Court File and Parties

Court File No.: CV-17-0150-00 Date: 2022-03-21

ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

Robin Lacey and Jennifer Lacey, Applicants M. Cupello, for the Applicants

- and -

Kakabeka Falls Flying Inc., Respondent J. Lester, for the Respondent

HEARD: February 24, 2022, at Thunder Bay, Ontario via Zoom

Before: Mr. Justice F. Bruce Fitzpatrick

Reasons for Decision

[1] The applicants Robin and Jennifer Lacey (the Laceys) bring an application seeking the following relief:

(a) A declaration that a Lease entered into between Robert Spence as Lessor and Kakabeka Falls Flying Inc. (“KFFI”) as Lessee dated November 20, 1968, (“the Lease”) registered as Instrument Number 149139 in the Registry Division of Thunder Bay (Number 55) on September 14, 1972, contravenes Section 26 of the Planning Act, R.S.O. 1960, Chapter 296, as well as Section 50 of the Planning Act, R.S.O. 1990, Chapter P.13, the Planning Amendment Act, 1960-61, the Planning Amendment Act, 1966, the Planning Amendment Act, 1967, and the Planning Amendment Act, 1968 and as a result, is void;

(b) a declaration that KFFI is responsible for and is to pay the Laceys’ property taxes as assessed against the land occupied by KFFI in the within application for 2017, 2018, 2019 and 2020;

(c) A mandatory order requiring KFFI to deliver up possession of the lands described in the said Lease to the Laceys;

(d) A Writ of Possession in favour of the Laceys as against the KFFI;

(e) Costs on a full indemnity, substantial indemnity or partial indemnity basis;

(f) Such further and other relief as this Honourable Court may deem just.

[2] At the commencement of the hearing counsel advised they were very close to settling the issue of the relief regarding property taxes as set out in paragraph (b) above. I directed that if the matter was not settled on or before March 11, 2022, I would be making an order further to Rule 38.10(1)(b) that that issue proceed to trial. I did not hear from counsel by that date so that discrete issue will be ordered to trial.

Background

[3] The Laceys are owners of a large rural property near Thunder Bay. The property consists of approximately 177 acres. KFFI operates an airfield on an approximately 16.5 acres of the Laceys’ land. Further to the provisions of the Lease, KFFI has operated the airfield for over 54 years. The Lease has a 99-year term commencing January 1, 1967 and terminating December 31, 2066. The Laceys say the Lease is of no force and effect as it violates the Planning Act sections noted above.

[4] The Laceys did not own the lands when the Lease was signed. The Laceys bought the land in June 2010, 42 years after KFFI signed the Lease with the Laceys’ predecessors in title. The Laceys knew about the Lease when they bought the lands. In fact, before the Laceys bought the land, Mr. Lacey contacted a solicitor about the Lease. Mr. Lacey wrote a letter to the solicitor asking how he could break the Lease and then deal with the KFFI on “his terms”.

[5] After 2010, things did not go well between the Laceys and KFFI. The Laceys accuse KFFI of doing bad things like failing to maintain liability insurance for the airfield, failing to pay their fair share of the property taxes, failing to maintain the property and sending back mail from the Laceys relating to the property.

[6] In 2017, the Laceys started this application. It sought all the relief noted above except the property tax relief. The application was heard in September 2017. An applications judge rendered a decision. The Laceys appealed. The Laceys advanced three grounds for appeal. The first ground of appeal asserted the Laceys were denied procedural fairness at the first hearing. The Court of Appeal agreed the appeal could be allowed on the first ground alone. In December 2018, the Court of Appeal remitted the matter to be heard on the merits by a new applications judge.

[7] After the decision of the Court of Appeal, the Laceys again amended their already-amended application to add the claim for property tax relief. New affidavit material was filed by both sides in 2019. COVID-19 intervened in 2020. Seven separate endorsements made by three different judges of this court, including me, have given directions on how the matter was to proceed since it was returned by the Court of Appeal. In my view, the parties have ignored some of the express directions of the Court in trying to organize this matter in an intelligible fashion and nonetheless pressed on to have this matter heard as an application.

[8] For some reason, the last endorsement I made in this file on September 28, 2021, was not included in the electronic material filed by the Laceys on this hearing.

