Virtue v Park, 2024 ABKB 85

Court of King’s Bench of Alberta Citation: Virtue v Park, 2024 ABKB 85 Date: Docket: 2201 08402 Registry: Calgary Between: Damon D. Park and Jennifer M. Park Appellants - and - Judson E. Virtue and Krista M. Virtue Respondents _______________________________________________________ Reasons for Decision of the Honourable Justice Colin C.J.

Feasby _______________________________________________________ Introduction [ 1 ] The Appellants, Damon and Jennifer Park (the “Parks”), wish to build a second dwelling on their lot (the “Park Lands”) in the neighbourhood of Montgomery in northwest Calgary contrary to the terms of a restrictive covenant (the “Shouldice Covenant”) on their title. The Parks obtained an ex parte order discharging the Shouldice Covenant from their property on July 15, 2022 (the “Discharge Order”).

The Respondents, Judson and Krista Virtue, who live next door to the Parks, later learned of the Discharge Order and brought an application to have it set aside (the “Set Aside Application”). Applications Judge Mason set aside the Discharge Order on March 9, 2023 (the “Set Aside Order”). The Parks appeal the Set Aside Order. [ 2 ] The Shouldice Covenant was put in place by James Shouldice Estate Ltd. (“Shouldice”) which owned a large tract of land in what is now northwest Calgary. Shouldice sold off the part of its lands, an area known as Shouldice Terrace, in the 1950s.

Both the Parks and the Virtues live in Shouldice Terrace which is part of the larger community of Montgomery. The Shouldice Covenant is similar to other restrictive covenants put in place by large Calgary landowners as they sold off their lands in the mid-20 th century for the development of the City.

These restrictive covenants were used as a form of planning or zoning to control development prior to the emergence of the planning and zoning regime that exists today. [ 3 ] The Parks submit that the Virtues were not entitled to notice of the ex parte application to discharge the Shouldice Covenant from the Park Lands because they did not have legal standing. The Virtues did not have legal standing, according to the Parks, because the Shouldice Covenant did not create a building scheme ( i.e. a plan that regulates development for a specific area) and accordingly was not a valid restrictive covenant.

They submit that the Shouldice Covenant failed to identify with precision the lands subject to the restrictions. The Virtues contend that they have legal standing because the Shouldice Covenant applies to the subdivision known as Shouldice Terrace. The Virtues submit that the lands are easily ascertainable by looking at the subdivision plan that is on file at the Land Titles Office. The Parks submit that even if the Court may have regard to the subdivision plan, the Shouldice Covenant is unclear whether the restrictions apply to all or only some of the lots within Shouldice Terrace.

Decision of the Applications Judge [ 4 ] An appeal from an Applications Judge is heard de novo : Agrium v Orbis Engineering Field Services , 2022 ABCA 266 at para 30 , leave to appeal to SCC refused, 40402 (20 April 2023). Though the appeal is heard de novo , it is important for the reviewing Justice to understand the decision of the Applications Judge.

And, as this case demonstrates, it is also important for the reviewing Justice to appreciate the circumstances in which the Applications Judge made the decision. [ 5 ] The Parks filed a Without Notice Application in July, 2022 for the discharge of the Shouldice Covenant on their property (the “Discharge Application”).

The Application indicated that “three of the properties immediately east and west [of the Park Lands] do have covenants registered against them but have different registration numbers.” The Application continued, “[o]n the basis that this is a unique registration to this property only it is respectfully submitted that [the] covenant ought to be discharged from the lands at the request of the Applicant.” [ 6 ] The covenant in question on the Park Lands, instrument 8105GM, provides, amongst other things, that there is to be only one dwelling house on the property.

The Affidavit of Damon Park, sworn on July 11, 2022 and submitted in support of the Without Notice Application, identified similar covenants with different numbers on adjacent properties. Park also noted that one nearby property was not subject to a covenant. He then deposed, “[b]ased on the above I believe that 8105GM is a specific registration number and is unique to the said Lands and not a building scheme.” [ 7 ] The Without Notice Application appears to have been heard as a desk application rather than in Court. Mason AJ granted the Discharge Order on July 15, 2022.

The Discharge Order provided that instrument 8105GM be discharged from the title to the Park Lands. [ 8 ] The Virtues subsequently learned of the discharge of the Shouldice Covenant on the Park Lands and filed an application on December 20, 2022 to set aside the Discharge Order and restore the Shouldice Covenant.

