Divisional Court comments on positive covenants

Property owners may covenant with one another in connection with their lands.  They may agree to negative covenants, which prevent certain things from being done on or with the land. For example, a negative covenant may prohibit certain uses that can be made of land or require that only certain types of building materials or colours can be used in buildings, etc.  Owners may also agree to positive covenants, which are promises to do something.  For example, a positive covenant may require one neighbour owner to pay something toward the costs of maintaining shared facilities or actually to carry out the maintenance activities, etc. 

The distinction between negative and positive covenants is important because, in Ontario and traditionally at Common Law, positive covenants do not generally run with the land.  That is, although a covenant may somehow be registered on title to a property (in a deed or easement, etc.), it does not necessarily follow the land when ownership changes.  Negative covenants will bind future owners, but positive covenants will not normally bind future owners.  Positive covenants are treated as agreements between the individual owners that attach to the owners, rather than to the land.

However, there are exceptions to the general rule.  In a 2016 appeal from a Small Claims Court decision, the Ontario Divisional Court reviewed the law on positive covenants and the exceptions to the general rule that positive covenants do not run with the land.  Statutory exceptions to the rule include: positive covenants granted by public authorities (Planning Act, R.S.O. 1990, c. P.13); positive covenants concerning condominiums (Condominium Act, 1998, S.O. 1998, c. 19); and positive covenants between the Crown and private landowners concerning the installation of survey monuments (Surveys Act, R.S.O. 1990, c. S.30, s. 61(1)).

There are also Common Law (non-statutory) exceptions to the general rule, including chain of covenants, the doctrine of benefit and burden, and conditional grants.  

The chain of covenants exception applies when successors-in-title (the future owners) agree to the same positive covenants.  That is, each time a property subject to the original positive covenant is transferred, the new owner(s) would agree to be bound by the covenant.  In reality, this is arguably the creation of a new covenant at the time of each transfer rather than a true exception to the rule.

In the 2016 appeal case, the Divisional Court described the other two Common Law exceptions as follows:

•  Conditional Grant Exemption. When being asked to enforce a positive obligation, the courts will first look at the transaction between the parties to see if a benefit was clearly made on the conditional acceptance of a positive obligation. If such an intention can be made out on the face of the transaction, the conditional grants exception is engaged
•  Benefit and Burden Exemption: If a conditional connection between the obligation and the benefit is not clear, the courts will then consider whether the benefit and burden exception applies. By looking at the circumstances of the transaction, the intentions and relationship of the parties, and the nature of the benefits and burdens at issue, the courts will determine if there is an implicit and necessary connection between formally separate obligations and advantages. Or, to repeat the words of Professor Ziff, this second exception looks to whether the courts should “tether previously separate promises”.

Both of those exceptions happen in circumstances where the Court determines that a future property owner should not escape the obligations of a previously-made positive covenant (on account of the positive covenant not running with the land) where that property owner is receiving a benefit connected with the covenant.  The Divisional Court summarized: "In a fulsome, pragmatic approach, as confirmed in Wilkinson, the courts must look to the substance of the relationship between the benefit and the burden to determine if the positive covenant continues to apply. As noted by Vice-Chancellor Megarry in Tito, when there is a sufficient degree of correlation between the obligation to pay and the grant of benefits, the burden and benefits exception applies."

Read the Divisional Court's decision at: Black v Owen.

Conservation Authority planning to appeal Divisional Court decision

This relates my previous post on the Gilmor v. Nottawasaga Valley Conservation Authority decision of the Divisional Court.  It appears that the NVCA plans to appeal the decision and is seeking leave to appeal from the Court of Appeal.  This is indicated in a ruling in a related Human Rights Tribunal matter (see AG v. NVCA) commenced by one of the landowners involved.

UPDATE:  Leave to appeal was granted to NVCA on February 19, 2016 by the Court of Appeal for Ontario.

Ontario Divisional Court rules conservation authority was wrong to apply general prohibition on development

The Gs purchased land in 2008 with a view to building a home.  Their lot, along with neighbouring 10 acre lots on which homes had already been constructed, was originally subdivided in the 1960s.  Although there was a shed, a garden and a driveway on their lot, no house had yet been built on the Gs' lot.

Long after the subdivision of the lots in the 1960s, the Gs' land was designated as a part of an environmentally protected area.  The reason for the designation was the small drainage ditch that crossed their land behind the area where they proposed to build a house.  That drainage ditch proceeds through the Gs' neighbour's land (where a house had already been built), through a culvert under a public road, and eventually to a creek that is a branch of the Nottawasaga River, the watershed of which is subject to the jurisdiction of the Nottawasaga Valley Conservation Authority (the "NVCA").

