Court File and Parties

COURT FILE NO.: CV-20-00652590-0000

DATE: 20210901

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

MANNING DEVELOPMENTS INC.

Applicant

– and –

THE CORPORATION OF THE TOWN OF LAKESHORE

Respondent

William A. Chalmers, for the Applicant

Brendan van Niejenhuis and Caitlin Milne, for the Respondent

HEARD: May 3, 2021

VERMETTE J.

[1] The Applicant, Manning Developments Inc. (“Manning”), brings this Application against the Respondent, the Corporation of the Town of Lakeshore (“Lakeshore”), for a series of declarations and mandatory orders in relation to a Costs Sharing Agreement made as of September 24, 2019 between Manning and Lakeshore (“Agreement”). Lakeshore’s position is that the Application seeks no concrete relief and the matters in issue are not ripe for adjudication.

[2] After the hearing of this matter, I received a letter from counsel requesting a case conference to discuss “new evidence” of which counsel for the parties were not aware at the time of the hearing. A case conference was held on May 19, 2021 and, at the end of the case conference, I directed that Manning bring a motion in writing for the admission of the new evidence, which would be determined at the same time as the Application. The parties subsequently agreed on a timetable for the exchange of motion materials.

Factual background

a. The settlement agreement and the Agreement

[3] Manning is the registered owner of certain lands in Lakeshore (“Subject Lands”). The Subject Lands are located in an area of Lakeshore that is subject to an amendment to the Town of Lakeshore Official Plan known as the “Amy Croft Secondary Plan”. The Amy Croft Secondary Plan was adopted by Lakeshore on August 7, 2018 and became final upon the expiry of all appeal periods on March 9, 2020.

[4] Manning objected to the Amy Croft Secondary Plan when it was adopted by Lakeshore. However, it withdrew its objection pursuant to a settlement agreement that it concluded with Lakeshore on March 20, 2019. The settlement agreement contemplates Lakeshore and Manning entering into a cost sharing agreement that contains a provision that limits Manning’s share of the land acquisition and construction costs for certain municipal services to approximately $140,000 per acre.

[5] As stated above, the parties subsequently entered into the Agreement, i.e. the Costs Sharing Agreement made as of September 24, 2019. The relevant sections of the Agreement read as follows:

2. Subject to the terms and conditions of this Agreement, Lakeshore agrees to:

(a) construct the municipal services necessary for the full development of all of the lands within the area to which the Amy Croft Secondary Plan applies. This includes, without limitation, the extension of Lanoue Street and Commercial Boulevard from their current termini to their point of intersection, required traffic signals, street lighting, sidewalks (both sides of the roads), all storm and sanitary sewer mains, watermains and an expansion of the existing stormwater management facility (the “Municipal Services”). Construction of the Municipal Services shall include, without limiting the generality of the foregoing, retaining a consulting engineer to design and oversee the construction of the Municipal Services and any necessary land acquisitions;

(b) contribute the total sum of one million one hundred fifty thousand dollars ($1,150,000.00) towards the cost of constructing the Municipal Services;

(c) employ the services of a professional engineer to complete the final design of the Municipal Services and to provide construction management services for their construction (“Managing Engineer”); and

(d) employ a public tender process, to be constructed by the Managing Engineer, for the construction of the Municipal Services.

6. (a) Lakeshore agrees to provide Manning with an accounting of the costs incurred in designing and constructing the Municipal Services upon request; and

(b) Manning shall be entitled to review the final engineering drawings for the Municipal Services to ensure, acting reasonably, there are sufficient service connections and adequate capacity for the Subject Lands. [Emphasis added.]

b. Manning’s proposed development and Lakeshore’s concerns regarding the municipal sanitary and water capacity

[6] In 2017, prior to the execution of the settlement agreement and the Agreement, Manning filed a pre-consultation form and preliminary site plan drawings that contemplated a commercial use for the Subject Lands. The pre-consultation form is a step required by Lakeshore before the formal applications and approval processes associated with development are to be commenced and presented to municipal Council for consideration pursuant to the Planning Act, R.S.O. 1990, c. P.13.

[7] Lakeshore was unaware of any proposal on Manning’s part to pursue high-density residential development at the time it entered into the Agreement. According to Lakeshore, based on Manning’s representations, Lakeshore’s expectation and understanding were that the Subject Lands were eventually going to be developed for commercial uses and that there were no immediate plans for development. Lakeshore states that this understanding is reflected in a number of documents, including an Environmental Site Assessment and a Sanitary Sewer Modelling Analysis.

[8] At the end of May 2020, Lakeshore received another completed pre-consultation form from Manning. Manning’s pre-consultation form advised Lakeshore of Manning’s intention to propose to develop an eight-story apartment building comprised of 167 residential apartment units, together with twelve townhouses. Lakeshore has no previous residential development of this magnitude and density within its borders.

[9] A pre-consultation meeting between Manning and Lakeshore was held on June 24, 2020. At that meeting, Lakeshore informed Manning of certain of the planning issues that would need to be resolved in order for Manning’s proposal to be able to proceed, including a zoning by-law amendment, an application for site plan approval, as well as potential requirements for approvals from the County of Essex. Lakeshore also identified some of the studies and documents that would be necessary to consider the proposal any further. In addition, Lakeshore advised that there was an immediate concern about the municipal sanitary and water capacity and whether a development of this scale and density could be accommodated in light of existing service connections and other proposed developments in the area to which the Amy Croft Secondary Plan applies (“Amy Croft Area”). Lakeshore outlined the initial steps that it would take to assess this question.

