Icona Hospitality Inc. v. 2748355 Canada Inc. et al.
[Indexed as: Icona Hospitality Inc. v. 2748355 Canada Inc.]
Ontario Reports Ontario Superior Court of Justice Cavanagh J. July 6, 2018 142 O.R. (3d) 109 | 2018 ONSC 4239
Case Summary
Real property — Restrictive covenants — Applicant purchasing land from respondent in 2005 as site for hotel — Applicant entering into restrictive covenant which provided that site would not be used for any other purpose — Site being within area subsequently identified by municipality as Urban Growth Centre — Applicant proposing to redevelop site by building high-rise mixed-use towers — Applicant's application under s. 61(1) of Conveyancing and Law of Property Act to delete restrictive covenants from title being dismissed — Applicant failing to show that restrictive covenants were spent and that their assertion by respondent would be meaningless — Applicant also failing to show that restrictive covenants were so unsuitable as to be of no value and that their assertion by respondent would be vexatious — Conveyancing and Law of Property Act, R.S.O. 1990, c. C.34, s. 61(1).
The applicant purchased property (the "site") from the respondent 274 in 2005. Prior to the sale, the site formed part of a larger parcel. Over the years, the respondent sold sections of that parcel to others, and remained the owner of approximately 70 acres. As part of its purchase, the applicant entered into a restrictive covenant with the respondent which provided that the site would not be used for any purpose other than the construction, development, operation and management of a hotel. The site was within an area identified by the municipality in 2010 as an Urban Growth Centre. The applicant proposed to redevelop the site by building mixed use towers. It brought an application pursuant to s. 61(1) of the Conveyancing and Law of Property Act ("CLPA") for an order deleting the restrictive covenants from title. The respondent and the owners of adjacent lands opposed the application.
Held, the application should be dismissed.
On an application under s. 61(1) of the CLPA, the court must decide whether the restrictive covenant is spent, or so unsuitable as to be of no value, and whether its assertion would be clearly vexatious. The jurisdiction under s. 61(1) must be exercised with caution, and an order will seldom be granted if prejudicial to the adjacent landowner. The applicant had not shown that the restrictive covenants were spent and that their assertion by the respondent would be vexatious. In order to find that the restrictive covenants were spent, it would be necessary to find that the circumstances that prevailed when they were given had so materially changed that the continued assertion of the restrictive covenants would be vexatious. While the area in which the site was located was not identified by the municipality as an Urban Growth Centre until 2010, at the time the restrictive covenant agreement was entered into, the applicable planning regime had identified the area as an area for greater intensification. The parties contemplated the possibility of future development of the site, and they agreed to address future development through the restrictions provided for by the restrictive covenant agreement. The applicant had also failed to show that the restrictive covenants were so unsuitable as to be of no value and that their assertion by the respondent would be vexatious. The court's determination of whether a restrictive covenant is so unsuitable as to be of no value is not to be made by examining the effect of the modification or discharge of a restrictive covenant on the monetary value of the respondent's land, through [page110] the court's assessment of expert appraisal evidence. That may be a factor for consideration, and in some cases an important factor, but it is not determinative. The applicant had not established that its proposed redevelopment of the site most likely would result in an increase in value of the respondent's lands, and even if it had established that fact, it could not be concluded from that fact alone that the restrictive covenants were so unsuitable as to be of no value and that their assertion by the respondent would be vexatious. There was evidence that the restrictive covenants remained of value to the respondent.
George (Re) (1926), 59 O.L.R. 574, [1926] O.J. No. 72, [1927] 1 D.L.R. 155 (C.A.); Miller and Lawrie (Re), [1978] O.J. No. 1441, 1978 CarswellOnt 2712 (H.C.J.); Ontario Lime Co. (Re), [1926] O.J. No. 505, [1927] 1 D.L.R. 765 (C.A.); Remicorp Industries Inc. v. Metrolinx (2017), 2017 ONCA 443, 138 O.R. (3d) 109, [2017] O.J. No. 2805, 414 D.L.R. (4th) 611, 83 R.P.R. (5th) 15, 279 A.C.W.S. (3d) 653; Silver Seven Corporate Centre Inc. v. 2871220 Canada Ltd., 2017 ONSC 5091, [2017] O.J. No. 4651, 90 R.P.R. (5th) 147, 285 A.C.W.S. (3d) 430 (S.C.J.); Van Bork v. William Carson Holdings Ltd., [1998] O.J. No. 4523, 80 O.T.C. 40, 83 A.C.W.S. (3d) 692 (Gen. Div.); Wainfleet (Township) (Re), [2002] O.J. No. 183, [2002] O.T.C. 49, 111 A.C.W.S. (3d) 363 (S.C.J.), consd
Other cases referred to Beardmore (Re), [1935] O.R. 526, [1935] O.J. No. 256, [1935] 4 D.L.R. 562, [1935] O.W.N. 479 (C.A.)
Statutes referred to Conveyancing and Law of Property Act, R.S.O. 1990, c. C.34, s. 61(1) [as am.]
Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 57.01(1)
APPLICATION for an order deleting restrictive covenants from title.
Counsel: William A. Chalmers, for applicant. Patrick G. Duffy and Michael A. Currie, for respondent 2748355 Canada Inc. Raymond M. Slattery, for respondent RI Vaughan Ltd.