[9] I repeat the specific paragraphs from that September 18, 2021, endorsement that continues to have a bearing on this application:

[9] Proceeding by way of application generally assumes that the facts are not in issue. The decision of the High Court in Collins v Collins (1981), 32 O.R. (2d) 358 provides that declaratory relief cannot be sought by originating application. The Rules provide an exception to this holding in Rule 14.05 (3)(h) in respect of an application where it is unlikely that there will be any material facts in dispute requiring a trial. Yet the main relief claimed by the applicant in this case is for a declaration that a lease is void. It seems to me a good deal of the material facts are in dispute in this matter. This creates a procedural problem for the Court.

[10] RSJ Warkentin addressed this question of procedure in an endorsement of February 21, 2019. The RSJ directed that the applicant shall inform the Respondents on or before March 15, 2019 whether they prefer to have this application converted to an action and the basis for that request. If the respondent did not agree the matter was to go back in front of the RSJ. This direction appears to have been unaddressed to date.

[11] I refer to this as my review of the extensive material in preparation for this hearing has raised the possibility that a good deal of the facts in this matter remain in dispute. I note that, at present, the applicants have filed four affidavits, three of which post-date the decision of the Court of Appeal. The respondents have filed two affidavits both of which post-date the decision of the Court of Appeal. In my view, the focus of this application has shifted since the matter was returned for a new hearing.

[10] I include this procedural history because it is context for how I am about to deal with this matter.

The Facts

[11] There is no dispute that the Lease was signed on November 20, 1968. There is no dispute that prior to May 2, 1968, section 26(3)(a) of the Planning Act contained an exemption from the general subdivision prohibition contained in the Act in a circumstance where both the subdivided land and the abutting land had an area of ten acres or more. Prior to May 2, 1968, the lands at issue, as set out in the Lease would qualify for this exemption under the Planning Act. The exemption would permit parties before May 2, 1968, to make a long-term lease in excess of 21 years. There is no dispute that if the Lease was made after May 2, 1968, the provisions of the Planning Act statutorily prohibited land conveyances containing terms in excess of 21 years of the type contained in the Lease. There is no dispute the Laceys had notice of the Lease when they purchased the land. There is no dispute the Laceys collected the rent stipulated in the Lease from KFFI for the years 2011 through 2015.

Positions of the Parties

[12] Counsel for the Laceys argue their position is very straight forward. The evidence is clear the Lease was signed after the applicable exemption in the Planning Act was removed on May 2, 1968. There is no persuasive evidence before the Court of the existence of the Lease, or an oral lease prior to May 2, 1968. Therefore, the Lease was void ab initio. As the Lease was void ab initio since May 2, 1968, it was irrelevant that the Laceys had notice of it when they bought the land. As the Lease was void ab initio since May 2, 1968, it is irrelevant that the Laceys collected the rent contained in the Lease in the years prior to the commencement of the application. The Laceys submit that despite their claim that KFFI has had no legal right to occupy the land since 1968, they should nevertheless pay their fair share of property taxes for the lands as they are a “month to month” tenant. The Laceys also submit that KFFI has not properly pleaded its defences to the application.

[13] KFFI submits there is persuasive evidence of part performance of an oral lease in respect of the lands now occupied by KFFI prior to May 2, 1968. The Lease commenced January 1, 1967. It complied with the Planning Act as at January 1, 1967. It was not void ab initio.

[14] In the alternative, KFFI asserts several arguments why the application should be dismissed. KFFI asserts the Laceys’ claim is statute barred. KFFI submits that the equitable doctrine of laches further prevents the Laceys from submitting this claim for adjudication. KFFI argues it operates a Federally regulated airport. Accordingly, the Planning Act provisions have no application to the Lease as this Federal activity enjoys the benefits of the doctrine of interjurisdictional immunity. Finally, as the Laceys bought the property with full knowledge of the Lease, they are prevented by the equitable doctrine of proprietary estoppel from asserting the claims made in the application.

[15] I have only summarized what I understand to be the positions of the parties on this application. I see some of these positions as being more meritorious of detailed discussion than others. I will deal with the applicable law and the merits of each position in turn.

Reasons for Decision

[16] The essential facts concerning the formation of the Lease occurred in the mid 1960’s. The materials that have been put forward on this amended amended application were unwieldly both because they were converted from a paper format to an electronic format mid-application and because the scope of the application grew after the matter was sent back to be heard for a second time. This is context for how I have determined to deal with this application.

