IN THE SUPREME COURT OF BRITISH COLUMBIA
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Citation: |
Okanagan Equestrian Society v. North Okanagan (Regional District), |
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2018 BCSC 800 |
Date: 20180515
Docket: S89882
Registry: New Westminster
Between:
Okanagan
Equestrian Society, formerly known as
Vernon and District Agricultural Society
and The Vernon Jockey Club Limited Liability
Plaintiffs
And
Regional District
of North Okanagan
and The Corporation of the City of Vernon
Defendants
Before: The Honourable Mr. Justice Tammen
Reasons for Judgment
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Counsel for the Plaintiffs: |
David H. Goodwin |
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Counsel for the Defendant, Regional District of North Okanagan: |
Barry S. Williamson |
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Counsel for the Defendant, The Corporation of the City of Vernon: |
James Yardley |
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Place and Date of Trial: |
New Westminster, B.C. |
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Place and Date of Judgment: |
New Westminster, B.C. |
TABLE OF CONTENTS
2. The 1964 transfer and 1965 Agreement
6. The 2000 Agreement and Land Transfer
i. The documentary record and the conduct of the parties
ii. The three certainties of a valid trust
Issue 2: Are the defendants in breach of the trust conditions set out in the 1965 Agreement?
i. Duty of good faith in contract
ii. The fair market value of Lot 1
iii. The alleged representations by the NORD
b. Removal of the softball diamonds
c. Supporting the Society in developing a business plan
Issue 5: Is the Society entitled to specific performance of the 2000 Agreement?
Issue 10: Is the Society entitled to general damages, special damages and costs?
[1] At issue in this case is the use to be made of a parcel of land in Vernon, B.C., known as Kin Park, on which sits Kin Race Track, reputedly the oldest thoroughbred racetrack in British Columbia. In 1964, the land on which the racetrack was built was owned by the Vernon Jockey Club (the “Jockey Club”), and consisted of two parcels, identified as Lots 2 and 3. At that time, there was no horse racing occurring at Kin Race Track, although the Jockey Club desired to bring thoroughbred racing back to Vernon. That group held a charter with the B.C. Racing Commission permitting them to run pari-mutuel horse racing events a certain number of days per year.
[2] The Kinsmen Club of Vernon (the “Kinsmen”) owned the shares of the Jockey Club, and thus controlled the land at issue. Pursuant to a 1964 transfer and an agreement executed on September 27, 1965, the Jockey Club transferred title to the land to the City of Vernon, with conditions as to future use (the “1965 Agreement”). The parties to the 1965 Agreement were the City of Vernon (the “City”), the Jockey Club and the Kinsmen. The characterization of these transactions is of fundamental importance to this litigation. The plaintiffs say a charitable trust was created, requiring the City to maintain the racetrack and permit horse racing in perpetuity. The City says the transfer was a gift, and no charitable trust was created.
[3] As will become clear in these reasons, there have been a series of subsequent transactions related to surrounding lands and agreements among the parties, which are also at issue. Those parties include the defendant North Okanagan Regional District (“NORD”), which owns some of the property, and is responsible for determining how park lands are used, and the plaintiff Okanagan Equestrian Society (the “Society”), an entity which now owns all shares of the Jockey Club, and is a party to a series of agreements concerning use of the lands.
[4] Of particular importance is an agreement signed on May 31, 2000 and executed by the NORD, the City and the Society, which covered use, maintenance and other mutual obligations of the parties for five years, and contained a clause which stipulated that the agreement “will be renewed” for successive five-year terms upon its expiration, subject to certain prerequisites (the “2000 Agreement”). The validity of that clause, as well as the issue of its alleged breach by the NORD, and if I so find, available remedies for the Society, are also central to this case.
[5] The Society seeks declaratory relief and specific performance of both the 1965 Agreement and the 2000 Agreement. In the alternative, the Society seeks damages for breaches of both the 1965 Agreement (against the City) and the 2000 Agreement (against both the City and the NORD).
[6] The Society also advances several other claims against each of the defendants. Pursuant to the 1965 Agreement, the Society seeks declaratory relief against the City, including, in addition to an order requiring repair and maintenance of the track, an order requiring the City to rebuild a grandstand which was destroyed by an arson fire in 2014.
[7] The Society seeks a declaration that both the defendants are in breach of the 2000 Agreement by failing to renew it, and seeks enforcement of the mandatory renewal clause, presumably in perpetuity.
[8] The Society also seeks damages against both defendants for failing to negotiate in good faith in connection with the 2000 Agreement, in particular the renewal of same.
[9] In addition, the Society seeks a permanent injunction restraining both defendants from altering the lands at issue in any way that would interfere with the activities of horse racing and racehorse training.
[10] There is also a claim against both defendants for damages related to work done by members of the Society in maintaining the racetrack between the time of non-renewal of the 2000 Agreement at the end of 2004, and the grandstand fire in July 2014. The Society seeks compensation in the amount of $10,000 per annum, the amount it received pursuant to the 2000 Agreement, which made the Society responsible for track maintenance.
[11] Finally, against the NORD, the Society makes a claim of unjust enrichment for the difference between what the NORD paid the Society for a parcel of land surrounding the track, which was transferred around the time of the 2000 Agreement, and what the Society says was fair market value of those lands.
[12] The further amended notice of civil claim also made a claim against the NORD for inducing the City to breach the 1965 Agreement, but that claim was not pursued in final argument by the Society, nor was any evidence led on the point.
[13] By agreement, the parties filed as Exhibit 1, seven binders of documents, divided into five volumes, although not all documents were referred to by witnesses and counsel. There were also several other exhibits, perhaps most importantly Exhibit 2, which is a large diagram showing the configuration of the land at issue, with coloured borders demarcating the parcel divisions, ownership of the land, and two different racetrack configurations.
[14] The plaintiff called nine witnesses, as well as a representative of the City, for cross-examination.
[15] The NORD called two witnesses.
[16] Obviously, the two most important documents in the case are the 1965 Agreement (Ex. 1, Vol. 1, Tab 7) and the 2000 Agreement (Ex. 1, Vol. 2, Tab 68). Within the documents binders are also various agreements regarding use and maintenance of the track between 1970 and 2000, to which I will refer as necessary. In addition, multiple drafts of the 2000 Agreement are sprinkled throughout the documents binders. Various witnesses referred to one or more of the drafts in the course of giving evidence about their direct part in, or understanding of, the negotiations leading to the execution of that agreement.
[17] Also, many of those same witnesses gave evidence concerning their interpretation of the 2000 Agreement, in particular the renewal clause. I must consider the evidence from the main Society witness, Gerry Saitz, who negotiated on behalf of the Society, as to the importance of that clause from his perspective. However, it is for the Court to interpret the clause itself, its meaning, and most importantly, its legal effect.
[18] Contained within the documents binders are many minutes of meetings from the Society, the Vernon City Council, and the Greater Vernon Parks & Recreation District (“GVPRD”), a committee which met to decide issues related to use of parks land within the NORD. The parties agree that these minutes represent the best contemporaneous record of what was discussed and said by named individuals at those meetings. However, there is some disagreement among the parties concerning whether any use can be made of the meeting minutes for substantive purposes, i.e. for the truth of their contents. I will address these issues as necessary in my consideration of the evidence.
[19] I will provide two obvious examples. Exhibit 1, Vol. 5, Tab 87 contains the minutes of the Vernon City Council meeting of September 27, 1965, the date the 1965 Agreement was executed. There, the mayor is reported as commenting on the generosity of the Kinsmen in “making a gift of the Kinsmen Race Track to the City.” I will consider that note as evidence that the mayor made the comment, and accept that it obviously reflects his view at the time. However, I will not consider the statement as evidence that the transfer of land was in fact a gift from the Kinsmen to the City. That determination must be made on directly admissible evidence, not the hearsay statement recorded in the minutes.
[20] At Ex. 1, Vol. 2, Tab 95, the minutes of the November 24, 2002 meeting of the Society show that Sean Newton reported that the City had accepted in principle the five-year business plan submitted by the Society. I rely on those minutes as proof that Mr. Newton made that statement, but not as evidence that in fact the City had accepted in principle the business plan. There is a substantial body of other evidence showing that the defendants had not approved the business plans submitted by the Society pursuant to the 2000 Agreement.
[21] Before setting out the important evidence in chronological fashion, I will attempt to set out the somewhat complex structure of the parcels of land which are the subject of this litigation, and then, in brief compass, a chronology of key events.
[22] Kin Park is located within the City, north of 43rd Avenue and east of Old Kamloops Road, either within or just outside the city centre. It sits across the street from Alexis Park Elementary School, and adjacent to a sporting arena where ice hockey is played.
[23] Kin Park consists of four parcels of land. Lot 3 is the infield portion of what was the original Kin Race Track. Four baseball diamonds, suitable for slow pitch, were constructed on Lot 3 sometime in the 1970s, and apparently at least two remain there to this day. Lot 2 is the old track itself, and a small portion of land adjacent to it to the west. These two lots were the subject of the 1964 transfer and the 1965 Agreement. Since 1964, they have been owned by the City.
[24] Lot 1 is roughly in the shape of an upside-down horseshoe, and surrounds Lot 2 on three sides, excepting the south. South of Lot 1 is 43rd Avenue, across which is the elementary school. On September 22, 1987, the Society’s predecessor group, the Vernon and District Agricultural Society, entered into an agreement to purchase Lot 1, and completed the purchase transaction on September 27, 1993 (the “1987 Agreement”). That land acquisition permitted the expansion of the track from a quarter mile to a five-eighths mile track. In addition, it permitted the construction of additional horse stalls, which over time became the Society’s primary source of income, through rental agreements to horse owners.
[25] The Society sold Lot 1 to the NORD in 2000, and that transaction was part of the overall negotiation among the parties which led to the execution of the 2000 Agreement.
[26] Parcel A is a fairly large plot of land, which surrounds Lot 1, to the north and east. It can best be described as the shape of an upside-down letter “L”, which runs from Old Kamloops Road eastward, then down to 43rd Avenue to the south. The hockey arena is on the southernmost part of Parcel A. The racetrack chute and northernmost part of the new track extend onto Parcel A. There are also some horse stalls on it, and an area devoted to parking for horse trailers and recreational vehicles. The NORD has owned Parcel A at least since 1990.
[27] It is perhaps of some significance that at all times in issue, in order to conveniently access the softball diamonds, ball players needed to cross not only the racetrack, but also a portion of Lot 1. Apparently, the NORD was also of the view during the 2000 negotiations that it might need to have access to a small portion of Lot 1 in relation to access to the hockey arena from 43rd Avenue.
[28] A very basic chronology of key events is as follows:
1964 to 1984
· April 27, 1964 – Lots 2 and 3 were transferred from the Jockey Club/Kinsmen to the City.
· September 27, 1965 – an agreement among the Jockey Club/Kinsmen and the City regarding use of lands was signed (i.e. the 1965 Agreement).
· December 14, 1970 – an agreement entitled “Kinsmen Racetrack Agreement” was signed by the City, Jockey Club, Kinsmen and the Society, for a term of five years, and anticipated renewal for another five-year term (the “1970 Agreement”). (The Society had, in 1958, secured from the Jockey Club a certain number of race days pursuant to the Jockey Club’s racing charter).
· 1970 to 1975 – the evidence is imprecise, but sometime in this time-span, Vernon Race Days returned to Kin Race Track.
· October 28, 1976 – a further agreement between the Society and the Jockey Club related to race days for the Society was made.
1985 to 1999
· May 11, 1985 – a five-year agreement was signed by the Society and the NORD (by then responsible for managing Kin Park) making the Society responsible for track maintenance, with assistance from the NORD, and guaranteeing the Society 29 days of exclusive use of the racetrack each year (the “1985 Agreement”).
· September 22, 1987 – the Society entered into an agreement to purchase Lot 1 from John Toporchak for $120,000, payable in annual instalments of $20,000 (i.e. the 1987 Agreement).
· January 6, 1988 – the first documented request by the Society to be permitted to use the racetrack for horse training outside the window for Vernon Race Days.
· April 6, 1989 – an agreement was executed by the NORD and the Society regarding horse training at the track, access to the softball diamonds by ball players, and maintenance of facilities.
· 1990 (exact date unknown, likely February) – first proposal was made by the Society to the NORD that the NORD purchase Lot 1 from the Society.
· 1990 (exact date unknown) – a further one-year agreement between the NORD and the Society regarding horse training, ball diamond access and maintenance of facilities was made.
· 1992 (exact date unknown) – GVPRD retained the consulting firm Siemens Equifacs to conduct a two-part assessment of horse racing in Vernon, including a potential track expansion to 5/8 mile.
· 1992 (exact date unknown) – GVPRD prepared a parks master plan.
· February 23, 1993 – the Society sent a letter to the NORD offering to sell Lot 1 to the NORD.
· May 20, 1993 – a joint funding request was made by GVPRD and the Society to the B.C. Racing Commission for funding for track expansion and improvements.
· September 27, 1993 – the Society completed the purchase of Lot 1, pursuant to the 1987 Agreement.
· 1994/1995 – the track expanded to 5/8 mile.
· November 28, 1995 – GVPRD sent a proposal to the Society offering to purchase Lot 1.
· May 6, 1996 –all Jockey Club shares were transferred from Brian Willows and the Kinsmen to the Society.
· February 3, 1998 – a two-year agreement, ending December 31, 1999, was executed by the NORD, the Society and the City regarding use and operation of Kin Park (the “1998 Agreement”).
2000 to 2005
· January 2000 – the Society offered to sell 3.5 acres of Lot 1 to the NORD for $270,000, conditional upon an operating agreement being put into place regarding future use by the Society of the Kin Park lands. The NORD refused.
· January 2000 to May 2000 – negotiations regarding the sale of Lot 1 and a new operating agreement took place.
· May 31, 2000 – a five-year agreement was executed by the NORD, the Society and the City regarding use, cost sharing and maintenance of Kin Park lands (i.e. the 2000 Agreement). This agreement also required the Society to provide the NORD with a five-year business plan for development of Kin Park as a multi-use equestrian facility. The formal offer to purchase Lot 1 was also signed by the NORD on this day.
· June 16, 2000 – the original completion date for sale of Lot 1 to the NORD by the Society. The Society refused to complete the transfer on this date.
· July 21, 2000 – the transfer of Lot 1 from the Society to the NORD was completed.
· October 2000 – the Society submitted to the NORD a document entitled “Request for Funds” and an accompanying document described as a five-year development plan.
· November 22, 2000 to June 28, 2001 – the NORD sent four letters to the Society requesting further information regarding a five-year business plan.
· July 30, 2001 – the Society responded to the NORD’s letters.
· November 2002 – the Society provided the NORD with an “updated” five-year plan.
· 2002/2003 – GVPRD undertook preparation of an updated parks master plan.
· March 31, 2003 – the Society sent a letter to the NORD, advising that it intended to complete a formal business plan covering calendar years 2003/2004 by the end of April.
· May 2003 – nine of the Society’s directors resigned.
· June 3, 2003 –Sheila McDonald, the President of the Society, sent a letter to the NORD advising that she had resigned because of a legal opinion that her position was invalid.
· June 4, 2003 – Al McNiven, a representative of the NORD/GVPRD attended the annual general meeting of the Society to ask questions about the Society and its activities.
· July 29, 2003 – the NORD sent a letter to the Society advising that, because the Society had not provided the NORD with an acceptable five-year business plan, the 2000 Agreement might not be renewed.
· August 13, 2003 – at a directors’ meeting of the Society, the acting President advised the board of the NORD’s position as to the inadequacy of the business plan.
· February 2004 – the NORD advised the Society that the 2000 Agreement would not be renewed.
· March 2004 – the Greater Vernon Parks Master Plan was issued.
· December 21, 2004 – the statement of claim in this action was filed.
2005 to Present
· January 2005 to summer 2013 – horse racing continued at Kin Race Track, despite the absence of an agreement.
· January 20, 2006 – the Kinsmen (then known as the Kin Club of Vernon) was struck from the Register of Companies and dissolved.
· July 9, 2014 – the grandstand at the racetrack was destroyed by arson fire. Since the fire, there has been no horse racing at Kin Race Track.
· 2016 – in response to homeless individuals taking up residence in the horse stables, the City removed many of the stable doors at Kin Park.
· April 26, 2017 – the plaintiffs filed a further amended notice of civil claim.
[29] Not surprisingly, there was no evidence from any active participant in the negotiations which led to the 1964 land transfer and execution of the 1965 Agreement. Two witnesses called by the plaintiffs, Brian Willows and Dr. Don Lemiski, were members of the Kinsmen at the relevant time, and were able to give evidence which provided useful background to those transactions. However, neither was directly involved in the negotiations.