The NVCA refused to grant permission to the Gs to build their house on the fringe of a potential floodplain regulated by the NVCA.  The Gs made an application for permission to build in 2009, and provided extensive evidence establishing the lack of any adverse impact of their proposed building on flood control.  Notwithstanding this evidence, the NVCA turned down the Gs' application.  The Gs then appealed to the Deputy Mining and Lands Commissioner (the "Tribunal").  The Tribunal turned down the appeal.  The Gs then appealed to the Divisional Court.

The Divisional Court found that the CA and the Tribunal had misconstrued the law as providing for a prohibition on development within the CA's area of jurisdiction.  The Court noted: "In the present case, the public interest which the NVCA was authorized to supervise was that of flood control - this limited but important jurisdiction was not intended to be wielded to assert wider jurisdictional authority than the Legislator had conferred and it certainly does not provide a general prohibition against development."

The Divisional Court allowed the Gs appeal and directed the approval of the proposed development without conditions and without a rehearing of the application:

"Subsection 3(1) of Ont. Reg. 172/06 (hereafter the “NVCA Regulation”) required the Tribunal to assess whether the proposed development would affect flood control and several other factors.  Instead, the Tribunal interpreted the law to impose a general policy prohibiting development subject only to an exceptional discretion, and the Tribunal placed a heavy if not impossible onus on the Gs to justify an exceptional departure from the general prohibition.  In so doing, the Tribunal made the same error of law that this court corrected in the case of 3437400 Canada Inc. v. Niagara Peninsula Conservation Authority, (2012), 354 D.L.R. (4^th) 756 (Ont. Div. Ct.). Properly interpreted, the NVCA Regulation does not prohibit development in designated areas; it only prohibits developments that are found to affect flood control or one of the other listed criteria (none of which were engaged in the immediate case). 

"The Tribunal (and the NVCA) incorporated within its analysis of flood control a concern for safety should there be a flood at the property, but on the evidence, the proposed development will not have any effect on flood control as such, and the evidence revealed only a very low risk to safety, even in the event of a hypothetical extreme flood of rare severity.  The Gs’ application ought to have been approved based on the uncontradicted evidence before the Tribunal, and this court has the appellate jurisdiction to grant an unconditional approval.  The Gs have other regulatory hurdles to cross before they can get final approval to complete their home.  Neither the interests of justice nor efficiency and economy of proceedings would justify requiring them to proceed through a third hearing on this matter six years after they commenced the application process." 

Read the decision at: Gilmor et al. v Nottawasaga Valley and The Township of Amaranth.

Grain Farmers of Ontario appealing neonicotinoid decision

Grain Farmers of Ontario ("GFO") is appealing the October 23 dismissal of its challenge to Ontario's neonicotinoid regulations.  That appeal is made to the Ontario Court of Appeal.  GFO is also making a motion to the Ontario Divisional Court for a review of the earlier Superior Court decision dismissing GFO's request for a stay of the regulation.  GFO says that, "We believe there are proper grounds for these steps".  GFO's news release can be found at: GFO Appeal.

This challenge by GFO still strikes me as an attack on government policy, something in which the courts are loathe to interfere (as was noted by Justice Akhtar in his dismissal of the case).  GFO's news release doesn't provide any details about the "proper grounds" for the appeal(s).  We may need to wait until the appeals are heard (if they proceed) and decisions rendered to see what "proper grounds" are being advanced.

Divisional Court comments on OEB approval of forms of landowner agreements

As part of its decisions to approve energy transmission projects, the Ontario Energy Board (OEB) approves the form of agreement to be offered to landowners affected by the approval.  Recently, the Ontario Divisional Court decided an appeal of a decision to approve the construction of electricity transmission lines for a wind energy project in which the appellant argued that independent legal advice (ILA) clauses in the approved landowner agreements were "confusing, misleading and unfair".

The OEB may only approve a project where the applicant has satisfied the Board that it has offered or will offer to each landowner affected by the approved route, an agreement in a form approved by the Board. 

The party that appealed the OEB decision was Conserve Our Rural Environment (CORE) Inc.  It argued that the ILA clause in some of the 6 forms of land agreement to be approved was false and misleading because it gave the impression that the party requiring ILA was the tenant (the project proponent) rather than the landlord (the landowner).  ILA was to be obtained by the tenant even though it was the tenant who had prepared the agreements.

