COURT FILE NO.: CV-11-0404-00

DATE: 2012May15

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

GRAEME BROWN and MONICA BROWN

Plaintiff

– and –

THE CORPORATION OF THE CITY OF BELLEVILLE

Defendant

Robert J. Reynolds, for the Plaintiffs

Jeffrey D. Paine, for the Defendant

HEARD: March 14, 2012 at Belleville

Tranmer J.

REASONS FOR JUDGMENT

[1] The parties move before the Court, under Rule 22, to have a Special Case determined.

[2] I have read the materials filed by the parties. I have been advised that the answers to certain of the questions stated for the Court to determine in the Special Case have been agreed upon by the parties. I have listened to the submissions of the parties. I am satisfied that the determination of the remaining questions may dispose of all or part of the procedures and substantially shorten the trial and therefore, result in a substantial savings in costs. Therefore, I heard and shall determine the Special Case.

FACTS AGREED UPON

[3] The facts agreed upon are set out in the Special Case as follows:

1. The Plaintiffs are the owners, as joint tenants, of a farm property comprising approximately 230 acres on the south side of Zion Road in Lots 11 and 12, Concession 7 of the former Township of Thurlow, now in the City of Belleville. The parcel owned by the Plaintiffs is shown outlined in yellow and identified as parcel 0174 on the Property Index Map at Tab 3.

2. The Defendant is a municipal corporation under the laws of Ontario having jurisdiction in and over territory including the former Township of Thurlow.

3. As of 1953, Mr. Roy Sills owned 300 acres of land consisting of the east half of Lot 11 and the entirety of Lot 12, Concession 7. The Plaintiffs’ farm property of 230 acres constitutes a portion of the original Roy W. Sills land. Four other parcels of the former Sills lands were severed and conveyed in 1966, 1973 (2 conveyances) and 1979 respectively to others prior to the Plaintiffs becoming owners of their lands. Those parcels are respectively a farm property to the south of the Plaintiffs’ farm, identified on the Property Index Map as parcel 0173, a thirteen foot (13’) strip along Zion Road for road widening, and two small residential severed lots located at the extreme north-west and north-east corners of the Plaintiffs’ lands, respectively parcels 0175 and 0176 on the Plan.

4. In 1953, the then Corporation of the Township of Thurlow wished to construct a drainage system along Zion Road in the said Township.

5. The Township constructed a drainage system which consisted of concrete draining tile running east-west parallel to Zion Road along the frontage of the property of Mr. Sills and his neighbours to the east and the west. This line included steel drainage basins, and steel culverts running under Zion Road. The system also included a ditch running southerly from Zion Road on an unopened road allowance at the east edge of Mr. Sills’ property between Lots 12 and 13. The drainage system drained the road, the road allowance, and the properties lying along Zion Road to both the north and the south. The run-off collected by the system drained into the ditch on the road allowance along the east side of Mr. Sills’ property and thence away to the south. The construction of the ditch created a berm running along the ditch on Mr. Sills’ side. A sketch illustrating the approximate location of the drainage system may be found at Tab 9.

6. About April 27, 1953, the Township entered into a written agreement with Mr. Sills for good and valuable consideration including access to his property. The municipality undertook amongst other things, as follows:

i. Having described the aforementioned drainage system as a “storm sewer”, and having recited that Mr. Sills had granted to the municipality the right to enter on his property for the purpose of “keeping and maintaining the said sewer in good condition and repair and replacing any part or portion thereof which it may become necessary to replace at any time”, the Township undertook to “maintain the said sewer in good working condition at all times.”

ii. The Township further undertook to “make good any and all damage caused to the Owner either by virtue of the original construction of the said sewer interfering now or in the future with the Owner’s use and enjoyment of his land in any way or as a result of lack of repair or of acts done at any time by the corporation in maintaining and repairing the said sewer.

The Agreement further specified that it would “inure to the benefit of and be binding upon the parties hereto and their respective heirs, administrators, successors and assigns.”

7. The Agreement was not registered on title under the Registry Act or the Land Titles Act.

8. Mr. Sills died on June 26, 1966. His heirs eventually sold the parcel now held by the Plaintiffs, then including the lands at the northwest corner, to John and Wendy Pleizier by deed dated August 11, 1973. There was no express assignment of the Agreement. The Pleiziers later severed and sold off the parcel at the northwest corner.

9. For some years, the drainage system functioned satisfactorily. However, its functioning gradually began to deteriorate after the Township ceased to maintain the drainage system. As a result, large areas of the properties on both sides of Zion Road, including that now owned by the Plaintiffs, have over time been drained less and less effectively.

10. The effects of this deteriorating functioning of the drainage system on the Sills property now owned by the Plaintiffs has included and continues to include the inability of the Plaintiffs to effectively drain their land by tile drainage to the ditch on the unopened road allowance.

11. In 1998, the municipal corporations of the Township of Thurlow and the City of Belleville were amalgamated into the current Corporation of the City of Belleville.

12. In 1980, the Pleiziers brought the Agreement to the attention of the Township. The Township responded through its solicitor that it was “no longer bound by the provisions of the agreement.” The Pleiziers took no action to enforce the Agreement or otherwise pursue the issue of the Agreement with the Township.

13. The Plaintiffs acquired title to their property from the Pleiziers on or about August 27, 2003 by Instrument No. 630096. There was no express assignment of the Agreement to them.

14. The Plaintiffs were provided with a copy of the Agreement by Mrs. Pleizier around the time of the closing of their purchase of the property. They did not know of the existence of the drainage system or the Agreement when they agreed to buy the property.

15. On September 20, 2004, the Plaintiffs requested the Defendant City to meet its obligations under the Agreement with Mr. Sills. The City reiterated its position that it was not bound by the agreement. The Plaintiffs maintained that the City was bound by the agreement, and, after further discussions went nowhere, brought this action seeking specific performance of the Agreement or in the alternative, damages for its breach.

