Enforcement of affirmative covenants: The welcome erosion of a common law prohibition

Introduction

We live in an era of common use, maintenance and ownership of real property, unlike any era in the recorded past. Our urban and suburban landscapes are replete with condominiums, cooperatives, property owners’ common area and governing property owners’ associations, shopping centres, industrial “parks,” reciprocal easements, shared accessways, and shared parking areas and utility facilities. Each of these forms of common property usually entails some benefit of common use, and typically some obligation or need to pay at least some part of the costs of ownership, maintenance, repair and operation. Most of the applicable rights and obligations arise under the covenants found in a recorded instrument or agreement. There is no “free lunch.” If you want improvements to be kept available and in good operating condition, those property owners who are entitled to use the improvements must pay their agreed-to or equitable share, whether or not the current owners were the parties to the original recorded instrument or agreement and whether or not they expressly assumed the obligation to pay.

At least at the trial level, some Canadian courts appear to be moving towards a more modern and enlightened position on the enforcement of affirmative covenants against successors-in-title. This is a position that most other common law jurisdictions have already adopted – some long ago.

The prohibition as generally recognized in Canada

In Westbank Holdings Ltd. v Westgate Shopping, 155 BCAC 1; [2001] BCJ No 852 (QL), 2001 BCCA 268 (CanLII), the court quoted with approval, the following text^Footnote1:

(a) The covenant must be negative in substance and constitute a burden on the covenantor’s land analogous to an easement. No personal or affirmative covenant requiring the expenditure of money or the doing of some act can, apart from statute, be made to run with the land.

***

Similarly, in Metropolitan Toronto Condominium Corp. No. 979 v Camrost York Development Corp. 26 OR 3d 238, 1995 CanLII7225 (ONSC), there was a dispute over annual fee payable for the use of an easement.

Turning next to the legal basis of the claim to the fee, the right to the annual fee was not the type of entitlement that, in law, could run with the land and pass to a successor in title. … The proposition that covenants to pay a periodical sum do not run with the land was supported by a long line of authority.

The Supreme Court recently re-affirmed the prohibition in Heritage Capital Corp. v Equitable Trust Co., 2016 SCC 19 (CanLII), citing with approval Amberwood Investments Ltd. v Durham Condominium Corp. No. 123, 58 OR (3d) 481; 211 DLR (4th) 1; [2002] OJ No 1023 (QL); 157 OAC 135, 2002 CanLII 44913. In Amberwood, the court considered a reciprocal easement agreement for access and support, the maintenance of shared facilities, and payment of the costs of maintenance. The agreement stated it was to run with the land and be binding on the owners’ successors. The court’s concurring opinion opened the door to enforcement of affirmative covenants by acknowledging that at least one or two exceptions might be available in Ontario; and the dissenting opinion went further. The concurring opinion states:

Although much criticized, and the subject of calls for reform in Ontario and elsewhere, the rule that positive covenants do not run with freehold land was settled law in Ontario. It was beyond the proper role of the courts to carry out any reform of this general rule. … This conclusion, however, left open DCC's arguments that the benefit and burden exception or the conditional grant exception to the general rule about positive covenants could be adopted in Ontario and, if adopted, was available on the facts of this case. However, the case law did not support Stinson J.'s finding that the benefit and burden exception has been clearly adopted by the English courts.

Enforcement of affirmative covenants in other jurisdictions

The decision that gave rise to the common law rule that affirmative covenants do not run with the land was Austerberry v Oldham Corporation, 1885, 29 Ch. D. 750. In Austerberry, the court held that an affirmative covenant to keep land in good condition was not binding upon successors-in-title.

In The Conveyancer and Property Lawyer, 2015, 4, 316-323, Enforcing positive covenants: a practical perspective, Walsh & Morris, the authors provide an overview of the numerous common law jurisdictions that have rejected or modified the Austerberry prohibition against enforcement of affirmative covenant.^Footnote2 The authors wisely attribute this development in large measure to the following: “Since the 1960s, increasing density of development has created a need to consider how best to address issues of maintenance and management of common property.”

