Tokijarhpabi Holdings Ltd v Wildman, 2017 ABQB 277

Court of Queen’s Bench of Alberta Citation: Tokijarhpabi Holdings Ltd v Wildman, 2017 ABQB 277 Date: 20170421 Docket: 1601 01600 Registry: Calgary Between: Tokijarhpabi Holdings Ltd. Plaintiffs - and - Curtis Kent Wildman, Michael P. Stubley and Heather L. Stubley, David John Irvine and Valerie Elaine Irvine, Peter Scentlebury and Ilsa Montague, Cornelis Van De Panne and Johanna A. Van De Panne, Scott H.D. Bower and Rebecca E.J. Bower, Shigeyuka Kamimori, Andrew M.J. Townsend and Jodi L. Townsend, Ninella S. Secara and Sorin S.

Secara, Gary Ross Dyck and Donna Rae Dyck, and Raymond Robitaille Defendants Corrected judgment: A corrigendum was issued on April 28, 2017; the corrections have been made to the text and the corrigendum is appended to this judgment. _____________________________________________________ Memorandum of Decision

of J.B. Hanebury , Master in Chambers ___________________________________________________ [ 1 ] This originating application seeks to discharge or amend a unique restrictive covenant that was registered in 1971 on the title to lands in the Alberta foothills. [ 2 ] The facts are convoluted and have all the twists and turns of a diabolical law school property exam. It is necessary to set them out at length in light of the arguments of the parties, particularly the argument that the applicant comes to this Court with “unclean” hands.

In addition, I expect that this application is but a way station on the litigation road, and a detailed description of the facts by this Court may be useful in the future. To make this decision more accessible to readers, I have set out the facts in detail in Appendix A to this decision and provided only a brief

summary below. [ 3 ] The restrictive covenant, instrument 2617LN (2617LN), predates the enactment of condominium laws in Alberta and was part of a scheme to establish a strata or condominium type of ownership system over rural lands near Jumping Pound Creek. The concept was novel at the time and the approval to build the community of 15 homes resulted from the developer working closely with the municipal district.

The common lands were to be put into the name of a company and the restrictive covenant required that its shareholders be the homeowners. [ 4 ] In essence the scheme provided two mechanisms for the protection of the development plan. [ 5 ] The first was the agreement in issue, which the parties agree is a restrictive covenant. It was executed by the Municipal District of Rockyview, the Calgary Planning Commission and Tokijarhpabi Holdings Ltd. (THL) in 1971. THL was to own all of the lands and after the sale of the homeowners’ lots it would remain the owner of the common lands.

The restrictive covenant provided that the owners of the lots and the shareholders of THL had to be identical. It was registered against the lands and the notation on the titles called it an “Easement”. [ 6 ] The second mechanism used to protect the development plan was a shareholders agreement, which was appended to the restrictive covenant and registered with it. It too required the owners of the homes and the shareholders of the company that owned the common lands to be identical. [ 7 ] Over time changes were apparently made to this second mechanism, the shareholders agreement.

The owners of the lots began retaining their shares in the company when they sold their houses, allegedly as a result of a unanimous agreement in 1995. This eventually resulted in the homeowners losing the ability to control the common lands. [ 8 ] No effort was made to change the restrictive covenant which forbade what they were doing, and at that point it is unknown if anyone even remained aware of its terms. A Homeowners Association (HOA) was set up to take over some of the responsibilities of THL such as the water system, and THL granted the Nature Conservancy an easement over some of the common lands.

Other common lands were sold and developed by the company. An easement was registered to protect the right of the owners to access their roadway and the common lands subject to the Nature Conservancy easement. [ 9 ] New purchasers in the community had varying understandings of what rights, if any, they had in relation to the common lands and their development. At an unknown date the Land Titles Office had lost 2617LN, and in 2000 a Certificate of Lost Instrument was issued.

However, a copy of 2617LN was found by THL in 2015, and the copy replaced the Certificate. [ 10 ] In 2014 THL accepted an offer from a developer to purchase the portion of the common lands not subject to the Nature Conservancy easement. The developer apparently intended to build high-density housing on the site. Because of the restrictive covenant THL could not clear the title, and the sale did not complete. THL brought this application seeking to discharge the restrictive covenant.

The subsequent owners, allegedly with the support of the remaining three original owners, oppose this application. [ 11 ] All interested parties have been served with this application. The original developer, the Municipal District of Rockyview, and the three remaining original owners who have shares in THL have chosen not to actively participate in the proceedings. ISSUES [ 12 ] THL acknowledges that the entire restrictive covenant is a “building scheme” restrictive covenant, including the clauses that require the shares of THL to be owned by the homeowners, and it runs with the land.

It argues that it should be discharged on two grounds. [ 13 ] The first is that the respondents all purchased their lots without notice of the terms of the restrictive covenant as the instrument was at some point lost and could not be reviewed at the Land Titles Office. As a result, the restrictive covenant no longer meets the common law requirements for a “building scheme” restrictive covenant and therefore should be removed from title pursuant to s. 48(5) of the Land Titles Act , R.S.A. 2000, c.

L-4. [ 14 ] The second is that, in addition to the conditions for a discharge found in s. 48(4) of the Act, the common law remedies for the discharge of a restrictive covenant remain available. They provide that a restrictive covenant that is spent, unworkable, or obsolete or its enforcement would be vexatious, can be discharged. It argues that test has been met and therefore 2617LN should be discharged.

[15] For the reasons that follow, I find that the restrictive covenant should not be discharged at this time. ANALYSIS [16] Before considering the two issues raised by the parties, I wish to make clear an initial determination that affects these reasons.It was alleged by the owners that THL does not come to this Court with “clean hands” and therefore the remedies it seeks should not beconsidered further.

