Lapolla v. The Estate of John Bostock, 2017 ONSC 7448

CITATION: Lapolla v. The Estate of John Bostock, 2017 ONSC 7448

COURT FILE NO.: CV-15-539856

DATE: 20171213

ONTARIO

SUPERIOR COURT OF JUSTICE

APPLICATION UNDER Section 50 of the Planning Act, R.S.O. 1990, c. P.13, as amended

BETWEEN:

MARIO LAPOLLA AND MARIA LAPOLLA

Applicants

– and –

THE ESTATE OF JOHN BOSTOCK by its Personal Representative JACKALENE FRASER and STEPHEN FRASER

Respondent

Darren Smith, for the Applicants

Christopher J. Rae, for the Respondent

HEARD: October 17, 2017

REASONS FOR DECISION

SANFILIPPO J.

A. Overview

[1] This application is brought for determination of a dispute regarding the enforceability of a certain Option Agreement affecting real estate owned by the applicants.

[2] The Option Agreement is said to grant to the respondent a right to request and receive a conveyance of a portion of a parcel of land that was initially conveyed in whole to the applicants through an agreement of purchase and sale with a previous owner. The Option Agreement mandated that the respondent pay a proportionate share of realty taxes during the years in which the Option Agreement was extant but not activated.

[3] The applicants submit that the Option Agreement is no longer valid, or alternatively was not at any time valid, on two grounds:

(a) The respondent is alleged to have failed to pay a proportionate share of property taxes and to have allowed this default to continue for in excess of two full years, with the result that the Option Agreement is no longer valid;

(b) The respondent’s conveyance of the property while retaining on option to purchase the abutting lands is contrary to s. 50 of the Planning Act, R.S.O. 1990, c. P.13 (the “Planning Act”), such that the Option Agreement is invalid.

[4] The respondent submits that there has been no default giving rise to termination of the Option Agreement and that the Option Agreement either complies with the Planning Act or is saved by s. 50(21) of the Planning Act.

[5] For the reasons set out herein, I have determined that the Option Agreement has not been breached by the respondent. I have also determined that while the Option Agreement contravenes s. 50(3)(b) of the Planning Act, the Option Agreement is nonetheless valid by operation of s. 50(21) as the Option Agreement expressly provides that it is subject to Planning Act compliance.

[6] Accordingly, this application is dismissed.

B. The History of Property Ownership by the Fraser Family

[7] In or about November 1991, members of the Bostock family and members of the Fraser family (collectively the “Fraser Family”), purchased a 25 acre parcel of land in the City of Vaughan (the “25 Acre Property”). This parcel of land consisted of a sizable house of some 5,700 square feet located at 11410 Pine Valley Road with some surrounding acreage (the “Main Property”) and 21 acres of largely agricultural land (the “21 Agricultural Acres”).

[8] The purchase of the 25 Acre Property by the Fraser Family was subject to an option agreement that had been registered in favour of a former owner of the property and assigned to the party who sold the property to the Fraser Family (the “1991 Option Holder”). This option agreement gave the 1991 Option Holder a right to purchase some or all of the 21 Agricultural Acres which, if fully and validly exercised, had the potential to leave the Fraser Family with only the Main Property.

[9] The purpose of the option agreement was well-understood by the Fraser Family. It permitted the Fraser Family to unconditionally own the Main Property while reserving to the 1991 Option Holder the possibility of maintaining some control over the 21 Agricultural Acres and the prospect of purchasing some or all of the 21 Agricultural Acres within the term of the option agreement provided that planning approvals could be obtained. In the interim, the holder of the option would have the use and enjoyment of the 21 Agricultural Acres and the ability to improve these lands to enhance the prospect of an eventual successful severance.

[10] The Fraser Family understood through this process, as well, that the 1991 Option Holder had a responsibility to pay a proportionate share of the realty taxes as apportioned between the Main Property and the 21 Agricultural Acres.

[11] In the period from 1991 to 1999, the 1991 Option Holder exercised the rights contained in the option agreement in relation to the 21 Agricultural Acres, severing with consent, acquiring and conveying portions of the 21 Agricultural Acres. By 1999, the portion of the 25 Acre Property that remained as between the 1991 Option Holder and the Fraser Family was reduced to a 12 acre parcel (the “12 Acre Property”) consisting of the Main Property now encased within approximately nine surrounding acres (the “Excess Lands”).

[12] It is this 12 Acre Property that is under consideration in this application. To understand better its configuration, a Plan of Survey is attached as a Schedule to these Reasons. The diagonal hash marks on the Plan of Survey show the Excess Lands. These are identified on the Plan of Survey as Parts 2, 3 and 4. The Main Property is the clear block identified as Part 1, surrounded on three sides, in a configuration much like the letter “U”, by the Excess Lands. The Main Property is approximately three acres and the Excess Lands are approximately nine acres making up the 12 Acre Property, although these sizes are unclear in the record and are approximated in this narrative more for scale than precision as the size of these different properties is not an issue in this application.

[13] The 12 Acre Property is situated at the intersection of Pine Valley Road and Kirby Side Road in the City of Vaughan. The Main Property, with its large house, fronted onto Pine Valley Road. The Excess Lands front on both Pine Valley Road and the Kirby Side Road. The Fraser Family built a small house that fronted on Kirby Side Road.

C. The Sale by the Bostock Estate to Gajcevic

[14] By September 2002, the ownership of the 12 Acre Property had passed in interest to the Estate of John Bostock whose personal representatives are Jackalene Fraser and Stephen Fraser (“Bostock Estate” or the “respondent”). On or about September 11, 2002, the Bostock Estate entered into an agreement of purchase and sale to sell the 12 Acre Property to Stjepan Gajcevic for a price of $599,000 (the “Gajcevic Purchase and Sale Agreement”). The closing of this sale was scheduled to complete on November 25, 2002.

[15] To be in a position to convey to Gajcevic the entirety of 12 Acre Property, free and clear of any continued interest by the 1991 Option Holder, the Bostock Estate bought out the rights of the 1991 Option Holder through payment of the sum of $237,000. Notice of the release of the 1991 Option Holder’s rights in the 12 Acre Property was registered on title on November 25, 2002. It was the intention of the Bostock Estate to no longer be the owner of the entirety of the 12 Acre Property but rather to become the Option Holder in relation to the Excess Lands.

[16] The Gajcevic Purchase and Sale Agreement reserved to the Bostock Estate an option to re-acquire the Excess Lands, as follows:

The purchaser acknowledges that the lands being purchased are shown as part 1 on the attached draft Reference Plan (schedule A) and comprise approximately 2.5 acres. The Purchaser further acknowledges that as a result of the Vendor’s land holdings containing a total of approximately 12.75 acres, shown as parts 1, 2, 3 and 4, that the Vendor shall transfer all 12.75 acres to the purchaser on closing but shall reserve, by way of an option agreement registered immediately following the said transfer, an option to acquire the surplus/ excess 10.25 acres. This option is exercisable by the Vendor from and after completion of this agreement.

