COURT OF APPEAL FOR ONTARIO
CITATION: Ottawa (City) v. ClubLink Corporation ULC, 2025 ONCA 34
DATE: 20250121
DOCKET: COA-23-CV-1232
Fairburn A.C.J.O., Coroza and Sossin JJ.A.
BETWEEN
City of Ottawa
Appellant
and
ClubLink Corporation ULC
Respondent
and
Kanata Greenspace Protection Coalition
Intervener
Kirsten Crain and Laura E. Robinson, for the appellant
Matthew P. Gottlieb, Crawford G. Smith, John Carlo Mastrangelo and Mark Flowers, for the respondent
Alyssa Tomkins and Charles R. Daoust, for the intervener
Heard: November 13, 2024
On appeal from the judgment of Justice Marc R. Labrosse of the Superior Court of Justice, dated October 13, 2023.
Sossin J.A.:
OVERVIEW
[1] This appeal concerns the effect of the decision of this court in Ottawa (City) v. ClubLink Corporation ULC, 2021 ONCA 847, leave to appeal refused, [2022] S.C.C.A. No. 40036. That decision resolved a key issue in dispute between the parties, the City of Ottawa (the “City”) and ClubLink Corporation ULC (“Clublink”), striking certain terms of an agreement concluded in 1981 (the “1981 Agreement”) governing the conveyance of the lands now owned by Clublink, and operated as a golf course (the “golf course lands”), for offending the rule against perpetuities.
[2] That decision did not address the impact that the removal of those terms of the agreement might have on other provisions in the 1981 Agreement and related contracts dealing with the land in dispute, and in particular the requirement that 40% of the property be kept as open space (of which the golf course lands form a part). This question was remitted back to the application judge.
[3] In this further decision of the application judge (the “remittal decision”), the application judge held that certain additional provisions in the agreement and related contracts were inoperative, including those provisions requiring 40% of the property be kept as open space, and those provisions relating to the golf course lands, resulting in Clublink being able to redevelop the subject lands without the constraints set out in the 1981 Agreement and related contracts.
[4] The remittal decision is now the subject of this appeal. The City argues that the application judge exceeded his jurisdiction by engaging in an exercise of severance of the original agreement and related contracts, and that the contractual provisions in the agreement requiring that Clublink maintain the 40% open space by continuing to operate a golf course remain valid and enforceable.
[5] The City’s position is supported by the intervener, Kanata Greenspace Protection Coalition (the “Coalition”). In the alternative, the Coalition asserts that even if Clublink is not required to operate a golf course on the subject lands, it must nonetheless maintain 40% of the property as open space, as required in the 1981 Agreement and related contracts.
[6] Clublink acknowledges that the application judge engaged in severance but contends this was permitted by the law of severance, and that he committed no error in his determinations of which provisions were inoperative. Clublink, therefore, argues that the appeal should be dismissed.
[7] For the reasons set out below, I conclude that the application judge reached the correct conclusion, effectively rendering all provisions relating to the golf course inoperative. Although I arrive at this result in a different way, without a line-by-line redrafting of the agreement, for the reasons that follow, the correct analytical approach arrives at the same place. Accordingly, I would dismiss the appeal.
BACKGROUND
[8] The factual and procedural background of the dispute was set out in this court’s decision allowing the appeal from the initial application decision, at paras. 3-7:
[3] In January 1997, the appellant, ClubLink Corporation ULC (“ClubLink”), acquired property subject to various historical land development agreements affecting its use, which were made in 1981, 1985, and 1988 between Campeau Corporation (“Campeau”) and the former City of Kanata (“Kanata”) (“the Agreements”). ClubLink assumed the former owners’ rights and obligations under the Agreements (“the Assumption Agreement”). In issue are the provisions contained in ss. 5(4) and 9 of the agreement entered into on May 26, 1981 (“the 1981 Agreement”) that: Campeau, or its successors and assigns, must operate a golf course on the property in perpetuity (“the golf course lands”), failing which, the golf course lands are to be conveyed at no cost to Kanata, now part of the respondent, the City of Ottawa (“the City”); and, if the golf course lands are conveyed, the City is obliged to continue using the golf course lands for recreation or natural environmental purposes, failing which, they are to be reconveyed to Campeau.
[4] ClubLink has operated the golf course for over 24 years. Due to declining membership, ClubLink started exploring the possibility of developing the golf course lands for residential and open space purposes. To that end, in October 2019, ClubLink submitted planning applications for a zoning by-law amendment and approval of a plan of subdivision and publicly accessible green space on the golf course lands.
[5] The City brought an application for an order requiring ClubLink to withdraw its applications; alternatively, it claimed that ClubLink’s applications triggered its right to demand conveyance of the golf course lands and it sought conveyance of the golf course lands to the City at no cost. The City requested a declaration that ClubLink’s obligations remain valid and enforceable. It also sought a declaration that if the golf course lands were conveyed to the City, the City would not be required to reconvey the golf course lands if it ceased to operate them as a golf course, so long as it used the golf course lands for recreation and natural environmental purposes.
[6] ClubLink resisted the City’s application because the City’s right to call on a conveyance had not vested within the 21 years following the 1981 Agreement. Therefore, ClubLink argues, the provisions requiring the operation of a golf course in perpetuity are void as contrary to the rule against perpetuities.
[7] The application judge interpreted the 1981 Agreement and allowed the City’s application in part. Importantly, he determined that the parties did not intend to create an interest in land because they never intended for the conveyances to materialize. He declared that the 1981 Agreement continues to be a valid and binding contract and that ClubLink’s obligations remain enforceable. ClubLink is therefore required to operate the golf course in perpetuity or convey the golf course lands to the City if it ceases to do so. However, he declared that in the event the golf course lands were conveyed to the City, the City is not required to operate the golf course in perpetuity so long as it uses the lands for recreation and natural environmental purposes. The application judge dismissed the City’s application for an order requiring ClubLink to withdraw its zoning bylaw amendment and plan of subdivision applications or alternatively to offer to convey the golf course lands to the City at no cost.