16. The Defendant City has delivered a Statement of Defence which does not deny that the Agreement was entered into, and admits that the Township and the City were amalgamated into the City in 1998, but raises various defences to the Plaintiffs’ claims.

THE QUESTIONS FOR DETERMINATION BY THE COURT

[4] The Questions for determination by the Court are,

Question 1

Did the Agreement of April 27, 1953, properly interpreted, impose a perpetual obligation on the Township of Thurlow to maintain the drainage system it had installed in good working condition at all times and to make good any and all damage caused to the property owner whoever that may be from time to time as a result of lack of repair or of acts done at any time by the corporation in maintaining and repairing the system.

Question 2

Whether as a result of the amalgamation of the Township of Thurlow and the Defendant City in 1998, the Defendant City is bound by the contractual obligations of the former Township which are found to have been created by the Agreement. (Statement of Defence, para. 7)

Question 3

Whether or not the Plaintiffs are successors or assigns of the Agreement and thus entitled to enforce the Agreement without need for an express assignment of the Agreement. (Statement of Defence, para. 7)

Question 4

Whether or not the Agreement, if properly interpreted as imposing a perpetual obligation, is invalid as contrary to public policy because it does impose a perpetual obligation. (Statement of Defence, para. 18)

Question 5

Whether or not the Agreement is invalid or not binding because it was not entered into, or the system was not constructed, under or in accordance with legislation such as the Drainage Act. (Statement of Defence, para. 13)

Question 6

Whether the Agreement is enforceable or not against the Defendant City because it was not registered on title under the Registry Act and/or the Land Titles Act. (Statement of Defence, para. 8)

Question 7

Whether or not there is sufficient description of the property and easements in the Agreement to create an enforceable agreement. (Statement of Defence, para. 8)

Question 8

Whether or not the Defendant has a valid defence to the Plaintiffs’ claim on the basis that the Plaintiffs are trying to enforce a positive covenant in regard to land. (Statement of Defence, para. 9)

Question 9

Whether the Agreement is enforceable or not as against the Defendant City because the Plaintiffs did not inquire about the Agreement and/or its status before they bought the land, and/or because the Plaintiffs did not reply on the Agreement when they bought the land. (Statement of Defence, paras. 10 and 11)

Question 10

Whether or not the Agreement is void as against public policy because it fetters the Defendant City’s discretion with respect to future uses of roads and road allowances. (Statement of Defence, para. 14)

Question 11

Whether or not the Plaintiffs are barred from enforcing the Agreement by s. 449 of the Municipal Act, 2001. (Statement of Defence, para. 20)

Question 12

Whether or not the Plaintiffs’ claim is defeated on the basis that the conduct of the Defendant amounts to the exercise or non-exercise of a discretionary function resulting from a policy decision. (Statement of Defence, para. 21)

Question 13

Whether or not a statutory limitation period acts to bar an action by the Plaintiff (or its predeceasors in title) and to what extent it should apply if at all (performance of the contract and/or consequential damages).

Question 14

Whether or not the Plaintiffs’ claim for damages for breach of the Agreement is defeated by the doctrine of laches. (Statement of Defence, para. 16)

CONSENT ORDER

[5] The parties advised the Court at the commencement of the hearing that they are agreed that Questions 1, 2, 5, 6, 11 and 12 should be answered in favour of the Plaintiffs.

[6] Accordingly, on consent, the following Order shall issue:

1. A DECLARATION that the Agreement on April 27, 1953, properly interpreted, did impose a perpetual obligation of the Township of Thurlow to maintain the drainage system it had installed in good working condition at all times and to make good any and all damage caused to the property owner whoever that may be from time to time as a result of lack of repair or of acts done at any time by the corporation in maintaining and repairing the system.

2. A DECLARATION that as a result of the amalgamation of the Township of Thurlow and the Defendant City in 1998, the Defendant City is bound by the contractual obligations of the former Township which are found to have been created by the Agreement.

3. A DECLARATION that the Agreement is valid and binding notwithstanding that it was not entered into or, the system was not constructed, under or in accordance with legislation such as the Drainage Act.

4. A DECLARATION that the Agreement can be enforced against the Defendant City although it was not registered on title under the Registry Act and/or the Land Titles Act.

5. A DECLARATION that the Plaintiffs are not barred from enforcing the Agreement by s. 449 of the Municipal Act, 2001.

6. A DECLARATION that the Defendant does not have a valid defence to the Plaintiffs’ claim on the basis that the conduct of the Defendant amounts to the exercise or non-exercise of a discretionary function resulting from a policy decision.

REMAINING QUESTIONS

[7] I turn to the remaining Questions requiring determination.

Question 3: Whether or not the Plaintiffs are successors or assigns of the Agreement and thus entitled to enforce the Agreement without need for an express assignment of the Agreement.

Question 8: Whether or not the Defendant has a valid defence to the Plaintiffs’ claim on the basis that the Plaintiffs are trying to enforce a positive covenant in regard to land.

THE PLAINTIFFS’ POSITION

[8] The Plaintiffs combined these two questions.

[9] The Plaintiffs acknowledge that they have no privity of contract with the City of Belleville. Counsel for the Plaintiffs relies on authorities for the proposition that there is a distinction in law between a benefit of a restrictive covenant that will run with the land in contrast to the burden of a restrictive covenant that will not run with the land. Counsel notes that the Defendant City is the party to the original Agreement made between the Township and Mr. Sills, and therefore, this is not a case of the burden of a covenant being sought to be enforced because it runs with the land. It is being sought to be enforced against the original covenantor.

