THE EXCISE TAX ACT AND THE APPLICATION OF THE COMMON LAW CONCEPT OF LICENCE IN A QUEBEC CIVIL LAW CONTEXT

Author: Pascale Laroche

TABLE OF CONTENTS

Introduction
Chapter I – Study of the Concept of Licence
1.1 Overview of property law in the common law: classification of property
1.2. Study of the concept of licence in the common law
1.2.1. Definitions
1.2.2. Nature and creation of licences
1.2.3. Types of licences
1.2.3.1. Bare licence
1.2.3.2. Contractual licence
1.2.3.3. Licence coupled with an interest
1.2.4. Rights and obligations of the licensor and the licensee
1.2.4.1. Revocability of licences
1.2.4.2. Enforceability against third parties
1.2.5. Criteria for distinguishing between licences and other rights
1.2.5.1. Licences and leases
1.2.5.2 Licences and profits à prendre
1.2.5.3. Licences and easements
1.2.5.4. Licences and bailment
1.3. Context in which the term "licence" is used in the E.T.A
1.3.1. Various meanings give to the term "licence" in the E.T.A
1.3.2. Licences and the expression "lease, licence or similar arrangement"
Chapter II – Problems with the Use of the Common Law Licence in Quebec Civil Law
2.1. Problems applying the E.T.A.'s provisions in Quebec civil law
2.2. Legislative amendments to paragraph 25(f) of Part VI of Schedule V
2.3. Administrative policy of Revenue Canada and the Quebec Department of Revenue
2.3.1. Paragraph (f) before the 1992 legislative amendment
2.3.2. Paragraph (f) since the 1992 legislative amendment
2.4. Does the common law concept of licence exist in Quebec civil law?
2.4.1. Licences and property law in Quebec civil law
2.4.2. Licences and nominate contracts under the Civil Code of Québec
2.4.2.1. Loan for use
2.4.2.2. Contract of lease
2.4.3. Licences and innominate contracts in Quebec civil law
Chapter III – Harmonization of the Excise Tax Act with Quebec Civil Law
3.1. Harmonization techniques: double, neutral term, Quebec clause and new definition
3.2. Recommendations
Conclusion


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 Tax173a)
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.
Aslan v. Murphy, [1989] 3 All E.R. 130.
Bata v. City Parking Canada Ltd. (1973), 2 O.R. (2d) 446, 43 D.L.R. (3d ) 190 (C.A.).
Binions v. Evans, [1972] 2 All E.R. 70.
Booker v. Palmer, [1942] 2 All E.R. 674.
Burgoyne v. Griffiths, [1991] 1 E.G.L.R. 14.
Canada v. Construction Bérou Inc., [1999] F.C.J. No. 1761 (F.C.A.)
Canada v. Mont Sutton (1999), F.C.A. File No. A-764-95.
Cherry v. Petch et al., [1948] O.W.N. 378.
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.
C.P.R. v. The King, [1931] 2 D.L.R. 386, A.C. 414, 38 C.R.C. 1.
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.
E. Moss Ltd. v. Brown, [1946] 2 All E.R. 557.
Errington v. Errington and Woods, [1952] 1 All E.R. 149, 1 K.B. 290 (C.A.).
Facchini v. Bryson, [1952] 1 T.L.R. 1386 (C.A.).
Ford v. Seligman, [1955] 1 D.L.R. 796 (C.A.).
Frank Warr & Co. Ltd. v. L.C.C., [1904] 1 K.B. 713.
Glenwood Lumber v. Phillip, [1904] A.C. 405, [1904-07] All E.R. 203 (P.C.).
Green Timbers Retirement Housing Society v. Canada, [1996] G.S.T.C. 101 (T.C.C.).
Gypsum Carrier Inc. v. The Queen, [1978] 1 F.C. 147.
Hill v. Tupper (1863), 3 B.&S. 826.
Hurst v. Picture Theatres Ltd., [1915] 1 K.B. 1.
I.B.M. Canada Ltd. v. The Queen, 93 D.T.C. 1266 (T.C.C).
Inwards v. Baker,[1965] 2 Q.B. 29 (C.A.).
Isaac v. Hotel de Paris, [1960] 1 W.L.R. 239, 1 All E.R. 348.
Ivory v. Palmer, [1975] I.C.R. 340.
Janisse v. Livesey, [1994] O.W.N. 465, 4 D.L.R. 73 (H.C.).
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.
Kerrison v. Smith, [1897] 2 Q.B. 445.
Kirchmeier v. PM Wright Ltd., [1996] A.Q. No. 1113.
Maritime Coastal Containers Ltd v. Shelburne Marine Ltd. (1982), 52 N.S.R. (2d) 51,
106 A.P.R. 51 (T.D.).
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.).
Palmer v. Toronto Medical Arts Building Ltd., [1960] O.R. 60, 21 D.L.R. (2d) 181 (C.A.).
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.
Re British American Oil v. De Pass, [1960] O.R. 71, 21 D.L.R. (2d) 110.
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:
BOOKS:
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).
DUPONT DELESTRAINT, P., Droit civil - Principaux contrats, 9th ed. (Paris: Dalloz,
1988).
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).
LAFOND, P., Précis de droit des biens (Montreal: Éditions Thémis, 1999).
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).
LAROUCHE, A., Théorie générale des obligations (Ottawa: University of Ottawa, 2000).
LINDEN, A.M., Canadian Tort Law, 4th ed. (Toronto: Butterworths, 1988).
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).
MARIANI, N., Les systèmes juridiques dans le monde (Montreal: Wilson & Lafleur, 2000).
MAZEAUD, H.L. and J., Leçons de droit civil, vol. 2, 3rd ed. (Paris: Montchrestien, 1968).