[30] Dr. Don Lemiski was the president of the Kinsmen in 1963. His general recollection was that the Kinsmen offered the racetrack lands to the City on condition that the lands were to be used and maintained in a manner which would preserve the Jockey Club charter. At that time, there was a requirement that the charter be used for a certain number of racing days each year to remain valid.
[31] Dr. Lemiski was no longer president of the Kinsmen by the time of the land transfer in 1964 and the execution of the 1965 Agreement. He played no part in the 1965 negotiations, was not a signatory to the agreement, nor did he recall seeing a copy of it before it was signed.
[32] I am not persuaded that I can give much weight to Dr. Lemiski’s evidence, both in cross-examination and re-examination, as to the intent of the 1964 land transfer and subsequent agreement, but I will set out the salient parts nonetheless. In essence, he opined that the land transfer was a gift from the Kinsmen to the City, albeit one with conditions attached. Specifically, he believed that it was a condition of the gift that the City preserve the racetrack in perpetuity and permit the Jockey Club to use the track for horse racing (again, in perpetuity) for as many days as were required to maintain the Jockey Club’s racing charter. When the land was not being used for horse racing, he believed it could be used for general recreational purposes.
[33] The notion of “perpetuity” excepted, the 1965 Agreement itself is entirely consistent with Dr. Lemiski’s opinion. The recitals set out that the 1964 land transfer was made “upon certain conditions” to be set out in the agreement. The recitals also state that the intention of all parties is that the City will assume “total legal and equitable ownership to said lands.”
[34] Further, the recitals refer to the obligation of the City to maintain the lands to enable the Jockey Club to maintain its “present standing” with the Horsemen’s Association, a clear reference to the racing charter held by the Jockey Club. Finally, the recitals state the intention of the City to develop the lands for “general recreational uses” in addition to horse racing.
[35] The body of the 1965 Agreement is six paragraphs, which I will set out in their entirety:
WITNESSETH AND IT IS AGREED between the parties hereto as follows:
1. The City agrees to bring into repair and keep in good repair for horse-racing the track presently found on said lands.
2. The City agrees to keep in good repair such buildings and other improvements as they may erect thereon from time to time.
3. The City agrees that during such period of each year so many days as may be required to maintain in good standing the right of The Vernon Jockey Club Limited to conduct horse-racing with Pari-mutuel betting (otherwise referred to as the “Charter”) that either The Kinsmen Club or The Jockey Club require use of track on said lands that the same will be granted and permitted to them free of charge, said accommodation to extend to all necessary buildings and out-buildings for the holding of racing events.
4. The parties hereto recognize that it is the intention of the City to develop said lands into a general recreational area for such purposes as the City may decide from time to time and The City agrees at all times to maintain the name of “Kin Race Track” as it refers to said lands.
5. The City agrees that it shall not at any time sell, mortgage or lease (for any time in excess of five (5) years) said lands or any portion thereof without first having the consent in writing of the other parties hereto or their successors.
6. It is recognized between all parties hereto that this Agreement is not in registerable form.
[36] Paragraph 3 spells out in clear terms the obligations of the City related to permitting such use of the track as is required for the Jockey Club to preserve its charter.
[37] Paragraph 4 is a formal recognition that the City intends to develop the lands into a general recreational area, and by its very broad terms, gives sole decision-making authority in that regard to the City.
[38] There is no reference in the agreement to the creation of a trust, nor is there a finite term for the agreement.
[39] Of note, there is no mention in the agreement of horse training or boarding. Also, there is no reference to any intention by the City to develop the lands for general equestrian uses. As we shall see, it was only with the increasing involvement of the Society, which was not a party to the 1965 Agreement, that those two notions became part of the contractual matrix.
[40] Mr. Willows provided an interesting and objective perspective to the land transfer and use of Kin Park by various groups. Mr. Willows practised law for over 40 years in Vernon, commencing in 1960, and he worked at the firm of Davidson and Seaton, which acted for the City in 1964/1965. Mr. Willows was also active with the Kinsmen and the Jockey Club over the years. Finally, he participated in the softball leagues which used the infield of the racetrack once the diamonds were constructed there.
[41] Mr. Willows was able to shed some light on the issue of the Jockey Club charter, at least his understanding of it, and confirmed that the Jockey Club very much desired to bring thoroughbred racing back to Vernon. He believed that the holder of a charter had the right to conduct thoroughbred racing, and was required to hold approximately 10 to 20 such races each calendar year in order to maintain the charter. During the 1960s, the Jockey Club was in essence loaning or renting out their days to Exhibition Park in Vancouver.
[42] Mr. Willows was not part of the negotiations concerning transfer of the lands in 1964 and the subsequent agreement in 1965. However, because of his involvement both personally and professionally with the various parties, he had some direct knowledge concerning these transactions. His signature appears on various documents in Ex. 1 in various capacities. He acted as commissioner for oaths on some of the land transfer deeds (Vol. 1, Tab 8); he witnessed all the signatures to the 1970 Agreement (Vol. 1, Tab 10); and he signed a 1976 agreement between the Jockey Club and the Society in his capacity as president of the Jockey Club (Vol. 1, Tab 11).
[43] Mr. Willows said that the 1965 Agreement reflected his understanding of the agreement reached among the parties regarding transfer and subsequent use of the land. He, as a member of the Kinsmen, believed that the land was to be used for a dual purpose: as a racetrack and also for general recreational use.
[44] Mr. Willows was the primary person responsible for maintaining the Jockey Club after the land transfer. He said that from that organization’s perspective, the most important feature of the 1965 Agreement was preservation of the right to conduct horse racing, i.e. what was sometimes referenced as protection of the charter.
[45] Over time, the Society became increasingly involved in the actual horse racing, and as I understand Mr. Willows’ evidence, by the time of the transfer of shares of the Jockey Club to the Society (which transfer he effected), only the Society was actually conducting horse racing in Vernon. The Jockey Club apparently ceased to do so, at a time which is unclear on the evidence.
[46] Regarding the softball diamonds, Mr. Willows recalled that there were four diamonds constructed in the 1970s, and as of the date of trial, two remained. He believed that softball was one of many possible and acceptable “general recreational” uses of the lands contemplated by the 1965 Agreement. His view of the conflict between horse racing and softball users which developed over time was that the Society was a bit selfish regarding use of the facility. He did not believe that the ball players were intolerant of the concerns expressed by the Society regarding shared use of the lands. He said that the softball diamonds were always well used.
[47] His strong view was that the intention of the original agreement was that the land be developed for general recreational purposes, not that it be used exclusively for equestrian purposes. He wrote a letter to the GVPRD in 1997 (Ex. 1, Vol. 1A, Tab 39) setting out his views regarding the intent and spirit of the 1965 Agreement, and expressing his opposition to the use of the infield area of the track as polo grounds. He wrote a letter to the City in 2000 (Ex. 1, Vol. 2, Tab 77) again expressing his views in strong terms, and opposing the removal of the softball diamonds to allow for development of the land for only equestrian activities.
[48] As for the present state of Kin Park, Mr. Willows referred to it as “disgraceful, an eyesore”. The absence of any upkeep to the track and surrounding lands has led to it being overrun with weeds, there is landfill from the adjacent construction projects on the track, and no maintenance appears to have been done in some time.
[49] The other documents which perhaps inform a consideration of the spirit and intent of the transfer and agreement of 1964/65 are letters exchanged between lawyers for the City and the Jockey Club just prior to those transactions. A letter dated November 13, 1963 from the City to the Jockey Club is at Ex. 1, Vol. 1, Tab 4. The Jockey Club’s response dated February 14, 1964 is at Tab 5.
[50] Page 1 of the November 13, 1963 letter refers to the intention of the City, once it takes title, to develop the land into a civic centre “and to develop and maintain the race track both as a foot and horse track with the additional possibility of car racing.” Page 2 sets out the responsibility of the City to “maintain the track and grounds generally”, as well as the means by which the Jockey Club will be able to ensure viability of its charter indefinitely (according to that letter, a long-term lease granting exclusive use for horse racing to the Jockey Club).
[51] The February 14, 1964 response from the Jockey Club is brief, and expresses agreement with the proposal made in the November letter. The Jockey Club letter also highlights the responsibility of the City to maintain the track.
[52] My interpretation of all the evidence is this:
1) what mattered most to the Kinsmen was that the land be developed for general recreational purposes/uses, which would include horse racing, but would also include other activities;
2) what mattered most to the Jockey Club was the preservation of its charter, i.e. the ability to hold thoroughbred racing at the track for a finite number of days each year;
3) in addition to the City granting use of the track to the Jockey Club for race days, the track needed to be brought into repair and maintained in order to enable race days to occur;
4) the City undertook to bring the track into good repair and keep it in good repair “for horse racing”, something which was important from the perspective of the Jockey Club; and
5) the use to be made of the lands, in addition to horse racing, i.e. the “general recreational uses”, was within the sole discretion of the City.
[53] The 1970 Agreement marked the first time that the Society was a party to a contract concerning use of Kin Race Track. The other parties to the agreement were the City, the Kinsmen and the Jockey Club. The agreement was for a period of five years, with a five-year renewal contemplated.
[54] The recitals refer to the 1965 Agreement, and specify that the 1970 Agreement is “subject thereto”. The 1965 Agreement is not referred to as a trust.
[55] It is difficult to define with precision the obligations of the parties under this agreement. The recitals refer to the intention of the Society to develop the lands. The body of the agreement refers to a “development program” for the track, which is to be prepared by the Society and presented to the City annually. The cost of this program is to be borne by the Society, with the proviso that the City will supply staff and equipment to assist, where it is economically feasible.
[56] Pursuant to the agreement, all improvements placed on the land become the property of the City. All income generated from use of the lands is to be diverted back into cost of improvements, and the Society is to provide the City with annual financial reports.
[57] Paragraph 6 of the agreement requires the Society’s permission for any party other than the City to use the lands and facilities. Paragraph 7 commits the City to assisting the Society with “landscaping and planning”.
[58] Paragraph 8 reads as follows:
The infield may be used by both the Society and the Vernon Department of Parks and Recreation in cooperation each with the other.
[59] The agreement is silent as to obligations to maintain the racetrack and any other facilities or improvements which may be placed upon the lands.
[60] It is noteworthy that this first agreement between the City and the Society specifically refers to cooperation between them with respect to use of the infield.
[61] There is no evidence that the Society submitted any development plans to the City, either annually or at all. Nor is there evidence that the Society submitted the financial information contemplated by the agreement. It appears from the evidence that the agreement was not formally renewed after five years.
[62] There is evidence, albeit somewhat imprecise, from Mr. Saitz, past president of the Society, that through volunteer labour and lumber provided by a Society director, the Society erected various improvements to the lands during the early 1970s. Presumably, this was done pursuant to the 1970 Agreement, although Mr. Saitz testified that the construction commenced in 1968. I accept Mr. Saitz’s evidence in general, but find that he is likely mistaken about the commencement date. It seems incongruous that the Society would devote time and resources to constructing improvements on City land prior to signing an agreement.
[63] The improvements included a grandstand, a beer garden, washrooms, a clubhouse, and some extra horse stalls.
[64] Mr. Saitz was not able to say precisely when horse racing commenced, nor when the softball diamonds were constructed. He did acknowledge that a “couple” of the ball players assisted with the construction of the beer garden, but said that the Society was mostly responsible for its completion.
[65] Mr. Saitz testified that horse racing resumed shortly after construction of the improvements completed in 1970. I find it was likely later than that, but certainly prior to 1976. He also said that horse training commenced at the same time. From that time forward, according to him, the Society assumed responsibility for maintaining the racetrack, and the City supplied a grader and a water truck.
[66] Mr. Saitz explained the importance of a water supply to all horse racing and training activities. Water is necessary both for the horses and for the track. If horse training is occurring on the track, it must be watered daily. If one considers watering the track as an important part of track maintenance, which I believe the parties do, then it is self-evident that the expansion of track activities from a small number of race days per year to months of daily horse training would exponentially increase the maintenance work.
[67] It is thus unsurprising that the Society took up the task of maintaining the track at the time it commenced using the track for horse training.
[68] Before turning to the next agreement among the parties, the 1985 Agreement, I wish to comment on the issue of horse training. As I have noted, the 1965 Agreement made no provision for horse training, only horse racing. Likewise, it only obligated the City to keep the track in “good repair for horse-racing”. It was silent regarding other maintenance of the track, specifically any maintenance which would be necessitated by horse training.
[69] Mr. Saitz gave evidence that horse racing and horse training go together, that you cannot have the former without the latter. I accept without hesitation that one would need to permit the racehorses that would be racing on race days to access the track for training runs in the days preceding the races. However, what actually occurred at Kin Race Track went far beyond that.
[70] According to Mr. Saitz, horse training commenced on the track in the early 1970s. The original horse training agreement permitted same for a finite window, from the middle of March to the end of May. In 1989, the training window was expanded to cover six months of the year, March 15 to September 15. Ultimately, the training window spanned eight months of the year, March through October, which according to Mr. Saitz was the entire calendar period for which it was possible to have a water supply at the track. Because of concerns with freezing, water could not be turned on during the winter months.
[71] According to Mr. Saitz, the initial request for permission to train horses, the letter from the Society to Mr. McNiven dated January 6, 1988, was written at the request of Mr. McNiven. Mr. Saitz said that horse training had been ongoing since the 1970s, but that Mr. McNiven insisted on putting it in writing. Mr. Saitz said the horse training agreement was part of Mr. McNiven wanting “control of everything”. Mr. Saitz did concede that horse training was a “bone of contention” between the parties.
[72] Other witnesses had different recollections on the issue of horse training from those of Mr. Saitz.
[73] Robyn Dalziel, another past president of the Society, said that in 1987, Mayor Anne Clark opened up the track to horse training, after Mr. McNiven refused to do so.
[74] Mr. McNiven said that he did not recall that horse training had been occurring prior to 1988, but that discussion of same commenced shortly after his arrival at the GVPRD in 1986.
[75] It really matters little when the Society commenced regular horse training on Kin Race Track. The evidence is relatively clear that the Society did not secure the imprimatur of the defendants to do so until 1988. The 1985 Agreement, like the 1965 Agreement, said nothing about using the racetrack for horse training. That omission was not lost on Mr. McNiven, who quite properly sought to formalize an agreement in that regard.
[76] The broader implication is that horse training, although not part of the proposed use by the Jockey Club in 1964/1965, assumed great importance in the negotiations among the parties in the 1990s, culminating in the 2000 Agreement.
[77] It was primarily the horse training which fuelled the conflict with ball diamond users. There was considerable evidence on this score from Ms. Dalziel. Moreover, horse training went from being an additional use, which the defendants permitted on their lands, to being potentially the raison d’etre for the renewal of the 2000 Agreement.
[78] I will set out the pertinent portions of this five-year operations and use agreement between the NORD and the Society.
[79] Paragraph 1 is a recognition that the NORD is responsible for the operation and maintenance of parks within the region, and an acknowledgment that the land and improvements are owned by the City.
[80] Paragraph 2 refers to the intention of the Society to “continue the development and use of the Kinsmen Race Track to conduct Pari-Mutual [sic] Races and other endeavours.” Like the 1970 Agreement, it obliges the Society to present its program to the NORD annually.
[81] Paragraph 4 stipulates that the cost of the development program is to be borne by the Society, but that the NORD will assist “wherever economically feasible”, and refers to the development being for “multi-use purposes”.
[82] Paragraph 5 cedes ownership of all improvements constructed on the land to the City.
[83] Paragraph 6 reads as follows:
The Society agrees to bring into repair and keep in good repair for horse racing the track presently located in the Park. The District will continue, as in previous years, to provide assistance by way of equipment wherever possible. Also, it is agreed that the District will provide a water truck or other means of watering, as agreed by the Society, on or during the actual race days.
Thus, the first sentence tracks the language of paragraph 1 of the 1965 Agreement, but substitutes the Society for the City as the party responsible for keeping in good repair the track “for horse racing”.
[84] Paragraph 7 gives the Society “full use” of Kin Park for the 29 days immediately preceding the statutory holiday in August, subject to some minor conditions.
[85] The 1985 Agreement does not mention horse training.
[86] There is no evidence that the Society provided the required information to the NORD annually.
[87] During the currency of this agreement, the first documented horse training agreements came into existence. The first, in 1988, was formalized through an exchange of correspondence between the Society and Mr. McNiven of the NORD. The second horse training agreement covered 1989, and is at Ex. 1, Vol. 1, Tab 19. Tab 20 appears to be an identical agreement, covering 1990.
[88] Mr. McNiven testified that there was no operations and use agreement in place from the end of 1989 to 1998. There does not appear to have been a horse training agreement in place post-1990. The operations and use agreements of 1998 and 2000 included a horse training agreement.
