Saskatchewan landowners challenging RM by-law that would expropriate gravel pit property

Two sisters own a quarter section of land in Saskatchewan adjacent to a gravel pit owned by their Rural Municipality ("RM").  The RM's current gravel pit is nearly exhausted, and the RM has been interested in obtaining the sisters' property - the property is ideally located next to the existing pit, and demand for gravel in Saskatchewan is currently very high.  In November, 2015, the RM offered to purchase the land, which has been in the sisters' family for generations, for $1.5 million.  The sisters rejected the offer.

The sisters then entered into a gravel extraction lease agreement in February, 2016 with a private company.  Later that month, the RM upped its offer by $17,000, and served a notice of expropriation along with its purchase offer.  The sisters again rejected the RM's offer.  The RM moved ahead and passed a by-law authorizing the expropriation of the property in May, 2016.

The matter has ended up in the Court of Queen's Bench.  The RM applied to have the compensation determined on the expropriation.  The sisters applied to the Court for determination as to whether the RM was lawfully expropriating the land for a purpose authorized by the Municipal Expropriation Act.  The Court has deferred the RM's application and allowed the sisters' application to proceed as an application to quash the by-law.

The sisters do not challenge the RM's authority to expropriate land where necessary to ensure that the RM has an adequate source of gravel to fulfill its duty to build and maintain roads within the municipality.  They argue that the RM's true purpose in passing the expropriation by-law was not to ensure an adequate source of gravel; instead, according to the sisters, the RM wants their property to acquire a source of gravel that the RM can sell at a profit in the context of the current high demand for gravel in Saskatchewan.

This will be an interesting case to watch.

Read the decision at: Rural Municipality of Edenwold No. 158 v Murray.

Warranty claim about under-powered high-clearance sprayer ends up in court

The Queen's Bench in Saskatchewan recently dismissed a claim by a farmer who alleged that a high-clearance sprayer he'd purchased was under-powered.  In 2010, the farmer of 2,300 acres spent considerable time researching options and decided on a 2010 Agchem 1184 RoGator ("1184") at a purchase price of $328,500 (before trade-in). The sprayer was delivered on May 11, 2010.  The farmer started using the sprayer on May 12, 2010 and complained that day to the sales representative that the sprayer was under-powered.  Namely, it was working too hard at the speed at which the farmer wished to operate.

Over the next several days, adjustments were made to the engine and tests were conducted.  The representative of the manufacturer concluded that the sprayer was working as intended.  The farmer disagreed and continued to complain that the machine was under-powered.

The farmer invoked Section 36 of Saskatchewan's The Agricultural Implements Act, R.S.S. 1978, c. A-10, and sent a notice of rejection.  Under the Act, the vendor then had seven days in which to try to remedy the problem.  However, by that time, the vendor and the manufacturer had already concluded that there was no problem with the machine.  No further action was taken.

Ultimately, the farmer demanded his money back.  He parked the sprayer at the farm and never used it again.  It was sold at public auction in 2012.  The farmer sued the vendor for breach of warranty on the basis that the machine did not perform well for the work it was intended.

The Court found that the farmer failed to discharge his burden of proving that the warranty in Section 36(4) of the Act was breached - "Every contract for the sale of a new implement is deemed to include a warranty that, if the new implement is properly used and operated, it will perform well the work for which it is intended."  The Court accepted the evidence of the manufacturer's representative who found that the sprayer operated properly - he observed that the sprayer was spraying properly and at an acceptable speed (given wet field conditions).  The Court also took note of the fact that the machine appeared to have completed its spraying operations successfully; in 2010, the sprayer was used for 1,400 acres with no evidence of any adverse effect on crop performance. The farmer's claim was dismissed.

Read the decision at: Coward v Kramer Ltd.

Nursery trees ruled to be chattels - claim for spray damage barred by limitation period

The Manitoba Court of Queen's Bench has dismissed a claim for spray damage caused to nursery trees (Roundup from a neighbouring wheat field) on the basis that the applicable limitation period had expired.  The key issue was the characterization of the trees - were they fixtures to the real property (the land) or were they chattels (movable property not affixed to the land)?  If they were fixtures, then a six-year limitation period would apply.  If they were chattels, a two-year limitation period would apply.  The action was commenced nearly four years after damage to the trees was first observed.

What is annexed or attached to the land becomes part of the land (a fixture), but there must be an intention to annex or attach evidenced by the degree of annexation and the object of the annexation.  In this case, the claimant argued that the trees were growing crops and, therefore, part of the real property (the land).  The defendants argued that the trees were planted only for the purpose of storage until they would be sold or used by the claimant, remaining as chattels (not fixed to the land).

