Court File and Parties

Date: 2020-04-20 Superior Court of Justice - Ontario

Re: KARL MATAR and MARK MATAR, Plaintiffs And: 1201553 ONTARIO LIMITED, 441 KING STREET WEST INC., 1301554 ONTARIO LIMITED and McCAIN FOODS LIMITED, Defendants

Before: Sossin J.

Counsel: Michael Carlson, for the Plaintiffs Eric Fournie, for the Defendants

Heard: February 24-26, 2020

Reasons for Judgment

Overview

[1] This action concerns the status of an historic laneway near the King Street/Spadina Avenue intersection in downtown Toronto (the “laneway”).

[2] The laneway runs between a building owned by the plaintiffs on Spadina Avenue and a building owned by the defendants on King Street West.

[3] The plaintiffs registered title over the laneway. The plaintiffs claim that the defendants, whose building has a number of encroachments on to the laneway both at surface level and in the air, are trespassing.

[4] The defendants claim the plaintiffs do not have title over the laneway, and therefore that there can be no trespass.

[5] The plaintiffs, Karl Matar and Mark Matar (the “Matars”), are the owners of the building located at 64 Spadina Avenue, one of the properties which abuts the laneway.

[6] The Matars issued their claim in this action on June 19, 2014.

[7] The defendants, 1301553 Ontario Limited, 441 King Street West Inc., 1301554 Ontario Limited (collectively, the “King Street defendants”), own a row of buildings between 425-455 King Street West (the “King Street Properties”), including the building at 425-439 King Street West (the “Samuel Building”), which abuts the laneway in the rear.

[8] McCain Foods Limited (“McCain”) is a tenant in the Samuel Building, pursuant to a lease signed December 6, 2011, and occupies the third, fourth and fifth floors.

[9] The King Street defendants and McCain delivered their statement of defence on September 2, 2014.

[10] Various requests to admit and replies were exchanged up to April 24, 2018.

[11] In April, 2018, the plaintiffs brought a motion under Rule 21 of the Rules of Civil Procedure, R.R.O. 1990, Reg 194, for a determination as to whether there was an admission of fact by King Street defendants relating to the ownership of the laneway, and also seeking to strike certain portions of the statement of defence.

[12] In Her Honour’s decision, dated April 24, 2018, Justice Matheson declined to make a ruling on the issue of the admission of fact, and refused to strike out the impugned paragraphs in the statement of defence.

[13] After the Rule 21 motion, each party sought partial summary judgment under Rule 20 on issues of trespass, unjust enrichment, adverse possession and the scope of title (though not the question of damages).

[14] Justice Glustein heard this motion on January 21, 2019, and determined that the matter was not proper for a partial summary judgment motion.

[15] The matter consequently was put on the trial list, and heard February 24-26, 2020.

[16] Why does the ownership of this laneway continue to be the subject of a dispute between the parties? The answer lies in the complicated history of the laneway, and the complicated relationship between the parties.

Background

[17] The King-Spadina area of downtown Toronto developed in various stages. First, it was designated for military use in the early nineteenth century. By the mid-1800s, as the population of the town expanded, the district was opened up for residential development. Several decades later, King Street developed into a commercial artery. Following the Great Fire of 1904, the area developed further into a manufacturing hub. By the First World War, King Street contained a range of factories and warehouses.

[18] The building at the southwest corner of King and Spadina was known initially as the Samuel Building, now has the municipal address of 425-439 King Street West. It was constructed as a five storey building in 1908, with a sixth storey added in 1913.

[19] The south wall of the Samuel Building is the northern boundary of the laneway. At the time of construction, a fire escape was installed on the south wall of the building, which extended approximately four feet into the laneway. A cast iron curb was fixed to the side of the Samuel Building at some point early in its use, and extended one foot into the laneway at the surface. These encroachments, as well as several other historical features of the south wall of the building which also encroach into the airspace above the laneway, remain.

[20] The plaintiffs do not contest these historic encroachments. Rather, the plaintiffs focus their claim in trespass on the following three more recent additions to the Samuel Building: a. first, a hydraulic loading ramp that encroaches 18 inches at its highest point and 26 inches when retracted, and approximately six feet when extended for loading (the “loading ramp”); b. second, a sign box installed by Murad Communications Inc. (“Murad”) located above the laneway encroaching four inches over the laneway, sigh lighting to illuminate the sign encroaching 42 inches (the “Murad sign box”); and c. third, the HVAC upgrade protruding 18 inches over the laneway running over 35 feet along the face of the building and over four storeys to the roof (the “HVAC system”).

[21] Two of these more recent encroachments were added by the King Street defendants. The loading ramp was added in 2001 in order to facilitate the efficiency of the laneway for loading and unloading purposes. The HVAC system, which was the catalyst for this litigation, was added in 2012 to accommodate the needs of McCain, as the tenant of the Samuel Building. The Murad sign box was installed in 1994, as part of an agreement Murad, the prior owners the Samuel Building and the plaintiffs, in order to generate revenues through advertising.

[22] The plaintiffs allege that each of these encroachments constitute trespass, and all revenues generated as a result of these encroachments constitute a basis for unjust enrichment.

[23] The King Street defendants take the position that neither trespass nor unjust enrichment can be established, as the laneway has never been the property of the plaintiffs. They argue that the laneway remains the property of the last party with deeded title, or alternatively, that the laneway is public property. In either case, the King Street defendants submit there is no basis for recovery of any damages or profits in relation to the laneway by the plaintiffs.

[24] In the further alternative, the King Street defendants argue that even if a trespass can be established, the plaintiffs have suffered no damages, nor is there any basis for an unjust enrichment remedy.

[25] Before turning to the legal test for trespass and unjust enrichment, it is first necessary to examine the history of the laneway, and the plaintiffs’ claim to title over it.

The History of Title to the Laneway

[26] The precinct of land at the southwest corner of King and Spadina was part of Section N, Plan of Military Reserve, granted by the Crown to Clarke Gamble on November 1, 1845. By grant, Clarke Gamble transferred Lots 7 and 8 to Mary Elizabeth Jones on December 18, 1845.

[27] It is not disputed that the laneway was part of this grant. Mary Elizabeth Jones, and later her estate, subdivided and sold parts of these lots, including the three lots on King Street West, which comprise the King Street Properties.

[28] The laneway, while part of these subdivisions, was never sold or transferred. The parcel of land containing the laneway was shown as “Lane” on Plan 692 of Subdivisions of Parts of Lots Nos. 5N, 6N and 7N, Section N Military Reserve, Toronto.

[29] Plan 692 was received and filed in the Registry Office of the City of Toronto on June 10, 1887.

[30] The laneway is approximately 16 feet wide and 271 feet long. It runs east-west, just south of King Street West, with the easternmost portion of the laneway extending southward. The laneway has been in use for at least 145 years.

[31] Aida Matar (“Aida”) and Abdallah Matar (“Abdallah”), the parents of the plaintiffs, purchased the property at 64 Spadina Avenue in the late 1970s.

[32] Through correspondence in 1986 and again in 1993, in response to queries from counsel for Aida and Abdallah Matar, the City of Toronto confirmed the status of the laneway as a “private lane.”

[33] The City Solicitor wrote in his letter of June 11, 1993, “With reference to your letter dated May 26, 1993, I advise that according to my records, the lane at the north side of the premises 64 Spadina Avenue is considered to be a private lane…I am not aware of any plans to establish a public lane to the north of premises 64 Spadina Avenue.”