The Virtues asserted that they were “directly and adversely affected” by the Discharge Order and that they were “interested persons and were entitled to notice of the Ex Parte application.” The Set Aside Application was heard by Mason AJ on March 9, 2023. [ 9 ] Mason AJ correctly treated the Set Aside Application as a de novo application.

The Court of Appeal observed in Marcil v Ellefson , 2014 ABCA 169 at para 23 , “i n many or most cases, it is appropriate to treat an application to set aside an ex parte order as a new application for the same order.” The Court of Appeal in Guillevin International Co v Barry , 2022 ABCA 144 at para 17 further explained in the context of an ex parte injunction: There are controls in place to protect against misuse of the ex parte procedure. The first is that the applicant for relief must act with the utmost good faith and make full, fair and candid disclosure of the facts to the court.

The second is that ex parte orders are subject to review at “comeback” hearings which are essentially de novo , and in which the original applicant still bears the burden of proof .

The third is that the evidence that can be considered on the comeback hearing is controlled to provide meaning to the obligation to provide full disclosure at the initial ex parte application. [ 10 ] On the Discharge Application, the Parks were required to show that the Shouldice Covenant was invalid by demonstrating that: (1) the grantor of the Shouldice Covenant did not object to the discharge of the instrument or no longer had legal capacity to enforce the Shouldice Covenant; and (2) the Shouldice Covenant did not form part of a building scheme such that it was enforceable by other property owners in the area. [ 11 ] The first question was answered by a letter dated July 7, 2022 from the representative of Shouldice disclaiming any interest in the enforcement of the Shouldice Covenant.

To address the second issue, the Parks relied on Re Singh (Land Titles Act) , 2020 ABQB 402 where Master Farrington, as he then was, held that an identically-worded restrictive covenant in the same area, which was also in favour of Shouldice, was too vague to create a building scheme. [ 12 ] The Virtues asserted that the law with respect to ascertaining the meaning of restrictive covenants changed after Singh and that, accordingly, Mason AJ should not follow Master Farrington’s decision.

Specifically, the Virtues submitted that the Court of Appeal in Restrictive Covenant Instrument 213AT (Re) , 2021 ABCA 138 (“ New Casa ”) held that resorting to extrinsic evidence was permitted to assist in the

interpretation of a restrictive covenant.

Master Farrington in Singh at para 12 concluded that the law confined him to looking only at “the face of the restrictive covenant to determine which lands are entitled to burden the subject property with enforcement of the restrictive covenant.” [ 13 ] Mason AJ, in her oral reasons delivered at the conclusion of the argument, said, “I believe because we’ve got somebody here who is wanting to make his own argument based on the case law subsequent to a decision that we have all been following in this court with respect to this covenant, I think I will give him a chance to do that.

So, I will set aside my order.” [ 14 ] An important point of context is that when this matter came before Mason AJ on March 9, 2023, it was in morning chambers. The hurly burly of morning chambers is not well suited to the consideration of applications that involve a large volume of evidence or a significant degree of legal complexity. Such matters are best heard by way of a special application set for a half-day or more where the facts and law may be presented in written briefs together with sufficient time for oral argument.

Mason AJ, quite appropriately, observed at the conclusion of argument, “this has gone on ... too long for morning chambers but I dealt with it.” [ 15 ] The brief oral reasons suggest that Mason AJ set aside her order not because she made a finding that there was a valid building scheme but on the pragmatic ground that the Virtues had raised a prima facie case that they had standing and that the status quo ante should be restored pending a proper hearing on the merits.

This is the sort of thing that sometimes happens in morning chambers when parties attempt to use a 20-minute slot for an application that requires two hours to be properly heard. Mason AJ explained, “I am not going to make any comment on the merits of what you argued, in terms of how it might ultimately turn out....” Counsel for the Parks then acknowledged that “it will likely be a special application.”

[16] The Set Aside Order prepared by the parties and endorsed by Mason AJ, however, simply provided that the Set AsideApplication was granted. Counsel for the Parks explained on appeal that given that the Set Aside Order provided that the Virtues’application was granted, the Parks had no alternative but to appeal. The unsaid part was that for the Set Aside Order to say that theVirtues’ application was granted, the Court must have implicitly found the Shouldice Covenant to be part of a building scheme.

