Owners, Strata Plan LMS 3905 v. Crystal Square Parking Corp.

2020 SCC 29 | Supreme Court of Canada | October 23, 2020

Appeal Heard: June 9, 2020 | Judgment Rendered: October 23, 2020 | Docket: 38741

Coram: Wagner C.J. and Abella, Moldaver, Karakatsanis, Côté, Brown, Rowe, Martin and Kasirer JJ.

Reasons for Judgment (paras. 1 to 59): Côté J. (Wagner C.J. and Abella, Moldaver, Karakatsanis, Brown, Martin and Kasirer JJ. concurring)

Reasons Dissenting in Part (paras. 60 to 106): Rowe J.

Headnote

Contracts — Post‑incorporation contracts — Formation — Strata corporations — Air space parcel agreement providing for payment obligations in relation to parking rights entered into and registered on title by developer prior to incorporation of strata corporation — Dispute later arising between strata corporation and owner of parking facility — Whether strata corporation bound by air space parcel agreement — Strata Property Act, S.B.C. 1998, c. 43.

The Crystal development is a large multi‑use development with various air space parcels, including an office tower and parking facility. In 1999, the developer and the City of Burnaby entered into an agreement ("ASP Agreement"), which provided for mutual easements for support, service connections, vehicular access and other uses to and on the Crystal's various air space parcels. In particular, s. 7.5 of the ASP Agreement obliged the owner of the parking facility to provide the owners of the other air space parcels with parking and vehicular access rights in exchange for an annual fee, payable monthly. It also provided that, upon the subdivision of any of the air space parcels by a strata plan, the strata corporation so created would be entitled to give all permissions and consents permitted to be given by the owners of the subdivided parcel, and that the strata corporation would be responsible for payment of the fee as well as for administering the parking rights of the strata lot owners. In addition, it provided that once the owner of the parking facility had recouped the capital costs of construction of the facility, the annual fee would be significantly reduced. Further, s. 16.3 provided that, upon subdivision of a parcel by a strata plan, the strata corporation was to enter into an assumption agreement with the owners of the other air space parcels so as to assume obligations under the ASP Agreement. The ASP Agreement was registered as an easement in a land title office on March 17, 1999.

On May 26, 1999, Strata Plan LMS 3905, which comprises 68 strata lots in the office tower on the Crystal's second air space parcel, was deposited in a land title office, establishing Strata Co. Strata Co. never entered into the assumption agreement with the other air space parcel owners that was provided for in the ASP Agreement. On June 28, 2002, the developer sold the fifth air space parcel, upon which the parking facility is situated, to a parking corporation ("CSPC"). As part of the transaction, the developer assigned the ASP Agreement to CSPC.

Until 2012, Strata Co.'s members parked in the parking facility and paid the fees at the rate contemplated in the ASP Agreement. A dispute then arose between the parties and Strata Co. ceased paying the parking fees. CSPC responded by revoking the parking privileges of Strata Co.'s members. Litigation ensued. Strata Co. sought a declaration that s. 7.5 of the ASP agreement was null and void or an order that it was unenforceable, or, in the alternative, an order that s. 7.5 be rectified to state that the capital costs had been fully recovered, and also sought damages or disgorgement for breach of contract. CSPC filed a counterclaim, seeking judgment in the amount of unpaid fees it alleged were owed to it by Strata Co. pursuant to the ASP Agreement. The trial judge found Strata Co.'s conduct did not evince an intention to enter into a post‑incorporation agreement and therefore that it was not bound by the ASP Agreement. The Court of Appeal reversed the trial judge's decision and held that Strata Co. had entered into a post-incorporation contract on the same terms as those of the ASP Agreement.

Held (Rowe J. dissenting in part): The appeal should be dismissed.

Per Wagner C.J. and Abella, Moldaver, Karakatsanis, Côté, Brown, Martin and Kasirer JJ.: Although a corporation is not bound by a pre‑incorporation contract, it may, after coming into existence, enter into a new contract on the same terms as those of the pre‑incorporation contract. The applicable test for finding that a post-incorporation contract exists is the same as the one for finding that any other agreement exists at common law. The test is objective, and the offer, acceptance, consideration and terms may be inferred from the parties' conduct and from the surrounding circumstances. An outward manifestation of assent by each party such as to induce a reasonable expectation in the other is required, and an examination of how each party's conduct would appear to a reasonable person in the position of the other party is necessary.

The Strata Property Act ("SPA") does not oust the common law principles relating to contract formation. The common law forms part of the context in which a legislature enacts statutes, and the legislature is presumed not to have intended to alter or extinguish common law rules in doing so. These presumptions can be rebutted only by establishing a clear expression of legislative intent to the contrary. There is no indication in the SPA of a clear legislative intent to rebut the presumptions; on the contrary, there are signs in the SPA that the legislature in fact intended to allow strata corporations to enter into unwritten agreements by their conduct. Finding that a contract is binding on a strata corporation on the basis of its objective conduct is not inconsistent with the SPA's governance model for strata corporations. Furthermore, there are no compelling reasons to alter the common law of contracts as applied to strata corporations in order to protect strata lot purchasers from unscrupulous practices of or unfair surprises from developers, because British Columbia's legislative framework already includes several protections for strata lot purchasers. Abrogating the generally applicable principles of contract formation in the case of strata corporations would undermine commercial certainty and thwart the reasonable expectations of commercial parties by casting aside the wisdom and experience found in centuries of incrementally developed precedent and principle governing commercial relations. Rather than attempting to reinvent contract law to accommodate the novelty of strata property ownership, it is best to resort to the settled and generally applicable principles established in the jurisprudence. Thus, the need for certainty in commercial affairs and the importance of protecting the reasonable expectations of commercial parties compel the continued ordinary operation of the common law in this area. A strata corporation can therefore enter into a post‑incorporation contract by its conduct.

The enforcement of a post‑incorporation contract which affects interests in land does not amount to an exception to the general rule that positive covenants do not bind subsequent purchasers of land. Real covenants and contracts create juridically distinct forms of rights and obligations, which should not be confused with one another. Landowners may use restrictive real covenants to bind subsequent purchasers in equity, even in the absence of privity of contract. In contrast, the right to contractual performance is a legal interest that is personal to the contracting parties. Another distinction between real covenants and contractual rights lies in the timing of the creation of the right. When equity is used to enforce a restrictive real covenant against a subsequent purchaser who purchased the land with notice of the covenant, the right being enforced is a pre‑existing equitable right which persisted through the transfer from the predecessor in title. Contractual rights, on the other hand, are created at the time of contract formation. In the case of a post‑incorporation contract, they are created after the corporation comes into existence when the parties objectively manifest an intention to be bound by a new agreement on the same terms as those of the pre‑incorporation contract. The enforcement of a contractual right against a party to the contract is therefore not to be equated with the enforcement of a real covenant against a subsequent purchaser and an otherwise valid and effective post‑incorporation contract is not unenforceable simply because its terms affect interests in land.

In the present case, the Court of Appeal was correct to find that Strata Co. did in fact manifest an intention, by way of objective conduct, to be bound by a post‑incorporation contract with CSPC after CSPC purchased the parking facility from the developer. There is strong evidence of both offer and acceptance of a post‑incorporation contract between Strata Co. and CSPC. After purchasing the parking facility, CSPC objectively manifested an intention to offer Strata Co. a contract on the terms of the ASP Agreement by making valid parking passes available to Strata Co.'s members in a quantity which corresponded to their share of parking spaces under s. 7.5 of the ASP Agreement. As well, CSPC's maintenance and operation of the parking facility over the years would have required significant capital expenditures. The ASP Agreement in fact provided for such expenditures, which were factored into the parking fee paid by Strata Co. Strata Co.'s members ought to have known that valuable consideration was being rendered for their benefit with an expectation that they would pay for it on terms corresponding to those set out in s. 7.5 of the ASP Agreement. In turn, Strata Co. objectively manifested an intention to accept CSPC's offer by paying the fees contemplated in the ASP Agreement, and its members exercised the rights corresponding to those payments by parking in the facility after CSPC became the facility's owner. The members, having either assented to the consideration or acquiesced in its being rendered, taking the benefit of it when it was rendered, should be taken impliedly to have requested its being rendered. Thus, a reasonable person in CSPC's position would consider that Strata Co.'s course of conduct constituted assent by Strata Co. to the terms set out in s. 7.5 of the ASP Agreement. Strata Co.'s objective conduct evinces an intention to enter into a legally binding agreement on the terms set out in s. 7.5 of the ASP Agreement.

Per Rowe J. (dissenting in part): The majority's analysis of the law in this case should be adopted, but not the disposition of the appeal. It should not be decided whether Strata Co. had manifested an objective intent to be bound to the terms of the ASP Agreement. Rather, this question should be remitted for determination by the trial court as it is better placed to answer it. Applying the law here is a fact‑specific exercise and the Court does not have all the facts needed to do so. The majority's finding of fact differs from that made by the trial judge and the Court of Appeal. The Court of Appeal treated taking the benefit of the agreement as a per se manifestation of the intention of the party to be bound by the terms as expressed. The majority, however, appears to frame things slightly differently in favour of a more traditional assessment of offer and acceptance. By reframing the legal test, the application of the law to the facts necessarily gives rise to a different question of mixed fact and law than that decided by the Court of Appeal.