[17] I do not accept the submission of the Lacey’s counsel that the matter is straightforward. I view the approach the Laceys have taken to this litigation to be legalistic, narrow, formalistic and inequitable. At the same time, the evidence which the Laceys put forward to claim relief is very broad, informal, and relies on a permissive approach to the admission of such evidence. Most of the evidence relied upon by the Laceys is hearsay, double hearsay, pure conjecture and information and belief about information obtained from counsel that is not simply of a procedural nature. This kind of “evidence” is not in keeping with a purely legal or equitable approach to dispute resolution. Also, the Laceys’ position on this entire matter fundamentally ignores the realities of their own conduct.

[18] It is clear from the material that in bringing this application, the Laceys wanted to force the KFFI off the property unless they agreed to pay more rent. Mr. Lacey’s affidavit of March 10, 2017, at paragraph 8 makes this plain. He said:

8. The Applicants are the current owners of the entire parcel of Land, a part of which continues to be utilized by the Respondent in accordance with the Lease Agreement, attached hereto and marked as Exhibit "B". Notwithstanding efforts by the Applicants to re-negotiate a new Lease with the Respondent at fair market value, the Respondent has been totally un-co-operative in entering into any fruitful negotiations.

[19] Also, in this application the Laceys have asked for much more than a declaration that the Lease is void. They have asked for a mandatory order that KFFI deliver up possession of the property. This is in the prayer for relief of the amended amended notice of application before the Court. I note that in the third of the four affidavits filed by the Laceys, Mr. Lacey outlines “his position”. It asserts there is a lease, but only a month-to-month lease. No other particulars of the terms of said lease are provided in the affidavit other than a claim that KFFI pay property taxes for lands for which the Laceys assert the KFFI has no right to possess other than on a month-to- month basis.

[20] This is also contrary to the express relief sought by the notice of application.

[21] The property tax issue has been skirted by the attempts of the parties to try to resolve the issue. Settling the issue is consistent with KFFI’s position that they have a right to possess the lands and have agreed to pay their fair share of property taxes. The Laceys on the other hand are trying to have their cake and eat it too. They want KFFI to pay taxes for lands that the say KFFI has had no legal right to possess for over 50 years. Despite counsel advising the court that the matter was close to settlement it did not happen by March 11, 2022.

[22] Mr. Lacey’s position on the application further ignores the fact that the Laceys bought the land with notice of the Lease. It ignores the fact that the Laceys took rent for the lands after a time they had sought legal advice on how to break the Lease. It ignores the fact that the Laceys waited for about six years after buying the land to commence this application. It ignores the fact that there is no question the effect of events that occurred 50 years ago remain in dispute. This is material because the Laceys have chosen and continue to insist the matter proceed by application, a procedure that assumes there are no material facts in dispute.

The Application of the Provisions of the Limitations Act

[23] I agree with KFFI’s argument that the Laceys’ claims in this application, other than the claim for payment of property taxes, are statute barred. On that basis the balance of the application not covered by the order for a trial of an issue (which will be set out at the end of these reasons), will be dismissed for the following reasons.

[24] Sections 4 and 5(1) and (2) of the Limitations Act, 2002, S.O. 2002, C. 24 provides:

4. Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered…

5 (1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).

5 (2) A person with a claim shall be presumed to have known of the matters referred to in clause (1) (a) on the day the act or omission on which the claim is based took place, unless the contrary is proved

[25] In 2016 van Rensburg J.A. of the Ontario Court of Appeal in Fennell v. Deol, 2016 ONCA 249 wrote at paras. 20 and 21;

20 The basic two-year limitation period begins to run on the day the claim was discovered. The date of discovery is the earlier of the two dates under s. 5(1) – when (a) the person with the claim had knowledge of, or (b) a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have had knowledge of, the matters referred to in s. 5(1)(a)(i) to (iv). If either of these dates is more than two years before the claim was issued, the claim is statute-barred.

21 Section 5(1)(a) considers when the person with the claim had actual knowledge of the material facts underlying the claim. Unless the contrary is proved, under s. 5(2), the person is presumed to have known of the matters in s. 5(1)(a)(i) through (iv) on the date of the events giving rise to the claim.

