Wednesday, February 22, 2017

BC Court of Appeal rules surveyor hired by one neighbour didn't owe duty of care to other neighbour

If a surveyor hired by one property owner in a boundary dispute gets it wrong, does the neighbouring owner have a claim in negligence against that surveyor?

In 2002, Owner B purchased a property and was aware that a fence at the back of the property might not align with the actual boundary line.  In 2007, Owners K bought the property directly behind B's property.  The Ks disputed the location of the fence, arguing that it was 12 feet inside their property line.  The Ks had hired a surveyor.  He'd already surveyed the property in 1990 and surveyed it again in 2007.  In both surveys, he found that the fence was 12 feet inside the property line.

In 2008, under cover of darkness, Mr. K tore down the fence.  B immediately commenced an action in trespass against the Ks.  Following a summary trial, the B.C. Supreme Court found that the Ks' surveyor was correct (that the fence was within the Ks property) and dismissed the trespass claim.  However, that decision was overturned on appeal.  A second trial took place and the Supreme Court this time ruled in favour of B.  The Court concluded that the Ks' surveyor was not correct and that the boundary was actually in the location of the fence.  That decision was upheld on appeal.

As is usually the case, B was awarded part of her costs payable by the Ks, leaving her out of pocket the difference between the costs awarded and her actual legal costs.  So B commenced an action against the Ks' surveyor, arguing that his errors resulted in her financial loss.  In response to B's action, the surveyor made an application to strike the claim on the basis that B had no cause of action against the surveyor.  That application was dismissed by the Supreme Court and the case ended up again before the Court of Appeal.

The Court of Appeal reversed the lower court decision and allowed the surveyor's application to strike B's claim on the basis that it failed to disclose a reasonable cause of action.  In summary, the Court wrote: "[B]'s pleading is fundamentally flawed. It fails to advance facts that reveal the necessary relational proximity to establish a duty of care. It does not allege that she had direct dealings with [the surveyor] or relied on his representations. Nor does it set out facts that would reasonably support a conclusion that [the surveyor] inferentially assumed responsibility for her beneficial interests. [B]’s claim must therefore be struck."

To recover damages in a negligence claim, it's not only necessary for the claimant to prove that the defendant (in this case, the surveyor) fell below the required standard of care and was negligent, but the claimant must also show that there was a relationship between the claimant and the defendant that created a "duty of care".  Making a mistake doesn't mean that someone will be liable to everyone in the world for any sort of loss that might somehow result from the mistake.  In this case, B had not hired the surveyor.  The Ks hired the surveyor in the context of an adversarial dispute with B, and the Court found that the surveyor did not assume responsibility for B's interests and did not owe her a duty of care.  

Read the decision at: Burke v. Watson & Barnard (A Firm).

Thursday, February 16, 2017

Divisional Court comments on positive covenants

Property owners may covenant with one another in connection with their lands.  They may agree to negative covenants, which prevent certain things from being done on or with the land. For example, a negative covenant may prohibit certain uses that can be made of land or require that only certain types of building materials or colours can be used in buildings, etc.  Owners may also agree to positive covenants, which are promises to do something.  For example, a positive covenant may require one neighbour owner to pay something toward the costs of maintaining shared facilities or actually to carry out the maintenance activities, etc. 

The distinction between negative and positive covenants is important because, in Ontario and traditionally at Common Law, positive covenants do not generally run with the land.  That is, although a covenant may somehow be registered on title to a property (in a deed or easement, etc.), it does not necessarily follow the land when ownership changes.  Negative covenants will bind future owners, but positive covenants will not normally bind future owners.  Positive covenants are treated as agreements between the individual owners that attach to the owners, rather than to the land.

However, there are exceptions to the general rule.  In a 2016 appeal from a Small Claims Court decision, the Ontario Divisional Court reviewed the law on positive covenants and the exceptions to the general rule that positive covenants do not run with the land.  Statutory exceptions to the rule include: positive covenants granted by public authorities (Planning Act, R.S.O. 1990, c. P.13); positive covenants concerning condominiums (Condominium Act, 1998, S.O. 1998, c. 19); and positive covenants between the Crown and private landowners concerning the installation of survey monuments (Surveys Act, R.S.O. 1990, c. S.30, s. 61(1)).