In fact the nation that gave us the Austerberry precedent that Canadian appellate jurisprudence still clings to has effectively rejected the rule in Austerberry in the most common situations in which affirmative covenants are sought to be enforced against successors-in-title. In Halsall v Brizell [1957] 1 Ch 169, [1957] 1 All ER 371, [1957], the court held that although a covenant to pay the costs of keeping common improvements was not enforceable if the successors-in-title did not want the benefit of the common improvements (including roads, sewers and seawall); if they wanted the benefit of the improvements the successors-in-title were obligated to pay.

The court went further in Wilkinson & Ors v Kerdene Ltd. [2013] EWCA Civ 44 (England and Wales Court of Appeal 2013):

As a consequence of the maintenance works which it has carried out, Kerdene has since 2000 sought to recover from the owners of the new bungalows…[M]ost of them are successors in title to the original purchasers against whom the positive covenant to pay can only be enforced by Kerdene if it can bring the case within the equitable beneﬁt and burden principle applied by Upjohn J in Halsall v Brizell

…

12. … Most raised an argument that, absent a chain of indemnity covenants (which does not exist in this case), the burden of the positive covenant to pay has ceased to be enforceable and cannot now be enforced on the basis of the beneﬁt and burden principle. In that connection, reliance was placed on the fact that parts of the original leisure facilities have either been sold off or no longer exist and on the failure by Kerdene to carry out maintenance… It was also pleaded that the defendants have made no use of any of the facilities apart from the roads and footpaths.

…

33. … Although the continued exercise of the Schedule 1 rights is not made expressly conditional upon payment…the payment is intended to ensure that the rights remain capable of being exercised. The authorities require one to look beyond the express terms of the conveyance and consider what in substance the covenantor is paying for. Here, as in Halsall v Brizell, the payment, at least in substantial part, is intended to provide a contribution to the cost of maintaining the roads and other facilities over which the owners of the bungalows are granted rights. None of them has ceased to use the roads nor wishes to do so.

See also: Elwood v Goodman, 2013 EWCA 1103^Footnote3

In Crow v Wood, [1971] QB 77, (1970) 21 P & CR 929, [1970] 3 WLR 516, [1970] EWCA Civ 5, [1970] 3 All ER 425, the Court of Appeal held that an obligation to maintain a fence in good repair ran with the land that had been in common ownership and was subsequently subdivided, characterizing the obligation as an easement or quasi-easement that could even arise from prescription. The court characterized Austerberry as a decision analyzing a contract that required an owner to keep a road in good repair.

In the U.S. the judicial precedent really gives no weight at all to the rule in Austerberry. The case law there has, with some variants, come down in favour of enforcement of affirmative covenants against successors-in-title. See, for example: Adaman Mutual Water Company v United States, 278 F.2d 842 (1960), which was decided in the context of a condemnation (expropriation) of land by the federal government that was subject to an obligation to pay assessments to a corporation formed to supply irrigation water to area property owners.^Footnote4 MercantileSafe Deposit and Trust Company v Mayor and City Council of Baltimore, 308 Md. 627, 521 A.2d 734 (1987), the issue was whether a lease obligation to restore altered leased premises constituted an enforceable affirmative covenant running with the land.^Footnote5 Greenspan v Rehberg, 56 Mich. App. 310, 224 N.W.2d 67 (1974) decided that an obligation to maintain access pursuant to an instalment sale contract ran with the land and was not merged into the deed that conveyed title to the owner of the burdened property.^Footnote6 Lake Arrowhead Club v Looney, 112 Wn.2d 288, 770 P.2d 1046 (1989) decided that the affirmative covenant obligating a property owner to pay the owner’s share of the cost of maintaining community facilities survived a tax sale.^Footnote7 Fitzstephens v Watson, 218 Or. 185, 190-191, 344 P.2d 221, 190-191 (1959), court upheld the affirmative obligation created in the servient property owner’s deed to furnish water.^Footnote8 Bessemer v Gersten, 381 So. 2d 1344, 1347-1348 (Fla Sup Court 1980), court upheld the enforcement of an affirmative covenant running with the land that obligated owners of properties in a subdivision to make payments for the maintenance of common facilities. In Nicholson v 300 Broadway Realty Corp., 7 NY 2d 240 (1959), the court held that an affirmative covenant to provide heat to an adjacent building ran with the land and was enforceable so long as the adjacent building stood.^Footnote9 Figure Eight Beach Homeowners' Association, Inc. v Parker, 62 NC App 367, 303 S.E.2d 336, rev den 309 NC 320, 307 SE 2d 170 (1983), court held that property owners’ association could enforce a recorded covenant obligating owners to pay assessments for maintenance and improvement of ascertainable common property.