[26] In my view, the evidence on this application establishes that the Laceys knew about the claims they raise in this application in 2010. This is because Mr. Lacey on April 16, 2010, wrote to legal counsel seeking a legal opinion about how to break the Lease. In that letter on the last page Mr. Lacey states;

I then told the KFFC that I believed that they have acted negligently and not in the spirit or intent of the original lease and then therefore the 1968 lease should be void and a new lease written. I am not trying to disband the KFFC but do believe that the contract lease should be invalid due to the above noted reasons, and a new agreement drawn up.

[27] There is no evidence that the Laceys were possessed of the legal argument now put forward on this application that the Lease was void ab initio prior to purchasing the land. Nevertheless, this correspondence is evidence of the Laceys’ actual knowledge of their possible claim to break the Lease. Further, it is actual knowledge that a legal proceeding would be required to prosecute this claim because the opinion of a solicitor was being sought.

[28] The Laceys seek a mandatory order requiring KFFI to deliver up possession of the lands described in the Lease to the Laceys. This is the result for which Mr. Lacey sought legal advice before he purchased the property. In my view, this is the kind of actual knowledge referred to in section 5(1)(a) of the Limitations Act. Section 5(1)(a) puts the onus on the Laceys to prove a circumstance to the contrary. The Laceys knew about this claim six years and 11 months before they commenced this application. They have not placed any evidence before the Court to displace the conclusion that they knew about their claim in April 2010. They commenced the application in March 2017. This application is clearly out of time. It is barred by the operation of section 4 of the Limitations Act.

[29] The Laceys respond to the limitation argument by referring to section 16 (1)(a) of the Limitations Act which provides;

16 (1) There is no limitation period in respect of,

(a) a proceeding for a declaration if no consequential relief is sought;

[30] This argument has no merit. This is because in this application consequential relief has been sought. There are two aspects of the consequential relief sought by the Laceys. First, the Laceys ask for a mandatory order requiring the KFFI to deliver up possession of the lands governed by the Lease. The only way that a Court could possibly order this relief is if the KFFI was in breach of the Lease (not claimed) or that the Lease was void ab initio (claimed). Second the Laceys’ ask for a writ of possession for the lands governed by the Lease. Again, the only way that a Court could possibly order this relief is if the KFFI was in breach of the Lease (not claimed) or that the Lease was void ab initio (claimed).

[31] Even if the consequential relief was excised from the application, or if after this decision is delivered, the Laceys were tempted to “try it again” with a fresh application, claiming only a declaration and nothing else, the practical result of the declaration for relief standing alone, is nothing other than an attempt to gain leverage for the Laceys trying to deal with the KFFI “on their terms”. In my view, this is relief which a court of equity would not tolerate. Such a request on its own ignores the entire history of the matter. The parties have been free to renegotiate a new lease since the day that Laceys bought the property. This has not occurred. A new lease is probably in the best interests of both parties. Courts are reluctant to make deals for the parties. For whatever reason, both parties have chosen to continue to litigate to achieve “back door” results rather than take a reasonable, accommodative, negotiated approach to their mutual problem. Conflict is generally a two-way street. Conflict resolution is definitely a two-way street. The parties have framed their response to a practical problem by taking a legalistic and formalistic approach. For the applicant, this approach has not persuaded the Court to grant the relief requested.

[32] I am also persuaded to dismiss this application on the basis of delay because of the underlying public policy premise of the Limitation Act which encourages parties to bring forward matters to the court in a reasonable period of time. This policy goal is generally achieved by limiting the ability of a party to seek redress in the courts when two years has passed since a party became aware of their cause of action. It recognizes the reality that memories fade over time. Witnesses are no longer available. Delay leads to prejudice.

[33] The essential facts which underlie the Laceys’ claim occurred over 50 years ago. Only after the matter was returned from the Court of Appeal, did the KFFI obtain evidence from a person, Clinton Martyn, who had direct knowledge of the events at issue that occurred in the mid 1960’s. The facts of this case demonstrate well the sound public policy goal of requiring parties to move with some dispatch to court. The “facts” of this case from the applicants’ side are inherently unreliable self-serving hearsay evidence and bald speculation. Far too much time has passed for this matter for the Laceys to now come to court to demand relief. Accordingly, I find that the application is dismissed (save the relief for payment of property taxes) as it is barred by the operation of section 4 of the Limitation Act.

