Court File and Parties

COURT FILE NO.: CV-22-306 DATE: 20230921

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Joshua Micheal Lake and Breanne Nicole Tessaro Applicants – and – The Corporation of the City of Cambridge Respondent

Counsel: Marc Whitely and Dylan Fisher, for the Applicants Patrick Kraemer, for the Respondent

HEARD: July 19, 2023

Justice D.A. Broad

Background

[1] In the spring of 2020, the applicants Joshua Micheal Lake (“Lake”) and Breanne Nicole Tessaro (“Tessaro”) (aged 25 and 24 respectively at the time) were looking to purchase a home to permit them to move out of rented accommodation. With the assistance of a realtor, they identified a residential property listed for sale at 424 Eagle Street South in the City of Cambridge (the “subject property”). After viewing the subject property on May 26, 2020, they submitted a formal offer to purchase it from the owner Jason Fowler (“Fowler”). Fowler was a stranger to them. After some negotiation through the parties’ respective realtors, the applicants entered into an agreement of purchase and sale to purchase the subject property from Fowler on June 5, 2020, providing for a July 17, 2020 closing.

[2] The applicants retained a lawyer to act for them on the closing of the purchase transaction. The closing proceeded on July 17, 2020, at which time their lawyer received and registered on title to the subject property a Transfer/Deed of Land from Fowler and a Charge/Mortgage of Land in favour of Computershare Trust Company of Canada (c/o First National Financial LP) to partially finance the purchase. The Transfer and the Charge were registered in the Registry Office for the Land Titles Division for the Region of Waterloo as instrument numbers WR1270218 and WR12702219 respectively.

[3] The subject property is legally described as Lot 15 Plan 237, City of Cambridge.

[4] Plan 237 was approved by the Mayor and Clerk of the Town of Preston, a predecessor municipality to the City of Cambridge, in 1913 and each of them assented to its filing in the Registry Office for the County of Waterloo.

[5] In the course of preparing to move into the residence on the subject property, the applicants came into contact with a Utility Compliance Technologist Aaron O’Keefe (“O’Keefe”) employed by the City of Cambridge to deal with certain issues respecting the water service to the subject property. In the course of an exchange of emails, O’Keefe advised the applicants that there was “something wrong” with the lot adjacent to the subject property to the right (422 Eagle Street South) and potentially with their lot.

[6] On November 17, 2020, O’Keefe wrote to the applicants to advise that, following a review of various requests relating to the servicing of three lots [Lot 16, Lot 15 and part of Lot 14 Plan 237], the City of Cambridge “has determined that there are issues with the creation of these lots that must be resolved before the City can process any servicing requests for this property.” The email attached a copy of Town of Preston By-law number 1492 passed March 6, 1950 (the “1950 By-law”) which O’Keefe stated “applies to this property” [that is, the applicants’ property Lot 15 Plan 237].

[7] The 1950 By-law designated, among others, lots 1-182 on Plan 237 to be “areas of subdivision control” pursuant to the Planning Act, 1946. The 1950 By-law went on to state that the land set out in it, “although within a registered Plan of Subdivision, shall be deemed not to be within a registered Plan of Subdivision for the purposes of Section 23 of the Planning Act, 1946.”

[8] It is apparent that the 1950 By-law was enacted pursuant to the authority of s. 23 of the Planning Act, 1946, SO 1946, c, 71, as amended by the Planning Amendment Act, 1947, SO 1947 c. 75, s. 9 and further amended by the Planning Amendment Act, 1949, SO 1949, c. 71, s. 7(1). The section, as amended, provided (in summary) that the council of a municipality may, by by-law, designate any area within the municipality as an area of subdivision control, and thereupon no person shall convey land in the area that has the effect of granting the use of or right in the land for a period of twenty-one years or more unless the land is described in accordance with and is within a registered plan of subdivision “but the Council may, in the By-law, designate land which although within a registered plan of subdivision shall be deemed not to be within a registered plan of subdivision for the purposes of this subsection” (emphasis added).

[9] The 1950 By-law was registered by the City of Preston in the applicable Registry office on March 22, 1950 as Instrument Number 19449.

[10] In an email dated March 23, 2021 to counsel for the applicant, the City Solicitor for the City of Cambridge Lisa Shields (“Shields”) presented the City’s legal analysis supporting its decision to deny municipal services, a civic address and roll number to the subject property (Lot 15, Plan 237) acquired by the applicants.