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).
MEGARRY, R. and H.W.R. WADE, The Law of Real Property, 6th ed. (London: Sweet
and Maxwell Limited, 2000).
MENDES DA COSTA, D. and R. J. BALFOUR, Property Law: Cases, Text and
Materials, 1st ed. (Toronto: Emond Montgomery Publications Limited, 1982).
MIGNAULT, P.B., Le droit canadien, vol. 8 (Montreal: Wilson & Lafleur, 1909).
OOSTERHOFF, A.H. and W.B. RAYNER, Anger and Honsberger Law of Real Property,
vols. 1 and 2, 2nd ed. (Aurora, Ont.: Canada Law Books Inc., 1985).
PINEAU, J., D. BURMAN and S. GAUDET, Théorie des obligations, 3rd ed. (Montreal:
Les Éditions Thémis, 1996).
ROUSSEAU-HOULE, T., Précis du droit de la vente et du louage, 2nd ed. (Quebec City:
Presses de l'Université Laval, 1986).
SINCLAIR, A.M., Introduction to Real Property Law, 2nd ed. (Toronto: Butterworths,
1982).
WILLIAMS, E.K. and F.W. RHODES, Canadian Law of Landlords and Tenants, vols. 1
and 2, 6th ed. (Toronto: Carswell, 1988).
ZIFF, B., Principles of Property Law, 1st ed. (Toronto: Carswell, 1993).
ZIFF, B., Principles of Property Law, 2nd ed. (Toronto: Carswell, 1996).

PROFESSIONAL COLLECTIONS AND COURSES:
ARCHAMBAULT, N., "Le louage" in La Collection de droit du Barreau du Québec -
Obligations, Contrats et Prescription, vol. 5 (Cowansville, Les Éditions Yvon Blais Inc.,
1995-96).
BERNARD, M.R., "Baux industriels et commerciaux" in Formation permanente du
Barreau du Québec (Cowansville: Les Éditions Yvon Blais Inc., 1974-75).
CROTEAU, N., "Le contrat d'adhésion, ses mécanismes d'application et ses implications sur la
pratique notariale" (1994) 1 Cours de perfectionnement du Notariat 107.
DESCHAMPS, M., "Le prêt " in La réforme du Code civil - Textes réunis par le Barreau
du Québec et la Chambre des notaires du Québec, vol. 2 (Sainte-Foy: Presses de
l'Université Laval, 1993) 1016.
FRENETTE, F., "L'usufruit et usage " (1997) Répertoire de droit nouvelle, série de la
Chambre des notaires du Québec - Collection pédagogique - Document 1 - Louage.
GOLSTEIN, Y., "Le bail commercial avec commentaires généraux sur les autres contrats
commerciaux" (1977) 1 Cours de perfectionnement du Notariat 26.
LAFRANCE, N., "Le bail commercial: de certains aspects actuels et éléments de planification "
(1992) 1 Cours de perfectionnement du Notariat 93.
LANGEVIN, N. et N. VÉZINA, " Le contrat " in Barreau du Québec - Obligations et
contrats, vol. 5, Collection de droit 1999-2000 (Cowansville: Les Éditions Yvon Blais Inc.,
2000).
LAROCHELLE, B., "Le louage commercial et industriel " (1997) 48Répertoire de droit
nouvelle, série de la Chambre des notaires du Québec - Collection pédagogique, Louage,
Doc 1.
LEBEL, L., "Une cour entre deux Codes: Aspects de la jurisprudence récente de la Cour
d'appel du Québec " (1996) 1Cours de perfectionnement du Notariat 1.
SHERMAN, D., "David Sherman’s Analysis" in GST Partner (CD-ROM) (Scarborough:
Carswell).

ARTICLES FROM LEGAL JOURNALS:
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.



[1] S.Q. 1991, c.64 (hereinafter "C.C.Q."); the Civil Code of Lower Canada was in
force from 1866 to 1994.
[2] The Program to Harmonize Federal Legislation with the Civil Law of Quebec
was entrusted to the CivilCode Section in 1996 following the adoption of the Policy on the
Application of the Civil Code of Québec to the Federal Government in 1993.
[3] R.S.C. 1985, c. E-15, as amended (hereinafter also "the Act").
[4] See Canadian Bar Association, Canadian Common Law Dictionary: Law of
Property and Estates (Cowansville: Les Éditions Yvon Blais Inc., 1997), p. 368.
[5] R. Megarry and H.W.R. Wade, The Law of Real Property, 5th ed. (London:
Sweet and Maxwell Limited, 1984), p. 1; A.F. Oosterhoff and W.B. Rayner, Anger and
Honsberger Law of Real Property, vol. 1, 2nd ed. (Aurora, Ont.: Canada Law Books Inc.,
1985), chap. 2.
[6] See book four: property, articles 899 et seq. C.C.Q.
[7] The term "property" refers both to physical objects and to the rights and interests
that a person may have.
[8] Real actions were usually reserved for claims relating to land and situations in
which damages could not restore an evicted owner to his previous condition. At that time, an
individual's social status was defined by the land he owned, hence the importance of the
restitution of property of which an owner had been dispossessed. M. Bastarache and
A. Boudreau-Ouellet, Précis du droit des biens réels (Cowansville: Les Éditions Yvon Blais
Inc., 1993), p. 14.
[9] Personal actions were usually reserved for claims relating to personal property.
Both specific restitution and monetary restitution were possible (often animals were used for
payment — hence the term "chattel", akin to "cattle"); id.
[10] For example, land and its appurtenances, such as buildings.