In Neponsit Prop. Owners' Assn. v Emigrant Indus. Sa v Bank, 278 NY 248 (1938), the New York Court of Appeals enforced the affirmative obligation of a property owner under a recorded covenant to pay maintenance fees to the association created to maintain common roads and other common facilities. The court applied common sense reasoning that is similar to the benefit and burden reasoning in Wilkinson above.

The covenant in this case is intended to create a charge or obligation to pay a fixed sum of money to be "devoted to the maintenance of the roads, paths, parks, beach, sewers and such other public purposes as shall from time to time be determined by the party of the first part [the grantor], its successors or assigns." It is an affirmative covenant to pay money

…

the grantee… obtained not only title to particular lots, but an easement or right of common [*260] enjoyment with other property owners in roads, beaches, public parks or spaces and improvements in the same tract. For full enjoyment in common by the defendant and other property owners of these easements or rights, the roads and public places must be maintained. In order that the burden of maintaining public improvements should rest upon the land benefited by the improvements, the grantor exacted from the grantee of the land with its appurtenant easement or right of enjoyment a covenant that the burden of paying the cost should be inseparably attached to the land which enjoys the benefit. It is plain that any distinction or definition which would exclude such a covenant from the classification of covenants which "touch" or "concern" the land would be based on form and not on substance.

…

Only blind adherence to an ancient formula devised to meet entirely different conditions could constrain the court to hold that a corporation formed as a medium for the enjoyment of common rights of property owners owns no property which would benefit by enforcement of common rights and has no cause of action in equity to enforce the covenant upon which such common rights depend.

[Emphasis supplied]

Deference to historic precedent

No competent lawyer would dispute the importance and value of precedent. But precedent in the context of affirmative covenants in Canada seems to occupy a more forceful position than is warranted by jurisprudence on precedents.

In Canada (Attorney General) v Hislop, [2007] 1 SCR 429, 2007 SCC 10 (CanLII) the court remarked:

Commentators and courts have pointed out that judges fulfill a legitimate law-making function. Judges do not merely declare law; they also make law. These critics argue that Blackstone’s view is a fiction as judges make law, especially in the common law world. See, e.g., Lord Reid, “The Judge as Law Maker” (1972-1973), 12 J.S.P.T.L. 22. They say such a fiction should not be turned into an ironclad principle.

…

The House of Lords recently adopted this view in the course of its discussion of prospective overruling: In re Spectrum Plus Ltd. (in liquidation), [2005] 2 A.C. 680, [2005] UHKL 41. The words of Lord Nicholls at para. 34 are particularly apt:

[Blackstone’s declaratory] theory is still valid when applied to cases where a previous decision is overruled as wrong when given. Most overruling occurs on this basis. These cases are to be contrasted with [those] where the later decision represents a response to changes in social conditions and expectations. Then, on any view, the declaratory approach is inapt. In this context [this] approach has long been discarded. It is at odds with reality. [Emphasis supplied]

British Columbia v Imperial Tobacco Canada Ltd., [2005] 2 SCR 473, 2005 SCC 49 (CanLII):

[D]evelopments in the common law have always had retroactive and retrospective effect. Lord Nicholls recently explained this point in In re Spectrum Plus Ltd., [2005] 3 W.L.R. 58, [2005] UKHL 41, at para. 7:

A court ruling which changes the law from what it was previously thought to be operates retrospectively as well as prospectively.

