A detailed analysis of the contract and an examination of the parties' intention will be necessary to determine this. If this exercise shows that the landlord has no such obligation, the contract will not be a lease but possibly an innominate contract.

Before turning to the second condition for the formation of a contract of lease, another mechanism should be considered, namely subleasing and the assignment of rights. Unless authorized to do so by the licensor, a licensee may not "sublicence"[297] or assign his or her rights to a third person and thereby create a legal relationship enforceable against the licensor. In the civil law, a lessee may sublease all or part of the leased property or assign the lease (art. 1870 C.C.Q.). However, the lessee must first tell the lessor his or her intentions as well as the name and address of the sublessee or assignee and must obtain the lessor's consent. These formalities derive from the intuitu personae nature of the contract of lease, especially in the case of residential leases. The parties choose to enter into a contract because of the qualities they have, their creditworthiness, their reputation, the type of business they operate, etc. Since subleasing involves a new contract between the lessor and a third party and assignment releases the lessee from his or her obligations, the legislature allows the lessor to refuse to enter into a legal relationship with a third party of whom the lessor disapproves. However, the reasons for the refusal must be serious. Thus, for both licences and contracts of lease, the consent of the licensor or lessor is required even though, in principle, such rights do not exist in the case of a licence and do exist in the case of a contract of lease.

2.4.2.2.4. Payment of rent

The second condition for the formation of a contract of lease is the payment of rent. The fact that leases are onerous contracts is what distinguishes them from loans for use in so far as the purpose of both (like licences) is to authorize the use of property by a person to whom it is handed over. Thus, for a licence to meet this second condition, it must be granted for value. Licences may also be gratuitous, but we believe that contractual licences will generally be granted for value and that bare licences, which are juridical facts, will be gratuitous. A contractual licence may be gratuitous, but since the licensor's obligations are normally better defined and more numerous simply because of the existence and negotiation of a contract, the licensor will seek some compensation for her or her undertakings.

Moreover, as we noted in Chapter I,[298] the consideration (licence fee) in the case of a licence for value may be paid in the same way as rent, namely through periodic payments, for the entire term of the licence or for as long as the licensee occupies or uses the land. It should be noted that a lessee is bound to pay rent during the entire term of the lease (art. 1855 C.C.Q.). As well, the rent must correspond to the property's rental value. However, it cannot be inferred from the definition in article 1851 C.C.Q. that the rent must take the form of money. In short, where a contractual licence for value is granted and the consideration is payable during the entire period when the property is used or during the entire term, this second essential condition for the formation of a contract of lease in Quebec civil law will be met. Otherwise, the licence will be similar to a loan for use or will simply be an innominate contract, as we will see shortly.

2.4.2.2.5. Enjoyment of the property for a certain time

Lastly, enjoyment of the property must be granted "for a certain time" (art. 1851 C.C.Q.). However, some authors feel that this is not one of the essential conditions for the formation of a contract of lease:

[translation]

It therefore seems that the expression "for a certain time" does not create a third essential element of leases. In our opinion, the legislature used those words to indicate that, for a lease to be entered into, the parties must agree not only on the price and the obligation to provide enjoyment of specific property but also on the term of the contract, at least when it is specified, the parties' total silence regarding the term generally implying that the lease is for an indeterminate term. This interpretation is now reinforced by the second paragraph of the same article 1851 of the Civil Code of Québec, which states that the term of a lease may be fixed or indeterminate.[299]

 The question of the revocability of a licence at the licensor's discretion raises the question of what its term is. To meet this condition, whether essential or not, a licence will have to extend over a certain period of time and not be granted only to authorize a momentary act. The contract will therefore have to be a contract of successive performance (art. 1383, 2nd para. C.C.Q.). However, given that, in principle, the licensor is not obliged to provide quiet enjoyment of the property (an obligation closely tied to this term-related condition), only a contractual licence stating that the licensor must provide quiet enjoyment of the property for a certain period of time can be equated with a contract of lease.

Finally, a lease may not be for more than 100 years (art. 1880 C.C.Q.). Since a licence is basically a temporary right, it seems unlikely that it would extend for longer than that period of time. Moreover, a contractual licence generally ends on the date provided for by the contracting parties and, if an agreement is silent in this regard, the licence always ends with the death of the licensor or the licensee, which will very likely occur before the maximum 100 years.[300]

These are therefore the rights and obligations that must be found in the clauses of a contractual licence for it to be characterized as a lease in Quebec civil law. Once again, the parties' intention will be a central factor in interpreting the agreement in so far as only it will be able to show that all the essential elements for the formation of a contract of lease are present.

This having been shown, what should be thought of the tax authorities' characterization of the agreement between the marina and the users of the mooring pontoons? Unfortunately, since we do not have all the terms of the contract, it would be unwise to express an opinion on this question. However, on the basis of the known facts, a contract of lease seems to have been validly formed: the marina must give users a mooring pontoon for a certain time, specifically a season, during which it must deliver to them and continue to provide them with a mooring pontoon in a good state of repair. The marina must also make all necessary repairs to preserve the pontoons so that they can be used for the purpose for which they were rented. One can imagine that, in return, the users must pay the marina a certain amount of money periodically. Thus, if the contract contains all of these elements, a contract of lease will exist. Otherwise, the contract will, subject to a few conditions, be an innominate contract.

2.4.3. Licences and innominate contracts in Quebec civil law

In Quebec civil law, innominate contracts are contracts whose terms are regulated not by the legislature but by the parties themselves pursuant to their freedom of contract, subject to the essential conditions for the formation of contracts and the provisions of the Civil Code of Québec concerning public order (art. 9 C.C.Q.).[301] Thus, an agreement that would be a licence in the common law will have to meet those conditions to exist validly in Quebec civil law as an innominate contract. As we said when looking at nominate contracts, an agreement that does not contain all the essential elements for the formation of a contract of lease or another nominate contract may, in such circumstances, be characterized as an innominate contract instead. From this perspective, it seems relevant to refer briefly to the essential conditions for contract formation in Quebec civil law. Those conditions are as follows: consent, capacity, object and cause (art. 1385 C.C.Q.).[302]

Articles 1386 to 1408 C.C.Q. deal with the first essential condition for the formation of a contract, namely consent. Unless the parties decide otherwise, the sole exchange of consents is sufficient to create an innominate contract, since the Civil Code does not require a particular form to be respected as a necessary condition for the formation of a contract.[303] An innominate contract may be oral or written.[304] However, in the circumstances, a written contract would be preferable to facilitate interpretation or proof.[305] Moreover, the exchange of consents must relate to all the essential elements of the contract (arts. 1386 and 1387 C.C.Q.). Since a licence in the common law may also arise from a juridical fact, the condition relating to consent therefore takes on increased importance for the formation of such a contract in the civil law.