[11] In her email Ms. Shields stated as follows:

“It has been determined that Plan 237, that was registered under the Registry Act, was a registered plan of subdivision pursuant to ss. 50(3) of the Planning Act. However, you are required to determine whether Plan 237 was still a plan for the purposes of ss. 50(3). That is, you were required to determine if a By-law had been passed to deem Plan 237 not a plan pursuant to ss. 50(4) of the Planning Act. A search of the Registry records would have determined that By-law 1492 deemed the plan of subdivision not to be a registered plan. This cannot be ignored.

… In order to divide and convey the lot legally, an application should be made to the Committee of Adjustment.”

[12] The history of dealings with the subject property (lot 15 plan 237) and the adjacent properties (lot 16 and part of lot 14 plan 237) from prior to registration of Plan 237 in 1913 to registration of the transfer of Lot 15 to the applicants is set forth in the affidavit of Maggi Smith (the “Smith Affidavit”) filed in support of the application. Ms. Smith is an assistant and law clerk with Pallett Valo LLP, counsel for the applicants in this proceeding. Ms. Smith’s review reflected the search results of the registered titles to the parcels in issue [Lots 14, 15 and 16 Plan 237] under the Registry Act R.S.O. 1990, c. R. 20. The search also reflected the conversion of the parcels’ title to Land Titles from the Registry system under the Land Titles Act R.S.O. 1990, C. L. 5. on August 18, 2003. The respondent has taken no issue with the accuracy of the title history described in the Smith affidavit and summarized below.

Declaratory Relief sought by the Applicants

[13] The applicants commenced this Application on March 16, 2022 seeking the following declaratory relief:

(a) that they are the registered legal and beneficial owners of Lot 15, Plan 237 and have been since July 17, 2020;

(b) that the transfer to them of Lot 15, Plan 237 known by instrument number WR1270218 and dated July 17, 2020, did not, and does not violate the Planning Act and is not void;

(c) that the 1950 By-law directly affected title to Lot 15 on Plan 237, within the meaning of the Land Titles Act, RSO 1990, c L.5 and had to be registered on title to PIN 03775-0574 (LT) to be effective against the Applicants.

Title History

[14] The history of the various changes in ownership of lots 14, 15 and 16 Plan 237 prior to the passage and registration on title of the 1950 By-law is not material to the issues on the Application and I therefore do not propose to review that history.

(a) Pre-2020 title history

[15] At the time of the passage and registration of the 1950 By-law, title to all of lots 14, 15 and 16 Plan 237 was registered to Harold and Janet Chiswell (the “Chiswells”).

[16] In apparent contravention of the subdivision control provisions of the 1950 By-law, in August 1961 the Chiswells transferred the northwesterly 15 feet of Lot 14 (being the lot abutting the subject property on the right side when facing the properties from the front) to Herbert and Arthur Fachs (the “Fachs”), while retaining the south-easterly 24.78 feet of Lot 14 for themselves.

[17] Based on images retrieved from Google Maps, a semi-detached dwelling came to be constructed on the part of Lot 14 transferred to the Fachs by the Chiswells in 1961.

[18] On October 27, 1972, the Chiswells transferred all of lots 15 (the subject property), 16 (the lot abutting the subject property to the left) and the retained part of lot 14 to Hazen and Rita Mooers. A transfer document municipally described the property being conveyed as 424 and 424A Eagle Street, Preston.

[19] Three transfers of Lots 15, 16 and part of lot 14 took place between 1983 to June 1987 culminating in Raymond and Agnes Ford acquiring title.

[20] The final transfer before the conversion of Lots 15, 16 and part of Lot 14 Plan 237 to Land Titles was from the Fords to John Kalinowski by instrument number 718822.

[21] On June 25, 1997, Kalinowski’s land was “parcelized” such that title to it came to be reflected in a single “parcel register” with a unique “property identification number” (PIN), specifically “03755-0426 (R)” prior to its conversion to Land Titles. The parcel register legally described the land as “LTS 15, 16 and PT LT 14, PL 237 AS IN WS718822.”

[22] It is noteworthy, as discussed below, that the 1950 By-law was not reflected as an instrument on parcel register 03755-0426 (R).

[23] On August 18, 2003, Kalinowski’s land, including the subject property, was converted to Land Titles from the Registry system. During the conversion process, a new PIN was ascribed to the parcel described as “Lot 16, Lot 15 and part of Lot 14, Plan 237 being 03775-0158 (LT).” It is again noteworthy that the 1950 By-law was not reflected as an instrument on this parcel register.

[24] The legal description in the Land Titles parcel register was “LT 15-16 PL 237 CAMBRIDGE; PT LT 14 PL 237 CAMBRIDGE as in WS718822; CAMBRIDGE.”