The riskto the Parks is that such a finding could be argued to constitute an issue estoppel on the question of whether the Shouldice Covenant ispart of a building scheme and effectively decide the validity of the Shouldice Covenant on the merits.

This problem could have beenavoided by the parties if more care had been given to drafting the Set Aside Order; they could have specified that the Applications Judgemade no finding on the merits of the application and that the Set Aside Order was made without prejudice to the positions of the partieson the merits of the issue of the validity of the Shouldice Covenant, including whether the Shouldice Covenant created a buildingscheme. I emphasize that it was not the Applications Judge’s job to do this for the parties.

Analysis The Law of Restrictive Covenants, Standing, and Notice [17] The time for an appeal of the Discharge Order elapsed long before the Virtues brought the Set Aside Application.Accordingly, the Order may only be set aside if they establish that they had a right to notice of the Discharge Application. Rule 9.15(1)of the Alberta Rules of Court, Alta Reg 124/2010 provides that “the Court may set aside ... an order, whether final or interlocutory, thatwas made (

a) without notice to one or more affected persons....” Accordingly, to have standing to make an application to set aside anorder under Rule 9.15(1)(a), one must be an “affected person.” [18] Justice Devlin explained in Gunda v Allied Shortridge Civil Enforcement Agency, 2022 ABKB 638 at para 7, “the change ofthe wording of Rule 9.15 expanded its scope; not, however, to the world at large. Properly read, the term “affected persons” in Rule9.15 means someone who is legally affected by a judgment or Order of the Court.

It does not extend to individuals who may have apersonal or moral stake in a legal proceeding.” [19] Consistent with Devlin J’s view, Alberta restrictive covenant cases have treated the question of entitlement to notice as aquestion of legal standing.

See, for example, Furano v Montgomery, 2006 ABQB 230 at para 21 where Hawco J held: “The fact thatneighbouring property-owners are bound by the same or similar restrictions or are interested in the enforcement of the covenant does notentitle them to notice of an application to discharge the covenant because they have no legally recognized interest in the proceeding.” Incontrast, where a restrictive covenant is registered against multiple properties using a single instrument, each landowner subject to thatinstrument is entitled to notice of an application to discharge the covenant: Vallieres v Vozniak, 2014 ABCA 290; Liu v Hamptons GolfCourse Ltd, 2017 ABCA 303. [20] Though the Set Aside Application was a de novo hearing and the burden would normally remain on the moving party in theoriginal application, there is a preliminary question of standing at issue in this case.

A party asserting standing, the Virtues in the presentcircumstances, usually bears the burden of establishing that a private right recognized by law or equity exists between the parties. Thereason for this is that the party asserting standing will often be in the best position to adduce evidence to demonstrate that they arelegally affected by the ex parte order.

The Virtues must show that there is an “arguable case” that they have standing: Finlay v Canada(Minister of Finance), [1986] 2 SCR 607, (SCC) at para 16; Nova Scotia Board of Censors v McNeil, [1976] 2 SCR 265at 267, (SCC). [21] A difficulty in this case and in most restrictive covenant cases is that the question of whether a person has standing turns onthe validity of the covenant. Essentially, the issue that determines standing also determines the merits of the underlying application.

TheApplications Judge in the present case found, in essence, that there was an arguable case of standing and indicated that the matter shouldproceed to a special application on the merits. As noted above, this decision was significantly influenced by the time constraints underwhich she was operating in morning chambers. On the present appeal, which is heard de novo, I am not time constrained nor am I limitedto considering only the question of standing.

Le Dain J explained in Finlay at para 16 that whether a court can go beyond standing anddecide a case on the merits in circumstances analogous to the present case “depends on the nature of the issues raised and whether thecourt has sufficient material before it, in the way of allegations of fact, considerations of law, and argument, for a proper understanding ata preliminary stage of the nature of the interest asserted.” I am satisfied that the evidence before me is sufficient to decide the question ofthe validity of the Shouldice Covenant on the merits, and that judicial economy dictates that a decision on the merits is a preferablecourse of action to returning the matter to be heard as a special application by an Applications Judge.

Given my conclusion on this point,the ultimate burden is on the Parks to show that the Shouldice Covenant is not valid just as it was on the Discharge Application. I notethat I would have reached the same conclusion on the merits irrespective of which party bore the burden of proof. [22] Restrictive covenants may start as a contract but are often sought to be enforced many years later against subsequent propertyowners who were not privies to the original bargains.