[11] Interest: "A person is said to have an interest in a thing when he has rights,
advantages, duties, liabilities, losses or the like, connected with it, whether present or future,
ascertained or potential. . . . In a narrower sense, interest was used as opposed to estate, and
therefore denoted rights in property not being estates [such as] . . . interests resembling estates
but not recognized as such by the common law . . . (Jowitt, p. 995-996)"; taken from Canadian
Bar Association, op. cit., note 4, p. 317.
[12] [translation] ". . . [P]rovided, however, that the produce of the land is still uncut.
As soon as such property is cut, it becomes a chattel personal."; taken from M. Bastarache and
A. Boudreau-Ouellet, op. cit., note 8, p. 17.
[13] Called a leasehold estate.
[14] Called a freehold estate.
[15] For a more detailed study, see M. Bastarache and A. Boudreau-Ouellet, op. cit.,
note 8, p. 16.
[16] For example, claims, patents, trademarks, copyright. See id., p. 17.
[17] Infra, pp. 13 et seq.
[18] Les dictionnaires Le Robert, Le Petit Robert 1 (Paris, 1996), p. 1280.
[19] Id.
[20] Id. See also R.E. Allen, The Concise Oxford Dictionary, 8th ed. (Oxford:
Clarendon Press, 1990), p. 683.
[21] A. Chavanne and J-J. Burst, Droit de la propriété industrielle, 4th ed. (Paris:
Précis Dalloz, 1993), pp. 190-91.
[22] The Civil Code referred to in this passage is the French Civil Code, Decree
No. 97-34, which came into force on January 1, 1998.
[23] Infra, section 2.4.
[24] See J.V. Di Castri, Occupiers' Liability (Burroughs and Company, 1980), chap.
3-5.
[25] Albert Mayrand, "À quand le trépas du 'trespasser'?" (1961) 21:1 Revue du
Barreau du Québec 1-28, pp. 12-13.
[26] [1982] 1 S.C.R. 452.
[27] Id., p. 468.
[28] Id.
[29] Id., p. 469 (emphasis added).
[30] Canadian Bar Association, op. cit., note 4, p. 368.
[31] (1673), 124 E.R. 1098.
[32] Infra, p. 13.
[33] M. Bastarache and A. Boudreau-Ouellet, op. cit., note 8, p. 263.
[34] J.A. Yogis, Canadian Law Dictionary, 3rd ed. (Barron's, 1995), p. 132.
[35] D.A. Dukelow and B. Nuse, The Dictionary of Canadian Law, 2nd ed.
(Toronto: Carswell, 1995), p. 678.
[36] J.A. Yogis, op. cit., note 34, p. 132. In French, a licensor is a permettant and a
licensee is a permissionnaire; see Canadian Bar Association, op. cit., note 8, p. 369.
[37] Infra, p. 23.
[38] Some texts also use the term "mere licence".
[39] For more details, see R. Megarry and H.W.R. Wade, The Law of Real Property,
6th ed. (London: Stevens and Maxwell Limited, 2000), pp. 1046 et seq.
[40] That action would be an "action in tort for intentional interference with real
property: trespass to land".
[41] In French, intérêt foncier. See Canadian Bar Association, op. cit., note 4, p.
319.
[42] [translation] "The fundamental characteristic of an estate is the temporal
delimitation that determines its duration. This is in fact the distinctive feature that makes it
possible to classify estates. It is also an element specific to English law that has led to the
development of the doctrine of concurrent interests, or interests of different durations
simultaneously affecting the same land."; M. Bastarache and A. Boudreau-Ouellet, op. cit., note
8, p. 35. See also E.K. Williams and F.W. Rhodes, Canadian Law of Landlords and
Tenants, 6th ed., vol. 1 (Toronto: Carswell, 1988), p. 1-1.
[43] A.F. Oosterhoff and W.B. Rayner, op. cit., note 5, chap. 8.
[44] Infra, p. 15.
[45] R. Megarry, A Manual of the Law of Real Property, 7th ed. (London: Stevens
and Maxwell Limited, 1993), p. 429.
[46] A. Mayrand, loc. cit., note 25, p. 7.
[47] Infra, pp. 25 et seq.
[48] R. Megarry, op. cit., note 45, p. 429.
[49] Id.; infra, p. 15.
[50] Id., p. 430.
[51] Thomas v. Sorrel, supra, note 31.
[52] Provided that the owner retains full rights to the premises occupied by the roomer.
The roomer does not have exclusive possession of the premises for which he or she has a
licence.
[53] Hurst v. Picture Theatres Ltd., [1915] 1 K.B. 1.
[54] Wood v. Leadbitter (1845), 14 L.J. Ex 161, 13 M.&W. 838, 153 E.R. 351.
[55] Hill v. Tupper (1863), 3 B.&S. 826; taken from R. Megarry and H.W.R. Wade,
op. cit., note 39, p. 1047.
[56] See R. Megarry and H.W.R. Wade, op. cit., note 39, p. 1047; E.H. Burn,
Cheshire and Burn's Modern Law of Real Property, 15th ed. (London, Edinburgh:
Butterworths, 1994), p. 586.
[57] Street v. Mountford, [1985] 2 All E.R. 289 (H.L.) – see the distinction with a
lease. See also Booker v. Palmer,[1942] 2 All E.R. 674 – giving a home for free to a friend
whose house was destroyed in wartime.
[58] Morris-Thomas v. Petticoat Lane Rentals (1986), 53 P.&C.R. 238 (storage of
antiques); taken from R. Megarry and H.W.R. Wade, op. cit., note 39, p. 1047.
[59] Frank Warr & Co. Ltd. v. L.C.C., [1904] 1 K.B. 713, p. 723; taken from R.
Megarry and H.W.R. Wade, op. cit., note 39, p. 1047.
