Introduction to Property Law PDF

Exported for Abraham Thomas Zachariah on Fri, 06 Dec 2024 16:06:15 GMT Chapter 17: Introduction to Property Law OBJECTIVES After studying this chapter, you should have an understanding of the meaning of property the different forms of property how property can be acquired the types of legal rights and obligations associated with property [A] Business Law in Practice Like many young men growing up in Saskatoon, Saskatchewan, Cranley Arcand spent many hours playing hockey in the arenas in and around the city. He started his amateur hockey career at the age of seven as a Novice, and progressed through the various minor hockey levels, ending with a stint in the Midget AAA where he played until he “aged out” when he turned 18. After completing high school, he worked for a few years at his uncle’s fishing lodge on the Churchill River, where he met his partner, Terry, a fishing guide who also grew up in Saskatoon. Cranley and Terry moved back to Saskatoon one year ago and now own and operate a business called Cran-Terra Outdoor & Sporting Goods (Cran-Terra). Cran-Terra is a full-service sporting goods business that sells new and used sporting equipment for hockey, lacrosse, and soccer, as well as goods for backpacking and camping, such as tents, canoes, and backpacks. The used equipment that is sold in their store is acquired through their sports exchange, which allows customers to buy, sell, or consign used sporting and outdoor equipment. They also serve their community by accepting donations of used sporting equipment that is made available to benefit less fortunate children and teens in the city. Their first year was challenging, but they managed to turn a modest profit. They are optimistic the business will do even better in the coming year, although not without some challenges. One problem that has come up is the space they are currently using for their business. Their one-year lease is due to expire in two months, and they have been unable to reach an agreement with the landlord about the rent going forward. They feel the landlord is demanding too much for the rent, but they are reluctant to move now that they have built up a customer base at their current location. There is another suitable retail property nearby, but its owner is more interested in selling it than leasing. Another problem they face is a mounting collection of unsold second-hand gear left with them on consignment that appears to have been abandoned by its owners. Finally, they are optimistic about the future of their business and want to ensure that the Cran-Terra name cannot be used by a competitor in the future. 1. What types of property are used in Cran-Terra’s business? 2. What are Cran-Terra’s rights and obligations in relation to the personal property that it acquires for its business? 3. How might Cran-Terra have avoided the problems it is now having with its lease? 4. How can Cran-Terra protect its name? Introduction to Property Law Property law consists of rules and laws that govern our relationship with things that can be owned. Defining Property While we tend to think of property as consisting of tangible things such as equipment, inventory, and real estate, what the law counts as property is considerably broader than physical things that can be held and touched. Property might even consist of something as esoteric as the right to use a particular industrial process or the right to use a particular business name. Nor does the mere fact that something has value and is worthy of protection make it property for the purposes of property law. For example, the right of citizenship is unquestionably valuable, but it is not a right that can be transferred or sold to others. One of the roles of property law is to determine what counts as property and thus can be owned. Property law also enables owners to protect their rights in relation to their property. Quiz Question 17.1 Mark as: None Review Which of the following statements is correct? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Everything that has value counts as property for the purposes of property law. b At law, property is confined to physical things that can be held and touched. c Property law determines what counts as property that can be owned. d Property law categorizes property into two broad groups: private property and public property. Show Submitted Answer Show Correct Answer Check My Answer Categories of Property Real Property Historically, the law has evolved to place property into distinct categories. Real property (refer to Chapter 19) is sometimes called “immovable” property and refers to land, whatever is permanently attached to it, and the associated legal rights. Even a growing crop would constitute real property until it is harvested and is no longer attached to the land. Each province operates a comprehensive system for publicly registering title to land and legal interests related to land. Cran-Terra’s lease constitutes a form of real property, and if Cran-Terra purchases the building for its business, it will become the owner of real property. In addition to the building itself, Cran-Terra would own the parking lot and possibly rights pertaining to things below the surface of the land, such as the right to mine for natural gas or minerals. The building owner would also own any improvements to the land as well as any items that are attached to the building, such as light and plumbing fixtures. If Cran-Terra obtains a mortgage to finance the purchase of the building, then the lender would also have an interest in the real property. Aboriginal Title The Canadian legal tradition also recognizes a unique form of title in certain lands in Canada belonging to Indigenous Peoples. Aboriginal title , the name given to this interest, incorporates “rights similar to those associated with fee simple,” including the right to decide how land will be used; the right of enjoyment and occupancy of the land; the right to possess the land; the right to the economic benefits of the land; and the right to proactively use and manage the land. Aboriginal title litigation is further discussed in Video 17.1. Video Please visit the textbook on a web or mobile device to view video content. BUSINESS APPLICATION OF THE LAW 17.1 Aboriginal Title “One of the primary issues with which Canadian society has to come to grips is the historical legacy of its acquisition of Aboriginal lands” and Aboriginal title is the legal method developed by modern courts to address this legacy. Several types of Aboriginal lands exist within Canada, including reserve lands within the meaning of the Indian Act , RSC 1985, c I-5, and Aboriginal title lands. While the courts have stated that the nature of the Aboriginal interest is the same in both reserve lands and Aboriginal title lands, reserve lands are those formally set apart by the Crown for the benefit of Indians under the Indian Act, while Aboriginal title arises out of the prior occupation or possession of lands by Indigenous Peoples. In recognizing that certain lands in Canada may be subject to Aboriginal title, Canadian courts have rejected a doctrine known as terra nullius (that no one owned the lands prior to European assertion of sovereignty). In practice, an Indigenous group establishes Aboriginal title by asserting a claim over particular lands based on proof of sufficient pre-sovereignty occupation that is continuous and exclusive. While many areas of Canada are subject either to modern land claim agreements or to treaties that incorporate land surrender provisions, there are parts of Canada where there is no land surrender treaty or modern land claim agreement in place and, accordingly, Aboriginal title could be asserted in those areas. These areas include Nova Scotia and New Brunswick, and parts of British Columbia, Québec, Ontario, Yukon, and the Northwest Territories. At present, there are many ongoing court cases involving claims of Aboriginal title. As was discussed in Chapter 4, a duty to consult and accommodate is triggered when the Crown has “knowledge, real or constructive” of the potential existence of Aboriginal rights or title and that a proposed activity might adversely affect the Aboriginal right or title. This duty to consult is proportionate to the strength of the Aboriginal claim. However, once Aboriginal title is established, development of the land normally requires consent of the Aboriginal title holder. As the claim strength increases, the required level of consultation and accommodation correspondingly increases. Where a claim is particularly strong—for example, shortly before a court declaration of title— appropriate care must be taken to preserve the Aboriginal interest pending final resolution of the claim. Finally, once title is established, the Crown cannot proceed with development of title land not consented to by the title- holding group unless it has discharged its duty to consult and the development is justified. Governments can infringe on Aboriginal rights conferred by Aboriginal title only where they can justify the infringements on the basis of a compelling and substantial purpose and establish they are consistent with the Crown’s fiduciary duty to the title holder. Features of Aboriginal Title Aboriginal land interests are distinct from other mainstream legal interests in land, such as fee simple or leasehold interests that are discussed in this chapter. Indeed, Canadian courts describe this form of title as sui generis to denote that it is unique compared to other forms of ownership and cannot be described with reference to traditional property law concepts. A Collective Right Reflecting the occupancy of Indigenous Peoples pre-sovereignty, Aboriginal title is a collective form of title, held not only for present title holders but also for future generations. As a result, it cannot be alienated (e.g., sold) other than to the Crown. Nor can it be encumbered by its owners in ways that could prevent future generations from using or enjoying it. Right to Possess, Enjoy, Manage, and Occupy Aboriginal title confers the right of exclusive use and occupation of the land and such uses are not restricted to traditional uses. However, the use of the land must be consistent with the collectively held nature of the title, cannot harm the rights of future generations, and cannot offend the basis for a particular group’s claim on particular lands. For example, if occupation is established with reference to the use of the land as a hunting ground, then the group that successfully claims Aboriginal title to that land may not use it in such a fashion as to destroy its value for such a use (e.g., by strip mining it). Right to the Economic Benefit of the Land The courts have recognized that Aboriginal title also includes the right to choose the uses to which land can be put, and that the title holders have the right to profit from its economic development. However, this right is subject to the ultimate limit that those uses cannot destroy the ability of the land to sustain future generations. As a result, and subject to negotiation, the Crown does not have any right to benefit from the use of land subject to Aboriginal title, such as a right to grant timber leases or collect royalties for its development. Critical Analysis Loading question... Quiz Question 17.3 Mark as: None Review Which of the following is an incorrect statement regarding the rights associated with Aboriginal title? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Aboriginal title is held collectively for present title holders and future generations. b Aboriginal title confers the right of exclusive use and occupation of the land. c Aboriginal title holders may develop and use the land in any way they see fit. d Aboriginal title is a unique form of ownership that is distinct from other mainstream legal interests in land. Show Submitted Answer Show Correct Answer Check My Answer Quiz Question 17.4 Review Mark as: None Which of the following is true with respect to Aboriginal title land? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a The Crown maintains the right to benefit from the use of the land, such as by granting a timber lease. b It cannot be sold other than to the Crown. c Its uses are restricted to traditional uses. d It is established by proving the existence of a treaty in relation to the lands. Show Submitted Answer Show Correct Answer Check My Answer Personal Property Personal property includes everything other than what is included as real property. Personal property falls into two major categories: tangible and intangible. Tangible property refers to property that is concrete or material. In its business, Cran-Terra will acquire sporting and outdoor goods that are not attached to land or a building. In law, this kind of personal property is known as chattels or moveables. Intangible property derives its value from legal rights, rather than concrete, physical qualities. Examples of intangible property are insurance policies, accounts receivable, bank accounts, and customer records, as well as the various forms of intellectual property such as patents and trademarks. Internet domain names have been recognized as a form of property. In law, these kinds of property are known as choses in action. Intangible property is no less real or significant than tangible property—in fact, it drives much of our modern economy. For example, any accounts receivable and insurance policies that Cran-Terra may acquire would be forms of intangible property. Cran-Terra may also acquire intellectual property such as ownership of its name. These forms of property derive their value from the legal rights they provide their owners, such as the right to be compensated in the event of a fire and the right to prevent others from using the name Cran-Terra. Quiz Question 17.5 Mark as: None Review Remmie owns the associated rights to property, the buildings, and everything affixed to them located on that property, and the property itself. How is this particular asset likely to be classified? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a as chattel property b as intangible property c as real property d as exclusive property Show Submitted Answer Show Correct Answer Check My Answer Quiz Question 17.6 Mark as: None Review What is the term choses in action synonymous with in law? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a tangible property b pledged property c intangible property d non-portable items Show Submitted Answer Show Correct Answer Check My Answer BUSINESS APPLICATION OF THE LAW 17.2 Should Everything Be Capable of Being Privately Owned? The Case of Fresh Water: Property or a Human Right? Chapters 17–19 describe forms of property that might be described as private property, that is, real property and personal property that may be held by individuals or businesses. This begs the question: should all things be capable of being owned privately by individuals or businesses? What constitutes property capable of being owned by individuals or businesses can change over time based on what a society through its state decides. One reason a society might decide to limit the ability of its citizens to own a particular thing is that it considers that the thing in question should be available to everyone and that if it can be owned privately, then its owner could limit access to something that is an essential human need or right. For example, most nations place limitations on the ability to privately own watercourses and bodies of water in the theory that the ability to use and access water must be preserved for the benefit of all abutting property owners and also for the general benefit of society as a whole that might rely on that water for transportation, consumption, or even recreation. Indeed, in 2010, the United Nations General Assembly adopted a resolution recognizing the right to safe and clean drinking water as a human right that is essential for the full enjoyment of life and all human rights. Unfortunately, access to clean drinking water remains a challenge for some First Nations communities. In 2021, two class actions were brought against the federal government, alleging breach of its obligations to First Nations and their members by failing to ensure that reserve communities have clean water. The litigation also alleged negligence, breach of fiduciary duties, breach of the honour of the Crown, and breach of various rights under the Canadian Charter of Rights and Freedoms. In July 2021, the Government of Canada agreed to settle the action for approximately $8 billion. Video 17.2 presents an Indigenous community’s transformational fight for clean water. Video Please visit the textbook on a web or mobile device to view video content. In Canada, rather than being owned by individuals, the ownership of most bodies of water is vested in the provincial Crown. In Saskatchewan, for example, this is explicitly recognized in the Water Security Agency Act, SS 2005, c W-8.1, s 38.2, which states: “[o]ut of every disposition of provincial land the property in, the right to, and the right to the use of all the water at any time in any river, stream, watercourse, lake, creek, spring, ravine, canyon, lagoon, swamp, marsh, or other body of water, or contained or flowing into it are reserved to the Crown.” However, some have suggested that even the Crown’s ownership is not true full and absolute ownership and that the fundamental importance of water to life necessarily means that this Crown ownership of water in situ, whether reflected in statute or not, is more in the nature of “custodianship” than “ownership.” Canada’s water management regime is a legacy of a time when water was seen as a limitless resource and the promotion of settlement and economic development were the primary focus of legislators. It is now evident that many factors come into play in the management of our freshwater supplies. For example, both droughts and flooding are being impacted by climate change, which in turn has consequences for Canada’s forests and wetlands and support for crops and agricultural activities. Flooding can be damaging to local landscapes and habitats, and have costly impacts on infrastructure, homes, and businesses. Moreover, a longer- term trend toward persistent and prolonged water scarcity has made it is clear that water is not the limitless resource it was once thought to be. Despite the importance of these issues, “water law and management regimes are one of the last frontiers of environmental regulation where decisions are based on insufficient real-time science about ecosystem needs. The knowledge gaps include basic information such as how much water is available, and how much water is actually being used.” Management of Canada’s fresh water is complicated because of the division of powers of the Constitution Act, 1867. Primary jurisdiction over most water management rests with the provinces, which in turn, issue licences for water use and delegate some responsibilities such as water treatment to local governments. In addition to control over international trade, federal responsibilities include water within federal lands, First Nation reserves, and two territories. The provinces and the federal government share responsibility for agriculture, national water issues, and health. Some have argued that modern water governance requires a more collaborative approach where all governments, rights holders, and stakeholders have roles and responsibilities and that partnership, stewardship, and dealing with the uncertainty of perpetual change will be the hallmarks of successful water law and management regimes in the future. In an effort to improve coordination amid a system of fragmented responsibility, the federal government has proposed the establishment of the Canada Water Agency to improve coordination, avoid duplication, and align actions to address key freshwater challenges. Critical Analysis Loading question... Quiz Question 17.8 Mark as: None Review Which of the following cannot be owned as property? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a an internet domain name b a river c a patent d a growing crop Show Submitted Answer Show Correct Answer Check My Answer There is no comprehensive system for publicly registering title to personal property as there is with real property, although there are some specialized registries for items such as motor vehicles, patents, and trademarks. One reason for the difference concerns the mobility of personal property. There is little utility in having a provincial registration system for most personal property when goods are so easily transported to another province. In addition, the value of individual items of personal property may not justify the cost of administering a registration system or the cost to owners of registering. Interests in personal property may be registered by creditors when property is used as security in its purchase on credit or later as collateral for a loan. Registration is considered economical because it protects the creditor’s rights to the pledged property. Quiz Question 17.9 Mark as: None Review Why is there no comprehensive system for publicly registering title to personal property? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Personal property is often intangible and therefore cannot be registered. b Personal property can be owned by many individuals at the same time and registration would lead to confusion. c Personal property is often highly mobile and may be of low value. d Personal property cannot be registered because it does not always have a serial number. Show Submitted Answer Show Correct Answer Check My Answer Quiz Question 17.10 Mark as: None Review Which of the following statements is correct? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Personal property includes all property that is capable of being privately owned. Personal property includes all property other than land, what is attached to it, and the rights associated with b those things. c A lease of land is an example of personal property. d An insurance policy is an example of tangible personal property. Show Submitted Answer Show Correct Answer Check My Answer Acquiring Property Rights The most obvious way to acquire property is to bring something new into existence. However, property can be acquired by a business in a variety of ways. For example: Land may be acquired through purchase or lease. The ownership of goods is acquired by purchasing or manufacturing them. Insurance coverage is bought by paying premiums and is described in the insurance policy that gives the customer the right to recover losses in specified circumstances. Accounts receivable are created by delivering goods or services to customers, who agree to pay at a later date. The supplier acquires the right to collect the accounts, which can be sold to other businesses. While certain kinds of intellectual property, such as copyright, are owned as a result of being created, ownership of other forms—such as a trademark—is established through use, or registration, or both. Intellectual property can also be bought from other owners. Ownership can also be acquired by finding and taking possession of lost or abandoned personal property. In law, a finder of personal property can assert ownership rights over the found property against everyone except its true owner. This aspect of the law illustrates how one person’s rights to property can vary relative to the rights others might have in the same property. For example, if a traveller found a piece of jewellery in an airport restroom, the finder’s right to claim ownership would likely supersede the right of the airport operator, provided the finder was not trespassing. However, unless its original owner intentionally abandoned the jewellery, the finder could not assert their ownership rights over those of the original owner. Some provinces have now enacted legislation to assist owners to find lost personal property. Alberta, for example, has created a searchable database to assist owners to locate lost personal property and holders of tangible personal property are required to electronically report the property where its value exceeds $1000. The Alberta legislation also deems unclaimed property abandoned after the passage of a certain period of time, in most cases, five years. Historically, ownership rights in relation to land could also be acquired by occupying land owned by someone else, such as by inadvertently misplacing a fence or building on someone else’s land. These rights are sometimes referred to as “squatter’s rights” and can be acquired if the occupation or “adverse possession” persists for a lengthy period of time, usually 10 years, although some provinces have now abolished squatter’s rights. Quiz Question 17.11 Mark as: None Review Which of the following is NOT method by which ownership of property may be be acquired? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a by finding and taking possession of abandoned property b by purchase a building c by the inadvertent placement of a fence on a neighbour’s land for a period of 10 years d by allowing a neighbour to park their car on your driveway Show Submitted Answer Show Correct Answer Check My Answer BUSINESS APPLICATION OF THE LAW 17.3 Is Sperm or Other Human Tissue “Property,” and If So, What Legal Rights and Obligations Should Attach to This Form of Property? Howard Lam was one of more than 400 men who, prior to undergoing treatment for cancer, entered into a contract with the University of British Columbia and paid a modest annual fee to have his sperm frozen and stored at a facility associated with the university. Unfortunately, due to a tripped circuit breaker, a failed alarm, and lack of a back-up power supply, the sperm thawed and was rendered useless. Lam and other men whose sperm was destroyed commenced a class action lawsuit against the university and associated entities, alleging negligence and breach of contract. In response, the university relied on a limitation of liability clause in their contract that absolved the university of liability for any malfunction, even if its cause was within its control. The plaintiffs in turn argued that the limitation of liability clause violated the province’s Warehouse Receipt Act, RSBC 1996, c 481, s 13, which imposes a duty on a warehouse operator to exercise care and diligence with respect to goods and imposes corresponding liability for loss or damage to stored goods. One of the issues the British Columbia Court of Appeal had to resolve was whether the stored sperm constituted “goods”—which were defined for the purposes of the legislation to include “all property other than things in action, money and land” (s 1). The majority of the court found that the sperm constituted property and thus goods—at least for the purposes of entering into a contract for its storage and suing for its loss due to negligence. As one might expect, notwithstanding its status as property, legislation is in place that prohibits commercial trade of human sperm and ova, called the Assisted Human Reproduction Act, SC 2004, c 2 (AHRA). This legislation also requires written consent of the donor before sperm or ova may be used, such as in fertility clinic. The right of a spouse to harvest or use the stored reproductive material of a deceased partner arose in two recent cases in British Columbia. Both deceased men died intestate and their spouses sought access to their sperm in order to conceive a child. In the first case, the husband had stored sperm before undergoing a serious medical procedure and he and his spouse had agreed the sperm would be used to conceive a child. However, he died without completing the written consent under the AHRA. The judge concluded the reproductive material was property that passed to the wife for her use and also that the consent that the deceased donor had given to the use of his reproductive material after death was sufficient to satisfy the fundamental objective of the AHRA that the donor’s consent must be both free and informed. He ordered that the reproductive material be released for the purpose of creating an embryo. In the second, more recent case, the Court of Appeal rejected the spouse’s claim that the sperm was property that had passed to her through his estate. In that case, the spouse obtained an emergency court order to remove sperm shortly after her husband’s death and then sought an order permitting its use. She testified that the couple had planned to have a second child, but for his unexpected and sudden passing. The Court of Appeal held that use of the sperm without written consent would violate the AHRA and that its removal by court order did not in itself, create “property” that could be passed to her. According to the court, the order for removal of the sperm did not create any substantive rights and was simply a means by which Ms. T was given an opportunity to argue that she had the right to remove and use her husband’s reproductive material to create an embryo. The first case had not been appealed and the Court of Appeal suggested it had been wrongly decided. But what about commercial trade involving other types of human tissue? Should it be treated the same as reproductive tissues, and should consent be required prior to its use (Figure 17.1)? In May 2008, Dr. Abraham performed a colonoscopy on Snezana Piljak during which he removed a polyp from Ms. Piljak’s colon. In August 2009, Ms. Piljak underwent unrelated testing at the hospital that revealed lesions on her liver and colon where the colonoscopy had been performed. She was diagnosed with colorectal cancer and died two years later. After her death, her estate commenced a negligence action against Dr. Abraham and other medical professionals involved in her treatment. One of the allegations was that Dr. Abraham should have detected the cancer and failed to meet the standard of care. In his defence, Dr. Abraham argued that unrelated medical conditions caused his patient’s death and he sought the court’s permission to access the liver tissue that was still in the possession of the hospital in order to test for a genetic condition known as HNPCC or Lynch Syndrome, a condition that is often undetected during colonoscopy and which increases the risk of certain types of cancer and causes cancer to develop very rapidly. Figure 17.1 Would treating human tissue like any other property have negative implications for society? [D] One of the issues raised in the case was the possibility that the testing would also reveal genetic information about Ms. Piljak’s family members, some of whom might not want the information and might therefore object to the testing. Ontario’s procedural rules permit a court to make an order for the inspection of “real or personal property where it appears to be necessary for the proper determination of an issue in a proceeding.” Therefore, a preliminary issue the court had to determine was whether the tissue that had been removed from Ms. Piljak at the hospital counted as personal property. The court ultimately concluded that the tissue sample constituted personal property, a “moveable,” and that while it had been owned by Ms. Piljak before its removal, it became the property of the hospital after its removal. According to the court, once excised, its possession and ownership was transferred to the hospital by virtue of being part of the hospital’s medical record. As for the rights of the patient in regard to excised tissue, the court accepted that at best a patient is entitled to have “reasonable access” to the tissue sample. Critical Analysis Loading question... Sources: Richard Warnica, “Human Tissue Removed for Medical Tests Is ‘Personal Property’ of Institution, Not Person It Came From: Ruling”, National Post (5 June 2014), online: https://nationalpost.com/news/canada/human-tissue-removed-for-medical-tests-is-personal-property-of- institution-not-person-it-came-from-ruling accessed 10 November 2022; Mayo Clinic, “Diseases and Conditions, Lynch Syndrome”, (last visited 10 November 2022), online: http://www.mayoclinic.org/diseases- conditions/lynch-syndrome/basics/definition/con-20025651; Alicja Puchta, “Human Sperm to Constitute Legal Property: Lam v University of British Columbia”, the Court.ca (18 February 2015, last visited 10 November 2022), online: http://www.thecourt.ca/human-sperm-to-constitute-legal-property-lam-v-university-of-british- columbia/. Legal Rights Associated with Property Unlike the Constitution of the United States, Canada’s Charter of Rights and Freedoms does not provide for the constitutional protection of property. However, this is not to say that Canadian law does not provide protections for property. Alberta, for example, has enacted the Alberta Personal Property Bill of Rights, RSA 2000, c A-31, which echoes the United States’ Fifth Amendment of the Bill of Rights of 1791 insomuch as it renders void any provincial law that authorizes the Crown to acquire permanent title in personal property unless the law incorporates a process for providing compensation for acquiring that title. The Canadian Bill of Rights, SC 1960, c 44, also provides that Canadians have to right to “enjoyment of property, and the right not to be deprived thereof except by due process of law,” although this statute applies only to federally regulated matters and can be overridden by any other act of Parliament. Specialized legislation also exists to protect certain types of property. For example, intellectual property rights are protected by several federal statutes such as the Patent Act, RSC 1985, c P-4, and privately owned land is protected from arbitrary expropriation by provincial statutes such as the Ontario Expropriations Act, RSO 1990, c E 26, which also require governments to meet basic requirements of procedural fairness when expropriating privately owned land. Many of our rights to protect