Court File and Parties

COURT FILE NO.: CV-17-577241 DATE: 20180928 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: City of Toronto, Applicant AND: Cloverdale Mall Inc., Respondent

BEFORE: D.A. Wilson J.

COUNSEL: Michael J. Sims, Counsel for the Applicant Bradley E. Berg and Grace Smith, Counsel for the Respondent

HEARD: September 18, 2018

Endorsement

[1] This Application is brought by the City of Toronto (“the City”) pursuant to Rule 14.05 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, seeking a declaration that the Respondent, Cloverdale Mall Inc. (“Cloverdale”) owns a bridge located over the East Mall (“the bridge”) and therefore, is responsible for its maintenance. In the alternative, if there is a determination that the City owns the bridge, the Applicant requests a declaration that it has the right to tear the bridge down if it sees fit. Cloverdale submits that the bridge is owned by the City and the maintenance of it is the City’s responsibility.

[2] There is little dispute between the parties on the facts. The government expropriated land from the former owner of the property, Cloverdale Shopping Centre Limited (“CSCL”) in 1968 in order to construct Highway 427. The expropriation and construction of the highway changed the road patterns. The East Mall is a road that runs in a north/south direction. The expropriation resulted in lands owned by CSCL being divided: on the west side of the East Mall was Cloverdale Mall; on the east side there were two adjacent plots on which stood a Brewers Retail store and a gas station. CSCL built the bridge in 1969 in order to connect the two pieces of land. It was agreed that the province would reimburse CSCL for the cost of building the bridge. There is no dispute that these three parcels of land are currently owned by the Respondent, the successor in ownership to CSCL. Similarly, the Applicant is the proper successor to the rights and obligations of the province and the borough of Etobicoke. I shall refer to the province, the department, the borough and the city as the City or the Applicant as for my purposes, they are the same entity.

[3] There were extensive negotiations between the province, the City and CSCL about compensation for the loss of the expropriated land. Minutes of Settlement were executed by counsel for the parties in 1972. The Minutes provided that the province conveyed to CSCL the strip of land that separated the gas station and the beer store; the province also conveyed lands adjoining the mall and the beer store so CSCL could access the private roads that connected to the bridge. The Minutes are silent on the issue of ownership and maintenance of the bridge.

Positions of the Parties

The Applicant

[4] The City takes the position that the bridge is owned by Cloverdale and the maintenance of it is the responsibility of the Respondent. It points out that the bridge is not attached to any public highway. The bridge is necessary for customers to access the mall and the other businesses on the east side of the bridge. The City argues that the negotiations for compensation proceeded on the understanding that the bridge would be privately owned.

[5] The City argues that principles of contractual interpretation require a finding that the parties intended that the bridge would be owned by the Respondent. The province reimbursed CSCL for the costs of constructing the bridge and there is no evidence that the province bought it from CSCL in order to convey it to the City. The function of the bridge is to connect lands on each side of the East Mall that are privately owned, to serve the customers of the businesses that are on those lands. The bridge serves no public purpose and it makes no sense that the government would have taken ownership of a bridge that connects privately owned lands, which requires the permission of the landowner in order to access.

[6] While there is reference in the Minutes to the obligation of the province to maintain other areas around the mall, there is nothing that addresses the obligation of the province to maintain the bridge. Had the parties intended that the province or the City be responsible for the maintenance of the bridge, the Minutes would have contained provisions stipulating this. The Applicant submits that there is no evidence that the City has ever maintained the bridge.

The Respondent

[7] Cloverdale argues that the City behaved as owners of the bridge—it was Etobicoke who determined that the bridge would be built and other decisions surrounding its construction. Further, the bridge goes through property that is owned by the city; the abutments of the bridge are built on the City’s property. In fact, at the time of construction, the bridge was built entirely on public land. Cloverdale argues that the law is clear that a fixture forms part of the land it is affixed to.

[8] The Respondent argues that nothing turns on the fact that CSCL arranged for the construction of the bridge; it was reimbursed by the City for the cost. Furthermore, there was another bridge built in the same time frame in similar circumstances (“the A&P Bridge”), and even though it was a privately used bridge, the City agreed to own and maintain it. The City has a statutory obligation to maintain the bridge and it has been doing so. The case law supports the conclusion that an expropriating authority must not only pay for improvements to land, but also must pay to maintain them.