Appellate courts should make findings of fact not made by courts below only when doing so is in the interests of justice and is feasible on a practical level. This involves weighing two factors: first, the possible savings to the parties in cost and time arising from the appellate court deciding such factual issues; and, second, the possible harm from an appellate court making such findings in the absence of adequate evidence. In this case, both factors run counter to the Court making findings of fact; rather, they favour appellate restraint. It is questionable whether there is efficiency in the use of judicial or counsel resources to be gained by the Court making the factual determinations that the majority would make. The Court cannot finally dispose of the action, as even if it dismisses the appeal, the case must be remitted to the trial court for determination of mutual mistake of fact, rectification, unconscionability or frustration; and, if the claim is not made out, for determination of the counterclaim and assessment of damages. In addition, at that trial the judge may well need to consider the circumstances of contract formation in detail. Second, there is possible harm from this Court making the factual findings that are proposed. In this case, evidence to which the Court does not have access could plausibly lead the trial judge to a different conclusion on whether and, if so, when the Strata Co. objectively manifested an intention to be bound. Moreover, the trial judge enjoys numerous advantages over appellate judges which bear on all conclusions of fact and can assess the credibility of witnesses, is relatively expert with respect to the weighing and assessing of evidence, and has had greater exposure to the entire factual nexus of the case.

The existence of a pre‑incorporation contract is part of the circumstances in which the parties' conduct is objectively interpreted. Conduct consistent with the contract can be persuasive evidence that an offer has been accepted. Such conduct is not, however, dispositive evidence of the acceptance of the offer. In some circumstances, an alternate inference may provide an objectively better explanation for the conduct than acceptance of the offer. It is plausible that the trial court, with the benefit of a more complete record, would not see the conduct by the Strata Co. as objectively manifesting an intention to accept the contract. There are three competing inferences that the trial court might prefer: in paying the parking fees, Strata Co. was performing a pre‑existing obligation rather than assenting to a new obligation; Strata Co. was performing what it (mistakenly) thought to be a pre‑existing obligation and if the parking corporation, CSPC, had reason to know this, it could be unreasonable for it to take Strata Co.'s payment as an indication of acceptance of a new obligation; and the ASP Agreement formed a conditional easement, and Strata Co.'s payment was the exercise of an option under the conditional easement. Accordingly, these factual matters should be remitted to the trial court.

Cases Cited

By Côté J.

Applied: Saint John Tug Boat Co. v. Irving Refining Ltd., 1964 88 (SCC), [1964] S.C.R. 614; adopted: Touche v. Metropolitan Railway Warehousing Co. (1871), L.R. 6 Ch. App. 671; Howard v. Patent Ivory Manufacturing Co. (1888), 38 Ch. D. 156; Smith v. Hughes (1871), L.R. 6 Q.B. 597; considered: Heinhuis v. Blacksheep Charters Ltd. (1987), 1987 2491 (BC CA), 19 B.C.L.R. (2d) 239; disapproved: In re Northumberland Avenue Hotel Co. (1886), 33 Ch. D. 16; Bagot Pneumatic Tyre Co. v. Clipper Pneumatic Tyre Co., [1901] 1 Ch. D. 196; referred to: Rhone v. Stephens, [1994] 2 A.C. 310; Tulk v. Moxhay (1848), 2 Ph. 774, 41 E.R. 1143; Austerberry v. Corporation of Oldham (1885), 29 Ch. D. 750; Noble v. Alley, 1950 13 (SCC), [1951] S.C.R. 64; Heritage Capital Corp. v. Equitable Trust Co., 2016 SCC 19, [2016] 1 S.C.R. 306; Parkinson v. Reid, 1966 4 (SCC), [1966] S.C.R. 162; Design Services Ltd. v. Canada, 2008 SCC 22, [2008] 1 S.C.R. 737; Keppell v. Bailey (1834), 2 My. & K. 517, 39 E.R. 1042; Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4, [2010] 1 S.C.R. 69; Kelner v. Baxter (1866), L.R. 2 C.P. 174; In re Empress Engineering Co. (1880), 16 Ch. D. 125; Natal Land and Colonization Co. v. Pauline Colliery and Development Syndicate Ltd., [1904] A.C. 120; Scotsburn Co‑operative Services Ltd. v. W. T. Goodwin Ltd., 1985 57 (SCC), [1985] 1 S.C.R. 54; Chartbrook Ltd. v. Persimmon Homes Ltd., [2009] UKHL 38, [2009] 1 A.C. 1101; Grant v. Province of New Brunswick (1973), 1973 1765 (NB CA), 6 N.B.R. (2d) 95; Phelps Holdings Ltd. v. Strata Plan VIS 3430, 2010 BCCA 196, 71 B.L.R. 1; Gibson v. Manchester City Council, [1979] 1 W.L.R. 294; Jedfro Investments (U.S.A.) Ltd. v. Jacyk, 2007 SCC 55, [2007] 3 S.C.R. 679; Parry Sound (District) Social Services Administration Board v. O.P.S.E.U., Local 324, 2003 SCC 42, [2003] 2 S.C.R. 157; R. v. D.L.W., 2016 SCC 22, [2016] 1 S.C.R. 402; Vallejo v. Wheeler (1774), 1 Cowp. 143, 98 E.R. 1012; Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494; Davies v. Jones, [2009] EWCA Civ. 1164, [2010] 2 All E.R. 755; Wilkinson & Ors v. Kerdene Ltd., [2013] EWCA Civ. 44, [2013] 2 E.G.L.R. 163; Halsall v. Brizell, [1957] 1 Ch. 169; Tito v. Waddell (No. 2), [1977] 1 Ch. 106; The Owners, Strata Plan BCS 4006 v. Jameson House Ventures Ltd., 2019 BCCA 144, 22 B.C.L.R. (6th) 35; Amberwood Investments Ltd. v. Durham Condominium Corporation No. 123 (2002), 2002 44913 (ON CA), 58 O.R. (3d) 481; Black v. Owen, 2017 ONCA 397, 137 O.R. (3d) 334; Elwood v. Goodman, [2013] EWCA Civ. 1103, [2014] Ch. 442.

By Rowe J. (dissenting in part)

Watkins v. Olafson, 1989 36 (SCC), [1989] 2 S.C.R. 750; Heinhuis v. Blacksheep Charters Ltd. (1987), 1987 2491 (BC CA), 19 B.C.L.R. (2d) 239; Hollis v. Dow Corning Corp., 1995 55 (SCC), [1995] 4 S.C.R. 634; Madsen Estate v. Saylor, 2007 SCC 18, [2007] 1 S.C.R. 838; Matchim v. Bgi Atlantic Inc., 2010 NLCA 9, 294 Nfld. & P.E.I.R. 46; Masterpiece Inc. v. Alavida Lifestyles Inc., 2011 SCC 27, [2011] 2 S.C.R. 387; Sharbern Holding Inc. v. Vancouver Airport Centre Ltd., 2011 SCC 23, [2011] 2 S.C.R. 175; Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235; Uber Technologies Inc. v. Heller, 2020 SCC 16, [2020] 2 S.C.R. 118; Canada (Attorney General) v. Fairmont Hotels Inc., 2016 SCC 56, [2016] 2 S.C.R. 720; Amberwood Investments Limited v. Durham Condominium Corporation No. 123 (2002), 2002 44913 (ON CA), 58 O.R. (3d) 481; The Owners, Strata Plan BCS 4006 v. Jameson House Ventures Ltd., 2019 BCCA 144, 22 B.C.L.R. (6th) 35; Robb v. Walker, 2015 BCCA 117, 69 B.C.L.R. (5th) 249; Arbutus Bay Estates Ltd. v. Canada (Attorney General), 2017 BCCA 374, 3 B.C.L.R. (6th) 59; Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633.

Statutes and Regulations Cited

Business Corporations Act, R.S.A. 2000, c. B‑9, s. 15(3).

Business Corporations Act, R.S.O. 1990, c. B.16, s. 21(2).

Business Corporations Act, S.B.C. 2002, c. 57, s. 20.

Business Practices and Consumer Protection Act, S.B.C. 2004, c. 2.

Canada Business Corporations Act, R.S.C. 1985, c. C‑44, s. 14(2).

Land Title Act, R.S.B.C. 1996, c. 250, ss. 20, 23, 26, 27, 29, 282, 288.

Law and Equity Act, R.S.B.C. 1996, c. 253, s. 59.

Real Estate Development Marketing Act, S.B.C. 2004, c. 41, ss. 14, 15, 21, 23.

Real Estate Development Marketing Regulation, B.C. Reg. 230/2018, s. 3(2).

Strata Property Act, S.B.C. 1998, c. 43, ss. 2, 4, 5, 6(1), 7 to 11, 20(2)(a)(iii), 30, 32, 35(2)(g), 38(a), 291.

Authors Cited

Adamski, Jakub, and Angela Swan. Halsbury's Laws of Canada — Contracts. Toronto: LexisNexis, 2017 Reissue.

