



COURT OF APPEAL FOR ONTARIO

CITATION: Ottawa (City) v. ClubLink
    Corporation ULC, 2021 ONCA 847

DATE: 20211126

DOCKET: C69176

Juriansz, Tulloch and Roberts JJ.A.

BETWEEN

City of Ottawa

Applicant

(Respondent
    on Appeal)

and

ClubLink Corporation ULC

Respondent

(Appellant)

and

Kanata Greenspace Protection Coalition

Intervener

Matthew P. Gottlieb, James Renihan, Mark
    R. Flowers and John Carlo Mastrangelo, for the appellant

Kirsten Crain, Emma Blanchard, Kara Takagi and Tamara
    Boro, for the respondent

Heard: June 17, 2021 by video conference

On appeal
    from the judgment of Justice Marc R. Labrosse of the Superior Court of Justice,
    dated February 19, 2021, with reasons reported at 2021 ONSC 1298.

L.B. Roberts J.A.:

A.

Overview

[1]

This appeal involves the application of the rule
    against perpetuities. At its core, this appeal turns on whether the contractual
    terms in issue create an interest in land or a mere contractual right to
    acquire property.

[2]

The rule against perpetuities is not
    controversial. Of ancient origin, the rule arises out of the public policy
    against the fettering of real property with future interests dependent upon
    unduly remote contingencies. It applies to extinguish an interest in land if the
    interest does not vest within 21 years. The rule does not apply to a
    contractual right that does not create an interest in land. It serves only to
    invalidate contingent interests in land that vest too remotely. See:
Canadian
    Long Island Petroleums Ltd. et al. v. Irving Industries Ltd.
, [1975] 2
    S.C.R. 715, at pp. 726-27, 732-33;
2123201 Ontario Inc. v. Israel
    Estate
, 2016 ONCA 409, 130 O.R. (3d) 641 at para. 20;
London and South
    Western Railway Co. v. Gomm
(1882), 20 CH. D. 562 (C.A.), at pp. 580-82.

[3]

In January 1997, the appellant, ClubLink
    Corporation ULC (ClubLink), acquired property subject to various historical land
    development agreements affecting its use, which were made in 1981, 1985, and
    1988 between Campeau Corporation (Campeau) and the former City of Kanata
    (Kanata) (the Agreements). ClubLink assumed the former owners rights and
    obligations under the Agreements (the Assumption Agreement). In issue are the
    provisions contained in ss. 5(4) and 9 of the agreement entered into on May 26,
    1981 (the 1981 Agreement) that: Campeau, or its successors and assigns, must
    operate a golf course on the property in perpetuity (the golf course lands),
    failing which, the golf course lands are to be conveyed at no cost to Kanata,
    now part of the respondent, the City of Ottawa (the City); and, if the golf
    course lands are conveyed, the City is obliged to continue using the golf
    course lands for recreation or natural environmental purposes, failing which,
    they are to be reconveyed to Campeau.

[4]

ClubLink has operated the golf course for over
    24 years. Due to declining membership, ClubLink started exploring the
    possibility of developing the golf course lands for residential and open space
    purposes. To that end, in October 2019, ClubLink submitted planning
    applications for a zoning by-law amendment and approval of a plan of
    subdivision and publicly accessible green space on the golf course lands.

[5]

The City brought an application for an order requiring
    ClubLink to withdraw its applications; alternatively, it claimed that ClubLinks
    applications triggered its right to demand conveyance of the golf course lands
    and it sought conveyance of the golf course lands to the City at no cost. The
    City requested a declaration that ClubLinks obligations remain valid and
    enforceable. It also sought a declaration that if the golf course lands were
    conveyed to the City, the City would not be required to reconvey the golf
    course lands if it ceased to operate them as a golf course, so long as it used
    the golf course lands for recreation and natural environmental purposes.

[6]

ClubLink resisted the Citys application because
    the Citys right to call on a conveyance had not vested within the 21 years
    following the 1981 Agreement. Therefore, ClubLink argues, the provisions
    requiring the operation of a golf course in perpetuity are void as contrary to
    the rule against perpetuities.

[7]

The application judge interpreted the 1981 Agreement
    and allowed the Citys application in part. Importantly, he determined that the
    parties did not intend to create an interest in land because they never
    intended for the conveyances to materialize. He declared that the 1981 Agreement
    continues to be a valid and binding contract and that ClubLinks obligations
    remain enforceable. ClubLink is therefore required to operate the golf course
    in perpetuity or convey the golf course lands to the City if it ceases to do so.
    However, he declared that in the event the golf course lands were conveyed to
    the City, the City is not required to operate the golf course in perpetuity so
    long as it uses the lands for recreation and natural environmental purposes. The
    application judge dismissed the Citys application for an order requiring ClubLink
    to withdraw its zoning bylaw amendment and plan of subdivision applications or alternatively
    to offer to convey the golf course lands to the City at no cost.