[10] Lakeshore’s concerns regarding the municipal sanitary and water capacity were based, in part, on a study conducted by one of its external consultants in 2017 entitled “Town of Lakeshore Sanitary Sewer Modelling Analysis – Amy Croft Drive Proposed Development” (“2017 Study”). The 2017 Study contemplated development of the parcels in the relevant area on the basis of Lakeshore’s understanding of their owners’ development plans. The 2017 Study concluded that there was sufficient conveyance capacity for the then-planned developments in “dry water flow conditions”, i.e. where there is no rain and the only capacity to be accounted for is the flow of actual sewage. However, it also concluded that the system could be expected to result in “surcharging” (i.e., sewage “backing up” and being forced into residences or overland) during the two-year or five-year expected stormwater events.

[11] The 2017 Study explained that this result was in significant measure due to the high incidence of “inflow and infiltration” (“I&I”) in the conveyance system as a whole, that is, areas of the system in which stormwater is able to enter the sanitary pipes. The 2017 Study indicated that if the I&I rate could be reduced across the system from 1.76 liters per second per hectare, to 0.21 liter per second per hectare, there would be sufficient capacity to service the developments then being proposed in the Amy Croft Area, and even at the five-year stormwater event, the system would not be expected to surcharge.

[12] After its pre-consultation meeting with Manning, Lakeshore commissioned its external consultant to prepare an updated water and sewer capacity and stormwater management assessment to assess the feasibility of Manning’s proposed development in light of the capacity requirements implied by an additional 167-unit apartment tower. Lakeshore received the updated assessment on August 11, 2020 (“2020 Study”) and provided it to Manning. The 2020 Study concluded that the sewer along Amy Croft Drive did not have capacity for the proposed development.

c. Manning’s applications for zoning by-law amendments and site plan approval

[13] On September 30, 2020, Manning submitted applications to Lakeshore for a series of zoning by-law amendments and for site plan approval under the Planning Act, along with a volume of supporting documentation, including a Planning Justification Report and a Functional Servicing Report.

[14] Under current zoning, Manning’s proposed development is not permitted. Among other things, current zoning prohibits: (a) structures in excess of 10.5 meters, and (b) structures in excess of 3,000 square meters of gross floor area. Manning’s proposal is for a building of approximately 30.5 meters with approximately 21,200 square meters in gross floor area.

[15] On October 30, 2020, Manning supplied to municipal staff a revised Functional Servicing Report. The section of the report dealing with sanitary servicing states the following, among other things:

The Stantec Consulting drawings for the Lanoue Street sanitary sewer system was designed using a commercial land use designation for the subject property. This amounts to a population of 37 persons/hectare population density. Based on this design the subject site has an allocation of 56 people. A high density residential development would have a larger population and sewage flow rate than provided.

The population of the proposed development is calculated to be 450 people. […]

Since the sewer design population is 56 people vs the actual development population of 450 people the Town of Lakeshore will need to make design provisions to increase the density and allowable discharge from this site.

The Town of Lakeshore will have to make adjustment to the Stantec design for the Lanoue Street Sanitary Sewer to increase the density from the subject site. It is likely that the future Lanoue Street sanitary sewer has adequate capacity as designed for the subject development. The Town of Lakeshore will also have to undertake further studies and analysis to ensure the Amy Croft sanitary sewer and downstream infrastructure is adequate for the subject development. [Emphasis added.]

[16] On November 2, 2020, Lakeshore staff sent a Notice of Complete Application to Manning. This triggered the need for municipal staff to study Manning’s applications on their merits and bring them before Council. Manning’s zoning and site plan approval applications were placed on the Council agenda to consider on February 2, 2021.

[17] As part of the municipal staff review, on November 4, 2020, Lakeshore’s Manager of Engineering Services provided a memo to the municipal planner assigned to Manning’s applications, reporting as to his department’s review of the revised Functional Servicing Report supplied by Manning. The memo, a copy of which was sent to Manning, contained the following three points:

1. The Town of Lakeshore currently does not have the sanitary sewage conveyance capacity within its collection system for an eight story multi-unit high rise residential building and 10 townhomes.

2. The Town of Lakeshore has commissioned a consultant to study the downstream sanitary sewer conveyance system to determine if additional capacity can be provided to the Amy Croft Secondary Plan area. We will contact the proponent once the study is complete. The study will be completed as soon as possible.

3. Please note, we have not reviewed the rest of the submission and will not do so until we can confirm that we can accommodate this development in our sanitary sewer collection system.

[18] The following day, Rocco Tullio, Manning’s President, sent an e-mail alleging that Lakeshore was in breach of the Agreement. Nevertheless, further consultation continued with Lakeshore’s external consultants, with other municipal staff commenting on the content of Manning’s applications for zoning by-law amendments and site plan approval, and with Manning’s representatives.