[9] The basis for the court’s decision allowing the City’s appeal was that two provisions in the 1981 Agreement, which governed the potential conveyancing of the golf course lands, constituted indefinite contingent interests in the land that had not vested in the 21 years following the agreement, and therefore were void for offending the rule against perpetuities.
[10] The court held that the 1981 Agreement formed a development contract that allowed Campeau, the original owners, to develop its own land, subject to certain limits to further the City’s public policies; most notably, the principle that 40% of the property must remain open space, and used for, among other purposes, a golf course. Roberts J.A., writing for the court, linked the conveyancing constraints in the 1981 Agreement with the broader commitment to the 40% open space principle, stating:
[57] There is no question that the 40% principle was an important contractual feature that allowed Campeau to advance the development of property and further the City’s public policies. The City wanted to ensure that 40% of the property to be developed would remain as open space to be used in certain ways. One of the ways was the operation in perpetuity of a golf course. That said, the 40% principle, by itself, does not determine the issue of whether the parties intended to give Kanata (and its successors and assigns) an interest in land or a contractual right to protect the 40% principle.
[58] In my opinion, when the Agreements are read and interpreted as a whole, and in the context of the factual matrix, the provisions in ss. 5(4) and 9 were intended to restrict or “fetter” the use that could be made of 40% of the property in order to further the City’s open space development policy. [Emphasis added.]
[11] Having found the two conveyancing provisions void, the court next turned to the implications of its decision. The court observed that Clublink had argued that, if the rule against perpetuities applies, then ss. 5(4) and 9 could not be severed from the 1981 Agreement and that all or part of the 1981 Agreement must be void as well. The court declined to consider this argument as the record was incomplete with respect to the relationship between ss. 5(4) and 9 on the one hand, and the rest of the 1981 Agreement and related contracts on the other. The question of further remedy was thus remitted back to the application judge.
[12] Before considering the dispute regarding the scope of the question remitted by this court back to the application judge, it is helpful to review the 1981 agreement and related contracts dealing with the golf course lands, much of which was central to the application judge’s analysis in the remittal decision giving rise to this appeal.
(1) The 1981 Agreement and related contracts relating to the golf course lands
[13] The following agreements govern the golf course lands.
(a) 1981 Agreement dated May 26, 1981
[14] The 1981 Agreement is sometimes referred to as “the 40% Agreement” as it sets out the contractual obligations leading to the requirement that 40% of the property be kept as open space.
[15] Section 3 provides:
- Campeau hereby confirms the principle stated in its proposal that approximately forty (40%) percent of the total development area of the 'Marchwood Lakeside Community' shall be left as open space for recreation and natural environmental purposes which areas consist of the following:
(a) the proposed 18-hole golf course
(b) the storm water management area
(c) the natural environmental areas
(d) lands to be dedicated for park purposes.
[16] Section 5, under the heading “methods of protection”, set out the mutual obligations of the parties in relation to the golf course lands:
- (1) Campeau covenants and agrees that the land provided for the golf course shall be determined in a manner mutually satisfactory to the parties and subject to subparagraphs 2 and 3 shall be operated by Campeau as a golf course in perpetuity provided that Campeau shall at all times be permitted to assign the management of the golf course without prior approval of Kanata.
(2) Notwithstanding sub-paragraph (1), Campeau may sell the golf course (including lands and buildings) provided the new owners enter into an agreement with Kanata providing for the operation of the golf course in perpetuity, upon the same terms and conditions as contained herein.
(3) In the event Campeau has received an offer for sale of the golf course it shall give Kanata the right of first refusal, on the same terms and conditions as the offer, for a period of twenty-one (21) days.
(4) In the event that Campeau desires to discontinue the operation of the golf course and it can find no other persons to acquire or operate it, then it shall convey the golf course (including the land and buildings) to Kanata at no cost, and if Kanata accepts the conveyance, Kanata shall operate or cause be operated the land as a golf course subject to the provisions of paragraph 9.
(5) In the event Kanata will not accept the conveyance of the golf course as provided for in sub-paragraph (4) above then Campeau shall have the right to apply for development of the golf course lands in accordance with The Planning Act, notwithstanding anything to the contrary contained in this agreement.
[17] In s. 9, after the provisions of s. 5(4) were fulfilled, if the City, as owner, proposed to cease to use land for recreation and natural environmental purposes, the City was required to reconvey those lands to Campeau at no cost.
(b) 1985 Golf Club Agreement dated June 10, 1985
[18] This agreement confirmed the obligations in the 1981 Agreement would apply to a specific parcel of the land owned by Campeau as outlined in the agreement. The agreement mandated the location, size, and standards for the golf course and referenced the arrangement between the City and Campeau to ensure the golf course lands be improved and expanded in conjunction with the development by Campeau of the Marchwood-Lakeside Lands.
(c) The 40% Agreement dated December 20, 1988
[19] On December 20, 1988, Campeau and the City entered into an agreement by which they identified the land that was to be set aside to meet the commitment to 40% open space. The parties also identified additional lands, referred to in the agreement as “excess lands”, to which the 40% Agreement did not apply. The 1981 Agreement and the 1988 Agreement would now only apply to the lands described in Schedule “A” of the 1988 Agreement. The golf club agreements were registered only on the title to the golf course lands.
[20] Section 7 of the December 20, 1988 Agreement provided, “It is hereby agreed that the Forty Percent Agreement and this Agreement shall enure to the benefit of and be binding upon the respective successors and assigns of Campeau and the City and shall run with and bind the Current Lands for the benefit of the Kanata Marchwood Lakeside Community.”
(d) 1988 Golf Club Agreement dated December 29, 1988
[21] On December 29, 1988, the parties entered into a second golf club agreement, which set out the precise description of the golf course lands based on legal descriptions and plans available at the time.
[22] In 1989, Campeau sold the Campeau Lands, including the golf course lands, to another real estate development company, Genstar Development Company Eastern Ltd. (“Genstar”). Genstar, Campeau and Kanata entered into an agreement dated March 30, 1989. Pursuant to that agreement, Genstar assumed Campeau’s obligations under the 1981 Agreement and the 1988 Agreement. Genstar later amalgamated with Imasco Enterprises Inc. (“Imasco”).
