Armstrong v. Penny, 2023 ONSC 2843

COURT FILE NO.: 226-08/226-08A

DATE: 2023-05-11

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

PETER ARMSTRONG and SHELLEY MARTIN Plaintiffs

– and –

JANET PENNY, personally and as the Estate Trustee of the Estate of GEORGE PENNY, deceased Defendants

– and –

COACHLAMP HOMES INC. Third Party

– and –

MATTHEWS, CAMERON, HEYWOOD – KERRY T. HOWE SURVEYING LTD., carrying on business under the registered business name of COE, FISHER, CAMERON Third Party

– and –

W.G. JACKETT AND SONS CONSTRUCTION LIMITED operating as JACKETT CONSTRUCTION Third Party

– and –

CITY OF KAWARTHA LAKES Third Party

COUNSEL:

Lawrence Theall and Faiza Tariq, for the Plaintiffs

Jeffrey Lanctot and Joseph Doris, for the Defendants

Susanne Sviergula and Maggie MacDonald, for the Third Party, Coachlamp Homes Inc.

Christopher Hluchan for the Third Party, Matthews, Cameron, Heywood – Kerry T. Howe Surveying Ltd., carrying on business under the registered business name of Coe, Fisher, Cameron

No one appearing

Natalie Kolos and Zoe Aranha, for the Third Party, City of Kawartha Lakes

HEARD: February 14, 16, 17, 18, 22, 23, 24, 25, June 6, 7, 8, 20, 28, 29, 30, August 24, September 9, December 19, 20, 21, 22, and 23, 2022

REASONS FOR DECISION

CHRISTIE J.

Overview

[1] The Defendants’ residence, including most of their garage and a small corner of their house, was built beyond their property line, onto the property of another. The encroachment is depicted as follows:

[2] It is not in dispute that, at the furthest point, the encroachment extends into the Plaintiffs’ property by 10.74 m or 35.236 ft.

[3] The Plaintiffs and Defendants have lived with a known encroachment for 20 years – since 2003. The time it has taken to reach some finality and resolution to this issue is astounding. The reasons for this extraordinary delay are not fully known to this Court.

[4] Despite the fact that this trial has taken twenty-two days to complete, over the better part of a year, the heart of this litigation is not in dispute – a portion of the Defendants’ home was built on property that they did not own, which now belongs to the Plaintiffs. It should be noted from the outset that the Plaintiffs have not continued to pursue any claim of nuisance or negligence against the Defendants as originally pleaded. The Plaintiffs have focused their action against the Defendants on the allegation of trespass. Importantly, the Defendants have conceded from the outset that this amounts to a trespass. Therefore, the Plaintiffs’ success as against the Defendants was predetermined, leaving this Court to determine the appropriate remedy.

[5] Due to this concession on trespass, it was clear from the outset that something must be done about this encroachment. It is not open to this Court to do nothing. This Court has been presented with three broad options:

a. leave the Defendants’ home where it has been since 1998, with the Defendants purchasing some severed portion of the Plaintiffs’ property (the suggestion being that depicted in Graphic B – Exhibit 3 – 346.1 m²/3725 ft²); or

b. require the Defendants to remove most of the encroaching portion of the residence, that being the garage - it must be noted that no one is suggesting that the Defendants’ house be removed, even though a corner of the house would still encroach on the existing property line, without the garage. The Plaintiffs have conceded that there is no adverse impact from this encroachment; or

c. require the Defendants to remove the garage, with the Defendants being permitted to purchase a severed portion of the Plaintiffs’ property, in accordance with Graphic D – Exhibit 5 – 377.7 m² (4065 ft²), which would allow the Defendants to rebuild with a different design.

All of these options will come at some expense to the Defendants. It must be noted that, while this Court can order the removal of the encroachment, this Court cannot order the Defendants to rebuild their home/garage in a certain way. If this Court determines that the property lines stay “as is”, then the encroachment needs to be removed. While a lot of time was spent at this trial looking at various options for Mrs. Penny to redesign her home/garage, whether and how Mrs. Penny decides to rebuild her garage would be up to her.

[6] In addition to the main action, this Court must also consider the Third Party Claim brought by the Defendants against the builder, the surveyor, and the City. This will require the court to examine the applicable duty of care owed, if any, by each of these entities, a determination of whether there has been a breach of any standard of care, and if so, whether any such breach resulted in a loss. This analysis will lead to a determination of whether any or all of the Third Parties are liable, whether any or all of them are required to indemnify the Defendants, and to what extent.

[7] It has been clear to this Court from the very beginning that the issues in this litigation would be focused on what should be done about this obvious and admitted trespass and who should pay for it.

[8] The Plaintiffs argued that the court needs to find the right balance in equity between the parties. While severance and sale of any kind is not the Plaintiffs preferred option, the Plaintiffs argued that the most equitable, fair, and balanced solution is to order the demolition and removal of the garage, with the smaller encroachment of the corner of the house to remain, and to allow the Defendants to purchase the land required to rebuild the garage, in accordance with Graphic D (377.7 m²), using a plan suggested by RWH, depicted as follows:

[9] According to the Plaintiffs, all costs of the transfer should be borne by the Defendants, and the Defendants should provide compensation to the Plaintiffs as follows:

a. Purchase of the land outlined in Graphic D - $85,376

b. Compensation for the forced sale – $34,150 (40% of value)

c. Compensation for the cost of planting trees to create privacy - $15,000

d. Damages for occupation and use of the land and for the ongoing trespass – $98,000 – which may need to increase depending on the time of the ongoing trespass.

e. Full indemnity costs, which by the time of closing submissions were in the range of $750,000, plus disbursements and HST. (The Plaintiffs argued that this Court should order entitlement to costs and scale of costs, as part of this judgment, subject to Rule 49 offers, as this would simplify future issues to be litigated.)

f. Further, the Plaintiffs argued that this Court must remain seized to provide some degree of supervision on all aspects of the order.

The Plaintiffs submitted that this accomplishes the most fair and equitable balancing in this difficult and challenging situation.

[10] As a matter of law, the Plaintiffs suggested that leaving any portion of the garage and house on the Plaintiffs’ land would not normally be available to the court, however, they agree to abide by an order forcing them to sell enough to allow Graphic D. The Plaintiffs argued that there must be a recognition of the impact to their family given the evidence. Therefore, if the court determines that compelled severance is the most appropriate remedy, this is not a simple mathematical formula to be applied to the severed portion, but rather the court must consider other factors and put premiums on forced sale and injurious affection. Further, the Plaintiffs argued that the fact that sale of any portion of land, and more specifically a sale of a smaller portion of land, is economically better for the Third Parties, is not an appropriate basis on which to decide this case. Rather, the court must look at all of the factors. The Plaintiffs argued that the factors weigh heavily against the sale of all the lands to permit the garage and house to remain.

[11] The Defendants argued that the most fair and equitable resolution is to allow the house and garage to remain, and for a minimal amount of property to be severed and sold to the Defendants for fair compensation. As for the timing of the valuation, the Defendants suggest that the court could select a date when the market was somewhat stable and then do what courts often do – order pre-judgment interest. This, the Defendants argue, will avoid an inflated price dictated by an unprecedented event, namely the COVID-19 pandemic. Further, the Defendants seek only full indemnity from the Third Parties. There is no request for any other form of relief. As between the Third Parties, the Defendants argued that the Negligence Act, R.S.O. 1990, c. N.1, requires this Court to allocate the compensation to be between them, with the default being that each are equally liable. Finally, the Defendants seek full indemnity costs from the Third Parties, which at the time of closing submissions were estimated at approximately $250,000, plus disbursements and HST. With respect to the fixing of costs, however, the Defendants requested that the court allow counsel some time, post judgment, for the parties to discuss costs, and if no agreement is reached, the parties could re-attend before this Court to argue this issue.

[12] As for the Third Parties, all argued that the garage and house should remain as is, where is, and that property be severed and sold to the Defendants, in accordance with Graphic B (346.1 m²), depicted as follows:

[13] None of the Third Parties accept any responsibility for this problem. The Third Parties claim contributory negligence on the part of the Plaintiffs and blame each other. In summary:

a. The builder, Coachlamp, took the position that, as a remedy to the claim for trespass, this Court should make a declaration, pursuant to section 37 of the Conveyancing and Law of Property Act, R.S.O. 1990, C. C.34 (“CLPA”), that the Defendants’ home remain as is, where is, and that the Defendants are entitled to a transfer, in fee simple, of that portion of the Plaintiffs’ land upon which their garage and house are found, as depicted in Exhibit 3, Graphic B. Coachlamp argued that the value of that parcel of land, being 346.1 m², should be valued as $29,206.75, plus pre-judgment interest. The Defendants should be required to pay this amount to the Plaintiffs before being indemnified. There should be no award for any other compensation, including injurious affection, occupation rent, gross up, premium or trespass. Coachlamp argued that the Defendants should be indemnified by the other Third Parties with the court to determine the division. In other words, Coachlamp took no responsibility for the problem that has arisen and argued that the Third Party Claim and all crossclaims against them be dismissed with costs. Coachlamp argued that both the surveyor, Coe, Fisher, Cameron (“CFC”), and the City of Kawartha Lakes are liable and bear responsibility for what has occurred. Coachlamp also reminded this Court that any amount that the Third Parties are ordered to pay must be reduced by $10,000 as a result of what has already been received from George Jackett, once a third party to this action. As for costs, Coachlamp argued that this Court should make no determination at this point on this issue, but rather allow the parties to make subsequent written submissions, given that there is a lot of information that this Court does not have, and it is further complicated by the COVID-19 pandemic. With respect to quantum, Coachlamp estimated their costs to be approximately $250,000, plus disbursements and HST.

b. Coe, Fisher, Cameron (“CFC”) argued that, as a remedy to the claim for trespass, this Court should transfer all rights, title and interest in the triangle portion of the property identified as “to be severed” in Exhibit 3 (Graphic B) to the Defendants. The value should be $29,500 as set out in the report of GSI from 2017, Exhibit T, with an effective date of October 31, 2017, to coincide with the GSI report, and prejudgment interest to be applied from the effective date to the date of judgment. CFC took no responsibility for the problem that has arisen, rather it was their position that they did not fall below the standard of care in their engagement by Coachlamp, as supported by the opinion of Dan Dzaldov that they met the standard of care by surveying the south limit and reporting their work with iron tubes and a reporting letter, which they argued is to be preferred over the opinion of Izaak de Rijcke, given Mr. Dzaldov’s greater practical experience. CFC deny that they were negligent in carrying out their engagement and argue that there is no causal connection between the services provided and the error in the construction of the Defendants’ home. Frankly, CFC took the position that Coachlamp is entirely responsible for the problem, and took no real position with respect to the City. Further, CFC claimed that the Plaintiffs were contributorily negligent. They argued that the Third Party Claim and all crossclaims against them be dismissed with costs. In the alternative, if this Court were to find CFC contributed to the problem, their responsibility should end with the delivery of the reporting letter, at which point, costs to demolish and move the foundation, according to Paul Pankhurst of Coachlamp, would have been in the range of $2000 to $3000, and that to the extent that CFC is liable, it ought to be capped at its proportionate share of this amount. In the further alternative, if this Court finds that CFC is exposed to liability for anything beyond the reporting letter, they argued that overall damages should be apportioned, with the first step being to apportion a range of 20%-25% of the loss to the Plaintiffs, with the balance apportioned amongst the Third Parties found liable. As for costs, CFC argued that this Court should make no determination at this point on this issue, but rather allow the parties to make subsequent written submissions, to be supplemented by oral submissions. With respect to quantum, CFC estimated their costs to be approximately $250,000, plus disbursements and HST.

c. The City of Kawartha Lakes argued that, while they are not responsible, whether one applies s. 37 of the Conveyancing and Law of Property Act or s. 99 of the Courts of Justice Act, R.S.O. 1990, c. C.43, it is clear that the appropriate remedy is one which permits the Defendants’ home and garage to remain in their current location. The City of Kawartha Lakes argued that, as a remedy to the claim for trespass, this Court should transfer all rights, title and interest in the triangle portion of the property identified as “to be severed” in Exhibit 3 (Graphic B) to the Defendants. In exchange for this transfer of title in the severed portion, the Defendants should be ordered to pay $29,206.75. As for the Third Party Claim, the City argued that Coachlamp and CFC are both liable and should be ordered to indemnify the Defendants in the main action: Coachlamp in contract and negligence, and CFC in negligence. The City argued that they are not liable for the error, as the alleged breaches of the standard of care raised against the City in this action (a) have not been pleaded in the Third Party Claim; (b) amount to a policy decision for which the City is immune from suit; (c) would require expert evidence to establish; and (d) in any event, the standard of care was not breached and/or did not cause the damages at issue. The City requests that the Third Party Claim and crossclaims against them be dismissed, with costs. In the alternative, if this Court were to find the City liable, they argue that there is nothing to suggest that their liability should be equal to that of the other Third Parties, and typically where municipalities are found negligent, it is on a significantly smaller scale than a builder. As for costs, the City argued that this Court should make no determination at this point on this issue, without full and complete information. They estimated their partial indemnity costs to be in the range of $250,000.

[14] As will be obvious, the difference between Graphic B, which is the suggestion of the Defendants and Third Parties, and Graphic D, which is the suggestion of the Plaintiffs, is 31.6 m² (340 ft²). With Graphic B, the house and garage will remain standing. With Graphic D, the garage will need to be demolished and reconfigured.

Basic Facts Not in Dispute Regarding the Parties, Properties, and History of Litigation

[15] Many underlying facts are not in dispute. It is important to understand these underlying facts in order to provide this decision with some context.

The Parties

[16] The Plaintiffs, Peter Armstrong and Shelley Martin, are married and are the registered owners of property municipally known as 582 Long Beach Road, R.R. #2, Cameron, Ontario.

[17] The Defendants, Janet Penny and her late husband, George Penny, are the registered owners, as joint tenants, of property municipally known as 570 Long Beach Road, R.R. #2, Cameron, Ontario.

[18] George Penny died on March 1, 2013, and Janet Penny then became the sole owner of the property. Janet Penny is currently 87 years old.

[19] Coachlamp Homes Inc. (“Coachlamp”) was a home construction business that was incorporated in the late 1970s. It was owned and operated by Paul Pankhurst. Paul Pankhurst was the president and owner of Coachlamp at the relevant time in 1998 and 1999. The company ceased operations in 2006-2007 when Mr. Pankhurst retired. During its thirty-seven years of operation, Coachlamp completed approximately six hundred jobs, two hundred of which were homes or condominiums.

[20] Matthews, Cameron, Heywood – Kerry T. Howe Surveying Ltd., carrying on business under the registered business name of Coe, Fisher, Cameron (“CFC”) is an Ontario land surveying company. Andrew Cameron was licenced as an Ontario Land Surveyor in September 1972. From 1972 to 1982, he worked for a number of different survey firms. In 1982, he joined the firm of Ray Matthews in Niagara Falls and they incorporated as Matthews and Cameron Surveyors. In 1991, the company became Matthews, Cameron, Heywood – Kerry T. Howe Surveying Ltd. Andrew Cameron was the senior partner and majority shareholder. At the relevant time, September 1998, Matthews, Cameron, Heywood – Kerry T. Howe Surveying Ltd. was a corporation which had a small office in Bobcaygeon. That office was established in 1996 or 1997 when the corporation was looking to expand operations beyond Niagara Falls. Dennis Fisher had been operating an office in Bobcaygeon as a sole proprietorship, and when that office was acquired, Mr. Fisher continued to work for the corporation as an Ontario Land Surveyor, running the day-to-day operations. In or around 2000, Matthews, Cameron, Heywood – Kerry T. Howe Surveying Ltd. bought out another practice in Lindsay, at which time they shutdown the Bobcaygeon office. At the relevant time in 1998, CFC had approximately 35 employees, 3 or 4 of which had an Ontario Land Surveyor designation. In approximately 2018, Mr. Cameron retired from the practice of surveying and sold the business to J.D. Barnes Limited.

[21] The subject properties would have been governed by the Township of Fenelon at the relevant time. The Township of Fenelon was a municipality in present-day Kawartha Lakes, Ontario. The Townships of Bexley and Fenelon amalgamated into the current City of Kawartha Lakes on January 1, 2001.

The Defendants’ Property

[22] By way of Deed of Land registered on February 20, 1985 as instrument number 194925, the Defendants acquired property legally described as Part Lot 12, Concession 9, Township of Fenelon, being Part 2, Plan 57R-4096 (the “Southern Penny Parcel”).

[23] By way of Transfer/Deed of Land registered on April 7, 1987, the Defendants acquired property legally described as Part Lot 12, Concession 9, Township of Fenelon, County of Victoria, designated as Part 1, Plan 57R-4096 (the “Penny Property”) from Pencraw Holdings Inc., the Defendants’ holding company.

[24] In other words, the Defendants’ property consists of two adjoining parcels of waterfront land.

[25] The Defendants’ property is known municipally as 570 Long Beach Road, R.R. #2, Cameron, Ontario.

[26] The Defendants’ property sat vacant until 1998.

The Encroachment

[27] In 1998, the Defendants, Janet Penny and her late husband, George Penny, hired Coachlamp Homes Inc., then owned by Paul Pankhurst, to construct a custom-built home on their vacant waterfront property on Sturgeon Lake at 570 Long Beach Road, Township of Fenlon (now the City of Kawartha Lakes). While the Pennys owned two adjoining waterfront lots, it was clear that they did not want to build on the southerly lot, Part 2, because they wanted to keep it for investment purposes. They also wanted the southernmost lot to create a privacy buffer with the neighbouring property further to the south.

[28] After a preliminary meeting with the Pennys at their cottage, Mr. Pankhurst met with Mr. and Mrs. Penny at the property to discuss their desired plans for their home. The property was “overgrown” with long grasses, bushes and trees. During this visit, Mr. Pankhurst and Mr. Penny walked down to the lake where they observed the only surveyor’s pin that Mr. Penny had been able to find, which was believed to represent the northeast corner of the property. They walked back up the north side of the property and Mr. Penny advised Mr. Pankhurst that this was the area where he wanted to build. Mr. Pankhurst did not take any measurements from the pin they located that day. Mr. Penny further advised Mr. Pankhurst that he wanted a view of the lake and that the house was to be as close as possible to the north property line so that if he and his wife sold the lot to the south, their house would be the farthest away from the adjoining lot. It was made clear to Mr. Pankhurst that George Penny wanted the home as close to the north boundary as possible.

[29] After the spring meetings between Paul Pankhurst and the Pennys, on August 27, 1998, Coachlamp signed a contract with the Defendants to build a house on their lot. The contract states in part as follows:

WHEREAS THE PARTY OF THE SECOND PART are the owners of land in the Township of Fenelon in the county of Victoria, Lot 12, conc. 9, Plan 57R 4096, Sub-lot 1, in the Province of Ontario. AND WHEREAS THE PARTY OF THE FIRST PART agrees to build for the PARTY OF THE SECOND PART a house on the above mentioned property as per Schedule “A” annexed for a price of $296,400.00 plus Goods and Services Taxes.