Issues and the Parties
Positions

[8]

ClubLink submits that the application judge made
    several reversible errors. In my view, ClubLinks first argument that the
    application judge erred in finding that ss. 5(4) and 9 of the 1981 Agreement
    are not void for perpetuities disposes of the appeal. It is therefore not
    necessary to consider the other issues.

[9]

ClubLink submits that in determining whether
    the parties to the 1981 Agreement intended to create a contingent interest in
    land, the application judge made extricable errors of law. It argues the application
    judge erred in three principal ways. First, he did not correctly consider the parties
    intentions as set out in ss. 5(4) and 9 of the 1981 Agreement. Second, he did not
    interpret the 1981 Agreement in light of the agreement dated December 20, 1988
    (the December 20, 1988 Agreement), which expressly states that the 1981
    Agreement runs with the land. Third, he did not apply binding jurisprudence
    that suggests control over exercise of the option and the expectation that the
    contingent interest holder will acquire the land are not determinative of
    whether the parties intended to create an interest in land.

[10]

The City submits that the application judge made no
    reversible errors in his analysis: he properly focused on the parties
    intentions, considering control over the conveyance as only one factor, and correctly
    determined that the intent of the 1981 Agreement was to ensure that 40% of the
    parcel of land that the original owner wished to develop would be set aside in
    perpetuity as open space for recreation and natural environmental purposes
    (the 40% principle). Further, while he referred to subsequent agreements, he
    correctly identified the limits of using post-contractual conduct in
    contractual interpretation. As a result, the City argues, the application judge
    correctly found ss. 5(4) and 9 serve as mere contractual mechanisms for
    safeguarding the 40% principle and do not create interests in land.

[11]

For the reasons that follow, I agree with ClubLink that the
    application judge erred in his analysis of ss. 5(4) and 9 of the 1981
    Agreement. Specifically, the application judge erred in his determination that because
    the parties never intended the rights to the conveyances to crystallize,
    there was no intention to create an interest in land. In my view, when the
    correct legal principles are applied, in the context of all the Agreements, the
    plain language of ss. 5(4) and 9 creates a contingent interest in land. Sections
    5(4) and 9 are therefore void and unenforceable as being contrary to the rule
    against perpetuities because the Citys right to call upon a conveyance of the golf
    course lands did not vest during the perpetuity period. I would therefore allow
    the appeal.

B.

Analysis

[12]

This case is about contractual interpretation and the
    application of the rule against perpetuities. As such, the application judge
    was required to consider the factual matrix to deepen [his] understanding of
    the mutual and objective intentions of the parties as expressed in the words of
    the contract:
Sattva Capital Corp. v. Creston Moly Corp.
, 2014 SCC
    53, [2014] 2 S.C.R. 633, at para. 57.

[13]

Accordingly, I start my review of the application judges
    decision with a summary of the factual matrix that the application judge
    considered and that is not in dispute. I shall then analyze the application
    judges decision in light of the determinative issues on this appeal.

(i)

The Agreements and
Factual
Matrix

[14]

In 1981, Campeau applied to the then Regional Municipality
    of Ottawa-Carleton (the Region) to amend its Official Plan to permit the
    development of a property described as the Marchwood Lakeside Community in
    Kanata. Campeau proposed to designate approximately 40% of the development area
    as recreation and open space.

[15]

To that end, Campeau and Kanata entered into the 1981
    Agreement, which was registered on title to the property under development. The
    key provisions respecting the uses that can be made of the property for the
    purpose of this appeal are contained in ss. 3, 5, and 9.

[16]

Section 3 sets out the provisions enshrining the 40% principle
    and the particular uses that can be made of the open space areas, as follows:

3. Campeau hereby confirms the principle stated in its proposal
    that approximately
forty (40%) percent
    of the total development area of the Marchwood Lakeside Community shall be
    left as open space for recreation and natural environmental purposes
which areas consist of the following:

(a)
the proposed 18-hole
    golf course

(b) the storm water management area

(c) the natural environmental areas

(d) lands to be dedicated for park purposes.

[Emphasis added.]

[17]

Under the title, Methods of Protection, s. 5 prescribes
    the use in perpetuity of the land to be provided for the golf course:

5. (1) Campeau covenants and agrees that
the land to be provided for the golf course
shall be
    determined in a manner mutually satisfactory to the parties and subject to sub-paragraphs
    2 and 3
shall be operated by Campeau as
    a golf course in perpetuity
provided that Campeau shall at all
    times be permitted to assign the management of the golf course without prior
    approval of Kanata.

(2) Notwithstanding sub-paragraph (1),
Campeau may sell the golf course
(including lands and buildings)
provided the new owners enter into an
    agreement with Kanata providing for the operation of the golf course in
    perpetuity
,
upon the
    same terms and conditions as contained herein
.

