The original proposal was WAY too aggressive, and at that time they did NOT own the existing apartment building to the west. They still don't even own the laneway that they were trying to build on.
Your theory seems to be totally flawed. The City (IMHO) was totally right to reject the original proposal. That is not a BAD thing as you're suggesting. If we apply your logic to any other site in the city, then the approach would be to come in with a ridiculously aggressive application from the start, and then cheap out once the City rejects you, and then blame the City for your new, crappy application.
The better approach would be to come in from the start with a solid, thoughtful and defensible application that actually meets policy and built form objectives (beyond just high-rise development near a subway).