Analysis

[9] The Minutes of Settlement attempted to commit to writing the final resolution of the issues between the City and Cloverdale arising from the expropriation of the land owned by the Respondent. As a result, the agreement sets out the rights as well as the obligations of the parties. The Minutes do not address the ownership of the bridge or its maintenance. Thus, the contract must be interpreted taking into consideration the intentions of the parties at the time.

[10] The Supreme Court of Canada has noted that

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. Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 47.

[11] The Court went on to note, at para. 58,

The nature of the evidence that can be relied upon under the rubric of “surrounding circumstances” will necessarily vary from case to case. It does, however, have its limits. It should consist only of objective evidence of the background facts at the time of the execution of the contract, that is, knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting.

[12] In Reardon Smith Line Ltd. v. Hansen-Tangen, [1976] 3 All E.R. 570 (H.L.), the court stated, “No contracts are made in a vacuum: there is always a setting in which they have to be placed…. In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes the knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.”

[13] Taking these well-established rules of contractual interpretation into consideration, I turn to the contract at hand. The Minutes state as follows with respect to the bridge:

The Department will pay to Cloverdale Shopping Centre Limited the sum of $36,500 in full payment for legal, valuation and other related expenses. It will also pay any amount which is not paid to date against the actual cost of the construction of the existing bridge across the East Mall joining the lands of the Parties of the First Part…. Price, Waterhouse & Co. on behalf of Cloverdale Shopping Centre Limited and at Cloverdale Shopping Centre Limited’s own expense and the Department officials on behalf of the Province of Ontario will discuss and determine whether there is money owing against the actual cost of the construction of the bridge.

[14] It is clear that the parties contemplated maintenance of other areas. Specifically, in paragraph 4 of the Minutes, the land on which the underpass was constructed was addressed and it was agreed that “the underpass, up to Cloverdale Shopping Centre Limited’s property line, will be a structure maintained by the Department and remain its responsibility with respect to its use.”

[15] In paragraph 5, it was agreed that only the part of the entrance to the shopping mall that was on Department lands would be maintained by the Department.

[16] The event giving rise to the Minutes of Settlement was the construction of Highway 427, which necessitated the expropriation of lands owned by the Respondent. As a further consequence, a bridge and an underpass had to be built in order to provide access to the mall and to the gas station and beer store for customers. In my view, the City had no need for a bridge over the East Mall and its construction was of no particular benefit to the City. Rather, the Respondent wanted and needed a bridge to be built in order to grant ease of access to customers on the roadway who wished to go to the mall or to the beer store or to the gas station.

[17] I have reviewed the Minutes and the correspondence between the solicitors at the time. There was a disagreement about the price to be paid to the Respondent for the construction of the bridge. The letter of Mr. Macaulay of January 31, 1972 notes that the Department held the view it had paid in full for the construction of the bridge while Cloverdale felt there were additional amounts owing. As a result, the Minutes provided that Price Waterhouse would determine if there were further amounts owing by the City for construction.

[18] In the Departmental Memorandum dated February 17, 1972, the Council agreed to pay the sum of $973,700 in “total settlement” of the expropriation, with the City and the province each paying half.

[19] In my view, at the time the Minutes were signed, the negotiations between counsel and the parties intended to finalize the matters between them arising out of the expropriation of the lands owned by the Respondent. A process was in place for the resolution of the dispute about the quantum of the payment owned to Cloverdale by the City. I do not accept that these Minutes constitute a limited release of the parties’ rights and obligations as urged on me by counsel for the Respondent. The Minutes release the City from “any and all claims” arising from the expropriation. In my view, the release indicates the intention of the parties to end all obligations between them, which would include the ongoing obligation of maintenance of the bridge.