To be valid, consent must be given by persons having capacity to contract (art. 1385 C.C.Q.), and that capacity must be assessed on the basis of the rules laid down in the Book on Persons (art. 1409 C.C.Q.). Consent may be given only in a free and enlightened manner (art. 1399 C.C.Q.). Error, fear and lesion are defects of consent that may jeopardize the consent of one of the parties and thereby prevent the contract from being formed.[306]

Fundamentally, a licence is merely a right of entry or even a privilege relating to the use of land for a certain period of time and a certain purpose. It is for this reason that a landowner who has granted a licence cannot subsequently sue the licensee for trespass. These are therefore the cause and object of a licence. In the civil law, the cause (art. 1410 C.C.Q.) and object (art. 1412 C.C.Q.) of a contract of lease may vary depending on the circumstances, but basically the parties are seeking to provide one of them with enjoyment of property in return for rent. The goal may be habitation or the use of an immovable for commercial purposes.[307] There is no doubt that a contract of lease also legitimizes the lessee's presence on the lessor's property. This means that, if the lessee does not leave the premises when the lease expires, he or she can be evicted by the lessor (art. 1889 C.C.Q.). An innominate contract must also have a cause and an object. In the circumstances, it is quite possible for an innominate contract similar to a licence to have a cause and an object like those of a licence.

Subject to these conditions, it is therefore possible in Quebec civil law to enter conventionally into a contract that is equivalent to a common law licence through the rules relating to innominate contracts. Such a contract is in no way prohibited by the legislature. The contract could be called a contract of licence, subject to this one warning: [translation] "The fact that a contract is innominate does not prevent it from having a common name and, conversely, attaching a name to a type of contract does not make it a nominate contract."[308] The dividing line between a sui generis contract and a nominate contract may be very fine, and the interpretation of such a contract should therefore be based on the substance and not the form of the agreement. Thus, as with the distinction between licences and leases in the common law, the distinction between a contract of licence and a contract of lease will have to be drawn by considering the parties' intention, the terms of the contract and, ultimately, the presence or absence of all the essential elements for the formation of the nominate contract in question, namely a contract of lease. These could therefore be the tests for distinguishing between a lease and a contract of licence in Quebec civil law.

However, treating licences as innominate contracts does raise some problems, especially as regards the interpretation of such agreements by the tax authorities and possibly the courts, which may prove tricky in some cases:

[translation]

The most interesting contractual litigation often centres on attempts to define the obligational content of and legal regime applicable to complex contracts that have been developed in legal practice but that do not exist in the civil codes. Although the Court of Appeal inevitably deals with nominate contracts like sale, lease and mandate, it must often venture into the field of innominate contracts. Sometimes, it must go beyond legal appearances and try to identify or specify the regime — as complex as it is uncertain — applicable to economic relationships that cannot be placed in the traditional legal categories.[309]

For nominate contracts, reference can be made on a suppletive basis to the provisions of the Civil Code of Québec where the contract says nothing about the rule or principle that applies when there is a conflict between the parties or simply when the scope of the parties' rights and obligations must be specified. Since innominate contracts are not regulated by the Civil Code as such, interpreting them becomes an exercise whose result may be uncertain. However, the courts and authors seem to have developed a rule of interpretation to avoid this outcome in practice:

[translation]

. . . For innominate contracts, the judge must engage in a much more difficult search to try to identify the rules that the parties intended to follow at the time they entered into the contract. That is why, in looking for the rules to be applied to an innominate contract, the court often tries to bring the contract back to known elements that are specific to one or more nominate contracts.[310]

This rule of interpretation also seems to have been adopted by the tax authorities to facilitate the application of certain legislative provisions where the facts indicate that the contract in question is not a nominate contract under the Civil Code of Québec. The circumstances that led to the publication of information bulletin TVQ 138.1-1, which concerns the supply of funeral property and services by a charity,[311] are similar to the questions addressed by our study. For the purposes of applying paragraph 25(c) of Part VI of Schedule V of the E.T.A. and section 138.1 of the Act respecting the Québec sales tax,[312] the tax authorities had to determine whether the sale of a burial plot or a right to use a crypt or a mausoleum niche was a supply by way of sale of a right to taxable real or immovable property or a supply by way of sale of real or immovable property in a Quebec civil law context.[313] The assignment of burial plot rights is an exclusively common law concept, like the concept of licence, and is therefore not among the various nominate contracts of the Civil Code of Québec. However, the Quebec Department of Revenue characterized the agreement using the above-mentioned rule of interpretation:

[translation]

The Civil Code of Québec does not provide for the possibility of assigning burial plot rights on an immovable that one continues to own. Such assignment is a common law concept that does not exist in the civil law. However, since such an assignment is similar to the long-term lease of an immovable, the Department, in applying the Act, refers to the rules concerning the supply of immovables by way of long-term lease.[314]

Must it be concluded from this rule of interpretation that a contract that does not contain all the essential elements for the formation of a contract of lease and that should therefore be characterized as an innominate contract could nevertheless, for the purposes of the E.T.A., be treated as a contract of lease, the nominate contract to which it is most similar? Would this result be acceptable? Does this interpretation not have the perverse effect of distorting the contract of lease? Does it not have the effect of subjecting agreements to a tax treatment that was not intended for them? In the case of burial plots, this problem apparently does not arise, since the supply of a plot in the common law or a right to use a crypt in the civil law is not a supply by way of sale. Paragraph 25(c) of Part VI of Schedule V of the E.T.A. is therefore not applicable in either case. The same tax treatment thus exists for these two supplies. What had to be determined was whether the supply was made by way of sale or otherwise, not whether it was made by way of lease or by way of licence. The supply in both cases was found to be a supply by way of "lease, licence or similar arrangement" rather than by way of sale.[315] That expression allows for the same tax treatment regardless of the applicable legal system.