[10] Counsel for the Plaintiffs submits that the Plaintiffs are entitled to the benefit of the covenant to “maintain the said sewer in good working condition at all times...” and “... To make good any and all damage caused the owner either by virtue of the original construction of the said sewer interfering now or in the future with the owner's use and enjoyment of his land in anyway, or as a result of lack of repair or of acts done at any time by the Corporation in maintaining and repairing the said sewer”, because they fit into three exceptions or qualifications to the privity of contract rule. These exceptions or qualifications are: 1) the benefit of a covenant can be assigned; 2) by statute, namely section 24 of the Conveyancing and Law of Property Act, a positive covenant benefit will run with the land to the successor in title; and 3) the principled exception set out by the Supreme Court of Canada in London Drugs Ltd. v. Kuehne 1992 CanLII 41 (SCC), [1992] Carswell BC 315 in regard to a covenant intended to benefit successors.

[11] With respect to the first exception, the Plaintiffs point out that the Agreement recites that it “shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, administrators, successors and assigns”. Although there was no specific assignment to the Plaintiffs or their predecessors in title, the Plaintiffs submit that at law they are successors to Mr. Sills and were clearly within the contemplation of the parties as such at the time the Agreement was made. The Oxford English dictionary defines as successor as one who succeeds another in an office, dignity, function or position.

[12] The Plaintiffs submit that they fit within this first exception. The City is a party to the Agreement which recites that it shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, administrators, successors and assigns. The Plaintiffs are successors to Mr. Sills.

[13] The second exception relied upon by the Plaintiffs is set out in section 24(1) of the Conveyancing and Law of Property Act. In Rhone v. Stephens [1994] 2 A.C. 310, the House of Lords dealt with a successor in title with a specific assignment of the covenant that the predecessor in title to the Defendant keep the roof in repair. The court held that, because of the relaxation of the rigors of the common law in the conveyancing legislation similar to section 24(1), as between persons interested in land other than as landlord and tenant the benefit of the covenant may run with the land at law but not the burden. The court stated that positive covenants affecting freehold land are not directly enforceable, except against the original covenantor, and that the benefit of positive covenants runs with the land. The court held in favour of the Defendant, who was the successor in title to the original party who had made the covenant to keep the roof in repair. The Plaintiffs also rely on the decision of the Ontario Court of Appeal in Amberwood v. Durham (2002), 2002 CanLII 44913 (ON CA), 58 O.R. (3d) 481. That case dealt with two successors in title to parties who had entered into an agreement to give each other easements over land and which provided for the sharing of costs of maintaining certain services to both parcels of land. The applications judge had held that the covenant to pay the expenses fell within the definition of a positive covenant and the matter was settled at law that obligations of that kind did not run with the land either at law or in equity, despite the contracting parties’ express intention to the contrary. The applications judge further held that the benefit and burden doctrine and the conditional grant of easement, which were exceptions to the rule and had been clearly adopted in English law did not apply in the case absent legislative reform or endorsement of them by an appellate court. The Court of Appeal dismissed the appeal.

[14] With respect to this second exception, the Plaintiffs rely on the decision of Kozak J. in Creighton v. Scott [1993] O.J. No. 2534 (Ont. Ct. of Justice – Gen. Div.) and in particular at paragraphs 10, 14 and 15:

10 The rule at law has been that the benefit of restrictive covenants, whether positive or negative, which are made with a covenantee having an interest in the land to which they relate, passes to his successors in title and is therefore enforceable by the assignees of the covenantee against the original covenantor. See Sharp v. Waterhouse and Section 24(1)(2) of the Conveyancing and Law of Property Act. There are two essential elements to bring this rule into operation. First, the covenant must touch and concern the land of the covenantee and secondly, the covenantee at the time of the making of the covenant must have the legal estate in the land which is to be benefited. (Rogers v. Hosegood (1900) 2 Ch. 388, and Webb v. Russell (1789) 100 E.R. 639. The burden of a covenant can never run with the land of a covenantor at law. (Austerberry v. Oldham (1885) 29 Ch. D. 750

14 In this case, the written agreement and the appropriate surrounding circumstances make it clear that the parties fully intended that the restrictive covenant have lasting implications and that it be capable of enforcement not only against the Plaintiff covenantors, but also against their assignees. To construe the agreement otherwise would be to ignore the good faith bargaining and negotiating that resulted in the overall resolution of territorial dispute and the ultimate conveyance of property.

15 The herein restrictive covenant is a negative covenant which meets all of the equitable criteria of having the burden of the covenant run with the land of the Plaintiff covenantors and be binding upon their assignees. Equity in this case would restrain any assignee of the covenantors with knowledge of the covenant from violating its provisions.

[15] The Plaintiffs submit that the benefit of a covenant runs with the land in favour of successors and assigns of the original covenantee as against the original covenantor. In this case, the relevant covenant clearly touches and concerns the land of the covenantee and the covenantee at the time of the making of the covenant had the legal estate in the land which is to be benefited. The Plaintiffs’ occupation of their land is affected by the non-repair of the drainage. The value of their land is affected when it is flooded and thus, the covenant touches and concerns the subject lands.

[16] In regard to the third exception, the Plaintiffs rely on the Supreme Court of Canada decision in Fraser River v. Can-Dive 1999 CanLII 654 (SCC), [1999] 3 S.C.R. 108 as setting out a principled exception to the privity of contract rule. The court held that, in certain circumstances, it may undertake an analysis to determine whether the doctrine of privity with respect to third-party beneficiaries should be relaxed. The analysis includes a determination, whereby the parties to the contract must have intended. that the relevant provision confer a benefit on the third-party and further, that the actions in question must come within the scope of the original agreement between the initial parties. The Plaintiffs point out that it is agreed in the present case that the City committed to a perpetual obligation and further the Agreement recites that successors and assigns are intended beneficiaries and further that the activities sought to be enforced by the Plaintiffs fall within the scope of the original agreement.

THE DEFENDANT/CITY POSITION

[17] The City submits that the key issue is privity of contract. It submits that no one except the original parties are bound by the Agreement, namely Sills and the City. Therefore, the Plaintiffs cannot enforce the Agreement against the city.