Schedule “A” describes a home of 3090 square feet, with a 736 square foot garage “as per drawing”.

[30] Plan 57R 4096 is depicted as follows:

It is to be noted that this Plan of Survey is from 1985 – 13 years before the Penny home was built.

[31] Coachlamp hired Colin Darling, a certified architectural designer, of Darling Design, to design the new home that Coachlamp would build on the Penny Property, and to prepare drawings, including the site plan required to obtain the building permit from the Township of Fenelon. As part of his design work, Mr. Darling did prepare drawings. On the first of those drawings, Darling indicated where the house was to be placed on the Penny Property (the “placement drawing”). The placement drawing indicated that, at its most northern point, the new home was to have a setback of eleven feet from the northern boundary limit of the Penny Property. At its most southern point, the home was to have a setback of twenty-two feet from the southern boundary limit of Part 1 of the Penny Property. The placement drawing was marked as Exhibit 13 and is depicted as follows:

It was made clear that this was a placement drawing, not a survey. Darling Design is not an Ontario Land Surveyor. He placed a drawing of the proposed house in a box representing Part 1. A statement on the placement drawing indicated that information was taken from a plan of survey. There were also further drawings prepared by Darling Design that showed the layout of the house more specifically. Those were marked as Exhibits 14-17.

[32] On September 10, 1998, Coachlamp submitted an application for a building permit with the Township of Fenelon (now the City of Kawartha Lakes), as follows:

[33] As can be seen, the building permit application was for a property on Long Beach Road, known as Concession 9, Lot 12, Plan 57R 4096, Part 1. Plan 57R 4096 referred to a registered plan that would denote the metes and bounds of the property, however, it is not clear if this plan was available for reference to those working in the building department at the time. Contained in the City’s records archive was a main floor plan for the Penny residence, as follows:

[34] The measurements on this drawing, for the overall dimensions for the main part of the house, matched what was listed on the building permit application. The placement drawing referenced above was also located in the City’s records archives, which showed the setbacks to the approximate water line and the two sides, which complied with zoning requirements and matched the measurements on the building permit. At the relevant time, September 1998, the zoning by-law required a setback minimum of 7.5 m from the front, which would be the property line adjacent to the road, and for this type of property, waterfront, there was a 15 m minimum from the waterfront. Further, there was a 3 m setback required on one interior side and 1.3 m setback required on the opposite interior side.

[35] The Township of Fenelon was paid fees of $1,848 for the Building Permit and a development charge of $1,243. The Town issued the Building Permit on September 14, 1998, which authorized Coachlamp to begin construction.

[36] On September 11, 1998, Coachlamp hired Matthews Cameron Heywood – Kerry T. Howe Surveying, carrying on business as Coe, Fisher, Cameron (“CFC”) to determine a boundary line for construction. Paul Pankhurst gave instructions over the phone during one phone call and provided CFC with two phone numbers at which they could contact him: an office phone number and a mobile phone number. There is much dispute about what the instructions were – in other words, what CFC was hired to do. CFC contends that they were ultimately only instructed to survey the south side of the Penny Property, while Mr. Pankhurst contends he asked CFC to survey the north side of the property. The Job Order Sheet refers to neither the north nor the south boundary, rather it states, “Locate 1 limit for loc/n of new house”. The Job Order Sheet is depicted as follows:

There is no further written record of the instructions given.

[37] Coachlamp also hired an excavation contractor, W.G. Jackett and Sons Construction Limited (“Jackett”), to dig the foundation for the home, and to install a septic system. Jackett began work on the property on September 7, 1998. They had heavy equipment on the property, clearing bush and moving earth, from that date up to and including September 14, 1998, and continuing until October 5, 1998. Jackett’s time sheets demonstrate the dates and type of work performed at the property:

[38] Also, within the time frame that Jackett was excavating the property, CFC attended at the property on September 14, 1998. Their field notes were marked as Exhibit 110 and are depicted as follows:

[39] This record demonstrates that the field crew found some previously set iron bars along the boundary of Sturgeon Lake, and that on that day, September 14, 1998, they placed four iron tubes along 400 ft, moving west from the lake, along what they determined to be the south boundary of Part 1.

[40] When Mr. Pankhurst next visited the property, either that same day or the following day, he claimed that he observed three or four little bright orange or red ribbons, used for surveying, on nails spread out on the rail fence on the north part of the Penny property. Mr. Pankhurst understood the ribbons confirmed that the rail fence was the northern property limit. This is greatly in dispute and is only set out here to provide context.

[41] CFC prepared a reporting letter to Paul Pankhurst dated September 22, 1998. In part the letter stated, “This letter is to document that on September 14, 1998, our field crew found regulation iron bars at both ends of the southerly limit of Part 1 on Plan 57R-4056. We also set iron tubes along the easterly 400' of this line.” An invoice for service rendered was attached to the letter for the amount of $256.80. It would appear that this invoice was paid in October 1998.

[42] Construction of the house proceeded throughout the fall of 1998 and was substantially completed around Christmas, 1998.

[43] The Defendants’ home is a 3,045 ft²one-storey brick bungalow, with an attached 1,216 ft² four-door garage. Unbeknownst to everyone at the time of construction, Coachlamp constructed the home so that the most northerly point measures 10.74 m, or 35.236 ft, perpendicularly north of the northerly limit of the Defendants’ property. Specifically, a large portion of the garage, and a small corner of the house, was ultimately built extending 10.74 m, or 35.236 ft, across the property line and onto the property of another. At the time the Defendants’ home was built, the Plaintiffs did not own the abutting land, rather it was owned by Gary Sorichetti.

[44] The Pennys moved-in sometime in March 1999 and they enjoyed their home for a few years without any knowledge that there was a problem.

[45] On November 23, 1999, Susanne Murchison, Building Inspector with the Township of Fenelon wrote to the Defendants inquiring into the building permit for their home. The letter stated in part: “As we have recently taken over building inspections in the spring of 1999, we are asking your assistance in clearing up our files. In checking our records we are unable to determine whether your building permit for a single family dwelling has been completed. If we can be of any assistance in determining what stage of construction you are at, please feel free to contact our office anytime…”

The 1999/2000 Reference Plan (“Plan 8229”)

[46] In late 1999, Gary Sorichetti retained CFC to prepare a reference plan for 582 Long Beach Road. This was prepared in December 1999, and deposited January 24, 2000 as Plan 57R-8229 (“Plan 8229”). It is depicted as follows:

[47] No encroachments were shown on the plan of survey.

The Plaintiffs’ Property

[48] In 2002, Peter Armstrong and Shelley Martin, the Plaintiffs, purchased 582 Long Beach Road, which abuts the Defendants’ property to the north. Mr. Armstrong loved this property because of the privacy, lot-width, and its acreage. Of course, the Penny home and garage was in the exact location it is today.

[49] The Plaintiffs’ property is two parcels of land, one much smaller than the other, that they purchased at different times and merged.

[50] The Plaintiffs acquired land legally described as Part Lot 12, Concession 9, being Part 1, Plan 57R-8229, Geographic Township of Fenelon, City of Kawartha Lakes (the “First Parcel”) on or about July 2, 2002, from Gary Sorichetti, by way of Transfer/Deed of Land registered as instrument number 394562. This is the lot immediately to the north of the Penny home and is in fact the lot into which the Penny home encroaches. The Plaintiffs did not obtain a building location survey of the property prior to purchasing it and did not know where the southern boundary of the property was located. Despite references in the listing documentation to the seller having a building location survey, none was provided.

[51] On June 25, 2002, Peter Armstrong sent correspondence to his lawyer with the subject line “Discrepancy?”. The letter stated:

I need you advice on something.

One of my prospective neighbours passed my father some documentation on the severance approval of the lot I am purchasing. I just wanted to alert you to an apparent discrepancy in the amount of land I purchased.

The listing and survey (see next page) provided with the listing indicated that I was purchasing 3.25 acres prior to the movement of the lot lines. I have naturally assumed that this is correct and it says so in the Agreement of purchase and sale. However, the Victoria County Planning Department report seems to suggest otherwise and indicates land of 2.55 acres.

One thought is that the planning department report shows straight lines whereas the survey shows the lot getting wide around the cottage. In your opinion, is this worth being concerned about?

Some documents were attached.

[52] The Plaintiffs chose not to obtain a building location survey despite it being a requirement of mortgage financing. The Mortgage Approval document dated June 27, 2022, and signed by Peter Armstrong and Shelley Martin on July 2, 2022, stated as follows:

Survey Requirements: You are to provide a Plan of Survey or Surveyor's Certificate signed by a qualified land surveyor showing the size of the lot and location of the buildings on the land.

Solicitor/Notary: The legal work on our behalf will be done by the undernoted solicitor/ notary and you or your solicitor/notary should deliver your title deeds to him/her at once, and the survey and insurance policy as soon as possible. These documents are required before advances may be made.

Whatever was done, the bank was obviously satisfied and advanced the funds. It is not clear what was given to the bank. The Plaintiff claimed that counsel obtained plan 8229, which was a recent survey, and presumably showed that to the bank, however, there is no evidence of that fact.

[53] The Plaintiffs were also advised by their lawyer that one of the exceptions to their acquiring good and marketable title to the property was any discrepancies which would have been revealed on an up-to-date building location survey. Trial Exhibit 30 was a reporting letter from Brian Evans to Peter Armstrong and Shelley Martin, dated August 29, 2002, which stated in part:

I am of the opinion that you have acquired a good and marketable title to the lands described in your Transfer/Deed of Land, which has been registered in the Land Registry Office subject only to the following exceptions:

11. Any defects or discrepancies which would have been otherwise revealed by an up-to-date building location survey.

[54] The Plaintiffs acquired an additional, smaller strip of land along the northern border of the First Parcel, legally described as Part of the Southerly part of Broken Lot 12, Concession 9, being Part 1, Plan 57R-8748, Geographic Township of Fenelon, City of Kawartha Lakes (the “Second Parcel”) on or about March 10, 2003, from Sorichetti by way of Transfer/Deed of Land registered as instrument number 0402918.

[55] The First Parcel was merged with the Second Parcel, and together they are referred to as the “Armstrong Property”, which is known municipally as 582 Long Beach Road, R.R. #2, Cameron, Ontario.

Discovery of the Problem and Litigation

[56] At the time of acquiring the additional smaller strip of land to the north, in early 2003, the Plaintiffs arranged for a survey of the southern line of their property. It was at this time that they discovered that the Defendants’ home, in fact most of the attached garage and a corner of the main house, extended onto their property. A fax from CFC, on January 27, 2023 attached the following diagram:

[57] The Pennys were informed of the encroachment around that same time.

[58] Over the next five years, the property owners worked to find a solution, ultimately without success.

[59] On July 30, 2008, five years after the problem was discovered, the Plaintiffs issued their Statement of Claim. They claimed for general damages in the amount of $1,000,000 and special damages in the amount of $1,000,000, as well as for a permanent and interlocutory order requiring that the Defendants remove that portion of the building that the Defendants built on the Plaintiffs’ property and in compliance with setback requirements of the Municipality. The Plaintiffs alleged that the Defendants, as owners of the structure, are liable in trespass, nuisance, and negligence. The Plaintiffs state that the presence of the Defendants’ garage on their property constitutes an ongoing trespass, an ongoing nuisance, and results in ongoing damages for the Plaintiffs. The following pleadings are of note:

a. The Plaintiffs state that the Defendants have acknowledged that a portion of the Defendants’ home is located on the Plaintiffs’ property and that this was as a result of a surveying error and construction error.

b. The Plaintiffs allege specific negligence on the part of the Defendants, including, but not limited to, deliberately or improperly constructing their garage on the property knowing that it would interfere with the Plaintiffs’ enjoyment of the property, hiring persons who were not capable of performing the work properly, and failing to remove the structure once they knew or ought to have known about the problem.

[60] The Defendants commenced a Third Party Claim on February 25, 2009 against those involved in the original construction of the home, including Coachlamp (the builder), CFC (the surveyor), Jackett Construction (the excavator), and the City of Kawartha Lakes. In fact, this Third Party Claim was issued long before any Statement of Defence was sent. The Defendants’ Third Party Claim seeks damages in the amount of $2,000,000 for an alleged loss of value of their own property and an alleged reduction in the property’s marketability, and indemnity from the Third Parties for the Plaintiffs’ alleged losses and damages in the main action. Specifically:

a. Against Coachlamp for breach of contract and negligence in building and locating the home partially on property allegedly owned by another.

b. Against CFC for negligence in failing to locate, identify and mark the northern boundary of the property so that the home would be built entirely within appropriate boundaries.

c. Against Jackett for negligence in digging and partially locating the foundation for the home on property allegedly owned by another.

d. Against Kawartha for failure to properly review the documents filed by Coachlamp in support of the application for a building permit and further for its failure to competently inspect the property as construction progressed to ensure that the location of the home complied with applicable zoning setbacks.

[61] The Defendants defended the Plaintiffs’ action in 2013. The Defendants plead in their Statement of Defence, dated July 30, 2013, in part, that the injunction sought by the Plaintiffs, for the removal of the encroaching structure, is an extreme and unreasonable remedy. They state that, if the court provides relief to the Plaintiffs, equitable relief such as monetary damages should be ordered instead of an injunction. The Statement of Defence includes the following:

a. Paragraphs 4-7 – The Defendants explain how they allege the home came to be built on the Plaintiffs’ property, referring to hiring and depending on Coachlamp Homes to build the home entirely on their property, and that Mr. Pankhurst of Coachlamp Homes completed and filed an application for a building permit, in which he stated where the home was to be located. Despite discrepancies, the Township of Fenelon Falls issued a building permit.

b. Paragraphs 8-9 – the Defendants explain that it was Coachlamp that hired the surveyors to locate the boundary limits of the property and allege that the surveyors failed to locate, identify, and mark the boundary line between the Defendants’ property and the property to its north.

c. Paragraph 18 – the Defendants allege that, in August 2003, the Plaintiff, Peter Armstrong, provided the Defendant with a copy of a survey which indicated that the Defendants’ home was built partially on the Armstrong property.

d. Paragraphs 19-20 – the Defendants allege that, based on the individual or combined negligence and/or breach of contract by the builder, surveyor, excavator, and City, the Defendants commenced a Third Party Claim against these entities, seeking damages and indemnity for the losses and damages claimed against them in the main action. The Defendants allege that the Third Parties are solely responsible for their home being situated on the wrong side of the property line and are responsible for the losses, damages and costs claimed by the Plaintiffs.

e. Paragraphs 21- 23 – the Defendants deny any personal responsibility to the Plaintiffs in trespass or negligence given their lack of knowledge of the situation until 2003. However, if found responsible, they seek contribution and full indemnity from the Third Parties.

f. Paragraph 28 – the Defendants claim for equitable relief in the circumstances, such that damages be assessed in substitution for an injunction.

[62] CFC and the City both defended the main action in 2013. Coachlamp did not initially defend the main action, but did so in 2018.

[63] All Third Parties defended the Third Party Claim. Specifically,

a. Coachlamp states that:

i. George Penny made his own inquiries as to the extent of his lands and advised Coachlamp of the northern boundary marker.

ii. It was not a term of its contract that it locate the legal boundaries of the lot and that George Penny asked Coachlamp to arrange to have a surveyor locate one boundary line, which they did.

iii. The failure to locate the northerly boundary was that of the co-defendant surveyor.

iv. The co-defendant excavator owed a duty of care to inquire as to the location of lot boundaries and the location of its work in respect of the lot boundaries and the required setbacks and contributed to the Plaintiffs loss by breaching that duty.

v. The municipality contributed to the Plaintiffs’ loss by granting a permit to the Defendants and permitting the commencement of construction without verifying that setback by-laws were complied with.

vi. The Defendants’ claim for damages is excessive and too remote and that they have failed to mitigate any loss, damage or injury suffered by them. Coachlamp says that in both claims for damages (Main Action and Third Party Action), relief was available to the Defendants pursuant to s. 37 of the CLPA.

vii. This Third Party Claim was not properly issued or served as the Third Party Plaintiffs had not, at the time of issuance, filed a Statement of Defence to the main action.

b. CFC states that they were retained by Coachlamp to locate one boundary limit on the property and that they attended on-site and did so. The surveyors deny that they have caused or contributed to any of the damages alleged against them in the Third Party Claim, but rather that the damages were caused or contributed to by other parties. Further they state:

i. The damages alleged are exaggerated, excessive, remote and unrecoverable at law. Further, the surveyors state they advised George Penny on January 20, 2003 of the subject encroachment and told him to seek legal advice, therefore, the Defendants’ claim for damages is barred by expiry of the relevant limitation period.

ii. The Defendants have failed or refused to assert their position in the main action that pursuant to section 37(1) of the CLPA they are entitled to retain the land for reasonable compensation, which is the most just and expeditious manner of resolving the dispute.

iii. The house should remain where it was constructed and the strip of land necessary to eliminate the encroachment be transferred to the Defendants upon payment of fair compensation, pursuant to s. 37(1) of the CLPA.

A crossclaim was brought against the other Third Parties for contribution and indemnity for any amounts which the surveyor may be found liable to the Defendants, and costs of defending the action and pursuing the crossclaim.

c. Kawartha pleads that, if any damages were sustained in the Third Party Claim, they were not caused by any fault, neglect, negligence, trespass, nuisance, or breach of duty on the part of the City. Specifically,

i. It or its building inspectors owed no duty of care to the Plaintiffs in the course of approving plans or conducting inspections pursuant to the Building Code Act or by-laws. However, work was carried out reasonably and without negligence.

ii. If any injuries, damages, or losses were sustained as alleged in the Third Party Claim, those were caused or contributed to by the fault of the other Third Parties.

iii. The Defendants failed to seek relief available to them pursuant to s. 37(1) CLPA.

iv. An order under section 37(1) of the CLPA is the most just, expeditious and least expensive manner of resolving the issues.

A crossclaim was brought against the other Third Parties for contribution and indemnity and costs of defending the action.

[64] The Third Parties also defended the main action and pleaded that the appropriate remedy, if any, to the Plaintiffs’ claims is to allow the Defendants’ house and garage to remain where they are and to re-draw the Defendants’ property line around the structure.

[65] There was no reply from the Plaintiffs to the Statements of Defence.

[66] The first round of discoveries commenced after George Penny passed away, in March 2013, with that first round finishing in January 2014.

[67] The matter was pre-tried in 2017.

[68] A second round of discoveries took place in 2018, largely focused on the pleading of s. 37 of the CLPA.

[69] W.G. Jackett and Sons Construction Limited (the excavator) was released from this litigation toward the end of 2021. The excavation company contributed the sum of $10,000 to the Defendants in exchange for a dismissal of the Third Party Claim, and any crossclaims, against them. It was agreed that all parties would take the position at trial that Jackett was not in any way negligent, liable, or at fault with respect to the matters in issue in the action. It was also agreed that the parties were at liberty to read in portions of the transcript of the examination for discovery of George Jackett as evidence against all parties.

[70] On February 15, 2022, this Court held that the Main Action and the Third Party Action would be heard at the same time and the trial commenced.

