Lensen v. Lensen

The Chief Justice‑‑This appeal arises out of an action brought by a son against his father. The son sued for (i) a declaration that an alleged oral agreement for the sale of certain farm lands between the father as vendor and the son as purchaser is valid and enforceable, and for (ii) a further declaration that the son is entitled to an order perfecting a gift of a quarter section of land and vesting title in his name. The son was unsuccessful at trial, but an appeal to the Saskatchewan Court of Appeal was allowed, and specific performance was granted. The only issue which needs to be addressed involves the role of an intermediate appellate court in relation to findings of fact made by a judge of first instance.

I

Facts

The appellant father, George Cornelius Lensen, was born in 1904 on a family farm in Saskatchewan. He married in 1926. About one year later his parents left the farm and moved to Saskatoon. At that time, George Lensen purchased the farm machinery from his father and paid for it over a period of years. He lived on the farm until 1963, when he and his wife, like his parents before them, retired to Saskatoon.

The respondent son, Keith Gary Lensen, was born in 1937 and is one of eleven surviving children of the appellant and his wife. He left school in 1952 at the age of sixteen and remained on the farm to help his parents. Except for brief intervals when he worked elsewhere for extra money, he has spent all his working life on the farm. In 1955, he rented a quarter section of land from his aunt and continues to farm it under a rental arrangement. Four years later, on April 11, 1959, he entered into a written one‑half crop share lease of two quarter sections of land with his father, for a period of one year. This lease was extended from time to time in writing until 1963. In 1962, the son married. A year later, as noted, his father and mother retired to Saskatoon, leaving the son and his wife on the farm. In April of 1964, the father and son executed another lease of other quarter sections of land on a one‑third crop share basis and in the same year the father sold his farm machinery to the son for $15,000, which was fully paid off by June of 1970.

At trial, the son testified that he waited until the machinery was fully paid off and then approached his father to make an agreement for the purchase of the land. He testified that after numerous discussions his father told him that he would give him the home quarter section and that he would have to pay $100,000 for the remainder of the land. The terms of payment were not set out other than that it was agreed orally, according to the son, that the father was to be paid in full when he chose to ask for the payment. If no such request was made during the father's lifetime, the purchase price was to be paid to his estate. The son testified that the father insisted on making the agreement in this fashion because he wanted to retain title as security for himself and his wife. The son stated that there was no third party present during these discussions.

Throughout the latter part of the 1970s, the son made substantial improvements to the farm, installing a sewage system, an underground gasoline storage tank and pump, two granaries, and a cattle shelter, as well as re‑wiring the house. The son also testified that on two occasions he had opportunities to purchase land from neighbouring farmers but did not do so after consulting with his father and being reassured that his father's land would be his. He also testified that he refrained from seeking a low‑interest loan from the government to purchase the land from his father because the latter assured him that it would be his in any event.

From 1964 to 1980, the father and son continued to operate on a one third‑crop share arrangement, but there were no written leases. Apparently, in 1980, differences arose between the parties over accounting for the crop share owed to the father. As a result, the father's solicitors sent the son a letter dated September 22, 1980 terminating the existing lease arrangements. At trial, the son was asked the following question:

Q....why didn't you instruct your solicitors to write your father's solicitors and say, I have an agreement with my father to buy the land and these are the terms of the agreement?

...A.My solicitors were handling it. They were advising me and I just went with what they said.

Negotiations for a new lease on a cash, as opposed to a crop, basis ensued but were not successful. The action giving rise to this appeal was commenced on April 27, 1981.

The case for the defence began with the father himself. The father flatly denied that he had ever had discussions with his son about selling the farm to him. He testified that he only agreed to lease the land to his son. With respect to the improvements and additions to the farm, the father testified that they were meant to increase the efficiency of the farming operations, to reduce or eliminate manual labour, or simply were done for the comfort of the son and his wife. By raising cattle and operating the farm, the son had accumulated an estate of his own in excess of $250,000 in value, and the improvements he made were not only in his interest but were insignificant when compared to the benefits he enjoyed. The father contends that the circumstances under which the improvements were made were just as consistent with a lease arrangement as with any agreement for the purchase of the land. The father also testified that he told his son to go ahead and purchase neighbouring lands on the two occasions when they were for sale, and that he told his son, when low‑interest government loans were available, that his land was not for sale.