[34] In his affidavit, Karl Matar stated that his mother had responsibility for keeping the laneway “clean, neat and in good repair.”

[35] Karl Matar also gave evidence that if vehicles not associated with the family or its business parked in the laneway, they would be towed. During the Toronto Blue Jays pennant runs in 1993 and 1994, Karl Matar and his brother were responsible for collecting parking fees for use of the laneway.

[36] On September 13, 1993, Aida and Abdallah purported to transfer the laneway from themselves jointly to Aida Matar individually. The laneway was described in the transfer as “Part of Laneways, Plan 692.” The consideration was listed as “Husband and wife conveying to wife alone for natural love and affection to record possessory title.” The transfer acknowledged the historic right of way for other users of the laneway.

[37] The transfer was filed with the Land Registry Office. The laneway subsequently was transferred by administrative conversion from the Land Registry system to Land Titles Conversion Qualified under the Land Titles Act R.S.O. 1990, c. L.5, on May 26, 2003.

[38] The relations between Aida Matar and Fairmont Investments Ltd. (“Fairmont”), the predecessor owners of the Samuel Building, appeared amicable.

[39] In October, 1994, Aida, Fairmont and Murad entered into an agreement to permit the construction of the Murad sign box (the “Murad agreement”). Under the agreement, Fairmont and Murad acknowledged that Aida Matar’s company, Gimpex Ltd. (“Gimpex”) had an absolute right to and ownership in the air space above the laneway. The Murad agreement provided that it would be binding on their respective successors and assigns, though the agreement itself expired after three years, in October, 1997.

[40] The King Street defendants purchased the King Street Properties in 1998. The issues between the plaintiffs’ parents and the King Street Defendants relating to the laneway began shortly thereafter.

[41] On May 28, 2001, counsel for Aida wrote to the King Street Defendants regarding the loading ramp, which had been constructed to improve loading and unloading from the laneway. The letter stated, “Your construction on the laneway is a trespass and must either be removed immediately or become the subject of a lease between our client and you.”

[42] Counsel for the King Street Defendants replied by letter dated June 11, 2001, and stated, “Our client disputes your client’s claim for ownership of the laneway and puts your client to the strict proof thereof. Such lane has been used by the public and the tenants of our client’s buildings and the mere registration of a contrived Transfer/Deed of Land confers no rights to your client.”

[43] On July 9, 2001, counsel for Aida wrote back and highlighted both that Aida was paying property tax on the laneway, and that Fairmont, the predecessor owner of the Samuel Building, had acknowledged Aida’s ownership over the laneway.

[44] The dispute between the parties at that point intensified, with an application brought by the King Street Defendants on July 23, 2004, seeking an injunction restraining Aida and other respondents from parking their vehicles or otherwise obstructing access to the laneway. Aida filed her own application against the King Street Defendants, dated December 16, 2004, seeking an injunction restraining the King Street Defendants from using the loading ramp and other relief, including damages for trespass.

[45] The applications were never heard. Minutes of Settlement were entered into on January 1, 2005 which appeared to resolve the dispute over the laneway.

[46] With respect to encroachments, paragraph 1 of the Minutes of Settlement provided that: Matar acknowledges and accepts all encroachments on or over the Laneway that existed as of January 1, 2005. The encroachment of the signbox is subject to paragraph 4. However, any new encroachments must be separately requested for in writing and agreed to in writing by Matar.

[47] The Minutes of Agreement included a term setting out that the agreement was for a three year term, and would expire December 31, 2007. While the Minutes of Settlement provided for a renewal period of a further three years, the parties instead entered into the “Laneway Agreement” on January 1, 2008.

[48] The key terms of the Laneway Agreement included: a. Aida Matar was listed as the “registered owner” of the laneway. b. Aida Matar recognized the King Street Defendants’ right of way over the laneway. c. Aida Matar agreed to accept all the existing encroachments. d. The King Street Defendants agreed to pay an “encroachment sum” of $6,000.00 annually.

[49] An agreement to extend the Laneway Agreement (the “extension agreement”) was signed by the parties on January 1, 2011. Its terms were substantially similar to the original Laneway Agreement, although the encroachment sum paid by the King Street defendants under the extension agreement increased to $7,000.00.

[50] The extension agreement set out that it would remain in force until December 31, 2012.

[51] The extension agreement expired on December 31, 2012 and there have been no further agreements between the parties.

The Dispute Giving Rise to this Litigation

[52] A number of events transpired in 2012, the final year of the extension agreement, which led to this litigation.

[53] Aida transferred her interest in the property to her sons, the plaintiffs, in April 2012, as part of her estate planning. Aida passed away in September, 2012.

[54] Tensions between the plaintiffs and the King Street defendants began to intensify in 2012, after McCain became a tenant in the Samuel Building, pursuant to a lease signed on December 6, 2011.

[55] The King Street Defendants agreed to add certain upgrades to the HVAC system in the building, which required a further encroachment over the laneway.

[56] The plaintiffs and King Street defendants entered into discussions with a view to extending the Laneway Agreement and addressing the new, proposed HVAC system encroachment in April, 2012.

[57] In May, 2012, the King Street defendants shared drawings of the proposed exhaust ducting.

[58] On September 11, 2012, the plaintiffs sent an email to the King Street defendants raising a concern with respect to the installation of the HVAC encroachment, which read: I was just passing by the laneway at 64 Spadina Avenue and noticed that the laneway was blocked. I stopped to ask what they were doing and they told me that they are installing an extensive exhaust system that will be exiting the side of the building going to the top. Sarah, I know you sent me the diagrams a while ago – but we did not hear from you whether this project was confirmed or not. As you may recall – we have not agree [sic] to anything being installed over the laneway. Can you please give me a call to discuss.

[59] On September 17, 2012, Andrea Faria, a representative of the King Street defendants, responded to Karl Matar, indicating “I am currently working on the contract and should have it to you shortly. Sorry for the delay.”

[60] The contract was not sent and the negotiations were never concluded. The plaintiffs reached out several times to the King Street defendants in October and November, 2012, without response.

[61] On January 3, 2013, after the expiry of the 2011 extension agreement, the King Street defendants terminated the negotiations. The parties have diverging accounts as to why the negotiations failed.

[62] After the expiry of the extension agreement, the King Street defendants revived their challenge to the plaintiffs’ title over the laneway.

[63] Following that rupture, the plaintiffs commenced this litigation.

Analysis

[64] In order to determine whether the King Street defendants are liable for trespass or unjust enrichment, the following three issues must be decided: a. Have the plaintiffs established the material facts necessary for an action in trespass, including possessory title?; b. If trespass has been established, what are the plaintiffs’ damages?; and c. Are the plaintiffs entitled to a remedy under unjust enrichment?

[65] I address each issue in turn.

A. Have the Plaintiffs Established the Material Facts Necessary for an Action in Trespass?

[66] To address the first issue, and determine whether the plaintiffs have established the King Street defendants’ trespass, the following questions must be answered.

[67] First, have the plaintiffs’ established a sufficient possessory interest for purposes to an action in trespass?

[68] Second, are the defendants barred from challenging the plaintiffs’ title by the doctrine of jus tertii?

[69] Third, are the defendants barred from challenging the plaintiffs’ title pursuant to the Real Property Limitations Act?

[70] Fourth, are the defendants estopped from challenging the plaintiffs’ title in light of the Laneway Agreement?

[71] Fifth and finally, are the plaintiffs barred from asserting title over the laneway because it is a public lane?

1) Is the Plaintiffs’ Assertion Title Sufficient for Purposes to an Action in Trespass?