[71] There is no dispute that the encroaching portions of the garage and house have remained in place since 1998, and that they were discovered in 2003.

Various Plans to Move the Garage

[72] This Court has heard about various suggested options to redesign the garage in such a way so as to minimize the encroachment, some in more detail than others, including:

a. Darling Design proposal in 2007 – Mrs. Penny’s evidence was somewhat uncertain in relation to this proposal and how it came about.

b. Integrity Construction Services proposal in 2011 – Mrs. Penny agreed that this proposal was prepared for her and her husband and she agreed that she looked into this option. Mrs. Penny was concerned that, on this proposal, the garage would be in front of the den and they would lose all the light coming in. She testified that this would “destroy the design….of the house itself. It would just look odd. It would not be attractive.”

c. RWH Construction proposals in 2016 and 2019 – RWH’s current president, Ryan Hayter, was contacted by Mrs. Penny in 2016 to attend at the property and give her an estimate and advice on what she could do with her garage, to keep it the same size, but get it off the neighbours’ property. A preliminary plan and estimate were prepared. The estimate was $263,519.11. RWH were contacted again in 2019, by counsel, and asked to provide another drawing and estimate, this time to re-build the complete home off of the neighbours’ property. In August 2019, Mr. Hayter provided the drawings and estimate. The cost of a complete rebuild was estimated at $1.2 million.

d. Laurie Young was qualified as a licenced architectural technologist to provide opinion evidence regarding architectural design, preparation of preliminary designs and 3-D renderings, the preparation and stamping of construction drawings for building permits and aesthetics of residential buildings. Ms. Young confirmed the feasibility of rebuilding the garage in several different ways, including the RWH proposal and her own drawings. Ms. Young also pointed out that the RWH proposal offered some upgrades to the existing garage, as well as other advantages, even though the square footage would decrease by 200 ft², and there would be some challenges with the brick and providing natural light.

e. Joe Crowley was qualified as an expert on construction costs and estimating costs to demolish and re-build residential structures, including garages. He estimated the rebuild of the garage according to the RWH/Young designs would now be $408,145 including HST.

Admitted Facts Versus Inferences

[73] In summary, some of the narrative is drawn from undeniable facts as set out above. Other parts of the narrative will need to be inferred from circumstantial evidence. In J.E. and K.E. v. Children’s Aid Society of the Niagara Region, 2020 ONSC 4239, at para. 95, the court stated as follows:

There is a legal distinction between speculation and drawing inferences from the circumstantial and direct evidence on the record. The trier of fact is permitted to do the latter, but not the former. In this context, “speculation” is the drawing of an inference in the absence of any evidence to support that inference or in situations where the inference is unreasonable - for example, where the inference does not logically and rationally follow from the proven fact. Drawing inferences based on an “educated guess” is speculation. If the inference drawn is reasonable, however, a reviewing court should not intervene just because other inferences (even arguably better inferences) could also have been drawn, see, for example, Walton v. Alberta (Securities Commission), 2014 ABCA 273 at paras. 26-27.

Admitted Trespass – Remedy in the Main Action

[74] There is no dispute that the Penny garage, and a small portion of the home, were built on what is now the Armstrong property. The Defendants have admitted that this amounts to trespass. By the time this trial concluded, it was clear that the Plaintiffs were no longer pursuing any claim of nuisance or negligence in relation to the Defendants.

[75] Given these circumstances, the Plaintiffs success in the main action against the Defendants is simple for this Court to conclude.

[76] The more difficult question, however, remains. What must be done to remedy this problem? It is not open to this Court to do nothing. As stated above, this Court has three broad options:

a. leave the Defendants’ home where it has been since 1998, with the Defendants purchasing some severed portion of the Plaintiffs’ property (the suggestion being that depicted in Graphic B – Exhibit 3 – 346.1 m²/3725 ft²); or

b. require the Defendants to remove most of the encroaching portion of the residence, that being the garage; or

c. require the Defendants to remove the garage, with the Defendants being permitted to purchase a severed portion of the Plaintiffs’ property, in accordance with Graphic D – Exhibit 5 – 377.7 m² (4065 ft²), which would allow the Defendants to rebuild with a different design.

[77] According to the Plaintiffs, the ordinary remedy in these circumstances is a mandatory order requiring that the building be removed from the Plaintiffs’ lands. The Defendants and Third Parties suggest that injunctive relief is not appropriate; rather, they argue that this Court should sever a piece of the Plaintiffs’ land for the Defendants to purchase, allowing the garage to remain where it stands.

Injunctive Relief

[78] Injunctive relief is the presumptive remedy in both nuisance and trespass. In 778938 Ontario Limited v. Annapolis Management Inc., 2020 NSCA 19, the numbered company appealed from a decision dismissing its application for a permanent injunction against the respondent for trespass and nuisance. The respondent, an adjacent property owner, extended the height of its building by 18 ft above the appellant's roof level, creating an increased risk of snow load on the appellant's roof. The respondent offered to pay for strengthening of the appellant's roof. There was some trespassing on the appellant's roof by the respondent's workers. The respondent rejected the appellant's demand to stop work pending reinforcement of its roof. Although the application judge agreed that the respondent had trespassed on its roof and that the increased snow load would constitute a nuisance, he declined to grant a permanent injunction because he found that the appellant had consented to the trespass or, alternatively, the trespass was trivial, favouring a remedy in damages. The appeal was dismissed. The court stated:

[13] Acquiescence is an appropriate consideration when deciding whether to afford an applicant an equitable remedy […]

[17] Starfish emphasizes that no damage need be proved to establish trespass. There is no reason to conclude that the judge was confused about the difference between nuisance and trespass because the risk of trespass had disappeared by the time of the hearing. The nuisance-trespass distinction had become academic at that point. But Starfish is right that the law is more generous in favouring an injunction for trespass, although it is the presumptive remedy for both: Sharpe, Injunctions and Specific Performance, 5th ed (Toronto: Thomson Reuters Canada Limited, 2017) s.4.590; Maxwell, para34-35.

[18] As Maxwell explains at para. 40, "equitable discretion to grant an injunction is usually--but not invariably--exercised to vindicate property rights". Sharpe elaborates at s.4.10:

Where the plaintiff complains of an interference with property rights, injunctive relief is strongly favoured. This is especially so in the case of direct infringement in the nature of trespass. ... The discretion in this area has crystalized to the point that, in practical terms, the conventional primacy of common law damages over equitable relief is reversed. Where property rights are concerned, it is almost that damages are presumed inadequate and an injunction to restrain continuation of the wrong is the usual remedy.

[19] Later, Justice Sharpe adds at s.4.590:

Where there is a direct interference with the plaintiff's property constituting a trespass, the rule favouring injunctive relief is even stronger than in the nuisance cases. Especially where the trespass is delivered and continuing, it is ordinarily difficult to justify the denial of a prohibitive injunction ...

[20] On the other hand, courts have refused an injunction where the trespass is temporary or trivial, or unlikely to be repeated or where it was unintentional and inadvertent…

[21] Maxwell was a case of an interlocutory injunction in which irreparable harm and balance of convenience had to be considered. Not so here when a permanent injunction is sought. Nevertheless a discretion to refuse an injunction remains. Sharpe proposes an intriguing approach in cases of modest and temporary trespass which cause little or no damage:

sec.4.640 ... Viewed broadly, the cases under consideration may be seen to involve the exercise of conflicting property rights rather than unilateral invasion or appropriation. Where there is no question of permanent appropriation of property, nor serious inconvenience or harm which could not be compensated in damages, it is not at all obvious that the absolute autonomy of an owner should inevitably be vindicated over the reasonable needs of a neighbour. It should not be forgotten that refusing an injunction does not deny the right altogether.

[24] Leaving a plaintiff to a claim in damages for trespass may not mean those damages will be nominal. In the context of this case, common law damages would represent actual injury to Attica's property. The judge found any actual damage was minimal. In contrast, equitable damages would be a substitute for a foregone injunction. They are prospective and may include such things as any diminished value of the claimant's property, or the lost opportunity to bargain for access that would otherwise be a trespass (Maxwell, at para 40 citing English authorities). For example, in Jaggard v. Sawyer, [1994] EWCA Civ 1, the English Court of Appeal affirmed a refusal to grant an injunction, and upheld an award of damages for trespass, representing the estimated cost of securing a right-of-way over an existing private road (see also: Coventry et al v. Lawrence et al, [2014] UKSC 13, para128-131).

[44] An injunction remains the presumptive remedy for nuisance and even more so for the direct interference of trespass. In general, owners need not finance their neighbour's development--put otherwise, their property should not be "expropriated" by the defendant or the Court. Nevertheless, Shelfer and Nalcor may be helpful in guiding the exercise of discretion and, if appropriate, in crafting injunctive relief which respects the interests of both parties, particularly with the flexibility of terms and conditions that the exercise of equitable discretion facilitates.

[79] In other words, equitable jurisdiction to grant injunctive relief is usually exercised to vindicate property rights and is strongly favoured in the case of trespass where the primacy of common law damages over equitable relief is reversed. The burden is, therefore, on the Defendants to establish that they should be relieved from the injunction requiring them to remove the trespass. In this case, the burden is on Janet Penny, and the Third Parties in their defence in the main action, to satisfy the court that it should exercise discretion in their favour in some way.

[80] It must be clearly stated - this is not a balancing of interests, such as in the case of interim and interlocutory injunctions. Subject only to equitable remedial discretion, where the court can certainly weigh various factors, balance of convenience is not, strictly speaking, a relevant consideration.

[81] The Defendants and Third Parties suggest this is an exceptional case where injunctive relief should be denied, in exchange for an equitable remedy under s. 99 of the Courts of Justice Act or s. 37 of the Conveyancing and Law of Property Act.

[Section 99](https://www.canlii.org/en/on/laws/stat/rso-1990-c-c43/latest/rso-1990-c-c43.html) of the [Courts of Justice Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-c43/latest/rso-1990-c-c43.html) – The Working Rule

[82] The Defendants and Third Parties refer to s. 99 of the Courts of Justice Act, which states:

A court that has jurisdiction to grant an injunction or order specific performance may award damages in addition to, or in substitution for, the injunction or specific performance.

[83] The test for awarding damages in lieu of an injunction was established over 130 years ago by the English Court of Appeal in Shelfer v. City of London Electric Lighting Co. (1894), [1895] 1 Ch. 287 (Eng. C.A.), at 322-3. The court in Shelfer held that damages may be substituted for specific performance or an injunction where the court is satisfied that:

a. The injury to the Plaintiff’s legal right is small;

b. The injury is one which is capable of being estimated in money;

c. The injury can be adequately compensated by a small money payment; and

d. Granting an injunction would be oppressive.

Absent such proof, an injunction should be granted. This has been referred to as the “Working Rule”. See also: Duchman v. Oakland Dairy Co., [1929] 1 D.L.R. 9 (Ont. C.A.) at paras. 24-26. While Shelfer and Duchman were both cases of nuisance, the Working Rule has been considered by the Ontario Court of Appeal in the case of trespass to land in Bellini Custom Cabinetry Ltd. v. Delight Textiles Ltd., 2007 ONCA 413, 225 O.A.C. 375, wherein the court stated at para. 44, “I see no error in the approach taken by the trial judge. She made no palpable or overriding error of fact, and she applied the relevant legal principles in exercising her discretion with respect to the appropriate remedy.”

[84] While the Working Rule is not a rigid rule of law, it provides firmly established principles our courts have relied on when exercising equitable jurisdiction in the case of trespass. The burden is on the Defendants to satisfy the test, failing which, an injunction should be granted to enforce the Plaintiffs’ legal rights.

[85] The assessment of whether the injury to the Plaintiffs’ legal rights is small must be assessed on a case-by-case basis. In this case, the Plaintiffs’ injury should be assessed against how much the trespass interferes with the “plaintiff’s right to exclusive possession”: see Fridman, Gerald HL et al., Fridman’s The Law of Torts in Canada, (Toronto: Thomson Reuters, 2020), p. 35. Accordingly, the determination of whether the injury is “small” or “large” is not measured with a tape measure or by comparing the size of this encroachment to the size of the encroachment in earlier cases. The consideration is one of usage, not acreage. This first element of the Working Rule is, therefore, assessed with consideration of how the trespass interferes with the use and intended use of the encroached upon property; in other words, the impact of the encroachment on the use and enjoyment of property at the point where the encroachment is located. While the piece of property upon which the encroachment sits has been described as a “small sliver of land”, this Court appreciates that the consideration is about much more than the square footage of the land upon which the encroachment sits.

[86] This Court has been provided with and considered many Ontario cases that have applied the Shelfer Working Rule in the last 100 years. Six of those cases were in the context of trespass and can be summarized as follows:

a. Vaz v. Jong, [2000] O.T.C. 323 (S.C.), costs award varied [2002] O.J. No. 2961 (Div. Ct.) – Vaz purchased his property in 1979. Jong moved into the house next door in 1985. In 1986, Jong built an addition to the back of the house. In 1992, Jong sought to alter his verandah. The plans revealed that there was a slight encroachment on Vaz’s property and that his consent was required. Vaz refused to consent to the alterations. Jong proceeded with the alterations and regarded them as a repair that resulted in no greater encroachment than the earlier construction. In 1998, Jong built a deck on the second-floor roof at the back of his house. The deck encroached upon the second-floor roof of Vaz’s house. After attempting to contact Jong, Vaz cut back the part of the deck that was on his property. Jong called the police and Vaz was arrested. The charge was withdrawn upon Vaz’s undertaking to restore the fence in its proper location. The court ordered that Vaz was entitled to damages, including aggravated damages, for trespass with respect to the encroachment of the roof deck. The current owner was ordered to alter the front porch to eliminate the encroachments. At para. 118, the Court determined that the encroachments were permanent and, therefore, “less small”, however, the fact that the plaintiff “came to the encroachments” on buying the property and the limited use that could be made of the space, led the Court to conclude that the actual injury occasioned by the encroachments, except for the downspout, were “small”. In addition, the court concluded that the injury was capable of being measured in money and could be compensated by a small amount of money. As for oppression caused by an injunction, the court considered the costs of ordering the removal of the encroachment, being $2000, and determined that would not amount to oppression. At para. 118, Justice Sutherland set out the four elements of the Working Rule and then stated:

[…] Although the four factors discussed above were not put forth as parts of a rule of law but rather as guidance in the exercise of a discretion, the absence of oppression is in my view a factor to be given considerable weight, particularly where, as here, the trespass is structural and so not transitory.

b. Pagliuca v. Paolini Supermarket Ltd., 2006 CanLII 40998 (ON SC), aff’d 2007 ONCA 617 – The applicants were owners of a large farm property in Cookstown along with a long, narrow strip of land of approximately 60 m in width, which provided them with access to their farm property from Highway 89. The respondent owned land to both sides of this strip of land along with a right-of-way over the strip of land, which was used to provide truck access to the supermarket on the west side. The respondent caused to be constructed a Tim Horton’s Donut shop on its property located on the east side of the right of way, which included a drive-thru on the west side of the shop. As part of the final landscaping, a sodded berm was established to the west of the drive-thru. It was approximately 3 m in width and 70 m long and sat entirely on the east limits of the applicants’ right of way. The Court determined that the declaration and mandatory order was appropriate for an application, but that damages for trespass by the encroaching berm would require a trial. The court held at para. 10 that “a mandatory order is the presumptive relief for cases such as the instant one and it lies with the opposing party to persuade the court that the equitable relief should not be granted.” The application judge found that the total area of the encroachment, being 210 m², was not trivial or trifling. He further held that a “few hours with a bulldozer would suffice to remove the offending berm followed by the installation of a simple retaining wall” which was “far from oppressive”. The Court of Appeal held:

[1] We see no error in the finding of trespass. The appellant in effect appropriated 210 sq. metres of the respondents’ land to facilitate the construction of a Tim Hortons. The appellant offered no evidence that the cost of removing the encroachment would be oppressive. The land on which the berm was constructed is a 66’ wide strip affording access to the respondents’ lands. While the trial judge directed the trial of an issue as to damages, he was entitled on the record to order an injunction and as he did so, the only issue remaining as to damages relates to any loss up to the time the encroachment is removed.

c. Bellini Custom Cabinetry Ltd. v. Delight Textiles Ltd., 2007 ONCA 413, 225 O.A.C. 375 – The parties were commercial neighbours. Because of a difference in the elevations of their properties, the defendant’s predecessor in title built a retaining wall between the properties. Unfortunately, the retaining wall encroached on the plaintiff’s adjacent property at the bottom and leaned over that property even farther at the top. In the early 1970s, an action brought by the plaintiff was settled which allowed the encroachment to remain so long as there was no further encroachment, in which event the consent would be rescinded. The further action commenced between new owners because there was further encroachment by the defendants’ wall that impeded the plaintiff’s use of its property. The wall was described as 260 ft long, in addition to the fact that there was a six-foot-high wooden fence mounted on top of the retaining wall which extended for the full length of the wall. The trial judge found that the consent to the encroachment contained in the 1973 settlement agreement was rescinded because of the significant further encroachment by the wall over the years. As a result, the trial judge held that the wall constituted a trespass and granted a mandatory injunction requiring the removal of the wall, where the cost to remove exceeded $200,000. The appeal by the defendants was dismissed. The Court noted:

[40] Although the appellants submitted that an order requiring it to take down the wall would be oppressive because of the cost involved, the trial judge noted that the appellants led no evidence as to the cost, although the respondent’s expert suggested a figure of $220,000. There was also no evidence of their ability to pay, or whether the order would be oppressive in that context, especially considering the already poor state of the wall.

d. Carriere v. Bourre, 2009 CanLII 38497 (ON SC) – The defendant’s property included a restaurant and tavern which was built very close to the joint property line with the plaintiff. The plaintiff’s garage was very close to this property line. The plaintiff claimed that renovations done by the defendant changed the slope of the land causing rainwater and melting snow to accumulate on the plaintiff’s driveway and into and on his garage floor. The freezing of this water shifted the plaintiff’s garage floor and broke the concrete floor slab, making the garage unsafe and unusable at times. The garage was 40-50 years old and in deteriorating condition. The defendant also installed an air conditioner and eavestrough along the adjoining edge of the defendant’s roof. The eavestrough and air conditioner encroached over the plaintiff’s property line. Damages to the garage of $7,866 were awarded. An injunction was granted ordering the removal of the encroachments, the eavestrough and air conditioner that encroached 0.6 to 0.8 ft onto the plaintiff’s property. It should be noted that the defendant did not defend these proceedings.

e. TMS Lighting Ltd. v. KJS Transport Inc., 2012 ONSC 5907, aff’d 2014 ONCA 1, 314 O.A.C. 133 – TMS and KJS occupied adjacent lands in a commercial neighbourhood. TMS alleged that KJS had interfered with its manufacturing operation, in that KJS’ trucks had driven onto TMS’ driveway and struck and displaced concrete barriers designed to prevent trespasses. TMS further took the position that, for several years prior to paving its parking lot, KJS’ trucks raised dust from its unpaved lot which blew into TMS’ factory and settled on the lighting fixtures. The court found that dust from KJS’ parking lot constituted a substantial interference with TMS’ use of its property. The court found that KJS trucks were trespassing on TMS’ driveway, which amounted to a substantial interference with TMS’ rights. As an award of damages would not deter KJS from continuing to trespass on TMS’ driveway, the court ordered that a mandatory injunction was necessary, in other words, KJS was ordered to stop trespassing on the driveway of TMS by turning its trucks. In addition, TMS was awarded total damages of $310,422. On appeal, the court found that the portion of damages attributed to lost productivity was unsustainable, given the lack of evidence. A new trial was ordered on the issue of assessment of lost productivity damages.

f. Ramsahai-Whing v. Weenen, 2016 ONSC 2427 & 2017 ONSC 1091 – This case involved a mass of concrete, with a volume of about 100 cubic feet, that had been placed on the plaintiffs’ property. The plaintiffs brought a motion for summary judgment. At the summary judgment motion, the Court found that there was no genuine issue requiring a trial, concluding that the defendants had committed an actionable trespass. The balance of the motion was adjourned for the parties to jointly retain a professional engineer to provide an opinion regarding the feasibility, safety, and cost of removal. After hearing from a professional engineer, the Court ordered an injunction to remove the mass of concrete, in accordance with the approach recommended by the engineer.