The Court sided with the defendants and found that the nursery trees were chattels.  They were treated as the claimant's "stock in trade - as inventory".  The trees were never intended to be permanently attached to the land or to constitute an improvement to the land.  As a result, the two-year limitation period applied and barred the claim for damages.

Read the decision at: Noralta Northern Alberta Trees Inc. v. Plato Enterprises (Alberta) Ltd.

No harm, no foul in gravel extraction lease case - Sask Court declines to terminate lease

In a Saskatchewan case decided last fall, the Court of Queen's Bench ruled that the tenant under a gravel extraction lease was not subject to termination of the lease for having missed a deadline to provide proof of insurance coverage.  A common term in commercial leases is that the tenant or lessee must maintain liability insurance in a specified amount and must provide proof of insurance on a periodic basis, often annually.

The contract in question in this case demanded that the lessee have insurance in place and that it provide proof of the insurance on or before December 30 of each year of the contract, failing which the contract would terminate.  In 2012, although the lessee had put the necessary insurance in place prior to December 30, 2012, an oversight resulted in a failure to provide proof of the insurance to the lessors until January 2, 2013.  On December 30, 2012, the lessors instructed their solicitors to send a letter purporting to terminate the contract, and they refused to accept the proof of insurance when delivered to their home on January 2.

The lessors argued to the Court that there was a clear breach of the contract - proof of insurance was due by a certain deadline and that deadline was missed.  The lessee argued that a breach of the contract required two joint failures - both a failure to have the insurance in place and a failure to deliver the proof of insurance.  In its reasoning, the Court assumed (for the purposes of argument) that there was a breach and then turned to consider whether it should grant relief from penalty and forfeiture under the contract pursuant to its equitable power under Section 13 of The Queen's Bench Act: "The court may grant relief against penalties and forfeitures and, in granting that relief, may impose any terms with respect to costs, expenses, damages, compensation and any other issues that the court considers appropriate."

The Court found in favour of the lessee on all three prongs of the test for granting relief: 1) the conduct of the lessee was a mere oversight - there was no suggestion of bad faith, but only "clerical ineptitude"; 2) the breach caused no harm - the insurance was in place; and, 3) the lessee would lose its significant investment in the property while the lessors would suffer no damage (other than to have to continue with their contract with the lessee).  On those bases, the Court granted summary judgment to the lessee and issued a permanent injunction against the lessors preventing them from terminating the gravel extraction lease by reason of the 2012 late delivery of proof of insurance.

Read the decision at: Elchuk v Gulansky.

Sask Court rules that no compensation payable on expropriation of road

A Saskatchewan municipality passed a by-law to expropriate a roughly 2-acre road parcel from a quarter section of privately-owned land.  The affected landowners applied unsuccessfully to the Court  of Queen's Bench to quash the by-law, following which the issue of compensation for the expropriation was set to be determined.  In a decision released last October, the Court ruled that, in the circumstances of this particular case, no compensation was payable for the taking.

The road had actually been constructed by the municipality in 1980 to provide access to nearby lands. The 2-acre roadway cut across an 8-acre triangular piece of the quarter section, which was cut off from the remainder of the lands by a railway line.  The landowners (and/or their predecessors-in-title) had acquiesced in the construction and continuing use of the road.  The municipality had continued to maintain the road since its construction.

In 2004, the landowners applied to subdivide the quarter section to turn the 8 acre parcel into a one-lot subdivision.  This prompted the municipality to raise a concern about the maintenance of the road access across the property.  Eventually, the one-lot subdivision proposal turned into a two-lot proposal.  Between 2004 and 2011, the municipality and the landowners attempted to negotiate a resolution.  The municipality offered to purchase the 2-acre parcel in December, 2010, but no agreement was reached.  In March, 2011, the municipality passed its expropriation by-law.

In determining compensation, the Court of Queen's Bench found that the highest and best use of the land being taken was not a two-lot subdivision as proposed by the landowners.  The Court found that a two-lot subdivision was not a "reasonably probable use of the eight acre parcel" and that "there was no reasonable expectation that such a subdivision would occur."  For one thing, the road access issue was holding up any approval of a two-lot subdivision.  There was also evidence that the subdivision would not meet setback requirements.