[72] To establish the tort of trespass to land, the plaintiff must show that the defendant entered upon land in the possession of the plaintiff, and remained on the land or put something on the land for their use without legal justification. Trespass to land is actionable per se without any proof of damage

[73] In Mann v. Saulnier (1959), 19 D.L.R. (2d) 130 (NB CA) (“Mann”), the New Brunswick Court of Appeal described the tort of trespass as follows (at pp. 132-133): Trespass to land is the act of entering upon land, in the possession of another, or placing or throwing or erecting some material object thereon without the legal right to do so. In Salmond on Torts, 12the ed. pp. 160-1, there is the following statement: In such cases, in order to be actionable as a trespass, the injury must be direct, within the meaning of the distinction between direct and consequential injuries…It is a trespass, and therefore actionable per se, directly to place material objects upon another’s land; it is not a trespass, but at the most a nuisance or other wrong actionable only on proof of damage, to do an act which consequentially results in the entry of such objects. To throw stones upon one’s neighbour’s premises is the wrong of trespass; to allow stones from a ruinous chimney to fall upon those premises is the wrong of nuisance.

[74] This Court adopted this description of trespass in Langille v. Schwisberg 2010 CarswellOnt 10561, in addition to citing a further summary of trespass set out in Lind Rinaldi, ed. Remedies in Tort (Toronto: Carswell, 1987) (at para. 93): The tort of trespass to land is committed by entry upon, remaining upon or placing or projecting any upon the land in the possession of the plaintiff without lawful justification. To be actionable, the defendant’s act must be voluntary, but it need not be intentional. Trespass may be committed either intentionally or negligently. The interference with the plaintiff’s property must be direct, not indirect or consequential.

[75] Thus, to establish a trespass, the plaintiffs must first show that they have sufficient possessory title over the property in question.

[76] The plaintiffs have put into evidence the proof of their title over the laneway. The Matars are acknowledged as the owners of the laneway in the Land Registry, pursuant to the transfer of the laneway Abdullah and Aida to Aida in 1993, and from Aida to the plaintiffs in 2012.

[77] Neither transfer was challenged, either at the time or since, by anyone else claiming an ownership interest in the laneway.

[78] They plaintiffs are on the assessment rolls as the owners of the laneway for purposes of municipal property taxes, and have given evidence of payments of such taxes dating back at least to 1998.

[79] Additionally, the King Street defendants recognized the plaintiffs as the registered owners in the Minutes of Settlement in 2005, the Laneway Agreement of 2008 and the extension agreement of 2011.

[80] In this case, I am satisfied that the unchallenged 1993 and 2012 transfers of the laneway constitute sufficient evidence of title for the purposes of trespass.

[81] Title over the laneway extended to the air rights above the laneway. It is a longstanding principle that the owner of a piece of land owns everything above and below it to an indefinite extent. At least as far back as Corbett v. Hill (1870) L.R. 9 Eq. 671, courts have sustained actions in trespass and acknowledged an owner’s right to air space.

[82] In Didow v. Alberta Power Limited, 1988 ABCA 257, the Alberta Court of Appeal reviewed the common law jurisprudence on this question in some detail and concluded (at paras. 9-10): [9] The authorities cited can, generally speaking, be divided into two groups:

1. Cases involving permanent structural projections into the airspace above another’s land;
2. Cases involving a transient invasion into the airspace above another’s land at a height not likely to interfere with the land owner. [10] With respect to cases in the first group, the weight of authority favours the view that a direct invasion by a permanent artificial projection constitutes a trespass.

[83] What remains to be determined is whether the plaintiffs’ possessory title for purposes of an action in trespass can be challenged by the King Street defendants, and if so, on what basis, and with what outcome with respect to this action.

2) Are the Defendants Barred by the Doctrine of Jus Tertii from Challenging the Plaintiffs’ Claim of Title?

[84] The King Street defendants argue that the plaintiffs have no lawful title to the laneway. The King Street defendants take the position that the plaintiffs’ title was flawed at the outset and is invalid. They argue that title over the laneway remains with the heirs of Mary Elizabeth Jones, as she was the recipient of the last known legitimate transfer of the laneway.

[85] The King Street defendants submit that the original 1993 transfer of the laneway to Aida Matar was defective, as it was a transfer for no or nominal consideration. They argue that a transfer for no value cannot create an estate or interest in land, where no such interest previously existed.

[86] Relatedly, the King Street defendants also argue that Aida Matar did not meet the test for adverse possession of the laneway in 1993, and therefore could not have obtained possessory title over the laneway in that way.

[87] Therefore, the King Street defendants take the position that the laneway was not Aida Matar’s to give when in 2012 she purported to transfer her interest to the plaintiffs.

[88] Consequently, the King Street defendants argue that the plaintiffs’ action against them in trespass must fail.

[89] The plaintiffs counter that the defendants challenge to their title over the laneway is barred by the doctrine of jus tertii, which precludes title being challenged by any save for those with as good or better a claim to title as the party whose title is impugned. In other words, it is not open to the King Street defendants to challenge their title over the laneway by arguing that Mary Elizabeth Jones remains the owner of the laneway.

[90] The doctrine of jus tertii is invoked infrequently, but its rationale has been well-accepted, as explained by R.E. Megarry and H.W.R. Wade in The Law of Real Property, 3rd ed (London: Stevens & Sons Limited, 1966), at p.77: Possession by itself gives a good title against all the world, except someone having a better legal right to possession. This last proposition is fundamental to our concept of title to land. If the occupier’s possession is disturbed, for example by trespass or nuisance, he can sue on the strength of his possession and does not have to prove his title. It follows that the person disturbing the occupier’s possession cannot attack his title, if he admits his possession; in the language of pleading, a defendant sued for trespass in such a case cannot plead jus tertii (that the land belongs to some third party, not to the plaintiff). As against a defendant having no title to the land, the occupier’s possession is in itself a title. But if the defendant himself lays claim to the land by a title of his own, he may of course plead his own title and so put the plaintiff’s title in issue; for then he is alleging a title not in a third party but in himself. (footnotes omitted.)

[91] Canadian courts have recognized the application of this doctrine on several occasions.

[92] In Dutton v. C.N.R. 1916 CarswellMan 130, affirmed 1917 SCC CarswellMan 43, the Court of Appeal for Manitoba affirmed that a defendant cannot question the title of a plaintiff in possession of property unless the defendant alleges true title over the property.

[93] A similar point was made in the Alberta decision, Gottschaik v. Hutton, 1921 CarswellAlta 71 at paras 9, 14-15, where Beck J.A., for the Alberta Supreme Court (Appellate Division) held that, “It is quite clearly settled by decision of the highest Courts that, in an action of trespass to goods or of trover, as against a wrongdoer any possession, which is complete and unequivocal, is a sufficient title to entitle the plaintiff to recover and that the defendant cannot against such title set up the title of this person (jus tertii) unless he claims against such third person.” (para.9)

[94] More recently, in Thomas v. Canada (Attorney General), 2006 ABQB 730, the Alberta Court of Queen’s Bench held (at para. 54): [54] The New Brunswick Court of Appeal in Jewett v. Bil (1999) N.B.R. (2d) 280, confirmed that a trespasser could not assert the jus tertii defence against the plaintiff who had possession of a lot but no legal title to the land. Although the plaintiff’s legal title to the land was flawed, he had bare possessory title by virtue of harvesting wood and inspecting the lot periodically. The Court accepted the proposition that the defendant could not assert that a third party had a better right of possession than the plaintiff unless he or she was acting on the authority of the party with a superior right. Therefore an action in trespass could be maintained against the defendant even though the plaintiff was not the “true owner” of the land. (Emphasis added.)