[87] Sixteen of the Working Rule cases were in the context of nuisance. Injunctions were granted in eleven of them, including a few that awarded both damages and an injunction. In the remaining five, only damages were awarded. The cases in which injunctions were granted can be summarized as follows:

a. Duchman – Upon appeal by the plaintiffs and cross-appeal by the defendants from the judgment at the trial, it was held that the noise and disturbance made by the defendant’s early morning dairy farm activities were such as to interfere with the reasonable comfort of the neighbours and constituted a nuisance. An injunction was granted restraining the defendants from conducting their business in such a way as to create any disturbance in excess of that customarily created by their predecessors at the time when the easement or obligation arose.

b. Godfrey v. Good Rich Refining Co. Ltd. et al., 1939 CanLII 57 (ON SC), [1939] O.R. 106 – The plaintiff was entitled to an injunction restraining the defendants from operating an oil refinery as to cause a nuisance to the plaintiff by reason of offensive odours. The plaintiff was not entitled to damages since no actual damage to the property had been established.

c. McKie v. K.V.P. Co., 1948 CanLII 295 (ON CA), [1949] 1 D.L.R. 39 (Ont. C.A.) – The actions were bought by the owners and occupants of parcels of land located on the Spanish River, in the District of Sudbury, seeking damages for injury suffered through the pollution of the water of the Spanish River by the defendant, and for an injunction to restrain the continued pollution of the river by the defendant, a paper mill. Damages were awarded, and in each case, an injunction was granted restraining the defendant from depositing foreign substances or matter in the Spanish River, which alter the character or quality of the water washing the lands owned or occupied by the plaintiffs. The Court of Appeal maintained an injunction but in slightly different terms, specifically, restraining the defendant from discharging or permitting to be discharged from the defendant’s works, into the waters of the Spanish River, any substance or matter that, to the injury of the plaintiff, affects the quality or character of the waters of the said River where the plaintiff’s lands border upon it, or that causes the said waters to become less pure than otherwise they would be.

d. Russell Transport Limited et al. v. The Ontario Malleable Iron Company Limited, 1952 CanLII 117 (ON SC), [1952] O.R. 621 (Ont. S.C.)– An action was commenced due to particles from a nearby foundry settling on the plaintiffs’ land. An injunction was granted restraining the defendants from discharging any substance, gas or matter in such a manner or to such an extent as to occasion damage to the plaintiffs’ property, buildings, or motor vehicles.

e. Atwell et al. v. Knights, 1967 CanLII 323 (ON SC), [1967] 1 O.R. 419 (Ont. H.C.) – A mandatory injunction was granted against a hen laying business where the court stated that the inconvenience from the obnoxious odors could not be adequately estimated in money.

f. Walker et al. v. Pioneer Construction Co. (1967) Ltd. (1975), 1975 CanLII 481 (ON SC), 8 O.R. (2d) 35 (Ont. H.C.) – The plaintiffs’ home bounded the 55-acre lands of Pioneer, which included a gravel pit and asphalt plant. The plaintiffs claimed for damages and an injunction against the defendant, Pioneer, on the basis of several items of alleged nuisance, including dust, fumes, noise and odour emanating from the defendant’s neighbouring land onto that of the plaintiffs’, and also on the basis of the alleged dangerous condition of Pioneer’s lands, certain use made by it of a mutual party telephone line, and the alleged unsightliness of Pioneer’s lands. The Court stated:

[51] I am aware of those Canadian decisions where, because of the factor of the widespread economic hardship resulting from an injunction, it is said to be appropriate to award damages in lieu of an injunction…. Fleming, in his Law of Torts, 4^th ed. (1971), at p. 371, has described this approach as “condoning the continuation of a nuisance at the behest of a wrongdoer who is willing to pay for it and subjecting the plaintiff to compulsory expropriation without legislative fiat”.

An injunction was granted, restraining the defendant from operating the premises as to cause a nuisance to the plaintiffs by reason of noise between the hours of 9 p.m. and 7 a.m.

g. Execotel Hotel Corp. v. E.B. Eddy Forest Products Ltd., [1988] O.J. No. 1905 (S.C.) – The plaintiff claimed in nuisance for physical damage to the roof of his hotel, loss of income, and diminished value of the hotel as a result of the defendant’s industrial activities. The defendant conducted a pulp and paper operation across the street. Wood chips were stored outside the defendant’s mill to be aged three months before being used. During the flinging process in which the chips were blown into piles, a winnowing effect on the wood particles was created by the wind, and dust was blown into the atmosphere. An injunction was granted prohibiting projections by the Flingers during easterly wind conditions and at other times restricting their use to a locked “nine-o’clock” or easterly position. Because of the accumulations of dust on the roof and the danger of it plugging the drains, the plaintiff was awarded $77,396 for roof and drain modification. Cost of cleaning to the time of trial was $18,750 and cost of future cleaning of dust from the hotel was $25,000.

h. Laing v. St. Thomas Dragway, 2005 CanLII 1501 (ON SC), [2005] O.T.C. 57 (S.C.) – A partial injunction was granted to curtail noise levels from a racing facility on Sundays. Racing on Sundays was not permitted to commence until 1:00 p.m. In applying the Working Rule, the court referred to the fact that, for three decades, the plaintiffs had sat idly by while the dragway expanded operations, which had been in operation for over 38 years prior to the litigation. The court found that granting a total injunction would be irreversibly oppressive to the defendants.

i. Balmain Hotel Group L.P. v. 1547648 Ontario Ltd., 2009 CanLII 28199 (ON SC) – The plaintiff, a hotel, brought a claim in nuisance allegedly caused by noise from the defendant’s late operations of a nightclub and restaurant. The court ordered an injunction to enjoin and prohibit noise audible beyond their property limit between 11:00 p.m. and 9:00 a.m.

j. Guinan v. Ottawa (City), 2010 ONSC 807 – There was ongoing damage to a house in Ottawa’s downtown core caused by tree roots from a 16 m high, 85 cm diameter silver maple tree located on city property between the house and the sidewalk, some 15 ft from its foundation wall. The court ordered a mandatory injunction requiring the City of Ottawa to remove the tree and to grind down and remove the stump. The court stated:

[162] In these circumstances the burden on the City to remove the tree is light in comparison to the burden on the Plaintiffs of repairing the structural damage and reconstructing their house on piles. The public interest in maintaining the urban forest in general and mature City street trees in particular is an important consideration, but in my view given the significant structural defect caused by this tree the public interest ought not to outweigh the common law rights of the Plaintiffs where damages have been found to be an inadequate remedy. Although a mandatory order to remove the tree is a drastic remedy not to be granted without considerable thought, in these circumstances it is warranted.

k. Krieser v. Garber, 2020 ONCA 699 – The defendants hired someone to design and build a dock at their waterfront property on Lake Simcoe. A permit was obtained from the Ministry of Natural Resources and Forestry, however the dock was not situated in conformity with the permit and impacted the plaintiffs’ use of their neighbouring waterfront and boat. The trial judge granted an injunction ordering that the defendants remove the dock. He further ordered punitive damages and substantial indemnity costs. On appeal, the Court of Appeal set aside the order of punitive damages and reduced the costs. The court stated:

[74] However, mandatory injunctions – which require the defendant not merely to cease some act but take positive action - - raise special concerns. Requiring the defendant to take positive acts, as Sharpe explains, (1) changes the balance of burden and benefits as between the parties and (2) raises issues concerning the court’s reluctance to become involved in ongoing supervision of complex obligations: see Injunctions and Specific Performance, paras. 1.500-1.520.

The five cases granting damages only included:

a. Bottom v. Ontario Leaf Tobacco Co. Ltd., 1935 CanLII 62 (ON CA), [1935] O.R. 205 (C.A.) – There were noxious fumes from a tobacco plant which caused “some special discomfort, though it may be a question how great that discomfort is” and some diminution in property value, but the court noted that the granting of the injunction would result in the closure of the plant and loss of 200 jobs in a community of 2300. The plaintiff was entitled to damages, the amount to be determined by a master.

b. Morris v. Dominion Foundries & Steel Ltd., 1947 CanLII 328 (ON SC), [1947] 2 D.L.R. 840 (Ont. H.C.) – The plaintiffs’ claim was for damages for an alleged nuisance caused by the defendant in the establishment of a scrap yard adjacent to the plaintiffs’ property, and for an injunction restraining the defendant from carrying on or continuing all operations and activities of any kind. The court found that if the defendant was required to move, it would be put to an expense of between $50,000 to $100,000, and would have its manufacturing processes materially delayed. Even if the defendant was required to move from the premises, the plaintiff would be left with the noise, dust, and smoke from trains. The defendant merely added something to the interference with enjoyment which already existed. The court awarded damages of $1000.

c. Mendez et al. v. Palazzi et al. (1976), 1976 CanLII 718 (ON SC), 12 O.R. (2d) 270 (C.C.) – The case involved tree root damage to the plaintiffs’ property. The court found that there was actual damage to the plaintiffs’ lawn but not substantial damage, such as to the foundation or tile beds, to merit a mandatory injunction.

d. Muirhead v. Timbers Brothers Sand & Gravel Ltd., [1977] O.J. No. 1748 (H.C.) – There was some nuisance caused by noise and dust from the defendants in the course of carrying out gravel and quarrying operations, but the plaintiffs no longer occupied the premises. Damages of $10,000 were awarded.

e. Schenck et al. v. The Queen in right of Ontario; Rokeby v. The Queen in right of Ontario, (1982), 1981 CanLII 1797 (ON SC), 34 O.R. (2d) 595 (H.C.) – The court found nuisance caused by the government’s application of salt spray on a highway that partially destroyed the plaintiffs’ orchards. The plaintiffs were awarded damages.

[88] Cases from other provinces were also provided to this Court and considered.

[89] In Arbutus Park Estates Ltd. v. Fuller, 1976 CanLII 1118 (BC SC), 74 D.L.R. (3d) 257 (B.C.S.C.), the plaintiff company acquired title to a large piece of waterfront property north of Nanaimo, British Columbia. The property was subdivided into 175 lots, and a building scheme was created which was registered in the Land Registry Office affecting the title of all of the lots. Some of the terms of the scheme restricted the user and some restricted the dwelling and out-building locations. The defendants were unaware of the restrictions when they bought and built on the lot. The court found that the defendants breached one of the restrictions by commencing construction of a garage without having obtained the plaintiff’s approval. However, the court refused to order demolition of the garage, considering it significant that the defendants were unaware of the restrictions and the plaintiffs were “anything but diligent”. See also Trawick v. Mastromonaco (1983), 1983 CanLII 1022 (AB KB), 24 Alta. L.R. (2d) 389 (AB QB).

[90] According to the Plaintiffs, the cases demonstrate that damages are substituted for a mandatory injunction, through an application of the Working Rule, only in cases where the relative impact of the encroachment is trivial and the impact of the injunction on the Defendant is severe. It must be recognized that the concepts of “trivial” and “severe” are subjectively relative and context specific. Frankly, the case law demonstrates a case by case, fact specific approach to every unique circumstance.

[91] The Plaintiffs’ claim was commenced based in nuisance, negligence, and trespass. The only remaining basis being pursued is trespass. As previously stated, trespass is acknowledged by the Defendants. Therefore, the Plaintiffs’ injury due to trespass is the only legal right that forms part of the equity assessment in this case as between the Plaintiffs and Defendants. It must also be recognized that the Plaintiffs did not directly advance a claim of negligence against the Third Parties in this case.

[92] The Defendants argued that the normal remedy for trespass to land is damages with the purpose being to restore the plaintiff as nearly as possible to his or her original position at the time the trespass was committed. Fridman, Gerald HL et al., Fridman’s The Law of Torts in Canada, (Toronto: Thomson Reuters, 2020), p. 69. In Clark v. McKenzie, 1930 CanLII 301 (BC CA), [1930] 2 D.L.R. 843 (B.C.C.A.), the parties owned adjoining lots, each with a frontage of 25 ft. The defendant built a two-story building on his lot and, about eighteen years later, the plaintiff found that the building encroached on his lot three and one-quarter inches at the front and diminishing to two inches at the rear. The evidence disclosed that the removal of the building from the plaintiff’s lot would cost about $1,500, and the value of the plaintiff’s lot was about $1,000. Upon the plaintiff bringing an action for damages for trespass and for a mandatory injunction for removal of the building, the defendant paid into court $50 in satisfaction of the plaintiff’s claim. At trial, it was held that the plaintiff should have accepted the $50 as adequate compensation. This was upheld by the Court of Appeal.

[93] The Defendants also relied on Power v. Goodram, 2012 ABQB 50, 529 A.R. 195. Power had purchased one unit of a duplex in order to renovate it and sell it. It was discovered that the party wall of the duplex was irregular and encroached onto Power’s property. At para. 180, the court states: “While I have sympathy for the predicament the Plaintiff finds herself in, moving the party wall would not only cost a great deal of money, but it would also create a layout in the building different than what has existed when both unit owners purchased their respective properties. I also note that the case law suggests rectification of physical irregularities such as this one must be decided by keeping in mind the practical realities of the situation.”

[94] This Court recognizes that this is not a typical trespass, however, it questions whether there is such a thing as a typical trespass. Every situation is unique, and the court must consider that uniqueness in determining an appropriate remedy under the Working Rule.

[Section 37](https://www.canlii.org/en/on/laws/stat/rso-1990-c-c34/latest/rso-1990-c-c34.html) of the [Conveyancing and Law of Property Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-c34/latest/rso-1990-c-c34.html)

[95] The Third Parties, in defending the main action, also relied on s. 37 of the Conveyancing and Law of Property Act, R.S.O., 1990, c. C. 34. (“CLPA”). The relevant portion of s. 37(1) reads in part as follows:

Where a person makes lasting improvements on land under the belief that it is the person’s own, the person or the person’s assigns are entitled to a lien upon it to the extent of the amount by which its value is enhanced by the improvements, or are entitled or may be required to retain the land if the Superior Court of Justice is of opinion or requires that this should be done, according as may under all circumstances of the case be most just, making compensation for the land, if retained, as the court directs.

It is argued that, if s. 37 of the CLPA applies, this Court may direct that the Defendants retain the land, as being “most just”, in exchange for “making compensation for the land”.

[96] The Plaintiffs initially argued that an order under s. 37 of the CLPA was not available in this case for two reasons:

a. The Defendants never sought this remedy; and

b. The doctrine of laches

[97] Rule 29.05 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, permits a third party to defend a plaintiff’s claim by delivering a Statement of Defence in the main action, “in which the third party may raise any defence open to the defendant”. In this case, this is a defence that was “open to the defendant” and, therefore, permitted for the Third Parties to advance. Clearly it is also open to the Defendants and Third Parties to make s. 37 arguments in these circumstances.

[98] As for the doctrine of laches, a party relying on this defence “must show a combination of delay and prejudice.” See Perry, Farley & Onyschuk v. Outerbridge Management Ltd. (2001), 2001 CanLII 5678 (ON CA), 54 O.R. (3d) 131 at para. 36 (Ont. C.A). Pursuant to r. 26.01, a "Court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment." The Third Parties brought motions to amend their Statements of Defence in the main action, to plead s. 37, in 2018. The Plaintiffs consented to the motion to amend and did not raise any issue of prejudice as contemplated by r. 26.01. Further, in the course of this trial, there has been no evidence of prejudice presented. There is no merit to this argument by the Plaintiffs.

[99] The material wording of s. 37 was enacted in 1877, over a decade before Shelfer was decided.

[100] The exercise of discretion under s. 37 is not to be exercised lightly. Before granting relief under s. 37, the court must apply a three-part test:

a. The party must have genuinely believed that he or she owned the land;

b. The improvements must be of a lasting nature; and

c. The court must weigh the equities between the owner and the person making the improvements to determine whether it is appropriate to grant a lien for the value of the improvements or to transfer the land to the person making the improvements.

See: Gay v. Wierzbicki, 1967 CanLII 352 (ON CA), [1967] 2 O.R. 211 (C.A.); McGuire v Warren, 2006 CanLII 23923 (ON SC), at para. 7; Ryan v. Kaukab, 2011 ONSC 6826, at para. 217. In granting a remedy pursuant to s. 37(1) of the CLPA, the court is required to use its discretion to grant the relief that is the most just solution taking into account all of the circumstances of the case: see McGuire v. Warren, at para. 18.

[101] Section 37 allows a court to order what is in effect a private expropriation and should only be done with great care. In Gay v. Wierzbicki, Laskin J.A. held that:

[11] The discretion of the court to allow the honestly mistaken person to retain the land on paying compensation is not one that is to be lightly exercised. I would hold that the claimant must show that the balance of convenience is decidedly in his favor before he is permitted to retain another’s land, or, that the equities preponderate in his favor within the framework of the statute

[102] The party seeking a remedy pursuant to s. 37(1) of the CLPA has the burden of establishing an honest and bona fide belief that the land was theirs when the lasting improvements were made to it. The existence of an honest and bona fide belief is a question of fact: see Wigle v Vanderkruk, 2005 CanLII 25104 (ON SC), [2005] O.T.C. 638 (S.C.), at para. 87. As for whether the honest belief needs to be reasonable, there is some debate in the case law. In Meconi v. Crichton, [2000] O.J. No. 2457 (S.C.), at para. 24, Jenkins J. held, “An honest belief must be based on fact or logic.” In Oro-Medonte (Township) v. Warkentin, 2013 ONSC 1416, at para. 159, relying on Halton Hills (Town) v. Row Estate, [1993] O.J. No. 1222 (Gen. Div.), the court held that there is a reasonableness requirement and also considered due diligence on the part of the claimant. In Wigle v. Vanderkruk, at para. 87, the court stated, “Although it is not necessary that the belief be a reasonable one, reasonableness may be considered in deciding on its existence.” Certainly, reasonableness must be a relevant consideration.