The Court then looked at the effect of the taking on the eight-acre parcel as a whole: "what, then, should the applicants be paid, taking account of the value of the road parcel? Based on the before and after method, the applicants should receive the difference between the value of the eight acre parcel that they owned prior to the expropriation, and the value of the approximately six acre site that they will have after the expropriation. That calculation accounts for the value of the road parcel, the damage to the remaining six acre parcel, and any increased value to the remaining land arising from the work to be done - that is, the maintenance of a public road - on the road parcel. "

On the basis that the highest and best use of the land affected was as an eight-acre one-lot subdivision, the Court concluded that no compensation was payable: "Given that the transfer of the road parcel without compensation was an unavoidable cost of a single lot subdivision, the value of the eight acre parcel for a single lot subdivision was the same before and after the expropriation of the road parcel. The applicants accordingly suffered no loss as a result of the expropriation. Indeed, and as noted by counsel for the respondent, the expropriation of the road parcel puts the applicants one step closer to having the legal access that is a requirement for any subdivision. As such, it is a special benefit to the applicants."

The Court would have reached the same conclusion had the highest and best use of the land been agricultural: "no compensation is payable - even if the highest and best use of the eight acre parcel was the existing agricultural use. The road parcel is already used for the road, and is not available for agricultural use. As such, loss of title to the road parcel would not affect the value of the quarter section for agricultural purposes. "

Read the decision at: Colhoun v Rural Municipality of Lumsden No. 189.

When "strong bonds of love and devotion" fall apart: Sask Court considers action to set aside gratuitous gift of land from elderly parent to adult child

Justice Schwann of the Court of Queen's Bench for Saskatchewan opened her recent decision in a farm estate case as follows: "At issue in this case are the legal ramifications flowing from a gratuitous gift of land from an elderly parent to an adult child, and the parent's subsequent desire to revoke that gift."  An elderly mother transferred a joint tenancy interest in the family farm to her stepson shortly before she left to live in an assisted living home, but a year later brought a court action to have the transfer set aside.  She died a few years after that before the action was decided - it was continued by her estate.  Upon the mother's death, the farm passed to the stepson as the surviving joint tenant.

Several grounds for setting aside the original transfer were proposed to the Court: 1) undue influence of the stepson over the mother; 2) the absence of independent legal advice; 3) breach of fiduciary relationship; 4) failure of consideration; and, 5) presumption of resulting trust.

Justice Schwann determined that the mother had gifted the interest in her farm property by exercise of free will - she was not unduly influenced by her stepson.  She also found that the mother had not received adequate independent legal advice about the transfer, but this was not in and of itself a reason to overturn the gift.  Justice Schwann did not find that the lack of independent legal advice meant that the stepson had dominated the mother's free will.  She also found that there was no fiduciary relationship, that no consideration (i.e. quid pro quo) was required for the gift, and that no resulting trust was established.  The action by the estate was dismissed in its entirety.

Read the decision at: Thorsteinson v Olson.

Manitoba Court determines that proposed pipeline is provincial, not federal

In a post last December, I reported about a case in Manitoba being fought over the jurisdiction of a proposed pipeline - federal or provincial.  A group of affected landowners had sought leave to appeal a decision of the Surface Rights Board and had also requested the judicial review of Manitoba's decision to approve the pipeline.  The leave to appeal matter was put on hold pending the outcome of the judicial review.  In January of this year, the Court of Queen's Bench issued its decision on the judicial review.

The landowners applied to the Court for an order declaring that the pipeline is interprovincial and, therefore, outside the jurisdiction of the Province of Manitoba.  They had previously applied to the National Energy Board (NEB) for the same order, but that application was rejected.

On the basis of the test set out in the Supreme Court of Canada decision in Westcoast Energy Inc. v. Canada (National Energy Board), the Court ruled that the Manitoba pipeline was provincial in nature and, therefore, within the jurisdiction of the Province.  The Court found that the EOG pipeline (the one at issue in the case) and the MIPL pipeline (the cross-border pipeline to which the EOG pipeline would connect) were not a single federal undertaking, and that the EOG pipeline is not integral to the operation of the MIPL pipeline.  On that basis, the EOG pipeline did not become part of the interprovincial MIPL pipeline for the purpose of determining its jurisdiction.  As the EOG pipeline is located within the boundaries of Manitoba, it is a provincial pipeline.

Read the decision at: Daniels et al v. EOG Resources et al.

Is there a special duty for an insurer who insures both sides in a spray drift case?

The fact scenario in this case is somewhat complicated.  In the end, the case is about an insurance company that found itself on both ends of a spray drift claim.  The Plaintiffs farm land adjacent to the land farmed by the Defendants.  The Plaintiffs claimed that the Defendants sprayed a herbicide on their land that drifted to the Plaintiffs' land and caused crop damage and subsequent financial loss. 

The Defendants had insurance coverage for that type of loss and turned the claim over to their insurer, SMI, to be dealt with.  There were negotiations, but the claim was not settled. 