[19] On December 2, 2020, Tammie Ryall, Lakeshore’s Director of Community and Development Services, sent a status report by e-mail to Mr. Tullio. The cover e-mail read as follows:

Please see attached a status report for the zoning and site plan proposal located at 1654 Manning Road which outlines the information and revisions that are requested.

If, after reviewing the comments, you would like to discuss the comments in more detail, your planner, Casey Kulchycki can arrange a meeting with Aaron Hair in the planning department (copied).

I draw your attention particularly to the servicing comments on page 3, which I understand the Engineering and Infrastructure Services staff have previously discussed with you –

• The Town of Lakeshore currently does not have the sanitary sewage conveyance capacity within its collection system for an eight story multi-unit high rise residential building and 10 townhomes.

• The Town of Lakeshore has commissioned a consultant to study the sanitary sewer conveyance system to determine if additional capacity can be provided to the Amy Croft Secondary Plan area. We will contact the proponent once the study is complete. The study will be completed as soon as possible.

[20] Less than 30 minutes later, Mr. Tullio sent the following e-mail to Ms. Ryall:

Tammie I'm a little confused

You do understand that the Town has entered into a legal binding settlement agreement and a Costs sharing agreement that was executed by the town in September 24th, 2019

We are not waiting for the town to hold this development up until you figure out what should have been figured out when you executed the agreement with me

You have been given an option to a solution on a without prejudice basis

You continue to prejudice this development and yet support the increase of gfa for Mr. Valente which we will eb [sic] appealing

I suggest you govern yourself accordingly and come up with a resolution to your problem within the next 24 hours

If we do not hear back by end of day today we will be serving the municipality with litigation

[21] The Notice of Application herein was issued two days later, on December 4, 2020.

[22] Despite the commencement of the Application, Lakeshore has undertaken efforts and commissioned studies to update its assessment of the overall conveyance capacity of the sanitary system in the area in light of a number of measures previously completed to reduce the I&I impact of stormwater and to explore possible alternative ways to increase capacity apart from reduction in I&I. The results of these studies were not available at the time of the hearing of the Application.

d. Beachside’s development

[23] The reference to “Mr. Valente” in Mr. Tullio’s e-mail of December 2, 2020 reproduced above is a reference to the proposed development on a neighbouring property owned by Beachside Developments Inc. (“Beachside”). Beachside’s proposal also requires amendments to Lakeshore’s zoning by-law and approval of a site plan. Beachside submitted its pre-consultation form in early 2017.

[24] On December 15, 2020, Lakeshore's Council met to consider, among other items, the application for zoning by-law amendments brought by Beachside. Beachside’s application for approval of its site plan was not yet before Council and the municipal servicing issues, including water and sewer conveyance, were expressly proposed to be considered at the site plan approval stage. Staff recommended the approval of the zoning by-law amendments subject to placing a “hold” designation on the lands, attaching conditions such as entry into a site plan agreement satisfactory to the municipality before that designation could be lifted. Council followed staff’s recommendation and approved the amendments, subject to the hold designation.

[25] The day before Council’s meeting, Manning delivered a submission in opposition to Beachside’s application which read, in part:

There is a clear disconnect between the Town’s approach to higher, denser development on the Beachside Site and the Town’s approach to higher, denser development on the Manning Site. Despite both Beachside and Manning making financial contributions to the required infrastructure upgrades, and despite the Town having previously agreed to provide the municipal services necessary for full development of lands within the Amy Croft Secondary Plan, the Town is prepared to ensure enlarged municipal services are available to accommodate the increases in zoned height and density at the Beachside Site but is not similarly prepared to ensure services are available to accommodate increased height and density on the immediate-adjacent Manning Site.

Accordingly, we submit that it is premature for Council to approve the proposed rezoning, or advance the proposed site plan, on the Beachside Site unless and until issues regarding the provision of agreed-upon servicing to the Amy Croft Secondary Plan are resolved. There is no discernable reason why the Beachside Site should be advanced with servicing issues to be determined through site plan while the adjacent Manning Site is stalled at zoning application based on assertions that municipal services will not be made available. Both Sites are subject to the same infrastructure and servicing policies under the 2020 PPS (see Policy 1.1.3.3: Promoting opportunities for intensification and redevelopment, taking into account the availability of suitable existing and planned infrastructure and public service facilities), the County of Essex Official Plan and the Town of Lakeshore Official Plan, including the Amy Croft Secondary Plan. The Town’s commitment to provide required municipal services (both through its policies and through its prior agreements) and the equitable availability of such services are clear issues of good planning.

[26] Manning has appealed Council’s decision to approve Beachside’s zoning by-law amendments application to the Local Planning Appeal Tribunal (“LPAT”). The appeal remained pending at the time of the hearing of this Application.

e. February 2, 2021 Council meeting

[27] As stated above, Manning’s zoning and site plan approval applications were placed on the Council agenda to consider on February 2, 2021. The package for the February 2, 2021 Council meeting included a staff report which recommended to defer Manning’s zoning by-law amendments application until April or May 2021. The staff report contained the following conclusion:

Administration recommends Council defer the zoning by-law application. This option would allow the developer to consider any potential comments or concerns raised at the public meeting, and would allow the Municipality time to further investigate the sewage conveyance issue. The sewage conveyance report (Jacobs) is anticipated to be completed at the end of March 2021, at such time the conveyance issue will be better understood. Administration recommends that consideration of this matter be brought back to Council in April or May of 2021. The approach to defer the application is in conformity with Section 7.3.2, Allocation and Phasing, of the Official Plan.