[95] While the King Street defendants have a deeded right of way over the laneway, it is not disputed that this cannot amount to an ownership interest for purposes of trespass. Therefore, the King Street defendants themselves have no claim to ownership over the laneway.

[96] As a result, pursuant to the operation of jus tertii, it is not open to the King Street defendants to challenge the plaintiffs’ title over the laneway by asserting that a third party (in this case, Mary Elizabeth Jones) has a better claim than the plaintiffs.

[97] The King Street defendants argue that they are not challenging title in the sense contemplated by jus tertii. Rather, they are simply holding the plaintiffs to strict proof of the elements of trespass, one of which is sufficient possessory title.

[98] The King Street defendants are not counterclaiming against the plaintiffs to interfere with their use of the laneway, but rather advance the view that in the absence of any heirs of Mary Elizabeth Jones having been identified, neither party should be able to interfere with the other party’s reasonable use of the laneway.

[99] While the applications of jus tertii in situations such as the one at bar are few, I accept the relevance of the principle to this action.

[100] While the plaintiffs have the burden of demonstrating sufficient possessory interest to establish a foundation for an action in trespass, I find that burden is discharged in this case by the 1993 and 2012 transfers of the laneway, each accepted by the Land Registry office, and neither challenged by the City of Toronto or another party with a competing claim to title.

[101] Having found the plaintiffs have title over the laneway for purposes of this action, it is not open to the King Street defendants, by way of defending this action, to challenge the plaintiff’s title to the laneway by asserting that title actually lies with a third party.

[102] Even if it were open to the King Street defendants to challenge the plaintiffs’ title, however, I find that their challenge would not succeed.

[103] The King Street defendants claim that transfers for no or nominal consideration (as was the case both with respect to the transfer of title to Aida Mattar in 1993, and the transfer from her to the plaintiffs in 2012), do not create an interest in land where no such interest existed previously.

[104] The King Street defendants rely on the Supreme Court of Canada’s judgment in Kaup v. Imperial Oil Ltd., [1962] S.C.R. 170, for the proposition that no person can convey a better title than they have, where there is no bona fide purchaser for valuable consideration. According to the King Street defendants (at para. 34 of their revised factum), “To the extent that the plaintiffs rest their claim on title, they must bear the defects inherent in that title.”

[105] The King Street defendants also rely on Maas v. Oakes, 2017 ONSC 5568, where this Court considered a dispute between two neighbours over a disputed strip of land between their properties on which a shed had been built. The Court, relying on Kaup, held that a purported conveyance of the land for no consideration was insufficient to establish title in the plaintiffs. [42] Mr. and Ms. Maas seek to rely on their conveyance of the disputed patch of land to themselves as part of their conveyance of the southeasterly parcel of Lot 11 from themselves, as tenants in common, to themselves, as joint tenants, on July 7, 2009, and on their application to consolidate the PIN of the southeasterly parcel of Lot 11 and the PIN of the disputed patch of land. [43] The Land Titles Act, which protects innocent purchasers for value from prior unregistered claims, does not create an estate in Mr. and Ms. Maas as a result of their transfer of the westerly 36’9” of the laneway, over which they never possessed either title or a right of way. The Supreme Court of Canada dealt with that issue conclusively in relation to Alberta’s counterpart of the Land Titles Act in 1962. [44] The Supreme Court, in Kaup and Kaup v. Imperial Oil Ltd. et al., (1962) rejected a claim by the purchaser and registered owner of certain land, to mineral rights, which the registrar of Land Titles had mistakenly failed to reserve to the vendor. The purchaser, UK, executed a transfer, without consideration, to herself and her husband, which contained no reservation in respect of mines and minerals other than a reservation of coal in favour of the Canadian Pacific Railway. The issue in the appeal was as to the title to the mines and mineral, other than coal, in the land. The trial judge and the majority of the Appellate Division of the Supreme Court of Alberta held that they were the property of the vendor’s estate. In dismissing an appeal to the Supreme Court of Canada, Martland J., speaking for the Court, stated: The proposition submitted by the appellants is that these sections have the mandatory effect that, upon the registration of any transfer, there is automatically created the estate or interest, defined in such transfer, in favour of the transferee, irrespective of whether or not the transferor had any legal estate or interest which he was entitled to transfer. This result flows, it is said, irrespective of whether the transferee was a bona fide purchaser for value or not. The sections of the Act dealing with the position of the bona fide purchaser for value, which I have mentioned, support these views as to the purpose and intent of the Act. The fact that these provisions were incorporated in the statute negatives the suggestion that the Act further curtails the old common law rule that no man can convey a better title than he possesses, so as to enable a transferor, having no title at all, to vest in a volunteer a legal title valid as against the true owner. In my opinion, The Land Titles Act altered that rule only to the extent that it established certain special rights for the benefit of the bona fide purchaser for value. Accordingly, the registration of a transfer from Urbanie Kaup, who had no title to any minerals, to herself and her husband, made without consideration, did not confer any title to mines and minerals in the transferees. [3] [Footnotes omitted, emphasis in original]

[106] However, as the Alberta Court of Queen’s Bench clarified in Darnley v. Tennant, 2006 ABQB 575 (“Darnley”), Kaup dealt with an error on the part of the Registrar and did not alter the general rule that fraud is the only true exception to the indefeasability of title. In Darnley, the Court concluded (at para. 29), [29] Kaup was a case concerning the correcting of an error made by the Registrar, and is distinguishable. Whether or not the Applicant was a volunteer or gave value does not affect the analysis. Fraud is the only true exception to the indefeasability of title. While there are cases holding that a volunteer cannot take advantage of the Act, they are almost always cases where fraud or a fraudulent conveyance was also involved: Imperial Bank v. Esakin, [1924] 2 W.W.R. 33 (Sask. C.A.); Friesen v. Bomok (1979), 95 D.L.R. (3d) 446, [1979] 3 W.W.R. 132 (Sask. Q.B.). Perhaps a transfer without consideration raises an inference of fraud, but that is a different thing than reading into the Act an exception to title that is not there.

[107] In this case, there is no allegation of fraud. What is clear from the examination of title thus far is that the Matars have asserted title over the laneway through the initial transfer in 1993 and subsequent transfer in 2012, that this title has been accepted by the Registry, and that this title has not been challenged either by the City of Toronto, or by any party with a competing claim to ownership (for example, the heirs of Mary Elizabeth Jones).

[108] For those reasons, this case also differs from Maas where the challenge to the defendant’s title was by a plaintiff, who raised a competing claim for title (though the Court found that title actually resided with a third party).

[109] Therefore, by virtue of the operation of jus tertii, I find it is not open to the King Street defendants to challenge the plaintiffs’ title in favour of a third party owner in the context of defending an action in trespass, but that even if they were permitted to do so, there are not sufficient grounds for concluding that the plaintiffs’ title to the laneway is defective.

[110] As I find no defect in the plaintiffs’ title, it is also not necessary to consider the King Street defendants argument that that the Aida Matar did not meet the threshold for adverse possession over the laneway at the time of the 1993 transfer.

3) Does the Real Property Limitations Act Bar the Defendants from Challenging the Plaintiffs’ Title?

[111] In light of my finding above, it is not necessary to examine the limitations issue, and whether the King Street defendants are barred from challenging the plaintiffs’ title given the passage of time, in detail.