CAVANAGH J.: --
Introduction
[1] The applicant, Icona Hospitality Inc. ("Icona"), wishes to redevelop lands that it purchased in 2005 from the respondent 2748355 Canada Inc. ("274 Canada"). At the time of the sale, the parties entered into an agreement that includes restrictive covenants. Icona requires the deletion of the restrictive covenants in order to complete its proposed redevelopment.
[2] Icona brings this application pursuant to s. 61(1) of the Conveyancing and Law of Property Act, R.S.O. 1990, c. C.34 ("CLPA") for an order deleting the restrictive covenants from [page111] title to its lands. The respondents 2748355 Canada Inc. and RI Vaughan Ltd. ("RI Vaughan"), owners of adjacent lands and beneficiaries of the restrictive covenants, oppose the application.
[3] For the following reasons, I conclude that Icona is not entitled to an order deleting the restrictive covenants from title to its land and that its application must be dismissed.
Background Facts
[4] Icona purchased the property known municipally as 3201 Highway No. 7 West in the City of Vaughan (the "subject site") from 274 Canada in 2005. It is the registered owner of the subject site. The subject site is currently occupied by a Hilton Hotel. The subject site is designated as an Urban Growth Centre under the current provincial growth plan, which anticipates major growth through intensification.
[5] Prior to its sale, the subject site formed part of a larger parcel bounded by Highway 407, Highway 7, Highway 400 and Jane Street that was purchased by 274 Canada in 1995 (the "interchange lands"). Over the years, 274 sold sections of the interchange lands, including the sale of the subject site to Icona. 274 Canada remains the owner of approximately 70 acres of the interchange lands (the "274 lands").
[6] As part of its 2005 purchase, Icona entered into a restrictive covenant agreement with 274 Canada that was registered on title to the subject site on April 29, 2005 (the "restrictive covenant agreement"). The restrictive covenant agreement provides that the subject site shall not be used for any purpose other than the construction, development, operation and management of a hotel with meeting and banquet facilities and any purposes ancillary or incidental thereto. The restrictive covenant agreement also includes other restrictions on the use of the subject site. The restrictive covenant agreement also provides that the covenantor shall not construct or erect on the subject site any building, structure or other improvement without first complying with the development restrictions set out in a schedule to the restrictive covenant agreement. These restrictions include a requirement for approval of development plans by the duly authorized agent of 274 Canada.
[7] The restrictive covenant agreement has a term of 40 years from the date of registration (that is, April 29, 2045) and a provision under which 274 Canada may, in its sole and absolute discretion, waive, modify or cancel the restrictive covenants. The restrictive covenant agreement also provides that 274 Canada may not unreasonably withhold or delay its consent to a written request to waive the restriction to only operate a hotel on the [page112] subject site received more than 20 years after the date of registration (that is, April 29, 2025).
[8] At the time that the restrictive covenant agreement was entered into in 2005, the City of Vaughan had recognized the future growth of the area in which the subject site is located and it had identified this area as one of the two potential areas for the future City Centre. Official Plan Amendment No. 500 ("OPA 500") was approved by the Ontario Municipal Board in 1998, and established an intent to ensure that this area will become, over time, the central focus of the City of Vaughan, with potential to become the "downtown". OPA 500 included principles to encourage the provision of a variety of higher density residential types in order to offer a range of housing and lifestyle opportunities. The Vaughan Metropolitan Centre Secondary Plan was later introduced in 2010 to implement the future Vaughan Metropolitan Centre and Urban Growth Centre. The subject site is located within the area identified as the Urban Growth Centre.
[9] Icona proposes to redevelop the subject site. The proposed redevelopment consists of three towers including two residential towers fronting onto Highway No. 7 with ground floor retail and one hotel tower fronting onto Interchange Way, and 16 townhomes. Icona has submitted to the City of Vaughan a site plan application to permit the proposed redevelopment. That application is currently being reviewed by the city. Part of the site plan approval process is to ensure that it is compatible with the surrounding context from both urban design and land use perspectives. According to evidence provided on behalf of Icona, the proposed redevelopment conforms to the applicable zoning by-law and implementation of the proposed redevelopment shall be subject to approvals by the City of Vaughan.
[10] The 274 lands are managed for 274 Canada by QuadReal Property Group ("QuadReal"). 274 Canada provided affidavit evidence in response to this application from Michael Reel, vice president, development, for QuadReal. Mr. Reel has been responsible for managing the 274 lands on behalf of 274 Canada since approximately 2003.
[11] According to Mr. Reel's evidence, throughout his time managing the 274 lands, the entire landholding has been treated holistically. The development of the lands has occurred through mutual agreements across the various parcels that consider, among other things, parking, servicing, uses and access as an integral whole rather than seeing each parcel of land as an individual unit. The restrictive covenants that apply to the subject site pursuant to the restrictive covenant agreement are among a number of similar restrictions that apply throughout the interchange lands. [page113] According to Mr. Reel's evidence, these restrictions were put in place as portions of the interchange lands were sold by 274 Canada to other parties.
[12] The 274 lands are currently occupied by low rise retail and commercial uses. QuadReal views these as interim uses that will be replaced as greater intensification occurs in the City of Vaughan. QuadReal's investment objective is to redevelop the 274 lands into a vibrant, mixed-use community, consisting of residential and office uses with supporting retail, in accordance with the planning regime approved by the City of Vaughan and taking into account what the market will support. 274 Canada began the process of developing the 274 lands in the last quarter of 2016. QuadReal has partnered with an experienced real estate development company to develop two 15-storey residential condominium towers and approximately 475 stacked townhouses on a vacant site that is part of the 274 lands. QuadReal intends to develop the other portions of the 274 lands in the near future as the market allows for it, including the lands along the south side of Highway 7 that are immediately west of the subject site.