[25] In April 2012, Kalinowski transferred title to his land (Lot 16, Lot 15 and part lot 14) to himself and Cheryl Davis.

[26] On January 31, 2020, Kalinowski and Davis transferred Lots 15 and 16 and part of Lot 14 Plan 237 to the Bauhaus Group Ltd. (“Bauhaus”) by Transfer registered as instrument number WR1241057. On the same day, Bauhaus transferred Lots 15 and 16 Plan 237 to Fowler by transfer registered as instrument number WR1241058.

[27] Following the registration of the transfer by instrument number WR1241058 to Fowler, two new parcel registers were created from what was formerly PIN 03775-0158 as follows:

(a) PIN 03775-0571 came to reflect the land that was lots 15 and 16 Plan 237 as owned by Fowler; and

(b) PIN 03775-0572 came to reflect the part of Lot 14 that was not transferred by Bauhaus to Fowler and which was retained and owned by Bauhaus by virtue of the Transfer registered as instrument number WR1241057.

[28] Again significantly, as discussed below, the 1950 By-law was not reflected as an instrument on either PIN 03775-0571 or PIN 03775-0572.

(b) 2020 Transactions

[29] On April 6, 2020, Lot 16 Plan 237 was transferred from Fowler to 2741274 Ontario Ltd. (“274”) by registration of the Transfer known as instrument number WR1252300. Upon such registration, PIN 03775-0573 came to reflect Lot 16 Plan 237 as owned by 274 and PIN 03775-0574 came to reflect Lot 15 Plan 237 showing Fowler as the registered owner.

[30] Again, the 1950 By-law was not reflected as an instrument on either PIN 03775-0573 or PIN 03775-0574.

[31] As noted above, on July 17, 2020, Fowler transferred Lot 15 Plan 237 to the applicants Lake and Tessaro by Transfer registered on PIN 03775-0574. The mortgage from Lake and Tessaro to First National Financial LP was registered as instrument number WR1270219 also on PIN 03775-0574. At the time of registration of these instruments, the 1950 By-law was not reflected as an instrument on PIN 03775-0574.

Applicants had no actual knowledge of the 1950 By-law

[32] The respondent (“City”) led no evidence that either Lake or Tessaro had actual knowledge of the 1950 By-law prior to or at the time of registration of instrument number WR1270218 by which the subject property was transferred to them by Fowler and they were not cross-examined on their affidavit in support of the application. I find that Lake and Tessaro had no actual knowledge of the 1950 By-law at the time of registration of the Transfer to them from Fowler.

Position of the City of Cambridge

[33] The City’s position in response to the Application consisted of the following propositions:

(i) the transfers from Bauhaus to Fowler (Instrument No. WR1241058 Lots 15 and 16 Plan 237) and from Fowler to 274 (Instrument WR1252300 Lot 16 Plan 237) were not valid transfers as they contravened section 50(3) of the Planning Act, R.S.O. 1990 c. P.13 which provides, in part, that no person shall convey land or grant the use of or right in land for a period of 21 years or more unless a listed exception applies, including (a) the land is described in accordance with and is within a registered plan of subdivision or (f) a consent is given to the conveyance or grant by the appropriate approval authority;

(ii) neither a plan of subdivision nor a consent was granted by the approval authority before Instrument Nos. WR1241058 and WR1252300 were registered;

(iii) by virtue of the passage of the 1950 By-law and its registration in the Registry office under the Registry system on March 22, 1950 and subsection 50(4) of the Planning Act, Plan 237 is deemed not to be a plan of subdivision for the purpose of subdivision control provisions of subsection 50(3) of the Planning Act, and there was, therefore, no authority allowing individual lots within Plan 237 to be transferred;

(iv) although subsection 50(28) of the Planning Act provides that a by-law passed under subsection 50(4) shall be registered in the “proper land registry office” there is no requirement to register such a by-law against individual parcels of land.

[It is noted in relation to this submission that the City led no evidence and made no submissions respecting how such registration could be effected if not against individual parcels of land];

(v) since PIN 03775-0574 (the subject property) is registered in Land Titles with a “qualified title” pursuant to s. 88 of the Land Titles Act, it was incumbent upon the applicants, or their solicitor, to search behind the Land Titles parcel register in the Registry system to determine whether a by-law had been passed and registered at any time under the Registry system deeming Plan 237 not to be a plan of subdivision for the purposes of subdivision control. The applicants and their solicitor were not entitled to rely upon the Parcel Register in Land Titles in accepting and registering a transfer of the subject property in this respect;

[It is noted in relation to this submission that s. 88 of the Planning Act provides as follows:

“A transfer for valuable consideration of land registered with a qualified title, when registered, has the same effect as a transfer for valuable consideration of the same land registered with an absolute title, except that such transfer does not affect or prejudice the enforcement of any right or interest appearing by the register to be excepted” (emphasis added)

Thus, the only distinction between absolute title and qualified title is that, in the case of the latter, the registered title is subject to any right or interest explicitly stated on the register to be excepted.]