Beatson, Sir Jack, Andrew Burrows and John Cartwright. Anson's Law of Contract, 30th ed. New York: Oxford University Press, 2016.

Benson, Peter. Justice in Transactions: A Theory of Contract Law. Cambridge, Mass.: Harvard University Press, 2019.

Burke, Edmund. Reflections on the Revolution in France, and on the Proceedings of certain Societies in London relative to that event. London: Seeley, Jackson and Halliday, 1790 (1872 reprint).

Fridman, G. H. L. The Law of Contract in Canada, 6th ed. Toronto: Carswell, 2011.

McFarlane, Ben, Nicholas Hopkins and Sarah Nield. Land Law. New York: Oxford University Press, 2017.

McCamus, John D. The Law of Contracts, 2nd ed. Toronto: Irwin Law, 2012.

Perell, Paul M. "Covenants as Contracts and as Interests in Land" (2005), 29 Adv. Q. 476.

Rabin, Edward H. Fundamentals of Modern Real Property Law. Mineola, N.Y.: Foundation Press, 1974.

Waddams, S. M. The Law of Contracts, 7th ed. Toronto: Thomson Reuters, 2017.

Ziff, Bruce. Principles of Property Law, 7th ed. Toronto: Thomson Reuters, 2018.

APPEAL from a judgment of the British Columbia Court of Appeal (Garson, Willcock and Fisher JJ.A.), 2019 BCCA 145, 24 B.C.L.R. (6th) 24, 2 R.P.R. (6th) 1, [2019] 12 W.W.R. 263, [2019] B.C.J. No. 790 (QL), 2019 CarswellBC 1227 (WL Can.), setting aside a decision of Young J., 2017 BCSC 71, 73 R.P.R. (5th) 244, [2017] B.C.J. No. 68 (QL), 2017 CarswellBC 93 (WL Can.). Appeal dismissed, Rowe J. dissenting in part.

Stephen Hamilton, for the appellant.

Ken McEwan, Q.C., and Emily Kirkpatrick, for the respondent.

Wes McMillan, for the intervener C.H.O.A. Condominium Home Owners' Association of B.C.

Andrew Morrison and Mark V. Lewis, for the intervener Urban Development Institute – Pacific Region.

Reasons for Judgment

The judgment of Wagner C.J. and Abella, Moldaver, Karakatsanis, Côté, Brown, Martin and Kasirer JJ. was delivered by

Côté J. —

I. Introduction

[ 1 ] The narrow question raised by this appeal concerns the enforceability of a payment obligation in relation to parking rights provided for in an instrument that is registered on title. In answering this narrow question, however, the Court must consider more fundamental legal questions related to the distinction between property rights and contractual rights, general common law principles with respect to contract formation, the common law's interaction with the relevant statutory framework and a proposed means of circumventing the long-standing rule that positive covenants do not bind subsequent purchasers of land.

[ 2 ] The facts of this appeal involve a number of players. The appellant is a strata corporation for the owners of Strata Plan LMS 3905 ("Strata Co.") established pursuant to the Strata Property Act, S.B.C. 1998, c. 43 ("SPA"). The strata property is situated on an air space parcel within the "Crystal" development, a large multi-use development in Burnaby, B.C. Tyba Crystal Investments Corp. and Dong Ah Canada Development Corp. developed the Crystal in the 1990s as a joint venture through the Crystal Square Development Corporation ("Developer"). The respondent, the Crystal Square Parking Corporation ("CSPC"), owns and operates a parking facility situated on another air space parcel in the Crystal.

[ 3 ] The dispute between Strata Co. and CSPC is centred on whether the former is bound by payment obligations in relation to parking rights provided for in an air space parcel agreement that is registered on title ("ASP Agreement"). The primary difficulty arises from the fact that the ASP Agreement was entered into and registered on title by the Developer before Strata Co. was incorporated. Strata Co. cannot therefore be bound by it as a matter of contract, because the agreement predates Strata Co.'s existence. However, CSPC takes the position that Strata Co.'s post-incorporation conduct manifested its assent to a new agreement on the same terms as those of the ASP Agreement and that the result was a contract that was binding on Strata Co. CSPC also argues that the payment obligations should be held to be binding on subsequent owners on the basis of the narrow English law principle of benefit and burden, such that Strata Co., having accepted the benefits arising under the ASP Agreement, is bound by the burden of that agreement. Strata Co. denies liability under either of these approaches.

[ 4 ] For the reasons that follow, I conclude that Strata Co. entered into a post-incorporation contract with CSPC on the terms set out in s. 7.5 of the ASP Agreement. As a result, I find it unnecessary to consider whether Strata Co. is bound on the basis of the narrow principle of benefit and burden. The appeal is therefore dismissed.

II. Facts

[ 5 ] The Crystal is comprised of seven air space parcels upon which are built, respectively, (1) a retail complex, (2) an office tower, (3) a residential tower, (4) a hotel, (5) a parking facility, (6) a police office and (7) a cultural centre.

[ 6 ] In March 1999, the Developer and the City of Burnaby entered into the ASP Agreement, which provided for mutual easements for support, service connections, vehicular access and other uses to and on the Crystal's various air space parcels. The ASP Agreement was registered as an easement in a land title office on March 17, 1999.

[ 7 ] Section 7.5 of the ASP Agreement obliged the owner of the parking facility to provide the owners of the other air space parcels with parking and vehicular access rights in exchange for an annual fee, payable monthly. In particular, it allocated 76 parking spaces to the owners of the second air space parcel, where the office tower was located. It also provided that, upon the subdivision of any of the air space parcels by a strata plan, the strata corporation so created would be entitled to give all permissions and consents permitted to be given by the owner(s) of the subdivided parcel, and that the strata corporation would be responsible for payment of the fee as well as for administering the parking rights of the strata lot owners. Section 7.5(g) provided that, once the owner of the parking facility had recouped the capital costs, that is, the costs of construction of that facility, the annual fee would be significantly reduced, as 90 percent of the revenues from charging the public for parking would be applied to cover operating costs and taxes so as to reduce the amount of the fee charged to the other air space parcel owners. In addition, s. 16.3 provided that, upon subdivision of a parcel by a strata plan, the strata corporation was to enter into an assumption agreement with the owners of the other air space parcels so as to assume obligations under the ASP Agreement.

[ 8 ] On May 26, 1999, Strata Plan LMS 3905 was deposited in a land title office, thereby establishing Strata Co. This plan comprises 68 strata lots in the office tower on the Crystal's second air space parcel. Strata Co. never entered into the assumption agreement with the other air space parcel owners that was provided for in the ASP Agreement.

[ 9 ] On June 28, 2002, the Developer sold CSPC the fifth air space parcel, upon which the parking facility is situated. As part of the transaction, the Developer assigned the ASP Agreement to CSPC together with "all other existing agreements . . . relating to the [air space parcel] approved by [CSPC]": A.R., vol. II, at p. 106. The record contains no indication of what "existing agreements", if any, were approved by CSPC.

[ 10 ] Until 2012, Strata Co.'s members parked in the parking facility and paid the fees at the rate contemplated in the ASP Agreement.

[ 11 ] In that year, a dispute arose between the parties. Strata Co. ceased paying the parking fees and CSPC responded by revoking the parking privileges of Strata Co.'s members. Litigation ensued. Strata Co. sought a declaration that s. 7.5 of the ASP agreement was null and void or an order that it was unenforceable, or, in the alternative, an order that s. 7.5 be rectified to state that the capital costs had been fully recovered, and also sought damages or disgorgement for breach of contract. CSPC filed a counterclaim, seeking judgment in the amount of unpaid fees it alleged were owed to it by Strata Co. pursuant to the ASP Agreement.

III. Procedural History

A. Supreme Court of British Columbia, 2017 BCSC 71, 73 R.P.R. (5th) 244

[ 12 ] Justice Young held that Strata Co. was not bound by the ASP Agreement. In her view, Strata Co.'s conduct did not evince an intention to enter into a post-incorporation agreement on the same terms as those of the ASP Agreement: para. 64. She observed that Strata Co.'s members had parked in the parking facility and made corresponding payments as contemplated by the ASP Agreement, but that this conduct was animated by their mistaken belief that they were already bound by that agreement: paras. 76-77. She held that conduct flowing from a mistaken belief that a pre-incorporation contract is binding is not sufficient to find that the newly incorporated entity has entered into a post-incorporation contract: para. 77. Given her conclusion that a post-incorporation contract did not exist, she did not address Strata Co.'s further arguments with respect to mistake, frustration and unconscionability, and she dismissed CSPC's counterclaim.