Sriskandarajah v United States, 3 SCR 609, 2012 SCC 70, 290 CCC 3d 349 (2012):

[19] Exceptionally, this Court has recognized that it may depart from its prior decisions if there are compelling reasons to do so: R. v Henry,2005 SCC 76 (CanLII), [2005] 3 S.C.R. 609, at para. 44. The benefits must outweigh the costs. For instance, compelling reasons will be found when a precedent has become unworkable, when its validity has been undermined by subsequent jurisprudence or when it has been decided on the basis of considerations that are no longer relevant. [Emphasis supplied]

The dissenting opinion of MacPherson in Amberwood Investments Ltd. v Durham Condominium Corp. No. 123, supra. is in the view of the author a correct statement of the direction the courts should adopt in the context of affirmative covenant enforcement:

Both the benefit-burden and conditional grant exceptions to the rule in Austerberry v Corporation of Oldham could and should be adopted into the law of Ontario and both exceptions applied to the facts of this case. The rule in Austerberry was a common law rule created by the courts, and there was no reason why the courts should not regard it as their function to assess in a principled way whether exceptions need to be developed to deal with unforeseen situations or cases where the strict application of the rule would lead to injustice. That process was the essence of the common law. [Emphasis supplied]

Cracks in the canadian prohibition against enforcement

Campobello Island Club v Goodhue, 2006 NBQB 412 - Property owners’ association prevailed in the association’s effort to collect past due common expenses payable by an owner under covenants recorded in all applicable deeds.^Footnote10 See also: Wasson Court Management v Kerr, 2006 NBQB 424, very similar facts to Campobello Island Club v Goodhue, except the recorded covenants included an enforceable provision for a lien to secure unpaid charges, and the common expenses did not properly include snow removal, paving and townhouse eavestrough cleaning because those services were not provided for in the recorded covenants.

Black v Owen, 2016 ONSC 40 (CanLII), the court applied dicta in Amberwood and the holding in Wilkinson to enforce an affirmative covenant under each of two alternative theories, which have been described as the “Benefit and Burden” and “Conditional Grants Exceptions.” The reasoning outlined by the court is strikingly similar to reasoning of the New York State Court of Appeal in Neponsit.^Footnote11

Although far from a perfect alternative to direct enforcement of an affirmative covenant, in Middlesex Condominium Corporation 229 v WMJO Limited, 2015 ONSC 3879 a joint use and maintenance agreement for common facilities included a provision for proportionate sharing of costs of maintenance and repairs, but based on Amberwood Investments Ltd., no claim was made to recover the proportionate share of costs against a successor owner. The condominium corporation sought recovery for unjust enrichment. Court held the claim for unjust enrichment was proper.

Conclusion

It can be argued that the rule in Austerberry was never sound. Common sense and a recognition of the densely populated and developed world we live in with interpendence upon common utility, roadway and other systems, leave no room for blind adherence to a case decided 140 years ago in a different world in a relatively narrow context.

Canadian appellate courts should re-evaluate their blind adherence to the Austerberry rule. As Mr. Justice Benjamin N. Cardoza^Footnote12 said:

I think that when a rule, after it has been duly tested by experience, has been found to be inconsistent with the sense of justice or with the social welfare, there should be less hesitation in frank avowal and full abandonment. … That court best serves the law which recognizes that the rules of law which grew up in a remote generation may, in the fullness of experience, be found to serve another generation badly, and which discards the old rule when it finds that another rule of law represents what should be according to the established and settled judgment of society. The Nature of the Judicial Process (1921), pages 150-51.

Mark Tipperman is a lawyer in Wolfville, N.S.