[13] The proposed Icona redevelopment requires the deletion of the restrictive covenants because, among other reasons, it includes non-hotel uses.
[14] According to Mr. Reel's affidavit, QuadReal views Icona's development proposal as having the potential to negatively impact its own plans for future residential and commercial development on the 274 lands. The 1,649 new residential units proposed by Icona on the subject site will compete in the same market segment as the planned and future residential development on the 274 lands. QuadReal is concerned that, if built, the Icona proposal will increase the supply of residential units on the interchange lands and negatively impact QuadReal's ability to proceed with the development of the residential units planned for the 274 lands. In addition, Mr. Reel expressed concern in his affidavit that if upgrades to the water and sanitary supply are needed to serve future development on the interchange lands, 274 Canada's plans may be delayed while those upgrades are constructed and 274 Canada could be required to "front-end" the costs of those upgrades by the City of Vaughan (that is, pay for the upgrades with other developments contributing as they are approved).
[15] 274 Canada has refused to consent to modifying or discharging the restrictive covenants in the restrictive covenant agreement.
[16] 274 Canada delivered responding material in opposition to this application. RI Vaughan did not deliver responding material, but it was represented by counsel at the hearing of this application [page114] who made brief submissions in support of the submissions made by counsel for 274 Canada.
Analysis
Legal principles
[17] Icona relies upon s. 61(1) of the CLPA as the authority for the relief it seeks on this application. Subsection 61(1) of the CLPA reads:
61(1) Where there is annexed to land a condition or covenant that the land or a specified part of it is not to be built on or is to be or not to be used in a particular manner, or any other condition or covenant running with or capable of being legally annexed to land, any such condition or covenant may be modified or discharged by order of the Superior Court of Justice.
[18] The principles to be followed on an application for modification or discharge of a restrictive covenant pursuant to the authority conferred by s. 61(1) of the CLPA were developed in several decisions from the Court of Appeal, and they have been applied in a number of subsequent decisions.
[19] In George (Re) (1926), 59 O.L.R. 574, [1926] O.J. No. 72, [1927] 1 D.L.R. 155 (C.A.), the Court of Appeal interpreted the 1922 version of the CLPA. The 1922 version of the CLPA provided that a restrictive covenant may be modified or discharged by order of a judge "on proof to his satisfaction that the modification will be beneficial to the persons principally concerned". Those words were eliminated at the time of the revision of the statutes in 1927: Miller and Lawrie (Re), [1978] O.J. No. 1441, 1978 CarswellOnt 2712 (H.C.J.), at para. 14.
[20] In George (Re), Middleton J.A. addressed the meaning of the words "on proof to his satisfaction that the modification will be beneficial to the persons principally concerned" that were found in the 1922 version of the CLPA [at para. 13]:
The provisions of the statute (12 & 13 Geo V. ch. 53) are not easy to interpret. A Judge is empowered to modify or discharge building restrictions "on proof to his satisfaction that the modification will be beneficial to the persons principally concerned." If this means beneficial to the applicant the provision is senseless, for the relief would not be sought unless the applicant deemed it a benefit. If it means beneficial to the respondents it is again meaningless, for the respondents would undoubtedly release any right they may have if for their benefit. The meaning that has been given to the expression in practice is that the Judge must satisfy himself that the balance of convenience is in favour of granting the application, having regard to the rights and interests of both parties, and I think it may safely be said that the order should not be made unless the benefit to the applicant greatly exceeds any possible detriment to the respondents.
(Citation omitted)
[page115] This passage is the source of an approach that has been taken by some courts of weighing the benefit to the applicant of the modification or discharge of a restrictive covenant against the detriment to the respondent of such a modification or discharge.
[21] In Ontario Lime Co. (Re), [1926] O.J. No. 505, [1927] 1 D.L.R. 765 (C.A.), the Court of Appeal again addressed the test to be applied on an application to modify or discharge a restrictive condition or covenant. Middleton J.A. referred to his decision in George (Re) and held that "the general balance of convenience and interest of all those concerned" must be considered. Middleton J.A. wrote [at para. 10] that "the Court should not sanction the making of an order which would substantially depreciate the adjacent land". In addition, however, Middleton J.A. made the following statements which considerably circumscribe the judge's exercise of discretion based upon the balance of convenience and interest of all those concerned [at para. 10]:
It has been more than once pointed out that under this statute there is no power to make compensation to a landowner who is prejudicially affected, and the jurisdiction is one to be exercised with the greatest caution, and an order should seldom, if ever, be made which will in truth operate to the prejudice of the adjacent landowner who has any real rights. The true function of the statute is to enable the Court to get rid of a condition or restriction which is spent or so unsuitable as to be of no value and under circumstances when its assertion would be clearly vexatious.
[22] This passage from the decision in Ontario Lime Co. (Re) was considered with approval by the Court of Appeal in Beardmore (Re), [1935] O.R. 526, [1935] O.J. No. 256 (C.A.). Masten J.A. expressed his opinion that [at para. 24] "the applicant must by his evidence completely satisfy the Court that if the proposed modification is allowed the injury to the neighbouring owners, who object, will be negligible".