(e) Assumption Agreement dated November 1, 1996
[23] Clublink purchased the golf course lands in 1997 from Imasco. As part of the purchase, Clublink, Imasco and Kanata entered into an assumption agreement dated November 1, 1996 (the “Assumption Agreement”). Pursuant to that agreement, Clublink agreed to assume all of Imasco’s liabilities and obligations in respect of the 1981 Agreement, the 1988 Agreement and the 1985 Golf Club Agreement. The Assumption Agreement sets out that every covenant, proviso, condition and stipulation in the 1981 Agreement and 1988 Agreement apply to and bind Clublink in the same manner and to the same effect as if Clublink had executed those agreements in the place and stead of Campeau or Imasco.
(2) What issue was remitted to the application judge?
[24] With those factual and contractual contexts in mind, I return to the question of what issue was remitted to the application judge by this court. That question is addressed in the final section of the court’s decision, after concluding that ss. 5(4) and 9 of the 1981 agreement were void for violating the rule against perpetuities. I reproduce that section of the decision below:
Is all or part of the 1981 Agreement void?
[66] ClubLink renews here the argument that if the rule against perpetuities applies, then ss. 5(4) and 9 cannot be severed from the 1981 Agreement and all or part of the 1981 Agreement fails. As noted in para. 146 of his reasons, the application judge did not consider this issue given his conclusion that the 1981 Agreement continues to be valid and enforceable.
[67] ClubLink argues that ss. 5(4) and 9 are integral to the 1981 Agreement and that severing ss. 5(4) and 9 from the balance of the contract fundamentally changes the 1981 Agreement with the result that ClubLink would be saddled with a perpetual obligation to run a golf course (or find a buyer willing to do the same) with no escape mechanism. According to ClubLink, there is no evidence the parties would have agreed to this bargain. ClubLink submits that severance is therefore inappropriate and, as a result, the appropriate remedy is to void the 1981 Agreement in whole, or, alternatively, all the provisions related to the golf course lands.
[68] In my view, this court is not in a position to consider ClubLink’s argument.
[69] First, ClubLink did not identify which provisions of the 1981 Agreement are so interrelated to ss. 5(4) and 9 and the void contingent interests in land that they must necessarily be inoperative. Further, there is no basis to void myriad other provisions in the 1981 Agreement that are unrelated to the golf course and that have already been performed.
[70] Moreover, the focus of the submissions before this court was on the validity and enforceability of ss. 5(4) and 9 of the 1981 Agreement. We do not have the benefit of the application judge’s findings on the larger question raised by ClubLink. And, in my opinion, the determination that ss. 5(4) and 9 of the 1981 Agreement are void and unenforceable may affect provisions of not simply the 1981 Agreement but also the 1985 and 1988 Agreements, as well as the Assumption Agreement. In my view, if the parties cannot agree, this larger question should be remitted to the application judge for determination.
[25] The application judge took the wording of para. 69 literally. In setting out his jurisdiction, he stated at para. 30 of the remittal decision:
The law of severance has no place in this decision. While there may be an open debate as to whether severance applies solely to illegal contracts as argued by the City or if severance also applies to provisions which have been declared void and unenforceable by statute, this is not a debate that the Court of Appeal directed this court resolve. The jurisdiction of this court must be focussed on paras. 69 and 70 of the Appeal Decision, which direct this court to identify which provisions of the Related Contracts are so interrelated to ss. 5(4) and 9 and the void contingent interests in land that they must necessarily be inoperative. [Emphasis in original.]
[26] The application judge also referred to the order arising from the Court of Appeal decision, which read, in part:
- THIS COURT FURTHER ORDERS that, if the parties cannot agree, the Application Judge should determine the issue of whether any other provision(s) of the agreements between Campeau Corporation and the City of Kanata—dated May 26, 1981; June 10, 1985; December 20, 1988; and December 29, 1988—or the agreement between Imasco Enterprises Inc., Clublink Capital Corporation and the Corporation of the City of Kanata dated November 1,1996, is affected by Paragraph 2 of this Order.
[27] In the remittal decision, the application judge reviewed the 1981 Agreement and related contracts with a specific lens. He was searching for individual provisions of the 1981 Agreement and related contracts that were “so interrelated to ss. 5(4) and 9 and the void contingent interests in land that they must necessarily be inoperative.” He clarified that this meant searching for the provisions related specifically to the void, contingent interest, and not just any provisions governing the golf course lands generally.
[28] In order to undertake this exercise, the application judge explained that he had to consider the original intent of the parties and the manner in which the contractual arrangement between the parties was meant to evolve. Further, according to the application judge, his role was to maintain, to the extent possible, the bargain between the parties “while taking into consideration that the path to redevelopment of the lands has changed significantly.”
[29] The application judge concluded that the 1981 Agreement and related contracts were not intended to create a permanent and unconditional obligation on Campeau or its successors to operate a golf course in perpetuity. He summarized this conclusion as follows, at para. 47:
As identified in the Application Decision, the 1981 Agreement represented a series of integrally related provisions that provided for not only the establishment of the 40% open space principle, but also the establishment of a golf course use over an important portion of that 40% open space area. The 1981 Agreement was meant to allow the area of the golf course lands to evolve over time beyond its intended original ownership and use as a golf course. It was also to ensure that if the golf course lands were ever redeveloped, Campeau or its successors would have the first opportunity to do so. [Emphasis added.]
