Court File and Parties

COURT OF APPEAL FOR ONTARIO DATE: 20231120 DOCKET: COA-22-CV-0316

Trotter, Sossin and Monahan JJ.A.

BETWEEN

Brian Huber Holdings Ltd. Applicant (Appellant)

and

Corporation of the Municipality of West Perth Respondent (Respondent)

Counsel: Jacob Damstra, for the appellant Steven J. O’Melia, for the respondent

Heard: November 3, 2023

On appeal from the order of Justice Russell M. Raikes of the Superior Court of Justice, dated October 5, 2022, with reasons reported at 2022 ONSC 5649.

Reasons for Decision

[1] This appeal arises from the interpretation of a cost-sharing provision in a Subdivision Agreement (“the Agreement”) that was entered into almost 50 years ago.

[2] On July 28, 1975, Arris Land Development Corporation (“Arris”) entered into the Agreement with the Township of Mitchell. In 1982, Arris sold its assets and assigned its rights and obligations under the subdivision to the appellant, Brian Huber Holdings Ltd. (“Huber”), while the Township of Mitchell, along with the Townships of Logan, Hibbert, and Fullarton, were amalgamated into the Corporation of the Municipality of West Perth (“West Perth” or “the Municipality”).

[3] The subdivision was built in the 1980’s. At the time, it was contemplated that the lands abutting the subdivision on all four sides might be developed.

[4] Under the Agreement, Huber was required to build a road running roughly north-south, on the east side of the subdivision, now known as Arthur Street. At the time, Huber installed servicing (which included storm sewers, sanitary sewers, asphalt, etc.). Also at the time, and still today, a parcel of land on the east side of Arthur Street is actively farmed. Over the years, the Municipality has borne the cost of maintaining Arthur Street.

[5] At the heart of this dispute is a provision entitled “Cost Sharing,” found in Schedule B to the Agreement, which reads:

This paragraph will apply to the sharing of construction costs with particular reference to the item breakdown shown in the following table. The Owner agrees to pay initially one-hundred percent of all construction costs associated with each phase of construction . The consulting engineer shall advise the Town of the finished costs thereof on a footage basis. The Town shall charge against the lots on the opposite side of the street their share of the costs shown as adjacent property owner’s costs in the following table. Upon the application of the relevant owner for a sub-divider’s agreement, or if none, for a building permit, the Town shall collect from such owner the share charged against him for the construction of the aforementioned services . Interest shall be charged at the rate of seven percent (7%) per year compounded. The entire amount less five percent (5%) collection charge to be retained by the Town shall be paid forthwith to Arris Land Development Corp. or its assigns. … [Emphasis added.]

[6] The table mentioned in this provision delineates how costs for various services are to be divided between Huber and “adjacent property owners”. The effect of the provision is that West Perth is responsible for collecting these monies from purchasers if and when the lands adjacent to the subdivision are developed, and then paying them to Huber (less a collection fee). The clear intention of this arrangement is to compensate Huber for the upfront costs expended in building the infrastructure that will benefit abutting lands.

[7] The amount of these payments is determined on the basis of the proportions set out in the table, plus interest as described in the provision. Because interest is calculated on a compounded basis from the date of the Agreement, the amounts are significant. In this case, the principal amount claimed is approximately $33,000. Today, with interest, the claim well exceeds $300, 000.

[8] The Town of Mitchell had a history of complying with the cost-sharing provision in the Agreement when adjacent lands were developed. However, there was no evidence adduced on the application as to the circumstances in which the Town of Mitchell considered its obligations to have been triggered under the Agreement. After the amalgamation that created West Perth, Huber wrote to West Perth on August 3, 2001, advising of the cost-sharing provision in the Agreement. West Perth replied and indicated that the provision was not legally enforceable because the Town of Mitchell never had legal authority to agree to it. West Perth has since changed its position.

[9] On May 22, 2019, counsel for Huber learned that an application had been made to the Municipality for approval of a subdivision on the east side of Arthur Street. Roughly 34.63 metres of the proposed subdivision would be directly east of Huber’s subdivision; the new houses would be built along a newly constructed street running east/west. Thus, the vast majority of the borders of the proposed subdivision and Huber’s subdivision would not be shared because the new subdivision is largely to the south (except for the single row of houses on the east/west street running perpendicular to Arthur Street ).

[10] Huber’s counsel wrote to West Perth to request payment based on the above-quoted provision of the Agreement. On July 25, 2019, West Perth’s counsel replied advising that West Perth could not comply with its obligations under the cost-sharing provision and invited Huber to appear before the County Council to make representations about whether a cost-sharing condition should be imposed for the proposed subdivision. Mr. Huber did not attend. West Perth approved the subdivision application on September 5, 2019.

[11] Huber brought an application under Rule 14.05 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, seeking various declarations and damages.

The decision of the application judge

[12] Relying on principles of contractual interpretation summarized in Prism Resources Inc. v. Detour Gold Corporation, 2022 ONCA 326, 162 O.R. (3d) 200, the application judge found that any developer expected to pay West Perth under the Agreement would have to derive a benefit from the infrastructure installed in Huber’s subdivision. He based this conclusion on his interpretation of the words “cost sharing” and “their share” in the provision. He concluded that where no benefit is conferred upon abutting lands, there should be no cost sharing. He rejected the literal reading proposed by Huber as “divorced from commercial sense”: para. 66 .