[103] When considering whether an improvement is a “lasting” one, in Gay, Laskin J.A. stated as follows at para. 14:

[a]n addition to the property amounting to more than mere repair or replacement of waste. The term ‘lasting’, if it adds anything to the term ‘improvements’ must refer to permanence, in the sense of not being easily removable, as is the case with some fixtures…

The Court of Appeal found at para. 13 that it is not necessary that the “structure should be wholly on the defendant owner’s land” and “[t]he fact that the structure straddles the properties of the parties is a factor going to the exercise of the Court’s discretion when viewed against all other relevant considerations.” The Court of Appeal had no doubt that the barn at issue was a “lasting improvement”.

[104] When considering whether to grant the encroaching party the right to retain the land, it is important to note that this remedy can be granted even if the value of the land encroached upon has not been enhanced. As stated by Laskin J.A. in Gay:

[9] I hold the view that the second part of s. 38(1) [now 37(1)] provides a discretionary alternative which is independent of the claim of lien, and hence does not require proof of enhancement of value of the land mistakenly built upon. Certainly, in most cases, a claimant’s ‘lasting improvements’ would enhance value; but the fact that in a particular case there may be no enhancement of value but rather a detriment […] would be a factor to be considered by the Court in deciding whether to apply the second part of s. 38(1). The Court’s discretion arises upon proof only that lasting improvements were made in the honest but mistaken belief already referred to.

As stated in Corkery v. Moffitt, 2022 ONSC 105, at para. 27, “The claim to retain is independent of a claim of lien and does not require proof of enhancement of the value of the land. The claim to a lien, on the other hand, requires showing an enhancement of value.”

[105] The third step of the s. 37 test involves an exercise of the court’s discretionary power. The court must weigh the equities between the owner of the encroached upon lands and the party who has made the improvements. The court will most certainly consider any impact of the forced sale upon the person being forced to sell. In Gay, while most of a large barn had been built on the encroached lands, Laskin J. found that:

[12] […] there is nothing to show that his road allowance is anything more than what it was when it was bought, namely, bushland. There is no indication that the “forced sale” of the land upon which the barn stands will have any adverse effect upon the utilization or the amenities of the defendants remaining land.

The court made the express finding that there was absolutely no impact on use and enjoyment of the land by the landowner and they could fairly be compensated by a valuation because they were holding it as investment. The court held that the value of the land was $145, based on a formulation of $500 per acre, and then ordered a payment of $200 – in other words a 38% premium, even though there was no negative impact on the homeowner. The Plaintiff argued that this added premium sets a reasonable baseline in circumstances where there is no negative impact on the landowner, demonstrating two things:

1. Compensation for the land is not fair value – it is something else and something more, and the baseline is 138%; and

2. If there is adverse impact, then there must be additional compensation for forced sale and injurious affection.

[106] This Court was referred to a number of other s. 37 cases. Many cases have been considered and can be summarized as follows:

a. Noel v. Page [1995] O.J. No. 2441 (Gen. Div.) – In this case, the plaintiff cottager sought an injunction requiring the defendant, a neighbouring cottager, to demolish the part of the defendant’s cottage that encroached 25.1 ft onto the plaintiff’s land and demolish a well constructed on the plaintiff’s land. Valin J. ordered the retention by the defendant. The Court found that the defendant believed the property line was demarcated by a tree line which the plaintiff planted years earlier. The court also noted that the plaintiff and his family maintained their property up to but not past that tree line. The court concluded that it would be very expensive, if not impossible, to move the encroachment short of tearing down the house. Despite finding that transferring title to the defendant would “seriously impact the integrity of the Plaintiff’s land in terms of shape and privacy”, the court ordered that the “balance of convenience is decidedly in the favour of the Defendants”: see para. 41. The court ordered that the plaintiff be compensated for the value of the land, a further 15% of the value of the entire property for injurious affection, all associated expenses, and all solicitor-client legal fees.

Valin J. recognized that, while it is a basic principle of real property law that a person is entitled to the full use, occupation, and possession of the land that they own, s. 37(1) of the CLPA is an example of an exception to that basic principle: see para. 34. The purpose of the section was stated in the following terms:

[35] However, s. 37 (1) of the Conveyancing and Law of Property Act was enacted by the legislature to address situations where a person mistakenly makes lasting improvements to property which is not owned by that person. In the event that a person makes lasting improvements to land under the honest or bona fide belief that the land was his/her own, it is open for the Court to determine whether, under all the circumstances, it is just that the land be retained to the extent of the encroachment and, if so, the amount of compensation to be paid.

The court noted that the defendant was reckless in failing to obtain a survey, ignoring the advice of their lawyer to do so, despite knowing that the boundary line was in dispute: see para. 38. Nevertheless, the court found that the defendant had an honest belief that the east property boundary was marked by trees that had been planted by the plaintiff’s family: see para. 39.

The Plaintiff argued that Noel v. Page can be distinguished, as the Penny garage can be taken down without demolishing the home. The Plaintiff also argued that the trial judge erroneously failed to consider any element of the Working Rule.

b. Dupuis-Bissonnette v. Wm J. Gies Construction Ltd., 2010 ONSC 3680 – In this case, retention was ordered where the encroachment in question was a portion of a retaining wall at the back of the property, with a width of between 7.8 and 11.8 inches, running for a length of 22.5 ft, for a total area of less than 22 ft², which represented less than 1.5 percent of the total area of Gies lot. The retaining wall provided structural support to an inground swimming pool. The encroachment occurred inadvertently and Dupuis-Bissonnette believed it was on their own land. The court found that there was no evidence that retention of this small area would have any negative effect on the market value or marketability of the property. Flynn J. ordered that Dupuis-Bissonnette was entitled to retain the land, reasoning that this was the most just solution in all of the circumstances, provided that they bear the full cost of the minor variance application, severance, and conveyancing. The court found that the balance of convenience clearly favoured Dupuis-Bissonnette retaining the land.

c. Limacher v. Pickering, 2013 SKQB 396, 432 Sask. R. 78 – Considering legislation similar to s. 37, a form of retention was ordered. The encroachment in question was a corner of a cottage, which accounted for a small area, and the encroached lot was vacant land for investment. The court granted an easement for the natural life of the structure, with compensation being paid to the owner, on the condition that the owners of the cottage did nothing to extend the life of the building. The court stated that “sentimentality cannot override a reasoned approach to identifying an appropriate remedy.” The court awarded damages for past trespass in the amount of $300.00, stating that the “encroachment has not interfered with their use of the property in any way.” In determining compensation for a future easement, the court considered the location of the encroachment, as near the centre of the lot with the potential to affect the size and placement of a future building. The court also considered the limited lifespan of the cottage. Compensation for the future easement was assessed at $2000.00.

d. Palkowski v. Ivancic, 2015 ONSC 7080 – The court found the parties engaged in a fraud on creditors in relation to exchange of title, and then later, the party who got false title, took the position they owned the land. Justice Dunphy found that the plaintiffs made substantial capital expenditures on the property, satisfying the lasting improvements requirement. The court found that the fairest resolution was to provide for title transfer, subject to compensation. The court stated at para. 115:

In the circumstances I find that is just and equitable to exercise my discretion to grant title to the plaintiffs. The plaintiffs cannot pick up a house that they have decorated and improved to their own personal style and taste in the mistaken belief that it was theirs. They have incurred substantial costs, including a great deal of their own labour which cannot be recovered by a simple economic analysis of the improvements in the value of the house.

The case was appealed to the Court of Appeal, 2016 ONCA 762, which upheld the findings of the judge based on fraud and oral trust issues and expressly said it was not offering any opinion on whether relief could be granted under s. 37.

e. Valery Construction Limited v Battilana et al. (January 26, 2018), Central South Region, 17-62065 & 17-63775 & 17-63794 (Hamilton, Superior Court of Justice); affirmed, C. Valery Construction Limited v Battilana, 2018 ONCA 849 – The Respondents mistakenly encroached upon the Applicant’s property believing it to be their own. The encroachments included a portion of a fence, concrete surrounding an in-ground pool, and roughly half of a pool shed. The encroachments pre-dated the Respondents ownership. The Applicant acquiesced in delaying complaining about the encroachments. The Applicant argued that it required the encroached upon land to further develop its property. There was no showing of interference with the use and enjoyment. The cost of moving or removing the encroachments was estimated to be tens of thousands of dollars. The court found that the equities supported a transfer of the fenced land with compensation at fair market value. The court noted at page 15:

It is not a prerequisite to the exercise of Section 37(1) or the definition of “lasting improvement” that an entire structure be encroaching; part of a structure is sufficient.

This decision was upheld by the Court of Appeal.

f. Corkery v. Moffitt, 2022 ONSC 105– The previous owners of the Corkery property built a garage that encroached on the Moffitt property. Subsequently, the previous owners of the Corkery property sold property to the Moffitts and sold the adjoining lot to the Corkerys. Prior to the sales, the parties learned about the encroachment. It was agreed that the previous owners would rectify the situation by tearing down the part of the garage that encroached and relied on a stake which divided the lots to do so. At that point, all parties believed that the garage was no longer encroaching. Many years later, the Corkerys decided to sell and a survey showed the garage still encroached. For it to be torn down and rebuilt, it would cost nearly $120,000. The court listed a number of factors to consider when deciding whether a claimant is entitled to a lien or to retain property: see para. 29. The court found that the encroaching garage was a lasting improvement and that there was an honest belief in ownership of the property it sat on. Doyle J. characterized the garage as “of some permanence and not easily removable as demonstrated by the cost quoted for its removal”: para. 60. The Court acknowledged that the discretion to allow the Applicants to retain the land on paying compensation was not one to be lightly exercised. However, the balance of convenience or equities favoured the transfer of the land, given the length of time of the encroachment, the use being made of the space surrounding the encroached property, and the fact that there was no evidence of prejudice to the Respondents, such as their property being devalued if the land was transferred to the Applicants.

[107] Similar to the Working Rule cases, the s. 37 cases demonstrate the uniqueness of every fact scenario presented and how the courts have made decisions on a case-by-case basis.

Conclusion on Remedy in the Main Action

Conduct of the Third Parties

[108] In deciding the appropriate remedy, the Third Parties argued that their conduct should not be considered. The Plaintiffs, on the other hand, argued that this was an attempt to hide behind the Defendants, the Pennys, while seeking to minimize their own liability.

[109] There is no question that the Plaintiffs chose to frame this action as property owner against property owner. The Plaintiffs never sought to include any of the Third Parties. However, the Defendants commenced a third party claim shortly after the action began, and years before even defending this action. Frankly, it seems counter intuitive to suggest that the conduct of the Third Parties should not be considered at all in deciding to grant a remedy. Of course, it was the Third Parties who introduced s. 37 of the CLPA into this litigation, a key component of this Court’s consideration. It seems wrong that the Third Parties can seek the benefit of having s. 37 introduced into the main action, but then ask this Court to ignore their conduct when deciding whether or not to grant the s. 37 remedy that they introduced. It seems equally wrong that the Defendants seek to rely on a concept introduced into this litigation by the Third Parties, but then ask this Court to consider the oppression brought upon them, while ignoring the fact that indemnity may be available.

[110] Whether considering the Working Rule, s. 37 of CLPA, or some combination of the two, the court is using its discretionary power in the context of equities. Equitable remedies are grounded in a consideration of the entirety of the circumstances and a determination of that which is most fair and just.

[111] On February 15, 2022, this Court held that the Main Action and the Third Party Action would be heard at the same time and the trial commenced. In deciding to consolidate the action, this Court held that:

a. The Defendants’ narrative clearly, even in the main action, is one that directly engages the Third Parties in all aspects.

b. Setting aside the liability issues, given the admitted trespass, the remaining issues in each action are undeniably interwoven.

c. Equitable relief requires a careful and global consideration of the circumstances that takes into account all of the remedial options available to the court.

d. Determining an appropriate remedy in this case, while proceeding with two separate actions, would require an extremely fine parsing of the issues that is not possible or reasonable, and could risk inconsistent findings based on the separation of the evidence. The court must be able to assess the criteria for advancing equitable relief with full knowledge of the circumstances. The court must know the options available and the cost of those options in order to do this analysis responsibly.

[112] The Defendants argued that the equities are between the Plaintiffs, Peter Armstrong and Shelley Martin, and the Defendants, George and Janet Penny. This Court agrees with this statement. However, it does not follow that there is no rational basis to consider the fact that there are Third Parties involved in this litigation and that they did certain things which are not in dispute. This Court does not need to determine whether or not they were negligent in order to consider their behaviour. This Court agrees that pre-supposing negligence on the part of the Third Parties would be improper at this stage. This Court agrees that pre-supposing indemnity would be improper at this stage, as ordering indemnity and receiving indemnity are two different things. This Court is cognizant of the evidence from Paul Pankhurst that Coachlamp has been dissolved, and that he sold his company name to another. However, the reality is that the Defendants, George and Janet Penny, did not physically build this home and garage. Coachlamp built the home. The Defendants, George and Janet Penny, did not survey any property lines. CFC was requested to survey a limit and did survey a limit. The Defendants, George and Janet Penny, did not issue a building permit. The Township of Fenelon received an application from Paul Pankhurst and ultimately issued a building permit. This narrative cannot be ignored in balancing the equities. While a guarantee of indemnification may be an improper consideration, the option of indemnification cannot be ignored. This Court does not agree that consideration of the actions of the Third Parties and the option of indemnification would lead to the Defendants being harmed twice.

Interaction Between the Working Rule and s. 37 of the [CLPA](https://www.canlii.org/en/on/laws/stat/rso-1990-c-c34/latest/rso-1990-c-c34.html)

[113] The Plaintiffs argued that this Court will need to address how the Working Rule interacts with s. 37 of the CLPA, and claimed that these principles work together in the case of trespass, in that both must be considered and applied. Therefore, the Plaintiff argued, in order to use s. 37 of the CLPA, the court must find that the Working Rule test has been met.

[114] There would appear to be no support for the proposition that the Working Rule needs to be met before turning to s. 37 of the CLPA. Quite frankly, the Working Rule is not a rigid rule, but merely a well-established guide for the court in exercising its discretion. It is of note that in all the cases provided to this Court where s. 37 has been considered and applied in this context, none of those cases suggest that the court must consider the Working Rule test as well as the test under s. 37. The s. 37 cases do not mention the Working Rule.

Remedy Ordered

[115] This Court accepts that it is very harsh for an owner of land to be forcibly compelled to sell land that they have no desire or wish to sell – this amounts to a private expropriation. This Court also accepts that it is very harsh for a homeowner, who did nothing wrong, to be forced to tear down a significant portion of their structure. Whether applying the Working Rule, s. 37 of the CLPA, or some combination of the two, it is the view of this Court that a just result is one in which the garage remains where it is and has been for many years. This Court understands the seriousness of taking one person’s land, no matter the size and location, and giving it to another, even in exchange for considerable value. However, the entirety of the circumstances here must be considered. This is the correct result in this case for the following reasons:

a. Certainly, the impact on the Plaintiffs’ legal right to use and enjoy their property as they wish cannot be ignored and has been seriously considered by this Court. For example, Mr. Armstrong made the following comments during his testimony about this property:

i. “…one of the things we loved about it was the privacy and the width of the lot was really, really important to us. And our general objective also was to make the lot as wide as possible.”

ii. “…we really wanted to make sure we had as large a footprint as we could to build.”

iii. “…I do love the outdoors. We use it very, very actively.” “…I love the outdoors and the space and the room of it…and the distance from the road and other things.”

iv. He explained using the area around the cottage for parking, entertaining, sports, and spending time with the dog.

v. “…we were so pleased to have the extra land, it was really you know valuable to us around the points on the property where we have it, particularly sort of that corridor… that is sort of shoreline development at the bottom, where you tend to put your cottages and other things.”

vi. At the time of the purchase of the lot, Mr. Armstrong successfully negotiated buying additional lands from the seller, Gary Sorichetti, which he referred to as the extra space near the deck on the northern side of the lot and further “extra” land, both of which are shown as severed in the plan of survey exhibit 31.

vii. He expressed his disappointment that the survey plans lack perspective on how close everything actually is on the ground and the sheer size and location of the encroachment, describing it as a “short baseball throw from the garage, which is jutting out into the property.”

viii. “It's right in the zone that we certainly would plan to build, and within range of that …I would expect anybody coming in to develop this lot…this isn't something that's at the top of the lot in a field where there is an encroachment of 35.26 with a set back on top of that, in a place that it doesn't matter. It really matters here, it really matters to me.”

ix. “… the proposed dwelling will be close to … Mrs. Penny's garage and closer to the southern lot line by virtue of the fact that we're centering it, as somebody developing the property would want to do…one of the practical aspects of this is we're going to have to remove trees, particularly behind the cottage for the….new driveway when we develop it.”

x. Mr. Armstrong had concerns with the aesthetics of the lot, “having this jut coming in to what are otherwise ….relatively straight lines and the impact of that on the property”.

xi. The encroachment also limits their use of the wooded area behind their existing cottage, which will become increasingly important as they move their new cottage further towards the lake.

b. Having fully considered all aspects of the evidence, however, the injury to the Plaintiffs' legal rights is small, given the circumstances of this case, including:

i. The size of the land on which the Penny’s garage and house currently stands, and which it is suggested would be necessary for it to remain where it is (as outlined in Graphic B), totals 346.1 m², which is a small percentage of the Plaintiffs' total property. Having said that, this Court accepts that the size of the injury to the Plaintiffs’ legal rights is not measured in square metres or feet. The fact that the Plaintiffs' appraisal expert, Peter McLean, described a larger portion of land he valued as a "small sliver of land", is of little to no value to this Court in determining the size of the injury to the Plaintiff’s legal rights.

ii. The Penny home and garage were in their current position when the Plaintiffs purchased the property. Peter Armstrong testified that the main reason he and Shelley Martin purchased their property was because they “loved the property”. He stated, “I love the cottage…my wife and I both love the lake”, and he appreciated that it “had a lot of mature trees further up the lot”, combined with the fact that there was a “good amount of privacy to the road”. Mr. Armstrong described that it was “poorly maintained” when they purchased it, but it was their intention to “hold it and likely to eventually rebuild”. Mr. Armstrong stated that they liked the fact that it was “sizable”, with “3.25 acres”. He stated that he had spotted this area from his boat for many years and “when it came up for sale they were really taken by the place and really wanted to get it”. This is, of course, Mr. Armstrong’s description of the property at a time when the Penny home was already situated in exactly the same place as it is today. In other words, Mr. Armstrong’s perspective of his property, before he knew that the property line ran through the Penny’s garage and home, was very positive indeed. There is no difference between then and now aesthetically. Peter Armstrong and Shelley Martin envisioned their plans for a future build with the Penny home exactly where it currently sits. At the time of purchase, it was potential proximity of neighbours to the north, not the south that concerned Mr. Armstrong.