Footnotes

Footnote 1

Westbank Holdings Ltd. v Westgate Shopping, 155 BCAC 1; [2001] BCJ No 852 (QL), 2001 BCCA 268 (CanLII), the Court quoted with approval, DeCastri in his text, Registration of Title to Land (Carswell 1987), cited by Clearwater, J. in Canada Safeway Ltd. v Thompson (City), [1996] M.J. No. 393, August 15, 1996, at page 8.

Return to footnote 1 referrer

Footnote 2

The Conveyancer and Property Lawyer, 2015, 4, 316-323:

The Austerberry rule was adopted in many common law jurisdictions, with the notable exception of the US. The position there has been clarified recently in the Restatement (Third) of Property, Servitudes (2000).23 - The starting point regarding validity of covenants in the US since the Restatement is that servitude24 is valid unless “it is illegal or unconstitutional or violates public policy.”25 Provision is made for the modification and termination of affirmative covenants if the obligation becomes excessive.26 It is worth noting that there is a separate system regulating "common interest communities," which are governed by statute in most states.27 In Scotland affirmative real burdens have been allowed to run with the land since Tailors of Aberdeen v Coutts (1840).28 The need for enforceability of positive obligations in Scotland is heightened by the infrequency of leasehold as a device for land management. Many of the other jurisdictions have, like England and Wales, become dissatisfied with the Austerberry rule over time. Indeed, legislation has been enacted in Northern Ireland,29 the Northern Territory of Australia, 30 New Zealand 31 and Ireland, 32 allowing positive covenants to run with the land. In addition to the jurisdictions where legislative changes have been made, a number of others have received recommendations from law reform bodies.33 The gradual move of common law jurisdictions towards a desire to end the Austerberry rule is likely motivated by socio-economic factors related to property values. Since the 1960s, increasing density of development has created a need to consider how best to address issues of maintenance and management of common property.34

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Footnote 3

Elwood v Goodman, 2013 EWCA 1103:

Could the benefit and burden principle apply where a successor in title acquires only part of the land that originally benefitted from the right of way?

Yes. It did not matter that there was no mechanism in the original transfer to provide for the subdivision of the retained land. The new owner of part was liable to contribute a fair and reasonable proportion of the maintenance costs by reference to the portion of the road which its unit abutted. Did it matter that the burden of the obligation had not been registered against Dobson's title?

…

Was Goodman liable to pay towards the contribution to the maintenance of the one metre strip?

No. Under the benefit and burden principle there has to be a correlation between the related benefit and burden. In this case Goodman had no right to use the one-metre extension (just a terminable licence to use it) and so was not liable to contribute to the cost of its maintenance.

Return to footnote 3 referrer

Footnote 4

Adaman Mutual Water Company v United States, 278 F.2d 842, 847 (1960):

As an integral facet of the overall plan, the duty to pay assessments attached to all land to which stock was appurtenant and upon which cultivation had commenced. We think this burden constituted an equitable servitude enforcible under Arizona law. See Murphey v Gray, 1958, 84 Ariz. 299, 327 P.2d 751; Kengla v Stewart, 1957, 82 Ariz. 365, 313 P.2d 424; O'Malley v Central Methodist Church, 1948, 67 Ariz. 245, 194 P.2d 444.

[4] That the duty to pay is an affirmative obligation rather than a negative restriction on use does not alter our conclusion.

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Footnote 5

Mercantile Safe Deposit and Trust Company v Mayor and City Council of Baltimore, 308 Md. 627, 521 A.2d 734 (1987):

The Maryland cases, therefore, give critical effect to the presence or absence of language binding successors and assigns. If these words are present, as they are here, the covenant is one running with the land or the functional equivalent thereof.