There are also Common Law (non-statutory) exceptions to the general rule, including chain of covenants, the doctrine of benefit and burden, and conditional grants.  

The chain of covenants exception applies when successors-in-title (the future owners) agree to the same positive covenants.  That is, each time a property subject to the original positive covenant is transferred, the new owner(s) would agree to be bound by the covenant.  In reality, this is arguably the creation of a new covenant at the time of each transfer rather than a true exception to the rule.

In the 2016 appeal case, the Divisional Court described the other two Common Law exceptions as follows:

  •  Conditional Grant Exemption. When being asked to enforce a positive obligation, the courts will first look at the transaction between the parties to see if a benefit was clearly made on the conditional acceptance of a positive obligation. If such an intention can be made out on the face of the transaction, the conditional grants exception is engaged
  •  Benefit and Burden Exemption: If a conditional connection between the obligation and the benefit is not clear, the courts will then consider whether the benefit and burden exception applies. By looking at the circumstances of the transaction, the intentions and relationship of the parties, and the nature of the benefits and burdens at issue, the courts will determine if there is an implicit and necessary connection between formally separate obligations and advantages. Or, to repeat the words of Professor Ziff, this second exception looks to whether the courts should “tether previously separate promises”.

Both of those exceptions happen in circumstances where the Court determines that a future property owner should not escape the obligations of a previously-made positive covenant (on account of the positive covenant not running with the land) where that property owner is receiving a benefit connected with the covenant.  The Divisional Court summarized: "In a fulsome, pragmatic approach, as confirmed in Wilkinson, the courts must look to the substance of the relationship between the benefit and the burden to determine if the positive covenant continues to apply. As noted by Vice-Chancellor Megarry in Tito, when there is a sufficient degree of correlation between the obligation to pay and the grant of benefits, the burden and benefits exception applies."

Read the Divisional Court's decision at: Black v Owen.

Thursday, February 9, 2017

Title Insurance and the costs of defending title to your property

Most real estate transactions in Ontario today involve title insurance.  Purchasers obtain title insurance to protect against unknown defects in title that crop up after the closing of the transaction, and title insurance policies generally include coverage for legal costs associated with defending title to a property.  As an example, if you purchase a property and then a neighbour commences a claim for adverse possession of part of the property (i.e. a claim that the neighbour is the true owner of something you thought you purchased), the title insurance coverage may include payment of the costs of defending the claim.

The issue of what legal costs may be covered by a title insurance policy, or what other costs may be covered, is normally a matter of interpretation of the contract as between the insured property owner and the title insurer.  However, Ontario courts have recently looked at what effect cost recovery under a title insurance policy should have on the awarding of costs in litigation.  If a property owner receives a payment from his or her insurer pursuant to a title insurance policy, should the owner also be entitled to a costs award against the other party in a dispute?  Is there a risk of double recovery?  Should that matter?

In 2011, the Ontario Court of Appeal ruled in Krawchuk v. Scherbak that a private insurance exception can apply to permit double recovery: "where a plaintiff recovers under an insurance policy for which he has paid the premiums, the insurance monies are not deductible from damages payable by the tortfeasor".  In that case, Ms. Krawchuk had purchased a house with serious latent defects based on misrepresentations by the vendors.  She had made a claim for coverage under her title insurance policy and settled that claim with the title insurer in exchange for a payment.  The defendants in the action argued that Ms. Krawchuk's recovery in the court action (which did not involve the title insurer) should be reduced in relation to the payment received under the title insurance policy.  Otherwise, they argued, Ms. Krawchuk would receive a windfall - double recovery.  The Court of Appeal found that double recovery was permitted in that case because it would be inequitable to allow the vendors (the tortfeasors or wrongdoers) to gain an advantaged based on benefits earned by Ms. Krawchuk through the payment of insurance premiums.