[112] The plaintiffs rely on the Real Property Limitations Act, R.S.O. 1990, c.L.15 to argue that the King Street defendants no longer can challenge the plaintiffs’ title to the laneway given the passage of over a decade between when the issue was first raised in 2001, and when the statement of defence was filed in 2014.

[113] Section 4 of this Act provides that: 4. No person shall make an entry or distress, or bring an action to recover any land or rent, but within ten years next after the time at which the right to make such entry or distress, or to bring such action, first accrued to some person through whom the person making or bringing it claims, or if the right did not accrue to any person through whom that person claims, then within ten years next after the time at which the right to make such entry or distress, or to bring such action, first accrued to the person making or bringing it. R.S.O. 1990, c. L.15, s. 4.

[114] While this limitation period could well preclude the King Street defendants from making a claim or counterclaim which turned on a challenge to the plaintiffs’ title, I do not see how it has application to the context of a defence against an action in trespass. A defence to trespass is not “an entry or distress” or “an action to recover any land or rent” within the meaning of this Act.

[115] The plaintiffs referred to no authority for the proposition that the King Street defendants would be barred from questioning title as a defence to trespass by operation of the Real Estate Limitations Act.

[116] The plaintiffs argue that the King Street defendants’ defence is no more than a counterclaim by another name, and therefore that the limitation period in the Real Estate Limitations Act applies.

[117] I do not accept this characterization.

[118] I find that the Real Estate Limitations Act does not relieve the plaintiffs of having to demonstrate sufficient title for purposes of an action in trespass.

4) Are the Defendants Estopped from Challenging the Plaintiffs’ Title Given the Laneway Agreement?

[119] The plaintiffs argue that the King Street defendants also are precluded from challenging their title due to the operation of the doctrine of promissory estoppel.

[120] As I have found that the plaintiffs’ title over the laneway is sufficient to ground its action in trespass, I also need not examine the application of estoppel in detail.

[121] The doctrine of promissory estoppel operates so as to prevent a party from retracting a position it stated, and on which the other party has relied.

[122] As the Supreme Court of Canada affirmed in Engineered Homes Ltd., [1983] 1 S.C.R. 641, the definition of promissory estoppel arises from Lord Denning oft-cited decision in Combe v. Combe, [1951] 1 All E.R. 767: Cases dealing with the question [of promissory estoppel] in this Court include Conwest Exploration Company Limited v. Letain, [1964] S.C.R. 20, and John Burrows Ltd. v. Subsurface Surveys Ltd., [1968] S.C.R. 607, in which Ritchie J., at p. 615, speaking for the Court, cited the judgment of Lord Denning in Combe v. Combe, [1951] 1 All E.R. 767: In the case of Combe v. Combe, Lord Denning recognized the fact that some people had treated his decision in the High Trees case as having extended the principle stated by Lord Cairns and he was careful to restate the matter in the following terms: The principle, as I understand it, is that where one party has, by his words or conduct, made to the other a promise or assurance which was intended to affect the legal relations between them and to be acted on accordingly, then, once the other party has taken him at his word and acted on it, the one who gave the promise or assurance cannot afterwards be allowed to revert to the previous legal relations as if no such promise or assurance had been made by him, but he must accept their legal relations subject to the qualification which he himself has so introduced, even though it is not supported in point of law by any consideration, but only by his word. It seems clear to me that this type of equitable defence cannot be invoked unless there is some evidence that one of the parties entered into a course of negotiation which had the effect of leading the other to suppose that the strict rights under the contract would not be enforced, and I think that this implies that there must be evidence from which it can be inferred that the first party intended that the legal relations created by the contract would be altered as a result of the negotiations.

[123] Therefore, arising from this authority, the plaintiffs relying on the doctrine must establish that the defendants made a promise which was intended to affect their legal relationship and that plaintiffs, in reliance on that representation, acted in some way to change the plaintiffs’ position.

[124] In this case, the plaintiffs submit that over the course of the 2005 Minutes of Settlement, the 2008 Laneway Agreement and 2011 extension agreement, as well as over the course of the negotiations in 2012 regarding the new HVAC encroachment, the King Street defendants by word or conduct, acknowledged the plaintiffs’ title to the laneway. Only on the expiry of the extension agreement in January, 2013, did they once again raise a challenge to the plaintiffs’ title.

[125] Based on these representations, the plaintiffs submit (at para. 83 of their factum), “that the King Street Defendants are estopped from contesting the titled ownership of the Subject Property or to use such a belated attack on the ownership of the Subject Property as a defence to the Plaintiffs’ allegations of trespass.”

[126] The King Street defendants, however, argue that the various agreements which include an acknowledgment of the plaintiffs’ right to receive a fee in exchange for encroachments, must be seen in the context of the dispute over title which began in 2001 and led to competing applications to the court for relief by 2003.

[127] While the King Street defendants were prepared to set aside the concern over title for the life of the Minutes of Settlement and subsequent, sequential agreements, there is no evidence that they ever agreed to recognize the plaintiffs’ title per se, or outside the context of mutually agreeable and time-limited terms set out in these agreements.

[128] When the extension agreement expired and was not renewed, the King Street defendants argue they had the right to revive their concern over the plaintiffs’ title over the laneway.

[129] Additionally, the King Street defendants argue the fact they entered into negotiations to renew an agreement with the plaintiffs does not amount to a representation that there would be no subsequent challenge to the plaintiffs’ title over the laneway.

[130] I agree. While the King Street defendants’ acknowledgment of the plaintiffs’ title over the laneway in the various agreements is clear, each agreement and the terms and recitals contained in each agreement were expressly term-limited.

[131] Therefore, I find that there was no representation by the King Street defendants to the effect that, even without the existence of an agreement, the title of the plaintiffs would not be challenged.

[132] For this reason, were it to be relevant, I find the threshold for promissory estoppel has not been met in this case.

5) Are the Plaintiffs Barred from Asserting Title Over the Laneway because it is a Public Lane?

[133] Leaving aside their argument that the laneway remains the property of Mary Elizabeth Jones, the King Street defendants also advance the alternative position that the plaintiff’s title to the laneway is irrelevant as the laneway is not private property at all, but rather a public highway.

[134] Notwithstanding the City of Toronto correspondence in 1986 and 1993, referred to above, confirming that the lane was in its view private, the King Street defendants argue that all laneways in the City of Toronto which are part of a plan of subdivision, are deemed to be public by operation of the Surveys Act, R.S.O. 1990, c.S.30.

[135] Section 57 of the Surveys Act, provides: 57. Subject to the Land Titles Act or the Registry Act, as to the amendment or alteration of plans, every road allowance, highway, street, lane, walk and common shown on a plan of subdivision shall be deemed to be a public road, highway, street, lane walk and common respectively. (Emphasis added.)

[136] The Registry Act, R.S.O. 1990, c. R.20, defines a “plan of subdivision” to be a “plan by which the owner of land divides the land into areas designated on the plan but does not include a plan under the Cemeteries Act or the Expropriations Act or any predecessor of such Acts.”

[137] The laneway at issue in this case was subdivided pursuant to Plan 692, first filed in the Registry office in 1887.

[138] This plan of subdivision, however, predates the enactment of this provision in the Surveys Act. The first reference to a “lane” in a “plan of subdivision” was in the version of the Surveys Act enacted in 1920.

[139] Therefore, the relevant question for lanes which are part of subdivisions registered prior to 1920 were intended to have retroactive application under this Act.