When questioned on what behaviour or act was relied upon to support this statement counsel for the owners advisedthat no one specific behaviour was being relied upon, but simply the series of acts undertaken that misled new owners and changed thenature of the restrictive covenant, and the loss and sudden discovery of a copy of 2617LN. The acts of the parties have been amplydescribed in the facts attached as Appendix A. [17] THL was clearly a poor record keeper. It clearly was disorganized.

It clearly did not appreciate the need to properly paper theinitiatives taken by the owners to manage their unusual legal situation. None of this is surprising in light of the fact that the communitywas small and gives every indication of having been closely-knit.

It seems that there was amongst them a true community of interests,not just a legally imposed one, the latter being a fundamental tenet of the type of restrictive covenant in issue. [18] In my view, the evidence before this Court indicates that people simply forgot about the terms of the restrictive covenant.When registered it was described as an easement, which it was in part. However the result was that its notation on the titles did notimmediately make the nature of all of its terms clear. There is no mention of it for many years in the documents provided and then itcould not be found.

However, when found by the president of THL, the missing instrument was disclosed to the owners. [19] This evidence does not support a finding that THL’s hands are not clean, merely careless. With that determination I turn to theissues raised by the parties. [20] There are two types of restrictive covenants in Alberta. As noted, it is acknowledged by the parties that, at the time of itsregistration, this restrictive covenant was of the second type, a building scheme type of restrictive covenant.

Building scheme restrictivecovenants are imposed over lands to regulate their development. [21] The validity of each type of restrictive covenant is determined by different tests, and it is not necessary that a restrictivecovenant meet the tests for both kinds of covenant: Potts v. McCann, 2002 ABQB 734, para. 24. [22] Restrictive covenants of either type can be discharged pursuant to either s. 48(4) or 48(5) of the Land Titles Act. The sectionsapply to different circumstances and utilize different tests to determine if a discharge should be granted. They state:

(4) The first owner, and every transferee… is deemed to be affected with notice of the condition or covenant, and to be bound by it if it isof such nature as to run with the land, but any such condition or covenant may be modified or discharged by order of the court, on proofto the satisfaction of the court that the modification will be beneficial to the persons principally interested in the enforcement of thecondition or covenant or that the condition or covenant conflicts with the provisions of a land use bylaw or statutory plan under

Part 17of the Municipal Government Act, and the modification or discharge is in the public interest.

(5) The entry on the register of a condition or covenant as running with or annexed to land does not make it run with the land, if thecovenant or condition on account of its nature, or of the manner in which it is expressed, would not otherwise be annexed to or run withthe land. [23] THL seeks the discharge of the restrictive covenant pursuant to both subsections and the common law. I will deal first with itsapplication to discharge the restrictive covenant pursuant to s. 48(5).

Should the building scheme restrictive covenant be discharged pursuant to s. 48(5) of the Act on the basis that it does not meet thecommon law requirements necessary for its validity? [24] THL says that it acknowledges that the restrictive covenant may have been valid upon its registration. However, upon the lossof the instrument behind the notation on the registry it no longer met the notice requirement of a building scheme restrictive covenant. That requirement, THL says, is found in Potts, at para’s 25 and 26, quoting from Elliston v.

Reacher, [1908] 2 Ch. 374 at 384, afff’d[1908] 2 Ch. 665. [25] After quoting the requirements necessary for a valid restrictive covenant found in Elliston, the Court in Potts, held that“[b]ecause of the wording of the transfer, and the operation of the Land Titles Act, I am satisfied that all of the present owners and theirpredecessors in title purchased the lots on the understanding that they would be bound by the scheme” [the restrictive covenant]. [26] THL relies on that statement to say that this restrictive covenant can be discharged under s. 48(5) because, as the instrumentwas lost, the common law requirement of notice was not met and the deemed notice requirements found in the Act cannot apply. [27] THL acknowledges that s. 48(4) of the Land Titles Act deems notice to be given when it provides that the owner and everytransferee is “deemed to be affected with notice…of the condition or covenant” and bound by it.

See as well: Lindner v. Chittick, 2010ABQB 819, para. 39; Crump v. Kernahan, , para. 17; Potts, para. 26. [28] However, it argues that the circumstances in this case are an exception to this deemed notice provision. It points to thestatement of the Court in G.A. Developments Ltd. v. Michael J. Girard and Evelyn G. Pagee, (September 8, 1999) Action No. 9903-10151 (Alta.

Q.B.) (unreported), where the Court held that in the case of fraud and “very few other exceptions” a purchaser takes titlesubject to the registrations on title. [29] While the nature of these other exceptions was not mentioned in that case, THL says that this case is just such an exception.The underlying instrument was unavailable and the notation on title did not describe the instrument as a restrictive covenant. As a result,when the respondents, as subsequent purchasers, bought their homes they had no actual notice and the deemed notice was inoperative.

The requirement for notice of the building scheme restrictive covenant was not met. Since the owners took without notice, 2617LN is nolonger a valid restrictive covenant and must be discharged. [30] In considering THL’s argument, the place to start is with the wording found in s. 48(5). It provides that a covenant may notrun with the land “on account of its nature, or of the manner in which it is expressed”. [underlining added] This wording indicates thatthe determination to be made is whether a document itself constitutes a valid restrictive covenant.

In Lindner, para. 21, the Court saidthat s. 48(5) means that, “if a covenant would not by its language run with or be annexed to the land, registration cannot cure thatdefect”. [31] In my view, it could certainly be argued that the wording of s. 48(5) requires the Court to examine the nature and terms of thecovenant when it was registered to ascertain if it is a valid restrictive covenant. It is not an examination of the effect of subsequent eventson its nature and terms. I note that Elliston was decided over a hundred years ago under a different land system than the Torrens systemto which Alberta is subject.