(3)
In the event Campeau
    has received an offer for sale of the golf course it shall give Kanata the
    right of first refusal
on the same terms and conditions as the
    offer for a period of twenty-one (21) days.

(4)
In the event that
    Campeau desires to discontinue the operation of the golf course and it can find
    no other persons to acquire or operate it, then it shall convey the golf course
(including lands and buildings)
to Kanata at no cost
and
if Kanata accepts the conveyance, Kanata shall operate or cause to
    be operated the land as a golf course subject to the provisions of paragraph 9
.

(5) In the event Kanata will not accept the conveyance of the
    golf course as provided for in sub-paragraph (4) above then Campeau shall have
    the right to apply for development of the golf course lands in accordance with
    The Planning Act, notwithstanding anything to the contrary contained in this
    agreement.

[Emphasis added.]

[18]

Section 9 provides for the circumstances under which Kanata
    would be required to reconvey the land to Campeau at no cost:

9.
In the event that any
    of the land set aside for open space for recreation and natural environmental
    purposes ceases to be used for recreation and natural environmental purposes by
    Kanata then the owner of the land, if it is Kanata, shall reconvey it to
    Campeau at no cost
unless the land was conveyed to Kanata as in
    accordance with Section 33(5)(a) or 35b [
sic
]
    of The Planning Act. [Emphasis added.]

[19]

Sections 4 and 10 expressly contemplate that further
    agreements concerning specific open space areas may be required to designate
    the golf course lands and to implement the agreed upon 40% principle.

[20]

Section 12 stipulates that the 1981 Agreement shall be
    registered against the lands.

[21]

By agreements dated June 10, 1985 and December 29, 1988,
    both of which were registered on title, Campeau and Kanata defined the
    improvements and, in particular, the size, precise location, and required
    safety measures for the golf course. Both agreements contain provisions providing
    that the agreement shall extend to, be binding upon and enure to the benefit of
    Campeau and Kanata and their successors and assigns.

[22]

Finally, in the December 20, 1988 Agreement, which was
    registered on title, Campeau and Kanata amended the 1981 Agreement to provide
    that the 1981 and December 20, 1988 Agreements would apply only to the Current
    Lands as designated in the Schedules to the December 20, 1988 Agreement,
    including the golf course lands.

[23]

Section 7 of the December
    20, 1988 Agreement stipulates that the 1981 and 1988 Agreements 
shall enure to the benefit of and be
    binding upon the respective successors and assigns of Campeau and the City
and
shall run with and bind the Current Lands
for the benefit of the Kanata Marchwood
    Lakeside Community (emphasis added).

[24]

On March 30, 1989, Campeau transferred the land to Genstar
    Development Company Eastern Ltd. (Genstar). Genstar assumed all of Campeaus
    rights and obligations under the Agreements.

[25]

Genstar, which later amalgamated with Imasco Enterprises
    Inc., and ClubLink entered into an asset purchase agreement dated August 6,
    1996 by which, among other things, ClubLink agreed to purchase the golf course
    lands. On January 8, 1997, Imasco transferred the property to ClubLink.

[26]

Under s. 3 of the Assumption Agreement, dated November 1,
    1996, ClubLink agreed that all of its predecessors assumed liabilities and
    obligations under the Agreements would apply to and bind [ClubLink] in the
    same manner and to the same effect as if [ClubLink] had executed the same in
    the place and stead of Campeau or Imasco.

[27]

Section 11 of the Assumption Agreement stipulates as
    follows:

The parties to this Agreement acknowledge and agree that
nothing in this Agreement alters the manner in
    which approximately 40% of the total development area of the Marchwood
    Lakeside Community is to be left as open space for recreation and natural
    environmental purposes (the Open Space Lands) as referred to in Section 3 of
    the 1981 Agreement
, so that the calculation of the Open Space Lands
    will continue to include the area of the Golf Course Lands including, without limitation,
    any area occupied by any building or other facility ancillary to the golf
    course and country club located now or in the future on the Golf Course Lands.
    If the use of the Golf Course Lands as a golf course or otherwise as Open Space
    Lands is, with the agreement of the City, terminated, then for determining the
    above 40% requirement, the Golf Course Lands shall be deemed to be and remain
    Open Space Lands. [Emphasis added.]

[28]

On January 1, 2001, by operation of the
City of Ottawa
    Act, 1999
, S.O. 1999, c. 14, Sched. E, twelve municipalities, including
    Kanata and the Region, were dissolved and the City of Ottawa was constituted.
    As a result, the City stands in the place of Kanata. All of Kanatas assets and
    liabilities, including all rights, interests, entitlements, and contractual
    benefits and obligations under the Agreements and the Assumption Agreement,
    became the assets and liabilities of the City:
City of Ottawa Act
, s.
    5(3)(b).