[34] Counsel for KFFI raised an alternative argument referencing the application of section 4 of the Real Property Limitations Act, R.S.O. 1990, c. L.15 (“RPLA”). Section 4 provides:

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.

[35] I find this section does not apply to the application at bar. I say this for a number of reasons. First, at highest, the 10-year limitation period of section 4 would apply only to the relief sought by the Laceys for a mandatory order for possession of the lands and a writ of possession in support of that mandatory order. There is no evidence before the court that KFFI was in breach of the Lease. The Laceys have no basis to make a claim for possession of land independent of the claim for a declaration that the Lease was void ab initio. In my view, section 4 of the RPLA does not provide a 10-year limitation period to bring this express declaratory type of relief.

[36] Also, I was persuaded by the reasoning of Associate Judge Muir in Bill Co. Incorporated v. Yellowstone Property Consultants Corp., 2012 ONSC 5116 at paras. 17 & 18. Associate Judge Muir reasoned that the RPLA does not apply to any and all potential claims simply because the basis of the parties’ relationship is a lease agreement involving real property.

[37] In my view, if the more specific provisions of the RPLA apply, the Laceys’ claim derives from the original landlord Robert Spence. I will discuss later in this judgment my view that Robert Spence actively determined to contract with the KFFI to allow it to have a 99-year lease on his property.

[38] In an affidavit dated November 27, 2017, the Laceys provided hearsay evidence of interactions Mr. Lacey had with Mr. Spence in 1979, 1980 and 1987. Mr. Lacey asserts he discussed the matter of the Lease at length with Mr. Spence.

[39] One of the hearsay statements made by Mr. Lacey in the November 27, 2017, affidavit is that the KFFI did not pay rent for the lands at issue for the initial years of their occupation, 1967 through 1971. This statement occurs at paragraph 41. If such was the case, Mr. Spence had a cause of action to dispossess the KFFI at the latest in 1971. This was a cause of action. Mr. Spence did not act upon it. It expired in 1982.

[40] Later at paragraph 47, of the November 27, 2017, affidavit, Mr. Lacey deposes the hearsay statement that Mr. Spence believed he was tricked by the KFFI but he could not afford the legal expenses to pursue the matter. Mr. Lacey does not specify when Mr. Spence said this. Taken at its most favourable to the Laceys, as Mr. Lacey deposes he last spoke to Mr. Spence in 1987, this trickery cause of action would have expired in 1997.

[41] In my view, if the ten-year limitation period of the RPLA applies, the time for anyone to have brought the claims like those put forward by the Lacey’s expired in 1997.

[42] If I am wrong with respect to my analysis as to the application of the Limitation Act, given the history of this matter, I will discuss the other reasons I would have dismissed the application had the KFFI not raised the Limitations Act issue.

Laches

[43] KFFI raises an alternative argument that the Laceys’ delay in prosecuting their claims was unreasonable and that equity demands that the application should be dismissed on that basis. I agree with this argument.

[44] Acquiescence and conduct are considered in any analysis involving the doctrine of laches. In my view, the fact that since 2010 the Laceys wanted to find a way to break the Lease and deal with the KFFI on their terms is a primary aspect of conduct which engages the doctrine of laches. The Lease was registered on title to the land when they purchased it in 2010. The Laceys waited seven years to make their claim. They took rent for six of those seven years. This is plain and obvious acquiescence to KFFI continuing to be in possession of the lands. I agree that it would be unjust to allow the Laceys’ claim to dispossess the KFFI of the lands to proceed in the face of their delay in bringing this matter forward. The Laceys have slept on their rights. I would also dismiss the application on this basis.

The Issue of Part Performance

[45] “Part Performance” is an equitable doctrine. It operates to relieve parties from the provisions of the Statute of Frauds that requires agreements in respect of land of more than three years to be in writing. It seeks to remedy unconscionable circumstances where parties have acted to their detriment in carrying out obligations not committed or not yet committed to writing in respect of land.

[46] Baltman J. in the decision Kang Corporation v. KRTT Group Ltd. and Mick Dhillon and Sukvinder Dhillon set out the well-established requirements that must be demonstrated by a party who asserts the doctrine applies to a particular matter. Baltman J. stated at para. 12;

[12] The case law states there are four requirements to be satisfied before the doctrine of part performance applies: (1) the performance must be referable to the contract; (2) the acts of performance must be acts of the plaintiff; (3) the contract must be one for which the law would grant specific performance if it had been properly evidenced in writing; and (4) there must be clear and proper evidence of the existence of the contract.