…

Indeed, this reasoning is entirely consistent with the majority American view that makes no distinction between affirmative and restrictive covenants for the purpose of determining whether a covenant runs with the land. It is well established that an affirmative covenant, which imposes a burden on the covenantor for the performance of some future act, may be a covenant running with the land and an interest in real property. See Barron v Whiteside, 89 Md. 448, 43 A. 825 (1899); Thomas v Vonkapff, 6 G & J 372 (1834); Gallagher v Bell, supra. See also Adaman Mutual Water Co. v United States, 278 F.2d 842 (9th Cir.1960); BurtonJones Development, Inc. v Flake, 368 Mich. 122, 117 N.W.2d 110 (1962); Vinson v Meridian Masonic Temple Building Assoc., 475 So.2d 807 (Miss. 1985); Mendrop v Harrell, 233 Miss. 679, 103 So.2d 418 (1958); Horst v Housing Auth. of County of Scotts Bluff, 184 Neb. 215, 166 N.W.2d 119 (1969); Old Dominion Iron and Steel Co. v Virginia Electric & Power, 215 Va. 658, 212 S.E.2d 715 (1975); Note, A New Phase in the Development of Affirmative Equitable Servitudes, 51 Har vL.Re v 320 (1937); II American Law of Property, § 9.16 (1952).

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Footnote 6

Greenspan v Rehberg, 56 Mich. App. 310, 321, 224 N.W.2d 67 (1974):

The fact that the covenant in the instant case was affirmative in nature, i.e., called for the performance of the specific acts by the covenantor, does not alter the applicability of the foregoing rules. Although in England and arguably in New York, it has been held that the burden of affirmative covenants does not run with the land, that rule has not been adopted generally throughout the United States and has no application in Michigan. See generally, Annotation, 68 ALR2d 1022 (1959), Affirmative Covenants as Running with the Land; Adams v Noble, 120 Mich 545; 79 NW 810 (1899); Mueller, supra, BurtonJones Development, Inc v Flake, 368 Mich 122; 117 NW2d 110 (1962).

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Footnote 7

Lake Arrowhead Club v Looney, 112 Wn.2d 288, 770 P.2d 1046 (1989):

We hold in the present case that a covenant requiring the owner to pay his share of the costs of maintaining the neighborhood's facilities also survives a tax sale.

…

Although historically, American courts were disinclined to allow the running of affirmative covenants, the modern trend is to allow them to run in the same manner as negative covenants. This change of attitude represents an acknowledgment of the social usefulness of affirmative, as well as negative, covenants. 6 P. Rohan 8.03[2]. Indeed, this court long ago allowed the running of an affirmative covenant as if it were a negative covenant. SEE RODRUCK v SAND POINT MAINTENANCE COMM'N, 48 Wn.2d 565, 295 P.2d 714 (1956).

…

SUPRA; MULLENDORE THEATRES, INC. v GROWTH REALTY INVESTORS CO., 39 Wn. App. 64, 691 P.2d 970 (1984). The majority of American jurisdictions are in accord. 5 R. Powell 675[2]; 6 P. Rohan 8.03[2][c]; Stoebuck, RUNNING COVENANTS: AN ANALYTICAL PRIMER, 52 Wash. L. Re v 861, 870 (1977). Accordingly, Looney's covenant satisfies the "touch and concern" requirement.

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Footnote 8

Fitzstephens v Watson, 218 Or. 185, 190-191, 344 P.2d 221, 190-191 (1959):

17. Although there is authority for the proposition that affirmative covenants will not run with the land, Merchants' Union Trust Co. v New Philadelphia Graphite Co., 10 Del Ch 18, 83 A 520 (1912); Kettle River R. Co. v Eastern Ry. Co., 41 Minn 461, 43 NW 469 (1889); De Gray v Monmouth Beach Clubhouse Co., 50 N J Eq 329, 24 A 388 (1892); Miller v Clary, 210 N Y 127, 103 NE 1114 (1913), but see Neponsit Prop. Owners' Ass'n v Emigrant Industrial Sa v Bank, 278 N Y 248, 15 NE2d 793 (1938); West v Giesen, 242 SW 312 (Tex Civ App 1922), the prevailing view is to the contrary. Murphy v Kerr, supra; Annotation, "Affirmative Covenants as Running with the Land", 41 ALR 1363, supplemented 102 ALR 781, 118 ALR 982; see cases collected in Clark, Covenants and Interests Running With Land (2d ed) p 249 et seq.; 5 Powell on Real Property, §§ 676, 677; 3 Tiffany, Real Property (3d ed) § 854; Bolles, Covenants of Estates in Land in Law and Equity, 33 Dick L Rev 50, 59 (1929); Lloyd, Enforcement of Affirmative Agreements Respecting the Use of Land, 14 Va L Rev 419 (1928); Walsh, Covenants Running with the Land, 21 N Y U L Q 28, 47 et seq. (1946); Note, 51 Harv L Rev 320 (1937). We accept the latter view. Guild v Wallis, 130 Or 148, 279 P 546 (1929); see Ford v Oregon Electric Ry. Co., 60 Or 278, 117 P 809, 36 LRA (NS) 358 (1911). [218 Or. at 208]