Arguably the statement in Potts as to notice was simply a statement of the law, not a finding that therequirement of ongoing notice found in Elliston continues under s. 48(5). Furthermore, the Court in Potts did not actually need toconsider this issue as a result of the deemed notification found in s. 60 and 48 of our Act. Notification was a given. [32] I note that in Potts, there were events subsequent to the registration of the restrictive covenant that were considered by theCourt. The building scheme restrictive covenant had been discharged from some of the affected lots.

The Court did not consider thischange in circumstances when examining the covenant to see if it complied with s. 48(5). It examined the covenant as at the time of itsregistration and then later in the decision discussed the effect of those subsequent events when determining whether the restrictivecovenant should be discharged under another provision, s. 48(4). [33] This view that the ambit of s. 48(5) is restricted to an examination of the document at the time of its registration finds somesupport in the aforementioned quote from Lindner as to the meaning of s. 48(5).

In that case the Court examined the original documentand held that it did not meet the requirements of a building scheme restrictive covenant as the ambit of the scheme was not readilyascertainable. In other words it did not by its nature meet the requisite test to constitute that type of restrictive covenant. See as well:Rockyview (Municipal District No. 44) v. Prince, [1996] A.J.

No. 1347, aff’d 1997 CarswellAlta 124 (ABQB), where subsequentevents, a discharge of the covenant against some lots, were considered under the equivalent of s. 48(4), when determining whether todischarge the covenant. [34] However, ultimately I do not need to decide whether the common law requirement of notice remains in light of the wording ofs. 48(5). Even if the requirement of notice remains, I have not been persuaded that the owners did not have notice.

While it is tempting tofind that the loss of the instrument behind a registration results in the loss of the registered interest, in my view such a finding would runcontrary to the deemed notice provision which is fundamental to our Torrens system. [35] At common law, the burden of a restrictive covenant passes with the land except in the case of purchasers without notice “andparties interested are entitled to ascertain from the covenant the exact nature, character and extent of the restriction”: Noble v.

Alley,1950 CarswellOnt 127 (SCC), para. 31. [36] Alberta’s Torrens land registry system has to a great extent replaced or codified the common law. A restrictive covenant canbe registered as a caveat, or as a separate instrument as was done in this case: Restrictive Covenants at IV(B). Upon occasion, as here,restrictive covenants can be a part of the registration of other interests. In Hongkong Bank of Canada v. Wheeler Holdings Ltd., thealleged restrictive covenant was within a mortgage. [37] As noted by D.J.

Manderscheid Q.C., “Restrictive Covenants: An Alberta Perspective”, 2000, R.P.R. (3d) 23 at III(B)(3),quoting from Marahrens v. Oluk, 1976 ALTASCAD 87 , [1976] 4 W.W.R. 94 (Alta. C.A.) and G.A. Developments, purchasersare deemed through both the basic operation of our land titles system and the provisions of the Act to have notice of a restrictivecovenant when it is registered on the title. See as well: Lindner v. Chittick, , para. 39, Bank of Montreal v. 1323606 Alberta Ltd., 2013ABQB 596, para’s 21-26; Hongkong Bank of Canada v. Wheeler Holdings Ltd., 1990 ABCA 337, para. 64; Crump v.

Kernahan, 1995CarswellAlta 348. [38]

Section 54 of the Act provides: So soon as registered every instrument becomes operative according to its tenor and intent, and on registration creates, transfers,surrenders, charges or discharges, as the case may be, the land or the estate or interest in the land or estate mentioned in the instrument. [39]

Section 60 provides that a title grants rights in property only subject to the encumbrances, liens, estates and interests that areendorsed on the certificate of title. As noted previously, s. 48(4) provides for deemed notice of a restrictive covenant. [40] Under the Torrens system the Register “conclusively determines the status of the title and all of the encumbrances [except] inthe case of fraud”: Vallieres v. Vozniak, 2014 ABCA 290, para. 21; Darnley v.

Tennant, 2006 ABQB 575. [41] Here the lack of actual notice is not because of fraud but rather the loss of the original instrument by the Land Titles Office.The Queen’s Bench decision, G.A. Gerard, that THL relies on to argue that a lost instrument is an exception to the deemed noticeprovision, provides no examples of what those other exceptions are.

The Alberta Court of Appeal in Vallieres spoke only of fraud as anexception. [42] The parties referenced indirectly only one case that deals with the question of the effect of the loss of Land Titles documents.That reference is found in Victor Di Castri’s loose-leaf text, Registration of Title to Land [Carswell: 2012]. At para. 40 it refers to adecision of the High Court of Australia determining the effect of the destruction of the registry of the New Guinea Land RegistrationOrdinance during the Second World War.

The Court held that the indefeasibility of the title of a registered owner did not depend on hisor her ability to produce the certificate of title but on the provisions of the Ordinance that conferred the title. The accidental or otherdestruction of the registry did not destroy the statutory title of the registered owner.

[ 43 ] In light of the nature of our Torrens system, the aforementioned deemed notice provisions of the Act , the fact that fraud is not in issue, and the lack of any case law to the effect that the loss of an instrument results in the loss of notice and the underlying rights, I am not persuaded that the facts in this case constitute an exception to the deemed notice provisions.

As a result, 2617LN cannot be discharged pursuant to the provisions of the common law utilized in conjunction with s. 48(5) of the Act. [ 44 ] Finally, there are three original owners who had actual notice of the terms of the restrictive covenant as did the applicant, THL, who owns the common lands.