[23] In Remicorp Industries Inc. v. Metrolinx (2017), 2017 ONCA 443, 138 O.R. (3d) 109, [2017] O.J. No. 2805, the Court of Appeal addressed s. 61(1) of the CLPA and observed that it does not indicate how a court's discretion is to be exercised. Pepall J.A. quoted with approval the passages from the decisions of Middleton J.A. in George (Re) and in Ontario Lime Co. (Re) that I have quoted above. Pepall J.A. held, following Ontario Lime Co. (Re), that the jurisdiction under s. 61(1) of the CLPA must be exercised with caution and that an order will be seldom granted if prejudicial to the adjacent landowner.
[24] In Silver Seven Corporate Centre Inc. v. 2871220 Canada Ltd., 2017 ONSC 5091 (S.C.J.), Monahan J. considered the relevant jurisprudence when he addressed how a court called upon to decide whether to modify or discharge [page116] a restrictive covenant pursuant to s. 61(1) of the CLPA should exercise its discretion. Monahan J. considered, in particular, whether it is appropriate to weigh the relative benefit to an applicant against the detriment to a respondent of modifying or discharging a restrictive covenant. Monahan J. noted that the Court of Appeal in Remicorp had confirmed the test stated in Ontario Lime Co. (Re) that the operation of s. 61(1) should be limited to cases where a restriction is spent or no longer useful, or where the discharge or modification of a restrictive covenant would have no negative or detrimental impact on the lands benefiting from the restriction, such that continued insistence on the restriction could be said to be vexatious. Monahan J. then explained why, in his view, a simple balancing of interests approach should not be followed [at para. 35]:
Thus, s. 61(1) would not be engaged even in cases where it was shown or could be assumed that the benefit to an applicant from modifying or eliminating a restriction on land use "greatly exceeded" the detriment to the respondent. To be sure, eliminating a restriction in such circumstances might be thought to be economically efficient, in the narrow sense that the net benefit from a particular change exceeds any resulting detriment, at least to the immediate parties. But in my view, the court's role under s. 61(1) is not to reallocate rights between adjacent landowners, without consideration, in the name of broader economic or public purposes such as economic efficiency. The reallocation of rights between the parties is a matter for the parties themselves to settle through negotiation rather than through an order under the CLPA as Hoy J. (as she then was) noted in Terastar Realty Corp., Re.
[Footnote omitted]
[25] I agree with Monahan J. that the proper approach for a court to follow on an application under s. 61(1) of the CLPA is the one expressed by Middleton J.A. in Ontario Lime Co. (Re) that the court must decide whether the restrictive covenant is spent, or so unsuitable as to be of no value, and under circumstances when its assertion would be clearly vexatious. The jurisdiction under s. 61(1) must be exercised with caution, and an order will seldom be granted if prejudicial to the adjacent landowner. As Monahan J. held in Silver Seven, this approach does not involve a simple balancing of the benefits to the applicant and detriments to the respondent, even in cases where it is shown that the benefit to the applicant from modifying or discharging a restrictive covenant greatly exceeds the detriment to the respondent. Evidence of such benefit and detriment would be part of the relevant factual inquiry that, in a given case, could inform the analysis.
[26] Icona submits that it has shown that (i) the restrictive covenants are spent; or (ii) the restrictive covenants are unsuitable because 274 Canada will suffer no detriment in terms of the monetary value of the 274 lands if the restrictive covenants are [page117] discharged; and (iii) under these circumstances, the assertion by 274 Canada of the restrictive covenants in opposition to Icona's proposed redevelopment would be clearly vexatious. Icona submits, therefore, that the restrictive covenants should be discharged.
Has Icona shown that the restrictive covenants are spent and that their assertion by 274 Canada would be vexatious?
[27] Icona submits that the restrictive covenants are spent and their assertion by 274 Canada would be vexatious. In support of this submission, Icona relies upon the expert evidence of Mr. Donald Given, a professional planner. In his affidavits, Mr. Given offered the following opinions:
(a) The development restrictions relating to land use, franchise operation, fitness area, food and beverages facilities and sale of alcoholic beverages are inappropriate and should be removed as these land uses and commercial permissions are governed by provincial plans, regional and municipal official plans and zoning by-law. (b) Icona's proposed redevelopment is consistent with all provincial, regional and municipal plans and policies, and implementation of the proposed redevelopment is subject to approvals by the City of Vaughan. (c) The proposed redevelopment is consistent with many of the principles of the Vaughan Metropolitan Centre Urban Design Guidelines dated January 2016, and the proposed redevelopment is a purpose which in itself will not be obnoxious to any reasonable occupant of the 274 lands. (d) Icona's proposed mixed-use redevelopment, which contains residential, retail and hotel uses which are permitted as of right, conforms to the applicable zoning by-law. (e) The benefit to Icona of deleting the restrictive covenants greatly exceeds any possible detriment to 274 Canada (and other respondents), particularly because it does not create any loss, disadvantage or detriment to the surrounding properties because a similar type of higher density, mixed-use redevelopment of the 274 lands is very likely to occur, and the 274 lands will benefit from the as-of-right permission in terms of land use policies and zoning permissions provided to Icona. (f) Enforcement of the restrictive covenants will result in the anomalous and highly undesirable situation where, unlike the balance of the lands in the Vaughan Metropolitan Centre, the subject site is restricted by an adjacent owner from [page118] developing in accordance with the overall planning regime and development vision of the City of Vaughan. (g) The general balance of convenience and interests of all those concerned favour the deletion of the restrictive covenants so as to permit the Icona redevelopment to take place. (h) The restrictive covenants are unsuitable and their insertion onto the subject site is clearly vexatious since they are contrary to provincial, regional and municipal policies from a planning perspective. When he was cross-examined, Mr. Givens acknowledged that the term "vexatious" is not a planning term, but more of a legal term that is often used as part of arguments made by lawyers at the Ontario Municipal Board.