B. Court of Appeal for British Columbia, 2019 BCCA 145, 24 B.C.L.R. (6th) 24

[ 13 ] The Court of Appeal reversed the trial judge's decision. Willcock J.A. held that Strata Co. had entered into a post-incorporation contract on the same terms as those of the ASP Agreement. He concluded that the trial judge had erred in principle by relying on the facts that Strata Co. did not have privity of contract in respect of the pre-incorporation contract and that it had not adopted or ratified that contract, because such circumstances were irrelevant to the determination of whether Strata Co. had entered into a post-incorporation contract by its conduct. Willcock J.A. also held that Strata Co.'s subjective misunderstanding that it was bound by the pre-incorporation contract was irrelevant to the determination of whether the parties had objectively manifested an intention to be bound by a post-incorporation contract. The court ordered that Strata Co.'s claim and CSPC's counterclaim be remitted to the trial court for determination of the contractual issues not addressed: mutual mistake of fact, rectification, unconscionability, or frustration and, if the claim is not made out, consideration of the counterclaim and assessment of amount owing, if any.

IV. Issues

[ 14 ] In this Court, Strata Co. maintains that it is not bound to pay the parking fees provided for in the ASP Agreement. Its arguments raise the following issues:

[ 15 ] (1) Can a pre-incorporation contract relating to land bind a landowner post-incorporation, as a matter of land law, notwithstanding the general rule that positive covenants do not run with the land?

[ 16 ] (2) What is the applicable analytical approach to determining whether the parties agreed to a post-incorporation contract?

[ 17 ] (3) Can strata corporations enter into post-incorporation contracts through their conduct?

[ 18 ] (4) Did Strata Co. manifest an intention to be bound by the terms of the ASP Agreement?

[ 19 ] CSPC raises the further issue of whether there is an exception to the general rule that positive covenants do not run with the land, and, if so, whether that exception applies here.

V. Analysis

A. Real Covenants and Post‑Incorporation Contracts: Key Distinctions

[ 20 ] I will begin my analysis by examining the distinctions between real covenants and contractual obligations. These distinctions are fundamental to a proper understanding of the present dispute.

[ 21 ] The doctrine of real covenants concerns the extent to which obligations incurred by an owner of land can persist upon a transfer of the land to a successor in title, in the absence of privity of contract between the persons seeking to enforce the obligation and those alleged to be bound by it. It is perhaps the most interesting and contested area of property law. Since Tulk v. Moxhay (1848), 2 Ph. 774, 41 E.R. 1143, courts sitting in equity have been willing to enforce restrictive covenants (that is, covenants requiring the covenantor to refrain from using its land in certain ways) against subsequent purchasers of the burdened land who purchased the land with notice of the covenant. In contrast, both courts of law and courts of equity have generally refused to enforce positive covenants (that is, covenants requiring the covenantor to take positive action) against subsequent purchasers of the burdened land: Austerberry v. Corporation of Oldham (1885), 29 Ch. D. 750 (C.A.); Rhone v. Stephens, [1994] 2 A.C. 310 (H.L.). This general rule that positive covenants do not bind subsequent purchasers of land has been affirmed by this Court: see Noble v. Alley, 1950 13 (SCC), [1951] S.C.R. 64, at p. 75.

[ 22 ] The enforcement of a real covenant, whether restrictive or positive, against a subsequent purchaser is therefore premised on the absence of privity of contract between the party seeking to enforce the covenant and the party alleged to be bound by it. This makes the doctrine of real covenants fundamentally different from the law of contracts. The right to contractual performance is a legal interest that is personal to the contracting parties, arising at the time of contract formation and from the consent of those very parties. Another distinguishing feature is that the rights and obligations created by the law of contracts flow from the formation of a new contract, not from the transfer of an existing one. Once a contract is formed, it is enforceable by and against the parties to it, and it is only the rights and obligations that may be transferred to a third party: Rhone, at pp. 316-18.

[ 23 ] Strata Co. argues that the enforcement of a post-incorporation contract which affects interests in land amounts to an exception to the rule that positive covenants do not run with the land. This argument conflates real covenants and contracts. It overlooks the fact that real covenants and contracts create juridically distinct forms of rights and obligations, and that the enforcement of a contractual right against a party to the contract is not to be equated with the enforcement of a real covenant against a subsequent purchaser. The enforcement of a contractual right against a contracting party is entirely separate from the question of whether a covenant runs with the land. The latter question only arises when no privity of contract exists between the party seeking to enforce an obligation and the party alleged to be bound by it. In the case of a post-incorporation contract, contractual rights are created at the time of contract formation, i.e., after the corporation comes into existence, and they bind only those who have objectively manifested an intention to be bound by a new agreement.

[ 24 ] Therefore, the enforcement of a contractual right against a party to the contract does not amount to an exception to the rule that positive covenants do not bind subsequent purchasers. A post-incorporation contract is not unenforceable simply because its terms affect interests in land.

B. Applicable Law for Determining Whether a Post‑Incorporation Contract Exists

[ 25 ] Strata Co. and CSPC both agree that the general common law test for contract formation applies to post-incorporation contracts. Both parties also agree that this Court's decision in Saint John Tug Boat Co. v. Irving Refining Ltd., 1964 88 (SCC), [1964] S.C.R. 614, is applicable in the present context. The parties disagree, however, with respect to the content of the applicable test.

[ 26 ] In Saint John Tug Boat, this Court held that a corporation is not bound by a contract entered into before its incorporation: p. 622. However, after a corporation comes into existence, it may enter into a new contract on the same terms as those of the pre-incorporation contract. This Court found that the party to the pre-incorporation contract can make an offer to the newly incorporated corporation, whether expressly or implicitly, and the corporation may accept that offer, whether expressly or implicitly: pp. 622-23. This Court held that the parties must, in some manner, manifest their intention to enter into a contract: p. 622. However, this Court found that such manifestation does not need to take the form of an express statement; conduct is sufficient: p. 622.

[ 27 ] In applying the principles discussed in Saint John Tug Boat, courts have framed the applicable test in different ways. Some have adopted a "benefit and burden" analysis: see Heinhuis v. Blacksheep Charters Ltd. (1987), 1987 2491 (BC CA), 19 B.C.L.R. (2d) 239. Others have relied on the traditional requirements of offer and acceptance: see In re Northumberland Avenue Hotel Co. (1886), 33 Ch. D. 16 (C.A.); Bagot Pneumatic Tyre Co. v. Clipper Pneumatic Tyre Co., [1901] 1 Ch. D. 196 (C.A.).

[ 28 ] In Heinhuis, the British Columbia Court of Appeal held that a company is "bound by a pre-incorporation contract when it comes into existence and takes the benefit of the contract": p. 241. It derived this rule from the following English cases: Touche v. Metropolitan Railway Warehousing Co. (1871), L.R. 6 Ch. App. 671; Howard v. Patent Ivory Manufacturing Co. (1888), 38 Ch. D. 156; and In re Empress Engineering Co. (1880), 16 Ch. D. 125. However, Touche, Howard and In re Empress Engineering are distinguishable from the present circumstances in an important way: they all involved contracts entered into by the promoters of a corporation for its benefit before it was incorporated. In contrast, the present case involves an air space parcel agreement entered into by a developer and a city before a strata corporation was incorporated.

[ 29 ] The rule in Heinhuis as derived from these English cases is not supported by the prevailing understanding of the law with respect to post-incorporation contracts. The relevant question when determining whether a post-incorporation contract has been formed is not simply whether the newly incorporated entity has taken the benefit of the pre-incorporation contract. Rather, it is whether the parties have manifested an intention to enter into a new contract. The taking of a benefit may be relevant evidence from which such an intention may be inferred, but it is not the end of the analysis.

[ 30 ] The older English cases of In re Northumberland Avenue Hotel and Bagot Pneumatic Tyre lend no more support to the proposition that the taking of a benefit by a corporation is automatically sufficient to bind that corporation. These cases suggest that if a corporation performs a pre-incorporation contract it may well be bound by it, but equally that performance of some obligations may not bind a corporation to the entire contract.

[ 31 ] In any event, the applicable test for finding that a post-incorporation contract exists is the same as the one for finding that any other agreement exists at common law. Regardless of how it has been expressed in the past, the test is objective.

[ 32 ] There is no principled reason to exempt post-incorporation contracts from generally applicable contract law principles. As this Court affirmed in Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494, at para. 33, "[c]ommon law courts have, over centuries, developed general organizing principles of contract law that apply to all contracts." There is no valid reason to treat post-incorporation contracts differently.

[ 33 ] The applicable test requires an "outward manifestation of assent by each party such as to induce a reasonable expectation in the other": Smith v. Hughes (1871), L.R. 6 Q.B. 597, at p. 607. Framed in terms of offer and acceptance, the question is whether a reasonable person in the position of the offeree would interpret the other's conduct as an offer, and whether a reasonable person in the position of the offeror would interpret the other's conduct as acceptance. The existence of a pre-incorporation contract is part of the circumstances in which the parties' conduct is objectively interpreted.

[ 34 ] The fact that this is the applicable test does not mean that a corporation can never be bound by its conduct in relation to a pre-incorporation contract. On the contrary, in certain circumstances, a corporation's conduct in relation to a pre-incorporation contract will be sufficient to find a post-incorporation contract, as Saint John Tug Boat illustrates. But this determination must be made on the basis of an objective assessment of the parties' conduct, not merely by asking whether the corporation has taken the benefit of the pre-incorporation contract.