The Purchaser agrees to execute and deliver on closing an Option Agreement substantially the (sic) form attached hereto.

[17] Attached as Schedule B to the Gajcevic Purchase and Sale Agreement was the form of option agreement that was intended to be implemented as part of the closing of the sale of the 12 Acre Property. An option agreement in the form and substantive content of the Schedule B was, indeed, executed and implemented on the closing of the Gajcevic Purchase and Sale Agreement on November 25, 2002 (the “Option Agreement”).

[18] The Option Agreement provided that the Gajcevic Purchase and Sale Agreement was conditional on the Bostock Estate retaining an option to repurchase the Excess Lands for no consideration. This option would be effective from the date of acquisition of the Excess Lands, November 25, 2002, to November 15, 2023 (the “Option Period”).

[19] The Option Agreement was registered on title to the Excess Lands on the closing of the sale of the 12 Acre Property to Mr. Gajcevic, as Instrument No. YR235708.

[20] The record contains an Acknowledgment of Trust re: Option that provides that Ian Fraser is the sole beneficial owner of the rights of the Bostock Estate in the Option Agreement although the registered owner of the Option Agreement is the Bostock Estate. Reference in these reasons to the “Option Holder” intends the respondent, Bostock Estate, through which Ian Fraser’s interest derives.

D. The Obligation to Pay a Share of Realty Taxes

[21] Section 15 of the Option Agreement grants to the Option Holder the use, possession and control of the Excess Lands, but along with these rights imposes on the Option Holder the obligation to pay a proportionate share of the realty taxes assessed against the 12 Acre Property, as follows (the “Realty Tax Sharing Provision”):

During the Option Period, notwithstanding anything to the contrary herein, the [respondent] shall retain the complete use, possession, and control of the Excess Lands, and the house, houses, or structures thereon, and may undertake among other things any use, surveying, testing, tree planting, relocating or removing, filling and grading, fencing or perform any other function deemed necessary by it to facilitate the use, enjoyment and or the further development of the Excess Lands including, without limitation the severance, rezoning and servicing of the Excess Lands.

During the Option Period, the [respondent] shall be responsible for the realty taxes applicable to the Excess Lands, and the house, houses, or structures thereon, including any penalty or interest accruing in respect of nonpayment of its share of such realty taxes and [the property owner] shall be responsible for the payment of the taxes in respect of the [12 Acre Property], except the Excess Lands. The amount of realty taxes to be paid by the [respondent] shall be determined by way of an apportionment assessment undertaken by the appropriate governmental Property Assessor for the Excess Lands, and house, houses or structures, which will be requested by the [respondent]. The [respondent] shall pay its portion of realty taxes so determined for the Excess Lands, and house, houses or structures, to the City of Vaughan at the billing times required by the City. During the Option Period, the [property owner] agrees to provide the [respondent] with notice of any assessments and the [respondent] shall have the right to appeal any such assessments.

[22] The intention of the Realty Tax Sharing Provision was that the total realty tax liability in relation to the 12 Acre Property would be shared between the owner of the 12 Acre Property and the Option Holder in a ratio that reflected the proportion of the realty taxes applicable to the Main Property compared with the portion of the realty taxes applicable to the Excess Lands. To come to an understanding as to how much of the property taxes were to be paid by the owner (Gajcevic) and how much by the Option Holder, the following steps were required:

(a) The Option Holder was to request an apportionment assessment by the appropriate Government Property Assessor;

(b) The Option Holder was required to pay its portion of the realty taxes so determined to the City of Vaughan when due;

(c) The property owner was required to provide the Option Holder with notice of any assessments;

(d) The Option Holder had the right to appeal any such assessments.

[23] At the time of the closing of the sale of the 12 Acre Property to Gajcevic, Ian Fraser states that he paid the amount of $6,177.76 to the City of Vaughan on account of realty taxes owed in relation to the Bostock Estate’s share of property taxes for the 12 Acre Property. The applicant disputes that this amount was paid by the Bostock Estate and submits, instead, that it was paid by Gajcevic. This is important to the applicants’ contention that there has been a failure on the part of the Bostock Estate to pay a share of property taxes as is necessary to comply with the Realty Tax Sharing Provision and thereby keep the Option Agreement in good standing.

[24] The record contains a Property Tax Statement produced by the City of Vaughan which confirms a payment in the amount of $6,177.76 on November 27, 2002, at or about the time of the sale of the 12 Acre Property to Gajcevic. The sworn testimony of Ian Fraser is that this amount was paid to the City of Vaughan on November 27, 2002 on the part of the Bostock Estate with the result that there would be no realty taxes owed at the time of the conveyance of the 12 Acre Property. This evidence was undisturbed on cross-examination.

[25] The respondent has established, on a balance of probabilities that the payment of $6,177.76 in realty taxes was paid by the Bostock Estate on November 27, 2002.

[26] This dispute concerning the attribution of the realty tax payment of $6,177.76 foreshadows one of the applicants’ two grounds for attack on the validity of the Option Agreement. The Realty Tax Sharing Provision specifies that default on the part of the Option Holder to pay its proportionate share of the realty taxes associated with the 12 Acre Property will cause the Option Agreement to be terminated and rendered void if the default continues for a period of two years (the “Option Termination Provision”).

[27] The Option Termination Provision made clear that the preservation of the Option Agreement requires the payment by the Bostock Estate of a proportionate share of the realty taxes assessed against the 12 Acre Property, derived by comparing the tax liability of the Excess Lands to the tax liability of the Main Property in numerical values that allow for payment of the entire realty tax liability of the 12 Acre Property.

[28] To this end, evidence was tendered by Ian Fraser of steps taken by him to promote collaboratively with Gajcevic the attendance at the offices of the realty tax assessor in order to implement an apportionment of the realty taxes owed by the Bostock Estate. This includes evidence of letters sent to Gajcevic in the period from May 1, 2003 to February 26, 2004. The only response received by Ian Fraser from Gajcevic was by letter dated March 4, 2004, in which Gajcevic proposed a sharing formula that was not acceptable to the Bostock Estate as it suggested allocating tax liability based on the relative square footage of the Excess Lands compared to the Main Property without factoring that the Main Property contained a large house that was considered to have more value than the remainder of the lands and buildings.

[29] Without ability to reach a sharing formula with Gajcevic, Ian Fraser testified to attending at the office of the realty tax assessor on July 28, 2004 to seek to determine unilaterally an allocation of the realty taxes. The note provided to Ian Fraser by Michelle Lundquist, a Customer Service Representative of MPAC, produced in evidence, calculated the assessment of the Main Property to be $597,957 and the assessment of the Excess Lands to be $197,025. A total 2003 assessment for 2004 taxes was determined to be $794,000 (rounded).