[28] Mr. Givens is an experienced professional, and he is qualified to give opinion evidence with respect to relevant land use planning issues. I do not consider Mr. Givens to be qualified to give expert opinion evidence in relation to whether the restrictive covenants are vexatious, which is a legal conclusion, and I disregard his evidence in this respect.
[29] Mr. Givens' conclusion with respect to the unsuitability of the restrictive covenants is founded on his opinion that the restrictive covenants conflict with applicable provincial, regional and municipal policies from a planning perspective. According to Mr. Givens' opinion, if a restrictive covenant operates to limit development of a property in ways that would be contrary to prevailing planning policies, the covenant should be considered to be unsuitable. On his cross-examination, Mr. Givens gave evidence that his opinion "was based on understanding the policy framework that guides development in this area and that what is in place now through those covenants would frustrate achieving that policy framework".
[30] Icona relies upon Mr. Givens' opinions in this regard in support of its submission that the restrictive covenants are spent and vexatious.
[31] I do not accept Mr. Givens' opinion in this regard. If I were to accept his opinion, I would need to conclude that the restrictive covenants were spent when they were given, because they operated to restrict development of the subject site according to the planning policies that prevailed at the time. It would not, however, have been open to Icona to apply to discharge the restrictive covenants immediately after they were given simply because they operated to restrict development of the subject site in ways that would otherwise be permissible. That is the very purpose of a contractual restrictive covenant. In order for me to [page119] conclude that the restrictive covenants that were negotiated and agreed upon are spent, I would need to find that the circumstances that prevailed when the restrictive covenants were given have so materially changed that the continued assertion of the restrictive covenants would be vexatious.
[32] At the time that the restrictive covenant agreement was entered into, the applicable planning regime under OPA 500 had identified the Vaughan Metropolitan Centre, which includes the subject site, as an area for greater intensification. The parties contemplated the possibility of future development of the subject site, and they agreed to address future development through the restrictions provided for by the restrictive covenant agreement. The Vaughan Metropolitan Centre Secondary Plan that was introduced in 2010 to implement the future Vaughan Metropolitan Centre and Urban Growth Centre also contemplated intensification through high-density mixed-use development. The policies that were in place from a planning perspective when the restrictive covenant agreement was made are similar to the policies that are now in place, in that both contemplated intensification through high-density mixed-use development.
[33] Icona submits that the most significant change in circumstances between the time that the restrictive covenant agreement was made and today is the intended development of the 274 lands by 274 Canada in a manner closely aligned with Icona's proposed redevelopment. Icona submits that an identical situation was before Gans J. in Van Bork v. William Carson Holdings Ltd., [1998] O.J. No. 4523, 80 O.T.C. 40 (Gen. Div.), where Gans J. noted [at para. 23] "[t]he anticipated development in the area is markedly different today than it was in 1985, as is evident from the reports of the municipal planners".
[34] In Van Bork, at the time that the restrictive covenant was given, a landowner, the plaintiff, obtained the benefit of the restrictive covenant from a developer who had sought to develop certain lands located [at para. 2] "below the ridge and at some distance from the [plaintiff's] estate". The purport of the restrictive covenant was to prohibit the developer from constructing a building on the developer's lands other than an office building in accordance with a specified architectural conceptual design. The defendant, the developer's successor in title, moved for summary judgment discharging or modifying the restrictive covenant. In his reasons, Gans J. addressed, at para. 23, how the circumstances had changed since 1985 when the restrictive covenant was given:
In the instant case, the plaintiff asks the court to consider the proposed development in a vacuum without regard to the development which, in fact, [page120] is poised to take place below the plaintiff's property and contiguous to the defendant's land. The defendant's project will be dwarfed by a neighbouring residential condominium development more than three-and-a-half times its size at a location directly behind and in closer proximity to the plaintiff's property than is the defendant's. Both developments are to be constructed on lands which are now zoned residential, a factor not in play in 1985. The anticipated development in the area is markedly different today than it was in 1985, as is evident from the reports of the municipal planners.
[35] In Van Bork, the development that was poised to take place in close proximity to the plaintiff's estate was a condominium development that would dwarf the defendant's project. This differed materially from the development that was proposed in 1985 when the restrictive covenant was given. In addition, although the restrictive covenant limited development to an office building, the zoning of the lands on which development was planned had changed to residential. The changes that Gans J. described in Van Bork are not similar (in their effect on application of the test for modification or discharge of a restrictive covenant) to the change that Icona describes as the most significant change from the time that the restrictive covenant agreement was made, the intended development of the 274 lands by 274 Canada in a manner closely aligned with Icona's proposed redevelopment.
[36] Icona has not satisfied me that the circumstances that prevailed when the restrictive covenant agreement was made in 2005 have changed in ways that are sufficiently material to allow me to conclude that the purposes for which the restrictive covenants were given have been eliminated, such that they should be considered to be spent. I conclude that Icona has failed to show that the restrictive covenants are spent.
Has Icona shown that the restrictive covenants are so unsuitable as to be of no value and that their assertion by 274 Canada would be vexatious?