[18] The City relies on the Supreme Court of Canada decision in Greenwood v. Beattie 1980 CanLII 202 (SCC), [1980] 2 S.C.R. 228 as authoritative as to the common law on this point. The city notes that there was no assignment of the Agreement by Sills.

[19] The city cites a number of cases for the proposition that equity will not permit a party to enforce a positive covenant on the basis that it runs with the land, even if that was the intention of the original parties.

[20] The City also submits that the covenant in issue between the parties had to have been expressly assigned by Mr. Sills to subsequent owners and does not pass solely as a result of the sale of the land. (Mohawk v. Suncor 2007 CarswellOnt 5894 (Ont. S.C.J.) and Lamvid Inc. v. 427654 Ontario (1985), 1985 CanLII 2003 (ON SC), 50 O.R. (2d) 782 (Ont. H.C.J.) The City also submits that alternatively, the covenant must have been contained in the deed itself. (Sekretov v. Toronto (1973), 1973 CanLII 500 (ON SC), 2 O.R. 161 (Ont. C.A.) On this point, the Plaintiffs submit that the authorities cited by the Defendant are cases that deal only with personal covenants and not those that touch or concern land.

[21] The Defendant disputes that a subsequent property owner is a successor within the meaning of the Agreement.

[22] The Defendant further submits that on the basis of the authorities that it cites the lands to benefit from the covenant to maintain and repair are inadequately defined and are not identifiable.

Analysis

[23] Firstly, I observe that the wording of the agreed upon answers to Questions 1 and 2 appears clearly to favour a determination of this issue in favour of the Plaintiffs,

The Agreement of April 27, 1953, properly interpreted, does impose a perpetual obligation on the Township of Thurlow to maintain the drainage system it had installed in good working condition at all times and to make good any and all damage caused to the property owner whoever that may be from time to time as a result of lack of repair or acts done at any time by the corporation in maintaining and repairing the system.

[24] If that is not the determinative answer to these two questions, then I go on to consider the submissions made by Counsel.

[25] The important facts in determining these two questions are as follows,

a. The Defendant city is the original covenantor.

b. The Plaintiffs are the successors in title to the original covenantee.

c. The deed to the Plaintiffs does not make reference to the Agreement and there was no specific written assignment of the Agreement from Mr. Sills to the Pleiziers or then to the Plaintiffs.

d. There is no privity of contract between the Plaintiffs and the city.

[26] Stong J. of this Court in Cornish v. Kawartha, 2006 CarswellOnt 3093 (Ont. S.C.J.) held that the Defendant corporation, the original covenantor, was bound by the covenants it had made in the original deed. The Court stated that whether the covenant in the deed was restrictive and ran with the land or was positive and therefore did not run with the land was a moot point because the corporation was the original covenantor.

[27] Anger and Honsberger, Law of Real Property 1985 Vol. 2 page 906, para. 1703.1 states that at common law the benefit of a restricted covenant will run with the land if:

1. The covenant touches or concerns the land;

2. At the time the covenant is made the covenantee has the legal estate in the land to be benefitted; and

3. The assignee of the covenantee, who claims the benefit of the covenant, has the same legal estate in the land as the original covenantee had.

[28] I accept the decision of Kozak J. in the Creighton case, and in particular, his comments at paragraph 10, 14 and 15, quoted above.

[29] In the case before me, the Plaintiffs, subsequent in title to the original covenantee, have no privity of contract with the City, the original covenantor. The Plaintiffs argue, therefore, that their right to the benefit of the covenant depends on whether or not they fit into an exception to the privity of contract requirement.

[30] I accept the submission of the Plaintiffs that they are successors to Mr. Sills as contemplated in the Agreement. Mr. Sills is identified as an owner in the Agreement and the city agreed with him that the Agreement “shall inure to the benefit of and be binding upon the parties hereto (the city) and their respective heirs, administrators, successors and assigns.” These words clearly demonstrate that it was in the contemplation of the parties that there would be subsequent owners of Mr. Sills’ property. As submitted by the Plaintiffs, a successor is defined as one who succeeds another in a position.

[31] Therefore, I find that the Plaintiff's fit within this exception to the privity of contract rule as successors.

[32] It is not necessary for me therefore to decide whether they are assigns of the Agreement and entitled to enforce the Agreement without an express assignment.

[33] If I am wrong in this decision, then I go on to consider whether the Plaintiffs fit within the second exception advanced by the Plaintiffs to the privity of contract requirement.

[34] I accept the submissions by the Plaintiffs that the effect of section 24 of the Conveyancing and Law of Property Act and Rhône is that the benefit of a covenant runs with the land and is enforceable against the original covenantor. The Ontario Court of Appeal agreed with that determination in Amberwood. Kozak J. reached the same conclusion in Creighton.

[35] The cases that the Defendant relies upon, namely: Berry v. Indian Park 1999 CarswellOnt 1248 (Ont. C.A.); Parkinson v. Reid, 1966 CanLII 4 (SCC), [1966] S.C.R. 162; Lohse v. Fleming, 2008 CarswellOnt 2221 (Ont. C.A.); and White v. Lauder Dev. (1975), 1975 CanLII 376 (ON CA), 60 D.L.R. (3d) 419 (Ont. C.A.) are cases that do not involve claims with the original covenantor. Therefore, they are not persuasive to me on this issue.

[36] The Defendant also relies upon the decisions of this court in Mohawk v. Suncor (2007), CarswellOnt 5894 (Ont. S.C.J.) and Innisfil 400 v. Ontario 2007 CarswellOnt 4671 (Ont.S.C.J.). In Mohawk, a landowner who had bought from V sued his neighbouring landowner who had also bought from V and who had covenanted to V that it would not sell drinks etc without the consent of V. This is not the same fact situation faced by the Plaintiffs in the present case. In the present case, the Plaintiffs seek to enforce a covenant made by the original covenantor, the City. Another point of distinction is that it was found in that case that the covenant by Suncor was a personal one to V.