[30] Ian Fraser testified that no formal apportionment assessment was capable of being provided by Ms. Lundquist due to lack of authority. However, the values derived would support a realty tax apportionment of 75% attributable to the Main Property and 25% attributable to the Excess Lands.

[31] On November 13, 2003, Gajcevic entered into an agreement to sell the 12 Acre Property to the applicants, Mario and Maria LaPolla (collectively “LaPolla” or the “applicants”) for a payment of $683,000 and an assignment of the Option Agreement. The Option Agreement thereby became applicable to LaPolla in their capacity as purchasers of the 12 Acre Property.

[32] The sale of the 12 Acre Property by Gajcevic to LaPolla completed on August 31, 2004.

E. Challenges in the Payment of a Share of Realty Tax by the Bostock Estate

[33] Ian Fraser testified that after the acquisition of the 12 Acre Property by LaPolla, he reached out to Mario LaPolla to seek an agreement on the apportionment of realty taxes, without success due to lack of response from LaPolla. Mindful of the obligation contained in the Termination Agreement to pay a proportionate share of realty taxes and cognizant of the potential for loss of the Option Agreement if a “default” in this obligation were to exist for “a period of two (2) full years”, Ian Fraser initiated a practice of making lump sum payments as estimations of the proportionate share by the Bostock Estate as Option Holder to contribute to the realty taxes.

[34] Ian Fraser considered the payment of lump sum estimations to be necessary because no agreement on apportionment of realty tax assessment was capable of being achieved notwithstanding evidence of a series of exchanges between lawyers retained by Ian Fraser and lawyers retained by LaPolla, throughout the period from 2004 to 2006, and thereafter between Ian Fraser and Mario LaPolla directly in the period from 2006 to 2008.

[35] In cross-examination conducted on July 25, 2017, Mario LaPolla conceded, for the first time, agreement to a 75:25 apportionment of realty tax liability with the Bostock Estate (Cross-examination of Mario LaPolla, q. 530). However, in the period from acquisition by LaPolla of the 12 Acre Property on August 31, 2004 to July 5, 2017, the record disclosed no acknowledgment by LaPolla of acceptance of an apportionment formula with the Bostock Estate of 75:25.

[36] Mario LaPolla also conceded, in cross-examination, that he had not, at any time, provided Ian Fraser with copies of any of the tax bills received by LaPolla as the registered owner of the 12 Acre Property (Cross-examination of Mario LaPolla, q. 357). Indeed, the tax records and tax reconciliation tendered in evidence in the application were obtained by Ian Fraser from MPAC further to a Freedom of Information request. This procedure was necessary because LaPolla did not provide copies of the tax bills to Ian Fraser and knew that the City of Vaughan would not provide Ian Fraser with copies of the tax bills without his consent (Cross-examination of Mario LaPolla, qq. 552-559). The failure on the part of LaPolla to provide copies of tax bills to Ian Fraser on behalf of the Option Holder constitutes a breach by LaPolla of the Realty Tax Sharing Provision.

[37] The inability of Ian Fraser and LaPolla to enter into an apportionment agreement on the sharing of the tax liability resulted from the failure on the part of LaPolla to share information concerning the realty tax assessment, as was required to understand the amount of taxes owing, and the failure on the part of LaPolla to negotiate and consider in good faith an apportionment agreement. In light of these breaches by LaPolla, Ian Fraser had no option but to estimate the proportionate share of property taxes that were attributable to the Excess Lands and to make periodic, estimated payments in relation to them.

F. Has the Respondent Breached the Realty Tax Sharing Provision?

[38] The applicants submit that the respondent failed to pay that portion of the overall tax bill for the 12 Acre Property that ought to be allocated to the Excess Lands. On this basis the applicants contend that there has been a breach of the Realty Tax Sharing Provision by the respondent with the result that the respondent has lost the option to buy the Excess Lands. Simply put, there has been a default and that “such default continue[d] for a period of two (2) full years.”

[39] In order to determine this issue, a detailed factual analysis was conducted to assess the following:

a) Did the Bostock Estate fail to pay a share of realty taxes for each year from November 27, 2002 forward?

b) Did any such default “continue for a period of two (2) full years”?

[40] I have earlier found that the Bostock Estate paid $6,177.76 in realty taxes on November 27, 2002 such that its responsibility for realty taxes was current for the 2002 tax year.

[41] No contribution toward taxes was paid by Ian Fraser in 2003, even though the amount of $2,205.37 was owed. On October 7 and 14, 2004, Ian Fraser advanced lump sum payments totaling $10,000 which served to cure the default for 2003 and more than satisfy the 2004 tax obligation of $2,133.60, leaving a credit balance in the Bostock Estate’s realty tax obligation of $5,661.03. To preview the history of payments, from October 7, 2004 to present the Bostock Estate realty tax obligation has never been in a deficit balance.

[42] No payment was delivered by Ian Fraser in 2005. However, the tax liability owed for 2005 of $2,106.26 was covered by the credit balance of $5,661.03 such that at the end of 2005 there was a continued credit balance in the Bostock Estate’s realty tax obligation, now at $3,554.77.

[43] Ian Fraser next forwarded a realty tax payment on November 29, 2006 and again on December 4, 2006, each time in the amount of $2,000 for a total of $4,000. When this was applied against the 2006 tax obligation of $3,174.87 there was a continued credit balance in the Bostock Estate realty tax obligation, now at $4,379.90.

[44] Thereafter, for every year from 2006 to present, Ian Fraser paid an estimated amount of taxes within every calendar year that was for the purpose of ensuring a running credit balance in the realty tax obligation of the Bostock Estate. This was achieved. The amounts paid each year and the quantum of the running credit balances are well-established in the record and establish that the Bostock Estate was never in arrears of the amounts owed as a required share of realty taxes. Notwithstanding that the Bostock Estate had credit balances in their realty tax obligations each and every year, LaPolla alleges that the Bostock Estate is nonetheless in default of the Realty Tax Sharing Provision.

[45] The LaPolla’s submission is that default occurs under the Option Termination Provision when the Bostock Estate fails to pay its share of realty taxes for a period of two years regardless of whether the realty tax account is in a deficit or credit balance. The wording of the Option Termination Provision is as follows:

In the event the [Bostock Estate] fails and (sic) any time during the term hereof to pay its share of realty taxes in respect of the Excess Lands and structures as determined in accordance with this paragraph and such default continues for a period of two (2) full years, this Option Agreement shall be terminated and void. [Emphasis added.]