(vi) citing Matwijow v. Pelham (Town) [2012] O.J. No. 1817 (S.C.J.) [aff’d 2013 ONSC 2079 (Div. Ct.)], at paras. 22 and 23, the City stated in its Factum that courts have considered the types of registrations represented by instruments WR1241058 (Buahaus to Fowler) and WR1252300 (Fowler to 274) as “deceitful and fraudulent.” In oral submissions, counsel for the City acknowledged that there is no evidence on the record of deceit or fraud in connection with the registration of instruments WR1241058 or WR1252300 and it withdrew the suggestion of deceit and fraud made in its Factum; and

(vii) the City advanced essentially a “floodgates” argument indicating that there have been many plans of subdivision registered under the Registry system throughout the Province of Ontario in respect of which by-laws have been passed by municipalities deeming such subdivisions not to be plans of subdivision for the purposes of the Planning Act. If the conveyance of the subject property to the applicants in the case at bar is found to have been valid, thousands of conveyances of lots in such subdivisions, including in the City of Cambridge Plan 237, could be completed without municipal approval, contrary to the subdivision control policies of the Planning Act. It is noted in reference to this submission that the City led no evidence of the number or location of registered plans in the Province which remain “deemed” by by-law not to be plans of subdivision for the purpose of subdivision control and, of those, how many of such remaining deeming by-laws have not been “entered or noted” in the Land Titles system as described below.

Determination

[34] I am unable to accept the positions advanced by Cambridge.

[35] For the reasons set forth below, I find that, insofar as title to the subject property was concerned, the applicants and their solicitor were entitled to rely upon the parcel register in PIN 03775-0574 under the Land Titles system. I also find that the applicants and their solicitor were not required to go behind the Land Titles system to conduct a search to determine whether a by-law had been registered under the Registry system deeming Plan 237 not to be a registered plan of subdivision for the purpose of subdivision control under the Planning Act.

[36] I find that subdivision control by-laws, including those which designate a plan of subdivision not to be a registered plan of subdivision, must be registered on title to property on the parcel register, or a notice of claim must be registered, to be effective against bona fide purchasers without notice, such as the applicants. This is because subdivision control by-laws directly affect title to property and are thus “encumbrances” within the meaning of the Land Titles Act.

[37] Pursuant to sections 87 and 88 of the Land Titles Act, the applicants took title in fee simple to the subject property, subject only to encumbrances entered or noted on the register and liabilities, rights and interests which are declared for the purposes of the Land Titles Act not to be encumbrances pursuant to ss. 44(1) of the Land Titles Act.

[38] I find that the 1950 By-law was not “entered or noted on the register” in the Land Titles system. I also find that the 1950 By-law is not declared to not be an encumbrance for the purposes of the Land Titles Act. Whereas ss. 44(1) para. 10 of the Land Titles Act deems any by-law passed under s. 34 of the Planning Act affecting land that does not directly affect title to land to not be an “encumbrance,” conversely, a by-law which does directly affect title to land is an encumbrance. The 1950 By-law does directly affect the title to the subject property by preventing its conveyance without municipal approval, and it was therefore required to be “entered or noted on the register” for the applicants to take title subject to it. Since the 1950 By-law was not “entered or noted on the register” the applicants’ title to the subject property is unaffected by it.

[39] Moreover, by virtue of the Registry Act, the 1950 By-law, which constituted a “claim” against the subject property for the purposes of Part III of that Act, expired on March 22, 1990 by virtue of the provisions of that Part, as no notice of claim was registered by the Town of Preston (or later by the City of Cambridge) in respect of the subject property prior to expiry of the notice period under Part III or prior to conversion of the subject property to Land Titles.

[40] The application must therefore be allowed, and the declarations sought by the applicants issued.

Discussion

(a) Registration of the 1950 By-law was required pursuant to the Registry Act and the Planning Act

[41] At the time of passage of the 1950 By-law, s. 74(1) of the Registry Act then in force (R.S.O. 1950, C. 336) required every “instrument” “affecting the land or any part thereof” to be registered to be effective against any subsequent purchaser or mortgagee for valuable consideration without actual notice. “Instrument” was defined in ss. 1(d) of the Act to include a municipal by-law.