As earlier noted, the president of THL, unbeknownst to him, had the restrictive covenant in his files when this application was filed. [ 45 ] THL’s argument that the new owners had no notice ignores these other parties with notice, and followed to its conclusion suggests that the restrictive covenant should be discharged under s. 48(5) only from the lots of the owners who have no objection to being subject to the building scheme.

That would leave the scheme registered against the lands owned by THL and the original owners. [ 46 ] It is difficult to make sense of such a result in the context of a building scheme restrictive covenant where the goal is to “facilitate the development of the whole estate according to a definite plan which all purchasers are bound to follow”. A key goal of such a restrictive covenant is mutuality, in other words community of interest and reciprocity of obligation: Restrictive Covenants at II C quoting from Nottingham Patent Brick & Tile Co. v. Butler (1885), 15 Q.B.D. 261 at 268 .

This would be destroyed if the covenant were discharged from some but not all of the lands. [ 47 ] I note that Sections 20 and 21 of the Act provide a process whereby parties can apply to the court for an order dealing with a lost instrument.

THL, who had deemed and actual notice of the terms of the restrictive covenant, did not seek such a remedy during the period the instrument was missing. [ 48 ] In conclusion, the temporary loss of a document containing a building scheme restrictive covenant is insufficient to permit the instrument to be discharged under s. 48(5) on the basis that it was not a valid restrictive covenant, when notification of the document remained on the titles of all owners, and when a number of the original owners who had actual notice continued to hold their titles as part of the scheme. [ 49 ] The application under s. 48(5) is dismissed.

Do the common law remedies for a discharge apply: that the restrictive covenant is spent, obsolete or unworkable or its enforcement so vexatious that it should be discharged? [ 50 ] The Courts frequently hear applications for the discharge of restrictive covenants pursuant to s. 48(4) of the Act . It provides for a discharge in only certain situations.

The discharge must be either beneficial to the person principally interested in its enforcement, or the restrictive covenant must conflict with planning legislation, and its discharge must be in the public interest. [ 51 ] THL is not relying on the requirements of this section. It argues that the case law acknowledges that, in addition to the narrow grounds for a discharge available in s. 48(4), the common law remedies continue to be available.

It asks this Court to discharge the restrictive covenant on the basis that it has become spent, obsolete or unworkable or its enforcement would be vexatious (spent test). [ 52 ] The owners respond that the onus is on THL to convince this Court that this is the law. [ 53 ] The owners point out that the threshold question, the applicability of these common law remedies, has not been answered.

It says that these common law remedies are not the law in Alberta and THL has not established that they should be the law. [ 54 ] After a careful reading of the case law I have come to the conclusion that THL has not discharged that onus. The question of the applicability of the spent test in the face of s. 48(4) of the Act is a question that is yet to be determined by this Court.

It remains open to argument whether s. 48(4) provides an exhaustive list of the circumstances where a restrictive covenant can be discharged, or the common law reasons for unenforceability continue to apply [ 55 ] Three cases were provided that reference the question of the continued availability of the common law remedies. The first reference is found in Potts . After finding that s. 48(5) does preserve the common law in relation to a determination of the validity of a restrictive covenant, Slatter J. then turned his attention to s. 48(4).

He said at para. 31: It is less clear whether s. 48(4) also incorporates those portions of the common law which would cause an initially valid covenant to become unenforceable at common law. ….[s. 48(4)] is a specific provision…which provides for discharge of restrictive covenants in some specifically defined situations. It is open to argument whether the

section intends to provide an exhaustive list of the circumstances in which a restrictive covenant can be discharged, or whether the common law reasons for unenforceability also apply. Some cases imply that the common law rules are now only part of the “public interest” mentioned in s. 48… [ 56 ] He ultimately held that whether the common law test or the statutory test was used, the covenant was not capable of being discharged. As a result, he found that he did not have to determine the question of whether the common law remedies continued. [ 57 ] Similarly, in Barker v.

Palmer , 2005 ABQB 815 , the Court applied both the common law test and the statutory test under s. 48(4) and held that regardless of which test was used, the restrictive covenant was enforceable. [ 58 ] While the Court in Barker references and relies upon Potts , it does not mention that no determination has been made as to whether the common law remedies continue. This may be because, like Potts , such a determination was unnecessary as it made no difference to the ultimate determination. [ 59 ] Finally in Kolias v.

Condominium Plan 309 CDC , 2008 ABCA 379 , the Court, speaking of s. 48(5) and referencing Potts , said that “the Act preserves the common law respecting restrictive covenants”. While at first blush this statement could appear to indicate that all of the common law in relation to restrictive covenants is preserved, the context of the statement, the lack of analysis, and

the open question left by Slatter J. in Potts lead to a narrower conclusion. The reference was made only in relation to s. 48(5). It remains unknown whether the common law remedies co-exist with the discharge provisions of s. 48(4) or if those provisions have replaced them. [ 60 ] Therefore, there is no case law or analysis before this Court that would lead to a conclusion that the common law remedies for the refusal to enforce an otherwise valid restrictive covenant continue available.

THL acknowledges that it is not applying under the narrow requirements of s. 48(4) to discharge the restrictive covenant, I assume because it knows that test cannot be met. In the result it has not met the onus on it to establish this Court’s ability to grant the common law remedies it seeks and its application is dismissed. [ 61 ] Finally, I note the argument of the owners that even if the common law remedies continue, they are used in the context of the enforcement of a covenant, not its discharge. For the reasons above I have not had to consider this argument.