[89] The documentary evidence is clear that the Society entered into the 1987 Agreement to purchase Lot 1, for $120,000, payable in six annual instalments of $20,000. Pursuant to that agreement, the Society became registered on title in September 1993. In the interval, sometime in early 1990 and again in February 1993, the Society offered to sell Lot 1 to the NORD.
[90] The letter from Mr. Saitz to the GVPRD in February 1993, offering to sell the land, requests that the GVPRD pay fair market value for the land, but that the proceeds be held in trust to be used for improvements by the Society to Kin Park. The Society sought in return for what it characterized as “donating” the land to the GVPRD that Vernon Race Days be available to it as and when requested.
[91] It appears from the contemporaneous documents that the Society wished to divest itself of the burden of ongoing mortgage payments and the payment of substantial property taxes at the time it offered to sell Lot 1 to the NORD.
[92] The sale of Lot 1 did not occur until summer 2000, shortly after the 2000 Agreement was executed. Although the evidence is far from clear, it appears that the Society had borrowed money to be used as an operating line of credit secured against the property. The amount of its indebtedness as of spring 2000 is uncertain but contemporaneous documents, including minutes of Society directors’ meetings, refer to bank indebtedness and ongoing mortgage obligations. It appears that, at time of sale, the Society was still paying annual property taxes on Lot 1, but was hopeful that legislative change might soon relieve that burden.
[93] In 1992, the GVPRD prepared a parks master plan, to address in a comprehensive fashion usage of all parks lands in the district. The report was not filed at trial, but Mr. McNiven was able to provide some evidence about its content. He referred to it in a memorandum he prepared for the GVPRD committee in 1993 concerning the proposed expansion of the racetrack. Apparently, the 1992 master plan recommended that Kin Park be developed as a multi-use equestrian facility, and that the softball diamonds be phased out by 2000.
[94] In 1992, the GVPRD retained the consulting firm of Siemens Equifacs to conduct a two-part assessment of horse racing in Vernon. Phase 1 was a preliminary assessment, covering in general the demand for horse racing in Vernon, and considering the feasibility of expansion of the Kin Race Track.
[95] Phase 2 was a detailed assessment of the work and cost involved in track expansion from a 1/4 mile track to a 5/8 mile track, and other associated upgrades to the facility. This report is at Ex. 1, Vol. 1, Tab 22. It contains detailed plans and drawings for the track expansion, as well as a host of other recommendations for improvements. Regarding the infield, the report notes that the track reconstruction will not disturb the ball diamonds, but adds: “It is still preferable to remove these as soon as is practical to accommodate other equestrian facilities in the infield.”
[96] The report notes that the infield will accommodate the potential needs of various equestrian groups, but that polo fields would not be practical to include in the infield.
[97] Another event central to the litigation was the expansion of the racetrack.
[98] In order to fund the track expansion, the GVPRD and the Society prepared a joint proposal to the B.C. Racing Commission, seeking funding of approximately $800,000 to expand the racetrack. Mr. McNiven drafted the letter and accompanying request for funding, dated May 20, 1993 (Ex. 1, Vol. 1, Tab 27). That proposal referred to the long-term plan to “expand and upgrade the facility to be an equestrian centre and over time relocate the softball fields.” The estimated cost to relocate the ball diamonds was $1 million. That funding was not part of the May 1993 request.
[99] Page 7 of the funding request sets out the financial commitments and contributions of the GVPRD and the Society to date. It sets the investment in improvements of the Society, largely through volunteer labour, at $660,000. Mr. McNiven testified that he received that figure from the Society, and did not see any documentation to support it, nor did he question it. He merely included it in the funding request.
[100] Construction on the expanded track completed in 1995, with funding provided by the B.C. Racing Commission. The expanded racetrack occupied parts of land owned by the Society and both defendants.
[101] On November 28, 1995, the GVPRD sent a proposal to the Society for the purchase of Lot 1, similar to what was proposed by the Society in 1993, but with a firm offer price of $160,000.
[102] On December 5, 1995, Mr. McNiven prepared and delivered a report to the GVPRD committee entitled “Kin Race Track – Future Operation and Development”. The report sets out his understanding of the history of the use of the racetrack and adjacent lands since 1965, and concludes with a series of recommendations, including that the GVPRD continue efforts to acquire Lot 1 and to negotiate an operating agreement with the Society. The report also notes the developing policy of the GVPRD to require users of municipal facilities to pay for usage, which had not been occurring at Kin Park to that point with regard to either softball or equestrian activities.
[103] There was no operating agreement in place for 1996/1997. Mr. McNiven prepared a presentation for the Society in either late 1995 or early 1996, which attempted to address concerns which he said had been raised by the Society concerning the defendants’ commitment to horse racing in Vernon. That presentation concluded with a list of issues or questions which Mr. McNiven noted must be discussed and resolved between the parties (Ex. 1, Vol. 1A, Tab 34). In my view, the presentation is strong evidence of the willingness of the defendants to engage in frank discussion of contentious issues with the Society. It, along with other evidence, tends to refute any assertion of the plaintiffs that the defendants intended to scuttle the Society’s plans to develop the facility for equestrian purposes.
[104] Commencing in early 1996, Dr. John Price, a veterinarian and Society board member, appears to have played an increasingly large role in shaping the direction of the Society’s plans. At his insistence, in part spurred by Mr. McNiven’s presentation, a steering committee was formed to discuss potential plans for expanded usage of Kin Park for equestrian purposes other than horse racing. Dr. Price wished to replace the softball diamonds with polo grounds, contrary to the recommendation of the Siemens Equifacs report.
[105] There was one meeting of the steering committee, and it accomplished nothing.
[106] Dr. Price delivered to the GVPRD in May 1996 his “vision” for the development of the Kin Race Track, which included formation of a management board with representatives of various “stakeholder” groups, including the Okanagan Polo Club, of which he was a member.
[107] In late 1997, Dr. Price resigned from the Society board, but continued to be a member. He wrote a series of letters to the B.C. Racing Commission and members of local government purporting to insist that they require the Society to enter into a lease of the Kin Race Track with the GVPRD, in order to maintain a horse racing licence.
[108] In 1997, Mr. Willows raised his concerns with the defendants about the 1964 intent of the Kinsmen that the lands not be used exclusively for equestrian purposes, but rather for general recreational purposes. Mr. Willows’ letter to the GVPRD in July 1997 led to Mr. McNiven’s presentation to the Kinsmen concerning proposed uses of the Kin Park lands.
[109] Dr. Price’s letter writing campaign appeared to at least highlight for the parties the desirability of negotiating an operating agreement. The 1998 Agreement, which lasted for two years, was the result.
[110] The 1998 Agreement expanded the horse training period to eight months, from March through October. It made the Society responsible for maintenance of the track, stables and buildings on its property. The NORD was responsible for maintenance of the grandstand and beer garden area.
[111] The concluding portion of the 1998 Agreement is a section devoted to the formation and responsibilities of a Management Committee, which would be comprised of representatives of all equestrian groups using the Kin Park, the parties herein, and the Kinsmen. Paragraph 11.2 of the agreement is an acknowledgment that the Management Committee would not be “fully in place” until the softball diamonds were relocated. There is no evidence that such a committee was ever formed.
[112] The 1998 Agreement expired on December 31, 1999.
[113] Negotiations for the 2000 Agreement and corresponding purchase and sale of Lot 1 commenced in early 2000 and concluded with the execution of both agreements on May 31, 2000. The land transaction was scheduled to close on June 16, 2000, but that date was moved to July 21 because the Society refused to close on June 16. According to a letter from the Society’s lawyer, it was concerned that the NORD was backing away from a commitment to pay for the relocation of the softball diamonds if and when that occurred.
[114] The removal of the softball diamonds was not a term of the 2000 Agreement, nor a condition of the sale of Lot 1. The only condition of the sale, for the sole benefit of the seller, was the following:
Conditions of Purchase
4. The obligation of the Owner to complete the sale of the Lands to the District is conditional upon the fulfilment of the following condition on or before the Condition Date:
(a) That the Owner shall have approved and signed an operating agreement governing the operation of the Kin Race Track Park for a five year term, acceptable to the District, by no later than the Condition Date.
[115] The 2000 Agreement was signed the same day, so the condition was immediately fulfilled.
[116] The 2000 Agreement contained the following acknowledgments and recitals:
All parties to this agreement recognize that it is in the best interest of the community for “Vernon Race Days” to continue and to operate in a viable manner. It is the intent to make Kin Race Track a busy, thriving facility. Kin Race Track, at this time, will continue to be a multi purpose recreational facility with the goal of making the most use of the facility as possible. This objective will require the full cooperation of all parties, therefore it is necessary that all parties act in good faith and maintain a spirit of good will for the benefit of the community.
It is acknowledged that the Vernon & District Agricultural Society initially purchased 7.5 acres of property (approximately 1988) and constructed stables on a portion of this property to further enhance and promote horse racing in the community. In 2000 the NORD and the VDAS entered into an agreement for the NORD to purchase this property (7.5 Acres). It is understood that the VDAS will use the proceeds from the sale of the land to the NORD, minus the outstanding debt, for improvements and upgrading to Kin Race Track Park.
WHEREAS:
A. NORD operates and maintains parks within the geographical limits of the Regional District of North Okanagan, including the boundaries of the City, under the authority of its Supplementary Letters Patent and agreements with the City;
B. NORD and the City are the registered owners in fee simple of separate parcels of real property comprising Kin Race Track Park;
C. VDAS has and wishes to continue to undertake horse racing within Kin Race Track Park;
D. Kin Race Track Park (hereinafter referred to as “KRTP”) is suitable for activities other than horse racing, race horse training and other livestock events and other activities may be managed or coordinated by NORD. VDAS to be consulted on any proposed change of existing use at the KRTP. VDAS to have the right to refuse activities at the KRTP that may affect the race track proper. The VDAS will not refuse activities without just cause.
E. NORD, VDAS, and the City wish to further enhance the facilities at Kin Race Track Park and increase the use of such facilities and Park through the development of a long term plan to be coordinated by the VDAS and the NORD, and the parties hereto recognize that the achievement of this goal will require flexibility and understanding among all parties involved (see Section 12);
F. The NORD, VDAS and the City agree that the horse racing facility will always retain the name “Kin Race Track Park”.
G. NORD, VDAS, and the City wish to enter into this Agreement to set forth their respective rights and obligations concerning the use, management and maintenance of facilities within Kin Race Track Park.
[117] I note here that Recital F effectively changed the name of Kin Park to Kin Race Track Park. For ease of reference, I will continue to refer to the racetrack as Kin Park or Kin Race Track in these reasons except where I refer specifically to this Recital.
[118] The first substantive clause, immediately after the definitions, was the term and renewal clause, the language of which was extremely controversial during negotiations, and about which I have heard much evidence. It reads:
2.1 The term of this Agreement shall commence on the 1st day of January, 2000 and is to continue for a five (5) year period terminating on the 31st day of December, 2004. This agreement will be renewed for successive 5 year terms subject to the VDAS continuing to operate Vernon Race Days and or race horse training and or other approved livestock events that are an effective use of the property and providing the VDAS has continued to operate within the spirit of this agreement. Compensation items contained in this Agreement will be reviewed at the time of renewal.
[119] Mr. Saitz testified that, although it was always the intention of the Society to hold other equestrian events at the site, the language of s. 2.1 of the 2000 Agreement meant that so long as horse training continued, the agreement should be renewed even in the absence of race days.
[120] Mr. McNiven, for his part, had concerns with the renewal clause, and memorialized his views in some notes he made to the NORD negotiator, Jack Borden, in the spring of 2000. Those notes are at Ex. 1, Vol. 5, Tab 35. Mr. McNiven adopted them in his testimony, and explained what bottomed his concerns expressed therein. In essence, regarding s. 2.1, Mr. McNiven worried that Vernon Race Days might not be viable, but that the Society would continue to use the track for only horse training, and that such might not be in the best interests of the community.
[121] In a similar vein, he was concerned with the wording of s. 5.5, which obligated the NORD to pay the Society $10,000 per annum for operation expenses, subject to the Society “holding Vernon Race Days and or racehorse training and or other approved livestock events” at Kin Race Track. Mr. McNiven noted that the 1965 Agreement did not contemplate horse training, and when it was formally agreed upon in 1989, the Society undertook to cover the additional track maintenance costs associated with the training.
[122] I pause to note that Mr. McNiven’s analysis of the underlying facts is entirely accurate. Unfortunately, the plaintiffs have overlooked the facts which are inconvenient to the claims in their pleadings. They seek mandatory orders and permanent injunctive relief said to be consonant with the “terms of the 1965 Trust Agreement”, requiring the defendants to bring the track into good repair for “horse racing and horse training” and preventing the defendants from altering the track in any way which would interfere with its use for “horse training and/or horse racing”.
[123] Those pleadings are also inconsistent with the evidence of Mr. Saitz, who stated during cross-examination that the effect of the 1965 Agreement, in his view, was merely to preserve the track for horse racing and to guarantee its availability for horse racing “in perpetuity”. He was quite clear that the 1965 Agreement did not specifically cover horse training. His view was simply that you cannot have one without the other.
[124] Section 3.5 of the 2000 Agreement made the Society responsible for stable rentals and stipulated that it would retain all rental revenue.
[125] Section 5.6 obliged the NORD to provide a grader for track preparation, prior to Vernon Race Days. Section 5.7 made the Society responsible for track maintenance.
[126] Section 6 covered horse training.
[127] Section 7 covered the ball diamonds.
[128] Section 8 covered maintenance, including the costs to be borne by the parties.
[129] Section 9 covered insurance. Of note, s. 9.5 obligated the defendants to rebuild any improvements lost during the time covered by the agreement.
[130] Section 10.7 was an “entire agreement” provision.
[131] Section 11 was entitled “Community Involvement”. It expressed the intention of the parties to generate increased usage of Kin Park.
[132] Section 12 was entitled “Planning”. It contained the requirement that the Society prepare and provide to the NORD a business plan. I will set out the entirety of Section 12:
12.1 The VDAS proposes to continue the development of Kin Race Track to conduct Vernon Race Days and or race horse training and or other approved livestock events. A business plan covering a five (5) year period is to be presented to the GVPRD within two months of signing this agreement. The VDAS will provide a minimum of the following information;
(a) An overall vision the VDAS has for KRTP, improvements and operation.
(b) What the objectives of the VDAS are and a plan to meet these objectives.
(c) What improvements are proposed for KRTP, when these improvements will take place and how the improvements will be funded.
(d) What strategy the VDAS will pursue in order to increase the usage of KRTP.
(e) How the VDAS will operate the training facility to ensure maintenance of the stables, etc.
The GVPRD will work cooperatively with the VDAS and support the VDAS with the development of these plans.
12.2 The development program is to be undertaken by the VDAS at its expense, however the NORD will consider assisting in the continuing development for recreational purposes.
12.3 Requests from the VDAS for assistance with the annual improvements must be submitted to the GVPRD by August 1st of the year preceding the proposed improvements. Such requests will be considered on an annual basis.
12.4 All improvements now situated upon the lands within KRTP shall become the property of the NORD.
[133] Section 13 obligated the NORD to continue to provide the Society with a water supply.
[134] Section 14.1 obligated the Society to provide to the GVPRD minutes of all meetings and annual financial statements “in a timely manner”.
[135] Section 14.2 was a mechanism for dispute resolution, which vested final decision-making with the NORD Board.
[136] The president of the Society at the time, Mr. Saitz, testified that he was completely exhausted at the conclusion of negotiations, so he delegated to another board member, Sean Newton, the task of preparing the five-year business plan which was required pursuant to the 2000 Agreement.
[137] Mr. Newton enlisted the assistance of various other individuals, including people with equestrian interests and expertise other than horse racing, to attempt to draft a suitable business plan. Despite their collective efforts, the Society was unable to deliver to the GVPRD a plan that was deemed sufficient during the term of the 2000 Agreement. Mr. Newton, for reasons which he could not explain, did not respond to Mr. McNiven’s requests to meet to discuss preparation of a plan, and no such meetings took place.
[138] The time covered by the 2000 Agreement was marked by a degree of internal strife within the Society, including the mass resignation of 9 of 15 board members in May 2003. The stated reason for the resignations was “internal conflicts” with other directors and members. I infer that at least some of the internal discord was conflict between horse racing enthusiasts and those interested in more expansive and varied equestrian activities.
[139] In June 2003, the president of the Society, Ms. McDonald, resigned, albeit for different reasons.