II

Judgments

Saskatchewan Court of Queen's Bench

The trial judge, Maher J., found for the father and dismissed the action. He was not satisfied that the acts allegedly done in part performance of an oral agreement were sufficient to dispense with the necessity for a contract to be in writing as required by s. 4 of the Statute of Frauds. He stated that the acts relied on as part performance "must be unequivocally and in their own nature, referable to some such agreement as that alleged", and "unequivocally referable to some dealings with the land in question". Maher J. was of the view that such was not the case before him. In his opinion, it could not be said on a balance of probability that the acts claimed to have been done in part performance of an agreement between the parties "unequivocally refer to the agreement alleged". He wrote:

They are equally consistent with the lease arrangements that were in place between the parties when they are considered in a setting where the plaintiff had every reason to believe that the land would be left to him by will in a manner similar to the defendant's acquisition of a portion of the same land from his father.

Nor, in his view, was there any "evidence to suggest that the plaintiff was in any way contractually obligated to the defendant to carry out improvements".

Having found the alleged acts of part performance to be insufficient to displace the Statute of Frauds, Maher J. found it unnecessary to determine whether in fact there was an agreement between the parties that the land was to be sold to the son. Nonetheless, he went on to find that there was no such agreement.

Saskatchewan Court of Appeal

The Saskatchewan Court of Appeal, per Tallis J.A., allowed the son's appeal and ordered specific performance. With respect to the issue of whether there was an oral contract for the sale and transfer of land, Tallis J.A. was of the view that the trial judge had not made any finding as to whether there was a contract for sale. Thus, he was of the view that the Court of Appeal, by virtue of s. 8 of The Court of Appeal Act, R.S.S. 1978, c. C‑42, was "free to act upon [its] own view of the evidence, draw inferences of facts and decide this issue". After reviewing the evidence, he concluded that there was such an agreement.

Turning to the issue of whether the acts allegedly in part performance of the contract displaced the requirement of s. 4 of the Statute of Frauds, Tallis J.A. reviewed the relevant authorities and concluded:

Learned counsel submits that the authorities do not go further and dictate that the acts must of necessity be referable to the interest in the land or the contract which is propounded. I do not read the recent Supreme Court of Canada authorities as applying such a stringent test that the acts must of necessity be referable to either the interest in the land or the contract which is being propounded. If the acts relied upon are "unequivocally referable in their own nature to some dealing with the land" the requisite test is met.

Tallis J.A. then reviewed the trial judge's ruling that the acts of part performance must be obligatory before they could be considered to have been done under the terms of the oral contract. Citing this Court's judgments in Brownscombe v. Public Trustee of Province of Alberta, [1969] S.C.R. 658, and Thompson v. Guaranty Trust Co., [1974] S.C.R. 1023, Tallis J.A. concluded that "the `contractually bound' or `obligatory test' is now of no application".

Applying the above law, Tallis J.A. concluded that the "substantial improvements and additions could only be referable in this case to a contract to purchase the lands and would not be the acts of a tenant under a yearly tenancy". He added that the son acted upon the alleged contract to his detriment, and concluded that the son was entitled to succeed in the appeal. Specific performance was ordered, except in relation to the "home quarter" of land, which was subject to the homestead rights of the defendant's wife.

III

Issue

The issue in this appeal is whether the trial judge found as a fact that no oral agreement existed between the parties and, if so, whether the Court of Appeal erred by substituting its version of the facts.

IV

Appellate Review

This issue arises in relation to Tallis J.A.'s conclusion that the trial judge had "dismissed the action on this ground (i.e., that the acts of part performance were insufficient to displace the Statute of Frauds) and made no factual finding on whether an oral contract for the sale of land was concluded between the parties". As noted, however, though he was of the view that it was unnecessary to make such a finding, Maher J. in fact addressed that very question:

In addition to the evidence of Boyd Lensen, three other witnesses testified that the defendant had indicated to them that his son Keith would be getting the farm. I have no reason to disbelieve the evidence of these witnesses and on the whole of the evidence I am satisfied that there were discussions between the defendant and his son Keith but I am not satisfied on a balance of probability that such discussions reached the point where there was an agreement for the sale of the land concluded. [Emphasis added.]