[ 35 ] As Saint John Tug Boat demonstrates, the offer, acceptance, consideration and terms of the post-incorporation contract may all be inferred from the parties' conduct and from the surrounding circumstances. The traditional requirements of offer and acceptance remain in place, but they can be met without an explicit verbal or written exchange.

C. Can Strata Corporations Enter into Post-Incorporation Contracts Through their Conduct?

[ 36 ] Strata Co. argues that strata corporations cannot enter into contracts through their conduct alone and that express, formal approval pursuant to the SPA is required. I respectfully disagree.

[ 37 ] Strata Co.'s argument is primarily based on the proposition that, given the unique governance structure of strata corporations (including the special resolutions and bylaws required to take certain actions under the SPA), the common law principles relating to contract formation should be modified for strata corporations so that informal contract formation based on conduct is not possible. This argument would have me conclude that there is a clear legislative intent in the SPA to preclude strata corporations from entering into contracts through their conduct.

[ 38 ] I am unwilling to draw this conclusion. The common law forms part of the context in which a legislature enacts statutes, and the legislature is presumed not to have intended to alter or extinguish common law rules in doing so: Heritage Capital Corp. v. Equitable Trust Co., 2016 SCC 19, [2016] 1 S.C.R. 306, at para. 32. These presumptions can be rebutted only by a clear expression of legislative intent to the contrary: Parry Sound (District) Social Services Administration Board v. O.P.S.E.U., Local 324, 2003 SCC 42, [2003] 2 S.C.R. 157, at para. 39; R. v. D.L.W., 2016 SCC 22, [2016] 1 S.C.R. 402, at para. 21.

[ 39 ] I find no indication in the SPA of a clear legislative intent to preclude strata corporations from entering into contracts through their conduct. On the contrary, there are signs in the SPA that the legislature in fact intended to allow strata corporations to enter into unwritten agreements by their conduct. Section 291 of the SPA allows strata corporations to acquire and dispose of personal property "in the same manner as an individual", and s. 20(2)(a)(iii) contemplates that a strata corporation may enter into a "lease or licence" with respect to common property. There is nothing in these or any other provisions of the SPA that would rebut the presumption that the common law continues to operate. There is no requirement of formality comparable to that imposed on certain transactions involving land, such as s. 59 of the Law and Equity Act, R.S.B.C. 1996, c. 253, for contracts relating to interests in land.

[ 40 ] I also disagree with Strata Co.'s suggestion that strata lot owners need the protection of a rule that strata corporations cannot enter into contracts through their conduct. I accept that strata lot owners may, in some circumstances, be unaware of the obligations incurred on their behalf by the strata corporation or its predecessors. But the solution to this concern is not to override the generally applicable principles of contract formation.

[ 41 ] There are compelling reasons for resisting this solution. First, as a matter of principle, abrogating the generally applicable principles of contract formation in the case of strata corporations would undermine commercial certainty and thwart the reasonable expectations of commercial parties by casting aside the wisdom and experience found in centuries of incrementally developed precedent and principle governing commercial relations: see Bhasin, at para. 33. Rather than attempting to reinvent contract law to accommodate the novelty of strata property ownership, it is best to resort to the settled and generally applicable principles established in the jurisprudence. Thus, the need for certainty in commercial affairs and the importance of protecting the reasonable expectations of commercial parties compel the continued ordinary operation of the common law in this area.

[ 42 ] Second, as a matter of policy, there are no compelling reasons to alter the common law of contracts as applied to strata corporations in order to protect strata lot purchasers from unscrupulous practices of or unfair surprises from developers, because British Columbia's legislative framework already includes several protections for strata lot purchasers. For instance, the Real Estate Development Marketing Act, S.B.C. 2004, c. 41, requires developers to disclose relevant information about a strata lot to prospective purchasers: ss. 14, 15, 21, 23. Developers who fail to do so may be exposed to penalties and purchasers may be able to rescind their purchase agreements: ss. 21, 23. The Real Estate Development Marketing Regulation, B.C. Reg. 230/2018, specifies the information that must be disclosed: s. 3(2). This information includes registered charges on title to the strata lot and to common property: s. 3(2)(a), (c), (d). Purchasers who buy a strata lot knowing of a registered charge that purports to require them to pay parking fees cannot then turn around and claim that they were surprised by the payment obligation: see Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4, [2010] 1 S.C.R. 69, at para. 117.

[ 43 ] Third, as a matter of policy, an exception for strata corporations is not warranted in this particular case. The issue here is not between an unscrupulous developer and an unsuspecting strata lot purchaser. This is not a case in which a developer made up new payment obligations and then sought to impose them on the strata corporation or its members. The dispute concerns an obligation to pay for a service — parking — that Strata Co.'s members had been receiving since the establishment of the strata corporation. The contractual rights to parking and the corresponding obligation to pay for parking are commercial in nature and arose in the context of a commercial transaction.

[ 44 ] Accordingly, I conclude that strata corporations can enter into contracts through their conduct and that generally applicable contract law principles govern the formation of such contracts.

[ 45 ] I would add that it is not open to Strata Co. to argue that the governing board of a strata corporation (the "strata council") must make an explicit decision to enter into a contract in order for the strata corporation to enter into a contract. As this Court explained in Jedfro Investments (U.S.A.) Ltd. v. Jacyk, 2007 SCC 55, [2007] 3 S.C.R. 679, at para. 23, agency law allows an agent to act without authority, and the principal is nonetheless bound if it ratifies the agent's actions, either expressly or by conduct. Here, even if the strata council never made a formal decision to enter into a post-incorporation contract on the terms of the ASP Agreement, Strata Co. may nonetheless be bound by such a contract if its members' conduct objectively manifested an intention to be bound by such terms.

D. Did Strata Co. Manifest an Intention to be Bound by the Terms of the ASP Agreement?

[ 46 ] I now turn to the question of whether Strata Co. manifested an intention, by way of objective conduct, to be bound by a post-incorporation contract with CSPC. This is the central question of this appeal. As the trial judge and the Court of Appeal came to different conclusions on this question, I must determine whether the Court of Appeal was right to reverse the trial judge's conclusion.

[ 47 ] The Court of Appeal held that the trial judge had erred in relying on Strata Co.'s subjective intention not to enter into a new post-incorporation contract. It held that Strata Co. had objectively manifested an intention to be bound by the ASP Agreement and it concluded that the strata corporation was bound. I agree with the Court of Appeal that the trial judge erred in this regard.

[ 48 ] The parties disagree with respect to several relevant aspects of the evidence. In particular, they disagree with respect to whether Strata Co. paid the parking fees directly to CSPC or to the Developer and whether there was a contractual relationship between Strata Co. and the Developer. The record before this Court does not resolve these factual questions. Nevertheless, I find that the record is sufficient to determine the issue of whether Strata Co. manifested an intention to be bound by the ASP Agreement through its conduct.

[ 49 ] I am persuaded that Strata Co. did in fact manifest an intention, by way of objective conduct, to be bound by a post-incorporation contract with CSPC after CSPC purchased the parking facility from the Developer. My reasons are as follows.

[ 50 ] CSPC objectively manifested an intention to offer Strata Co. a contract on the terms of the ASP Agreement. After purchasing the parking facility, CSPC made valid parking passes available to Strata Co.'s members in a quantity which corresponded to their share of parking spaces under s. 7.5 of the ASP Agreement. As well, CSPC's maintenance and operation of the parking facility over the years would have required significant capital expenditures. The ASP Agreement in fact provided for such expenditures, which were factored into the parking fee paid by Strata Co.

[ 51 ] In turn, Strata Co. objectively manifested an intention to accept CSPC's offer. Strata Co.'s members parked in the facility and paid the fees at the rate set out in the ASP Agreement, with the knowledge that they had access to 76 parking spaces in accordance with s. 7.5, and after CSPC had already incurred capital expenditures for the maintenance of the facility. Strata Co.'s members ought to have known that valuable consideration was being rendered for their benefit with an expectation that they would pay for it on terms corresponding to those set out in s. 7.5. The members, having either assented to the consideration or acquiesced in its being rendered, taking the benefit of it when it was rendered, should be taken impliedly to have requested its being rendered: Touche, at p. 676; Howard, at p. 164; Saint John Tug Boat, at p. 623.

[ 52 ] The evidence of both offer and acceptance is strong. There is no evidence suggesting a better explanation for CSPC's conduct than an intention to offer Strata Co. a contract on the terms of the ASP Agreement. And there is no evidence suggesting a better explanation for Strata Co.'s course of conduct than an acceptance of the corresponding offer.

[ 53 ] Thus, a reasonable person in CSPC's position would consider that Strata Co.'s course of conduct constituted assent by Strata Co. to the terms set out in s. 7.5 of the ASP Agreement. Strata Co.'s objective conduct evinces an intention to enter into a legally binding agreement on the terms set out in s. 7.5 of the ASP Agreement.