iii. This Court accepts that the encroachment is not “land on the fringe”, but rather, land in the middle of the property. Having said that, the Plaintiffs will still be able to build their proposed new cottage exactly where they want to build and exactly how they want to build it, with the Penny home and garage remaining. During trial, Christopher Musclow, qualified to give expert evidence as an Ontario Land Surveyor, provided input into the location of the Plaintiffs’ proposed new home. He agreed that the proposed new home would have a sufficient setback with the Penny home and garage remaining in its current location.

iv. This Court is not satisfied that severance in accordance with Graphic B (Exhibit 3) will diminish the value of the remaining property in any way, other than simply reducing its size, which the Defendants will be required to pay for. The evidence, including the expert evidence, has simply not demonstrated this to be the case. While Peter McLean stated that, esthetically, it would be more pleasing to a purchaser, seller, or occupant to have smooth lot lines, this does not assist this Court with any impact to the value of the remaining property.

v. The Plaintiff argued that Janet Penny’s home, as it is, interferes with their use, yet, on demolishing and rebuilding the garage, the Plaintiffs are suggesting more land be transferred to Janet Penny than what she is asking for if the garage remains (377.7 m² versus 346.1 m²). This would reduce the setbacks of their proposed new house from the boundary with the Penny property. The Defendants only want enough land to leave the house and garage where it is – nothing more. It must be remembered that boundary lines are imaginary. They do not impact aesthetics, but rather use. The smaller the severance, the greater the land available for the Plaintiffs to use and create privacy if they wish.

vi. The Plaintiffs have very specific wishes as to the placement of their new cottage in relation to their property and the waterfront. They are perfectly entitled to make these choices and to have their preferences turned into reality. However, the reality is that Mr. Armstrong intends to place his new home as close as possible to the Penny home, removing further trees between the properties as depicted in the photos. Surveyor Chris Musclow provided Mr. Armstrong with a sketch for the positioning of his proposed new home, with the following comment: "I centered the house ‘more’ in the middle, but did not go to the exact middle - as I recall that you still wanted to retain some privacy from the property to the south. Thus, I figured you would want some bush still left standing." In response, on September 13, 2020, Mr. Armstrong requested that the proposed building be "shifted a little further south". On Mr. Armstrong's instructions, Mr. Musclow moved the proposed building “about 35% more south” - well into the current bush which exists on the property. This is not consistent with someone who wants to be further apart from his neighbours to have more privacy.

vii. Any significant concern about privacy to the north, or narrowness of the property to the north, ignores the reality that the Plaintiff, Shelley Martin, owns the property immediately to the north, which is a larger piece of property, having 201 ft of waterfront. This Court does accept, however, that Shelley Martin may want to sell her land at some point.

viii. The reality is that whether the Penny garage stays, goes, or is reconfigured, the Penny home is not going anywhere. Even though there is a small encroachment caused by the corner of the house, no one is suggesting that this creates any problem. Therefore, the southwest corner of the Armstrong/Martin home will be 17.71 m away from the northeast corner of the Penny home. This is the closest point between the two homes no matter what happens. Laurie Young, called by the Plaintiffs, testified that there was no privacy difference between leaving the garage or swinging it in, as long as there were no windows on the back.

ix. Mr. Armstrong talked about intending “to build a thick corridor of trees that run straight back so we have sort of that space behind the cottage but we have a good level of privacy with Mrs. Penny and her family”, however, Mr. Armstrong has only “planted a few spruces” that are not “solid” over the past 20 years.

c. The Plaintiffs’ injury can be estimated in money. The land at issue has been appraised by two experts, Peter McLean and Ward Lansink, thereby demonstrating that the injury, the loss to the Plaintiffs, can be readily estimated in money. The Plaintiffs’ argued that the injury cannot be estimated, as the fair value of the land does not provide a true measure of the qualitative loss suffered to the Plaintiffs’ use and enjoyment of their lands. If this were true on these facts, land could never be valued. This cannot be the case. It is the view of this Court that this is not a unique case where the land is essential for a specific use that provides it with a qualitative identity that supersedes any monetary benefit that can be obtained from the forced sale of the land.

d. The Plaintiffs’ injury is one which can be adequately compensated by a relatively small money payment. The Defendants acknowledged that they only require enough land for their home to remain with appropriate setbacks – no more, no less. There is absolutely no reason to transfer any more than is absolutely necessary – not even a square inch. As already stated, lot lines are imaginary. Given the relatively small amount of land this would require, its position on the Plaintiffs property, the treed composition of the area in question, and the fact that the Plaintiffs can still construct the cottage they desire if the home and garage is left as is, money is an adequate remedy.

e. Granting an injunction would be oppressive to the Defendants:

i. It would be oppressive to the Defendants to move their house/garage, a residence that has now been there for more than twenty years. Janet Penny and her husband built their retirement home. They spent a lot of time designing it. They have created numerous memories in this home. While this Court accepts that no party is suggesting that any portion of the house be torn down, tearing down and repositioning the garage certainly changes the character of the residence. Even if this Court accepts that Janet Penny could not point to any “shortcomings” with the RWH proposal, there is no question that this is not the house of her choosing. The house of her choosing is the one that already exists.

ii. Mrs. Penny made it clear that she does not want to experience a major renovation. The rebuild option would most certainly be a significant inconvenience to Mrs. Penny. Having said that, this Court cannot order Mrs. Penny to rebuild and therefore cannot really take that into account. However, this Court can order the garage to be demolished and this would most certainly be oppressive.

iii. The fact that Mrs. Penny has a second home that she could go to certainly diminishes the inconvenience caused by having to be out of the Long Beach home during renovations, however, it does not change the overall impact of having to reconstruct this home.

iv. Mr. Armstrong acknowledged during his testimony the impact this would have on Mrs. Penny. When it was suggested to Mr. Armstrong that Mrs. Penny has a substantial connection to the home, he stated, “I know she does, she uses her property regularly and … I know having known her for probably 25 years … the Pennys … were acquaintances or friends of my family, I know that they were excited about the home ….I can only see that it would be distressing to anyone to have to remove your home.”

v. Ryan Hayter testified that demolishing and rebuilding the garage would have cost $263,519.11 in 2016 but would now cost between $395,000 - $790,000. Joe Crowley testified that the work would take 4 - 5 months to complete with workers on-site for 8 - 10 hours per day, including a period when Mrs. Penny would likely need to move out of the home. The design proposed by the Plaintiffs' expert, Laurie Young, would also result in the loss of 200 ft²of space.

f. Demolishing and rebuilding, in any way, will greatly exceed the value of any property to be severed. This Court accepts that there is no evidence that Janet Penny will be unable to pay. Further, in this case, the Defendants are seeking full indemnity from the Third Parties. Even if indemnity is to occur, however, it does not change the startling difference in cost. Cost is of course only one of many factors to be considered.

g. If one compares the equities as between the Defendants and Plaintiffs, on the one hand, Mrs. Penny would have her entire garage removed and be faced with redesigning the garage as it relates to the house that she and her husband carefully designed. Mrs. Penny did absolutely nothing wrong, yet she will need to endure the stress and inconvenience of this process. On the other hand, the Plaintiffs knew where the Penny home and garage was located. When they purchased the property they loved, they never expected to use this piece of land. They have never had the use of this piece of land. It is no more oppressive now than when they bought the property. They are in the same position. Therefore, Mrs. Penny would have her life upended, while the Plaintiffs will end up with more land than they ever thought they had.

h. The Defendants carry no fault in this matter. They hired an experienced builder to carry out this project. There is no negligence or contributory negligence on the part of the Defendants, in fact, such a claim is no longer being pursued.

i. The Defendants genuinely believed their house was on their property. Even if not required, the reasonableness of the Defendants belief is obvious. Janet Penny never intended to build on the Plaintiff’s property. She believed her house was built entirely on her property and had no reason to believe otherwise. She understood that Coachlamp had taken steps to determine the proper location of their home within the boundaries of their property. They moved into the home at the end of 1998. It was not until 2003 that she knew otherwise. The totality of the evidence leads to only one reasonable conclusion – the Defendants honestly and reasonably believed their house was built entirely on their property and not on the Plaintiffs’ property.

j. The Defendants have treated the area in question as their own since 1998, planting trees after construction and mowing the grass, and even after 2003 when the encroachment was discovered, they continued to maintain and use the area.

k. The Defendants’ garage and home are a “lasting improvement”. This house, with attached garage, was custom-built in 1998, at a cost of nearly $300,000, and has been in continuous use since its completion around Christmas 1998. There is nothing temporary or transient about the structure. Mrs. Penny testified about the uses to which the three-car garage is put, which included parking cars, a tractor, boats, and Seadoos. The garage has a fourth rear access door. The garage is also connected to the house by an interior door allowing access between the two spaces without going outside. While it is certainly possible for the garage to be removed from the house and relocated, the garage and house are certainly permanent fixtures which are not easily removable. Clearly an attached garage and a part of a house are “lasting improvements”.

l. It is not necessary that the entire structure of the lasting improvement be encroaching, rather it is sufficient that part of the structure encroaches on another’s land.

m. As previously mentioned, the costs associated with demolishing and rebuilding any part of the Defendants home was estimated in 2016 as being $263,519.11 and will be significantly more today. The cost will well exceed the cost of the original build. This is significant and unreasonable in the circumstances, when another remedy exists.

n. It is true that the Defendants are seeking indemnification, and therefore, there may be no cost to Mrs. Penny. This is one of many factors to consider.

o. The Plaintiffs had an opportunity to discover the encroachment when they bought their property but failed to do so, such as with a building locate survey. When considering the equities between the owner and the person making the improvements, it is necessary to consider the actions of the Plaintiffs when purchasing the subject property, including:

i. The Penny home and garage were located in their current position, and very visible, when the Plaintiffs chose to purchase their property in 2002. The Plaintiffs could not possibly have assumed that the property upon which the Penny garage sat belonged to them.

ii. The Plaintiffs purchased their property without knowing for certain where the south boundary of the property was located.

iii. The Agreement of Purchase and Sale permitted the Plaintiffs to have an inspection of the property done by a third party, but the Plaintiffs chose not to do so.

iv. According to Mr. Armstrong he relied on an undated survey provided by the listing agents, which did not locate any buildings on the land.

v. The Seller Property Information Statement indicated that there was "a plan of survey showing current location of all buildings, improvements, easements, encroachments and rights of way." Despite this reference to a building location survey, Mr. Armstrong did not know whether he ever asked his lawyer or real estate agent about a survey that included buildings. He stated, “I don’t know that we discussed a survey that included all buildings. We discussed a survey.”

vi. On June 25, 2002, Peter Armstrong sent correspondence to his lawyer with the subject line “Discrepancy?”. He had become aware of documents relating to the prior severance of the property which showed it having a size of 2.55 acres, while the listing document suggested it to be 3.25 acres. Mr. Armstrong believed it to be a reasonable conclusion that the discrepancy was because the planning department report had straight lines and the survey had the boundary lines get wider around the cottage. Mr. Armstrong took no steps to independently verify conclusions reached in discussions with his counsel.

vii. Included in the package of documents provided to Mr. Armstrong before closing was a letter dated May 3, 1999, from the Pennys to the County of Victoria Planning Department, where they expressed their concerns about the location of the boundary line: “We believe that the markers that have been set into the ground marking the property to be severed are in fact on our property.” Mr. Armstrong could have inquired with the Pennys about their concern but chose not to.

viii. The mortgage terms for the purchase of the property required the Plaintiffs to “provide a Plan of Survey or Surveyor’s Certificate signed by a qualified land surveyor showing the size of the lot and location of the buildings on the land.” The mortgage approval is signed by the Plaintiffs.

ix. In a reporting letter from their lawyer, Mr. Evans, dated August 29, 2002, Mr. Evans advised the Plaintiffs that they had "acquired a good and marketable title to the lands described in your transfer deed of land which has been registered in the Land Registry Office, subject only to the following exceptions." One of the exceptions listed was "[a]ny defects or discrepancies which would have been otherwise revealed by an up-to-date building location survey." The Plaintiffs’ claim of reasonable reliance on their lawyer is undermined by this caution provided by the lawyer.

No survey was ever obtained confirming the location of the buildings on the land prior to closing.

p. A party purchasing land is expected to conduct due diligence prior to closing, which would include a title search as well as obtaining and reviewing a survey of the parcel of land: see Metcalfe v. South Bruce (Municipality), 2004 CanLII 48887 (ON SC), [2004] O.T.C. 1160, at para. 10 (Ont. S.C.); see also Holmes v Walker (1997), 1997 CanLII 12293 (ON SC), 35 O.R. (3d) 699 (S.C.). It is clear that the actions of Peter Armstrong or Shelley Martin did not in any way contribute to the encroachment that occurred. They did not own the property at the time of the build, had nothing to do with what occurred, or any ability to stop it from happening. However, this is certainly relevant when considering how important boundary lines were, or are, to them, and therefore relevant in considering the equities of the parties.

[116] Whether the Working Rule is applied, or s. 37 of the CLPA is applied, or even all of these factors in combination, an injunction requiring the removal of the Penny garage is inappropriate. The equities favour the home and garage staying where it is, with severance of the minimal amount of property to allow for the building to remain with proper setbacks. Mrs. Penny will be required to purchase this severed piece of property at a value to be determined below.

[117] In coming to this conclusion, this Court has not given any consideration to reducing potential damages for the Third Parties. At this stage of the analysis, there has been no consideration of advantage or disadvantage to the Third Parties resulting from this remedy.

[118] This decision is not made lightly and must not be taken as condoning trespass. This decision is only reached after careful consideration of the entirety of the circumstances, including the conduct of, and impact to, the parties. Granting an injunction, requiring the Defendants, completely innocent parties, to tear down their attached garage that has stood for nearly 25 years would be oppressive on the Defendants, in circumstances where the injury to the Plaintiffs’ legal rights is small. The Plaintiffs purchased this property, knowledgeable of their future plans, with the Penny home and garage exactly where it is. The Plaintiffs made their purchase with no expectation that they would ever be able to use this land upon which the Penny home encroaches. This result is in line with the above caselaw. This seems to be the exact case that the Working Rule and s. 37 may have contemplated. In weighing the equities between the Plaintiffs and Defendants, it is most just to transfer the minimum amount of required land to the Defendants. The Defendants have met their burden.

Valuation of the Land

[119] In order to determine the appropriate value of the land to be severed, this Court has carefully reviewed the evidence of the two appraisers, Peter McLean and Ward Lansink. It is necessary to summarize their evidence in order to provide the basis for this Court’s ultimate valuation.

Peter McLean

[120] Peter McLean is a designated member of the Appraisal Institute of Canada. He is not a surveyor. He began working as an appraiser in 1990. Since 1998, he has been operating his own business, of which he is president and founding partner. He received his designation in 2008 as an Accredited Appraiser with the Canadian Institute. He was president of the Appraisal Institute of Canada for one year approximately two years prior to his testimony. He has lived and worked in the Peterborough area since 1990. Mr. McLean described his practice as an appraiser over the past 10 or 15 years as specializing or focusing on commercial property, although his firm also does appraisals of single-family dwellings for matrimonial purposes, and retrospective values for the CRA. Mr. McLean explained that he does have experience doing appraisals in cottage country, and that his firm “do more and more it seems, cottages, where the owners have passed away and there’s capital gains so they have to be done for the….Canadian Revenue Agency.” He explained that his firm also does appraisals of new cottages as well. Mr. McLean was ultimately qualified, on consent, as a duly accredited appraiser, qualified to provide opinion evidence with respect to the valuation of residential waterfront properties in the Kawartha Lakes Region of Ontario.

[121] Mr. McLean prepared two reports in relation to this matter: an original report in March 2018 and an update to his original report dated February 7, 2022. He also provided some commentary and remarks on January 7, 2021, regarding the market and some opinions on Ward Lansink’s report.

[122] Mr. McLean explained that his February 2022 report was prepared as there had been movement in the real estate market regarding waterfront properties, as in the values and sale prices had gone up substantially. Therefore, he thought it was worthwhile to re-visit valuation to see whether or not there had been an increase in the value determined in the 2018 report.

[123] Mr. McLean was taken through his original March 2018 report. He testified:

For this particular appraisal I was working towards a current value, a value of a portion of the land that was being - or my job was to determine what that small parcel of land was worth, knowing that it is not a current market value because it is not the type of property that could be put on the MLS system, which is the Multiple Listing Service from the Real Estate Boards, it has a very - there is not a general willing buyer or willing seller. So it's, it's to estimate a current value of that parcel alone that can't be accessed because it's not on a road, not on a waterfront. So it is very limited in its use.

He confirmed that he was not attempting to establish or consider a current market value in these circumstances. He also confirmed that he was attempting to establish if there was any damage or diminution in value of the property at 582 Long Beach Road due to the encroachment of the garage. Mr. McLean explained that the property of 582 Long Beach Road was very rectangular, as in straight lot lines. As for whether shape and configurations were relevant to his assessment of values, Mr. McLean stated:

I would say that configuration and shape of lots is probably important in any evaluation, it is not just subject to this particular one. If you have a nice square lot with a nice square frontage on the road or on the lake, it's better than something that is very irregular.

Just the sketch shows the irregular shape of the garage and if kept the lot lines straight, more of a - so maintained its rectangular shape rather than an irregular lot line to one side, esthetically it would be more pleasing to a purchaser or seller, or occupant.

[124] According to Mr. McLean, the property of 582 Long Beach Road “may take longer to be marketed if the encroachment or the garage is on that piece of land”. He explained that “it may have a negative effect on exposing the property to the market” and “the reasonable appraiser test would indicate that that probably would hinder the marketability of the property, which would affect the exposure time.”

[125] As part of his work leading up to the March 2018 report, Mr. McLean drove in the driveway of 582 Long Beach Road and took some photographs. He briefly got out of the car and looked around a “little bit”. He did not enter any buildings. He took notice of the area, including the waterfront and the lake. He estimated the highest and best use of the property, and then developed an approach to value to focus on sales in the City of Kawartha Lakes and did some analysis of the data. He determined the portion of land to be conveyed and estimated what it would be worth.

[126] When he updated the report for 2022, Mr. McLean found that the available data was limited. He stated:

I found when I updated this particular report there wasn't a lot of sales that were very current because our market has changed so much in the last two to three years. So I used some statistics to analyze the difference of the previous value to today's value…

[127] Mr. McLean prepared a concise narrative report. When asked how long a report might remain valid to the court, he stated:

Typically anything that is older than six months in an active market, would have to be updated and may not be relied upon in its entirety. Now there's always exceptions and it also depends on the type of market that you are appraising the property in.

[128] As for the market at the time of his testimony, Mr. McLean testified that values had “gone up everywhere in Ontario and certain product are selling at two times, three times the listing prices…” He stated:

Yes, like single family dwellings within the City of Peterborough, waterfront it seems - I have heard agents tell me that they've had clients buy waterfront sight unseen. There has been large increases in waterfront properties since the pandemic, that seems to have changed the market. There's no - there is just not one thing I guess that is dictating what the market is doing. It's a combination of a number of things, portability of mortgage money, the pandemic itself where people have more free time or maybe have decided that they are going to make this big purchase because of it. I don't know. I can't narrow it down to just one thing.