[140] Ms. McDonald was succeeded as president by Ms. Dalziel who, unfortunately, was ill-equipped to lead the Society through this important phase of its existence. One stark and obvious example of that is Ms. Dalziel’s evidence concerning her efforts to prepare the business plan. She testified that she did so, but that she never delivered a copy to Mr. McNiven, and she could not locate a copy.
[141] In December 2002, the GVPRD commissioned the firm of Faye Baker Consulting to prepare, in conjunction with Catherine Berris Associates Inc., an updated Greater Vernon parks and recreation master plan. The terms of reference included an assessment of the long-term need for an equestrian facility at Kin Park, and stipulated that the Society must be consulted during that evaluation process.
[142] Ms. Dalziel met with Ms. Berris, on behalf of the Society, pursuant to those terms of reference. Ms. Dalziel said the meeting was extremely brief; that it occurred in a parking lot; that although she had a copy of her business plan with her, she did not leave it with Ms. Berris; and that she came out of the meeting convinced that the defendants intended to remove the racetrack. She also believed that the defendants did not intend to renew the 2000 Agreement. She reported her beliefs to the Society’s board of directors.
[143] The updated parks and recreation master plan was completed in March 2004. It notes that Kin Park did not then function well for either softball players or equestrian users, and recommended development of Kin Park as a “tournament-level field sports facility”.
[144] There was considerable evidence from Society members concerning efforts to improve the infield to accommodate diverse equestrian activities, and to hold such events between 2000 and 2005. The Society did construct a show ring in the infield, and as a result, was able to host some barrel racing events, as well as a number of dog shows.
[145] However, the Society was collectively of the view that its efforts at expansion were significantly hindered by the continuing presence of the softball diamonds and by scheduling difficulties created by the GVPRD. Mr. Newton’s evidence was that in order to proceed with the more advanced aspects of his business plan, at least one of the ball diamonds would need to be removed. In order to develop Kin Park as a world class equestrian facility, similar to Spruce Meadows in Calgary, likely the entire infield would be required.
[146] There appears to be at least an element of “Catch-22” to the evidence, in that the Society was in essence saying it could create a thriving multi-use equestrian facility if the defendants would remove the ball diamonds, while the defendants’ position was that they would only consider such removal if the Society could demonstrate the need for such a facility, and its fiscal viability.
[147] On July 29, 2003, the NORD wrote to the Society, advising that because of the Society’s failure to provide a satisfactory business plan, the 2000 Agreement might not be renewed.
[148] Ms. Dalziel’s meeting with Ms. Berris took place on November 13, 2003.
[149] On February 16, 2004, the NORD gave formal notice to the Society, through counsel, that it would not renew the 2000 Agreement.
[150] There were some efforts by the Society in the spring of 2004 to seek a reconsideration of the defendants’ position on renewal, but those were wholly ineffective.
[151] Mr. McNiven testified that he agreed with the decision not to renew the 2000 Agreement, and he expressed that opinion in a memorandum to the Greater Vernon Services Commission dated May 19, 2004. In cross-examination, Mr. McNiven listed among his reasons the following:
· the Society had not prepared a satisfactory business plan;
· he was concerned about the stability of the Society, in light of the mass resignations from the board of directors;
· he had experienced difficulty obtaining basic information from the Society, such as minutes of meetings and financial statements; and
· in his view, the demand for equestrian activities in the Vernon area was steadily decreasing.
[152] On December 31, 2004, the 2000 Agreement expired. That same day, the plaintiffs commenced this action.
[153] The Society continued to use the racetrack for Vernon Race Days through 2013.
[154] On October 31, 2008, the NORD notified the Society that effective October 31, 2010, it would cease to issue permits for the Society to use the Kin Race Track and ancillary facilities. The notice also requested that the Society remove any equipment that it owned from the property.
[155] Two events occurred on July 9, 2014 which each effectively put an end to Vernon Race Days, at least temporarily. That day, the Society was advised by provincial safety inspectors that the electrical wiring for the grandstand was unsafe, and required substantial upgrading, and that no activities could take place until such upgrading was completed. The electric power to the facility was discontinued. That evening, an arson fire destroyed the grandstand and surrounding structures.
[156] Since that time, there has been no horse training or racing on the Kin Park Race Track.
[157] In 2016, apparently in response to homeless individuals taking up residence in some of the stables, the defendants caused to be removed all the stable doors. According to the evidence of Bruce Hattori, the defendants caused considerable damage to the doors and hinges at the time of removal.
[158] I will list the issues in the way they have been framed by the plaintiffs in written submissions, and address them seriatim:
1) Whether the transfer of the Kin Race Track lands to the City of Vernon in 1964 is impressed with a trust in perpetuity on conditions as set out in the 1965 Agreement.
2) Whether the City and/or the NORD are in breach of the trust conditions set out in the 1965 Agreement in:
a) failing to maintain the racetrack and improvements from January 1, 2005 to the present, and
b) in terminating the Society and Jockey Club’s use of Kin Race Track for horse racing;
such that the Society is entitled to mandatory orders and/or damages.
3) Whether the NORD failed to act in good faith in the negotiations with the Society for the purchase of the Society’s lands in obtaining the transfer of lands at substantially less than fair market value based on representations:
a) that the Society would have the right to a renewable Operating Agreement on five-year terms for the management of horse training, horse races and other equestrian activities at Kin Park;
b) in representing that the Society would have the opportunity to expand the equestrian uses with the future removal of the softball diamonds; and
c) in representing to the Society that the NORD would work cooperatively with the Society and support the Society with respect to the development of a five-year plan for an equestrian centre.
4) Whether the City and/or the NORD are in breach of the 2000 Agreement in failing to renew the contract for five-year successive terms separately from the compensation issue.
5) Whether the Society is entitled to specific performance of the 2000 Agreement.
6) Whether the City and/or the NORD are in breach of the 1965 Agreement and/or the 2000 Agreement in failing to rebuild the grandstand and other improvements from the insurance proceeds or otherwise.
7) Whether the City and/or the NORD are liable to compensate the Society for the ongoing maintenance of the Kin Race Track from January 1, 2005 to July 9, 2014 at a rate of $10,000 per year minimum.
8) Whether the Society is entitled to a permanent injunction restraining the City and the NORD from altering the lands on which the Kin Race Track is sited in any way which would interfere with the use and operation of the Kin Race Track for horse training and/or horse racing.
9) Whether the Society is entitled to compensation related to the sale of the Society’s lands to the NORD based on unjust enrichment.
10) Whether the Society is entitled to general damages, special damages and costs.
[159] The short answer to this question is “no”.
[160] The 1964 land transfer did not create a charitable purpose trust for the following reasons:
a) there is nothing in the documentary record or conduct of the parties which evinces an intention to create a trust;
b) the “three certainties” required to create a trust are not present; and
c) the transfer and subsequent agreement was not for a charitable purpose.
[161] As I have noted, the documents created contemporaneously with the transfer in 1964 do not characterize the transaction as a trust. There is nothing in the documents filed with the Land Title Office which references a trust. The indenture which effected the transfer from the Jockey Club to the City was dated April 27, 1964 and filed in the Land Title Office on October 7, 1964. There, the Jockey Club is referred to as “the Grantor”.
[162] Among the covenants of the Grantor are that “he has done NO ACTS TO ENCUMBER the said lands”, and that that the Grantor “RELEASES to the Grantee ALL HIS CLAIMS upon the said lands”.
[163] Thus, with the execution and filing of those documents, the City became the owner in fee simple of the lands absolutely. The City took unencumbered title to Lots 2 and 3 in 1964.
[164] It is a serious question whether or not the parties to the 1964 transfer could have ex post facto created trust obligations with the 1965 Agreement. The City argues that as a matter of law they simply could not do so, that any trust would of necessity have been required to be created at the time of land transfer. The City points out that in the two primary cases relied upon by the plaintiffs on this point, Armstrong v. Langley (City) (1992), 69 B.C.L.R. (2d) 191 (C.A.); and Save the Heritage Simpson Covenant Society v. City of Kelowna, 2008 BCSC 1084 [Heritage Simpson], the deed or covenant which formed part of the instrument of transfer contained clear language consistent with the creation of a trust.
[165] I also note the following from Waters’ Law of Trusts in Canada, 4th ed. (Toronto: Thomson Carswell, 2012) at 148:
… the next question is whether a trust can be grafted upon an absolute gift. The simple answer is that it cannot; a person can do nothing to give away what that person has already given away, by whatever means the person attempts to do that.
[166] It seems that in attempting to make the transfer of land to the City a “gift with conditions attached”, the Kinsmen/Jockey Club could not have been engaging the law of trusts, but rather the common law of contract. The legal effectiveness of those “conditions”, it seems to me, is best determined pursuant to traditional contract law principles.
[167] Although I question whether the 1965 Agreement could have imposed trust obligations on the City as Grantee of the 1964 transfer, I will nonetheless consider whether the parties, through their words and conduct, intended to create a trust. I am satisfied that the language of the 1965 Agreement and conduct of the parties is inconsistent with an intention to do so.
[168] The recitals of the 1965 Agreement state, in part, as follows:
The Jockey Club with the full concurrence of the Kinsmen Club did transfer said lands to the City upon certain conditions to be reflected and contained herein;
AND WHEREAS it is the intention of all parties hereto that the City assume total legal and equitable ownership to said lands…
[169] Arguably, the transfer “upon certain conditions” is consistent with the creation of a trust. However, the mutual intention of the parties that the City assume “total legal and equitable ownership” to the lands is inconsistent with an intention to create a trust.
[170] Nowhere in the agreement, and specifically the body of it, is there any reference to a trust.
[171] Paragraphs 1 to 3 of the 1965 Agreement spell out the main conditions which bind the City and create its obligations related to repair/maintenance of the track and any buildings erected by the City, and the preservation of the Jockey Club charter through the provision of race days.
[172] Paragraph 4 is the one paragraph which is most consistent with a trust obligation, although its potential terms are extremely difficult to discern. I will address this point further under the heading of “the three certainties of a valid trust”. The only concrete obligation which paragraph 4 imposes upon the City is with respect to maintenance of the name, “Kin Race Track”.
[173] Paragraph 5 is, in my view, inconsistent with general trust obligations. The requirement to obtain consent of the other parties before selling the land is arguably consistent with the creation of a trust. However, the ability, by clear implication, of the City to encumber through lease or mortgage the lands for any period up to five years, without prior approval, is entirely inconsistent with trust obligations.
[174] Finally, the recognition at paragraph 6 that the agreement is “not in registerable form” is inconsistent with the creation of a trust. I infer from the inclusion of that paragraph that the parties understood that, if their desire was to create a trust, that such should have been done through documents which would have been registered in the Land Title Office at the time of transfer.
[175] The plaintiffs argue that the documents which pre-date the transfer of the land, specifically the letters at Ex. 1, Vol. 1, Tabs 2B, 3, 4 and 5, demonstrate an intention to create a trust. I disagree. Those letters clearly show that the Jockey Club wished to transfer its land to the City, but preserve its charter, by ensuring that the track would be made suitable for racing, and be available to them for that purpose. Obviously, the track was not being used for racing at that time, and I infer from the insistence by the Jockey Club that the City bring it into good repair, that considerable work needed to be done before racing could resume. By the transfer and agreement, the Jockey Club was shifting that burden onto the City.
[176] The Kinsmen were clearly contemplating using the infield portion of the track for purposes other than horse racing, as shown by the letter at Tab 2B. The balance of the contemporaneous documents, including correspondence, shows that the Kinsmen were content to defer to the City as to how best to develop and use the land for other recreational purposes. There is no evidence that the Kinsmen wished to impose specific trust obligations on the City in that regard.
[177] Likewise, there is no evidence that the Jockey Club intended to create a trust by transferring the land to the City. Certainly, it desired to ensure that its racing charter was preserved through availability of the track. However, the means by which that was to occur was first contemplated to be through a long-term lease, later through the terms of the 1965 Agreement.
[178] The conduct of the parties post-1965 is also inconsistent with the creation of a trust. There is no evidence that anyone ever referred to the creation of a trust prior to the filing of the notice of civil claim in these proceedings. At this trial, Dr. Lemiski did not refer to the land transfer as a trust, but rather as a “gift” with conditions attached to it.
[179] Various members of the Society, as reflected in minutes of Society meetings, and in their evidence at trial, believed that the 1965 Agreement preserved the right to have horse racing on the Kin Race Track “in perpetuity”. However, none of them ever referred to the agreement as a “Trust agreement”, plaintiffs’ pleadings excepted. Moreover, there is considerable evidence that common misconceptions about the substance of the 1965 Agreement came to inform the views of many individuals, who likely had not ever read the agreement.
[180] One example is the simple fact that the language on which the Society and its members seem so fixated, “in perpetuity”, appears nowhere in the 1965 Agreement. Another example is the letter dated February 2, 1997 at Ex. 1, Vol. 5, Tab 14, from the B.C. Racing Commission to the Society, which refers to the author’s belief that there was “a covenant attached to this parcel of land stating it must be used specifically for a racetrack.” Obviously, no such covenant is attached to Lots 2 and 3. It is unclear if, and to what extent, that misinformation informed the Society’s collective thinking about the 1964 land transfer.
[181] Finally, I refer to the evidence of Mr. Saitz, who negotiated the 2000 Agreement on behalf of the Society. As earlier stated, I found Mr. Saitz to be a credible witness, and was impressed by most of his evidence. I do not doubt the sincerity of his beliefs and understanding of the 1965 Agreement. However, it became clear that he was, to some extent, labouring under some misconception about the actual content of the agreement.
[182] His evidence on this point can be summarized as follows:
· by the time of the 2000 negotiations, the Society owned the Jockey Club, and the Jockey Club had donated the land to the City with the stipulation that the racetrack be available for horse racing in perpetuity;
· the gist of what he called the “original grant” was that the land was supposed to remain a racetrack forever; and
· the Society believed that the 1965 Agreement was still in effect.
[183] Of note, Mr. Saitz did not refer to the 1965 Agreement as a trust agreement. More importantly, his understanding of the content of it was mistaken. In addition to maintaining the track and any buildings which the City constructed on the land, and preserving the name, the City agreed to provide the Jockey Club with sufficient race days to preserve the Jockey Club’s charter. The agreement did not purport to make the track available for horse racing in perpetuity, nor to preserve the racetrack forever.
[184] Finally, I observe that the parties did not conduct themselves as if the 1965 Agreement created a trust in the decades which followed. For instance, there is no hint in the evidence of the Jockey Club ever taking the position that the City held the lands in trust for it and must forever use the track for horse racing. Indeed, the Jockey Club seems not to have had much of a voice at all in negotiations related to the use of Kin Park after 1970.
[185] The Kinsmen appear to have taken the position that the City should use the lands for general recreational purposes. However, when Mr. Willows wrote to the City on August 24, 2000, to set out his understanding of the land transfer, he simply referred to the City’s “commitment to the Kinsmen Club”. Mr. Willows, who by then had been a practicing lawyer for 40 years, did not refer to the creation of a trust in 1964/65. It should also be remembered that Mr. Willows was not only a former member of the Kinsmen but also, until 1996, the person primarily responsible for the running of the Jockey Club, and as of time of transfer of all shares to the Society, the sole personal shareholder in the Jockey Club.
[186] The Society and the two defendants likewise did not conduct themselves as if a trust had been created in 1964. As noted by the City in submissions, it negotiated new agreements over the years, which altered the responsibilities and rights once contained in the 1965 Agreement.
[187] A small but important piece of evidence relates to the name of the park. One of the very few clear and mandatory specific obligations imposed on the City in the 1965 Agreement was “at all times to maintain” the name “Kin Race Track”. The 2000 Agreement changed the name to “Kin Race Track Park”.
[188] Although there is considerable evidence that all the parties attempted to adhere to their understanding of the essential spirit of the 1965 Agreement, the evidence is equally clear that none of them behaved as if the 1965 Agreement contained trust obligations. Perhaps the best example of this is the ever-changing nature of the agreements regarding track maintenance. If the 1965 Agreement created a trust, one of the fundamental obligations of the City under that trust was to “keep in good repair for horse racing” the track. And yet, in a series of agreements post-1965, the NORD and the Society made different arrangements for track maintenance. By 1985, the Society had assumed the same responsibility for track maintenance which the Society now says was always part of the City’s obligations pursuant to the “1965 Trust agreement”. As noted below, in 1985, the Jockey Club and the Society were entirely different legal entities.
[189] It is also worth noting that for the entire currency of the 1985 Agreement, the Kinsmen still owned the Jockey Club shares, not the Society. Thus, any obligation to make the track and other facilities available for race days was owed by the City to the Jockey Club. However, the agreement grants the Society “full use of Kin Race Track Park” for the 29 days preceding the August long weekend each year. There is no provision made for the potential for that timeframe to clash with the Jockey Club’s need of the track for its race days. Surely, if the City was imbued with a trust obligation to the Jockey Club, neither it nor the Society would have entered into such an agreement.