[37] Innisfil 400 does deal with claims by the original covenantee and a subsequent covenantee against the original covenantor. The Court dismissed the claim by the original covenantee because prior to commencement of the action it conveyed all of its lands to the subsequent covenantee or alternatively because the claim a statute barred. The Court dismissed the claim by the subsequent covenantee on the basis that the covenant required a series of positive acts to be performed and held that positive covenants do not run with the land. The Court did not consider expressly that this claim was against the original covenantor. For that reason, I decline to follow it as decisive of the case before me.

[38] The Defendant also submits that the Plaintiffs cannot enforce the covenant as assignees. It argues that the benefit of a restrictive covenant can only be expressly assigned to a purchaser from a covenantee. It submits that the benefit of a covenant cannot pass as a mere incident of a conveyance. In this regard, it relies on the Mohawk case. I find that case distinguishable because that was the situation of a personal restrictive covenant where the purported express assignment was made some 17 years after the original conveyance. The court held that in cases involving a personal restrictive covenant, the assignment must be made contemporaneously with the sale of the property to which it relates. The Court held that an assignment at a later date, long after the covenantee has disposed of all of his lands, is not effective.

[39] In this regard, the Defendant also relies upon the decision of this court in Lamvid v. 427654 Ont. Ltd. (1985), 1985 CanLII 2003 (ON SC), 50 O.R. (2d) 782 (Ont. S.C.J.). In that case, V sold a shopping center to L. V also assigned a lease for a certain premise within the shopping center to L which lease was between V and T in which V covenanted to T that it would not rent other space in the shopping center to anyone for the purposes of operating a restaurant. The assignment of lease from V to L did not contain an express assignment of that covenant. The court held that a personal covenant to be enforceable had to have been expressly assigned. The court also held that if a covenant runs with the land, it is not necessary to expressly assign the covenant. The assignment of the lease from V to L was sufficient to automatically assign the covenant. Potts J. said in that case, at paragraphs 14 and 15,

On a careful reading of the covenant in this lease, it is manifest to me that this restrictive covenant was intended to run with the lands and premises. It would not make sense for the landlord and tenants of the shopping center to enter into noncompetition covenants which were personal only. As soon as one tenant or the landlord sublet the premises, the covenant would fall, unless expressly assigned, and the shopping center would be thrown open to competition among the tenants, to the detriment of the landlord and all the tenants. Having determined that the restrictive covenants run with the land, it follows that it is unnecessary for the assignment of lease to contain an express assignment of the restrictive covenant and express assignment of a restricted covenant is only necessary if the comment is a personal one...

[40] This case supports the position of the Plaintiffs before me that the benefit of a covenant may be enforced by the successors or assigns of the original covenantee without the necessity of an express assignment, even as against a subsequent covenantor.

[41] The Defendant also submitted that the Plaintiffs cannot enforce the Agreement because the lands to benefit from the City’s covenant are not sufficiently described or identified in the Agreement. The Defendant relies on Mohawk for the proposition that the agreement must clearly describe the lands to benefit from the covenant. Those lands must be readily ascertainable from the agreement. A high degree of identification is required. That case is distinguishable from our case on this point. In that case, in its deed from V, S agreed that it would not sell drinks without the consent of V. V sold the adjoining land to M. M sued S to enforce the covenant. M’s property was not described in the S deed. In Brown, there is one agreement only, not two separate conveyances, and one original owner of the subject property, not two separate adjoining landowners.

[42] The Defendant also relies upon the case of Sekretov v. Toronto (City) (1973), 1973 CanLII 500 (ON SC), 2 O.R. 161 (Ont. C.A.) for the proposition that the dominant lands must be clearly identified and ascertainable from the deeds themselves. It points out that neither the Township lands nor the Sills lands are identified in detail in the Agreement. It points out that there is no mention of the Agreement in any of the deeds which convey any portion of the Sills lands. In Sekretov, the application judge found that covenants in the deed from the municipality to the covenantee were invalid. The Ontario Court of Appeal dismissed the appeal by the city because the deed to the original covenantor did not describe the lands to be benefited from the City’s covenant and further, because the covenant was dependent on a future resolution of City Council.

[43] The description of the lands to benefit are set out in the Agreement between Mr. Sills and the city, “the Corporation has constructed and laid down a storm sewer on part of lots 12 and 13 in the 7th concession, Thurlow and along the road between said lots 12 and 13.... The owner owns that part of said Lot 12, on which the said sewer was constructed and has and will receive material benefits from the construction of the said sewer.” In Mohawk, the court quotes from the Nova Scotia Court of Appeal, “in order to comply with the requirements (the high degree to which a dominant tenement requires identification) there must be either a metes and bounds description of the lands or a reference to a plan identifying the lands or some other specific reference by which the lands to be benefited may be readily identified or ascertained” (para.60). The Defendant points out that the Sills lands have been divided into five parcels since the original Agreement. As stated above, the fact situation in Mohawk is distinct from that in the present case. The Browns are not adjacent landowners to a second piece of property in the conveyance of which the covenant was made. The City of Belleville derived benefit as set out in the Agreement. In my view, it cannot now assert that the description of the Sills property was so inadequate as to render the Agreement unenforceable.

[44] For these reasons, I find that the Plaintiffs fit within the second exception to the priority of contract requirement.

[45] I have found that the Plaintiffs fit within two exceptions to the privity of contract requirement, therefore, I do not propose to deal with the Plaintiffs’ position that they also meet the third exception.

[46] For these reasons, I find that the answers to questions 3 and 8 of the Special Case must be answered in favour of the Plaintiffs.

[47] Therefore, an Order shall issue for a DECLARATION that the Plaintiffs are successors of the Agreement and thus, are entitled to enforce the Agreement without an express assignment and for a DECLARATION that the Defendant does not have a valid defence to the Plaintiffs' claim on the basis that the Plaintiffs are trying to enforce a positive covenant in regard the land.