our property exist in the common law. For example, the torts of trespass and nuisance protect a person’s possession and enjoyment of land from interference, and the tort of passing off protects the goodwill attached to the products of a business. These torts are discussed in Chapter 12. The Bundle of Rights The collection of legal rights associated with ownership of property is sometimes characterized as a bundle of rights , and included in this bundle are the right to exclude, the right to possession, use, and enjoyment of property, and the right to transfer or dispose of property. The owner of property who is also in possession is entitled to deal with it essentially as they see fit. Their options include the following: They can sell the property and transfer ownership and possession to the buyer. They can lease the property to another business with the intent of regaining possession or selling it when the lease expires. They can use the property as security for a loan, thereby giving the lender the right to seize or sell the property if the borrower defaults on the loan. They can transfer possession of its chattels to another business for storage, repair, or transport with the corresponding right to regain possession. It should be noted that lands within Canada that are subject to Aboriginal title also convey significant rights to the title holder, including the right to possess, enjoy, manage, and occupy as well as the right to economic benefit of the land. For further discussion of the unique features of Aboriginal title, refer to Business Application of the Law 17.1: Aboriginal Title. Sometimes these rights are in conflict with rights that were granted by the Crown to developers without regard to outstanding claims of Indigenous Peoples, as occurred in Tŝilhqot’in Nation v British Columbia (Case 17.1). CASE 17.1 Tŝilhqot’in Nation v British Columbia, 2014 SCC 44 THE BUSINESS CONTEXT: This decision clarifies the obligations of the Crown when dealing with lands subject to claims of Aboriginal title. FACTUAL BACKGROUND: The Tŝilhqot’in Nation, a grouping of six bands sharing a common culture and history, have lived for centuries in an area of land located in South Chilcotin, in the Cariboo region of British Columbia. The lands in question had never been surrendered in a treaty and, until 1983, the Tŝilhqot’in people were one of hundreds of Indigenous groups in British Columbia with an unresolved land claim. In 1983, the province of British Columbia granted Carrier Lumber Ltd a commercial licence permitting logging on land considered by the Tŝilhqot’in people to be part of their traditional territory. The First Nations government of the Xeni Gwet’in (one of the six bands that make up the Tŝilhqot’in Nation) objected to the commercial logging licence and sought a declaration from the court prohibiting the logging on the lands in question. The dispute eventually led to the blockade of a bridge that Carrier Lumber Ltd was attempting to upgrade. The blockade ceased when the provincial premier promised there would be no more logging without consent of the Xeni Gwet’in. Although talks ensued, the parties were unable to reach an agreement and, in 1998, the group’s original land claim was amended to include a claim for Aboriginal title on behalf of all the Tŝilhqot’in people. The lands subject to the claim for Aboriginal title were confined to approximately 5 percent of what the Tŝilhqot’in people regarded as their traditional territory and were sparsely populated by about 200 (of the approximately 3000) Tŝilhqot’in members, along with a handful of non-Indigenous people who also supported the Tŝilhqot’in claim to title. THE LEGAL QUESTION: Did the historical evidence support the Tŝilhqot’in Nation’s claim of Aboriginal title to the lands in question? RESOLUTION: The trial commenced in 2002 and continued for 339 days over a span of five years. The trial judge, who spent time on the lands subject to “the claim and heard extensive evidence from elders, historians, and experts, found that the Tŝilhqot’in people were, in principle, entitled to a declaration of aboriginal title,” although for procedural reasons refused to make a declaration of title. On June 26, 2014, in a unanimous decision, the Supreme Court of Canada held that the Tŝilhqot’in Nation had established Aboriginal title to the lands in question. According to the court, while the population was small, the evidence established that the lands were regularly used and continuously occupied by the Tŝilhqot’in people, who treated it exclusively as theirs, repelling other people from the land and requiring permission for outsiders to pass over it. Importantly, the court held that the title was not confined to specific, intensely occupied areas but also extended to lands used regularly for hunting, fishing, or other resources at the time of assertion of European sovereignty. The court also held that, in addition to the government’s duty to consult and accommodate, once Aboriginal title was established, a government may only infringe on the rights of the Aboriginal title holder for a compelling and substantial purpose and in a manner consistent with the Crown’s good faith duties to the group. Tŝilhqot’in First Nation being granted B.C. title claim is discussed in Video 17.3. Video Please visit the textbook on a web or mobile device to view video content. In the years since the 2014 decision, the provincial government and the Tŝilhqot’in National Government have been working to transition governance of the lands to the Tŝilhqot’in people. In February 2016, the province and Tŝilhqot’in Nation signed the Nenqay Deni Accord, which outlines eight pillars of reconciliation and clarifies the next steps in transitioning the title area to Tŝilhqot’in management and control. In 2019, the federal and provincial governments, and the Tŝilhqot’in National Government signed the Gwets’en Nilt’i Pathway Agreement (“Towards It, We Are Striving”), which has been described as a historic reconciliation agreement to support Tŝilhqot’in self-determination. The transition is complex and challenging and involves many stakeholders, including non-Indigenous tenure holders and licensees such as ranchers, guide outfitters, and trappers. The interests of these previous users of the land are now subject to the right of the Tŝilhqot’in owners to benefit economically from their lands and to determine how their lands are to be accessed and used. Sources: Government of Canada, Canada, British Columbia, and the Tŝilhqot’in Nation Sign Gwets’en Nilt’i Pathway Agreement (28 August 2019), online [news release]: https://www.canada.ca/en/crown-indigenous- relations-northern-affairs/news/2019/08/canada-british-columbia-and-the-tsilhqotin-nation-sign-gwetsen-nilti- pathway-agreement.html; Government of British Columbia, Tŝilhqot’in Nation, B.C. Strengthen Relationship (26 September 2022), online [news release]: https://news.gov.bc.ca/releases/2022PREM0059-001448. Critical Analysis Loading question... Right to Exclude One of the most important rights associated with property is the right to exclude others from accessing or interfering with it. For example, the property rights associated with land normally include the right to exclude others from entering upon land or interfering with the owner’s use of the land. The property rights in a book that is subject to copyright include the right to prohibit others from copying or modifying the work in question. Most business activity involves the expenditure of energy and resources in order to create property or increase its holdings of property, and therefore the right to exclude is a fundamental and important right. TECHNOLOGY AND THE LAW 17.1 Drones, Airspace Rights, and the Right to Exclude In 2019, the environmental NGO, Sea Shepherd, published dramatic drone footage it obtained over a salmon farm on Vancouver Island. The footage appeared to show rotting salmon and included close-up footage of equipment and workers at the privately operated farm. No legal action was pursued against Sea Shepherd, but the incident raised questions about rights of property owners to the airspace above their property, particularly with respect to drones. One of the most important rights of a property owner is the right to exclude. Historically, the physical boundaries of a landowner’s rights were expressed by the Latin maxim, cujis est solum ejus usque ad coelum et ad inferos or “whoever’s is the soil, it is theirs all the way to heaven and all the way to hell.” Today, the rights of a landowner to the airspace above their property are much more limited. While the common law does not establish a specific height at which such rights end, cases suggest that ownership of airspace over one’s property is limited to “such height as is necessary for the ordinary use and enjoyment of [the] land.” Can a private property owner prohibit operation of a drone over their property? The law is unclear. Drone use in Canada is regulated by Transport Canada (Video 17.4). Regulations introduced in 2019 require registration of drones over 250 grams and require operators to be licensed, but are silent regarding the right to operate a drone over private property, other than to provide that drones must not be operated at altitudes higher than 400 feet or in controlled airspace, or closer than 30 metres to a person (or 5 metres for advanced operators). Operators are also prohibited from operating over a bystander. The regulations say nothing about operation over private buildings or property, but Transport Canada guidelines advise operators that they are subject to privacy laws with respect to collecting and storing data during their drone excursions. Locally, municipal bylaws may place further restrictions on drone operation. Video Please visit the textbook on a web or mobile device to view video content. Given that federal regulations are silent about operation over private land, could a landowner bring an action in trespass or nuisance for the operation of a drone over their property? While there is a dearth of case law involving drone intrusions on private lands, some guidance may be drawn from cases involving other overhead intrusions over private property. In one case, a property owner sued a crane operator for trespass and nuisance, seeking an injunction and damages. In that case, a 90-foot construction crane swung over the neighbouring two-storey building approximately 10 times a day, with intrusions amounting to about an hour per day in total. The trespass claim was rejected as the intrusion was found to be too transient, but the crane operation was found to constitute a nuisance that entitled the landowner to damages. In another case, a landowner was successful in a trespass claim involving a power line that hovered 50 feet above their farm. The court found that the line was within the airspace that formed part of the owner’s property, as it was within the height necessary for the ordinary use and enjoyment of the land. While this latter case involved a permanent rather than a transitory intrusion, it suggests that the limits of one’s airspace ownership will vary depending on how the owner uses and enjoys their property. Sources: Drew Cherry & Rachel Mutter, “WATCH: Anti-Salmon Farming NGO Releases Drone Footage of Die-Off at Cermaq’s BC farms”, Intrafish (21 November 2019), online: https://www.intrafish.com/aquaculture/watch-anti- salmon-farming-ngo-releases-drone-footage-of-die-off-at-cermaqs-bc-farms/2-1-710482; Ryan Morasiewicz & Tessa Rowland, “Can Private Property Owners Ban Drone Overflights?”, Mondaq (15 November 2019), online: https://www.mondaq.com/canada/aviation/864630/can-private-property-owners-ban-drone-overfligh; David Blair, Brian Lipson, Tim Lawson & Kosta Kalogiros, “Transport Canada’s New Rules for Drones”, Mondaq (8 March 2019), online: https://www.mondaq.com/canada/aviation/788496/transport-canada39s-new-rules-for-drones; Canadian Aviation Regulations, SOR/96-433. Part IX – Remotely Piloted Aircraft Systems. Critical Analysis Loading question... Cran-Terra will have the right to exclude individuals from entering its business premises and may enforce that right by commencing a suit for the tort of trespass. Similarly, Cran-Terra can grant potential customers the legal right to enter its property by inviting them to enter the store during business hours. Cran-Terra could also exclude others from using any trademarks it has registered and could enforce this right by suing for damages and seeking an injunction to prevent further unauthorized use. Quiz Question 17.15 Mark as: None Review One of the limitations of ownership of intangible property such as copyrights and trademarks is that it is impossible to exclude others from using the property. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a True b False Show Submitted Answer Show Correct Answer Check My Answer Right to Possess and Use Another right usually associated with property is the right of possession. While the ownership of property and right to possess it are normally held by the same person or entity, it is often possible to separate these rights so that ownership may rest with one party while the right of possession rests with someone else. This is essentially the nature of a lease , which results in one party owning the property while someone else has the right to possess that property for a period of time, after which possession is ultimately returned to the owner. There are several examples of possession rights in the Cran-Terra scenario that are common in a business environment: Cran-Terra’s customers will be leaving their property on Cran-Terra’s premises, including goods that have been consigned. Unlike with donated goods, in a consignment , there is no intention that Cran-Terra will become the owner of the consigned property. Cran-Terra could renew its lease with the building owner. By doing so, Cran-Terra would get the benefit of using the building without having to make the large capital outlay required to purchase it. Some property cannot be physically possessed by its owner and its value lies in the right to control the use of the property. For instance, intangible property such as a specialized process that is protected by a patent has no physical existence that is capable of being possessed, but the right to use the process may be very valuable. An inventor who develops and patents a new product or process might choose to grant a licence to permit someone else to manufacture and sell the product or use the process in exchange for the right to receive royalties from the product’s future sales. Cran-Terra could grant a business a licence to use its name in another location. Right to Transfer or Dispose Normally, the rights associated with the ownership of property also include the right to dispose of the property or transfer the property (such as by selling it) to someone else. However, there are exceptions. For example, the title to most land in Canada incorporates the right to sell the property, but it is also possible to own land only for the duration of one’s life, after which the title reverts back to its initial owner or their estate. The owner of a life estate may be able to transfer the property to a third party but cannot transfer a greater interest than they possess. As such, a buyer’s interest will be surrendered upon the death of the original holder of the life estate. There are other situations in which the property rights in personal property do not include the right to sell or transfer the property. For example, a person who rents or borrows personal property only has a temporary interest in the property and cannot sell it or otherwise dispose of it. Personal property and real property rights might also be subject to a trust. A trust arises when the owner of property transfers their rights in specific property to someone who holds the property (the “trustee”) for the benefit of the trust’s beneficiaries. Although a trustee has legal title to the trust property, they are normally prohibited from using the property for their own personal benefit and owe fiduciary duties to the beneficiaries of the trust. Trusts are often used in wills to control how property is used after the death of the testator, but trusts have many other purposes and business uses. For example, most pension plans are facilitated by use of the trust concept. A pension plan is usually administered by pension trustees who hold legal title to the pension fund assets and manage the funds for the benefit of the plan’s members who have the legal right to benefit from the assets held in the fund. The law of trusts is complex and a more detailed explanation of trusts is beyond the scope of this book. Quiz Question 17.16 Mark as: None Review Which of the following would conflict with an owner’s “bundle of rights”? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a entering into a lease agreement for personal benefit b using property owned by a trust for personal benefit c entering into an easement for personal benefit d transferring ownership for personal benefit Show Submitted Answer Show Correct Answer Check My Answer Cran-Terra will acquire used sporting equipment under consignment arrangements and also through donation. The legal title in goods that are consigned to Cran-Terra will remain with the original owner; however, physical possession will transfer to Cran-Terra, most likely under contractual terms that will allow Cran-Terra to keep a portion of the sale proceeds. In contrast, the donors of used equipment will be surrendering both their legal title and physical possession; they will have no remaining property interest in the goods and cannot reclaim the goods once they have been donated. While we typically associate ownership of property with rights, ownership might also entail legal obligations. Most municipalities impose a tax on the ownership of real property in order to fund municipal services such as police and fire protection, road maintenance, and infrastructure. Landowners may also have obligations under legislation to co-operate with certain intrusions on their land. For example, in British Columbia, where the province owns most subsurface oil and gas rights, a landowner can be required to grant a developer access to the property. As with several other provinces, British Columbia imposes mandatory arbitration in the event the resource developer and surface landowner cannot agree on fees and terms of access (Petroleum and Natural Gas Act, RSBC 1996, c 361, ss 152, 159). Similarly, landowners of environmentally sensitive property may have statutory obligations to protect the natural features of the property. A municipality may also impose land use rules in order to regulate local development and bylaws that require property owners to provide proper upkeep of their property. Quiz Question 17.17 Mark as: None Review Which of the following best describes the “bundle of rights” associated with ownership of property? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a The bundle is a set of rights that is always the same for every type of property ownership. b The bundle of rights always includes the right to sell or dispose of the property. c The bundle of rights always includes the right to use the property any way the owner sees fit. The bundle of rights usually includes the right to exclude, possess, use, enjoy and transfer or dispose of the d property. Show Submitted Answer Show Correct Answer Check My Answer Bailment of Personal Property One of the unique features of personal property is portability. Because of this characteristic, owners are not always in constant possession of their personal property. A bailment is a temporary transfer of possession of personal property from the owner, known as a bailor , to another party, known as a bailee. A business or individual in possession of personal property belonging to a third party may have a duty to care for the property, and, depending on the nature of the bailment, may also have certain rights in the bailed property. Many commercial transactions are bailment arrangements: renting a car leaving goods with an online retailer to sell to the public leaving property at a repair shop hiring a commercial carrier to deliver goods to a customer delivering property to a storage facility Bailments are also common in the non-commercial context, such as lending a lawn mower to a neighbour or asking someone in a café to watch your laptop while you place your order. A bailment arrangement can exist independently and does not require a contractual relationship. In each of these situations, someone is in possession of someone else’s property. The question that arises: how much responsibility is entailed in possessing someone else’s property? For example, should a neighbour who borrows your lawn mower and a stranger who agrees to watch your laptop for a few minutes owe the same amount of responsibility for your property? Or, does someone who pays a fee to use your lawn mower owe the same level of care toward it as someone who has been allowed to use it for free? In business, liability issues can arise when some mishap occurs in relation to the property while it is in the possession of the bailee. For example, the skates and consigned goods of Cran-Terra’s customers might be lost or damaged while in Cran-Terra’s possession. Ideally, the contracts between Cran-Terra and its customers will specify the extent of Cran-Terra’s liability for these events. Bailees may not escape their responsibilities by turning over a bailed chattel to employees. If the chattel is damaged, lost, or stolen as a result of employees’ negligence, the employer as bailee is vicariously liable so long as the employees were acting within the ordinary course or scope of their employment; that is, the employees were engaged in the performance of their assigned duties. In addition, bailees are liable for the intentional wrongdoing of their employees. A bailee who entrusts bailed goods to an employee is personally (not vicariously) liable for the theft of the goods by the employee. Another basis of liability of a bailee for theft by an employee is the law of negligence. The employer has a duty to hire honest, responsible people. Accordingly, failure to engage in proper hiring practices may result in liability for the employer. In general, the liability of a bailee for bailed property will be governed by the common law of bailment, statutory rules that may be imposed on special types of bailees (e.g., warehouses and innkeepers) and the specific contract terms between the parties. Arrangements constituting bailments can sometimes be confused with a mere licence to leave one’s property where it would not otherwise be permitted. A licence arises when one party allows another to do something that would otherwise be unlawful. For example, Cran-Terra might permit a neighbouring business owner to temporarily park its delivery truck on Cran-Terra's property. In order to constitute a bailment, the truck’s owner would have to show the following: The personal property was voluntarily delivered to Cran-Terra for a particular purpose (such as storage or repair, for example). The parties intended that Cran-Terra have custody and control over the bailed property. The parties intended the property to be returned (or disposed of). Thus, merely placing the truck on Cran-Terra’s property with its consent may would likely be seen as licence. However, if the truck owner also left the truck’s keys in the custody of Cran-Terra and then left on vacation, this would suggest custody and control over the property has been delivered Cran-Terra. The distinction is important. If Cran-Terra is a bailee, it will owe the common law duty of care toward the property (which is discussed next), and will bear the onus of showing that any loss or damage to the truck was not due to its failure to fulfill its duty. Quiz Question 17.18 Mark as: None Review Which statement best describes the liability of a bailee if a loss of the property occurs while the bailee is in possession? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. A bailee will be strictly liable for the return of the bailed goods as well as for any damage, whether or not the a bailee was careless. b A bailee will only be liable if their gross negligence caused or contributed to the damage or loss of the property. c A bailee’s liability will vary depending upon the nature of the bailment. d A bailee will only be liable if the bailment was for the benefit of the bailee. Show Submitted Answer Show Correct Answer Check My Answer Quiz Question 17.19 Mark as: None Review Five Star, a Canadian hotel, offers its guests valet parking as part of their room rental. Upon arriving at the hotel, a guest provides their vehicle keys to the hotel valet, who in turn parks the vehicle in the hotel’s secure, underground parkade. When the owner wishes to have access to their vehicle, they contact the valet, who brings the car out of the parkade and returns the keys to the owner. Which of the following statements it correct? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a This arrangement would constitute a lease of the parking space by the hotel guest. b This arrangement is a licence, in which the hotel authorizes the guest to leave their vehicle on the hotel’s property. c This arrangement is a bailment, in which the hotel is bailor and the valet is the bailee. d This arrangement is a bailment, in which the hotel is bailee and the guest is the bailor. Show Submitted Answer Show Correct Answer Check My Answer Common Law Liability of Bailees The common law obligations of bailees to care for the goods of their bailors have evolved through various stages. Initially, bailees were 100 percent liable for the return of bailed chattels as well as for any damage, whether or not the bailee caused the damage and even where the bailee exercised reasonable or even extreme diligence. Today, in the absence of statutory rules or a formal agreement between the parties, all bailees are expected to exercise care toward the bailor’s property; however, the degree of care expected will vary with the circumstances, including whether payment is involved, which party is benefiting from the bailment, the nature of the property being bailed, and the expertise of the bailee. Is Payment Involved? Most commercial bailments are based on a contract requiring payment for the use of the property or as compensation for storage or another service. This is known as a bailment for value. Possession of property may also be transferred without payment by virtue of a loan or a free service. This would occur when, for example, a prospective buyer takes a vehicle for a test drive or someone parks their car in their neighbour’s garage for the winter. Because there is no compensation involved in such arrangements, such an instance is known as a gratuitous bailment in the sense of being free or “without reward.” In general, a bailee who receives a payment must show greater care than a gratuitous bailee. For Whose Benefit Is the Bailment? The question of who benefits from a gratuitous bailment is particularly important, as the answer will determine the bailee’s responsibility for the property. Gratuitous bailments can benefit the bailor or the bailee. If the bailment is gratuitous and for the benefit of the bailor, the standard of care is very low. If the bailment is gratuitous and for the benefit of the bailee, the standard is very high. For example, when someone stores his car in a friend’s garage for the winter at no charge, the bailee—the person who owns the garage—derives no advantage from the relationship, while the bailor—the person who owns the car—now has protection for their vehicle from harsh weather. It is the bailor, therefore, who gains from the bailment and the standard of care is low. Conversely, when a person borrows their neighbour’s lawn mower, the owner of the lawn mower—the bailor —is simply doing a favour and does not derive any tangible benefit from the bailment. The borrower—the bailee —can now cut their grass without having to buy or lease a lawn mower from someone else and is therefore the party who profits from the relationship and the standard of care is very high. Bailments that benefit both the bailor and the bailee are most common in the commercial world and usually involve bailments for value—that is, bailments in which one of the parties is paid for the provision of a service or other benefit. For example, the owner of skates consigned to Cran-Terra benefits from the relationship since they receive the services of Cran-Terra in selling the property and Cran-Terra benefits from the customer’s payment in turn. The obligation of Cran-Terra in these situations is to take the same care of the goods as a “prudent warehouseman acting reasonably” might be expected to take of their own goods. The Nature and Value of the Bailed Property The standard of care expected of a bailee will be higher for more valuable property, and the care provided by the bailee should be appropriate for the type of property. For example, a bailee of valuable and delicate property such as a rare antique book would be expected to exercise a higher degree of care toward the book and might be expected to store it in a dry and secure place. A jeweller making arrangements to ship a customer’s valuable ring for repairs might be expected to make certain the ring is transported in the safest possible manner and that adequate insurance is in place in case of the ring’s loss during its transportation. Special Circumstances in the Transaction Where the bailee is instructed by the bailor as to the value of the goods or special storage requirements, for example, this increases the standard of care that the bailee must meet. The Expertise of the Bailee A bailee who specializes in a certain type of bailment (such as storage) is expected to take greater care than an ordinary person. Quiz Question 17.20 Mark as: None Review What would the courts NOT take into account when deciding if a bailee exercised reasonable care? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a whether the property being bailed was insured for loss or damage b who benefits from the bailment c the nature and value of the property that was bailed d whether the bailee is a bailee for value or a gratuitous bailee Show Submitted Answer Show Correct Answer Check My Answer Quiz Question 17.21 Review Mark as: None What is most likely to result if a bailment is without reward and for the benefit of the person possessing the property? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a The bailor’s standard of care will be low. b The bailee’s standard of care will be low. c The bailor’s standard of care will be very high. d The bailee’s standard of care will be very high. Show Submitted Answer Show Correct Answer Check My Answer The Contract of Bailment In bailments for value, the contract between the bailor and the bailee is central. For example, the contract may raise or lower the standard of care owed by the bailee or may set the standard at ordinary care and diligence but limit the amount of damages for which the bailee may be held liable. The parties are free to negotiate the details of their own agreement. A contract will normally include a description of these aspects: the services to be provided by the bailee the price to be paid by the bailor and payment terms the extent to which the bailee is liable for damage or loss the remedies of the parties for failure to perform In a storage contract, for example, the focus is on the bailee’s liability for loss to the chattels in question and the bailee’s remedies for collecting storage charges. Because a warehouser deals with the property of many customers in similar circumstances and is under pressure to keep prices competitive, such a business is likely to have a standard form agreement that all customers are expected to sign (Figure 17.2). The main object from the perspective of the storage company is to minimize its responsibility for damage caused to property in its possession and it might do so with such a clause: “The warehouseman’s liability on any one package is limited to $40 unless the holder has declared in writing a valuation in excess of $40 and paid the additional charge specified to cover warehouse liability.” While this clause may seem unfair—after all, if the warehouser’s negligence causes more than $40 in damage, should it not have to pay the full tab?