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.

Small Claims Court dismisses farmer's claim for triticale crop lost after lease expires

The Plaintiff in this case planted soybeans in 2010 on the 30 acres he rented from the Defendant.  After harvesting the soybeans that fall, the Plaintiff planted and fertilized a crop of triticale - a hybrid grain planted in the fall for harvest early the next summer.  However, by 2011 the Defendant had decided to lease his land to a new tenant who was willing to pay higher rent to grow Napa cabbage.  The Defendant authorized the new tenant to plough under the triticale crop.

Having lost the lease and his triticale crop, the Plaintiff sued the Defendant for $25,000 in damages, representing the loss of grain, straw, lost labour, seed and fertilizer.  The Plaintiff based his claim on two arguments: 1) he had a lease for the property for 2011; and, 2) in the alternative, the doctrine of emblements entitled him to harvest his triticale crop after the 2010 lease expired.  The Plaintiff also claimed that the Defendant was unjustly enriched by the ploughed under triticale.

The trial judge found that there was not a single instance in 2010 or 2011 in which the Defendant agreed to lease his land to the Plaintiff in 2011.  There was, therefore, no lease for 2011.  The judge then addressed the doctrine of emblements - "a right given by law to a person who has an estate of uncertain duration that unexpectedly comes to an end through no act or fault, to take growing crops which were sowed or planted".  In the case of a farm lease, a tenant may have a right to harvest or to care for crops where they were planted prior the unexpected termination of the lease. 

The right to emblements depends on "what is known or expected by the tenant at the time he sows his crops".  In this case, the trial judge added that the expectation of the tenant must also be reasonable.  He found that the Plaintiff, at the time he sowed the triticale in the fall of 2010, had only an expired or soon-to-be expired lease for 2010 and a hope that he would be able to outbid the competition for the land in 2011.  The trial judge determined that this was not a reasonable expectation and dismissed the action.

Read the decision at: Vieraitis v Fitzgerald.

Auction sale error - John Deere 4640 goes for $1,800 - Court fixes mistake

The Provincial Court of Saskatchewan has granted judgment to an auctioneer to correct a 10x mistake in the price paid for a John Deere 4640 tractor at auction.  Evidence from attendees at farm auction testified that the winning bid for the tractor was $18,000, but the successful bidder paid only $1,800 to the auctioneer.  The clerk for the auctioneer had made a clerical error and listed $1,800 on the invoice issued to the successful bidder, who provided payment in that amount and took possession of the tractor. 

Although the successful bidder was contacted by the farm owners about the mistake, he refused to pay the difference between the $18,000 bid and the $1,800 had had already paid.  At trial, the successful bidder called no evidence, but did cross-examine the witnesses from the auctioneer "in an apparent effort to challenge their credibility".  During his testimony, the auctioneer explained that he had paid out the $18,000 to the farm owners after the mistake made by his clerk was discovered.

The Court found that there was a clerical error made, the purchase price of the tractor was actually $18,000, and the successful bidder "seized on the mistake, to obtain a benefit he knew or ought to have known that he was not entitled in law to have."

Read the decision at: Ukrainetz (Ukrainetz Auctioneering) v Borowski.

Owner liable for damages caused by pet goat

A Small Claims Court in Nova Scotia has awarded a woman $1,500 in damages after her neighbour's goat rammed her car.  At first, the goat had chased the woman's young daughter who had exited the vehicle.  When the daughter managed to get back into the car, the goat rammed the side of the car and then climbed on top of it.  The goat was being "goatsat" while the owner was away.

The Small Claims adjudicator ruled that the goat was to be considered a wild animal rather than a domesticated one for the purposes of the case:

The law divides animals into one of two categories.  The first category is wild by nature known as ferea naturae .  The second category would be those considered domesticated by nature and this category is known as mansuetae naturae.  I grant you it is sometimes difficult to categorize animals as wild by nature versus domesticated by nature. For example, is a cow a domesticated animal or a wild animal?  Is a Rottweiller or a Pitbull a wild animal or a domesticated animal?  These are questions that face the Small Claims Court on more than one occasion.  I think it is safe to say the goat would fit in to the first category of an animal that is wild by nature.  No doubt they can be trained to a certain extent but when you have an animal like a goat would you allow it to live in your home.  I suggest there is only so far you can go to training an animal like a goat.  The same could be said for a tiger.  While they may be well trained they are wild animals.  As such the law imposes a very high duty on the owner to prevent any kind of injury from such animals even if the owner believes in his own mind that the animal is harmless.  The owner of such an animal will be strictly liable for any injury caused by that animal, which is the case here.

Read the decision at: Pittman v. Morin.

Ontario: Small Claims Court Claims Limit now up to $25,000

Effective January 1, 2010, the jurisdiction of the Small Claims Court in Ontario has risen to $25,000, exclusive of costs and interest. Prior to 2010, only claims for $10,000 could be brought in the Small Claims Court, which offers a more streamlined and less expensive court process than the Superior Court.

http://www.attorneygeneral.jus.gov.on.ca/english/courts/civil/changes_to_SCC_Jan_2010.asp