[129] The concept of highest and best use of a property was described by Mr. McLean in the following terms:

The highest and best use of a property is primarily - is it legal under the zoning or the Official Plan. Can they continue to use the determined and longevity of the use of the property? Based on the zoning, being a rural residential and the Official Plan being waterfront, it's a legal use. It's been that use for a number of years. The area is also of similar type properties and uses so that is what we determined would be the highest and best use on that zoning.

[130] Considering both properties, 582 and 570 Long Beach Road, Mr. McLean concluded that the highest and best use of these properties is either a single-family dwelling or a seasonal residential dwelling.

[131] Mr. McLean concluded that “a portion of the land that is improved – the garage, would be best assembled with the land to the 570 Long Beach Road.” Using the direct comparison approach, he attempted to find as many comparable sales as he could, considering characteristics such as waterfront with road access, the amount of water frontage, the number of feet, the characteristics of the lake or river, whether services were available, and the location. He stated that these factors were taken into account and he would try to find the most similar to the subject properties and then make adjustments where necessary. The fewer adjustments to be made, the better the comparable.

[132] In determining a value, Mr. McLean first valued the land as a whole, using the direct comparison approach with comparable sales, and then the 4-3-2-1 method was used to determine the value of a portion of the land. As for comparable sales, Mr. McLean testified that he “didn’t really recognize any true comparable sales”. He explained that he could have chosen to gather sales in different areas but that they do not have a scientific formula to determine the differences found in each of the comparables for them to be very reliable. Mr. McLean explained the typical uniqueness of rural waterfront properties and the adjustments required. He stated, “There is no perfect solution, it is subjective and I try to eliminate any doubt in the adjustments, so that’s why I chose to use a statistical analysis based on waterfront sales.” Mr. McLean explained that the largest reliance in doing an appraisal would be the market results from the Multiple Listing Service (“MLS”).

[133] In reviewing the data from MLS to prepare his 2022 update, Mr. McLean searched waterfront lands for the previous three or four years and found some but not many comparable or recent sales. He stated, “I didn’t have the same quality of sales this time around.” Mr. McLean explained that he chose not to use older sales because of the significant changes in pricing in the previous few years in the Peterborough and Lindsay area, in that there was low inventory, increase in demand, and it had driven the price up.

[134] Mr. McLean admitted that, in 2018, he was more comfortable with the value he arrived at for the property. He valued the land using the direct comparison approach and at that time there were some available sales for which he made adjustments. In 2022, because of the lack of recent comparable sales in the close proximity of the subject property, he chose percentages that were published through the Real Estate Board of the City of Kawartha Lakes. According to this data, from November 2018 to November 2021, there was an average sales price increase of 126% in relation to waterfront properties. From March 2018 to January 2022, using approximately 400 waterfront sales in the City of Kawartha Lakes, the median sale price increased by 119% for waterfront properties. He agreed that he did not know any of the characteristics of the properties. Having said that, Mr. McLean acknowledged that “the reliability of this approach may be limited in a rapidly changing economic and/or legislative environment where an appraiser may have limited evidence upon which to base adjustments.” He stated that this observation was more relevant to the update in 2022 as there was less reliability on direct comparables.

[135] As for adjustments using the direct comparison approach, Mr. McLean explained that adjustments are both quantitative and qualitative. A time adjustment is a quantitative adjustment, whereas physical characteristics of the property are qualitative adjustments. Mr. McLean conceded, “It’s not an exact science.” In relation to his conclusions in March 2018, Mr. McLean made qualitative adjustments, however, when he did the updated assessment in February 2022, he made quantitative adjustments, due to the lack of comparable sales that would allow him to do a qualitative adjustment on each one.

[136] In his search for comparables, Mr. McLean looked for sales on other lakes but his concentration was on Sturgeon Lake. Having said that, he did search for comparables on Pigeon Lake, Sturgeon Lake, and Balsam Lake. Mr. McLean felt that there was a good selection of sales for comparison in 2018. In cross-examination, Mr. McLean claimed that he considered the nine characteristics listed in his report, but conceded that he did not show that analysis in his report. Mr. McLean agreed that in his 2018 report, he did not include a copy of the MLS listings for comparable properties he identified. However, Mr. McLean was cross-examined on some of the comparables he used. It was demonstrated that one of the comparables was in fact a property north of Parry Sound on a different Pigeon Lake, not in the City of Kawartha Lakes. Mr. McLean agreed that this would not be an appropriate comparable.

[137] Ultimately, Mr. McLean determined that the adjusted range for the subject property, 582 Long Beach Road, was $6 to $10 per ft², which he opined was a reasonable range of values for the property based on the size and location. Mr. McLean noted, “so that's the small portion of land that is not large enough to build on so someone…would pay considerably less…because of the marketability of that and also the use. You can't build on it, you can't get to it. It certainly would decrease the value.” He agreed that he made an adjustment to his assessment of value based on the fact that this parcel, on its own, was not developable. As for valuing the land as a whole, Mr. McLean stated, “The land as at vacant, like probably in the range of $10 a square foot…based on the characteristics of the subject property at that time.” Based on the square footage of the total land, 130,975 ft², this would make a valuation of over $1.3 million. Mr. McLean agreed that none of the comparable sales in 2018 came even close to this amount, rather the highest sale price was $359,000.

[138] As for the potential parcel to be severed and added to 570 Long Beach Road, Mr. McLean agreed that he provided a proposed drawing of what he recommended and included that in his report.

The proposed new lot line was 16 m from the existing lot line. As to the reason he provided this proposed drawing, he stated:

I got a copy of the survey sent to me early on, which described where the three car garage was encroaching on the subject property and I mentioned earlier in my testimony that regular lot lines, regular depths, side yards are attractive. They - visibly they are very attractive. You can put fences up without worrying about ins and outs. It could be a cedar hedge. And it looks very nice. That's why I went from the one iron bar down through and made it kind of a regular shaped lot and would allow, you know, further enhancement of landscaping or whatever that whoever decides to continue.

[139] Mr. McLean stated that this is what he thought would be reasonable. This is in line with what has been captured in Graphic F, however, in cross-examination, it was made clear that this drawing is not exactly in line with any of the graphics that were marked as Exhibits. It was closest to Graphic F, however, even Graphic F was a smaller portion to be severed. He further stated, “So rather than making it close, like a close up line I felt it was reasonable to increase the lot line to change the lot line to a linear kind of design to increase the side yards and increase privacy and be esthetically pleasing to both parties.” In cross-examination, Mr. McLean clarified that he received this diagram from original counsel for the Plaintiffs. Mr. McLean agreed that he is not a surveyor, but that he drew the red line and the yellow shading. He agreed that there was no indication on the diagram as to the length of the red lines and explained that “I just scaled them off with a ruler. They are approximate”. Mr. McLean did not do any measurements at the property.

[140] In cross-examination, Mr. McLean agreed that he had not seen a survey exactly in line with his drawing of 15,500 ft² for the taking, but he stated, “that was my sketch and that’s what I assumed would be the taking.”

[141] Ultimately, Mr. McLean concluded that within that range of $6 to $10 per ft², he would use $6 per ft² to value the portion of the property to be severed in March 2018. As for updating this information for February 2022, Mr. McLean did not feel that there were any relevant comparables upon which to base a value. Therefore, he turned to the statistics from the City of Kawartha Lakes Realty Association and Canadian Real Estate Board. Finding the City of Kawartha Lakes statistics, using waterfront properties, the most reliable, he chose to apply them in order to increase the value from the 2018 number. He then simply applied a percentage to the $6 per ft² that he found as the value in his 2018 report. Ultimately, he used 125% for an increase from 2018 to 2022, therefore, increasing $6 per ft² to $13.50 per ft², and then rounded down to $13.00 per ft².

[142] In cross-examination, it was pointed out to Mr. McLean that one of the comparables, Evergreen Way, that he had considered for his 2018 report had actually resold in 2021, but that he had not considered it in his 2022 report. So even though he used this property as a comparable property for his 2018 appraisal, he did not use the July 2021 sale from the same property in his 2022 appraisal.

[143] Using these values, Mr. McLean then testified that he applied the “before and after method”, recognized by the Appraisal Institute and International Right of Way. In other words, as of March 6, 2018, the value estimate was determined for the whole parcel “as if vacant” and the portion of the Part was deducted to arrive at the value of the Part owned by 582 Long Beach Road. In other words, 582 Long Beach Road, land as if vacant, is 130,975 ft². At $6.00 per ft², the value would be $785,850 rounded to $785,000. The value of the part to be retained was 115,475 ft², and at $6.00 per ft², would be $692,850. Therefore, the value of the part to be conveyed is the difference between the whole and the part to be retained, which is approximately $92,000. In cross-examination, Mr. McLean agreed that none of the comparables he used in 2018 came close to $785,000, rather the most expensive sale was $359,000.

[144] Using the same method at $13.00 per ft², Mr. McLean valued the entire property at just over $1.7 million. Using the same approach as above, he reached a January 15, 2022 value of the portion to be taken as $200,000.

[145] Applying the 4-3-2-1 method to this analysis, Mr. McLean determined that the bulk of the parcel to be taken was in the first and second portion. Using the $13.00 per ft² that he reached from comparables, and adding the 125% for time adjustment, he determined that the value of the whole of the property, 130,975 ft², was $1,702,675. Breaking that whole square footage into four equal quadrants, and valuing the various parcels on the 4-3-2-1 method, would mean that the first and second quarters would be valued at $20.80 per ft² and $15.60 per ft² respectively, with an average of approximately $18.00 per ft². Applying that to the area to be taken, 15,500 ft², he valued the taking at $280,000 as at January 2022. Mr. McLean agreed that he did not consider the third quarter value when considering this approach, even though Graphic F and his own diagram went well into the third quarter. He agreed that if he considered the third quarter, the square foot price would have decreased to $15.60 rather than $18.00.

[146] Mr. McLean explained that he did not attribute any value to injurious affection. He stated, “based on my plan and the small sliver of land to take - there would not be any injurious affection.” He conceded that in coming to this conclusion he did not have any discussions with Peter Armstrong or Shelley Martin and did not undertake any investigation as to how the taking of the land might impact how the Armstrong/Martin family used the property. However, he stated, “Um, well that maybe goes back to my sketch on the survey, providing that line that I proposed, that it would have - like a regular lot line and setbacks that both property owners could enjoy the continued use.” He did not have any information about how the Armstrong/Martin family might develop the land in the future. As to how they were using it presently, he understood that they used it as a seasonal residence – a cottage. He confirmed that he did not apply any amount for injurious affection as he did not “think it was relevant”.

[147] Ultimately, as for a value in January 2022, Mr. McLean believed that the before and after and the summation methods were more reliable, and valued the property to be taken at $200,000.

[148] In commenting on the Lansink conclusions, Mr. McLean was asked whether he agreed with Mr. Lansink’s comment that a minimum incentive would be plus or minus 25 percent above value and the range of incentive would be 30 percent to 40 percent above value. Mr. McLean stated, “I think under a reasonable appraiser test, that may be the case because of the incentive from one party to another.”

[149] In determining a value for the property at 582 Long Beach Road, Mr. McLean did not consider that Ms. Martin purchased the 5.162-acre property immediately to the north of the subject property for $401,000. He stated that he was not aware of this fact.

[150] In cross-examination, Mr. McLean agreed that if his $6.00 per ft² value in 2018 was wrong, then his 2022 value would also be wrong. He stated, “If I was incorrect in 2018 it would be passed on.”

[151] In cross-examination, Mr. McLean agreed that, in fact, his use of 130,975 ft² as being the total land area for the property was incorrect. It should have been 164,221 ft². Therefore, his values would have actually been even higher. Using this square footage at $6.00 per ft², the value of the entire property, as a vacant lot, in 2018 would have been $985,327 and the value of the entire property at $13.00 per ft², as a vacant lot, in 2022 would have been over $2.1 million. Based on the error on the square footage, many of the calculations in the reports were incorrect, which Mr. McLean corrected in a revised table to his report. However, Mr. McLean indicated that his price per ft² would not change.

Ward Lansink

[152] Ward Lansink testified as an accredited real estate appraiser with the Appraisal Institute of Canada. He first began working in the appraisal industry as an appraiser assistant with Lansink and McIver from 1990 to 1997. He took some time away from the appraisal industry before returning to this work in 2003. He became a candidate member in 2003 with the Appraisal Institute of Canada and joined his father’s firm, Lansink Appraisals and Consulting in May 2003. It was a small appraisal firm in London, Ontario that did a variety of appraisal assignments ranging from residential, commercial, farm, agricultural, motels, and gas stations. During the time he was with his father’s firm, he took all the required educational courses to become an accredited member with the Appraisal Institute of Canada. He became accredited in August 2010. During his education he also achieved a diploma in Urban Land Economics. In 2011, he moved to gsi Real Estate & Planning Advisors, a small unique appraisal firm in Toronto, as a real estate appraiser, where he remained until October 2020. Mr. Lansink’s interests moved toward more of a litigation analyst type role. With gsi, his main focus was on expropriation-related matters, with his work balanced between working for property owners and government authorities. The work related to partial takings, such as road widening, and he worked specifically on the project involving the extension of Highway 407 East toward Peterborough. In October 2020, he moved into a director role at Altus Group Limited. Shortly before his testimony in this trial, he had moved to a new role at Robson Associates. However, his type of work as an appraiser has not changed. He had experience appraising residential properties, including rural residential properties and, more specifically, cottage properties.

[153] Ward Lansink was ultimately qualified as a duly-accredited appraiser, qualified to provide opinion evidence with respect to: 1) the evaluation of partial takings; and 2) the valuation of residential properties in Ontario.

[154] In relation to this litigation, Mr. Lansink authored an appraisal report and two consulting letters, including:

a. gsi Appraisal Report – October 30, 2017;

b. Letter dated May 4, 2021; and

c. Letter dated February 18, 2022.

[155] In his October 2017 report, he was asked to appraise a portion of 582 Long Beach Road, Kawartha Lakes. In order to do this work, he did not attend 582 Long Beach, but rather attended the Penny property, immediately to the south, 570 Long Beach Road. From that property, he was able to look across the property boundary to the north and also look at those lands in and around the Penny residence and the garage and other adjacent lands to the north.

[156] Mr. Lansink described the Armstrong property as a narrow, irregular-shaped site with a gross site area of approximately 3.77 acres. According to Mr. Lansink, it is irregular, in the sense that it was not uniform and not rectangular, however, the irregularity does not impact the highest and best use. Its MPAC assessed value on January 1, 2016 was $552,000. Mr. Lansink explained that the MPAC value is for property tax calculation and is assessed as a fully-improved parcel, but cautioned that it is not necessarily to provide a site-specific valuation, and “may not be construed as pure market value”. On the Official Plan, the Armstrong property is designated as waterfront, and will permit for a vacation dwelling, a permanent dwelling, a marina, a recreational vehicle park, a tourist resort, and a municipal park. Using specified criteria, Mr. Lansink determined that the highest and best use of the subject property, as vacant, was “development and construction of a residential dwelling used as legally permitted by land use controls”. As for the highest and best use of the property as improved, he determined that this would be “continuation of the existing dwelling used as legally permitted by land use controls”.

[157] In determining the value of vacant property, Mr. Lansink considered six different methods, but in this case, selected the Direct Comparison Approach. He explained that this method provides a basis for value through an analysis of sales of similar vacant parcels, adjusted to provide a value indication for the land being appraised. In other words, the appraiser goes to the marketplace, looks at what else has sold, and then adjusts, both quantitatively and qualitatively, for any differences between those sales and the subject property. As for comparable sales in this case, Mr. Lansink attempted to locate and analyze vacant land sales, with similar rural/waterfront residential land use potential, concentrating on parcels between 1-5 acres with sales occurring within the three or four years preceding the effective date. He also concentrated on comparable sales within close proximity to the subject property but did extend outward a bit to areas outside Kawartha Lakes, to ensure he was capturing the most suitable comparable. He ultimately considered six comparables in total but determined that the most comparable sales were only two, listed as Comparable Sale 1 and Comparable Sale 2 in his October report. After making what he determined to be relevant adjustments, he determined that the range of value was between $455,000 and $525,200, with an average of $490,100. Using this analysis, Mr. Lansink determined that the estimated market value of the subject property, as vacant, as at the effective date, was $520,000, representing the estimated market value for the entire Armstrong property, being the entire 3.77 acres, as vacant.

[158] After concluding a market value for the entire 3.77 acres, Mr. Lansink applied the 4-3-2-1 Rule. The 4-3-2-1 Rule consists of a depth adjustment that appraisers use when valuing vacant lots with the value of a vacant lot decreasing as depth increases. When applied to a parcel with water frontage, similar with the subject property, more of the value is applied along the water frontage, especially as the subject property is a long, deep linear property. With the total area of the property representing 100% of the value, 40% of the value is allocated to the first quarter closest to the waterfront, the second closest quarter being 30% of the value, the third closest quarter being 20% of the value, and the quarter furthest from the water at 10% of the value. In this case, Mr. Lansink stated that he decided how the property would be quartered up, which was not equal quarters, and, understanding where most of its use and utility is, allocated the majority of the value to the areas closest to the waterfront. In using this method, Mr. Lansink determined that the closest two quarters to the waterfront would be valued at $364,000 (70 percent of $520,000). Mr. Lansink also determined this amount to be reasonable when doing a “reconciliation check” with comparables 4, 5, and 6.

[159] As part of his work on this matter, Mr. Lansink was provided with a survey which has been depicted in Graphic B, referred to in his report as scenario 2. Mr. Lansink did not decide how this area was marked. The area was 348 m². According to Mr. Lansink, it is not within his expertise to determine what portion of a property ought to be severed, rather he is usually provided with a survey or other illustration to value. Using scenario 2, Mr. Lansink converted the 348 m² to acres, which was .086 acres. He determined that this .086 acres would sit in the first 70% of the value of the property. Mr. Lansink valued that first 70% at $364,000. Scenario 2 represents .086 acres, or 8.1 percent of that portion. Multiplying 8.1 percent by $364,000, it would round out to $29,500. The portion to be severed, as depicted in Scenario 2, was therefore valued at $29,500.

[160] Ward Lansink was cross-examined extensively on the comparables that he used and the adjustments that he made. Mr. Lansink agreed that the Armstrong property is in one of the ideal locations on Sturgeon Lake, one of the predominant lakes in the area, which is not weedy and has depth. During the examination, he produced his working file which showed more specific calculations that he had made. Mr. Lansink stated, “It is not necessarily exact science, and there is actually a… term out there that talks about…appraisal is the balance of…some art and some science. And so, especially with cottage properties that would occur.” Mr. Lansink was also cross-examined about errors that he made in his original report. For example, he agreed that up until 2021, he believed that the lakefront for the Armstrong/Martin property was 85 ft rather than the true waterfront of 133 ft.