(ii)

Interpretation of the 1981
Agreement

Standard of Review

[29]

It is common ground that the application judges interpretation
    of the Agreements attracts a deferential standard of appellate review:
Sattva,
at paras
.
50-52
. Contractual interpretation
    is a question of mixed fact and law requiring the
application
of principles of contractual interpretation to the words of a contract and its
    factual matrix:
Sattva
, at para. 50. Absent an extricable question of
    law, which courts should be cautious in identifying, or palpable and overriding
    error, appellate intervention is not warranted:
Sattva
, at paras.
    53-54.

[30]

An extricable question of law includes a legal error made
    in the course of contractual interpretation such as the application of an
    incorrect principle, the failure to consider a required element of a legal
    test, or the failure to consider a relevant factor:
Sattva
, at para.
    53.

[31]

Respectfully, I am of the view that the application judge made
    an extricable error of law in his interpretation of ss. 5(4) and 9 of the 1981
    Agreement. As I shall explain, it was an extricable error of law to conclude that
    contracting parties must intend a contingent interest in land to materialize in
    order to create a contingent interest in land.



The Application Judges Interpretation of
    the 1981 Agreement

[32]

According to the application judge, ss. 5(4) and 9 were
    intended only as off ramps that served as safeguards which preserve the true
    intent of maintaining the 40% principle. The true intent of the 1981
    Agreement, according to the application judge, does not involve Kanata ever
    becoming the owner of the Golf Course (lands and buildings). The application
    judge explained that, as the parties never expected, nor intended for, the
    interest in land to crystallize, they had no intention to create an interest
    in land. Sections 5(4) and 9 were mere contractual provisions. The application
    judge summarized his conclusions at para. 104 of his reasons, as follows:


Section 5(4) was
    not intended to allow for Kanata to eventually own and operate the Golf Course.
    This section created nothing more than an

off-ramp
    to ensure

that the true
    intention of the 1981 Agreement

to
    maintain 40% open space within the Campeau Lands through the use of a golf
    course

was carried out;


Section 9 also was
    not intended to create an interest for Campeau to regain possession of the
    lands no longer used for open space. The intent is to provide an alternative
    should Kanata no longer use the land for open space. It is to allow for an
    alternate use of the land should Kanata change the anticipated use.


Both ss. 5(4) and 9
    create contractual rights that may or may never crystallize. The question is
    not
when

the
    ownership changes but
if

the
    ownership changes;


Support for this
    conclusion is also found in (a) the absence of any control given to Kanata to
    trigger the conveyance of the Golf Course Lands, and (b) the absence of any
    control to Campeau to trigger the reconveyance of open space lands.

[Emphasis in original.]

[33]

Respectfully, the application judge erred in using the
    expectation that a contingency would materialize as a factor to distinguish
    between an intent to create an interest in land and a contractual right. As
    earlier noted, the rule against perpetuities applies only to
contingent
interests in land that vest too remotely. Whether the
contingent
interest in ss. 5(4) and 9 was intended to materialize is not the question; it
    is the nature of all contingent interests that they may never materialize. Moreover,
    the lack of control over the triggering of the conveyances does no more here
    than emphasize the contingent nature of the interests in issue.

[34]

The governing case law establishes that a contingent
    interest in land can be created without the intention that it will one day
    crystallize and that control over the triggering event is not determinative.

[35]

In
City of Halifax v. Vaughan Construction Company Ltd.
    and the Queen
, [1961] S.C.R. 715,
Weinblatt v. Kitchener (City)
, [1969]
    S.C.R. 157,
[1]
and
Jain v. Nepean (City)
(1992), 9 O.R. (3d) 11 (C.A.), leave to appeal
    refused, [1992] S.C.C.A. No. 473
, three decisions that are
    factually similar to the present case, the courts found an interest in land
    even though there was no expectation that the interest would crystallize. Like
    here, the contractual provisions in issue allowed the municipalities to control
    development and were not intended to ensure the land would one day be conveyed
    to the municipalities. In all three cases, the conveyance of the properties to
    the municipalities was contingent on the owners failing to fulfil their core
    contractual obligations. As here, the owners default, which triggered the
    right to conveyance, was not in the interest holders control. While the rule
    against perpetuities was not found to be infringed in these cases, they
    establish that an expectation that the interest will crystallize is not
    required to create an interest in land.