CONCLUSION [ 62 ] The application to discharge the restrictive covenant is dismissed. The covenant was a valid building scheme restrictive covenant when registered and under the Torrens system it remained a valid restrictive covenant while lost, and therefore cannot be discharged under s. 48(5).

The case law provided does not persuade the Court that the common law remedies (the spent test) have survived the enactment of the discharge provisions found in s. 48(4) with the result that the restrictive covenant cannot be discharged on that basis. [ 63 ] The amendment application sought to remove the developer from the restrictive covenant.

It was not found in the original application and was added in argument and I am not prepared to grant it at this time. [ 64 ] If the parties cannot agree as to costs, they may make contact the Clerk within 30 days to make an appointment to speak to the issue. [ 65 ] Finally, I would like to thank counsel for the steps taken to narrow the issues before the Court and their interesting arguments on the points in issue. Heard on the 25 th day of January, 2017. Dated at the City of Calgary, Alberta this 21st day of April, 2017. J.B. Hanebury M.C.Q.B.A. Appearances: Glenn Solomon, Q.C.

Geoffrey Boddy Jensen Shawa Solomon Duguid Hawkes LLP. for the Respondents / Applicants Bruce J. Macleod Scott Venturo LLP for the Applicant / Respondent _______________________________________________________ Corrigendum of the Memorandum of Decision

Of J.B. Hanebury, Q.C., Master in Chambers _______________________________________________________ The Citation line reflects 2017 APPENDIX A - STATEMENT OF THE FACTS Tokijarhpabi Holdings Ltd. (THL) was incorporated in 1971 to own lands near Jumping Pound, east of Calgary, Alberta. The owner and developer of the lands, Mr. Simpson, presented a new concept to the Municipal District of Rockyview. He wanted to place 15 houses, each on two acres, rather than the 20 acres normally required, and amalgamate the remaining required acres as common lands to be enjoyed by all of the residents.

There was no condominium or strata legislation in Alberta and ultimately the Municipal District approved this novel application. The Calgary Regional Planning Commission (which no longer exists) approved an application for the subdivision of the lands with a portion to be divided into 15 lots, each approximately 2 acres in size. The balance, approximately 270 acres, was to remain as one common area and access roadway (common lands and access roadway). THL then entered into the agreement in issue with Mr. Simpson and the Municipal District of Rockyview (the 1971 agreement). The next month Mr.

Simpson transferred the lands to THL, the land was subdivided and the 1971 agreement was registered against the title to the common lands and each of the 15 lots as 2617LN. The registration was noted as: “Easement ‘Extended By Over Access Right of Way.’” This registration was necessary as it was a requirement of the subdivision approval. The lots were then transferred to the individual owners and the owners of each lot received one share in THL and each transferee was expected to sign a shareholders’ agreement. THL now asks that the 1971 Agreement, 2617LN, be discharged or amended.

The 1971 Agreement contained a number of terms relevant to this application. The agreement stated that the developer would transfer the common lands to THL who would control and manage them. The shareholders of that company “ shall be only the owners of the lots and each owner of a lot shall enter into a shareholders agreement in the form set forth and attached as Exhibit “B” to this agreement.” [underlining added] It provided an easement over the access rights of way to the owners of each lot and construction and maintenance of the access roadways remained with THL unless otherwise agreed to by the parties.

The lots were for residential use only. Most importantly paragraphs 9 and 10 stated: 9. The Developer agrees that the common land shall be deemed to be one agricultural parcel accessory only to the private enjoyment of

the lots…and no further subdivision or use shall be made thereof unless and until the preliminary regional plan, municipal district zoning by-laws and subdivision and transfer regulations…so provide for further subdivision or use of the common land … 10. The parties may terminate the within Agreement with the consent of the Approving authority and Rockyview…for the purpose only of registering and substituting a new agreement providing for the continuation on the titles to the lands and the terms herein except as otherwise agreed upon by the parties and approved by the Approving authority . 11.

The parties may terminate the within Agreement with the consent of the Approving Authority and Rockyview provided, however, they first cause a plan of survey to be registered showing such road or roads as the Approving Authority may deem necessary….and further by a plan of subdivision dedicate such reserves as may be designated by the Approving Authority…and the easements and access right-of-way plans provided herein shall be discharged from the titles to the said lands. [underlining added] Clause 13 provided that the Developer agrees that the provision of reserves for community and school uses has been deferred “until a further subdivision of the said lands”.

Finally, paragraph 15 provided that “it is further understood and agreed...that the covenants herein contained are and are deemed to be covenants running with the land and that this covenant may be registered against the land pursuant to

Section 52 [now s. 48] of the Land Titles Act ….” The appended Shareholders Agreement stated in the

preamble that THL was incorporated “for the main purpose of holding and maintaining the common lands for the benefit, use and enjoyment of the registered owners” of the lots. It provided that THL would control, manage and administer the common lands for the benefit of the owners, provide utility services, maintain and clear the access roads, and make the rules and regulations for the use of the common lands. Each owner was granted a licence to access the common lands. There was a requirement for each owner to pay his or her share of the costs, including taxes, and each was granted one vote for his or her share.

The Shareholders Agreement provided for its filing as a caveat on the title to the Owner’s property and that the Owner “shall transfer his share in the Company to any purchaser of the Owner’s property, it being understood that the share of the Owner does in effect run with the title to the Owner’s property and that the interest of the Owner in the Common Lands can only be retained so long as the Owner retains the Owner’s property.” It further provided that “any sale of the Owner’s property shall be null and void in the event that an agreement for its purchase and sale does not include a clause whereby the purchaser agrees to assume all of the terms and conditions of the within Agreement and as well agrees to the purchase of the Owner’s share in the Company…” Similarly, THL covenanted that it would not issue shares to any person other than an owner of one of the lots and that it would allow the right of ingress and egress to, and use of, the common lands to the Owner.