Question 4: Whether or not the Agreement, if properly interpreted as imposing a perpetual obligation, is invalid as contrary to public policy because it does impose a perpetual obligation.

[48] The Plaintiffs submit that there is no public policy against the imposition of a perpetual obligation, whether pursuant to Agreement or not.

[49] The Defendant in argument did not advance the position that the perpetual obligation, which it conceded existed in answers to Questions One and Two, was invalid as against public policy.

[50] I find that the Plaintiffs succeed on this question and accordingly an Order shall issue for, a DECLARATION THAT the Agreement, which imposes a perpetual obligation upon the City, is not invalid as contrary to public policy because it does impose a perpetual obligation.

Question 7: Whether or not there is sufficient description of the property and easements in the Agreement to create an enforceable agreement.

[51] The Agreement recites that the City has constructed and laid down a storm sewer on Part of Lots 12 and 13 in the 7th Concession and along the road between Lots 12 and 13 in the Township of Thurlow. It recites that Mr. Sills owns that Part of Lot 12, on which the sewer was constructed.

[52] The Defendant did not make lengthy oral submissions on this point. In written submissions on the point, it submits that the property upon which the drainage system was installed is not clearly identifiable or adequately described. The City submits that strict and precise descriptors are required for covenants to be annexed to the land so as to determine what lands constitute the dominant tenement and the servient tenement. It points out that the original parcel of Mr. Sills has been split up as a result of subsequent conveyances. It is submitted that this makes it uncertain as to the location of the drainage system, upon whose lands it rests and what lands are to receive any benefit.

Analysis

[53] For the reasons that I have already stated, I find that the original Agreement sets out a sufficient description of the property. The City accepted $200 in consideration from Mr. Sills and received the right any time to enter upon that part of his lands for the purposes of keeping and maintaining the sewer in good condition and repair and replacing any part or portion thereof as may become necessary at any time. The City also covenanted to make good any and all damage caused to the owner by virtue of the original construction or as a result of the lack of repair. The description of the property was sufficient for the City to have made such a substantive agreement. I further note that the agreed facts as set out in paragraph 5 of the Special Case confirm that there was no uncertainty as to the affected lands and the lands that would benefit from the construction of the drainage system, a storm sewer. The fact that the City is the original covenantor is significant. It is not a defence, in my view, for the City to say now that its covenant is void because the lands to benefit were inadequately described.

[54] I find that an Order shall issue for, A DECLARATION THAT there is sufficient description of the property and easements in the Agreement to create an enforceable agreement.

Question 9: Whether the Agreement is enforceable or not as against the Defendant City because the Plaintiffs did not inquire about the Agreement and/or its status before they bought the land and/or because the Plaintiffs did not rely on the Agreement when they bought the land.

[55] The Plaintiffs submit that the Agreement is enforceable by them even though they did not inquire about the Agreement or its status before they bought the land and did not rely upon the Agreement when they bought the land.

[56] Paragraph 14 of the agreed upon facts state that the Plaintiffs were provided with a copy of the Agreement by Mrs. Pleizier around the time of the closing of their purchase of the property, on or about August 27, 2003. They did not know of the existence of the drainage system or the Agreement when they agreed to buy the property.

[57] The Plaintiffs submit on the authority of Waddams, The Law of Damages, 3rd edition, p.267-272, and the C.E.D. (Ont. 3d) Contracts s.85, para.99 that they do not need to prove reliance as an element of their breach of contract claim. The Plaintiffs submit that this is the finding of the Ontario Court of Appeal in Hickey-Button v. Loyalist 2006 CanLII 20079 (ON CA), [2006] O.J. No. 2393.

[58] The Plaintiffs submit that reliance is not a required element of a breach of contract action.

[59] The Defendant did not make submissions on this point.

Analysis

[60] On the basis of the authorities cited, I find that the facts agreed upon as to the Plaintiffs’ failure to inquire about the Agreement or its status or to rely upon the Agreement when they bought does not preclude their claim as advanced.

[61] An Order shall issue for a DECLARATION THAT the Defendant does not have a valid defence to the Plaintiffs’ claim on the basis that the Plaintiffs did not inquire about the Agreement and/or its status before they bought the land, and/or by reason of the defence that the Plaintiffs did not rely on the Agreement when they bought the land.

Question 10: Whether or not the Agreement is void, as against public policy because it fetters the Defendant City’s\ discretion with respect to future uses of roads and road allowances.

[62] The Plaintiffs submit that this is not a case where the Agreement imposes a fetter on the municipality’s legislative powers with respect to future uses of roads and road allowances. The Plaintiffs submit that this is a case where the municipality was simply acting in its proprietary or business capacity in entering into a contract, which at law, it is entitled to do. The Supreme Court of Canada in Pacific National Investments Ltd. v. Victoria (2000), 2000 SCC 64, 193 D.L.R. (4th) 385 (S.C.C.) para.65, holds that acting in such a capacity, a municipality is permitted to hinder its legislative discretion in so far as the contracts it enters into affects the resources available to it. The court held that municipalities will be bound by their business contracts. They will not be free to break them on a whim. They will have to pay compensation to the other party barring an express statutory provision denying any form of compensation or damages. In Stewart v. Stewart 2004 BCSC 8, [2004] B.C.J. No. 16 (B.C.S.C.), the municipality placed virtually all of its assets beyond its control, thus severely limiting its discretion to manage future municipal economic development. The British Columbia Supreme Court distinguished that situation qualitatively from a fettering of legislative powers. The court held that municipalities clearly have the power to enter into business arrangements that diminish the control by elected officials over assets.

[63] Therefore, the Plaintiffs submit that it is no defence to this case that the agreement could tie up some funds available to the municipality. Furthermore, there are no facts stated in the Special Case providing any detail whatsoever on the point. At the highest, the City could say that the unknown cost to maintain the drainage system could or would affect the City's ability to do other projects in some unspecified way.