[37] Icona also submits that the restrictive covenants are so unsuitable as to be of no value, and that the circumstances are such that for 274 Canada to assert the restrictive covenants in opposition to Icona's proposed redevelopment would be clearly vexatious. In this regard, Icona submits that the value to be considered is the monetary value of the [page121] 274 lands. Icona submits that it has tendered expert evidence that the monetary value of the 274 lands will not be adversely affected by the proposed redevelopment and that 274 Canada did not tender expert evidence to show otherwise.
[38] In support of its submission that the value to be considered in the determination of whether a restrictive covenant is so unsuitable as to be of no value is the monetary value of the 274 lands if the restrictive covenants are discharged, Icona relies upon Miller v. Lawrie (Re), supra. In Miller, the court was called upon to decide whether a restrictive covenant should be modified or discharged pursuant to the CLPA. The plaintiff applied for an order discharging a restrictive covenant that restricted him from erecting a separate residence on his property (which he had taken steps to sever into two lots to permit a separate residence to be built). Without an order discharging the restrictive covenant, the severed lot had no value to a purchaser.
[39] In Miller, Labrosse J. (as he then was) referred to the principles on which the courts have acted as set out by the three early decisions of the Court of Appeal to which I have referred, including Ontario Lime Co. (Re). Labrosse J. considered the evidence from the persons who objected to the removal of the restrictive covenant and he noted that a good deal of the evidence was in relation to the views which they enjoyed from their properties, and that they maintained they would no longer have if the relief sought were to be granted and a house were to be built on the severed lot. Labrosse J. found, as a factual matter, that the view of one defendant would not be interfered with if a house were built on the severed lot in accordance with the applicable zoning by-law. Labrosse J. found that the view of the other adjacent landowner of the trees on the severed lot was of little importance because preservation of the view was not dependent on the restrictive covenant. Having considered this evidence and made these findings, Labrosse J. held [at para. 20]:
In my opinion, any detriment to the defendants Lawrie and Waugh must be in terms of value. That is the real issue and it must be resolved on the evidence of the two experts called by the parties.
Labrosse J. then addressed the expert evidence as to monetary value and he accepted the evidence that construction of a house on the severed lot would not be detrimental to the value of the defendants' properties. Labrosse J. concluded that the benefit to the plaintiff greatly exceeded any possible detriment to the defendants and that the injury, if any, to the adjacent owners who objected would be negligible.
[40] Icona submits that through the Miller decision the Ontario High Court propounded two important principles to be applied by a court when it considers an application for deletion of a restrictive covenant: first, that any detriment to the opposing party must be "in terms of value", meaning monetary value; and second, that the issue of value must be resolved on the evidence of experts called by the parties.
[41] I do not agree that the decision in Miller is authority for these general principles. This decision is fact specific. In Miller, [page122] Labrosse J. first considered the evidence given by each of the defendants of impairment to the view that each enjoyed if a new house were to be built on the severed lot. This evidence did not directly relate to the effect on the monetary value of the defendants' properties if the restrictive covenant were discharged. Only after Labrosse J. had addressed this evidence and concluded that the views of the defendants would not be materially affected by removal of the restrictive covenant did he identify the detriment "in terms of value" to the defendants as the real issue. There was expert evidence before Labrosse J. concerning detriment to the monetary value of the defendants' respective properties from two opposing experts, and he addressed this evidence in order to reach his conclusion. The decision of Labrosse J. in Miller depended on the facts of that case, and he applied known legal principles taken from decisions of the Court of Appeal. The decision in Miller does not establish legal principles that apply generally in other cases.
[42] Icona also relies on Van Bork in support of its submission that the issue of value must be resolved on the evidence of experts called by the parties. In Van Bork, Gans J. held that the position of the beneficiary of the restrictive covenant was predicated on allegations of fact that were speculative at best and unsupported by any evidence, including evidence of experts in any discipline pertinent to the matters at issue. The moving party, in contrast, had led evidence of a municipal planner who described what, if any, impact the proposed development might have on the responding party and his neighbours. As I have noted, Gans J. observed [at para. 23] that "[t]he anticipated development in the area is markedly different today than it was in 1985, as is evident from the reports of the municipal planners". He concluded that there was no valid reason to maintain the covenant, the basis for which was all but spent having regard to the then permitted development in the immediate neighbourhood of the responding party's property. In reaching his conclusion, Gans J. applied the test in Ontario Lime Co. (Re), and he was mindful that the jurisdiction of the court should be exercised with the greatest caution. I regard Van Bork to be a case involving application of legal principles to the particular facts in evidence. It does not stand for the proposition that, in every case, an applicant must tender expert evidence or that, if such evidence is tendered, a respondent must call responding expert evidence. Each case will turn on its particular facts.
[43] Icona also relies [on] the decision in Wainfleet (Township) (Re), [2002] O.J. No. 183, [2002] O.T.C. 49 (S.C.J.). In Wainfleet, the township brought an application, without notice to abutting landowners, to allow it to convey land that had been conveyed to it in 1926 (with a restriction that the land be used by the grantee as [page123] a public park) to the Niagara Peninsula Conservation Authority, which intended to continue to use the land as a park. In Wainfleet, Quinn J. held that the pith and substance of the restrictive covenant was the use of the land as a park, not its use by the township as a park. Quinn J. found that the desired conveyance was bona fide and that the proposed transferee was as likely to fulfill the covenant as the current owner, the township. Quinn J., at para. 20, considered the jurisprudence that was cited to him (which included Ontario Lime Co. (Re), Beardmore (Re) and Miller) and he expressed his view that the word "detriment" as used in Beardmore (Re) appeared to be restricted to monetary detriment. Quinn J. concluded that there would be no monetary injury to adjoining landowners, and he allowed the application.