Finally, THL could only be wound up, disbanded or re- organized by way of a unanimous vote of the shareholders. A copy of this Shareholders Agreement was attached to the 1971 Agreement and registered as a part of 2617LN. It is unclear if only some or all of the original owners signed this agreement. THL states that over the intervening years the parties made some changes and amendments to the shareholders’ agreements. As noted below, many of the written changes and amendments put into evidence are either not fully executed or are completely unexecuted.

The 1971 Shareholders Agreement was allegedly amended in 1973, 1981, 1984, 1985, 1988, and 1995. The first amended copy put into evidence is from 1988 and is unsigned by THL and signed by only nine of the 29 owners of the 15 lots. It provided that each owner would receive two rather than a single share in THL and that only 75% approval was required to dissolve, wind-up or re-organize the company or to change the purpose or basic form of the development.

The more substantive changes to the Shareholders Agreement occurred in 1995 and, it is alleged, successfully separated the ownership of the shares in THL from the ownership of the lots in the development. Filed in evidence is an undated memo from Erik Laerz, at that time both an owner and a shareholder of THL. It is entitled “Summary of Meeting held February 12, 1995”. The memo explained the “thought processes” that “were not completely understood” by all of the owners. It stated that “[w]e are voting on a change to the Shareholders Agreement to allow us to keep our shares in Toki [THL] if we sell our house”.

It noted that the reason for this was that “[d]evelopment in the Cochrane region has woken us up to the fact that we are surrounded by a $1.5 million property. It is not easy to walk away from that.” It continued: When someone sells their house, they may hang onto their shares in Toki [THL]. The new owners become members in Toki but not shareholders. The new members are responsible for the sinking fund and may use the undeveloped common land like we have always done, but they do not have a vote regarding development and will not share in any future income.

On the question of whether non-resident shareholders would eventually out-vote residential shareholders the memo stated that this would probably occur eventually but noted that it would require 75% approval to subdivide [the common lands] so there would need to be 23 non-resident votes before the resident shareholders lost control. The memo said the reason this issue was being dealt with now was because the shareholders had until April 30 th to file their 1994 tax returns and if they did not claim a capital gains exemption on their shares in THL they would lose it.

It stated that the next step was to create a separate Home Owners Association agreement, a THL Shareholders agreement and a lease agreement between the Home Owners and THL. Also put into evidence is what appears to be a draft working Shareholders Agreement dated 13 February 1995. It has notes as to the changes to be made to various clauses. It speaks of “owners” and “members” and appears to suggest that an owner will have the option of bequeathing, selling or redeeming his or her share in THL. It is unsigned. A month later, on March 19, 1995, a meeting of the owners was convened, and entitled a “special meeting”.

At this point all of the shareholders of THL were homeowners. Two versions of the minutes of this meeting were filed. They are identical except that one does not contain the wording that all “shareholders were present or represented”. That minute states: The meeting considered a motion to amend the Shareholders Agreement, according to a document circulated on or about the 17 th of February, 1995. The essence of the motion was to permit a shareholder to retain their share in [THL] upon sale of their house.

A distinction was made between a shareholder, who has equity in the common lands, and a member, who pays joint water and road expenses. The motion was carried unanimously. Motion to approve minutes: Eric Laerz The owners opposing this application allege that the March 19, 1995 meeting was in fact contentious and that this decision was not unanimous. In making this statement they rely on a conversation with an original owner who filed no evidence in this proceeding. Several years later THL had a “Co-owners’ Agreement” prepared that was back-dated to the March 19, 1995 meeting.

It was executed by THL and at least one owner and provided that THL held the common lands as bare trustee and agent on behalf of all of the owners and would own, hold, control and administer them for their benefit. It set out terms similar to the original shareholders’ agreement as to

the duty of THL to maintain the lands and roads and the duties of the owners to pay their share of the costs and taxes. The agreement provided that it could be amended with the consent of two thirds of the votes of the co-owners. The

preamble stated that a

schedule was attached by which the Co-Owners could transfer their interests in the road and common lands. No

schedule was attached. Minutes of the first meeting of the to-be-incorporated Homeowners Association (HOA) dated December 5, 1999 were put into evidence. The minutes directed that the HOA be incorporated and stated: Keith Pierce noted that we must expect the south side of our land to be annexed into the town of Cochrane. We have to know what we want before this happens and take what steps are necessary. Al MacKay has sent a request to Toki members to solicit the views of the group as a first step toward drawing up a plan.

For example, do we want lots of not less than 2 acres each, do we want the new houses clustered, what landscaping would we want done, should we look for "theme" such as horse owners, tenants, etc. In 2000, the HOA was incorporated with its objectives stated as the management, maintenance and control of community facilities including the road and water system. A Homeowners Agreement was prepared, effective retroactively to December 1999. The Agreement was between the HOA and each lot holder. The copy in evidence is unsigned.

It provided that each homeowner had one vote in the HOA and the HOA was to control and maintain the road and water system for the benefit of all lot owners. THL and the HOA executed a Licence Agreement dated March 22, 2000, although the actual date of its execution is questioned by at least one homeowner. In any event, this Agreement apparently resulted from concerns expressed by the homeowners about their access to the common lands should THL be wound up. The Licence Agreement stated that THL granted to the owners or occupants of the subdivision a licence to enter upon the road and common lands.