Under the provisions of the E.T.A. concerning supplies made by way of "lease, licence or similar arrangement", an agreement that would be a licence in the common law but an innominate contract similar to a lease in the civil law could therefore be treated as a similar arrangement. The tax authorities' interpretation of these terms clearly shows that an agreement does not have to be a lease or a licence in the strict sense. In so far as it provides for the possession and use of real property, it can be characterized as a similar arrangement.[316] This explains the significance of innominate contracts as an institution that can integrate, in Quebec civil law, agreements that would be contractual licences in the common law but that do not contain all the essential elements for the formation of a lease in Quebec civil law. Since the tax treatment of leases, licences and similar arrangements is the same, a clear distinction between those rights does not have to be drawn for the purposes of the E.T.A.

However, in so far as the expression "lease, licence or similar arrangement" has not been used in paragraph 25(f) of Part VI of Schedule V of the E.T.A. since the 1992 legislative amendment, must it be inferred, based on the above-mentioned rule of interpretation, that innominate contracts that do not meet all the essential conditions for the formation of a lease would nevertheless be given the same tax treatment as leases? If so, a situation of horizontal inequity would arise not only in the case of an agreement conferring continuous possession or use of property for more than a month that is a taxable licence in the common law provinces and an exempt lease in Quebec, but also in the case of such an agreement that is a taxable licence in the common law provinces and not a lease, but merely an innominate contract similar to a lease, in Quebec, which would be an exempt contract in Quebec in so far as it is treated as a lease for the purposes of the Act.

The Department of Finance's current tax policy is to tax agreements that are licences, as defined by the common law, in all Canadian provinces regardless of the name that such agreements may have in Quebec or elsewhere.[317] However, that interpretation and characterization of agreements that are licences in the common law has the effect of exempting, in Quebec, even more agreements that should be taxable according to the Department of Finance's tax policy. That is therefore why we believe that agreements that would be licences in the common law can exist conventionally in Quebec civil law as innominate contracts, but the interpretation of such contracts is, in our opinion, highly problematic for the purposes of paragraph 25(f) of Part VI of Schedule V of the E.T.A.

The problem still lies in the fact that the common law concept of licence is meaningless in Quebec civil law. Subject to the conditions looked at above, licences may be created contractually and may validly exist through innominate or other contracts, but the very essence of a licence does not exist in Quebec civil law. There cannot be perfect uniformity in this regard. There is no doubt that the two legal systems intersect, meaning that it is possible to draw parallels between some of their respective concepts. Ultimately, however, the differences are such that, fundamentally, the exhaustive importing or exporting of certain concepts is impossible and, according to some, undesirable.

There are two lines of thought in this regard within the Quebec legal community. It is well known that Quebec civil law is a mixed law whose two main sources have been, and still are, French civil law and the common law of England as well as the other Canadian provinces and, to some extent, the United States.[318] This is how Quebec civil law as it now stands has developed. However, despite those origins, the practice of comparative law is not viewed the same way by advocates of the two lines of thought:

[translation]

The mixed nature of Quebec law is, quite naturally, reflected in the methodology of comparative law in Quebec. On the one hand, authors and judges often practise comparative law within the same major system of civil law, especially French law. In confining themselves to the world of civil law, they are motivated by a concern to keep Quebec law close to the other civil law systems and thus ensure its integrity — a recurrent theme in Quebec legal literature. On the other hand, there are judges and sometimes authors who draw inspiration not only from the civil law but also from the common law. This second trend reflects a desire to harmonize the solutions of Quebec law with those of the other Canadian provinces and the United States. As will be seen below, these two ways of looking at comparative law do create some tension.[319]

Without a doubt, the statements of Beetz J. and Mignault J.A. referred to in Chapter I of our study[320] fall under the first line of thought. In so far as the concept of licence cannot be exhaustively incorporated into Quebec civil law, would they recognize that concept in Quebec property law or would they treat it the same way as the invitee-licensee-trespasser trilogy in extracontractual liability? We do not know the answer to this question, although a negative answer could not be surprising. But is it viable?

Despite the close connection that Quebec has with France, both in its legal system and at an economic and cultural level, the fact remains that Quebec is the only civil law province in all of Canada. In these circumstances, although we understand the concern that some people have to keep Quebec law close to the other civil law systems, is this really beneficial in a context of trade globalization and increasingly competitive markets?

That is also the context in which the Department of Justice Canada is making its harmonization efforts: [translation] "Eighty percent of the world's countries are governed by legal systems derived from either the common law or the civil law. Our grasp of both legal systems enables us to better understand the norms, laws and legal institutions of countries as different from ours as Chile, Japan and France. That understanding facilitates our trade with them."[321] It also facilitates the application of our federal statutes, such as the E.T.A. Thus, it is perhaps a matter not so much of determining whether licences as defined by the common law exist in Quebec civil law generally or identifying their civil law equivalent as of trying to adopt a definition of licences for problematic situations that would allow that statute in particular to be applied fairly and equitably. In fact, this seems to be everyone's avowed purpose, whatever the means relied on to achieve it, as noted by Létourneau J.A. in Canada v. Construction Bérou Inc.:[322]

The Interpretation Bulletin issued by Revenue Canada sought, because of the legal uncertainty surrounding the idea of the leasing, to introduce a salutary degree of certainty in tax matters which is necessary for the economic development resulting from these financial and commercial transactions. In operational terms, it also allowed Revenue Canada to plan and adopt a uniform and equitable approach at the national level for such transactions, whatever might be the disparities in private law produced by the special features of one legal system as compared to another. I should mention in passing that it is interesting to see that in the appeal case Her Majesty the Queen and Mont-Sutton Inc. . . . which was heard by this Court on June 16, 1999, the appellant admitted that the concept of a licence at common law . . . does not exist in Quebec civil law. In order to deny a deduction to a taxpayer, the respondent argued that it was necessary to [translation] "ensure a fair and equitable application of the Act throughout Canada" and that even if the concept of a licence was not part of Quebec civil law, "the provisions of the Act should be applied uniformly to everyone so far as possible whatever the legal system". . . . It is a matter for surprise that in the appeal at bar the respondent is using the special nature of Quebec civil law as a reason for denying the appellant a deduction which is granted to taxpayers and businessmen operating under the common law system.[323]

It is thus from this perspective that we are proposing the harmonization solutions set out in the last chapter of our study.