[13] The application judge concluded, in the alternative, that there was a gap in the contract. He applied the “officious bystander” test from Canadian Pacific Hotels Ltd. v. Bank of Montreal, [1987] 1 S.C.R. 711 to imply a term, based on the presumed intentions of the parties, clarifying that, if abutting lands derived no benefit from the existing subdivision, they would not trigger cost-sharing obligations.

[14] The application judge further found that there was no evidence that the new subdivision would gain a benefit from the services installed by Huber.

[15] Finally, the application judge rejected Huber’s claim for unjust enrichment on the basis that any enrichment accruing to West Perth was rooted in a juristic reason: the contract between the parties.

[16] In summary, the application judge found: West Perth only had to seek reimbursement from a developer or builder on the lands adjacent to the subdivision if the developer or builder derived a benefit from the improvements installed by Huber; that obligation was not triggered by the proposed subdivision because there was no benefit to be derived. Accordingly, West Perth did not breach the Agreement .

Discussion

[17] The appellant submits that the application judge erred: (1) by not construing the cost-sharing provision as a whole; (2) in his assessment of the commercial efficacy of his interpretation of the provision; (3) by implying a term when it was unnecessary to do so; and (4) in concluding that there was no evidence that the builders of the new subdivision would benefit from the services installed as part of Arthur Street.

[18] We see no error in the application judge’s analysis. He identified the applicable principles of contractual interpretation, as discussed in Prism. In applying these principles, he considered the Agreement as a whole. We disagree with the appellant’s submission that, in his interpretation of the cost-sharing provision, he failed to consider the table to which it referred. The table details the proportionate contributions of Huber and whoever acquires and builds on the adjacent lands. However, the actual proportions were not in issue on this application; instead, the question was whether the cost-sharing provision was triggered in the first place. The table provided no assistance on this issue.

[19] Another strand of this same submission – that the application judge failed to consider the cost-sharing provision as a whole – is that he failed to give effect to the following clause: “Upon the application of the relevant owner for a sub-divider’s agreement or if none, for a building permit , the Town shall collect from such owner the share charged against him for the construction of the aforementioned services” (emphasis added). The appellant submits that West Perth’s obligations would be triggered upon the issuance of a building permit, even if the structure to be built (e.g., a pole barn or some other agricultural structure) did not require connection to the Arthur Street road or sanitary/storm sewers.

[20] It is true that the application judge did not specifically analyze these words of the provision in his written reasons. However, the scenario posed by the appellant is not helpful to its cause. It seems inconceivable that, at the time the Agreement was entered into, the parties would have contemplated the Municipality extracting payment under the Agreement from a farming family who builds a structure upon their lands, one that does not require any of the Arthur Street servicing. Any other interpretation would be unreasonable.

[21] The appellant submits that the application judge erred in his conclusion that Huber’s interpretation of the Agreement was “divorced from commercial sense” and that it made “no sense in the context of the purpose of the agreement and does not make good business sense”: at para. 66. The appellant submits that the application judge erred in making this assessment from a subjective perspective, rather than looking at the matter objectively. We disagree. The application judge’s analysis of this issue was sound and fair, and construed the Agreement in a reasonable manner.

[22] The appellant is correct that, in the course of his reasons, at para. 64, the application judge referred to the fact that the newly proposed development would not need to connect to the Arthur Street “water lines”. This service is beyond the scope of the Agreement between Huber and West Perth; it is the subject of an agreement with a public utility. In our view, this reference was minor and does not detract from the application judge’s firm grasp of the focus and operation of the Agreement.

[23] In all of the circumstances, we see no error in the manner that the application judge construed the Agreement. In light of this conclusion, it is not necessary to consider the application of the “officious bystander” test and the implied term.

[24] Lastly, the appellant submits that the application judge erred in concluding that there was no evidence that the lands adjacent to the subdivision gained any benefit from the services that are part of Arthur Street. The appellant asks us to find that there was evidence of a benefit or, alternatively, to order a new hearing in the Superior Court to address this factual issue.

[25] In our view, there was an evidentiary basis in the record to ground the application judge’s conclusion on this issue. The sworn affidavit of Bruce Potter, P. Eng., a development engineer for West Perth, said that the new development “does not front onto Arthur Street … and does not benefit from any of the services installed on Arthur Street”. This evidence placed the issue squarely in play. It was open to the appellant to adduce evidence on this issue, or to request an adjournment of the application to seek a different opinion. Similarly, it could have applied to adduce fresh evidence on appeal. None of these options were pursued.

[26] In conclusion, the obligations of West Perth under the cost-sharing provision of the Agreement were not triggered in this case. The application judge made no error in so finding.

Disposition

[27] The appeal is dismissed. It was agreed that the successful party would be entitled to its costs in the amount of $20,000, inclusive of disbursements and applicable taxes. The respondent is entitled to its costs in this amount.

“Gary Trotter J.A.”

“L. Sossin J.A.”

“P.J. Monahan J.A.”