[36]

In
Halifax
, the Supreme
    Court interpreted an agreement between the City of Halifax and the Maritime
    Telegraph and Telephone Company. The latter made certain covenants, which were
    later assumed by Vaughan Construction Company Limited upon purchasing the
    property, to either build within a reasonable time or reconvey the property for
    a specific sum if it decided not to build. The deed provided that the covenant
    would run with the lands until the construction of the building. The court
    affirmed that the City of Halifax held an equitable interest even though it was
    not the holder of an option that it could exercise at any time. Importantly,
    the court held that Vaughan had no uncontrolled right to determine whether it
    would reconvey; unless it complied with the building covenants within a
    reasonable time, the City of Halifax could have enforced a reconveyance. Therefore,
    the City of Halifax had an interest in the land because the construction
    company could not prevent the exercise of the City of Halifaxs right under the
    covenant by doing nothing; they had to build the building or reconvey the
    property.

[37]

Similarly, in
Weinblatt
, the parties entered into
    an agreement that provided for the reconveyance of property to the City of
    Kitchener for the purchase price if the purchaser failed to commence
    construction of a seven-story building within a specified period. The builder
    applied to construct a two-story building instead but was refused. Weinblatt
    then purchased the property from the builder but his proposal to erect a building
    was also not in conformity with the agreement and was likewise rejected. The
    City of Kitcheners claim for reconveyance of the property was successful. The court
    held that the City of Kitchener had a contingent interest in property that ran
    with the land because the covenant provided that Weinblatt had to meet the
    building conditions under the agreement or reconvey the property.

[38]

Finally, this courts decision in
Jain
is apposite.
    In issue was the interpretation of a contract that contained a condition, which
    was included in the deed, designed to ensure development: the City of Nepean
    would be entitled to repurchase the property for a particular amount if Jain
    did not start constructing a building of a specific size within 12 months of
    registration of the transfer. The court found the City of Nepean had an
    equitable interest in the land that always existed even though the right of reconveyance
    was contingent on the default of the development conditions. In this case, the
    mortgagee took its interest with notice of the Citys equitable interest in the
    property.

[39]

The application judge adverted to
Halifax
,
Weinblatt
, and
Jain
in his review of relevant case law
    but only as examples of [t]he more traditional circumstances where a right to
    repurchase has been found to create a contingent interest in land. These
    decisions, in which the circumstances are almost identical to those of the
    present case, found an interest in land arose notwithstanding the absence of an
    expectation that the right to the reconveyance would crystallize and the lack
    of the municipalities control over triggering the reconveyance. The trial
    judges conclusion that there was no contingent interest in land because there
    was no expectation the right to the reconveyance would crystallize constitutes
    an error of law:
Deslaurier Custom Cabinets Inc. v. 1728106 Ontario Inc.
,
    2016 ONCA 246, 130 O.R. (3d) 418, at para. 41, affd 2017 ONCA 293, 135 O.R.
    (3d) 241, leave to appeal to refused, [2016] S.C.C.A. No. 249.

[40]

The City submits that
Halifax
,
Weinblatt
,
and
Jain
are distinguishable
    from the present appeal because all three cases involve provisions for a
re
-
conveyance of property to the
    original vendor. The argument follows that since Kanata never owned the golf
    course lands, this is not the case of a landowner who is controlling the use of
    their land after they have sold it. I disagree that this factual difference
    distinguishes these cases. Whether the municipalities were the original vendors
    does not change the nature of the right: the municipalities were able to
    control development of the land through a covenant that ran with the land. The
    contingent interest fettered the land by controlling development, regardless of
    whether the interest holder was a former owner.

[41]

The application judge applied the Superior Court decision
    in
Loyalist (Township) v. The Fairfield-Gutzeit Society
, 2019 ONSC
    2203,

relied on by the City,
for the proposition
that no interest in
    land arises where there is no expectation that the right to repurchase will
    crystallize. He determined that the court in
Loyalist (Township)
used
    this factor to distinguish this courts decision in
2123201
,
put
    forward by ClubLink. In
2123201
, this court concluded that an option
    to repurchase was an equitable interest in land; the court in
Loyalist
    (Township)
characterized the right to repurchase as a contractual right.
    The application judge explained at para. 72 of his reasons that in
2123201
,
    there was an expectation that the option to repurchase would crystallize at
    some point (i.e., once the gravel was removed); whereas, in
Loyalist
    (Township)
, there was no such expectation: the right to repurchase arose
    only if the Society wished to dispose of its interest to an organization that
    had different objectives from those of the Society  [t]hus, there was no
    expectation that the right to repurchase would crystallize. As a result, the
    application judge reasoned that the 1981 Agreement was similar to the agreement
    in
Loyalist (Township)
and distinguishable from the agreement in
2123201
because Kanata did not expect its right to call for a conveyance of the golf
    course lands would crystallize.