Chapter III – Harmonization of the Excise Tax Act with Quebec Civil Law

3.1. Harmonization techniques: double, neutral term, Quebec clause and new definition

Before the most appropriate harmonization method for the E.T.A. can be identified, the problem must first be described in a more precise way. The source of the problem is that Parliament uses private law concepts in the E.T.A. without defining them. For the purposes of applying the Act's provisions, Parliament could have decided to define the terms that usually fall under private law. For leases and licences, no definitions are provided, which is why it is necessary to rely on the common law and Quebec civil law to determine their meaning. To use the terminology formally adopted by the jurists in the Program to Harmonize Federal Legislation with the Civil Law of Quebec,[324] this is therefore a situation involving "complementarity" between federal law and provincial private law.[325]

Next, the problem arises in one of three possible situations: situations of unijuralism, situations of semi-bijuralism and situations of apparent bijuralism. A situation of unijuralism arises when a statutory provision is based on a concept or on terminology that is unique to the common law in both the English and French versions of the statute.[326] A situation of semi-bijuralism arises where the French version of a legislative provision is based on concepts or terminology specific to the civil law and the English version is based on concepts or terminology specific to the common law.[327] Finally, a situation of apparent bijuralism arises where the vocabulary used in English and French in a statute is based on civil law terminology but inappropriately so.[328] The problems that exist in applying the concept of licence in the E.T.A. arise out of a situation of unijuralism, since that concept and the terminology used in the English and French versions of the Act are exclusive to the common law.

Four harmonization techniques were developed by the jurists in the Program to Harmonize Federal Legislation with the Civil Law of Quebec, namely the double, the neutral term, the Quebec clause and the new definition. The double is a drafting technique that involves using different terms to express the legal rule applicable to each legal system. This technique is particularly useful when it is necessary to clearly delimit the application of a legal rule in Quebec and elsewhere in Canada.[329] The use of a neutral term is a drafting technique that involves using a neutral term that has no connotation in either legal system, while the generic groups together a number of legal concepts under a single term specific to the legal system involved.[330] The Quebec clause involves incorporating into the statute a provision or a clause in a definition that describes the statute's application for the province of Quebec specifically, with reference being made to Quebec civil law concepts and terminology. Finally, the new definition is a legislative drafting technique that, in the context of legislative bijuralism, involves giving a term a meaning that applies to both the civil law and the common law.[331]

However, the choice of one of these harmonization technique must take account of the following three fundamental objectives: the application of the provisions must be uniform in all Canadian provinces while respecting Quebec civil law; harmonization must be achieved without changing existing tax policy; and, finally, the interpretation of the Act must be consistent with sections 8.1 and 8.2 of the Interpretation Act:[332]

Section 8.1: Both the common law and the civil law are equally authoritative and recognized sources of the law of property and civil rights in Canada and, unless otherwise provided by law, if in interpreting an enactment it is necessary to refer to a province's rules, principles or concepts forming part of the law of property and civil rights, reference must be made to the rules, principles and concepts in force in the province at the time the enactment is being applied.

Section 8.2: Unless otherwise provided by law, when an enactment contains both civil law and common law terminology, or terminology that has a different meaning in the civil law and the common law, the civil law terminology or meaning is to be adopted in the Province of Quebec and the common law terminology or meaning is to be adopted in the other provinces.[333]

We have therefore taken these parameters into account in trying to develop some harmonization solutions for the E.T.A. The harmonization technique that involves incorporating into the statute a provision specifically describing how certain concepts apply in Quebec strikes us as the most appropriate one in the circumstances. The last section of our study therefore deals with the incorporation of a Quebec clause into the E.T.A. and sets out our recommendations.

3.2. Recommendations

The concept that presents a problem in Quebec civil law is the concept of licence as defined by the common law, which is not recognized in Quebec civil law. As we have seen, the use of the term "licence" in the E.T.A. is not always problematic. We have looked at the various definitions that can be given to that term[334] and seen that application problems arise only in a property law context. Our analysis of the concept of licence in the common law has ultimately enabled us to draw certain parallels with civil law institutions that have some characteristics of the common law concept. Unfortunately, none of those institutions exhaustively encompasses all possible licences so as to create perfect uniformity of application in every Canadian province.

We have seen that the provisions of the E.T.A. that use the concept of licence as part of the expression "lease, licence or similar arrangement" do not create application problems for Quebec. This is because the tax authorities' administrative position on the interpretation of that expression allows for the uniform application of the E.T.A. in all Canadian provinces.[335] Thus, an agreement that would be characterized as a licence in the common law provinces can be characterized as a "similar arrangement" in Quebec without it being necessary to specifically determine the nature of the agreement in Quebec civil law.

However, the fact remains that the term "licence" used in a property law context, whether in the expression "lease, licence or similar arrangement" or alone, is a meaningless term in Quebec civil law. Moreover, when it is used alone, as in paragraph 25(f) of Part VI of Schedule V of the E.T.A., the objective of uniformity is compromised. That is why a harmonization solution is necessary for such provisions.

First of all, in so far as the E.T.A. applies to both Anglophone and Francophone taxpayers in the common law provinces and Quebec, we recommend that the term "licence" be used in the English version and the term "permission" in the French version. This choice of the French term "permission" to translate "licence" is consistent with the terminology used by the Canadian Bar Association in its Canadian Common Law Dictionary: Law of Property and Estates.[336] We prefer this term to others, such as "permis", which is more appropriate in an administrative law context,[337] and "permis d'occupation", which clearly applies to residential licences but not to licences that more specifically confer a right to use property, such as a licence conferring a mooring right or a right to use ski slopes.

Moreover, the term "permission" has the advantage of not being a specifically civil law term. It does not correspond to the name of a real right or a nominate contract in the Civil Code of Québec, which could be confusing. In the civil law, the term "permission" simply means authorization.[338] We also feel that the use of this term would have the advantage of distinguishing, in the French version of the Act, situations in which a licence exists in a property law context from situations in which a licence is a permit in an administrative context or a copyright, patent, trademark or franchise in intellectual and industrial property law.[339] For the purposes of the E.T.A., a supply would therefore be made by way of "lease, licence or similar arrangement" in the English version and by way of "bail, permission ou accord semblable" in the French version. It is also interesting to note that, in the French version of the Act respecting the Québec sales tax, the term "louage" is used in the expression "louage, licence ou accord semblable" and not the term "bail" used in the federal statute.[340] Since the Civil Code of Québec mostly uses the term "bail" in articles 1851 et seq. even though the term "louage" is used in the chapter title, we feel that both terms are appropriate.