[30] The application judge emphasized that ss. 5(4) and 9 of the 1981 Agreement were the “essential provisions” for the evolution of the golf course lands. He held, “[t]he impact of determining that those sections are void and unenforceable fundamentally changes the bargain that the parties had negotiated.” He acknowledged without finding other provisions inoperative, the owners of the golf course lands would be required to maintain a golf course there in perpetuity, and without any contractual path to development. On this question, he found such an outcome was contrary to the intent of the parties in entering into the 1981 Agreement, stating at para. 53:
The 1981 Agreement was not an agreement to operate a golf course in perpetuity and this is contrasted by other agreements which have been acknowledged by the courts as creating perpetual obligations. The 1981 Agreement clearly identified that the golf course lands would be operated by Campeau as a golf course in perpetuity, but this was subject to various other provisions of the 1981 Agreement which allowed for a discontinuance of that use. Importantly, the Related Contracts provided for redevelopment and the 40% principle being deemed to be maintained.
[31] The application judge next analyzed each of the 1981 Agreement and related contracts. On the basis of a careful analysis of the interrelationship between the various contractual provisions and ss. 5(4) and 9 of the 1981 Agreement, he found the following sections inoperative in whole or in part:
1981 Agreement
Section 3
Campeau hereby confirms the principle stated in is proposal that approximately forty (40%) percent of the total development area of the ‘Marchwood Lakeside Community’ shall be left as open space for recreation and natural environmental purposes which areas consist of the following:
(a) The proposed 18 hole golf course
(b) The storm water management area
(c) The natural environmental area
(d) Lands to be dedicated for park purposes.
Section 5(1)
Campeau covenants and agrees that the land to be provided for the golf course shall be determined in a manner mutually satisfactory to the parties and subject to subparagraphs 2 and 3 shall be operated by Campeau as a golf course in perpetuity provided that Campeau shall at all times be permitted to assign the management of the golf course without prior approval of Kanata.
Section 5(2)
Notwithstanding sub-paragraph (1), Campeau may sell the golf course (including lands and buildings) provided the new owners enter into an agreement with Kanata providing for the operation of the golf course in perpetuity, upon the same terms and conditions as contained herein.
Section 5(3)
In the event Campeau has received an offer for sale of the golf course it shall give Kanata the right of first refusal on the same terms and conditions as the offer for a period of twenty-one (21) days.
Section 5(5)
In the event Kanata will not accept the conveyance of the golf course as provided for in sub-paragraph (4) above then Campeau shall have the right to apply for development of the golf course lands in accordance with The Planning Act, notwithstanding anything to the contrary contained in this agreement.
Section 10
It is the intent of the parties that this agreement shall establish the principle as proposed by Campeau to provide 40% of the land in the ‘Marshwood Lakeside Community’ as open space; however, as development occurs and plans are finalized, further agreements concerning specific open space areas may be required to implement this principle and to provide for the construction of works in these areas.
1988 Agreement (December 29, 1988)
Section 4
Any sale of the golf course (including lands and building) shall be subject to the purchaser entering into an agreement with the City providing for the operation of the golf course in perpetuity and for the assumption of all other obligations of Campeau under the Golf Club Agreement and this Agreement.
Section 5
Option: The City consents to the transaction of purchase and sale provided for in the Purchase Agreement provided that nothing herein shall derogate from or cancel the City’s Option upon any subsequent sale of the Golf Course by the Purchaser. The Purchaser acknowledges and confirms that the Option shall continue to be in effect, and shall bind the Purchaser on any subsequent sale by the Purchaser as aforesaid notwithstanding the City’s consent to the transaction as aforesaid.
Assumption Agreement (November 1, 1996)
Section 10
Open Space Lands: If the City is required under Section 9 of the 1981 Agreement to reconvey any land (because, as provided for more particularly in such Section 9, such land ceases to be used for recreational and natural environmental purposes by the City), then the City shall notify the Purchaser of such conveyance prior to delivering it to Imasco or as Imasco may direct.
Section 11
Open Space Lands: The parties to this Agreement acknowledge and agree that nothing in this Agreement alters the manner in which approximately 40% of the total development area of the "Marchwood Lakeside Community" is to be left as open space for recreation and natural environmental purposes (the "Open Space Lands") as referred to in Section 3 of the 1981 Agreement, so that the calculation of the Open Space Lands will continue to include the area of the Golf Course Lands including, without limitation, any area occupied by any building or other facility ancillary to the golf course and country club located now or in the future on the Golf Course Lands. If the use of the Golf Course Lands as a golf course or otherwise as Open Space Lands is, with the agreement of the City, terminated, then for determining the above 40% requirement, the Golf Course Lands shall be deemed to be and remain Open Space Lands.
[32] The application judge concluded that the other provisions of the 1981 Agreement and related contracts remain in force as they were not sufficiently interrelated to ss. 5(4) and 9 so as to render them inoperative, though in the case of some provisions, their validity turned on being able to interpret them so as not to affect the golf course lands.
ANALYSIS
[33] The City raises three grounds of appeal. According to the City, the application judge erred in:
a) Failing to carry out the Court of Appeal’s direction in remitting ClubLink’s severance argument for further consideration;
b) Applying an unknown and incorrect principle of “inoperability” to contractual provisions that established personal rights; and
c) Failing to apply the governing principles of contractual interpretation in identifying the inoperative provisions.
[34] I will deal with each of these grounds of appeal in the analysis below.
STANDARD OF REVIEW
[35] The City contends that the standard of review over the application judge’s decision is correctness: 1) as it concerns this court’s direction to the application judge; 2) the availability of a remedy/doctrine of “inoperability”; and 3) extricable questions of law in the interpretation of the related contracts.
[36] Clublink did not address the standard of review expressly, though it asserts the application judge committed no “reversible error.”
[37] I agree that the application judge’s interpretation both of the remittal from this court and the application of “inoperability” were subject to a standard of correctness. In the course of his decision, the application judge also makes specific factual findings based on the record (or relies on findings made in the original application), for example, with respect to the intent of the parties in entering into the 1981 Agreement, and these findings are entitled to deference absent a palpable and overriding error: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at para. 10.
(1) The Court of Appeal’s remittal to the application judge
[38] In my view, this appeal turns largely on the application judge’s understanding of the task remitted to him by this court.
