Court of Appeal reverses Bear Creek natural severance ruling

The Court of Appeal for Ontario has overturned a recent Superior Court decision that found a property to have been severed naturally by a creek.  The owners of the property wished to deal with the property on the basis that it was severed into two parts by the creek running through it.  The local municipality challenged that view, but the Superior Court ruled that there was a natural severance resulting in two separate parcels of land.

On appeal, the Court of Appeal found that the evidence put before the lower court "was not capable of establishing that the Creek as it passed over the respondents' property was a navigable stream ... Title to the bed of the Creek does not lie with the Crown.  There is no natural severance of the respondents' property."  In the original application, the main issue was whether the creek had been navigable at the time of the original grant of lands in the area.  If it had been, then ownership of the creek bed was reserved to the Crown and the properties bisected by the creek would be divided into two severed parts.

Read the decision at: Middlesex Centre (Municipality) v. MacMillan.

Federal Court of Appeal overturns Northern Gateway approval

The Federal Court of Appeal has quashed the decision by the Federal Cabinet to approve the Northern Gateway pipeline project on the basis that Canada failed to consult adequately with First Nations on the pipeline route.  With changes to the National Energy Board Act made by the previous government, pipeline projects like the Northern Gateway project are subject only to a review by the National Energy Board.  The NEB then makes a recommendation to the Federal Cabinet, which has the ultimate say in whether a project is approved.

The appeal court ruled that Canada failed in its approach to consultation with First Nations on the project, noting that the government carried out consultations in a "brief, hurried and inadequate" way.

Read the decision at: Federal Court of Appeal.

TransCanada pipeline easement beneath swimming pool nixes property sale

The Plaintiffs in this case wanted to sell their residential property.  They listed the property for sale and the Defendant agreed to purchase it for $1,685,000.  The Agreement of Purchase and Sale was dated August 25, 2014 and the transaction was scheduled to close on November 28, 2014.  The property featured a pool, cabana and patio in the backyard.

After entering into the Agreement of Purchase and Sale, the Defendant discovered that a TransCanada Pipelines Limited ("TCPL") easement ran directly under the pool, cabana and patio.  An agreement provided that TCPL could remove the pool and cabana if necessary, and the agreement and the easement were the subjects of ongoing litigation between the Plaintiffs and TCPL.  The Agreement of Purchase and Sale between the Plaintiffs and the Defendant did not expressly reference the easement or the litigation.

The Defendant discovered the easement on November 6, 2014.  On November 7, 2014, the Defendant advised the Plaintiffs that he would not close the deal, and requested the return of the $50,000 purchase deposit.  The Plaintiffs refused to return the deposit and commenced an action against the Defendant for damages resulting from the failure to close the deal.  The Defendant counterclaimed for the return of the deposit.

As the Court explains in its decision on the claim and counterclaim, the Plaintiffs had constructed the pool, cabana and patio in 2011 without the consent of TCPL.  The TCPL easement dated from 1992, but the Plaintiffs were apparently unaware of it when excavations began (it was actually the second of two TCPL easements on the property).  TCPL permitted the Plaintiffs to encroach on the TCPL easement on certain conditions including:

(a)   The owners agree to sign a formal agreement prepared by TCPL which will be registered against the title of the land and will carry forward with future ownership;

(b)   In the event TCPL’s future operations, new installations, integrity or maintenance programs require the removal of the improvements (the pool and cabana) situated on its easement, the Owner agrees to remove the improvements immediately upon receipt of notice. The Owners and TCPL agree to equally share (50/50) the cost to remove the improvements;

(c)   The Owners covenant and agree that upon the Owner’s sale or disposition of the Lands, the Owners shall fully disclose the restrictive covenant to any prospective purchaser.

A letter containing those terms was registered on title to the property, but the Plaintiffs did not otherwise advise the Defendant of the letter or the subsequent litigation between TCPL and the Plaintiffs.

After the Defendant failed to close the transaction, the Plaintiffs defaulted on their mortgage and the property was sold under power of sale in May, 2015 for $1,730,000.  Although the sale price was higher than the price the Defendant would have paid, the Plaintiffs claimed they received $78,100 less in the power of sale because of the difference in the real estate commission charged (5% vs. 2.5%).

The Plaintiffs brought a motion for summary judgment seeking the damages they claimed from the Defendant.  Instead, the Court dismissed the Plaintiffs' claim and granted judgment to the Defendant for the return of the $50,000 deposit.  The Court ruled that the Defendant was entitled to rescind the Agreement of Purchase and Sale because the (second) TCPL easement and associated encroachment agreement and litigation had not been disclosed to the Defendant in the Agreement of Purchase and Sale.  As the Court noted:

The reference to a single easement in Schedule A of the APS did not provide the defendant with notice or disclosure of the 1992 easement or the June 2, 2011 letter agreement. Schedule A did not referentially incorporate the 1992 easement or make it part of the APS. This is especially true when the wording of Schedule A is compared to the wording of Schedule A in the earlier Purbas APS, which specifically referenced the TCPL litigation. Accordingly, the existence of the 1992 easement, the June 2, 2011 letter agreement, the unexecuted “Agreement To Install Swimming Pool and Cabana”, and the cloud of the litigation in relation to the plaintiffs’ refusal to execute the agreement, all meant that the plaintiffs did not comply with paragraph 10 of the APS which required the title to be free from all registered restrictions except as specifically provided in the agreement.

Read the decision at: Savo and Robichaud v Moursalien.