[60] Infra, p. 23.
[61] Coleman v. Sir W. Foster (1856), 1 H.& N. 37, 156 E.R. 1108, p. 1109.
[62] Terunnanse v. Terunnanse, [1968] A.C. 1086. Note that, in the case of a licence
between corporations, the licence is revoked as soon as one of the two corporations ceases to
exist, whether by operation of law or pursuant to its incorporating instrument. The same is true
where either the licensor or the licensee is a corporation.
[63] [1948] A.C. 173.
[64] Id., pp. 188-89.
[65] For example, a guest in a house.
[66] Set of norms that developed alongside the common law in the Courts of Chancery
to offset the lack of equity in the common law.
[67] Booker v. Palmer, supra, note 57, p. 677. Infra, p. 17 as regards the rules of
equity.
[68] Winter Garden Theatre Ltd. v. Millennium Productions, supra,note 63, p. 189.
[69] For more details, see R. Megarry and H.W.R. Wade, op. cit., note 39, p. 1048;
E.H. Burn, op. cit., note 56, p. 587.
[70] In the common law, the term "profit à prendre" is used in both English and French.
[71] For more details, see R. Megarry and H.W.R. Wade, op. cit., note 39, p. 1049;
E.H. Burn, op. cit., note 56, p. 586.
[72] Taken from R. Megarry and H.W.R. Wade, op. cit., note 39, p. 1050; E.H. Burn,
op. cit., note 56, p. 587.
[73] Supra, note 54.
[74] [1897] 2 Q.B. 445.
[75] Id., pp. 448, 451.
[76] Supra, note 53.
[77] Winter Garden Theatre Ltd. v. Millennium Productions Ltd., supra, note 63,
p. 189.
[78] Id.
[79] See also Errington v. Errington and Woods, [1952] 1 All E.R. 149, 1 K.B. 290
(C.A.).
[80] Winter Garden Theatre Ltd. v. Millennium Productions Ltd., supra, note 63,
p. 191.
[81] See Ivory v. Palmer, [1975] I.C.R. 340, and Burgoyne v. Griffiths, [1991] 1
E.G.L.R. 14, p. 16; taken from R. Megarry and H.W.R. Wade, op. cit., note 39, p. 1052.
[82] Hurst v. Picture Theatres Ltd., supra, note 53.
[83] Winter Garden Theatre Ltd. v. Millennium Productions Ltd., supra,note 63, p.
202.
[84] Hurst v. Picture Theatres Ltd., supra, note 53.
[85] Verrall v. Great Yarmouth Borough Council, [1981] Q.B. 202, [1980] All E.R.
839, M&B 547, p. 216; taken from R. Megarry and H.W.R. Wade, op. cit., note 39, p. 1052.
[86] Winter Garden Theatre Ltd. v. Millennium Productions Ltd., supra,note 63, p.
204.
[87] In French, permission par préclusion: Canadian Bar Association, op. cit., note 4,
p. 368.
[88] Winter v. Brockwell (1807), 8 East 308, p. 310; taken from R. Megarry and
H.W.R. Wade, op. cit., note 39, p. 1053.
[89] R. Megarry and H.W.R. Wade, op. cit., note 39, p. 1053.
[90] [1965] 2 Q.B. 29 (C.A.); for a more complete study, see E.E. Gillese, Property
Law: Cases, Text and Materials, 2nd ed. (Toronto: Emond Montgomery Publications
Limited, 1990), p. 19:2.
[91] Inwards v. Baker, supra, note 90, p. 37; taken from R. Megarry and H.W.R.
Wade, op. cit., note 39, p. 1054.
[92] Taken from R. Megarry and H.W.R. Wade, op. cit., note 39, p. 1054; E.H. Burn,
op. cit., note 56, p. 589.
[93] Terunnanse v. Terunnanse, supra, note 62, p. 1095; taken from R. Megarry and
H.W.R. Wade, op. cit., note 39, p. 1055.
[94] Supra, p. 15.
[95] [1936] 3 All E.R. 483.
[96] Supra, note 79.
[97] Id., pp. 155-56.
[98] [1965] A.C. 1175 (H.L.), pp. 1239 and 1251, respectively.
[99] [1972] 2 All E.R. 70.
[100] [1989] Ch. 1, [1988] 2 All E.R. 147.
[101] Id., p. 22.
[102] The content of this section is taken from B. Ziff, Principles of Property Law, 1st
ed. (Toronto: Carswell, 1993), pp. 214 et seq.; D.R. Mendes Da Costa and J. Balfour,
Property Law: Cases, Text and Materials, 1st ed. (Toronto: Emond Montgomery
Publications Limited, 1982), pp. 1157 et seq.
[103] E.K. Williams and F.W. Rhodes, op. cit., note 42, p. 1-1.
[104] Reversionary interest: "A future estate in real property created by operation of law
when a grantor conveys a lesser estate than he or she has. The residue left in the grantor is
called a reversion which commences in possession in the future upon the end of a particular
estate granted or devised, whether it be a freehold or less than a freehold. (Reilly, p. 374) ";
Canadian Bar Association, op. cit., note 4, p. 527.
[105] E.K. Williams and F.W. Rhodes, op. cit., note 42, pp. 9-1 et seq. "Interesse
Termini: An executory interest which is a right of entry that a lessee acquires in land through a
demise"; D.A. Dukelow and B. Nuse, op. cit., note 35, p. 529.
[106] S.O. 1997, c. 24.
[107] Street v. Mountford, supra, note 57.
[108] Id., p. 292 (emphasis added).
[109] Supra, note 79.
[110] Id., pp. 154-55.
[111] Supra, note 57.
[112] Id., p. 677.