[42] In The Township of Trafalgar v. Hamilton, [1954] O.R. 81, the Court of Appeal held that a by-law affecting the “use” of land but not necessarily rising to the level of “affecting title” to the land still had to be registered on title to be effective against a bona fide purchaser for value without notice of the by-law.

[43] At para. 17 of Trafalgar, Hogg, J.A. stated that, as the by-law in question restricts the use to which property may be put, it may prejudicially affect it and thereby cause “serious loss” to the purchaser, and registration of the by-law is intended to meet such a situation.

[44] After release of the decision in Trafalgar, the Registry Act was amended to stipulate that the requirement for registration of an “instrument” to bind a subsequent purchaser or mortgagee does not extend to a municipal by-law “affecting land that does not directly affect the title to land” (see R.S.O. 1960, c. 348 s. 76(1) and (3)(c)).

[45] Thus, by-laws regulating the “use” of land are not required to be registered under the Registry system to be effective, while by-laws “directly affecting title” are required to be registered, failing which they are to be adjudged fraudulent and void against any subsequent purchaser or mortgagee for valuable consideration without actual notice.

[46] The foregoing proposition was confirmed by the decision of Osler, J. in Innes v. Van De Weerdhof, [1970] 2 O.R. 334 (H.C.J.) at paras. 26-28. He held that, while a zoning by-law restricting land use is not a by-law affecting title, even though it does affect the land, a subdivision control by-law directly affects the title by preventing a vendor from conveying any interest in the land to a purchaser. Although the prohibition on conveyance is not absolute, in that it may be overcome by successfully obtaining consent of the relevant approval authority, so long as such consent is not obtained no title can be conveyed.

[47] On the authority of Van De Weerdhof, I find that subdivision control by-laws that prevent the conveyance of any interest in land, such as the 1950 By-law in the case at bar, directly affect title and are required to be registered to be effective against subsequent registrations, such as transfers and mortgages. This requirement, reflecting an important policy objective of the Legislature, has remained intact from 1947 to date by virtue of both the Registry Act and the Planning Act. Subsection 23(2) of the Planning Act, 1946, SO 1946, c. 71 as amended by the Planning Amendment Act, 1949, SO 1949, C. 71 provided that such a by-law shall be registered in the “proper registry office.”

[48] The requirement for such registration has continued under the current Planning Act. Subsection 50(27) of the current Act provides that a by-law passed under subsection (4) deeming a plan of subdivision, or part thereof, registered for eight years or more, not to be a registered plan of subdivision for the purposes of subsection (3) is not effective until the requirements of subsection 28 (registration of the By-law in the proper land registry office) has been complied with.

[49] As noted above, the subject property was converted to Land Titles on August 18, 2003. The subject property was therefore in the Land Titles system at the time that the applicants received the Transfer from Fowler.

[50] By virtue of s. 3 of the Registry Act R.S.O. 1990, c. R. 20, after conversion to Land Titles, the Registry Act ceased to apply to the land.

(b) The 1950 By-law was required to be registered in the Land Titles system for the Applicants to take title subject to it

[51] I find that, just as the Registry Act and the Planning Act are complementary in requiring registration on title of subdivision control by-laws, including those that “deem” plans on lands in the Registry system not to be plans of subdivision, to be effective against subsequent purchasers and mortgagees without actual notice, the Land Titles Act and the Planning Act are similarly complementary in respect of lands which are in the Land Titles system.

[52] The Court of Appeal confirmed the principles that underlie the Land Titles Act in Stanbarr Services Limited v. Metropolis Properties Inc. 2018 ONCA 244 at para. 13, relying on the description of those principles by Epstein, J. (as she then was) in Durrani v. Augier (2000), , 50 O.R. (3d) 353 (Ont. S.C.) at para. 42 as follows:

The philosophy of a land titles system embodies three principles, namely, the mirror principle, where the register is a perfect mirror of the state of title; the curtain principle, which holds that a purchaser need not investigate the history of past dealings with the land, or search behind the title as depicted on the register; and the insurance principle, where the state guarantees the accuracy of the register and compensates any person who suffers loss as the result of an inaccuracy. These principles form the doctrine of indefeasibility of title and [are] the essence of the land titles system . . .

[53] At para. 43 of Durrani Epstein J. added, in relation to the doctrine of indefeasibility of title, the following observations:

Several important sections of the Act clearly contemplate providing some form of indefeasibility of title to those who register land and instruments affecting land. For example, section 78(4) provides that an instrument, when registered, is deemed to be effective according to its nature and intent. Section 87 provides that a transfer for valuable consideration of registered land, when registered, confers on the transferee an estate in fee simple in the land transferred, subject to encumbrances noted on the register or provided by statute.