[28] Section 7.3.2 of Lakeshore’s Official Plan referred to in the staff report provides that “[w]hen unallocated servicing capacity does not exist for a proposed development, the Town will defer the processing of the planning application until capacity is available, or until a servicing agreement is in place to ensure that such capacity will be available to service the development within one year of the granting of the planning approval.”

[29] The staff report also advised Council that a new holding provision was being proposed with respect to the Subject Lands:

A new holding provision for the subject lands is also being proposed to be placed on the lands, and removal will be subject to: site plan agreement approval; condominium agreement approval; final condominium approval by the County; that the Denis St. Pierre Sanitary Treatment Plant expansion has been tendered; and that the sanitary conveyance system is sized appropriately to accommodate the proposed development. (Appendix F, draft By-law).

[30] At its February 2, 2021 meeting, Council did not make a decision on Manning’s zoning by-law amendments application. Given Council’s failure to make a decision on the application, Manning exercised its right to appeal to the LPAT under subsection 34(11) of the Planning Act.

[31] While Manning’s zoning by-law amendments application is under appeal, its site plan application is not being processed by Lakeshore pending the decision of the LPAT as “the use is not in place”.

Manning’s position

[32] It is Manning’s position that Lakeshore has: (a) failed to construct the municipal services necessary for the full development of the Subject Lands such that there are sufficient service connections and adequate capacity for the Subject Lands; (b) failed to provide Manning with an accounting of the costs incurred in designing and constructing the municipal services necessary for the full development of the Subject Lands such that there are sufficient service connections and adequate capacity for the Subject Lands; and (c) failed to provide Manning with the final engineering drawings for the municipal services necessary for the full development of the Subject Lands such that there are sufficient service connections and adequate capacity for the Subject Lands. Manning argues that Lakeshore’s inaction amounts to failures to comply with the Agreement.

[33] Manning also complains that Lakeshore has refused to allow Manning to tie into the municipal services, but has permitted other developers of lands within the Amy Croft Area to tie into, take advantage of or benefit from the municipal services. Manning alleges that Lakeshore is preferring the interests of those developers overs Manning’s interests.

[34] Manning submits that even if it is true that the current sanitary sewer does not have the capacity for Manning’s proposed development, this is irrelevant to the question as to whether the relief sought by Manning on this Application should be granted because of the express wording of the Agreement and Lakeshore’s obligation under the Agreement to construct the municipal services necessary for the full development of all of the lands within the Amy Croft Area, including all storm and sanitary sewer mains. According to Manning, if the current sewer is not sufficient, then Lakeshore is obliged to construct a sewer that is sufficient. Further, Manning’s position is that Lakeshore is not entitled to “defer the processing of the planning application until capacity is available, or until a servicing agreement is in place to ensure that such capacity will be available to service the development within one year of the granting of the planning approval”, as provided in its Official Plan, because Lakeshore agreed to construct the municipal services necessary to ensure that capacity is available.

[35] Manning states that, as a result of the 2017 Study, Lakeshore has been aware since 2017, i.e. more than two years before the Agreement was signed, that there was insufficient sewer capacity to service the then contemplated development within the Amy Croft Area. Manning points out that nothing in the Agreement or in the Amy Croft Secondary Plan limits in any way the development by Manning in the Amy Croft Area to commercial development or precludes high-density residential development by Manning in the Amy Croft Area. Manning argues that if it was essential to the planning of municipal infrastructure servicing the Amy Croft Area that the development of the Subject Lands be restricted to commercial uses, Lakeshore had the opportunity to include language in that regard in the Agreement, but did not do so.

[36] Manning submits that the Agreement must be interpreted with sound commercial principles and good business sense, and that a commercially sensible interpretation of the Agreement is one that requires Lakeshore to take steps to construct the municipal services necessary for the full development of the lands in the Amy Croft Area as soon as Lakeshore knew or ought to have known that the existing sewer system was insufficient for the full development of those lands. Manning argues that because Lakeshore knew it was obliged to provide sufficient services for the full development of the lands in the Amy Croft Area as of September 24, 2019, and because it knew that the full development could include higher-density residential development (because that type of development is permitted by the Amy Croft Secondary Plan), Lakeshore should have started the necessary studies regarding the sufficient services, and construction on such services, at the very latest when it turned its mind to the provisions of the Agreement, which Manning submits is January of 2020.