[113] [1958] 1 Q.B. 513, 3 All E.R. 563.
[114] See now the Tenant Protection Act, 1997, supra, note 106.
[115] Addiscombe Garden Estates Ltd. v. Crabbe, supra, note 113, p. 565.
[116] Id., p. 568.
[117] [1960] O.R. 71, 21 D.L.R. (2d) 110.
[118] See Glenwood Lumber Company Ltd. v. Phillips, [1904] A.C. 405, [1904-07]
All E.R. 203 (P.C.), in which Lord Davey refused to consider the parties' agreement a licence
because of the restrictions imposed by the landlord. In the present case, the Court of Appeal
relied on what Lord Davey had stated.
[119] Id., p. 73.
[120] Street v. Mountford, supra, note 57.
[121] Supra, note 113.
[122] Id., p. 297.
[123] Supra, note 79.
[124] Supra, note 113.
[125] Supra, note 79.
[126] Street v. Mountford, supra, note 57, p. 297.
[127] Taken from A.F. Oosterhoff and W.B. Rayner, Anger and Honsberger Law of
Real Property, vol. 2, 2nd ed. (Aurora, Ont.: Canada Law Books Inc., 1985), pp. 973 et
seq.; M. Bastarache and A. Boudreau-Ouellet, op. cit., note 8, p. 71; see R. Megarry and
H.W.R. Wade, op. cit., note 39, chap. 18.
[128] Duke of Sutherland v. Heathcote, [1892] 1 Ch. 475, p. 484; taken from R.
Megarry and H.W.R. Wade, op. cit., note 39, chap. 18.
[129] Race v. Ward (1855), 4 El.&Bl 702, 119 E.R. 259; taken from R. Megarry and
H.W.R. Wade, op. cit., note 39, chap. 18.
[130] Walsh v. Lonsdale (1882), 21 Ch. D. 9; taken from R. Megarry and H.W.R.
Wade, op. cit., note 39, chap. 18.
[131] Cherry v. Petch et al., [1948] O.W.N. 378; taken from R. Megarry and
H.W.R. Wade, op. cit., note 39, chap. 18.
[132] Taken from A.F. Oosterhoff and W.B. Rayner, op. cit., note 127, pp. 983 et
seq.
[133] Taken from Gypsum Carrier Inc. v. The Queen, [1978] 1 F.C. 147, p. 149.
[134] Id.; taken from D.R. Mendes Da Costa and J. Balfour, op. cit., note 102, pp.
912 et seq.
[135] Id., p. 150.
[136] Supra, note 113.
[137] Derived from the 11th century French word bailler, meaning "to give"; Canadian
Bar Association, op. cit., note 4, p. 58.
[138] The term "bailor" is also accepted; Canadian Bar Association, op. cit., note 4, p.
58.
[139] B. Ziff, op. cit., note 102, p. 239.
[140] (1708), 2 Ld. Raym. 909, 92 E.R. 107; taken from B. Ziff, op. cit., note 102, p.
239.
[141] For a more detailed examination, see id., pp. 238 et seq.
[142] Bata v. City Parking Canada Ltd. (1973), 2 O.R. (2d) 446, 43 D.L.R. (3d)
190 (C.A.).
[143] 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.).
[144] Maritime Coastal Containers Ltd. v. Shelburne Marine Ltd. (1982), 52
N.S.R. (2d) 51, 106 A.P.R. 51 (T.D.).
[145] McLennan v. Charlottetown Flying Services (1979), 24 Nfld & P.E.I.R. 72,
65 A.P.R. 72 (P.E.I.S.C.).
[146] Palmer v. Toronto Medical Arts Building Ltd., [1960] O.R. 60, 21 D.L.R.
(2d) 181 (C.A.).
[147] Division I – Interpretation for Part IX of the E.T.A.
[148] Parts I to VIII, Schedules I to X.
[149] See Revenue Canada Views in GST Partner (CD-ROM) (Scarborough:
Carswell), Technical Interpretation 940218, February 18, 1994.
[150] Subsection 337(8) of the E.T.A. See also section 17 in Part II of the E.T.A.
[151] Subparagraph 1(e)(i) of Schedule II of the E.T.A.
[152] See also section 10 of Part V of Schedule VI of the E.T.A.
[153] M. Bastarache and A. Boudreau-ouellet, op. cit., note 8, p. 263. See Revenue
Canada Views, op. cit., note 149, regarding the distinction between a licence in property law
and a permit granted by a government or municipality to regulate certain activities.
[154] Subsection 123(1) of the E.T.A.
[155] As in paragraph 25(f) of Part VI of Schedule V.
[156] For more information on the supply of real property by way of sale, see Revenue
Canada Views in GST Partner (CD-ROM) (Scarborough: Carswell), Policy Statement P-
111R, February 1995.
[157] D. Sherman, David Sherman’s Analysis in GST Partner (CD-ROM)
(Scarborough: Carswell).
[158] [1996] G.S.T.C. 101 (T.C.C).
[159] 93 D.T.C. 1266 (T.C.C.); taken from id., p. 102.
[160] [1932] 4 D.L.R. 281; taken from id.
[161] (1992), 9 O.R. (3d) 186; taken from id.
[162] (1978), 88 D.L.R. (3d) 303 (S.C.C); taken from id., p. 103.
[163] (1988), 37 M.P.L.R. 175 (Div. Ct); taken from id.
[164] Green Timbers Retirement Housing Society v. Canada, supra, note 158, p.
104.
[165] Revenue Canada Views inGST Partner (CD-ROM) (Scarborough: Carswell),
GST/HST Memorandum, Chapter 19.1, para. 31.
[166] See articles 1195 et seq. C.C.Q.