Nor can it be said that this finding was made in a vacuum. The following exchanges, for example, occurred between counsel and the father:

Q....When Keith was finished paying for the machinery, did you have any conversation with Keith about Keith acquiring the home quarter?

A.No. No.

Q.Did you have any conversation at that time with Keith buying the balance of the farm for one hundred thousand dollars?

A.No. I never heard tell of that until I think it was 1980 I believe. That's the first I heard tell of that hundred thousand‑dollar deal. And that was from Lyle and Blayne [brothers of Keith Gary Lensen] when they went to try and make a settlement on this cash lease.

When asked what he thought when he was told of the deal, he stated:

I just laughed. I thought, nonsense. I never heard tell of that before.

The father also denied disclosing the contents of his will:

Q....Have you ever had any discussion with Keith about willing Keith in a Will any or part of your land.

A.No. I never disclosed any contents of my Will to any of the family.

...

Q....Has Keith ever asked you if you were going to will him the home quarter?

A.Not that I recall. Not directly asked me if I was going to do that.

...

Q.Did you at any time indicate to Keith that in your view the other seven quarters were worth a hundred thousand dollars?

A.No.

Q.Did you ever say to Keith that you would sell him the other seven quarters for a hundred thousand dollars?

A.No.

Q.Did you ever say to Keith that you were going to set up a Will and leave him the chance to buy the rest of the farm for a hundred thousand dollars?

A.No, I didn't disclose the contents of my Will.

Eight other witnesses testified on the father's behalf. Lyle Lensen, brother of Keith, stated:

A.The only arrangement I understood that Dad and Keith had was that it was a one‑third‑two‑third crop share arrangement. That's the only arrangement I have ever been aware of.

Linda Speidel, Keith's sister, testified that in the fall of 1980 Keith told her that his father would not let him buy the land. She stated that Keith had never mentioned any agreement to buy the land or any "gift" arrangement. Elmer Irvine, the father's son‑in‑law, testified that Keith often complained that his father would not sell the land. Nada Irvine, Keith's sister, also testified that Keith had told her that his father would not sell the land to him, and that Keith, discussing the possible purchase of other land, had indicated that he only wanted his father's land. She also testified that Keith had never mentioned the existence of any agreement to sell or gift the land. Doris Lensen, Keith's mother, testified that she had never considered giving up her homestead rights, and that the first she heard of any agreement for sale was in March of 1981. Carole Steiner, Keith's sister, also testified that Keith had told her in the fall of 1980 that his father would not sell the land to him, and that there had been no mention of the land being given to Keith as a gift. Blayne Lensen, Keith's brother, testified that Keith on a number of occasions prior to September 1980 had told him that he wanted but was unable to buy the farm. Blayne Lensen testified that the first time any agreement was mentioned to him was in March of 1981 when he assisted in an attempt to negotiate a cash lease between Keith and his father. Finally, Iris Stack, Keith's sister, testified that over the years there had never been any mention by Keith to her of any gift or sale of the land to him by his father. Much of Keith Lensen's own testimony in this regard was denied by the above witnesses.

Other elements of the evidence given at trial lend credence to the trial judge's conclusion. Maher J. noted that the acts done by the son allegedly in part performance of the agreement were "equally consistent with the lease arrangements that were in place between the parties." It is clear there was evidence on which a trial judge might properly make a finding that there was no agreement as alleged between the father and son. It is equally clear that Maher J. in fact made such a finding.

The question thus arises whether it is proper for the Court of Appeal to reverse a finding of fact made by a judge at first instance. Section 8 of The Court of Appeal Act, R.S.S. 1978, c. C‑42, provides the following:

8. Upon appeal from, or motion against, the order, decision, verdict or decree of a trial judge, or on the rehearing of any cause, application or matter, it shall not be obligatory on the court to grant a new trial, or to adopt the view of the evidence taken by the trial judge, but the court shall act upon its own view of what the evidence in its judgment proves, and the court may draw inferences of fact and pronounce the verdict, decision or order that, in its judgment, the judge who tried the case ought to have pronounced.