[37] In its 24-page “Reply Factum”, Manning particularized eight alleged breaches of the Agreement:

a. Lakeshore breached the Agreement by not taking steps at the outset of the Agreement (in January 2020) to construct the municipal services necessary for the full development of the lands in the Amy Croft Area.

b. Lakeshore breached the Agreement by advising Manning that Lakeshore would be relying on the Official Plan to defer processing of Manning’s planning application until servicing capacity is available.

c. On July 30 and August 18, 2020, Lakeshore’s senior staff refused to commit to providing servicing to Manning because to do so would result in there being “nothing remaining for the other land owners”.

d. On November 26, 2020, Lakeshore refused to commit to providing servicing to Manning’s proposed development.

e. In the staff report prepared for the February 2, 2021 Council meeting, Lakeshore municipal staff recommended that a holding provision be imposed on Manning’s proposed development due to the lack of sewage system capacity.

f. The holding provision recommended by Lakeshore municipal staff for Beachside’s proposed development does not include any mention of sewage system capacity.

g. On December 15, 2020, Lakeshore Council voted to approve Beachside’s application for zoning by-law amendment in accordance with the recommendation of Lakeshore municipal staff.

h. Lakeshore has refused to allow Manning to tie into the municipal services, but has allowed other developers to do so.

Lakeshore’s position

[38] Lakeshore argues that the Application seeks no concrete relief and the matters in issue are not ripe for adjudication as future events will either eliminate the controversy or will serve to concretely define it. Lakeshore submits that there is as yet no distinct breach of the Agreement, and it is premature to say that there will be an issue while the appeal is pending before the LPAT and the necessary studies undertaken by Lakeshore are underway. In its view, the relief requested by Manning will have no practical effect since, among other things, it merely restates the terms of the Agreement which remains in force.

[39] Lakeshore also argues that the meaning ascribed by Manning to the expression “full development” in the Agreement, i.e. development without limitation, is unreasonable. Lakeshore’s position is that context and common sense cannot support the idea that the language of “full development” means that Lakeshore is required to complete the servicing for any possible development advanced by Manning, regardless of feasibility, planning legislation and policy, and proportionate cost. According to Lakeshore, the parties did not agree, nor could they have agreed, to waive the zoning legislation and Official Plan provisions applicable to the Subject Lands, or the statutory process to amend such legislation under the Planning Act. Lakeshore’s view is that there is no purpose in adjudicating an alleged claim in breach of contract as the ultimate outcome of the LPAT appeals, the approval processes and studies underway will shape the parties’ ultimate obligations to each other “in ways that a speculative decision in advance will not be able to usefully address.”

[40] Lakeshore also states that, although it is premature to argue this point, it would be entitled to plead the doctrine of unilateral mistake by way of defence and in support of the remedy of rescission if the words “full development” have the meaning ascribed to it by Manning.

[41] Lakeshore summarizes its position as follows in its Factum:

Accordingly, the Application is not ripe for adjudication. The declaratory relief it seeks is abstract, academic and hypothetical. “Full development” cannot be construed to include development that is unlawful under current zoning. And, should events unfold at the LPAT (or otherwise) so that the development becomes lawfully permissible, the Applicant's position would then leave the municipality in a position to plead the doctrine of unilateral mistake and seek rescission of the Cost Sharing Agreement should it so elect.

Discussion

[42] I agree with Lakeshore’s position that the relief requested in this Application will have no practical utility at this stage and that, in many respects, this Application is premature and not ripe for adjudication. As a result, I decline to grant the relief sought by Manning.

a. The specific declaratory relief and related orders sought in this case

[43] Most of the relief sought by Manning in this Application is declaratory in nature. Declaratory relief is granted by the courts on a discretionary basis, and may be appropriate where: (a) the court has jurisdiction to hear the issue, (b) the dispute is real and not theoretical, (c) the party raising the issue has a genuine interest in its resolution, and (d) the responding party has an interest in opposing the declaration being sought. A declaration can only be granted if it will have practical utility, that is, if it will settle a “live controversy” between the parties. See Daniels v. Canada (Indian Affairs and Northern Development), 2016 SCC 12 at para. 11 and S.A. v. Metro Vancouver Housing Corp., 2019 SCC 4 at paras. 60-61.

[44] The specific declarations and orders sought by Manning are set out in bold font below. I explain why I decline to grant these declarations and orders next to each of them:

a. A declaration that pursuant to section 2 of the Agreement, Lakeshore is obliged to forthwith construct the municipal services necessary for the full development of all of the lands within the Amy Croft Area. Aside from the word “forthwith”, this declaration merely repeats the words contained in section 2(a) of the Agreement. Given that Lakeshore agrees that it is bound by section 2(a) of the Agreement (although it may have a different interpretation of this provision than Manning) and the fact that the construction of certain municipal services has already started, granting this declaration, without something more, would have no practical effect and would not resolve any controversy between the parties.

b. A declaration that the Subject Lands are included in the Amy Croft Area. This is not in dispute. Therefore, granting such a declaration would not have practical utility and would not settle a live controversy between the parties.

c. A declaration that the municipal services necessary for the full development of all of the lands within the Amy Croft Area (referred to herein and in the Agreement as the "Municipal Services") include all municipal services necessary for the full development of the Subject Lands. Given that it is agreed that the Subject Lands are part of the Amy Croft Area, this declaration does not add anything to the first declaration set out above. Again, without something more, this declaration would have no practical effect and would not resolve any controversy between the parties. It merely repeats what the Agreement states without addressing the issues of contention between the parties, such as the meaning of “full development”.