Restrictive covenants are accordingly enforced as a matter of equity, not a matter ofcontract: Owners, Strata Plan LMS 3905 v Crystal Square Parking Corp., 2020 SCC 29 at para 19. Côté J observed in Strata Plan atpara 19, “[restrictive] covenants and contracts create juridically distinct forms of rights and obligations, which should not be confusedwith one another.” [23] Slatter J, as he then was, held in Potts v McCann, 2002 ABQB 734 at para 24 that there are two ways in which a restrictivecovenant can be valid.

The first type of covenant “arises when a covenant is placed on a servient tenement for the benefit of a dominanttenement.” That type of restrictive covenant is not in issue in the present case.

The second type of restrictive covenant “arises when abuilding scheme is imposed over an area of land to regulate the development of that area.” This second type of restrictive covenant isalleged to exist in the present case. [24] A related question that must be confronted is whether an individual must own land that is subject to the same restrictivecovenant which, in turn, is registered using the same instrument number to have standing and be entitled to notice.

Put differently, in thecontext of the Alberta Land Titles system, must a restrictive covenant that establishes a building scheme be contained within a single

instrument registered against multiple titles rather than multiple instruments registered against multiple titles? Slatter J in Potts at paras19–20 concluded that a group of neighbours whose titles had the same restrictive covenant as the title in issue registered pursuant todifferent instrument numbers did not have legal standing.

Hawco J, following Potts, in Furano held at para 12, “only the Owners, orthose whose properties are encumbered by the same restrictive covenants registered against their title by the same registration number,are entitled to notice of proceedings to discharge a restrictive covenant.” [25] Lutz J in Lindner v Chittick, 2010 ABQB 819 at para 57 acknowledged the conclusions in Potts and Furano but concluded,“in a situation as is found here, where every single party holds under a different instrument number, I do not rule out the possibility that abuilding scheme could be found despite the different instrument numbers if an area of mutual obligation had been defined in some otherway.” Strekaf J, as she then was, took a similar approach in Jukes v 1735560 Alberta Ltd, 2014 ABQB 131 at para 21 holding: “so longas the properties that fall within the scope of the building scheme are sufficiently identified, I do not consider it necessary that therestrictive covenant must be registered against all the properties by a single instrument number.” In my view, the approach followed byLutz and Strekaf JJ is preferable to that in Potts and Furano because it is consistent with the approach to contractual

interpretationadopted by the Supreme Court of Canada in Sattva Capital Corp v Creston Moly Corp, 2014 SCC 53 and recognized by the Court ofAppeal as applying in the context of restrictive covenants in New Casa. [26] Where a restrictive covenant imposes a building scheme, the owners of all lots in the building scheme are legally affected,have standing, and are entitled to notice of an application to vary or discharge the restrictive covenant on any title within the buildingscheme area.

The existence of a building scheme that includes the Virtues’ property and the Park Lands determines if the Virtues wereentitled to notice of the Discharge Application and, accordingly, whether they have standing to apply to set aside the Discharge Order. Abuilding scheme exists where the following conditions are met: 1. The titles to the properties in issue are derived from a common vendor; 2. The vendor must have laid out the relevant parcels subject to restrictions that could only be consistent with a general scheme ofdevelopment; 3.

The restrictions must be intended for the benefit of all the parcels within the scheme (i.e., there must be an element of mutuality);and 4. The affected parcels must have been purchased on the understanding that the restrictions would enure to the benefit of all the otherparcels, the area of which must be identifiable. Eran S. Kaplinsky, Malcolm Lavoie & Jane Thomson, Ziff’s Principles of Property Law, 8th ed (Toronto: Thomson Reuters, 2023) at477.

See also Potts at para 25 per Slatter J, as he then was, citing Elliston v Reacher, [1908] 2 Ch 374 at 384, aff’d [1908] 2 Ch 665(CA). [27] The traditional approach to restrictive covenants in Canada is strict. For a restrictive covenant to be enforceable by the ownersof property in a building scheme, the other lands within the building scheme must be ascertainable on the face of the title.

