Executive Summary: Key Legal and Evidentiary Issues

• Justice Rees resolved a decades-long dispute over the beneficial ownership of "Adjacent Lands" tied to a 1991 commercial real estate transaction between Claridge December Holdings Inc. and Co-Operative d'Habitation Desloges Inc.
   
• Desloges argued that Claridge's application for a vesting order was statute-barred and barred by the equitable defence of laches, but the court rejected both arguments.
   
• Contractual interpretation played a central role, since the court had to decide whether a Planning Act compliance clause in the parties' Offer to Purchase was a true condition precedent.
   
• Evidentiary disputes arose over the admissibility of Desloges's audited financial statements and an accountant's expert opinion used to calculate damages for property taxes, insurance, and maintenance.
   
• Trust law issues required the court to determine whether an express trust had failed and, if so, whether a resulting trust arose in Claridge's favour.
   
• Rectification of a drafting error in the Offer to Purchase was also addressed as an uncontested procedural matter.
   

Facts of the case

In 1991, Claridge's predecessor company entered into an Offer to Purchase with Desloges as part of a social housing development project in Ottawa. Under this agreement, Desloges acquired legal title to the overall property but agreed to hold a portion of it—the "Adjacent Lands"—in trust as nominee for Claridge, subject to conditions including Claridge obtaining subdivision approval and registering a transfer (the "Back-Deed") by July 1, 1992. Desloges executed the Back-Deed at the time of the transaction, but Claridge never obtained the required planning approval or registered the transfer within the specified time. Claridge did not pursue the matter for years, engaging with the City of Ottawa on site planning matters but not formally seeking Desloges's cooperation until 2015, at which point Desloges refused and asserted that it, not Claridge, owned the Adjacent Lands. Claridge then applied for a vesting order to align legal title with what it claimed was its beneficial ownership. Desloges cross-applied, seeking compensation of $450,000 for property taxes, insurance, and maintenance costs it said it incurred with respect to the Adjacent Lands since 1991, alternatively pleading unjust enrichment.

Policy and legislative provisions at issue

The court's analysis engaged several statutory provisions. Under the Real Property Limitations Act, section 4 sets a general ten-year period to sue for recovery of land, but section 42 creates an exception for trust property, deeming the limitation period not to start running against a beneficiary until the trustee conveys the land to a purchaser for value. Section 2 of that Act preserves the equitable defence of laches. On the Planning Act, sections 50(3) and 50(21) restrict conveyances of land absent compliance with subdivision control rules, while permitting parties to make an agreement conditional on future compliance. Clause 8(d)(vi) of the Offer to Purchase was drafted with this requirement in mind. Desloges's compensation claim was assessed against sections 4 and 15 of the Limitations Act, 2002, which impose a two-year discoverability period and an ultimate limitation period, respectively. Desloges also invoked section 16(2) of the Perpetuities Act and section 9 of the Statute of Frauds in an unsuccessful effort to establish its own claim to the Adjacent Lands.

Reasoning and analysis

The court held that Claridge's application was not statute-barred, since no conveyance to a third-party purchaser had triggered the limitation period under the Real Property Limitations Act, and that laches did not apply because Claridge's delay did not amount to acquiescence and Desloges had not detrimentally changed its position by relying on the status quo. Turning to the trust question, the court found that clause 8(d)(vi)—which conditioned the trust's effectiveness on obtaining Planning Act approval—was a true condition precedent, since its fulfilment depended on the approval of a governmental planning authority not party to the agreement. Because Claridge never obtained that approval, the express trust failed. However, the court concluded that a resulting trust arose in Claridge's favour, since the failure of an express trust causes the property to revert to the settlor, and the surrounding evidence—including documents connecting the original transferring corporation, '697, to Claridge—supported treating Claridge as the settlor. On Desloges's cross-application, the court ruled that claims for costs incurred more than two years before the application was filed were barred under the Limitations Act, 2002. It excluded Desloges's expert accountant's opinion as inadmissible, finding his methodology for allocating insurance and property tax costs unsound and not grounded in recognized principles, and instead preferred Claridge's expert evidence that the Adjacent Lands did not generate additional property tax liability. The court did, however, adopt the accountant's proportional methodology for maintenance costs alone, finding it a reasonable basis for allocation given the audited financial statements' breakdown of land-related expenses.

Ruling and overall outcome

The court granted Claridge's application, ordering a vesting order to transfer legal title of the Adjacent Lands to Claridge in line with its beneficial ownership under the resulting trust. Desloges's cross-application was granted only in part: the court awarded Desloges $46,304 in damages for maintenance costs incurred from December 2016 onward, plus pre- and post-judgment interest, while rejecting its claims for insurance and property tax reimbursement for lack of proof. The court also granted Desloges's uncontested request to rectify a drafting error in clause 8(d)(v) of the Offer to Purchase by inserting the word "mortgage." The parties were given leave to file costs submissions within fourteen days of the decision if they could not agree on costs.