[47] In my view there was no issue on this application that the Lease is a contract for which the law would grant specific performance had it been signed prior to November 16, 1968.

[48] The necessity of a discussion of whether the doctrine of part performance applies arises as much of the focus of the parties’ materials and their submissions involved events that occurred before May 2, 1968. This is because the entire case for the Laceys hinges on the assertion that the Lease did not come into effect until November 20, 1968. This position is premised on the fact the Lease was signed that day. This argument has a fundamental flaw. It ignores the fact that the Lease granted to the lessee a right to possess the demised premises commencing January 1, 1967. In my view, express words in written in a land lease dealing with when the right to possess land commenced is clear persuasive evidence of when the parties agreed the Lease would commence and when it in fact commenced. In this case the Lease did not commence the day it was signed. The parties agreed it would cover a period before it was executed. There is no explanation for this other than it was the clear intention of the parties to the agreement to take advantage of an exemption in the Planning Act which applied to the lands for any time up to and including May 1, 1968.

[49] The Laceys point to the fact that KFFI was not incorporated until February 19, 1969. Prior to that date it was an unincorporated organization. Nevertheless, the lessee on the face of the Lease is identified to be a corporation the Kakabeka Falls Flying Inc., the respondent in this matter. Again, the Laceys rely on a technicality to assert the parties to the Lease were not determined. I do not accept this argument. On the face of the Lease, the current occupant of the lands, the KFFI is set out as the lessee. As such a great deal of time has passed since the late 1960’s, I am left to speculate about how this could be as KFFI was not actually incorporated until February 1969. I had no evidence of the practice of solicitors at the time regarding the drawing of leases in a circumstance where one party had yet to be formally incorporated. I suspect in the 1960’s the processes by which companies were incorporated and the turn-around times for incorporations by the province of Ontario looked very different from how it is done today. Notwithstanding this, in my view, it is plausible on the evidence to find that the parties who made the Lease were always meant to be the parties who actually ended up being the parties; that is the landowner Mr. Spence and a corporate entity that had yet to be incorporated in November 1968 but ultimately was incorporated just three months later.

[50] The parties have determined to have this matter heard by way of application. They have filed multiple affidavits that are wide ranging in scope. Nevertheless, on all of the evidence I find the Lease came into effect on January 1, 1967. The evidence the parties have identified as being concerned with part performance also supports such a conclusion.

[51] The only direct evidence on matters related to the lands in the 1967 to 1968 period came from an affidavit put forward by KFFI. The evidence of Clinton Martyn was the best evidence regarding the issue of part performance and the clear intentions of the parties who signed the Lease that it was to commence on January 1, 1967.

[52] Mr. Martyn has lived his whole life on a property adjacent to the lands at issue in this application. In 1967, KFFI sought Mr. Martyn’s permission to work on his lands. The work was clearing bush so KFFI could establish a runway on the lands covered by the Lease. This is evidence of part performance of a lease contract. The property at issue was not a turn-key commercial property. It had to have work done to it and adjacent lands to prepare it for the intended use. No one would do the work if they did not intend to benefit from it for ultimate occupation. In my view, the fact that the demise needed work does not mean that the occupation of the lands, and thus the Lease, only started when the work was completed.

[53] Mr. Martyn has an express memory of the work being done in the summer of 1967. This is because it was being done with a new tractor, a Caterpillar D-7 type that Mr. Martyn had never seen before. Mr. Martyn also recall planes flying in and out of the lands subject to the Lease in 1967. This is persuasive evidence of acts that could be characterized as part performance but also acts of the agreement by the parties that KFFI had a lease on Mr. Spence’s land.

[54] This evidence satisfies three of the four requirements for a finding of acts of part performance. First, the work was referable to the contract. Trees had to be cleared so planes could take off and land. Second, KFFI did the work and was flying the planes. KFFI is now standing in the role of plaintiff asserting that they have a right to maintain their occupancy further to the Lease. Finally, the Lease was ultimately signed and on its face stated the right to occupy the demise began in January 1967. This is consistent with the work and the flying planes witnessed by Mr. Martyn in the summer of 1967.

