Dispute over sewer stinks for one condo

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A decision was released today from the Court of Appeal regarding another shared facilities dispute. At trial, the appealing party was found liable for a portion of the expenses incurred to maintain a shared sanitary sewer pumping station.

The facts can be briefly summarized as follows. MCC229 is a condominium in London. It was built on the same parcel as three other condominiums (MCC282, 392, and 500) that are now owned by WMJO. The City requires that the sewage from all four condominiums be pumped uphill to connect to the City service. Since the time that MCC229 was created in 1991, it has managed and operated the pumping station for all of the condominiums. In keeping with a Joint Use Agreement, WMJO contributed its proportionate share of the costs for the pumping station for more than ten years. It stopped making payments in 2006 when it took the position that it had no obligation to contribute toward the costs.

The trial judge found WMJO liable on the basis of unjust enrichment [Note: unjust enrichment is a legal remedy based on equity and fairness. To be successful, a party must prove three components: 1) the other person received a benefit; 2) that he or she suffered a loss corresponding to the other person’s benefit; and 3) there was no juristic reason for the benefit and loss. A juristic reason is an explanation based on law for the enrichment. If there is a reason for the enrichment, then it is not unjust.]

The court found that WMJO had benefited because it was able to connect to MCC229’s pumping station rather than build and manage its own. MCC229 had suffered corresponding deprivation as it had not received any compensation from WMJO and had to operate a larger pumping station than it needed to for its own residents.

On appeal, the court agreed with the trial judge. There was ample evidence of the benefit received by WMJO and the cost to MCC229. The Court of Appeal’s decision focuses on a specific part of the test for unjust enrichment: the absence of a juristic reason. The court stated that the reasonable expectations of the parties and public policy considerations will be considered.

WMJO argued that the development agreement and the Ontario Water Resources Act (which requires MCC229 to maintain the pumping station) are juristic reasons that MCC229 should bear all of the costs.  The court disagreed. The development agreement clearly provided for the sharing of costs for “common internal driveways and services”. Also, the court found that while the OWRA requires MCC229 to maintain the pumping station, it is silent on the responsibility for the cost of maintaining it.

An interesting legal argument raised by WMJO was that a previous decision of the court of appeal (called Amberwood) stood for the position that a public policy rationale existed for not using the remedy of unjust enrichment to enforce positive covenants upon subsequent owners of land. [Note: a positive covenant is a promise by a landowner to do something (i.e. pay money) or use the land in a certain way. In Amberwood the court found that positive covenants do not run with the land, which means subsequent owners of the lands are not bound by the promises made by previous owners. A negative or restrictive covenant, which restricts the permitted uses of the lands, can run with the land if certain conditions are met]. The court rejected WMJO’s argument. An unenforceable contract is a basis for granting a remedy in unjust enrichment; the Amberwood decision did not change that.

MCC229 was awarded $9,800 in legal fees for the appeal.

In my next post, I’ll write about shared facilities agreements and offer some tips to help you make sense of them.