Law Times

Law Times • June 12, 2017 Page 7 www.lawtimesnews.com 262 days of enforceable positive covenants BY JEFFREY LEM T wo hundred and sixty-two days. That's how long we have had enforceable positive covenants under Ontario real property law. It's a brief window into an alternate uni- verse that has since been closed, presum- ably forever, by a unanimous panel of the Court of Appeal in Black v. Owen 2017 ONCA 397. But, I digress. One of the most basic tenets of Anglo- Canadian real property law provides that positive covenants (those covenants that require an owner of land to do something affirmative) cannot run with the land and bind successors in title. In contrast, negative or restrictive covenants (those covenants that require an owner of land to refrain from doing something) can run with the land and bind successors in title under certain circumstances. The rule is often ascribed to Tulk v. Moxhay, (1848) 41 E.R. 1143, [1843 -1860] All E.R. 9. However, this isn't quite accurate since Tulk v. Moxhay is more of an authority for the enforceability of restrictive cov- enants, and it sets out the circumstances in which restrictive covenants can run with the land and be enforceable against successors in title. The true genesis of the proscription against positive covenants running with the land is the more obscure case of Austerberry v. Oldham (1885) 29 Ch.D. 750 (Eng. C.A.). Notwithstanding the gradual watering-down of the rule in other parts of the common law world, for more than 100 years, Austerberry remained the binding authority in On- tario (indeed, probably all of Canada) for the proposition that positive covenants can never run with the land to bind successors in title. It wasn't until 2002 that the rule in Austerberry re- ceived any serious judicial scrutiny at all in Canada. In Amberwood Investments Ltd. v. Durham Condominium Corp. No. 123, 211 D.L.R. (4 th ) 1, 50 R.P.R. (3d) 1, the Ontario Court of Appeal considered the old proscription and decided against disrupting a century of well-established law, deferring, instead, to the legislature to make any changes in favour of enforce- able positive covenants. One would have thought that the ex- haustive analysis by the Court of Appeal in Amberwood would have carried Ca- nadian law over for another century or so, but one would be wrong. Scarcely two decades after Amberwood, in Black v. Owen 2016 ONSC 40, the Ontario Di- visional Court took it upon itself to chal- lenge the majority holding of the Court of Appeal in Amberwood. Black v. Owen is a case relating to the collection of modest maintenance fees for private roads in Wychwood Park, a small enclave community within the City of Toronto. The Small Claims Court had applied the rule in Amberwood (and, by extension, the rule in Aus- terberry) and found that the obligation for the periodic payment of money sought to be imposed on the residents of Wychwood Park was in- deed a positive covenant that could not, therefore, be enforced against successors in title. The judge, sitting in the Divisional Court for the appeal in Black v. Owen, actually appears to overturn the Court of Appeal (no, that was not a typographi- cal error — the Divisional Court actually appears to overturn the Court of Appeal) by declaring that the rule in Amberwood (and, by extension, the rule in Austerber- ry) was no longer the binding paradigm in assessing the enforceability of positive covenants purporting to run with the land. For all intents and purposes, the Di- visional Court in Black v. Owen followed the dissenting opinion in Amberwood, which favoured a "benefit and burden" analysis in lieu of the rigid prohibition en- dorsed in Austberberry. The Divisional Court reversed the Small Claims Court and enforced the 100-year-old Wychwood Park "fees" against the current owners, notwithstand- ing that those fees were classic positive covenants. For 262 glorious days, the rule in Aus- terberry was dead in Ontario. It was also dead elsewhere where the Ontario Divi- sional Court might have been persuasive. However, the oddity of the Divisional Court so blatantly following a relatively re- cent Court of Appeal dissent did not seem to sit so well with the Court of Appeal. On May 18, the Court of Appeal re- stored order to the judicial universe by releasing a unanimous decision overturn- ing the Divisional Court and restoring the Small Claims Court holding. Although there were a number of grounds for the successful appeal, one of them clearly was the proposition that there simply is no "Divisional" in "Court of Appeal." Since May 18, Amberwood and Aus- terberry again constitute the law of the land, at least until legislative reform changes things. Besides, that doesn't seem likely with common element condomin- ium legislation occupying much of that space since Amberwood. It is obvious that there is no five-member panel of the Court of Appeal being assembled to re- verse itself on the issue, and this author would be shocked if a lower court would ever be tempted to follow the dissent in Amberwood again. The coup is over, Austerberry has sur- vived and its grip on the law is now prob- ably secure for another 100 years. Positive covenants are not enforceable against suc- cessors in title that do not contractually agree to be bound. LT uJeffrey Lem is the director of titles for the province of Ontario. This article ref lects the personal views of the author alone. Guiding principles a must-read BY CLAIRE LEHAN O n a day-to-day basis, a typical corporate lawyer spends very little time thinking about human rights. This is not out of apathy or a lack of respect for the issues but rather a lack of knowledge and understanding of human rights issues and how they can intersect with one's legal practice. While, domestically, certain hu- man rights are