The Divisional Court determined that the appeal was not on a question of law or jurisdiction, which was the only basis on which the appeal could be made.  The OEB's authority to approve the form of contract is discretionary, and an arguably unreasonable exercise of discretion is not an error of law or jurisdiction.  Therefore, the Court dismissed the appeal.

In the event that it was wrong in this determination, the Divisional Court also went on to decide the appeal as if a question of law or jurisdiction had been raised.  It found that the applicable standard is one of reasonableness, and it found that the decision of the OEB was reasonable.  The Court stated, "It is important to understand that what the Board approved was a form of agreement which is the subject of subsequent negotiation between the parties.  It represents terms from which the party propounding the project may not unilaterally resile."

Read the decision at: Conserve Our Rural Environment v. Dufferin Wind Power Inc.

Divisional Court upholds land registry freeze in face of apparent "scheme"

The Ontario Divisional Court has upheld a decision of the Director of Land Titles to place a freeze on the land records for a piece of property in Bruce County.  Krystal Summer Williams had sought to register a "self-to-self" transfer of the property, which was still administered under the Registry Act system of land registration.  Under the registry system, a person dealing with the property only has to trace the chain of title back for forty years.  The property in this case had not been dealt with since 1936 and Ms. Williams applied to become the registered owner of the land.

Ms. Williams admitted that she did not own or have any interest in the property prior to registration, and the Director alleged that she was involved in a scheme to convey title to property that she does not own. 

The Divisional Court agreed and ruled that the Director had authority to impose the freeze in order to determine the propriety of the self-to-self transfer.  In the Court's view, this was "merely a scheme to create an interest in land where none exists." 

Read the decision at: Williams v. Ontario.

While it may sometimes seem unfair when rules are changed in the middle of a game...

... that is the nature of the game when one is dealing with goverment programs.

That was the statement made by the Ontario Divisional Court in a recent decision dismissing an application for judicial review of actions take (or not taken) by the Ontario Power Authority and the Ontario Minister of Energy in connection with green energy Feed-in-Tariff projects.  A long list of project proponents (118 in total) sought declarations from the Court that the OPA and the Minister "acted unreasonably in failing to process applications in accordance with" the OPA's own rules and that the Minister's new "Directions" in the FIT program are "unfair, discriminatory and ultra vires the enabling legislation".  The Applicants also sought an order requiring the OPA to process their existing FIT applications in accordance with the previous FIT Program Rules.

The complaint was that changes made to the FIT Program Rules were unfair to those project proponents who had already applied under the old rules - the new rules would apply to all outstanding project applications that had not already reached a certain point in the review/approval process.  Included with the new rules were lower prices to be paid for the electricity generated by FIT projects.

The Divisional Court found that the standard of review of the Minister's decision (in making and applying the new FIT rules) was reasonableness; the Court had to give considerable deference to the decision of the Minister.  In the end, the Court did not agree with the Applicants that the decisions in question were unreasonable.  In response to the argument made about legitimate expectations, the Court said:

Turning then to the ground of legitimate expectations, it is perhaps useful to begin with a definition of what the principle of legitimate expectations involves. The principle was set out in Canada (Attorney General) v. Mavi, 2011 SCC 30 (CanLII), [2011] 2 S.C.R. 504 where Binnie J. said, at para. 68:

Where a government official makes representations within the scope of his or her authority to an individual about an administrative process that the government will follow, and the representations said to give rise to the legitimate expectations are clear, unambiguous and unqualified, the government may be held to its word, provided the representations are procedural in nature and do not conflict with the decision maker’s statutory duty.

Once again, I find little to which the applicants can point that would constitute a representation that is “clear, unambiguous and unqualified”. The statements to which the applicants do refer that were made by Ministers Smitherman and Duguid do not, on their face, amount to representations that are unambiguous and unqualified. They are also not directed specifically to the applicants. Rather, they were statements of general application. In addition, the statements were clearly made in relation to the FIT Program itself and have to be read with, and understood in the context of, the detailed requirements and conditions of that program to which I have made reference above. Read in context, the applicants could not reasonably assert a legitimate expectation based on these statements that the criteria for the FIT Program or the process under it would not change.

The Court also disagreed with the Applicants that they had gained any vested rights through their involvement in the FIT program application process.  Likewise, the Court found that there was nothing to prevent the new FIT rules from having retroactive effect.  It was in the course of communicating this conclusion that the Court made its comment about changing the rules of the game mid-course.  As with tax laws, "no one has a vested right to continuance of the law as it stood in the past".  When planning one's affairs based on the current state of legis

Read the decision at: Skypower CL I LP et al. v. Minister of Energy (Ontario) et al.