Despite its apparently broad language, s. 8 has been given a relatively narrow interpretation. In Board of Education of the Long Lake School Division No. 30 of Saskatchewan v. Schatz (1986), 49 Sask. R. 244, at p. 248, the Saskatchewan Court of Appeal itself, per Sherstobitoff J.A., addressed the reasons why s. 8 ought to be given a narrow scope:

While, on its face, s. 8 appears to confer not only the power, but a duty to "rehear" or "retry" a case, simple fairness and justice require a court of appeal to recognize that a trial judge has an immense advantage in assessing evidence and arriving at findings of fact as opposed to a court of appeal which is confined to an examination of a cold black and white record of a trial proceeding, completely devoid of the tension, emotion, colour, and atmosphere of a trial, all of which factors are immeasurably important in assisting a trial judge in arriving at his conclusions. It is for these reasons that a court of appeal must extend very substantial deference to the finding of facts of a trial judge. The issue has been considered on many occasions by the Supreme Court of Canada and its decisions bear these principles out.

A similar justification for limiting the scope of appellate review of findings of fact made in the first instance was offered by Lamer J. in Beaudoin‑Daigneault v. Richard, [1984] 1 S.C.R. 2, at pp. 8‑9:

So far as the rules for intervention by a first court of appeal in the findings of fact of a trial judge are concerned, in my opinion, whatever the uncertainty of the rule regarding some of our decisions in recent years . . . the rule is clear with regard to findings based on the credibility of witnesses: an appellate court should not intervene unless it is certain that its difference of opinion with the trial judge is the result of an error by the latter. As he had the benefit of seeing and hearing the witnesses, such certainty will only be possible if the appellate court can identify the reason for this difference of opinion, in order to be certain that it results from an error and not from his privileged position as a trier of fact. If the appellate court cannot thus identify the critical error it must refrain from intervening, unless of course the finding of fact cannot be attributed to this advantage enjoyed by the trial judge, because nothing could have justified the judge's conclusion whatever he saw or heard; this latter category will be identified by the unreasonableness of the trial judge's finding . . . .

It is a well‑established principle that findings of fact made at trial based on the credibility of witnesses are not to be reversed on appeal unless it can be established that the trial judge made some "palpable and overriding error which affected his assessment of the facts": Stein v. "Kathy K" (The Ship), [1976] 2 S.C.R. 802, at p. 808; see also Métivier v. Cadorette, [1977] 1 S.C.R. 371; Jaegli Enterprises Ltd. v. Taylor, [1981] 2 S.C.R. 2; Doerner v. Bliss & Laughlin Industries Inc., [1980] 2 S.C.R. 865; Schreiber Brothers Ltd. v. Currie Products Ltd., [1980] 2 S.C.R. 78; Lewis v. Todd, [1980] 2 S.C.R. 694; and Wire Rope Industries of Canada (1966) Ltd. v. B.C. Marine Shipbuilders Ltd., [1981] 1 S.C.R. 363. While section 8 of the Saskatchewan Court of Appeal Act authorizes the Court of Appeal to "draw inferences of fact", this task must be performed in relation to facts as found by the trial judge. Unless the trial judge has made some "palpable and overriding error" in this regard, s. 8 should not be construed so as to modify the traditional role of the Court of Appeal with respect to those findings.

In the present case, the trial judge was entitled to believe the defendant father's evidence and the evidence of his witnesses and reject the son's testimony and the testimony of his witnesses as to the existence of an oral contract between the parties. With respect, the Court of Appeal erred in two respects: first, in assuming that the trial judge had made no finding on the issue; and, second, by effectively substituting its version of the facts for that given by the trial judge. Since it cannot be said that the trial judge made some palpable and overriding error which affected his assessment of the facts, such a substitution cannot fairly be said to fall within the role of the Court of Appeal as set out in s. 8. In my opinion, the appeal ought to be allowed on this basis. The matter should be referred back to the Court of Queen's Bench to deal with the counter‑claim, left unaddressed by Maher J., for an accounting and an order for possession of the land.

V

I would allow the appeal, set aside the judgment in the Court of Appeal, refer the matter back to the Court of Queen's Bench, and award costs to the appellant in this Court and in the courts below.