But what about a case where there is no tort or wrongdoing?  In a case decided in 2016, a judge of the Ontario Superior Court of Justice found that there was no wrongdoing and, on that basis, deducted title insurance proceeds from an award of costs to the successful parties.  The case involved use by one neighbour of a roadway that ran through another neighbour's property.  The road was not a public highway, and the owners of the road made an application to the Court for a ruling that the road was not an "access road" as defined by the Road Access Act and for an order closing the road.  The neighbours made a counter-application seeking the opposite orders.

The Court agreed with the road owners that the road was not an "access road" and issued an order preventing the neighbours from using it.  Not surprisingly, the road owners had looked to their title insurance policy for coverage in the matter, which affected title to their property.  They received a payment of roughly $25,000 from their title insurer.  The application judge found that the road owners used "those fund[s] to defend the application ... rather than accepting payment in compensation for the inconvenience of providing ... access."  That is, the road owners could have simply kept the $25,000 as disturbance compensation and allowed use of the road to continue (in which case they would not have incurred litigation costs).  Instead, the road owners used the funds received to fund the litigation and were successful in avoiding the disturbance that would have been caused by ongoing use of the road.

Based on that distinction, the application judge deducted the $25,000 title insurance payment from the overall costs awarded to the successful road owners in the case.  He distinguished the case from the Krawchuk v. Scherbak case heard by the Court of Appeal on the basis that there was no tort or wrongdoing involved.  This was simply a case about whether an "access road" under the Road Access Act did or did not exist.  In the absence of a tort or wrongdoing, the application judge was not prepared to allow a double recovery by the road owners through an award of costs.

Read the decision at: Gouett v Mullins.

Friday, February 3, 2017

Compensation for Injurious Affection: Impact on remaining land or impact on financial position of owners?

AltaLink expropriated a right-of-way over a strip of land from an Alberta couple for an electrical transmission line.  In a compensation hearing before the Alberta Surface Rights Board (the "Board"), the owners were denied compensation for injurious affection.  The injurious affection they claimed was a loss in value of the remainder of their property that was not taken by AltaLink.  The owners appealed the Board's decision to the Alberta Court of Queen's Bench and, on appeal, the Court reversed the decision of the Board and awarded the owners $125,780 in lost value plus interest.

The land in question consisted of two adjacent parcels containing approximately 230 acres, of which approximately 121 acres were cultivated.  The owners had purchased the land in February, 2013 for $511,500, and they were aware at that time that AltaLink had received approval from the Alberta Utilities Commission to construct and operate the transmission line across the property.  Prior to the purchase of the property, the new owners had rented the property for approximately 27 years, and it appears from the decision that they were able top purchase the property at below market value.  The Board found that the market value at the time of the expropriation in 2014 (the date of valuation for the purpose of calculating compensation) was somewhere between $902,000 and $930,000.

The owners argued that the taking of the right-of-way resulted in a loss of value to the balance of the property that was not taken as right-of-way related to the presence of the right-of-way and the transmission line.  They argued that their loss was not limited to the loss of value to the land as they were currently using it, but should be calculated based on their loss of ability to subdivide the property for new residential lots.  But for the AltaLink right-of-way, the owners could subdivide and sell the individual lots.  They put the value of their loss at 30% of the market value of the property.

The Court disagreed with the owners that the right-of-way would prevent the development of multiple residential lots, but accepted that the right-of-way would result in a loss in the value of the lots that could be created.  On that basis, the Court would have calculated the compensation to be paid to the owners based on  a market value loss of 15% (half of the 30% proposed by the owners), or approximately $131,000.  The Court then ended by making a finding that the $125,780 that would have been awarded by the minority dissenting member of the Board (in the original hearing) was therefore reasonable and set compensation at that amount.

Taken on its own, the Court's ruling on loss of value to the remainder of the property based on loss of value of prospective subdivision lots is not remarkable.  However, what is noteworthy is the Court's rejection of AltaLink's argument that no injurious affection compensation was payable at all because the market value of the property never fell below the amount the owners paid for the property.  AltaLink argued, and the majority of the Board had agreed, that an award of injurious affection would result in a windfall for the owners because they had paid substantially less than market value for the property.

