Kingdom Properties Ltd. V. Kilometer 147 GP Ltd.
Kingdom Properties Ltd. V. Kilometer 147 GP Ltd., 2021 ABQB 881, a recent decision of the Master in Chambers from the Alberta Court of Queen’s Bench, has affirmed that the Court may not be bound to refuse to enforce an illegal contract when enforcing the contract would have harsh effect and would not be required to affirm legislative policy.
The Alberta Department of Environment and Sustainable Resource Development (the “Crown”) leased two parcels of provincial lands to Kingdom Properties in 2013. Kingdom Properties then granted subleases of these two parcels to Kilometer 147 in 2014, without any approval by the Crown to do so. Kilometer eventually fell significantly into arrears for payment of rent to Kingdom, leading Kingdom to terminate the subleases in 2016 and seek summary judgment for arrears as well as damages for the unexpired portion of the subleases and accelerated rent.
The defendants put forth the argument that, pursuant to s 43(1) of the Public Lands Act, the holder of a Crown lease shall not sublet the land without the approval of the Crown and thus the subleases were illegal and unenforceable. The Master found that Kilometer having no liability to Kingdom despite their occupation and use of the lands for a significant period of time would be a harsh effect. Furthermore, since the Crown had taken its own steps to sanction Kingdom for its breach of statute, finding the contract unenforceable would not be necessary to affirm the legislative policy. Accordingly, the subleases were not unenforceable despite their illegality, and a claim for arrears was allowed. Although, the claims for prospective rents for the balance of the subleases and accelerated rents were declined.
By Ty Schmidt – Supervised by Professor Maharaj
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