[46] The factual record shows that the Bostock Estate was behind in its payment of realty taxes only in 2003 (-$2,205.37) and then for less than two years (November 27, 2002 to October 7, 2004). The applicants concede that this period of arrears is not of sufficient duration to support termination of the Option Agreement.

[47] The applicants’ contention is that the Option Termination Provision mandates a payment within a period of two years, regardless of whether there is a credit or deficit balance in the realty tax obligation. There is only one time in the 14-year history of tax payments that the Bostock Estate did not make a tax payment within two full years; that is within a 730 day time period. Ian Fraser made a realty tax payment on October 7, 2004 and then again on November 19, 2006, representing a period that exceeded two full years. The applicants submit that this constitutes a default under the Option Termination Provision notwithstanding that during this time period the realty taxes were not in arrears.

[48] The applicants’ position is that a credit balance in the realty tax account does not have the effect of alleviating the obligation on the part of the Bostock Estate to submit a payment within a two year time period. The default is alleged to be allowing two full years to pass (October 7, 2004 to November 19, 2006) without making a payment even though the tax account had a credit balance.

Interpretation of the Option Agreement

[49] The Option Agreement, and the Realty Tax Sharing Provision and Option Termination Provision forming part of it, must be interpreted in accordance with the modern-day statement of contract interpretation set out in Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 47:

Regarding the first development [the adoption of an approach to contract interpretation which directs courts to have regard for the surrounding circumstances of the contract – often referred to as the factual matrix], the interpretation of contracts has evolved towards a practical, common-sense approach not dominated by technical rules of construction. The overriding concern is to determine “the intent of the parties and the scope of their understanding”. … To do so, a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning: … [Citations omitted.]

[50] This common-sense approach to contract interpretation builds upon the Supreme Court’s statements in Eli Lilly & Co. v. Novopharm Ltd., 1998 791 (SCC), [1998] 2 S.C.R. 129, that contractual intention of the parties is to be ascertained by reference to the words used in the contract read in light of the surrounding circumstances, with the objective of achieving a contract interpretation that is a fair and sensible commercial result. It is the surrounding circumstances that are paramount in this analysis, not evidence concerning the subjective intentions of the parties: Eli Lilly, at para. 54; Healy v. Gregory, 75 C.C.P.B. 178 (Ont. S.C.J.), at para. 61. Rather, the intentions of the parties must be discerned from the contract as a whole: BG Checo International Ltd. v. British Columbia Hydro & Power Authority, 1993 145 (SCC), [1993] 1 S.C.R. 12.

[51] The parties concurred in submission that the principles of contractual interpretation stated by Blair J.A. in Plan Group v. Bell Canada, 2009 ONCA 548, 96 O.R. (3d) 81, at para. 37, ought to be applied to interpretation of the Option Agreement. The principles set out by the Court of Appeal require that a meaning must be given to all the terms of the contract to avoid an interpretation that would render any term ineffective, that the intention of the parties is determined with reference to the words used in the contract and that objective evidence of the factual matrix underlying the negotiation of the contract be taken into consideration, without reference to subjective intention. Blair J.A. stated as well that a commercial contract is to be interpreted “in a fashion that accords with sound commercial principles and good business sense and that avoids a commercial absurdity”: para. 37.

[52] I cannot accept the submission by the applicants that a default can occur in payment of a share of realty taxes when the payments caused the tax account to be in a credit balance. This would require a determination that a payment made before a due date is not meaningful. Such a finding would distort the meaning of default in defining a payment obligation and would produce the very commercial absurdity that is cautioned against in Plan Group.

[53] I also cannot accept the submission by the applicants that a default occurs when a payment is not made within a period of two full years (730 days) even when there is a credit balance in the tax account. The applicants contend that the requirement to make a payment within the period of two full years transcends the payment of money toward the realty tax obligation and is a threshold requirement to evidence continued involvement and participation in the management of the Excess Lands. This is not a sound interpretation of the Realty Tax Sharing Provision.

[54] Indeed, in cross-examination, Mario LaPolla provided evidence that undermined the position taken by the applicants that payments were required from the Bostock Estate within two full years regardless of whether there was a credit balance in payment of a proportionate share of property taxes:

Q. 514: Sir, if you owe $10,000 taxes in 2010 but you pay $30,000, okay? Let’s say you only owe $10,000 for 2010 but you pay $30,000, and then in 2011, so you’ve overpaid by $20,000. Right?

A. Yeah.

Q. 515: That means in 2011, if you also owe $10,000, you’ve already paid. Right?

A. Yeah.

Q. 516. You don’t need to make another payment?

A. No.

Q. 517. You agree with that?

A. Yeah.

Q. 518. Then in 2013, if you also owed $10,000, you’ve already got a $10,000 credit. Right?

A. Yeah.

Q. 519. You don’t need to make another payment?

A. No.

Q. 520. Because it has already been paid?

A. Yeah.

[55] Read in its entirety, the Option Agreement contains a seemingly straightforward requirement on the part of the Option Holder to pay their proper share of the realty taxes and, should they fail to do so, to make sure that no such default persists for two full years. The ramifications of failing to do so are severe: the loss of the option to purchase the excess lands. As such, a finding that the Bostock Estate failed to comply with this requirement must be made on solid evidence of default. Here, we have a history of credit balances through estimations made by Ian Fraser of the amount of realty taxes owed. The applicants seek a determination that the credit balances ought to be unrecognized, on the basis that they were made early and over-estimated the amounts due, and that the option ought to be declared forfeited by the Bostock Estate on the basis of an interval between installment payments of more than two full years.

[56] Aside from the issue that such a position is not supported on the applicants’ own evidence, such an interpretation of the Option Agreement must be discarded in favour of an interpretation that produces a sensible commercial result, as is instructed in Consolidated-Bathurst v. Mutual Boiler, 1979 10 (SCC), [1980] 1 S.C.R. 888, at p. 901:

Similarly, an interpretation which defeats the intentions of the parties and their objective in entering into the commercial transaction in the first place should be discarded in favour of an interpretation … which promote a sensible commercial result.

[57] Even if the Bostock Estate were to have breached the Option Agreement by not paying a precise share of the exact tax obligation on a regular interval, as is alleged by the applicants, this breach would have been caused or, at a minimum, contributed to by the conduct of the applicants in failing to supply the respondent with copies of the realty tax bills and by failing to collaborate in establishing an allocation formula for sharing in the payment of the realty tax obligation. The applicants cannot seek a remedy for an alleged breach on the part of the Bostock Estate that the applicant’s induced or contributed to by their own conduct: Commissioner of Agricultural Loans v. Irwin, 1940 20 (ON CA), [1940] O.R. 489, aff’d 1942 4 (SCC), [1942] S.C.R. 196; S.M. Waddams, The Law of Contracts, 7th ed (Toronto: Thomson Reuters Canada Limited, 2017) at p. 419; Walker v. Jones (2008), 2008 47725 (ON SC), 298 D.L.R. (4th) 344 (Ont. S.C.J.), at paras. 142—46, and the authorities cited therein.