[54] Notwithstanding the doctrine of indefeasibility of title, there remain situations under the Land Titles system where title is taken subject to unregistered claims and other interests. For example, the Parcel Register PIN 03775-0574 for the subject property (Lot 15 Plan 237) reads, in part, as follows:

“Subject on first registration under the Land Titles Act, to:

Subsection 44(1) of the Land Titles Act.”

[55] Subsection 44(1) sets forth a list of “liabilities, rights and interests” which do not need to be registered for title to be taken subject to them and deems them not to be “encumbrances” (see Hamilton (City) v. Equitable Trust Co., 2013 ONCA 143 at para. 28)

[56] For the purposes of the case at bar, the relevant part of s. 44(1) reads:

44 (1) All registered land, unless the contrary is expressed on the register, is subject to such of the following liabilities, rights and interests as for the time being may be subsisting in reference thereto, and such liabilities, rights and interests shall not be deemed to be encumbrances within the meaning of this Act:

10. Any by-law heretofore passed under section 34 of the Planning Act or a predecessor of that section, and any other municipal by-law heretofore or hereafter passed, affecting land that does not directly affect the title to land.

(emphasis added)

[57] The effect of s. 44(1) clause 10 is that by-laws related to the use of land (for example zoning by-laws) do not need to be registered on title to a Land Titles parcel register to be effective against a transferee or mortgagee without any actual notice of the by-law.

[58] Importantly for the purposes of the case at bar, the converse is also true. Those “liabilities, rights and interests” which do “directly affect” title to the land such as the subdivision control by-law in Van De Weerdhof do have to be registered on the Land Titles parcel register for title to be taken subject to them.

[59] The “mirror principle” which provides that the register is a perfect mirror of the state of title, operates to protect persons who rely on the register from loss. This principle is codified by s. 72(1) of the Land Titles Act which addresses the effect of unregistered instruments as follows:

72 (1) No person, other than the parties thereto, shall be deemed to have any notice of the contents of any instruments, other than those mentioned in the existing register of title of the parcel of land or that have been duly entered in the records of the office kept for the entry of instruments received or are in course of entry.

[60] As noted by counsel for the applicants, it does not appear that there are any reported cases which directly interpret subsection 44(1) clause 10 of the Land Titles Act. Although s. 1 of the Act defines “land” to mean “land, tenements, hereditaments and appurtenances and any interest therein,” the terms “title, “direct/indirect” and “affect” are not defined.

[61] Black’s Law Dictionary, 9th ed. includes the following definitions of these terms:

affect: vb. 1. Most generally, to produce an effect on; to influence in some way.

directly: adv. 1. In a straightforward manner. 2. In a straight line or course. 3. Immediately…

title…2. Legal evidence of a person’s ownership rights in property: an instrument (such as a deed) that constitutes such evidence.

[62] I find that a bylaw which removes a person’s right to transfer a lot in a manner that does not violate the subdivision control provisions of the Planning Act, or without governmental consent, does affect such a right in a straightforward way, by eliminating it. The 1950 By-law can thus be seen as a municipal bylaw which does directly affect the title to the applicants’ land. The 1950 By-law was therefore an “encumbrance” within the meaning of the Land Titles Act and had to be registered on the Land Titles parcel register for title to have been taken by the applicants subject to it.

[63] The combined effect of sections 87 and 88 of the Land Titles Act is that when a transfer of land with a qualified title, as in the case at bar, is registered, it confers on the transferee an estate in fee simple in the land transferred, subject only to (a) the encumbrances, if any, entered or noted on the register and (b) the liabilities, rights and interests, if any, as are declared for the purposes of the Act not to be encumbrances, unless the contrary is expressed on the register.

[64] For the applicant’s title to the subject property to have been taken subject to the 1950 By-law, the by-law needed to be entered or noted on the Land Titles register or deemed not to be an encumbrance pursuant to ss. 44(1) Land Titles Act or the applicants must have had actual notice of the bylaw.

(c) The applicants did not have actual notice of the 1950 By-law

[65] As noted previously, there is no evidence that the applicants had actual notice of the 1950 By-law. Moreover, in Stanbarr the Court of Appeal emphasized at para. 26 that, since notice is one of the limited number of exceptions to the mirror principle, its application has been strictly construed. The party must actually know about the defect. It is not sufficient that it has become aware of facts that may suggest it should make inquiries. The factual analysis in relation to a notice argument is limited to a consideration of what the party knew, not what it could have known had it made inquiries.