Our second recommendation concerns the definition of the concept of licence. As we stated above, Parliament has chosen not to lay down its own private law rules by not including its own definitions of the concepts of lease and licence in the E.T.A. Reliance must therefore implicitly be placed on the private law definitions even though this creates some ambiguity. That is why we recommend that the terms "lease" and "licence" in the English version and the terms "bail" and "permission" in the French version be defined for the purposes of the E.T.A. Using the Quebec clause harmonization technique, those definitions could be added to the general definitions section, section 123(1) of the E.T.A. They could draw inspiration from the definition of the term "real property" in section 123(1), which contains a definition for the application of the term "immovable property" in Quebec and a definition for the application of the term "real property" in the other Canadian provinces.[341]

This type of drafting would allow these two concepts to be defined using terminology specific to each legal system. For example, to define the concepts of lease and licence for Quebec, it would be appropriate to use civil law terms, such as "real right" (droit réel), "nominate contract" (contrat nommé) and "innominate contract" (contract innommé).[342] In defining those concepts for the other Canadian provinces, it will be possible to use the terms "interest in land" (intérêt foncier) and "exclusive possession" (possession exclusive), which, for all practical purposes, have no real meaning in Quebec civil law, not to mention the fact that, as we have seen, the meaning of those terms goes beyond the words that make them up.

If a Quebec clause is not included, a joint definition would also be possible. It would be necessary to use neutral terms that have no specific connotation in the civil law or the common law. As an example, the terms "permis" (licence) and "droits réels" (interest) are defined as follows in the French version of the Federal Real Property Act:[343]

«permis» Droit d'usage ou d'occupation d'immeubles qui n'est pas un droit réel.

«droits réels» Droits réels immobiliers, notamment les servitudes; y sont assimilés les droits du locataire d'un immeuble.

We would like to make a few comments on the terminology used in those definitions. We feel that the use of the term "droit d'usage" ("right of use" in English) could be confusing given that it is a recognized real right and a dismemberment of the right of ownership in Quebec civil law that makes it possible to enjoy the property of another for a time and to take the fruits and revenues thereof, to the extent of the needs of the user and the persons living with the user or his or her dependants.[344] However, a permis or licence is in fact not a real right but rather a strictly personal right. This is a fundamental element that distinguishes licences from leases and other real rights in the common law. Thus, in order to apply the Act in Quebec, it would be preferable to use the term "droit d'utilisation"/"right to use" rather than "droit d'usage"/"right of use" in the definition of "permis"/"licence". These comments also apply to the drafting of a definition of "permission"/"licence" for the purposes of the E.T.A.

We should specify that the definitions in the Federal Real Property Act are applicable in an administrative law context that is very different from the ordinary law context to which our study relates. What is involved is an administrative contract that is [translation] "one way for the government to authorize the private sector to use a portion of public property while retaining ownership thereof".[345] Moreover, in their Traité de droit administratif, R. Dussault and L. Borgeat express the view that a permis as such cannot be reduced to a civil law concept:[346]

[translation]

The legal relationship that exists between the licensor and the licensee is not a contract by negotiation but rather an adhesion contract. . . . The relationship is in fact a legislative and regulatory one the elements of which are beyond the control of one of the parties. . . . The fact that there is a public party to the act takes this legal relationship outside the system of ordinary law: it is an administrative contract.[347]

Thus, in administrative law, the concept of permis exists in Quebec as a way of granting rights to use public property. Although that administrative law concept is similar to the concept of permission in property law, the latter is nonetheless not part of the ordinary law of the province of Quebec. Thus, in developing a definition of the concept of permission for the purposes of applying the E.T.A. in Quebec, it would be worth drawing inspiration from the definition of "permis" in administrative law, subject to the comments made above.

Apart from these reference points, we are aware that drawing up a definition of the concept of permission or licence will not be an easy task. The definition will have to be precise so as not to encompass rights or agreements that are not characteristic of licences while being general to allow for some flexibility in its application. However, the definition will have to include all the basic elements of a licence: a personal right that does not confer an interest in land or exclusive possession of property and that is granted to authorize the occupation or use of property or the performance of an act that would otherwise constitute trespassing. The other characteristics of licences, such as revocability and enforceability, derive from their personal nature.

However, the difficulty will be representing these common law concepts in defining licences for Quebec. Three concepts should be mentioned: interest in land, exclusive possession and trespass, none of which is known in Quebec civil law. The first two concepts can, for all practical purposes, be represented by the civil law concept of real right, but the concept of trespass does not exist in Quebec.[348] It would therefore be preferable not to attach too much importance to that concept in developing a definition. This is all the more logical given that, for the purposes of the E.T.A., in most cases contractual licences will be involved and breach of contract will be relied on before trespass. Alternatively, the licensor could rely on article 912 C.C.Q., since a licence does not have the effect of transferring the attributes of the right of ownership to the licensee at the time it is granted. This remedy would therefore be available to the licensor in order to obtain an injunction, as in the common law, against any licensee who refused to leave the premises when his or her rights were extinguished.

In conclusion, in so far as all the basic elements of a licence are included in a definition for the application of the E.T.A. in Quebec, the lease/licence characterization for the purposes of paragraph 25(f) of Part VI of Schedule V of the E.T.A. will depend entirely on the terms of the agreement and the parties' intention. Those elements will make it possible to determine whether all the essential elements for the formation of a contract of lease are present or, in the alternative, whether the agreement is an innominate contract that contains all the elements of a licence as set out in the definition of that term.

While this solution seems ideal in theory, we believe that the practical application of paragraph 25(f) will still be problematic. Some agreements characterized as licences in the common law will still be able to be characterized as leases in the civil law and, in circumstances where the period of possession and use of the property is more than one month, there will still be a disparity between the tax treatment in Quebec and that in the common law provinces. This is because the concept of lease is fundamentally different in the two legal systems and because a licence is more similar to a civil law lease than to a lease under the common law itself. How can we prevent an agreement that is basically a licence and not a lease in the common law from being characterized as a lease in the civil law for the sole purpose of ensuring that both of these agreements are given the same tax treatment?

With respect to the E.T.A.'s provisions, and especially paragraph 25(f) of Part VI of Schedule V, we believe that the distinction between leases and licences will ultimately be a question not so much of ordinary law but of tax policy. It cannot be denied that tax policy was developed largely in reliance on the common law classification of rights and property and not the civil law classification. That is why Revenue Canada constantly has to clarify its administrative position on the application of the E.T.A. in Quebec. From this standpoint, we feel that the wording of the definitions of "lease" and "licence" should take account of how those rights are defined in the common law and the civil law but that those rights should ultimately be defined on the basis of the government's tax policy, even if the distinction between leases and licences would be somewhat different under ordinary law. If presumptions were established in this way solely for the purposes of the E.T.A. or certain provisions thereof, the application of those provisions in Quebec would thus be resolved.