Then the Plaintiffs filed an amended claim adding SMI as a second defendant.  As it happened, SMI was also the insurer of the Plaintiffs.  Although the Plaintiffs' policy with SMI did not cover the crop damage loss they sustained, the Plaintiffs pleaded that SMI was duty bound to pay out their claim through the Defendants' insurance.  SMI owed a duty of good faith and fair dealing to the Plaintiffs, they alleged, and so SMI had acted in bad faith in failing to settle the Plaintiffs' claim through the Defendants' insurance.

The judge of the Saskatchewan Court of Queen's Bench hearing the case determined that the Plaintiffs' claim against SMI had no reasonable chance of success or arguable case.  The judge wrote, "To impose a duty on the insurance company to act fairly in resolving the claim would put its insured's [i.e. the Defendants'] financial position at risk.  The insurer's primary obligation arises from its contractual obligations to its insured under the policy being claimed on and not to a third party who may be insured in circumstances unrelated to the action." [emphasis added]

On that basis, the Court did not permit the Plaintiffs' to amend their claim to include SMI as a defendant.

Read the decision at: Sweet v Sweet.

Alberta Court interprets a farmer's "poorly-drafted" will

In this case, B owned and operated a large farm that included 33 quarter sections of land and about 600 cattle.  He had a will and died.  And although he remained married to his wife, D, at his death, he had been living with G for more than 20 years.  The issue in the case was whether a specific bequest of $700,000 in favour of G should be paid only if the specific farm lands in which she was given a life interest were sold, and then only from the proceeds of the sale of those lands.  The alternative was that the bequest was conditional on the sale of other lands that formed part of the residue of the estate. 

In a certain paragraph of his will, B specifically bequested to pay and transfer the amount of $700,000 to G "immediately if the farm lands are sold or at the time of sale if the farm land sells at a later date."  The term "farm lands" is not defined, giving rise to the issues in this case. 

Based on a reading of the entire will as a whole, and in light of the circumstances of the making of the will, the Court ruled that G's interpretation was to be preferred.  An order was made requiring that the will be interpreted as thought it read that the $700,000 was payable immediately when the residue lands were sold or at the time of sale if the residue lands are sold at a later date.  In other words, the lands in which G held a life interest did not have to be sold for G to receive the $700,000 - G did not have to abandon her life interest in order to get the bequest payment.

Read the decision at: Bruce Estate (Re).

NB Court tells landowners to allow access to power line right-of-way

NB Power and Bell Aliant brought an application before the New Brunswick Court of Queen's Bench asking the Court to interpret a Right of Way Agreement after a family in Fredricton denied access to their property for utility work.  Beginning in May 2011, various employees of the two utility companies attempted to access a right of way on the property.  The utilities said they have a right to enter the property, and to remove trees and brush within a distance of five feet of their lines.  They said they have these rights under the Agreement and under s.84 of the Electricity Act.

In response to the application, the Fredricton family suggested that a trial was necessary to determine the issues, saying that there were "materials issues in dispute".  However, the Court disagreed.  It found that the language of the Right of Way Agreement is unambiguous and grants the rights of access being denied by the property owner and her son.  Also, the Court found that the rights in the Electricity Act are even broader.

The Court concluded that it could decide the case as an application and ruled in favour of the utilities.  It granted an injunction restraining the respondents from preventing access to their property.

Read the decision at: NB Power et al. v. Kinsella.

Sask. Wind Farm can seek damages over failed injunction against development

The Saskatchewan Court of Queen's Bench has ruled that the Red Lily Wind Farm may pursue a claim for damages against David McKinnon based on his undertaking as to damages given when he obtained a injunction against the wind project.  McKinnon commenced a putative class action, claiming that the wind turbine farm caused adverse effects on human health.  He sought and obtained an ex parte injunction (i.e. without Red Lily being present), one of the conditions of which being the undertaking to pay damages if it turned out the injuction was unnecssary.  When the injunction was lifted, Red Lily decided to pursue McKinnon for damages.

The parties asked the Court to determine whether Red Lily is entitled to enforce the undertaking, which read:

The Plaintiff, David McKinnon, hereby undertakes to abide by any Order as to damages which this Court may make by reason of the granting of an interlocutory injunction at the request of the Plaintiff if it shall appear that the Defendants have sustained damages for which the Plaintiff ought to pay.

The Court of Queen's Bench found that the case law "unequivocally establishes a strong presumption that an undertaking will be enforced, a presumption which can only be rebutted by compelling facts amounting to special circumstances."  The Court noted that McKinnon filed no sworn material and failed to establish the existence of any special circumstances.  Therefore, Red Lily is entitled to enforce the undertaking.  The Court then set out the procedural steps to be followed to determine the amount of damages, if any, to be awarded to Red Lily.

Read the decision at: McKinnon v Red Lily Wind Energy Corp.