[44] Icona submits that the decision in Wainfleet is authority for its submission that the detriment that will be suffered by a party opposing deletion of a restrictive covenant must be a monetary detriment. I disagree. The reference made by Quinn J. to "monetary detriment" was in relation to the weighing of the benefit to the applicant against the detriment to the respondent from modification or discharge of a restrictive covenant. In the particular factual circumstances in Wainfleet, Quinn J. considered that the monetary value of the adjoining lands would be unaffected by the proposed modification to the restrictive covenant, and this finding informed his decision. I regard Wainfleet to be another example of a case that involved the application of known legal principles to the facts in evidence, and not one that establishes legal principles to be applied generally.
[45] I do not agree that the authorities cited by Icona support its submission that the court's determination of whether a restrictive covenant is "so unsuitable as to be of no value" must be made by examining the effect of the modification or discharge of a restrictive covenant on the monetary value of the respondent's land, through the court's assessment of expert appraisal evidence. In given circumstances, a landowner may have valid reasons for negotiating a restrictive covenant as part of the conveyance of land, and the legitimacy of these reasons may not be capable of measurement entirely through assessment of appraisal evidence in relation to the effect of removal of the covenant on the monetary value of the respondent's land. This may be a factor to be considered by a judge in the exercise of his or her discretion, and in some cases an important factor, but, as a matter of general principle, it is not determinative.
[46] Even though I do not consider appraisal evidence of the monetary value of the 274 lands if the restrictive covenants are discharged to be determinative, I will address the expert appraisal [page124] evidence tendered by Icona in this regard because I do not regard the effect of a discharge of the restrictive covenants on monetary value of the 274 lands to be an irrelevant factor.
[47] Icona relies upon the expert evidence of Lois Hicks who is an accredited appraiser of the Canadian Institute and has been a professional appraiser since 1989, with considerable experience in appraising commercial properties including commercial land and retail centres. Ms. Hicks offered her opinion that Icona's proposed redevelopment of the subject site will have no adverse effect on the value of the 274 lands or the lands of the other respondents and that the proposed redevelopment "most likely" will result in betterment, or enrichment, of the values of the respondents' lands.
[48] 274 Canada challenges Ms. Hicks' evidence on the following grounds:
(a) Her affidavit does not comply with the consulting standards set out in Rule 10 of the Canadian Uniform Standards of Professional Appraisal Practice ("CUSPAP") which is binding on all accredited appraisers. Ms. Hicks agreed on cross-examination that, as a professional appraiser, she must follow these rules when giving an opinion. In response, Icona submits that 274 Canada has failed to show that Ms. Hicks' lack of "technical compliance" with these standards adversely affected her opinion in any way. (b) Ms. Hicks failed to comply with Rule 6 of the CUSPAP which sets out the minimum content necessary for an appraiser to produce a credible report containing a formal opinion of value for real property that will not be misleading. On her cross-examination, Ms. Hicks' evidence was that this standard does not apply to her affidavit because she did not create an opinion of value, and that value has to be a specific number. Ms. Hicks' evidence on cross-examination was that she provided "a relationship, not a value". Icona submits that 274 Canada has failed to show that any failure to comply with any technical standard impacted Ms. Hicks' opinion. (c) Ms. Hicks' affidavit contains legal conclusions and verbatim passages from Mr. Givens' affidavit and from the case law. In response, Icona submits that Ms. Hicks did not provide legal conclusions and that it was up to 274 Canada to challenge Ms. Hicks' opinions through expert evidence. (d) Ms. Hicks did not contact the owners of neighbouring properties to determine the harm they might suffer or their future plans, and Ms. Hicks did not review Mr. Reel's [page125] affidavit when she gave her affidavit evidence. In response, Icona submits that it was not necessary to contact owners of neighbouring properties in order for Ms. Hicks (and Mr. Given) to give their opinions.
[49] 274 Canada submits that Ms. Hicks' evidence should be given no weight.
[50] I accept that Ms. Hicks is an experienced professional appraiser who is qualified to give opinion evidence in relation to the value of land, including commercial and retail properties. Icona did not ask Ms. Hicks to give a professional opinion of the values that the 274 lands or the subject site would have in hypothetical circumstances where (i) Icona's proposed redevelopment proceeds as planned; and (ii) the restrictive covenants are discharged, in comparison with their current values. By limiting her opinion to one of "a relationship, not value", Ms. Hicks was not required to satisfy the rigorous requirements set out in Rule 6 of CUSPAP that apply when an appraiser is giving an opinion of value for real property.
[51] In addition, I regard the opinion given by Ms. Hicks in her affidavit to be largely conclusory, with little analytical support shown in her affidavit for her conclusion, and with little explanation of the process that she followed to arrive at her conclusion. The key passages in her affidavit are paras. 9-14, that I have reproduced below:
- I have considered the details of the Proposed Development, the value added to the Subject Site and the implications, if any, for adjacent lands. I conducted a site visit on November 17, 2017, to better understand the existing condition of the area. I have reviewed the following locations, where intensification increased adjacent land values, in the course of my consideration of the impact to value of the Proposed Development: (a) East Beaver Creek, Richmond Hill; and (b) Kennedy and Highway 401 -- Delta Hotel, Scarborough and Tridel.