[140] In Cornwall (City) v. Geneau (2000), 51 O.R. (3d) 460 (“Geneau”), Polowin J. held that the effect of this Act was retroactive to the plans then in existence. Polowin J. acknowledged that other courts had held this same Act was not retroactive in operation; see, for example, Alfrey Investments Ltd. v. Shefsky Developments Ltd. (1974), 6 O.R. (2d) 321, 52 D.L.R. (3d) 641 (H.C.).

[141] In Geneau, Polowin J. held that it whether or not the municipality had assumed public operation of a laneway was not determinative to its status as public property (at paras. 21-22): [21] The lane in question in the case at bar is shown on Plan 16, registered by the Mattice Estate in 1881. Having come to the conclusion that s. 13(2) of the Surveys Act of 1920 (the predecessor section to s. 57 of the Surveys Act, R.S.O. 1990, c. S.30) is retroactive, I find the subject lane to be a public lane. [22] It may very well be that whole sections of this lane no longer look like a lane. However, the case law establishes that the rights of the public to a public road cannot be lost by adverse possession over the prescription period or by acquiescence or estoppel. This principle was illustrated in the case of Gardiner v. Canada Trust Co. The applicant in that case had been using the lane in question as a driveway since at least 1977 (12 years). Further, in the immediate neighbourhood other parts of the lane were assumed by contiguous property owners who had placed fences across the land in question. In addition, the evidence was that the City had not assumed this lane by by-law or by expending any public money thereon. There was no evidence that any members of the public had used the land.

[142] If the laneway in this case was deemed retroactively a public lane by the effect of the 1920 Surveys Act, then that public ownership could not have been altered by the purported transfers of the laneway in to Aida Matar in 1993, or from her to the plaintiffs in 2012.

[143] The King Street defendants also highlight the precise language used by the City in its response to counsel for the Matars’ parents on the status of the laneway. The City’s 1986 letter stated that, “there is no project at this time to open a public lane to the north of premises No. 64 Spadina Avenue.” (Emphasis added.) Again, in 1993, the City stated that, “I am not aware of any plans to establish a public lane to the north of premises 64 Spadina Avenue.” (Emphasis added.)

[144] The King Street defendants submit that this language is not inconsistent with their position that these are public thoroughfares, even if not yet assumed by the City.

[145] The argument that the laneway is public would have a number of implications, which go far beyond the questions at issue in this litigation. These implications include that the plaintiffs could be entitled to recover property taxes paid in error. Further, costs of maintenance of the laneway (snow clearance, etc) would fall to municipal authorities, as could liability for injuries which occur as a result of the maintenance of the laneway. Other by-laws and City ordinances applicable to public lanes may also apply (or have retroactive effect) over the laneway.

[146] Additionally, all other laneways in the City of Toronto treated as private but in the same circumstances as the laneway, presumably would also need to be treated as public laneways, with similar implications for taxes, maintenance responsibilities, liability and by-law enforcement. While these implications may merit further examination in the appropriate case with the City’s participation as a party or intervenor, it is not necessary to do so in this case.

[147] The issue in Geneau was whether a property owner could defeat an attempt by the municipality to access the lane and have the lane declared to be public property. That situation is distinguishable from the case at bar.

[148] If the City of Toronto were to change its position and seek to take up the laneway at issue in this case, the question of the operation of the Surveys Act on the laneway may have to be fully determined.

[149] Given that the City of Toronto is not a party to this litigation, I see no need to delve further into positions it may or may not take in the future with respect to the laneway.

[150] For the same reason, it is not necessary to examine whether the laneway may be deemed a public laneway at common law, which requires an intention of the owner to dedicate the land as a public highway and an acceptance by the public of this dedication.

Conclusion on Trespass

[151] For the reasons set out above, I find that the registration of the transfer of the laneway by the plaintiffs in 1993 and again in 2012, the acceptance of these transfers by the Land Registry, the assertion by the City of Toronto that the laneway is private, together with the absence of any other party asserting a competing claim for title, is sufficient to establish the title necessary for an action in trespass.

[152] I find the two encroachments which were subject to the encroachment fee under the 2008 Laneway Agreement and 2011 extension agreement (the Murad sign box and the loading ramp), and the HVAC system which was the subject of negotiations between the parties with respect to renewing this agreement in 2012, each constitute a trespass against the plaintiffs.

[153] The period of trespass began on January 1, 2013, after the expiry of the extension agreement and the breakdown in negotiations between the parties.

[154] I now turn to the question of the appropriate remedy for this trespass.

B. What are the Plaintiffs’ Damages?

[155] As I have found the King Street defendants liable in trespass to the plaintiffs, I must consider the amount of damages to which the plaintiffs are entitled.

[156] The three encroachments which constitute the trespass in this case are quite distinct, as is the basis for damages with respect to each encroachment.

The Murad Sign Box

[157] The Murad sign box is the encroachment with the most obvious commercial value. It was installed in 1994 pursuant to an agreement between Murad, the predecessor owners to the King Street defendants and Aida Matar’s company, Gimpex.

[158] The Murad sign box generates a specific amount of revenue. The King Street defendants renegotiated the contract with Murad in 2008 and again in 2014 and 2018 resulting in specific revenue streams.

[159] With respect to the appropriate damages flowing from the Murad sign box encroachment, the plaintiffs rely on Moses v. Trans-Canada Displays Ltd., 2001 BCSC 1461 (“Moses”). That case involved trespass by the placement of a billboard on the land of the plaintiff’s Indian Band property without authority.

[160] The Court in Moses held that the measure of damages should be the loss of opportunity by the Band to put the land to productive use, as opposed to the market revenue obtained from advertisers for use of the billboard: [32] In this case, while the trespass created a loss of opportunity by the Band to put the land to some productive use, there was no evidence the Band in fact intended to use the land for some productive use during the relevant period. The Band did not respond to any of the offers it had obtained from advertisers in order to quantify its claim for damages, or enter into any negotiations with the advertisers to explore a higher price (para. 6 of affidavit of Teri Clayton sworn July 31, 2001, lands officer for the Band). [33] However, as the trespass continued after Trans-Canada was clearly notified that the Band was proceeding with its claim, it was not only negligent but also deliberate and wilful. Trans-Canada intentionally chose not to apply for a permit from the Ministry knowing of the risk the permit might be not be granted. It was also aware that Mr. Shuter and the Shuter estate had an ongoing dispute with the Band regarding title to the property. In these circumstances it cannot be said that the “taking” of the billboard space was inadvertent or a mere mistake while the real owner stood by, especially after November 9, 1999. [34] Assessing reasonable market rent in these circumstances should not, in my view, permit a deduction for the trespasser’s costs, even in the absence of physical harm to the property. [35] In determining the amount of reasonable market rent, the best evidence is the value of the rent paid by a ready, willing and able buyer of advertising space from a ready, willing and able seller of that space. In the circumstances of this case, that value can only be the price paid by the advertisers who contracted with Trans-Canada, being the revenue collected by Trans-Canada over the period of the trespass. That amount was the value to Trans-Canada of the use of the property. [36] Compensatory damages for this amount do not in my view “punish” the trespasser but are merely consistent with the principle that a trespasser should not be able to benefit from his trespass. (Emphasis added.)

[161] In this case, unlike Moses, it was not open to the plaintiffs to put the space to other uses, as the Murad sign box was affixed to the property of the King Street defendants.

[162] In the subsequent case of Ormond v. Richmond Square Development Corp., this Court relied on Moses for the principle that the degree of culpability in committing the trespass is relevant with respect to whether “milder” or “more severe” damages should be awarded.