[39] The City submits that the application judge erred in his understanding of his jurisdiction as set out in the remittal decision. According to the City, the application judge started his analysis with the erroneous assumption that any “interrelated provisions” were “inoperative”. The City argues that the Court of Appeal decision did not pre-determine that its finding in relation to the conveyancing provisions necessarily impacted the rest of the 1981 Agreement or related contracts, nor did this court create a new doctrine of “inoperability” to guide the application judge’s analysis.
[40] Clublink argues that the application judge’s articulation of the issue remitted by the Court of Appeal in his remittal decision carefully tracks the language of the Court of Appeal at paras. 69 and 70, and does not reveal any error.
[41] I make two observations at the start of this analysis. First, the court expressly did not state an opinion on Clublink’s submissions on the extent to which all or part of the 1981 Agreement was void. Second, while the court used the terminology of “inoperability” in relation to Clublink’s submission at para. 69, the concern of the court in the remittal was whether the determination that ss. 5(4) and 9 of the 1981 Agreement were void may affect other provisions in that and related contracts.
[42] In my view, the application judge’s focus on determining provisions that were “inoperative” because they were “interrelated” with ss. 5(4) and 9 of the 1981 Agreement distracted from the overarching question for resolution, which was, as set out in para. 70 of this court’s decision: “the larger question” of how the rest of the 1981 Agreement and related contracts were affected by the voiding of the two provisions concerning the conveyancing of the golf course lands. While the court addressed the need to look at the clauses to determine what could not stand in light of this court’s decision, the court did not suggest or encourage a redrafting of the contractual agreements. If this was needed, then the overarching question would be answered by a simple acknowledgement that the contract(s) as they related to the golf course lands could not stand. It appears from the reasons below that this is the ultimate conclusion arrived at by the application judge.
[43] The application judge proceeded on the premise that the bargain struck by the parties to the 1981 Agreement could be maintained, provided that the remaining terms of the agreement and related contracts permitted the redevelopment of the golf course lands. However, as the application judge himself found, the provisions voided by the Court of Appeal were the “essential provisions” governing the evolution of the golf course lands. With those provisions no longer enforceable, the bargain struck by the parties in 1981 as found by the application judge was no longer tenable.
[44] Below, I explain that the application judge did not need to effectively redraft the contracts between the parties. I also address the proper remedy in light of the fact that the bargain between the parties relating to the golf course lands was at an end.
(2) The application judge’s unnecessary redrafting of the contract
[45] The City’s two latter grounds of appeal concerning inoperability and the proper principles of contractual interpretation may be dealt with together. Here, the question is whether the application judge erred in his remittal decision by finding specific provisions of the 1981 Agreement and related contracts to be inoperable based on his assessment of their interrelation with ss. 5(4) and 9 of the 1981 Agreements, which had been found to be void.
[46] Much of the submissions before us by the parties in this regard concerned the doctrine of severance. With respect to how severance emerged as a key issue, it is important to keep in mind how the issue was framed before the application judge. The application judge described this framing in the following terms, at paras. 15-17:
[15] The most interesting part of the argument advanced by Clublink and the City is that neither requests severance and both allege that the other is effectively requesting severance. The City alleges that ClubLink is effectively requesting that this court applies the “blue pencil” approach to severance beyond ss. 5(4) and 9 of the 1981 Agreement to strike out any other section that relates to the golf course.
[16] ClubLink advances that in seeking for the Related Contracts to be maintained, the City is effectively requesting to sever ss. 5(4) and 9 of the 1981 Agreement and maintain the rest.
[17] ClubLink argues that each of the Related Contracts must be declared invalid as a result of the Appeal Decision, namely that ss. 5(4) and 9 of the 1981 Agreement are void and unenforceable. ClubLink argues against the applicability of the doctrine of severance as those sections cannot be excised from the agreements governing the golf course without fundamentally altering the bargain reached between the parties in the 1980s. The result is that the Related Contracts are not enforceable to the extent that they apply to the golf course lands. [Footnotes omitted.]
[47] As set out above, the application judge stated plainly that, “[t]he law of severance has no place in this decision.” However, in their submissions on the appeal, both parties take the view that the application judge nonetheless engaged in severance as part of his analysis of which provisions of the 1981 Agreement and related contract were “inoperative.”
[48] Clublink advanced the argument before the application judge that all of the provisions of the 1981 Agreement and related contracts relating to the golf course lands should be considered void. The application judge read the Court of Appeal’s decision remitting the question back to him as precluding that approach. He stated, at para. 35: “Furthermore, although ClubLink has made the primary argument that each of the remaining Related Contracts should be declared inoperative, that was not the preliminary view of the Court of Appeal and it is not the view of this court.” Rather, the methodology adopted by the application judge was to consider and respond to each of the paragraphs of each of the 1981 Agreement and related contracts dealing with the golf course lands individually.
[49] Clublink, in the alternative, proposed red-line changes to the 1981 Agreement and related contract dealing with 15 paragraphs (ss. 3, 3(a), 4, 5, 9, and 10 (in part) of the 1981 Agreement; s. 3 of the 1985 Golf Club Agreement; ss. 2, 5 and 6(d) of the 1988 40% Agreement; s. 4 of the 1988 Golf Club Agreement; and ss. 5, 7, 10, and 11 of the Assumption Agreement). Effectively, the application judge adopted this approach. Clublink asserts that these modifications to the 1981 Agreement and related contracts were permissible under the law of severance.
[50] The City argues that the doctrine of severance does not permit these changes to the 1981 Agreement and related contracts undertaken by the application judge.
[51] According to the City, the application judge’s characterization of the Court of Appeal’s direction was wrong, as it was premised on the erroneous assumption that any “interrelated provisions” to ss. 5(4) and 9 of the 1981 Agreement would be “inoperative”.
[52] The City further contends that this court’s decision did not pre-determine that its finding on the conveyancing provisions necessarily impacted the rest of the 1981 Agreement or the other related contracts. Additionally, the City argues that the court did not intend to create a new doctrine of “inoperability” that would guide the application judge’s consideration of the remittal. The City submits that, because of this error, the application judge engaged in the very exercise of severance that he had asserted had no place in his remittal.