[190] Finally, I note that the position of the plaintiffs throughout, and certainly in the years leading up to the 2000 Agreement, was not consistent with trust obligations being created by the 1965 Agreement. Their position, repeatedly expressed to the defendants, was that the entire parcel of lands should cease to be developed for general recreational purposes, that the softball diamonds should be removed, and the land should become a large equestrian centre.
[191] In my view, that position is inconsistent with the existence of a trust obligation on the part of the City to develop the lands for “general recreational uses”. It is consistent with a broad discretion vested in the defendants, as owners of the land, to determine how to develop and use the land in a way which best serves the needs of the community.
[192] In order for a valid trust to be created, there must exist what in law are referred to as the three certainties, namely: (1) certainty of intention; (2) certainty of subject matter; and (3) certainty of objects.
[193] In my view, none of the three certainties presently exists in this case.
[194] As regards certainty of intention, it is impossible to say what would be the extent of the trust obligations imposed upon the City by the 1965 Agreement. Clearly, the 1965 Agreement acknowledged the intention of the City to develop the land into a general recreational area. However, there is no precision as to scope of that proposed development. No permitted uses are specified. No particular uses are proscribed.
[195] Likewise, the scope of any obligation to preserve the track for the specific purpose of horse racing is difficult to define. On a broad reading of paragraph 1 of the agreement, the City would be obliged to forever keep the racetrack in good repair “for horse racing”. However, the only specific obligation which relates to use for horse racing is making the facilities available to the Jockey Club for the number of days which is required to maintain the racing charter.
[196] The interpretation which is urged upon the Court by the plaintiffs is that the agreement creates a trust obligation to make the track available for horse racing and horse training “in perpetuity”, at unspecified and undefined times, to the Society, an entity which now controls the Jockey Club.
[197] With regard to any intention to develop the lands for uses other than horse racing (i.e. “general recreational uses”), the plaintiffs made no submissions on how to reconcile that intention and any corresponding trust obligation with their interpretation of the obligations regarding horse racing.
[198] I turn next to certainty of subject matter. At first blush, this would seem to be readily met. The 1964 transfer of land comprised Lots 2 and 3, two plots of land which largely consisted of a racetrack and its infield area. The 1965 Agreement refers to an obligation to keep in good repair “the track presently found on said lands”. So, say the plaintiffs, certainty of subject matter is straightforward.
[199] However, post-1995, that track no longer exists. In its place sits a larger, differently shaped track, which occupies parts of two additional parcels of land. So, although there may have been certainty of subject matter in 1965, the same cannot be said at the time of the hearing in 2017.
[200] Finally, there is no certainty of objects, i.e. beneficiaries, pursuant to the trust. It is simply impossible to say for whose benefit the City might be holding the land pursuant to the 1965 Agreement. At various times, in particular the late 1990s, the defendants felt obliged to consider the wishes of the Kinsmen, one of the putative donors of the land, and possible beneficiaries of any resulting trust. The plaintiffs seem at all times to ignore any desire of the Kinsmen to use the land for purposes other than horse racing. From their perspective, the sole beneficiaries would seem to be whatever legal entity holds the Jockey Club shares.
[201] In my view, there is no legally satisfactory way to resolve this question, absent a finding that a charitable purpose trust was created. I turn next to that issue.
[202] The plaintiffs forcefully submit that the appropriate way to characterize the transactions of 1964/65 was that they created a charitable purpose trust.
[203] I will begin by setting out the relevant law.
[204] A common law trust, the object of which is the carrying out of a purpose, must have a recognized charitable purpose in order to be valid: Heritage Simpson at para. 111.
[205] The rules regarding certainty of objects do not apply to charitable trusts. If a charitable purpose trust is created, then the requirement that there be certainty of objects is met. The beneficiaries of such a trust are said to be the community at large, or an appreciably important class of the community: Vancouver Society of Immigrant and Visible Minority Women v. M.N.R., [1999] 1 S.C.R. 10 at para. 147 [Vancouver Society].
[206] Likewise, the rule against perpetuities does not apply to a charitable purpose trust.
[207] In order for a purpose to be charitable, the Supreme Court of Canada held in A.Y.S.A. Amateur Youth Soccer Association v. Canada (Revenue Agency), 2007 SCC 42 at para. 26, that it must fall into one of four categories set out by the House of Lords in Pemsel v. Special Commissioners of Income Tax, [1891] A.C. 531 (U.K.H.L.). The four categories are: (1) the relief of poverty; (2) the advancement of education; (3) the advancement of religion; and (4) certain other purposes beneficial to the community, not falling under any of the preceding heads.
[208] Given the facts of this case, only the fourth Pemsel head is relevant: see A.Y.S.A. at para. 27; Heritage Simpson at para. 115.
[209] Justice Iacobucci set out the following test where the fourth Pemsel head is at issue at para. 177 of Vancouver Society:
177 … the Privy Council in that case set out what is in my view a useful approach to the assessment of an organization’s purposes under the fourth head (at p. 33):
[The Court] must first consider the trend of those decisions which have established certain objects as charitable under this heading, and ask whether, by reasonable extension or analogy, the instant case may be considered to be in line with these. Secondly, it must examine certain accepted anomalies to see whether they fairly cover the objects under consideration. Thirdly -- and this is really a cross-check upon the others -- it must ask whether, consistently with the objects declared, the income and property in question can be applied for purposes clearly falling outside the scope of charity; if so, the argument for charity must fail.
To this I would add the general requirement, outlined in Verge v. Somerville, supra, at p. 499, that the purpose must also be “for the benefit of the community or of an appreciably important class of the community” rather than for private advantage.
[210] Much of what I said about lack of certainty of intention and certainty of objects informs the analysis of charitable purpose trust.
[211] In most cases in which an intention to create such a trust is found, there is language in the deed or other title documents which sets out the purpose for which the land is to be used, and in some cases, which uses are proscribed.
[212] I will refer to two examples from the jurisprudence. In Armstrong, at 194, lands given to a municipality by an athletic association were “to be used only for the purpose of a public park, playground and for recreational facilities.” In Heritage Simpson, two parcels of land were sold to the City of Kelowna subject to the conditions that the city would “use the property for municipal purposes” and would not “at any time, sell the property or use it for commercial or industrial purposes” (at para. 4). In both cases, trusts were found to have been created.
[213] In the present case, there is no language in the title documents which addresses use of the land. One must of necessity look to the 1965 Agreement. As I have already noted, the recitals refer to the intention of the parties that the City assume total legal and equitable ownership, but also to the intention that the City be responsible for maintaining the track, and to “insure” to both the Kinsmen and the Jockey Club to keep the land in such a state as to enable the Jockey Club to maintain its racing charter.
[214] The recital immediately following refers to the land being developed by the City for “general recreational uses as well as that of horse-racing”.
[215] Of course, the recitals are not determinative of the actual contractual obligations of the parties, but merely evidence of intention.
[216] The body of the agreement does not contain any language which readily lends itself to an interpretation consistent with an intention to create a charitable purpose trust. For instance, if it contained mandatory language specifying that the lands could only be used as a park, one might find such an intention. Similarly, if the clear language prohibited the City from using the land in a manner which generated income, such an intention might be inferred. Here, however, the City is not prohibited from leasing the land and thereby generating income from it.
[217] The language of paragraph 4 is vague and general, and certainly not mandatory. I agree with the submission of the City that it is “aspirational” in nature. It simply sets out a recognition by the parties that the City intends to develop the lands into a general recreational area, but leaves to the City’s sole discretion the purposes of such development, and concludes with the City’s agreement to maintain the name “Kin Race Track”.
[218] The only parts of the agreement which contain mandatory language obliging the City to do certain things are paragraphs 1 to 3, in which the language used is: “The City agrees”, followed by the specific obligation.
[219] Read together, those paragraphs cannot create a charitable purpose trust. The preservation of the charter of the Jockey Club is not an object which benefits the community at large, nor an appreciably important class of the community. It certainly benefits the Jockey Club, and may benefit those interested in horse racing, but serves no greater purpose for the public good.
[220] Finally, I note that the relief sought by the plaintiffs under this heading is not consistent with enforcement of obligations created upon a public body pursuant to a charitable purpose trust. The plaintiffs are not seeking to prohibit the defendants from selling the land, or using it for some commercial purpose. Nor are they attempting to prevent park lands or nature preserve lands from being turned into a highway. Rather, they seek specific injunctive relief, including an order that they be permitted to conduct, free of charge, their horse races on the land in perpetuity.
[221] In light of my findings that no trust was created, I need not decide this issue.
[222] However, I must consider the alternative claim of the plaintiffs that they are entitled to damages for breach of the 1965 Agreement. In order for the plaintiffs to succeed on the claim of damages, it is sufficient that the 1965 Agreement, although not a charitable trust, was a valid and subsisting contract as of the beginning of 2005.
[223] In my view, it was not.
[224] Although the arguments of the City related to the absence of consideration and frustration of the contract are interesting, and may have much to recommend them, I do not intend to address them here. My conclusion is based on my acceptance of the City’s arguments regarding the effect of s. 247 of the Municipal Act, R.S.B.C. 1960, c. 255 [Municipal Act, 1960], and the replacement of the 1965 Agreement with subsequent agreements.
[225] By sheer happenstance, my acceptance of both those arguments puts 1985 as the last possible time that the parties could have been bound by the terms of the 1965 Agreement. As noted by the City, s. 247 of the Municipal Act, 1960 in essence caps at 20 years the life of most contracts, leases and agreements entered into by local government with respect to acquisition of land, thus ending the 1965 Agreement’s lifespan in 1985. That is also the year in which a new agreement was executed which substantially changed the obligations of the parties, thus leading to a conclusion that it was the intention of the parties to replace the 1965 Agreement with the 1985 Agreement.
[226] Section 247 of the Municipal Act, 1960 reads as follows:
247 (1) The Council shall not incur any liability beyond the amount of the municipal revenue for the current year and any of the accumulated revenue surplus of prior years appropriated for the annual budget or the annual budget as amended, except as hereinafter provided in this Division.
(2) The Council shall not borrow in anticipation of current revenue, save as hereinafter provided in this Division.
(3) Notwithstanding subsection (1), the Council may contract for the supply of materials, equipment, and services, professional or otherwise, required for the operation, maintenance, and administration of the municipality and of municipal property,
(a) where the duration of the contract is for five years or less, without the assent of the owner-electors; and
(b) where the duration of the contract exceeds five years and not more than twenty years, with the assent of the owner-electors.
(4) Notwithstanding subsection (1), where in this Act provision is made for the acquisition, by lease or otherwise, of real or personal property, the Council may enter into a lease or other agreement,
(a) where the duration of the lease or other agreement is for five years or less, without the assent of the owner-electors; and
(b) where the duration of the lease or other agreement exceeds five years and not more than twenty years, with the assent of the owner-electors; and
(c) with the Crown in right of Canada or of the Province, without the assent of the owner-electors.
(5) Except under clause (c) of subsection (4), no contract, lease, or agreement shall be entered into under this section where the duration or term of the contract, lease, or other agreement is in excess of twenty years.
[227] I am satisfied that the 1965 Agreement fell within the provisions of s. 247, as it clearly related to the acquisition of land by the City.
[228] Counsel for the City relies on Burns Lake Indian Band v. Village of Burns Lake, 2000 BCSC 1040. At issue in that case was an agreement by the Village to provide water to the plaintiff pursuant to a 1974 agreement. In deciding that the agreement was void based on its contravention of s. 247, the trial judge held:
[45] A review of the 1974 water and sewer agreement discloses that the Village was taking on various obligations under the agreement including, at its own expense, maintaining and repairing in good, substantial and workman like manner water storage and trunk distributions mains and lines that were situated within the Reserve (para. 3) and was also by virtue of para. 4(c) “obligated to indemnify Her Majesty against any loss which may be suffered or sustained by Her Majesty directly or indirectly arising from the improper repair and non-repair of mains and lines on Reserve property”.
[46] I find therefore that the water and sewer agreement was a contract that incurred a liability for the Village. Given that the agreement was in a period in excess of 20 years duration, then pursuant to s. 247(5) the water and sewer agreement is void as being ultra vires of the Villages powers by virtue of s. 247(5) of the then Municipal Act….
[229] In the present case, I am satisfied that similar reasoning applies. Pursuant to the 1965 Agreement, the City clearly took on obligations, most importantly to keep in good repair the track for horse racing. The agreement does not specify a term, and the plaintiffs’ position is that it is valid “in perpetuity”. I find that the interpretation advocated by the plaintiffs would certainly void the agreement pursuant to the provisions of the Municipal Act, 1960. I would prefer to simply hold that the maximum duration of the 1965 Agreement, at least the part which created obligations upon the City, is 20 years. Beyond that, it cannot be enforceable.
[230] Further, I am persuaded that over time, and certainly by the time the 1985 Agreement was executed, the 1965 Agreement was replaced with a series of other agreements which covered the same subject matter.
[231] The City relies on Ridge Rock Construction Ltd. v. Beckmyer Builder Ltd., 2006 ABQB 850, in particular the following at paras. 22 and 23:
[22] The law is not in dispute between the parties; both submit the following legal principles from Industrial Construction Ltd. v. Lakeview Development Co. (1976), 16 N.B.R. (2d) 287 (Q.B.) at paragraph 6 apply:
It is well settled law that the parties to a contract may be express agreement or by their conduct rescind or vary their contract: see Halsbury’s Laws of England, Fourth Edition, volume 9, paragraphs 561 and 570. Whether the parties intended to rescind or to vary must be determined in the light of all of the circumstances of the case; but the parties will be presumed to have intended to rescind the old contract and to have substituted a new one whenever the new agreement is inconsistent with the original contract to an extent which goes to the very root of it: see Morris v. Baron and Company, [1918] A.C. 1; British and Benington Limited v. North Western Cachar Tea Company, Limited, [1923] A.C. 48.
[23] Garner v. W.R. Kirk Holdings Ltd. (2000), 256 A.R. 139 (Q.B.) is a case where the same issue arose. The trial judge summarized the relevant principles of Morris v. Baron and Company as follows:
[33] ... Both parties agreed that it is the intention of the parties that is paramount and that the appropriate test to be applied was that stated by Lord Dunedin in Morris v. Baron & Co., [1918] A.C. 1 (U.K. H.L.). Morris v. Baron dealt with a written contract for the sale of goods but the principles enunciated therein are equally applicable to contracts in writing, including a guarantee. Lord Dunedin stated at page 25:
The difference between variation and rescission is a real one, and is tested, to my thinking, by this: In the first case there are no such executory clauses in the second arrangement as would enable you to sue upon that alone if the first did not exist; in the second you could sue on the second arrangement alone, and the first contract is got rid of either by express words to that effect, or because, the second dealing with the same subject-matter as the first but in a different way, it is impossible that the two should be both performed.
[Emphasis added.]
[232] As noted by the City, increasingly over time, the parties looked to agreements other than the 1965 Agreement to define their rights and obligations. The most obvious example of this is the provisions related to maintenance of the racetrack. Those obligations changed materially in various iterations of the agreement. For instance:
· the 1965 Agreement made the City responsible for track maintenance (to “keep in good repair for horse-racing the track”);
· the 1985 Agreement made the Society responsible for track maintenance, in almost identical language;
· the 1998 Agreement made the Society responsible for track maintenance; and
· the 2000 Agreement made the Society responsible for track maintenance, but obliged the NORD to pay the Society $10,000 per year for operations expenses.
[233] I consider the shifting obligations regarding track maintenance to be strong evidence that the 1985 Agreement, and subsequent agreements, replaced the 1965 Agreement.
[234] In addition, the 2000 Agreement contained a “whole agreement” clause, which reads as follows:
10.7 This agreement constitutes the entire agreement between the parties hereto and none of the parties have given or made any representation or warranty to any of the others nor are there any Agreements collateral hereto other than as expressly set forth herein. The parties are aware that an agreement was entered into between the City of Vernon and the Jockey Club (Kinsmen Club) when the land was transferred to the City of Vernon [i.e. the 1965 Agreement].
[235] In my view, the reference to the 1965 Agreement is nothing more than an acknowledgment of its existence, not evidence that the parties considered it to be still in effect. Were it otherwise, it would have been a simple matter to so state. Alternatively, the parties could have spelled out which parts of the 1965 Agreement remained in effect, and which did not. I infer, on all the evidence before me, that the parties wished to invoke the spirit of the 1965 Agreement, but could not have meant to incorporate the actual terms of that agreement into the 2000 Agreement in s. 10.7. Indeed, the plain language in the first sentence precludes such a conclusion.