[ 54 ] My colleague disagrees with this finding and argues that I should not be determining whether the parties objectively manifested an intention to be bound by a post-incorporation contract. He says that in doing so, I am reassessing the evidence and making new findings of fact: Rowe J.'s reasons, at paras. 75-76. With great respect, this is not the case, however. The trial judge explicitly found that there was significant objective conduct indicating that Strata Co. had entered into a post-incorporation contract with CSPC: trial decision, at para. 67. But in her opinion this objective conduct was overridden by the subjective intentions and later conduct of Strata Co.'s principals: trial decision, at para. 77. As the Court of Appeal found, it was an error of law for the trial judge to rely on these intentions and later conduct: para. 53. If the evidence the trial judge relied on improperly is disregarded, all that remains are the findings of fact that support the existence of a post-incorporation contract. Therefore, this Court will not be making any new findings of fact if it concludes that Strata Co. and CSPC entered into a legally binding agreement on the terms set out in s. 7.5 of the ASP Agreement.

[ 55 ] I am thus in agreement with the Court of Appeal that — subject to Strata Co.'s further arguments that have not been addressed, which will have to be remitted for determination — the payment obligations stipulated in the ASP Agreement are enforceable against Strata Co. in contract. Whether they are also enforceable on the basis of a benefit and burden exception is a different question, to which I will now turn.

E. Is There a Narrow Principle of Benefit and Burden That Can Be Applied to Circumvent the General Rule That Positive Covenants Do Not Bind Subsequent Purchasers of Land?

[ 56 ] CSPC asks this Court to adopt the narrow principle of benefit and burden from English law. It argues that this principle applies where the benefit and burden are conferred in or by the same transaction, the benefit and burden are related to each other in a material way, and a subsequent owner is permitted to accept or reject the benefit: Davies v. Jones, [2009] EWCA Civ. 1164, [2010] 2 All E.R. 755; Wilkinson & Ors v. Kerdene Ltd., [2013] EWCA Civ. 44, [2013] 2 E.G.L.R. 163; see also Ziff, at p. 474. This narrow principle of benefit and burden was enunciated in Halsall v. Brizell, [1957] 1 Ch. 169, and subsequently endorsed by the House of Lords in Rhone, at p. 322. It is not to be confused with the wider and more general principle of benefit and burden enunciated in Tito v. Waddell (No. 2), [1977] 1 Ch. 106, at p. 301, which the House of Lords rejected: Rhone, at p. 322. It is also not to be confused with a conditional grant of an easement, for which the failure to fulfill a condition triggers the termination of the easement: Ziff, at p. 476; The Owners, Strata Plan BCS 4006 v. Jameson House Ventures Ltd., 2019 BCCA 144, 22 B.C.L.R. (6th) 35, at para. 6; Amberwood Investments Ltd. v. Durham Condominium Corporation No. 123 (2002), 2002 44913 (ON CA), 58 O.R. (3d) 481 (C.A.), at paras. 85-86.

[ 57 ] The ultimate question, whether this Court should recognize the existence of a narrow principle of benefit and burden, must be left for another day. The conclusion that Strata Co. is bound by a post-incorporation contract with CSPC on the terms set out in s. 7.5 of the ASP Agreement is sufficient to dismiss the appeal. It is therefore unnecessary to consider the merits of this alternative means of binding a subsequent owner. Nonetheless, I offer the following brief remarks, which should be taken as no more than observations.

[ 58 ] The appellate courts in Canada that have considered this issue have declined to adopt the narrow principle of benefit and burden: Black v. Owen, 2017 ONCA 397, 137 O.R. (3d) 334, at para. 50; Jameson House, at para. 80; Amberwood Investments Ltd., at para. 84. They appear to conceive of the principle as creating an interest which runs with the land. There is, however, some authority for the proposition that the English law principle does not create an interest in the land: Elwood v. Goodman, [2013] EWCA Civ. 1103, [2014] Ch. 442, at paras. 35-36. Rather, the English doctrine of benefit and burden may be contractually based, such that it imposes a personal obligation particular to a subsequent purchaser who has decided to accept the burden in order to enjoy the benefit: B. McFarlane, N. Hopkins and S. Nield, Land Law (2017), at p. 351.

VI. Conclusion

[ 59 ] For the foregoing reasons, the appeal is dismissed with costs throughout. Therefore, the Court of Appeal's order remitting Strata Co.'s claim and CSPC's counterclaim to the trial court for determination of the unaddressed issues is upheld.

Reasons Dissenting in Part

The following are the reasons delivered by

Rowe J. (dissenting in part) —

I. Introduction

[ 60 ] I would adopt my colleague's analysis of the law in this case, but I would respectfully differ from her as to the disposition of the appeal. I would not decide whether Strata Co. had manifested an objective intent to be bound to the terms of the ASP Agreement. Rather, I would remit this question for determination by the trial court as the trial court is better placed to answer that question. Simply put, applying the law here is a fact-specific exercise and this Court does not have all the facts needed to do so.

II. Facts

[ 61 ] As my colleague explained, Tyba Crystal Investments Corp. and Dong Ah Canada Development Corp. started a joint venture through Crystal Square Development Corporation ("Developer") to create a mixed-use development known as the "Crystal".

[ 62 ] In March 1999, the Developer entered an agreement with the City of Burnaby ("ASP Agreement"). The agreement purports to assign rights and liabilities among the owners of the seven "Air Space Parcels" ("ASPs") that constitute the Crystal. At the time of the ASP Agreement, the Developer owned all seven ASPs. This agreement was registered as an easement at the Land Title Office on March 17, 1999.

[ 63 ] On May 26, 1999, the Developer deposited Strata Plan LMS 3905 at the Land Title Office, thereby creating the appellant ("Strata Co."), a strata corporation for members residing in the second ASP ("ASP 2"). It consists of 68 strata lots in the office tower.

[ 64 ] On June 28, 2002, the Developer sold Crystal Square Parking Corp. ("CSPC") the fifth ASP ("ASP 5"). ASP 5 consists of a parking facility. In the same transaction, the Developer made a general assignment to CSPC that transferred to CSPC "all other existing agreements . . . relating to the Property approved by [CSPC]" ("Assignment Agreement") (A.R., vol. II, at p. 106). It also purported to transfer to CSPC "the benefit of all covenants, representations and warranties in respect of [ASP 5]", and to give CSPC full power to demand and enforce payment for those covenants (ibid.). The Developer warranted that "to the best of its knowledge and belief" and "subject to obtaining any necessary third party consents", it had the power to make this assignment (p. 107).

[ 65 ] Among other terms, the ASP Agreement purported to set out rights and obligations between the ASP 2 Owner and the ASP 5 Owner. The ASP 5 Owner is to provide an easement to access and use 76 spots to the ASP 2 Owner, and "in consideration" for this access and use, the ASP 2 Owner is to pay the ASP 5 Owner an annual parking fee (ASP Agreement, s. 7.5(a), (b) and (d)). Although, at the time the ASP Agreement was entered on title, the Developer was the owner of both of those parcels and Strata Co. did not exist, the ASP Agreement purported to bind the successors in title of the Developer — that is to say, "run with the land" (ASP Agreement, ss. 1.1(h) to (n), 16.3, 17.3 and 18.8). Of course, the general rule is that positive covenants do not run with the land, even if by their terms they purport to do so (see Côté J.'s reasons, at para. 17).

[ 66 ] Regardless, Strata Co. paid fees and received parking for "many years" (2017 BCSC 71, 73 R.P.R. (5th) 244, at para. 93 ("trial judgment")), at least some of which fees were paid to CSPC. Between 2010 and 2012, Strata Co. disputed some of the fees charged, and on 4 July 2012, CSPC revoked Strata Co.'s parking privileges.

[ 67 ] Eventually, this dispute led to the present proceeding wherein Strata Co. sought a declaration that it was not bound by the terms of the ASP Agreement. CSPC counterclaimed, seeking damages equal to the amount of unpaid fees.

[ 68 ] Strata Co. succeeded at trial in the British Columbia Supreme Court. The trial judge, Justice Young, considered two theories of how the ASP Agreement might bind Strata Co. — as a positive covenant that ran with the land, and as a post-incorporation contract that Strata Co. had adopted. Justice Young rejected both theories, holding that the obligations do not run with the land (para. 60), and that Strata Co. had not adopted the post-incorporation contract (paras. 77-79). She thus ordered that "[t]he payment provisions of the [ASP] Agreement . . . are not binding on [Strata Co.]", that "Clauses 7.5(d), (e), (f), (g), (h) and (i) of the ASP Agreement are unenforceable against [Strata Co.]" and dismissed the counterclaim by CSPC and the claim against the Developer (A.R., vol. I, at p. 31). Having found that there was no obligation on this basis, she did not consider other arguments that Strata Co. had advanced.

[ 69 ] CSPC appealed to the Court of Appeal for British Columbia (2019 BCCA 145, 24 B.C.L.R. (6th) 24). It advanced two grounds: first, that the trial judge had erred by holding that a positive covenant could never run with the land, and, second, that the trial judge had erred in her application of the test for adoption of a pre-incorporation contract.