[42]

As I earlier explained, a contingent interest in land may
    never materialize. Moreover, I do not read
Loyalist (Township)
as
    standing for the proposition relied upon by the application judge: the
    expectation that a contingent interest would materialize was simply [a] distinguishing
    feature noted by the court in
Loyalist (Township)
between that case
    and
2123201
, and not a determining factor in the courts analysis: at
    para. 35. Notably, the court in
Loyalist (Township)
made no reference
    to
Halifax
,
Weinblatt
, and
Jain
. Moreover, the
    courts determination in
Loyalist (Township)
that the right in
    question was a contractual right and not an interest in land flowed from the
    courts conclusion that the agreement creating the right did not purport to
    impose rights that would attach to the land: at para. 36.

[43]

The courts reasoning in
Loyalist (Township)
reflects the well-established distinction that a contingent interest in land
    differs from a mere contractual right insofar as the agreement giving rise to
    the rights purports to attach the rights to the land, such as the right to call
    for a conveyance, which affect the landowners rights to freely use, manage,
    develop or dispose of its property:
Gomm
, at pp. 580-82;
Loyalist
    (Township)
, at para. 36.;
Manchester Ship Canada Company v. Manchester
    Racecourse Company
, [1901] 2 Ch. 37 (C.A.), at pp. 50-51.

[44]

A return to the public policy underpinning the rule against
    perpetuities further assists in distinguishing between a contingent interest in
    land and a mere contractual interest. The public policy attempts to prevent
    the grasp of the dead hand to be kept on the hand of the living in the form
    of restrictions on the subsequent landowners ability to use or dispose of its
    property that run with the land: Thomas Edward Scrutton,
Land in Fetters
,
    (Cambridge: Cambridge University Press, 1896), at p. 108;
Canadian Long
    Island Petroleums,
at pp. 726-27. As stated in
Weber v. Texas Co.
,
    83 F.2d 807 (5th Cir. 1936), at p. 808, and affirmed by the Supreme Court in
Canadian
    Long Island Petroleums
, at p. 732:

The rule against perpetuities springs from
    considerations of public policy. The underlying reason for and purpose of the
    rule is to avoid fettering real property with future interests dependent upon
    contingencies unduly remote which isolate the property and exclude it from
    commerce and development for long periods of time, thus working an indirect
    restraint upon alienation, which is regarded at common law as a public evil.

[45]

In consequence, a contingent interest in land fetters
    real property, excluding it from commerce and development and working an
    indirect restraint upon alienation. It is this public evil that the rule
    against perpetuities targets by imposing a 21-year limitation. A mere
    contractual right is within neither the purpose of nor the reason for the
    rule because it does not forestall or restrain free alienation and is
    therefore not objectionable:
Weber
,
at p. 808;
Canadian Long Island Petroleums
, at pp. 732-733.

[46]

As there were extricable errors of law in the application
    judges construction of the contractual provisions of the 1981 Agreement, his
    decision is not entitled to deference and must be set aside:
Sattva
, at para. 53
.

[47]

I shall now consider afresh the contractual provisions in
    issue.

The parties intended to create contingent
    interests in land

[48]

As I shall explain, I am of the view that the parties
    intended by ss. 5(4) and 9 of the 1981 Agreement to create contingent interests
    in the golf course lands.

[49]

The dispute centres on the characterization of the
    provisions for the conveyance of the property, ss. 5(4) and 9, either as creating
    contingent interests in land or contractual rights. It is common ground that if
    the conveyance provisions create an interest in land, the rule against
    perpetuities applies and the provisions are void because the conveyance did not
    occur within the 21-year perpetuity period. Alternatively, if they give rise to
    a contractual right, the rule against perpetuities does not apply and, subject
    to the other issues raised on this appeal, the provisions remain valid and
    enforceable.

[50]

Contractual provisions do not always fit neatly within the
    common dichotomy, which is found in many of the perpetuity cases, of an option
    to purchase that creates a contingent interest in land and a right of first
    refusal that does not. Accordingly, the fact that the language in s. 5(4) (or
    s. 9) of the 1981 Agreement may not be typical of the language used to define
    an option to purchase, as the application judge noted, is not determinative.

[51]

This classification difficulty was recognized in
2123201
.
    Rather than attempting to impose a rigid classification scheme, this court
    clarified in
2123201
, at paras. 38 to 41, that the issue is one of basic
    contract interpretation to determine the true intent of the parties at the time
    the agreement is made. As such, the analysis should focus on whether the
    parties intended to create an interest in land or a mere contractual right. The
    indicia of that intention include the purpose and terms of the agreement and
    the context in which it was made:
2123201
, at paras. 38-43.

[52]

As the application judge rightly stated, the basic rules of
    contract interpretation require the determination of the intention of the
    parties in accordance with the ordinary and grammatical words they have used,
    in the context of the entire agreement and the factual matrix known to the
    parties at the time of the formation of the contract, and in a fashion that corresponds
    with sound commercial principles and good business sense:
Weyerhaeuser
    Company Limited v. Ontario (Attorney General)
, 2017 ONCA 1007, 77 B.L.R.
    (5th) 175, at para. 65, revd on other grounds,
Resolute FP Canada Inc. v. Ontario
    (Attorney General)
, 2019 SCC 60, 444 D.L.R. (4th) 77.