[58] To allow the applicants to take advantage of the default that they were contractually bound to help avoid would be contrary to the duty of honest performance of contract law, as stated in LeMesurier v. Andrus (1986), 1986 2623 (ON CA), 54 O.R. (2d) 1 (Ont. C.A.), at p. 7:

Vendors and purchasers owe a duty to each other honestly to perform a contract honestly made. As Middleton J. put it in Hurley v. Roy (1921), 1921 522 (ON CA), 50 O.L.R. 281 at 285, 64 D.L.R. 375 at p. 377: “The policy of the Court ought to be in favour of the enforcement of honest bargains …”.

[59] I have thereby determined that there has been no breach by the respondent of the Realty Tax Sharing Provision in the Option Agreement such that the applicants’ reliance on the Option Termination Provision is not established.

G. The Planning Act Issue

[60] The purpose of the Planning Act is to provide for land use planning, including subdivision control. The purpose of subdivision control is described in Pierotti v. Lansink (1979), 1979 1653 (ON CA), 25 O.R. (2d) 656 (Ont. Co. Ct.), aff’d 25 O.R. (2d) 656 (Ont. C.A.), at p. 658, as follows:

The overriding purpose of subdivision control is to curb the indiscriminate carving up of land into subdivisions to ensure orderly development and to enable the municipalities to safeguard themselves against the high cost of providing municipal services. In short, the legislation was and is intended to enable the municipalities of Ontario to control and regulate the division of land into individual building lots.

[61] The core operative provision of the subdivision control process is s. 50(3) of the Planning Act. This provision essentially prohibits conveyancing unless the conveyance satisfies one of the ten enumerated categories of acceptable conveyancing set out in sub-paragraphs 50(3)(a) to 50(3)(h). The category of s. 50(3) that is applicable to the conveyancing of the 12 Acre Property and of the grant of the Option Agreement is s. 50(3)(b), which provides as follows:

50(3) No person shall convey land by way of a deed or transfer, or grant, assign or exercise a power of appointment with respect to land, or mortgage or charge land, or enter into an agreement of sale and purchase of land or enter into any agreement that has the effect of granting the use of or right in land directly or by entitlement to renewal for a period of twenty-one years or more unless,

(b) the grantor by deed or transfer, the person granting, assigning or exercising a power of appointment, the mortgagor or chargor, the vendor under an agreement of purchase and sale or the grantor of a use of or right in land, as the case may be, does not retain the fee or the equity of redemption in, or a power or right to grant, assign or exercise a power of appointment in respect of, any land abutting the land that is being conveyed or otherwise dealt with other than land that is the whole of one or more lots or blocks within one or more registered plans of subdivision. [Emphasis added.]

[62] Section 50(3)(b) is designed to respond to the very problem that prompted subdivision control: the division of land into smaller parcels. This section makes clear that the landowner is not allowed to convey property in circumstances in which the property owner retains ownership of the adjoining land. The terminology employed by s. 50(3)(b) for this statutory mandate is that the vendor “does not retain the fee … of … any land abutting the land that is being conveyed”.

[63] The concept of “fee” in property law has a long history. Most fundamentally, the fee refers to the interest in land that confers on its holder the absolute right to dispose of the land, as addressed by the Court of Appeal in Reference re Certain Titles to Land in Ontario, 1973 609 (ON CA), [1973] 2 O.R. 613 (Ont. C.A.), at p. 622:

In litigation involving the application of the Planning Act, R.S.O. 1960, c. 296, and amendments, the word “fee” gave rise to difficulty and the divergent views as to its proper signification held by members of the Bar and of the judiciary stamp it as an ambiguous term. ... The question arose in Re Redmond et al. and Rothschild, 1970 317 (ONCA), [1971] 1 O.R. 436, 15 D.L.R. (3d) 538, in which this Court, without referring to the Carter and Congram case effectively overruled it. Kelly, J.A., stated at pp. 439-40 O.R., pp. 541-2 D.L.R.: …

Having in mind the purpose of Part II of the Planning Act, and the context of the portions of the Act in which the words appear, it is my opinion that the retention of which the Legislature sought to prohibit by s. 26 was that of the power to dispose of the abutting lands as distinguished from an interest in those lands; “fee” must accordingly refer to such an interest in the abutting lands as confers on the holder thereof the absolute right to dispose of the lands.

[64] In Re Forfar and Township of East Gwillimbury et al, 1972 1231 (SCC), [1972] 28 D.L.R. (3d) 512n (S.C.C.), Martland J. stated as follows:

We are all in agreement with the reasons delivered on behalf of the Court of Appeal by Mr. Justice Schroeder. We think that, fairly construed, the words “retain the fee” embrace not only the holder of the fee, but, as well, the holder of the power over the fee, and we also think that the term “grantor” must have a concordant meaning.

[65] The characterization of the term “fee”, as determined by Justice Schroeder in the Ontario Court of Appeal in Re Forfar and Township of East Gwillimbury et al, 1971 543 (ON CA), [1971] 3 O.R. 337 (Ont. C.A.), at p. 344, and referred to by the Supreme Court, is as follows:

I take it to be the view of the members of the Court who decided Re Richmond et al. and Rothschild that the term “fee” as used in s. 26(1)(b) [the predecessor to section 50(3)(b)] meant such an estate or interest as was reasonably necessary to accomplish the purpose which the legislators had in view and was not used in its narrow, technical, legal sense. … It is against the retention of such power of control over alienation of the property abutting the land conveyed or otherwise dealt with that the prohibiting provisions of [s. 50(3)(b)] are aimed.

[66] The legislative intention underlying s. 50(3)(b) is clear. Section 50(3)(b) prohibits the retention by a vendor of a fee interest in an abutting land.

Does the Option Agreement Violate the Planning Act?

[67] The applicants contend that the Option Agreement breaches s. 50 of the Planning Act and thereby ought to be declared void. In particular, the applicants submit that the conveyance of the 12 Acre Property by the Bostock Estate while retaining the option to purchase the Excess Lands contravenes s. 50(3)(b) of the Planning Act by reason of the Bostock Estate retaining the fee interest in lands abutting those that are conveyed. At the core of this submission is that the Bostock Estate is both grantor of title to the 12 Acre Property and the grantee of the rights in the Option Agreement and the applicants’ predecessor in title, Gajcevic, was conversely both the grantee of the title to the 12 Acre Property and the grantor of the Option Agreement. As the result of operation of the Option Agreement would be that the Bostock Estate would be the owner of a portion (Excess Lands) of the abutting land conveyed (the 12 Acre Property), the applicants contend that there is a breach of s. 50(3)(b) of the Planning Act.