[161] Mr. Lansink agreed that when he did the 4-3-2-1 calculation, he valued the first two portions closest to the waterfront as 70% of the value of the whole of the property at $364,000. Breaking that down into a value per ft², it would be $7.84 per ft². Mr. Lansink explained that, by undertaking this process of creating quadrants, and applying a higher percentage value to the first two quadrants, which includes the encroachment, it actually provides an increased value for the property to be taken, relative to if a quadrant analysis had not been performed. In other words, it fairly balances and considers the uses of the property, with the primary focus being that the usage of the water frontage would increase that value, and Mr. Lansink was giving fair credit to those who will lose the property.

[162] Further, Mr. Lansink was taken through his Excel worksheets. He outlined and acknowledged some errors that were made along the way, even errors with some adjustments. However, despite some clarifications he took the position that “the estimate of market value of portions of 582 Long Beach Road, Kawartha Lakes, in assemblage with 570 Long Beach Road, Kawartha Lakes, as at October 20, 2017, under ‘Scenario 1’ and ‘Scenario 2’ remains unchanged.” Mr. Lansink explained that he felt comfortable with that statement because nothing turned on the adjustments that were corrected. Nothing changed within his overall reconciliation. The reason for that was “because I relied on Sales 1 and 2 …as the two primary comparables to establish the final range of which I then opined within…” Mr. Lansink agreed that comparables 4, 5, and 6, which range in size from .6 of an acre to .8 of an acre, are understated because there had not been a site condition adjustment. The range without the site adjustment was between $359,000 and $506,000. It was suggested to Mr. Lansink that based on the information he provided, it would have been perfectly reasonable to put the value of the just over one acre of land in quarters 4 and 3, the 70 percent value, at something over $500,000. Mr. Lansink agreed that the value would “ebb and flow” within the range but felt his $364,000 valuation was supported. It was suggested to Mr. Lansink that, while there is not a known precise number, the value for the two quadrants closest to the waterfront, would clearly be higher than $364,000 as he had earlier concluded. Mr. Lansink stated:

If we were to do this more finite analysis, I would agree that it could be higher than 364. I am not going to suggest that it would be, you know, higher than the, the upper end of that range, which is where you earlier suggested that it was well in excess of 506, I believe you said. Maybe not the words, "in excess of" but it would sit somewhere within that, that range.

So, if we were to actually look more specifically at Raby's Shore and what adjustment may be specific to Raby's Shore, because that is the most relevant here because it's a less than one-acre site, sold right before the effective date, less than one acre. And then we are now really looking at the 359 and adjusting the 359 for that one site characteristic we have been discussing about the weeds, even if it is 10 percent we jump up to 400,000. Even if we jump up 20 percent we are at the 440. So…I will concede that but again, that would probably, now that we are going through this and we are openly discussing analysis, then that might be a realistic point of reconciliation for what the value of the subject property would be at a one-acre rate along its shoreline.

[163] In a letter dated May 4, 2021, Mr. Lansink applied Mr. McLean’s $6.00 per ft²valuation to Scenario 2. Mr. Lansink took the .086 acres and converted it to square feet, which totalled 3,745 ft². Calculating that at $6.00 per ft², the value of the parcel depicted in Scenario 2, using Mr. McLean’s square foot valuation, was $22,500 rounded up.

[164] In a letter dated February 9, 2022, Mr. Lansink applied Mr. McLean’s $13.00 per ft² valuation to Scenario 2. Mr. Lansink took the .086 acres and converted it to square feet, which totalled 3,745 ft². Calculating that at $13.00 per ft², the value of the parcel depicted in Scenario 2, using Mr. McLean’s square foot valuation, was $48,700 rounded up.

[165] Also, in February 2022, Mr. Lansink was asked to comment on Mr. McLean’s statement in his 2022 report that a search for comparable sales similar to the subject property were “less than optimal”. In order to comment on this, Mr. Lansink went to the marketplace to see if there were sales that he found comparable. He used the MLS System to identify any market findings between March 6, 2018 and January 15, 2022. He used the following criteria: property type, being land; status as closed (meaning sold); the relevant search dates; municipality and area, being Kawartha Lakes, Selwyn and Trent Lakes; waterfront; acreage range, being from .5 acres to 9.99 acres. This search provided 90 results, ranging from $49,000 to $1.35 million, with an average of $354,841 and a median of $355,000. He then removed the two highest, sales of $1.35 million and $1.1 million, and just looked at the 88 remaining results, leaving sale prices between $49,500 and $760,000, with an average of $335,065 and a median of $341,500. Mr. Lansink then further narrowed the search results to what he believed were closer comparables, based on similar body of water being Sturgeon, Pigeon and Balsam Lake. From this narrowing, he found 19 sales that happened on Sturgeon, Pigeon and Balsam Lake which ranged from $80,000 to $599,900, with an average of $327,463 and a median of $277,000. Mr. Lansink noted that the one comparable that Mr. McLean did say that he found, 29 Southside Road on Pigeon Lake, was included in those results. From the 19 results, Mr. Lansink read the MLS listings and determined that 11 “may be suitable” for comparability. Mr. Lansink admitted that he did not do any other due diligence on these properties, such as inspect them or get into the full details of these as ultimate comparables, for example, determining appropriate adjustments. For these 11 possible comparables, the highest sale price was $599,900, and the average sale price was $360,164. The average price per ft² for these properties was $9.60, with a median of $8.80 per ft². Just focusing in on the three properties on Sturgeon Lake, the average price per ft² was $8.20, with a median of $8.80.

[166] In cross-examination, Mr. Lansink was taken to some of the 19 properties that he found in his search. Upon closer examination, Mr. Lansink did agree that some of these properties would not be suitable for comparability. However, he was asked to comment on Mr. McLean’s statement that “A search for comparable sales similar to the subject property have been sought in the market with findings being less than optimal.” He stated that the intent of his response in February 2022, was “to say that, while these may not be perfect, while these may not be ultimately comparable, there are and have been some transactions between the two effective dates of Mr. McLean's work that could be a starting point for analysis. And again, I am not saying that these are perfect or ultimately comparable, but there is a good starting point, and if one were to complete further due diligence and research then maybe some of these would be the basis for comparability.” Mr. Lansink agreed, a number of times, that he did not take the steps to determine whether these were, in fact, proper comparables and, therefore, could not provide an opinion on whether there were, in fact, any properties that could be used for that purpose. However, Mr. Lansink questioned why Mr. McLean would not, at the very least, consider the re-sale of Evergreen Way as a suitable comparable given that he had considered that very same property in his 2018 report.

[167] Mr. Lansink acknowledged that the value of the portion of land in Scenario 2 that he determined in 2017, $29,500, was an estimate, and stated:

But it does represent, as I have mentioned here, a sterilized, compartmentalized value of the subject property. And it is assuming that the, the buyers are equally - or the parties are equally motivated, so you have got a willing buyer/willing seller, and I have referred back to that definition of market value. And so, it meets that test. It is reasonable and appropriate to make that assumption that we do have this equally-motivated buyer and seller situation going on. However, in my experience that sometimes incentive does come into play in these unique partial taking situations and there may be a value greater than that of this sterilized, compartmentalized value to be considered within these types of transactions, or these takings. And this comes out of my experience with the expropriation context. It is something that I see. It is not something that I opine on necessarily, because it is not something that is ultimately requested of me to provide opinion of incentive. Okay? But I do state that in this case that it may be reasonable to consider and I do then say that a general consensus of this would be in around 25 percent above value. And I have done this based on my experience in other work assignments with partial takings where you have, let's say, an unmotivated seller and a motivated buyer or vice versa and how those transactions may occur at values perhaps greater than market value.

[168] In cross-examination, Mr. Lansink agreed that the 25% is a minimum and, in fact, the range of incentive would be 30% to 40% above value. He stated:

So this comes out of some work I have done, where I did study incentive, and from one party to another party, and where one party wasn't necessarily willing but was approached to become a willing seller. And so, that range of 30 to 40 percent came out of that study, and a minimum of around 25 percent was also found within that study.

[169] Mr. Lansink agreed that he did not add any incentive to his valuation. He also agreed that he did not add any amount for injurious affection, being any impact upon the overall use of the remaining land.

[170] In cross-examination, Mr. Lansink explained that statistical analysis is used to support an adjustment as part of the Direct Comparison Approach but that he would not solely rely on this to prepare a new report. He stated:

We use the statistical analysis to support an adjustment as part of the Direct Comparison Approach. It's, there are situations, Mr. Theall, where we may look to utilize a market condition adjustment over a period of time using statistics to assist in discussion of what has happened maybe around an effective date. But if, if there is a new report with a completely new effective date, it's uncommon. I don't see it. I don't do it where I just take my old report and extend it through with a market condition adjustment only. I would have to go through the appraisal standard again to ensure I meet the standard and the appraisal reporting standard that I have done my due diligence with the traditional methodologies and give reason as to why they are included or not.

[171] It was suggested to Mr. Lansink that this time adjustment approach could be solely relied on if the appraiser concluded that there were no sufficient direct comparators. Mr. Lansink stated:

I am going to say no, but if I, I could have maybe two points. So the, the first point being is that there could be a compounding error that occurs through that method. So if there was an error in the first report and you are using that first report as a starting point and adjusting from there, you are compounding that first error through to the second report….So there is that error. The second one was that if you don't mind me referring to - and again, this wasn't asked of me, but referring to page 4 of the February letter, Index Number 8 is actually a sale on Evergreen Way that was a comparable that was selected in Mr. McLean's first 2018 Report. And then, actually sold again before his effective date in 2022. So, there was evidence that he relied on in his first report that then transacted again during that window of time when he said there weren't any comparables. And that comparable then does provide a better indication in his second report. So he, it was there, it was available. There was a resale of it.

[172] Mr. Lansink clarified that he was not saying that a single comparable sale would be preferred, but that it was market evidence and that “a reasonable appraiser would utilize whatever sale information they have to then support their ultimate conclusion. It may not be the ultimate approach, but it would be there in reconciliation for sure. Especially if there was an update from an earlier report to a new date and a new report, where that one transaction referenced in his first report shows up as evidence available for his second report.” Mr. Lansink did confirm, however, that he did not assess the 11 properties he located in determining that any of them were suitable comparables. Mr. Lansink also added that “this was one of the hottest periods of time in real estate in the last decade of, of Ontario. And to have an appraiser suggest that there was no market evidence during that period of time, I think is somewhat peculiar…”

[173] Mr. Lansink did agree that, as compared to October 2017, “February 2022 is a completely different market.” Mr. Lansink was also asked about his understanding of what has been happening with the residential cottage property market in Ontario from February 2022 to now. He stated that, statistically, average prices have declined, while acknowledging that every area in cottage country is different. Mr. Lansink attributed this to a fear in the market, perhaps at least partially caused by the Bank of Canada raising lending rates significantly. As for percentage of decline between February 2022 to December 2022, Mr. Lansink estimated a 20% to 30% drop, while acknowledging that these are general trends, and he was not suggesting that every property had dropped.

[174] In re-examination, Mr. Lansink acknowledged having spent some time in cross-examination being taken through a number of potential adjustments to Comparable Sales 4, 5 and 6 from his 2017 report. However, he confirmed that when he came up with the $364,000 for the first and second percentage of value, and he compared it to the comparable properties for this reasonableness check, he was comparing it to the unadjusted value of those comparable sales.

Conclusion on Valuation of the Parcel to be Taken

[175] It is this Court’s view that the selection of suitable comparables and decided adjustments to those comparables is a somewhat subjective exercise and is certainly not an exact science, especially when appraising a unique rural property. Both appraisers acknowledge this circumstance. Both appraisers were criticized for their selection or lack of selection of comparables. Both appraisers were challenged on the comparables they used as not being on “all fours”. However, this is the very essence of a comparable – it is not identical and does not need to be identical. If this were the case, the court would not need appraisals.

[176] Both appraisers have acknowledged errors and limitations to their opinions. Many of those have been outlined above and have been seriously considered by this Court.

[177] The original reports for both appraisers are dated, being in 2017 and 2018. In attempting to update the value to the time this trial commenced in February 2022, the exercise is further complicated by the unprecedented occurrence of the COVID-19 pandemic. In attempting to update the value to the end of this trial (December 2022) or the time of judgment (May 2023), there are further complications in that the market seems to be experiencing a cooling, to adjust for the increases during the COVID-19 pandemic. There would seem to be no perfect time for valuation given the circumstances.

[178] This Court is not required to achieve perfection in its valuation – rather the goal is one of fairness taking all of the various factors into account. Some of those factors are as follows:

a. The gsi report in 2017 determined an approximate value of $7.84 per ft² for the portion of property to be severed.

b. The McLean report in 2018 determined an approximate value of $6.00 per ft² for the portion of property to be severed.

c. While both experts were seriously challenged and criticized in their approaches and analyses, the 2017 and 2018 reports were both based on comparable sales and, interestingly, their values per square foot were not that far apart.

d. The update to the McLean report in 2022, which provided a valuation of $13.00 per ft², was not based on any comparable sales, rather it was based on a statistical analysis to determine an overall percentage increase in the market. This valuation would seem to far exceed the possible comparable sales that might have been available to consider at that time. Having said that, the possible comparables found by Mr. Lansink were not analyzed by him to determine their suitability for comparison.

e. A valuation of this property at any point during the COVID-19 pandemic would seem skewed and unfair. During the pandemic, prices soared. More recently, prices have significantly declined to adjust. These dramatic highs and lows do not speak to a fair valuation. Given that the COVID-19 pandemic was outside of the control of these parties, no one should benefit or suffer as a result. Such a result would fly in the face of the equitable remedy seeking to be achieved.

[179] Based on all of the circumstances, this Court has determined that a fair valuation of the portion of property to be severed is $7.00 per ft², with an added 30% to acknowledge the forced taking as suggested to be appropriate by Mr. Lansink, resulting in a valuation of $9.10 per ft². This valuation is effective as of January 1, 2018.

Other Damages and Compensation

[180] In addition to the value of the land to be severed, the Plaintiffs seek:

a. Damages for occupation and use of the land and for the ongoing trespass – $400 per month commencing at the time of purchase in July 2002;

b. Compensation for the cost of planting trees to create privacy - $15,000; and

c. Consideration of injurious affection depending on the remedy.

[181] Trespass is actionable without proof of damages, however, general damages for trespass, other than nominal damages, may only be awarded where there is evidence that a loss was suffered: see Cantera v Eller, 2007 CanLII 17024 at para. 63 (ON SC), aff'd 2008 ONCA 876 (ON CA).

[182] Regardless of the main remedy chosen, the Plaintiffs argued that they are entitled to a measure of damages for the loss of use of their land for over 20 years. They argued that occupation rent can be awarded based on unjust enrichment and is an appropriate measure of damages for trespass: see Cormpilas v. Ioannidis, 2020 ONSC 4831, at paras. 29-30; Dagarsho Holdings Ltd. v. Bluestone, 2004 CanLII 11271 (ON SC), [2004] O.T.C. 525, at para. 26. As explained in Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269, at para. 32, unjust enrichment is established when there is a benefit, for which another suffers a corresponding deprivation, and there must not be a juristic reason for that benefit. The court explained “juristic reason” as follows:

[40] The third element of an unjust enrichment claim is that the benefit and corresponding detriment must have occurred without a juristic reason. To put it simply, this means that there is no reason in law or justice for the defendant's retention of the benefit conferred by the plaintiff, making its retention "unjust" in the circumstances of the case: see Pettkus, at p. 848; Rathwell, at p. 456; Sorochan, at p. 44; Peter, at p. 987; Peel, at pp. 784 and 788; Garland, at para. 30.

[41] Juristic reasons to deny recovery may be the intention to make a gift (referred to as a "donative intent"), a contract, or a disposition of law (Peter, at pp. 990-91; Garland, at para. 44; Rathwell, at p. 455). The latter category generally includes circumstances where the enrichment of the defendant at the plaintiff's expense is required by law, such as where a valid statute denies recovery (P. D. Maddaugh and J. D. McCamus, The Law of Restitution (1990), at p. 46; Reference re Goods and Services Tax, 1992 CanLII 69 (SCC), [1992] 2 S.C.R. 445; Mack v. Canada (Attorney General) (2002), 60 O.R. (3d) 737 (C.A.)). However, just as the Court has resisted a purely categorical approach to unjust enrichment claims, it has also refused to limit juristic reasons to a closed list. This third stage of the unjust enrichment analysis provides for due consideration of the autonomy of the parties, including factors such as "the legitimate expectation of the parties, the right of parties to order their affairs by contract" (Peel, at p. 803).

[43] In Garland, the Court set out a two-step analysis for the absence of juristic reason. It is important to remember that what prompted this development was to ensure that the juristic reason analysis was not "purely subjective", thereby building into the unjust enrichment analysis an unacceptable "immeasurable judicial discretion" that would permit "case by case 'palm tree' justice": Garland, at para. 40. The first step of the juristic reason analysis applies the established categories of juristic reasons; in their absence, the second step permits consideration of the reasonable expectations of the parties and public policy considerations to assess whether recovery should be denied:

First, the plaintiff must show that no juristic reason from an established category exists to deny recovery... . The established categories that can constitute juristic reasons include a contract (Pettkus, supra), a disposition of law (Pettkus, supra), a donative intent (Peter, supra), and other valid common law, equitable or statutory obligations (Peter, supra). If there is no juristic reason from an established category, then the plaintiff has made out a prima facie case under the juristic reason component of the analysis.

The prima facie case is rebuttable, however, where the defendant can show that there is another reason to deny recovery. As a result, there is a de facto burden of proof placed on the defendant to show the reason why the enrichment should be retained. This stage of the analysis thus provides for a category of residual defence in which courts can look to all of the circumstances of the transaction in order to determine whether there is another reason to deny recovery.

As part of the defendant's attempt to rebut, courts should have regard to two factors: the reasonable expectations of the parties, and public policy considerations. [paras. 44-46]

[44] Thus, at the juristic reason stage of the analysis, if the case falls outside the existing categories, the court may take into account the legitimate expectations of the parties (Pettkus, at p. 849) and moral and policy-based arguments about whether particular enrichments are unjust (Peter, at p. 990). For example, in Peter, it was at this stage that the Court considered and rejected the argument that the provision of domestic and childcare services should not give rise to equitable claims against the other spouse in a marital or quasi-marital relationship (pp. 993-95). Overall, the test for juristic reason is flexible, and the relevant factors to consider will depend on the situation before the court (Peter, at p. 990).

[183] The Plaintiffs argued that the facts underlying an unjust enrichment claim have been admitted. The Defendants have, without legal justification, occupied and used the land under the garage since the Plaintiffs purchased it, and the Plaintiffs have been deprived of the use of that land. Accordingly, the Plaintiffs are entitled to some measure of occupation rent for the land under the garage. The Plaintiffs acknowledged that assessing occupation rent in these circumstances is difficult as there is no rental market for a garage shaped piece of land. Accordingly, the Plaintiffs propose occupation rent and general damages for trespass at $400 per month occupied.

[184] While the concept of occupation rent was not specifically pleaded in the amended statement of claim, this Court is willing to entertain the idea given the claim for general damages was pleaded. This Court is satisfied that the Defendants have received a benefit, and there has been a corresponding deprivation to the Plaintiffs. Frankly, this is obvious. The Defendants have occupied and used the land under the