But the Board had incorrectly "focused on the financial loss to the landowners and not the loss in value of the remaining land ... they were suspicious that the negative impact of the transmission line had already been factored into the sale price."  The Court ruled that "the fact that the Appellants purchased the land after the Respondent obtained a permit and license to build the line is of no consequence.  The payment for injurious affection is based on the impact on the value of the remaining land, not the impact on the financial position of the owners.  This does not result in a windfall or unjust enrichment to the Appellants because, until the line is removed, it will have a negative impact on the Land's value, which is an economic loss."

Read the decision at: Koch v Altalink Management Ltd.

Wednesday, February 1, 2017

Read CAFA's latest Cultivating Business magazine

The Canadian Association of Farm Advisors ("CAFA") has published its 2017 Cultivating Business magazine.  In addition to articles of interest to farmers and farm businesses, the magazine includes a directory of farm advisors from across Canada.  

Click HERE to read the full magazine.

Tuesday, January 31, 2017

Enbridge Line 10 Replacement Pipeline: Landowner intervention persuades Enbridge to rethink pipeline route

The National Energy Board ("NEB") has approved the application by Enbridge Pipelines Inc. for the Line 10 Replacement Pipeline Project.  Line 10 is an oil pipeline that has operated in the Hamilton, Ontario area since the 1960's.  Enbridge also operates Line 11 adjacent to Line 10 within a shared easement.  Late in 2015, Enbridge applied to the NEB for permission to replace Line 10 in large part to avoid increasing integrity issues with the pipe.  Enbridge's proposed replacement pipeline would require less intervention and would also be larger in diameter than the existing pipeline.

For the majority of the replacement pipeline, Enbridge proposed to follow its existing Line 10 / Line 11 corridor; the existing Line 10 would be decommissioned in place and a new pipe would be installed next to it.  However, in certain locations, Enbridge asked for permission to move away from its existing pipeline corridor and to build the replacement pipeline within a new corridor to be established on previously unaffected properties.  Those locations that Enbridge wanted to avoid were golf courses.

In its application to the NEB, Enbridge suggested that it was necessary to route its replacement pipeline through previously undisturbed farm land because by doing so it would minimize the environmental and socio-economic impacts of its project.  In other words, Enbridge took the position that creating a new pipeline corridor through previously undisturbed agricultural lands would cause less impact than constructing and operating its pipeline through golf courses that already accommodated Enbridge's existing two-pipeline corridor.  

Landowners in the vicinity of two of the golf courses along Enbridge's existing Line 10 corridor challenged Enbridge on its theory.  They joined together and formed the Copetown Landowners Group ("CLG"), and intervened in the NEB hearing process.  CLG engaged an expert in pipeline routing and land use planning and submitted lay and expert evidence to the NEB that demonstrated the obvious - creating a new pipeline corridor through previously undisturbed farm land in order to avoid disturbing previously disturbed golf courses (which would still, in any event, house the operational Line 11 and the decommissioned Line 10) would not minimize the environmental and socio-economic impacts of the project.  

Ultimately, Enbridge revisited its proposed pipeline route in the area where it had intended to construct the replacement pipeline across lands owned by CLG members.  Enbridge still did not choose to install the replacement pipeline adjacent to its existing Line 10 and Line 11 pipelines, but it did adjust its route to follow another nearby utility corridor (one that actually was located between the existing Enbridge corridor and its proposed corridor through the CLG-owned lands).  The nearby utility corridor was already home to an electrical transmission line and multiple underground pipelines.

CLG's participation in the NEB Line 10 hearing demonstrates the importance of landowner involvement in the project approvals process.  But for the intervention of the CLG landowners, it is unlikely that Enbridge would have adjusted its proposed route to follow an existing previously-disturbed corridor.  Enbridge wanted, for its own reasons, to avoid installing its replacement pipeline through golf courses.  Enbridge was determined to create a new pipeline route through previously undisturbed farm land.  And in the absence of any opposition, it is unlikely that the NEB would have questioned the proposal, even though it would create a third utility corridor through prime farm land. 

Landowners have to be ready to participate in the regulatory process to protect their interests and the interests of their communities.  It seems that no one else, including local municipalities, will do it for them.

Read the NEB's decision at: NEB Line 10 Replacement Decision.