[20] There is no dispute that the Respondent carried out the construction of the bridge and the City agreed to pay for it. In the affidavit of Amanda Rupert filed as evidence by the Respondent, the Departmental Memorandum dated March 13, 1968 from Etobicoke is attached. That memorandum stated that it was the policy of the province “with respect to improvements on private property to fully compensate the owner in order that such improvements may be undertaken at the control and direction of the owner” (Exhibit 2). Looking at the intentions of the parties at the time, I am persuaded that the understanding of the City and Cloverdale was that once the bridge was built and paid for by the City, Cloverdale would be the “owner” of the bridge and consequently, the entity responsible for its maintenance.

[21] In the face of the available evidence, I find that the parties intended that upon the payment by the City, its obligations concerning the bridge were extinguished. Cloverdale was the party who benefited from the construction of the bridge, and it intended that it be compensated in the Minutes for the expropriation of its property and the need to construct a bridge. I agree with the submission of counsel for the Applicant and find that the bridge connects two private roadways and serves the private interests of the Respondent. It would have been clear to both parties that after the construction was finished, the bridge would require ongoing maintenance. This is not an issue that would have arisen after the Minutes were signed; rather, I find that is it something that would have been within the parties’ knowledge at the time they entered into the contract: Sattva. In this context, where the parties were attempting to finalize their commitments to each other, it is not reasonable to interpret the contract to include a term that the City would continue to pay for the maintenance of a bridge from which it derived no benefit. It does not make “commercial sense” as discussed in Weyerhaeuser Co. v. Ontario (Attorney General), 2017 ONCA 1007, 77 B.L.R. (5th) 175.

[22] The Minutes do set out certain maintenance obligations of the City, for example with respect to the underpass at Dundas St. West in the areas that are on the land owned by the province. Had the parties intended that the maintenance of the bridge would remain with the City, given the extensive negotiations that went on between counsel for the parties, they would have specifically stated this as a term of the Minutes.

[23] Mr. Berg argues that the bridge is built at least in part on lands owned by the City; he emphasizes that the bridge abutments fall wholly within the East Mall right of way which is owned by the City. It is the submission of the Respondent that the bridge is a fixture and as such, there is a presumption that it is considered part of the land. Counsel argues that the bridge is a permanent structure affixed to land owned by the City going over airspace also owned by the City, thus the law supports a finding that the City owns the bridge. While I agree that the bridge sits on land owned by both parties, in order to determine whether it is a fixture, the court must look at a number of factors and decide if the presumption that the chattel is a fixture has been rebutted. According to Professor Bruce H. Ziff, Principles of Property Law, 7th ed. (Toronto: Thomson Reuters Canada, 2018),

the determination of whether a chattel has been transformed into a fixture is a matter of intention, objectively determined … The test is whether the purpose of the attachment was: (a) to enhance the land (which leads to the conclusion that a fixture exists); or (b) for the better use of the chattel as a chattel.

[24] In the instant case, the purpose of the bridge was to ensure that customers continued to come to the stores on the lands owned by Cloverdale after the expropriation and construction of the highway, with the resultant changes to the roadways. The bridge added no value to the lands owned by the City. I do not find on the evidence that the bridge was a fixture to the land owned by the City. Thus, the City is not its owner.

[25] While Mr. Berg urged me to consider the contract concerning the A&P Bridge that runs to the south of the bridge in the instant application, I do not find it of assistance. There is nothing in the record that deals with what the parties were negotiating when dealing with the A&P Bridge and it is not clear that the construction of that particular bridge arose out of lands expropriated by the province. The parties to that contract were different than those who were negotiating the bridge over the East Mall. The factual matrix of the A&P contract is not the same as the one in the instant application. The fact that the ownership of the A&P Bridge remained with Etobicoke and the City covenanted to undertake the maintenance of the bridge really is of no assistance to me in the interpretation of the Minutes of Settlement in this case.

Order

[26] I find on the evidence that it was the intention of the parties that following the building of the bridge and payment of the costs of construction by the City, the Respondent was the owner of the bridge and responsible for its upkeep and maintenance.

[27] I am indebted to counsel for their collaboration on this application, their excellent advocacy, and their economic use of the court’s time. As agreed, the costs of the application are fixed in the sum of $20,000 inclusive payable by the Respondent to the Applicant.

D.A. Wilson J. Date: September 28, 2018