[53] With respect to severance itself, the City asserts that the doctrine of severance arises only in the context of illegal contracts. Relying on Transport North American Express Inc. v. New Solutions Financial Corp., 2004 SCC 7, [2004] 1 S.C.R. 249, at para. 22, the City frames severance as a particular approach to statutory illegality in contract, and the remedy of severing the illegal provisions and enforcing the remainder, either through the “blue-pencil” approach or by way of “notional severance.”
[54] The so-called blue-pencil approach to severance applies to address the question of whether an illegal contract can be rendered legal by striking out (i.e., drawing a line through) the illegal promises in the agreement. The resulting terms can remain valid and enforceable, so long as “the core” of the agreement remains intact. If the core of the agreement cannot be maintained, then the illegal cause is not a candidate for severance and the entire contract is void. Another approach, referred to as “notional severance” applies where it is possible to read down the illegal provision so as to render it legal and therefore remain enforceable.
[55] One of the factors for the court to consider in whether an illegal contract should be partially enforced, or declared void ab initio, is the potential for a party to enjoy an unjustified windfall: Transport North American, at para. 42. In this context, the City asserts that to remove the barriers to Clublink redeveloping the golf course lands would represent an unjustified windfall, as this would mean the property is worth far more than Clublink paid for it.
[56] Further, the City submits that there is no basis for removing those additional contractual commitments relating to the 40% principle and the operation of the golf course in perpetuity, as there is no time limit to contractual obligations, unlike contingent interests in land, relying on Canadian Long Island Petroleums Ltd. v. Irving Wire Products, [1974] 2 S.C.R. 715, at pp. 735-36. As the City observes in its factum, “[t]he rule against perpetuities is not a mechanism for relief from contractual obligations that do not create interests in property.”
[57] By contrast, Clublink submits that the law of severance applies where the party seeking to sever a void or unenforceable provision from the balance of a contract can demonstrate that the remaining obligations “can fairly be said to be a sensible and reasonable obligation in itself such that the parties would unquestionably have agreed to it without varying any other terms of the contract” (adopting the language of Canadian American Financial Corp. (Canada) Ltd. v. King (1989), 1989 CanLII 252 (BC CA), 60 D.L.R. (4th) 293 (B.C.C.A.), at pp. 305-06).
[58] Clublink submits that, in Transport North American, at para. 55, the Supreme Court confirmed that severance does not apply when the impugned provision is “in substance so connected with [the other provisions in the contract] so as to form an indivisible whole that cannot be taken to pieces without altering its nature”.
[59] In an exchange during oral submissions, Clublink acknowledged that it was aware of no case in which severance has been extended to the context of a contract where some provisions are void due to the rule against perpetuities. Clublink argues, however, that there is no principle or public policy reason why this doctrine should be confined only to cases of statutory illegality, and not cases involving prohibitions at common law.
[60] In making this argument, Clublink relied on several cases in support of this proposition, including 2176693 Ontario Ltd. v. Cora Franchise Group Inc., 2015 ONCA 152, where van Rensburg J.A. stated at para. 35:
Where part of a contract is unenforceable because enforcement would be contrary to statute or the common law, rather than setting aside the entire contract, courts may sever the offending provisions while leaving the remainder of the contract intact. Severance lies along a spectrum of remedies available when a provision of a contract is illegal, including voiding the contract in whole or in part. The appropriate remedy will depend on the particular context. Courts are generally reluctant to sever contractual provisions because severance alters the terms of the original agreement between the parties. [Citations omitted; emphasis added.]
[61] Clublink asserts that the application judge appropriately applied the principles of severance articulated by the Supreme Court in Transport North American and by this court in Cora in declaring provisions requiring Clublink to continue operating the golf course in perpetuity to be unenforceable, while leaving other independent obligations intact.
[62] I would reject these submissions. In my view, addressing the question remitted by the Court of Appeal did not invite an examination of the law of severance and its applicability to this case.
[63] The application judge’s analysis began from the premise that it was not open to him simply to declare all the provisions of the 1981 Agreement and related contracts relating to the golf course to be void. In my view, Roberts J.A. specifically left open this possibility in para. 69 of her reasons, when she highlighted that the court’s decision did not address the contractual provisions between the parties unrelated to the golf course lands:
First, ClubLink did not identify which provisions of the 1981 Agreement are so interrelated to ss. 5(4) and 9 and the void contingent interests in land that they must necessarily be inoperative. Further, there is no basis to void myriad other provisions in the 1981 Agreement that are unrelated to the golf course and that have already been performed.” [Emphasis added.]
[64] Roberts J.A. observed the onus was on Clublink to demonstrate the extent to which other provisions in the 1981 Agreement and related contracts had to be considered void in light of the removal of ss. 5(4) and 9.
[65] Clearly this court left open the possibility for an application judge to arrive at the conclusion that the entirety of the provisions relating to the golf course in the 1981 Agreement and related contracts were void. In my view, as discussed further below, based upon the application judge’s own interpretation of the 1981 Agreement and related contracts, it is clear that he reached that conclusion. Rather than simply declaring the contract(s) void as they related to the golf course lands, he effectively redrafted the agreement to reach the same end, thereby potentially engaging the broader law of severance.
(3) The availability of severance for contracts affected by the rule against perpetuities
[66] I would leave for another day whether, in a suitable case, severance may apply to contracts where provisions have been declared void due to the rule against perpetuities. It is neither necessary nor appropriate to embark on that analysis in this context. It is clear that this court, in remitting the question back to the application judge to determine which contractual provisions were affected by its decision, did not intend, in this way, to develop new jurisprudence with respect to the law of severance. Indeed, the question of severance, and any limits applicable to severance in relation to illegality, was not considered by the court in remitting a limited question back to the application judge. As well, because he viewed severance as irrelevant to his analysis, we also do not have the application judge’s view on any of the severance case law or its possible application to these circumstances.
[67] In light of this conclusion, I also need not address in any detail the City’s argument that “inoperability” is not a remedy known to contract law. I read the application judge as using the term “inoperative” in the remittal decision because it appeared in para. 69 of the Court of Appeal’s decision when referring to Clublink’s submission before the court. In this context, I do not take this term to mean anything other than void and unenforceable, just as the court had found ss. 5(4) and 9 to be void and unenforceable.