[66] The position advanced by Ms. Shields in her email of March 23, 2021 that “a search of the Registry records would have determined that By-law 1492 deemed the plan of subdivision not to be a registered plan” is therefore incorrect and does not assist the City. It runs counter to the curtain principle underlying the Land Titles Act, which holds that a purchaser need not investigate the history of past dealings with the land or search behind the title as depicted on the register (see Stanbarr at para. 47).

(d) The 1950 By-law expired and had no further effect under the Registry Act

[67] In addition to the foregoing analysis in relation to the effect of the 1950 By-law on the applicants’ title to the subject property under the Land Titles Act, the applicants also point to the Registry Act, arguing that the 1950 By-law, which falls within the definition of a “claim” under ss. 111(1) of that Act as a “restriction as to the use of land or other encumbrance affecting land,” expired by virtue of ss. 113(1) on March 22, 1990, being the expiry date of the 40 year title search period provided by ss. 112(1).

[68] I am persuaded that the “claim” of the City pursuant to the 1950 By-law expired effective March 22, 1990 by reason of the failure of the Town of Preston, and later the City, to register a notice of claim with respect to the subject property within the notice period for the claim, or after expiration of the notice period but before registration of any conflicting claim of a purchaser in good faith for valuable consideration, pursuant to ss. 113(2) of the Registry Act.

[69] Pursuant to ss. 111(1) of the Registry Act “claim” is defined as:

“a right, title, interest, claim, or demand of any kind or nature whatsoever affecting land set forth in, based upon or arising out of a registered instrument, and, without limiting the generality of the foregoing, includes a mortgage, lien, easement, agreement, contract, option, charge, annuity, lease, dower right, and restriction as to the use of land or other encumbrance affecting land;”

[70] I find that the 1950 By-law is a “claim” within this definition as a “right, claim or demand of any kind or nature…affecting land…arising out of a registered instrument… including a restriction as to the use of land or other encumbrance affecting land.

[71] Subsection 112(1) of the Registry Act provides that:

“A person dealing with land shall not be required to show that the person is lawfully entitled to the land as owner thereof through a good and sufficient chain of title during a period greater than the forty years immediately preceding the day of such dealing, except in respect of a claim referred to in subsection 113 (5).”

[72] I find that ss. 113(5) of the Act has no application. Paragraph (a) of that subsection relates to certain specified interests of the Crown, an interest of a municipality in a public highway or lane and unregistered rights-of-way, easements or other rights that a person is openly enjoying, and para. (c) relates to railway rights-of-way.

[73] Paragraph (b) relates to “a claim arising under any Act.” There appears to be no caselaw on point interpreting this provision. I find that the claim of the Town of Preston (and later the City of Cambridge) deeming Plan 237 not to be a plan of subdivision does not come within the ambit of para. 113(5)(b) as it arises under the 1950 By-law, not under an Act of the legislature. By contrast, the applicants point to s. 349(3) of the Municipal Act, 2001, S.O. 2001, c. 25 as an example of a claim against land arising under an Act. That provision provides that municipal taxes are a special lien on land in priority to every claim, privilege, lien or encumbrance of every person except the Crown. I find that merely because a municipal by-law affecting land may be enacted by virtue of a power conferred on the municipality by statute, does not make the by-law “a claim arising under any Act.”

[74] Subsection 112(3) (b) of the Registry Act provides that a chain of title is not affected by any instrument registered before the commencement of the title search period except an instrument in respect of the claim for which a valid and subsisting notice of claim was registered during the title search period.

[75] Importantly, ss. 113(1) provides that a claim that is still in existence on the last day of the notice period expires at the end of that day unless a notice of claim has been registered.

[76] Subsection113(2) provides that a person having a claim may register a notice of claim with respect to the land affected by the claim (a) at any time within the notice period for the claim; or (b) at any time after the expiration of the notice but before the registration of any conflicting claim of a purchaser in good faith for valuable consideration of the land.

[77] Thus, the City could have readily protected its interest in maintaining the continued effect of the 1950 By-law for subdivision control purposes by registering a notice of claim on title to the land affected by it prior to the expiry of the notice period on March 22, 1990 or prior to conversion to Land Titles. It was not sufficient, as submitted by the City, for the Town of Preston to have made a one-time registration of the 1950 By-law on title to the subject property on March 22, 1950 to maintain its continued priority, beyond the 40 year notice period under the Registry Act or conversion to Land Titles, over the interests of subsequent purchasers for valuable consideration and without notice.

