The main legal point established in the judgment is the validity and interpretation of the lease agreement, the rights and obligations of the parties under the lease and subsequent tenancy, and the liability for rent and breach of covenant.

Lord Macmillan.-

The appellants are the owners of a private radio station, originally designated by the letters C K G W, at Bowmanville, some forty miles from Toronto, which they began to operate in 1928. In 1933, the Canadian Radio Broadcasting Commission, constituted under the Canadian Radio Broadcasting Act, 1932, who were then organizing a basic network of stations across Canada, entered into negotiations with the appellants with a view to acquiring a lease of their undertaking. As a result of these negotiations the appellants and the Commission on 9th and 16th June 1933, executed an indenture of lease "as of" 15th May 1933. It is with the chequered fortunes of this lease that the present litigation is concerned. Its validity, its interpretation and its effect are all in issue.

[2] The subjects of the demise are described as consisting of the lands and premises of the appellants at Bowmanville and "all plant and equipment owned by the lessor and used by it in connection with the operation of radio broadcasting station C K G W, the whole of the said property being hereinafter referred to as the 'demised premises.'" The lease in cl. 2 is expressed to be "for and during the terms of three years to be computed from 15th day of May 1933, and thenceforth next ensuing and fully to be complete and ended on 15th day of May 1936." The stipulated rent was $12,000 yearly payable in advance in equal quarterly instalments of $3,000 on 15th day of May, August, November and February.

[3] The lease contains two covenants which figure so largely in the controversy between the parties that it is necessary to quote them textually as follows :

"4. And the lessee covenants with the lessor to keep the whole of the demised premises modern and up-to-date and in good repair and operating condition."

"12. And also that at the expiration of the term hereby granted and of every succeeding term of three years to be granted by the lessor to the lessee as hereinafter provided the lessor will at the costs and charges of the lessee grant a new lease for a further term of three years from the determination of the present or then existing lease at the same rental per annum as provided for by the present lease irrespective of any buildings erections and improvements erected or made thereon or therein by the lessee and the lessee covenants and agrees to accept such new lease and to execute the same and if no such new lease be entered into as aforesaid the present or then existing lease as the case may be and all the terms and conditions thereof shall continue until terminated by the lessor upon one month's notice in writing to the lessee. Provided however that the lessor shall not be under any obligation to grant a new lease unless the lessee shall have fully paid, observed and performed all rents covenants and agreements contained in the present or then existing lease as the case may be."

[4] There was also a clause conferring on the lessee an option at any time during the currency of the lease or any renewal thereof to purchase the whole of the demised premises at a price to be agreed or failing agreement to be fixed as therein provided.

[5] The Commission entered into possession of the demised premises and proceeded to utilise the station. On the expiry of the term of three years on 15th May 1936, no new lease was entered into between the parties, but the Commission remained in occupation and continued to pay the rent quarterly.

[6] On 2nd November 1936, the Canadian Broadcasting Act, 1936, came into force whereby the Canadian Broadcasting Corporation, the present respondents, were constituted. This Act repealed, the previous statute of 1932 and by S. 25 provided that the Corporation should take possession of all property and assets and assume all the obligations and liabilities of the Canadian Radio Broadcasting Commission, the original lessees.

[7] On 26th January 1938, the Corporation addressed a letter to the appellants stating that because of the completion of