From another standpoint, we believe that it would also be possible to correct the problem that arises in applying paragraph 25(f) of Part VI of Schedule V of the E.T.A. in Quebec by returning to the original wording of that provision while including therein the changes that occurred with the 1996 legislative amendment. The use of the expression "lease, licence or similar arrangement" followed by the criterion of continuous possession or use would mean that agreements would not have to be characterized as leases or licences in the civil law. To comply with the tax policy concerning licences, other criteria might have to be added so as not to alter the current tax base. We will content ourselves with these comments in so far as they go beyond the scope of our mandate and that of the Program to Harmonize Federal Legislation with the Civil Law of Quebec.[349]

Conclusion

Our study of licences, but also our overview of property law in the common law and the civil law, makes us realize the extent to which the historical and structural differences between the two legal systems can have major repercussions when applying provisions that, prima facie, should not present any problems. This is also why harmonization work is so important at a time when the globalization of trade necessarily leads to the disappearance not only of certain geographical borders but also of certain legal borders. It is legitimate for each legal system to want to preserve its identity and its own institutions and avoid any unwarranted interference by other legal systems. However, there comes a time when the application of federal legislation is affected by this, as we have seen with the E.T.A.

From this point of view, we consider it appropriate to include definitions in the E.T.A. to facilitate the application of provisions referring to concepts that are fundamentally different in the civil law and the common law, or even that exist in only one of those systems, while complying with the tax policy applicable to consumption taxes. We believe that the recommendations we have made take account of those objectives and that any change of a term or an entire provision will make it possible to attain the equity objectives underlying the Canadian tax system.

BIBLIOGRAPHY

Legislation and Regulations:

Federal:

Income Tax Act, R.S.C. 1985, 5th Supp., c.1, as amended.

Interpretation Act, R.S.C. 1985, c. I-21.

Excise Tax Act, R.S.C. 1985, c. E-15, as amended.

Federal Real Property Act, S.C. 1991, c. 50.

A First Act to harmonize federal law with the civil law of the Province of Quebec and to amend certain Acts in order to ensure that each language version takes into account the common law and the civil law, Bill S-22, First reading, May 11, 2000.

A First Act to harmonize federal law with the civil law of the Province of Quebec and to amend certain Acts in order to ensure that each language version takes into account the common law and the civil law, Bill S-4, First reading, January 31, 2001.

Provincial:

Quebec:

Civil Code of Québec, S.Q. 1991, c. 64.

Act respecting the Québec sales tax, R.S.Q., c. T-0.1, as amended.

Ontario:

Tenant Protection Act, 1997, S.O. 1997, c. 24.

New Brunswick:

Landlord and Tenant Act, R.S.N.B. 1973, c. L-1.

Alberta:

Residential Tenancies Act, R.S.A. 1980, c. R-15.3.     

Foreign:

France:

Civil Code, Decree No. 97-34, in force as of January 1, 1998.

CASES:

Addiscombe Gardens Estates Ltd. v. Crabbe, [1958] 1 Q.B. 513, 3 All E.R. 563.

A.G. of Canada v. Constance St-Hilaire, 2001 FCA 63.

A.G. of Canada v. Metropolitan Toronto Hockey League, [1995] G.S.T.C. 31, 94 G.S.T.C. 55, T.C.C. 93-2868 (GST).

Anastasia Rubis v. Gray Rocks Inn Limited, [1982] 1 S.C.R. 452.

Appah v. Parncliffe Investments Ltd., [1964] 1 All E.R. 838, 1 W.L.R. 1064 (C.A.).

Ashburn Anstalt v. Arnold, [1989] Ch. 1, [1988] All E.R. 147.

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Clore v. Theatrical Properties Ltd., [1936] 3 All E.R. 483.

Cobb and another v. Lane, [1952] 1 All E.R. 1199.

Coggs v. Bernard (1708), 2 Ld. Raym. 909, 92 E.R. 107.

Coleman v. Sir W. Foster (1856), 1 H.& N. 37, 156 E.R. 1108.

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Crabb v. Arun District Council, [1976] Ch. 179.

Dillwyn v. Llewlyn (1862), 4 De G.F. & J. 517, 45 E.R. 1285.

Duke of Sutherland v. Heathcote, [1892] 1 Ch. 475.

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Gypsum Carrier Inc. v. The Queen, [1978] 1 F.C. 147.

Hill v. Tupper (1863), 3 B.&S. 826.

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I.B.M. Canada Ltd. v. The Queen, 93 D.T.C. 1266 (T.C.C).

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Johnson v. British Canadian Insurance Co., [1932] 4 D.L.R. 281, S.C.R. 680.

Jones & Sons v. Tankerville, [1902] 2 Ch. 440.

Keith Whitney Homes Society v. Payne (1992), 9 O.R. (3d) 186.

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Maxwell v. Brown (1982), 35 O.R. (2d) 770 (Co. Ct.).

McLennan v. Charlottetown Flying Services (1979), 24 Nfld & P.E.I.R. 72, 65 A.P.R. 72 (P.E.I.S.C.).

Metro-Matic Services Ltd. v. Hulmann (1973), 4 O.R. (2d) 462, 48 D.L.R. (3d) 326 (C.A.).

Morris-Thomas v. Petticoat Lane Rentals (1986), 53 P.&C.R. 238.

Muskett v. Hill (1839), 5 Bing. N.C. 694 at 707, 132 E.R. 1267.

National Provincial Bank Ltd. v. Ainsworth, [1965] A.C. 1175 (H.L.).

National Provincial Bank Ltd. v. Hastings Car Mart, Ltd., and others, [1964] 1 All E.R. 688, Ch. 665, AC 1175 (H.L.).

O'Neil v. Esquire Hotels Ltd. (1972), 30 D.L.R. (3d) 589 (N.B.S.C., App. Div.).

Ontario Regional Assessment Commissioner, Region 13 v. Downtown Oshawa Property Owners Association (1978), 88 D.L.R. (3d) 303 (S.C.C.).

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Plimmer and another v. Wellington Corporation (1884), 9 App Cas 699, H.L. A.C. 1875-90.

The Queen v. Smith (1980), 113 D.L.R. (3d) 522.

Race v. Ward (1855), 4 El.&Bl 702, 119 E.R. 259.

Radaich v. Smith (1959), 101 C.L.R. 209 (Austr. S.C.).