It stated that the licence remained in effect until terminated by THL. It provided that the HOA would observe the provisions of the Homeowners Agreement, which were incorporated by reference and deemed to be part of the licence. The Agreement was signed both by THL and the HOA. Individual lot owners did not sign the agreement. Attached to the Licence Agreement filed with this Court are two documents dated five years prior: the minute of the March 19, 1995 special meeting and the aforementioned memo of Mr. Laerz about the February, 1995 meeting, describing what he believed the homeowners were trying to accomplish.

In March 2000, the van de Pannes bought Lot 9 and discovered that 2617LN could not be located by the Land Titles Office. As a result the Registrar provided them with a Certificate of Missing Instrument. In April 2000, a subdivision proposal was made to the Council of Rockyview Municipal District to subdivide the THL common lands into three parcels. The report to Council from its Planning Services Department stated: The subject lands are owned by [THL] which provides each …lot owner a 1/15 th share in the common land and its management ”.

It said that “[t]he landowners propose to register a conservation easement on the +/- 100 acre balance to allow the lands to be jointly managed by the owners in conjunction with the Nature Conservancy of Canada. ….[and] [t]he landowners have indicated that the other two large parcels will be retained until such time as the lands are annexed by the Town of Cochrane and can be developed to urban standards.” [underlining added] It seems the Municipal District, a signatory to the original agreement, was unaware of any change in the nature of the ownership of the common lands.

The proposal was approved and the common lands became three parcels of 40 acres, 96 acres and 100 acres. The approval states that the “provision of a Reserve is to remain deferred by Caveat”. The owners say that this reference must be to 2617LN and the lands protected by it. The 40 acre parcel was then sold to a developer who had the land annexed by the Town of Cochrane and then built approximately 250 housing units. No evidence was provided as to what happened to the profits from this sale.

With this subdivision, the Land Titles Office put the notification of I 2617LN against the newly subdivided lands but overlooked Lot 19, the 100 acre parcel. This error was corrected in 2015. In July 2000, THL granted the Nature Conservancy of Canada a conservation easement over the 100 acre parcel, Lot 19. The terms of their agreement meant the land could not be developed. Therefore, at this point, THL owned the Nature Conservancy lands (Block 19), Block 18 which contained about 95 acres, and the access right of way (Toki Road), which comprised about 6 acres.

In May, 2006 Erik Laerz, who at that time was only a shareholder and not an owner, wrote to the existing owners about a “skirmish” over the water system. His email referred to the original shareholders agreement from 1971 that “kept us functional and mostly friendly”. The same year Mr. van de Panne raised concerns about the increasing number of shareholders in THL who were not homeowners and the fact that THL controlled access to the common lands and the roadway.

He noted that the interests of THL and the HOA were different, with the former looking to profit from land sales while the latter valued quality of life and maintaining property values. He raised a concern that the road and common land access were revocable at the “pleasure” of THL. He suggested a meeting of owners, both those with and without shares in THL, to see if an agreement could be reached on their rights.

Presciently he noted that “if this matter is not cleared up now, it will come back later, when interests will diverge much more, and clashes will be much more likely between holdings and homeowners which will have few common members." In 2006 an email from the potential purchasers of one of the homes raised concerns about future access to the common lands and the revocable nature of the licence agreement. The potential purchasers acknowledged that they would not be shareholders in THL and that Lot 18 may be developed in the future but were concerned that this would result in a re-routing of the access road.

The owners of the lot responded to the potential purchasers advising that they would be the sixth homeowners who were not shareholders. Mr. Laerz sent an email to one owner in late 2006 advising that the intention was to transfer the roadway access and the lands with the Nature Conservancy easement to the HOA for one dollar when the remaining lands were developed. Meanwhile, there were ongoing problems with the municipality’s requirements for the water system used by the homeowners. In 2007, an email was sent to the members of the HOA indicating that Mr.

Laerz, and possibly other shareholders of THL were interested in selling their shares. The email describes the assets of THL: the lands; the conservation easement; and, the road and water systems and speaks to the possible sale of lot 18 for development. It appears that the expressions of concern about the revocable nature of the Licence Agreement led to the Amended Licence Agreement which was executed in January, 2008 by THL and the HOA.

The amendments stated that the parties “acknowledge and agree that at some point in the future a portion of the Common Land….may be subdivided and developed or sold for subdivision and development, and new lots will be made available for sale and new homes will be constructed”. It stated that “[a]t that point in time…the licence to use that portion of the Common Land contained within the …[new] Subdivision will be terminated”.

It also acknowledged that the new subdivision may result in a realignment of the access road and that Lot 18, part of the common lands, may be subdivided and developed or sold for subdivision development. It incorporated the provisions of the Home Owner’s Agreement of December 1999.

Put into evidence next is an Amended Co-owners Agreement, dated September 2009. It is unsigned. Its terms are similar to those found in the 1995 Co-ownership Agreement. THL is still a bare trustee and agent for the co-owners and will own, control, manage, maintain and administer the common lands on their behalf as beneficiaries, on a pro rata basis. It provided that each co-owner shall resign as a director of THL "when he/she ceases to be a co-owner and thereby ceases to own a share in the company." The agreement attached a

Schedule 1which provided some terms for the transfer or bequeathing of shares in THL. In 2012 one homeowner, who was also a shareholder in THL, proposed a motion to the shareholders of THL that the Nature Conservancy lands be transferred to the HOA and THL proceed with selling the south lands (Lot 18) to be developed with a maximum of 27 dwellings. The motion was defeated 22 to 8. In January 2013, THL advised the homeowners that it had passed a motion to sell all of its assets as a single package.