d. A declaration that the Municipal Services necessary for the full development of the Subject Lands include, but are not limited to, those identified in section 2(a) of the Agreement, and any other services certified by a land use planner as necessary to fully develop the Subject Lands. Section 2(a) of the Agreement provides that Lakeshore agrees to construct the municipal services necessary for the full development of all of the lands within the Amy Croft Area. It goes on to say that this includes, without limitation, a number of enumerated services. Thus, the first part of this declaration (up to the word “Agreement”) merely repeats the terms of the Agreement and has no practical utility. There is no reference in the Agreement to a land use planner determining which other services would be necessary to fully develop lands, and I do not see any basis to imply such a term. Further, the declaration, as currently worded, is insufficient as it does not specify, among other things, who would retain the land use planner and the involvement of the parties in such a process.

e. A mandatory order directing Lakeshore to construct the Municipal Services necessary for the full development of the Subject Lands, including, but not limited to, those identified in section 2(a) of the Agreement, and any other services certified by a land use planner as necessary to fully develop the Subject Lands in such a way that there are sufficient service connections and adequate capacity for the Subject Lands. This order is an amalgamation of the declarations (a), (c) and (d) above. I decline to make such an order for the same reasons that I decline to make these declarations.

f. A mandatory order directing Lakeshore to provide Manning with an accounting of the costs incurred in designing and constructing the Municipal Services necessary for the full development of the Subject Lands. This order repeats the language of section 6(a) of the Agreement, except that this provision states that Lakeshore will provide Manning with an accounting upon request. There is no evidence before me that such an accounting was requested and refused. There is no “real” dispute on this issue.

g. A mandatory order directing Lakeshore to provide Manning with the final engineering drawings for the Municipal Services necessary for the full development of the Subject Lands that provide sufficient service connections and adequate capacity for the Subject Lands. This order generally repeats the language of section 6(b) of the Agreement. It is premature and does not relate to a “real” dispute between the parties. It is obvious from the facts set out in the “Factual background” section above that the final engineering drawings requested are not available because no final decision has been made. Further, there is no evidence before me that Lakeshore has taken the position that Manning is not entitled to receive a copy of such drawings when they are available.

b. Meaning of “full development”

[45] While I decline to make the specific declarations and orders requested by Manning for the reasons set out above, I note that the issues at the core of this Application also support the conclusion that this Application is premature and not ripe for adjudication. The issue of the meaning of “full development” is one of them.

[46] Section 2(a) of the Agreement provides that Lakeshore agrees to “construct the municipal services necessary for the full development of all of the lands within the [Amy Croft Area]”. As stated above, one major issue with the relief sought by Manning is that it only repeats the words “full development”, without addressing the real issue between the parties about the meaning of this expression. However, even if I were to ignore this problem, it is my view that the interpretation put forward by Manning with respect to the meaning of “full development” should be rejected. It is also my view that it is unnecessary and premature to determine the full scope of the expression “full development” on this Application.

[47] When interpreting a contract, a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning. The meaning of words is often derived from a number of contextual factors, including the purpose of the agreement and the nature of the relationship created by the agreement. Relevant surrounding circumstances 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. See Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 at paras. 47, 48, 58.

[48] Manning’s position is that “full development” means development that is permitted by the Provincial Policy Statement, the County of Essex Official Plan and the Town of Lakeshore Official Plan. It conveniently omits zoning by-laws from this list, even though such by-laws operate as a constraint on development.

[49] One significant issue with respect to Manning’s submission on this point is that while there might be support for residential intensification in the three documents that it relies on, this support is expressed in very general terms. I do not accept that the parties’ intention at the time of the formation of the contract was that any proposed development that promotes residential intensification – no matter its size, height, and the number of residents involved – would be included in “full development”. This is especially the case since section 2(a) of the Agreement refers to the full development of all the lands in the Amy Croft Area, not only the Subject Lands. Forcing Lakeshore to assume the highest possible level of residential intensification on each and every parcel of land in the Amy Croft Area when planning for and constructing municipal services, without taking into account the binding provisions of zoning by-laws and without any known limits on the permissible level of residential intensification, is wasteful and does not make any sense.

[50] At the time of the formation of the contract, the parties were legally constrained and bound by the existing zoning by-laws. They could not legally agree to a development that contravened such by-laws, and it could not have been their intention to enter into an illegal or unenforceable contract. In any event, where an agreement admits of two possible constructions, one which renders the agreement lawful and the other of which renders it unlawful, courts will give preference to the former interpretation: see 1298417 Ontario Ltd. v. Lakeshore (Town), 2014 ONCA 802 at paras. 13-14. This is further support for the conclusion that, contrary to Manning’s submission, Lakeshore’s existing zoning by-laws cannot be completely ignored.

[51] However, it would reasonably have been in the contemplation of the parties at the time of the formation of the contract that zoning by-laws could be amended in the future, as part of the existing municipal processes. Thus, while I reject Manning’s position that the zoning by-laws should not be considered when interpreting the words “full development”, I also decline to find that the zoning by-laws that existed at the time of the execution of the Agreement are a complete bar to developments that do not comply with such by-laws.[^1] The Agreement does not prevent the parties from using municipal processes to seek to amend zoning by-laws, and the evidence shows that zoning by-law amendments were within the contemplation of the parties when the Agreement was entered into. This is because zoning by-law amendments would have been required even if Manning had proceeded with a commercial development, as anticipated by Lakeshore, instead of a high-density residential development. Further, zoning by-law amendments were required and approved with respect to Beachside’s development. This is relevant to the extent that: (1) the Agreement applies to all the lands in the Amy Croft Area, which include Beachside’s property; (2) the total estimated costs of designing and constructing the municipal services referred to in Schedule “C” to the Agreement include Beachside’s proposed development; and (3) I infer from the evidence that both parties knew at the time of the formation of the contract that zoning by-law amendments were required with respect to Beachside’s proposed development.