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Footnote 9

Nicholson v 300 Broadway Realty Corp., 7 NY 2d 240 at 248: in a footnote the court cited other examples of affirmative covenants the court had upheld as enforceable: [2] We note several of these exceptions: covenants to build fences along boundary lines (Moxley v New Jersey & N. Y. R. R. Co., 143 N.Y. 649; Dey v Prentice, 90 Hun 27), to maintain party walls (Mott v Oppenheimer, 135 N.Y. 312), to provide railway crossings (Post v West Shore R. R. Co., 123 N.Y. 580; Day v New York Cent. R. R. Co., 31 Barb. 548), to maintain and repair buildings and dams (Nye v Hoyle, 120 N.Y. 195; Denman v Prince, 40 Barb. 213), to repair canal wall (Morehouse v Woodruff, 218 N.Y. 494, supra), to repair and maintain right of way and sewers laid therein (Greenfarb v R. S. K. Realty Corp., 256 N.Y. 130) and to pay for damages caused by sparks and cinders falling on ice of lake (Morgan Lake Co. v New York, N. H. & H. R. R. Co., 262 N.Y. 234).

Return to footnote 9 referrer

Footnote 10

Campobello Island Club v Goodhue, 2006 NBQB 412:

[27] In my opinion, the Respondents' obligations arise because the restrictive covenants contained in their Deed run with the land and because the Respondents agreed, in writing, to comply with the restrictive covenants contained in their Deed.

[28] In my opinion, the covenants giving rise to the Respondents' obligations are enforceable, both as restrictive covenants which run with the land, and as personal covenants signed by the Respondents.

[29] In Woolworth v Hudson's Bay Company et al., [1985] N.B.J. No. 160, the Court of Appeal concluded that a restrictive covenant will run with land in two circumstances and quotes from the earlier New Brunswick case of Friesen v Valley View Estates Ltd. (1977), 18 N.B.R. (2d) 1 as follows:

I take it to be well settled in law that a restrictive covenant can be deemed to run with the land only in two circumstances, viz., (a) where the covenant, whether or not expressly made binding upon the successors and assigns of the grantee to whom it is initially conveyed, is expressly stated to run for the benefit of described lands of the Covenantee; or, even if failing that, (b) the land against which the covenant is to run and the land for the benefit of which the covenant is to run are both part of a common building scheme, all parts of which are subject to – if not totally then at least substantially – to the same restrictions.

Return to footnote 10 referrer

Footnote 11

Black v Owen, 2016 ONSC 40 (CanLII):

[64] It is not disputed that the law in Ontario is that positive covenants generally do not run with the land. The Supreme Court of Canada and the Court of Appeal for Ontario have both affirmed that positive covenants do not run with freehold land in either law or equity: see Parkinson et al. v Reid, [1966] S.C.R. 162; Amberwood Investments Ltd. v Durham Condominium Corp. No. 123 (2002), 211 D.L.R. (4th) 1 (Ont. C.A.). This rule is sometimes referred to as the Austerberry rule, due to its roots in the British case, Austerberry v Oldham Corp. (1885), 29 Ch. D. 750.

[65] The questions in this appeal are whether the exceptions to this rule are the law in Ontario, and whether the exceptions apply to the facts of this case.