[163] On this reasoning, the plaintiffs argue that the King Street defendants should be liable for the more severe damages of the revenue stream of the Murad sign box (or some portion thereof). They submit that the Murad sign box had been part of the encroachment fee under the previous agreements and therefore the trespass was clear and intentional after January 1, 2013.

[164] The total revenues received by the King Street defendants pursuant to its licensing agreement with Astral Media (“Astral”) for the Murad sign box between January 1, 2013 to the date of the hearing has been $519,924.57.

[165] Given the absence of opportunity costs to the plaintiffs, and the fact that the parties had already agreed on a value for this encroachment over the period of the Laneway Agreement and extension agreement, I would not be prepared to award damages based on a share of the Murad sign box revenues.

[166] In light of the fact that the Murad sign box was factored into the encroachment fee agreed upon by the parties, I find these agreements represent a more appropriate benchmark for the damages caused by the Murad sign box encroachment over the relevant period.

The Loading Ramp

[167] The plaintiffs acknowledged that it is challenging to ascribe a quantum of damages for the loading ramp. The laneway has been used for loading and unloading from the Samuel Building for its entire existence (this was also the reason why the iron curb was originally installed). It is undisputed that the King Street defendants have a right of way to use the laneway for this purpose.

[168] The loading ramp was installed in 2001 by the King Street defendants. The encroachment of the ramp is minimal until it is extended. Arguably, by making the loading and unloading process more efficient, the ramp’s effect is to minimize obstructions of the laneway.

[169] The loading ramp was factored into the “encroachment fee” in the Laneway Agreement and extension agreement and so in that sense had some value to the parties. Unlike the Murad sign box, however, that value does not correspond to some objective, market benchmark.

[170] The plaintiffs propose damages of $100,000 for the trespass of the loading ramp encroachment.

[171] The King Street defendants argue this number is arbitrary and excessive.

[172] Again, in light of the fact that the loading ramp was factored into the encroachment fee agreed upon by the parties, I find that is a more appropriate benchmark for the damages over the relevant period.

The HVAC System

[173] The HVAC system was installed in 2012 and, as discussed above, was the catalyst for this litigation. It also is the only encroachment at issue which was not included as part of the encroachment fee paid under the Laneway Agreement and extension agreement.

[174] The plaintiffs argue that the HVAC system was an essential element of the lease between the King Street defendants and McCain, and consequently that the measure of damages for the HVAC system should be the profit the King Street defendants received from that lease, which it calculates as $665,524.17.

[175] The King Street defendants point out that McCain is paying a market-based amount for the lease, and given the low vacancy rate in the area, it would have had no difficulty leasing the property to another party with or without the HVAC system.

[176] Again, the King Street defendants argue the damages claimed by the plaintiffs are excessive.

[177] Calculating damages for the HVAC system presents a more challenging problem, as it was never subject to an agreement between the parties during the Laneway Agreement and the extension agreement. Indeed, it was the failure to agree upon a value for this encroachment that caused the negotiations to a further renewal of the agreement between the parties to founder.

[178] Nonetheless, I find the previous agreements between the parties provides an appropriate template for assessing the damages of this most recent encroachment as well as the previous encroachments.

The Calculation of Damages

[179] In light of the analysis above, how should damages in trespass be calculated for the three encroachments at issue?

[180] None of the encroachments actually impede the functioning of the laneway, or otherwise interfere with the plaintiffs’ enjoyment of their interest in the laneway. As the encroachments are all attached to the Samuel Building, the plaintiffs could not make use of this space themselves without the agreement of the King Street defendants.

[181] While the King Street defendants derive significant revenue from the Murad sign box, and while the loading ramp clearly has a tangible benefit, the plaintiffs agreed to a flat encroachment fee as part of the Laneway Agreement and extension agreement. I see no need to alter that approach to the value of the encroachments in determining the appropriate amount of damages for the trespass.

[182] Further, I find the most reliable indicator of damages from trespass are the revenues which the plaintiffs would have expected from the encroachments, had the extension agreement been renewed.

[183] Between the 2008 Laneway Agreement and the 2011 extension agreement, the cost the King Street defendants paid for the encroachments increased from $6,000 to $7,000.

[184] I find it reasonable to assume the payments for the encroachment would have increased by a similar increment for a further renewal period, that is the encroachment fee would have increased from $7000 to $8000 in a two-year January 1, 2013- December 31, 2014 renewal agreement scenario, in the normal course.

[185] However, given the addition a of new and significant encroachment in the form of the HVAC system, I find it reasonable to envision that the encroachment fee would have increased further.

[186] The HVAC system constitutes a new and substantial encroachment, which was not part of the calculations of earlier agreements, though the system does not interfere with the operation of the laneway, and does not extend past existing, historical encroachments to the air rights over the laneway, such as the fire escape.

[187] There is no evidence on which one could attribute a particular proportion of the encroachment fee to the Murad sign box or to the loading ramp under the Laneway Agreement or extension agreement. Therefore, I find it reasonable to conclude that 50% of the encroachment fee may be attributed to each, or $4000 as the fee for each encroachment.

[188] On this reasoning, the additional amount of the encroachment fee which reasonably can be attributed to the HVAC system would be an additional $4000 to the encroachment fee at the time of the initial trespass after January 1, 2013. This additional element would make the encroachment fee $12,000 for the initial January 1, 2013 – December 31, 2014 period.

[189] If one assumes further incremental increases would follow with each, two year renewal period, the encroachment fee would have risen to $13,000 for the January 1, 2015-December 31, 2016 renewal period, and $14,000 for the January 1, 2017- December 31, 2018 renewal period, and $15,000 for the January 1, 2019- December 31, 2020 renewal period.

[190] On the basis of these assumptions, the amount of damages for trespass between January 1, 2013 and the date of the hearing would be approximately $93,000.00. This quantum is approximate, as it does not yet reflect any portion of 2020 in the calculation of the fee, or any cumulative interest on these fees (at the Courts of Justice Act rate).

Exemplary and Punitive Damages

[191] The plaintiffs submit that exemplary and punitive damages also are appropriate in this case given the special quality of culpability in the King Street defendants’ trespass; see, for example, Avender v Western Canadian Timber Products Ltd., 2018 BCSC 1711.

[192] The plaintiffs also argue the damages should reflect the fact that the King Street defendants engaged in “bad faith” negotiations in 2012 with respect to renewing the extension agreement,

[193] I do not accept this characterization. The evidence discloses that negotiations proceeded in 2012, but without success. The fact that negotiations do not succeed does not mean they were not pursued in good faith.

[194] As the King Street defendants had negotiated Minutes of Settlement, the Laneway Agreement and the extension agreement in the past with respect to rights of encroachment over the laneway, I find no basis to conclude that the King Street defendants did not similarly pursue negotiations in 2012 with a view to a successful outcome as well.

[195] I find that neither exemplary nor punitive damages are appropriate in this case.

C. Have the Plaintiffs Established Unjust Enrichment?

[196] The plaintiffs seek recovery from the defendants on the basis of unjust enrichment.

