Executive Summary: Key Legal and Evidentiary Issues

• Delta argued that a road improvement clause in its 2010 Development Agreement exceeded Lacombe County's authority under the Municipal Government Act and was void ab initio.
   
• Section 651 of the Act, which covers improvements with excess capacity, including off-site roads, was found to authorize the developer's obligation to pay for upgrades to Range Road 1-1.
   
• The court distinguished a contract negotiated and signed before subdivision approval from conditions unilaterally imposed on an approval under s. 655.
   
• Any challenge to the subdivision approval condition requiring adherence to the Development Agreement had to be brought as an appeal under s. 678, and Delta never appealed.
   
• Enforcement legal costs under clause 13 of the 2018 Amending Agreement were upheld because that agreement was a non-compelled contract outside the scope of s. 655.
   
• An unsigned Draft 2023 Amending Agreement was not binding, and Delta's March 2023 payment could not be part performance because it came before Council approved the draft.
   

Facts of the case

Delta Land Co. Inc. owns land in Lacombe County. In 2010, it applied to the County to develop the land into bareland condominium units for recreational vehicles and a daily use seasonal RV park, known as Sandy Point Resort. As part of its proposal, Delta submitted a traffic impact assessment report dated October 10, 2010, prepared by an engineering company it had retained. The report recommended that Range Road 1-1 be improved to residential subdivision standards. Delta and the County then signed a Development Agreement on October 14, 2010.

The County approved the subdivision on August 25, 2011, and communicated the approval in a letter dated September 1, 2011. Condition 18 required that all requirements in the Development Agreement be adhered to before final approval of the subdivision. The approval letter notified Delta of its right to appeal the conditions and included a Notice of Subdivision Appeal form. Delta did not appeal and proceeded with the development.

In 2018, the parties agreed that paving Range Road 1-1 from Highway 12A to the Sandy Point entrance was of mutual benefit and that the County would do the work that year. Under the written agreement dated January 2, 2018 (the Amending Agreement), Delta was to pay the cost, up to a specified maximum, on the sale of the lands or within five years, whichever came first. That agreement replaced the road improvement levy provisions of the Development Agreement. The County carried out the paving and claimed the cost of the work, less levies collected and an agreed reduction. Because the lands were not sold, payment was due on January 2, 2023.

Delta made a partial payment of $244,043.13 on March 23, 2023 [the same payment is described as $244,043.10 at paras 59 and 60 of the reasons]. The County later offered an instalment plan over nine years, which Delta did not accept. In its counteroffer, Delta sought to eliminate other obligations under the 2010 Development Agreement, and the County refused.

The County sued for the balance, interest, and enforcement costs. Delta defended on the basis that the road improvement obligation was ultra vires and void ab initio, which would also void the 2018 payment obligation. It also counterclaimed for restitution of amounts paid under provisions it said exceeded the County's statutory authority.

Policy and legislative provisions at issue

Clause 3.1 of the Development Agreement stated that improvements to the existing road system would be needed to accommodate increased traffic from the development. It required the developer "to pay for a portion of the costs" of listed improvements, including Range Road 1-1 from the new realignment of Highway 12 to the development's main access road, to a local main access road standard. Payment was due before the County's final approval of the subdivision plan. The agreement also stated that it would operate only if a bare land condominium subdivision was approved.

The 2018 Amending Agreement required interest at the Servus Credit Union Ltd prime rate plus 1%, calculated and compounded quarterly until paid. Under clause 13, Delta had to pay the full cost of solicitors the County retained in the event of default. Paragraph 7 of the unsigned Draft 2023 Amending Agreement set out an instalment plan. Paragraph 12 confirmed that future obligations under the 2010 agreement continued to apply.

Several provisions of the Municipal Government Act, RSA 2000, c M-26, were central to the dispute. Section 6 recognizes a municipality's natural person powers. Under s. 655(1)(b), a municipality may require certain agreements as a condition of subdivision approval, including agreements to pay for roads giving access to the subdivision. Section 651 allows a municipality to require an applicant to "construct or pay for all or a portion of an improvement with an excess capacity." Its definition of "improvement" in s. 651(5)(b) includes a road, whether or not it is on the land being developed and whether or not it exists at the time of approval. Appeals of subdivision decisions fall under s. 678, while s. 650(1)(b)(ii) allows a development permit to be conditioned on payment for pedestrian walkways. The counterclaim also referred to "Lake Access" charges under paragraph 15.1 of the 2010 Development Agreement.