—its function is to signal which party should buy insurance on the item being stored: the bailor or the bailee. In this case, the onus is on the bailor (as the owner who is limited to a claim for $40) to purchase insurance, since the item being stored is likely worth much more than that amount. Figure 17.2 Who is responsible for third-party inventory damaged during storage by an e-seller? [G] The other focus of a bailment contract is on the remedies that the bailee can use to obtain payment from delinquent customers. For example, the contract may provide that the bailee is entitled to retain possession of stored items until payment is received and may also give the bailee the right to sell stored items in order to apply the proceeds to the outstanding account. Certain types of bailments may be subject to special regulations or rules that may set out the standard of care and other rights and obligations of parties to the bailment contract. Contracts to transport goods, for example, are subject to standard statutory terms that may set out the standard of care, and businesses that store or repair goods may have special statutory remedies in the event of a customer’s non-payment. Transportation A bailee who receives property and transports it according to the owner’s instructions is called a carrier. Common carriers are those who represent themselves to the public as carriers for reward, meaning they are prepared to transport any property for any owner so long as their facilities permit and they are paid for the service. Common carriers are held to a very high standard of care regarding the property they carry. If property is lost or damaged while in their possession, it is presumed that the carrier is liable. The owner is not required to prove fault by the carrier, mainly because it is difficult for the owner to know what happened to the property during the transport. Carriers are required to account for their treatment of the property and have limited legal defences which are mainly related to circumstances within the control of the owner or beyond the control of the carrier. For example, if the owner fails to pack fragile goods adequately or the goods are destroyed in a natural disaster, the carrier could be excused from liability. As a result of this heavy responsibility based on legislation and the common law, carriers normally include provisions in their standard form agreements with customers that the carriers’ liability will be severely limited, typically to a low dollar amount, should mishap occur with the property. Customers are protected by legislation covering each form of transport—rail, road, sea, and air—and clauses used in contracts on international or interprovincial routes must be approved by the Canadian Transport Agency. Carriers have a common law lien against the property for transport charges, but enjoy no corresponding right to sell the property if the owner fails to pay. Quiz Question 17.22 Mark as: None Review Which of the following describes a right of a carrier in the event a customer fails to pay for the transport? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a the right to sell the customer’s property b the right to impose a common law lien c the right to punitive damages d the right to liquidated damages Show Submitted Answer Show Correct Answer Check My Answer Storage The general responsibility of a warehouser toward their customers’ property is to treat it as a “prudent warehouseman” would deal with their own property. This imposes a standard of reasonableness that includes responsibility for all foreseeable risks. Because the standard is high and the potential losses are high, a warehouser will typically limit their liability to their customers in their standard form agreements. The remedies of a storage bailee, or warehouser, are contained in legislation in each province. The bailee has a lien over the property until the owner pays the storage fees and, if payment is not forthcoming, a warehouser has the right to sell the property and apply the proceeds to the outstanding charges. Any surplus proceeds of the sale go to the owner. The legislation contains safeguards for the owner in that notice of the intended sale must be given and the bailee must deal with the property in a reasonable manner—for example, not sell valuable property for the amount of a relatively small storage bill. Repairs When the owner of property takes it to a repair shop, the main purpose of the transaction is the repair of the property. If the property is left at the shop, a storage bailment, which is incidental to the main purpose of the arrangement, is also created. At the appointed time for pick-up, the owner—the bailor—expects to receive the property in a good state of repair and otherwise in the condition in which it was delivered. From a business perspective, it makes sense to agree on a price in advance, but if the parties do not agree on the price for storage and repairs at the outset, the repairer’s compensation will be a reasonable amount for the service provided. The repairer cannot charge more than is reasonable, nor can the owner refuse to pay anything, just because no price was agreed in advance, and some provinces provide guidelines for determining the fair value of the storage and repair costs. For example, in Ontario, fair market value is determined based on the repairer’s fixed costs, variable costs, direct costs, indirect costs, and profit. Most provinces have legislation giving the bailee a lien against the property for the value of the repairs as long as the bailee has possession of the property. As with the storage situation, the bailee also has the right to sell the property (subject to procedural requirements) to recover the repair charges. In Alberta, for example, a repairer has a lien for its repair and storage costs or other costs associated with caring for the property that is not retrieved within the time period specified in the contract or upon notice if there is no fixed time in the contract. If an account remains unpaid for a period of six months (three months in the case of motor vehicles), or the property is not retrieved within the time period in the contract or notice, then the repairer may sell the property upon meeting certain notice requirements. This notice is waived in the case of goods valued at less than $300, and such goods may be sold at a price and by means the repairer considers reasonable. If the repairer is unable to sell the goods, they may be disposed of in a manner the repairer considers reasonable in the circumstances. Quiz Question 17.23 Mark as: None Review Shawna received a factory recall notice from her GM dealership. She accepted the dealership’s offer to drive her to work when she brings the car in for the service recall. What will be the certain result when Shawna hands the dealership her car keys? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a An agreement on price for the service will be created in advance. b An incidental storage bailment will be created. c A low standard of care will be expected. d The dealership will lose the right to retain property for payment. Show Submitted Answer Show Correct Answer Check My Answer CASE 17.2 Letwin v Camp Mart, 2021 ONSC 4175, aff'd 2022 ONCA 475 THE BUSINESS CONTEXT: This case illustrates the duty of care and liability of a gratuitous bailee when agreeing to store a customer’s property. This case also discusses the allocation of risk when the customer had previously agreed to insure the property in question. FACTUAL BACKGROUND: Peter Letwin owned an RV but wanted a larger trailer to accommodate his father-in- law on family vacations. On September 1, Mr. Letwin purchased a holiday trailer from Camp Mart. The purchase was financed by Desjardin, and Mr. Letwin signed a sales agreement with Camp Mart indicating he was responsible for loss resulting from damage to the property and would insure the new RV. The rights of Camp Mart in the sale agreement were assigned to Desjardin as part of the financing arrangement. Mr. Letwin also signed a document titled “Urgent Notice,” which was a form acknowledging that he must insure the trailer with Desjardin endorsed as the payee of the insurance in the event of loss. Despite signing these documents, Mr. Letwin did not recall being informed that he needed to obtain insurance and testified that he did not think insurance was needed until he picked up the RV. At the time of the purchase, Mr. Letwin asked Camp Mart to store the RV until October 30, 2016, when his campsite would be ready, and Camp Mart agreed to store the RV, free of charge, on its property. An agreement to that effect was signed by the parties, which indicated the charge for the storage would be $0. Mr. Letwin’s campsite was not ready in October, and he asked Camp Mart if they could continue to store the property until spring 2017, which they agreed to do, free of charge. Camp Mart representatives later testified that they agreed to store the RV as a favour to the customer, given the fact he had made a large purchase and because they cared about their reputation and online reviews. The trailer was stolen on May 16, 2017, by thieves who used bolt cutters to enter Camp Mart’s gated lot. The theft took place in less than 5 minutes. In addition to the locked gate, the lot was surrounded by a deep ditch and Camp Mart employed a security company to conduct periodic checks of the property. Unfortunately, the theft occurred in the early morning, shortly after the security check had taken place. Mr. Letwin, who had not insured the trailer, brought a negligence action against Camp Mart. Camp Mart argued that the promise in the sale agreement to obtain insurance not only obligated Mr. Letwin to obtain insurance, but also relieved Camp Mart of any liability for the loss, even if caused by its own negligence. THE LEGAL QUESTION: As bailee of the trailer, what was Camp Mart’s duty to Mr. Letwin, and did Camp Mart discharge its duties as bailee? What was the legal effect of Mr. Letwin signing an agreement in which he promised to insure the property in question and signing the Urgent Notice to Insurer? RESOLUTION: The court found that while Mr. Letwin may not have paid attention to the insurance clause and notice to obtain insurance in favour of the lender, there was no doubt that Camp Mart informed him of the need to have insurance when he purchased the RV. According to the court, a promise to insure may relieve the other party of liability in some situations, but this was not the case with Camp Mart, as the promise to insure was in the sales contract that had been assigned to Desjardin as part of the financing arrangement, and the Urgent Notice was also with respect to Desjardin and not Camp Mart. The court then considered Mr. Letwin’s argument that Camp Mart had failed to meet the requisite standard of care as bailee of the trailer. Mr. Letwin argued that Camp Mart was a bailee for reward and should be held to a higher standard of care, arguing that agreeing to store the RV was an implied term of the purchase of the RV and that the defendants received consideration because the plaintiff would not have bought the RV if the defendants did not agree to store it. The court, however, noted that the extension of the storage agreement to the spring of the following year was clearly gratuitous, as the purchase had already been completed when Camp Mart agreed to the extension. Accordingly, Camp Mart was acting as a gratuitous bailee at the time of the theft, which required it to show it was not grossly negligent and that it had kept the goods “as a prudent owner might reasonably be expected to take of his own goods in similar circumstances.” Both sides presented expert evidence as to the appropriate security measures and to the security measures used by similar businesses. Camp Mart had increased its security measures after a theft in the previous year, installing cameras, gates, ditches, and starting security patrols. The court found that while that additional improvements could have been made, such as by using a blocker vehicle at the gate and a stronger and thicker lock, these would not have prevented a motivated thief from stealing the RV. The court also noted that while tire and hitch locks may have helped, they were not used in other dealerships and found that Camp Mart had fulfilled its duty as a gratuitous bailee. Critical Analysis Loading question... BUSINESS APPLICATION OF THE LAW 17.4 Defining Liability in Contracts of Bailment A key aspect of a bailment contract is often the provision limiting the bailee’s liability from what it would otherwise be under the common law rules of bailment, and businesses whose livelihood is based on the bailment relationship will usually pay