Ramsden v. Dyson (1866), LR 1 HL 129.

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Re Canadian Pacific Hotels Ltd. and Hodges et al. (1978), 96 D.L.R. (3d) 313 (Co. Ct.).

Re Public Utilities Commission of the Town of Mitchell and Ord, [1935] O.W.N. 31.

Re Ramsey and Heselmann (1983), 42 O.R. (2d) 255, 148 D.L.R. (3d) 764 (Div. Ct.).

Re Totem Tourist Court and Skaley et al., [1973] 3 O.R. 867 (Dist. Ct.).

Regina v. Poulin, [1973] 2 O.R. 875 (Prov. Ct., Crim. Div.).

Robert Addie and Sons (Colleries) Ltd. v. Dumbreck, [1992] A.C. 358 at 371 (H.L.).

Shell-Mex and B.P. Ltd. v. Manchester Garages Ltd., [1971] 1 W.L.R. 612.

Snowlarks Ski School Inc. v. Mont Gabriel Lodge (1973) Inc., [1975] C.S. 790.

Stiles v. Tod Mountain Development Ltd. (1992), 64 B.C.L.R. (2d) 366 (B.C.S.C.).

Street v. Mountford, [1985] 2 All. E.R. 289 (H.L.).

Terunnanse v. Terunnanse, [1968] A.C. 1086.

Thomas v. Sorrell (1673), 124 E.R. 1098.

Torbett v. Faukener, [1952] 2 T.L.R. 659.

Trizec Equities Ltd. v. Regional Assessment Commissioners, Region 27 (1988), 37 M.P.L.R. 175 (Div. Ct.).

Tulk v. Moxhay (1848), 2 Ph. 774.

Verrall v. Great Yarmouth Borough Council, [1981] Q.B. 202, [1980] All E.R. 839, M&B 547.

Walsh v. Lonsdale (1882), 21 Ch. D. 9.

Walton Stores Ltd. v. Sydney County Council, [1968] 2 N.B.W.R. 109, 70 S.R. 244 (N.S.W.), 88 W.N. (Pt 2) 153 (C.A.).

Winter v. Brockwell (1807), 8 East 308.

Winter Garden Theatre (London) Ltd. v. Millennium Productions, [1948] A.C. 173.

Wood v. Leadbitter (1845), 14 L.J.Ex 161, 13 M.&W. 838, 153 E.R. 351.

SECONDARY MATERIALS:

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ANGER, H.D. and J.D. HONSBERGER, Canadian Law of Real Property (Toronto: Canada Law Book Company Limited, 1959).

BASTARACHE, M. and A. BOUDREAU-OUELLET, Précis du droit des biens réels (Cowansville: Les Éditions Yvon Blais Inc., 1993).

BAUDOIN, J.L., Les obligations, 4th ed. (Cowansville: Les Éditions Yvon Blais Inc., 1993).

BAUDOIN, J.L. and P-G. JOBIN, Les obligations, 5th ed. (Cowansville: Les Éditions Yvon Blais inc., 1998).

BENSON, M.L. and M.A. BOWDEN, A Guide to Canada's Property Law (Toronto: Carswell, 1997).

BROWN, R., The Law of Personal Property, 3rd ed. (Chicago: Callaghan and Co., 1975).

BURN, E.H., Cheshire and Burn's Modern Law of Real Property, 14th ed. (London, Edinburgh: Butterworths, 1988).

BURN, E.H., Cheshire and Burn's Modern Law of Real Property, 15th ed. (London, Edinburgh: Butterworths, 1994).

CHAVANNE, A. and J.J. BURST, Droit de la propriété industrielle, 4th ed. (Paris: Précis Dalloz, 1993).

DALLOZ, Répertoire pratique de législation, doctrine et jurisprudence, vol. 7 (Paris: Librairie Dalloz, No. 255).

DI CASTRI, J.V., Occupiers' Liability (Burroughs and Company, 1980).

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DUSSAULT, R. and L. BORGEAT, Traité de droit administratif, vol. II, 2nd ed. (Quebec City: Presse de l'Université Laval, 1986).

GILLESE, E.E., Property Law: Cases, Text and Materials, 2nd ed. (Toronto: Emond Montgomery Publications Limited, 1990).

GOLDSTEIN, G. and D-C. LAMONTAGNE, Droit des contrats spéciaux: Recueil de jurisprudence, 2nd ed. (Montreal: Les Éditions Thémis, 1995).

GRENON, A. and L. BÉLANGER-HARDY, Éléments de la common law et aperçu comparatif du droit civil québécois (Toronto: Carswell, 1997).

JOBIN, P-G., Le louage des choses (Cowansville: Les Éditions Yvon Blais Inc., 1989).

JOBIN, P-G., Traité de droit civil - Le louage, 2nd ed. (Cowansville: Les Éditions Yvon Blais Inc., 1996).

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LAMONTAGNE, D-C., Biens et propriété (Cowansville: Les Éditions Yvon Blais Inc., 1993).

LAMONTAGNE, D-C. and B. LAROCHELLE, Droit spécialisé des contrats, vol. 1 (Cowansville: Les Éditions Yvon Blais Inc., 2000).

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LLOYD EVANS, D., The Law of Landlord and Tenant (London: Butterworths, 1974).

MALAURIE, P. and L. AYNÈS, Droit civil - Les contrats spéciaux (Paris: Les Éditions Cujas, 1992).

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MEGARRY, R. and  M.P. THOMPSON, A Manual of the Law of Real Property, 7th ed. (London: Sweet and Maxwell Limited, 1993).

MEGARRY, R. and  H.W.R. WADE, The Law of Real Property, 5th ed. (London: Sweet and Maxwell Limited, 1984).

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MENDES DA COSTA, D. and  R. J. BALFOUR, Property Law: Cases, Text and Materials, 1st ed. (Toronto: Emond Montgomery Publications Limited, 1982).

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SINCLAIR, A.M., Introduction to Real Property Law, 2nd ed. (Toronto: Butterworths, 1982).

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BÉNABENT, A. and C. LUCAS DE LEYSSAC, "La nature juridique des locations saisonnières" (1977) Dalloz-Chroniques 241.

BOUGANIM, V., "The Multiple Faces of the 'Bail par Tolérance'" (1994) 2:1 Revue d'études juridiques 1.

BRISSON, J-M., "L’impact du Code civil du Québec sur le droit fédéral: une problématique" (1992) 52:2 Revue du Barreau 345.