[55] Both parties relied on written documents about the events of 1967 to 1971 that were located following the decision of the Court of Appeal. There was no express agreement indicated by counsel as to whether these documents were admitted as to the truth of the contents or admissible without proof of the originals. This is one of the difficulties inherent in proceeding by way of application, which presumes material facts are not at issue, when clearly they were. I expect the originals of the documents are long gone in any event.

[56] KFFI relies on a memorandum of agreement dated June 19, 1967. It stated:

It is agreed between the parties that it is the intent and understanding that Robert Spence shall rent or lease to the Kakabeka Falls Flying Club certain property for them to establish two runways approximately 2,500 feet in length and 300 feet in width, together with one access road from the runways to the River, together with an area for parking and buildings. The Intent of the parties is to sign this memorandum so that Kakabeka Falls Flying Club may start work on the property but that this agreement shall be superseded by one prepared and incorporating proper descriptions of the runways, roads and parking and building areas.

[57] The Laceys point to a number of handwritten minutes of the Club that were produced as exhibits to affidavits of the KFFI affiant. The minutes were from May 17, 1967, to June 9, 1969.

[58] The minutes were lengthy. Reading them all, it is clear the persons present were actively engaged in dealing with how they were going to operate an airstrip on the lands that were set out in the Lease. On July 17, 1967, there is a minute reporting “Airport Construction”. It notes “strip almost cleared of brush and access road to floatplane base is passable”. A minute of September 27, 1967, notes “bills to be paid for work done on construction”. A minute of January 29, 1968 speaks of “an official opening”.

[59] The Laceys point to minutes after May 2, 1968, which suggests that construction was not completed as it was “ongoing” and that the grand opening had not occurred as of July 1, 1968. They also point to correspondence that indicates the payment of rent for the lands may not have been received by Mr. Spence until 1971.

[60] Other than the direct evidence of Mr. Martyn, all of these dated documents authored by various people whose status and identities are unclear was the best evidence the parties had as to the state of affairs over fifty years ago. Neither party took any issue with the reliability or the admissibility of the documents. Both sides argued the documents they referred to were persuasive of their respective position.

[61] In my view, all of this hearsay documentary evidence on the balance of probabilities establishes an oral lease contract was in place prior to May 2, 1968, where KFFI was the lessee and Mr. Spence was the landlord. The issue of the non-payment of rent is not determinative that no lease existed. Disputes over rent do not absolutely lead to a conclusion that no agreement is in place. Rent disputes happen all the time. If parties do not work it out, they take steps like suing for the rent. I have no evidence that Mr. Spence ever brought any legal action of any kind in respect of the Lease. If the parties do work it out, they do things like honour the terms of the contract. Just like Mr. Spence did for 33 years.

[62] For all these reasons, I would also dismiss the application on the basis of a finding of fact that the Lease was in place prior to May 2, 1968. It was an oral agreement that eventually was memorialized in the written Lease. Also, if I am wrong in that assessment of the evidence, in my view there is persuasive evidence before the Court of acts of part performance of a contract for land which the equitable jurisdiction of this court would use to protect the KFFI’s continued occupation of the lands further to the 99-year term of the Lease.

Doctrine of Actual Notice

[63] KFFI argues that as the Laceys knew about the Lease, they cannot argue they are not bound by it. The Laceys take no issue they were aware of the terms of the Lease. They argue the issue of notice is irrelevant as they say the Lease was of no force and effect since May 2, 1968. I agree that notice of the lease is an issue. However, in my view it goes to the equities of the matter between the parties and militates in favour of dismissing the application. The Laceys were not forced to buy the land. They did not inherit it. They purchased the land with eyes wide open as to the existence of a long-term lease on their property.

Doctrine of Proprietary Estoppel

[64] Proprietary estoppel is an equitable doctrine. It engages concepts of inducement, detrimental reliance and unconscionability. In my view, the Laceys have induced KFFI to continue to occupy the property by accepting the rents under the Lease. To the extent KFFI has continued to occupy and improve the lands and pay the rent this constitutes acts of detrimental reliance. In the circumstances, I would view as unconscionable an order dispossessing the KFFI of the lands on the basis of the “void ab initio” argument. It is an attempt to achieve an unfair advantage in a commercial relationship that, for the KFFI, is over 55 years old. The Laceys were plain in their materials they wanted to deal with the KFFI on “their terms”. Bargains are not one-way streets. The court will not intervene to impose a bargain on an inequitable basis.

