Court of Appeal upholds decision requiring municipality to honour drainage agreement

In a previous post (January, 2013), I reported on a Superior Court decision requiring a municipality to honour a drainage agreement from 1953.  The agreement required the municipality to maintain and repair in perpetuity part of a storm sewer drainage system that it had constructed on and near the lands of a local farmer.  60 years later, the successor landowners wanted the municipality to honour the agreement; the municipality ceased all maintenance and repair work, and the matter ended up in court.

The Ontario Court of Appeal has upheld the lower court decision requiring the municipality to honour the agreement.  The municipality appealed on three issues: (1) the landowners' claims concerning the agreement are statute-barred; (2) the landowners have no standing to enforce the agreement since they have no privity of contract with the municipality; and (3) the agreement is contrary to public policy and, hence, unenforceable.

On the limitation period issue, the Court of Appeal agreed with the lower court judge that there was insufficient evidence that the municipality's repudiation of the agreement had been accepted by the landowners or their predecessors in title.  Instead, the contract (repudiated by the municipality) was affirmed by the landowners and treated as subsisting and on-going.  If the contract in this case was still in effect, then the municipality was under a perpetual obligation to maintain and repair the drain.  No limitation period had expired to free the municipality from this obligation.

On the issue of standing, the Court of Appeal disagreed with the strict application of the doctrine of privity of contract (i.e. only the parties to the contract have standing to sue for breach of the contract) for this case.  To apply the doctrine would have allowed the municipality to escape the stated purpose and express terms of the contract (which provided that it would "inure to the benefit of and be binding upon the parties hereto and their respective heirs, administrators, successors and assigns").  Here, the Court of Appeal was prepared to allow the current landowners to enforce the contract as they stood in the shoes of the original contracting party.  The Court would also have applied the principled exception to the privity rule if necessary.

Lastly, the Court of Appeal rejected the municipality's argument that the agreement was void on public policy grounds.  The Court noted that the municipality's factum (written argument) did not address one part of this argument and that it would not be fair for the landowners to have to deal with it.  The Court also rejected the argument for lack of evidentiary support.

Read the decision at: Brown v. Belleville (City).