[53]

Here, to ascertain the parties intentions, it is necessary
    to read all the Agreements. The City submits that the December 20, 1988
    Agreement was concluded at a different time and for a different purpose.
    However, the subsequent agreements were expressly contemplated in the 1981
    Agreement and the four agreements, read together, give effect to the parties
    intentions. Moreover, ClubLink assumed the rights and obligations of its
    predecessors not simply under the 1981 Agreement but under all the Agreements.

[54]

As a result, the related contracts principle is also
    engaged in the interpretative process here. Under the related contracts
    principle, where more than one contract is entered into as part of an overall
    transaction, the contracts must be read in light of each other to achieve
    interpretive accuracy and give effect to the parties intentions:
3869130 Canada
    Inc. v. I.C.B. Distribution Inc.
, 2008 ONCA 396, 239 O.A.C. 137, at paras.
    33-34;
Salah v. Timothys Coffees of the World Inc.
, 2010 ONCA 673,
    268 O.A.C. 279, at para. 16;
Fuller v. Aphria Inc.
,

2020 ONCA 403, 4 B.L.R. (6th) 161
, at para. 41, 51;
Catalyst
    Capital Group Inc. v. Dundee Kilmer Developments Limited Partnership
, 2020
    ONCA 272, 150 O.R. (3d) 449, at para. 50.

[55]

I start with the overall purpose and nature of the
    Agreements.

[56]

The Agreements formed a development contract that allowed
    Campeau to develop its own land but subject to certain limits to further the
    Citys public policies, most notably, the 40% principle.

[57]

There is no question that the 40% principle was an
    important contractual feature that allowed Campeau to advance the development
    of property and further the Citys public policies. The City wanted to ensure
    that 40% of the property to be developed would remain as open space to be used
    in certain ways. One of the ways was the operation in perpetuity of a golf
    course. That said, the 40% principle, by itself, does not determine the issue
    of whether the parties intended to give Kanata (and its successors and assigns)
    an interest in land or a contractual right to protect the 40% principle.

[58]

In my opinion, when the Agreements are read and interpreted
    as a whole, and in the context of the factual matrix, the provisions in ss.
    5(4) and 9 were intended to restrict or fetter the use that could be made of
    40% of the property in order to further the Citys open space development
    policy. As such, I see the rights created by the Agreements as
    indistinguishable in substance and effect from the contingent property interests
    created in
Halifax
,
Weinblatt
,

and
Jain
, earlier reviewed, where
    restrictions were used to control development.

[59]

In
Halifax
,
Weinblatt
, and
Jain
,
the municipal right holder did not hold
    an option that it could exercise at any time and the right to the conveyance
    only arose if the landowner did not develop or use the lands according to the
    agreements. Once the triggering event occurred, for example development did not
    commence within the agreed upon time, the landowners were obligated to reconvey
    the properties to the holder of the right. The juridical nature of this right
    of conveyance was determined to be an interest in land.

[60]

The rights in issue in the present case are
    indistinguishable. As in
Halifax
,
Weinblatt
, and
Jain
,
    the Agreements here impose rights that expressly run with the land and were
    registered on title. The conveyance to the City would occur only if and when
    Campeau or its successors and assigns ceased to use the land as a golf course
    and could not find someone to take over its operation. Other than determining
    whether to use the land as a golf course, Campeau had no discretion over the
    conveyance. If it chose to stop using it as a golf course and could not find
    someone to continue this use, then it had to convey the property to the City.
    The automatic transfer of ownership triggered by the contingency of a future
    event creates a contingent property interest.

[61]

The conveyance provisions under ss. 5(4) and 9 of the 1981
    Agreement fall squarely within the public policy purpose of the rule against
    perpetuities, namely, to prevent contingent property interests from vesting too
    remotely. The conveyance provisions purport to control in perpetuity the use
    that can be made of the golf course lands: if the owner ceases to use the golf
    course lands as a golf course, the lands will be conveyed to the City.

[62]

The parties intention to create an interest in land also manifests
    in the plain and explicit language of the Agreements. According to the
    cardinal presumption of contract interpretation, the parties intended what
    they wrote:
Weyerhaeuser
, at para. 65. For example:

i. The 1981 Agreement uses clear conveyance
    language with respect to the contingent interests created under s. 5(4)
    (convey and conveyance) and s. 9 (reconvey and conveyed). I contrast
    this conveyance language with the contractual right of first refusal that
    appears in s. 5(3).

ii. Section 12 of the 1981 Agreement
    stipulates that the Agreement shall be registered on the title to the entire
    property, including the golf course lands. All four Agreements were registered
    on the title to the property.

iii. Section 7 of the December 20, 1988
    Agreement expressly states that the 1981 and 1988 Agreements shall enure to
    the benefit of and be binding upon the respective successors and assigns of
    Campeau and the City and
shall run with and bind the
    Current Lands
for the benefit of the Kanata Marchwood Lakeside
    Community (emphasis added).