[ 70 ] The Court of Appeal allowed the appeal on the second ground, but not the first. It agreed with CSPC that the trial judge had erred by focusing on Strata Co.'s subjective understanding of their obligations. According to the Court of Appeal, the trial judge should instead have considered three requirements to find a contract: "(1) objectively discernible essential terms; (2) consideration; and (3) outward expression of the intention of the parties to be bound by the terms as expressed" (para. 51). Applying this test, the Court of Appeal considered the third requirement to be made out because Strata Co. had taken advantage of all the terms of the ASP Agreement (paras. 60-66). It thus set aside the order of the trial judge. It then remitted the other "contractual issues" that Strata Co. had raised to the trial court, including "mutual mistake of fact, rectification, unconscionability, or frustration and, if the claim is not made out, consideration of the counterclaim and assessment of amount owing, if any" (A.R., vol. I, at p. 52).

[ 71 ] Strata Co. now appeals to this Court.

III. The Legal Issues

[ 72 ] As my colleague describes, at para. 14 of her reasons, Strata Co. raises four issues in this appeal: first, whether a pre-incorporation contract relating to land can bind a land-owner post-incorporation; second, the analytical approach to determine whether parties agreed to a post-incorporation contract; third, whether strata corporations can enter post-incorporation contracts through conduct; and, fourth, whether the Strata Co. manifested an intention to be bound by the terms of the ASP Agreement. CSPC raises the further issue, on which it lost at the Court of Appeal (see appeal judgment, at para. 31), as to whether there is an exception to the general rule that positive covenants do not run with the land and, if so, whether it applies here.

[ 73 ] I agree with my colleague that the general prohibition against positive covenants that run with the land does not itself invalidate an otherwise valid post-incorporation contract that relates to land (Côté J.'s reasons, at paras. 17-24) and that a strata corporation can enter a post-incorporation contract through conduct (paras. 38-45). I also agree with my colleague as to the appropriate analytical framework through which to address the formation of a post-incorporation contract (paras. 32-35).

[ 74 ] Similarly, I am in full accord with my colleague in the restraint she has shown in refraining to make a change to the common law to adopt what she calls the narrow principle of benefit and burden (paras. 56-58). This Court properly considers a number of factors before making an incremental change to the common law where it is not necessary to do so in order to decide the case before it. This Court considers whether the issue was properly raised on the facts, whether it was argued fully here or in the courts below, whether the Court understands the issue fully, and whether there is an urgent need for guidance. As this Court explained in Watkins v. Olafson, 1989 36 (SCC), [1989] 2 S.C.R. 750, the Court "may not be in the best position to assess the deficiencies of the existing law, much less problems which may be associated with the changes it might make" (p. 760). The legislature, not the courts, has the major responsibility for law reform in our system of government (pp. 760-61). Here, these factors point away from making such a change to the common law, and so it is prudent for the Court to await a more appropriate case before contemplating such a change.

IV. Application

[ 75 ] Where I respectfully differ from my colleague is in the application of the law to the facts. She would find "that Strata Co. did in fact manifest an intention, by way of objective conduct, to be bound by a post-incorporation contract with CSPC after CSPC purchased the parking facility from the Developer" (para. 49). I would not make such a finding. Rather I would remit this question of fact, along with the other questions the Court of Appeal remitted, to the trial court.

[ 76 ] The finding of fact that my colleague would make differs from that made by the trial judge. In addition, and with respect for my colleague's contrary view, I do not see the Court of Appeal as having made this finding either. Following Heinhuis v. Blacksheep Charters Ltd. (1987), 1987 2491 (BC CA), 19 B.C.L.R. (2d) 239, the Court of Appeal treated taking the benefit of the agreement as a per se manifestation of the intention of the party to be bound by the terms as expressed. My colleague, however, appears to frame things slightly differently than did Heinhuis in that she favours a more traditional assessment of offer and acceptance (para. 36). While this may seem a subtle difference, it seems to me to be one that is meaningful. By reframing the legal test, the application of the law to the facts necessarily gives rise to a different question of mixed fact and law than that decided by the Court of Appeal.

[ 77 ] Appellate courts should make findings of fact not made by courts below only when doing so is in the interests of justice and is feasible on a practical level (Hollis v. Dow Corning Corp., 1995 55 (SCC), [1995] 4 S.C.R. 634, at para. 33; Madsen Estate v. Saylor, 2007 SCC 18, [2007] 1 S.C.R. 838, at paras. 23-24; Matchim v. Bgi Atlantic Inc., 2010 NLCA 9, 294 Nfld. & P.E.I.R. 46, at paras. 94-99). This involves weighing two factors: first, the possible savings to the parties in cost and time arising from the appellate court deciding such factual issues; and, second, the possible harm from an appellate court making such findings in the absence of adequate evidence (Masterpiece Inc. v. Alavida Lifestyles Inc., 2011 SCC 27, [2011] 2 S.C.R. 387, at para. 103; Sharbern Holding Inc. v. Vancouver Airport Centre Ltd., 2011 SCC 23, [2011] 2 S.C.R. 175, at paras. 94, 172 and 174). In this case, both factors run counter to this Court making findings of fact; rather, they favour appellate restraint.

[ 78 ] First, I question whether there is any efficiency in the use of judicial or counsel resources to be gained by this Court making the factual determinations that my colleague would make. This Court cannot finally dispose of the action, as even if it dismisses the appeal, the case must be remitted to the trial court for determination of mutual mistake of fact, rectification, unconscionability or frustration; and, if the claim is not made out, for determination of the counterclaim and assessment of damages. In addition, at that trial the judge may well need to consider the circumstances of contract formation in detail.

[ 79 ] Second, there is possible harm from this Court making the factual findings that are proposed. In contrast to various cases where this Court has made its own findings of fact (e.g., Masterpiece, at paras. 103-12; Sharbern Holding, at para. 175; Madsen Estate, at paras. 24-31) the record before this Court is limited: in addition to the findings of fact made by the trial judge and those by the Court of Appeal, this Court has before it only the pleadings, the ASP Agreement, the Assignment Agreement, and the transfer of title from the Developer to CSPC. No transcript was provided on appeal, despite the substantial vive voce evidence heard by the trial judge (see trial judgment, at paras. 18-34). In this case, evidence this Court does not have access to could plausibly lead the trial judge to a different conclusion on whether and, if so, when the Strata Co. objectively manifested an intention to be bound. Moreover, as this Court explained in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, the "trial judge enjoys numerous advantages over appellate judges which bear on all conclusions of fact" (para. 25 (emphasis in original)). The trial judge can assess the credibility of witnesses, is relatively expert with respect to the weighing and assessing of evidence, and has had greater exposure to the entire factual nexus of the case (ibid.).

[ 80 ] In the following sections, I will first reiterate the legal framework, then set out the alternate inferences that would be available to the trial judge, were this Court to remit rather than decide these factual matters.

A. The Legal Framework

[ 81 ] As my colleague explains, there is no principled reason to exempt post-incorporation contracts from generally applicable contract law principles (para. 32). An "outward manifestation of assent by each party such as to induce a reasonable expectation in the other" is required (para. 33). Framed as offer and acceptance, the test is whether a reasonable person in the position of the offeree would interpret the other's conduct as an offer, and whether a reasonable person in the position of the offeror would interpret the other's conduct as acceptance. The existence of a pre-incorporation contract is part of the circumstances in which the parties' conduct is objectively interpreted (para. 33). My colleague's statement of the law in this regard is sound.

[ 82 ] Conduct consistent with the contract can be persuasive evidence that an offer has been accepted. A reasonable person in the position of the offeror would tend to understand from the conduct that the offeree has accepted the offer.

[ 83 ] Such conduct is not, however, dispositive evidence of the acceptance of the offer. In some circumstances, an alternate inference may provide an objectively better explanation for the conduct than acceptance of the offer. The paradigmatic example is that if the offeror declares that silence shall constitute acceptance, the silence of the offeree is often not best explained by acceptance (see J. Adamski and A. Swan, Halsbury's Laws of Canada — Contracts (2017 Reissue), at HCO-19 and HCO-20; S. M. Waddams, The Law of Contracts (7th ed. 2017), at §93; G. H. L. Fridman, The Law of Contract in Canada (6th ed. 2011), at pp. 54-55).

[ 84 ] Here, it is plausible that the trial court, with the benefit of a more complete record, would not see the conduct by Strata Co. as objectively manifesting an intention to accept the contract. I can contemplate three competing inferences that the trial court might prefer, as described below. Accordingly, I would remit these factual matters to the trial court.

B. Potential Inference One: Strata Co. Was Performing a Pre-Existing Obligation

[ 85 ] The first potential inference the trial court could make is that, in paying CSPC, Strata Co. was performing a pre-existing obligation rather than assenting to a new obligation. There is an absence of evidence on this point (Côté J.'s reasons, at para. 48), but that is not evidence of the absence of such a pre-existing contract. Rather, it would lead me to remit this question to the trial court, before whom there may be evidence leading to the finding that Strata Co. was bound to a pre-existing obligation.

[ 86 ] Specifically, evidence before the trial court may show that Strata Co. paid the parking fee to the Developer and so formed a contract with the Developer. As my colleague notes, on the record before us this remains an open possibility (para. 48). The evidence before the trial court may also show that the CSPC was assigned the Developer's interest in this contract with Strata Co. As my colleague indicates, this is not clear on the record before us either (ibid.).