- In my professional appraisal opinion, the Proposed Development of the Subject Site will have no adverse effect on the value of the Respondents' Lands. Further, in my professional appraisal opinion, the Proposed Development of the Subject Site most likely will result in betterment, or enrichment, to the values of the Respondents' Lands.
- Particularly, the built form of the proposed mixed-use development will provide highly visible at-grade retail uses along Highway No. 7 and Interchange Way (where the entrance to the retail is located), creating a clearly visible entry point to the building. In terms of building materials, the proposed redevelopment will integrate glass and various stone materials in order to create an aesthetically pleasing façade and podium structure along the frontage of Highway No. 7. It is my opinion that the proposed mixed-use redevelopment is aesthetically attractive and will incorporate high-quality materials.
[page126]
- It is my professional appraisal opinion that the Restrictive Covenants are unsuitable and their insertion onto the Subject Site is clearly a hindrance to the natural Highest and Best Use of the Subject Site and thus, they artificially suppress the Subject Site's value.
- The Proposed Development is consistent with the intent of the City of Vaughan to create a Corporate Centre Node plan to become, over time, the central focus of the City of Vaughan, with potential to become the "downtown" with a variety of higher density residential types. Accordingly, it is my professional appraisal opinion that the benefit to the Applicant (and two other development potential in the area) of deleting the Restrictive Covenants greatly exceeds any possible detriment to the Respondents. This is particularly so because the Proposed Development does not create any loss, disadvantage or detriment to the surrounding properties, including the Respondents' Lands.
- Given that the proposal for the Subject Site will not only replace, but increase the available hotel units, and, there remains two hotels on Interchange Way, there will be no loss of hotel availability.
[52] The only analysis that Ms. Hicks describes in her affidavit of how Icona's proposed redevelopment would affect the monetary value of the 274 lands is her reference in para. 9 to her review of two other locations where intensification increased adjacent land values. Ms. Hicks does not explain whether these other locations involve circumstances that are comparable to the circumstances in which 274 Canada finds itself, including, for example, whether the adjacent landowners at the two other locations intended to develop their own lands in ways that would compete with the uses of the developer who engaged in the development that resulted in intensification. On the evidence of Ms. Hicks, there is no way for me to evaluate whether these two other locations are truly comparable.
[53] Because Ms. Hicks' opinion is almost entirely conclusory and the limited analysis shown in her affidavit to support her conclusion (the other two locations where, she says, intensification increased adjacent land values) does not allow me to determine whether they involve lands that are comparable to the 274 lands, I am unable to accept Ms. Hicks conclusion and find that Icona's proposed redevelopment most likely will result in betterment, or enrichment, to the values of the respondents' lands.
[54] Even if I had found that Icona had proven on a balance of probabilities that Icona's proposed redevelopment would result in an increase in the monetary value of the 274 lands, or at least no decrease in the monetary value of these lands, I would not conclude that Icona has shown that the restrictive covenants are so unsuitable as to be of no value and that their assertion by 274 Canada would be vexatious. The question of monetary value is only part of the analysis.
[page127]
[55] Mr. Reel's evidence is that the restrictive covenants remain of value to 274 Canada. His evidence is that if Icona's development proceeds, there is a potential that 274 Canada's plans for future mixed-use development on the 274 lands will be negatively impacted. The 1,649 new residential units proposed by Icona on the subject site will compete in the same market segment as the planned and future residential development on the 274 lands, and the need for possible infrastructure upgrades in the area may delay 274 Canada's plans.
[56] Icona is critical of the evidence given by Mr. Reel because he says that Icona's proposed redevelopment has the potential to negatively impact 274 Canada's future plans, that Icona's development may utilize water and sanitary supply capacity that would otherwise be available for future development on the 274 Lands, and that if upgrades to water and sanitary supply are needed to serve future development on the interchange lands, 274 Canada's plans may be delayed.
[57] I do not consider the criticisms of the uncertainties in Mr. Reel's evidence to be valid in the circumstances. Mr. Reel is not in a position to know precisely how, or to what extent, Icona's proposed redevelopment may adversely affect 274 Canada. There is no suggestion that 274 did not negotiate the restrictive covenant agreement in good faith for the purpose of protecting its legitimate interests. Icona has not shown that these interests are no longer legitimate because of the circumstances that are now in place in relation to the 274 lands.
[58] For these reasons, I conclude that Icona has failed to show that the restrictive covenants are spent or so unsuitable as to be of no value, or that the circumstances are such that for 274 Canada to assert these covenants would be vexatious. I exercise my discretion to refuse to discharge the restrictive covenants.
Disposition
[59] For the forgoing reasons, Icona's application is dismissed.
[60] 274 Canada seeks costs on a partial indemnity scale in the amount of $88,565.29, all inclusive. This is on an approach that calculates fees based upon 60 per cent of the actual fees charged. I have considered the factors in rule 57.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 and I consider the costs claimed to be reasonable and proportionate, given the nature and importance of the issues for the parties. I fix costs to be paid by Icona to 274 Canada in the amount of $88,565.29.
[61] RI Vaughan seeks costs representing a counsel fee for the appearance of its counsel at the hearing of this application. RI Vaughan did not file any material, and made only very brief [page128] submissions. I fix costs to be paid by Icona to RI Vaughan in the amount of $1,000.
Application dismissed.
End of Document