[68] The applicants’ submission necessitates an analysis of two conveyances or “dealings” with the 12 Acre Property: first, does the conveyance of the 12 Acre Property, which had imbedded in it the Option Agreement, violate the Planning Act; second, does the Option Agreement, itself, violate the Planning Act.

[69] The Gajcevic Purchase and Sale Agreement, by which the Bostock Estate conveyed the entirety of the 12 Acre Property to Gajcevic, like the agreement of purchase and sale by which Gajcevic conveyed the 12 Acre Property to LaPolla, does not contravene the Planning Act. The entirety of the property was conveyed. No part of the property was retained by the vendor. This was the finding in Marcrob Estates Ltd. v. Servedio, [1976] O.J. No. 1281, 1 R.P.R. 344 at 345 (Ont. H.C.), aff’d [1977] O.J. No. 800, 1 R.P.R. 344 at 352 (Ont. C.A.), where Cromarty J. determined that the retention of the right to re-purchase a portion of the conveyed property did not constitute the retention of a fee interest (at para. 14):

There is no evidence that Marcrob was the owner of any lands abutting those conveyed to Rosa and Vincenzo Crocitto. If it is the defendants’ argument that by putting an option to purchase into the agreement of purchase and sale, he was attempting to retain the fee in the “back lands” it appears to me that it conveyed all of its lands subject only to the right to purchase a portion of them if and when the Planning Act was complied with in accordance with the terms of the agreement.

[70] A similar determination was made in Ratnanather v. Kosalka (1995), 1995 7075 (ON SC), 24 O.R. (3d) 326 (Ont. Gen. Div.), wherein Langdon J. held at p. 334 that a conveyance of the entirety of a parcel of land that was subject to an option to buy-back a portion of the entire parcel conveyed did not contravene the Planning Act as the seller did not retain the fee in abutting lands:

While this transaction was structured to avoid the Planning Act restrictions on the retention of abutting land, it did so by compliance, i.e., by a transfer of the whole. The risk of getting back less than the whole was borne by the contracting party. The Act does not forbid risk-taking. The purpose of the Act is to prevent the subdivision of land without planning approval. No parcel of land was subdivided. The sellers retained an interest in part of the parcel but not one equal to a power to dispose. The option and its exercise would never create more than one parcel if approval were not forthcoming. I conclude that the seller did not retain the fee in abutting lands within the meaning of the Planning Act. This conclusion accords with the result of the decision of the Court of Appeal in Marcrob.

[71] In the Bostock Estate conveying to Gajcevic the entirety of the 12 Acre Property, just like its conveyance by Gajcevic to LaPolla, even with the Option Agreement as a fundamental element of the transaction, the vendor in each case did not retain a fee in the 12 Acre Property being conveyed. The Bostock Estate has no power to dispose of or otherwise affect the Excess Lands until the Option Agreement is activated: in the meantime, the entirety of the 12 Acre Parcel is owned by LaPolla. As such, the conveyance of the 12 Acre Property did not contravene the Planning Act. Like Langdon J.’s determination in Ratnanather, this conclusion accords with the Court of Appeal’s reasoning in Marcrob.

[72] It is the Option Agreement that gives rise to non-compliance with s. 50(3)(b) of the Planning Act. An option to purchase land creates an equitable interest in the land that is exercisable by the option holder immediately upon the grant of the option: Canadian Long Island Petroleums Ltd. v. Irving wire Products (1974), 1974 190 (SCC), [1975] 2 S.C.R. 715.

[73] In Morgan Trust Co. of Canada v. Falloncrest Financial Corp., 2006 38728 (ON CA), 218 O.A.C. 71 (Ont. C.A.), the Court applied the finding in Dical Investments Ltd. v. Morrison (1990), 1990 6606 (ON CA), 75 O.R. (2d) 417 (Ont. C.A.), that options to purchase are subject to the application of s. 50(3) of the Planning Act. The Court of Appeal then determined, at para. 17, that an option to re-purchase land where the vendor would retain abutting land is a breach of the Planning Act:

In this case 787 purchased all seventy-four acres of the Wolscht property and then granted an option to purchase back two acres of the property to the Wolschts while retaining abutting lands that are not the whole of one or more lots or blocks within a registered plan of subdivision. The Option Agreement is therefore in violation of s. 50(3) of the Planning Act.

[74] The Option Agreement calls for LaPolla to convey to the Bostock Estate, and now to Ian Fraser through transfer, the Excess Lands while LaPolla retains the fee in the abutting Main Property. This constitutes the potential conveyance of land by a vendor while retaining the fee interest in the abutting property. The applicants’ complaint of the Option Agreement is well-founded in that, when activated, the Option Agreement would require the applicants to convey abutting lands (Excess Lands) while retaining a fee interest in the Main Property. This would be contrary to the legislative purpose of s. 50(3)(b) of the Planning Act and applicable case law, and would thereby breach the principle against retaining a fee in land that abuts the land conveyed.

[75] Hence, the Option Agreement is in breach of the Planning Act in any event of my determination that the conveyance of the entire 12 Acre Parcel does not contravene the Planning Act.

[76] The finding that the conveyance of the 12 Acre Parcel did not involve the retention of a fee interest by the vendor is made on the authority of Marcrob and Ratnanather and is predicated on there being a single conveyance of the 12 Acre Property in the form of the conveyance of the entirety of the land that the vendor then-owned. In the event that the conveyance of the 12 Acre Parcel with its included grant of the Option Agreement constitutes two conveyances or dealings with the property, then s. 50(15) of the Planning Act would be pertinent. Section 50(15) of the Planning Act provides as follows:

Where a person conveys land or grants, assigns or exercises a power of appointment in respect of land, or mortgages or charges land, or enters into an agreement of sale and purchase of land, or enters into any agreement that has the effect of granting the use of or right in land directly or by entitlement to renewal for a period of twenty-one years or more by way of simultaneous conveyances of abutting lands or by way of other simultaneous dealings with abutting lands, the person so conveying or otherwise dealing with the lands shall be deemed for the purposes of subsections (3) and (5) to retain, as the case may be, the fee or the equity of redemption in, or the power or right to grant, assign or exercise a power of appointment in respect of, land abutting the land that is being conveyed or otherwise dealt with but this subsection does not apply to simultaneous conveyances or other simultaneous dealings involving the same parties acting in their same respective capacities. [Emphasis added.]