The SupremeCourt of Canada held in Galbraith v Madawaska Club Ltd., [1961] SCR 639 at 653, (SCC) that “the deed itself must sodefine the land to be benefited as to make it easily ascertainable.” See also, Guaranty Trust Company of Canada v CampbelltownShopping Centre Ltd., 1986 ABCA 71 at para 9; Kolias v Owners: Condominium Plan 309 CDC, 2008 ABCA 379 at para 13. [28] In the UK, similar criteria are used to identify building schemes, but a different approach is taken to the use of extrinsicevidence to identify the lands covered by a building scheme.

The Judicial Committee of the Privy Council observed in Jamaica MutualLife Assurance Society v Hillsborough Ltd. et al, [1989] UKPC 27, [1989] 1 WLR 1101 at 1107: “The existence of these matters is aquestion of fact to be determined from the terms of the titles and the relevant circumstances surrounding the sales by the common vendorto the various purchasers.” More recently, the Court of Appeal in Birdlip Limited v Hunter & Anor, [2016] EWCA Civ 603 at para 21explained that a prerequisite to the examination of the surrounding circumstances is an indication in the title documents of the existenceof a building scheme.

The Court of Appeal observed at para 37 “the cases in which schemes of mutual covenant have been found to existhave been cases where there is something in the conveyance or other transactional documents to alert a purchaser to the existence of thescheme.” The more lenient UK approach to the use of extrinsic evidence to identify dominant lands in a restrictive covenant was noted inKirk v Distacom Ventures Inc., [1996] BCJ No 1879, (BCCA) at para 29, citing Marten v Flight Refuelling Ltd.,[1961] 2 All ER 696, Ch D, per Wilberforce J, as he then was. [29] Côté JA in Kolias considered whether a dominant tenement could be identified.

The restrictive covenant in Kolias was notalleged to create a building scheme. The law described by Côté JA, however, applies equally to restrictive covenants that refer to buildingschemes. Consistent with Galbraith, Côté JA held that extrinsic evidence is not admissible for the purpose of identifying lands thatbenefit from a restrictive covenant. He wrote at para 22: In my opinion, extrinsic evidence is not admissible in this case. Apart from the word “sight lines” (discussed above), the restrictivecovenant does not contain any reference whatever to the existence of an intended dominant tenement.

Therefore, even if the lawallowed extrinsic evidence to resolve ambiguous descriptions of dominant tenements, there is no such ambiguity here. This omission isnot equivalent to an ambiguity. Ambiguity must exist in the language of the restrictive covenant as written. It cannot be created by theevidence sought to be adduced: Fridman, The Law of Contract in Canada 445-46 (5th ed. 2006).

The chambers judge, therefore, erred inlaw when he admitted extrinsic evidence to identify the dominant tenement in this case. [30] Côté JA went on to explain in Kolias that a technical approach to restrictive covenants is required because of the requirementfor certainty in land conveyancing. He observed at para 29: Among the principles of land law and conveyancing, two are important here: (

a) there must be few and carefully-defined restrictions on free alienation of land; and

(

b) conveyancing needs a high degree of certainty, and profits greatly from conveyancing which is quick and cheap. The Torrens system emphasizes both of these principles, especially the second. [ 31 ] Lutz J in Lindner was faced with the question of whether lands that allegedly comprised a building scheme could be identified using extrinsic evidence. The restrictive covenant in question applied to a lot on Briar Crescent NW in Calgary and it was alleged that the building scheme comprised all lots on Briar Crescent NW.

However, the restrictive covenant in question referred to a subdivision plan but did not identify the specific lots within the plan that comprised the alleged building scheme. Lutz J, following Kolias , held that the court may only resort to extrinsic evidence where there is ambiguity in the description of the lands.

He held at para 48: “ Applying the rule that extrinsic evidence is only admissible where there is an ambiguity, and not where there is no reference at all to the ambit of the scheme, my analysis would stop here.” [ 32 ] The Court of Appeal in New Casa considered a restrictive covenant in a different neighbourhood in northwest Calgary, Hounsfield Heights, that contained a similar provision to the Shouldice Covenant in issue in the present case permitting only a single dwelling per lot.

The certificates of title in New Casa identified the other lots subject to the covenant by number and referenced a subdivision plan filed with the Land Titles Office.

The Court of Appeal held at paras 23–24 that the fact that “the restrictive covenant itself refers to the certificates of title [of the dominant tenements] ... is a complete answer to New Casa’s contention that we cannot look at the certificates of title to ascertain the benefitted lands.” [ 33 ] The reference to the certificates of title in the restrictive covenant in issue in New Casa was a complete answer to the assertion that the Court could not look at the certificates of title because it was essentially an incorporation by reference.