regulated by strict laws, when clients have operations overseas, the rules and requirements become less clear. The fact that many of the leading global human rights standards are currently only considered to be "soft law" further encourages the misconception that corporate lawyers can disregard human rights issues when giving legal advice. This way of practice is slowly beginning to change as clients increasingly express the need for assistance in navigating complex and potentially costly human rights challenges within their business model. These challenges can range from issues as straightforward as a minor employment dispute to issues as complex as determining the extent of a client's obligations when operating in a conf lict zone. Human rights issues are also becoming more im- portant in the context of transactions, as many compa- nies are now requiring that extensive human rights due diligence takes place prior to an acquisition or merger. Failing to accurately identify human rights issues in a transaction can be costly, if not fatal, to a client. Consequences of such a failure may include not only the steep cost of litigation but also the revocation of a permit or the loss of a company's social licence to op- erate. The focus on human rights is also increasingly investor-driven, with many large investors demanding transparency and accountability with respect to hu- man rights issues. Although this shift may at first blush appear to be rooted in altruism, the reality is that investors are in- creasingly aware of the significant costs that accom- pany a failure to respect human rights. For example, recent research on the costs of com- pany-community conf lict conducted by the Corpo- rate Social Responsibility Initiative at the Harvard Kennedy School and the Centre for Social Responsi- bility in Mining at the Sustainable Minerals Institute at the University of Queensland showed that a major world-class mining project with capital expenditures of between US$3 billion and US$5 billion would suf- fer costs of roughly US$20 million per week of delayed production in net present-value terms in the event of a shutdown due to a labour dispute or community op- position. So, as human rights issues continue to permeate the legal sphere and demand for expertise grows, how should corporate lawyers prepare themselves to tackle this complex area, particularly when no clear legal framework exists? Fortunately, while a clear legal framework may be lacking, there is a growing body of guidance that ex- ists to set out the responsibilities of companies when it comes to respect for human rights — the most authori- tative being the UN Guiding Principles on Business and Human Rights. The guiding principles are a set of 31 principles drafted after years of extensive stakeholder consulta- tions, which clarify the duties and responsibilities of states and corporations to protect and respect human rights in the context of business activities. The principles are based on three pillars. These are the states' obligations to protect human rights, corpo- rations' responsibilities to respect human rights and, lastly, access to effective remedies if human rights are not respected. While the guiding principles do not impose new legal obligations on businesses, they serve as a tool to guide corporate practice and offer a framework upon which states can base their domestic legislation. The public and the private sector have embraced the principles as the leading guide in the area of business and human rights. They were endorsed by the Ameri- can Bar Association in 2012 and the G-7 Leaders in 2015, and large companies such as the Coca-Cola Company and General Electric have come out in support of their implementation. Interestingly, the Fédération Internationale de Foot- ball Association announced in 2015 that it will make it compulsory for both contractual partners and those within the supply chain to comply with the provisions set out in the Guiding Principles. Compliance with the guiding principles in a contractual context could in- clude an obligation to identify the human rights risks arising from contracts and negotiating language into the contacts that properly incentivizes behaviour that respects human rights and disincentives behaviour that does not. To assist lawyers in understanding their obligations under the Guiding Principles, the International Bar Association has released a practical guide on business and human rights. The guide details how the princi- ples may be used when providing advice on corporate governance and enterprise risk management, report- ing and disclosure, disputes, contracts and agreements and development of and participation in human rights standards. The work done by the International Bar Association to create such an in-depth guide speaks volumes as to the value these Guiding Principles can bring to a corporate lawyer's practice. While it's easy to understand why corporate lawyers have thus far remained fairly reticent to fully engage in the human rights issues that arise within their practices, given the rise of global standards and guidance directed squarely at the legal practice, corporate lawyers are be- coming better equipped to play a valuable and mean- ingful role in the protection and promotion of human rights. While the area's mix of soft law and hard law combined with limited guidance and tough facts may make some lawyers' stomachs turn, this complexity is precisely why it's so important for lawyers to stay en- gaged in this area. My advice for today — read the guid- ing principles. Your clients will thank you for it. LT uClaire Lehan is a corporate lawyer with Bennett Jones LLP in Toronto. u SPEAKER'S CORNER COMMENT The Dirt Je rey W. Lem Je rey W. Lem

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