[167] Revenue Canada Views, op. cit., note 165, paras. 29 and 31. See also section
254.1 of the E.T.A. for a definition.
[168] Revenue Canada Views inGST Partner (CD-ROM) (Scarborough: Carswell),
GST/HST Memorandum, Chapter 19.2.2, para. 21.

[169] The federal sales tax was introduced in 1924.
[170] Department of Finance Canada, Goods and Services Tax: An Overview, the
Honourable Michael H. Wilson, Minister of Finance of Canada (August 1989), p. 1 (emphasis
added).
[171] Government of Canada, Report of the Royal Commission on Taxation
(Ottawa: Queen's Printer, 1966).
[172] See J.M. Crago, "The Unit of Taxation: Current Issues" (1994) 52:1 University
of Toronto Faculty of Law Review 1.
[173] This will be done frequently in systems in which the taxation unit is the family and
not individuals, or vice versa.
173a) R.S.Q., c. T-0.1, as amended (hereinafter "A.Q.S.T.")
[174] These rules are taken from Revenue Canada Views in GST Partner (CD-ROM)
(Scarborough: Carswell), Technical Interpretation 98-0102933, "Fourniture de droits
d'amarrage saisonniers", September 29, 1998, p. 2.
[175] Id. See infra, section 2.3.
[176] According to the Department, under subsection 136(1) of the E.T.A., such a
supply of a right to use is considered a supply not of intangible property but of real property.
This therefore makes section 25 of Part VI of Schedule V of the E.T.A. applicable.
[177] See 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), for Revenue Canada's interpretation of
the expression "for a period of less than one month", to which we will return below in section
2.3.
[178] See Revenue Canada Views in GST Partner (CD-ROM) (Scarborough:
Carswell), Technical Interpretation 11950-4, "Goods and Services Tax Treatment of the Right
to Moor a Boat in a Marina", June 17, 1994.
[179] Department of Finance Canada, Explanatory Notes, paragraph 25(f) of Part VI
of Schedule V of the E.T.A., February 1993 (emphasis added).
[180] Amended by S.C. 1993, c. 27, subs. 175(2).
[181] Department of Finance Canada, Press Release No. 92-064, "Further Technical
Amendments to the GST Introduced" (Ottawa: Government Publications, September 14,
1992).
[182] See A.G. of Canada v. Metropolitan Toronto Hockey League, supra, note
177.
[183] Hence the application of paragraph (f) before the 1992 amendment, that is, for
agreements entered into before September 14, 1992.
[184] Supra, note 177.
[185] "The phrase 'for a period of less than a month' modifies the actual supply of real
property under the terms of the agreement and not the term of the agreement . . .", supra, note
177, p. 34.
[186] Id.
[187] Id.
[188] Revenue Canada Views in GST Partner (CD-ROM) (Scarborough: Carswell),
Technical Interpretations 1991/06/12 of June 12, 1991 and 1991/06/26 of June 26, 1991.
[189] Revenue Canada Views in GST Partner (CD-ROM) (Scarborough: Carswell),
Policy Statement P-062, May 25, 1993.
[190] A.G. of Canada v. Metropolitan Toronto Hockey League, supra, note 177, p.
34.
[191] Supra, note 177.
[192] Revenue Canada Views, op. cit., note 188.
[193] Revenue Canada Views, op. cit., note 189, p. 2.
[194] Revenue Canada Views in GST Partner (CD-ROM) (Scarborough: Carswell),
Technical Interpretation 11950-1, July 7, 1994. We should note that this is Revenue Canada's
administrative position and that an analysis of easements in the common law and servitudes in
Quebec civil law would be necessary to determine whether that position is legally valid. Such an
analysis is beyond the scope of our research.
[195] Revenue Canada Views, op. cit., note 189, p. 3.
[196] Revenue Canada Views, op. cit., note 149.
[197] Revenue Canada Views, op. cit., note 174.
[198] Revenue Canada Views in GST Partner (CD-ROM) (Scarborough: Carswell),
Technical Interpretation 11950-1/11890-1, July 5, 1999.
[199] Revenue Canada Viewsin GST Partner (CD-ROM) (Scarborough: Carswell),
Technical Interpretation 11950-1/11895-1, July 11, 1998.
[200] Revenue Canada Views, op. cit., note 149 (emphasis added).
[201] Revenue Canada Views, op. cit., note 189, p. 2.
[202] Revenue Canada Views, op. cit., note 165, citing Revenue Canada Views,
Policy Statement P-062.
[203] Revenue Canada Views, op. cit., note 189, p. 2.
[204] Revenue Canada Views, op. cit., note 174, p. 3.
[205] Collection fiscale du Québec (CD-ROM) (Farnham: Publications CCH), open
forum 29/09/96-02/10/96.

[206] Revenue Canada Views, op. cit., note 174, p. 3.
[207] Id., p. 4.
[208] 2001 FCA 63, [2001] 4 F.C. 289.
[209] J-M. Brisson, "L'impact du Code civil du Québec sur le droit fédéral: une
problématique " (1992) 52:2 Revue du Barreau 345-60; see id., para. 39 in F.C.
[210] Id.
[211] [translation] "Movable or immovable incorporeal property basically includes
personal rights, real rights, mixed rights and intellectual rights"; D-C. Lamontagne, Biens et
propriété (Cowansville: Les Éditions Yvon Blais Inc., 1993), p. 39.
[212] Id., p. 41.
[213] Id.
[214] According to the principle of the relativity of contract.
[215] D-C. Lamontagne, op. cit., note 211, p. 41.
[216] Id., p. 42.
[217] Id., p. 47.
[218] See id., p. 261.
[219] Supra, section 1.2.5.2.