Indeed, the Court concluded at para 24 that the certificates of title were not extrinsic evidence. Slatter J in Potts noted that just such an incorporation by reference was considered in the seminal Elliston case. He explained at para 34 that in Elliston , where a building scheme was found to exist, “the various transfers incorporated by reference a common plan and indenture that imposed the building scheme on all the properties.” [ 34 ] The Court of Appeal in New Casa nevertheless considered the question of whether extrinsic evidence may be considered in the

interpretation of a restrictive covenant. The Court considered many of the Alberta restrictive covenant cases discussed in the preceding paras that limit the use of extrinsic evidence and concluded at para 42 that none of the cases “ go so far as to prohibit the court from looking at the certificates of title to determine the lands affected by the restrictive covenant.” [ 35 ] The Court of Appeal in New Casa states at para 50 that a restrictive covenant “ is a contract and its

interpretation is governed by the law of contract.” Though this statement is at odds with Côté J’s conclusion in Strata Plan at para 19 that restrictive covenants are creatures of equity, not contracts, the Court of Appeal’s direction to use the principles of contract

interpretation to ascertain the meaning of restrictive covenants is surely correct. The Court of Appeal accordingly applied Sattva which directs courts to consider the factual matrix or surrounding circumstances that would have been known to parties at the time of contracting: see also, IFP Technologies (Canada) Inc. v EnCana Midstream and Marketing , 2017 ABCA 157 at paras 80–85 . Sattva and IFP indicate that ambiguity is no longer a prerequisite for the consideration of the factual matrix or surrounding circumstances.

The restrictive covenant cases that precede New Casa do not consider or account for this significant development in contract law because, for the most part, they also preceded Sattva and IFP . [ 36 ] As part of its analysis of extrinsic evidence, the Court of Appeal in New Casa had regard to the relevant subdivision plan filed at the Land Titles Office. The Court reasoned as follows: [53] The lots are the lands covered by certificates of title VR 140 to 148. Within those titles are references to the individual lots in the subdivision Plan 5625AC.

Both the certificates of title and the plan are objective evidence of the background known to the parties and can be used to determine the meaning of the words “lots” or “lot.” [54] The drawing of Plan 5625AC shows clearly what was meant by “lot” at the time the restrictive covenant was executed. The certificates of title VR 140 to 148 also described the lands with reference to Plan 5625AC. When one has regard to the circumstances that existed at the time of the restrictive covenant, a reasonable

interpretation of the “lots described above” is that it was intended to refer to all of the lands described in certificates of title VR 140 to 148, at the density as subdivided and shown in the drawing of Plan 5625AC. [55] This

interpretation accords with the underlying intent and purpose of the restrictive covenant: to regulate development and maintain uniformity of development in the area. [56] This is the

interpretation which the chambers judge accepted and endorsed when he found that the lots affected by the restrictive covenant could be ascertained “with reference to the title itself and with reference to the subdivision plan that’s referenced in the title.” We are satisfied that the chambers judge’s reference to “the title itself” was meant to mean the original titles VR 140 to 148 and the drawing of Plan 5625AC. The chambers judge’s conclusion as to what was meant by the words “lot” or “lots,” accords with the principles of contractual

interpretation and is reasonable. We dismiss this ground of appeal. [ 37 ] The change of approach to extrinsic evidence in the context of restrictive covenants in New Casa aligns Alberta law once more with the UK law described in Birdlip .

New Casa does not open the door to a wide-ranging exploration of extrinsic evidence; rather, like Birdlip , it permits consideration of extrinsic evidence only where there is some indication on the face of the restrictive covenant or title documents of the existence of a building scheme. [ 38 ] The Court’s consideration of the subdivision plan referred to in the certificates of title in New Casa does not offend the policy considerations identified by Côté JA in Kolias .

The certainty and efficiency required by conveyancing is not unduly impaired if a party is required to obtain a copy of a subdivision plan identified in a restrictive covenant and filed with the Land Titles Office. Does the Shouldice Covenant Create a Building Scheme?

[ 39 ] The Transfer of Land for the Park Lands contains the Shouldice Covenant. The Transfer of Land for the Virtue Lands also contains the Shouldice Covenant. The only difference between the two certificates of title is the description of the lot.