[236] As in Sign-O-Lite Plastics Ltd. v. Metropolitan Life Insurance Co. (1990), 49 B.C.L.R. (2d) 183 (C.A.) at 194, I find that there was an “express intention” on the part of the parties to the 1965 Agreement to enter into a completely new agreement and that this can be “the only inference to be drawn from the fact that they did precisely that.”
[237] I find that the parties did intend to replace the 1965 Agreement with the 1985 Agreement.
[238] If I am incorrect in that finding, I find that for certain, by the time of the agreements of 1998 and 2000, it was the intention of the parties to replace the 1965 Agreement with a new agreement.
[239] I make that finding for several reasons. First of all, I have considered that the parties to the 1985 Agreement were different than those to the 1965 Agreement. In my opinion, that is not important since the NORD was in essence standing in the shoes of the City in executing that agreement. The issue regarding the Society standing in the shoes of the Jockey Club at that time is far less clear. It was not until 1996 that the Society obtained control of the Jockey Club, through share acquisition. There is evidence that in 1978 the Society contracted with the Jockey Club to acquire some of the Jockey Club’s “race days”, but not all of them. The evidence is unclear regarding the holding of any race days by the Jockey Club at that time. As I noted earlier, the Jockey Club almost seems to have had no voice post-1965. I infer that the Society purported to stand in the shoes of the Jockey Club as early as 1985.
[240] However, if I am wrong, then for certain, by 1998, the Society did so, in light of the acquisition of all the shares of the Jockey Club. The other reason which satisfies me, for certain, that by 1998 the parties’ intention was to replace the 1965 Agreement is that the entire landscape had, quite literally, changed with the expansion of the racetrack in 1994/95. By 1995, the track which occupied Lot 2, owned by the City, had been replaced with a larger track which occupied parts of three different lots, with three different owners.
[241] By the time the track expansion was completed, the 1965 Agreement would, of necessity, have needed to be replaced with a new agreement which adequately addressed the rights and obligations of the parties with regard to the new racetrack and surrounding lands and improvements.
[242] On a literal reading of the 1965 Agreement, circa 1995, there would have been almost nothing which was enforceable, other than perhaps the retention of the name, which was changed in 2000 in any event.
[243] For instance, the City’s duty to keep in good repair the track “found on said lands” could only apply to the old track, confined to Lot 2.
[244] Paragraph 2 of the 1965 Agreement only applied to buildings which the City erected on the land, and they had not erected any.
[245] Paragraph 3 related to the provision of the track for race days to the Jockey Club for retention of the charter. By 1995, it was beyond the control of the City to make the entire track available to the Jockey Club, since the track spanned two other parcels of land which the City did not own.
[246] In summary, there is overwhelming evidence that the 1965 Agreement was replaced with subsequent agreements related to the use and operation of the Kin Park lands.
[247] I therefore need not consider damages for alleged breaches of that agreement said to have occurred in 2004 and later.
[248] As this issue is framed by the plaintiffs, it can be addressed without turning to the three representations said to have been made by the NORD to the Society during the 2000 negotiations. I say that for two reasons:
1. I accept the NORD’s submission that the duty to act in good faith referred to in Bhasin v. Hrynew, 2014 SCC 71, does not apply to contract negotiations, as distinct from performance of one’s obligations under an existing contract; and
2. I find that the NORD did not pay “substantially less than fair market value” for Lot 1, and thus the basic premise in the question posed is not valid.
[249] The Supreme Court of Canada in Bhasin, at para. 33, recognized the existence of an organizing principle of good faith that governs contractual performance and, as a further manifestation of that principle, a general duty to act honestly in the performance of contractual obligations. The Court explained the content of those related principles as follows:
[65] The organizing principle of good faith exemplifies the notion that, in carrying out his or her own performance of the contract, a contracting party should have appropriate regard to the legitimate contractual interests of the contracting partner. While “appropriate regard” for the other party’s interests will vary depending on the context of the contractual relationship, it does not require acting to serve those interests in all cases. It merely requires that a party not seek to undermine those interests in bad faith. This general principle has strong conceptual differences from the much higher obligations of a fiduciary. Unlike fiduciary duties, good faith performance does not engage duties of loyalty to the other contracting party or a duty to put the interests of the other contracting party first.
…
[73] … I would hold that there is a general duty of honesty in contractual performance. This means simply that parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract. This does not impose a duty of loyalty or of disclosure or require a party to forego advantages flowing from the contract; it is a simple requirement not to lie or mislead the other party about one’s contractual performance. Recognizing a duty of honest performance flowing directly from the common law organizing principle of good faith is a modest, incremental step. The requirement to act honestly is one of the most widely recognized aspects of the organizing principle of good faith…. [Citations omitted.]
[250] The Ontario Superior Court of Justice considered whether the duty of good faith extends to the negotiation of contracts in Power Limited Partnership v. Ontario Electricity Financial Corp., 2016 ONSC 4415. The plaintiff in that case claimed that the defendant had breached its duty of good faith and honest contractual performance by intentionally misleading the plaintiff in the course of its negotiations of a new power purchase agreement with Ontario Hydro. Relying on Bhasin, Justice Matheson held that the first step in considering such a claim is to identify the contractual obligation that was allegedly performed dishonestly, and found as follows at para. 71:
[71] … the course of conduct relied upon by PLP was the negotiation of a new contract, not the performance of an obligation under an existing contract. In essence, PLP accuses OEFC of intentionally misleading it in the course of negotiating and signing the 1999 PPA. The duty of honesty under Bhasin does not apply to a negotiation. PLP must tie this claim to a contractual obligation.
[251] The finding in Power Limited Partnership is consistent with the jurisprudence prior to Bhasin that refused to recognize a duty to negotiate in good faith: see Westcom TV Group Ltd v. CanWest Global Broadcasting Inc. (1996), 27 B.C.L.R. (3d) 291 (S.C.); and Ko v. Hillview Homes Ltd., 2012 ABCA 245. In Ko, the court determined that the issue of a possible duty to negotiate in good faith was raised too late on appeal to be considered fully. However, the court nevertheless discussed the existence of such a duty and held at para. 136 that most of the cases on the subject state that “[s]uch a duty seems incompatible with the adversarial nature of negotiations between parties who deal at arm’s length”.
[252] As in Power Limited Partnership, I find that the basis of the plaintiffs’ bad faith claim is not the performance of an obligation under an existing contract but the negotiation of a contract, which ultimately led to the 2000 Agreement. Accordingly, the plaintiffs’ claim fails.
[253] The 1987 Agreement resulted in the Society purchasing Lot 1 for $120,000. The sale completed and the Society was placed on title in 1993. The evidence is far from clear as to the state of indebtedness of the Society as of 1993, and also in spring 2000. The Society may at some point have completely paid Lot 1’s initial purchase price, and then incurred further indebtedness by way of a line of credit secured against the property. Alternatively, the indebtedness as of 2000 may have been both a portion of the initial purchase price and further funds drawn on the line of credit. The plaintiffs’ written argument concedes that the amount of $120,000 which the NORD paid at time of closing in 2000 was used to pay off the line of credit.
[254] The evidence is clear that the Society offered to sell Lot 1 to the NORD at least twice, in 1990 and in 1993, prior to the 2000 negotiations. Also, the NORD offered to purchase Lot 1 from the Society in 1995. There is no evidence of any discussions about potential selling prices at any of those times.
[255] In January 2000, the Society offered to sell part of Lot 1, slightly less than half, to the NORD for $270,000. The NORD declined, and there were no further negotiations at that time.
[256] The sale of Lot 1 by the Society to the NORD soon came to be incorporated into the larger discussions between the parties concerning long-term use of the lands, and the mutual desire to have a new five-year operating agreement in place.
[257] The NORD clearly saw benefit to the GVPRD in securing municipal ownership of all the lands incorporating Kin Park and the surrounding environs. The Society clearly wanted to sell the lands, in order to pay off its line of credit, and secure some operating capital. Each side attempted to strike a bargain to its benefit, both as regards the purchase price of Lot 1, and in the larger contractual scheme.
[258] My interpretation of all the evidence is that the NORD, although cognizant of the financial circumstances of the Society, did not try to take unfair advantage of them, but rather factored financial need into the purchase price and mechanism of payment. I refer specifically to Mr. McNiven’s memorandum of February 24, 2000 to Jack Borden, the main negotiator on behalf of the NORD (Ex. 1, Vol. 1A, Tab 53). There, Mr. McNiven alludes to the benefit to the NORD of acquiring the property, and the fact that the NORD should have the ability to decide, in the long term, what use of the property is in the best interests of the community. It is that part of the memorandum on which the plaintiffs rely for their submission that, had they known of it, they would not have sold the land to the NORD.
[259] Later in the same memorandum, Mr. McNiven sets out a rough proposal for acquisition of the lands, including the idea of paying $100,000 to $120,000 to the Society “up front” to allow it to pay off debts, with the balance paid over time, to perhaps a total of $190,000.
[260] The evidence is overwhelming that the Society sought to obtain fair market value for Lot 1, and also made the sale conditional on the execution of a five-year, renewable operation and use agreement.
[261] Minutes of Society board meetings disclose some difference of opinion within the Society about the value of Lot 1. At a meeting on December 7, 1999, a director reported that two different appraisal firms reported that the land was worth between $150,000 and $200,000, assuming some value could be realized from the buildings on site. According to Mr. Saitz, the Society disagreed with those valuations.
[262] At a meeting on January 12, 2000, a director reported that an adjacent property had been assessed at $100,000 per acre. That was the figure on which the Society’s offer to sell 3.5 acres to the NORD for $270,000 was based. As noted, that offer was flatly rejected by the NORD.
[263] I do not take any of the reported valuations set out above as evidence of the actual value of Lot 1. They are merely a reflection of the disparate information which was then available to the Society as to valuation, which obviously informed the sale negotiations.
[264] Minutes of a meeting on February 29, 2000 demonstrate that the negotiations leading to the $200,000 price were comparatively swift and amicable. There is no suggestion in any of the evidence that the Society at the time, in effect, gave away or donated the land in exchange for a promise of perpetual use for whatever equine purposes it saw fit to hold. Rather, the Society negotiated a price which it obviously thought was fair, and made the sale conditional on the successful negotiation of a new five-year operating agreement.
[265] There is very little admissible contemporaneous evidence about the actual value of Lot 1 in early 2000. The evidence I have on that score is the price paid by the Society over a decade earlier, and the price for which it sold in 2000. In addition, there is contained within the Rivard & Associates report, noted below, a copy of what is apparently the 2000 assessment, which puts the value at $235,200.
[266] Exhibit 1, Vol. 4, Tab 146 is a report prepared by Rivard & Associates in 2011, entitled “Retrospective Market Value Appraisal” for Lot 1, circa 2000. That report puts the value at $325,500.
[267] However, the report notes that the valuation is based on certain extraordinary assumptions, in particular:
A. That the land would be used at its highest and best use;
B. That the land is not municipally or publicly owned;
C. That the land, which was classified as Public Institutional zoning, could be re-zoned for low density residential, which was deemed to be its highest and best use.
[268] In addition, the report, although it referred to the shape of Lot 1 as “highly irregular”, made no allowance at all for the obvious and necessary assumption that, in order to attain maximum value for the land, the adjacent parcel or parcels would likewise need to be re-zoned and utilized for any proposed housing subdivision. Mr. Saitz acknowledged as much in his evidence.
[269] Moreover, Mr. Saitz agreed that the Society would never have attempted to obtain re-zoning of the land for residential uses, nor sold it for such purposes. The only reason the Society purchased the land in the first place was in order to expand the racetrack. The entire goal of the Society’s endeavours was to ensure the future of horse racing and training at the site.
[270] Against that backdrop, I attach no weight to the Rivard & Associates appraisal. None of the extraordinary assumptions are factually accurate, nor even realistic. Moreover, the evidence of the Society’s witnesses is clear that the Society would not have sold the land for the purpose identified as “highest and best use” in the Rivard report.
[271] The Rivard & Associates retrospective appraisal is of no assistance in attempting to place a value on the property as of 2000, with the extremely limited exception of the apparent copy of the 2000 assessment. That assessed value is much nearer to the actual sale price than to the retrospective valuation.
[272] When one looks at the entire contractual matrix in May 2000, including the terms of the operating agreement, it would be easy to conclude that either $200,000 was fair market value for Lot 1, or that any minor discount was based on the other financial terms of the 2000 Agreement, which favoured the Society.
[273] I am unable to determine the precise fair market value of Lot 1 at time of sale in 2000. It follows that the plaintiffs have not met the burden of proving that they sold it at less than fair market value.
[274] Although I have found that I can decide Issue 3 without reference to the alleged representations made by the NORD to the Society during the 2000 negotiations, because the issue occupied so much trial time and is of such importance to the plaintiffs, I will now address the three representations in turn.
[275] With respect to the renewal clause, the Society says that the NORD’s negotiator, Mr. Borden, actively misled it. Mr. Saitz said in evidence that the approval of the land sale by the Society membership hinged on the NORD agreeing to a five-year agreement “that would be renewed”, and that without such agreement, there would have been no sale.
[276] The remedy which the Society seeks is specific performance of the renewal clause of the 2000 Agreement, and damages for unjust enrichment based on the sale of the land for less than fair market value.
[277] Before addressing the alleged representations made by Mr. Borden, I wish to clearly set out my understanding of Mr. Saitz’s evidence. There is no doubt that from his perspective, and that of the other Society members who testified, the Society wanted horse racing to continue in Vernon forever, and also wished for the Kin Park lands to be preserved for use as a horse racing track in perpetuity.
[278] However, the Society was also concerned about the long-term viability of horse racing in Vernon, and whether or not Vernon Race Days would continue. That is why the Society insisted on the “and/or” language in the 2000 Agreement, and the inclusion of horse training as an acceptable use of the lands. The Society was hedging its bets against the prospect of there not being Vernon Race Days sometime in the future. It could still insist on renewal of the agreement if it was carrying on horse training on the track.
[279] As for the need to preserve the “right” to hold horse racing on the track “in perpetuity”, Mr. Saitz stated very clearly that such was not a concern for the 2000 Agreement, because it was already covered by the 1965 Agreement. His evidence was that the Society owned the Jockey Club; the Jockey Club had donated the land for one dollar; and the document created at that time said that the track would be available in perpetuity. Therefore, track availability for horse racing did not need to be part of the 2000 negotiations. What needed to be addressed was securing a five-year operating agreement to manage the racetrack.
[280] Mr. Saitz was equally clear in his March 7, 2000 letter to the NORD (Ex. 1, Vol. 1A, Tab 55), that the sale of Lot 1 “must include an acceptable 5 year operating agreement” and be approved by the Society membership. That letter was written after the sale price had been negotiated and accepted by the Society’s board of directors.
[281] There then ensued lengthy negotiations regarding the terms of the operating agreement. The Society’s negotiators were Mr. Saitz and one other director. The NORD’s negotiator, Mr. Borden, received input from various others, including Mr. McNiven.
[282] Many drafts were prepared, and various changes made to much of the wording of the agreement. Of central importance is s. 2.1, the renewal clause. A sticking point for negotiations became the use of permissive versus mandatory language, i.e. “may be renewed” versus “will be renewed”.
[283] At one point, after Mr. Saitz thought they had settled on “will”, the language was changed back to “may” and he mistakenly signed that agreement. The language was changed back to “will” prior to formal execution of the agreement by all parties.
[284] Nonetheless, certain members of city council, including Barry Beardsell, had concern that the Municipal Act, R.S.B.C. 1996, c. 323 [Municipal Act, 1996], precluded local government from committing to financial obligations for more than five years, without holding a referendum. Mr. Beardsell testified that he raised his concern with Mr. Borden, so that Mr. Borden would be sure to raise the concern at the Society meeting which he attended on May 30, 2000.
[285] The minutes of that meeting are at Ex. 1, Vol. 2, Tab 66. I accept that the minutes accurately capture what was said by the various speakers. In addition, I heard evidence from Mr. Saitz, Ms. Dalziel, Ms. Pace and Mr. Newton, who all testified about their recollection of the meeting and their individual understanding of what Mr. Borden said about the renewal clause. Mr. Borden did not testify, so I have no evidence about what he meant to convey. I am left with the minutes, which show the gist of what he actually said.
[286] The evidence from all the Society members is, with some variation, that they understood that the agreement would be automatically renewed after five years, but that the issue of compensation would need to be separately negotiated. However, that is not what Mr. Borden actually said.
[287] Some of the comments attributed to him are as follows:
· Mr. Borden explained that if an agreement of any kind is to continue for more than five years it must go to a referendum. No one can sign an agreement beyond a five year period.