Reasoning and analysis

Delta characterized s. 651 as an "oversizing" provision and argued that, when applied to roads, it reaches only access roads already covered by s. 655. Justice McGuire rejected that reading. The definition of "improvement" in s. 651(5)(b) expressly includes off-site roads, and how rarely municipalities use the provision for roads was irrelevant to whether they may. The court also noted that Delta had not referred to Camgill Development Corporation v Wood Buffalo (Subdivision and Development Appeal Board), 2023 ABCA 264, in which s. 651 was applied to road improvements. On this basis, s. 651 authorized requiring Delta to pay for improving Range Road 1-1 as a condition of subdivision approval.

The court held that the clause would stand even if that conclusion were wrong. A municipality's ability to contract under its natural person powers is unlimited except where legislation imposes limits. Section 655 is one such limit, but it applies only to contracts entered into as a condition of subdivision approval. The Development Agreement was negotiated and signed before approval, and the subdivision authority approved the subdivision on the basis of that existing agreement rather than requiring Delta to sign a new one.

Delta relied on Prairie Communities Development Corp. v Okotoks (Town), 2011 ABCA 315. The court found that the paragraphs Delta cited did not support its position once read with their context. In that case, coercion had negated the voluntariness of the agreement. Here, there was no evidence of coercion, and the Range Road 1-1 clause had been proposed by Delta to mitigate a recognized risk to its subdivision approval.

Bristol Developments (Alberta) Ltd v Sturgeon (Municipal District No 90), [1992] AJ 1458, involved an approval condition requiring a developer to sign an agreement. Even there, the court refused to strike an off-site services clause from the executed agreement.

The proper remedy for an improper approval condition was an appeal under s. 678, and the time for that appeal expired in September 2011. Even a successful appeal might have led to revocation of the approval under s. 680(2) rather than removal of a single condition. Justice McGuire found that Delta's defence amounted to a very out of time appeal that blurred the line between contract law and statutory approval terms. A developer may offer more than the municipality can compel in order to secure approval, but it cannot obtain the approval on that basis and then renege.

Delta conceded that a valid 2010 agreement meant the 2018 Amending Agreement was also valid. On clause 13, the court accepted that a legal-costs clause could not be included in an agreement referred to in s. 655. No approval condition compelled the 2018 Amending Agreement, however. It was a separately executed contract supported by consideration in the form of a new payment arrangement, so clause 13 was valid.

The Draft 2023 Amending Agreement failed as a contract. Lacombe County sent it on April 18, 2023, as a draft awaiting Council's consideration. Lance Dzaman, a Delta employee, replied on April 20 that he needed to show owner Frank Wilson, which showed he lacked authority to accept it. Council appears to have approved the draft on April 27.

On that date, and again on May 10, Mr. Dzaman sought removal of paragraph 12 or a meeting to discuss it. Tim Timmons, the County's Chief Administrative Officer, refused to remove it. His response to the May 10 email stated that the 2018 agreement remained in place until the new Amending Development Agreement was executed.

Delta's March 23, 2023 payment came more than a month before Council approval, so it could only be a partial payment on the 2018 debt. Relying on Harvey v Perry, [1953] 1 SCR 233, the court found that the parties' correspondence and conduct showed no agreement on terms.

On the counterclaim, Delta conceded that any payments made more than two years before the counterclaim were statute-barred. It therefore sought reimbursement of only two amounts: $244,043.10 and $96,744.38. The $244,043.10 was a payment under a valid clause of a valid agreement.

Delta's $96,744.38 payment related to paving a walkway between Sandy Point and the nearest subdivision [the County's position, at para 13, describes a $96,000 payment for trail improvements]. That obligation arose from a separate Campground Development Agreement dated August 11, 2022. It was a development permit condition authorized by s. 650(1)(b)(ii), and the court found nothing improper in it. The counterclaim for both amounts was dismissed.

Nothing was reimbursable for the Lake Access charges under paragraph 15.1, as Delta had never paid them. The County did, however, concede in argument that the Lake Access clause was outside the scope of what it could require under the Act.

Ruling and overall outcome

Lacombe County's claim was allowed and Delta's counterclaim was dismissed. The court held that the 2010 Development Agreement, including the road improvement clause, and the 2018 Amending Agreement were both valid and enforceable. Under the 2018 Amending Agreement, Delta owes the principal amount of $1,488,625.11 [stated as $1,488,625 at para 46]. It must also pay interest calculated under the agreement's terms and the County's legal costs on a solicitor and own client basis. The reasons do not quantify the interest or costs, so no exact total award can be determined from the decision.