[52] Thus, my view is that the scope of “full development” likely includes the possibility of zoning by-law amendments in accordance with the appropriate municipal processes, with both parties being mindful of their contractual obligations and the existing good faith doctrines while following these processes. However, I do not make a formal finding in this regard. To do so is, in my view, unnecessary to decide this Application and premature in light of the municipal processes that are underway.

[53] In this regard, I agree with Lakeshore that it is premature to determine whether there is a breach of the Agreement while Manning’s appeal is pending before the LPAT and the studies undertaken by Lakeshore are underway. The results of the studies may resolve the issues raised about sanitary sewage conveyance capacity, and the outcome of the LPAT appeal and associated municipal processes will shape the meaning of “full development” and/or the contours of an alleged breach of contract. I am not in a position, nor is it this Court’s role, to opine on the merits of Manning’s application for zoning by-law amendments. Without these amendments, Manning’s proposed development cannot lawfully be included within the expression “full development” in section 2(a) of the Agreement. I also note that Lakeshore has not refused to construct the necessary municipal services and that staff’s recommendation was not to reject Manning’s application for zoning by-law amendments, but to defer it for a few months in order to have the benefit of the studies that were being conducted with respect to the issue of sewage conveyance.

[54] Finally, I note that the fact that Lakeshore appears to be treating Beachside’s applications differently than Manning’s applications, while not satisfactorily explained in the record before me, does not in itself constitute a breach of the Agreement, especially since the consideration of the municipal servicing issues, including water and sewer conveyance, has been expressly postponed until the site plan approval stage, which has not occurred. Manning has not identified any specific provision of the Agreement that is breached by the alleged differential treatment given to Beachside so far.

c. Timing for the execution of Lakeshore’s obligations under the Agreement

[55] Both parties seem to agree that, in the absence of a specified time limitation in the Agreement with respect to the construction of the municipal services, Lakeshore should perform this obligation within a reasonable timeframe. Predictably, the parties disagree as to what reasonableness requires in the circumstances of this case.

[56] In order to determine what a reasonable period is to execute certain obligations, one needs to know what those obligations are and what needs to be done in order to perform them. Here, neither of these necessary pieces of information are known. The municipal services to be constructed depend on the meaning to be given to the “full development of all of the lands within the [Amy Croft Area]”. As set out above, it is premature to determine what, if anything, “full development” includes in addition to what is currently permitted under the zoning by-law presently in force. Further, in the absence of the results of the studies undertaken by Lakeshore, there is no evidence before me as to what Lakeshore would need to do in order to achieve the necessary capacity, how long that would take, etc.

[57] While Manning argues that Lakeshore has known about issues regarding sewer conveyance for some time, it has not established that Lakeshore has acted unreasonably since May 2020, i.e. when Lakeshore received Manning’s pre-consultation form indicating for the first time Manning’s intention to propose a high-density residential development, which falls outside what is currently permitted under the zoning by-laws. When Lakeshore realized that Manning’s proposed development was going to raise issues with respect to sewer conveyance, it started studying the question on a timely and continuous basis. Aside from general allegations, Manning has not stated with any specificity what exactly, in its view, Lakeshore should have done/constructed in the circumstances. Manning’s own Functional Servicing Report submitted at the end of October 2020 stated that “Lakeshore will also have to undertake further studies and analysis to ensure the Amy Croft sanitary sewer downstream infrastructure is adequate for the subject development.” Lakeshore has followed this course of conduct. For the reasons stated above, I do not accept the proposition that Lakeshore should have started constructing municipal services after the conclusion of the Agreement based on a definition of “full development” that includes an unknown level of residential intensification.

[58] Manning raises two additional arguments with respect to timing: (1) it points to the clause in the Agreement that states that time shall be of the essence; and (2) it argues that because section 7.3.2 of Lakeshore’s Official Plan provides that Lakeshore will defer the processing of planning applications until servicing capacity is available or until a servicing agreement is in place to ensure that such capacity will be available to service the development within one year of the granting of the planning approval, Lakeshore had to take steps to meet the one-year requirement.

[59] I do not think that the “time is of the essence” clause adds anything to the analysis on this issue. I also reject Manning’s argument based on the Official Plan. The one-year period starts running at the time of the granting of the planning approval. At the present time, and at the time the Agreement was entered into, no development had been approved for the Subject Lands, and the present proposal cannot proceed under the current zoning by-law. Further, and in any event, even if Council had approved Manning’s applications on February 2, 2021, there is no evidence before me that servicing capacity will not be available by February 2, 2022. Again, Manning has not adduced any evidence as to the specific steps that Lakeshore needs to take and/or should have taken, and how long such steps would take to be completed.

d. Alleged breaches of the Agreement and Lakeshore’s position regarding unilateral mistake and rescission

[60] As set out in paragraph 37 above, Manning alleged for the first time in its Reply Factum that Lakeshore had committed eight specific breaches of the Agreement.