· The Society could make a case for the payment being more than $10,000.00 when the agreement is renegotiated.
· When I look at the contract…it seems we are talking about the entire use of the facility and I think that when it comes time, because we have changed the word in there that this agreement ‘will’ be renewed but that the compensation items will be reviewed at the time of renewal.
· If you meet your objectives you are going to be in a lot better position to negotiate five years from now. You’ve got to have confidence in yourselves and you’ve got to have confidence in the two people you are going to send in to negotiate the agreement – that’s just the way it is.
[288] There is also reference in the minutes to comments by Mr. Saitz showing that he had discussed ss. 2.1 and 5.5 with the Society’s lawyers that same day.
[289] The thrust of what Mr. Borden conveyed to the Society, as reflected in those minutes, is that the NORD could not commit to an agreement of any kind for more than five years without holding a referendum. It was for the Society to show that it was making good use of the facility and to put its best foot forward in the renegotiation five years hence. It was unfortunate that his remarks focused on the potential amount of compensation, and the comment at the third bullet point above is most unfortunate. That comment likely led to confusion on the part of the Society’s members.
[290] I do not find that Mr. Borden deliberately misled the Society with his remarks, nor that anything he said furthered any belief which its members held concerning its right to renew the agreement. In that regard, it relied on the mandatory language which it insisted be part of s. 2.1, and apparently the advice of a lawyer. In my view, Mr. Borden was quite clear in alerting the Society to a possible interpretation that the NORD could not be bound to an agreement of greater than five years’ duration.
[291] There is some ambiguity, and room for misunderstanding in Mr. Borden’s comments specifically related to the terms of financial compensation. However, I find that the defendants were attempting to alert the Society membership to the possible ineffectiveness of the mandatory renewal language which the Society insisted be part of s. 2.1. The fact that the NORD alerted the Society to the issue, in my view, is evidence of good-faith bargaining on the part of the NORD, not the opposite.
[292] The agreement was formally executed the day following the Society meeting which Mr. Borden attended, on May 31, 2000. The Society had obtained that which was a prerequisite to the sale of Lot 1, namely an acceptable renewable five-year operating agreement. However, the Society clearly thought that it had successfully negotiated a five-year agreement which would not only be renewable, but which would automatically renew every five years, provided that it at least kept up the horse training at Kin Park.
[293] Mr. McNiven, on behalf of the NORD, and Mr. Saitz, on behalf of the Society, also signed the formal offer to purchase Lot 1 on May 31, 2000. The condition related to the operating agreement contains similar language to that which was in Mr. Saitz’s letter of March 7, 2000, namely that the Society’s obligation to complete was conditional on the execution by the parties of an acceptable five-year operating agreement.
[294] Whether or not the renewal clause is enforceable and will lead to perpetually repeating five-year agreements must be decided later in this judgment. At this juncture, I simply repeat that it was the language of the contract itself, not any representations made by the defendants, which led to the Society’s belief.
[295] I do not believe the plaintiffs allege that the NORD made a specific promise to remove the ball diamonds by a particular date, but rather that the NORD promised that as the Society demonstrated a demand for equestrian activities on the infield, the ball diamonds would be relocated to permit same.
[296] The Society points to the joint proposal to the B.C. Racing Commission in 1993, which says the long-term plan for the NORD includes relocation of the ball diamonds, at a cost to be borne by the NORD of $1 million. Mr. Saitz acknowledged that the 1993 proposal was the only written commitment by the NORD to relocate the softball diamonds of which he was aware.
[297] Mr. Saitz was clear in his evidence that the NORD did not promise to remove the ball diamonds during the negotiations. He was referred to drafts of the agreement, which contained language related to removal of the ball diamonds, and said he could not recall if he had attempted to negotiate those terms. He did agree that at some point in the negotiations, the directors of the Society recognized the resistance by the NORD to such a clause, and agreed to the removal of that language.
[298] Mr. Saitz also said that the softball and equestrian uses could have continued to co-exist at Kin Park, but that “nothing ever got done”. Clearly, however, it was the firm wish of the Society that the softball diamonds be relocated. The Society had expressed its concern to the NORD concerning ball players crossing the track during horse training, and various near accidents which that caused. There was also apparently ongoing friction between the softball players and some members of the Society.
[299] Moreover, the Society, through the efforts of board member Dr. Price, had commenced discussions with the NORD about turning the entire park lands into an equestrian centre in the mid-1990s. Dr. Price’s initial idea was to replace the softball diamonds with polo grounds. That was the proposal which apparently prompted Mr. Willows’ letter to the City in 1997.
[300] As mentioned above, a steering committee was formed to consider use of Kin Park, on which were apparently represented various equine groups, municipal government and the Kinsmen. There was only one meeting of this committee.
[301] The Society, after the polo grounds proposal evaporated, apparently had other ideas about increasing and broadening equestrian uses of Kin Park. The Society sought to expand its membership from horse racing enthusiasts to all equine disciplines. It clearly wanted to persuade the NORD that there was sufficient demand for equestrian events to justify removal of the softball diamonds.
[302] The position of the defendants was much more nuanced than that of the Society. The defendants were at all times concerned with making use of Kin Park in a way that best served the overall needs and wishes of the community. They were always open and receptive to ideas presented by the Society to expand equestrian uses at the park. However, the defendants were obviously reluctant to remove the softball diamonds, which were always in demand, unless that was really necessary in order to use the infield for some other purpose.
[303] Mr. McNiven also said that he believed that the Kinsmen needed to be consulted, since they had gifted the land to the City in 1964, and had expressed the desire that it be used for general recreational uses.
[304] Mr. Beardsell said that he wanted the Society to thrive, and wished horse racing to continue in Vernon, but that the funding and promotion of general equestrian activities was not a priority of local government. He said that the GVPRD made some traditional sporting activities a priority, but that such things as skiing, golfing, and equestrian pursuits were not among them.
[305] Mr. Beardsell, an accountant, also opined that the NORD could not afford to move the softball diamonds, and that suitable replacement fields were not available. At that time, the NORD leased some lands from the Department of National Defence, but the diamonds there were inadequate for the community’s needs, and the lease was not secured long term.
[306] I interpret the position of the defendants as being open-minded, but perhaps sprinkled with a dose of skepticism about the viability of any vision the Society had to convert Kin Park into a thriving multi-use equestrian facility. In essence, they entered into the 2000 Agreement and put the onus on the Society to demonstrate the demand for such a facility, and to present a plan for development of it, including plans for payment of the no doubt substantial costs.
[307] It should be remembered that since 1970, the Society had been signing agreements with the NORD which spoke of a plan or program to develop the facility, but apart from building the grandstand and other structures, the only equine development pre-2000 was the construction of stables, from which the Society generated its primary income.
[308] There is ample evidence that the defendants were sincere in their commitment to at least consider removal of the softball diamonds, and also evidence that they never misled the Society by making concrete promises to do so.
[309] The participation of the defendants in commissioning the Siemens Equifacs reports, which led to the track expansion, is but one piece of evidence that the defendants were not anti-horse racing. The joint proposal which was presented in order to secure funding for the track expansion referred to a long-term plan to remove the ball diamonds.
[310] There was also, as noted by Mr. McNiven, a master parks plan prepared in 1992, which recommended that there be no expansion of the ball diamonds at Kin Park. That plan recommended that the ball diamonds be removed by 2000. That led to serious consideration by the defendants of possibly relocating those diamonds. This was reflected in the language of the 1998 Agreement.
[311] The idea of moving the softball diamonds in 2000 led to Mr. Willows’ second letter to the defendants setting out his perception of the Kinsmen’s ideas for use of the lands.
[312] Whatever the plans of the defendants for removing the softball diamonds from Kin Park, there is no language in the 2000 Agreement which references same. Indeed, the agreement states that Kin Race Track will continue to be used as a multi-purpose recreational facility, and has an entire section devoted to “Ball Fields”.
[313] There is no substance to the claims of the plaintiffs that the defendants made false promises to remove the softball diamonds at some unspecified time in the future. The 2000 Agreement could not be read as including any such assurances.
[314] It is also noteworthy that at the time the Society refused to complete the transfer of Lot 1, its complaint was not with the removal of the diamonds, but rather with statements made by Mr. Beardsell, reported in the newspaper, that the NORD could not afford to remove the diamonds. The letter from the Society’s lawyer to the NORD does not refer to any concrete promise to remove the diamonds, but merely to who should bear the cost if the diamonds were relocated. The letter states, in part:
My clients indicate to me that they have not asked in any way for any absolute commitment to move the diamonds, but simply an assurance that if they are successful in expanding Kin Park as an equestrian facility GVPRD would look at moving the diamonds and acknowledge that in the event the diamonds are to be moved it would be at the expense of GVPRD.
[315] Finally, I must note that, apart from any alleged misrepresentations, the plaintiffs’ positions under these two headings are entirely inconsistent. As with their interpretation of the 1965 Agreement, where they seek to enforce only certain portions of it, they advocate inconsistent positions regarding the 2000 Agreement. Their primary position is that the 2000 Agreement should be automatically renewed, apart from the NORD’s obligation to pay them a specified amount of money each year, in perpetuity. They also say that at some unspecified time in the future, the defendants should honour some commitment to remove the softball diamonds.
[316] Both objectives cannot co-exist. The entire section of the agreement covering “Ball Fields” would need to be removed or re-written, and the entirety of the recitals would need to be re-drafted as well. If the agreement was perpetually renewed, as is, it would always cover softball diamonds on the infield.
[317] Presumably, what the plaintiffs seek is an agreement which is renewed automatically on these terms until such no longer suits them, at which time it could be renegotiated.
[318] The plaintiffs claim that they were misled into thinking that the NORD would provide them with support in the development of the five-year business plan which they were obligated to produce pursuant to s. 12.1 of the 2000 Agreement.
[319] I find there is no substance to this claim. The only representation by the NORD is contained in s. 12.1 in these terms:
The GVPRD will work cooperatively with the VDAS and support the VDAS with the development of these plans.
[320] The evidence is clear that Mr. McNiven sought to meet with Society representatives to discuss the business plan on two occasions, and on both occasions, the Society did not take up his invitation.
[321] Mr. Saitz said that he was exhausted by the contract negotiations, so delegated responsibility for preparing the business plan to Mr. Newton. Mr. Newton could not say why he declined to meet with Mr. McNiven. He said that he found Mr. McNiven’s requests for information “annoying”, and that he was somewhat intimidated by Mr. McNiven. However, he offered no reason for not taking up the invitations to meet to discuss the plan.
[322] The Society cannot now complain that the defendants failed to provide it with the support which was promised in the agreement, in light of the Society’s failure to accept the offer of assistance.
[323] The Society says that the 2000 Agreement should be renewed in its entirety, except for the compensation portion of the agreement, s. 5.5, and that it should continue in perpetuity unless terminated for cause.
[324] The NORD submits that the 2000 Agreement should not be renewed, for the following reasons:
1) the renewal clause runs afoul of s. 828 of the Municipal Act, 1996, since it creates a financial liability of greater duration than five years;
2) the renewal clause is really an “agreement to agree”, and is thus unenforceable; and
3) there was cause to decline to renew the 2000 Agreement, within the confines of the wording of s. 2.1.
[325] Section 828 of the Municipal Act, 1996 reads as follows:
828 (1) Except as otherwise provided in this Part, a board must not incur a liability beyond the amount of revenue of the regional district for the current year unless one or more of the following applies:
(a) the liability arises out of a contract for the supply of materials, equipment or services
(i) for a term of 5 years or less, or
(ii) with the assent of the electors, for a term not longer than 20 years;
(b) the liability arises under a lease, agreement for sale, mortgage or other agreement
(i) by which the regional district acquires, or finances its acquisition of, real property or real property and related personal property, and
(ii) that has a term of 10 years or less;
(c) the liability arises under a lease, agreement for sale, mortgage or other agreement
(i) by which the regional district acquires, or finances its acquisition of, real property or real property and related personal property,
(ii) that has a term longer than 10 years, and
(iii) that has received either the assent of the electors or the consent of the minister;
(d) the liability arises under a lease, agreement for sale, mortgage or other agreement with the federal government or the Provincial government by which the regional district acquires, or finances its acquisition of, real property or real property and related personal property;
(e) the liability is authorized under section 830 or 831.
(2) Except for a liability referred to in subsection (1) (a) (i), a liability referred to in subsection (1) must be authorized by bylaw.
(3) Assent of the electors as required by subsection (1) is obtained if, by a vote in accordance with section 808 (3) (b) for the service area or service areas in respect of which the liability is incurred, a majority of the votes counted as valid for that area or areas, as applicable, is in favour of the agreement.
(4) A bylaw, other than a bylaw under section 829, must not authorize a debt for capital purposes unless
(a) the term for the repayment is the lesser of
(i) 30 years, and
(ii) the reasonable life expectancy of the work for which the debt is contracted, and
(b) the debt is included in its capital expenditure bylaw prepared under section 834 (2).
[326] In this case, there was no counter-petition opportunity, so the real issue is whether or not the automatically renewing agreement creates liabilities on the part of the NORD for a period greater than five years.
[327] The Society submits that the very wording of s. 2.1 envisages that compensation items will be separately negotiated at the time of renewal, and thus there is compliance with s. 828. In short, says the Society, the agreement, except s. 5.5, should be automatically renewed every five years, but that upon each five-year renewal, the parties must negotiate what, if any, compensation is payable by the NORD to the Society pursuant to s. 5.5. Thus, no actual financial liabilities are created which extend beyond five years.
[328] The NORD submits that the agreement envisages that some amount will be paid by it to the Society pursuant to s. 5.5, and that clearly creates a liability which extends beyond five years for the NORD. In addition, the NORD says that there are other items in the agreement which create “liabilities” for the NORD, as that term is defined in the jurisprudence.
[329] Both counsel referred to Robson v. District of Maple Ridge, 2000 BCSC 996, a decision of Justice Ralph of this Court, and the Court of Appeal decision at 2002 BCCA 422. At issue in that case was a 25-year lease signed by the District of Maple Ridge with a developer. At trial, Ralph J. held at para. 38, that the lease was a “legally enforceable financial commitment of more than 5 years”, and was consequently a “liability” requiring a counter-petition opportunity. On appeal, the Court endorsed that finding at para. 31, for essentially the reasons given by Ralph J.
[330] The NORD also relies on Burns Lake Indian Band, in advocating for a broad interpretation of what is meant by “liability” pursuant to the Municipal Act, 1996. As noted earlier in these reasons, in that case, an obligation to provide water to the village was held to be a “liability” within the meaning of the statute.
[331] In my view, there exists a possibility that either through failed negotiations or outright refusal by the NORD to compensate the Society, there might not be any money payable for operating expenses under s. 5.5. Section 2.1 does not specify that there will be a certain minimum payment, or any other amount payable, but simply leaves the renegotiation of s. 5.5 to the parties on renewal. I agree with the Society that there is no “liability” thus created by those provisions of the agreement.
[332] However, I find that there are other parts of the 2000 Agreement which create ongoing obligations on the part of the NORD which do amount to “liabilities”. These are:
a) The NORD’s commitment to provide a grader in preparation for Vernon Race Days at s. 5.6;
b) The NORD’s obligation to maintain the grandstand and beer garden at s. 8.2;
c) The NORD’s obligation to provide access to a water standpipe at s. 13.1; and
d) The NORD’s obligation, at its sole expense, to maintain the softball diamonds at s. 7.1.
[333] Item (d) above may at first blush seem incongruous, since the Society wished for the diamonds to be removed. However, as I noted earlier, what the parties negotiated is an agreement which envisaged the ball diamonds existing on the infield of the track, seemingly in perpetuity, on the Society’s view of the contract. If the diamonds remained in place, under the clear terms of this agreement, s. 7.1 obligated the NORD to maintain them.
[334] In my view, the aforementioned items all constitute “liabilities” pursuant to the Municipal Act, 1996. On an automatically renewing contract, each of those liabilities would carry on beyond five years and thus run afoul of the Act. I find that the automatic renewal of the 2000 Agreement, as set out in s. 2.1 is void as being unenforceable. That section of the agreement is ultra vires.
[335] I do not intend to address the argument advanced by the NORD that s. 2.1 was not a binding renewal clause, but rather an “agreement to agree”. There may well be merit to that position, but I need not decide the question in light of my earlier findings.
[336] I do intend to address the issue of non-renewal of the 2000 Agreement for cause. In my view, the NORD was entitled, acting within s. 2.1, to decline to renew the agreement.
[337] Mr. McNiven said that, by early 2004, his opinion was that the agreement should not be renewed. His reasons were: the decline in demand for horse racing; the Society’s inability to attract events to Kin Race Track; the Society appeared to have become dysfunctional; and the Society’s failure to produce an acceptable five-year business plan.