[220] D-C. Lamontagne, op. cit., note 211, p. 263.
[221] Id.
[222] See R. Megarry and H.W.R. Wade, op. cit., note 39, paras. 17-021 et seq.;
A.H. Oosterhoff and W.B. Rayner, op. cit., note 127, pp. 835-36.
[223] Id., pp. 837-38.
[224] D-C. Lamontagne, op. cit., note 211, p. 279.
[225] Id.
[226] Id., p. 280.
[227] Id., p. 294 with regard to the existence of this right in the Civil Code of Québec.
[228] Id., pp. 294-95.
[229] Id., p. 297.
[230] Id., p. 294.
[231] Supra, note 57.
[232] Articles 1708 et seq. C.C.Q.: sale, gifts, leasing, lease, affreightment, carriage,
contract of employment, contract of enterprise or for services, mandate, contract of partnership
and of association, deposit, loan, suretyship, annuities, insurance, gaming and wagering,
transaction, arbitration agreements.
[233] Supra, pp. 6-7.
[234] Articles 1713 et seq. of the Civil Code: lease of things; articles 1875 et seq. of the
Civil Code: loan for use or commodatum.
[235] Or precarious leases; taken from C. Roy- Loustaunau, "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, p. 6.
[236] The precarious occupation agreement does not appear anywhere in the nominate
contracts chapter of the French Civil Code, supra, note 22.
[237] Commodatum in French civil law is similar to loan for use in Quebec civil law.
See articles 1875 et seq. of the French Civil Code, supra, note 22.
[238] P. Malaurie and L. Aynès, Droit civil - Les contrats spéciaux (Paris: Les Éditions
Cujas, 1992), p. 349.
[239] The potential for avoidance has now been reduced by law: see id. and C. Roy-
Loustaunau, loc. cit., note 236, p. 3.
[240] J.M. Pizzio, "La notion de convention d'occupation précaire et son application
jurisprudentielle" (1980) J.C.P., Semaine juridique 2975, para. 2. Note the similarity of the
facts surrounding the creation of this last agreement with the facts in Booker v. Palmer, supra,
note 57.
[241] Id., paras. 3-4 and paras. 6 et seq.
[242] Id.
[243] Id., paras. 9-10, para. 17 to the same effect and C. Roy-Loustaunau, loc. cit., note
236, paras. 7-9: [translation] "We note that the indications of precariousness are now numerous
and varied: short term provided for, of course, but also intermittent or incomplete enjoyment of
the premises."
[244] A. Bénabent and C. Lucas de Leyssac, "La nature juridique des locations
saisonnières" (1977) Dalloz-Chroniques, p. 243.
[245] Judgment of the Cour de Cassation, 3rd civil division, October 28, 1987; taken
from C. Roy-Loustaunau, loc. cit., note 236, para. 2.
[246] C. Roy-Loustaunau, loc. cit., note 236, para. 5.
[247] P-G. Jobin, "Le droit comparé dans la réforme du Code civil du Québec et sa
première interprétation" (1997) Cahiers de droit 477, p. 482.
[248] Article 2313 C.C.Q.
[249] M. Deschamps, "Le prêt" in La réforme du Code civil, textes réunis par le
Barreau du Québec et la Chambre des notaires du Québec, vol. 2 (Sainte-Foy: Presses de
l'Université Laval, 1993), p. 1016.
[250] Id., p. 1017.
[251] Id., pp. 1017-18.
[252] Id., p. 1018.
[253] Supra pp. 18-19; see what Lord Denning stated in Verrall v. Great Yarmouth
Borough Council, supra, note 85, p. 216.
[254] M. Deschamps, loc. cit., note 249, p. 1018.
[255] Supra, p. 7.
[256] M. Deschamps, loc. cit., note 249, p. 1019.
[257] Id.
[258] Supra, pp. 16-17; Kerrison v. Smith, supra, note 74, pp. 448-51.
[259] [translation] "The Civil Code of Québec does not require the lender to be the
owner of the thing loaned. Academic commentary under the Civil Code of Lower Canada was
also to this effect." Taken from M. Deschamps, loc. cit., note 249, p. 1019, referring to P.B.
Mignault, Le droit civil canadien, vol. 8 (Montreal: Wilson & Lafleur, 1909), p. 109.
[260] Id.
[261] Supra, note 95; supra, note 100; supra, p. 21.
[262] Subject to articles 2322 and 2323 C.C.Q.; M. Deschamps, loc. cit., note 249, p.
1020.
[263] Articles 2318 and 2320 C.C.Q.
[264] M. Deschamps, loc. cit., note 249, p. 1016.
[265] Article 1513 C.C.Q.
[266] Articles 2319 and 1512 C.C.Q.; M. Deschamps, loc. cit., note 249, p. 1021.
[267] Id.
[268] Id., p. 1021.
[269] J.A. Yogis, op. cit., note 34, p. 132.
[270] Supra, pp. 25 et seq.
[271] Article 2313 C.C.Q.
[272] Article 1851 C.C.Q.
[273] P-G. Jobin, Traité de droit civil - Le louage, 2nd ed. (Cowansville: Les éditions
Yvon Blais Inc., 1996), p. 9.
[274] Id., p. 23.
[275] Supra, section 1.1.
[276] P-G. Jobin, op. cit., note 273, p. 27.
[277] Only where the lease has a fixed term.
[278] P-G. Jobin, op. cit., note 274, p. 28.
[279] Street v. Mountford, supra, note 57, p. 292 (emphasis added).
[280] Moreover, a description of the property is an essential condition for the formation
of a lease in the common law.
[281] Supra, note 113.
[282] Id., p. 568.
[283] B.A .Oil v. De Pass, supra, note 117.