[61] I note that Manning never amended its Notice of Application and is not seeking declarations with respect to these alleged breaches. I have already addressed the specific declarations and orders that Manning is actually seeking in this Application. I find it unnecessary to discuss the breaches alleged by Manning in any detail as most of them are directly or indirectly addressed above in the discussion regarding the meaning of “full development”, the treatment of Beachside, and the timing for the completion of Lakeshore’s obligations under the Agreement.[^2] However, I will comment on Manning’s repeated complaint in its materials (and one of the alleged breaches) that Lakeshore has refused to allow Manning to tie into the municipal services. Such complaint is premature – given that the construction of Manning’s project has not been authorized, let alone started, Manning has nothing to “tie into” the municipal services. There is no evidence, and it is speculative to assert, that Manning will not be able to tie into the municipal services at the relevant time.

[62] I do not express any view about the merits of Lakeshore’s position that it may be able to plead the doctrine of unilateral mistake and seek rescission of the Agreement if it so elects. As acknowledged by Lakeshore, such arguments are premature. In any event, these issues were not before me (i.e. Lakeshore did not commence any proceeding for this relief) and the evidentiary record is insufficient to address them.

Manning’s motion for an order granting it leave to file fresh evidence

[63] The motion for leave to file fresh evidence relates to a letter received my Manning’s counsel on May 4, 2021, the day after the hearing of the Application, from Beachside’s counsel (“Beachside Letter”). The Beachside Letter encloses a letter dated April 15, 2021 from Lakeshore to Beachside (“Lakeshore Letter”).

[64] Manning submits that the applicable test in the circumstances is two-fold: (1) whether the evidence could have been discovered by the exercise of reasonable diligence; and (2) whether the evidence might probably change the result. Given that Lakeshore did not propose any other test, I will use this test for the purpose of this motion.

[65] There is no dispute regarding the first criterion. The only issue is whether the evidence might probably change the result. As Lakeshore submits, for any evidence to be admissible, it must first be relevant.

[66] I find it unnecessary to discuss the fresh evidence in great detail because it would not have changed the outcome of this Application if it had been part of the evidence. However, since I need to determine Manning’s motion, I find that leave to file fresh evidence should not be granted as the second criterion is not met.

[67] I agree with Lakeshore that the Beachside Letter is irrelevant. Beachside’s counsel’s personal interpretation of the Lakeshore Letter is irrelevant and should be given no weight, especially given the adversarial relationship between Manning and Beachside.

[68] I now turn to the Lakeshore Letter. In a letter dated May 6, 2021 to Manning’s counsel, Lakeshore’s counsel admitted that the Lakeshore Letter “is not as clearly drafted as it might be”, that a particular table in the Lakeshore Letter “has created the unfortunate potential for confusion”, that the grammar used to describe a particular category “is unfortunately capable of ambiguity relative to Category 2”, and that a certain statement “is potentially confusing out of context”. In my view, these are all euphemisms. The Lakeshore Letter is anything but clear and hopelessly confusing in light of the record on this Application.

[69] I disagree with Lakeshore’s submission that the treatment plant capacity is not an issue in the context of Manning’s application to Council, and that only conveyancing/sewer capacity is in issue. This submission is directly contradicted by Lakeshore’s own documents, notably the holding provision proposed to Council by Lakeshore municipal staff with respect to Manning’s application for zoning by-law amendments. However, I accept Lakeshore’s evidence that the issue of conveyancing/sewer capacity with respect to Beachside’s development has not been dealt with and will be dealt with at the site plan application stage, as reflected in the evidence on the Application.

[70] Ultimately, for the purpose of this motion, I am prepared to assume that the Lakeshore Letter establishes that Lakeshore is treating Manning and Beachside differently. This differential treatment is irrelevant to the seven specific declarations and orders sought by Lakeshore in this Application, which are discussed in paragraph 44 above. Further, as stated in paragraph 54 above, the fact that Lakeshore may be treating Beachside’s applications differently than Manning’s applications does not in itself constitute a breach of the Agreement. Given this, it is not probable that the Lakeshore Letter might change the result on this Application (and, as stated above, it would not have changed the result).

Conclusion

[71] The Application and the motion for leave to file fresh evidence are dismissed.

[72] If costs cannot be agreed upon, Lakeshore shall deliver submissions of not more than three pages (double-spaced), excluding the bill of costs, within 14 days of the date of this endorsement. Manning shall deliver its submissions (with the same page limit) within 10 days of its receipt of Lakeshore’s submissions.

Vermette J.

Released: September 1, 2021

[^1]: Manning’s reliance on the case 1298417 Ontario Ltd. v. Lakeshore (Town), 2014 ONCA 802 is misguided as the allowance for “full development” in the agreement in issue in that case was expressly subject to compliance with the existing zoning provisions. While the same language was not included in the Agreement, it does not make the zoning provisions irrelevant because they are legally binding. I also note that the surrounding circumstances with respect to the known contours of the proposed development at the time of the formation of the contract were different in that case compared to the present case.

[^2]: Some of the alleged breaches also appear to be based on erroneous factual premises.