That package included the developable land, water system, water license, transportation studies, road, and the creek lands with the Nature Conservancy conservation easement. THL said that it had selected a realtor and suggested the HOA might be interested in purchasing those assets at a price of $3.5 to $4 million. One owner responded, copying the others, repeating the email he had received from Mr. Laerz in 2006 saying that the intention was to sell the Nature Conservancy lands to the HOA for one dollar when the south lands [Lot 18] were developed. Mr.

Laerz replied, saying he was not in fact on the executive of THL at that time and was merely a shareholder expressing an opinion. He noted that there was “no deceit or intention to mislead” in his email. Whoever developed the remaining lands would likely transfer the lands with the Nature Conservancy easement to the HOA to avoid liability. Around this time some unsuccessful efforts were made to find the missing 2617LN. In March, 2013, Mr.

Laerz wrote to some owners and said that “the only action I see that is worth doing is creating an access agreement to the Creek [Nature] Conservancy Lands if there isn’t one already”. In a subsequent email he indicated that the missing 2617LN was an easement relating to the road access to the homeowners’ lots. In November 2013, THL and the individual homeowners executed an Access Agreement with respect to the lands subject to the Nature Conservancy Easement [Lot 19]. It was registered and gave the homeowners and future home of homeowners the right to use the lot for recreation.

It listed the dominant tenements as the homeowners’ lots and the servient tenement as Lot 19. On September 30, 2014, THL, the HOA and the homeowners executed an Access Agreement with respect to Lot 18 [the lands to be developed] and the road access and registered it on the relevant titles. Its intent was to preserve access to the homeowners’ lots and it provided the homeowners with access through theToki Road to their lots despite the development of Lot 18. The HOA was to be responsible for the maintenance of the roadway.

The agreement was registered against the title to the homeowners’ lands and THL’s lands, other than the Nature Conservancy lands. In November 2014, a letter of intent to sell Lot18 to a developer was accepted by THL. It appeared the developer might put high-density housing on the lands, rather than houses on two-acre lots as some homeowners had anticipated. Some of the homeowners became concerned about how the lands were going to be developed.

As the Nature Conservancy lands were also owned by THL, there was also a concern that they would be transferred to the developer and then opened up for use to all new homeowners or to the public. Two of the original owners and shareholders of THL alerted all of the owners to these concerns. In January 2015, the solicitors for THL wrote to all of the homeowners asking that they sign a discharge of 2617LN as they were “cleaning up” the title to the THL lands.

The request noted that there was an Agreement which had been registered on title on November 7, 2014 which protected their rights of access to, and use of, the right of way.

A flurry of activity followed as people unsuccessfully sought to find the missing instrument 2617LN. Mr. Laerz was asked for a copy and could not find one. Writing to all owners in February, 2015, one THL shareholder said that “[t]he easement on the road guarantee (sic) the same rights of access to the road as does the original Easement, if it exists at all, and clearly supercedes it.” He ended by saying that “you have no rights at risk here”. In February 2015 Mr. Laerz sent a letter to the HOA and the residents providing a brief history of the development and explaining why the instrument should be discharged.

He noted that the title for the Toki Road indicated that 2617LN was registered against it and described it as ”Access Right of Way (subject to) in favour of lots 1 to 15”. He said that in 2012 a joint committee of residents and THL members replaced the intent of 2617LN with a “new Access Right of Way for Toki Road”. Unfortunately, their lawyer failed to follow through and remove 2617LN “which was now redundant and meaningless”. He stated that he had gone through all the THL president’s papers three times and could not find 2617LN.

He concluded by stating that “[o]ne other significant fact is that 2617LN points only to Toki Road [and] [a]ny right of Lots 1-15 described in 2617LN pertains only to their use of a road”. Later in February 2015, Mr. Laerz found a copy of the missing document and noted that he had previously missed it as “the document looks anything but an Access Right of Way”. He made arrangements to provide a copy to the HOA. Another request to the homeowners from a representative in THL to discharge 2617LN was received in March, 2015. It stated that the easement 2617LN dealt only with the road access.

On April 13, 2015 the owners of the 11 lots who were not shareholders in THL filed a caveat against Lot 18 (the lands THL sought to develop), lot 19 (the Nature Conservancy easement lands) and the Toki road lands, claiming an interest pursuant to the Access Agreement and the 1971 Agreement. Attached to their caveat was a document alleged to be a copy of the missing 1971 agreement. One couple in the same circumstances filed an individual caveat. All of these owners had purchased their homes between 1999 and 2013.

In April, 2015, counsel to several of the homeowners wrote THL pointing out the actual terms of instrument 2617LN, including the ownership structure for the lands and the shares of the company and asked how the instrument could be lawfully discharged from Lot 19, the Nature Conservancy Easement lands. Mr. Boucock, who was an original owner, wrote to all owners and THL in May, 2015.

He said that he had done the original master plan for the development and noted that while there was “100% agreement of the Homeowners of various issues of the Common Land, including the [prior] sale [to a developer], it could be possible that it was not legal according to the Property Title of each Homeowner”. THL could not clear the title to Lot 18. The sale was not completed. At this time only three lots are still held by the original owners. As part of the evidence for this application the subsequent owners, the respondents in this application, were asked what they were told when they bought their homes.

Their responses differed. For example, one owner said she was offered the prior owner’s shares in THL but declined in light of the cost. Others were unaware of the ownership structure. Some said they understood that Lot 18 could be developed but it would either be into 2 acre residential parcels, or they or the Nature Conservancy, or the HOA, would have input into, or control over, the future development. It seems that no one expected that high-density development was possible or that the Nature Conservancy lands might be open to owners in that higher density development or to the general public.

The owners who are not shareholders oppose this application to discharge 2617LN. They say that this view is shared by the shareholders of THL who are still owners but have not formally joined the application. _______________________________________________________