particular attention to the wording of such clauses. For example, we saw in Chapter 9, in the London Drugs case, how the the clause limiting the bailee’s liability to $40 impacted the outcome in that case. While in the London Drugs case, the enforceability of the $40 clause between the customer and the warehouse company was not challenged, such clauses are vulnerable and can be challenged in various ways: Failure to bring an onerous standard term to the attention of the customer when a reasonable person should have known that the customer was unaware of the term and not consenting to it. Refer to the Tilden and Karroll cases in Chapter 7, for example. Failure of the language in the clause to exclude liability in the circumstances. It is important when drafting clauses limiting liability to avoid ambiguity and use clear and plain language to define the limits of liability in the contract. Serious defect affecting the formation or performance of the contract such fundamental breach or unconscionability. Refer to the Tercon Contractors case in Chapter 9. The use of exemption and limitation clauses may also regulated by statute, particularly in consumer contracts. For example, New Brunswick consumer protection legislation applies to consumer sales that include lease or hire of a consumer product and provides that a clause limiting liability will not be enforced unless the term is considered to be “fair and reasonable” (Consumer Product Warranty and Liability Act, SNB 1978, c C- 18.1). Industry-specific legislation may also set the terms for particular types of contracts. Critical Analysis Loading question... Lodging Someone who offers lodging to the public is known as an innkeeper. At common law, an innkeeper’s responsibility for guests’ property is similar to that of common carriers. They must take great care of guests’ property and are responsible for loss or theft. There is an important practical distinction in the degree of control between carriers and innkeepers. Carriers have total control of the property when it is delivered for shipment, while guests share control over their property through their occupation of rooms. In some provinces, innkeepers are permitted by legislation to limit their liability to a specific amount ($40 to $150, depending on the province) if they post the legislated limits in the establishment. Their protection is lost if the loss to property is due to a negligent or deliberate act of the innkeeper (or the inn’s employees) or if the property has been deposited with the inn for safekeeping. Quiz Question 17.26 Mark as: None Review Which statement best describes an innkeeper’s common law liability for guest property? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a They have total control and therefore complete liability. b They must take great care and are responsible for theft or loss. c They are only responsible for losses caused by the innkeeper’s staff. d They are only liable for gross negligence. Show Submitted Answer Show Correct Answer Check My Answer Table 17.1 summarizes the specialized bailments discussed in this chapter. Type of Storage Repair Transport Lodging Bailment Specialized designation for Customer Customer Shipper Guest the bailor Specialized designation for Warehouse Repairer Carrier Innkeeper the bailee Bailee’s Reasonable Reasonable High High standard of care Liability normally Contract Contract Contract Legislation limited Who gets paid Bailee Bailee Bailee Bailee for a service Remedies for Lien, sale Lien, sale Lien Lien non-payment Applicable Yes Yes No Yes legislation Table 17.1 Summary of Specialized Bailments Quiz Question 17.27 Mark as: None Review Which statement best characterizes the nature of most commercial bailment situations? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a The bailee is liable for latent defects. b The standard of care is very high. c They typically benefit both the bailor and bailee. d The standard of care is very low. Show Submitted Answer Show Correct Answer Check My Answer Risk Management The risks relating to property concern protection of ownership, rights to possession, and the preservation of economic value. With tangible property, the major concern is with responsibility for loss or damage to the property. In bailments for value, an additional risk is the failure of the customer to pay for services such as storage or repair. Businesses subject to these risks can use the risk management model to minimize their impact on the success of the business. For example, with respect to its customers’ property and any equipment that it rents out, Cran- Terra can negotiate contracts that will indicate who bears the loss in a variety of circumstances. The contracts can assign the loss and thereby indicate which party should seek to transfer its risk through appropriate insurance policies. As in most business situations, the risks that cannot be avoided, reduced, or transferred will be retained. Business Law in Practice Revisited 1. What types of property are used in Cran-Terra’s business? Cran-Terra will utilize a variety of property, including real property (the building that serves as its storefront and anything permanently attached to the building and land), tangible personal property (inventory, shelving, customers’ property, rental equipment), and intangible personal property (trademarks, accounts receivable). A typical business would use a similar range of property, including examples of the major classifications of property. 2. What are Cran-Terra’s rights and obligations in relation to the personal property that it acquires for its business? Cran-Terra may lease a building to run its business. Alternatively, Cran-Terra may acquire its land by purchase. In either case, Cran-Terra will have the right to permit others to enter the property. Provided Cran-Terra is compliant with human rights legislation prohibiting discrimination on the basis of gender, religion, or other prohibited grounds, Cran-Terra will also have the right to exclude individuals from its property. If it purchases a building, then as the owner of the land and building, Cran-Terra will also own the fixtures that are already attached to the building, such as the counter at the back of the store and lighting and plumbing fixtures. As owner, Cran-Terra could lease the property to another business or sell the property. If Cran-Terra sold the property, the new owner would assume title to the land and building, as well as any personal property that has been permanently affixed to the property. For property it does not own, but of which it has temporary possession, Cran-Terra has more limited rights. For example, Cran-Terra has the right (according to legislation) to hold customers’ property until they pay the agreed fees. If customers don’t pay, Cran-Terra can sell their property to recover the outstanding fees. It is important to emphasize these rights in the agreements with customers. For property it does not own and property it rents to customers, such as canoes and kayaks, Cran-Terra’s obligations arise from the nature of the transactions involving the property and the terms of the applicable contracts and legislation. For example, Cran-Terra has a duty to treat customers’ property as a reasonably competent proprietor would treat its own property, subject to the protection for Cran-Terra contained in its standard form customer contracts. In addition, Cran-Terra’s customers must take reasonable care of the rented equipment subject to normal wear and tear. The rental agreement will likely set out both Cran-Terra’s obligations and those of its customers, including responsibility for damage to the rented property and liability from its use, in considerable detail. 3. How might Cran-Terra have avoided the problems it is now having with its lease? Unfortunately, the terms of its initial lease were a matter for Cran-Terra to negotiate with its landlord and required long-term planning on the part of Cran-Terra. Ideally, Cran-Terra would have negotiated a renewal option and a manner for determining the amount of its rent in the future renewals of its lease. 4. How can Cran-Terra protect its name? Cran-Terra’s name will be a registered trademark and is a form of intellectual property protected by legislation. If Cran-Terra does not register its trade name or trademark, it may still be able to protect others from using it, although registration would create a presumption of ownership and validity. As an owner, Cran-Terra could license another business to use its name in another location. Cran-Terra also has the right to exclude others from using the trademarks it has registered and could enforce this right by suing for damages and seeking an injunction to prevent further unauthorized use. Chapter Summary One of the roles of property law is to determine what counts as property and thus can be owned. Another role of property law is to enable owners to protect their rights in relation to property. Property can be divided into real and personal. There are two categories of personal property: tangible, which includes goods or chattels, and intangible, which includes various contractual and statutory rights. Ownership is acquired by purchase or manufacture (goods); creation or purchase (intellectual property); or trading (accounts receivable). Typical rights associated with the ownership of property are the right to exclude others from interfering with the property, the right to possess and use the property, and the right to transfer or dispose of the property. A bailment is the temporary transfer of possession with no change in ownership. Key issues in bailment are the standard of care that the bailee must observe in relation to the property and the remedies that the parties have for recovering fees. Standard form contracts are a common feature of commercial bailments. The most common types of bailments are leasing, storage, repairs, transportation, and lodging. Each has somewhat different rules for liability and remedies. Chapter Study Key Terms and Concepts Aboriginal title Title to land that belongs to Indigenous Peoples that is protected by section 35(1) of the Constitution Act, 1982, and which incorporates the right of enjoyment and occupancy, the right to possess the land, the right to the economic benefits of the land, and the right to proactively use and manage the land. bailee The person who receives possession in a bailment. bailment Temporary transfer of possession of personal property from one person to another. bailment for value Bailment involving payment or compensation. bailor The owner of property who transfers possession in a bailment. bundle of rights The set of legal rights associated with property, which usually includes the right to exclude, the right to possess and use, and the right to transfer to others or dispose of property. carrier A bailee who transports personal property. consignment An arrangement in which the owner of goods (the consignor) permits a seller (the consignee) to sell the goods on their behalf, usually paying the consignee a portion of the sale proceeds. gratuitous bailment Bailment that involves no payment. innkeeper Someone who offers lodging to the public. intangible property Personal property, the value of which comes

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