The Transfer of Land for the Park Lands provides as follows: JAMES SHOULDICE ESTATE LTD., a body corporate with Head Office at 55 Canada Life Building, in the City of Calgary, in the Province of Alberta, being registered owners of an estate in fee simple, subject, however, to such encumbrances, liens and interests as are notified by memorandum underwritten, in all that certain tract of land situate in the Province of Alberta, being composed of LOT SEVENTEEN

(17) IN BLOCK FIFTY-SIX

(56) ACCORDING TO A PLAN OF RECORD IN THE LAND TITLES OFFICE FOR SOUTH ALBERTA LAND REGISTRATION DISTRICT AS SHOULDICE TERRACE CALGARY 4994 G.I.

Excepting thereout all mines and minerals, and subject to the following building and other restrictions being conditions precedent to this transfer, which said restrictions are and shall be considered to be covenants running with the land and shall be appurtenant to and for the benefit of other lands in the subdivision of which the land hereby transferred forms a part , that is to say: That the Transferee will not without the consent of the Transferor in writing first had and obtained erect, construct, build, bring or place or cause to be erected, constructed, built, brought or placed on the land hereby agreed to be sold (

a) Any building used or to be used as a dwelling house of a lesser value than Two Thousand Five Hundred (2,500.00) dollars. (

b) Any building whatsoever within a distance of twenty-seven (27) feet from any street or avenue fronting said land. (

c) More than one building used or to be used as a dwelling house excepting only where each such building shall have independently of the other or others a frontage of not less than fifty (50) feet . (

d) Any commercial undertaking or business and without restricting the generality of the foregoing the breeding, raising or husbandry for commercial purposes of dogs, fur-bearing animals or animals of any nature or description. [emphasis added] [ 40 ] The parties agree that the titles to the properties in issue in the present case are derived from a common vendor.

The three remaining requirements for a building scheme are contested. [ 41 ] The Virtues submit that the Shouldice Covenant is consistent with a general scheme of development and that it was intended for the benefit of all the parcels within the scheme ( i.e. Shouldice Terrace). The Virtues submit that this is the only reasonable conclusion to draw from the words “for the benefit of other lands in the subdivision of which the land hereby transferred forms a part....” [ 42 ] The Parks rely on two cases that address the same Shouldice Covenant in issue in the present case.

The first is Singh where Master Farrington held at para 10: “Here, the wording is ‘for the benefit of other lands in the subdivision of which the land hereby transferred forms a part’. It is impossible to tell which specific parcels are entitled to enforce the building scheme from reading the restrictive covenant.” The Parks also rely on Re Owen , 2006 ABQB 591 at para 8 where Master Laycock held: The applicant has satisfied me that there is no one capable of enforcing the restrictive covenant and its discharge is in the public interest.

In this case, the public interest is best served by removing the restrictive covenant so the land can be controlled by the statutory planning controls enacted by the City of Calgary. The existence of an unenforceable restrictive covenant causes confusion within the community as to the nature of the allowable development. Secondly, development within this community has moved beyond single family dwellings to multi-family units.

Furthermore, similar restrictive covenants on adjacent lands have been discharged or modified by court order to allow for higher density development. [ 43 ] The Parks submit that the validity of the Shouldice Covenant has already been determined by the Court and that the decisions in Owen and Singh have informed the reasonable expectations and decision-making of property owners in the area.

The Court, they argue, should be loath to effectively reimpose a system of restrictive covenants on the neighbourhood. [ 44 ] The Virtues submit that to the extent that the Shouldice Covenant has been discharged from other properties in Shouldice Terrace, the discharges may have occurred pursuant to the “unfortunate practice” of applying ex parte to remove restrictive covenants referred to by Slatter J in Potts at para 12 . The Virtues further contend that Owen and Singh do not bind the Court and that the Shouldice Covenant has been discharged from fewer than 10% of the almost 400 lots in Shouldice Terrace.

Accordingly, the Virtues submit, there is not a significant reliance interest in the non-enforceability of the Shouldice Covenant. [ 45 ] Based on the terms of the Shouldice Covenant, I am satisfied the vendor laid out the relevant parcels subject to restrictions that could only be consistent with a general scheme of development. The reference to the subdivision plan and the statement that the covenant was for the benefit of other lands in the subdivision plan, in my view, cannot be understood any other way.

