Court of Appeal for Ontario

Date: 2018-12-11 Docket: C65348

Judges: Doherty, van Rensburg and Hourigan JJ.A.

Between

Robin Lacey and Jennifer Lacey Applicants (Appellants)

and

Kakabeka Falls Flying Inc. Respondent (Respondent)

Counsel

Michael Cupello, for the appellants

Jordan R.D. Lester and Warren A. Mouck, for the respondent

Heard: November 1, 2018

Appeal

On appeal from the judgment of Justice W. Danial Newton of the Superior Court of Justice, dated April 6, 2018, with reasons reported at 2018 ONSC 2239.

Reasons for Decision

Background

[1] The appellants Robin Lacey and Jennifer Lacey brought an application for a declaration that a lease registered in 1972 against property they had purchased some seven years earlier (with notice of the lease) was void. The lease is between the respondent Kakabeka Falls Flying Inc. and the appellants' predecessor in title, Robert Spence. The lease, which was signed on November 20, 1968, is for a term of 99 years from January 1, 1967 to December 31, 2066. The appellants alleged that, at the time it was entered into, the lease violated s. 26(2) of the Planning Act, R.S.O. 1960, c. 296 (now s. 50(3) of the Planning Act, R.S.O. 1990, c. P.13), which prohibits the subdivision of a property, including by a lease of only part of a property for a term exceeding 21 years.

[2] Until May 2, 1968, s. 26(3)(a) of the Planning Act provided an exemption from the subdivision prohibition where both the subdivided land and the abutting lands had an area of ten acres or more (as is the case here). The application judge determined that the parties to the lease entered into an oral lease and that there had been part performance before May 2, 1968, such that the lease continued to be subject to the statutory exemption. This finding was determinative of his conclusion that there was a valid lease. The application judge therefore did not address any other arguments that were raised in response to the application.

Issues on Appeal

[3] The appellants raise three arguments on appeal.

[4] First, the appellants argue that they were denied procedural fairness when they were refused leave to provide evidence on the question of whether there had been part performance of an oral agreement. This issue was only raised by the application judge at the conclusion of argument, and he permitted only written argument to be provided on this matter.

[5] Second, the appellants submit that the application judge erred in law in finding part performance when there was no evidence to reasonably support such a finding.

[6] Third, the appellants argue that the application judge erred in his application of the test for part performance.

Procedural Fairness

[7] We are satisfied that this appeal can be determined on the first ground. A fair reading of the record that was before the application judge indicates that no one had anticipated the need to address whether there was an oral lease and the question of part performance, before these issues were raised by the application judge at the conclusion of oral argument.

[8] Indeed, in response to the application, the respondent's affidavit evidence confirmed that the written lease was entered into in November 1968 (that is, after the Planning Act amendments came into effect). It also (1) asserted that the Planning Act did not apply because the leased premises are an "aerodrome", governed by the Aeronautics Act, R.S.C. 1985, c. A-2, and not subject to provincial planning legislation (the "jurisdiction" issue); (2) relied on s. 26(3)(a) of the 1960 Planning Act, without reference to the statutory amendment by which that exemption was removed; and (3) argued that the relief sought was barred by the appellants' delay, as they purchased the land with notice of the lease and accepted rent payments for a period of seven years (the "laches" issue).

[9] At the conclusion of oral argument when the application was heard on September 26, 2017, the application judge adjourned the hearing and directed that the parties provide written submissions to address two matters: whether a subsequent purchaser with notice could attack the validity of the prior lease, and whether there was an oral agreement prior to the written agreement dated November 20, 1968. The appellants then prepared an affidavit to address the matters raised by the motion judge, and served the affidavit on opposing counsel. The respondent's counsel objected to the new evidence, and there was an exchange of correspondence about a possible motion to introduce the affidavit. Ultimately, the parties found themselves before the application judge on January 26, 2018 to address the two additional issues he had raised. The application judge granted the respondent's motion to strike the new affidavit, granted leave to the respondent to deliver a reply factum, and adjourned the application to a new date.

[10] After hearing further submissions on the two additional issues on March 5, 2018, the application judge released his reasons for dismissing the application on April 6, 2018. As already noted, he concluded that there was an oral lease agreement and part performance before May 2, 1968 (the effective date of the amendment to the Planning Act removing the relevant exemption).

Evidentiary Insufficiency

[11] In our view, the evidence before the court to support a finding of part performance before May 2, 1968 was thin. Although the lease is dated November 20, 1968 and was for a stated term commencing on January 1, 1967, the respondent lessee was only incorporated on February 19, 1969. There was evidence that the club started using the land after the lease was registered on title in 1972, but no evidence before the application judge about whether it was used before that time. There was some evidence that the land had been cleared of trees in 1968, however it is unclear when that occurred, or who did it. Although the written lease provided for rent payable commencing in January 1968, there was no evidence about whether rent was actually paid. The application judge referred to a survey completed on February 22, 1968 and dated April 17, 1968. A copy of the survey, with cross-hatching showing the leased area, was attached to the appellants' initial affidavit. There was no evidence of the purpose of the survey, or when the cross-hatching was added.

[12] In short, we agree with the appellants that the evidence that was before the court, without more, was not persuasive on the question of part performance and, more importantly, that, after raising this issue, the application judge erred in refusing to permit further evidence to be received.

Fresh Evidence and Procedural Fairness

[13] We disagree with the respondent that the appellants' failure to bring a motion specifically seeking to file a further affidavit is fatal. The affidavit had been served and filed with the court. The question of the admissibility of the affidavit was squarely before the application judge on January 26, 2018, when he ordered that fresh evidence could not be received. Nor was this a case where r. 39.02(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (to prohibit, without leave, the filing of an affidavit by a party who has cross-examined on an affidavit delivered by an adverse party) was in play. In our view, the application judge's refusal to permit the filing of fresh evidence to properly respond to an issue that he had raised, especially when the record provided so little evidence on that issue, was unfair to both parties.

Remaining Issues

[14] The other defences to the application raised by the respondent, namely the jurisdiction and laches issues, were argued before the application judge but not determined by him. The respondent invites this court to decide these issues. We are not prepared to do so. The record before this court is incomplete and does not permit us to arrive at any determination of these issues. Further, as the jurisdiction issue raises the constitutional applicability of the Planning Act to the subject property, this issue cannot be determined until the Attorney General of Canada and the Attorney General of Ontario have received notice of a constitutional question in accordance with s. 109 of the Courts of Justice Act, R.S.O. 1990, c. C.43. No such notice has been provided.

Disposition

[15] For these reasons, the appeal is allowed, and the judgment of the application judge is set aside. The application is referred back to another judge of the Superior Court for a determination on the merits, including any directions that judge may provide with respect to the evidentiary record. The costs award of the application judge is set aside. Costs of the application, including the proceedings before the first application judge, are to be determined by the new application judge hearing the matter.

[16] The respondent shall pay the appellants their costs of the appeal in the sum of $12,000, inclusive of disbursements and applicable taxes.

"Doherty J.A."

"K. van Rensburg J.A."

"C.W. Hourigan J.A."