[64] The Plaintiffs also submit that the Defendant argues in its factum that it is contrary to public policy for a municipality to commit itself to doing certain acts at the suit of a private citizen to the exclusion of the remainder of the municipality. On this point, paragraph 5 of the agreed upon facts clearly establishes that others beyond Mr. Sills would benefit from the drainage system, including the municipality itself. Furthermore, the City received benefit and consideration pursuant to the Agreement, namely money, access to the system and a system that drains not only Mr. Sills’ lands, but those of other municipal residents and that of the municipality itself.

[65] The Defendant relies upon the decision of Stong J. of this Court in Cornish v. Kawartha Lakes 2006 CarswellOnt 3092 for the proposition that a municipal corporation may not, by contract, agree to not use the discretionary powers granted to it for the public good. That Court held that such a contract, to the extent that it puts the interests of private parties before those of the general public, is a nullity. The Defendant City submits that a municipality cannot fetter its discretion with respect to the use of public highways or to open or not to open a road. It submits that “the devotion of the use of a public right-of-way for the perpetual benefit of a private property owner is clearly contrary to public policy…Enforcement of the Agreement or a finding of validity would create a perpetual obligation of the municipality to provide a drainage system for a private landowner without the municipality receiving any benefit for itself and further, it would involve devoting an existing unopened road allowance to drainage to the potential detriment or even exclusion of any use in the future for public transportation.” (Factum para.44)

[66] As I noted during argument, this submission by the City is without factual support in the Special Case.

Analysis

[67] In my view, on the facts of the case as stated, it cannot be said that the municipality has acted to the exclusive benefit of only one resident to the exclusion of other residents or the municipality itself. The Agreed Statement of Facts at para.5: “The drainage system drained the road, the road allowance and the properties lying along Zion Road to both the north and the south.” and also para.4: “…The Township of Thurlow wished to construct a drainage system along Zion Road…”.

[68] Furthermore, the facts do not support the City’s submission that the Agreement fetters the municipality’s discretion with respect to its use of its highways or to open or not to open a road.

[69] I find that an Order shall issue for a DECLARATION THAT the Agreement is not void as against public policy as fettering the Defendant City’s discretion with respect to future uses of roads and road allowances.

Question 13: Whether or not a statutory limitation period acts to bar an action by the Plaintiffs and to what extent it should apply, if at all.

[70] The Plaintiffs submit that as it is agreed that the Agreement imposes a “perpetual obligation on the City to maintain the drainage system in good working condition at all times and to make good any and all damage caused to the property owner whoever that may be from time to time as a result of lack of repair or of acts done at any time by the Corporation in maintaining and repairing the system”, (Questions 1 and 2), then the obligation arises and continues day-to-day and the only limitation issue could be how far back from the date of the statement of claim the plaintiff could claim for and recover damages.

[71] Indeed, in my view, the agreement with respect to the determination of Questions 1 and 2 would appear to defeat or bar any limitation period defence, “... To maintain the drainage system it had installed in good working condition at all times...” and “...To make good any and all damage caused to the property owner whoever that may be from time to time as a result of lack of repair, or of acts done at any time by the Corporation in maintaining and repairing the system.”

[72] The Plaintiffs consented to allowing the Defendant to plead the limitation defence based on a letter dated December 10, 1980 from the Township lawyers to the Pleiziers in which that Township stated that it was no longer bound by the provisions of the Agreement and that the Township was not prepared to take any action with respect to the repair or maintenance of the ditch. Paragraph 12 of the Special Case recites that these owners took no action to enforce the Agreement or otherwise pursue the issue of the agreement with the Township. On September 20, 2004, the Plaintiffs requested that the City meet its obligations under the agreement, but the City repeated its position that it was not bound by the Agreement.

[73] The Plaintiffs submit that the repudiation by the City is of no effect because it was not accepted by the Pleiziers or the Plaintiffs. The Plaintiffs submit that acceptance must be clear and unequivocal, communicated to the party repudiating the contract and that mere inactivity or acquiescence will generally not be regarded as acceptance. (Picavet v. Salem [2000] O.J. No. 2806 (Ont. S.C.J.)); (Ginter v. Chapman 1967 CanLII 810 (BC CA), [1967] B.C.J. No. 27 (B.C.C.A.)). In Ginter, the British Columbia Court of Appeal stated that repudiation of the contract by one party is of no consequence in law unless the other party accepts it as such and communicates the acceptance to the repudiator within a reasonable time.

[74] The Plaintiffs submit that mere inactivity or acquiescence is not acceptance of a repudiation. The agreed upon facts do not include the fact that the Pleiziers accepted the repudiation by the City. They “took no action to enforce the Agreement or otherwise pursue the issue of the Agreement with the Township.” (para.12)

[75] The Plaintiffs submit that the burden is on the Defendant to prove the fact of acceptance of the repudiation.

[76] The Plaintiffs submit therefore that the limitation period did not begin to run in 1980, or expire in 1986.

[77] The Defendant accepts that the issue is whether the Pleiziers accepted the repudiation by the Township (City), on the facts of this case. It submits that whether the agreement is a simple contract or a speciality contract, the limitation expired either in 1986 or in the year 2000. It notes that the Statement of Claim was not issued until July 2011.

[78] The Plaintiffs point out that the Defendant does not dispute its position that the law requires that the Defendant prove an acceptance of repudiation in a manner that is clear and unequivocal.

[79] The Defendant submits that in doing nothing in response to the City’s repudiation, the Pleiziers demonstrated acceptance of the repudiation.

Analysis

[80] On the facts, the action of the Pleiziers can be viewed as no more than inactivity. The burden is on the Defendant to prove more, namely, acceptance and communication of acceptance. The Defendant has failed to do so. Therefore, no limitation period began to run in 1980.