[77] Section 50(15) applies to simultaneous conveyances or dealings in abutting lands and deems the retention of a fee interest in certain prescribed circumstances. There is symmetry in the wording of ss. 50(3)(b) and 50(15) that allows for their seamless connection. The words emphasized by italics in the sections quoted above in paragraphs 61 and 76 of these reasons are identical. Section 50(3)(b) prohibits the retention by a vendor of a fee interest in an abutting land and s. 50(15) tells us when the fee interest is deemed to have been retained. If the sale of the 12 Acre Parcel by the Bostock Estate to Gajcevic and the grant of the Option Agreement by Gajcevic to the Bostock Estate constitute two dealings in the 12 Acre Parcel, then a fee interest in the conveyed lands is deemed to have been retained by the transferor where the following elements are satisfied:

a) The party enters into an agreement effecting a right in land directly or by entitlement to renewal for a period of twenty-one years or more;

b) There are simultaneous conveyances or “other dealings” with abutting lands;

c) The simultaneous conveyances or other dealings involve the same parties acting in different capacities.

[78] The applicants and respondent agree that the Option Agreement constitutes an agreement effecting a right in land. The parties also agree that the Option Agreement involves an Option Period of twenty-one years or more. The Option Agreement is executed on September 11, 2002 and is exercisable by the Bostock Estate from that date until November 15, 2023: being a period in excess of twenty-one years. No argument was made that the Option Period was ten days shy of twenty-one years in duration on the basis that the Option Agreement was registered on title on November 25, 2002.

[79] The parties disagree whether the conveyance of the 12 Acre Property and the grant of the Option occurred simultaneously, but agree that these dealings involve the same parties acting in different capacities. Namely, the Bostock Estate was the transferor of the 12 Acre Property and the grantee of the Option. Correspondingly, the applicants’ predecessor in title, Gajcevic, was the transferee of the 12 Acre Property and the grantor of the Option.

[80] But were the conveyance of the 12 Acre Property and the grant of the Option Agreement simultaneous? The respondent submitted that although the registrations took place on the same day, November 25, 2002, the registration of the Transfer Deed in relation to the conveyance of the 12 Acre Property (registration number YR235698) took place before the registration of the Notice of Option to Purchase (registration number YR235708), with the result that the dealings in the land were not simultaneous. This position is without support in applicable case law. By way of example, in Purolator Courier Ltd. V. MacLeod (1975), 1975 650 (ON SC), 9 O.R. (2d) 256 (Ont. Co. Ct.), at p. 257, the court held as follows:

The word “simultaneous” is applicable to two or more individual events which occur at precisely the same time. These events, for example, may be the delivery of two separate deeds of conveyance, as in Cait v. Lemrac Holdings Ltd., 1969 429 (ON SC), [1969] 2 O.R. 544 (H.C.), and in Buttery v. Alexander (1973), 1973 454 (ON SC), 3 O.R. (2d) 87, 44 D.L.R. (3d) 503 (Co. Ct.), or may be two distinct transactions included in one deed of conveyance as in situation No. 3 in Certain Titles to Land in Ontario, Re, 1973 609 (ON CA), [1973] 2 O.R. 613, 35 D.L.R. (3d) 10 (C.A.), where one deed purported to convey certain lands to B and other lands to C.

[81] The question of whether the conveyance of the 12 Acre Property and the granting of the Option Agreement are simultaneous transactions must be determined by examination of the substance of the transaction rather than its form: Re Forfar and Township of East Gwillimbury et al, 1971 543 (ON CA), [1971] 3 O.R. 337 (Ont. C.A.), aff’d 1972 1231 (SCC), [1972] 28 D.L.R. (3d) 512n (S.C.C.), at pp. 343-4. In my view, the registrations of the transfer of title to the 12 Acre Property and the granting of the Option Agreement for a portion of that property would be considered simultaneous. As such, in the event that the conveyance of the 12 Acre Property and the granting of the Option Agreement are two conveyances or dealings with the property, s. 50(15) of the Planning Act would deem that a fee interest in the conveyed land was retained by the vendor in non-compliance with s. 50(3)(b).

[82] In summary, in application of Marcrob and Ratnanather, I have determined that the conveyance of the 12 Acre Property complies with the Planning Act in that a fee interest was not retained by the vendor. In the event that I am wrong in my determination that the conveyance of the 12 Acre Property, imbedded with the Option Agreement, is not one transaction affecting the entirety of the land but rather two conveyances or dealings with the property, then s. 50(15) of the Planning Act would deem that a fee interest in the conveyed land was retained by the vendor in non-compliance with s. 50(3)(b). In either event, the Option Agreement is in breach of s. 50(3)(b) of the Planning Act because it creates an equitable interest in the optioned land while allowing the grantor to retain the abutting lands.

Can the Breach of the Planning Act be Saved by Section 50(21)?

[83] As noted earlier in these reasons, an option to purchase land, such as the Option Agreement, creates an equitable interest in the land that is exercisable by the option holder immediately upon the grant of the option: Canadian Long Island Petroleums Ltd. This calls into question, prior to the actual exercise of the right to purchase, the validity of the Option Agreement. Although I have determined that the Option Agreement violates the Planning Act, this is not determinative of its validity.

[84] The Supreme Court held, in Queensway Construction Ltd. v. Trusteel Corp. (Can.) Ltd., 1961 9 (SCC), [1961] S.C.R. 528, at p. 533, that an agreement affecting land can be valid even though in contravention of the Planning Act if the agreement is conditional on compliance with the Planning Act. At p. 533, Judson J. stated, “I am of the opinion that a contract may be made in contemplation of planning board approval”. In that decision, contravention of s. 24(1) of the Planning Act did not cause the agreement to be invalid as the rights contained in the agreement were conditional on Planning Act compliance.

[85] The principle in Queensway Construction has been engrafted into s. 50(21) of the Planning Act. Indeed, s. 50(21) has been referred to as the “statutory enactment of Queensway Construction”: Sidney H. Troister, The Law of Subdivision Control in Ontario, 3d ed. (Aurora: Thomson Reuters Canada Limited, 2010) at p. 28.

[86] Section 50(21) of the Planning Act states as follows:

An agreement, conveyance, mortgage or charge made, or a power of appointment granted, assigned or exercised in contravention of this section or a predecessor thereof does not create or convey any interest in land, but this section does not affect an agreement entered into subject to the express condition contained therein that such agreement is to be effective only if the provisions of this section are complied with. [Emphasis added.]

[87] In Morgan Trust Co. of Canada v. Falloncrest Financial Corp. (2006), 30 M.P.L.R. (4th) 8 (Ont. S.C.J.), at para. 3, Morawetz J. held that an agreement that is in breach of s. 50(3) of the Planning Act can be saved by s. 50(21):

An agreement in contravention of section 50(3) may be remedied by section 50(21) of the Act. This latter subsection will save the contravening agreements where the agreement entered into is subject to an express condition contained therein that such agreement is to be effective only if the provisions of this section are complied with. [Emphasis added.]