[68] As I clarify below, and as the court framed the issue itself in remitting the question to the application judge, the “larger question” to be resolved was whether all or part of the 1981 Agreement would be void and unenforceable in light of ss. 5(4) and 9 being declared void and unenforceable.
(4) Can the bargain struck by the parties in the 1981 Agreement be continued after voiding ss. 5(4) and 9?
[69] The key to addressing whether all or part of the 1981 Agreement and related contracts must be considered void is determining whether the bargain struck over the golf course lands, and reflected in the 1981 Agreement and related contracts, could survive the removal of the conveyancing provisions in ss. 5(4) and 9? Those provisions together provided for the contractually permissible path for redeveloping the golf course lands to another use.
[70] It is worth reiterating, as did this court in remitting the question back to the application judge, that this dispute does not touch those aspects of the 1981 Agreement and related contracts that deal with the property aside from the golf course lands. Those provisions either are no longer relevant or have been effectively discharged. The entirety of the dispute between the parties, and the reason for the original application by the City, relates to the golf course lands alone.
[71] With respect to the golf course lands, the application judge found that the right of Campeau to have those lands evolve with time, including uses apart from a golf course, was central to the bargain struck by the parties. He nevertheless concluded that this bargain could be continued if certain provisions in the 1981 Agreement and related contracts posing barriers to redevelopment were found to be inoperative. He explained his understanding of his task as follows, at para. 37, “The court must also seek to maintain, to the extent possible, the bargain of the parties and the impact on other agreements, while taking into consideration that the path to redevelopment of the lands has changed significantly.” (Emphasis added.)
[72] The City submits that provisions such as the contractual obligation to maintain the use of the golf course lands as a golf course in perpetuity (s. 5(1)) and the City’s right of first refusal, among other provisions, should not be interfered with simply because the conveyancing provisions have been found void. They emphasize that contractual obligations are not subject to any rule against perpetuities and may run with ownership of the land, relying on Harris v. Minister of National Revenue, 1966 CanLII 58 (SCC), [1966] S.C.R. 489, at pp. 497-498; and Sutherland Estate v. Dyer (1991), 1991 CanLII 7120 (ON SC), 4 O.R. (3d) 168 (Gen. Div.), at paras. 19, 32-33, 37-40.
[73] The intervening Coalition argues that contrary to Clublink’s framing before the application judge, the core of the 40% Agreement and the related contracts is the protection of open greenspace for recreation and environmental purposes. The Coalition emphasizes the application judge’s reference to this as the “true purpose” of the original 1981 Agreement. The Coalition highlights that the “Forty Percent Agreement” was a broader commitment beyond the specific requirement of operating a golf course. Section 7 of the 1988 Agreement, as noted above for example, stated that, “It is hereby agreed that the Forty Percent Agreement and this Agreement shall enure to the benefit of and be binding upon the respective successors and assigns of Campeau and the City and shall run with and bind the Current Lands for the benefit of the Kanata Marchwood Lakeside Community.” (Emphasis added.)
[74] Based on the application judge’s thorough review of 1981 Agreement as part of the remittal decision, and in light of his earlier findings in the application decision, he concluded that the parties intended, through “integrally related provisions,” to strike a balance between the 40% open space principle and allowing the golf course lands to evolve over time beyond its use as a golf course. He explained, at para. 47:
As identified in the Application Decision, the 1981 Agreement represented a series of integrally related provisions that provided for not only the establishment of the 40% open space principle, but also the establishment of a golf course use over an important portion of that 40% open space area. The 1981 Agreement was meant to allow the area of the golf course lands to evolve over time beyond its intended original ownership and use as a golf course. It was also to ensure that if the golf course lands were ever redeveloped, Campeau or its successors would have the first opportunity to do so.
[75] The removal of the provisions imposing constraints on the conveyancing of the golf course lands, however, fundamentally frustrated that balance. In other words, once s. 5(4) and 9 of the 1981 Agreement are removed, the bargain struck by the parties in relation to the golf course lands cannot be sustained.
[76] Simply leaving the remaining provisions in effect, as urged by the City and supported by the Coalition, in effect, would require the golf course lands to be maintained for that purpose in perpetuity. As the application judge found in the remittal decision, such an outcome would be at odds with the intent of the parties to the 1981 Agreement, which also was to ensure a pathway for the evolution of the use of the golf course lands.
[77] The contractual obligations, such as the requirement that the owner operate a golf course on the lands and the right of first refusal, are not subject to the time limits imposed through the rule against perpetuities on property interests, but also cannot be viewed in isolation. These provisions only reflect the intent of the parties to the 1981 Agreement to the extent that the conveyance rights and restrictions also attached to the golf course lands.
[78] Stripped of those conveyancing rights and restrictions, it cannot be said that the parties nonetheless would have wished to have the contractual obligations relating to the golf course lands enforced, nor can it be said that the provisions of the related contracts, to the extent they bear on the golf course lands, can operate separate and apart from the initial bargain reflected in the 1981 Agreement. Similarly, the Coalition’s argument that the 40% open space principle should remain enforceable even if the requirement to operate a golf course is not, also must be rejected. Without the balance created by the 1981 Agreement, the bargain between the parties relating to the golf course lands is at an end, including the 40% open space provisions.
(5) The proper remedy in this case
[79] For the reasons given above, I do not agree with the City that Clublink’s relief should be limited to the two provisions in the 1981 Agreement that relate to the contingent interests in property.
[80] The respective obligations of Clublink and the City in relation to the golf lands cannot continue to be enforced notwithstanding the removal of the conveyance provisions in ss. 5(4) and 9. As set out above, with these key provisions removed the fundamental bargain struck by the parties is at an end. Or, put differently, the bargain between the parties was intended to adhere to the golf course lands for as long as possible. As it turns out, at common law and pursuant to the Perpetuities Act, R.S.O. 1990, c. P.9, as long as possible was a period of 21 years. The bargain remained intact over that period, but at the end of 21 years, the original bargain was spent, and the parties’ agreement with respect to the golf course lands could no longer continue.