Monday, January 16, 2017

Ontario Court of Appeal confirms test for grantor's easement of necessity remains "strict necessity", not "practical necessity"

In Ontario, an easement of necessity may arise where land that is sold is inaccessible except by passing over adjoining land retained by the seller (i.e. an implied grant by the seller of an easement that allows the purchaser to access the purchased lot).  The easement must "be necessary to use or access the property", and necessity is determined at the time of the grant (the situation at the time the property was sold).

It is also possible for the easement to arise in the opposite direction, where the grantor (the party selling the land) requires an access easement across the land being sold or transferred.  That was the situation reviewed recently by the Ontario Court of Appeal in Toronto-Dominion Bank v. Wise.  In a case where the grantor or seller seeks an easement over the land that he or she transferred, the test is one of "strict necessity".  The test to be met by a grantor seeking an easement is supposed to be more difficult than where a grantee seeks an easement because "grantors are not permitted to derogate from the terms of their grant of land.  If they want to reserve an easement, they should do so explicitly at the time they make the grant.  An easement of necessity will be found only if it was necessary in order for the grantor to be able to use his or her property at the time of the grant."

In the Toronto-Dominion Bank v. Wise case, the application judge in the Superior Court had found that a landlocked waterfront property had an easement of necessity over a neighbouring property in spite of the availability of water access.  The judge found that the water access was "impractical".  On appeal, the Court of Appeal reversed the decision on the basis that the water access, whether inconvenient or impractical, was available, and that the property in question was not rendered unusable.  The test to be applied was not "practical necessity" (as the judge at first instance had proposed), but remained one of "strict necessity".

Read the decision at: Toronto-Dominion Bank v. Wise.

Wednesday, December 28, 2016

Funding to Support Public Input into NEB Modernization

Funding to Support Public Input

Natural Resources Canada (NRCan) is offering funding to support the development of research, studies or position papers related to the six themes of the NEB Modernization review: (1) Governance; (2) Mandate; (3) Decision-making roles; (4) Legislative tools for lifecycle regulation; (5) Indigenous engagement; and, (6) Public participation. This is in addition to the funding mentioned in the Terms of Reference that was made available to support the participation of Indigenous peoples.

Who can apply?

Funding is available to interested public stakeholders such as non-governmental organizations or associations.

How funding will be allocated

Limited funding may be provided on a case-by-case basis, subject to the established criteria below.
Funding decisions will be based on the following assessment criteria:

  • Proposals must be less than $25,000 in total (including tax). Note that travel costs and capital costs are not eligible.
  • All work must be completed by April 1, 2017. To maximize perspectives received through this process, funding is limited to one approved proposal per organization.
  • Proposals must detail the deliverable (e.g. report, study, position paper) that your organization will produce and the timeline.
  • Proposals must describe how the project contributes to the NEB Modernization review.
  • Proposals must include details on the level of effort and resources that will be allocated to the proposal (e.g. resources to be used and their salaries). NRCan will use this information to confirm whether or not the cost of the proposal is fair and reasonable.
  • Should your proposal be selected to receive funding, you will be contacted directly by NRCan officials. Final products must be provided to NRCan electronically in Microsoft Word format.
  • Recipients who have already been allocated funding for Indigenous participation in the NEB Modernization review are not eligible for funding to support public input.

Eligible activities
Research, studies or position papers related to one of the six themes of the NEB modernization review:
  1. Governance;
  2. Mandate;
  3. Decision-making roles;
  4. Legislative tools for lifecycle regulation;
  5. Indigenous engagement; and,
  6. Public participation.

More information on these six themes can be found in the expert panel’s Terms of Reference.

Funding level

A maximum of $25,000 (including taxes) is available per applicant.

How to apply?

If you think your organization or association can contribute to the NEB Modernization review process, submit a proposal between two and five pages in length to link) with the subject line “Public input funding proposal” and your organization’s name.

Should you wish, you may also mail your application to:
National Energy Board Modernization Secretariat
Natural Resources Canada
580 Booth Street,17th Floor
Ottawa, ON  K1A 0E4

Application Deadline

Applications will be accepted until January 31, 2017. Funding is limited and will be distributed on a case-by-case basis.