[284] R. Megarry, op. cit., note 45, p. 633.
[285] P-G. Jobin, "Résiliation et renouvellement du bail conclu avec plus d'un locataire:
le difficile ménage à trois" (1987) Can. Bar Rev. 305.
[286] [1975] C.S. 790.
[287] Id, p. 21 (full text).
[288] Id.
[289] Id.
[290] F.C.A. No. A-764-95, June 29, 1999.
[291] R.S.C. 1985, 5th Supp., c.1, as amended.
[292] Canada v. Mont-Sutton Inc., supra, note 290, p. 5.
[293] Id., Factum of the Attorney General of Canada, Cross-Appeal, supra, note 290,
p. 12.
[294] Taken from R. Megarry, op. cit., note 45, pp. 306 et seq.; see also E.K. Williams
and F.W. Rhodes, op. cit., note 42, pp. 9-1 et seq. and pp. 10-1 et seq.
[295] R. Megarry, op. cit., note 45, p. 337.
[296] The statutes and regulations governing leases vary from province to province. For
example, in Alberta, see the Residential Tenancies Act, R.S.A. 1980, c. R-15.3; in New
Brunswick, see the Landlord and Tenant Act, R.S.N.B. 1973, c. L-1.
[297] See Revenue Canada Views, op. cit., note 189, p. 2.
[298] Supra, section 1.2.3.2.
[299] P-G. Jobin, op. cit., note 273, p. 26.
[300] Except where the licence is between corporations or where either the licensor or
the licensee is a corporation.
[301] L. Langevin and N. Vézina, "Le contrat" in Barreau du Québec, Obligations et
contrats, vol. 5, Collection de droit 1999-2000 (Cowansville: Les Éditions Yvon Blais), p. 35;
see J.L. Baudoin, Les obligations, 4th ed. (Cowansville: Les Éditions Yvon Blais, 1993), para.
4.
[302] J.L. Baudoin , id., paras. 89, 177, 189 and 195, respectively.
[303] Id., para. 108.
[304] Id., para. 65.
[305] D-C. Lamontagne and B. Larochelle, Droit spécialisé des contrats, vol. 1
(Cowansville: Les Éditions Yvon Blais, 2000), p. 272.
[306] For more details, see J.L. Baudoin, op. cit., note 301, paras. 108 et seq.; or L.
Langevin and N. Vézina, op. cit., note 301, pp. 41 et seq.
[307] D-C. Lamontagne, op. cit., note 305, pp. 290-91.
[308] A. Larouche, Théorie générale des obligations (University of Ottawa, 2000), p.
14.
[309] L. Lebel, "Une cour entre deux codes: aspects de la jurisprudence récente de la
Cour d'appel du Québec" in Cours de perfectionnement de la Chambre des notaires du
Québec (March 1996), para. 52.
[310] J-L. Baudoin and P-G. Jobin, Les Obligations, 5th ed. (Cowansville: Les
Éditions Yvons Blais, 1998), p. 61 (emphasis added).
[311] 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.
[312] Supra, note 173a).
[313] Collection fiscale du Québec (CD-ROM) (Farnham: Publications CCH),
Technical Interpretation 95-0113274, October 7, 1996.
[314] Collection fiscale du Québec, op. cit., note 311, para. 6 (emphasis added).
[315] Id., p. 2.
[316] Supra, p. 45.
[317] See again Department of Finance Canada, op. cit., note 181: "It is proposed that
paragraph 25(f) be amended to make all supplies of real property by way of licence taxable."
(Emphasis added)
[318] P-G. Jobin, op. cit., note 247, pp. 481-82.
[319] Id., p. 282.
[320] Supra, pp. 8-9.
[321] Department of Justice Canada, Civil Code Section, Harmonisation des lois
fiscales (Ottawa, Presentation to professors and students at Université de Sherbrooke, May
31, 2000), p. 2.
[322] [1999] F.C.J. No. 1761 (F.C.A.).
[323] Id., para. 24.
[324] Supra, note 2.
[325] Department of Justice Canada, Civil Code Section, Harmonisation de la
législation fédérale (Ottawa, Presentation to student researchers, October 19, 2000), p. 6.
[326] Id., p. 8.
[327] Id., p. 9.
[328] Id., p. 10.
[329] Id., p. 14.
[330] Id., p. 15.
[331] Id., p. 6.
[332] R.S.C., c. I-21, as amended by Bill S-4, 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, First
reading, January 31, 2001.
[333] Id., Part 2.
[334] Supra, section 1.2.1.
[335] Supra, section 1.3.2.
[336] Canadian Bar Association, op. cit., note 4, p. 368.
[337] R. Dussault and L. Borgeat, Traité de droit administratif, 2nd ed., vol. II
(Quebec City: Presse de l'Université Laval, 1986), p. 156.
[338] H. Reid, Dictionnaire de droit québécois et canadien (Montreal: Wilson &
Lafleur Ltée, 1994), p. 422.
[339] Supra, section 1.2.1.
[340] See, for example, section 30 of the A.Q.S.T., "Lease of Property" (Convention
de louage d'un bien), which is equivalent to section 136 of the E.T.A.
[341] "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;"
[342] The French equivalents are consistent with the terminology used in R. Reid, op.
cit., note 338, pp. 203, 133 and 132, respectively.
[343] R.S.C. 1991, c. 50, section 2. For the new wording of these provisions, see Bill
S-4, 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, First reading, January 31, 2001.
[344] Articles 1172 et seq. C.C.Q.
[345] R. Dussault and L. Borgeat, op. cit., note 337, p. 156.
[346] Id.
[347] Id., p. 162.
[348] Supra., p. 7.
[349] Supra, note 2.