[81] The facts as to the conduct of the Plaintiffs are less clear (paragraph 15 of the Special Case and footnote 11). What occurred between the December 15, 2004 letter and the August 3, 2010 letter is not a matter of record. Clearly, there were ongoing discussions that the City saw fit to end in its August 3, 2010 letter. “I have been instructed by Counsel to advise that it is the City’s position that it bears no responsibility to the present landowners under the 1953 Agreement and accordingly, the City is not prepared to take any action in constructing or maintaining the drainage works.”

[82] The Statement of Claim was issued within one year thereafter.

[83] On the record before me, I cannot find that the letter of December 15, 2004 started the time of a limitation defence to begin to run. For example, bona fide settlement discussions can suspend the commencement of a limitation period and its running in certain circumstances. The onus is on the Defendant to prove the date that the limitation began.

[84] Therefore, an Order shall issue for a DECLARATION that there is no statutory limitation period that acts to bar an action by the Plaintiffs.

Question 14: Whether or not the Plaintiffs’ claim for damages for breach of the Agreement is defeated by the doctrine of laches.

[85] The plaintiffs submit that this question is specifically worded in its reference to “Plaintiffs’ claim for damages for breach of the Agreement”. They submit that the doctrine of laches does not defeat a claim pleaded in damages, but rather applies only to equitable remedies on the authority of the C.E.D. (Ont. 3d.) Estoppel, para.72-73.

[86] The City submits that the doctrine of laches may operate to deny relief to claimants who have unreasonably delayed or been negligent in asserting their claims, and in particular, in this case since 1980 when the Pleiziers received the first Township letter repudiating its obligations under the Agreement. The Defendant agrees that it must demonstrate that the Plaintiff, by delaying institution of the action, has either:

a. acquiesced in the Defendant’s conduct; or

b. caused the Defendant to alter his position in reasonable reliance on the Plaintiffs’ acceptance or otherwise permitted a situation to arise which it would be unjust to disturb.

[87] The City submits that it would be reasonable to assume that the passage of over 50 years since maintenance was last performed has extensively altered the condition of the ditch and drainage system and the associated infrastructure. It submits that it is quite likely that the complete reconstruction over 1 km length would be required to make the system operable which would undoubtedly involve a significant expenditure with no benefit to the City.

[88] There is no factual basis set out in the Special Case to support these submissions. There are no facts about deterioration of the system, its present condition, the work required to remedy or its cost beyond the statements in paras. 9 and 10 of the agreed facts.

Analysis

[89] For the reasons I stated in answer to Question 13, the record does not demonstrate conduct on the part of the Plaintiffs that could invoke the doctrine of laches.

[90] Even if I am wrong on that, I accept the Plaintiffs’ submission that the doctrine of laches cannot defeat a claim framed in damages.

[91] Therefore, an Order shall issue for a DECLARATION that the Plaintiffs’ claim for damages for breach of the Agreement is not defeated by the doctrine of laches.

SUMMARY OF THE ORDERS MADE

[92] On consent, the following Order shall issue:

1. A DECLARATION that the Agreement on April 27, 1953, properly interpreted, did impose a perpetual obligation of the Township of Thurlow to maintain the drainage system it had installed in good working condition at all times and to make good any and all damage caused to the property owner whoever that may be from time to time as a result of lack of repair or of acts done at any time by the corporation in maintaining and repairing the system.

2. A DECLARATION that as a result of the amalgamation of the Township of Thurlow and the Defendant City in 1998, the Defendant City is bound by the contractual obligations of the former Township which are found to have been created by the Agreement.

3. A DECLARATION that the Agreement is valid and binding notwithstanding that it was not entered into or, the system was not constructed, under or in accordance with legislation such as the Drainage Act.

4. A DECLARATION that the Agreement can be enforced against the Defendant City although it was not registered on title under the Registry Act and/or the Land Titles Act.

5. A DECLARATION that the Plaintiffs are not barred from enforcing the Agreement by s. 449 of the Municipal Act, 2001.

6. A DECLARATION that the Defendant does not have a valid defence to the Plaintiffs’ claim on the basis that the conduct of the Defendant amounts to the exercise or non-exercise of a discretionary function resulting from a policy decision.

[93] For the reasons stated, the following Order shall also issue.

7. A DECLARATION that the Plaintiffs are successors of the Agreement and thus, are entitled to enforce the Agreement without an express assignment.

8. A DECLARATION that the Defendant does not have a valid defence to the Plaintiffs' claim on the basis that the Plaintiffs are trying to enforce a positive covenant in regard the land.

9. A DECLARATION that the Agreement, which imposes a perpetual obligation upon the City, is not invalid as contrary to public policy because it does impose a perpetual obligation.

10. A DECLARATION that there is sufficient description of the property and easements in the Agreement to create an enforceable agreement.

11. A DECLARATION that the Defendant does not have a valid defence to the Plaintiffs’ claim on the basis that the Plaintiffs did not inquire about the Agreement and/or its status before they bought the land, and/or by reason of the defence that the Plaintiffs did not rely on the Agreement when they bought the land.

12. A DECLARATION that the Agreement is not void as against public policy as fettering the Defendant City’s discretion with respect to future uses of roads and road allowances.

13. A DECLARATION that there is no statutory limitation period that acts to bar an action by the Plaintiffs.

14. A DECLARATION that the Plaintiffs’ claim for damages for breach of the Agreement is not defeated by the doctrine of laches.

COSTS

[94] If the parties are unable to agree on costs, the Plaintiffs may make written submissions as to costs within seven (7) days of receipt of this decision. The Defendant shall respond within five (5) days.

[95] Submissions are to be no more than two (2) pages plus a costs outline, plus authorities, if any.

[96] Submissions that do not comply will not be considered.

The Honourable Mr. Justice Gary W. Tranmer

Released: May 15, 2012

COURT FILE NO.: CV-11-0404-00

DATE: 2012May15

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

GRAEME BROWN and MONICA BROWN

Plaintiff

– and –

THE CORPORATION OF THE CITY OF BELLEVILLE

Defendant

REASONS FOR JUDGMENT

Tranmer J.

Released: May 15, 2012