GAUTHIER, P-Y., "Du contrat de précaire sur les images de cinéma" (1989) Dalloz-Chroniques 113.

GRAGO, J.M., "The Unit of Taxation: Current Issues" 52:1 University of Toronto Faculty of Law Review 1.

HONORAT, J. and H. HOVASSE, "Chronique de jurisprudence commerciale" (1997) Répertoire du Notariat Défrénois 1269.

JOBIN, P-G., "Le droit comparé dans la réforme du Code civil du Québec et sa première interprétation" (1997) Cahiers de Droit 477.

JOBIN, P-G., "Résiliation et renouvellement du bail conclu avec plus d'un locataire: le difficile ménage à trois" (1987) Canadian Bar Review 305.

MAYRAND, A., "À quand le trépas du 'trespasser'?" (1961) 21 Revue du Barreau du Québec 1.

OLIVIER, A., "Fitness for Purpose in the Contract of Lease under the Civil Code of Quebec" (1995) 40:1 McGill Law Journal 187.

PERREAULT, A., "Contrat de stationnement, nature du contrat" (1942) 2 Revue du Barreau du Québec 128.

PIZZIO, J-M., "La notion de convention d'occupation précaire et son application jurisprudentielle" (1980) J.C.P. Semaine juridique 2975.

PRATTE, P., "Le harcèlement envers les locataires et l'article 1902 du Code Civil du Québec" (1996) 56:1 Revue du Barreau du Québec 3.

ROACH, J.E., "La location immobilière en common law", extract from an upcoming work (University of Ottawa, 2000).

ROUSSEAU-HOULE, T., "Les récents développements dans le droit de la vente et du louage de choses au Québec " (1985) 15 Revue de droit de l'Université de Sherbrooke 307.

ROY-LOUSTAUNAU, C., "Le contrôle judiciaire de la validité de la convention d'occupation précaire de locaux commerciaux à l'épreuve de la théorie générale des contrats" (1988) Dalloz-Chroniques 216.

REFERENCE WORKS:

ALLEN, R.E., The Concise Oxford Dictionary, 8th ed. (Oxford: Clarendon Press, 1990).

Black's Law Dictionary, 6th ed. (St-Paul, Minn.: West Publishing Co., 1990).

CANADIAN BAR ASSOCIATION, Canadian Common Law Dictionary: Law of Property and Estates (Cowansville: Les Éditions Yvon Blais Inc., 1997).

Dukelow, A. and B. NUSE, The Dictionary of Canadian Law, 2nd ed. (Toronto: Carswell, 1995).

Halsbury's Laws of England, vol. 27, 4th ed. (London: Butterworths, 1994).

Les dictionnaires Le Robert, Le Petit Robert 1 (Paris, 1996).

PATRY, R., et al., Droit des biens, vol. 2, La Clef (Canadian Bar Association, 1993).

REID, H., Dictionnaire de droit québécois et canadien (Montreal: Wilson & Lafleur Ltée, 1994).

Yogis, J.A., Canadian Law Dictionary, 3rd ed. (Barron’s, 1995).

GOVERNMENT PUBLICATIONS:

FEDERAL:

DEPARTMENT OF FINANCE CANADA, Explanatory Notes, paragraph 25(f) of Part VI of Schedule V of the E.T.A. (February 1993).

DEPARTMENT OF FINANCE CANADA, Goods and Services Tax: An Overview, the Honourable Michael H. Wilson, Minister of Finance of Canada (August 1989).

DEPARTMENT OF FINANCE CANADA, Press Release No. 92-064, "Further Technical Amendments to the GST Introduced" (September 15, 1992).

DEPARTMENT OF JUSTICE CANADA, Civil Code Section, Harmonisation de la législation fédérale (Ottawa, Presentation to student researchers, October 19, 2000).

DEPARTMENT OF JUSTICE CANADA, Policy on Legislative Bijuralism/Politique sur le bijuridisme législatif, 1997.

DEPARTMENT OF JUSTICE CANADA, The Harmonization of Federal Legislation with Quebec Civil Law and Canadian Bijuralism: Respecting the Coexistence of Canada's Two Legal Traditions (Consultation Paper, 1997).

GOVERNMENT OF CANADA, Royal Commission on Taxation, Report of the Royal Commission on Taxation (Ottawa: Queen's Printer, 1966).

Revenue Canada Views in GST Partner (CD-ROM) (Scarborough: Carswell), Technical Interpretation 11950-11890-1, July 5, 1999.

Revenue Canada Views in GST Partner (CD-ROM) (Scarborough: Carswell), Technical Interpretation 98-0102933, September 29, 1998.

Revenue Canada Views in GST Partner (CD-ROM) (Scarborough: Carswell), Technical Interpretation 11950-11895-1, July 11, 1998.

Revenue Canada Views in GST Partner (CD-ROM) (Scarborough: Carswell), Technical Interpretation 11950-1, July 7, 1994.

Revenue Canada Views in GST Partner (CD-ROM) (Scarborough: Carswell), Technical Interpretation 11950-4, June 17, 1994.

Revenue Canada Views in GST Partner (CD-ROM) (Scarborough: Carswell), Technical Interpretation 940218, February 18, 1994.

Revenue Canada Views in GST Partner (CD-ROM) (Scarborough: Carswell), Technical Interpretation 1991/06/26, June 26, 1991.

Revenue Canada Views in GST Partner (CD-ROM) (Scarborough: Carswell), Technical Interpretation 1991/06/12, June 12, 1991.

Revenue Canada Views in GST Partner (CD-ROM) (Scarborough: Carswell), Policy Statement P-111R, February 1995.

Revenue Canada Views in GST Partner (CD-ROM) (Scarborough: Carswell), Policy Statement P-062, May 25, 1993.

Revenue Canada Views in GST Partner (CD-ROM) (Scarborough: Carswell), GST/HST Memorandum, Chapter 19.1.

Revenue Canada Views in GST Partner (CD-ROM) (Scarborough: Carswell), GST/HST Memorandum, Chapter19.2.2.

PROVINCIAL:

QUEBEC:

Collection fiscale du Québec (CD-ROM) (Farnham: Publications CCH), Interpretation Bulletin TVQ 138.1-1- supplies of funeral property and services by a charity, September 30, 1999.

Collection fiscale du Québec (CD-ROM) (Farnham: Publications CCH), Open Forum 29/09/96-02/10/96.

Collection fiscale du Québec (CD-ROM) Farnham, Publications CCH, Technical Interpretation 95-0113274, October 7, 1996.