Mitsui & Co. (Canada) Ltd. v. Royal Bank of Canada

Mitsui & Co. (Canada) Ltd. v. Royal Bank of Canada

The leases contained true unilateral options to purchase within the meaning of s.2(1)(b)(ii) of the Conditional Sales Act (the notice and valuation steps were conditions precedent to exercise, not elements converting the option into a right of pre-emption), options exercisable at fair market value are enforceable, and because the leases were not registered as required the lessor's reservation of title is void against the appellants; appeal allowed.

Citation
[1995] 2 SCR 187
Parties
Appellant (secured Creditor): Royal Bank of Canada; Appellant (receiver and Manager of Pegasus Helicopters Incorporated): Doane Raymond Limited; Appellant (trustee of the Estate of Pegasus Helicopters Incorporated): Peat Marwick Thorne Inc.; Respondent (lessor): Mitsui & Co. (Canada) Ltd.
Court
Supreme Court of Canada
Jurisdiction
Canada
Judgment Date
4 May 1995
Procedural Posture
Civil Appeal to Supreme Court of Canada / Final Adjudication on Appeal From Nova Scotia Court of Appeal; Judgment on Merits
Outcome
Appeal allowed with costs
Legal Topics
Conditional Sales Act, Option to Purchase, Registration and Priority, True Lease Vs Conditional Sale, Receiver Appointment
Source Language
English
Sale Leases Secured Transactions Property Law Bankruptcy/receivership Conditional Sales Act Option to Purchase Registration and Priority +2 more

Case Brief

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Parties

Royal Bank of Canada

Appellant (secured Creditor)

Doane Raymond Limited

Appellant (receiver and Manager of Pegasus Helicopters Incorporated)

Peat Marwick Thorne Inc.

Appellant (trustee of the Estate of Pegasus Helicopters Incorporated)

Mitsui & Co. (Canada) Ltd.

Respondent (lessor)

Procedural Posture

Civil Appeal to Supreme Court of Canada / Final Adjudication on Appeal From Nova Scotia Court of Appeal; Judgment on Merits

Legal Issues

  1. 1 Whether leases containing an option to purchase fall within s.2(1)(b)(ii) of the Conditional Sales Act
  2. 2 Whether clause 32 constituted an option to compel sale or merely a right of pre-emption/right of first refusal
  3. 3 Whether failure to register the lease-option under the Conditional Sales Act renders the lessor's reservation of title void against secured creditors/receiver

Ratio Decidendi

The leases contained true unilateral options to purchase within the meaning of s.2(1)(b)(ii) of the Conditional Sales Act (the notice and valuation steps were conditions precedent to exercise, not elements converting the option into a right of pre-emption), options exercisable at fair market value are enforceable, and because the leases were not registered as required the lessor's reservation of title is void against the appellants; appeal allowed.

Court Disposition

Appeal allowed with costs

Orders

  • Appeal allowed with costs throughout
  • Each lease declared to fall within the scope of s.2(1)(b)(ii) of the Conditional Sales Act and, having not been registered, the respondent's reservation of title is void against the appellants