[ 87 ] If Strata Co. formed a contract with the Developer, then Strata Co.'s payment to CSPC may be entirely explained by the assignment of the Developer's interest. It would not be objectively reasonable in such circumstances for CSPC to see Strata Co.'s conduct as acceptance of a new contract with CSPC; rather, the objectively reasonable inference would be that Strata Co.'s conduct was performance of an existing contractual obligation, which the Developer assigned to CSPC the right to enforce.

[ 88 ] With respect, I see this as an inconsistency in my colleague's reasons. Having (rightly) said that this Court cannot determine whether there is a pre-existing obligation because of the paucity of the factual record, my colleague proceeds to find that a contract was formed with CSPC. In making the finding that a contract was formed with CSPC, my colleague forecloses the possibility of finding the contract was made first with the Developer and then assigned to CSPC.

[ 89 ] This is not merely an academic dispute: when the contract was formed matters for issues that are being remitted to the trial court. By declaring when, and with whom, Strata Co. manifested the intent to be bound, my colleague may be prejudging some issues that she would remit to the trial court.

[ 90 ] For example, as this Court recently affirmed in Uber Technologies Inc. v. Heller, 2020 SCC 16, [2020] 2 S.C.R. 118, one of the two elements of the unconscionability analysis is an inequality of bargaining power (para. 62). This element focuses on whether a party can adequately protect their interests in the contracting process (para. 66). There may be differences that have significance in the unconscionability analysis between the circumstances of Strata Co. forming a contract with the Developer and Strata Co. forming a contract with CSPC.

[ 91 ] The rectification analysis similarly depends on when the contract is made. Strata Co. sought rectification as an alternative remedy to the declaration that the ASP Agreement was unenforceable against them. Specifically, it sought to rectify a term of the ASP Agreement that set out the amount the ASP 2 Owner must pay the ASP 5 Owner (A.R., vol. II, at pp. 9 and 15). As this Court explained in Canada (Attorney General) v. Fairmont Hotels Inc., 2016 SCC 56, [2016] 2 S.C.R. 720, rectification is available when an instrument "inaccurately records a party's agreement respecting what was to be done" (para. 3). Assuming Strata Co. originally formed a contract with the Developer, then the rectification analysis may differ if Strata Co. adopted the contract early in its existence, when the Developer would have had full control of the strata corporation (see Strata Property Act, S.B.C. 1998, c. 43, at ss. 2, 4, 5 and 7 to 11), as opposed to after the Developer had sold Strata Co. to individual unit holders. The rectification analysis would focus on whether the ASP Agreement accurately reflected the agreement between Strata Co. and the Developer, so who controlled Strata Co. at the time of contract formation matters. By contrast, if Strata Co. formed the contract with CSPC directly, the rectification analysis would have to focus on whether the parties could be said to have any agreement separate from the terms of the ASP Agreement.

[ 92 ] Given that unconscionability and rectification are two of the issues being remitted to the trial court, and given that both of these doctrines turn on the circumstances at the moment of contract, it is not appropriate to gloss over when Strata Co. first entered into a contract and who that contract was with.

C. Potential Inference Two: Strata Co. Was Performing What it Thought to Be a Pre-Existing Obligation

[ 93 ] The second potential inference is that Strata Co. was performing what it (mistakenly) thought to be a pre-existing obligation. If the evidence disclosed that CSPC had reason to know of Strata Co.'s belief that it was performing a pre-existing obligation, one could legitimately ask whether it would be unreasonable for CSPC to take Strata Co.'s payment as an indication of acceptance of a new obligation.

[ 94 ] The trial judge found Strata Co. believed it was already bound by the ASP Agreement as a positive covenant that ran with the land (paras. 76-77). Although legally incorrect, this misapprehension by Strata Co. is understandable given the terms of the ASP Agreement that purport to bind successors in title.

[ 95 ] As my colleague explained, it was an error by the trial judge to solely consider Strata Co.'s subjective understanding that it was already bound. Although it is intuitively appealing to say that one cannot be tricked into a contract, this is not the legal test. The trial judge should also have considered whether Strata Co.'s counterparty had reason to know of Strata Co.'s misapprehension. One party cannot be "tricked" or misled into accepting a contract if the other party has reason to know of the trickery or the misunderstanding. In those circumstances, it would not be objectively reasonable for the other party to see conduct consistent with this misunderstanding as acceptance.

[ 96 ] Applied here, the question that arises is whether CSPC had reason to believe that Strata Co. laboured under a misapprehension that provided another explanation for its conduct. There is no evidence in the appeal record regarding communication that took place between CSPC and Strata Co. after the Assignment Agreement was executed. However, CSPC was aware of the terms of the ASP Agreement, including the terms that purported to cause the ASP Agreement to run with the land.

[ 97 ] Depending on the circumstances at the time of contract formation and what the parties communicated to each other, the trial court may find that acceptance of a new contract with CSPC is not the most reasonable explanation for Strata Co.'s objective, outward behaviour.

D. Potential Inference Three: Strata Co. Was Exercising an Option Under a Conditional Easement

[ 98 ] A third potential inference the trial court may make is that the ASP Agreement formed a conditional easement, and Strata Co.'s payment was the exercise of an option under the conditional easement.

[ 99 ] By "conditional easement", I refer to an easement, the benefit of which the dominant tenement can obtain only if it performs a positive action. Justice Charron adverted to this possibility in Amberwood Investments Limited v. Durham Condominium Corporation No. 123 (2002), 2002 44913 (ON CA), 58 O.R. (3d) 481 (C.A.), when she explained that "if a grant of benefit or easement is framed as conditional upon the continuing performance of a positive obligation, the positive obligation may well be enforceable, not because it would run with the land, but because the condition would serve to limit the scope of the grant itself" (para. 86). If this positive action is not performed, the only remedy for the servient tenement is to refuse to grant the benefit of the easement (The Owners, Strata Plan BCS 4006 v. Jameson House Ventures Ltd., 2019 BCCA 144, 22 B.C.L.R. (6th) 35, at paras. 86-87 and 95, citing B. Ziff, "Restrictive Covenants: The Basic Ingredients", in The Law Society of Upper Canada, ed., Special Lectures 2002 — Real Property Law: Conquering the Complexities (2003), at pp. 320-23).

[ 100 ] This can be contrasted with the English rule known as the "conditional grant exception", which CSPC urged us to adopt (R.F., at paras. 82-135). Under this rule, the servient tenement may seek a remedy of performance of the positive action (or damages for failing to do so), rather than simply withholding the benefit of the easement.

[ 101 ] It would not be appropriate to decide whether the ASP Agreement can be construed as creating a conditional easement at this time. This issue has not been argued before us, and the construction of an easement is a question of mixed fact and law that ought to be considered in its entire factual matrix (Robb v. Walker, 2015 BCCA 117, 69 B.C.L.R. (5th) 249, at paras. 30-31; Arbutus Bay Estates Ltd. v. Canada (Attorney General), 2017 BCCA 374, 3 B.C.L.R. (6th) 59, at paras. 27-29; see also Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 50).

[ 102 ] I do not wish to foreclose the possibility that the trial court would find there is a conditional easement, based on ss. 3(al) and (am) of Part I of the ASP Agreement (transferring an easement from the ASP 5 Owner to the ASP 2 Owner), and 7.5(a) and (b) (providing this easement is limited by "terms, conditions and limitations"), 7.5(f) (providing for the suspension of the easement in the event of non-payment), 7.8 (providing who has the benefit and burden of easements) of Part II of the ASP Agreement. If the judge were to find such a conditional easement, then it would seem to follow that Strata Co. would be free to choose to either pay for the right to park or not to use the parking.

[ 103 ] If the trial court were to accept this construction, then the trial court might find that Strata Co.'s payment to CSPC is objectively best understood as Strata Co. exercising an option under the conditional easement, rather than as Strata Co. having accepted a new contract with CPSC.

[ 104 ] Making such a finding, of course, would not foreclose the possibility of Strata Co. also forming a covenant with CSPC by other conduct. Conduct that is consistent with Strata Co. forming a covenant with CSPC and that is not consistent with Strata Co. invoking a power under the conditional easement would be persuasive.

V. Conclusion

[ 105 ] In the circumstances, it would be better for this Court not to decide whether Strata Co. made an objective manifestation of assent to CSPC. Rather, I see the better course of action to be simply to set out the law that the trial court will apply to the facts. There is no compelling reason for this Court to decide the factual questions. To the contrary, there is good reason for this Court to exercise restraint by remitting such questions to the trial court.

[ 106 ] I would, therefore, respectfully dissent in part as to the order to be granted.

Appeal dismissed with costs throughout, Rowe J. dissenting in part.

Solicitors for the appellant: Hamilton & Co., New Westminster.

Solicitors for the respondent: McEwan Cooper Dennis, Vancouver.

Solicitors for the intervener C.H.O.A. Condominium Home Owners' Association of B.C.: Allen/McMillan Litigation Counsel, Vancouver.

Solicitors for the intervener Urban Development Institute – Pacific Region: Shields Harney, Vancouver.