[78] On the basis of the foregoing provisions of the Registry Act, I find that the 1950 By-law, as a “claim” against the title to the subject property, expired on March 22, 1990, being the end of the 40 year period following its initial registration on March 22, 1950, as no notice of claim was registered in respect of it prior to the expiry of the notice period. In addition, no notice of claim was registered by the City after such expiration and prior to conversion to Land Titles.

(e) The City’s floodgates argument

[79] As noted previously, the City advanced a “floodgates” argument in oral submissions, asserting, without evidentiary support, that virtually every municipality in the Province of Ontario has passed one or more by-laws deeming registered plans of subdivision not to be plans of subdivision for the purposes of subdivision control under the Planning Act. If the applicants are permitted to prevail on their application, a myriad of conveyances of whole lots on such subdivisions, deemed by by-law not to be plans of subdivision, could be completed without municipal approval, thereby circumventing important planning policy throughout the Province.

[80] The nature and effect of a “floodgates argument” was considered by Jerke, J. of the Alberta Court of Queen’s Bench in the case of Hamm v. Canada (Attorney-General), 2019 ABQB 247 at paras. 261-262 as follows:

A "floodgates argument" is one where a possible legal rule is scrutinized on the basis that it may trigger a large and problematic consequence. For example, in Canadian National Railway Co v Norsk Pacific Steamship Co, [1992] 1 SCR 1021, 137 NR 241, Stevenson J (in concurring reasons), examined a floodgates argument on the implications of pure economic loss as a basis for damages in tort:

Many judges, lawyers and jurists seem extremely concerned about what life would be like after the death of the exclusionary rule against recovery of pure economic loss. The worst apocalyptic scenarios are feared. Everyone will go bankrupt, business will be impossible to conduct, the cost of insurance will be astronomical. The floodgates will be opened and our legal system will collapse. I do not share these fears.

A common -- and justified -- criticism of many floodgates arguments is that these dire prognostications are purely hypothetical. Cromwell J warned against this risk in Canada (Attorney General) v Downtown Eastside Sex Workers United Against Violence Society, 2012 SCC 45 at para 41, [2012] 2 SCR 524:

. . . these concerns can be overplayed and must be assessed practically in light of the particular circumstances rather than abstractly and hypothetically. ...

[81] In Leduc (County No. 25) v. Alberta (Local Authorities Board), 1987 ABCA 172 the Alberta Court of Appeal commented at para. 14 in relation to the floodgates argument advanced in that case that “our usual answer to that [floodgates] argument is that the flood has not yet started and will be dealt with when it does.”

[82] In my view, the applicants are entitled to have their application for declaratory relief, brought by reason of the City’s refusal to provide municipal services to the subject property, determined on its own merits in accordance with applicable legal principles, most notably the “mirror” and “curtain” principles which underlie the Land Titles Act, without risk of having their legitimate interests sacrificed in the name of an abstract and hypothetical “floodgates” argument, unsupported by evidence.

Disposition

[83] For the foregoing reasons, the application is allowed, and judgment is granted to the applicants declaring as follows:

(a) The applicants, Joshua Micheal Lake and Nicole Tessaro, are the registered legal and beneficial owners of Lot 15, Plan 237, City of Cambridge in the Regional Municipality of Waterloo (the “subject property”), subject to the Charge/Mortgage of Land in favour of Computershare Trust Company of Canada registered as instrument number WR1270219;

(b) The transfer to the applicants of the subject property by Transfer/Deed of Land registered by instrument number WR1270218 and dated July 17, 2020 did not and does not violate the subdivision control provisions of the Planning Act R.S.O. 1990, c. P.13 and is not void; and

(c) Town of Preston By-law 1492 passed March 6, 1950 and registered on March 22, 1950 in the Registry Office for the Registry Division of the County of Waterloo as instrument number 19449 directly affected title to Lot 15 Plan 37, is an “encumbrance” within the meaning of the Land Titles Act, R.S.O. 1990, c. L. 5 and had to be registered on title to PIN 03775-0574 (LT) to be effective against the applicants’ interest in the subject property.

Costs

[84] The parties are strongly encouraged to resolve the issue of costs.

[85] If they are unable to do so, the applicants may deliver written submissions on costs within 14 days of the release of this Endorsement. The respondent has 10 days to deliver responding submissions on costs. There shall be no reply submissions without leave or without a request by the court.

[86] The costs submissions shall not exceed four (4) double-spaced typewritten pages, exclusive of Bills of Costs, Costs Outlines and Offers to Settle, and shall be delivered to the Trial Coordinator at Brantford at the e-mail address utilized for the release of these Reasons.

[87] If the foregoing timetable is not followed, the parties shall be deemed to have settled the question of costs.

D.A. Broad, J. Released: September 21, 2023