[65] The tenancy at issue is unique in that the property is used as an aerodrome. Federal oversight is involved in its operation. There are significant improvements to the lands. Those improvements were done in the context of a long-term lease. It would be unfair to overturn those expectations where the party that seeks that result knew full well of the obligations before they became legally obliged through ownership of the lands to give effect to the long-term bargain.

Interjurisdictional Immunity

[66] KFFI argues that the provisions of a provincial statute, the Planning Act cannot be used as a vehicle to interfere with the operation of an aerodrome that is governed by Federal legislation. I see no merit to this argument in the context of the facts of this case. The fact that I am not persuaded by this argument does not mean that I am convinced the Planning Act provisions relied upon by the Laceys would or did operate to make the Lease void ab initio. As previously mentioned, I am of the view the evidence on this matter indicates a valid lease was in place prior to May 2, 1968.

Result

[67] For reasons stated, the claims for relief in the amended amended application, save and except the claim for property taxes are dismissed with costs payable on a partial indemnity basis. The KFFI will have its costs of the application to date. At the end of the hearing, I asked counsel for a reasonable estimate of costs they would expect to pay if they were not successful. I am persuaded that the costs estimate of counsel for the Laceys was the most reasonable estimate for a matter of this complexity. Given the history of this matter, I am not confident that my view of a just and proportionate costs award will be improved by having the parties waste further legal fees arguing about an issue where a reasonable position has already been put to the Court. This matter has been unduly delayed for too long. Accordingly, the Laceys will pay the KFFI partial indemnity costs forthwith fixed in the amount of $15,000.00 inclusive of HST and disbursements.

[68] Rule 38.10 governs the disposition of applications. I am ordering an issue contained in the amended amended notice of application be converted to an action and then proceed to trial. As noted previously, the parties did not settle an issue included in the amended amended application concerning payment of property taxes. Counsel had agreed they would not make submissions about the issue during the hearing in the full confidence the matter would settle. It did not settle.

[69] I am familiar with the scope and nature of the property tax issue as the result of trial management meetings I had with counsel and the parties. In my view, this issue of property taxes is fact-based. It is a matter where material facts are in dispute. It will likely require the calling of an independent witness from the Municipal Property Assessment Corporation to advise the court how the assessment on the property was arrived at. This matter should proceed as an action.

[70] In most circumstances where applications are converted to actions, in the interests of efficiency, courts order that affidavits be treated as pleadings, and cross examinations on affidavits be treated as discoveries for the purposes of the conduct of the trial of the action. This will not work for this matter. The record of material filed on this matter consisted of 11 affidavits. The affidavits spanned the period March 10, 2017 (the first affidavit of Mr. Lacey) to September 14, 2021, the last affidavit filed from a clerk in the office of counsel for the applicant, which contained substantive and not simply procedural evidence. The scope and focus of the affidavit material shifted substantially over that approximate four-year period. The matter was heard and then appealed on the basis of procedural objections. The parties have encountered difficulties moving the matter forward in the COVID-19 era and at a time when the court is transitioning to a paperless environment. Counsel for the applicant complained the respondent had not properly pleaded aspects of its response to the application despite it being abundantly clear from the materials filed the nature and scope of the respondent’s position. The conduct of this matter has not been “textbook”. For these reasons I find it is not appropriate, nor efficient for the applicant to be allowed to continue to pursue its claim for payment of property taxes by way of the current record. If this issue of property taxes, which came up relatively late in the application process is going to be pursued, it must be started anew. Therefore, I am ordering that the applicant within 60 days of the release of these reasons serve and file a statement of claim containing its claim for payment of property taxes alone. The provisions of the Limitations Act do not apply as the claim is simply being converted from the application to an action. The opportunity to file a new pleading is not to be construed as a vehicle for the Laceys to include other claims. The respondent shall serve their statement of defence within 45 days of being served with the new pleading. The matter will then proceed under the Simplified Rules.

The parties will follow that procedure including the exchange of affidavits of documents and the conduct of a pretrial before the matter is tried. I am not seized of this action.

“original signed by” The Hon. Mr. Justice F.B. Fitzpatrick Released: March 21, 2022