[88] In Morgan Trust, the option agreement was incapable of being remedied because the agreement did not contain an express condition stating that the option was only effective if the provisions of the Planning Act are complied with. This determination was upheld on appeal: Morgan Trust Co. of Canada v. Falloncrest Financial Corp., 2006 38728 (ON CA), 218 O.A.C. 71 (Ont. C.A.). Contrast the decision of Goodman J., as he then was, in Smale v. Van der Weer (1977), 1977 1384 (ON SC), 17 O.R. (2d) 480 (Ont. H.C.J.), where an agreement that would otherwise breach the Planning Act was upheld as valid by reason of a saving provision that made clear that the agreement would be effective only if the provisions of the Planning Act were complied with. Also see Dexter Road Development Corp. v. Itkine, 2015 ONCA 81, 50 R.P.R. (5th) 36.

[89] It is not a violation of the Planning Act to enter into a non-compliant agreement that expressly states that its operation is subject to compliance with the Planning Act. This is the effect of s. 50(21), the Supreme Court decision that spawned it and the cases that have applied it. The offending agreement, in this case the Option Agreement, immediately creates an equitable interest in land (Canadian Long Island Petroleums) but the Planning Act breach is purely theoretical until acted upon. In this case, the Option Agreement creates an equitable interest in land upon formulation but only becomes operational if made compliant with the Planning Act so long as it contains a saving provision.

[90] The Option Agreement contains such a “saving provision” in paragraph 9, which provides, in pertinent part, as follows:

This agreement is subject to compliance with the subdivision control provisions of the Planning Act of Ontario and amendments thereto. The Purchaser [Bostock Estate] may at any time or times following the date of this Agreement and during the Option Period make any necessary or desired application or applications to the appropriate land division authority, site plan authority, Committee of Adjustment and or to Council to obtain any approvals required to permit the conveyance of the Excess Lands or any part or parts thereof to the Purchaser [Bostock Estate] in compliance with the Planning Act. … (the “Saving Provision”).

[91] Interestingly, the Notice of Option to Purchase registered against title to the 12 Acre Property states in its Box 4, for further clarity: “The Option to Purchase is being granted by the Transferor to the Transferee for no consideration, subject to consent for severance being granted” [emphasis added].

[92] The applicants acknowledge that the Saving Provision constitutes the “express condition” required by s. 50(21) to save an otherwise non-compliant agreement affecting land: applicants’ factum, para. 42. In any event, the Saving Provision would have been determined to be an “express condition” as required by s. 50(21) of the Planning Act on the authority of Dexter Road Development Corp., at para. 8:

We do not accept the submission that the case law supports the proposition that s. 50 must be specifically referenced. To the contrary, in our view, by making the Option Agreement conditional upon compliance with the [Planning] Act, the Option Agreement satisfied the statutory requirement that there be an express condition that it would only be effective if the requirements of s. 50 were satisfied. Reference to the Act in general is sufficient to meet the obligation imposed by s. 50(21) because it is impossible to effect a severance that is in compliance with the Act, but not s. 50 of the Act.

[93] The applicants contended nonetheless that the Option Agreement is invalid and incapable of being saved by s. 50(21) on the basis that s. 50(21) is only applicable where there is compliance with the Planning Act: applicants’ factum, para. 42. This submission is based on the wording in s. 50(21) that “such agreement is to be effective only if the provisions of this section are complied with.” The alternative position stated by the applicants is that even if s. 50(21) is applicable in the case of non-compliance with the Planning Act, a qualitative assessment ought to be conducted to determine whether there is any possibility that the identified breach of the Planning Act might be cured and, if not, then the contract ought not to be saved on the basis of s. 50(21).

[94] I cannot accept the applicants’ interpretation of s. 50(21), which I find to be inconsistent with the wording of that section and with the Supreme Court decision in Queensway Construction. With reference to a breach of s. 50(3)(b), the applicants’ submission runs contrary to the finding in Morgan Trust Co. and Ratnanather, at p. 331, which states: “[t]he purpose of s-s. 50(21) is to validate and facilitate agreements which otherwise would be made ineffective by the language of the infamous s. 50(3)(b).”

[95] The effect of s. 50(21) is not to cure the contravention of the Planning Act. Rather, where the Option Holder has specifically acknowledged that the Option to Purchase is “effective only if the provisions of this section are complied with”, as the Saving Provision does, then s. 50(21) defers the determination of any contravention of the Planning Act until the Option to Purchase is actually triggered and acted upon. In the meantime, the Option Holder can do precisely what the Saving Provision authorizes the Option Holder to do: namely, seek those approvals required from the appropriate authorities, including land division, site plan, committee of adjustment or Council, to obtain the approvals required to permit the conveyance of the optioned lands.

[96] I have determined that the Option Agreement is non-compliant with s. 50(3) of the Planning Act but, based on the Saving Provision, is saved by operation of s. 50(21) of the Planning Act and is therefore valid.

H. Disposition

[97] The applicants have not established a breach by the respondent in payment of a proportionate share of the realty taxes required by the Realty Tax Sharing Provision in the Option Agreement such that the applicants’ reliance on the Option Termination Provision is not established.

[98] The Option Agreement contravenes s. 50(3)(b) of the Planning Act because it creates an equitable interest in the optioned land while allowing the grantor to retain the abutting lands. However, the Option Agreement specifically provides that it is subject to compliance with the Planning Act. As such, in accordance with s. 50(21) of the Planning Act, the respondent holds an option to purchase that is valid subject to compliance with the Planning Act. As in Ratnanather, the risk of compliance with the Planning Act as will be required to obtain a conveyance of the Excess Lands is borne by the respondent. But this does not render the Option Agreement invalid.

[99] As I have determined that the Option Agreement is valid, this application is dismissed.

I. Costs

[100] The parties are encouraged to discuss and attempt to resolve the issue of costs.

[101] In the event that the parties are not able to reach agreement on the issue of costs, the respondent shall deliver written cost submissions of no more than five pages within twenty days of the release of this decision. Counsel for the respondent shall deliver written submissions of a similar length within forty days of release of this decision. I will then consider and deliver an endorsement on the issue of costs.

Sanfilippo J.

Released: December 13, 2017

SCHEDULE TO REASONS

PLAN OF SURVEY OF PART OF EAST HALF OF LOT 30,

CONCESSION 7, CITY OF VAUGHAN

CITATION: Lapolla v. The Estate of John Bostock, 2017 ONSC 7448 COURT FILE NO.: CV-15-539856 DATE: 20171213

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

MARIO LAPOLLA AND MARIA LAPOLLA

Applicants

– and –

THE ESTATE OF JOHN BOSTOCK by its Personal Representative JACKALENE FRASER and STEPHEN FRASER

Respondent

REASONS FOR JUDGMENT

Sanfilippo J.

Released: December 13, 2017