[66] The Court of Appeal in Amberwood recognized certain statutory exceptions to the general rule. ***

[67] The Court also discussed three potential common law exceptions confirmed in the English law, including: (i) a chain of covenants; (ii) the doctrine of benefit and burden; and, (iii) conditional grants. ***

Explanation of the Benefit and Burden and Conditional Grants Exceptions

[71] In Tito v Waddell (No. 2), [1977] 1 Ch. 106, the famous British case on the benefit and burden principle, Vice-Chancellor Megarry explained the differences between the exceptions ***

[72] In summarizing this section of Tito, British Professor Christine Davis writes:

Under the pure principle of benefit and burden, as defined by Megarry V-C. in Tito v Waddell (No. 2), an obligation imposed by a deed or other arrangement that also grants a benefit may bind a person taking the benefit. According to Megarry V-C. the pure principle deals with cases where it is not possible to construe the burden as a condition of the benefit.

See C. Davis, “The Principle of Benefit and Burden” (1998) 57 Cambridge L.J. 522, at p. 537.

[73] Canadian Professor Bruce Ziff has also addressed Vice-Chancellor Megarry’s reasoning in Tito, though he uses the case’s alternative name, Ocean Island:

The central rationale of the pure principle can be found in several venerable playground adages: ‘you can't have it both ways’; ‘you can't have your cake and eat it too’; and ‘you can't blow hot and cold’. Generally speaking, these notions have received recognition interstitially throughout the law, but the significant contribution of the Ocean Island case is that it draws together and builds on this earlier authority…The principle of benefit and burden applies where, as a matter of construction, the benefits and burdens are created as independent obligations, for a central feature of the doctrine is to tether previously separate promises. Where, by contrast, conditional benefits are involved, the matter is more easily resolved. In that instance, the benefit and the burden are so intimately intertwined that a taking or approbation of the benefit ineluctably means that the burden has also been assumed… [Emphasis added in original]

See B. Ziff, “Positive Covenants Running With Land: A Castaway on Ocean Island?” (1988-1989) 27 Alta. L. Re v 354, at pp. 356-357.

[74] By way of synthesis, I make the following observations as to the meaning of the two exemptions:

Conditional Grant Exemption. When being asked to enforce a positive obligation, the courts will first look at the transaction between the parties to see if a benefit was clearly made on the conditional acceptance of a positive obligation. If such an intention can be made out on the face of the transaction, the conditional grants exception is engaged.

Benefit and Burden Exemption: If a conditional connection between the obligation and the benefit is not clear, the courts will then consider whether the benefit and burden exception applies. By looking at the circumstances of the transaction, the intentions and relationship of the parties, and the nature of the benefits and burdens at issue, the courts will determine if there is an implicit and necessary connection between formally separate obligations and advantages. Or, to repeat the words of Professor Ziff, this second exception looks to whether the courts should “tether previously separate promises”.

***

[96] The majority in Amberwood did accept that the conditional grant exception could apply, but found that it did not apply in the facts of that case.

[97] The reluctance of Charron J.A. to apply the benefit and burden exception in 2002 was caused, in part, by legal ambiguity in the English cases. This ambiguity has been clarified by the recent decision in Wilkinson. That case is strikingly similar to the circumstances and the facts of this case. There is also no doubt that both the benefit and burden and the conditional grants exceptions are now part of the English common law.

[98] I also note that these principles have been applied by Crane, J. in in Wentworth Condominium to ensure fairness in that fact situation.

[99] The common law of positive covenants is in evolution, and is capable of adapting to new factual and contextual situations. I adopt the reasons of MacPherson, J. A. in Amberwood as reflecting the current status of the law in Ontario, taking into account recent clarification and confirmation of the benefit and burden exemption in England. I conclude therefore that both the conditional grant and the benefit and burden exceptions reflect the current law in Ontario.

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Footnote 12

Benjamin N. Cardoza sat on the U.S. Supreme Court and the New York Court of Appeals

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