[63]

While each of these examples taken in isolation may not be
    determinative, I view them, together with the factors that I have just
    reviewed, as demonstrating the parties intention to create contingent
    interests in land. Similarly, I read the requirement under s. 5(2) that
    subsequent owners must contractually assume the obligations under the
    Agreements, as simply a mechanism to ensure compliance. It does not, by itself,
    derogate from the parties intention to create contingent interests in land as
    provided for in ss. 5(4) and 9 of the 1981 Agreement.

[64]

In summary, the parties intended by the clear language and
    purpose of their Agreements to create contingent interests in the golf course
    lands under ss. 5(4) and 9 of the 1981 Agreement that ran with and fettered the
    land: under s. 5(4) of the 1981 Agreement, the Citys interest in the golf
    course lands was contingent on Campeau (or its successor or assign in title)
    ceasing to operate the golf course; and under s. 9, the reconveyance was
    contingent on, first, the conveyance under s. 5(4), and, second, the City
    ceasing to use the lands as prescribed.

[65]

The owners have operated the golf course for more than 21
    years. Neither the Citys right to a conveyance nor ClubLinks right to a
    reconveyance have vested within the perpetuity period. As a result, these
    contingent interests in the golf course lands are now void.

Is all or part of the 1981
Agreement
void?

[66]

ClubLink renews here the argument that if the rule against
    perpetuities applies, then ss. 5(4) and 9 cannot be severed from the 1981
    Agreement and all or part of the 1981 Agreement fails. As noted in para. 146 of
    his reasons, the application judge did not consider this issue given his
    conclusion that the 1981 Agreement continues to be valid and enforceable.

[67]

ClubLink argues that ss. 5(4) and 9 are integral to the
    1981 Agreement and that severing ss. 5(4) and 9 from the balance of the contract
    fundamentally changes the 1981 Agreement with the result that ClubLink would be
    saddled with a perpetual obligation to run a golf course (or find a buyer
    willing to do the same) with no escape mechanism. According to ClubLink, there
    is no evidence the parties would have agreed to this bargain. ClubLink submits
    that severance is therefore inappropriate and, as a result, the appropriate
    remedy is to void the 1981 Agreement in whole, or, alternatively, all the
    provisions related to the golf course lands.

[68]

In my view, this court is not in a position to consider
    ClubLinks argument.

[69]

First, ClubLink did not identify which provisions of the
    1981 Agreement are so interrelated to ss. 5(4) and 9 and the void contingent
    interests in land that they must necessarily be inoperative. Further, there is
    no basis to void myriad other provisions in the 1981 Agreement that are
    unrelated to the golf course and that have already been performed.

[70]

Moreover, the focus of the submissions before this court
    was on the validity and enforceability of ss. 5(4) and 9 of the 1981 Agreement.
    We do not have the benefit of the application judges findings on the larger
    question raised by ClubLink. And, in my opinion, the determination that ss.
    5(4) and 9 of the 1981 Agreement are void and unenforceable may affect provisions
    of not simply the 1981 Agreement but also the 1985 and 1988 Agreements, as well
    as the Assumption Agreement. In my view, if the parties cannot agree, this
    larger question should be remitted to the application judge for determination.

Disposition

[71]

Accordingly, I would allow the appeal. Sections 5(4) and 9 of
    the 1981 Agreement are void and unenforceable.

[72]

By letter dated June 22, 2021, the parties advised of their
    agreement that the successful party is entitled to costs of the appeal in the
    amount of $59,000, all inclusive. Accordingly, I would award costs of the
    appeal to ClubLink in this amount.

[73]

If the parties cannot agree on the disposition of costs for
    the application below, I would allow them to make brief written submissions of
    no more than two pages, plus a costs outline, within five days of the release
    of these reasons.

Released: R.G.J. NOV 26, 2021


L.B.
    Roberts J.A.

I
    agree. R.G. Juriansz J.A.

I
    agree. M. Tulloch J.A.





[1]

Some have argued that there are inconsistencies between
Canadian Long Island Petroleums
,
Halifax
, and
Weinblatt
: Paul M. Perell, Options, Rights of Repurchase and Rights of First
    Refusal as Contracts and as Interest in Land (1991) 70:1
Can. Bar. Rev. 1
. However, this court in
Jain
largely resolved these issues and found that the holdings in
Halifax
and
Weinblatt
are still good law despite the reasoning in
Canadian Long Island Petroleums
:
see
Jain
, at p. 19.