[338] I find that the Society did not produce a suitable five-year business plan, as required by s. 12.1, and was thus not operating within the spirit of the 2000 Agreement, contrary to s. 2.1.
[339] The two attempts by the Society to produce a business plan are contained at Ex. 1, Vol. 2, Tab 79 and Vol. 2, Tab 94. Both were clearly unacceptable from the perspective of the NORD, who conveyed that view to the Society, and requested to meet to discuss the issue. Those invitations went unanswered.
[340] Mr. Newton was the Society director primarily responsible for at least the first of those two attempts, the document entitled “request for funds”. The second attempt incorporated much of what was in the first, with additional sections prepared by people with some special knowledge of particular equine disciplines.
[341] After the first business plan was met with a response from the GVPRD requesting further detailed information, including revenue projections, Mr. Newton responded by letter dated July 30, 2001. That letter declined to provide any information about revenue projections, which Mr. Newton referred to as “folly”, which I take to mean completely uncertain.
[342] It appears that at the time, the Society had little in the way of revenue stream beyond the stable rentals. They tended to break even on Vernon Race Days. Ms. Dalziel referred in her evidence to the Society’s ability to seek government grants as a source of funding. There is some evidence (at Ex. 1, Vol. 1, Tab 18) that the Society had received some sort of provincial funding in the late 1980s, but no evidence that it sought any between 2000 and 2005. Nor is there any evidence that it had a plan to do so. The only level of government to which it looked for funding in that period was municipal, namely the defendants.
[343] With respect to the documents contained at Tabs 79 and 94, I mean no disrespect to the authors, but in my view, they do not contain the sort of detail and precision that one would expect to see in a business plan prepared by and for a corporate entity. It is plain to see why they were deemed unsuitable by the NORD.
[344] When the Society was put on notice that its failure to deliver a suitable business plan was jeopardizing its right to a renewal, it is clear that it had not come up with anything remotely close to that which was envisaged at s. 12.1.
[345] Shortly after the delivery of the second attempt at a business plan, many of the directors, including Mr. Newton, resigned, it seems because of infighting on the board among people from different equine disciplines.
[346] There was then apparently an attempt by the new president, Ms. Dalziel, to come up with a business plan. No such document has ever been produced to either the defendants or the Court. Ms. Dalziel said that she built upon the previous plan, but changed dates for proposed events and added some other items. She was unable to locate a copy of it for trial.
[347] I have some doubts about whether or not Ms. Dalziel ever produced a document which could be considered a new business plan, or whether she simply changed dates on an earlier version and considered that sufficient. I have no doubt that she was ill-equipped to lead the Society during this critical period of its existence. Her actions, and more importantly inactions, described above, are most unfortunate. They effectively scuttled any possibility of the Society securing renewal of the 2000 Agreement.
[348] It follows from the preceding paragraphs that I find the defendants did not breach the 2000 Agreement when they failed to renew it.
[349] I took from the plaintiffs’ submissions that what they sought under this heading was specific performance of s. 2.1, the automatic renewal of the agreement for successive five-year terms.
[350] However, I do wish to say that, whatever the legal effect of s. 2.1, leaving aside the ultra vires point, I would seriously question whether what is proposed by the Society in this litigation, namely the perpetual renewal of this agreement, could withstand legal scrutiny, simply on public policy analysis. Once the trust claim of the Society fails, the situation becomes this: the Society is not only permitted to hold Vernon Race Days on City property, but it is permitted to build stables on municipal lands, derive income from renting them out, and train horses on municipal land, rent-free, for eight months of the year, and continue to do so for as long as it chooses, by invoking the automatic renewal clause.
[351] Obviously, I make no findings on that score, but simply point out what always seemed to me to be an untenable part of the plaintiffs’ case.
[352] For the reasons I have already stated, I decline to order specific performance of the renewal clause.
[353] Both the original statement of claim and the further amended notice of civil claim refer only to the 1965 Agreement on this issue. However, the issue is framed to include both agreements in the written submissions of the plaintiffs.
[354] I can find no language in the 1965 Agreement which would have required the City to rebuild the structures which burned down in the 2014 fire. A plain reading of paragraph 2 of that agreement requires the City to keep in “good repair” any buildings it chooses to construct on the land. The term “they” is used, but in my view, the pronoun must refer to the City. As noted, the Society built the grandstand.
[355] Beyond that, there is no express language requiring the reconstruction of a building which is destroyed entirely.
[356] The 2000 Agreement contained such a clause, which reads:
9.5 It is understood that NORD and the City insure all improvements on their respective property. If a loss occurs, NORD and the City agree to rebuild the lost improvements for an amount not to exceed the insurance proceeds, within this five year agreement.
[357] The City has at all times maintained the appropriate insurance on the grandstand and other structures erected by the Society in the 1970s (and perhaps 1980s). Apparently, the grandstand and nearby structures, which included washrooms and what has been referred to as a clubhouse, were destroyed by the fire in 2014. The City collected $800,000 as proceeds on the insurance policy.
[358] If the fire had occurred any time prior to December 31, 2004, or if I had upheld the renewal clause, I would have had no hesitation in finding that the City was in breach of that provision, in taking insurance proceeds and failing to rebuild the grandstand. However, having found that the 2000 Agreement was terminated at the end of 2004, I cannot so find. The City was not required to rebuild the grandstand with the insurance proceeds.
[359] During submissions, I asked counsel for the City why I should not find that the City had been unjustly enriched by this insurance windfall for a structure which it did not construct, and counsel advised me that the pleadings did not make such a claim. Counsel for the Society confirmed that no such claim was being advanced; that the only remedy sought was a declaration of breach of contract and an order for specific performance that the grandstand be rebuilt.
[360] I decline to make such an order, there being no breach of contract by the City.
[361] This claim is based on the volunteer labour of members of the Society in maintaining the track and stables from 2005 to the middle of 2014. The evidence of Mr. Hattori was that he spent approximately four hours per day from 2003 to 2013 on physical tasks related to track maintenance. Mr. Hattori explained in some detail what he did, and why it was required to ensure that the track was suitable for thoroughbred horse training during the months when weather permitted such training. Mr. Hattori also testified that the hourly wage paid to workers at Hastings Park racetrack was approximately $20. I accept Mr. Hattori’s evidence, both as to his own labour, and as to industry standard pay rates.
[362] Based on his evidence, the Society submits that it is entitled to approximately $14,400 per year for maintaining the track (based on four hours per day, every day for six months of the year). In the alternative, the plaintiffs say they should be compensated $10,000 per year, the amount set out in the 2000 Agreement.
[363] I find that the Society is not entitled to any compensation.
[364] The Society had knowledge that the defendants had declined to renew the 2000 Agreement, yet chose to carry on as if the agreement was still in effect. There are myriad problems with its fundamental position that the defendants should reimburse it for volunteer time expended on maintenance of the track and stables.
[365] The stables were the primary source of the Society’s income for the period in question. It was obviously its responsibility to maintain them.
[366] As for the track, at most, pursuant to the so-called “spirit” of the 1965 Agreement, the plaintiffs were permitted to hold Vernon Race Days at the Kin Race Track for a certain number of days each year. Under the original terms of the 1965 Agreement, keeping the track in good repair for that purpose fell to the City. As noted earlier, there was no provision in that agreement for horse training. Most of the maintenance referred to by Mr. Hattori was required to enable horse training to occur for six to eight months of the year. The defendants should not be expected to pay the Society for the privilege of having horse training occur on the defendants’ lands for half the year, at no user cost to the Society.
[367] It is also worth noting that Mr. Hattori’s evidence was consistent with what one would expect from a member of a non-profit organization, namely that he volunteered his time to do what needed doing. He did not testify that he expected to be compensated for his time. There was considerable evidence throughout the trial that the Society had limited ability to raise funds, but relied heavily on volunteer labour to accomplish its goals. I do not see why it should now be compensated for such volunteer labour.
[368] Finally, as the plaintiffs acknowledge under other heads of relief they seek, there was never any guarantee that the compensation terms of the 2000 Agreement would be renewed. The compensation payable to the Society, if any, on renewal, was always subject to review.
[369] The Society’s claim for injunctive relief depends primarily on success on the claim that the 1965 Agreement created a charitable trust. I have found that it did not.
[370] The Society might also have succeeded in this claim if I had found that the 2000 Agreement should be renewed every five years, in perpetuity. I declined to make that order as well.
[371] I see no other basis for the claim that the Society is entitled to a permanent injunction on the terms sought. I decline to make such an order.
[372] I have already found that the Society has not satisfied me that it in fact sold Lot 1 for less than fair market value in 2000. However, I will also address the arguments of the Society, at paragraphs 417 to 419 of its written argument, that the defendants were unjustly enriched by the Society using the net proceeds from the sale, approximately $80,000, for improvements to the lands.
[373] The evidence is not entirely clear on the amount of the Society’s indebtedness at time of sale. The plaintiffs’ written argument puts the amount owing, and secured against the property, at $120,000.
[374] Both the 2000 Agreement and the offer to purchase Lot 1, the purchase agreement, were executed on May 31, 2000. The 2000 Agreement contains two paragraphs of “acknowledgments” which precede the formal recitals. The second of these paragraphs refers to the purchase agreement, and concludes as follows:
It is understood that the VDAS will use the proceeds from the sale of the land to the NORD, minus the outstanding debt, for improvements and upgrading to Kin Race Track Park.
[375] The purchase agreement is silent as to use of the sale proceeds, with one unrelated exception. The purchase agreement is structured so that the first $120,000 is payable upon title being conveyed, along with assurances that all outstanding encumbrances “will be discharged”. Presumably, that was the means by which the line of credit, secured against the property, would be paid.
[376] The balance of the purchase price was paid in four annual instalments of $20,000, each payable on the anniversary of the completion date. That $80,000 is presumably the money which was intended to be used for racetrack improvements and upgrades. The Society submits that those funds were used for those purposes, and the defendants do not appear to dispute that.
[377] Thus, it does appear that the plaintiffs spent $80,000 on improvements to the lands owned by the defendants, pursuant to the language and intent of the 2000 Agreement. Does this amount to unjust enrichment of the defendants?
[378] The basic test for unjust enrichment is not in dispute. It is described by the Supreme Court of Canada in Pettkus v. Becker, [1980] 2 S.C.R. 834, as follows:
1. a benefit to the defendant;
2. a corresponding deprivation to the plaintiff; and
3. the absence of any juristic reason for the defendant’s retention of the benefit.
[379] Both the Society and the NORD rely on Pacific National Investments Ltd. v. Victoria (City), [2004] 3 S.C.R. 575. In that case, the trial judge awarded damages of $1.08 million for improvements made by the plaintiff developer to lands owned by the defendant city, pursuant to a development plan premised on zoning that was promised, but not ultimately granted. In reliance on the promised zoning, and as part of the overall plan, the plaintiff constructed roads, parkland, walkways and a new seawall. The planned zoning, mixed use, multi-storey buildings, was downgraded by the defendants to single storey commercial, precluding the plaintiff from building additional two-storey residences.
[380] The Court of Appeal reversed the trial judge. On further appeal, the Supreme Court of Canada restored the award for unjust enrichment. Justice Binnie, for the Court, began his analysis by observing:
13 The doctrine of unjust enrichment provides an equitable cause of action that retains a large measure of remedial flexibility to deal with different circumstances according to principles rooted in fairness and good conscience. This is not to say that it is a form of “‘palm tree’ justice” (Peel (Regional Municipality) v. Canada, [1992] 3 S.C.R. 762, at p. 802) that varies with the temperament of the sitting judges. On the contrary, as the Court recently reaffirmed in Garland v. Consumers’ Gas Co., [2004] 1 S.C.R. 629, 2004 SCC 25, a court is to follow an established approach to unjust enrichment predicated on clearly defined principles. However, their application should not be mechanical. Iacobucci J. observed that “this is an equitable remedy that will necessarily involve discretion and questions of fairness” (para. 44).
[381] The Court found that the city had received over $1 million worth of roads, parkland, walkways and a new seawall, entirely paid for by the appellant. The improvements were far in excess of what the city could have demanded pursuant to the Municipal Act, R.S.B.C. 1979, c. 290. In those circumstances, the Court had little difficulty finding that the city had been enriched.
[382] Applying what it termed “a straightforward economic approach,” the Court also found a corresponding deprivation of the appellant, who had paid for the whole enrichment: Pacific National Investments Ltd. at para. 20.
[383] The plaintiffs urge similar findings in this case. I am unable to find either enrichment of the defendants or deprivation of the plaintiffs.
[384] In this case, the improvements made by the plaintiffs to the Kin Park lands are both difficult to quantify, and solely for the benefit of the plaintiffs. There was evidence that the plaintiffs constructed a show ring in the infield. There is no evidence what that is, and minimal evidence of its cost.
[385] In any event, the show ring was apparently used solely by the plaintiffs for the barrel racing events and dog shows which they hosted. There was no benefit to the defendants at the time. Presently, the defendants are not able to use whatever improvements were made to the lands by the plaintiffs.
[386] The Society has filed some of its financial statements for the period covered by the 2000 Agreement. There is no specific accounting that shows how the Society spent the four annual $20,000 payments. The 2002 statement of “profit and loss” contains a line item showing “arena construction” at a cost of $16,644.48. There is no further breakdown.
[387] There is no evidence concerning any other construction or improvements made to the lands by the plaintiffs over the course of the agreement. There is simply an assertion that, pursuant to the contract, the Society used the money for improvements and upgrades to Kin Race Track.
[388] Finally, I find that there was a juristic reason for any enrichment brought about by the expenditure of the $80,000 on improvements, namely the 2000 Agreement. I have already found that the defendants paid fair market value for Lot 1. Once the land transfer occurred, the plaintiffs were engaging in their equestrian activities on land owned by the defendants without being required to pay user fees. The evidence is that the GVPRD was by then requiring all user groups to pay such fees for use of park lands.
[389] In addition, the plaintiffs, under the terms of the agreement, were receiving annual payments of $10,000 for track maintenance from the defendants. The defendants received little to no benefit from the terms of the agreement. As noted earlier, any obligation to maintain the track, pursuant to the 1965 Agreement, covered only the period of race days. It was always entirely reasonable to expect the plaintiffs to maintain the track, at their expense, for the extended period of horse training. Under the terms of the 2000 Agreement, they were being at least partly compensated by the defendants for that work.
[390] The expectation that the plaintiffs would re-invest the $80,000 in the Kin Race Track facility made sense from their perspective as well. They must have understood that they bore some onus of demonstrating that they could transform the lands into a thriving equestrian centre if they hoped to maintain the extremely favourable contractual terms of the 2000 Agreement.
[391] I also note that the February 1993 offer by the Society to sell Lot 1 to the NORD proposed that the sale proceeds would be held in trust, to be used by the Society to make improvements to the lands. What the Society wanted in return was fair market value for the land and an assurance that it would be able to hold Vernon Race Days.
[392] By 2000, the Society wished to receive fair market value for the land, and to have in place a renewable five-year operating agreement, which would permit it to train horses, hold Vernon Race Days, and develop the land as an equestrian facility. Apart from the automatic renewal of the agreement, the Society got everything it desired from the 2000 negotiations, which led to the land sale and execution of the 2000 Agreement. In my view, the overall terms of that agreement were extremely favourable to the Society, and provided a sound juristic reason for the re-investment of the net sale proceeds into land improvements.
[393] I have thus far in these reasons, found no basis for awarding any damages to the plaintiffs, and have dismissed their various claims for relief.
[394] However, I should comment on the evidence of damage to the horse stalls said to have been caused by the City in 2016, when the stable doors were removed. I heard viva voce evidence about this damage, and also received photographic evidence of it, as well as other damage to the racetrack rails. There was significant evidence concerning the general state of disrepair into which the defendants have permitted the entire facility to fall since the 2014 fire.
[395] Although this evidence was led without objection by the defendants, I see nothing in the pleadings nor the written argument of the plaintiffs which claims damages for the physical damage caused to the stables or track rails. Quite apart from the absence of pleadings, I cannot find any compensable damages owing to the plaintiffs by the defendants occasioned by any of the events post-2014. I decline to make any award of damages under this heading.
[396] I share Mr. Willows’ view that if Kin Park is presently an eyesore, such is deplorable. However, I am unable and unwilling to apportion responsibility or blame for that sad state of affairs. Obviously, the majority of the issues among the parties which I have decided could and likely should have been adjudicated years ago. I do not know why this case took more than ten years to get to trial. Hopefully, with this judgment, the defendants can commence to make better use of the land.
[397] I dismiss the action. The defendants are entitled to their costs.
“Tammen J.”