[81] The Coalition represents many of the purchasers who directly or indirectly purchased and paid a premium for the houses or lots along the golf course lands. Those purchasers could reasonably have expected the golf course lands to be used as a golf course, or remain open space, for as long as legally permitted. Similarly, in this context, as long as legally permitted turned out to be a time span of 21 years from the signing of the 1981 Agreement.
[82] As stated above, the City also invites the court to take into consideration whether the outcome of this analysis will result in an unjustified windfall for Clublink. To the extent Clublink may receive a windfall by now being able to redevelop the golf course lands, that windfall is attenuated by the fact that it has maintained the golf course on the golf course lands since 1997, notwithstanding the uncontested evidence of the declining revenue associated with this use of the property. Further, it is reasonable to infer that the purchase price Clublink paid included the possibility of redeveloping the land subject to the now void conveyance provisions contained in the 1981 Agreement. For these reasons, I would reject the City’s argument that Clublink would enjoy an unjustified windfall if the provisions in the 1981 Agreement and related contracts concerning the golf course lands are held to be void.
(6) The proposed redevelopment
[83] The City’s initial application arose as a response to Clublink’s proposed redevelopment of the golf course lands. The proposed development consists of a total of up to 1,480 residential units in the subdivision, of townhouses, semi- detached homes, apartment units and single detached family homes, as well as parks and public open spaces.
[84] The question of whether the proposed redevelopment can move forward also lays at the heart of the application judge’s remittal decision.
[85] The result of this analysis will have the same practical effect as the application judge’s careful redrafting of the 1981 Agreement and related contracts in his remittal decision. Clublink will be able to pursue its proposed redevelopment of the golf course lands, and the City will no longer be able to withhold its consent in relation to that redevelopment.
[86] The end of the bargain underlying the 1981 Agreement and related contracts over the golf course lands, however, does not bring an end to the City’s constraints over the redevelopment of the golf course lands. Those lands remain subject to the Planning Act, R.S.O. 1990, c. P.13, and municipal authority over zoning, by-laws and related regulatory provisions.
[87] The City could have opposed Clublink’s proposed changes to the zoning by-law amendment relating to the golf course lands and argued maintaining the golf course in perpetuity was consistent with the Planning Act and in the public interest. Instead, the City appears simply not to have taken a position.[^1]
[88] As a result of the City’s delay in responding to its application, Clublink sought relief before the Ontario Land Tribunal (the “OLT”). In March of 2022, the OLT approved Clublink’s proposed zoning by-law amendment, subject to conditions: ClubLink Corporation ULC v. Ottawa (City), 2022 CanLII 23501 (Ont. Land Tribunal) (the “OLT decision”). The OLT decision makes clear that Clublink’s proposed redevelopment of the golf course lands is consistent both with the City’s Official Plan, and the public interest, and highlighted the increase in publicly accessible open spaces as part of the redevelopment proposal:
Is the proposed development compatible with the existing neighbourhood character, in the public interest and represents good land use planning?
[151] The Tribunal regards this as the core issue that is before it. This redevelopment represents good land use planning and is in the public interest. In evaluating this proposal, the Tribunal finds that the redevelopment is compatible with the existing character of the neighbourhood. The conclusions are based on the cogent and credible evidence presented by the Applicant’s expert witnesses.
[221] The Tribunal finds that it is in the public interest for the redevelopment to proceed as the planned development intends to dedicate 32.6% of the development lands to open spaces which include, parklands, woodlots, green areas, and parkettes. These open spaces are to be conveyed to the City, hence will become public open spaces, available for the community all year round.
[89] In my view, the OLT decision lends further support for the remedy in this case. As the parties to the 1981 Agreement made clear, the contract between the City and Campeau was intended to be consistent with and further the goals of the City’s Official Plan. Indeed, the 1988 Agreement’s preamble begins, “WHEREAS pursuant to Campeau's request for an amendment to the Official Plan of The Regional Municipality of Ottawa-Carleton, Campeau and the City entered into an agreement dated the 26th day of May, 1981, governing the designation of Certain lands within the ‘Marchwood Lakeside Community’ as recreation and open space…”.
[90] The OLT specifically found the redevelopment of the golf course lands to be consistent with the City’s current Official Plan and the other governing land use policies (see para. 226), and otherwise to be in the public interest.
[91] Arguably, the remedy sought by the City on this appeal would result in the frustration of these planning and regulatory goals by the continuing operation of the 1981 Agreement and related contracts requiring a golf course to be operated on the golf course lands. The delinking of the use of the golf course lands from such planning and regulatory goals also appears contrary to the premise of the original agreement.
DISPOSITION
[92] For these reasons, I would dismiss the appeal but issue a fresh declaration. The simplest and most accurate way to give effect to this Court’s earlier decision declaring ss. 5(4) and 9 of the 1981 Agreement to be void, is to grant a declaration that all provisions in the 1981 Agreement and related contracts relating to the golf course lands are to be considered void as a consequence. Where provisions relate to the property as a whole, they are to be interpreted as no longer applying to the golf course lands.[^2]
[93] In light of the mixed success on this appeal in terms of the arguments advanced by the parties, I would make no order as to costs.
Released: January 21, 2025 “J.M.F.”
“L. Sossin J.A.”
“I agree. Fairburn A.C.J.O.”
“I agree. Coroza J.A.”
[^1]: The City argued before the OLT that the 1981 Agreement requires adherence to the 40% open space principle, but the OLT held that it had no jurisdiction to interpret or apply that contract (see ClubLink Corporation ULC v. Ottawa (City), 2022 CanLII 23501 (Ont. Land Tribunal), at para. 64).
[^2]: As set out above, my understanding is that all of the other contractual obligations relating to the property, aside from the golf course lands, have either been discharged, assumed by others, and/or are no longer a practical consideration in the relationship between the City and Clublink.