I am also satisfied that the affected parcels were purchased on the understanding that the restrictions would enure to the benefit of other parcels in the area. This is also clear from the terms of the Shouldice Covenant. [ 46 ] Two questions, which are related, require more sustained consideration. Were the restrictions intended for the mutual benefit of all the parcels within the scheme? And is the area of those parcels identifiable? To begin with, based on the law reviewed in the previous

section of these reasons, I am satisfied that I may have regard to the subdivision plan referenced in the Shouldice Covenant. The subdivision plan is incorporated by reference and, even if it were not, it would be permissible extrinsic evidence. Having regard to the subdivision plan in the present circumstances is no different than what was done in New Casa where a subdivision plan on file at the Land Titles Office was considered.

If the restrictions were for the benefit of all the parcels within the scheme, those parcels are identified in the subdivision plan on file with the Land Titles Office. [ 47 ] The question of whether the restriction was for all the parcels of land within the scheme comes down to what is meant by “ for

the benefit of other lands in the subdivision of which the land hereby transferred forms a part....” The only thing that this languagecertainly excludes is lands outside the subdivision. But the wording does not specify which lands inside the boundaries of the subdivisionare included. Does it mean all the other lands in the subdivision or only some of the other lands in the subdivision? The word “other”,where not preceded by a possessive pronoun (e.g. hers), the definite

article the, or an adjective like all, can mean either all other or someother; it is ambiguous. [48] How can this ambiguity be resolved? The Virtues and their neighbours who provided supporting affidavits attest to theirunderstanding that the Shouldice Covenant originally applied to all lots in Shouldice Terrace. The Virtues in their written submissions,though not in affidavit evidence, indicate that the Shouldice Covenant remains on the title of more than 90% of the lots in ShouldiceTerrace. However, this is not the kind of extrinsic evidence that may be considered.

Attestations of belief by individuals who were notthe original property owners as to the territorial scope of a building scheme many decades after it was put into place are not reliableevidence. [49] Where there is ambiguity in a restrictive covenant that is not easily resolved by reference to extrinsic evidence of the naturepermitted by New Casa, courts typically resolve the ambiguity in favour of the free use of the land.

Lord Dunedin observed in Andersonv Dickie, [1915] UKHL 563, 84 LJPC 219 (HL) at 227, “all conditions restricting use of land must be very clearly expressed, thepresumption always being for freedom”, quoted with approval by Estey J in Noble et al v Alley, [1951] SCR 64 at 74, (SCC). This is consistent with the policy objectives identified by Côté JA in Kolias and the approach taken in Goodwin v Ridley, 2006BCCA 581 at para 14.

The ambiguity in the Shouldice Covenant must be resolved in favour of the free use of the land subject, of course,to the City of Calgary zoning by-laws. [50] After reviewing the extrinsic evidence and surrounding circumstances, the intention of the framers of the Shouldice Covenantremains elusive. I conclude that it is inappropriate to resolve the ambiguity by reading in “all” before the words “other lands in thesubdivision.” As such, the Shouldice Covenant remains ambiguous — the specific lands subject to the restrictive covenant cannot bedetermined.

Therefore, the Shouldice Covenant is unenforceable. [51] Had I been in the position of the Applications Judge faced with this issue in morning chambers, I might well have concluded,as she did, that the Virtues had an arguable case for standing and that the matter should be set down for a special application to determineboth standing and the merits where there would be written argument and an appropriate amount of time for oral submissions.

However,on this appeal, which was heard de novo, I had the benefit of having the time permitted by a special application as well as pre- and post-hearing written submissions which enabled me to decide the case on its merits. In the circumstances, a decision on the merits of thequestion of whether the Shouldice Covenant constitutes a building scheme is appropriate and there is no benefit to returning the matter tobe heard as a special application by an Application Judge. The parties had their special application in the form of this appeal.

There is nojudicial economy in returning the matter to an Applications Judge for a special application which could once more be appealed de novo. Conclusion [52] The appeal of the decision of Mason AJ is allowed. The Parks are entitled to

Schedule C costs in the appropriate column forboth the appeal and the Set Aside Application before Mason AJ. Heard on the 17th day of January, 2024. Dated at the City of Calgary, Alberta this 9th day of February, 2024. Colin C.J. Feasby J.C.K.B.A. Appearances: Zul Verjee, K.C. and Nicholas Austin for the Appellants Judson E. Virtue and Krista M. Virtue, for the Respondents