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.

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.