[197] In Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269 (“Kerr”), the Supreme Court described the basis for the doctrine of unjust enrichment as follows (at paras. 31-32): [31] At the heart of the doctrine of unjust enrichment lies the notion of restoring a benefit which justice does not permit one to retain: Peel (Regional Municipality) v. Canada, [1992] 3 S.C.R. 762, at p. 788. For recovery, something must have been given by the plaintiff and received and retained by the defendant without juristic reason. A series of categories developed in which retention of a conferred benefit was considered unjust. These included, for example: benefits conferred under mistakes of fact or law; under compulsion; out of necessity; as a result of ineffective transactions; or at the defendant’s request: see Peel, at p. 789; see, generally, G. H. L. Fridman, Restitution (2nd ed. 1992), c. 3-5, 7, 8 and 10; and Lord Goff of Chieveley and G. Jones, The Law of Restitution (7th ed. 2007), c. 4-11, 17 and 19-26. [32] Canadian law, however, does not limit unjust enrichment claims to these categories. It permits recovery whenever the plaintiff can establish three elements: an enrichment of or benefit to the defendant, a corresponding deprivation of the plaintiff, and the absence of a juristic reason for the enrichment: Pettkus; Peel, at p. 784. By retaining the existing categories, while recognizing other claims that fall within the principles underlying unjust enrichment, the law is able “to develop in a flexible way as required to meet changing perceptions of justice”: Peel, at p. 788.

[198] The test for unjust enrichment described in Kerr requires first that the plaintiff establish that a benefit was given to the defendant that was received and retained, and second, that this benefit corresponds to a deprivation on the part of the plaintiff. The third aspect of the test for unjust enrichment is the absence of a juristic reason for the benefit and corresponding deprivation.

[199] The plaintiffs raise a number of arguments for why the defendants have benefitted from their trespass, to the corresponding detriment of the plaintiffs.

[200] The plaintiffs argue that since January 1, 2013, when the extension agreement expired, the King Street defendants have enjoyed benefits from the use of the docking system, the sign box and the HVAC system. The defendant, McCain, also benefitted directly, particularly from the HVAC system installed to accommodate its kitchen.

[201] The most obvious benefit is the revenues the King Street defendants have retained from the arrangement with Murad with respect to the sign box.

[202] The second benefit raised by the plaintiffs is the lease with McCain, which they argue was only possible due to the installation of the HVAC system to their specifications.

[203] While the plaintiffs acknowledge some difficulty in quantifying the benefit to the loading dock system, they nonetheless contend that it represents a tangible benefit to the King Street defendants.

[204] The plaintiffs also argue that the encroachments at issue in this action also form a “cloud on title” which has impaired the plaintiffs’ ability to sell their property. In effect, the plaintiffs argue the only potential purchaser of the property would be the King Street defendants.

[205] Finally, the plaintiffs submit that the failure to renew the extension agreement has benefitted the King Street defendants. Since January 1, 2013, the King Street defendants have not had to pay for the right to encroach on the laneway, and the plaintiffs have been deprived correspondingly of those revenues.

[206] I accept the premise that the King Street defendants have received benefits by trespassing through the three encroachments on to the laneway. However, the question is whether there is any corresponding detriment to the plaintiffs as a result of these three encroachments.

[207] While the King Street defendants received revenues from the Murad sign box lease, the plaintiffs suffered no losses or opportunity costs as a result, as the plaintiffs had no right to erect the sign box on the King Street defendants’ building. Similarly, while the King Street defendants benefitted from the loading ramp and HVAC system, there was no corresponding loss, lost opportunity or detriment to the plaintiffs.

[208] Similarly, with respect to the cloud on title, while the plaintiffs may well encounter difficulties if they put their property on the market as a result of the uncertainty as to title over the laneway, I do not accept that this potential detriment benefits the defendants (nor is this potential detriment a consequence of the King Street defendants trespass per se).

[209] The only correspondence between benefit and detriment relating to the trespass was the encroachment fee itself. After the expiry of the extension agreement, the King Street defendants gained the benefit of no longer paying an encroachment fee while continuing to encroach on the plaintiffs’ laneway, to the corresponding detriment of the plaintiffs, who no longer received the revenue from these fees.

[210] Having found a benefit to the King Street defendants and a corresponding detriment to the plaintiffs as a result of the trespass, I must now consider whether there was any juristic reason for this enrichment?

[211] The Supreme Court confirmed its approach to the existence of a juristic reason in Kerr: [40] The third element of an unjust enrichment claim is that the benefit and corresponding detriment must have occurred without a juristic reason. To put it simply, this means that there is no reason in law or justice for the defendant’s retention of the benefit conferred by the plaintiff, making its retention “unjust” in the circumstances of the case: see Pettkus, at p. 848; Rathwell, at p. 456; Sorochan, at p. 44; Peter, at p. 987; Peel, at pp. 784 and 788; Garland, at para. 30. [41] Juristic reasons to deny recovery may be the intention to make a gift (referred to as a “donative intent”), a contract, or a disposition of law (Peter, at pp. 990-91; Garland, at para. 44; Rathwell, at p. 455). The latter category generally includes circumstances where the enrichment of the defendant at the plaintiff’s expense is required by law, such as where a valid statute denies recovery … However, just as the Court has resisted a purely categorical approach to unjust enrichment claims, it has also refused to limit juristic reasons to a closed list. This third stage of the unjust enrichment analysis provides for due consideration of the autonomy of the parties, including factors such as “the legitimate expectation of the parties, the right of parties to order their affairs by contract” (Peel, at p. 803).

[212] In light of these principles, I find there was no juristic reason for the King Street defendants to continue encroaching on and over the laneway without paying a fee to the plaintiffs after the expiry of the extension agreement as of January 1, 2013.

[213] Given the negotiations which persisted throughout 2012, it is reasonable to conclude that the King Street defendants expected to pay encroachment fees in the future, and expected those fees would rise in light of pervious incremental increases, given the added, significant encroachment of the HVAC system.

[214] Based on this finding, however, the quantum of damages for this unjust enrichment would be the same as the amounts determined above in damages for the trespass itself, which represent a reconstruction of reasonable encroachment fees that the King Street defendants would have been obliged to pay the plaintiffs from January 1, 2013 onwards, which I have calculated as approximately $93,000.

[215] For this reason, there is no basis for awarding a separate remedy for the unjust enrichment in this case.

Conclusion

[216] Based on the analysis above, I find the plaintiffs succeed in their action in trespass against the King Street defendants with respect to the encroachments on the plaintiffs’ laneway. I also find that the King Street defendants have been unjustly enriched as a result of this trespass.

[217] I find the King Street defendants are liable to the plaintiffs for damages of $93,000, together with a calculation for the period of 2020 until the date of the judgment, and a calculation of the cumulative interest on the relevant amount of damages between January 1, 2013 and the date of judgment, at the pre-judgment interest rates prescribed in the Courts of Justice Act.

[218] While these damages address the trespass from January 1, 2013 until the date of this judgment, the situation going forward must also be addressed.

[219] In their statement of claim, the plaintiffs sought a mandatory order compelling the defendants to remove the loading ramp, Murad sign box and HVAC System encroachments. Such an order, at this point, is premature.

[220] It remains open to the King Street defendants, in light of this judgment, to make changes to the encroaching structures so that they no longer encroach on the laneway.

[221] It also remains open to the parties to renew their agreement for an encroachment fee, based either on the envisioned amounts in the calculation of damages in this judgment, or otherwise.

[222] If no reasonable alternative can be found, the plaintiffs then may seek an order compelling one or more of the encroachments to be removed, providing sufficient time for the King Street defendants to put in place alternative structures, if necessary, which do not encroach on the laneway.

[223] The plaintiffs are also entitled to their costs of this action. If the parties cannot agree on costs, submissions may be made of no more than three pages, together with a bill of costs, within 30 days of this judgment.

Sossin J. Released: 2020-04-20